Select Committee on Trade and Industry Minutes of Evidence

Examination of witnesses (Questions 80 - 106)



  80. If we can talk about the content, one of the recommendations in your report is that you stimulate high-quality on-line educational content, is it not?
  (Ms Hewitt) Yes.

  81. I notice that one of the milestones is for January next year: pilot start on initiative to deliver whole courses on Key Stage 3 maths, Japanese and Latin courses. I can understand Key Stage 3 maths, but do you expect a big takeup on Japanese and Latin?
  (Ms Hewitt) I am afraid I do not know what takeup the Department of Education is anticipating on Japanese and Latin, but I am delighted to see that they were indeed piloting those highly innovative applications. They are indeed in discussions with various potential partners, including the BBC and also, I think, Granada TV and some of the other private sector players, in looking to deliver an on-line curriculum. We have seen the huge success of the BBC with its byte-size revision. I think the majority of GCSE students last year did at least some of their revision using the BBC's byte-size guides.

  82. I think you would probably agree, though, that we need to see a broader range of courses?
  (Ms Hewitt) These are the initial pilots. My understanding is that DfEE's goal is to have the entire provision backed up with internet content.

  83. If I can finally look at the cultural content, we have talked about the ability of people to access the internet, but also I think you yourself addressed the fact that the willingness and the motivation to address it was also important. You talk about the relevance of much of the on-line material and how it seems to be irrelevant at the moment. When you look at what you are going to do, you say you will consider how the Government might best work with the cultural sector and creative industries to explore new ways to stimulate the development and availability of high-quality cultural content. That sounds like a lot of waffle to me. What is actually going to happen?
  (Ms Hewitt) Since then I am happy to say that Chris Smith has launched what is called "Culture OnLine" which has got some funding behind it, where what he and the Department of Culture are seeking to do is to enable much more on-line access to the extraordinary wealth of content and cultural riches that are within the museums and the art galleries of our countries. We know the British Museum has already made enormous strides in this direction, and Culture OnLine will, by the end of next year, have developed more prototype, mock-up examples of how this can be taken forward. There will then be in this programme the first-phase content coming on-line from 2002.

  84. Yes, but it is not very quick, though. I think the steering group is going to be set up in February, and the showcase website a year in December?
  (Ms Hewitt) That is correct. There is a lot of work to be done there, and there may be legislative issues, I am not sure.
  (Mr Pinder) There will need to be one or two pieces of legislation as part of the restructuring to give us the ability to pass some of the stuff across the internet. This is the cultural side.

  85. Is this because of copyright?
  (Mr Pinder) Absolutely right.

  Chairman: Mr Hoyle, if you would like to pursue culture, please do.

Mr Hoyle

  86. All the culture is in Chorley, and the Minister was there only a week ago, so she recognises the culture.
  (Ms Hewitt) Visiting an absolutely excellent school. I should have paid a compliment to my colleague here.

  Mr Hoyle: Bishop Ralston is truly a wonderful school.

  Chairman: Sadly he was not a pupil there.

  Mr Hoyle: Although my wife was, Chairman.

  Chairman: Nepotism is always important.

Mr Hoyle

  87. Can I take you on to the tscheme? Obviously under the Electronic Communications Act the major plank of that was the tscheme. I wonder if you could report on the progress of the scheme from your own perspective?
  (Ms Hewitt) Indeed. It has made, I think, a good start. What we now need to do is to see much more high-profile promotion of the scheme. What Trust UK has done obviously is to establish itself, to start accrediting codes of practice, particularly that from the Consumers' Association and the Direct Mail Association. They have also put in place an independent committee chaired by Lord Borrie which will actually validate the codes that apply for accreditation to Trust UK, and I think that is very helpful. As I say, the next stage is really to get much more publicity for Trust UK, so that we get more code owners wanting to become part of Trust UK, but also crucially so that we get much more consumer awareness. Certainly I have been trying, as part of the run-up to Christmas, to get across basic advice to consumers about on-line shopping, but also to take the opportunity to explain about the Trust UK hallmark.

  88. Is the Alliance for Electronic Business seeking to be funded?
  (Ms Hewitt) I am sorry, I was talking about Trust UK. I do apologise, because you were talking about the tscheme, were you not?

  89. Yes.
  (Ms Hewitt) I am sorry, it is confusing having different schemes, I have to confess. As far as the tscheme goes, yes, I am satisfied with the progress. There are some very difficult issues there. The Alliance for Electronic Business has had to confront those. They have got their board in place. They are now piloting the performance standards as well as the assessment regime before it goes live and actually starts to deliver approvals to the trust service providers, which it will start to do in March. Again, there is a need to publicise that, both for the sake of the trust service providers who may wish to apply to the scheme for accreditation and for the sake of consumers who need to know that approved digital certificates are available. Perhaps I could ask Andrew Pinder to comment on this.
  (Mr Pinder) Part of the problem or part of the issue with the tscheme is that you need services which will accept digital certificates, and therefore there is a demand side as well as a supply side to this. The tscheme addresses the supply side, but there is also the demand for that. As part of trying to deal with that demand, or at least provide facilities, the Government Gateway, which will be on-line in January, will take digital certificates; in fact, we are still talking to Viacode, who are the potential first accreditor through the tscheme, to take their certificates through our Government Gateway. There are certain government services who demand digital certificates going on line next year. Those services are likely to be services from MAFF and Customs and Excise to start with and later on Inland Revenue. So on the demand side we are doing things to try to facilitate these things as well as on the supply side.

  90. Moving on to the Regulation of Investigatory Powers Act, better known as RIPA—RIPA sounds much better—RIPA (sic) of course are meeting with industry today to discuss the presentation of that and that meeting is taking place with Charles Clarke.
  (Ms Hewitt) Yes.

  91. I wonder if you do not feel this is a snub and somewhat a downgrading of the E-commerce Envoy. Surely you should have been leading these discussions? I wonder what you feel about that.
  (Ms Hewitt) I am delighted.

  92. That you are excluded?
  (Ms Hewitt) Far from feeling snubbed, it was my Department and I who put in place last year the Industry Forum which got the Home Office and the law enforcement agencies and the internet service providers and the internet industry talking to each other and beginning to understand each other's business. When Charles Clarke and I were appointed in July of last year to our respective positions, we found there were very considerable difficulties with the proposals which were being made for the RIP Act. We initiated that Industry Forum but always with the intention that the Home Office, and in particular Charles, would take over chairing that because the RIP Act is a piece of Home Office legislation, albeit one on which my officials and I have been very closely involved and will continue to be closely involved, but it is absolutely right that he chairs that and ensures that the law enforcement agencies and the Home Office draw up a new code of practice under the RIP Act in very close consultation with the industry. We ourselves obviously work very closely with the Home Office to ensure we have our own input into the implementation issues and the code of practice, just as we did into the drawing up of the RIP Act in the first place, and of course we continue to talk directly to the industry with whom we have a very close relationship and, amongst other things, make sure they are content with the progress being made on the Act.

  93. Can you comment on the suggestion made by the National Criminal Intelligence Service, GCHQ and all the other spooks which are around, that companies should keep all their communications for seven years. Would you agree with those comments?
  (Ms Hewitt) I do not agree with the proposals. I saw them in the press, I think, ten days ago. I have not had formal communications with the Home Office, I have discussed it informally with Charles Clarke and I understand it is his view as well that that proposal should not be implemented.

  94. Will that be part of the discussions today?
  (Ms Hewitt) I have no doubt it will, but since the discussions are taking place at the moment I have not yet had a report on it.

Helen Southworth

  95. Can I ask you about small businesses. You have considerable personal enthusiasm for drawing small businesses into electronic commerce and electronic communications. What are you actually finding is the real role that Government needs to play within this process?
  (Ms Hewitt) A very important role, and part of it relates to the broader issues we have been touching on, making sure that the skilled people are there and making sure the legal framework is right, making sure that we have cheap competitive access to the internet—hugely important for small businesses. But there is also a very specific function we are playing, which is making sure that small businesses have an independent source of advice on how the internet and electronic networks can actually help their business. We now have in place 100 UK online for Business centres across England, and there are counterparts in other parts of the country. We have stepped up that programme of UK online for Business centres. When they started, they were really there to meet the needs of the small business owner/manager with somebody who would talk in plain English, who would not try and sell them an inappropriate product, who would not blind them with something which did not meet their business needs. In a sense we have moved past that because we have now got so many SMEs which have computers, they are connected to the internet, they might be using it for e-mail or putting up a website, and now the challenge is much more to give them very detailed advice from the perspective of their business as to how they can really use ICT right through the value chain for business-to-business commerce in particular. So, thanks to the additional funding we got from the Spending Review 2000, we are increasing the number of business advisers in those online centres, and we are just in the process of a pretty large scale direct mail and radio advertising campaign and trade press advertising campaign targeted on SMEs to increase their use of those centres. They are proving very, very popular and very effective in helping a lot of small businesses to get on-line. As I said earlier, we are ahead of the game in terms of our businesses trading on-line, but it is still a minority, we still have a long way to go there.

  96. There are two things which small businesses constantly say to me when I am talking to them about electronic commerce. One is fiscal measures, and they are, unsurprisingly, very keen to have the Government sharing risk with them. The second is something which goes back to what the Chairman was saying earlier, what do we do when it goes wrong, because small businesses cannot afford to pay permanent experts to be on call when they need them.
  (Ms Hewitt) We put in place in the Budget of this year 100 per cent first year capital allowances for any business with fewer than 50 employees, and that is the vast majority, making an investment in ICT, which was very, very warmly welcomed by small businesses and by the Federation and other representative bodies. In terms of how you get help, and we touched on that earlier, not for all but for a number of SMEs the development of application service providers is going to be very important. Instead of the business or the organisation buying their own IT and then having to put in place a contract with a help line or having somebody on the staff who actually knows what to do with it, which is one way, the alternative is that you use an application service provider who is responsible for giving you a level of IT service that you specify, and you then pay a fixed monthly rate accordingly. There are pros and cons with ASPs, it is at an early stage of the market, but some SMEs are reporting very good experience with them because, instead of having to make the up-front investment and then learn, sometimes painfully, what the real costs of using it are, they can agree a package of service and pay for that on a fixed monthly basis, so they know in advance what their costs are going to be. So there is increasing choice for SMEs and the SMEs themselves are becoming more sophisticated customers of ICT, and that is hugely important as well and something where again UK online for Business can help.

  97. You have carried out sectoral studies on e-business and you are pulling together the results. Can you let us have some information on the outcome of those?
  (Ms Hewitt) Somewhere I have a very helpful table which I might be able to leave with you, but I will have to find it first. We are well under way with the different sectoral studies and perhaps the simplest thing is if I let you have a note afterwards of which have been completed and what the completion date is for the other ones. I certainly expect we will be publishing those. For instance, one of the early ones, which was on the aerospace sector, gave us a very good indication of the comparison between our own aerospace sector and what was going on in other parts of the world, and suggested where much greater action needed to be taken to get right through the supply chain in aerospace the full potential of the internet realised. In fact we have almost completed the first wave of the studies—steel, aerospace, motor vehicle retailing, downstream gas, telecoms services, electronics manufacturing, chemicals, upstream oil and gas, biotechnology and metal forming and finishing—and we will publish them on-line. It is the UK site.

  98. Have you been able to draw any conclusions yet about what DTI needs to do in terms of making businesses aware of critical aspects of e-commerce?
  (Ms Hewitt) The central conclusion, and we are looking at how we translate this into implementation, is that we need to integrate e-business with our other supply chain initiatives, because the DTI works very closely with the different industry sectors to help them to improve their productivity and their competitiveness. So, for instance, in the motor manufacturing sector, we have a very well established supply chain initiative with the Society of Motor Manufacturers and Traders. We are putting in place a similar industry-based supply chain initiative in the textile sector and so on. E-business and exploiting electronic networks right through the value chain is not a separate add-on, it is part of a whole process of raising productivity and competitiveness in all the firms, from the tier one suppliers right down to very small tier four and five suppliers. We need to integrate it into our supply chain work.

  99. What are you doing about working with small businesses to tackle fraud? I have had particular examples in my constituency of credit card fraud, where several hits were made on a company because they were having orders made electronically and apparently there was a problem about authorisations being given which then—
  (Ms Hewitt) Where the transaction was repudiated and the company which had delivered the goods found the credit card issuer was taking back the money?

  100. Absolutely, but they had an additional set of problems in that in communicating with the police, the police did not seem to be able to understand how and where the transactions were taking place, and were very, very slow in responding, to such an extent that another delivery was made and the police were not able to even be present to see who took the goods off the postman.
  (Ms Hewitt) I obviously cannot comment on the individual case, which I do not know about in detail, but there is obviously a very serious issue of fraud and indeed other forms of crime on the internet. We have been working with the credit card issuers, with the British Bankers Association, and with other industry bodies, to ensure that they put in place effective risk management systems and effective systems for preventing and dealing with fraud on the internet, so that you do not end up with small businesses having to carry the liability which really they should not be asked to carry because it was not in a sense their fault in the first place. The Home Office has also been working with the industry, particularly with the card issuers, to support the introduction of address verification because there are issues around there in terms of ensuring when an on-line order is made you need to check whether the address is actually the right one for the credit card holder. So we are making steps on that. As far as the police are concerned, the Home Office has been making pretty considerable investments in strengthening the capacity of the police really in a technical capacity to deal with crime on the internet, including fraud, but for some police forces this will be a very new issue indeed.

Mr Hoyle

  101. I wonder if you have been contacted by SMEs who are very, very concerned about IR 35 contractors going overseas, which would leave them with an IT skills shortage that they do not think can be filled? I wonder if you share their worry about what is happening?
  (Ms Hewitt) I do not think I have had any small businesses raise IR 35 with me. I have had a couple of large businesses saying they have lost a few contractors as a result of IR 35. I recently spoke at a main session of the CBI Conference on e-commerce generally, a big panel discussion, and nobody raised IR 35. It is interesting, if you look at one of the contractor's websites, you will find a monthly survey of the number of IT contractors who have left or are planning to leave the country. On the most recent one I have seen, and I think it was the early December results, there were about 78 sub-contractors who were planning to go to Germany or had already gone, there were about 48 who were planning to go to the Netherlands or had already gone, there were around the 10s or 20s in a handful of other countries. If you look at what other countries are doing, you will find the German Government is already taking steps against what they call disguised employment, fraudulent self-employment; the Australians have introduced a very similar law; the Americans, and many, many other industrialised countries are taking steps to protect the integrity of their tax system and ensure there is fairness between employees who are paying not just income tax but also national insurance contributions and people who, although they are doing the same thing as the employees, have managed to route their income through a personal service company. Of course we are monitoring the situation very closely, we have not yet got to the end of the first tax year in which IR 35 has been in force, and I know colleagues in the Inland Revenue have been working very closely with the contractors group and other parts of industry to ensure they are giving as clear guidance as they possibly can, so people know whether they are still in fact self-employed and able to use their personal service company for self-employment, or whether in fact their contract falls on to the employment side of the line.


  102. Mr Pinder, have you had any other reactions to this?
  (Mr Pinder) No. My experience is the same as the Minister's.

Mr Chope

  103. I am very surprised at the Minister's comments on that because the Professional Contractors Association has obtained leave to pursue a judicial review against the Government on the very basis that the Government's legislation discriminates unfairly against small companies. I thought the Minister was sympathetic to small companies and small IT companies in particular, but it appears she could not care less and we will have to wait and see what happens in the court case. I really want to ask the Minister about e-procurement and e-tendering because, again, in the documents there is much mention of the progress which is being made on e-tendering and that there is going to be 50 per cent e-tendering by 2001. What month in 2001 is that objective going to be achieved?
  (Ms Hewitt) If I may just, very briefly, comment, I care very deeply about small businesses, which is why I spend so much time listening to them. As I say, no small business users have raised with me the issue of IR 35. Obviously I am aware of the concerns of the Professional Contractors Group and of the judicial review. We will see what decision the court comes to, but clearly the Government will be defending that action. On the issue of e-tendering, as you have seen from the UK online Annual Report, we have been making pretty substantial progress in different government departments with procurement, with the Ministry of Defence, for instance, rolling out its own e-procurement site and several other departments doing the same. Health, for instance, is well advanced with an e-procurement process. What Peter Gershon at the Office of Government Commerce is now doing is testing innovative and flexible approaches to e-procurement rather than, as was the original idea, putting in place a sort of single catalogue right across Government which everybody would have to use. We think it is better to try a much more flexible and in a sense much more market-led and innovative approach, and that is what is happening at the moment with the pilot. Do you want to add to that?
  (Mr Pinder) The Government target is to have 100 per cent e-tendering by 2002.

  104. Looking at page 8, the Government target is first of all to have 50 per cent e-tendering by 2001 and I wonder if you could tell me, again, in which month in 2001 you think that target is going to be achieved?
  (Ms Hewitt) December.

  105. Thank you. While we are rushing ahead with e-tenders, it seems, from a question that the Minister answered which I put down about the payment of bills, that electronic measures are causing delay in bill paying. In her own Department the target of 100 per cent bill payments last year was missed and only 93 per cent was achieved and, indeed, in the Ministerial Support Unit in her Department only 67 per cent was achieved. The Minister said in answer to a question I put down about this, because of a resource accounting and budgeting system being introduced, including a new electronic measure of the bills received and paid, there had been these delays. Does it mean that as soon as we go electronic, we go backwards to start off instead of going forwards?
  (Ms Hewitt) Mr Chope, as you will know, it is often the case, in the private sector as well as the public sector, that large and complex new IT systems have teething problems, and resource accounting and budgeting is a major transformation—a long, overdue transformation, in my view—of the way in which the public sector accounts for its capital as well as its revenue transactions. Of course, right across the department we have had to change the computer systems in order to deal with it. At the same time the DTI has been rolling out a new IT system. I was most dissatisfied with the fact that we had slipped behind on the level of bill payments that were being achieved on time because, of course, as the Small Business Minister, I want to see all our suppliers paid on time, and that is precisely the target that we have set not just for DTI but right across government. Those problems are being fixed, and I hope we will very quickly get back on track with prompt bill payments.

  106. So when do you think you will get back to 100 per cent of bills being paid on time?
  (Ms Hewitt) I do not, I am afraid, have a date yet, but as soon as I do perhaps I can write to you.

  Chairman: Minister, thank you very much to you and your colleagues. We shall look forward to getting the memorandum and the other bits and pieces of paper that you promised us. Thank you very much indeed.

previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2000
Prepared 15 December 2000