Examination of Witnesses (Questions 1-19)
ANDREW CAHN,
SUSAN HAIRD,
ASIF AHMAD
AND IAN
FLETCHER
6 DECEMBER 2006
Q1 Chairman: Good afternoon, everybody.
Mr Cahn, I welcome you and your colleagues. This will be a very
interesting session for the Select Committee on Foreign Affairs,
because it was a long time ago that we last had UK Trade &
Investment come before us for a discrete evidence session. As
you know, your organisation has a relationship both with the Department
of Trade and Industry and with the Foreign and Commonwealth Office,
so we thought it was important to maintain our relationship in
a public evidence session. Could you introduce your colleagues
to us and then we will get into some questions?
Mr Cahn: Certainly, Chairman.
Thank you very much for the invitation. I am particularly delighted
to have this opportunity to appear before the Foreign Affairs
Committee. I am accompanied today by Susan Haird, who is the deputy
chief executive of UK Trade & Investment, Ian Fletcher, who
is the managing director of the international group, and Asif
Ahmad, who is director for Asia.
Q2 Chairman: Thank you. You have
published a document called "Prosperity in a Changing World",
in which you outline a five-year strategy. Why did you feel the
need to publish that strategy? What are the reasons, and what
are the shortcomings and difficulties with current UK trade performance
that you intend to deal with?
Mr Cahn: It is always a good idea
for an organisation to have a clear strategy, so I was very pleased
when earlier this year, almost a few days before I took office
as chief executive of UK Trade & Investment, the Chancellor
of the Exchequer, in his Budget statement, asked me, together
with the Ministers to whom I report, the Secretary of State for
Foreign and Commonwealth Affairs and the Secretary of State for
Trade and Industry, to publish a strategy by the end of the summer.
So I was doing that in response to ministerial direction. I think
the main motivating or driving force for Ministers asking for
the strategy was to take another look at the challenge of globalisation,
what that meant for trade and investment in this country and how
my organisation could reform itself, change itself, so that we
could address more readily the challenges of globalisation and
help to make British companies more productive and more competitive
in a globalised world.
In his Budget statement, the Chancellor
also asked me to "revamp"—I believe that was the
term—the organisation, so part of the strategy was addressing
the question of how I could change the organisation and how we
could reform it, so that we could deliver the new objectives.
Q3 Chairman: I am going to ask you
a rather personal question, but I hope you will understand why
I need to ask it. We have had evidence from Clifford Chance, which
says that "it would signal the importance the government
attaches to trade and investment if Mr Cahn were to have Permanent
Secretary status". It is implying that somehow the status
of the job you do has been downgraded and that sends the wrong
signal. How would you respond to that?
Mr Cahn: I do not think the status
has been downgraded at all—in fact, almost the opposite.
I think I have been given a very clear remit by my Ministers.
I am very comfortable with the grade and the position I have.
I think the principle of having one permanent secretary per Department
is, generally speaking, a good one and I think that was one of
the main motivating forces. If I may say so, it is a mistake to
regard the status of the post holder of my job or of the organisation
generally by grades or grade titles. The way to judge it is whether
we are being taken seriously by Ministers, by the outside world
and by our stakeholders—and by, those measures, I think
we are.
Q4 Chairman: I understand that you
have many issues to consider in your work, one of which is a target
to increase exports resources for firms newly engaged in exporting,
with recommendations for public service agreement targets. Will
you be able to achieve those and, if so, will it be to the detriment
of your other work?
Mr Cahn: May I answer that question
in two parts? First, I think we will meet the PSA targets set
for us during the SRO4[1]
process, including the targets for assisting new-to-export companies,
and I would like to say that my predecessor did much of the hard
spade work in implementing SRO4. Secondly, the publication of
the strategy gives us something of a new set of objectives, and
we are already in negotiation with the Treasury on a new set of
targets, which will be agreed in the course of the present comprehensive
spending review. I expect those targets to be somewhat different
from the current ones.
Q5 Chairman: You have had to reduce
the number of posts in your headquarters. You have also had to
reduce your budget and introduce efficiency savings. How has that
impacted on you?
Mr Cahn: It has had a good impact
and a not-so-good impact. The good impact is that it is always
challenging but usually productive to be required to take a hard
and firm look at all one's processes, all one's functions, and
how they are carried out, and one tries to find more efficient
ways of doing it. I believe that we have made some significant
value-for-money savings, and we have now a leaner and more effective
organisation as a result of the cuts that we have made, particularly
the cuts in the headquarters organisation where efficiency savings
were to be found.
The less good aspect is that one can always
make a certain number of efficiency savings, but I believe that
we could do more if we had more. Part of that is that we could
do more with less. It is a good discipline, and we are doing more
with less. Equally, we could do more with more if we were offered
it.
Q6 Chairman: I call Paul Keetch.
Q7 Mr Keetch: For the record, in
a private capacity I have seen UK Trade & Investment at work
in two places in the world, and your staff are doing a fantastic
job. It is a great organisation, and I am pleased that you are
here today.
Can we set the context for the UK's position?
You say in your document "Prosperity in a Changing World"
that the UK is near the top of the premier division. If we are
to use a football analogy, who are our main competitors, and is
there any danger of us being relegated?
Mr Cahn: Thank you, Mr Keetch,
for your kind words. I can say on behalf of my staff that many
of them work extremely hard and do an extremely good job.
When I was appointed but before I had taken
up my job, I made it my business to talk to as many people as
I could who knew the world. One of my questions was precisely
that: who are the best trade promotion organisations in the world?
I wanted to know which ones I should see and which ones I should
try to emulate. A regular response was that UK Trade & Investment
is one of the best in the world. It was our consumers and stakeholders
saying that. It is true; I think that we are an effective organisation.
We could be better, and we will be better; the five-year strategy
is designed to improve us, but we start from a good base. That
is why I said that we are in the premier league.
Who are the other good organisations? The
Irish, who have separate organisations for inward investment and
export promotion, have a very good reputation, but they work in
a rather different way. The inward investment side focuses on
a couple of sectors and a few countries. Other organisations that
are well regarded include those in Australia, such as Austrade,
and those in Canada and the Netherlands. Interestingly, the French
have just significantly expanded their Invest in France Agency,
so the encouragement of inward investment is now becoming a fashionable
or generally accepted thing to do.
Will we get relegated? I have every confidence
that we will not get relegated. I believe that we perform well.
We are setting ourselves some real challenges to improve our performance,
to become more target-driven and to measure our performance. In
future we will know whether we are doing well. In the past it
was, to an extent, a case of feeling or intuiting whether we were
doing well, but in the future we will know, because we will have
outcome measurements. We will have more professional and commercially
engaged staff, with new skills. That will enable us to raise our
performance. Whether we make it to the championship of the premier
league remains to be seen, but that is my objective.
Q8 Mr Keetch: To follow on from the
issue of supporting our premiership status, when the Committee
was in China we were told that business in Hong Kong and Shanghai
occasionally felt that other countries' political commitment—visits
by Ministers, the French President, Prime Ministers or whomsoever—was
better than the UK's. Are you happy at UKTI that you get the level
of political support that you need—a Minister or the Prime
Minister going somewhere—or do you think that we could do
better as a country in providing that support both to your staff
and to the businesses that you are trying to promote?
Mr Cahn: I think that I have strong
political support. As an example of that, at the launch of our
strategy in July, we had Alistair Darling, the Secretary of State
for Trade and Industry, and John Healey, a Minister in the Treasury.
Mrs. Beckett was also due to come, but was called away to the
House at the last moment, so her permanent under-secretary came
instead, and Ian McCartney appeared by video link from Beijing,
so we have strong ministerial support.
Do we have enough visits? Well, Ian McCartney
was in India last week, and Alistair Darling was in China. I am
not sure that one can ask for stronger ministerial visit support
than that. So far, I have received only strong political support
from all my Ministers. In particular, Ian McCartney has shown
himself strongly committed to the strategy and to the development
of UK Trade & Investment, and to working with British exporters
and inward investors, so I am very happy with the level of political
support that I have.
Q9 Mr Heathcoat-Amory: You referred
to Ian McCartney, but he is the only Trade Minister in the whole
Government, and is shared between the Foreign Office and the DTI.
At one time we had an entire Department, called the Board of Trade.
Do you feel that the loss of an autonomous British trade policy
makes your job more difficult? I notice in your strategy that
you talk about our commitment to free trade, but there is nothing
that we can do to promote free trade, because it is all done for
us by Mr Mandelson—or not, depending on the balance of forces
in the European Union. Would your job be made easier if we could
sign bilateral trade agreements with other countries?
Mr Cahn: Trade policy is not my
responsibility, Mr Heathcoat-Amory. That is for the relevant civil
servants and Ministers in the Department of Trade and Industry.
I merely feed in to them the commercial concerns of British companies
and potential inward investors from overseas; but I am quite comfortable
that the present arrangements work effectively, and I am happy
to work with them.
It is a great shame and a pity that the
Doha development round is in the position that it is. I very much
hope that it will get unblocked, and I know that British Ministers
are working extremely hard to that effect. When they make these
overseas trips, as I was saying to Mr Keetch just now, they press
particularly hard on trying to free up trade policy. I know that
both Mr Darling in China and Mr McCartney in India were doing
that last week. That shows that there are still some bilateral
elements around in trade policy.
Q10 Mr Heathcoat-Amory: On the related
subject of tax and regulation, you said that trade policy is set
for you and there is nothing you can do to change that. Do you
take the same view of the rising tide of complaints about over-regulation
and high taxes, which have now become quite a chorus from British
business and the City? Do you regard it as part of your job to
act as advocates for them by trying to keep us in the first division
through making us a lower taxed and lightly regulated jurisdiction?
Mr Cahn: My job is primarily,
in this case, to represent the interests or explain the concerns
of potential inward investors coming into this country and to
explain to Ministers, civil servants and other policy makers what
the potential inward investment community thinks about the present
state of regulation, tax, and other issues. Interestingly, we
do that exercise regularly and every six months we seek to gather
together the views of inward investors with whom I also have regular
meetings.
The issue of regulation is usually one
of seeing Britain as a well-regulated country. I am sure that
all of us have examples of where we feel that regulation could
be improved, but the perspective from overseas is that, compared
with other countries, Britain is pretty well regulated. We have
reliable, secure, stable and predictable regulation, which is
generally speaking not too onerous. In recent years tax has not
been one of the major concerns of inward investors; it is certainly
a concern because tax is always a concern, but it is not one of
the major concerns.
Q11 Mr Heathcoat-Amory: You are ignoring
the recent calls for attention to be given to the tax and regulatory
burden. I understand your point; you are a salesman for the UK
and I would not therefore expect you to say, "Don't invest
here." But, I also hope that, perhaps even privately, you
are putting the case for keeping us in the first division in the
way you have outlined.
Mr Cahn: When British companies,
the CBI and others make that point, they are, of course, doing
so to the Treasury, which has responsibility for the issue rather
than me. I ensure that I argue the case for as benign an environment
for business as possible in this country. One of the things that
we have set up in the strategy is a group that I will lead with
Ian McCartney—some of the meetings will be taken by him,
and some by me, and we will take some together. The group will
meet with British businesses all around the country to listen
to them and hear what their concerns are. Clearly, if they raise
issues about tax, we will pass those on to whoever the responsible
Minister is in this country.
Q12 Mr Purchase: Nice to see you
again, Mr Cahn, and welcome. You mentioned a moment or two ago
that you could do "more with more" and I thought that
was an interesting phrase. I know that you have set out the targets
for what you hope to achieve, but I remind you that Britain's
share of world trade has scarcely moved in 100 years; it has stuck
pretty solid at around 7%. Not withstanding massive changes in
the volume and velocity of trade and so on, it seems that you
have set yourself something of a mountain to climb with the targets
that you have set. When we aggregate all the improvements you
were hoping to make, for instance at least 40% new-to-export firms
to improve their business performance in two years and at least
50% of existing exporting firms to improve their performance,
how do we actually increase our share of world trade and what
more would you do with more?
Mr Cahn: Thank you, Mr Purchase.
First, may I elaborate a little on the "more with more"
phrase? At the same time as we published our strategy, "Prosperity
in a Changing World", we also published a rather substantial
piece of economic analysis. It is called the relative economic
benefits study—at least, that is how I know it, although
that is not what is written down.
Ms Haird: It is the economic rationale
for Government support, international trade and investment.
Mr Cahn: Thank you, Susan. We
call it something different in-house. It is a piece of economic
analysis by independent economists, Treasury economists and DTI
and UK Trade & Investment economists, so it has a strong independent
element. One of its conclusions is that the resources devoted
to UK trade and investment are well used. You would expect me
to quote the figures, but they are in the public domain—for
every pound of Government money that is spent on our trade and
development activities there is £17 of benefit to the UK
economy. Those figures relate to our four principal export trade
development schemes.
There is also the conclusion that for inward
investment, although they cannot quantify the benefit precisely,
there is very substantial benefit to the UK economy. Therefore,
I have every confidence that we give good value to the taxpayer
and to the country. If we had more, we would no doubt give even
better value. I repeat that I think it is absolutely essential
that we make ourselves more efficient, and it has been a good
discipline and a good exercise in recent years that we have been
forced, through budget cuts, to make ourselves more efficient
and to make value-for-money savings. I have no problem with that;
I think we have done a good job and we are now an efficient organisation.
We can become even more efficient and we are in the process of
doing so. But we do offer good value for money.
To come quickly to your point about how
we increase our share of world trade: we have to work very hard
just to stand still. It is becoming an ever more competitive environment
out there; I suppose that is what globalisation means. It means
that there are lots of businesses overseas wanting to eat our
lunch. I do not want to appear under- ambitious, but it may be
that we will do quite well to retain our share of world trade
and maintain that 7% figure.
The specific target for new-to-export companies
is very important, because what we are doing there is encouraging,
developing and facilitating those companies that will become the
big exporters of the future. Of course, many of them will fall
by the wayside but every big company starts as a small company.
Some small companies develop into medium-size companies and then
into big companies and become major exporters. I think we need
to spend a lot of effort encouraging the new-to-export companies
and companies that are exporting to emerging markets for the first
time so that they can grow in future.
Q13 Mr Purchase: Most companies showing
a return on capital employed such as the one you mentioned—17
to one—would be very anxious to sell more of that product
because it sounds like a very good margin to me. But I am still
trying to press you on the point about the individual companies'
targets. If they are met that would mean, would it not, increasing
the aggregate export that we manage? That should, by some kind
of logic, although not necessarily mathematical, result in a larger
share of the world's export markets for Britain.
I ask you again, what more would you do
with more? If it were my company and I was getting that kind of
return I would be breaking down the door of the bank and asking
for further investment in order that I could make more money.
Mr Cahn: Of course, the companies
we are targeting, the need-to-export companies, are substantial
in number although not quite as substantial in terms of the amount
they export, so perhaps even if we were to increase their number
substantively it might not change the share of world trade substantially.
To answer the question what I would do
with more, we have had to withdraw from a certain number of sectors
and I think we have made the right choices. The sectors we are
now focusing on are the ones that will benefit most from our intervention,
but of course we could cover more sectors if we had more resources.
I do not want to appear to be getting into a bidding game; I am
content with what I have. I think we are doing a good job with
what I have. I set out my strategy on the assumption that we will
have the sort of resources we have at the moment. We can do a
very good job on that basis. I think we are doing a very good
job.
Q14 Mr Purchase: I am sorry to say
this, but on that level that is relatively unambitious.
Q15 Chairman: Thank you. John Horam.
Q16 Mr Horam: One aspect of the area
you operate in, Mr Cahn, is the sheer plethora of organisations
of one kind or another that are hoping to promote trade. I am
thinking first of the regional development agencies. There are
the English ones and there are the devolved Administrations in
Scotland and Wales. There are organisations such as the chambers
of commerce and the various councils such as the British Council.
Even Ken Livingstone is now in on the act. He did not get to Venezuela
in the end to get his oil for London buses, or whatever it was.
He is now, as I understand it, trying to establish links with
Mumbai and Delhi. All this is a mess, is it not? What attitude
would you take to this? I have heard of letting a thousand flowers
bloom, but this is ridiculous.
Mr Cahn: I do not think that it
is a mess. I think that there are some real advantages in having
a lot of organisations all working hard in the same direction.
Q17 Mr Horam: They must duplicate.
Mr Cahn: The key question is do
we have good co-ordination—are we avoiding duplication and
fragmentation? The answer is largely yes, but there are some problems.
That is why we decided to initiate a review of this area and in
particular a review of the work of the RDAs[2]
overseas to see whether there is duplication and fragmentation.
Q18 Mr Horam: How do you know? How
can you reassure me that there is not a lot of confusion out there
among your potential customers?
Mr Cahn: When we have finished
the review we will make it public. I hope that that will reassure
you. If I may give my personal assessment after eight months in
the job, there are some strong advantages in having a variety
of players in this field. One is that we get more resources, which
plays to Mr Purchase's point. The devolved Administrations and
the RDAs and other bodies like Think London or the Corporation
of London have their own resources. If they come in and have their
own representations and offices and make their own efforts both
to attract inward investment and to assist in other forms of export
promotion, that just brings more resources to the field. That
must in itself be a good thing. There are also some strong brands
out there which are useful. Scotland really does have a brand
of its own to promote. Therefore my comparator organisation, Scottish
Development International, has something clear to sell.
I do not say that there is no issue to
be looked at. That is why we have set up this review. The issue
comes when you have a large number of representations in one city.
In Beijing and Mumbai, for example, we have rather a lot of different
organisations. Some are co-located, which can work very well.
But there is rather a lot and there is the worry that they are
not well co-ordinated. We have co-ordinating machinery. We have
a committee on overseas promotion which is designed to co-ordinate
all the efforts on inward investment.
Q19 Mr Horam: Is it effective?
Mr Cahn: I think it is effective.
1 Spending Review 2004. Back
2
Regional Development Agencies. Back
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