Examination of Witnesses (Questions 300
- 319)
TUESDAY 14 JULY 1998
MR D ROWE-BEDDOE,
MR B WILLOTT,
MS S LLOYD-JONES,
MR J TURNER
MR G JACKSON
AND MR
A MORGAN
Chairman
300. Thank you for coming once again before
us to discuss investment in industry in Wales. You have this opportunity
now, this massive change within the various organisations which
come under the auspices of the new WDA. You have given us an outline
of the new Agency structure. In 1994, there was a reorganisation
and at that time it appears from evidence we have had that there
may have been too much stress on inward investment in the sense
that when you were set up in 1994 there was no indigenous director
for example. How can we as a Select Committee be assured that
you are not just tagging on the various aspects of the old DBRW,
LAW? How can we be assured that you are now focused on getting
the balance right between indigenous and inward investment?
(Mr Rowe-Beddoe) I thank you for the
opportunity to appear again before the Committee. May I introduce
Brian Willott, Chief Executive of the Agency and Chief Executive
Designate of the enlarged Agency. Alan Morgan is Director of Business
Development and on his right is James Turner, Managing Director
of the International Division. On my left is Ms Sian Lloyd-Jones,
Chief Executive of the Development Board for Rural Wales and Managing
Director Designate of the Mid Wales Division of the enlarged Agency.
To her left is Mr Grenville Jackson, Director of Development (East)
of the Development Board for Rural Wales and Director Designate
of the new Strategic Policy Division of the enlarged Agency. I
should like, if I may, to take your question but, before answering
it directly, attempt to put into perspective what I think are
genuine misunderstandings held in certain quarters in Wales in
regard to the activity of both the Development Board and the Welsh
Development Agency in this question of support for indigenous
and inward investment business. It may interest the Committee
to know that some 20 per cent of the combined budgets of these
two organisations currently in this year is spent directly on
business development and inward investment: 20 per cent of the
combined budget is therefore direct spend. The balance of that
combined budget is spent on providing the business infrastructure,
providing sites and premises, improving the environment, providing
investment in urban regeneration, in order to make Wales more
attractive for business and its people. This investment of some
£136 million is actually to the benefit of both indigenous
and inward investment business. It is also important that we know
and we all agree that there is a consensus to increase support
for our SMEs. The current role of the two agencies is as follows.
We do not do everything, and since the transfer in 1991 of various
support functions to the TECs and Local Enterprise Agencies[1],
the Agency has focused on specialist programmes for companies
in the manufacturing and service related industries whose turnover
is £250,000 per annum or more and who can prove to our own
professional experts on evaluation that they have a capacity to
grow. Consequently, the WDA today works with some 3,000 businesses
of the 13,000 which are categorised in Wales as having a turnover
of £250,000 or more. The Development Board for Rural Wales
on the other hand has continued to support business startups both
directly and through the Business Connect network. Some 1,000
businesses have been identified in mid Wales as our target. In
any one year, the Development Board works with some 300 of those
businesses. In the enlarged Agency, therefore, it is the intention
to adapt and to extend both best practice and best programmes
from both organisations for the delivery of effective business
support, utilising local partners wherever practicable. The relaunched
Business Connect and the new strategic role for the WDA in its
all-Wales management, will in our opinion be a vital ingredient.
In 1994, to be specific to your question, there was a business
services function in the Agency and the current Business Development
Director is sitting here right now, Mr Morgan. When we devolved
the organisation in 1994, the object was for the first time in
the history of the Agency to decentralise authority with responsibility.
That is what we did. At the same time, with the resources which
were then available to us, the support for indigenous business
was conducted within the regional divisions, three domestic divisions,
but there was a coordinating and a strategic role for programme
innovation and the question of programme standards which was in
fact retained in the centre. I may say it was not something which
went away. There has always been the question of balance in our
minds between inward investment and indigenous business support.
In fact they are complementary to each other I would suggest and
so much of our indigenous business, our SMEs, have actually prospered
as a result of high-tech and leading-edge innovating companies
which have come into Wales.
301. That explains it. May I move on to the
savings which you hope to achieve of £3 million a year through
the merger? Do you intend to achieve this by cutting staff or
services? Given that you intend to increase the strength of the
regional offices, is that not going to be difficult to achieve?
(Mr Rowe-Beddoe) No. Let me just say that the object
of the exercise is to improve the efficiency and efficacy of the
delivery of service in Wales. It is very clear. The synergy is
that bringing three organisations together is where the cost savings
can be found but not in any way in the diminution of service.
(Mr Willott) As part of the savings we will be reducing
staff numbers. Our staff complement in the three organisations
combined a year ago was 510; it will come down to 460, which will
be the complement of the new organisation. Within that complement
there will be significant savings in the common services because
clearly if you start off with three finance departments you only
need one so we will be maximising the savings from such synergies.
Within the overall reduction to 460 we are using the savings from
the synergies to increase the resources in the regional offices
delivering services in the regions. That is the broad strategy.
Mr Thomas
302. I know this word "synergy" is
bandied about quite a lot now by business people. Could you explain
what it means?
(Mr Willott) What it means is if you have three different
functions, for example, by combining them and making one simple
system you can reduce the staff. In the legal area, the WDA has
a very small legal department, the Land Authority for Wales has
a slightly bigger legal department. By putting them together and
completely restructuring we can actually get substantially greater
output from the existing staff by reorganising the way and the
nature of the work they do.
303. Your view is that you propose to restructure
completely. That is the view you hold, is it not? The enlarged
Agency will involve a complete restructuring exercise.
(Mr Willott) No, I did not say that.
304. You used the word "restructuring".
(Mr Willott) Yes, of the finance departments. That
was the context I was talking about. The restructuring has not
fundamentally restructured the regions but the centre has been
restructured because we have had to bring in the Land Authority
as a self-financing land division. We are creating a Strategic
Policy Division which is an organisation we have not had before
and its role will be economic analysis, generating economic policies
and it will have within it the rural policy unit. The Business
Development Division will be akin to what the WDA had before but
its role will in fact be rather different. Instead of being a
division whose primary role is to deliver a lot of business services,
its role will become more a policy division, determining what
kind of services and products the enlarged Agency should be delivering,
though it will be delivering those services which need to be delivered
on a pan-Wales basis.
305. Looking at the Agency's structure in diagrammatic
form, you have on a previous occasion prepared some supplementary
evidence, probably for overhead projection material. There is
an outline in diagrammatic form of the Agency's structure. It
rather looks from that that you have bolted on the Land Division
to the existing central functions.
(Mr Willott) No; no.
306. Equally you have bolted the Mid Division,
which corresponds with the old DBRW area, on to the regional structure.
How do you respond to the allegation that all you have done here
is rather than genuinely integrate the functions of DBRW and LAW
you have simply bolted them on as adjuncts which are not necessarily
integrated into your strategic approach? I am asking you simply
to respond to that allegation.
(Mr Willott) I am a bit puzzled by the word "allegation".
I do not recognise it as an allegation. The Mid Wales Division
naturally falls into place because DBRW covers one of the four
regions of Wales which have been proposed by the Secretary of
State and it is natural that it becomes the Mid Wales Division
of the enlarged Agency so you have four equal regional divisions
corresponding to the regions set out by the Secretary of State.
The other divisions, and it is quite a flat structure, have different
roles. For example the Strategic Policy Division I have already
described is a policy division. The Business Development Division
is a policy division again and it will be working closely with
the four regions in the delivery of services. The International
Division carries on the role originally in the WDA. The Land Division
is the core of the Land Authority for Wales which was brought
in as a freestanding division after a lot of debate internally
and with the Land Authority. It will be working very closely also
with the four regional divisions because they are deeply involved
in urban regeneration in close conjunction with local authorities
and the Land Division will exercise its powers in close association
with our regional divisions and the local authorities concerned.
The remaining functions are central division functions.
Mr Livsey
307. Would it not have been better to have seen
the geographical divisions as a delivery system rather than prime
functions of the Agency? When one looks at other aspects—we
could discuss this for a long time and I do not think that would
be wise—nonetheless strategy must come somewhere near the
top, business, international and land are prime functions and
some of these divisions are delivering what has been distilled
from decisions in those prime functions.
(Mr Willott) There are so many different ways you
could slice the functions of an organisation like the WDA. One
of the paramount considerations was that we wanted service delivery
to be as close to the customer as possible, which is why we focused
service delivery in the four regions as much as possible rather
than the centre.
Mr Llwyd
308. Looking at the structure, if I may say,
it seems to be a little bit top heavy. Do you not agree that the
Irish model provides perhaps better focus and parity of esteem
and parity of resource for indigenous businesses?
(Mr Willott) The Irish model just slices the structure
in a different way and it has its advantages but also its disadvantages,
as I understand it.
309. Namely?
(Mr Willott) Namely that they have a struggle to coordinate
policy and they have had to set up a new organisation to oversee
the inward investment and the indigenous business organisations.
They have set up Forfas in order to bring a degree of coordination
in, whereas the coordination is inherent in our system.
(Mr Rowe-Beddoe) The natural linkages between inward
investment and indigenous business, and they are natural, are
broken in Ireland. Interestingly enough, the evidence which could
be provided to you by talking to some companies who have settled
in Ireland would actually support my view.
Mr Llwyd: We shall be coming on to this in more
detail later, but we were in Ireland recently and if the Irish
ladies and gentlemen are to be believed that is not the case at
all. They do have a structure which allows for freedom of ideas
movement between both the indigenous and the inward investment.
They say they meet regularly in terms of joint sourcing and so
on and so forth. That is not their experience.
Chairman
310. May I go back to the savings point? If
the Pathway to Prosperity is to be believed, talking about the
regional offices and staffing, at present the regions employ 182
and will employ 217. With that in mind, that tends to suggest
you are going to take a bigger cut in the central organisation
of approximately 35 jobs. Is that right?
(Mr Morgan) Certainly in terms of business development,
the actual operational staff in the centre has been reduced from
25 to 14 with a different role to carry out which is to look at
the needs of indigenous business and to develop programmes on
an-all-Wales basis to be delivered at the regions. The majority
of the increase in staff in the regions is in the business development
area.
Chairman: That seems to make sense.
Mr Livsey
311. Could you tell us where the four regional
offices will be based? Do you intend to maintain any local or
sub-regional offices such as exist at the moment in mid Wales
in Machynlleth?
(Mr Rowe-Beddoe) The four offices are based, and are
intended to be based, in St Asaph, in Penllergaer, in Treforest
and in Newtown. In addition of course in Newtown there is a further
office about to come on stream in Aberystwyth because the Machynlleth
office is moving further west. There is no consideration of anything
else. We have a desk at Parc Menai, which is used as required
by any of our executives dealing in that part of Wales. It is
a so-called "hot desk" and it is used during the week
but it is not an office.
312. What exactly will the regional offices
do? In particular, can you explain which Business Development
functions are being retained at the centre and which will be carried
out by the regional offices and the rationale for the strategy
worked out in that respect?
(Mr Morgan) The Chief Executive has referred to the
fact that the delivery of the majority of our programmes will
be through the regional offices, wherever possible by third parties
because of limited resources. We will be using the Enterprise
Agency movement and other providers in those regions. The rule
is that all our programmes, with the exception of those which
are really indivisible such as the Wales Information Society where
our resources at the moment are one person basically concentrating
on that initiative, will be delivered—Source Wales, Technology
Transfer, the Skills Development programmes we are involved with—through
the regional offices. The structure within Business Development
at the regional level is being created to ensure we have those
skills in the new structure, in the new regional offices.
313. Will Business Connect be administered on
a regional basis as well?
(Mr Morgan) Yes. We are currently partners in all
the Business Connect consortia. That will continue. The regions
are in fact looking at the different structures of Business Connect;
certainly I know in North Wales they have just put up a new proposal
for the local Business Connect consortium. As referred to in the
economic agenda, the Agency will be providing executive support
for an all-Wales management board for Business Connect.
Mr Thomas
314. With reference to Source Wales, can you
tell us where that will be managed, centrally or in the regions?
(Mr Morgan) Source Wales has always been delivered
in the regions. We have had a team looking at development programmes
in the centre and that will continue. The small number of staff
we do have currently in the centre will be moved to the regions;
they will be based in Treforest though they could have an all-Wales
role to carry out from there. In the centre we were just looking
at the programme, evaluating it, monitoring it and enhancing it
wherever possible.
(Mr Willott) May I just clarify what you said? Source
Wales has been delivered both locally in the regions and nationally
and the intention is that the delivery of it will be regional
largely and the centre will therefore be a policy role.
315. What do you envisage will be the relationship
between the regional offices to which you referred and the regional
economic fora within Wales?
(Mr Rowe-Beddoe) They are already very close. Both
the DBRW and the WDA have participated fully in the creation of
the regional economic forums. From my observation they play a
very valuable role in partnership with others in those forums.
It is to be strengthened further because it is clearly where much
of the regional considerations in policy and planning are now
beginning to take place. Much to be strengthened; already very
strong. We see that to be fundamentally a very important building
block in the whole question of developing a strategic plan for
Wales.
(Mr Willott) Could I elaborate on one point. We have
flagged up two key principles in the reorganisation, summarised
by the two words "strategic" and "partnership".
In other words, if we are to be effective we see the need to be
more strategic in our thinking and our approach but in order to
deliver what we need to do, we need to focus on doing it through
other people. The regional offices themselves will be focusing
a lot on delivering our services through other people, either
providing the funding, procuring services or whatever.
316. Could you do with more regional offices?
(Mr Willott) No.
317. Some people might argue that you need to
be more devolved, more involved with the grassroots. I know it
is all tied up with budgets but how do you react to that? Particularly
in North Wales, do you think there is a need to have an office
in North West Wales and an office in North East Wales? I am simply
making the point. I am not saying I have a view one way or the
other.
(Mr Willott) Given that the key role of the Agency
is to procure the delivery of services, what matters is where
the people who are delivering the services are. For example, there
are 32 Business Connect offices around Wales. They are the place
where local services are delivered to local businessmen rather
than from the WDA offices.
318. You appreciate that it is not universally
held to be the case as far as Business Connect is concerned. There
is an issue which this Committee is concerned with.
(Mr Willott) Absolutely. This is what part of the
document is referring to. There is a need to bring up the quality
of service from all the Business Connect offices across Wales.
That was the thrust of what the Secretary of State was getting
at.
319. Business Connect at the moment is not in
fact a properly devolved hands-on structure, is it?
(Mr Rowe-Beddoe) We are very conscious of that and
I think the Agency, when Business Connect was born, was somewhat
ambivalent in understanding what it had to do. The example of
how Business Connect can work is most certainly in mid Wales.
The example of the Development Board for Rural Wales in this regard
is one we are taking forward and we are delighted to have the
opportunity in the Government's paper to be in a coordinating
role across Wales. The Agency realises its need to focus on that.
1 Note from witness: We
did not transfer support functions to the Enterprise Agencies
directly. Rather, it was as a consequence of transferring support
functions to the TECs who in turn contracted with Enterprise Agencies
to deliver certain functions. (Mr Morgan) In 1994 confusion
was probably caused by the name of the department in the organisation
which was called Agency Coordination rather than Business Development.
Agency Coordination carried out the role which the Chairman has
just described. Back
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