Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 40-59)


24 OCTOBER 2006

  Q40  Mr Binley: I understand the need to reduce but I do not want to throw the baby out with the bathwater either. That is where monitoring has its relevance. I wonder what sort of monitoring you did with this plethora of activity to ensure that we are now doing the right things?

  Mr Darling: As we work our way through the 3,000-odd schemes we will have to reach a judgment as to whether or not each one is worth keeping or that the reason for it is still something that we want to pursue. I suspect it will vary. There is no way that we are going to carry out 3,000 independent separate evidence-based research projects. That would be mad as well. Some of them I suspect we will just reach a judgment on does this serve any purpose or not? What I am quite clear about is that this will take some time. There is a degree of urgency about it because frankly it is not something we can allow to go on year after year and we will have to be brutal in some cases. I suspect you will find that a worthy case can be made for everything, including the Effluent Online service, but at some stage ministers have got to say okay, tough luck, we want to rationalise this. I would defy anyone to tell me it is not right to reduce the thing to something that is manageable and understandable.

  Q41  Rob Marris: We are talking about the thorny issue of regulation. Eleven months ago your department published a draft simplification plan and one of the things to do was to save the company £643 million a year by changing company law, which we are all painfully aware from last week has been going ahead in the House of Commons. You also mentioned in the Departmental Annual Report that one of the things that your department is looking at is employment law proposals to lighten the load on business in areas of redundancy law, maternity leave and dispute resolution. Could you say a little more about that because as a Labour MP I do prick up my ears when I read something like that?

  Mr Darling: There are two points. You are right that regulation is a matter of growing concern for businesses and for the Government. We are making a determined effort to reduce the amount of regulation that the Department and across government we are responsible for, some of it inevitably coming from Europe. The whole thing does not lie in our hands. The way in which we transpose these things, the way in which we put them into place does need to be looked at, though a word of caution here. We recently lost a court case where we had tried to make it simpler and easier and the court said we need to be more prescriptive, so it is always difficult. The question ministers have to ask themselves when they sign off statutory instruments is if they were running a small company how would they react to getting this on their desk? Is it comprehensible? I said to our department at one of the first meetings I had with the senior people in the DTI is that we need to ask ourselves on any of these things "do we really need to do it? Is the world going to be a better place as a result of it?" If it is not, then we should not be doing it. May I say a word about company law. Although in some ways if you are confronted with a very large piece of legislation that had three days on its report stage on the floor of the House of Commons and you say is that simplifying it? I think the consensus is yes, it is, because the reason it is so big is it is consolidating all companies' legislation which, as a lawyer of many years ago, must be a good thing so that you do not have to go fishing around several different sources. I hope it has also been written in language that is easier to understand. It is also very deregulatory. There are a lot of burdens on companies that are going as a result of this which is why it broadly speaking has all party support. On the employment law simplification, this is something that we are looking into at the moment. I cannot tell you the outcome as it is not completed yet, but if you take dispute resolution, for example, companies will tell you, especially smaller companies, that it must be right to try to persuade people to resolve difficulties before they go to a tribunal because tribunals are becoming increasingly expensive and they can be quite complex. The laudable aim back in the 1970s of keeping the lawyers out of it has clearly failed. This is a very complicated area of the law. When we introduced the alternative procedure we have done so in an honest attempt to try and make things easier. I have had a look at this, as have others, and I have come to the view that I think in some ways we are running the risk of recreating a problem that arose with the formal procedure. It has become complex. When you have to call for your lawyer on the alternative procedure so that you get it right then you do have to ask yourself whether or not we could not have made it simpler still. Of course we have to be mindful of the rights of employees and employers—both are important—but when the law gets to a stage where it is so complex from its very start then we do need to ask ourselves and not be too proud about these things, if you do not get it right first time then you should be ready to sit down and try and get it right the second time.

  Q42  Rob Marris: When the report uses the phrase "to lighten the load" is it referring more, as you have done in your answers, to the procedure to the enforcement of rights, or is it actually talking about changing some of those rights?

  Mr Darling: No, it is about the procedures and the process. In terms of employment regulation and employment law, as you know, both in our manifesto and also in the White Paper, Success at Work, which we published in March of this year, we set out broadly that we do not anticipate changing the standard part of employment law in this parliament. What we are looking at is some of the procedures and if we can simplify them. The balance we have between employers' rights and employees' rights is broadly right. You should never say you will never change anything but I think they are broadly right. What I think is not right is the panoply that goes around them and we should not be in the business of supporting the legal fraternity.

  Q43  Rob Marris: I will not comment on that. The report goes on to say: "Business and regulators have been widely engaged". Have you engaged trade unions?

  Mr Darling: Yes.

  Q44  Rob Marris: It is not mentioned in the report.

  Mr Darling: Whether it is or not, as it happens I met the TUC last week when we discussed just this. Perhaps at some stage I should say that I am a Member of the Faculty of Advocates. I do not practise but just in case anyone thought that I am being unfair in criticising my legal colleagues.

  Q45  Rob Marris: Can I ask a final question on this simplification of the regulation. I see from the report that it is one of your Permanent Secretary's top priorities. I was wondering how the Department is getting on with these 60 measures set out in that draft plan.

  Mr Darling: Who better to ask than the Permanent Secretary?

  Sir Brian Bender: We have published the simplification plan in draft and the proposition now is that the final version of it be published some time later this autumn. That will therefore set out our further thinking that in the light of discussions with various—I will not use the word "stakeholder"—business, unions, and so on, to firm up what we will be delivering in the period ahead. The answer is to watch this space for something to be published this autumn.

  Q46  Mr Bone: I would like to ask you some questions about public procurement. I understand that the Department of Trade and Industry is very keen to encourage small businesses, whether they are selling manufactured goods or services, to be able to sell them more freely to government. Could you give me some examples of how you are encouraging them?

  Mr Darling: It goes back to the point I was making about spending power. The Small Business Service, which the Department has—you may want to ask me about some of the changes we are making there—they are trying to make it easier for small businesses to know what government is procuring. Part of our problem is a lot of what we procure is very large scale and probably beyond the reach of many companies, but if I use the word "government" broadly, whether it is through its agencies or even local government, what we want to do is to make it easier for people to get access to understand what it is the Government wants. We are not at the stage where we are quite deliberately breaking contracts down so they are biddable for by small businesses, but the Small Business Service has worked quite a lot with businesses that it deals with to try and make these things easier. I do not think they have got there yet.

  Q47  Mr Bone: That is very laudable and encouraging, but there seems to be a problem here in Gershon because under that proposal that is trying to save billions of pounds because of government inefficiency and one of the plans, Chairman, is that they are going to do it by central purchasing and that is rather at odds with the answer you have just given. If you have to purchase centrally in large quantities then small businesses cannot get involved.

  Mr Darling: There is a tension. Firstly, government has to be more efficient. There has been a lot of evidence and there has been a lot of select committee concern over the years and over successive governments that people say government is not as efficient as it could be. If you look at IT government buyers, there you are predominantly dealing with large suppliers and perhaps government could drive a harder bargain. On the other hand, there are other things government buys that are smaller scale where perhaps it would be easier for small businesses to bid. There can be a tension but I do not think the whole thing is insuperable. I do think that given the amount of money government spends it can influence things. I do not want to name particular countries but we can think of one not a million miles across the Channel where you could be almost protectionist in your approach. That would be wrong. In terms of encouraging the small business sector of being more efficient, encouraging certain behaviour and innovation we can be more imaginative.

  Q48  Mr Bone: To give you a practical example, when I was in business making high-tech clocks it was impossible to sell to the Government because the Government wanted to fit every department with the same clock, whereas if you break it down there are these small companies which are growing in the United Kingdom who are the driving force of our economy who want to grow who are always forced to sell into the private sector because they never seem to have this lead into government.

  Mr Darling: My recollection is—and if I get it wrong I will write to you—we are doing two pilots at the moment in the West Midlands and in one of the London Boroughs where we are trying to see how we can better engage small businesses with being able to get into government contracts. You are absolutely right, if you look at the shape of the British economy, and manufacturing in particular, the vast bulk of it are quite small and the reason why we are spending time and resource on training people—a number of people in business have been trained in how better to engage with government—we also have to look at those aspects of government services or tools where you can quite rightly, and it is the right thing to do, you can break them down so that they are more bite-size. That is something we can do. I know the RDAs are looking at that as well. I would be very happy to provide you with further details of these pilots. I am not sure of the position yet. They are not finished yet but maybe some preliminary conclusions, as long as you regard them as just that, would not go amiss?

  Mr Bone: That would be most helpful, Mr Chairman.

  Q49  Mark Hunter: I would like to ask some more questions about Gershon and the Comprehensive Spending Review. Firstly, can I ask you in relation to the Department's Annual Report about financial efficiency gains that are referred to in figure 6.4. Are you on track to achieve those financial efficiency gains that you have set out to do so? Could you expand on how you intend to achieve those targets?

  Mr Darling: With your permission, Chairman, I will set out the overview and it may be that Brian or Mark can expand on them. Firstly, the Department is becoming more efficient. We have reduced the headcount quite substantially since 2003 and it will reduce further. We are quite deliberately concentrating on those areas where we can make a difference. I mentioned the Small Business Service where we are very substantially reducing the amount of staff because there are some things I think we can do more effectively than others and we are reducing the staff accordingly. In UKTI, for example, which I think you have an inquiry into, we have reduced the staff there because, having looked at it, we think we can do it with less staff than we have got. We are concentrating on specific areas. There will be reductions in headcount and that is likely to continue. The Department has also been looking at the way in which it does things. It has gone from eight buildings down to two and a half which is more efficient. Where we can we have been shifting people out of London. We have people in Aberdeen dealing with Energy, for example, and other areas too. In terms of both staffing what we do—I suppose you will touch on this at some point during this hearing—inevitably everybody says what is the DTI for?

  Q50  Chairman: We will keep that until the end.

  Mr Darling: Just touching on that, it is a very intelligent question to ask because I think there are things where we can make a difference. There are other things where we are not really making a difference that frankly we should not be doing. That is my general overview. Do you think it would be helpful if Brian or Mark were to say something briefly to you?

  Sir Brian Bender: As figure 6.4 indicates, the headcount reductions are only a small proportion of the total efficiency programme. As the Secretary of State said, we have been reducing our accommodation costs. We have moved from an estate in London of eight buildings to two and a half and we have future plans to consolidate that further. We have improved our procurement. We are driving out the efficiency too of some of our arms-length bodies like the research councils. On the headcount we achieved, as the Departmental Report indicates, the 1,010 savings we were required to do during the Spending Review period 2004 by April of this year. We are still on track. In the few months since the publication of the report, the last report we provided to the centre, which was dated June, we delivered efficiency savings of £212 million against a target of £146 million. We are continuing to be on track or slightly ahead of track on that.

  Q51  Mark Hunter: Moving on to the next one, the Annual Report last year planned total public spending by the Department for 2005-06 was £6.3 billion; in this year's Report the estimate was £7.5 billion. Can you explain the difference in those figures and what we are getting for that fairly significant increase?

  Mr Clarke: It is largely in respect of the Science budget is where that came mostly through.

  Mr Darling: There has been an increase in the Science budget.

  Chairman: We will give Mr Clarke a chance to find this. It is actually £1.2 billion we are talking about so I do not want to pass over this too lightly.

  Q52  Mark Hunter: It seems rather a lot for Science, important though it is.

  Mr Darling: Do you want to come back to that?

  Q53  Mark Hunter: Okay. The final question I was going to ask you have touched on, which was about the reduction in full time equivalent posts. Again under Gershon the DTI is set to lose just over 1,000. Looking through the annual report, there appears to be some variation in these figures between the annual report and the resource accounts, although I accept you still seem to be on target to reach them. I wanted to ask whether or not you could confirm the size of reduction that has taken place so far and, secondly and more importantly, given the reduction is clearly happening, what feedback are you getting from customers, as you term them, and their levels of satisfaction about the service the DTI is still providing, given that you are trying to provide it with a lot fewer people?

  Mr Darling: We will achieve what we said we would but we need to do more than that. One of the areas in which we need to do more than that is in business relations in the department. I have mentioned the Small Business Service but the department needs to know what is going on in industry generally. My view is that we need to focus our attention on those areas where we know that they need DTI engagement, either because of regulation in Europe or because of structural changes, like the automotive industry, for example, where there are continuing regulatory issues, and like pharmaceuticals and so on. We concentrate our efforts far more there. In terms of feedback, as you know there are surveys carried out by various people and inevitably they will be mixed. As with most things, if you have a good experience with somebody, you think very highly of them. If you do not get what you want, you tend to have a more negative view. What most people want to know is that they can deal with the government at whatever the appropriate level is. Here I would make an important point. I do think that the DTI should not be seen as the only intermediary between business and government. If you have a problem or a concern about tax, you should be able to speak to the Treasury. I know from the Department of Transport that managers may have all their relationships with the people concerned. They do not go to other government departments. If we are going to be more efficient, if we concentrate on those areas, we can make a difference.

  Sir Brian Bender: I appreciate there are slightly different publications. Sometimes they include our executive agencies; sometimes they include UK Trade and Investment as part of the core department; sometimes it is an average during a particular period. As of 1 September, the full time equivalent number of staff in the core department, excluding UK Trade and Investment, was 3,078. That takes account of a few dozen who moved as a result of the machinery of government change when the Department of Communities and Local Government was set up. It is a matter of fact confirmed by the centre in Whitehall that we have achieved the headcount target of over 1,000 that we were committed to. As the Secretary of State said, we are not stopping there because it is right that we continue to look across the piece at where we can do things more efficiently and more effectively.

  Q54  Mark Hunter: In summary, you have had no customer feedback that tends to suggest people are dissatisfied as a result of these savings?

  Mr Darling: I am not aware of any evidence that we have of people saying, "Because you have reduced staff, therefore I am not getting anything." Of course there are still people who will say, "I thought you might be able to do this or that and you have not been able to do it" and that is something clearly we have to be mindful of.

  Mr Clarke: I mentioned the Science and Research Council spending earlier on. That is about £400 million of the increase. £300 million relates to the RDAs and the rest is related to what is called annual management expenditure relating to provisions for old liabilities in respect of the UK Atomic Energy Authority.

  Mark Hunter: I think it is worth having a note.

  Q55  Chairman: The total public expenditure figures are all over the place. The department seems to be giving a very lumpy pattern of expenditure up and down. For example, 2003-04 outturn was 5.5 billion, 2004-05, 4.7 and 2005-06, 7.5.

  Mr Darling: It is the case that there are some areas that we are quite deliberately spending more money on. There are other areas which Mark has just referred to which are not wholly within the department's control such as the liabilities which we have not just for the Atomic Energy Authority but also for coal, shipbuilding and so on. I am very happy to let you have chapter and verse.

  Q56  Rob Marris: On page 171 of your annual report, it delineates between the 2004-05 outturn and the estimated outturn for 2005-06, an increase of £2 billion spending on increasing UK competitiveness, going up in round terms from £1.5 billion to £3.5 billion. What does that mean: "increasing UK competitiveness"? It is quite an umbrella term.

  Mr Clarke: It covers a range of things.

  Sir Brian Bender: I would expect it to cover things like the technology strategy where that involves capital. You will see in the further tables on page 183 onwards they give quite a detailed analysis of that showing the technology strategy.

  Q57  Rob Marris: Perhaps you can give us a note on that.

  Mr Darling: We will write to you.

  Q58  Rob Marris: As to what that term means.

  Mr Darling: What Mark is saying to you is that if you look further on that money is accounted for.

  Rob Marris: I have no doubt of that. I was wondering what the phrase meant. £2 billion is a lot of money.

  Q59  Chairman: We are laughing about this but one of the most important jobs this Committee does is to scrutinise expenditure and we are not getting very clear, convincing answers.

  Mr Darling: I am very happy to let you have further details. One of the things that clearly we need to look at is the way in which we describe things, although we need to watch when we describe them that we do not lose something with that and we are very accurate about where the money goes.

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