Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 40 - 59)

TUESDAY 6 JUNE 2000

SIR DAVID WRIGHT, MRS BARBARA PHILLIPS, MR DAVID HALL AND MR DAVID WARREN

Mr Rowlands

  40. Is it not more fundamental than that? If you are suggesting that after the agreement you may have the ability, capacity and power to move money not just within the FCO budget, but also between an FCO budget and a DTI budget, would not the Foreign Secretary be rather loathe to concede that power to Sir David Wright, or to anybody else?
  (Sir David Wright) Those are the terms of the review to which the Foreign Office subscribed. The resource allocation passages in the review envisage that the process whereby I have that right has to be discussed with the Foreign Office officials, the Foreign Secretary's representatives. That is not something that I would want to operate in an autocratic sense.

  41. You would have a right to override them. The Foreign Affairs Committee could ask the Foreign Secretary why expenditure on commercial promotion has gone down in Latin America and Brazil. His defence would be that Sir David Wright transferred that to a programme in the DTI.
  (Sir David Wright) It comes back to the issue referred to by Sir John Stanley over the board. The terms of the report state that plans for the allocation of trade development resource to overseas posts will need to be dovetailed with plans drawn up by FCO geographical directors for consideration by the board and ministers for allocation of FCO resource against other objectives. In other words, if we were to get to the point where my wishes and my objectives did not dovetail in the way that is described in the report, the board would then want to give a very firm view to ministers as to what they, as commercial practitioners, thought of my proposals and indeed thought of the reaction.

Mr Berry

  42. Sir David, how on earth can the FCO know how many person years are devoted to this activity without knowing who is doing what and where? Is it a figure that they have plucked out of the air? Have they just said, "We guess it is X, but we do not have a clue how much is in France, Germany or Japan"?
  (Sir David Wright) They have to deal with what I will describe as "multi-hatted" functions. If you were to take two groups of people who carry out commercial work—what we will call the UK-based staff and the locally-engaged staff—the second group is really quite straightforward because in most posts they are 100 per cent commercial employees. Most of the locally-engaged staff have a very clear set of responsibilities so one can quickly establish precisely how much all that costs. The problem arises with these "multi-hatted" people who split their work between us and other functions. That has to be divided up and calculated as a sum of money.

  43. They are people employed in the UK?
  (Sir David Wright) No, they are people employed in posts overseas. Dividing up the costs of all those people, when many of them may only have 50 per cent of their work on commercial work, or 60 or 70 per cent, is a complex matter.

  44. I appreciate it is complex, but I do not understand how they can possibly know how many person years have been spent on an activity unless they have that information. You may want to say, "I note what you say", but I do not see logically how they can possibly talk about figures of that kind without knowing how the figures were arrived at in the first place.
  (Sir David Wright) I shall ask my colleague, David Hall, who is responsible for resources to add to what I am about to say. He has been responsible for trying to deal with this intractable problem. They have been able to put a pretty broad estimate, which is the £90 million to which Mr Rowlands referred, upon what these activities cost. However, that is not sufficient for the sort of concordat that we were talking about a moment ago. It is not sufficient because that concordat will involve me saying, "Out of that total sum Mr X in Kuala Lumpur costs a certain sum of money"—that is what we know from the management information system—"and therefore I can take the cost of Mr X and say that I do not want him in Kuala Lumpur any more, but I want him in Brussels". We cannot yet do that.
  (Mr Hall) It is quite common for diplomatic service staff overseas to be doing things very similar to trade promotion, but not exactly trade promotion. Examples are inward investment—although that would change now that that is coming within the fold—science and technology, international financial questions, trade policy and WTO issues. It is not easy or, from the point of view of day-to-day management of a post, very sensible to try to divide this all up into kind of fixed proportions. Clearly, those proportions vary over time, according to the agenda. Those are the kind of practical issues with which we have been wrestling. Very shortly, the Foreign Office hope to do a further census of who does what in this area. We hope that that will help to take this matter forward.

Sir John Stanley

  45. Sir David, you have indicated the unsatisfactory nature of the Foreign Office's management information systems. Therefore, can we turn to the DTI's management information systems? If you had to fill a particular post at a particular grade overseas, would it be materially more expensive to fill it with someone from the Foreign Office on Foreign Office terms, compared with someone from the DTI on DTI terms?
  (Sir David Wright) The answer is not materially, no.

  46. Are you sure?
  (Sir David Wright) Most staff from the DTI who are seconded to posts overseas, are eligible for Foreign Office terms. In that respect, there would be no difference at all. If they were to go on different terms, the overall costings of things such as housing, allowances and children's education, if relevant, would be broadly similar.
  (Mr Hall) I am a DTI official, but ten years ago I was seconded as the commercial counsellor in Washington and I received exactly the same terms and conditions as my FCO colleagues of the same grade.

  47. Is that true around the world, Sir David? You have used some qualifying words like "broadly" and "materially". Are you just hedging your bets, or do you actually know?
  (Sir David Wright) I can certainly give you an exact reply in a paper. My view is supported by David Hall's point, that most DTI staff go abroad on Foreign Office terms. I am hedging my bets, to use your phrase, because I cannot give you a categoric assurance that there are not some DTI staff abroad on different terms. I shall have to check that. But even if they were abroad on non-Foreign Office terms, the monies involved would not be material.

  48. Could we have the note that you have offered? In terms of the value for money to British taxpayers, there may be a material advantage to taxpayers and the overall number of personnel that we put into export promotion overseas if there were a major substitution of existing Foreign Office personnel on Foreign Office terms by DTI personnel on DTI terms. That is really what I am driving at.
  (Sir David Wright) I understand the question. Currently, we are working towards a greater degree of interchange between the two departments in that respect. That makes your question particularly relevant. We shall enhance the number of people from the DTI who are working in posts overseas and we shall enhance the number of FCO people working here in the UK. Currently there are 62 Foreign Office staff working in the UK operation and 23 DTI staff working in overseas posts. Those numbers will go up. That is one of our objectives. The question you asked is relevant to that, so we shall let you have that note.[3]

Mr Laxton

  49. Sir David, in addressing remarks to Mr Rowlands you have already made reference to the move in resources away from export promotion towards electronic service delivery and trade development. That was one of the recommendations of the Wilson report. Are you able to give us some practical examples of the advantages of doing that, rather than just that it was recommended in the Wilson report?
  (Sir David Wright) Yes, I can. That gives me an opportunity to talk more about this important side of our work. At the present time, we have an arrangement or an activity called Export Explorer. The Export Explorer schemes are designed specifically for newcomers to exporting. They are designed to assist them in their first step into overseas markets. We are using the Export Explorer schemes in particular in relation to markets that, for the sake of this discussion, are called "less challenging". Belgium and the Netherlands come into that category and the Nordic countries, Canada and the United States are Export Explorer targets.[4] That activity has continued for a year now. We are seeing that as very much the sort of core of the trade development ethos. We want to develop it further. It involves activities like training in export planning, giving new companies consultation with experienced export advisers, access to market research, help with internet marketing, a hand-held visit to an overseas market and then a bit about aftercare service when the company returns having carried out some business. Provisionally, we are linking with this development of Export Explorer, something called Passport to Export and we are testing that on a number of possible groups at the moment. We hope to roll out the project and the programme in September. That is very much the style in which we shall be seeking to pursue this trade development concept.

  50. Are these companies coming to you through the regional development agency arrangements or are they coming to you direct? I want to come on to the electronic gateway arrangements in a moment. Are these companies self-selecting themselves in that they want to get into the export activity? How do they find their way in your direction?
  (Sir David Wright) I come back to the Chairman's first question and my response about identity, visibility and recognition. We hope that by having a more effectively branded operation the awareness, particularly among the SMEs, of our services will be enhanced and therefore that they will access us in the first instance, through that website, through this new gateway to which I referred. That gateway should provide them with the initial information that they need about the trade development schemes, about particular markets, about programmes of activities that are available to them and they will then be able to move through from the gateway. That is one access point. The second access point relates to the regional structure. As I have explained, we have just appointed nine international trade directors in the English RDAs. They will run the export development counsellors who will sit in local business links and those export development counsellors will be expected to be both responsive and active in searching out new companies to assist. They will have an understanding of the company and industrial profile of their area; they will know whether businesses in particular areas are thought to be potential exporters; and they will be able to go out and introduce them to the schemes. Equally, they will be there in a responsive sense so that if small and medium-sized enterprises access the small business service and ask questions about possible overseas trade, they will be pointed in the direction of our staff. That is a second way in which we shall be accessed. I believe there is a third way. That relates to my reference to the phrase "trade partners UK", the partnership concept. So many of our missions overseas and our participation in trade fairs is run either through chambers of commerce or through industrial associations or trade associations. They contract with us to send a mission to a particular country or to have British participation at a particular trade fair. We would expect that when a particular company approached those organisations saying that it wanted to take part in a mission to China, for example, that they would say, "Have you exported already? Have you exported to China before? If you are thinking of going into China as your first export market perhaps that is a bit over-ambitious. Why not speak to British Trade International and get a bit of advice". Those are the three ways.

  51. What are the advantages of your new gateway that was launched at the end of last month—I have not as yet had a look at it—over what was originally provided, which was the straightforward internet access? In terms of the internet access, what sort of level of hits did you get onto that site?
  (Sir David Wright) Perhaps I can answer your final question at the end. Mr Hall may know the exact answer to that. It is not in my mind at the moment. The new gateway has an advantage over the old internet site in that it provides much fuller information. Already we have managed to put on 3,500 pages of country sector information, which is almost twice as much as there was on the original site. We see this site as a central vehicle for our activities and, therefore, we are tasking posts overseas that they should be involved with us in filling out that gateway and providing much more information than they have done hitherto about the particular markets for which they are responsible. Also on the site we have a new search engine which allows someone visiting it to acquire more information than they would have had in the past. We have a database of new export-related events—2000 events which may be trade fairs, trade missions or conferences about particular markets and that was not there previously. We are using the new gateway to signpost businesses who visit it to other sites that are not ours, but which will provide information that businesses may need about particular markets. We also have a self-assessment questionnaire on the gateway which is designed to be rather like a Passport to Export issue, which allows a company to do a test of its capacity and we have a whole range of frequently asked questions to which they can find answers. All that is new and additional. Our wish is to ensure that that gateway becomes almost the chosen point of entry for companies rather than the telephone. We shall have a matching telephonic response mechanism organisation at the same time, but we want to build and advertise the gateway so that it becomes the first port of call for exporters.

  52. As I say, I have not visited it yet, but I wrote to you a good while ago and received a response from you about a criticism by a small company in my constituency of what it felt was the inadequacy of the previous site.
  (Sir David Wright) The previous site was very conventional and very much a static information site. We are very keen that this new gateway should be more interactive. In the long term there are two prizes to be gained from that. Firstly, through its maturity it will be such a source of information that we may be able to make staff savings at the centre of people who hitherto have obtained information from booklets or faxes or whatever. Secondly, in due course, inquirers will be able to e-mail direct to commercial officers in posts overseas as a result of having gone through the gateway. That is not done much at the moment. That is in the long term.

  53. Have you any information on the number of hits?
  (Sir David Wright) On Brit Trade, the old gateway, we had 250,000 hits a month.

  54. Continuing with the issue of the services that you provide to the business community, there has been, I understand, some examination of the role of the business advisory groups. What conclusion has been reached on that, Sir David?
  (Sir David Wright) The Wilson review committed us to review the business advisory group structure. I think the review concluded that business advisory groups were an essential feature of the scenery in terms of government activity in that area. It was crucial that we should remain closely in touch with the views and advice of British companies, but that over the years they had grown a little topsy and become perhaps more numerous than was needed. So the former chairman of British Overseas Trade Board, Sir Martin Lang, was asked to do the review that the Wilson review instructed we should do. I should start one stage further back. The international group, which is part of my central operation, is based on four broad geographical regions: Europe, Africa and the Middle East, Asia and the Americas. The business advisory group review concluded that that should be matched at a business advisory level; that each one of those four areas should have a matching advisory group; that the chairman of that advisory group should have regular exchanges with the people who run the international group; and that those four geographical groups should, as time and situation require, be able to set up small perhaps time-limited very market specific groups, if it was thought necessary, for exploiting the advantages of one particular market.

  55. There was some criticism from the Latin American advisory group that they felt that the changes that they foresaw may mean that the private sector would have less involvement and there would be more involvement from civil servants. They see that as being perhaps a retrograde step. Are the decisions that have been taken likely to calm them?
  (Sir David Wright) I think and hope that they have been calmed, Mr Laxton. You are quite right, it would have been a retrograde step. That was not the intention of the business advisor group review at all. The intention was to make the business advisory groups more effective. We have reached an agreement with those Latin American groups that they will restructure themselves over an 18 month period, with continuation of support from British Trade International and that in due course, after they have restructured themselves, we would hope that they would become partners who would deliver things for us.

  56. With a continuing strong input, I assume, from the private sector.
  (Sir David Wright) Yes. All the advisory groups will be composed of representatives of the private sector.

Mr Illsley

  57. I have two separate questions. One refers back to the question of resources. I understand that your current budget is around £188 million which is made up of £67 million for programme expenditure, £90 million for running costs overseas and £31 million for UK running costs. Are you happy with that budget, or will you be looking for an increase in the Comprehensive Spending Review?
  (Sir David Wright) Yes, you are right to say that I shall be looking for an increase. Perhaps I should say that no, I am not happy. This year, it is proving extremely difficult to manage the additional functions that I have to fulfil within that budget envelope that was agreed two years ago. So, to reflect that, I have made proposals to the two Secretaries of State for additional funding.

  58. Can you give us an idea of the order of the increase for which you will be looking?
  (Sir David Wright) The figures are still the subject of intense negotiations between us and the Treasury, or between the two Secretaries of State and the Treasury. I have no idea how they will work out. I am particularly concerned that on the capital side for the development of the gateway, that I should receive an increase. I am asking for something of the order of several millions of pounds for that. The overall proposal of increase against those totals is 25 per cent. I have no idea what the Chancellor's beneficence will produce in the end.

  59. Following on Mr Laxton's question, is British Trade International happy with information provided on export controls? Recently I had experience of a company in my constituency wanting to export a simple piece of equipment to Iraq and that was very standard equipment used in mining. They came across a whole lot of problems in trying to find out whether they needed an export licence and problems in trying to obtain one. I think that they have lost a $600,000 contract as a result. Do you think that there is adequate information provided on issues where export licences are needed?
  (Sir David Wright) I am grateful for that question because it allows me to speak a little about another aspect of our work, which I shall develop from the reference to export controls. As you know, we ourselves are not the authority, the agency, that delivers authorisations for export in those sensitive areas. Over the past year I have discovered that British Trade International, Trade Partners UK, is very much seen by business in a different light, or an additional light, to what was envisaged in the Wilson review. We encapsulate that in-house in the phrase "the exporter's friend". Increasingly, I and my colleagues have found ourselves being asked for advice or information or action on issues that actually are not within our responsibility or delivery. I share the view of the Committee that I believe that this is quite an important aspect of our work. It is important that companies should feel that even though we are not the deliverer of a policy, if it affects their capacity to get into foreign markets, we should offer some assistance, or at least show that we are aware of the problem with the relevant agency. I have found that I am dealing with that on issues like tariffs, protection of intellectual property, and environmental controls. Companies are raising such issues with me and are seeking some comfort. That has happened over export controls, although not in relation to Iraq but in relation to another country, and I, or my staff, have intervened with the export control people in the DTI and the Foreign Office to urge more speed. Understandably, one of the problems that businesses face in this area and which has been put to me rather simply, is that in a sense it is not so much the answer that is worrying but the time that it takes. If companies are to be told that they do not have authorisation to export, they want to know quickly so that they can turn their attention and resources to another market. That is a sentiment that I understand. We are expressing that view to the people who run such matters.



3   See page 16. Back

4   Note by Witness: In these markets we operate Export USA and Export Canada initiatives which are designed to give small and medium sized companies the knowledge and confidence to compete in the respective markets. Back


 
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