Examination of Witnesses (Questions 1-19)|
BENDER, KCB AND
24 OCTOBER 2006
Q1 Chairman: Gentlemen, welcome. We welcome
you, Secretary of State, for the first time in your role as Secretary
of State for the Department; we are very glad to see you here.
Although we have seen Sir Brian before, you and Mr Clarke are
new to us. Perhaps you would like to introduce your colleagues
for the record?
Mr Darling: Thank you very much.
I probably should not say that I am looking forward to my first
appearance before the Select Committee; however, I am advised
that its style is somewhat different to the select committee that
I have been appearing in front of for the last four years. In
case someone reads the record of that, if I may say how much I
enjoyed appearing before the Transport Select Committee and I
would not want to have any unfortunate exchanges, Chairman. As
you correctly say, you have met the Permanent Secretary, Sir Brian
Bender before; you have not met Mark Clarke, who is in charge
of the Department's finances and who is now well settled in. Of
course, you have not seen me in this capacity, but we are pleased
to be here so far.
Q2 Chairman: We will find out yet
whether you are or not. Can I begin with a specific issue which
is in presently in the news? There is a new EDM that the clerks
of the House greatly approve of, that is extremely parliamentary,
referring the issues relating to Farepak to the Select Committee.
It is an unusual opportunity to have you in front of us and to
perhaps act on that EDM even if it is not a resolution of the
House quite yet. Have you anything to tell the Committee about
Mr Darling: It is clearly a matter
of concern that a very large number of people in this country
have paid money to this group of companies that are either in
receivership or in administration. Usually we do not confirm whether
or not there is an investigation under the Companies Act but,
because these companies are in administration or receivership,
I can tell the Committee that this morning the Department's Insolvency
Service is about to start an investigation under the Companies
Act 1985. Those reports may result in further action but at this
stage I cannot say. It is probably not the only examination there
is going to be but there is clearly concern here because so many
people have been affected. It follows that now this investigation
has started I cannot answer any further questions in detail and
I certainly would not want to prejudice any proceedings taking
place now or that might take place in the future. What I can say
is two things: one is obviously the issue having been raised with
Farepak we have asked ourselves could there be problems elsewhere?
Our investigations so far suggest there are, we think, two other
companies in this market which is a fairly small one. We have
no reason to believe there is any problem with these other companies
but that is something that we will consider. I strongly believe
that government should not rush into doing something until we
have analysed what the problem is. That has been done in the past,
usually with unfortunate consequences. The other thing for the
sake of completeness is that the Committee may be aware that Ian
McCartney, the Minister of State of the Department, met the British
Retail Consortium over the weekend with a view to seeing what
their members might be able to do on a voluntary basis and that
was a constructive meeting. Having regard to the number of people
affected here, the receiver and administrator do not actually
know yet because the company did not know how many people were
affected. It is a matter of concern especially at this time when
a lot of people are going to be in severe difficulties when they
quite reasonably expected that having saved through the scheme
they would get Christmas presents and other things which are now
not going to be made available. It is a very, very unsatisfactory
situation and it is for that reason, amongst others, that the
DTI's Insolvency Service has started that investigation.
Q3 Mrs Curtis-Thomas: Ian McCartney
did have constructive conversations you said with members of the
industry over the weekend but does "constructive" mean
that they might be considering some sort of support to the families
who find themselves without any funds or presents at Christmastime?
Were they those sorts of conversations?
Mr Darling: They were discussing
in general what the BRC members and others might do. They have
not reached any decision. It is clearly difficult because I suspect
that in many, many cases it would not be able to offer anything
approaching what the families might reasonably have been expecting.
I expect there will be other Members around this table who, like
me, have started to receive letters from constituents who have
spent a lot of money in the expectation that they were going to
get Christmas presents and are now not going to. Whilst the British
Retail Consortium is acutely aware of the distress that has been
caused, I do not think it is ever going to be in a position to
take the place of it and it would be wrong to raise expectations
that way. However, they are considering what might be done and
once they have done that then probably they will make an announcement.
Clearly no-one can stand in the shoes of this company. Something
has gone very wrong with this company and it is tragic for the
families concerned. What we will do is, firstly, through the investigation
and through other agencies' examinations, find out what happened
with a view to looking to what we might do in the future but,
secondly, we do want to work with the British Retail Consortium
and others to see if there is anything we can do to ameliorate
the situation, but inevitably that is going to be limited.
Q4 Mr Weir: Like you, I have had
letters from many constituents who have been affected, some of
which are calling for the Government to do something. I appreciate
that that is not likely to happen, but for clarity an investigation
under the Companies Act is not likely to lead to any compensation
for those who are affected by this.
Mr Darling: No. The purpose of
this investigation is to find out what happened and then to make
recommendations either to the regulatory authorities for prosecution
or in relation to whether or not directors should be disqualified
from holding office. That is the purpose of it. It has never been
the case that any government would stand behind a shop; it is
not possible to do that. Clearly this is a situation where people
have been saving for some considerable time with an expectation
that they will provide for themselves and their families at Christmastime.
It is tragic for them, the BRC is aware of that, but even if it
can make some sort of gesture it is going to be just that; it
is not going to be able to compensate, and to go down that route
would raise all sorts of questions and complications that would
frankly defeat anyone.
Q5 Mr Bone: I do not think the Minister
wanted to give the impression that this investigation is purely
for those purposes. It is actually an investigation to find out
Mr Darling: Yes.
Mr Bone: You might have given the impression
that something had happened.
Q6 Chairman: I am being very generous.
We must get on to the main purpose of this session.
Mr Darling: It is a perfectly
fair point. You cannot pre-empt the investigation; it only started
Q7 Mr Wright: This is a similarity
to what happened a few years ago with the furniture company, World
of Leather, where they were taking orders and did not honour those
orders and people lost their finances. Do you now consider, perhaps
in the light of what has happened with Farepak, that perhaps we
should consider some form of legislation, some form of protection,
some sort of bonding scheme when these schemes come forward?
Mr Darling: I would rather find
out what happened and then decide how best to proceed. It would
be wrong for me to pre-empt the investigation.
Q8 Mr Wright: That may well be an
Mr Darling: It would be better
to find out what happened. I did say earlier on that over many
years governments have been tempted into coming up with a solution
before they actually found out what the problem was and it is
better to find out what, if any, the problem is, whether it is
specific to this company or whether it is a generic problem. Once
we have had the investigation obviously we will draw our conclusions.
Q9 Chairman: I am not making a cheap
point here but I do hope that the investigation is more rapid
than, for example, the Phoenix Consortium and the MG Rover Companies
investigation which is dragging on interminably. I hope there
will be more rapid inquiries now. I appreciate that is not entirely
under your control.
Mr Darling: Quite rightly ministers
do not become involved in investigations; that would be quite
wrong. It has to be effective and it has to be efficient. We need
to know the position as soon as is reasonable.
Q10 Chairman: We will turn to the
main purpose of the session which is our scrutiny of the Department's
work over the year. I have in front of me three documents: your
Business Plan which is very good, very succinct, very readable;
the recently received Consolidated Resource Accounts which are
audited, accurate and helpful and give all the information; and
then what I describe as the Pooh-Bah of the trio. You will remember
his quote: "Merely corroborative detail intended to
give artistic verisimilitude to an otherwise bald and unconvincing
narrative." I do not quite understand the purpose of these
three documents, particularly as this £37.50 document I have
in front of me is littered with errors and errata, some of which
are quite fundamental to one's interpretation and reading of the
report. Do you think this document, into which I am sure many
person hours go in the Department, is worth producing?
Mr Darling: That question was
asked of me in just about every department I have ever been in.
You ask what is the purpose of these three? Obviously it is self-evident
what they are there for. The Business Plan tells you what we were
planning to do and the Departmental Report is an account of what
happened in the previous 12 months. All select committees from
time to time ask themselves what is the value of producing this?
Might it not be better to look in more detail at particular areas?
My view, on balance, is that I think it is a good idea for departments
to account for what they have done. However, I have always seen
it as a first port of call, especially by the Department of Trade
and Industry which covers such a huge range of issues. Inevitably
somebody who wanted to know more about what we were doing in energy
would consult not just the annual report, they would look at the
Energy Review we published in the summer, they would look at all
sorts of other things. Similarly, the Insolvency Service might
want to go deeper into what we are doing than is contained in
the report. Inevitably when you produce a large report, and they
are done over a comparatively short timescale, errors may occur.
We have provided you with a list of errors that we have identified.
I am sorry about those. On balance producing a report is a good
thing. There is a big questioncould it be better? Do you
need everything that is in it? You mentioned the £37.50.
All I can say is that last time in Transport when I attempted
to take things out it was met by stiff resistance from the Select
Committee. I may be wrong but I think you suggested keeping things
in that we suggested taking out 12 months ago.
Q11 Chairman: The tables in the annexes
are very useful at the back but this report was littered with
errors. Your PSA targets you translated ones from the wrong spending
review period and so things that were slipping were actually on
course and things that were partly met were on course. The most
important two pages probably in the whole report were wrong. I
hope at least you can make sure it is accurate next year.
Mr Darling: It is a perfectly
fair criticism and it should not have happened. We will try and
make sure that when you get next year's report that it is not.
Q12 Chairman: I hope all the readers
who have paid their £37.50 have had the errata slip as well
as it is quite important. Looking at those public service agreements
and the targets, how valuable are they? What influence does the
Department have in many of the things you have targets to achieve?
Mr Darling: A lot of the PSAs
and targets are shared with other departments which is inevitable
if you look at something like productivity and so on. There are
others like energy, for example, where we have a direct influence
here at home, but in terms of climate change not only are other
government departments involved but so too are governments of
other countries. One of the things that we are looking at as part
of the Comprehensive Spending Review, which will of course be
published next year, is whether or not we should have quite the
range of targets we have at the moment. My own view for what it
is worth is it would be far better having far fewer targets and
concentrating on those things where a department can reasonably
be held to account. If you have a target that is shared the problem
then always is that, rightly or wrongly, someone else is involved
with the thing and there is not that line of accountability. There
are also other targets on productivity where there are so many
different things in play you keep asking yourself can you hold
any secretary of state, any department, accountable if we do not
meet a target? That said, to take productivity it is patently
obvious one of the things as a country we need to do is to drive
our productivity. As you know, a lot of the drivers that determine
that are totally out with the control of Government targets or
ones that you can only influence very indirectly. My preference
would be from 2007this is the stage we are looking back
over the last 10 yearsas well as fixing up our public spending
for the three years beyond 2008 it is an opportunity and what
I would like to see is to have less targets but ones where you
more reasonably say it is up to you to deliver this.
Q13 Chairman: Making the UK the best
place in the world for your business, but it is not really within
Mr Darling: I do not think anyone
would dispute that as an objective, no matter where they sit in
the House. It is a good thing, but yes, with things we can do,
like Company Law Act regulation and tax and so on, but whilst
in the DTI we are responsible for some regulations, tax is a matter
for the Treasury. There are other things that are altogether more
intangiblethe general critical mass in London, for examplewhich
are much more difficult.
Q14 Chairman: Before I hand over
to Roger Berry, I am slightly concerned that the Energy Minister
is actually a part-time Energy Minister. Energy is one of the
most important issues facing the country today, yet poor Malcolm
Wicks, his responsibilities do not stop with Energy. Do you think
the ministerial workload is appropriately shared around? Could
you do with an extra parliamentary under-secretary of state or
something to help make sure these things do get the ministerial
time they need?
Mr Darling: I am not aware of
any clamour to have even more ministers than we have at present.
As a matter of fact, I am the Energy Minister. I am the Minister
responsible for everything that happens in the DTI. Malcolm Wicks
assists me and very ably he does it as well. It is inevitable
if you have a limited number of ministersand every department
has got thisthey are going to have to do more than one
thing and most ministers are capable of doing that. You are absolutely
right, Energy has gone from having pretty little strategic salience
five years ago to having massive salience now and massive importance,
which is why I take a direct interest in it myself, which is why
we published the Energy Review, a White Paper coming up. Happily
in Malcolm I have a very able Minister of State who is able to
do more than one job at once. However, we always keep these things
under review. We just have to be reasonable in how people have
the work allocated so that they can cope with it.
Q15 Chairman: We are told that until
recently you only had one official to support it. It does seem
you are quite lean and mean on the Energy side which is a very
important issue for the Department.
Mr Darling: When I took over this
job in May I was determined that this Energy Review would be just
that, a total Energy Review that would not ignore developments
that had taken place in this country. A lot of what was in the
Energy Review and what you will see when we publish the White
Paper, which will probably be in March now because of areas like
microgeneration where we are about to publish a document on that
and there is more information that we need from the industry and
so on. There are areas that we perhaps in the past have not gone
into sufficiently. I want us to exploit to the full greener sources
of energy. We need to be more imaginative about what is called
distributive energy at the same time as maintaining the energy
mix which is essential. I hope I have indicated in that answer,
going back to your first question, that I see energy as probably,
in policy terms, one of the biggest things the DTI is going to
be dealing with in the foreseeable future.
Q16 Chairman: There are two very
Mr Darling: We have more than
Q17 Roger Berry: Secretary of State,
before April the Department felt it important that the Innovation
Group and the Office of Science and Technology were separatethere
was a clear rationale for thatand since April they have
now been merged. What changed the Department's mind to bring about
the new approach?
Mr Darling: It is probably fair
to say this was not something that was thought up on 31 March.
Q18 Roger Berry: I was not suggesting
that for one moment.
Mr Darling: 1 April was simply
the date when the OSI came into existence. Quite simply, I do
not see a gap between Science and Innovation; one runs into the
other. What we are keen to do, if you are interestedI expounded
on this last night when I was speaking to the Royal Societyis
that we need to do far more to exploit the undoubted ability that
we have to invent, to research into goods and services we can
sell. Where we are quite good at in this country is in our ability
to invent and to innovate. If you look at the Department of Trade
and Industry the title does not in some ways do justice to what
we do. Over half our budget goes on Science and Innovationnearly
£3.5 billionand it makes sense to bring these together.
I also think, although I am relatively new to the Department,
having the OSI located within the DTI has been beneficial. It
has been immensely helpful to us having someone like Sir David
King there as well. The reason we have done it is that one logically
runs into the other.
Q19 Roger Berry: I agree, except
that there is more to innovation than simply that which takes
place within Science and Technology. Innovation is in business
processes, business services, et cetera. How do you respond
to that? There are significant issues that are not purely and
simply Science and Technology.
Mr Darling: That is true, and
I suppose however you brigade the Department you can make a counter-argument
that there might be a better arrangement. The link with Science
and Innovation is very important. This decision was taken before
I got to the DTI but that would certainly have influenced me in
my consideration. You are quite right, there is a lot of innovation
that is not directly linked. Going back to Peter Luff's point
in relation to what is the Department for and what can it influence,
this is one area in Science and Innovation where we cannot do
everything, but through financial support, through other means
we can encourage this process. When you consider the immense problems
we face with globalisation, when you bear in mind what is happening
on the other side of the world, this is where we have to be. We
have to make sure that we are at the forefront here. We have a
very, very good record. In the past we have not always been so
good at exploiting it in this country and that is something that
we need to get better at.
Sir Brian Bender: May I add something
since I have the continuity of being to blame for recommending
to the last Secretary of State this merger. I saw great value,
as the Secretary of State has said, of bringing together the budget
for the Science push and the budget for the Innovation pull into
one place and then trying to bring that culturally more into the
centre of the Department. On the second point, taking your direct
question, Mr Berry, about the relationship with non-science innovation,
it is really important in any department to make sure the different
silos do not operate as silos. One of the really important things
we are working on now, particularly as we are trying to make the
Technology Strategy Board an arms-length body, is making sure
the link in to industry on the business side of the department
is kept strong. The Director General for Enterprise and Business
works closely with the Director General for Science and Innovation
to try and make sure that we do not fall into the trap of thinking
that all innovation is science push and technology, but we are
keeping our fingers on both sides of it.