TUESDAY 10 NOVEMBER 1998

MRS BARBARA ROCHE, DR R HEATHCOTE AND MR A MANTLE

  100. Is it correct that this is one of the areas where we are at odds with the EU, in the sense that their guidelines do not cover equipment of this nature?
  (Mrs Roche) No, that is not my understanding. We are not unique, as I understand it, as far as the UK is concerned in having our export control regulations covering defensive equipment.
  (Mr Mantle) There are items of defensive equipment on the military list and the military list is the international agreement on things which are controlled to which the Minister was referring earlier. We are not alone. The other question is that just because a thing is controlled does not mean to say it is always going to be refused.

  101. You have been kind enough to supply us with the percentage of export licences which you are completing within the ten days for the ones which do not have to go outside the Department and 20 days for ones which do. The target is 70 per cent, which in itself is not particularly ambitious, but it is not being met and in some cases it is not being met by a mile. Can you tell us why this is and whether you think there are any realistic prospects in the near future for this improving? In particular, within the 20-day one, which is by far the worst one, you are down below 40 per cent. Do the other departments to which you circulate these licences have their targets for responding to you? Patently they seem to be missing them if they do.
  (Mrs Roche) First of all on those cases which do have to be circulated to other advisory departments, the latest set of figures which you do not have because they came after the memorandum, show us doing rather better. You are quite right when you talk about our target of 70 per cent. The latest figures on the non-circulated cases show that we have actually exceeded our target and we are now just over 78 per cent of those, so we are exceeding those. That does not mean to say I am complacent on that and I should like to see us doing better and certainly my officials want to see us doing better. What we have done is to put more resources into this area of the Department's work and to increase our staff complement as far as that is concerned. As far as the circulated cases are concerned, the latest figures show that overall we are doing better on that. On those latest figures they have gone up to just over 50 per cent. The difficulty we have had recently on those figures is—and we have highlighted this with you—that the recent nuclear tests in India and Pakistan and the recent statement which the Foreign and Commonwealth Office made there as to how we would now process licence applications, means that there have been some delays but we are, together with our advisory departments, getting on top of that. Obviously we have to wait for the other departments for advice on this before we can progress the licensing procedure. We are now expecting, apart from a few difficult cases which we are still dealing with, to improve our targets on this. They have targets as well.

  102. Do they publish?
  (Mrs Roche) They would have a 20-day response on that.
  (Dr Heathcote) Ten days.
  (Mrs Roche) It is 20 days for us and ten days for them on the circulated cases.

  Mr Morgan: It might be helpful if we could get some of these figures as well from the other departments.

  103. I wonder whether you have any information or if not whether it would be possible for the Committee to get it. How many contracts have been lost because of Department delays?
  (Mrs Roche) It would be difficult to put any figure on this at all. Let me say to you that we work with the industry closely, we keep in close touch with them. We endeavour, as far as we are concerned, to give as speedy a response as possible—but you would expect us as a government to give that response—with every possible proper consideration. Clearly we have to circulate it to our advisory departments. Where we have a situation, as we did with those nuclear tests in India and Pakistan, very special care had to be taken. I could not possibly put a figure on it. What I do say to you is that we are moving as speedily as we possibly can with our other departments.

  104. If you could not put a figure on it, could you let us know how many complaints you have received?
  (Mrs Roche) We could certainly give you a figure on that. For as many complaints that we get, we also get congratulations on other parts of the system.

  105. Let us have those as well.
  (Mrs Roche) I shall let you have them because perhaps the other figure I should have given you, apart from the increased figures on the circulated cases of just over 50 per cent, if you look at our Rating Advisory Service, is the figure there of 90 per cent. So we are doing pretty well on that. We shall certainly give you some figures on complaints; we shall be delighted to do that.

  106. And the good news as well.
  (Mrs Roche) Yes.

  107. Some disappointment has been expressed from some of the written submissions which we have had about the lack of any sort of substantive proposals to improve and beef up the end-user controls. What sort of measures are you thinking of in this regard? Are you attracted to any of the catch-all type of arrangements which could be applied?
  (Mrs Roche) This is a very important issue and not an easy one either and probably a very, very difficult one. We have of course featured it in the White Paper and we are considering responses. We are working with others in the EU as far as end-user control is concerned and certainly we have looked at the responses which have come in, particularly of course from industry, but also from the NGOs, as far as the overall catch-all is concerned. This is some work which we are taking forward; certainly it is work which the Foreign Office are very concerned in as well and we are taking this forward with our other EU partners. I should not want to pretend to you that this is an easy area of work; it is not, but we are absolutely committed to taking it forward and we will examine what the NGOs have said to us very seriously indeed.

  108. Do you have any sort of view on what the prospects are, for example, of being able to introduce an end-user process which would be relatively standard across the EU?
  (Mrs Roche) Difficult to say at this early stage. In the process we are examining it with other countries in the EU but what I would not want to do is to say to you that there is any easy answer to this or any easy solution. It is an area of work which we will take forward. Clearly the Foreign Office have a very, very key role here in this work and with them we are working very closely on this.

  109. May I press you on the Foreign Office role? Do you ever get the reverse pressure where you might be minded to turn something down and the Foreign Office say no, it would be unhelpful and they actually want you to approve it?
  (Mrs Roche) In a sense it is a fairly consensual process. May I tell you what I think my role is and the role of my Department because perhaps that would be helpful? I regard myself, if it is not too grandiose to say so, as the custodian, the guardian on behalf of the Secretary of State, of the process. That is my role. My role is not to substitute my judgement for the expert advice which might be given by the FCO or the MOD. My role is an almost quasi-judicial one: it is to make sure the process has been gone through, it is consistent, so that we are being consistent with licences, between all the licences, and we are adopting the process in the most fair and transparent way. That is in a sense my role.

  110. That does not quite answer my question. I am asking you whether your Department ever gets some sort of pressure from the Foreign Office saying they want to support this particular regime, it would be helpful if you granted them a licence, even though your own judgement and that of your officials might go a bit the other way.
  (Mrs Roche) In a different way that is trying to say what our role is and that is not my role. My role is to be the guardian of the licensing process. It is the Foreign Office's role to set the overall framework with the criteria. They have the advice of our posts abroad who give them the advice as to why it is they should come to the decisions they make; obviously Ministers then make the overall decisions. My role in the process is to look at it and ask whether we are being consistent. Is this what we have done before? Is the integrity of the process protected? That is my role. The departments work very, very closely together indeed.

  111. The process may be harmonious but it is not consensual, is it, in fairness? What actually happens is if your officials have concerns that there is a case which needs to go out to the MOD, or the Foreign Office, it goes to those Ministers and if Ministers, usually at Minister of State level within those departments, say no, that is it really, is it not?
  (Mrs Roche) What happens is that as with any other Government decision, at one level officials discuss and then at another level Ministers discuss and then an overall decision is arrived at, like in any other area.

  112. I am not attacking on this, I just want to understand the process. How often in fairness have you discussed—discussed as opposed to your officials or sending written submissions to Ministers in other departments—how often have you had cause to discuss export applications with colleagues in other departments?
  (Mrs Roche) From time to time. Of the proportion which Ministers see and it is about three per cent which actually goes to Ministers, of that three per cent, there is a very, very small number in that three per cent which needs further discussion between Ministers to make sure that the process is correct.

  113. Can you think of any instance during your time where if a Foreign Office Minister has said no, that has not effectively been the final decision?
  (Mrs Roche) It is never finally a no. The end is when the overall Government decision is made. There will always be discussions between Ministers, between myself and the Foreign Office Ministers involved and the MOD Ministers involved about a particular licence. We will continue to discuss it until we are agreed on a particular outcome. When it actually gets to ministerial level and you have some added discussion, that is a very, very small number of cases indeed. Quite rightly you and the Committee would expect us to give it that proper consideration.

  114. I hear what you say. I hear what you say on that. Unfair in a sense because you did not hear the evidence of the Defence Manufacturers but any objective observer listening to their evidence would say they were expressing very considerable concerns about delays. It seems we have a slight dysfunction here in that there seem to be very few refusals, very few appeals, but seemingly quite lengthy delays in the process throughout. Clearly there are some cases which are quite difficult. Is it not possible to devise a system whereby one separates out those which are difficult and ensures that the bulk of those which clearly are not refused get through much more speedily than they do at the present moment?
  (Mrs Roche) I wish it were that simple. Quite clearly there are many licence applications where it is very straightforward and on some aspects of the system, the Ratings Advisory Service as I have already mentioned, when you get exporters formally coming to us and asking what the rating is and whether it is even licensable, we are bang on target. There are many things we are getting through with a very quick response indeed. There are always going to be cases which are difficult, where we need to have technical advice and of course, because of the particular circumstances—I have already mentioned India and Pakistan recently—we will need to circulate that. That does not mean to say that I am complacent about those delays. I have already said that we want to see an improvement and that is indeed why we have put more resources into this area. I know as well that my colleagues in the MOD and in the FCO want to make sure on the circulated cases as well that we get the time down. We are working to do that and certainly the latest set of figures which we have had are encouraging in this direction. There was bound to be quite a problem after the incidents in India and Pakistan, but I believe we are on the right road again.

  115. India and Pakistan were hopefully very much one-offs and quite recent one-offs. I do not think the witnesses whom we were hearing today were expressing particular concern about that. What they were expressing concern about was what they saw, within the process, as endemic delays, very often what they saw as very straightforward applications. Is there anything you think the manufacturers could do to help themselves in the process? Is it a question of coming to officials earlier with information or talking?
  (Mrs Roche) Clearly the more information we have the better and sometimes there may be something on the form which requires us to make sure that we have investigated it properly. As you will know, we are introducing the new computer system, which we very much hope will be something which will help exporters because it will enable them to communicate with us in electronic form and eventually we hope that when the new system comes into place and it beds down that will be something which will help them. Our responsibility as a department is that when we circulate cases we are obviously dependent on our advisors in other governmental departments in the process. We do understand what exporters and what defence manufacturers say to us. Certainly for our own part, we want to make sure that we are increasingly meeting our targets. Certainly we see the new computer system as being something which will be a great help in this area.

  116. May I press you on that point? One of the things which the DMA said to us quite frequently was that there was a problem sometimes that your own people did not understand the nature of the request which was being put to them and perhaps they did not have the necessary technical expertise to make an assessment. Is that fair? Do you possess the technical expertise?
  (Mrs Roche) I am rather surprised to hear that because we certainly pride ourselves on our technical expertise. As far as the DTI is concerned, as far as my officials are concerned, we actually have highly regarded, and if I may say so not just highly regarded domestically but highly regarded international experts who are members of the licensing department and they are our in-house resource, particularly on the very difficult issues. In addition to that we rely on technical expertise from the MOD as well and the relationship between our technical experts and the technical experts from the MOD is very, very good indeed. It is an extremely regular contact. I am slightly surprised to hear that but of course if there are any specific cases where there has been a problem and if anybody would care to write to me on that, I should very happily investigate that.

  117. Perhaps the problems occur on the rather more mundane items?
  (Mrs Roche) That may well be. If that is the case, if there is any misunderstanding, please, we should be delighted to hear and we shall look at it. We have put more resources into this section of the Department of Trade and Industry, so what we want to do is to give a good service to those who come to us.

  118. Under the new proposals a lot of concern has been expressed by academia and exporters on the proposal to make export of information by intangible means subject to the same controls as if exported on paper or disk. How serious is the problem with which these proposals are trying to wrestle? On page 24 of the White Paper you say that "it is difficult to make an accurate assessment of the extent to which UK firms may be exporting technology intangibly without consulting the Government". Realistically how are you going to be able to police the transfer by e-mail or fax or word of mouth?
  (Mrs Roche) As you say, not an easy issue. There is clearly an anomaly there. For example, export controls cover the export of technology by computer disk because that is something which exists physically. If you were to export the technology, either by for example say a fax or indeed by e-mail, that would not be controlled. We are actually talking about the method. There is a gap there and what we are doing in the White Paper is catching up in terms of what was not possible in 1939. We have and are looking at the responses which we have received; particularly on this we have received responses from industry and from the academic world. We want to look at it very carefully. Clearly in what we do, we do not want to operate anything in an unreasonable way or in any way which puts a regulatory burden either on industry or on academic research. There clearly is a gap here which does need to be plugged and we want to do that. This is an issue we are considering very carefully as a result of the White Paper responses.

  119. Is there a problem or are you just trying to create a problem?
  (Mrs Roche) We do not know.