Previous SectionIndexHome Page

6.44 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson): I congratulate my hon. Friend the Member for St. Helens, North (Mr. Watts) on securing this debate and drawing attention to what I know is an important issue for him, his constituents and former employees of Ravenhead Glass. He has, as usual, made an eloquent and forceful case on behalf of his constituents. It might help if I set out in some detail the current position of the company.

On 29 November 2000, Paul Stanley and Ronald Robinson of Begbies Traynor, Manchester were appointed joint administrators of Ravenhead. An administration order allows court-appointed administrators to make proposals to restore a company's viability or to sell all or part of its business as a going concern. Officials have been in touch with the office of the administrators, and it has been confirmed that, until 16 March 2001, Ravenhead was trading on the basis that negotiations to sell the business as a going concern would be successful. Regrettably, the American company with which those negotiations were being held pulled out, citing the considerable capital investment required, particularly in view of the substantial losses and large overheads associated with the company's current operations.

Most of Ravenhead's employees have now been made redundant, except for 60 or so who have been retained to conduct an orderly rundown of the business and fulfil back orders. Officials have been informed that the administrators are now proceeding to sell the individual assets of the company, and the indications are that there will be no prospect of a payment to unsecured creditors.

It is always a great blow when a company goes into a state of insolvency and redundancies are necessary, although those are of course commercial matters for the parties concerned and not something in which the Government can intervene. The Government's role is to

29 Mar 2001 : Column 1198

ensure that employees have minimum safeguards in employment rights legislation and to provide support and assistance to business when appropriate. I shall say something a little later about the points that my hon. Friend raised on anti-competitive practices and the way in which British workers are treated in such situations.

My Department's redundancy payments service can, under the Employment Rights Act 1996, within limits pay certain entitlements owed to former employees of insolvent companies. That legislation, which implements the European Union insolvency directive, guarantees a basic minimum of payments to employees of insolvent employers who would usually have to wait a considerable time for payment, or receive no payment, as creditors in the insolvency.

The RPS in Birmingham received 120 application forms from redundant employees of Ravenhead, and they were validated against information supplied by the administrators. The RPS has, under the legislation, made redundancy payments to all employees who have completed two years' service. Any holidays that have accrued at the time of the employees' dismissal and bonuses have been paid as well.

The RPS is currently processing compensatory notice payments, and the vast majority of them have been paid. The only claims still to be processed are those of the long-termers who are claiming the maximum 12 weeks, and they will be dealt with as soon as the employees return the forms. As far as I am aware, there are no outstanding queries.

It might be helpful if I explain that, when payments are made, the RPS will take over the employees' rights in relation to the amount of the debt paid from the national insurance fund and seek to recover the payment by lodging a claim for the debts in the insolvency proceedings. The payments of contractual debts that exceed minimum statutory entitlement payable from the national insurance fund remain lodged in the insolvency. Payment of those amounts will depend on whether the insolvency practitioner is able to raise sufficient funds from the sale of the company's assets to cover the debts.

I should also point out that the EU collective redundancy directive provides for employers to consult employee representatives on proposed redundancies and is implemented in the UK under the Trade Union and Labour Relations (Consolidation) Act 1992. All employers operating in the United Kingdom, including overseas companies, are bound by UK consultation legislation. Similarly, any UK companies operating in another member state are bound by the legislation of that state.

The directive also provides for sanctions to be taken against an employer for failing to comply with the consultation requirements. It is for the member state to determine the sanctions that may be taken. In the UK, an employer who is proposing to dismiss as redundant 20 or more employees at one establishment over a period of 90 days is required to consult appropriate representatives of employees who may be affected by dismissals or measures taken in connection with them.

Unless prevented by special circumstances, the consultation must begin in good time, and in any event there is a minimum requirement of at least 30 days before the first dismissal takes effect in a case in which between 20 and 99 dismissals are proposed, and 90 days when 100 or more are proposed.

29 Mar 2001 : Column 1199

Employers are also required to notify my Department's redundancy payments service within the same time scale, so that support may be given to those facing redundancy in the form of measures, including retraining, that the Government office and other local agencies take to mitigate the effect. Statutory employment rights are also in place for employees in these unfortunate circumstances.

An employee's representative may make a complaint to an employment tribunal if it is believed that the employer has failed to consult in accordance with the statutory provisions. If the tribunal finds a complaint justified, it will make a declaration to that effect, and in appropriate cases, whether or not the employees are still employed, it may take steps to safeguard their remuneration by making a protective award. The period of the award is determined by the tribunal and may be up to a maximum of 90 days.

My hon. Friend asked about the pension scheme. There is an anticipated shortfall of about £5 million. The administration of the scheme has now been delegated to an independent pension trustee who will deal with employees' claims and investigate the reasons for the shortfall. Any concerns that employees have about the scheme need to be reported to the administrators so that they can liaise with my Department's redundancy payments service. The Department operates a free telephone helpline on matters relating to redundancy, and my officials will do what they can to assist with any questions. The telephone number, it may be helpful to note, is 0500 848489.

I note that my hon. Friend feels that the present legislation does not protect employees or their pension schemes from unscrupulous companies. However, it may be helpful if I outline the relevant provisions of the employment protection legislation. They provide that an employee of an insolvent company who is owed arrears of wages, holiday pay and certain other debts may claim these amounts, subject to statutory limits, from the redundancy fund.

Furthermore, if an insolvent employer has failed to pay some contributions into the pension scheme, a claim can also be made for payments into the scheme from the redundancy fund. Taking together the work of the independent trustee and officials at the DTI's redundancy payments service, we should be able to address my hon. Friend's points.

On a general note, insolvency law contains what I believe are effective provisions against abuses of limited liability. For example, under the Company Directors Disqualification Act 1986, the administrators are required to make a report to the Secretary of State if they form a view that the conduct of a director makes him or her unfit to be involved in the running of a company. Of course, I cannot anticipate whether the administrators will make such a report, but if they do, the Secretary of State has a discretionary power to apply to the court for a disqualification order, if he judges that to be in the public interest.

Disqualification orders run for between two and 15 years, and all identified cases of misconduct are pursued. About 2,800 directors have been banned for unfit conduct in the past two years. The concerns that have been expressed about the management of Ravenhead should be passed to the administrators for their consideration. In addition, if there is evidence that there has been fraudulent or wrongful trading, a liquidator can

29 Mar 2001 : Column 1200

ask the court to declare that those responsible should make a personal contribution towards the company's assets. However, any such sum would be available for the general body of creditors rather than any specific group, such as employees.

Ravenhead Glass was designated a large-scale redundancy in December, when the first redundancies were announced, allowing early access to Employment Service programmes. Some initial discussion has been held locally about the rapid response fund. Former Ravenhead employees have been placed on a case load for matching to any suitable vacancies that arise. The jobcentre is also carrying out a specific marketing exercise to target local companies that may be able to offer employment to these people. I know that my hon. Friend is deeply involved with that process.

The final 40 workers left Ravenhead on Friday 23 March. Local Employment Service jobcentres opened on Saturday to book appointments and deal with initial claims.

Before I say a little about the glass industry in general, I shall respond to what my hon. Friend said about the way in which UK workers are treated, compared with those in other European Union countries. He will be aware that in early February my right hon. Friend the Secretary of State for Trade and Industry announced a complete review of redundancy arrangements, with regard not only to information and consultation, which have become a concern following some recent high-profile cases, but to the question whether it is easier to sack British workers than anyone else in the EU.

Unlike some political parties represented in the House, we do not think that this country should sell itself on the basis of being the sweatshop of Europe. We are sensitive to such criticisms, and I am sure that the comprehensive review that we have set in train, which involves the CBI and the TUC, will illuminate the debate on that issue when it is concluded. I shall also consider what my hon. Friend said about anti-competitive activity.

I should take this opportunity to mention the support that we have given to the UK glass industry since 1 May 1997. The industry overall has accepted offers of regional selective assistance totalling £18 million, of which £1 million has gone towards the manufacture of hollow glass.

In addition, the Department has been working with British Glass and Glass Technology Services in a number of areas, including financial support for an innovation project to design safer screw threads on glass bottles, and assistance with the establishment of a glass manufacturing improvement club.

Discussions were held with British Glass last year about other potential projects, including a competitiveness analysis. I strongly urge it to consider working with the Department on a competitiveness analysis, because such an analysis can often lead to the identification of further areas in which the Department can work with the sector to mutual best advantage.

My hon. Friend suggested that the parent company may have employed anti-competitive practices. The trading operations of the company have been under increasing pressure because sales to European countries are made under fixed-price contracts in euros, which have been seriously affected by the fall of the euro against the pound. I shall ask my officials to look into that issue.

29 Mar 2001 : Column 1201

Finally, my hon. Friend was kind enough to pay tribute to the Department's representatives, especially in the north-west. I shall pass what he said on to them, and I assure him that we shall continue to give whatever

29 Mar 2001 : Column 1202

assistance we can in what we understand are the very difficult circumstances that have arisen at Ravenhead in his constituency.

Question put and agreed to.

 IndexHome Page