HC Deb 13 May 1999 vol 331 cc525-32

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

7.17 pm
Mr. Harry Barnes (North-East Derbyshire)

Renishaw is a small, compact community—there are fewer than 1,400 people on the electoral register—which suffered a number of years ago from a pit closure at Renishaw Park, which devastated the community. On 22 April, a foundry went into receivership, which led to 140 people being made redundant. Another 40 people continue to work at the foundry, wondering about their future.

Renishaw foundry is now cosmopolitan. Many people who were employed there came from the constituency of my right hon. Friend the Member for Chesterfield (Mr. Benn) and a number also came from the constituency of my hon. Friend the Member for Bolsover (Mr. Skinner)—about one third were from my constituency. However, we are talking about more than 140 job losses, as many suppliers and haulage firms will be affected, as will those who are dependent on people in the community having a full wage packet.

Why did the job losses arise in such stark circumstances? The receiver moved in on 22 April and, almost immediately, 140 workers were made redundant. They had not known that that would occur, although they feared that it might. The community was devastated.

In October 1997, Carbo Ltd. leased 5.8 acres out of a 13.4 acre site in Chesterfield, which it leased to a firm that called itself Bryan Donkin Foundry Ltd., although the company had previously had nothing to do with the foundry.

The first payment was planned to be £375,000. In July 1998, the new company purchased Renishaw foundry from British Steel for £800,000 and took on British Steel's pension and other liabilities. The land was bought by a company called Renishaw Properties Ltd. for £35,000. However, the major shareholder of Bryan Donkin Foundry Ltd. and Renishaw Properties Ltd. is a Mr. Ling. There is a clear connection between the two companies.

In the meantime, Carbo Ltd. persuaded Bryan Donkin Foundry Ltd. to relinquish the lease at Chesterfield by waiving the outstanding initial fee of £375,000 and promising £500,000 if any profits were made later from a property deal that it hoped for on the site. I shall deal with the property bonanza later, but it was that favourable arrangement that allowed the company to purchase Renishaw foundry.

In return, Bryan Donkin Foundry Ltd. moved about 100 workers and some machinery to the Renishaw foundry, where only 70 workers were then employed. That was completed by the end of 1998. In 1999, and perhaps in the months before, Bryan Donkin Foundry Ltd. lost money hand over fist, even though it did not pay any rent in that period to its other half, Renishaw Properties Ltd. No accounts have been recorded in Companies house for Bryan Donkin Foundry Ltd. or Renishaw Properties Ltd. I understand that the auditor would not sign the Bryan Donkin accounts because he felt that the company was not viable.

Let us consider the gainers and losers in those interlinked transactions. The workers are clearly losers, with 140 made redundant and 40 facing an insecure future. The firm's collapse means that they are not entitled to jobseeker's allowance payments for several weeks. They are entitled to a week's redundancy money for each year that they have worked, but as my hon. Friend the Member for Amber Valley (Judy Mallaber) discovered from a question that she tabled, it takes nine weeks on average for the redundancy payments office to deliver payments.

The only substitute for JSA payments is income support on the ground of urgency, yet out of 90 cases in jobcentre areas in north Derbyshire, only six have been given income support so far, and two are due to get it shortly. That is because all income in a household is assessed by a means test. A wife's earnings, or other earnings in the household, are considered for income support purposes. In one case, a wife's disability payments have been taken into account and prevented payment of income support.

The matter has been raised previously by my hon. Friends the Members for Amber Valley and for Erewash (Liz Blackman). In reply to my hon. Friend the Member for Erewash, the Minister, my hon. Friend the Member for Wallasey (Angela Eagle) said: We are aware that, under existing rules, if money is owed from an insolvent employer, full benefit cannot always be paid immediately to ex-employees claiming Jobseeker's Allowance or Income Support, although payments can be made to avoid hardship. Since this problem came to our attention, we have been working to simplify the complex legislation in this area and we are currently considering proposals for changes to the relevant benefit rules."— [Official Report, 17 December 1998; Vol. 322, c. 715.]

No announcement has yet been made on proposed changes to the legislation. Today, I received a fax from the Minister for Employment, Welfare to Work and Equal Opportunities, pointing out that that will not occur yet, although there is concern about the matter. I doubt whether my hon. Friend the Minister for Energy and Industry will be able to give a different reply from the one that I received. However, it would be welcome to hear that there was to be urgent consideration of the matter and that an announcement will be made soon of help to overcome a problem that affects many firms going into receivership or into liquidation.

At present, the ex-workers' pensions seem to be guaranteed. A great deal of work has been done by the trade unions. Indeed many people have tried to assist in this desperate situation—no one more than a local district councillor, Brian Ridgeway. He has been behind much of the activity and organisation to try to help those workers who are in very desperate circumstances.

There are losers, but there will also be clear winners, if things turn out as some people hope. The workers will not be among those winners in any way, unless some miraculous changes take place. The first to gain is Carbo, which has got rid of Bryan Donkin's work force, but it has had to meet no redundancy or other payments. Carbo looks to make a fortune in the future. On 27 July 1998, the chairman of Carbo, Bill Goodall, was reported as saying: The new agreement with BDFL"— that is Bryan Donkin Foundry Ltd.— substantially improves the development potential for the Chesterfield site. In due course, the disposal of the enlarged site for development will conclude the group's exit from its former Bryan Donkin business and enable both shareholders and the Company to benefit in the resultant value creation. Matters have developed since then. Last week, a draft plan was submitted to Chesterfield borough council in order to cash in on those provisions. The company is looking to create a development in which there will be a hotel, supermarkets, a business centre, a traffic centre and a host of other facilities that will lead to considerable financial developments. At present, it is only a draft plan at an early stage. Chesterfield borough council is obliged by law to undertake a screening process under the 1999 environment assessment regulations. However, if Carbo and its associates gain a fortune, at least the ex-Bryan Donkin workers should have some share when that development takes place.

Another winner is British Steel, which sold Renishaw foundry and its land for £835,000 and saved £1.5 million in potential redundancy payments alone. Ex-British Steel workers who were made redundant at Renishaw should also be sharing in British Steel's good fortune.

What about Mr. Ling, who is the key shareholder in Bryan Donkin Foundry Ltd. and in Renishaw Properties Ltd.? Is he a gainer or a loser? The assets he seems to have are a potential £500,000 from the property deal in Chesterfield, if it goes through, and rent and other moneys from the ownership of Renishaw Properties Ltd. and from any new firm that the receiver is able to find. His liabilities are any unfulfilled hopes that he may have and the possible loss of the £800,000 that he initially paid out to purchase the company.

I want a Department of Trade and Industry inquiry into all those arrangements, so that we know who is getting what and from whom, and I call for immediate action to clear up the matter of the jobseeker's allowance. It is entirely unacceptable that the people who are at the rough end of the affair should be the former work force. I call for attention to be given to losses incurred by suppliers, hauliers and so on, in the area, so that some help may be given to them. We also need to do all that we can to assist the receiver and to encourage the receiver to find a buyer for the foundry. If there is a buyer the re-employment—even if the conditions change—of some of the work force becomes a significant possibility. If a buyer can be found, we should try to ensure that those who are re-employed are those who are losing their jobs now.

Via the Employment Service, we should give the ex-workers every assistance by ensuring that job opportunities are found for them. I understand that there is some possibility of those who are ex-British Steel workers having access to appointments publicised through British Steel. It is just as well that the fight to save the Eckington jobcentre was successful, because that centre serves Renishaw, Killamarsh, Eckington and the surrounding area, a large part of which is affected by the job losses.

I hope that the Minister will consider those matters seriously. A crisis is affecting a community that has been badly hit in the past, so everything that can be done must be done. When I met them, the work force asked me, "Why have these events occurred? Why have we suffered in this way? Who has done this to us? Who has benefited from it?" Answers to those questions can be provided only by an inquiry.

7.33 pm
Mr. Tony Benn (Chesterfield)

I should like to speak, if the Minister will allow me—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The right hon. Gentleman may speak, as long as the mover of the motion and the Minister are agreeable.

Mr. Barnes

indicated assent.

The Minister for Energy and Industry (Mr. John Battle)

indicated assent.

Mr. Benn

I shall take only a minute, as my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) has handled the case with his usual brilliance.

There is a lot wrong. Bryan Donkin Foundry Ltd. is one of the most highly skilled companies in Britain, producing for the gas industry. When the company was privatised, no long-term planning was carried out and it got into difficulties. Then, when the foundry was moved and merged, the trade unions went along with it because they thought that jobs would be saved, but that hope was dashed. Now, the workers might be denied not only redundancy pay but jobseeker's allowance.

The Government must take all those issues on board, in addition to the fact that high interest rates damaged the foundry's prospects. I hope that all the points that my hon. Friend has made will be considered extremely carefully. I speak not only as a Member of Parliament, but as a former Secretary of State for Industry and for Energy who appreciates the relevance of the company and its contribution to British manufacturing industry.

7.34 pm
The Minister for Energy and Industry (Mr. John Battle)

In an Adjournment debate, it is traditional to congratulate the hon. Member who secured it, but I should like to say rather more. My hon. Friend the Member for North-East Derbyshire (Mr. Barnes) always champions his constituents' interests, whether relating to job losses or other matters, with serious, passionate concern. Tonight, he has demonstrated what the House of Commons should be about by the way in which he has brought to our attention an individual case that allows us to extrapolate specific structural questions. I regret that we have only a short time for this debate; it would have been better if we had spent three hours on this topic, rather than on the previous debate.

I listened intently to my hon. Friend's speech, which was full of carefully researched details of the financial transactions that have led to the collapse of the company, and the job losses. I cannot respond to every detail, but I shall certainly follow through every detail that is raised in the House tonight—if not at the Dispatch Box, then elsewhere.

Why were there job losses? I know that that is a matter for my right hon. Friend the Member for Chesterfield (Mr. Benn), who is present, as well as my hon. Friend the Member for Bolsover (Mr. Skinner). It concerns the relationship of redundancies and insolvencies, to which my hon. Friend the Member for Amber Valley (Judy Mallaber) drew attention.

Why were there job losses? On 22 April 1999, Robert Kelly and John Newell, two partners in Ernst and Young, were appointed joint administrative receivers of Bryan Donkin Foundry Ltd. They were appointed by the debenture holder, Smurfit Paribas International, at the request of the directors, as the company was no longer able to meet its liabilities as they fell due. Department of Trade and Industry officials have been in touch with the receivers, who explained that, by the time that they were appointed, the company's working capital was exhausted.

It may help if I briefly scan the history of the company. I understand that Bryan Donkin Foundry Ltd. was incorporated in 1997 to acquire the assets of the foundry division of the company known as Bryan Donkin Company Ltd, which traded from Chesterfield. It paid £2 million for the assets, of which some £800,000 was payable immediately, the balance being spread over three annual instalments.

It appears that problems began at quite an early stage. The receivers have told my officials that draft accounts to 30 September 1998 showed trading losses of about £1 million on a turnover of £6 million. It seems that those losses eventually led to the receivership, which may have stemmed in part from the acquisition of the business of the Renishaw foundry, which was formerly operated by British Steel, in 1998. Simultaneously, the land and buildings at the Renishaw site were acquired by a newly incorporated company called Renishaw Properties Ltd, which, as my hon. Friend the Member for North-East Derbyshire said, was effectively under the control of the same individuals as Bryan Donkin Foundry Ltd.

Having moved to the Renishaw foundry site, Bryan Donkin Foundry Ltd. surrendered the lease of its existing site at Chesterfield back to the landlords, Carbo plc. The sum received by the company on the surrender of the lease appears to have been used partly to fund the acquisition of the Renishaw foundry assets.

That move from the Chesterfield site to Renishaw has been described as unsuccessful. The cost of the move appears to have been substantially underestimated. The move itself seems to have taken two months longer than anticipated. Finally, having established the business at Renishaw, it became apparent to the directors that their turnover forecast could not be reached. Management accounts then showed a substantial trading loss.

The receivers say that, upon their appointment on 22 April 1999, they had no alternative—in the absence of assets that could be rapidly converted into cash to provide further funding—but to serve redundancy notices. Since then, the receivers have carried on trading in a limited way, while advertising the business for sale. As my hon. Friend the Member for North-East Derbyshire said, they are continuing to seek to sell the business as a going concern. He asked whether there might be a buy-out of the foundry. That would be a way forward, if it could be achieved; it would certainly save jobs. My hon. Friend's ambitions in that regard would be helpful.

Let me say a word on the position of the workers. I am told that the receivers have already had a meeting with the full-time union officers representing the work force, and that a further meeting is planned for tomorrow. I understand that my hon. Friend has been invited to that meeting. I hope that other right hon. and hon. Friends who have attended tonight's debate have been invited.

The local jobcentres at Chesterfield, Eckington and Staveley are offering what help they can to the employees who have been made redundant. A recent meeting to discuss help for the work force was attended by representatives of the North Derbyshire training and enterprise council and others, including the Employment Service, North East Derbyshire council and the East Midlands regional development agency. I understand that a bid was then made for assistance from the rapid response fund, to assist retraining and job searches for all those involved. Early entry has been agreed to the work-based learning scheme for adults and to STEPS—a programme centre offering intensive help with job search. Two awareness sessions have been held at the Renishaw hall, and further sessions and presentations are planned.

On 5 May, the Government office for the east midlands received a request from North Derbyshire TEC seeking approval for large-scale redundancy terms to be applied to the redundancies at the Bryan Donkin foundry. The Government office replied on the same day, agreeing to that. The application of large-scale redundancy terms will enable immediate access for Donkin staff to Employment Service and TEC programmes.

I shall deal with jobseeker's allowance and the letter sent earlier today to my hon. Friend by my right hon. Friend the Minister for Employment, Welfare to Work and Equal Opportunities. In his letter, my right hon. Friend stated that if employees were dismissed by an insolvent employer without notice or with insufficient notice, they could claim a compensatory payment under the DTI's insolvency provisions, once the notice period had expired. That should be arranged by the receiver.

Before the introduction of jobseeker's allowance, ex-employees could claim unemployment benefit during their notice period and the compensatory payments would then be reduced accordingly. That is not possible under jobseeker's allowance, because of a regulation that treats people as already possessing any income that is due to be paid, regardless of whether it has actually been paid.

Any notice payment due must, therefore, be taken into account in calculating jobseeker's allowance during the notice period, even though it has not yet actually been paid. That is the double bind. People are being penalised twice. We acknowledge that the benefits legislation is complex, but it seems that people are getting caught in the rules and being forced to pay twice. I shall raise the matter again with my right hon. Friend the Minister.

I know that efforts are being made to conclude the matter of the Donkin employees as soon as possible, and I hope that my hon. Friend, together with our other right hon. and hon. Friends, will make the point powerfully as a result of this debate.

With regard to the company's accounts and the request for an investigation, neither Bryan Donkin Foundry Ltd. nor Renishaw Properties Ltd. has filed accounts at Companies house. The receivers told officials that the accounts for BDFL for the period ended 30 September 1998 were completed, but had not been signed off by the auditors prior to the receivers' appointment.

The time limit for filing accounts at Companies house for a private company is 10 months from the year end. As the directors had until 31 July 1999 to comply, they are not in default. Renishaw Properties Ltd. was not incorporated until 8 May 1998, so the accounts for its first year are not due.

On the question of an investigation, the joint administrative receivers are under a duty to report to the Secretary of State if it appears to them that the conduct of any of the directors was such as to render him unfit to be concerned in the management of another limited company. On receipt of such a report, the Secretary of State has a discretionary power to apply to the court for a disqualification order against that director.

The receivers have told my officials that concerns that have been raised in the House tonight have also been mentioned to them. No doubt they will be taken into account when the receivers consider their report to the Secretary of State.

In addition, the DTI has wide-ranging investigatory powers under companies legislation which can be exercised if there is good reason to do so. The powers are generally used in relation to live companies, but in suitable cases, we would not hesitate to use them where a company was already subject to insolvency proceedings. The receivership is of course at an early stage, but officials will ask the receivers to let us know whether they have continuing concerns, so that the use of the investigative powers can be kept under review as a possibility, in the light of comments that have been made tonight.

I shall say a word about Carbo plc and the development of the Chesterfield site. My hon. Friend raised the question of the proposed redevelopment of the Bryan Donkin factory in Chesterfield. Officials have established that Chesterfield borough council received a planning application to redevelop the site. The council is considering whether to refer it to my right hon. Friend the Secretary of State for the Environment, Transport and the Regions under the Town and Country Planning (Shopping Development) (England and Wales) (No. 2) Directive 1993, so there is still room for challenge. It seems to me that this particular case is almost a classic tale of asset stripping at the expense of people's livelihoods, and it should be thoroughly investigated. I will do my best to ensure that this matter is taken further after tonight's debate.

As I am sure my hon. Friend appreciates, and as I have tried to spell out, this case ranges across Departments—the Department of Trade and Industry, the Department of Social Security, the Department for Education and Employment and the Department of the Environment, Transport and the Regions, given its planning responsibilities. I have listened intently to his case.

Mr. Dennis Skinner (Bolsover)

On rogue employers, there was a story knocking about the DTI before the turn of the year to the effect that, in the interests of the business community and of getting more economic activity, it would not be a bad idea for the new Labour Government to be a little bit more lenient with these eager-beaver employers. Has that idea been put to bed?

Mr. Battle

I hope that it has. We have no intention of backing rogue employers and people who jeopardise other people's livelihoods through malpractice. People may legitimately start up companies—or, indeed, co-operatives—and things might not go well the first time round, but why do we so readily write them off when they have made a fair, open and transparent effort? I think that there have been conversations about whether the bankruptcy laws could separate rogues from people who have made a genuine effort, but we have no intention whatever of going soft on rogues.

In a sense, rogue is too general and too generous a word, because some of this malpractice jeopardises people's lives and blights them for generations. As my hon. Friend the Member for North-East Derbyshire spelled out, that involves not one particular company, but the supply chain and other companies in the area, and communities suffer as a result. If we can look into the detail of this matter, I only hope that an occasional case study—not a hypothetical example—might highlight flaws in the structure that we in the Government ought to address in achieving a legislative framework that would ensure that the same thing does not happen to others.

Question put and agreed to.

Adjourned accordingly at thirteen minutes to Eight o'clock.