Examination of Witnesses (Questions 880
WEDNESDAY 17 MAY 2000
880. You are back! That is a very speedy register
of a vote!
(Ms Hewitt) I did not vote electronically. It turned
out to be a Ten Minute Rule Bill and apparently the Chamber will
survive without my vote.
Chairman: I will leave you with time to reflect
on that question, Mr Allan. We are moving on to Baroness O'Cathain.
881. In Washington we recognised the fact that
the Americans kept on stressing the importance of venture capital
and also the importance of granting share options, options to
peoplereally massive options to people. The question to
ask is: do you buy into that? This is because there is a feeling
abroadand, indeed, it was expressed to us in Washington
at a private view by the European Union representativehe
thought it was terribly greedy to have all these people taking
share options when there were homeless people on the streets.
That is polarising it a bit but there is a deep unease. I am asking
you to what extent you think it is possible (or indeed acceptable)
to replicate that part of the emphasis on venture capital and
massive share options in the United Kingdom, in order to drive
e-commerce ahead even more rapidly than at the moment.
(Ms Hewitt) I certainly do think, and so does the
Government, that we need a stronger and deeper venture capital
market, not only in the United Kingdom but in the European Union
as a whole; and that we need to encourage and support share options
as a way of encouraging people to take the risks that are involved
in starting up a new business that may be highly risky and uncertain
in its outcome. I think it was Winston Churchill who said, "If
you want a wealthy country then you have to tolerate wealthy men"and
womenbut he did not say that! Therefore, we would want,
as a Government, to encourage more and more people to take entrepreneurial
risks. Then, if they succeed by dint of enormously hard work,
of having a wonderful idea, of innovating a new technology, a
new product, whatever it is, if they succeed in making large sums
of money, well, good luck to them.
(Ms Hewitt) That is the proper fruits of success and
the more that success can be shared amongst all employees the
better. I was talking yesterday to Amazon.com, who are trebling
their warehouse space in Milton Keynes as the logistics part of
their operations in this country. I asked what the starting wage
would be for a picker and packer, a warehouse operator, a relatively
unskilled job: £6 an hour and share options. I think that
is absolutely right because they make the pointand it is
true in most of these dot-com start-ups but increasingly in the
broader economythe success of the business depends upon
every member of the team. That is, in a sense, the essence of
a knowledge based economy. Therefore, employee share ownership,
in a variety of forms, is increasingly the natural form of ownership
for the knowledge economy.
Baroness O'Cathain: Thank you very much for
883. Minister, good afternoon. Your Department
has, at last, started looking at the amalgamation of regulators
in terms of OFGAS and OFGEN. Is there a case, do you believe,
like we discovered in America, for the amalgamation of such organisations
as OFTEL, the ITC, Radio Communications Agency, and the like in
(Ms Hewitt) There is certainly a case. It needs to
be looked at and that is what we are doing. We announced some
months ago that DCMS and DTI would jointly prepare a White Paper
on the regulatory framework for converging communications industries.
We are starting work on that at the moment. We will publish a
White Paper in the autumn. I do not yet know what the White Paper
will say, but clearly it is an absolutely central issue to look
at whether you need sector specific regulation on top of a general
Competition Act regime; and, if so, what are the objectives and
principles that govern that regulation? Then, what are the institutional
arrangements for it? But it is, on the face of it, anomalous to
have different regulators born in an age where telecommunications
and broadcasting were completely distinct things, carrying on
in an age when increasingly they are not distinct at all.
884. Is this one of the reasons why you dropped
telecommunications from the Utilities Bill?
(Ms Hewitt) It is one of the reasons. When we introduced
the Utilities Bill, and when we drafted it, we had not at that
point considered or decided to have a White Paper on communications
regulation. We initially kept telecommunications in the Utilities
Bill. In fact, there are some useful things we could do, even
within the present confines. But, increasingly, it seemed sensible
just to deal with the whole communications issue through the White
885. Much has been put to us this afternoon
by Reuters, that there is a case for more co-ordination and collaboration
between regulators in this area in Europe. What do you think about
that and what would be the Government's policy? Are you content
to move in that direction?
(Ms Hewitt) I am sure there is a case for closer collaboration.
I think we are getting that. That is not the same as saying there
should be a single European regulator. But the European Union,
through its telecommunications review and through its review of
programme on liberalisation, is facilitating a process whereby
the national regulators increasingly learn from each other; but
is also, in a sense, setting standards that national regulators
should adopt. That comes out quite clearly in the telecommunications
Lord Woolmer of Leeds
886. May I turn to SMEs. Quite a lot of SMEs,
to all our delight, really are getting involved and professional
in this area but still quite a large proportion are not. To what
extent, in your judgment, are SMEs taking up e-commerce? Do you
think the Government could do more in helping or encouraging those
who currently do not appear to have the resources or inclination
to take up e-commerce? Finally, in relation to the Small Business
Service, what part are they playing, in your view? Is there more
they could be doing?
(Ms Hewitt) I was very concerned by last years' bench
marking study when we found although we have some absolutely world
leading small companies, if you look at the picture as a whole,
our smallest businesses in particular were at the bottom of the
G7 league table for exploiting the Internet, and that is disastrous.
Last year we put a lot of effort into the process of encouraging
and insentivising small businesses to get on-line. One of the
very important programmes here is my Department's Information
Society Initiative which has rolled out local support centres
right across the country. The last one was opened just before
Christmas. They advise small businesses. In a way, they strip
out the technical jargon, which is a real barrier for the non-technically
literate small business person. They are not tied to any one product
or provider. They overcome the fear that a lot of small business
people have, that they are just going to be sold something wholly
unsuitable that is in the interest of the sales rep, and they
can advise them from the point of view of their business as to
how ICT will help. We have marketed them mainly through direct
mail and have had a very, very good take-up. That is one very
practical way it will help. I was delighted that in the recent
budget the Chancellor allocated another £10 million to that
programme so that we can bring in even more business customers,
but it was clear that we needed to do more and, again, I think
we took a very important step in the budget when the Chancellor
announced 100 per cent first year capital allowances for businesses
who employ fewer than 50 people, making an investment in ICT.
There is a real advantage there and, of course, it also reflects
the fast moving nature of the technology that you are investing
in. Those two things are very important. Getting the cost of access
down will also help. I am hopeful, though I have not yet seen
the figures, that when we get the results of the new bench-marking
study, which is just being completed at the moment, we will see
a very sharp increase in SME take-up. One additional point, if
I may, is that we are now seeing more and more commercial providers
offering complete service packages to small businesses. They will
host websites, they will help you design it, they will offer all
the e-commerce transaction facilitiesthe credit card, the
status, the billing system and so onthey will do all of
that for a per monthly fee. It can start for a simple package
of about £15 a month, and the business person can get on
with doing what they know about, which is designing the product
and getting out there, finding the customer and selling the product
and not having to turn themselves into an IT specialist or a web-master.
887. What do we know of the experience and practice
elsewhere in the EU in the SME sector? How do we compare with
the SMEs in France and Germany, for example? Are there any lessons
from there that are helpful to us?
(Ms Hewitt) The bench-marking study certainly suggests
that, particularly, our micro-business centre was lagging behind.
The new Small Business Service under David Urwin's direction is
bench-marking the business support services generally against
a range of other countries. That is not yet complete, but it is
certainly something the SBS will do in order that we can define
what world-class business support services look like and make
sure that we are delivering them.
888. What are the principal reasons why the
SMEs in some of the other European countries do better than ours?
(Ms Hewitt) I am not sure. I cannot give
you a simple answer to that I am afraid, my Lord. I do not know
whether in France the very early roll-out of Minitel may have
helped to acclimatise businesses as well as individual consumers.
Although take up of the Internet in France is still lower than
it is in the United Kingdom, there is a different context there
and that might have helped part of it, but I am afraid I do not
really have an answer for it.
889. We have had some worrying evidence given
to us by Freeserve who are building portals for small businesses
and we asked them what the nature of their relationship with the
new SBS was, and they said they have had relatively little contact,
which surprised us. I am sure you must be concerned about that
kind of comment coming from the industry?
(Ms Hewitt) The SBS is very new and David Urwin in
particular, as the new Chief Executive, is having to meet an enormous
number of people and is putting in as many as he can in a very
short space of time. When the DTI transition team started work
on what we call "the single gateway", which is now a
websitebusinessadviceonline.org.ukwe did bring in
a number of private sector and non-private sector partners, because
what we want is to create a portal for public sector information
and services to SMEs that will also be available through banks,
lawyers and accountants, trade associations and the CBI and all
the rest of them, through a call centre, as well as directly on-line,
so that SMEs can access this information in any way they want.
As Freeserve and a number of other companies develop their portals
for small business, we will certainly want to have click-throughs
to and from those sites, so that our information services are
available to Freeserve's small business customers, or Colt's small
business customers or anybody else's small business customers,
but frankly there are so many commercial providers moving into
the small business market that in a way I would be surprised if
my officials, or SBS officials, have had time to see everybody
Chairman: It is just that Freeserve is so big.
If we move on to a different topic. Lord Paul?
890. There is a shortage of skilled workers,
as the Chancellor talked about in his budget. The Americans are
really pouring in people from outside and the Germans have also
tried it. What are we going to do about it? I know you are going
to India, they are all waiting for you.
(Ms Hewitt) I am looking forward to it.
891. But India is also there, we were there
last month, and one of the messages was very strong, that even
they have started suffering from the shortage of IT personnel.
What effort have we made to solve this problem? How are we going
to train more people in this country? I have to leave at 4.55,
this is a very fascinating subject, but I am still trying to fight
for the manufacturing industry.
(Ms Hewitt) Thank you, my Lord. Maybe I could just
take this opportunity to say that e-business is everybody's business,
and this distinction in public comment between the new economyand
the implication is that .com Internet stuffand the old
economymanufacturingdying, is nonsense, because
technologies are transforming manufacturing, as you, my Lord,
know a great deal better than I do. So I very much reject that
old/new economy distinction and so does the Government as a whole.
892. But I keep the message going.
(Ms Hewitt) On this specific issue of skills, we are
all suffering from skills shortages in this world. The Information
Agency Partnership, which is chaired by Steven Byers the Secretary
of State, brings together the chief executives of all the leading
telecoms, Internet and contents providing companies. That partnership,
set up a task force last year under Alan Stevens' direction, to
look specifically at the issue of skills. They published a very
useful report just before last Christmas. As a result of that
we have put in place both a short-term and medium-term strategy,
the short-term aspect of which was a very fast change to our work
permit system. Unlike the USA, we do not have to pass primary
legislation to alter the quota for workers. What we were able
to do, and we did in March, was to add a whole range of ICT and
engineering job categories to the list of shortage occupations
for work permits. There is no quota, and there is no limit on
the number there. So any company in the United Kingdom that needs
to recruit from abroad into one of these shortage occupations
can get a fast-track work permit and does not have to go through
what can be quite substantial hoops about proving that they have
tried to recruit all over the whole of the EU.
893. Sort of reverse brain drain?
(Ms Hewitt) If I may say so, my Lord, I do not think
that it is a reverse brain drain. I think that increasingly this
is a global economy and that there is very real value to individuals,
to their home countries and to companies, to have exchanges of
workers. I suspect that increasingly we will see United Kingdom
based companies bringing people in from abroad to fill shortage
occupations who will acquire very valuable other experience in
the course of working here and will then go back to their own
countries to work there, to set up new businesses, to continue
working in what may well be a global employer, and that will happen
in most other industrialised countries as well. I think that is
very valuable to Indiaif it is India that the worker is
coming fromas well as to the United Kingdom. Having said
that, we also have to have our own strategy for growing our own
skills, and of course we are doing that as well. One of the things
that the IAP Task Force discovered, which I certainly did not
know, was that we have over 800 qualifications in the ICT and
engineering field. So it is quite impossible for the student,
the parents or careers advisors to chart a path for somebody into
this part of the economy. The DTI and the DfEE have been working
together. We now have the Qualifications and Curriculums Council
rationalising those qualifications, so that we have a sensible
path for providers, the FE colleges, as well as the individuals.
The DfEE, who are in the lead on this, are working with the national
training organisations. We have four or five of those in this
field of ICT and engineering and we are looking at how that can
work more sensibly. The DfEE, again in the lead, are looking at
how the New Deal can be adapted in order to fast-track unemployed
people who have got an aptitude for this into ICT jobssomething
that has been happening very successfully in Irelandand
we are also looking at how we can work with businesses, I think
they will lead in this to improve the whole image of careers in
ICT and engineering, because, perhaps surprisingly given what
is going on in this field, it is actually quite difficult to attract
people into IT and engineering courses. It is particularly difficult
to attract girls and women into it, and that really goes back
to a very long standing problem about attracting women into engineering.
We are looking again at how we can deal with that problem and
actually convey to young people and women how attractive these
jobs are. They have an image of nerds in front of a computer screen
with no contact with other people. The reality is, of course,
very exciting and interdisciplinary teamwork where interpersonal
skills are at a premium, but that is not the image.
Chairman: Back on to a European question, my
894. Some non-United Kingdom observers expect
Germany and not the United Kingdom to be the powerhouse of e-commerce
in Europe. Are we being complacent? How do we actually compare
with Germany? Is the Prime Minister's aim that we should have
the best environment for e-commerce achievable in a short enough
time frame? We are talking about the development of e-commerce
really within the next five years.
(Ms Hewitt) We are certainly not complacent and we
are very well aware that all the time we are shooting at a moving
target. It is a bit like productivity gains. Our manufacturing
sector has been making great productivity gains, but other countries
are often moving even faster. That is even more true in the world
of e-commerce. At the moment the latest Booths Allan survey, for
instance, that the Prime Minister quoted from recently does show
the United Kingdom as having the largest e-commerce market in
the EU with, interestingly, a higher proportion of our businesses
overall trading on the Internet and a higher proportion of our
population having Internet access and so on. Of course, Germany
is the largest economy and, therefore, it would not be at all
surprising if in the end it did not also have the largest e-commerce
market. That is not the only test of being the best place for
e-commerce, and there are issues there about Internet access and
Internet access costs. For instance, the United Kingdom has a
very real competitive advantage, not only in mobile telephony,
but also in digital television. We have seen digital television
take-up go from nought to something approaching 4 million in just
over 12 months, which is very, very fast. So, we are unique, I
think, in our combination of platforms, wired access, wireless
access and digital television on satellite, cable and digital
terrestrial, which will rapidly enlarge our consumer market place,
it will help to enlarge the SME take-up and it will make us a
very, very attractive market for the companies that are supplying
the hardware, the software and the applications that will then
take advantage of third generation and digital television. I think
we have some very real advantages there over the USA, but also
by comparison with Germany.
895. How much do we share our initiatives with
other nations in Europe, because quite clearly the success of
our e-commerce is determined by the open market and trading across
(Ms Hewitt) Indeed, and one of our objectives is to
secure what I feel is a very large prizea single market
in e-commerce across Europe. We are very committed to that and
in a sense I think all of us, as European Member States, are competing
with each other and competing for inward investment and so on,
and we have remained a destination for foreign directive in the
EU, but we are also co-operating, we are learning from each other,
we are sharing best practice, and we are working with our colleagues
in the European Union to get the right regulatory and legal framework
at the European Union level.
Lord Cavendish of Furness
896. Minister, listening to you I get the impression
that you are enjoying your job very much.
(Ms Hewitt) I am indeed.
897. I want to prey a little on how this is
all working. How does joined up government work in connection
with e-commerce? How do you, Minister, and Mr McCartney co-ordinate?
Finally, how are you going to "push down and across"
the process of co-ordination?
(Ms Hewitt) I am thoroughly enjoying the job. This
is exciting stuff. I have overall responsibility for the Government's
Information Age Agenda. Within that I have the day-to-day responsibility
for e-commerce and e-business, as it were, in its narrow sense.
Ian McCartney has the responsibility for e-government and for
driving that forward. We see each regularly, both informally and
through the Information Age Ministers' Network, which I chair
and which is the first Ministers' network to have its own secure
website. We are trying to work on-line as well as through physical
meetings. We also co-ordinate very closely through Alex Allan
who is based in the Cabinet Office and who reports to both of
us as well as directly to the Prime Minister.
898. I do get the feeling that the Government
is having a little bit of difficulty. Is this going as fast as
you would like?
(Ms Hewitt) Last year I felt very strongly that of
the three things we had to dowhich is getting the market
framework right, getting the people right and getting the Government
itself on-linethe Government part was much the hardest
challenge. Every global corporation and every large corporation
is struggling as they move from vertical silos to horizontal processors
and get everybody focused on the same outcomes, which has to be
customers, or in our case, citizens, and as they move from hundreds
of different IT systems that do not talk each other to a common
centrally determined technical specification, that then enables
information to flow absolutely freely across the entire organisation.
We have got, in government, exactly the same issues; vertical
silos, a difficulty of focusing on outcomes, legacy systems that
do not talk to each other and e-mail systems that certainly do
not communicate with each other. We are overcoming those problems.
The GSI network will help hugely and the e-government strategy
that we publish will mandate a common set of technical, essentially
Internet based standards that in turn will allow those legacy
systems to talk to each other so that we can then, on-line, offer
services to citizens without having to replace, at vast expense,
all those old IT systems sitting in departments. I know this is
something that we will be happy to discuss in more detail if you
want to come back to it.
Lord Faulkner of Worcester
899. Following on from Lord Cavendish's question,
you announced, I think, that the Government is advancing the deadline
for introducing services on-line to the public from 2005 to 2003.
Can you tell us a little bit about how you expect to achieve that?
(Ms Hewitt) Let me just correct one point there. The
initial target was 100 per cent on-line by 2008. The Prime Minister
has brought that forward to 2005. There will be a number of services
on-line by 2003 and indeed before then, but the 100 per cent target