Examination of Witnesses (Questions 140
- 159)
TUESDAY 6 JUNE 2000
SIR DAVID
WRIGHT, MRS
BARBARA PHILLIPS,
MR DAVID
HALL AND
MR DAVID
WARREN
140. Your staff?
(Sir David Wright) My staff. In the past the DTI could
not do that because the staff overseas belonged to a different
government department. Thirdly, when we have the accounting arrangements
for our organisation properly arranged it will be my responsibility
to move those resources around from market to market, depending
upon the potential of particular countries.
141. You have to do that even in the face of
opposition from ambassadors?
(Sir David Wright) The recommendation in the Wilson
Review is that I should have responsibility to do that, and even
in the face of opposition; but one hopes one would not reach that
point—that we would have criteria which we could use to
employ when taking our decisions on how to apply our resources.
Additionally, of course, we now have a new appraisal structure
which has not existed in the past, whereby all ambassadors are
appraised for their commercial work by my organisation. That never
happened before. There is now a formal system, whereby those heads
of mission receive a report from me and my officials every year.
142. Finally, I notice in your report you say
that one of our priority markets is China, including Hong Kong,
and the fact the Foreign Affairs Committee is going to China in
two weeks. Could you tells us, since BTI has been going, what
specifically you have done to raise the game in China? What specific
things have you done to reflect the fact that China is now one
of your priorities? What should we look out for when we go to
China that you have made a difference about?
(Sir David Wright) What you should look out for in
China, first of all, is an active promotional programme.
143. Are you saying you did not have that before?
(Sir David Wright) I am saying that we are giving
more of our time and more of our programme budget to China than
we would have been doing in the past. For instance, in the financial
year which has just concluded we have spent £1.2 million
of our promotional budget on China; we have sent 17 outward missions
to China; and we have engaged in 27 trade fairs in China; we have
opened a new mission in Chongqing and a new trade promotion office
in China; we have enhanced the scale of the Shanghai Consulate
in order to profit from the developments in that part of China;
indeed, the Secretary of State for Trade and Industry paid a trade
promotion visit to China just about a year ago designed to build
on that. He would not have chosen China had it not been one of
our target markets.
Chairman
144. Before we leave this, you mentioned in
passing there is a Scot working in Paris. What is the justification
for that, or do we have to ask someone else? I would not have
thought that was our highest priority. A smashing place to work
but—
(Sir David Wright) Chairman, you did say you would
have to ask someone else because it is not my budget. I think
it is fair to say—and now I am straying again into an area
I am not theoretically responsible for, which is the promotional
policy of Scottish Trade International—given the fact that
France is our third largest market in the world, given the fact
that there is perceived to be a good deal of opportunity for promoting
the Scottish brand (and you will be as aware as I am that there
is a Scottish branding activity), there are particular benefits
which can be obtained from having that man there acting as a focus
for Scottish companies. Scottish Trade International take the
view (and I am interpreting what they have told me) they have
a particularly challenging problem in Scotland over exports. The
vast majority of Scottish exports are in fact from inward invested
foreign companies. They are seeking very hard to develop new Scottish
exporters, particularly from SMEs, and they take the view that
the hands-on arrangements which they undertake, and which successfully
operate in the Scottish partnerships in the regions and localities
of Scotland, they can carry that hands-on support through into
foreign markets and actually have somebody there on the spot.
They do have them in other places—Johannesburg, Hong Kong
and Dubai to name three.
145. You also made reference to outputs in your
remarks. Do you think you could send us copies of the information,
because other Government agencies tend to publish these figures.
We realise it is early days yet, but if you could make that available
to us we would be grateful.
(Sir David Wright) Yes, certainly. In the report on
our first year, which is in the pack which is distributed, we
have listed our objectives. What we are now seeking to do is to
translate those objectives into a set of key targets for the coming
year. Those are already available and I could let you have a copy
of those. The next stage on from that will be to develop some
market specific outcomes related to our trade development purpose,
which is to bring new companies to the market. We will be seeking
to establish how we can give individual posts specific targets
in terms of the number of new companies they introduce into the
market, and the relative success of those companies. We have not
got those out yet but we can let you have the first.[2]
Chairman: When they become available we would
be grateful.
Ms Perham
146. The Memorandum of Understanding between
BTI, DTI and FCO, what progress has been made on that?
(Sir David Wright) The progress is as follows: we
have reached a clear agreement with the DTI over what is called
our "programme budget"; that is the budget we use for
promotional activities, which is of the order of £67 million
this year. That has now been vested in me as the Accounting Officer
for that budget. I now have complete responsibility for the operation
and use of that budget. There are two other budgets which I am
responsible for, and they are the running costs budgets from the
two departments which cover essentially staff costs. We have not
yet been able to finalise the agreement in that area. When I said
at the outset that over the last 13 months we have done pretty
well everything which the Wilson Review instructed us to do, the
one thing we have not done is address the problem you are now
addressing. We still have to find a way of identifying clearly
the running costs for the FCO overseas, and that relates to a
point which I mentioned to Mr Berry earlier on, which is that
a lot of FCO staff overseas are not actually doing 100 per cent.
commercial work; they are splitting their commercial work on inward
investment work, or they are splitting their commercial work with
consular work or public diplomacy work. There are also some additional
costs associated with staff overseas which go beyond their salary.
On the DTI side, the DTI running costs I have no problem with.
I know what the sum of money is; I know what the running costs
are; I know how much everything costs me; I can manipulate and
move that money freely. We have not, however, actually signed
the agreements yet with the DTI because we are seeking to finalise
an agreement with the FCO and settle those two running cost elements
of the triangular concordat at the same time.
147. That is a problem for the resource management
structure, is it not, until that is sorted out?
(Sir David Wright) You are, if I might say so, extremely
well informed. There is a resource management problem within the
FCO in terms of this process of identification. They can tell
me how many man years they allocate to trade promotion, but quantifying
that in specific monetary terms is still proving difficult.
148. Or even woman years!
(Sir David Wright) I apologise for that. Perhaps you
get more out of woman years.
149. I am sure you do. I am sure my colleague
would agree with me! It is difficult to know where we are at the
moment. As far as you know at the moment, are you happy with the
resources which are allocated to you?
(Sir David Wright) Not at all.
150. Perhaps that is a silly question.
(Sir David Wright) No, it gives me an opportunity
to say I am not at all happy with the resources that are allocated
to me. I think one of the problems which I face, or have faced
over the last year, is that the Wilson Review invented this new
organisation in the course of the Comprehensive Spending Round.
Hence, we were brought into existence against an envelope of resources
which was already fixed. The money I have available from the two
parent departments for 2000-01 is a sum of money that was agreed
by those two departments with the Treasury in the CSR in 1998.
Hence, since we were not in existence at that time, we are in
effect trying to do more than was provided for in that 1998 CSR
settlement. That has been a problem because I have had three new
areas to which I have had to allocate resources: one has been
to introduce a new IT structure, to have all our information and
all our services available on-line through our new gateway, which
we announced last week—which is an expensive activity even
if you developed it inhouse; secondly, we have had to set up our
regional operation without new resources; and, thirdly, we have
had to do more on the sectoral promotion—looking at particular
industry opportunities in foreign markets than we have done in
the past. I am not well provided for in terms of resource in this
particular year; it will be very tight indeed. I am now, of course,
engaged in encouraging the two secretaries of state to bid for
additional resources in the Spending Round which will conclude,
one anticipates, some time in the next two months.
Ms Perham: Alongside everyone else.
Mr Rowlands
151. This raises some rather more fundamental
policy issues and departmental issues. From the information we
have in our notes, the present budgetary structure is roughly
this, is it not: there is £67 million worth of programme
expenditure, and £31 million for running costs in the UK
on the DTI budget, that is £98 million or thereabouts; and
the running costs of the overseas posts, although it is still
difficult to calculate, is in the order of £90 million; so
it is almost half and half between the two departments, but slightly
more on the DTI. Coming now to this negotiated Comprehensive Spending
Review for the next three-year programme, you said you are asking
the two secretaries of state to come into bat on your behalf,
but are you as an organisation making a collective bid for a BTI
budget for the next three years?
(Sir David Wright) First of all, the description you
have given of the resources is absolutely spot on, and we are
in total agreement on that. Secondly, I can only put in a consolidated
bid through the two secretaries of state. Those are the two political
masters on whom I depend. Broadly speaking, I am looking to the
Foreign Secretary to provide him with some more resources for
the delivery of services overseas in posts overseas. I am looking
to the Secretary of State for Trade and Industry to provide me
with some additional resources here in the UK particularly in
respect of two of the issues which I mentioned a moment ago. One
is the development of our gateway; and the second is the development
of a better filled out regional structure. The gateway is a sort
of capital expenditure issue. The regional structure is very much
a human running cost staff issue. If I could just take you a bit
further through that. One of the principles behind Wilson is that
we should engage more in trade development than in just trade
promotion. The concept being that we need to actually bring more
companies into this activity than we have done in the past. That
is something which we very much want to deliver through the regions,
through the International Trade Directors in each English RDA
whom we have now appointed. Also sitting alongside the Small Business
Service (which, as you will be familiar with, has now been set
up on the newly drawn Business Link map) we will have British
Trade International people, trade partners, UK people, alongside
the Business Links.
152. I can see something of a tug taking place
between the departments. Although we are talking about mature
joined-up government in this respect I can see, when it comes
to budgets, a pull in different directions. We, as the Foreign
Affairs Committee, have repeatedly reported the understaffing
in many of our posts on commercial work vis-a-vis our German or
French opposite numbers. We have endlessly brought up in annual
report after annual report these discrepancies in staffing costs
and resources. I can therefore see a Foreign Secretary, even within
this new joined-up structure, wishing to make a bid to the Treasury
in the Spending Review for a significant increase in frontline
investment in commercial posts etc. or Latin America or whichever
target area. At the same time, what you have been describing to
us is the other side, that the priority must be to actually get
our small SMEs, and that would imply a significant amount in the
budget of the DTI in terms of running costs and programme expenditure.
Whereas you might have joined up, is there not going to be a competing,
conflicting priority in terms of the Spending Review over the
next years?
(Sir David Wright) I think you are absolutely right
to say there is always going to be a tug over the resources and
how you can prioritise them.
153. Are both secretaries of state willing to
allow you to be the arbiter?
(Sir David Wright) This is why the question I answered
a moment ago about the concordat is so important, because once
we have the concordat settled I am expected to be the arbiter
of all this.
154. After the three year decisions have been
taken?
(Sir David Wright) Yes, but once the funding is available,
if I have the flexibility which follows from the concordat, I
will be able to shift the resources around as a function of judgment
on where they should be placed. This takes me back to a point
Sir John Stanley raised about the Board. This is why the Board
is very important and why, within the findings of the Wilson Review,
there is a clear instruction that the Board should confirm the
Chief Executive's decisions on resource allocation; because the
Board is meant to be business focused and will be able to give
a view on the sort of issues which you have been referring to.
The tug takes place, and I have to see how I can operate within
that tug—hopefully with the sort of flexibility which, if
I can get this concordat finally agreed with the Foreign Office,
I will have—but then the Board will take a judgment on how
much that meets the needs of business.
155. The Foreign Secretary at this moment in
time, for the next three-year Comprehensive Review, will be making
a bid to the Treasury and he will obviously be making a significant
bid for increased commercial work, frontline commercial work in
posts; the select committee will be pressing him; he gets quite
a lot of what he wants on that side as a part of his budget, and
the DTI will be making its perspective bid. Are you saying if
you get this Memorandum of Understanding you can switch the money
that the Foreign Secretary has fought for, for his frontline commercial
work in posts, to say programme work to encourage SMEs? Is that
what you are seeking?
(Sir David Wright) Could I list what I am seeking.
What I am seeking in the first instance is the capacity to shift
resources around the international network. That is, in a sense,
the most important target which I have. I think, rather perhaps
reflecting what you have said about the findings of select committees
in the past, we have not operated with enough fleetness of foot
overseas in moving staff into markets which take off and away
from markets which suddenly become rather static. I think the
classic case for that was the 1997 Asian economic crisis, when
maybe we should have been able to move some of our staff from
some of those South East Asian countries where exports plummeted
into, perhaps, North America more quickly. That is certainly what
flexibility is designed to do. That is my first target. Even without
the concordat I have already been able to employ some of this
flexibility as a result of the sort of activity which I have referred
to with Ms Abbott when I said we were seeking to identify more
outcomes from our posts; we have actually reduced some staff in
one part of the world to provide us with an increase in our staff.
156. That stays in the FCO budget. Do you have
the power to shift money from an FCO agreed budget in the Spending
Review to a DTI budget if that is what you decide the priority
to be? Is that possible?
(Sir David Wright) It will be possible under the terms
of the Wilson Review. It does envisage a movement of the balance
of resources from one side of the operation domestic to overseas,
or overseas to domestic.
157. That is not yet agreed in this Memorandum
of Understanding?
(Sir David Wright) Until I get this Memorandum of
Understanding agreed I do not have this flexibility. Your question
is very important for me, because it allows me to emphasise to
the Committee just how crucial this is. Unless we can reach that
position we will not have this flexibility which will give us
that fleetness of foot.
Chairman
158. I am sorry, I am at a loss here. We can
understand the problems of finance and the fact that it will not
be resolved for another two months; but why has it taken 13 months
to get to the point where the Memorandum of Understanding and
the recommendations of the Wilson Report are not being realised?
Where is the problem?
(Sir David Wright) The problem, Chairman, is with
the Foreign Office management information system, which does not
allow them to identify clearly the specific resources which are
allocated to commercial work overseas and, hence, to encapsulate
that in a sum of money which can therefore be embodied in a document
which we will sign, which will make me the additional Accounting
Officer.
159. Is it really a big problem?
(Sir David Wright) Yes.
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