Examination of Witnesses (Questions 900
WEDNESDAY 17 MAY 2000
900. Did Lisbon not ask for a target of 2003
for all government services?
(Mr Allan) It was electronic access to the main basic
public services by 2003.
(Ms Hewitt) We are moving just as fast as we can and
are in the middle of a cross-cutting review as part of the Spending
Review 2000 looking at the knowledge economy, but including electronic
government. We will have more to say on that in July when we announce
the results of the Spending Review, but certainly we are prioritising
government services that can be delivered on-line to citizens.
We have recently announced the issue of a contract for the creation
of UK On-line which will be a government portal for citizens that
can be customisable so that depending on whether you have children
and where you live you can ensure that you get the information
you want about changes in the national curriculum or about local
schools or other things that are happening in your town or city
and so on. We are making some real progress on that, but we also,
particularly when it comes to very large operations like social
security, have some hurdles to overcome even to meet the 2005
901. Can I ask you if you are responsible for
keeping your colleagues up to the mark on this? Are you satisfied
that they are getting technologically literate at the same speed
as you are?
(Ms Hewitt) Ian McCartney and I, at the Prime Minister's
request, recently did a joint presentation on e-commerce in the
Government to a Cabinet session that was wholly devoted to this
subject. What was very encouraging was the personal commitment
of all Cabinet Ministers to transforming public services by using
information and communications technology. We know from the business
experience that transforming a corporation like GE into an e-business
is only happening because of Jack Wilcher's personal leadership.
In our case, we have the Prime Minister's personal leadership,
he has gone out there and learnt how to use the Internet and he
is now using e-mail and I am sure that is having a very interesting
effect on the culture of Number 10 and the Cabinet Office. Increasingly
I think what I am finding is that ministerial colleagues are frustrated
because they have not always got the right equipment or the right
network access to enable them to work on-line in the way that
they want, which is why the Government strategy, the rolling out
of GSI and the creation of the New Knowledge network across government
is so important, because it will enable ministers and officials
to communicate across these vertical boarders and work cross-departmentally.
902. I hope that the Prime Minister did not
open the "I love you" e-mail.
(Ms Hewitt) I am sure he was warned in time.
903. Minister, good afternoon. Can I return
to the question of equity for these new companies? In America
we learned that about 5 per cent of pension fund assets are actually
going into private equity and in the United Kingdom it is about
1 per cent. What can we do to incentivise not only pension funds,
but insurance companies and other institutions, to provide equity
capital for these organisations as the demand for that equity
(Ms Hewitt) This is an enormously important point,
my Lord. Indeed, the Chancellor has just announced that he has
asked for Paul Miner from Gartmore to undertake an independent
study of why it is that our large financial institution are not
putting more into the venture capital market? We have also taken
some steps ourselves to try and deal with some of these venture
capital problems or some of these equity gaps, for instance, through
the New Enterprise Fund. We are putting public sector money both
into a new high technology fund and into a regional fund that
will be managed by specialist fund managers, and we are using
the public sector investment to leverage in money from the private
capital market in order to deepen liquidity in the venture capital
904. How fast do you think this report will
be out, because one of the impressions that we have from the pace
of change and the speed at which people are setting up these businesses
and the requirements is that it seem to be very dramatic? How
quickly do you think the report will be out and you can action
(Ms Hewitt) I will have to let you have a note on
that, if I may, my Lord. This is Treasury led and it is a Treasury
responsibility for financial services, but what I would say, from
talking to the new Internet start-ups, is that there is no shortage
of venture capital available at the moment for a good business
plan. There are certainly difficulties for some more esoteric
knowledge based firms where the only asset they have is the intellectual
capital, they have no physical assets to offer as security, which
is one of the reasons why we were interested in a high technology
fund. There are certainly difficulties for smaller businesses
in the more traditional sector in securing business engine and
venture capital support, hence the Enterprise Fund Initiative?
(Mr Allan) The First Tuesday Initiative around the
country has demonstrated that there is tremendous interest in
bringing people together with business ideas and the venture capitalists
Lord Chadlington: Yes, we have had some very
905. The complaint here and the difference with
the United States seems to be that the money goes in faster in
the United States, people can attract it much more quickly from
a start-up point, whereas here people want to see that it looks
like a likely winner before they are prepared to commit their
(Ms Hewitt) Indeed. I guess it is not for the Government
to substitute its judgment for risk assessment by the market,
but there are issues there around getting the market to work more
906. And there are incentives in the United
States as well.
(Ms Hewitt) Exactly so.
907. It may be something you feel is more a
question for the Treasury, but what steps are we taking to play
a proper or leading role in Europe regarding the appropriate method
of taxation, not only in Europe, but also around the world?
(Ms Hewitt) If I may just add one more comment to
the previous question before I come on to that one? I would particularly
point to the changes that the Chancellor announced in the last
budget on capital gains tax, and I think that the new capital
gains tax taper will make it much more attractive for entrepreneurs
who have made substantial sums through their own start-up business
then to invest in new start-ups, their own or other people's.
For instance Professor Andy Hopper in Cambridge hugely welcomes
that change in the CGT regime, because he certainly thinks that
it is going to increase, very substantially, the amount of equity
capital and venture capital that is available for new start-ups.
On the taxation side, I am happy to say that we are working very
closely, not only within Europe, but within the OECD, on the taxation
aspects of e-commerce, because this is not a national issue, it
is very much an international issue. The OECD is consulting on
a proposed addition to the commentary on the permanent establishment
article of the Model Tax Convention, which, although somewhat
abstruse, is rather important in this issue. I think both in the
OECD and within the European Commission on the VAT question, we
want to work very closely with other governments in order to ensure
that we do get the best possible tax regime. I think I am right
in saying that colleagues in the Inland Revenue are indeed chairing
the OECD working party on the taxation issue. So we are playing
a very full role in this.
908. Does that include talks with the USA?
(Ms Hewitt) Indeed it does, and when I was in Washington
recently I agreed with the Vice President's advisor on e-commerce
that we would set up, through our officials, a regular dialogue
which would focus on a variety of issues. He was particularly
pleased with the role that our Government has played in facilitating
the recent agreement between the European Union and American administration
on privacy, which has been such an enormous issue, particularly
over there, and the taxation issue is very high on both of our
Lord Sandberg: That is very encouraging.
Chairman: We are actually seeing the OECD. Minister,
you have answered all of our questions very helpfully indeed.
909. I am bursting to ask another one, is that
all right, Minister?
(Ms Hewitt) Of course it is.
910. Today we had evidence from Reuters and
it contradicted evidence that we had from British Telecom last
week. We are struggling to get the correct data on pricing of
access to the Internet. I am just wondering if there is anything
here that the regulator, with a bit of a push from you, could
do to publish prices of access to the Internet? I think it is
fundamental, because everybody does say that the greatest driver
of people becoming more literate in the e-commerce world is access
to the Internet, and one of the problems about access to the Internet
is the cost of it and the fact that people are not really sure
that the charges they see listed are what they pay or if there
are hidden points. In the US, as you know, it is a political target
that access to the Internet should be made available to everybody.
I am just wondering if there is a wayit just came to me
while I was listening to your evidence todaythat the regulator
or the Department of Trade Industry could actually regularly published
access charges to the Internet? Would that be a help?
(Ms Hewitt) That is an extremely interesting and pertinent
question, my Lady. The OECD has recently published a bench-marking
study that we have drawn on and publicised, which does show that,
for instance, for 40 hours Internet access a month off peaktypical
individual consumer usewe have the cheapest costs in the
world, not simply in Europe. We will soon, I think, have other
bench-marking data for the costs of private residential use and
business use. OFTEL will publish the results of those bench-marking
studies as quickly as they become available. OFTEL itself has
been looking specifically at the question of costs of leased lines
as well as other Internet access costs, but I think that we are
driving competition even further and faster into a telecommunications
market that was one of the first in the world to embrace it. We
will get increasing competition in fixed wired access and we have
seen the cost of international and national voice calls falling
very fast with local loop and bundling, which OFTEL is driving
forward very vigorously, and we will see competition enter that
market. We have growing competition from within the wireless networks,
with five entrants of for third generation mobile, because we
have reserved the best licence for a new entrant. We will see
growing competition between wireless and wired, and then, of course,
we have the television form of access to the Internet. The Prime
Minister recently set the target of universal accessibility by
911. But you would not necessarily agree to
publish those figures on a regular basis?
(Ms Hewitt) I will take that back to OFTEL, but OFTEL
will shortly be publishing the latest bench-marking studies.
912. There are some quite strongly held views
that the position has not been represented accurately in this
country and we will draw this to your attention. There is no complaint
about off peak pricing, but of course SMEs and the majority of
people are looking for the price to come down big time, and business
is done not off peak.
(Ms Hewitt) That is absolutely right,
my Lord. Last year I was drawing attention to the need to get
peak hour access costs down. They are also falling, but it does
partly depend on where the business is situated. If you are in
London you have an intensely competitive business telecommunication
market base and very low charges as a result. We have a plethora
of telecommunications firms to choose from. That is not yet the
case, for instance, in my own city of Leicester where I run a
small business in the form of my Parliamentary office, but competition
is coming as we get new entrants to the market.
Chairman: Thank you very much again, Minister.