Examination of Witnesses (Question 31-64)
Q31 Chair: Thanks
very much for coming along this morning. I think you have been
sitting through all the last evidence session. Perhaps I can
start where the last evidence session finished off. Mr Davies
said he thought that it was Remploy's management plan to get rid
of the factory network. Is it?
Ian Russell: Firstly,
thank you for inviting us to talk with your Committee this morning.
We appreciate that opportunity. The Remploy board, which I chair,
has a plan, and that is the modernisation plan. That is what
we are tasked with delivering. As you will have seen from the
evidence, there are really two key objectives in that, both of
which have been discussed in the first part of your session this
morning. One is to quadruple the number of disabled and disadvantaged
people that we support into work over the next five years, and
we are on track for doing that. We have now trebled the number
of disabled people that we support into work over the last three
years. The second key objective of the plan is to remain within
the Government's and the Department's financial target, the grant-in-aid
that we receive, of £555 million over a fiveyear
period. These are the two objectives that we have.
On placing people into mainstream work, that is going
very well, as I have mentioned; we have trebled the number of
people that we are supporting on that side. But on the financial
side, we are not in line with our budget; we are running over
that £555 million currently by about £14 million.
If we continue on our current path, we will be looking at an
overspend of some £40 million. I think, Chair, that
the answer to your question is the company and the board's plan
is the modernisation plan. That is what we are tasked with delivering,
and making sure we hit all the targets that are set for us within
Q32 Chair: That
does not really answer the question, because within your target
and your modernisation plan, if you are to hit your financial
targets, you will have to withdraw from the factory services,
because that is the drain on your finances. That is why there
is a gap between what the Government has said that you can spend
and what you are actually spending. Am I right in saying that
actually that is the factory networkit is not the Interwork
programme that is causing that discrepancy in your funding?
Ian Russell: You
are correct, Chair, that the overspend, currently and projected,
on the budget, is caused by the factory side of the business,
and there is one reason for that: the level of sales that was
projected in the modernisation plan is not being achieved. Although
we are reducing costs by more than was planned, nevertheless the
losses within the factories have not come down in the way in which
the plan envisaged. That is why we have moved on to the voluntary
redundancy programme, which has been the source of some discussion
already this morning.
Actually, the other really important consequence
of that lack of sales, that lack of work in the factories, is
that on an average day 50% of our factory employees have no work.
Since our mission, Remploy's mission, is to transform the lives
of disabled people through employment, we think it is fairer to
offer our factorybased employees the opportunity to move
into mainstream work. Last year, on an unaudited basis, we supported
some 20,000 disabled and disadvantaged people into work. We think
it is fairer to offer our 3,000 factory employees that opportunity,
rather than progressing with a situation where 50% of our employees,
on an average day, have no work.
Chair: One of my colleagues
will ask you questions about why your sales are so low.
Q33 Kate Green:
How would you respond to the point that was made a few moments
ago by Kathleen Walker Shawthat management never really
wanted to put its energies into making the factory side successful,
because it is just too hard?
Ian Russell: All
the facts, as opposed to the historic rumours, show that that
is just not true. What Ms Shaw described in the 1990s and the
early part of the 2000s was a situation where a lot of people,
including the GMB, did a terrific job at getting legislation passed
that would enable public-sector organisations to place contracts
with employers more than 50% of whose workforce were disabled.
I think that is a very laudable 1990s-early 2000s achievement,
but the fact is, when the modernisation plan was being written,
the management at the timethis is 2007proposed an
increase in the level of public sector sales through the factories
of 50%. It was management's plan to increase factory sales into
the public sector by 50%, based on the opportunity created by
that new legislation.
Between the publishing of our consultation paper
on the modernisation plan in May 2007 and its final approval by
the Secretary of State later in 2007, the trade unions, the Government
and local stakeholders had all persuaded us that, rather than
a 50% increase, a 130% increase in public sector sales was achievable
because of the support that we would receive. You heard from
our trade union colleagues earlier, and how Phil Davies described
his support for that increased target of 130%. Despite an increase
in the number of salesmen that we have, the increase in the quality
of the sales force, the improvement in the systems around the
sales force, the fact is that that increase in sales has proved
to be unachievable, and that is what has caused half of our factory
workforce, every day, to have no work.
Q34 Stephen Lloyd:
Following on from that, you obviously heard that the previous
speakers were very unhappy with what they would define, I think
charitably, as inadequate procurement processes, both in the legislative
terms in Brussels and also the lack of real focused procurement
officers from Remploy within the UK. They were quite bluntconspiracy
to fail, sales not being achieved. You heard; you were here.
How would you respond to that?
Ian Russell: Again,
one has to look at the facts. The company, with the Government
and the Department's support, has increased its sales force by
20% since modernisation, so we have 20% more salespeople on the
ground than we did three years ago.
Q35 Stephen Lloyd:
How many more procurement officers do you have? There is a very
specific difference. There are business development, sales and
also procurement officers. They are completely different, so
I am assuming you have invested in procurement officers as well.
That is crucial.
Ian Russell: Mr
Lloyd, I think the reference to procurement officers was within
the organisations that we are looking to sell to. We have salesmen
selling to procurement officers, but you make a very good point,
because one of the things we did was that, in addition to boosting
the number of salespeople by 20%, we significantly raised the
quality. We appointed a very senior head of public sector sales
with experience of procurement officers, and we appointed to our
board a non-executive director who himself was a procurement officer.
We have done a lot of work to try to get to grips with this area
but, despite the unions' help, despite the Government's help and,
frankly, despite the previous Prime Minister's helpeverybody
has been on board for the last three years, since modernisation,
to drive up the level of public sector salesthey have remained
flat. We are selling roughly the same amount today to the public
sector that we were selling three years ago.
Q36 Stephen Lloyd:
Why? You are the Chairman; you are the Chief Executive. I have
worked in both the public and private sectors; I went down this
road numerous times before I got into politics. What, in your
opinion, are the main reasons why that has failed? You say that
is the right investment. I would have a nonexec with a
procurement background; I would have a head of business development
who understood public sector procurement. Why did you not get
a result, in your judgment?
Tim Matthews: When
we talked, as we have extensively, with the main Government procurement
officers who are clearly the access routes into major contracts,
it is fairly clear that, in two or three areas of our skills where
we have major manufacturing capacity, we have had major successes.
Now, whether we would have had those irrespective of all the
support and whether we would have won them on strictly commercial
grounds is hypothetical, but in areas like our specialist textiles
business, like the area of schools furniture, we have made very
significant strides both with education authorities and increasingly
with private contractors, who are running the BSF
In one of the new areas of business, the recycling
of IT equipment, where we work with both private providers and
large public sector agencies on their refresh programmes, we have
seen in those areas where we can add major valueand where
there are significant multimillion contracts to be hadthat
we have won some very significant work and delivered a very highquality
service. We provided for the Home Office a full rekitting
of their protective suits two years ago. They put us forward
for a quality and service award on the back of that.
The fact is, if you look outside those quite specialist
areas, Government does not buy a huge amount of goods and services
that are manufactured in Remploy factories. We have done a lot
of work, as the Chairman said, through our sales teams, and we
have done a lot of work with local authorities and with other
public-sector agencies, but they tend to be quite small contracts
outside those three big areas. We have seen across those areas
that the procurement has been fairly flat. It is not that we
have not bid for work or we have not chased work. We do not bid
for work that we do not think we can deliver.
Q37 Stephen Lloyd:
I am very interested in what you are saying, but in a sense it
could be argued that you are building or supplying products that
the market does not require. In pure business terms, obviously
what one would do is either go bust or change the product. Now,
clearly it is a different issue for Remploy for our disabled employees.
The supportive framework there is important, so the going bust
is not an option, though I have to say you are heading in that
direction. What are the reasons why you do not change your product?
That is what businesses do. That is the marketplace.
Tim Matthews: We
have done. The example I cited of the recycling of IT equipment
was a major shift of emphasis. Those businesses, the capabilities
and the business development, take a little time to build up.
I think what we have seen over the last three years since I have
been in Remploy is our markets have actually been stronger and
better to develop with a number of our private sector clients.
If you look at our top10 clients by value of contract,
they are all private sector clients now. We have in effect shifted
to where we can satisfy the market, but that, apart from those
three main areas of work, has not been in the public sector.
Ian Russell: If
I could add to Mr Lloyd's private sector example of what a successful
management team would do, they would look to change the business
model in that situation, which we have done. That is one of the
reasons why, under our Chief Executive's leadership, we have looked
at the possibility of more social enterprise and locally-based
factories, so trying to get back to a smaller, more local business
We have had some success with that. The fact is
that, sitting here today, our local enterprises and our social
enterprises still are only 40% full of work, so there is still
not a huge quantity of revenue and business to be achieved, even
under that more local strippeddown model with fewer overhead
costs. There is still not a lot of work out there to satisfy
the number of employees that we have. Bearing in mind that our
mission in life is to transform lives through employmentthat
is what we dothat is the key that we have to try to find.
Q38 Kate Green:
I very specifically want to come in on that point. We were told
earlier this morning by one of our witnesses that there was, inevitably,
an element of lower productivity associated with the employment
of profoundly disabled people. How do you take account of that
in your business model?
Tim Matthews: It
is certainly the caseand this does not just apply in Remploy,
clearlythat disabled people in different environments require
different degrees of support, some of which, less than is often
assumed, can add additional costs either to the process or to
the level of supervision. What we have to do in talking with
customers and clients about work is we clearly have to make commercial
decisions about how we price, how we put forward the quality of
our services, and we have to take into account any additional
on-costs that come with that. That is one of the reasons why
there is a cost of supporting disabled people in employment.
The question that we are wrestling with is: what is a reasonable
level, given the degree of support that people need?
Q39 Kate Green:
You are making that decision from a commercial perspective.
Tim Matthews: I
have not met a client buying services from us yet who would not
say, "We want the best quality products that you can give
at a price that is competitive in the market." Customers
do not deal with us as charities and we do not wish to be dealt
with as charities. Clearly, we have to price in a way that balances
the need and desire to maximise the work and the quality of the
work that we can get into the factories, but not to the point
where we are just bidding for work at any price.
Q40 Kate Green:
So it is very important to get that business mix right.
Tim Matthews: Yes.
Q41 Chair: Can
I ask how many of the expanded sales team have a disability?
Tim Matthews: I
am not sure I can answer that one.
Q42 Chair: How
many of your management team have a disability?
Tim Matthews: Overall,
outside of the factory workforce, which would clearly skew the
numbers, about 25% of our staff and managers have a disability.
Q43 Chair: Going
down the business model route of the social enterprise is one
of the routes that we might be exploring in Aberdeen, where Cornerstone
already has a corner of a factory, and I understand the Aberdeen
factory has lots of work at the moment. In that sense, your sales
team has been successful. If you are going to go down that route,
that is going to be a much smaller, more discrete, more autonomous
unit and, if you are to continue to employ disabled people, we
need disabled people with management experience, otherwise management
is going to be run by nondisabled people, which will skew
the whole raison d'être that you have of providing jobs
for disabled people.
Is it not the case that, as a company, you have actually
thought of disabled people at the lower end of the labour market,
rather than thinking that disabled people could be in management
roles as well, so you were looking at the full range? Is there
something about disabled people who perhaps would be capable of
the higherlevel jobs that they do not want to be anywhere
near a company like Remploy, because of its history?
Tim Matthews: Well,
that has certainly not been my experience. In our Employment
Services business, we necessarily spend a huge amount of time
talking with employers, both public and private sector, about
the business benefits to them as well as any wider social benefits
of employing disabled people throughout their organisation, from
top to bottom. We cannot credibly do that unless we have a very
clear policy and achievement ourselves of being a model employer
of disabled people, and that is why I said we currently have something
of the order of 25% of our staff who are disabled, which I think
would be way ahead of any comparable professional services company.
Having said that, I think we recognise we have some
considerable way to go, certainly in terms of giving disabled
people the opportunities and encouragement to move right to the
top of the organisation. Last year, as part of that, we put in
place a management development programme specifically aimed at
some of our higher-potential disabled junior and middle managers
to give them accelerated opportunities to rise through the management.
I accept we do have some way to go, but it is something we are
passionate about as a business. We have to be passionate about
it and committed to it if we are to be credible in the market
in which we operate.
Q44 Chair: That
is true whether it is the factory side of things or the Interwork
side of things.
Tim Matthews: Absolutely.
Q45 Chair: Can
I ask how you think you have handled the voluntary redundancy
side? Do you accept the reason why the unions and the workforce
are very suspicious about what will happen, and that maybe helps
to explain the leaflet that Harriett Baldwin read out from?
It is that the unions feel that promises were made the last time
that a redundancy package was offered and support was promised,
and that support did not materialise; the jobs did not materialise.
What people thought they would get, having left the factory,
did not materialise. Many individuals suffered as a result, and
that is not a good legacy. Therefore, because those promises
were not kept at that time, any promises about the voluntary redundancy
scheme and what will happen to people are unlikely to be kept
this time. Do you accept the criticism that that is where that
suspicion comes from?
Tim Matthews: I
accept that is probably where that criticism comes from. Going
back to a point made earlier, I think if you examine the facts
of what happened and the identified issues that have arisen since
200708, that does not bear out those claims. Remploy at
the time made commitments to staff who opted, and, as last time,
people had a choice between whether they took a voluntary severance
or a voluntary early retirement package, or they had the choice
of staying with Remploy under Remploy terms and conditions, with
ongoing support to find them work.
We have to accept that those disabled people have
both the right and ability to make choices about their lives as
well as nondisabled people do, and for those who opted to
leave Remploy, we put in place a package of ongoing employment
support. Nobody could force somebody once they had left the company
to stay in touch, but where they opted to take that choice about
200 of those staff stayed in touch, and we continued to provide
whatever support they looked for. We equally made it clear, both
to all those people who decided to leave and through the trade
unions, that where people were in any position of personal difficultywhether
it was financial, family or whateverthey should not hesitate
to contact us if they felt that we were somebody they wished to
contact. Again, there was no compulsion on anybody to contact
The survey information was referred to earliera
number of surveys have been conducted. I have to say that one
of the key features of those surveys is the very low response
rate. One can read a number of things into that, but what you
cannot do, I think, is draw any hard and fast conclusions about
both the number of people who are in work and whether any of those
people have previously been in work, then were not in work and
have subsequently been in work. They were a very small survey
sample, and one snapshot at one point in time.
Q46 Chair: You
said that you have kept in touch with about 200 from the 2008
redundancies. Have you tracked their progress and what has happened
to them? Have you got a detailed analysis of how many got into
work or not? If your emphasis is on the employment support and
not the factories, and you want to sell yourselves as an employment
services company successful at getting people with disabilities
into work, then surely the group who were exemployees of
Remploy should be your shining examples of how good you are at
taking people with disabilities, who may have been in supported
or even sheltered employment for quite some time, and getting
them into open employment or supported employment with a mainstream
employer. Do you have those kinds of figures?
Tim Matthews: The
group of people we have the best quality of data on are those
who, in effect, moved out of Remploy's employment but stayed on
our terms and conditions(Ts and Cs), because we continued to pay
Q47 Stephen Lloyd:
Sorry, I do not understand thatmoved out of your employment
but stayed in Ts and Cs and you still paid them?
Tim Matthews: They
were people who came out of factories that closed in modernisation,
but elected to stay. Part of the offer at the time was you could
either take voluntary redundancy or voluntary early retirement,
or you could stay as a Remploy employee not engaged in a factory.
As part of our Employment Services business, we would then work
with you to find employment for you.
Q48 Chair: The
accusation at the time was that you were paying people to stay
Tim Matthews: The
position now is that over 85% of those people are in paid employment.
Where we have a cohort that we can track, we have demonstrated
that those people have the skills and the adaptability to move.
Q49 Stephen Lloyd:
Is that option equally going to be available for the current round
of voluntary redundancies that are up for discussionthe
option for remaining under Remploy T and Cs and then Remploy working
with them to get them paid employment?
Tim Matthews: I
was not there at the time, but the reason why that option was
available was that a number of factories were closing. If you
were coming out of a closing factory, it was deemed to be appropriate
to have an alternative option to voluntary severance. Under the
current voluntary severance programme, there is no proposition,
there is no plan to close any of the factories. Anybody who is
not opting to leave will remain working in their current factory.
Chair: We have some questions
on Employment Services.
Q50 Brandon Lewis:
Just to pick up on an issue I had earlier, is the expansion of
Employment Services the main aim, and where does that sit now,
in light of the results of the Work Programme, in your failure
to pick up any of those contracts?
Ian Russell: If
I could answer that. I think it would be inaccurate to describe
it as the main aim because, as we said earlier, under the company's
modernisation plan we have two aims. We have the aim of increasing
the number of disabled people whom we support into mainstream
work, which is what you are referring to, but we also have the
aim of remaining within the Department and the Government's budget
for Remploy of £555 million over five years. On the
Employment Services side, if we deliver the modernisation planand
we are three years into it, and we are on track, in line, with
the planthrough our Employment Serviceswhat used
to be Interwork, Chairwe will have supported 71,000 disabled
people into mainstream work. During that time, currently, we
have 3,000 disabled people in our factories.
If your question is about whether Remploy today,
as a result of modernisation, is supporting more disabled people
into work as opposed to in our factories, the answer is yes, by
a factor of 20. It is 71,000 compared with 3,000. That clearly
is a very big improvement, a big change, in the number of disabled
people whom we are supporting, but that does not make our factory
employees any less important. There is the importance both of
hitting the financial targets, but also as I mentioned just briefly
earlier, the fact that one in two of our factory employees, as
the Committee sits here today, has no work.
We do not think it is morally right to bring somebody
into a Remploy factory in the morning, allow them to play cards,
watch the television and do some trainingbut there is only
a certain amount of training you can doand go home in the
evening. We are about transforming lives through employment,
not transforming lives through unemployment. We think both parts
of the business are important, but 71,000 disabled people over
five years through our Employment Services is a very, very important
part of the business.
Q51 Stephen Lloyd:
You have your 2,000 disabled employees in factories, and 50% of
the time they are out of work. I was in business for years before
being in politicsa lot of people on the panel have; you
obviously both have. Clearly public sector procurement is a bit
flat at the minute and I think your answers demonstrate that you
have taken some steps over the last few years to deal with it.
But it is a bit flat, and the private sector seems to have a bit
of movement. What is the silver bullet or the magic wand to increase
output or throughput for the people within the factories, if there
is one, in your opinion?
Ian Russell: I
do not think there is one. I took over as Chairman of Remploy
just before the modernisation plan was published, so I have been
with the company for three or four years in its 70year historya
relatively short time. Even in that short time, it does seem
to me that every conceivable effortnot just by Remploy,
but by the trade unions, by officials, by Government, by local
stakeholdershas been made to try to maximise the amount
of work in the factories. Yet, as we sit here today, there is
less work in the factories than there was three or four years
Why is that the case? I think the Chief Executive
has mentioned some of it. International competition: if you are
running a manufacturing business in the UK today, which is what
our factories are, the presence of competition from Eastern Europe,
from China and from Asia generally is a very important part of
it. Whole industries have moved offshore. If I take an example
from our automotive business in Coventry and in Birmingham in
particular, I think the workers and the management team there
have done a fantastic job at getting business from Jaguar Land
Rover. There is barely a board meeting that we have now where
we are not approving a new contract for Jaguar Land Rover, but
all it is doing is replacing work that has been lost by other
manufacturers that have gone overseas.
I do not think there is a silver bullet. That is
why there are two parts to the modernisation plan that the previous
Government set outthe mainstream employment part with 71,000
over five years; and the factories with 2,000 or 3,000 employees
in them as well. Both parts are important. There is no doubt
that the growth is on the mainstream side, because there are more
offices, shops and administrative positions than there are factory
positions in the UK.
Q52 Kate Green:
Mr Russell, you have no plan that I have heard to make the factories
viablewhether, as you say, despite every conceivable effort
or, as the unions say, because of a lack of effort or skill on
the sales side. You have factories that are not currently delivering
to the modernisation plan's financial objectives. You have planned
to make a number of people redundant, and that process is in train.
You will leave, therefore, factories even more unstaffed and
with empty space and unused equipment. I cannot see what your
longterm plan is for Remploy Enterprises.
Ian Russell: The
longterm plan is the modernisation plan.
Q53 Kate Green:
No, Mr Russell, that is not a plan; that is an objective in terms
of the financial achievements you need to come up to. What I
do not understand is what you are going to do with your factories
to achieve those objectives.
Ian Russell: In
the modernisation plan, the plan for the factories is very clear.
I am sorry to keep coming back to it, but it is the company's
plan; that is what we are working to. The plan for the factories
is very simple. It is to financially remain within the budget,
within the £555 million, and to make sure that the factories
offer employment, offer work. That is what we are here to do:
transform lives through employment. How do we do that? It is
not by cutting costs. We do not provide work by cutting costs;
we provide work by winning contracts, whether public sector or
To answer Mr Lloyd's question, I do not think there
is a silver bullet towards that. We have increased the sales
force by 20%; we have increased the recruitment quality that we
are bringing on board of our sales force very significantly.
We have appointed more senior sales managers than the company
has ever had before. We have introduced a sales IT system that
makes it very efficient for our salespeople to do their job.
We have provided them with rewards, with incentives. I think,
compared with what I see in other places by way of a sales force,
we have done as much as we can. The plan is to keep pressing
on that, because that is where success lies.
Q54 Kate Green:
I understand that. If you keep pressing, and you still cannot
meet the financial objectives, what are your options?
Ian Russell: The
options are very clear. I mentioned in an opening answer that
we are currently about £14 million above the budget, at variance
to the budget if you like, on the factory side. The Department
has given us a withinfiveyear waiver to allow us to
do that. We are now trying to restore the position to get back
to the original £555 million target. We are doing that
in part by offering voluntary redundancy to our factory workforce.
We are also reducing other costs. Over the fiveyear period,
we will have taken about £64 million out of what you
might describe as our overhead cost base, and that is about £5 million
more than the modernisation plan. To come back to your question,
in addition to pressing for sales, we are also pushing down harder
on our overhead costs and other costsharder than was in
the modernisation plan, to make up for the shortfall in sales.
That is what we will continue to do over the next two years in
an effort to try to deliver that side of the modernisation plan.
Q55 Kate Green:
Will there then have to be, as it were, a stocktake in two
years' time as to how successful you have been?
Ian Russell: I
would imagine the Government, the Department and the board, towards
the end of the fiveyear period, would want to, as any organisation
would, say, "Well, we're coming to the end of the current
planning period. Let's look and see what happens beyond that."
To be very clear, the board of Remploy, which I chair, is tasked
with organising the company as effectively as possible to deliver
the modernisation plan. That is our job.
Q56 Chair: The
fact is that you did not become a prime contractor for the Work
Programmethat the successful bit, in your eyes, of the
business is the Interwork bit, but you are not a prime contractor.
How is that going to affect your viability on that side of the
Tim Matthews: It
is important to be clear: we will have a substantial role under
the Work Programme. It was disappointing not to be appointed
as a prime contractor. You will know from all the investigation
you have done that the role of the prime contractor is to arrange,
manage and deliver through a supply chain. We are a nominated
subcontractor. That is not a word I would use as a pejorative
term. We are a part of the supply chain nominated by five of
the winning contractors and, although those discussions are still
ongoingthey are not closedit is fairly clear that
we will have a very substantial delivery role as an organisation,
under the Work Programme, with a number of those successful primes
and a number of other primes, which are also now beginning to
look in earnest at their subcontracts.
Equally, we are the largest provider of the Work
Choice programme in this country. One of the targets we were
set in the modernisation plan was to grow Work Step, as it was
thennow Work Choicebusiness with commercially competed
contracts for Employment Services. There again we are way ahead
of our target, both in terms of the financial return but also,
more importantly, the numbers of people we are placing into employment.
Yes, the Work Programme was a disappointment; clearly we would
have liked to have been in a prime contracting role, but we have
a very secure future in that business, both as a subcontractor
but continuing to be the largest provider of employment services
for disabled people in this country.
Chair: In the five minutes
we have remaining, I am going to go to Karen and we have questions
Q57 Karen Bradley:
Thank you, Chair. A very simple question: how do you justify
awarding bonuses of, I think, £1.3 million, while announcing
the voluntary redundancy programme?
Ian Russell: If
I may, through the Chair, I think there are a couple of points
of reference that the Committee may not have been fully informed
of: the figure of £1.5 million that you refer to covers
between 300 and 400 people. This covers the sales force that
we have just talked about; it covers the sales managers; it covers
the managers of our Employment Services branches; it covers our
factory managers. It is a broad group of people. The company,
as you would expect, has a remuneration committee of the board,
which comprises entirely nonexecutive directors.
Q58 Karen Bradley:
Ian Russell: We
have a deputy general secretary of a union on the board.
Q59 Karen Bradley:
On the remuneration committee?
Ian Russell: And
on the remuneration committee. I was just trying to think whether
he is on the remuneration committee.
Tim Matthews: He
Ian Russell: Yes,
that is right. We have a remuneration committee of nonexecutive
directors including the trade union representative. On an annual
basis they set targets for that 300 to 400 management population.
Those are audited at the end of the financial year to compare
the target with the result. The target is agreed with the Department
before the start of the year. The audited results are reviewed
by the Department at the end of the year. Although those performance
targets might have resulted in bonuses of a certain level, for
the executive directors for last year and this year, those bonuses
will now be capped under the public sectorthe Department's
guidelines, Treasury guidelines. For the previous two years,
both the Chief Executive and a number of other directors voluntarily
waived part of their bonuses, so there is a sort of capping structure
in place in addition to that very quantified and audited process
that the remuneration committee of nonexecutive directors
puts in place.
Q60 Karen Bradley:
Can we just clarify the numbers? The figures we were given were
£1.3 million to 288 managers. You are saying that it
is more people than thatbetween 300 and 400.
Ian Russell: I
think the figure is £1.5 million, and I think the number
of people is higher than you were given. We may be talking about
different years. Perhaps I could, through the Chair if it is
allowed, give you the information afterwards.
Q61 Stephen Lloyd:
If you check that and get the exact detail to the Chair, that
would be useful. We are running out of time. Can I bring one
issue in, if that is okay? There has been a little discussion
around what the DWP or you would say is the subsidised cost per
disabled factory worker, so to speakanywhere between £18,000
and £22,000. The previous witnesses were quite categorical
that that was unfair, because it was including frontloading a
whole range of other costs and really it was much lower than that.
I had a little bit of discussion with them saying that naturally
Remploy would have to include the capital cost, because you do
for factory workers. None the less, I did take on board their
point that they still felt you frontloaded it a great deal and
it is nowhere near that sort of figure. Could you tell me whether
their evidence has some strong credence, or do you stick to what
the DWP basically saysabout £22,000 per disabled factory
Tim Matthews: The
calculation is a simple and auditable calculation. It is the
ratio between the number of supported people we have in the factories
and the annual operating loss of the factory businesses. Now
that operating loss is an audited figure, which has appropriate
allocation of overhead into it as well as direct costs. It is
a very simple calculation; it is not one that is subject to manipulation.
You can argue about whether it is the right ratio, but that is
the ratio that was established in the modernisation plan.
Q62 Stephen Lloyd:
It is the loss divided by the number of
Tim Matthews: Supported
Stephen Lloyd: Okay, fine,
Ian Russell: Briefly
through the Chair, the way to arrive at a lower figure, which
may well be what our trade union colleagues have done, is to exclude
the sum of the central costs. Now, the reason why that would
be wrong is we have just had the discussion about the importance
of getting sales into the company. A lot of the sales costs are
held in the centre, so if you want to arrive at a lower loss per
factory, excluding the sales force is a very good way of doing
it. However, I am not sure that it is right.
Q63 Karen Bradley:
So it is the figure that we have been given here of a £63 million
loss for the 54 factories, and that is where you get the
£22,000. It is just a very simple division.
Ian Russell: Correct.
Q64 Karen Bradley:
This is purely factories' costs with an element of central costs
Ian Russell: Yes.
Chair: I think I am about
to lose my colleagues, because the House is now sitting. I shall
draw this session to a close. Thank you very much. My thanks
to the first set of witnesses and thanks very much to you for
coming along this morning.
I suspect that this may be something that we will
be keeping a close eye on. We will not be writing a formal report
on this particular session; it was more an airing of the ideas.
Obviously, we already have all the evidence, and obviously with
the Work Programme, which we are interested in particularly, we
will be looking at the effects on individual workers with regard
to it or individual benefits claimants.
Remploy may be part of that discussion as well, about
how we deal with the issue of how disabled people not only get
into work but are sustained in work. That is something we will
be revisiting, and I suspect that Remploy might be part of that
much wider inquiry. Thank you for this morning.
1 Building Schools for the Future Back