Select Committee on Foreign Affairs Minutes of Evidence


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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