Examination of Witness (Questions 20-39)|
WEDNESDAY 12 DECEMBER 2001
20. We can be sure that there is no short list
drawn up already?
(Ms Hewitt) No, there is no secret shortlist.
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 outsidegeneral
secretary of the TUC, general secretaries of the major unionswho
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 sayingand 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.
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
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
(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
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
(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
(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
(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 doand we are
doing as one of the outcomes of the reviewis 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 performersand that is the kind of people you will
be wantingto 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.
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 environmentregulatory,
legal and the market environmentwithin 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 runCompanies House and the Patents Office,
for instance, both of which are doing an excellent jobthey
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.
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
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
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
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.