Examination of Witnesses (Questions 40
- 51)
THURSDAY 17 JANUARY 2008
RT HON
DES BROWNE
MP, MR DESMOND
BOWEN AND
MR TONY
PAWSON
Q40 Peter Luff: I share your admiration
of UKTI; I think it is an organisation that has got its act together
with extensive consultation with industry on its new strategy.
Why was there no consultation of the defence industry about this
new strategy?
Des Browne: We discussed extensively
the implementation of this policy objective with the defence industry
to the extent that when the arrangements were announced the industry
welcomed it. The fact that NGOs have seen that there is a renewed
commitment to the highest business standards which we wish to
seek to apply across this industry is a good thing.
Q41 Peter Luff: Will you publish
those discussions in some form?
Des Browne: I do not know whether
it would be possible to meet the commitment to publish the discussions
because I suspect a lot of them took place in different formats.[28]
Q42 Peter Luff: Will you reflect
on it?
Des Browne: I will reflect on
the request but I am not conscious, to be absolutely honest, that
the people who were involved in those discussions were asked to
keep them confidential. In fact, as I recollect, we talked about
them quite freely in the public domain.
Q43 Peter Luff: What difference will
the defence exporters notice? Digby Jones—Lord Jones of
Birmingham—becomes our leading defence arms sales spokesman;
that will be quite a big change I expect. Apart from that what
difference will the exporters notice?
Des Browne: What they will see
is an integration into the Government's more general trade support
activities while at the same time building on the success of DESO
and still allowing the best of the specifics of DESO that were
related to defence to be preserved such as, for example, the support
that my department gives them. We will still put significant resources
into that; it is entirely appropriate that we should be able to
tell governments abroad who may wish to buy a particular capability
through the mouths of our military people exactly how it can be
used and how it can advance the ambitions that we have about deployable
capability et cetera. They will see themselves in a bigger and
more integrated organisation and they will have the advantage
of the more extensive networks of that organisation in support.
It may well be that Mr Pawson may be able to add to that because
he has been in charge of this.
Q44 Peter Luff: Where will he be
after the first of April?
Mr Pawson: There is going to be
some form of open competition some time for the head of the new
organisation. I think I want to make two points. As the Secretary
of State has made clear, there is continued commitment by MoD
to the support of defence exports which was an initial point of
concern for the industry. That having been given, this is actually
a very constructive, progressive development in two quite separate
areas. Firstly, in terms of transparency, the very first question
you asked Chairman was about the separation of promotion and licensing
within the Ministry of Defence. This, of course, does make that
separation much clearer and, rightly or wrongly, there is a misperception
or concern about it. Working on the inside, that is a wrong perception
but the perception is there. So it would help there. Secondly,
inside the Ministry of Defence there has sometimes been a blurring
between whether we are doing this for economic reasons, to support
an industry, high-tech, good for the country and good for jobs
et cetera, or are we doing this for defence reasons? In the future
we are going to have a service level agreement between the UKTI
and the Ministry of Defence; that is going to be published so
there is greater transparency and greater clarity there. One aspect
of this is that some commentators have been asking for this greater
transparency and greater clarity; this will provide it. In terms
of support for industry, UKTI has a very extensive overseas network,
for example. There are over 1300 people in UKTI overseas; DESO
is in less than 20 countries. So there will be access to this
network. DESO does not have any money to give industry; UKTI does
under the industrial policies. Access to UKTI services in the
broad sense will be easier for the defence industry. That is particularly
true of companies who are new to exporting and are new to the
market SMEs.[29]
The defence industry itself is changing; it is not concentrating
solely on defence in the way that it once did so that, for example,
it is moving into border security, homeland security if you like.
That is why the new group in UKTI is going to be the Defence and
Security group. There are number of advantages both in terms of
the transparency and accountability and in terms of developments
in industry being reflected in the way in which the Government
is supporting it.
Q45 Peter Luff: You are actually
not transferring DESO, you are splitting it up. That is not a
criticism, it is an observation. It seems from the Prime Minister's
statement that government-to-government defence sales, including
the current arrangements with Saudi Arabia, will remain within
the MoD. What is the reason for the MoD retaining responsibility
for these contracts? How long will that process go on for? Is
it future government-to-government contracts too? It is a big
slice of DESO's activities. Do you understand the concern that
some people have that they see it as possibly being used as some
kind of cloak for sensitive and controversial deals within MoD
rather than moving into UKTI?
Mr Pawson: I was using shorthand
in relation to DESO for the export promotion part of DESO. There
is the export licensing part which is staying behind, hence the
clarity I mentioned earlier. There are the government-to-government
arrangements, including between Saudi Arabia and the British Government
which remain with the Ministry of Defence, which in turn have
detailed back-to-back contracts from the Ministry of Defence to
defence suppliers and only the Ministry of Defence can operate
those contracts. Future ones are going to be considered on a case-by-case
basis but there are not any anticipated in the near future.
Q46 Mr Bailey: The theme of NGOs,
UKTI, MoD and due diligence. It has been put by Transparency International
that this change does give the opportunity to improve safeguards
to ensure that the tax payer is not underwriting corruption abroad
and to improve methods of due diligence. What is your view of
that?
Des Browne: We do not underwrite
corruption abroad in any event but, as I say, if people see this
as a commitment to the highest business standards then I welcome
that because that is what we have. If they see it as assisting
the defence industry to become more transparent and, in their
perception, accountable demonstrably and supporting good governance
then I welcome that because that is our objective and I believe
that is the industry's objective. Certainly when I meet the leaders
of industry those are the conversations that I have with them,
among others. It allows us to set out some form of common code
of good business practice which will help that process along the
route and I welcome that as well. There are advantages. They are
not advantages that could only have been achieved by this change
but if you can get all of the other advantages that Tony sets
out with that then that is good. I am determined to try to prove
in my contribution to this area of policy that this does not need
to be a zero sum game.
Q47 Mr Bailey: Will those improvements
include the publication of names of intermediaries and advisors?
Des Browne: There are a number
of issues which need to be addressed. Since I no longer have direct
responsibility for these issues—or will not have from the
first of April—I would much prefer that it should be the
secretary of state for DBERR in his negotiations and discussions
who takes these issues forward.
Q48 Linda Gilroy: On the EU single
market some estimates have suggested that there is as much as
three billion pounds per year in administrative and legal charges.[30]
What is the MoD view of the creation of a single market to try
to overcome the waste in some of that? Is the logic of any changes
in that direction a reduction in the licensing for armed transfers
between European States? What are the implications for the UK
strategic export control system?
Des Browne: I had not heard those
figures before; it may well be that Tony might want to comment
on them. It seems to me to be grossly exaggerated but I suspect
the source is a particular view of Europe.
Q49 Linda Gilroy: It is the Chairman
of the European Parliament Sub-Committee on Security and Defence
Estimates.
Des Browne: I had not heard those
figures before. I would need to go and consider them but they
do seem to be quite extraordinarily large. There is work going
on in this intra-community transfer directive which is the legislative
route for the work that is being done to change the way in which
intra-community transfers of defence related items takes place.
There is a document published and we are considering our position
in relation to this document that has come out and there will
be further discussions with the council working group but by and
large our view is that this area of work addresses an objective
that we have which is that our licensing practices in our view
were ahead of most other Member States and we are trying to get
them to bring their licensing practices to where we believe ours
are. That manifestly would be in our interests.
Q50 Linda Gilroy: So you think it
is possible to get a win-win situation.
Des Browne: Obviously we have
to be very careful here. As I recollect—although I do not
remember the detail—we did not agree with the early proposals.
We argued for a set of proposals which were much more akin to
the scheme that we have in this country. Those proposals have
broadly been accepted, which we are pleased about. They are reflected
in the current document which is out for consideration by other
countries, including some who supported the earlier proposals.
So this is a dynamic process. Insofar as the actual documentation,
it shows that we have been persuasive in our arguments; we have
won a lot of the arguments and we are pleased about that. Broadly
we welcome the direction of this but we are alert to the possibility
that it could slip back at any time and we will make sure that
we try to prevent that from happening.
Q51 Chairman: Thank you. It is four
o'clock and we did aim to finish at four o'clock. May I thank
you and your officials for your written evidence and also for
coming along this afternoon; it has been very informative and
very helpful and we look forward to seeing you again. If you have
any other suggestions or questions we can put to the Secretary
of State for DBERR please put them in an envelope in my pigeon
hole; that would be very much appreciated.
Des Browne: Thank you very much.
I thought this was a once in a generation appearance.
Chairman: We hope not. Thank you very
much again.
28 Ev 45-47 Back
29
Small and Medium Size Enterprises Back
30
Note by Member: Recte euros. Back
| 
