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More than half of factories employing mainly disabled workers are set to close, with the loss of 1,700 jobs in a move attacked as "barbaric."
The Government announced that Remploy is proposing to close 36 of its 54 factories, with potential compulsory redundancies of 1,752 people, including 1,518 disabled employees.
Minister for Disabled People Maria Miller said the Remploy board was proposing to close the sites by the end of the year because they were unlikely to achieve independent financial viability.
She said the £320 million budget for disability employment has been protected, adding that the money will be spent more effectively.
Politicians and union leaders hit out at the Government, warning that many disabled workers might never find another job, especially with unemployment moving towards three million.
Unite general secretary Len McCluskey said:
"This is a barbaric decision. The Government has sunk to a new low. To choose to cut these jobs only a few days after the Government passed the welfare bill is proof it has no intention of helping the most vulnerable in society. Instead the coalition is only making life worse.
"In the worst economic crisis since the 1930s, these workers' prospects of finding work are almost zero."
Phil Davies, national officer of the GMB, said:
"This is one of the worst decisions that this discredited coalition Government has taken since coming to office.
"Thousands of disabled workers will now pay with their jobs for the incompetence of this Government and other public sector bodies that did not take advantage of EU procurement rules that allow supported manufacturing jobs for disabled workers.
"These factories have lacked support for years and have never been properly loaded with enough work to make them economically viable."
Shadow work and pensions secretary Liam Byrne said it was "disappointing" the Department for Work and Pensions (DWP) announced the closures in a written statement rushed out after Prime Minister's Questions, denying MPs the chance to quiz David Cameron on the "callous decision".
Labour MPs lined up to criticise the move, raising points of order in the Commons.
Geraint Davies (Swansea West) condemned the "clandestine, cloak and dagger assassination" of Remploy.
Chris Bryant, whose Rhondda constituency includes the Porth factory due to shut, said the statement had been "sneaked out", adding: "It is unfair to disabled people in this country to treat them in this way. It's a disgrace."
Ian Lucas (Wrexham) said the Minister "should be ashamed of herself", telling MPs:
"She should come here and if she is making the right decision she should make the arguments.''
Leighton Andrews, the Welsh Government's Education Minister, said:
"This announcement will be devastating for those workers, their families and the local communities. In our submissions to the UK government, the Welsh Government has made clear our vigorous opposition to such closures, not least at a time of economic hardship, and an extremely unfavourable labour market."
Ms Miller said she had assessed "very carefully" the needs of Remploy workers, as well as the 6.9 million disabled people of working age who could benefit from greater specialist employment support.
"The Government will reduce its current subsidy to Remploy from the beginning of the new financial year so that we cease funding factories which make significant losses year after year and restrict funding to those factories which might have a prospect of a viable future without Government subsidy."
The DWP said all disabled Remploy staff affected by the changes would get "tailored support" via an £8 million support package running up to 18 months - that averaged to around £2,500 per person.
A spokesman said keeping open the factories did not provide value for money, adding:
"It currently costs the Government and taxpayer £25,000 each year to support each disabled employee working in a Remploy factory yet the average Access to Work award to support a disabled person in mainstream employment is £2,900."
Last year, the independent Sayce review recommended Remploy should concentrate on helping people find employment in the open labour market.
Liz Sayce, author of the review and chief executive of Disability Rights UK, said:
"The Access to Work programme must expand. We currently face a crisis of disabled youth unemployment - being 'not in education, employment or training' is twice as common amongst young disabled people, as non-disabled.
"Without individualised employment support there is a real risk they will become a lost generation, out of work for life, and that others will slip out of work unnecessarily."
The group's vice chairman, Phil Friend, added:
"While the Remploy factory model was right for the 1940s but unsustainable today, it is crucial that Remploy employees have the right support - intensive where needed - to secure their financial security and move into open employment or social enterprise."
Remploy factories make products and provide services to private and public sector customers throughout the UK and beyond, supplying chemical and biological protection suits to the police and armed forces, furniture to the UK education sector, operate an IT recycling business and manufacture components for leading motor manufacturers.
It was established in 1945 and opened its first factory in Bridgend, South Wales, in 1946.
:: Factories earmarked for closure are: Aberdare, Aberdeen, Abertillery, Acton, Ashington, Barking, Barrow, Birkenhead, Bolton, Bridgend, Bristol, Chesterfield, Cleator Moor, Croespenmaen, Edinburgh, Gateshead, Leeds, Leicester, Manchester, Merthyr Tydfil, Motherwell, Newcastle, North London, North Staffs, Oldham, Penzance, Pontefract, Poole, Preston, Southampton, Spennymoor, Springburn, Swansea, Wigan, Worksop and Wrexham.