Examination of Witnesses (Questions 1-19)
SIR BRIAN
BENDER KCB, MS
CATHERINE BELL,
MR DAVID
EVANS, MS
JOAN MACNAUGHTON
AND MR
MARK GIBSON
25 OCTOBER 2005
Q1 Chairman: Sir Brian, welcome. I wonder
if I could ask you to begin by introducing yourself and your team
for the record.
Sir Brian Bender: Thank you, Chairman.
I am Brian Bender. This is my 22nd day as the Permanent Secretary
at DTI and for that reason I have brought along what I hope the
Committee will feel to be a strong team. On the far right is Joan
MacNaughton, who is Director General for Energy. Next to me, on
my right, is David Evans, who is the Director General for Services.
For these purposes that would include any questions on the financial
tables that I cannot tell you myself. On my left is Catherine
Bell, who was the Acting Permanent Secretary in the period from
February until my arrival on 3 October. On her left is Mark Gibson,
the Director General for Business Relations.
Q2 Chairman: Thank you, Sir Brian. This
evidence session is about the Annual Report published in June
of this year. I just wonder if you could begin by telling me what
you see as the purpose of the Annual Report.
Sir Brian Bender: It is intended
to be a report for external stakeholders who have an interest
in the work of the Department. It should be a report on the Department's
performance looking backwards and some of the key priorities looking
forwards. It plainly does need to include performance against
Public Service Agreement targets. Its format is governed by Treasury
guidance, so we are not completely free as to what we put into
it and how. Without wishing to start this evidence session as
though I am too much sucking up to the Committee, an important
readership group is this Committee and this sort of hearing can
address whether it provides the sort of information this Committee
finds useful about the Department.
Q3 Chairman: I am happy to tell you
I have indeed read it word for word, including finding the references
to female secretaries of state, so you know I have read every
single word of it. I have to say I did not find it all terribly,
terribly helpful in every respect. I am confused. I started reading
it: a DTI Strategy with five key priorities and three principles;
a Five Year Programme with three objectives; a Business Plan over
three years with four priorities and 12 PSA targets. God, it is
a logical nightmare to get through, Sir Brian.
Sir Brian Bender: I read it and
I think one of the thoughts that went through my mind, looking
forward to next year and using one of these awful current words,
was: is there a clearer narrative that we can give it for the
future? There is bound to be a mismatch between the Department's
priorities and objectives and the Public Service Agreement targets
because the PSAs never cover the whole of a Department's operations;
they tend to cover around half. One of the questions that I expect
both the Treasury and we will be looking at into the run into
the Comprehensive Spending Review is whether or not we, and they,
wish to revisit or indeed rewrite, in any radical sense any of
the PSAs looking forward from this CSR 2007 period. Our objectives
are wider than the PSAs and they are also an internal tool to
help us deliver. What I think, looking at the document, is: it
may be better for the future if we cross-refer rather more to
the Business Plan because that is also a published document. To
take it as read and expect anyone to remember it is too much.
The Business Plan did indeed match the objectives against the
PSA targets and the Departmental Report does not do that, so I
think that is something we ought to think about for next year.
Q4 Chairman: Do we really need a
Strategy, a Five Year Programme and a Business Plan? Do we need
all three documents? Would one not be better putting everything
together?
Sir Brian Bender: Taking the last
thing first, the Business Plan: we absolutely need a Business
Plan for what the Department will be doing over a three year period.
I think the existence of both the Strategy and the Five Year Programme
is a reflection of what the DTI itself did a couple of years ago
in setting out its strategy over a multi-year period, and then
in the course of 2004 the Prime Minister asked all departments
to produce Five Year Programmes. The fact that the DTI had done
something a bit similar the year before was not sufficient and
it was right and appropriate in the context of all departments
doing it for it to produce something else. My own view is that
in a better world there would be a strategy document that sets
out what the Department is seeking to do over quite a long timescale
and there would be a business plan which sets out the more concrete
performance and delivery targets over a three year period.
Q5 Chairman: Let us go on to these
Public Service Agreements. It looked to me rather as if you had
quite a clear idea—you, corporate, the DTI—about what
you wanted to do with the Department but then you had these PSAs
imposed on you and you married them up to your already pre-determined
objectives. Is that a fair analysis?
Sir Brian Bender: No, I do not
think it is. The process of PSAs has been a progressive one since
1998. They were invented in the context of the Comprehensive Spending
Review of 1998 and there has been a progressive development of
them in each Spending Review since. As I said earlier, they cannot
and will not cover the whole of a department's operations. They
are something that sets out in clear outcome terms, often on a
cross-government basis, what it is that the taxpayer should be
getting from the investment in departments. If you take out the
one on productivity, which we share with the Treasury, that clearly
goes across the Department's work. If you take the one on climate
change, until the last Spending Review that was shared between
Defra and DTI and is now shared jointly also with Department for
Transport. In terms of setting out a series of outcome targets
I think it is a good thing. Whether they are as good as they should
be is another matter. I do not regard it as something that is
imposed, I think it is something that we and the Treasury in successive
Spending Reviews discuss and negotiate, and plainly there ought
to be some relationship between the resource that is put in and
the target.
Q6 Chairman: The Public Service Agreements,
as you have indicated there, have changed between 2004 and 2005
in a number of respects.
Sir Brian Bender: Yes.
Q7 Chairman: Sometimes I cannot help
feeling that is to cover up failure to meet them. For example,
number five, "Secure agreement by 2005 for a significant
reduction in trade barriers", seems to have slipped to 2008
in the revised PSA. Certainly there is patchy progress towards
these PSAs is there not, Sir Brian?
Sir Brian Bender: Can I answer
that in two respects. First of all, if they differ then it is
important that we report against the previous one as well. In
some cases they have been superseded by something completely different
and it may complicate the Departmental Report, but I do think
it is important the Department reports against what it said it
would do previously and the new target. On trade barriers, yes,
there was slippage and the slippage was because the Cancun meeting
in 2003 was not successful. It was unrealistic simply to carry
on blindly as though that was the target. Success in reduction
of trade barriers, success in global trade liberalisation, success
in the Doha Round is an important Government priority and the
crucial next stage is the meeting in Hong Kong in December.
Q8 Chairman: Of course, this Committee
is doing a separate inquiry into that issue so I will not pursue
that now. Some have been dropped altogether. Why was number eight
dropped on e-business, for example?
Mr Evans: This was as a result
of discussions between the Department and the Treasury in which
the Treasury concluded that it would be better for this particular
PSA target to be re-invented as a Departmental Performance Standard,
so it was something we would still report against but it would
not count against the tallies of the Government's overall Public
Service Agreement targets.
Q9 Chairman: I am sorry, I am a new
boy. Where do Departmental Performance Standards rank with all
the other priorities, objectives, PSA targets and so on? What
is their importance to you? Do you lie awake at night worrying
about meeting them too?
Mr Evans: Yes, we do indeed, but
only to the extent that we need to worry if we are concerned that
we might not achieve them. That standard, like all the other PSA
targets, is integrated within the Department's system of business
planning. It contributes to the way in which we set out our objectives,
the way in which we allocate our internal resources and, of course,
it is something on which we report in the Annual Report.
Q10 Chairman: That is helpful. I
said there was patchy progress towards a number of these targets,
what do you intend to do to get the Department back on track where
you are clearly not meeting those targets?
Sir Brian Bender: We are required
to report to the Treasury twice yearly in a Departmental Delivery
Report against the PSAs. Your question is both timely but difficult
for me to answer precisely because we are required to put the
next return into the Treasury in the course of the next month
or so. One thing I will want to look at—this is my first
opportunity to do this in a coherent way in the Department—is
those areas where we are not on track and what it is we are doing
and need to do to get them on track. On some of them, like the
one on trade liberalisation, my view is we are doing what we can
at the moment, but there are others where we may need to press
on one lever or pull on another rather harder. My general answer
to your question is identifying what the levers are to secure
delivery and progress and what the various measures are, and working
out those where we ought to be doing something a bit different,
a bit faster.
Q11 Judy Mallaber: Sir Brian, I am
very pleased so early on in your new position to be able to draw
your attention to PSA targets nine and ten and focus you on them.
On the one on promoting gender equality, the report says that
outcomes have been mixed. On the other one, which has now extended
from not just talking about ethnic diversity but also bringing
in employment relations, these are all very important targets
for the Department but they are ones where you have difficulty
because your role is to get every other department to be good
and historically that has been problematic. You have a minister
who is responsible to two different Cabinet members, which may
be a strength or a weakness. What action or ideas do you have
on how you are going to carry out that remit given the structural
difficulties that it poses for the Department?
Sir Brian Bender: On any outcome
target that Government is seeking there is quite a likelihood
that it will not be the only one responsible for ensuring delivery,
so on the productivity one I mentioned earlier there are a number
of contributing departments, including Education and Skills, Transport,
etc. On this particular one, as you say, within the Department
we have Meg Munn, and Alan Johnson's particular responsibility
in her regard will relate to labour market issues; and Tessa Jowell
is the Minister for Women, so there is that double reporting line
and double leverage therefore. As far as maximising potential
in the workplace in the new PSA ten, what we are doing at the
moment is gathering the data to have the indicators. We are likely
to say in the Departmental Performance Report that is due to be
published in January that it is too early to assess progress.
I hope the Committee will not think that is a cop out because
what we are trying to do in that is get together what should be
the data for determining whether we are on track and then the
conversations will be with the other departments and organisations
that are responsible for their parts of that. On gender equality,
as I understand it the majority of target indicators are on course,
so flexible working, Equal Pay Reviews and child care provision
are on course. I think one of the indicators has been slipping
and that is women in the senior Civil Service.
Q12 Judy Mallaber: As I see it, the
difference in these targets is they are not ones where you are
working with another department but they are ones where you are
sitting in judgment on other departments. What difficulty do you
think that will create? What are you going to do to make sure
that the DTI is squeaky clean and is seen to take a lead given
some of the embarrassments, for example when we found that ACAS
was falling short of equal pay, which does come within the DTI
remit?
Sir Brian Bender: At the risk
of using too much jargon today, I think my answer to the first
part of the question is around partnership. I do not see a marked
difference between working with others or sitting in judgment
on them because essentially there has to be a shared understanding
that these are not DTI targets, they are Government targets the
DTI has to own. For example, the Cabinet Office owns the target
on diversity in the Civil Service but we have to work in partnership
with them and be judged by them on whether DTI is delivering its
part of that. As in so many areas, this is a matter of being clear
with other players what is expected of them and what the measures
are and having a grown up conversation with them about whether
they are achieving it. On whether or not the Department is squeaky
clean, it is a platitude maybe, but in areas where we are owners
across Government of something it will be pretty embarrassing
if we are not doing pretty well on it ourselves. In my last department,
the department's own performance on environmental management of
its own operations was something that I, the board and ministers
attached importance to because it was a bit difficult to preach
across Government if we did not have a pretty good record ourselves.
It will be something that we need to look at carefully and ensure
that we have a good record and where we do not we should address
it, both within the Department and in relation to its NDPBs. I
do not kid myself that will necessarily be easy on some of these
issues.
Q13 Chairman: As a matter of interest,
why do you think that the ethnic diversity target is less precise
and measurable than the gender target? You are measuring improvements
in gender equality but only promoting ethnic diversity.
Mr Evans: On the issues about
measurement of ethnic employment, the PSA target we have is precisely
measurable because it is about the difference between the employment
rate of ethnic minorities and the average employment rate.
Q14 Chairman: That was the 2004 target.
I think the 2005 one is different. The 2005 target seems to have
weakened. It says: "By 2008 promote ethnic diversity, co-operative
employment relations and greater choice and commitment in the
workplace, while maintaining a flexible labour market", so
a motherhood and apple pie target, whereas you had a very precise
one before.
Mr Evans: The new target embraces
a wider range of objectives, including the old one, plus reducing
the incidents of racial discrimination at work and includes maintaining
and improving a flexible market and ensuring that we are bringing
in other aspects of our labour market policies. In that respect
I agree it represents that there are new and different measurement
capabilities required in order to do that, however the core ethnic
minority target remains part of the new framework.
Sir Brian Bender: One of the indicators
remains: "Raising the self-employment rate of under-represented
ethnic minorities relative to that of other groups".
Q15 Mr Hoyle: Obviously this is your
22nd day of getting behind the desk. Do you see this as promotion,
demotion or just a sideways move?
Sir Brian Bender: I find it very
hard to answer that in a straight way. It is a big department
and an exciting agenda. I had been in Defra four years, it is
five years since I joined MAFF. It was right to move and I am
delighted to be taking up this new and different challenge. It
is a similar department in terms of size, complexity, budget and
challenges.
Q16 Mr Hoyle: Okay, we will ask you
again in six months. Let us move on to a very important area,
and that is R&D. Obviously the Government has shown a great
commitment to R&D, it has brought tax credits in, there is
more money than ever before going into R&D, but how do we
really measure the effectiveness of publicly funded R&D? We
have got all these woolly ways of trying to measure them but the
truth of the matter is we do not really know. What do you think
we should do to bring in new measures? Do you really think it
is working? My view is that we hear companies say, "Yes,
it is good but it is not enough". I wonder what you think
after your 22nd day.
Sir Brian Bender: There are two
different aspects. One is the science where it is basic science
and how one assesses the excellence of that science. Professor
Keith O'Nions, as Director General of the Research Councils, has
a series of measurements in place for that, such as relative citations
per research head of the population where the score of the UK
is extremely high. That is science for what one might say is the
public good, although an OECD study recently found that if there
is a 1% growth in public R&D it does actually lead to about
a sixth of that increase in total factor productivity in the economy.
One element is the basic science, whether that is money well spent
and whether that is producing an improvement in the basic science
base and the public good. If one then moves into the applied science
and the R&D, then I guess the sort of measure is the extent
to which that is leading to an improvement in competitiveness,
the knowledge economy and innovation in British industry. Yesterday
we published the R&D scoreboard, which is a publication which
has been produced now for a number of years, which shows how business
is doing in its R&D. My view on that is that it is a pretty
mixed picture. There is a Government target that R&D spend
should be 2.5% of GDP by 2014—the current figure is 1.9%—and
the hard news is that R&D growth was stronger in the Americas
and Asia Pacific region than in Europe. The absolute level of
R&D reported by companies in the UK fell by 0.5% of the 750
companies covered in it. On the positive side, there were more,
what the report calls, R&D vigorous UK firms, 7% more, a significant
growth in middle sized very R&D intensive companies, and there
are 100 more smaller companies with R&D of at least 300,000.
The bottom line on this is as a nation we are not doing well enough
at getting the R&D into the innovative product on the marketplace
and that was one of the main messages of the Innovation White
Paper that was published last year. There are a number of measures
that the Department and Government are pursuing to try to improve
that, including the work on R&D Tax Credits, Higher Education
Innovation Funds, Small Business Research Initiative, which is
now made mandatory, and the Department's Technology Strategy.
There is a lot we are doing to try to improve that but I think
the fair response is that as a nation we have a way to go and
if we do not crack it then the response to globalisation challenge
will be more difficult.
Q17 Mr Hoyle: That is a very fair
analysis. As part of that score card surely we ought to try to
put in how many of those tax credits have been used in successful
R&D that transfers not to jobs abroad but to manufacturing
in the UK. I think that is the key. Yes, we may be getting better
at R&D and we may be putting a lot of money in but I do not
like the idea that suddenly we have the great ideas, that as usual
we do in this country, to create jobs abroad. I wonder whether
there is an encouragement that can lead R&D through to manufacturing
in the UK rather than overseas.
Sir Brian Bender: I have a couple
of responses there. First of all, I think it is dangerous to try
to play this as a zero sum gain because one of the other things
that came through the score card, as I am sure you will have spotted,
is that the 17 foreign owned UK companies which invest most in
R&D perform more highly than UK owned companies. In other
words, if you have got a foreign owned company they tend to be
putting more into R&D than British companies.
Q18 Mr Hoyle: We both know that this
Government and previous governments have never been great supporters
of indigenous companies and that has always been the problem.
There has always been an uneven playing field that has had the
advantage for the overseas company coming in, and I understand
that, but the losers have always been companies in this country.
That has been an unfair advantage and that is why there has always
been money available in order to take R&D forward as well,
because they say "Give me some money for R&D, we will
extend this plant or put this new car in", so they get more
money than the indigenous companies do. I think that has got to
be addressed at some point in the future.
Sir Brian Bender: I will ask Mr
Gibson to say something on your direct point. The second point
I wanted to make on your first question is that with the Treasury
we are doing an evaluation of what is happening on take-up of
R&D Tax Credits. At the moment we believe it has been strong
but exactly what it is achieving we are doing more work on. Mark,
do you want to answer the second question?
Q19 Chairman: I want to try to keep
focused on the R&D issue at this stage. We might come on to
more general manufacturing issues at the end.
Mr Gibson: In our support for
both R&D and capital investment we are neutral in terms of
ownership. The test is, is the company operating in the UK in
a serious way. We have supported, and we do support, many British
companies. We have supported the British aerospace sector and
the launch aid we have given both to British Aerospace and Rolls-Royce,
going all the way back to the 1940s, has been in the billions
of pounds. We have no prejudice in terms of foreign ownership
or UK ownership, the test is are they going to operate and do
R&D and do manufacturing in this country.
Mr Hoyle: I will leave that to the end
because I will come back and prove that is not quite the case
later. In the meantime, would you say there is a particular region
that leads the way in taking advantage of the tax credits?
Chairman: I think I will bring Mike Weir
in as well because he wants to ask questions on that point.
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