To be published as HC 1051-ii

House of COMMONS



Scottish Affairs Committee

Remploy Marine Textiles Fife

Thursday 21 March 2013

Esther McVey MP, Ian Russell CBE and Jeremy Moore

Evidence heard in Public Questions 86 - 212



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Oral Evidence

Taken before the Scottish Affairs Committee

on Thursday 21 March 2013

Members present:

Mr Alan Reid (Chair)

Jim McGovern

Pamela Nash

Lindsay Roy


In the absence of the Chairman, Mr Reid was called to the Chair

Examination of Witnesses

Witnesses: Esther McVey MP, Minister for Disabled People, Department of Work and Pensions, Ian Russell CBE, Chairman of the Board, Remploy, and Jeremy Moore, Director for Disability and Work Opportunities, Department of Work and Pensions, gave evidence.

Q86 Chair: Good afternoon. Thank you all very much for coming at such short notice; we very much appreciate it. Minister, will you start by introducing yourself and your colleagues?

Esther McVey: Thank you very much indeed and thank you for having us here today. My name is Esther McVey and I am the Minister for people with disabilities. To my right is Ian Russell, who is the chairman of Remploy Ltd. To my left is Jeremy Moore, DWP director for disability and work opportunities. I thought it might help the Committee to direct questions at the right people if I differentiated between my role and that of Mr Russell. Questions relating to Remploy sites or the commercial process should go to Mr Russell; those relating to strategy and policy should obviously come to me.

Chair: Thank you very much.

Q87 Jim McGovern: Minister, I thank you and your colleagues very much for coming along. I imagine that the DWP and Remploy will have learned lessons from the phase 1 sell-off process. How will these be applied to phase 2?

Esther McVey: Do you want to come to me first?

Chair: The simplest thing would probably be for you to decide which of the three of you is most suitable to answer the question.

Esther McVey: I can, indeed. You are quite right in that regard-of course, lessons are always learned about what we can do and how best to go forward. One of the key lessons for us relates to the whole process of commercial sales to help social enterprises set up. In the first stage, we had the commercial process viewed first, and the other process, for purchasing the assets and so on, followed on. We found from that-particularly with what was demanded under TUPE, which made it very difficult for people to take it over entirely as a commercial process-that it was best to get together and view all bids, whether they were for assets or for the business, knowing all the time that first and foremost was future employment for the staff; secondly, it had to be about viability and sustainability of the business, whether it was a commercial or a social enterprise; and, finally, it was about value for money, so all of that could be taken into account once we knew what everybody wanted. Equally, when we were looking at support for the individual members of staff of Remploy-getting in personal case workers and the support package-the issue was how we would get that help in as early as possible. In stage 1, people were concerned about the staff but may have delayed that process as they wanted to know what the legalities were, whereas now we are thinking about the people first and foremost and how we can make it work for them. For us, that was really what we learned from stage 1.

Q88 Jim McGovern: As I said, I imagine that DWP, which you have just covered, Minister, but also Remploy, has probably learned something from what happened in phase 1. Can I ask Mr Russell to respond?

Ian Russell: Certainly, Mr McGovern. One of the key lessons for us was earlier access to the sites. In stage 1 last year, we gave bidders or interested parties access to the sites after the initial bids were in and before their best and final offers were to be received-in that very detailed period. This time round, we have enabled bidders that request it to have access to the sites now, rather than waiting until a later stage. Our reason for doing that is to improve both the prospect of the number of bids that we receive and also to improve prospective bidders’ understanding of exactly what they are bidding for. We think that is an important lesson from last year that we have taken in and applied this year.

Q89 Lindsay Roy: Why would you have to wait for a request? Why would Remploy not be more proactive in encouraging bidders to come forward for a visit?

Ian Russell: Mr Roy, I guess the difference is that we are not insisting that they make a visit-we have not made that a condition of receiving a bid. We have pointed out to all interested parties that they have the opportunity to make a visit. We have encouraged them, to use your word, to do that, but at the end of the day it is up to a bidder to decide whether it wants to do that. We have not made it a condition of receiving a bid.

Q90 Lindsay Roy: That is not the experience that we have had on the ground in Fife. People have had to use their own initiative. Understandably, you would expect that, but some of the people who planned to set up social enterprises have not had that invitation. As far as I know, they have expressed an interest, but they have not had an invitation to look around the factory sites.

Ian Russell: I know there have been a number of steps in the process. This might cover the examples that you are referring to. Before a prospective bidder is given access to the site, we ask them to sign non-disclosure agreements-confidentiality agreements. Clearly, from a commercial perspective-and also, importantly, from an employee perspective-we do not want to open the doors of the sites to everybody; we want to encourage people who are serious about the prospect of bidding. Bidders have had to sign confidentiality documentation, which is very much in line with normal commercial process-certainly in my own experience of the way these things happen. It may well be that the people you are referring to were not willing to sign the documentation and that then did not give them access to the site.

Q91 Lindsay Roy: Was that due to the complexity of what was being asked for? For example, I understand that they were asked at, I think, stage 3 to give details of their property adviser and legal adviser, and bank details.

Ian Russell: That is not the case at this stage. The document that we have asked people to sign for the current stage of the process, which would allow them both to access the site and to receive much more in the way of data from us, is a relatively straightforward form. Most people have signed it very promptly and quickly. A number of people have referred it to their lawyers, which has slowed things down a bit, but the majority of people have found it very easy to complete the forms.

You referred to property, financial and other advisers. There is no precondition at this stage requiring bidders to have advisers on board, but there is a requirement that any bids that we receive are financially sound. One of our key criteria is to continue the employment of disabled people. That will happen only if somebody makes a financially sustainable bid; we do not want them to bid now and be struggling in six months’ time. We have said to prospective bidders that, if they wish to use advisers to help them in that regard, they are welcome to do so, but it has not been a condition at this stage.

Q92 Lindsay Roy: Can you explain why councillors, for example, felt that they needed to go to lawyers in relation to the non-disclosure agreement? As I understand it, Fife council still has not signed an NDA, and that has inhibited its engagement in the process.

Ian Russell: I am afraid that I cannot explain to you why it felt the need for a lawyer. I would say two things in response. One is that Dundee city council signed the documentation very promptly, so it can be done. Secondly, we have had three requests from Fife council to change the documentation. We have met those requests. It then asked for a further change; we have met that request. It asked for a further change; we have met that request. Between two and three weeks ago, we sent back to Fife council the document amended in line with its request. I think you are right-I do not think it has yet signed. You would have to ask it why it has not done that.

Q93 Jim McGovern: You mentioned Dundee city council. A Remploy action group has been set up in Dundee and the Minister addressed that group a few weeks ago. It has consistently said to me that it has signed the appropriate documentation but has not yet received the information that it requires to build up a business case to put in a bid. Can you confirm or otherwise whether it has that information yet?

Ian Russell: It certainly has the information that we are making available at this stage.

Q94 Jim McGovern: What does that mean?

Ian Russell: Let me explain. One of the key requirements for us at the moment is to make sure that every bidder has access to the same information; otherwise it is not a level playing field. Because this is in part a public process, we are under an obligation to make sure that we do not favour one bidder over another. So we have a standard set of information, which is available at this stage to prospective bidders such as Dundee city council. I have to say that, in my own experience of these things in a private setting, the information that we have made available at this stage to prepare what is a preliminary business plan-we are not looking for detailed plans at this stage-is more than would normally be made available.

We have made available three years’ worth of trial balance level detailed financial information. That is down to the level of things like "£54 for cleaning"; it is very detailed stuff. We have made available records of all assets and liabilities-plant and equipment that is in the factory. We have made available details of the contracts that the factories have. We have made available details of staffing levels and skill sets within the employee group, so that bidders can assess what sort of employees we have. There is a very long list of information available at this stage, and I would be happy to share it with you. I would have thought that that information would be sufficient for any bidder interested in putting forward a business plan for us at this stage.

Q95 Jim McGovern: Can I pursue this point? Mr Russell, you still give the impression that you are not giving all the information. You say you are giving the appropriate or current information that you are allowed to give. What is missing?

Ian Russell: Let me give you an example of what is missing. What is missing at this stage is individual employee payroll details.

Q96 Jim McGovern: Why?

Ian Russell: Because we do not think bidders require individual employee payroll details to prepare a business plan at this point. We think giving them departmental payroll data-this is the cost of that department; this is the skill set of that department-is sufficient. Equally, we have not given all the details that exist on individual contracts that the organisation has because, frankly, it is commercially sensitive. We have, I think, 11 expressions of interest for the Cowdenbeath and Leven sites. I do not think it is commercially sensible to give all 11 people with expressions of interest payroll and contract details, because they simply do not need those in order to prepare a high-level business case, which is being requested at this stage. I apologise if you get a sense that we are holding back information-

Jim McGovern: We do.

Ian Russell: You are right-we are. I think that, commercially, we are entitled to. There was no test-

Q97 Jim McGovern: Is it not a discouragement to potential bidders?

Ian Russell: No, I do not think so. As we discovered in stage 1, the information that people are getting at this stage is more than enough. The next stage, where people have to put in best and final offers, is the point at which they would get more information of the type that you are referring to. It is important to realise at this stage what the test is. I will explain this in a little bit of detail, if I may. The test that is being applied at this stage is not whether bid A is better than bid B. That comes later; it is the next stage. What we are trying to do at the moment is to elicit preliminary business plans from prospective bidders. Providing they meet three criteria, they get through to the next stage. It is a pretty low bar that we are setting.

Q98 Chair: Maybe you were going on to answer the question, but I was just going to ask you what the three criteria were.

Ian Russell: The first of the three criteria is the continued employment of disabled people. The second is that the high-level business plan is financially sound. We do not want to sell factories to people who go out of business after six months; that does not help our employees. The third is that it passes a value-for-money test for the Department and for Remploy-for the public purse, if you like. At this stage, we are looking for preliminary business plans that continue with the employment of disabled people, are financially sound and meet the value-for-money test. If they do, they go through to the next stage, when more detailed information would become available. They are not competing against another bid; they are simply seeking to pass those three tests.

Q99 Jim McGovern: I have a couple of points. For the purposes of clarity, I want to take you back to the first criterion-to continue to employ disabled people. The work force in Dundee is a mixed work force. There are able-bodied people and disabled people. The only criterion you are referring to is to employ disabled people.

Ian Russell: It is the principal criterion. We have 43 employees in total, of whom 36 are disabled, so there are seven non-disabled employees. Clearly, we would like them to have continued employment as well, but Remploy’s ethos-its reason for being-is to support disabled people into work. Understandably, that is our key focus, but of course we would pay attention to a bidder’s plans for the continued employment of non-disabled people as well.

Q100 Jim McGovern: The second point relates to the third criterion that you mentioned: value for money. How do we quantify that?

Ian Russell: One starting point is to say that, if there are no successful bids for factories, as happened in some cases in stage 1, and Remploy has to close a factory, it will clearly cost us money to do that. There will be redundancy costs, property wind-up costs and disposal costs. So, a starting point from a value-for-money perspective is to say that a bid has to be better financially than the cost of closure. Because a lot of the bids that we received last year for the stage 1 properties were competing bids, bidders were quite keen not to pass that test by a sliver; they wanted to pass it by quite a lot, because they wanted to be the winning bid. That is the initial test-is it better than the cost of closure?

Q101 Jim McGovern: Given the record of the last Remploy closures and how many people have managed to find alternative employment, would it be value for money to put 43 people on the dole?

Ian Russell: Clearly, that is not the objective.

Q102 Chair: Just for clarification, when you look at value for money, are you looking at value for money purely for Remploy or for the taxpayer as a whole? Are you taking into account the fact that, if people do not get a job, they could well end up being in receipt of jobseeker’s allowance for a considerable period of time? Is that taken into account?

Ian Russell: We try to take that into account, but it is an uncertain calculation. A lot of people have been supported into work as part of the programme last year, so you don’t know quite what the numbers will be, but we do try to take that into account. It is a wider calculation.

Q103 Chair: Do you have a formula? Do you assume a certain length of time?

Ian Russell: No, because it depends very much on the skill set and mix of the work force in an individual factory. Frankly, it also depends on the location of the factory and what else is around.

Q104 Chair: But presumably you must have some formula that you use. You are not just going to pluck a figure out of the air; you must have some criteria.

Ian Russell: We have a formula for the absolute calculation of whether it is better from Remploy’s perspective, and we know precisely what that is; but then there is a judgmental element over and above that, which is the wider picture.

Q105 Chair: Do you have a written-down formula, or is it just left up to somebody’s judgment in each individual case?

Ian Russell: It is judgment, but it is a pretty broad church that applies that judgment. It is worth saying at this stage that the evaluation of the bids is not just a Remploy job. We have input from the Department and input from KPMG. We have an independent panel, which is completely independent of Remploy and Government-including, I believe, prospectively a representative from Scotland on that committee-as well as the board of Remploy looking at this. I want to give you the impression that a wide range of people are looking to make that judgment. Some of it can be calculated and some of it is judgment.

Q106 Jim McGovern: Can any of the witnesses confirm the current status of the Remploy facilities that were included in the phase 1 process?

Esther McVey: In what way? What do you mean by that question?

Q107 Jim McGovern: What is their status? Are they earmarked for closure?

Esther McVey: If you are asking what has happened so far at all of the 36 factories, I can tell you. Two of the factories-Barrow and Chesterfield-did complete with a commercial process. Various other factories have metamorphosed in different ways. That is why we looked at social enterprises-how we would do them and how we would look at mutuals. Bolton is quite interesting. Somebody has bought the site, but they were prepared to let a social enterprise be on that site. DWP gifted the assets to them, and there were 10 to 14 jobs by the end of March. In north London, we have an organisation ready to employ eight ex-Remploy employees. In Oldham, we have seen a new community interest company set up, taking on 25 employees. In Wigan, we have seen a new social enterprise set up, with 20 job opportunities. This is what has happened to the factories. We really are seeing people from the local community and businesses taking a hold and wanting to get involved. When it comes to the jobs overall, I can really talk only about the 1,148 people who said that they wanted to engage with us. We know we have got 307 of those into employment and 250 on to traineeships.

Q108 Jim McGovern: I am sorry, but can you clarify what you meant by the figure of 1,100 and something that you gave who want to engage? What does that mean?

Esther McVey: At the time, we said we would help people with personal case workers and put in place a package of £8 million, but some people decided that they did not want that support and did not want to engage with us. In fact, when I came on board in September, the number of people who said they would actively engage with us was closer to 850. Now, perhaps because they have seen that they have that support, we have put things in place and people have got jobs, that figure has increased to 1,148, as I said.

Q109 Chair: Could I ask you for some detailed figures? First, how many factories were involved in phase 1?

Esther McVey: Thirty-six.

Q110 Chair: Of those, how many are still operating in one way or another?

Ian Russell: None.

Esther McVey: Under the Remploy board-

Q111 Chair: Not under Remploy, but in some other way.

Esther McVey: Separately.

Q112 Chair: How many are still operating?

Esther McVey: I was explaining how they had come forward. Barrow and Chesterfield have come forward as commercial operations. I was going through what was happening at Birkenhead, Bolton, north London, Oldham, Southampton and Wigan. Many of them are coming forward and developing.

Q113 Chair: Are you able to give me a number for how many of the 36 are still operating?

Esther McVey: I have explained that. Two are operating as a commercial process, and these others are now coming forward. Because they are starting at different times and having support at different times, I cannot give you an exact number. There are two further ones that could be coming to completion-Edinburgh and Motherwell. That will happen in the next couple of months. At the moment, those deals for completion and support are ongoing.

Q114 Chair: I am sorry, but I am still confused. Mr Russell said that there were none still under Remploy. You have said that two of the 36 were commercial. What is the status of the other 34?

Esther McVey: I have another eight that have people working and in employment, and the numbers are going up. As I said, there are further ones that will complete going forward in the next couple of months. That will make two, eight and a further two, but there are more coming forward.

Q115 Chair: You say "coming forward", but what is their status at the moment? Mr Russell said they are not with Remploy. If they are not commercial, what is their actual status? You said there were two, eight and two. That leaves 22 factories in some other state, but I am not clear about what state those 22 are in.

Esther McVey: That state would be that people are looking at the assets. Groups such as mutuals and social enterprises are coming together to see whether they can take them over and whether this is something they can do. As I said, two factories-those in Motherwell and Edinburgh-will potentially be completed in the next two months. That will mean another four employees at one site and, I think, about eight employees at the other, but it is not finalised yet; they are putting all of their pieces down.

Q116 Chair: I am sorry, but I still cannot fathom this out. What is happening in these factories at the moment? Are they still operating, or are they shut-closed-while investigations are carried out? I am afraid I am still not clear.

Jim McGovern: I think the question we want to ask is, how many people were employed in the 36 factories, and are they still all employed? Has anybody lost their job yet?

Chair: Jim, we can come to that question.

Esther McVey: I have given you those numbers in the 1,148 people I mentioned.

Q117 Chair: We will come to that question in a minute. Mr Russell, can you help?

Jim McGovern: I never heard the Minister’s answer.

Chair: Jim, please. Mr Russell, can you help me?

Ian Russell: If we wind the clock back slightly, we had 36 factories last year that were put up for sale, on the understanding that if they were not sold they would be closed. Two were sold; 34 were closed by Remploy. However, a number of them, correctly, as the Minister has said, were bought as sites-some just as sites, some as sites with equipment in them-by purchasers who wanted to restart activity. Some of the activity that restarted in the sites was the same activity that there had been under Remploy and some of it was completely different-a different business line altogether.

Q118 Chair: Two commercial operations have been referred to. Were all of the other 34 factories sold by Remploy to somebody?

Ian Russell: They were sold by Remploy to somebody, but what somebody then did with them varied from site to site. I think that is what the Minister was referring to.

Q119 Chair: Are you able to give me a number for those that closed completely, with all the employees made redundant?

Ian Russell: We do not know that yet, because the final closure by Remploy of some of those sites was as recently as December, because of the run-off of work. Therefore we do not yet know which of those sites might reopen. The Minister referred, in particular, to a couple in the pipeline under social enterprise ownership. So there is still the prospect of continued employment and continued economic activity in a number of the sites.

Q120 Chair: You have sold 34.

Ian Russell: Yes.

Q121 Chair: How many of those are still employing people at the moment? Do you know?

Ian Russell: It would be about a dozen.

Q122 Chair: At the other 22, were people just made redundant?

Ian Russell: That is my hesitation. As the Minister explained correctly, some of the other 22 are still in a process that may lead to employment in that factory.

Q123 Chair: But are they working at the moment?

Ian Russell: No.

Q124 Chair: They are not working.

Ian Russell: They are not all working at the moment.

Esther McVey: Equally, that is why I gave the other set of figures where we have helped to find people other employment. As I said, of the 1,148 who have engaged and been part of our personal case worker and support package, 307 have found jobs and 250 are in some form of traineeship.

Q125 Jim McGovern: I am still intrigued by the lack of any sort of clarification about figures. Of the 36 factories, how many people were employed there, how many people remain employed and how many have gone on to find alternative employment?

Esther McVey: What we were explaining is that two factories have remained, as they were going through a commercial process. Others are now opening up as social enterprises, so those were separate figures for those who were employed. The other set of figures that I gave you are for people we have helped get into other forms of work. Some people could be working with Asda, some could be working with Amazon, and some are working with very small SMEs. I said that, of those, 307 are in work and 250 people have gone into other forms of training to get further work. One of them did forklift truck work and is now working with Tesco; others are working at distribution centres. Those were the figures as of Monday, but it is an ongoing process. I get the figures on that every Monday, and every Monday we are pleased to say they have increased. We will continue to support them for the next 18 months.

Q126 Jim McGovern: How many people were employed in the 36 factories?

Esther McVey: I think there were 1,056.

Q127 Jim McGovern: Over the 36 factories?

Esther McVey: Yes. In some of the factories there were 20, while in some there were 40. The total number of people working in Remploy was 2,200, at all the Remploy sites.

Q128 Jim McGovern: And 300 have found alternative employment or are still employed.

Esther McVey: Yes. That was in stage 1 and stage 2; obviously they are still working at the stage 2 sites. You are quite right-we are looking at 1,500. The number of those who came forward to work with us was 1,148; that was the entirety of the numbers from stage 1. That is why we have always got to balance it up against the number of people who are disabled in the UK or in Scotland. There are 6.9 million of those people across the UK and 668,000 in Scotland. That is part of what the Sayce review was all about. We were spending a sixth of the budget, which we have protected, on 2,200 people, when really we had to look at the entirety of people of working age who are disabled. In fact, Peter Hain even said at the time that the Remploy deficit would obliterate any other programmes for disabled people. We have said it, and Liz Sayce said it in the Sayce report. That is what they looked at-how can we best support all disabled people of working age to get them into work?

Q129 Chair: Have I got this right? In round figures, there were 1,000 people engaged, 300 found a job and 200 are still in some form of-

Esther McVey: It is 250.

Q130 Chair: What is happening to the other roughly 450?

Esther McVey: That is sort of where the complication is in getting clarity on the number, because some of those are in the new social enterprises that are setting up at the moment and have wanted to remain there. I can give you the numbers, where they are expected to be employed there in the next couple of months. As you can imagine, some, such as Wigan, started off with only four people, but they are now up to 20. That is what has happened-you have seen those people come back on board, but gradually, because it is a brand new social enterprise. I guess they could not say straight away, "We definitely know we can take on the payroll for 20 people." What they could say was, "We believe we can, and if we do it incrementally, we will see that happen." I can say that, because I watched Wigan do that from day 1-before it set up, when it got its first two people and, as it has proceeded, as with the others. That is really the extra support that we are trying to put in place to make sure that these are successful.

Q131 Lindsay Roy: You said that 34 were sold and two are viable entities continuing under some kind of Remploy umbrella. I take it that there were no bids from social enterprises or from workers’ buy-outs in the 34.

Ian Russell: I have one piece of clarification of what you have just said. Thirty-four were sold, and two were sold but as viable businesses. None of the 36 is now Remploy owned.

Q132 Lindsay Roy: Were any of the 34 sold to social enterprises or workers’ co-operatives?

Ian Russell: We had bids from a number of social enterprises-from employee interest as well as other interest.

Q133 Lindsay Roy: Were any sold to them?

Ian Russell: None of them were successful. The two out of the 36 that were sold as continuing businesses, which were Barrow and Chesterfield, were neither social enterprise nor employee bids.

Q134 Lindsay Roy: The other 34 were not social enterprises or workers’ co-operatives either?

Ian Russell: There are, indeed, some in that figure. As the Minister highlighted, the number of them is increasing. This is out of the 34-

Q135 Lindsay Roy: I am trying to clarify whether a social enterprise or workers’ co-operative put in a bid that was successful among the 34.

Ian Russell: Yes. I am sorry to be seeking clarification again. Start with the 36 in total. The two that were sold were sold as continuing businesses.

Lindsay Roy: I understand that.

Ian Russell: Basically, it was the same work force, with some change, and the same activity, but a new owner. Those were the two. The other 34 did not receive successful bids as a complete business. The factories were closed, the sites were put up for sale and a number of social enterprise and employee bids were made for the sites and the equipment. As the Minister said, out of that 34, a number of new businesses have started using those sites, some of which are owned by social enterprises.

Q136 Lindsay Roy: For clarification, after three months with the initial bid, they were not successful. At the end of the six months, there were some buy-outs. Is that the case?

Ian Russell: Yes. In the bidding for complete, continuing businesses, the social enterprise bids were not successful. The number of successful bids was relatively low-two out of 36-in part because of the TUPE requirement. As a buyer of one of the factories, you have to take the work force on their existing terms and conditions. To answer your question, I think a number of social enterprises found that quite onerous.

Q137 Lindsay Roy: Can I clarify that there are 65 between Cowdenbeath and Leven, not 43? As I understand it, there is only who is not disabled.

Ian Russell: I think I was referring to Dundee, in answer to Mr McGovern’s question. I think you are absolutely right about the numbers for Cowdenbeath and Leven.

Q138 Pamela Nash: I refer to Mr Russell’s comments earlier about what was taken into consideration in a value-for-money calculation. Clearly, there are figures for what that means for Remploy but, in terms of the Government, it was thought of but difficult to calculate. Is this something you support? Are the Government really looking at what this means for the local economies and the people concerned? I appreciate that so far you do not have figures for who is and is not employed, but have the potential for these people being unemployed and the cost on the Government been taken fully into consideration? I would like to ask the Minister for her opinion first; I would be happy to take more detail afterwards.

Esther McVey: Of course all of that is taken into consideration. That is why an independent panel was brought on board-to look at all of those aspects. Equally, we have known that for some time the Remploy factories have had a very uncertain future. We saw what happened in 2008, when 29 factories were closed. Some of the key differentials between then and now are that incentives were put in place, so people just took redundancy and retirement. All of the 1,600 people did that; nobody monitored them, supported them or looked at what happened to the local areas and environment. We did not want to do that this time. We took on board what the Sayce review had said about how to get people into mainstream employment. Equally, we looked at how we could support the individual and the local environment, because you cannot have all that money, in a protected budget of over £300 million, going into failing factories. That is what it was-the money was not going to the individual person. The issue is how we really get them into work.

If we look at stage 2 alone, you have 152 people who work in the Remploy factory and 668,000 people who are disabled. We really have to help all of those people, because there is a significant difference between the numbers. I do believe we can get those people into work, because Remploy Employment Services, which is different from the actual Remploy factories, has found work for 1,700 people with similar disabilities. That is what we have to look at-the whole of the area and, obviously, those individual people. I went up to Scotland twice to meet the various stakeholders-the trade unions, the MSPs and the factory workers-to ask whether we were doing enough and whether we could put more support into the local community, which we have done. We have set up community support funds, so there is not only support with job clubs but also a social gathering and support. To me, that was key, because being in work is not just about work-it is also about the social element of that.

Chair: Before I bring Jim in, I am conscious that we are 35 minutes in and are still on question 2. I would like to get on to some of the detail of the Fife factories. With that hint, Jim, we will take your question.

Q139 Jim McGovern: Minister, I am grateful for the fact that you visited the factory in Dundee, but I am sure you would agree that there was no sense of gratitude from the work force in Dundee saying, "This is a great idea. Shut this factory and put me into mainstream employment." I am sure you are aware that there was a certain opposition, to say the least, to the Government’s plans. I have a question for Mr Russell. You mentioned TUPE-the Transfer of Undertakings (Protection of Employment) Regulations. Can you confirm that, where a bid is successful, the new employer will recognise trade unions, if there is a trade union in the factory? Will they also maintain the pension scheme and the pension rights of the work force?

Ian Russell: The answer to the question is that we would take the employer’s intentions in those regards into account. Clearly, where we are transferring a business, as we did in stage 1, a new owner of the business-whether that is a social enterprise or a commercial owner-has to abide by the TUPE regulations and other employment regulations; TUPE is not the only requirement here. One of the things we get into in the next stage of this process is a detailed discussion with the prospective bidders of what their intentions are. The two points you have mentioned-trade union membership and pensions-would absolutely be up for discussion at that stage. Because we are a public body, on both of those subjects we would be looking to make sure that, where possible, the employee status quo was maintained. We want to retain employment of the work force-that is one of our key objectives in assessing bids-but we also want to make sure that the prospective owners live up to their responsibilities and recognise the rights, because these are vulnerable people who would be transferring out of Remploy to a new employer. Our inquiry of the new employer would be very detailed, to make sure that we were passing responsibility for those employees over to the best possible responsible new owner.

Q140 Jim McGovern: I have one more question, and then I will take a back seat; I apologise for taking up so much time. I am sure that you are aware of article 19, Mr Russell. Has Remploy been using article 19 to try to maintain the factories?

Ian Russell: We have tried. In Scotland in the last five years, we have succeeded in achieving one article 19 contract, worth £1.2 million. As you and others on the Committee will know, there has been an enormous amount of effort, both out of Holyrood and out of Westminster, to try to bring forward more article 19 contracts-for all of the Remploy businesses, not just the Scottish ones, but in this context, in particular, for the Scottish sites. Helen Eadie MSP has been enormously instrumental over time, as have been the two representatives the Committee saw a few days ago, Mr Turner and Mr Moist, who, with Ms Eadie, have been trying for many years to bring forward more article 19 contracts, both for Remploy and, more broadly, for supported organisations. I have to say that in a Scottish context we have been very disappointed at what Holyrood has achieved. One of the reasons why, over the last five years, since the modernisation plan for Remploy was launched, factories such as Leven, Cowdenbeath, Stirling, Clydebank and, indeed, Springburn have been less successful than we would have liked has been our inability to secure article 19 contracts from the Scottish Government. The answer to your question, Mr McGovern, is that we have had one.

Jim McGovern: Thank you for that. It is disappointing, though.

Q141 Lindsay Roy: Can you give an assessment of why you think that failure has occurred?

Ian Russell: I think it is principally for two reasons. In part, we do not always make what the Scottish Government want to buy. Leven and Cowdenbeath make life jackets, principally. There is some demand in the Scottish Government for life jackets.

Chair: They own a large ferry company, Caledonian MacBrayne, so there should be big demand.

Q142 Lindsay Roy: There are also the North sea assets, although they are not directly owned by the Scottish Government.

Ian Russell: Correct.

Q143 Jim McGovern: It seems crazy that the Dundee factory can manufacture uniforms for Japanese armed forces personnel but cannot get contracts for UK armed forces personnel.

Ian Russell: I can only say to both of you that I entirely agree with the points you are making, but you both know that we have been trying pretty hard-and with huge support from Ms Eadie and others-to secure these contracts from the Scottish Government over a number of years. I have now been associated with Remploy for six years. Certainly, while I have been here-I am sure my predecessor would say the same-we have put a huge number of man-hours into trying to secure article 19 contracts. Others have tried on our behalf, but it really has not been forthcoming.

Q144 Lindsay Roy: Is there a distinct lack of marketing expertise within Remploy itself?

Ian Russell: I do not think so. It is often said that the management costs are too high; that is one of the misunderstandings about the Remploy accounts. Actually, most of what are perceived to be management costs are sales and marketing costs.

Q145 Lindsay Roy: We heard last week that there was a perception that there was a distinct lack of expertise in marketing. Indeed, as far as the Leven and Cowdenbeath operation was concerned, we were told, without definitive figures, that Remploy received around £30 per life jacket and the company that sold them did so with about a £100-plus profit. It seems rather strange that there is only a single outlet.

Ian Russell: I will explain the background to that, if I may.

Q146 Lindsay Roy: There has been no diversification at all.

Ian Russell: I think that is not quite right. About 14 years ago, the two factories-Leven and Cowdenbeath-had a serious problem, because the then distributor left us. Ocean Safety stepped in. In that 14-year period of time, two things have happened. One is that Ocean Safety as a distributor has helped us with a network of international sales offices. As you will know, we now sell equipment out of Leven and Cowdenbeath to America, the middle east and Europe, which we did not do before. Secondly-this goes to your diversification point-in that period of time we have developed new, better product, evolving the designs in co-operation with Ocean Safety. I would say that part of the difference between the price that Leven and Cowdenbeath get for the product and the price the product is sold for is to pay for assistance with the product development, all the international marketing and sales offices and, very importantly, the international service centres. As you can imagine, if you deploy a life piece of equipment, you want it to be put back together so you can reuse it. Ocean Safety provides that service to us. All of that is part of the cost differential between what we sell for and what they sell for.

Q147 Lindsay Roy: There does seem to be an exorbitant chasm between the price that Remploy gets and the price at which it is sold.

Ian Russell: I would say that the number of employees in Ocean Safety who are helping to sell and service the equipment and helping with product design is many times the number of employees we have in the Cowdenbeath and Leven factories. It is also worth taking into account that a lot of the sales are bulk sales. Shipping lines will buy not just one life jacket but perhaps 500 or so at a time, so the price that Ocean Safety receives for the product is often quite heavily discounted to achieve a bulk sale in, say, America to a shipping line. It would be misleading to look simply at the retail price, as opposed to the discounted price, and think that that was all of the margin. That is not the case.

Q148 Lindsay Roy: I hear what you say, but certainly the perception among Friends of Remploy is that there is this huge chasm, which they cannot explain-and, indeed, only one outlet. There does not seem to have been diversification of outlet; as I understand it, Ocean Safety is the sole distributor.

Ian Russell: I think it is not quite the sole distributor, but you would certainly be right in saying that it is the main distributor.

Q149 Lindsay Roy: How is it, then, that with a full order book, an international Kitemark and a great export market, it is making a loss?

Ian Russell: Our costs are too high.

Q150 Lindsay Roy: Which costs, in particular?

Ian Russell: All of our costs, really. If you look at the income statement-the profit and loss account-for Leven and Cowdenbeath, the sales revenue that we get barely covers our employment costs. In addition to that, we have to buy materials to make the life jackets and the other life-saving equipment. We have to pay for the rent, the rates, the heat and the light of the factories. We have to pay for things such as payroll services and depreciation on the equipment. That is why the two factories together have a sales value of just over £1 million and lose about £1 million. Our costs are roughly twice our revenue.

Q151 Lindsay Roy: The raw materials are around £800,000.

Ian Russell: I am including that in the £2 million of costs. Even if you took out all overheads-if you pared back the cost base with almost no overheads-I think you would still be looking at a loss of about £800,000 a year, so it is a very difficult situation.

Q152 Lindsay Roy: It has reduced from £1.6 million to £800,000.

Ian Russell: It has got better-absolutely-because we have been working to try to reduce costs and to increase sales. However, I will not pretend-this is a difficult situation. Frankly, that is why we are saying that these are businesses that would have a prospect of being better run under a different ownership, where there might be benefits of scale and benefits of putting our product alongside other products that might lead to more sustainable employment.

Q153 Lindsay Roy: We accept that. What we are seeking together is to get a viable business, to sustain as many disabled jobs as we possibly can-that is the core objective. Is a one-size-fits-all approach appropriate? Are there unique circumstances for each set of factories?

Ian Russell: Yes. I think it is not a one-size-fits-all approach. There is a framework that, I agree with you, is common but, within that framework, we work hard to try to meet the aspirations of individual sites and the requirements of individual bidders. We are now running a process over 18 sites in total. The people we are dealing with as prospective bidders are mainly in the commercial world-they know what this looks like and what they expect to see. That is why we have KPMG alongside us giving us its expert advice. It starts off as a uniform process, but, once we engage with somebody who has expressed interest in acquiring or working with one of the factories, we really do try to tailor our approach to suit that particular bidder, where we possibly can. We have been very interactive, not just with bidders but also with councils and Scottish Enterprise, as well as with the Minister and her Department, obviously, to try to make sure that we really do maximise-

Q154 Lindsay Roy: With all due respect, that does not match with Iain Duncan-Smith’s response to Gordon Brown, in which he said that there was no opportunity for flexibility. What kind of flexibility is there? If you are saying that there is some flexibility in the dealings with each individual company, that is very welcome.

Ian Russell: I think the Secretary of State was referring to Mr Brown’s request for flexibility over timetable and money. I think Mr Brown had asked whether the timetable could be extended and whether more money could be provided; I am paraphrasing the request. I believe the Secretary of State pointed out that, in fairness to all bidders, we had set a timetable. Interested parties were aware about a year ago of the prospect that these sites might now be made available for sale; the data that are in the data room for the expressions of interest have been there for between three and four months, which is longer than a normal commercial process would be. I think the Secretary of State was indicating that, in fairness to all the bidders and, indeed, the businesses themselves, we should stick to the timetable that we had set out. My point is that within that timetable we will work as flexibly as we can with individual bidders.

Q155 Lindsay Roy: That is not reflected in the timetable that we have-from January to March for the outline bids. That is a three-month period.

Ian Russell: In December, we made information available about the future sale and the commercial process for these sites. As I said in response to a question from Mr McGovern, we have put a lot of very detailed cost, revenue and balance sheet information into the data room. We have engaged with everyone who has expressed an interest in making a bid to try to help them to see what is required and put a bid together in that way, wherever we can. Really, 12 weeks is long enough, certainly in a commercial environment, for the high-level response we are looking for by the end of next week. It is not that difficult an exercise at this stage.

Q156 Lindsay Roy: How many of the 11 bidders have accessed the data room?

Ian Russell: There are 18 in the case of Dundee and 11 in the case of Leven and Cowdenbeath. All those expressions of interest have access to the data room if they have all signed the non-disclosure agreement and the conflict of interest document.

Q157 Lindsay Roy: How many have signed the non-disclosure agreement and the confidentiality document?

Ian Russell: I can tell you that next week when we are successful with the bids.

Q158 Lindsay Roy: As I understand it, some are still waiting for the information. Some of them have had it in the last two weeks.

Ian Russell: I think the only thing that has held up providing information-this goes back to my earlier answer to Mr McGovern-has been the to-ing and fro-ing over the signing of the non-disclosure and confidentiality agreements. As soon as those have been signed, access to the data is there. I want to leave you with the impression that we have been working actively with people who have expressed an interest in these sites. We have had 29 expressions of interest. We have been phoning on a regular basis all of the people who have expressed an interest to try to make sure that, where they can, they get in a bid. Our interest is to have, by the end of next week, as many credible, sustainable bids that secure employment for disabled people as possible.

Q159 Lindsay Roy: I assure you that I have been working hard on behalf of the local area and Remploy to ensure that that is the case and that we have as many potential bidders as possible.

Ian Russell: I know from our earlier meeting in January that you have put a lot of effort into this. We thank you for that.

Q160 Pamela Nash: It is my understanding that there may be people who are interested in bidding on Remploy Marine but may not be clear on what detail would be expected of them in a business plan. I know the deadline is next week, but the final offer deadline is not until the end of May. Is that correct?

Ian Russell: Yes, that is correct.

Q161 Pamela Nash: Is there anything you could say that could help those potential bidders that may not yet have expressed an interest or submitted a business plan?

Ian Russell: The only thing I would suggest is that on our website there is an e-mail address for getting into this process. If there is anybody you know of who would like to engage with us, if they e-mail us this afternoon, there is absolutely still time for them to get in a bid. We will give them every support that we can to do that.

Q162 Pamela Nash: Would they be advised of what would be expected of them in a business plan, in terms of the level of detail that is required?

Ian Russell: Absolutely. We have talked to all the people who have expressed interest to explain to them what is required and have shown them the data that are available to them. They could e-mail me, if it would be helpful; if you want to put them in touch with me, I will very happily get them involved in the process.

Q163 Chair: Could I clarify something? You said there had been 11 expressions of interest in Remploy Marine Fife. How many of those have actually signed a non-disclosure agreement?

Ian Russell: We will know with certainty at the end of next week the number of people who have signed a non-disclosure agreement and the number of bids that we have received.

Q164 Chair: Do you know at the moment how many have signed the non-disclosure agreement?

Ian Russell: Because we are running a commercial process, we are not giving out that information. We will be able to give you that information at the end of next week.

Q165 Lindsay Roy: It seems strange that you cannot even give us a number-not the names.

Ian Russell: Let me illustrate why. If you are bidding for one of our sites and, because of something I say, you know that you are the only bidder, suddenly we have put you in a very advantageous position. I am very keen to keep a level playing field. We have had 11 expressions of interest, and 18 for the textile businesses. I hope you will appreciate that one of our responsibilities is to keep a level playing field. We really must do that. If we give you information in advance of putting it in the public domain, it puts us in a very difficult position.

Q166 Chair: I accept that. The reason for asking the question was that the evidence we heard last week suggested that Fife council, in particular, was having difficulties with the non-disclosure agreement. Has Fife council discussed its difficulties with you?

Ian Russell: Yes, it has.

Q167 Chair: Clearly, as of last week, it still had difficulties. Do you accept that these are genuine difficulties? Do you think there is a way round this?

Ian Russell: I hope that there is a way round it, because we would like it to have access to the data room and to submit a bid. Very briefly, the background to this is that it expressed an interest. We engaged with it as described and explained to it what the non-disclosure agreement and the conflict of interest document would involve. It took that away to its lawyers. Its lawyers wanted to make changes to the standard documentation and sent it back to us. We tried to accommodate that and sent it another version to sign. It showed that to its lawyers, who wanted further changes that were not in the first round and sent it back to us. We tried to accommodate that and sent it a third version; I lost count there. It has had three versions from us, in which we have tried to take account of its comments. We sent it the last version-the third version-between two and three weeks ago, and we have heard nothing from it since. Other councils have been able to sign this documentation and get access to the data room. I am a bit perplexed as to why it is such a struggle for Fife, to be honest.

Q168 Lindsay Roy: Can you understand why Fife council came to you with these queries about the non-disclosure agreement?

Ian Russell: Because its lawyers had advised it not to sign the standard version. It wanted an amended version.

Q169 Lindsay Roy: Was that because it felt that there were problems about breach of confidentiality if it contacted the Scottish Government, Dundee city council or any other council and shared the information?

Ian Russell: I think that was part of it, although I am not sure that that was all of it. We have explained to the council what the situation is. We thought we had got it over that hurdle but, two to three weeks later, we are still waiting to hear from it.

Q170 Lindsay Roy: That is not my information.

Ian Russell: It is mine. Could we talk outside the Committee? I am very keen to get Fife council involved.

Q171 Lindsay Roy: I have checked with David Ross; I spoke with him this morning. As far as he was aware, it had still not been finalised. That is a brake on the council’s possible opportunity to engage and, indeed, through business gateway, to try to support any other people who are interested in putting together a bid-for instance, by finding a vacant factory that might suit a bidder.

Ian Russell: I think it is factually correct to say that the ball has been in its court, so to speak, for two to three weeks. It may think it has put it back to us, but as of 10 o’clock this morning, certainly, we had not received anything. Perhaps you and I could speak after the Committee meeting. I am very keen to get it in.

Q172 Chair: Are the issues that Fife council is raising issues that have been raised by other organisations?

Ian Russell: No.

Q173 Chair: Are they unique to Fife council?

Ian Russell: They seem to be unique to Fife. I am sure it feels they are legitimate. It is just frustrating for us, and probably for the council, that four or five weeks have passed and it has not managed to get into the process.

Q174 Lindsay Roy: Given these circumstances, is there any flexibility in terms of the deadline date for Fife council beyond 28 March?

Ian Russell: In fairness to all bidders, the deadline is the end of next week. As I mentioned in answer to an earlier question, if people will contact us today, there is still time to put in a bid. We would be very happy to help them get their outline business plan into us by the end of next week.

Lindsay Roy: I will certainly do that in the second half of this week.

Ian Russell: Thank you very much.

Q175 Pamela Nash: Minister, there is a quote in the press from a DWP spokesperson talking about Marine Textiles Fife. It says, "If bidders come forward with a credible plan to safeguard jobs and put the marine textiles business on sustainable long-term footing, then requests for extra funding will be considered as part of the commercial process." Can you confirm that that is the case?

Esther McVey: I am not really sure what the extra funding would be. I know what funding and support we have put in place, whether that is tapered wages over a three-year period or support with the business plan. I know in a very separate way that Scotland has offered a sort of recruitment incentive for ex-Remploy staff who want to work elsewhere. I do not know what that quote is. Jeremy, am I right there?

Jeremy Moore: I can only assume that, as the Minister said, it is a reference to either protection of the employee subsidy or the Scottish Government’s offer. There is no plan to put any additional financing into the scheme.

Q176 Pamela Nash: The subsidy is a standard three-year figure-is that correct?

Jeremy Moore: Yes.

Esther McVey: It is exactly £400, tapering over three years.

Jeremy Moore: Yes, over three years.

Q177 Pamela Nash: It is £400.

Jeremy Moore: That is right-in the first year.

Q178 Pamela Nash: And in the second year?

Ian Russell: I think it is 4.8 in the first year, 1.0 in the second and 0.6 in the third, so 6.4 in total.

Q179 Lindsay Roy: It seems that there are things on which we get mixed messages from the DWP and from Remploy business inquiries. It does say here that "extra funding will be considered as part of the commercial process".

Esther McVey: I do not believe that any mixed messages have gone out on that, because we check and double-check what goes out. Maybe you have a quote from the media and there was a misinterpretation somewhere along the line, but what goes out, what is on the Remploy website and what comes out from us would be one and the same.

Q180 Lindsay Roy: This is a quote from the Dundee Courier on Monday 4 March.

Esther McVey: Possibly the Dundee Courier was not as rigorous as we are when we put out our information.

Jim McGovern: You are probably right.

Q181 Lindsay Roy: This is not a trite point. It was quoted from a DWP spokesperson.

Esther McVey: Have we a name for the DWP spokesperson? As a generic person like that, people can give quotes that are not necessarily correct.

Lindsay Roy: I understand that, but I can also understand the confusion that that has caused within the community.

Q182 Pamela Nash: Just to be clear, are you saying that this quote that has been attributed to the DWP is not an official quote?

Esther McVey: I am saying that we do not know where that is and the question is thrown back-absolutely.

Q183 Chair: Minister, at the end of the Adjournment debate on 15 January, you agreed to meet local Members and all the relevant parties in Scotland. Could you tell the Committee whom you met and how the meetings went?

Esther McVey: I have had various meetings up in Scotland. I had one in October, when I went to Edinburgh and met a selection of 20 MSPs at Holyrood. I went back on 4 February, when I went to Dundee and Leven. Again, I met various stakeholders. I went to the various factories and met trade unions. The aim was really to have as open and frank a conversation as we could on both sides, whether it was the employees or myself; Jim and Lindsay Roy can witness to that. Key to that visit was not only an engagement and an explanation of how people could tender, enter the process and put forward expressions of interest-clearly, we went through all of that route-but equally, through the media, to see whether people were interested. It was really to ask whether anyone else had expressions of interest, although that had been done quite rigorously beforehand through KPMG and Remploy. The visits hit upon many subjects and areas.

Q184 Chair: Did you have discussions with the Scottish Government about how they could help to encourage a co-ordinated approach to the phase 2 sell-off?

Esther McVey: I did indeed. I went there with representatives from Remploy and from DWP who were part of the commercial process, because I thought I might not be able to answer the questions but other people there could. It went from things as simple as gathering together people who are interested to quite in-depth discussions about people perhaps not putting in just a single bid because they might want to put in a bid for the business, which in this instance would be across Leven, Cowdenbeath and Dundee. All those issues, as well as the time plan-the timing of how this was to proceed-were discussed.

Q185 Chair: Did the local authorities that you met have any concerns to raise about the process?

Esther McVey: The one that seems to have come through is Fife. As has been said, Dundee was happy to proceed and felt it had all the information that was required, but obviously this issue for Fife seems to have rumbled on.

Q186 Chair: You can appreciate our difficulties, because we had Fife here last week saying that it was unable to sign the non-disclosure agreement and we have Mr Russell here today saying he thought he had answered all the issues that it had raised. Is there anything that you as the Minister can do to bang heads together, shall we say, to try to get this resolved?

Esther McVey: I tried again, because everybody was up for a meeting with the Secretary of State, to get people round a table to say what we could do. From that, straight away the lawyers from Remploy and Fife had the first contract. As has been said, it seems to have gone through three different redrafts. Again, Fife has to figure out why it has difficulties with that when we have seen that nobody else has. I did put it together with Dundee to see why Dundee found it acceptable and not Fife. Obviously, I cannot answer on its behalf.

Chair: Right.

Q187 Lindsay Roy: Just for the record, Fife councillors believe that Dundee may be open to legal challenge. There is an issue I want to raise. Does the non-disclosure agreement not inhibit collaborative approaches, simply by the very nature of non-disclosing?

Ian Russell: Provided that both parties are happy to collaborate-

Lindsay Roy: It may be more than two.

Ian Russell: Provided that all parties are happy to collaborate-I am sorry; I did not mean to limit it to two-and sign a non-disclosure agreement between them to that effect, there is no problem. All we are trying to do, as I am sure you will appreciate and would want us to do, is to protect the information from a commercial and confidential perspective, to confine its knowledge to those people whom we know. If two, three or more parties want to get together in the sort of collaboration the Minister just referred to, the documentation we are asking people to sign absolutely does not prohibit that. What we are asking them to do is to be up front about it-to tell us that they are doing it.

Q188 Lindsay Roy: When we met the Minister before, we asked for some examples of case studies. I am afraid the recipient found them less than helpful. In fact, he described them as tokenistic, because they are really just four lines of paper.

Esther McVey: I think they wanted to understand what other factories in other areas had done. As a simple example of the various types of businesses, social enterprises and mutuals that had sprung forth, we were saying, "This is what has happened in various parts of the country." Again, I would not have business plans or anything like that. Maybe they are not sure what information they seek.

Q189 Lindsay Roy: What they were looking for were examples of how various groups have collaborated in putting forward a bid, to a non-disclosure agreement.

Esther McVey: It has shown both the uniqueness and the difference across the country, with different people who really wanted this to happen and how they were making it happen. Maybe there is the difference.

Q190 Lindsay Roy: There is nothing here to indicate that. The expectation was that there would be more detail of how this had been arrived at in the various examples you have given.

Esther McVey: But it has to be from themselves as well-what it is they want to happen and how they think it is going to work. These are very different businesses, so how could they explain that on behalf of somebody else? It has to be their motivation.

Q191 Lindsay Roy: I understand that. What they were looking for was some models to work from.

Esther McVey: I think they need to look to themselves for that.

Q192 Lindsay Roy: I do not disagree that they have to look to themselves, but in any scenario there are procedures where people can be helped, aided and supported through a process if they are not very clear themselves.

Ian Russell: One of the offers of assistance, certainly for employee collaborative bids, has been-as was the case last year-the offer to provide £10,000-worth of support. This may be what you have in mind, as it would allow somebody who has a keen interest, as the Minister said, but maybe not all of the expertise required at this stage to use the £10,000 allowance to bring in that expertise. Last year, that was certainly taken advantage of, in the sense that people took up that offer. If that would work this time round, it might be the solution. Again, if you would like to put the people you have in mind in touch with me or one of my colleagues, we would be very happy to try to help them to get that done.

Q193 Lindsay Roy: I can contact them to see whether that is how they wish to proceed.

Ian Russell: Okay.

Chair: I think we have covered questions 1 to 14. Do members of the Committee have anything else to add?

Q194 Lindsay Roy: I want to clarify the position on value for money. Can you confirm that a key component of this is sustaining employment of disabled workers and that the criteria will not be that you go to the cheapest bidder?

Ian Russell: That is absolutely correct. The criteria are continuing the employment of our disabled people, financial sustainability-that is to say, it is not a business plan that will fail in the first sixth months-and, only thirdly, the value-for-money test.

Q195 Lindsay Roy: And the value-for-money test is?

Ian Russell: It has to be better for Remploy than the cost of closure-with, as we discussed earlier, the more subjective overlay, because it depends on the mix of staff and the location, the alternative costs for those employees.

Q196 Lindsay Roy: Can you understand why, when there was discussion of a negative consideration bid, people felt that that was an opportunity for asset stripping?

Ian Russell: I can understand it.

Q197 Lindsay Roy: Can you give us an assurance that that is not the case?

Ian Russell: I can absolutely give you the assurance. Going back to my earlier answer, one of the reasons why we have an independent panel, including someone put forward by the Scottish Executive, overseeing the whole process of receiving bids and which ones get taken forward, is to make sure that we do everything possible to make sure that the successful bidders are only people who have the welfare of our disabled employees and other employees at heart and have a sustainable business plan to keep their employment going forward, as well as meeting the financial test. The Department, KPMG, the independent panel and the board of Remploy all look in detail at every bid and business plan that comes forward to try to make sure that we avoid the situation that you have just described.

Lindsay Roy: Those are all the questions I have at the moment.

Q198 Jim McGovern: I have a point for clarification. Mr Russell, I think you said there were 11 plus 18 expressions of interest. What is the difference there?

Ian Russell: I am sorry for not being clear. We had 11 expressions of interest for Leven and Cowdenbeath. We had 18 expressions of interest covering the other textile factories-Dundee, Clydebank, Stirling and Birkenhead.

Q199 Jim McGovern: I see. So there has been an expression of interest in Dundee, although you are not able to divulge just what it is.

Ian Russell: Correct. We had 18 covering the other textile factories, including Dundee.

Q200 Lindsay Roy: Are you in a position to tell us about the intellectual property rights?

Ian Russell: For Leven and Cowdenbeath, in particular?

Lindsay Roy: Yes.

Ian Russell: Absolutely. As you may know-it is in the data room-a lot, though not all, of the intellectual property rights were jointly developed over the last 14 years by Ocean Safety and Remploy. This is the collaborative work I referred to earlier. We have been very grateful to Ocean Safety for that. We have benefited from the introduction of new product, which has helped with sales and the internationalisation of the business to America, Argentina, Denmark and the UAE. The consequence of that is that, in some cases, the property rights are jointly held. Any bidding process or new bidder would need to take that into account.

Q201 Lindsay Roy: Finally, do you accept that there have been some shortcomings in terms of the transfer of information when people have expressed an interest?

Ian Russell: I am not sure I understand the question. Could you clarify it, please?

Q202 Lindsay Roy: We have been told that there have been delays in getting information from Remploy business inquiries and that has inhibited their approach.

Ian Russell: I am certainly not aware of that, other than the point we discussed earlier about not giving information to people unless they sign the non-disclosure agreement and the conflict of interest agreement. As far as I am aware, as soon as people have done that, they have had access to the data room and have had all the information that we discussed earlier. The data room is electronic, so as soon as you have signed the non-disclosure agreement and the conflict of interest agreement you can go online and look at the information. There is no delay through documents arriving in the post or something of that sort-it is just there.

Q203 Chair: Has any organisation other than Fife council expressed problems with signing the non-disclosure agreement?

Ian Russell: I am aware that Scottish Enterprise had some difficulties, but we resolved those with it very quickly.

Q204 Jim McGovern: Dundee city council also expressed concerns. I wrote to the Minister and, I believe, the Minister passed the correspondence to Remploy. I assume that Dundee now has the information.

Ian Russell: It has had it for some time. I thought the question was about problems that have been lengthy and ongoing. You are right that Dundee also had issues, but those were resolved very quickly. Dundee is in the data room.

Q205 Chair: So, as far as you are aware, Fife council is the only organisation whose problems with the non-disclosure agreement have not been resolved?

Ian Russell: Correct.

Q206 Pamela Nash: Can I ask a follow-up question? Mr McGovern mentioned the problems with Dundee, and you said that they had been resolved quickly. Are there any situations where this has occurred, they have not been resolved and the other person has walked away from the table?

Ian Russell: None that I am aware of. The only one that comes close to what you have asked about is the situation with Fife council.

Q207 Lindsay Roy: Just to clarify the position again, you are saying that it is not a one-size-fits-all approach-there is a degree of flexibility.

Ian Russell: Correct, but there are-

Lindsay Roy: Within parameters.

Ian Russell: Yes. There is flexibility over some things. There is not flexibility over timetable and money.

Q208 Lindsay Roy: Can you give us an idea of what things there is flexibility about and what there is not flexibility about?

Ian Russell: There is the example we talked about earlier of the assistance given to a bidder to try to help them put together a business plan. There is the example of our phoning people who have expressed interest on a regular basis to make sure that we are doing everything we can to support them in preparing and making a business plan proposal next week. There is flexibility in terms of access to the site. Where that has been requested, we have tried to be as flexible as we can over dates and access in that way. I know that money and timetable are two big issues, and there is no flexibility there, but, on everything else on which we can be flexible, we have done our best.

Chair: Do members of the Committee have any other questions?

Q209 Jim McGovern: I have one point for Mr Russell. It is a business question, so your answer may be a matter of opinion rather than a matter of fact. In the Adjournment debate that took place in January and to which the Minister responded, the former Prime Minister, Gordon Brown, the right honourable Member for Kirkcaldy and Cowdenbeath, said that, in order for the Fife factories to survive, they would need the Dundee factory, because the Dundee factory has the cutting machinery. Would you concur with that?

Ian Russell: I think the cutting that is done at Dundee could be done in two other ways. One is that the equipment that is in Dundee could be transferred with the Leven and Cowdenbeath factories, so I do not think it requires all of Dundee.

Q210 Jim McGovern: That is not the answer I was looking for.

Ian Russell: You asked for my opinion, and I am trying to give it.

Jim McGovern: I appreciate that.

Ian Russell: The other possibility is that it could be done elsewhere, as there is a lot of capacity for cutting within the UK. I know it is not the answer you are looking for, but I do not think the success of a bid for Leven and Cowdenbeath depends also on a continuing business in Dundee. The cutting is important, but the whole of Dundee is not vital for the continuation of Cowdenbeath.

Q211 Jim McGovern: But presumably it would make good business sense for the three of them to work in conjunction.

Ian Russell: I think that the business sense for the cutting in Dundee is there-absolutely. In terms of the rest of the Dundee plant and whether it makes sense to see the three together, as opposed to two factories plus the cutting, I think that is a struggle, to be honest. The cutting in Dundee is an absolutely crucial part of the Leven and Cowdenbeath product line, but that can be done other than in Dundee.

Jim McGovern: I appreciate your honesty.

Ian Russell: Sorry.

Q212 Chair: Before we finish, is there anything you want to add that you feel would be useful for the Committee to know?

Esther McVey: I am fine.

Lindsay Roy: Can I say a personal thank you to you for coming to Fife, discussing these things with us and showing an interest in the particular factories and the situation they find themselves in? We are trying to work together to get the best possible outcome.

Chair: Thank you very much for coming, particularly since we did not give you much notice. We have found it very useful this afternoon.

Prepared 27th March 2013