Select Committee on Trade and Industry Second Report


1998 objectives and targets

14. In July 1998 the Government published the conclusions of its Comprehensive Spending Review, together with new 3-year spending plans for each Department.[19] The Government announced that there would be Public Service Agreements (PSAs) for each department. These were eventually published in December 1998.[20] The DTI had four principal objectives, giving rise to 12 specific targets against which the Department's performance was measured. Two of these targets were joint with the FCO, and one with HM Treasury. In addition to these objectives and targets, a number of targets were set for the DTI and its Agencies on the productivity and efficiency of departmental operations.

15. The 1999 Departmental Report (DR 1999), published in March 1999, was reorganised to reflect the four Objectives, which it reproduced, together with the 12 targets, but without the specific measurements to be used or the baseline from which measurements were to be made.[21] The 2000 Departmental Report (DR 2000), published in April 2000, again set out the Objectives and targets, and for the first time included the measurements to be used of their achievement and an assessment of progress. [22] It also set out the targets set for departmental operations and productivity, arising from the March 1999 Modernising Government White Paper, together with an outline of the Modernising DTI Action Plan.[23] The Permanent Secretary told us that, while there had long been objectives and targets for Government departments, they had helped in their new guise to "sharpen the Department's performance" and to concentrate minds on a number of issues.[24] We welcome the trend towards fuller publication of the specific targets set for DTI and the measurements used to assess progress in reaching them.

Directorate targets

16. Objectives and targets are also set for individual DTI directorates. These have on one occasion in the past been assembled for publication in one document.[25] It is a matter of legitimate public interest to know the objectives and targets to which constituent parts of a department are working. They are not secret. Modern technology offers the possibility of making such information available electronically. We obtained from the department the objectives for two sample Directorates, the Vehicles Directorate and the Company Investigations Branch.[26] They provide a clear and useful picture of the activity of these public servants, as well as raising a number of questions as to the extent to which targets and objectives are appropriate. They are also a matter of legitimate interest to the staff of the department. We recommend that the objectives and targets of the directorates of the DTI be placed on the department's website, together with the assessment made of the progress in their achievement.

July 2000 objectives and targets


17. The document setting out the results of the 2000 Spending Review also recorded that new PSAs had been agreed for the 3-year period, and would be published shortly in a separate White Paper.[27] The chapter on the DTI listed what were described as "Key PSA targets" — improving UK competitiveness by narrowing the productivity gap, building an enterprise society and improving the international ranking of the UK's science and engineering base.[28]


18. On 28 July 2000 the Treasury published the Public Service Agreements.[29] The 1998 PSAs have been refined and developed, in particular by making the targets as clear and readable as possible .

"Many of the targets set in the 2000 Spending Review extend CSR [ie 1998] targets, or re-word them so they are expressed more clearly or measurably."[30]

The paper also noted that all departments would be " publishing Technical Notes later in the year, which will specify precisely what will be measured under each target".[31] On 3 November 2000 the Treasury published a short Paper on Service Delivery Agreements (SDA 2000)[32] and placed in the Library a set of the SDAs for each department. Departments published their own SDAs on their departmental websites. On 20 December 2000, the DTI published the Technical Notes by placing them on its website. We have published the DTI Service Delivery Agreement and Technical Notes as Appendices to the Minutes of Evidence. We regret that neither the Treasury nor the DTI made these papers available to the public in a readily accessible form.

Individual Objectives and targets


19. In advance of publication in July 2000 of the new objectives and performance targets, we decided to assess how far the 1998 objectives, targets and measurements had been appropriate, and how far the objectives and targets had been met. We have used this as the basis of a judgement of the new Spending Review 2000 (SR 2000) objectives and targets.

1998 Objective A Promote enterprise, innovation & increased productivity; in particular by encouraging successful business start-ups, and by increasing the capacity of business, including small and medium enterprises (SMEs), to grow, to invest, to develop skills, to adopt best practice, and to exploit opportunities abroad, recognising the development of the knowledge economy and taking account of regional differences.

SR 2000 Objective I — to promote enterprise, innovation and increased productivity.

1998 PSA target 1To put in place policies to narrow the productivity gap relative to other industrialised countries over the cycle.

1998 PSA target 2To secure improvements in performance against a set of competitiveness indicators to be developed and published annually from 1999.

SR 2000 PSA target 1 — Improve UK competitiveness by narrowing the productivity gap with the US, France, Germany and Japan over the economic cycle. JOINT TARGET WITH HM TREASURY

Productivity gap

20. DR 2000 provided as a baseline for the achievement of 1998 PSA Target 1 the 1997 indexed figures for output per worker and per hour for the UK and four other countries (USA, Japan, France, Germany). There were, however, no updated figures to demonstrate whether the target had been met. The commentary on progress referred to the rate of implementation of the commitments in the December 1998 Competitiveness White Paper, which, among other matters, set out the Government's proposals for narrowing the productivity gap; and to various measures in recent Budgets. In oral evidence, the Permanent Secretary emphasised that the target was not to narrow the gap but to put in place policies to narrow the gap.[33] He also drew attention to the competitiveness target to which we refer below. In subsequent written evidence, DTI provided us with indexed figures for the UK as against the other G7 countries as a group. The output per worker figures were for 1999; those for output per hour were for 1998.[34]

21. When the Chancellor of the Exchequer published his pre-Budget Report on 8 November 2000, he published with it a document entitled " Productivity in the UK: The Evidence and the Government's Approach". This set out at some length the "sizeable" productivity gap between the UK and other industrialised countries, and stated that the productivity gap with the US might indeed be widening. An Appendix contains the text of a letter of 19 October 2000 from the Chancellor to the CBI and TUC, where it is stated that " Britain's productivity gap with our main competitors remains as much as 35 per cent. There are substantial shortfalls - not just with the US, but with Germany and France as well". While there is still no way of telling from the figures available to us whether the productivity gap with the other major industrialised countries individually and as a whole has widened or narrowed over the past three years, it would seem to be the conventional wisdom within Whitehall that the gap has widened and is widening.

22. The new SR 2000 target set has the advantage of being related to a specific outcome, and of specifying the countries against which the measurement is to be made. The December 2000 Technical Notes provide comparative baseline productivity figures which demonstrate the scale of the gap at present. They also warn of delays in production of estimates of output per hour from other countries, and that "differences in the economic cycles of the comparator countries" will have to be taken into consideration in making a comparison.

23. It was plainly unsatisfactory that the principal competitiveness target should not have been adequately measured and that it should have explicitly given priority to enunciation of policies over measurement of outcomes. The result is that it cannot be demonstrated that policies pursued over the past three years intended to narrow the productivity gap have had any measurable outcome. Questions can indeed be raised about the usefulness of a target of seeking to close the productivity gap based on a simple comparison with other economies. There must in future be some assessment of the extent to which policies put in place to narrow the productivity gap have had some measurable effect. The productivity gap must from now on be measured on the basis of statistically consistent, readily comprehensible and speedily available figures.


24. The Permanent Secretary described the 39 competitiveness indicators eventually published in December 1999 as " an attempt to chart economic progress on a broad front".[35] The first set of updated figures was to have been available in December 2000, so that this would have been the first opportunity for progress to be assessed. We understand that they are now not to be published until February 2001. Given the importance of being able to measure this target, which has been carried over to the new set of targets, the department and the Competitiveness Council must ensure that the first evaluation of competitiveness indicators is clear and objective, with a weighting set out in advance of what is to constitute an overall improvement.

1998 PSA target 3To increase the productivity and profitability of SMEs assisted by Business Links partnerships, and to show year by year improvements in the quality of services delivered under the Business Link brand.


25. Neither of the two measures used to measure 1998 PSA target 3, of the increase in productivity and profitability of Business Link (BL) assisted firms being better than non-assisted firms, and the satisfaction rating as measured by survey , were available at the time of publication of DR 2000. The former will not be evaluated until September 2001. In subsequent evidence, the department has told us that the satisfaction rate in 1999 was 74% overall ( rising to 78% among small firms), compared to 75% overall in 1997.[36] The April 2001 target is an 80% satisfaction rate. The SDA 2000 target carries forward these measurements, adding a volume target for the number of online inquiries to the SBS website. While we do not set much store by the slight fall in the proportion of businesses expressing satisfaction with Business Links, the fact is that this part of the target on support for enterprise seems to have been missed.

1998 PSA target 4To secure an increase in the number of successful high growth business start-ups. JOINT WITH HM TREASURY


26. The target of 20,000 successful high-growth business start-ups by 2005 was measured from a 1994 baseline of 15,300. It is only after several years have passed that the success — defined as having at least 10 employees and/or a turnover of at least £1 million in the fourth year of trading — or otherwise of start-ups can be measured. DR 2000 records that "latest indications" are that there was an increase in 1995 of such start-ups over 1994. We questioned the Permanent Secretary as to the practical value of such a measurement, which can only be an assessment of policies pursued by a different administration in an earlier Parliament.[37] He accepted that the penalty of such a measurement was that some years would be needed before it would be possible to assess whether current policies were having the desired effect. The target of increasing the number of successful high-growth business start-ups is theoretically admirable. The inevitable time-lag in measuring its attainment renders it of no practical use in assessing the department's recent or current performance.

1998 PSA target 7To increase from 350,000 to 1 million the number of UK SMEs wired up to the digital marketplace by 2002.

Wiring up SMEs

27. This target will be met. The May 1999 benchmarking exercise showed that 600,000 firms were already "wired up", defined as making frequent use of "external networking technologies". As a result a new 2002 target of 1½ million SMEs has been set, together with subsidiary targets of 1 million firms trading online, and the performance of micro businesses to be of world class.[38] The latest study shows that the main target has already been met, but not that of trading online, nor that of micro business performance. The department told us that " There is more to do if we are to achieve the target".[39]

SR 2000 PSA target 2 — Help build an enterprise society in which small firms of all kinds thrive and achieve their potential, with an increase in the number of people considering going into business, an improvement in the overall productivity of small firms, and more enterprise in disadvantaged communities.

19  Cm 4011, Modern Public Services for Britain, July 1998 Back

20  Cm 4181, Public Services for the Future: Modernisation, Reform, Accountability, December 1998 Back

21  Cm 4211, pp 8-9 Back

22  Cm 4611, pp 12-18 Back

23  ibid, pp 19-23 Back

24  Q 1 Back

25  Q 1A Back

26  Ev, pp 31-33 Back

27  Cm 4807, para 2.24 Back

28  ibid, p 78, Box 15.1. These are SR 2000 targets 1,2 and 5 Back

29  2000 Spending Review: Public Service Agreements, Cm 4808: HC Deb, 28 July 2000, col 1034w Back

30  ibid, paras 1.11-1.13 Back

31  ibid, 1.12 Back

32  Cm 4915, Spending Review 2000:Service Delivery Agreements 2001-04: A Guide Back

33  Qq 21 ff Back

34  Ev, p 26, para 3 (a) (i) Back

35  Q 27 Back

36  Ev, p 26, para 3 (a) (iii) Back

37  Qq 30-34 Back

38  Ev, p26 para 3 (a) (iv) Back

39  ibid Back

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