Research
25. In our Report last year we recommended that the
Government commission research to establish:
a) the volume and categories of the "goods
falling within definitions on the Military List and in the dual-use
regulations but which are being exported in breach of export controls
without licences";[35]
and
b) the extent to which dual-use goods "not
subject to control are exported from the UK and are then incorporated
into equipment which had it been exported from the UK would have
been subject to export control".[36]
26. We regret that the Government declined to follow
our recommendations[37]
and, as far as we are aware, has not commissioned any independent
research to test the effectiveness of the legislation in these
and other key areas. Instead, the Government has drawn on an internal
assessment of the controls undertaken by the Export Control Organisation
(ECO) to evaluate the impact and effectiveness of the controls,
which it described as "a useful starting point for the Review"[38]
and "a contribution to a broader debate".[39]
The Government explained that the evaluation comprised two elements:
Business impact; the extent to which the new controls
have placed additional burdens upon business. For this element,
we looked at the number of applications received on average per
annum in comparison to the estimates in the final Regulatory Impact
Assessment (RIA) […] We also looked at application processing
times for Open Individual Export Licences, Standard Individual
Export Licences, Open Individual Trade Control Licences and Standard
Individual Trade Control Licences following the introduction of
the new controls, to gauge whether exporters have received a slower
service than previously.
Effectiveness; the extent to which the controls achieved
their intended purpose. To measure this, we gathered information
from those in the ECO who process licence applications or conduct
compliance visits, and exporter feedback from seminars and workshops.
Although this evidence is not statistically based, we nevertheless
feel that it is an important contribution, which can be supplemented
from other sources as the review progresses. It is also legitimate
to view any refusals made under the new controls as an indication
of effectiveness: these represent transactions which we had no
means of stopping before the introduction of the new controls.[40]
27. The Government stressed that the ECO assessment
did not prejudge the results of the public consultation.[41]
In the 2007 Consultation Document the Government posed a number
of "questions for readers" to gauge the extent to which
the conclusions on business impact that the ECO had drawn from
its own evidence were supported—or not—by exporters
and other interested parties.
28. In our view the ECO's assessment is useful but
as the Government itself concedes is only a starting point which,
in our view, fails to provide the breadth and depth of analysis
to supply the assurance that the system is working effectively.
The assessment has two flaws: it allows the ECO to report on its
own effectiveness and therefore lacks an element of independence;
and it concentrates on those who comply with the controls, albeit
with some shortcomings. Supplementing the ECO assessment with
responses to the Consultation Document goes some way to addressing
these shortcomings but is not a substitute for a systematic analysis
of the effectiveness of export controls since 2004. The responses
may, as the Government appears to want, encourage a debate but
this is a debate that we have observed and reported on for several
years. We are concerned that without better and harder evidence
the debate will not reach a conclusion.
29. The Government states that the internal assessment
drew on evidence held by the ECO only and was not a Government-wide
assessment.[42] We question
this approach. How can the Government measure the effectiveness
of the legislation without examining, for example, the extent
to which it has prevented "undesirable transfers" (a
term used in the EU Code of Conduct on Arms Exports[43]
and also by Malcolm Wicks MP, Minister of State for Science and
Innovation, in his introduction to the 2007 Consultation Document)?
One obvious way to do this is to enter into an inter-agency consultation
and check with enforcement agencies and intelligence. There is
no indication in the 2007 Consultation Document that this has
been done. There is only one reference to the main enforcement
agency, HM Revenue and Customs (HMRC), but that is a listing in
an annex of abbreviations and glossary of commonly used terms.[44]
We cannot believe that the Government intends that agencies such
as HMRC and the intelligence services to make their contributions
by completing the questionnaire in the Consultation Document.
In the absence of a Government-wide assessment we question whether
the Government is justified in making the assertion in the Consultation
Document that "no serious non-compliance with [the new controls]
has come to light".[45]
We recommend that the Government carry out a government-wide
assessment of the effectiveness of the export control legislation
since 2004 and that the assessment encompass all the agencies
with responsibility for the monitoring and enforcement of export
controls.
30. We have examined the limited material that is
available. It appears to us to throw up more questions that need
to be answered. For example, when he answered a Parliamentary
Question in 2006 the then Financial Secretary at the Treasury,
Mr John Healey MP, indicated that 17% of the goods seized in 2004-05
would not have been licensed for export and the remaining 83%
would have been granted an export licence had the exporter applied
for one.[46] Commenting
on the figures the Export Group for Aerospace and Defence (EGAD)
said that if 17% of attempted shipments which were seized would
not have received an export licence, "that is a very high
proportion".[47]
EGAD was not aware of any analysis of the figure.[48]
We asked HMRC about the cases where licences would have been granted
and it explained that the percentages were estimates and "might
be slightly overstated". HMRC continued:
If we discover export control breaches, such
is the general complexity that we will not necessarily know at
the time as to whether such goods would be rated licence-required.
Sometimes we might find in some cases that the decision which
emerges from the DTI ratings people does not follow what we expected.
If we were to pull back from these cases you might be criticising
us for paying less attention to enforcing this area.[49]
31. We are disappointed and puzzled that the Government
has not carried out research. Whilst we acknowledge that research
may not be straightforward, we consider that the Government is
under a duty to measure and analyse the effectiveness of its policy
in this important area. If, as EGAD points out, it were to be
the case that 17% of the goods leaving the country were doing
so in breach of export controls and would not have been given
a licence if one had been sought, this would cast a serious doubt
on the effectiveness of the system. We recommend that the Government
in responding to this report produce detailed evidence to demonstrate
the effectiveness of export controls.
32. In the face of the Government's reluctance to
commission research we asked Miss Joanna Kidd and Dr Sibylle Bauer,
two of our advisers, to examine aspects of the UK's systems of
export control and to compare it with aspects of the systems in
other countries. This work is not exhaustive but we consider that
as well as providing preliminary conclusions, it highlights issues
that require further and more detailed consideration. We have
published the results of their research, which each carried out
with a colleague, as memoranda.[50]
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