Peter Hain announced plans to use public sector contracts to boost loss-making factories for disabled workers as he headed off a row with trade unions at Labour’s conference.

Mr Hain, the Work and Pensions Secretary, pledged to urge ministers to use powers to allocate procurement contracts to Remploy, the government company that provides jobs for severely disabled workers, and to similar supported posts.

He intervened further in a row over Remploy’s plans to close or merge half of its factories for disabled workers, saying that none must shut without the agreement of ministers, while talks with unions continue.

The GMB, which has led the campaign against the planned closure or merger of 42 Remploy factories, hailed his commitments as a major change in policy and will put on hold plans to call strikes The union will announce today the results of a ballot on industrial action among Remploy members, who are expected to vote by a large margin for strikes, but will now pursue new talks in an attempt to settle the dispute.

Government sources admitted that Mr Hain’s announcement was a “change of emphasis” after pressure from unions to use European procurement rules that allow governments to reserve some state contracts for supported factories for disabled workers. Union leaders used openly protectionist arguments as they called on ministers to support them. A motion debated by Labour’s conference, which Mr Hain declared was in line with Government policy, pointed to forthcoming contracts worth £150 million for soldiers’ and nurses’ uniforms.

Paul Kenny, the GMB’s general secretary, told the conference: “As for the statement made by our Prime Minister about British jobs for British workers, why not ask our NHS nursing staff if they would prefer to wear uniforms made in China under labour contracts which may include low pay, underage workers, no union organisation? Or a uniform made with pride, love and commitment from a Remploy factory in Scotland, Merseyside or Wales?”

Mr Hain’s announcement, which followed extensive talks with unions in Bournemouth, came after the GMB gave warning that it would force a vote on the issue at the conference, inflicting the first platform defeat of Gordon Brown’s leadership.

Instead, the motion was sent to Labour’s national policy forum, in line with new conference procedures introduced by Mr Brown and backed reluctantly by unions on a two year trial.

Mr Hain told the conference: “Both unions and [Remploy] management agree that winning more public procurement is crucial, using European procurement rules to bring reliable, good-quality public contracts into supported factories and businesses. I have also made clear to Remploy management that no factory closures will take place without the agreement of Government ministers.”

Remploy, which is trying to refocus itself from being a direct employer of people with severe disabilities to a specialist employment agency working to find jobs with mainstream employers, aims to help 20,000 disabled people a year into work five years from now.

Its plans follow a report which concluded that many Remploy factories were not value for money.

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