Remploy Marine Fife

Gordon Brown Excerpts

Tuesday 15th January 2013 Commons Chamber

[Mr Gordon Brown (Kirkcaldy and Cowdenbeath) (Lab)]

I rise on behalf of myself, my hon. Friends the Members for Dunfermline and West Fife (Thomas Docherty) and for Glenrothes (Lindsay Roy), and, I believe, the whole communities of the county of Fife to urge the Government to save the jobs, the work programme and the marine business of the Remploy factories in Leven and Cowdenbeath in Fife. The two factories, set up in 1948, have been part of the industrial fabric of Fife for six decades. These factories, like those in Dundee, which is represented here today, Stirling and other parts of Scotland and the United Kingdom, have trained and employed thousands of workers with disabilities over the past 60 years, who have found confidence from working in these units. As I will show in a minute, these factories in Fife have an order book and an established product that people want to buy. Indeed, the order book could be rapidly extended in the right circumstances and, as I will also show, two prospective buyers have indicated to me and to my hon. Friends the Members for Glenrothes and for Dunfermline and West Fife that they would be interested in purchasing the factories.

I am pleased that the Secretary of State, as well as the Minister, is here this evening. These factories cannot be expected, in current circumstances, to be able to move from making a loss of £1.6 million two years ago and a prospective loss of £800,000 this year, to overnight financial viability under the Government’s proposals, even with the subsidy that is on offer for a short time. I want to show the Government why they have to be more flexible in ensuring that jobs that can be saved and should be saved are actually saved, and that these privatisations do not become either the liquidations of factories in Leven and Cowdenbeath, as has happened in so many other parts of the country, or the decimations of the work force. They also need to ensure that that does not happen at one of the most difficult economic times and in circumstances where the most vulnerable workers need our support.

We could talk about the general history and the policies being applied to Remploy, but I want to talk specifically about Fife, and about Leven and Cowdenbeath in particular. I wish to suggest that the Secretary of State and his Minister join a meeting with the Scottish Government and the council of Fife; this should be a tripartite group that works together to devise a plan that gives financial viability over a period of months to these factories, which we accept the Government are determined to sell on but which, in my view, could be saved.

Why do I say that? I do so because the assets of the two factories, which I have known for 30 years, are not just a loyal, dedicated and committed work force, who have made enormous sacrifices over the past year—the wage bill has been cut by 30% from £1.6 million to £1.1 million—but a product that is well established across the world as one of the most successful and sophisticated products available for marine safety. The factories are producing 30,000 of these garments each year, and I am told that they could easily move to 40,000, an increase of more than 25% or 30%. That is easily achievable in the existing factories. The design is selling not just in this continent, but worldwide and there is a market that I know can be extended over time.

Of course, the assets are not only physical assets—the ability to produce a large number of goods—but that of our having managed to approach two prospective buyers who are interested, in certain circumstances, in purchasing the factories and who would be prepared, if the conditions were right, to take over the factories and ensure that, after a short period, they are viable.

What is the problem that has to be solved? It is clearly this: the financial viability of these factories is incredibly difficult in the current circumstances, given that they have had losses of £1.6 million and, we expect, will lose about £800,000 this year—they have halved their losses, but they are still substantial losses for two small factories—and given that they have fixed costs as well as overheads and raw materials that mean that the input costs are very high indeed. Rents and rates are £57,000 or so and they pay £200,000 in central administration costs, which could be reduced but not entirely eliminated, as that figure covers insurance, payroll and a number of unavoidable administrative items. They need to buy in materials, obviously, at a major cost of £800,000 for the factory. That cost can be reduced significantly over the next few years, but it will not be reduced overnight unless we can take extraordinary action.

We have a product that people want to buy, a market that could be expanded, a sophisticated good that is world leading and an order book that is full—of course, the buyers would be prepared even now to extend the orders beyond the date they have been given—but the costs have historically been high and so, before even a penny is paid in wages, the factories are having to fork out more money than the sales revenues they receive from their goods. That is the problem we have to address.

Of course, the terms on which the Government will sell the two factories allows a buyer to come in and offer less than £1.2 million, which will be the cost of redundancy. It is possible that someone could take the factory off the Government’s hands and be paid about £1 million to do that. The problem, however, is that that redundancy cost might at some time have to be paid out and no responsible person would tell the buyer that they should not safeguard against the possibility that the redundancy costs will have to be paid. We must come up with something better.

I say to the Minister and the Secretary of State that the £6,400 subsidy that is on offer for three years—an average of about £2,000 a year, although it is about £4,000 in the first year—cannot overnight eliminate losses that were more than £20,000 per employee two years ago and are probably about £12,000, £13,000 or £14,000 per employee at the moment. The idea that a subsidy that averages £2,000 can eliminate the shortfall overnight is impossible. Today, I talked to the Minister in the Scottish Parliament, Mr Fergus Ewing, about what he can do to help. My view, and that of my colleagues and Fife council, which has also been involved, is that there is a way forward for a viable product, that the Government should try to make these two factories work and that they need to give them the time that is necessary to achieve viability. The employment support that should be on offer must be greater in this case than the average of £2,000 a year. That is simply inadequate to bridge the gap between the current losses and the financial viability that is obtainable.

The Scottish Parliament is prepared to pay £5,000 per disabled employee over a period of 18 months. That would make a difference and I welcome it. I know that Fife council is prepared to do more, because it has an employment fund to help people secure jobs. If we are to save these two factories, which I have known for 30 years and which do spectacularly good work, we need the Government, the Scottish Administration and Fife council to come together. I urge the Minister to consider this proposition.

[Jim McGovern (Dundee West) (Lab)]

I have a Remploy factory in my constituency and we have set up an action group composed of MPs, MSPs, elected local councillors and so on. May I urge my right hon. Friend to use his good offices to ask Fife council to contact Dundee council to see whether we can work together to form some sort of co-ordinated rescue package?

[Mr Brown]

Of course. The cutting equipment that is necessary for the raw materials that produce the manufactured goods in Fife is in Dundee. If a rescue is going to work, there must be some relationship between what happens in Leven and Cowdenbeath and in Dundee. We will follow up my hon. Friend’s suggestion about a meeting between Fife and Dundee.

I urge the Government to agree to hold a meeting, preferably in Fife, with representatives of the Government, the Scottish Administration, who have agreed that they will attend such a meeting, and Fife council, who will be there, to see whether the combination of what is on offer in employment support can achieve the financial viability over a short period of time that is essential if this product is to be produced in Britain. It will be sold and made somewhere, so the only question is whether it will be produced in Britain and not, as is likely, in Asia or elsewhere in the world.

The price of failure is that 50 or more Remploy factories will move from privatisation to liquidation. If they do not move to liquidation, it will mean the decimation of the work force. I know that large numbers of people employed in Fife will never work again, despite the employment support that is available. We will be throwing away the opportunity to make a viable product, which with help to make it financially viable is one that people will be prepared to buy not just in this country but around the world.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I congratulate the right hon. Gentleman on bringing the issue to the House. I highlight not just the £5,000 the Scottish Government have committed over and above the support from the Department for Work and Pensions, but also the support through Scottish Enterprise for potential bidders. There could be a whole package of measures if people work together.

[Mr Brown]

I hope there is financial support from Scottish Enterprise. I have not yet seen it. An 18-month subsidy will not be adequate to bridge the gap between the losses incurred at the moment and financial viability.

The price of failure is that large numbers of people will lose their jobs, but success could be achieved by all the parties working together—the UK Government, the Scottish Administration and the Labour-led council. That could mean that at least two of the units that at the moment most people would say are more likely to fail than succeed could be brought into viability to extend their output and create more jobs in a community that desperately needs them. I hope that the Minister will also listen to my hon. Friends the Members for Glenrothes and for Dunfermline and West Fife.

--- Later in debate ---

[Esther McVey]

I am running out of time and there is lots to say, so on this occasion I will not give way.

What is the vision for people with disabilities in the workplace? It is not our vision—we went out to disability experts and organisations and asked them to review the disability employment support and what we should be doing. They strongly supported the idea of moving away from the Remploy model. First and most importantly for the 21st century, they felt that we needed to get more disabled people into mainstream work. We need to get more disabled people into work because at present only 46% of working age disabled people are employed, compared with 76% of people who are not disabled. That means that there is a 30% gap in the employment rate and 2 million people out there whom we have to support.

In conclusion, the vision is that the money that has been protected must follow the person and will not go to loss-making businesses. Let me put that in context. Although the factory at Leven generated about £1.2 million in revenue for 2011-12, it is running at a loss of more than a third of a million pounds per annum. The factory at Cowdenbeath generated just under £0.8 million, but it loses £0.5 million in revenue per annum. We could use all that money to help support people with disabilities into work. We can help each one with, on average, £3,200 to get into work.

Of the 668,000 people with disabilities in Scotland, 152 work in a Remploy factory, but last year Remploy Employment Services got 1,700 people with similar disabilities into work. That is what we have to do—support all those people.

To answer directly some of the questions that have been asked, the Remploy commercial process is designed to maximise the number of jobs for disabled people. We are seeking viable bids for its business, wherever possible, and getting the best offers we can to come forward. That is what it is about—supporting disabled people.

Remploy is offering a three-year tapered wage subsidy of £6,400 per disabled person. The right hon. Member for Kirkcaldy and Cowdenbeath has said that that subsidy is insufficient and has called for more money, but how did we come to that figure? We worked on past precedents. The right hon. Gentleman’s Government put wage subsidies in place for Workstep and we were guided by that, but the subsidy is worth more than that and other subsidies, such as the Youth Contract. We also have to strike a balance between the needs of Remploy’s disabled employees and those of other disabled employees, to whom we cannot offer that wage subsidy.

Yes, we have to take into account support for the workers, but not in a way that affects the commercial market for other companies in the marketplace. Significantly increasing the subsidy and support provided to existing businesses risks the very test that the commercial process seeks to perform, in that a business must demonstrate that it can be viable without continued Government subsidy. We have given Government subsidy in the past and, as I have said, the past modernisation plan failed—£555 million was put into it over a continuous period and it did not work. Therefore, we have to look at what is feasible and viable and at how we can move forward.

[Mr Gordon Brown]

rose—

[Esther McVey]

I have three minutes to go, but I will give way to the right hon. Gentleman.

[Mr Brown]

This debate is about Remploy Marine Fife and questions need to be answered about it. I have made a practical proposal that the Government, the Scottish Administration and Fife council should meet and look at flexible arrangements, so that the shortfall is eliminated as quickly as possible for a viable product. Will the Minister agree to those meetings?

[Esther McVey]

I will, indeed, agree to those meetings. In fact, I will be in Dundee on 4 February and I will be more than happy to meet Members.