Examination of Witnesses (Questions 420-439)
DTI AND UKTI
21 MARCH 2006
Q420 Chairman: 300 or 400 people?
That sort of size?
Ian Pearson: Very few would employ
300 or 400 people. There are some particularly small businesses.
There is some strong evidence to point to the fact that helping
existing exporters break into new markets rather than helping
companies break into their first international market can also
add a great deal of value.
Q421 Chairman: Would you advise a
small business that has done much exporting to start with India?
Ian Pearson: I would not want
to be in a position where I made the decision on that at all.
Q422 Chairman: Your PSA target has
made the decision for you on that. That is the point. The Chancellor
has told you that you have to do that.
Ian Pearson: We have targets in
terms of new to export companies but not to particular individual
marketplaces. The Indian market is more difficult than certain
other markets in our home market of the European Union. There
is some strong evidence that says that existing exporters, mid-corporate
companies, are areas where these companies could export and invest
more than they are doing at the moment and we ought to be encouraging
them to do so. That might be a focus for our future activity.
Q423 Mr Clapham: Can I kick us off
down the education route because it is a very important area?
You used the figure of 28 million people entering the labour market
annually and amongst that number is a very impressive number of
science and technology graduates. We know from a recent report
produced by McKinsey's that they took the view that many of the
multinationals who employ some of these graduates were rather
put off by the quality of the graduates. Last week we had a group
of Indian businessmen before us and they were of the view that
there were great opportunities here for the British universities.
I wonder what we are doing to encourage institutional collaboration
between universities in the UK and universities in India, particularly
in this area of science and engineering. I am aware of the UK
India Education and Research Initiative but I wonder if it is
robust enough to really stimulate the UK universities to make
the effort to make the connection with Indian universities. Is
there anything else that we might be able to do?
Ian Pearson: That is a very important
question. I see education as one of the UK's great strengths.
I have been to 22 countries as Trade Minister in the last 10 months
and in every one of them the importance of the UK's education
system, the work that we do through the British Council and others
in terms of providing English language training, is extremely
important. In many cases it is the front door for doing future
business with the United Kingdom because it does give people good
experiences of the UK and a range of contacts and links that very
often develop into business in the future. You mentioned specifically
the UK India Education and Research Initiative. It is a particularly
good time to mention it because this week the British Council,
the Department for Education and Science, the FCO and the Office
of Science and Technology are launching a major, £10 million
initiative, strongly supported by both the UK and Indian Prime
Ministers, to facilitate the development of research and collaborative
partnerships between UK and Indian institutions. It is a five
year programme starting next month and it aims to bring about
a step change in the relationships between the UK and India when
it comes to research and education in exactly the areas that you
are talking about. It very much builds on the Prime Minister's
original initiative in this regard. There is a lot more that we
can do and we expect that this initiative will help us deliver
a lot of that.
Q424 Mr Clapham: When I think of
my own area I think in terms of Sheffield University with a good
engineering department. Is there anything more we can do to encourage
them to get out there, to get over to India, to promote the department?
I know that some of this work has been going on in other areas
but it just seems that in engineering, where we really ought to
be taking a lead, some of our universities are perhaps just sitting
back.
Ian Pearson: I do not know the
specifics in terms of Sheffield University but I get the strong
impression that if you talk to most university vice-chancellors
and say, "What are your international links?" they will
reel off a list of names of universities in different countries
across the world where they have research projects. I think it
was Chekhov who said that there is no such thing as national science;
it is just that there is no national multiplication table. Our
UK academic community has been very good at developing stronger
links with a clear, commercial outlet to them. It is something
that we have done quite a lot of work on in the UK, as you know,
over the last 10 years. Making that international is important
and that is why I think this initiative is very important. We
have the London School of Economics offering courses in India
at the moment. I am sure that other UK universities are looking
at running courses as well. We have seen in places like China,
Nottingham University has set up a campus which the Committee
are familiar with. There is an increasing trend to see that happening.
Universities need to continually be aware of the dangers of brand
dilution and that is why some of our universities have not wanted
to set up international campuses. I gather the LSE regularly benchmarks
its activities to ensure the right sort of quality standards.
Q425 Mr Clapham: In tandem with that
UK India Education and Research Initiative, are we encouraging
British research institutions to become involved with that education
initiative as well so that we get the connection between companies
that are looking at commercial opportunities in the market?
Ian Pearson: My understanding
is that is exactly covered by this new initiative that is going
to be kicking off next month, so yes.
Q426 Mr Hoyle: I am interested in
what you say because you do mention China and UK universities
setting up a campus in China. I asked the question why have we
not got our universities setting up a campus in India, only to
be told that it is against the law of India. You cannot do that.
I thought it rather strange because about half an hour later I
passed a brand new campus that said, "Western University."
Western Australia have set up a campus. We asked the Minister
and the Minister said, "The rules changed two or three years
ago." Why on earth are we not up to speed on what the rules
are? How long do we have to wait before we take it seriously?
We seem to be getting this message that we are not in the business
of being proactive. We always seem to be reactive to everybody
else. We have to start flag waving and delivering. It is rather
embarrassing. With the strong historical links, all the reasons
should be there and our universities should be winning the number
of graduates. We are not. America leads; Australia is second and
we are trailing in third place. What can we do to get to the top
of the pile and ensure that we know what the rules are in India?
Ian Pearson: In terms of students
coming into the UK and how we fare internationally, yes, the United
States is first. The UK is second and Australia is third. The
most recent statistics I have seen say that there are 250% more
Indian students applying to study in the UK academic year 2005-06
than there were in 2000-01 which is a huge figure. In terms of
our market share, we are closing the gap with the United States.
Student visa figures for the USA for 2005-06 are only 15% higher
than the UK figure, as compared to 74% higher in 2000-01, so we
are making progress in this area.
Q427 Mr Hoyle: The Australians will
overtake us if we are not careful. Quite rightly, we have a campus
in China but would you not agree with me that we should be establishing
campuses in India?
Ian Pearson: As a government,
we would be very happy to see this happen but it is up to our
university sector.
Mr Hoyle: It is also up to the UK Council
to know what the rules are. It is no use saying to universities,
"You cannot come in because it is illegal." The rules
changed three years ago. Do we really know what the rules are
in India?
Q428 Chairman: I understand from
talking to the CII that British businesses come here, are told
they cannot do something and go away again. Meanwhile, other countries
keep a much closer eye on what is going on and they are doing
it. The Brits come back two years later and miss the opportunity.
We heard that quite a lot in India. We take no for an answer.
Ian Pearson: We all hear a lot
of anecdotal stories. It is sometimes difficult to get behind
those and see what the true picture is. The true picture is that
we have a good level of understanding certainly within government
and UK Trade & Investment about the investment opportunities
that exist and the barriers where there are barriers.
Chairman: The impression from Kamal Nath
was that he feels sometimes our competitors are better at it than
we are.
Roger Berry: Minister, you referred to
Indian students coming to the UK to study. Obviously there are
things in relation to trying to increase the number that are matters
for universities. There are also things that the government can
do. An issue that came up time and time again when we were in
India related to visas for students. Australia and the United
States are more attractive because the visa arrangements enable
students to stay on for a year or two after graduation in their
country of study and the complaint was made that Indian students
do not have that opportunity in the UK. I know there is going
to be a debate on the new visa regime this afternoon in the House.
Rob Marris: They do in Scotland.
Q429 Roger Berry: Do you recognise
this as a real issue, that the visa regime should provide opportunities
for students from India to spend time in the UK after they have
graduated? If it does not do that, that provides a disincentive
to come into the UK. If you accept the argument, what is the government
doing about it?
Ian Pearson: We have recognised
this as an issue. As you will be aware under the Fresh Talent
Initiative in Scotland, Indian and other students will have a
right to work for two years after graduation. In the pre-Budget
report the Chancellor announced that in selective disciplines—I
think that includes science and engineering and others—foreign
students would have a right to work for up to one year in the
United Kingdom. It is also the case that, when you look at our
UK visa regime, students over the age of 16 can work for up to
20 hours a week during term time and they can work during vacations
while they are here. That is not necessarily the case in other
countries. Our assessment is that this is particularly attractive
compared with the United States, for example, which has more restrictions
on how much you can work when you are studying.
Q430 Roger Berry: Is it not very
confusing when Scotland appears to have a policy and the rest
of the UK seems to have a different policy? I did not realise
international affairs were a devolved matter.
Ian Pearson: Scotland has devolved
functions when it comes to its higher education system.
Chairman: Immigration policy is not devolved.
Q431 Roger Berry: I am not talking
about a visa to study; I am talking about the ability to stay
on and work afterwards for a year or two, which is what makes
the United States much more attractive than the UK. That facility
is there. For a limited period, people can stay on. Does the UK
not look silly in the rest of the world when Scotland has a policy
which is saying one thing and in the rest of the UK it is totally
different?
Ian Pearson: My understanding
is that this is being closely looked at by government and that
the conclusion reflected in the announcement was, certainly as
far as England was concerned, we would want to change the system
so that you could work for one year after graduation.
Roger Berry: On the visa thing, are we
not being incredibly unhelpful? In business, we met senior people
in international companies in India with good reasons to come
to the UK to do work for a few days, a few weeks or whatever to
do business and the complaint was they had problems getting a
visa to come here and do the business. These are companies that
are entirely trustworthy with a good track record. Are we not
just being terribly unhelpful to, in this case, Indian entrepreneurs
and skilled personnel who want to come to the UK as part of their
normal business when they get hassle and it takes them ages to
get all the paperwork?
Q432 Chairman: I have a letter in
my hand sent to me by Xansa. It was couriered across yesterday
and it is specifically on this point. IT is a very fast moving
industry now and requiring six months of work before you can establish
you are a legitimate employee in a company and can have a visa
to come to help implement a project is quite difficult. There
is a lot of churn in India now. People are moving around companies
very quickly and skills are being sought. Are you sure this visa
regime is really in UK plc's best interests?
Ian Pearson: We have fast track
visa arrangements for India as we have for a number of other countries.
Q433 Chairman: That was praised.
Ian Pearson: That should make
it easier for known businesses to be able to get people working
here in a speedy fashion. If there are specific examples where
we think that is not working as well as it should, I am more than
happy to take those on board and consider them. If Xansa want
to get in touch with me about the situation I am happy to meet
them for a discussion.
Q434 Chairman: It might be easier
than you imagine, Minister.
Ian Pearson: Specifically on the
one year work permit, I personally think there is quite a strong
case for looking at two years as Scotland has done, but at the
moment the decision has been for one year and there are good reasons
why that decision has been taken. Again, this is something we
will need to look at as a government.
Roger Berry: Without pre-empting what
we might decide, I would be shocked if we did not have something
to say about this.
Mr Hoyle: We still cannot get round why
Scotland can give an extension and England cannot. This baffles
us and it must baffle you as well. If Scotland can, England can
or nobody can. It is quite a serious point. Here we have Scotland
out there saying, "Come to our universities. You can stay
on longer and work" not just in Scotland but in England via
a Scottish university. It is absolutely absurd and yet an English
university cannot offer the same. We want to know why. Perhaps
you could give us a note.
Q435 Chairman: When we go to two
years, will Scotland go to three in some kind of nuclear race?
Ian Pearson: This is an issue
that cuts across a number of government departments and I am happy
to write to the Committee and provide a note.
Chairman: You can anticipate a robust
recommendation from the Committee on this point!
Q436 Rob Marris: I think that would
be very helpful because a major university which serves your constituency
and mine is the University of Wolverhampton and they are losing
out on students to Scottish universities. This is not a level
playing field for English universities trading in India, if I
can put it that way, and they lose students to Scotland who can
then come down and work in Wolverhampton when they finish their
courses. In terms of skills, one of the things that surprised
me and some of my colleagues when we visited India a couple of
weeks ago is that, in spite of 27 or 28 million people coming
on the labour market and millions of science graduates and so
on, in certain parts of India they appear to be experiencing skills
shortages and even looking to the UK to fill those skills gaps.
I am not just talking about where we have a longer history; I
am talking about sheer numbers. What is the Department doing to
try and forecast where those skill shortages in India are and
are likely to be in the next two or three years so that UK plc
can pick up the slack and do our society some good as well as
theirs?
Ian Pearson: It is a matter for
the government of India to collect its own statistics on skills
levels and pressures of demand in the marketplace in the way that
we do skills surveys. We would expect that the government of India
would do something similar. We hear anecdotal evidence about skills
shortages. Recently, NASSCOM published the NASSCOM McKinsey report
that mentions skills shortages in the IT sector. My understanding
is that when it comes to IT and certain parts of engineering the
anecdotal evidence tends to suggest that the skills shortages
are in the management area.
Q437 Rob Marris: Healthcare management
is another we hear about.
Ian Pearson: This is an area India
will want to address for itself and it is only right that it should
do so but again there are potential opportunities for UK businesses
here. I have mentioned Logica CMG and Xansa as models which have
a blend. As these companies have grown, they have trained IT managers
who will work in the UK and in India and, depending on contracts,
they may well work globally as well. You are seeing UK companies
forming business relationships, establishing centres in India
that are training graduates and giving them management skills.
I think that is beneficial for the Indian economy. It is also
good for the UK companies.
Q438 Rob Marris: Does the DTI part
of your brief keep an eye on those sectors? For example, had you
been the equivalent department in Poland in the mid-1990s you
might have thought setting up a dental school would be a pretty
good idea because we are probably joining the EU and we can export
a load of dentists to the UK because they have all these shortages.
That might have been the way to go. Are we engaged in a similar
kind of exercise through the DTI in spotting those sectoral gaps
in India?
Ian Pearson: Through our sectoral
teams, we tend to monitor situations quite closely. Through JETCO
arrangements these will be discussed at a business to business
level as well. There is a reasonable range of information that
is available there. A lot of it tends to be anecdotal rather than
hard, statistical.
Q439 Mr Wright: Regarding taxation,
one of the companies that we met in Bangalore was very concerned
about locally based employees when they travelled abroad. Their
expenses—for example, hotel costs and other expenses—were
regarded as salaries and this is a particular burden. Were you
aware of this situation and, if so, have you had discussions with
your Department and the Treasury?
Ian Pearson: We are certainly
aware that India has a fringe benefit tax regime. Even in the
UK various fringe benefits are taxable. My understanding of the
Indian regime is that fringe benefit tax has to be paid by employers
for expenses incurred by employees. It was introduced in the Government
of India's budget 2005. It is not for us to interfere in the taxation
decisions of a sovereign government. My understanding is that
the Government of India looked at this. They made this decision
in their budget. It is clearly quite controversial within India
but it is ultimately a matter for the Indian Finance Minister
and the Indian Government.
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