Select Committee on Trade and Industry Minutes of Evidence

Examination of Witness (Questions 20-39)



  20. We can be sure that there is no short list drawn up already?
  (Ms Hewitt) No, there is no secret shortlist.

Richard Burden

  21. I think, from what you have said today, I understand what you are trying to say about the strategy board objective and the composition. The fact is though that the press comments did happen on November 22 and 23, and that created a reaction. The TUC press release on 22 November not only stressed reservations about this but went on to say that John Monks was sending a copy of his letter to the Prime Minister and asking to see him as soon as possible. Given the fact that once something does get into the public domain, albeit perhaps based on a misinterpretation of what was intended, it can take a momentum of its own, can it not? And there will be quite a few people outside—general secretary of the TUC, general secretaries of the major unions—who themselves will be maybe rather concerned about the interpretations that has been put on your objectives. My question is: You have said you are going to meet John Monks but has the Department any other strategy in mind of more publicly saying—and perhaps today will contribute to it—"Look, this press comment at the end of November was wrong. This is not what was intended and this is what is intended . . ."

  (Ms Hewitt) We have already put that in place. I have already written not only to John Monks but also to a range of other people whom we originally consulted on the review and I have set out in exactly the same terms as I have set out in the memorandum to your Committee this morning what it is that we are proposing. I have also made it very clear that the TUC and individual unions will be amongst the range of organisations that will be invited to suggest names for the various non-executive posts that we are looking for. If I may say so, I think things have rather moved on because I think the misunderstandings that led to those press statements have been to a large extent cleared up. Only last week I chaired an immensely successful manufacturing summit which built on the partnership work that the CBI and the TUC have done together on the issue of productivity. I was able to announce some modest additional funding for programmes that are very strongly supported by both the CBI and the TUC and the summit discussions themselves were a model of partnership working because each part of the presentation to that summit was led by an industrialist and a trade unionist. So I think the commitment to openness and to partnership working and to an effective dialogue with all our stakeholders and partners is very, very clear in the actions that I have taken and am taking as Secretary of State.

  22. Given that background over the last week, and perhaps today, if those same newspapers re-approached some of the parties involved, whether it be the TUC or whatever, are your fears now allayed? Do you think that they would say yes?
  (Ms Hewitt) I think that is a matter for them rather than for me. But I would hope so.

Mr Lansley

  23. You have said you want to have people on the strategy board who have led change in a large organisation and changed culture. Who advised you that the best way of leading change in a large organisation was by appointing people to an advisory board to determine how to do it?
  (Ms Hewitt) That, if I may say so, is a rather crude characterisation of what we are doing. If you look at what we are doing in the review, we are seeking first of all to be much clearer about the purpose of the DTI and about its priorities; secondly, to create an organisational structure that much better reflects those priorities; and, thirdly, and actually really most importantly, to strengthen the leadership and the management of the organisation and in particular to ensure that we create a more open culture within the Department where the enormous knowledge and expertise that our staff have is shared much more effectively across the Department rather than being confined within silos, which is what has tended to happen in the past, and that the whole Department is more outward looking, more focused on outcomes and better at making things happen quickly. I know from my own modest experience of business as well as from talking to a range of people who have led organisational change, including the consultants who helped us with this review, that effective change within large organisations depends upon effective leadership from the top, because unless there is effective leadership at the top, the momentum of change is lost and you do not actually drive it through. I think having some people who have gone through that often difficult and painful process themselves, helping, and both supporting and challenging ministers and officials in this regard, will be very helpful.

  24. You have arrived back at precisely the point of my question. The Department has recently, in your person, acquired a new Secretary of State; the Department has recently acquired a new Permanent Secretary. Is not the right way to address change, substantial change, if change is needed in an organisation, to do it by way of leadership from those positions? Why did you not seek the appointment of somebody as permanent secretary who had led change in a large organisation and achieved major culture change?
  (Ms Hewitt) My new Permanent Secretary was appointed following an open recruitment process which was not confined to the Civil Service and he was the unanimous choice of the appointment panel.

  25. There is this plethora of people you are referring to who have led change in large organisations, who you fondly hope will be available to advise about it, but you could not persuade any of them to take the role of being permanent secretary? Nobody from outside the civil service was available to take such a role?
  (Ms Hewitt) I do not happen to be privy to the candidates who applied for the Permanent Secretary job: that happened before I became Secretary of State. I am as well aware as you are of the enormous salary difference between somebody who has led a large successful commercial organisation and a permanent secretary within the Civil Service. I have no doubt at all that that is a factor in the minds of people who might consider applying for the Permanent Secretary job. I also know that our new Permanent Secretary was the unanimous first choice of the search panel, interviewing panel, and I know certainly, from six months of working with him, that he is an excellent Permanent Secretary and absolutely committed to change within the Department.

  26. How will you measure success? If we were here in 15 months time, say a year on after the formal introduction of this, in April 2002, how would you measure success? If it is about productivity and competitiveness, and thus far there is no evidence of any spectacular increase in productivity or competitiveness over the last four years, how will you measure your success a year on?
  (Ms Hewitt) We are looking at that issue at the moment. Of course we have our existing PSA targets. We will be reviewing those with the spending review 2002. I certainly think it will be possible to make those PSA targets rather more precise, and the Committee has had helpful things to say on that in the past. We are not the only people who can influence and help to shape productivity within the United Kingdom, but what I will be looking for and seeking to put in place is a much more effective evaluation of the contribution that we can make as a Department. One of our PSA targets, for instance, is to create a framework of competition law that is one of the best in the world. We say in the PSA target that we would measure that through a process of peer review and benchmarking. We used a process of that kind a year or so ago again, which made it quite clear that our current competition framework, although it is not bad and was significantly improved in the early days of the `97 government, could be further strengthened, and so it will be. We will then be able to measure the impact that is having. Similarly on our business support schemes, which you may want to come back to in more detail, at the moment some of those but not all of them are evaluated; they are not all evaluated in a consistent way. One of the responsibilities of the new chief economist and the strengthened central strategy unit, which is building, as I say, on the initiative of my immediate predecessor, Stephen Byers, will be to give us a much more effective and robust evaluation system, so that we can see that the billion pounds we invest annually in business support programmes are actually being used to maximum effect and are delivering measurable productivity improvements in companies.


  27. Maybe we could move on, Secretary of State, to some of the functions of the Department rather than the structure. There is a kind of interface between the two. The role of the Department as a servant to business and an assistant to business involves your own civil servants giving an appreciation of what being in business is about and, equally, getting people from business into the Civil Service. I am really talking here about secondment. There seem to me to be two things. One is that there is no shortage of volunteers from within your own ranks to get out. This may be the tunnel that takes them, if not as far as the trees, certainly under the wire in terms of the big escape. The other side of it of course is that there is the feeling in certain areas of business that if you are getting moved into the Civil Service it is perhaps a knight's move or a rook's move, to use a chess analogy, that might not necessarily take you that much further forward but it certainly takes you a wee bit further away from where you were when you started. Sometimes secondment is about second rate. How do you go about making the DTI attractive to potential secondees? Do you find that there is a leakage from the brightest and the best in the Department when they have smelt the fresh air of free enterprise?
  (Ms Hewitt) Chairman, I would not accept your implication that the DTI is some kind of prison from which people escape at the earliest possible opportunity.

  28. Sometimes it is quite late in their careers, I have to say.
  (Ms Hewitt) But there is a very serious point here. We have got within the Department some absolutely outstanding officials. That became very clear to me in the two years that I spent, before becoming Secretary of State, as Minister for small business and e-commerce. One of the things that I was very struck by was not only my own experience of outstanding officials but also the number of business people who said to me how superb particular individuals were, what a good understanding they had of a particular business or a sector, how helpful they had been, how much they knew about a particular technology, whatever it happened to be. It is important that that is put on the record again. We also benefit hugely from the secondees that we have. I have not looked at the exact figures, but I think it is probably true to say that the majority of them would be in their forties or fifties, so they are quite well advanced in their careers, and in some cases certainly this may be their last post before retirement from their full-time career. That is not necessarily a bad thing at all because what they bring into the Department is an enormous amount of expertise from the business or whatever other organisation they have worked in before. We also benefit from the secondments that our own civil servants have within business because in most cases they then come back to us. It is certainly true that quite a few of our officials do get head-hunted by business, not necessarily following a secondment, to move into the private sector, and some of them do move into the private sector. But by no means all of them. We keep a lot of very good people and we go on recruiting a lot of very good people. What I would like to do—and we are doing as one of the outcomes of the review—is to manage our secondment process in both directions in a more effective and strategic way, so that we get younger officials and younger people from the private sector and the not-for-profit sector coming into the Department earlier in their careers, seeing that and having their employers seeing that as a really valuable part of expanding their expertise and broadening their personal development, so that they then take back into their careers something that is really useful to them. I have had two or three business people in recent weeks say to me that that is how one should work and, indeed, offer their help in making that happen.

  29. We all know the problems that small businesses have when they lose members of staff for maternity leave and things like that, and new legislation has made provision and some might say truly generous provision in terms of the size of the business. Notwithstanding that, we recognise that it must be more difficult to get small business sector needs into the Department. Have you addressed this issue? Could it be that it could be on a part-time basis, a couple of days a week, or for shorter periods? Because obviously a small business cannot afford to have one of their skilled performers—and that is the kind of people you will be wanting—to come to the department and it always creates difficulties for small businesses out of London because there is travelling time as well as the other lost time. Have you given any thought to that? Because it seems to me a gap in your provision.
  (Ms Hewitt) We do have part-time secondees already within the range of secondments available in the department. I think we can look further at how we might attract people on short secondments or part-time secondments from the small business sector. You will be aware, I think, that we announced as part of this process of broadening our expertise that all members of the senior Civil Service within the department will be expected to spend one week every year within business, by which I would include social enterprise, not-for-profit businesses. We will encourage them very much to get out there into small businesses, because in a sense it is easier to go into another large organisation.

  30. It sounds a bit Maoist this, does it not?
  (Ms Hewitt) Yes; something of a cultural revolution and no bad thing either, if I may say so, Chairman. I think it is very valuable. I have spent most of my working life running small organisations, not-for-profit businesses, and when I have owner-managers of small businesses talk to me about the problems of managing with a small workforce and being your own personnel director and your own finance director and your own marketing director, I know exactly what they are talking about. The more senior officials we have who at least have some idea of what that experience is like, the better. But we have also found other ways in which small business people can contribute. The Small Business Council which we established last year has on it 15 or 16 people who are owner-managers of small firms and who are making a very useful contribution, in terms of their time, helping us to deal with issues to do with regulation and policy making and, again, strengthening the expertise that is available to the department and indeed to the government as a whole.

  Chairman: I would like to think that you do not just focus on London. Your regional offices and the regional development agencies ought now to be able to accommodate people so that the travelling distances, particularly in relation to small businesses, are not as great, because obviously time is of the essence for them. Perhaps you could bear that in mind.

Linda Perham

  31. Your memorandum says that "...the Department must be able to make things happen." But many commentators have argued that the Department should not actually do that, they should leave the market forces to operate and just create the right environment for business to flourish. If, by emphasising delivery skills, you turn civil servants into managers, are you not running the risk that they will try to micro-manage business themselves rather than concentrating on the broad policy issues?
  (Ms Hewitt) That is an extremely important issue because it is not our job as a department or a government to try and second-guess business or to make decisions for them. A very important part of our job is creating the right environment—regulatory, legal and the market environment—within which businesses can flourish. Even that requires the ability not only to analyse a policy but to make good decisions and then to implement those decisions. The way in which we create institutions, the way in which our agencies run—Companies House and the Patents Office, for instance, both of which are doing an excellent job—they are part of the commercial infrastructure within which business operates and they need to go on delivering an outstanding service to business customers because otherwise they get in the way of business success. So that is part of the delivery agenda. But there is also another part of the Department's work which is the business support services. I think that is quite an important part of the Department's work. What we have been seeking to do in the last two years, as you know, is really to strengthen the work of Business Links, reduce their number. We are seeking to raise their quality. That is beginning to have real effects. Most of those business advisers, of course, are people who have themselves run their own business or worked in a small business and they bring those skills to bear. We have other teams of people within the sector-based team who are working with industry to deliver, for instance, best practice programmes within industry, and the Industry Forum Programme, which we are now expanding, has a proven track record in raising productivity and quality of output within the companies that it works with. That sort of service, that is what I mean also when I am talking about making things happen. Similarly, when we have companies coming to us, for instance, in an area where regional selective assistance applies, where a company wants to make an investment and may well have a choice of location, this investment may make the difference between survival and going under. It is very important that we have the skills to evaluate that project quickly and to make a good decision, but also to make it pretty promptly because, as we know, Whitehall time is not always the same as the timescale within which businesses have to make decisions. I think we can sharpen our own delivery and our own focus and our own expertise.

Mr Lansley

  32. Why is David Irwin not seeking reappointment as chief executive of the Small Business Service?
  (Ms Hewitt) David came to us on a two-year contract. He was in fact a social entrepreneur. He ran a highly successful not-for-profit business in the north-east of England and he came to us for two years to set up and run the Small Business Service. When I set that up as small business Minister, we envisaged it having two different kinds of functions. One was to improve the delivery of business support services, restructure Business Links and then improve their quality and consistency. The other was to act as a strong voice for small business within government, working particularly on the regulatory agenda. We have made real progress on both of those objectives. David Irwin has played a vitally important role, creating the new Small Business Service, putting in place the new framework of Business Links, and working alongside Lord Haskins on the Better Regulation Task Force, seeking to improve the quality of regulation that is coming out of government.

  33. Did you have any conversation with David Irwin about whether he would continue if the Small Business Service were kept within the organisational form that it was established?
  (Ms Hewitt) I had several conversations with David Irwin and with other people, as indeed did the Permanent Secretary, as we looked at where we should go with the Small Business Service in the light of the broader review. We decided to strengthen both of the roles which are currently combined within one organisation. We will retain the Small Business Service doing the delivery job, raising the quality of Business Links but also helping to streamline the support services that we offer. We will then have a separate role of one person from the small business community working alongside Lord Haskins to strengthen that role on the regulatory reform side. We are looking at exactly how that should best be fulfilled, consulting with colleagues within government about that. We will be making announcements on that in due course.

  34. But you divided the Small Business Service into two parts.
  (Ms Hewitt) That is right.

  35. And separated it into different parts of the Department or submerged it within the broader structure of the Department. Where is the strong voice for small businesses? Has that disappeared?
  (Ms Hewitt) No, it did not disappear and I think what you are overlooking there is the role of Small Business Council and its chairman.

  36. Strong 15 voices, somewhere down in the bowels of the Competitive Frameworks division. What about the reporting line for the chief executive of the Small Business Service? Did that not used to be direct to the Secretary of State, indeed with a dotted line to the Prime Minister? That has disappeared altogether, has it?
  (Ms Hewitt) The chief executive of the Small Business Service does indeed have the right to go to the Prime Minister on regulatory issues and that will remain the case for the individual who will be working alongside Lord Haskins in his role on better regulation.

  37. The Small Business Service as such was established on the basis that it would be a British equivalent of the Small Business Administration in America. You have transformed it into simply the Small Business Service inside the Department of Trade and Industry in precisely the form it used to exist.
  (Ms Hewitt) No. You are misunderstanding what we are doing and the way in which we are building on the achievements of the last two years and what we are doing by having different people focus on each of these two roles: the delivery of services, particularly through business links, and the strong voice on better regulation. We will actually deliver a better service and a stronger voice for small business even than we have been able to achieve so far.

  38. Who would be the most important voice on small business regulation? Would it be the chairman of the Better Regulation Task Force or the chief executive? Presumably there will not be a chief executive of the Small Business Service any more; there will be a person presumably from outside the Civil Service operating on the regulatory structure of supporting the Small Business Council.
  (Ms Hewitt) There will be an individual working alongside Lord Haskins.

  39. You keep saying Lord Haskins. Do you mean the new chairman of the Better Regulation Task Force?
  (Ms Hewitt) Yes. I am sorry. We will have the chairman of the Better Regulation Task Force, Lord Haskins's successor. We will have a second person focusing purely on small businesses and the impact of regulation on small businesses, supported by a unit of officials working simply on those regulatory issues as they affect small businesses and I would expect the relationship between those two individuals to be just as strong and effective as has been the relationship between Lord Haskins and David Irwin.

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