House of COMMONS









Tuesday 14 July 2009


Evidence heard in Public Questions 172 - 273





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Oral Evidence

Taken before the Business & Enterprise Committee

on Tuesday 14 July 2009

Members present

Peter Luff, in the Chair

Mr Adrian Bailey

Mr Michael Clapham

Miss Julie Kirkbride

Mr Mark Oaten

Lembit Öpik

Mr Anthony Wright


Witnesses: Lord Davies of Abersoch CBE, a Member of the House of Lords, Minister for Trade, Investment and Business, Sir Andrew Cahn, Chief Executive, UKTI, Mr Patrick Crawford, Chief Executive, ECGD and Ms Claire Durkin, Director, Europe and International Trade Directorate, Department for Business, Innovation & Skills; and Mr Gareth Thomas MP, Minister of State for International Development, Department for International Development, gave evidence.

Q172 Chairman: Welcome to this second evidence session for our inquiry into exporting out of recession. We are very grateful to have you, Lord Davies, before us for the first time. I think we have Lords minister left in the team before we have got the full set, but I am very grateful to you. I am also very grateful to you, Gareth, for coming. When Gareth Thomas heard about this evidence session he asked if he could come, which is a very healthy sign which we are very grateful for, thank you, and we all appreciate that because there are some issues about the overlap we are very anxious to explore. Having said that welcome, could I just ask the team to introduce themselves.

Ms Durkin: Claire Durkin. I am Head of both BIS and DFID trading development policy.

Sir Andrew Cahn: I am Andrew Cahn. I am Chief Executive of UK Trade and Investment.

Mr Crawford: I am Patrick Crawford, Chief Executive of the Export Credit Guarantee Department.

Q173 Chairman: Thank you. My first question has to go to Gareth Thomas but, Lord Davies, please chip in as well as you want to. At a previous reshuffle-not the one we have just had but the one before - much was made of the fact that trade policy and trade issues would now be the shared responsibility with DfID; and until this last reshuffle Gareth Thomas was a minister in both departments. Now you are back again "just" being a minister in DfID and no longer shared. Does this suggest the Government has had a rethink about the relationship between trade policy and international development questions?

Mr Thomas: I do not think it does. As Peter Mandelson explained to the Committee last week, I think it reflects some of the broader issues about the nature of the reshuffle. The Trade Policy Unit is still very much a joint department across the two government departments. Claire Durkin in that sense straddles both departments. Before the Trade Policy Unit was created there were a number of ministers who had responsibility for trade policy work. I think I have had responsibility for trade policy in one shape or form for the six years I have been a minister. I do not see a fundamental change. Mervyn and I have already met; we are clear where each of us and where each department will lead in terms of trade and trade policy questions; but I think we will take a broadly pragmatic approach. Both of us have a longstanding interest in development. Both of us have worked with UK business so are conscious of the different interests in terms of trade policy there. I do not think it represents a fundamental change of direction.

Q174 Chairman: Speaking personally, I still have reservations about having large numbers of ministers in the Lords. This Committee has some sympathy for the idea the trade promotion minister in particular should be in the Lords for reasons we will probably explore later. One of the advantages for me of the old arrangement was that when we had Question Time for the department before the House Gareth Thomas could come and answer for trade questions on the floor of the House with an authority. We have lost a lead trade minister now; he is just in the Lords now. Who is going to answer the trade policy questions on the floor of the House of Commons?

Mr Thomas: With respect, there have been a number of departments at one stage or another on which trade questions have come up. Treasury questions have seen trade issues raised; business questions have seen trade questions raised; DfID questions have seen trade questions raised; and PMQs too. Essentially ministers from each of those departments will have to answer trade questions at different points in time. That was true of the old regime, just as it was true of the regime before that.

Q175 Chairman: Up to a point. Lord Davies, you have the over-arching responsibility here: we do not have a quid pro quo in the Commons so that we can interrogate these very important questions.

Lord Davies of Abersoch: I think some of the trade issues naturally fall into the business area, so they will be for me; and others, to do with developing markets, fall into Gareth's. It will require us to work together as a team. I think having two ministers is an advantage, not a disadvantage. I think we have a common goal, which is getting Doha Agreement and getting open markets.

Q176 Chairman: We will talk about those as issues later on.

Mr Thomas: Chairman, if I could just add. I think at the very first development questions I had to appear at as a minister I was asked a fairly complex question about the difference between the amber box, the green box and the blue box by the then chair of the International Development select committee. I raise it in a sense to demonstrate the point that both of us have just made, that questions on trade policy come up at a series of Question Times.

Q177 Chairman: Who will answer on trade question at Business, Innovation and Skills Question Time on trade matters?

Lord Davies of Abersoch: In the House of Lords I will, and in the House of Commons Gareth.

Q178 Chairman: He cannot; he is not a minister in the right department.

Lord Davies of Abersoch: I am sorry, on trade policy I thought you said.

Q179 Chairman: On trade policy. Questions about UKTI and so on, that we ask at business innovation skills questions, who will answer in the Commons?

Lord Davies of Abersoch: Ian Lucas has been covering a number of the business issues in the House of Commons. Pat McFadden as the equivalent of Peter Mandelson is covering all of the department's issues in the House of Commons.

Q180 Chairman: He is a busy man. We are used to having a Trade Minister in the Commons. Gareth Thomas was that man but we seem to have lost something in this new arrangement?

Lord Davies of Abersoch: I think we have to be careful here. I think in trade generally it is not just trade policy and a wider issue of trade promotion; I think it is important as Trade Minister that I am involved in trade policy as well as trade promotion.

Q181 Chairman: Your predecessor took a different view, of course!

Lord Davies of Abersoch: I know. I think it is important also that we realise how complex the issues are as regards developing markets; that is why a partnership with Gareth is very important.

Mr Thomas: I am touched by the sense of loss you feel of me at questions!

Q182 Chairman: It is genuine!

Mr Thomas: In a sense the area of trade policy has gained two ministers with a longstanding interest in trade policy questions. It is certainly true that Digby did some of the work in terms of having conversations with a number of key ministers where he was pushing the trade promotion agenda as well. I am sure if needs be from time to time, if I am in a particular country where there are UK interests to argue then I will happily do that at that time if that is what is necessary. UK ministers in general when they are abroad often raise a series of issues beyond necessarily just their departmental brief.

Q183 Chairman: How are you going to ensure effective communication across three departments? Claire Durkin may be partly the answer to that question. I have heard criticism made of UKTI, for example, not criticism of the organisation but of the reporting structures it has, that it has two masters; now trade policy has three masters - without the commonality of the minister there used to be - Foreign Office, BIS and DfID; and also a whole host of other government departments too are often touched by trade policy. Are we going to get proper joined-up government communication?

Mr Thomas: On trade policy there continues to be a Cabinet committee that when necessary can meet to resolve trade policy questions. I have no doubt that, as hopefully the Doha Round gathers further momentum, there will be a need for that trade policy and that trade committee to meet. We have a joint Trade Policy Unit; it is partly Claire's responsibility to ensure that coordination at official level across government. In the end, as you will have seen from the statement on the G8 yesterday, on the biggest trade policy issue of all, the Doha Round, the Prime Minister takes a very close personal interest; and he will, through the Number 10 machinery, help to continue to ensure joined-up government operations on this.

Lord Davies of Abersoch: I think another example of coordinated effort really is in the last few days we have got leading corporations involved in Africa coming together, together with the Foreign Office, with Gareth, with myself, looking at trade with Africa; and I think huge advantage in having all of the departments involved and all ministers involved, and a great attendance from the corporate sector, and we have got full attendance from the ministerial groups; so I think we have to work as a team.

Q184 Chairman: Can I ask you about the question of the split loyalty of UKTI reporting to two departments. Does that pose any challenges or do you think it is inevitable?

Lord Davies of Abersoch: Obviously a lot of people have asked me-I am six months into government-as to whether it is a plus or a minus. I think that if you are the trade minister you work very closely with the ambassadors; you work very closely with the Foreign Secretary, and with Peter Ricketts; so I think it is a huge advantage because, at the end of the day, UKTI has its own organisation but we also have the ambassadors. We need to work as a team and I think it is a huge advantage reporting to both.

Sir Andrew Cahn: If you go back to 1999, Sir Richard Wilson did his report and recommended this dual structure. I think at the time some people thought it was a bit of a fudge but actually in practice it has worked extremely well. What it gives us is we are plugged into the Foreign Office network and it focuses the Foreign Office's mind on commercial componency, on trade promotion in a way that perhaps it was not focussed before. I think it has brought the Foreign Office very much into the field and made them committed to it. Yet we also have for the Trade Department a full commitment, and we have the home perspective. Actually the coordination would say, "Having a single minister, currently Lord Davies who straddles the two departments, means we get good coordination". I have looked at lots of examples around the world and lots of countries do it in different ways; I think ours stands up to scrutiny and compares with the best.

Q185 Chairman: We should thank you publicly for your stewardship of the Department as Acting Permanent Secretary for a while as well; for how many months?

Sir Andrew Cahn: Two-very short!

Q186 Miss Kirkbride: You said you were going to be responsible for trade policy as well as trade promotion. Bearing in mind that that is an EU competence and that we have an EU Commissioner in charge of trade policy, I was wondering what influence you would bring to bear on that issue?

Lord Davies of Abersoch: One of the changes I think is happening in governments around the world, and is certainly happening here, is that we do need on matters of trade and business generally people with expertise who have had international experience of trade, as I have, to be inserted and injected into government. I think that experience of living in Asia and working with governments across the world will be a strength; and it enables me and Gareth to work closely together and obviously liaise with the EU, and obviously also start pushing even more aggressively the argument for open market and Doha.

Mr Thomas: Perhaps Miss Kirkbride I could add, we have in terms of the EU drawn up a wish list in terms of priorities for trade policy negotiations in terms of free trade agreements with a number of allies in the EU, and are obviously seeking to influence the Commission, not only the Trade Commissioner whom both of us have had conversations with, but also the presidency and other Member States. We do not simply sit back and in a sense allow the EU to do trade to us; as Mervyn as alluded to, we seek to actively go out and persuade the EU to take the line that we take; we seek to explain British business concerns; we seek to explain the development concerns that we have about particular trade policy questions, and encourage the Commission as far as we can do to pursue the UK interest.

Miss Kirkbride: How much of your time do you think you will be giving to trade promotion, because obviously your predecessor gave it a great amount of time?

Chairman: Not too much on that, please.

Q187 Miss Kirkbride: In your written submission the Committee notes that one of the new support measures for business is a series of ministerial meetings to identify policies that might affect UK trade competition. I wonder if you could tell us any ideas and views you have had arising from those meetings that might boost conditions?

Lord Davies of Abersoch: I think inevitably my role is making sure that I have got the pulse of UK corporates, SMEs and large corporations; so I have got to travel across the UK, which I have been doing; and working with the regional ministers, working with the department and making sure that I truly understand what is going on, in the SME sector particularly. An example of that is we have had probably about 300 small businesses into 10 Downing Street for a discussion in the last two weeks, entrepreneurs and exporters, understanding what their issues are and what their concerns are. Additionally, I have done 17 overseas visits to 14 countries since I took the job; so it is a blend of international travel and really helping exporters and attracting inward investors; and at the same time travelling across the UK.

Q188 Miss Kirkbride: From your meetings with SMEs and everything else, is there anything in particular that has arisen which you think we could be doing better? Bearing in mind the Government's policy to try and trade our way out of our present economic difficulties, what is it we are going to do better and more of in the future to make matters better than they are now?

Lord Davies of Abersoch: I think the whole series of initiatives we put in place - and I will not go through the list but they have been extensive - which are about giving real help now to consumers and businesses. I think there are still some challenges out there. The banks have been stabilised and have got lending targets. The challenges I think now are that we have got a global recession going on; we have got challenges in so many different markets; on the other hand, there are pockets of real growth in the world and we have got to make sure we are helping businesses get that export market. I think through a whole series of measures in UKTI, but also governmental initiatives, we have helped business. I think there are still some challenges out there, trade credit being of the big ones, seed corn capital for young business - and that is why the Science Innovation Fund, which was launched last week, is a good move - but basically we have still got some challenges out there. I think what we are doing is putting a series of government initiatives but also working very closely with the RDAs. I had dinner with the RDAs last week, all of them in Derby, and then Andrew spent the day with them. I think it is all about getting closer to the businesses and making sure that the banks are helping; and making sure that our initiatives are working.

Q189 Miss Kirkbride: There is one issue I would like to take up with you which a constituent drew to my attention last night. It is quite complicated so I will not go into it now, but he has an SME and he is having real trouble getting his goods shipped. The particular line he was upset with was the Maersk line but he said it was a wider issue of SMEs not getting access to containerised shipping at the times they want, whereas the big boys of course with the bulk contracts had got this all sorted out; but for him the lack of flexibility and some specific issues with regard to the way we operate shipping policy, versus the way other people do, was causing his business real difficulties in that he could not ship his goods on time. Have you had this raised with you at all?

Lord Davies of Abersoch: I have not but the best thing is for them to write to me and I will take that up.

Q190 Miss Kirkbride: I certainly will

Lord Davies of Abersoch: I think the most common issues for SMEs-and, as I have said, I have met hundreds of them in the last few weeks-is around trade credit, short-term insurance and I think it is also about confidence. We need exporters and small businesses to have the confidence to reach out to international markets. I think that is very much part of the promotion we are doing in UKTI. I will take that up if they write in.

Q191 Miss Kirkbride: I am sure those issues are true, but if it gets down to a simple level of not being about to book your space on the ship -----

Lord Davies of Abersoch: Claire might have a response, but with that particular one if they write to me I will take it up.

Q192 Miss Kirkbride: I just wondered whether Claire or Sir Andrew had come across this, and you are aware of other people being concerned about this access?

Ms Durkin: I am very interested in this, if I may say so, Chairman. We are preparing for the pre-Budget Report a study on doing business with the borders, where the spirit is that we have an action plan to make sure it is a lot easier for us practically to do real business at our borders so we are as competitive as anyone else in the world. We have been out to consultation and the reason I am very interested is that we have not had this raised, and it is obviously a very real issue. If you could send it in I promise we will explore it at the different ports to compare performance and see if there is something concrete we can actually do.

Miss Kirkbride: I certainly will. You will get it later this afternoon!

Q193 Chairman: Could I just push you on one issue here to do with trade promotion. In UKTI's submission dated 28 April paragraph 6.20 talks of the meetings you are going to have, Lord Davies, or are having with ministerial colleagues across government "to raise the specific concerns of international and UK-based businesses where current or proposed regulation and/or legislation will have a potentially detrimental impact on UK competitiveness as a place to invest in ...". I entirely agree with that and welcome that initiative. "It is vital", the note says, "that ministers and policymakers ... understand the potential impact of proposed policy changes on businesses' ability to compete in global markets". The spirit of that I can only say is absolutely right. Can you give me an example if any specific outcomes of those meetings identified particular problems?

Lord Davies of Abersoch: I am a member of the National Economic Council, the NEC, which is meeting at least once a week really and it takes problems, and a good one is visas which has been very topical recently. A lot of businesses have raised that as an issue, so I have taken that up and had a meeting with Phil Woolas and just pushed it with the Home Office, so we are looking at that. I will not go into the whole list but there are a series of matters that are raised and either I would go and talk to the ministers involved, or I would go and raise it at the NEC. Issues to do with export help; issues to do with banks; there is a whole series of issues that get raised at the NEC and individually with ministers; visas has been the most recent one.

Q194 Chairman: We will want to return to the visa question a little bit later on, in one specific context.

Mr Thomas: Chairman, I wonder if I could take you back to the border trade policy issue and give you another example to back up what Mervyn said, and that is: increasingly the relationship between developed countries, in terms of increasing market access, is about trying to reduce non-tariff barriers; so trying to get agreement on the type of regulation, the standards that British business or European business has to adhere to, to be accepted in other markets. For example, in the US or in Japan, say, accountancy standards that UK accountants have to adhere to we would want accepted in the US; and that standards that lawyers have to adhere to we would also want to have accepted both in the US and Japan. Through the European Union's transatlantic economic dialogue with the US-a bit of jargon for which I apologise-we have made progress in terms of accountancy standards; and through similar dialogues we have made progress on access to lawyers into Japanese markets. I would not want to overstate the level of that additional access we have secured, but it is that type of regulatory discussion with developed countries which we want to continue developing.

Q195 Chairman: I understand that, but the implication of your evidence was that it was barriers that were erected by the British Government accidentally to export activity, like aspects of visa regime?

Lord Davies of Abersoch: We have got to constantly be aware of any legislation we bring in that we are not putting more and more obstacles in the way of business. That is why I work very closely with the Better Regulation Executive; and that is why-particularly with the burden for SMEs-we have to make sure it is not too heavy. On the other hand, we have got to introduce certain laws, so it is making sure that the balance is right. I think at the moment there is a good dialogue on regulation with the Better Regulation Executive.

Q196 Mr Bailey: This issue of trade promotion, I am a fairly simple soul and we have had discussion on trade policy and trade promotion. In my own innocent way I would have assumed that trade policy was trade promotion, banging the drum for Britain. Could you just explain how you would distinguish between the two and how you see your role within that distinction?

Lord Davies of Abersoch: I think at the world level, the architecture for the world, the discussions on climate change, financial architecture and trade, we need the world to come together and have an agreement on open markets and the Doha Agreement. As far as I am concerned-I am also a simple person - I think that is very, very important for continuing to take people out of poverty and for global growth. We are in a competitive marketplace so separately the UK needs to compete for inward investment, and we need to help exporters. So UKTI's role, and Andrew may want to add something, is to attract inward investment; and clearly we are doing well on that-an 11% increase last year and still absolutely the leader in Europe; so FDI is continuing to grow here; but at the same time we have had huge recession going on and we have to make sure we are helping businesses of all shape and sizes across all the sectors. We have got a UKTI system of helping over 21,000 companies, and we have got that approach which is helping businesses but, at the same time, we need to be selling our story internationally, so we have got international offices and we are working very closely with the RDAs. I think trade promotion is very different from trade policy.

Sir Andrew Cahn: I think the simplest way of distinguishing the two is that trade policy is creating the conditions within which trade happens. Countries negotiate, the European Union negotiates and Britain, of course, is the most open trading nation I know of and we press always for opening borders and opening trade. UK trade and investment seeks to take advantage of those open trade borders to help British companies to export as effectively, and indeed inwards investors to export, globalised companies to export from these shores. We very much are a service delivery organisation helping British companies and international companies based here; whereas Claire and her team, working to Lord Davies and Mr Thomas, are a policy department trying to create the conditions in which we as a service department can take advantage.

Q197 Mr Bailey: I think that is quite a helpful clarification. Lord Jones previously saw his role very much, as he said himself, banging the drum for Britain, a trade promotion element of the job description; and also pointed out that it was really necessary to have somebody carrying out that role relatively free from all the encumbrances of Westminster duties. Do you see your role differently? Do you feel that if you do that that hinders your ability to represent Britain more effectively abroad?

Lord Davies of Abersoch: No, not really. I think Lord Digby had his own view on this. I am six months in and, as I said earlier, I have travelled extensively in the UK and internationally and I already have, and so does the Department, huge contacts around the world. We have to continue banging the drum for Britain. I agree with Digby, I think one of the things I have learnt in the six months is that Britain has a hugely diverse economy, wonderful entrepreneurial activity going on across a series of sectors; we are the sixth largest manufacturing nation in the world; we are still a very open market and attractive; and I think it is very important that we sell that story internationally because the media will not; so I think it is very important that UKTI and other government agencies do that. I see that very much as part of my role. On the other hand, we are in a very changing world situation and I think we have to accept that organisations like ECGD, which I am responsible for, have to adapt, and so does UKTI. The reality is that UKTI's focus over the last few years has changed because the markets have changed. My experience of UKTI in six months is that it does a great job. It produces £16 for every £1 invested; it is very focussed and adding a great amount of value to the economy; but-and there is a "but"-we have to make sure we are banging the drum for the UK and that is exactly what we are doing. I think the Business Ambassadors Network is really beginning to kick in; they have done a huge range of visits internationally. There is still a question as to whether we could do more on attracting foreign direct investment into the UK. We have done very well; we are number one in Europe, second only to the US worldwide; but I still believe that maybe we could do more. I am having a look at ways in which we might do that.

Q198 Mr Bailey: I want to deal with Business Ambassadors in a moment, but if I could just pursue this line of inquiry a little more. Obviously as a member of the Upper Chamber you do not have, if you like, the day-to-day accountability to electors which is incredibly time-consuming.

Lord Davies of Abersoch: I feel that I do!

Q199 Mr Bailey: Maybe! Do you feel that the role of trade promotion is more easily done by a member of the Upper Chamber because there are fewer Westminster duties? You may not agree with that last statement!

Lord Davies of Abersoch: I will get Gareth to add to that. My experience is that we do not just need one ex-business person doing this role; we need business ambassadors. We also need the CBI; we need the Institute of Directors; we need the Chambers of Commerce; the RDAs. Everybody has a part to play in promoting Britain and British excellence. We have got a knowledge-based economy and we have got fantastic things going on. I was proud to talk to the SMEs at the Queen's Award Ceremony last night with 190 companies-it made you proud to be British. We have got to make sure that right across industry, right across all the chambers, right across every piece of the corporate sector, we are selling the UK. I think as the Trade Minister I see trade promotion as a key aspect of my job and that is why I am spending so much time travelling.

Q200 Mr Bailey: I believe, like this Committee, you made a recent trip to the UAE?

Lord Davies of Abersoch: Yes.

Q201 Mr Bailey: Could you give us some sort of feedback on how you felt you were successful in promoting trade there? Did you have any problems by virtue of the fact that you had an anchor in Westminster?

Lord Davies of Abersoch: I think exports to the Gulf increased 25% last year. There is no doubt with the Gulf generally - I have spent many years going to the Middle East-there are huge opportunities for the UK. I was in Abu Dhabi last week-I think we agreed a series of measures on how we can improve cross-border trade with Abu Dhabi. We are implementing those measures-Edward Oakden, the Ambassador and myself-in the coming weeks; but it is right across the Middle East. Trade has grown significantly; they feature amongst our high growth, high potential markets in the UKTI list; and I think we have got to make sure we take advantage of the outstanding relationships that we have right across the region. Yes, good progress on my visit; Lord Mandelson has also been visiting the region; but we need to make sure we continue the focus on the Middle East and UAE in particular. I saw the Saudis two weeks ago so, yes.

Q202 Mr Wright: On the UAE you describe it as one of the exciting markets that there is, but there is a lack of awareness out there. How are you going to respond to the lack of awareness that there is with businesses about the opportunities in the UAE?

Lord Davies of Abersoch: You say there is "a lack of awareness", I think it is growing. I think what we need to do is-Abu Dhabi is a good example - we are going to have an Abu Dhabi week in October; we are going to bring the seniors from business over; we are going to work with the CBI et cetera to make sure that small businesses understand the potential. We are going to do that in a series of road shows across the Middle East. I think we do have to raise awareness. What you find is that small businesses are gradually realising the opportunities in the Middle East. What we are doing in UKTI is showcasing success stories. I am a big believer that you have to showcase companies, big and small, that have done well in the region.

Sir Andrew Cahn: Perhaps I may simply add that we have added significant numbers of staff in UAE, in Qatar and in Saudi. Two years ago we decided those were high priority markets and we shifted staff there, so there is increased resource gone in. Also we have got a regional hub in Dubai. For three years now we have had a very successful regional event for the whole of the Gulf region based in Dubai, and we have particularly brought SMEs there. While I agree with you that there is still more opportunity there; it is still a growth region; it is growing and there are a lot of opportunities; the trick is to introduce new British companies to the region and persuade them to stay the course, because in the Gulf short-termism does not work. You have to go there and you have to make long-term partnerships and then trade flows. I think our greatest challenge is, first of all, to persuade new exporters that it is worth the trouble, and then to help them and guide them through those early years when the returns are not as good as they might be in the later years when the returns can be excellent.

Lord Davies of Abersoch: I think there are about a thousand British companies that are doing business very successfully in the Gulf. I think my other focus, and the focus of UKTI, and the Business Ambassadors, has got to be continuing the relationship so we attract foreign direct investment into the UK-a big opportunity for us.

Q203 Mr Bailey: Before I go on to Business Ambassadors, on the trip that the select committee made it was put to us, and fairly strongly I think, that there was perhaps a feeling that in the past the British government had not really cultivated its relations with the Middle East as it might have done; and that the one thing that you could do which was of huge benefit in making both the UAE and Saudi Arabia feel important and engaged with the country was for a prime ministerial visit, or at least the most senior minister. No disrespect to yourself, whom I reckon has unparalleled experience at this, how do you see your role in encouraging the Prime Minister and Lord Mandelson to carry out this role? What is your assessment of the added value it would give to the work that you are doing?

Lord Davies of Abersoch: I think it is a great point. There is no doubt that the prime ministerial visits are very important, and obviously the Prime Minister has visited the region in the last few months and Lord Mandelson has visited. We need a continuous stream of ministerial visits and the more senior the better. I am working with Number 10 on a series of things to do with the Middle East; and I am working very closely obviously with Lord Mandelson. Funnily enough, I had a discussion in it this morning as to how we are going to organise this next visit. As part of the ministerial coordination of visits, which I am very involved in, the Middle East does need continuity, it does need senior calling, and we also need to make sure, which we are doing, that when the leaders are over in the UK, as they are very often, that we are seeing them, which we are doing.

Mr Thomas: Mr Bailey, one of the other things we can do in terms of encouraging British business to have confidence to invest in the Middle East is through the negotiation of investment, promotion and protection agreements, which help to give confidence to British investors that their capital investment in other countries will have a higher level of protection than if the agreement is not there. The Middle East is one of the key areas which the Trade Policy Unit is targeting for agreement.

Q204 Chairman: Before we move on, could I just come in on that point briefly. This is one of the old chestnuts - the Committee travels around different countries and we talk to ambassadors and high commissioners and representatives of the British business community and they say, "A British Prime Minister", not just this one but the generic British Prime Minister, "cannot make as many visits to markets as the French President or the German Chancellor, because they are tied up in the day-to-day business of the Commons; and we have a huge competitive disadvantage", they say, "because the effective head of state", the head of government in our case, "cannot commit the time to trade promotion that other countries, our competitors can". Do you feel that is the scale of disadvantage that the British business community, and the Foreign Office, seems to believe it is?

Lord Davies of Abersoch: I am not going to recommend a constitutional reform! The Prime Minister is visiting extensively.

Q205 Chairman: He is very constrained. He went to India for two days and one of them was a Sunday, which was limited.

Lord Davies of Abersoch: I think he is travelling extensively. I think everybody needs to do it. I think the Duke of York's role is understated. I think he does fantastic things for business. I know he has got his critics in the media, but if you saw the letters that I get from businesses on the work that he does, he does a great job for British business. I think it is not just the Prime Minister; I think it is a collection of individuals, including the Foreign Secretary; but I would also say with the ambassadors themselves their role has changed over the last few years, and they have become hugely important for us as ambassadors, not just on foreign policy but on business.

Q206 Chairman: What we have also heard is that it is very important that people who are seen to have the ear of the Prime Minister travel. In the Gulf we had a lot of praise for you, Lord Davies, personally because you have a high reputation in the Gulf, you are known historically in that region and they felt you were the next best thing - even better probably! In India Lord Mandelson enjoys a similar status, to be fair. He is perceived to be a very high profile character who is known to like India, take an interest in India and he gets a high profile in the India media here in the UK. We do have a disadvantage against Sarkozy and French presidents which we can counter in different ways.

Lord Davies of Abersoch: Yes, we need leaders in every industry, as we said earlier on, to help us.

Q207 Chairman: Competitors do that too.

Lord Davies of Abersoch: I think it is not just the Duke of York, the Prime Minister, the Foreign Secretary or other ministers; you have seen Ed Miliband doing a series of visits on renewables and pushing the whole agenda, very much business related.

Q208 Chairman: The CII, the Confederation of Indian Industry, were here recently and they made their usual complaint that senior leaders of British business were not prepared to make the time to meet them; they met at a junior level of the organisation not a senior level, and there is a lack of engagement in the British business sector in doing this high level stuff.

Lord Davies of Abersoch: We received them; I saw the FICC; I am off to India in September; I was there three weeks ago. There is no doubt that with a market of the potential that India has for us and the historical links there is so much more that we can do with India.

Q209 Chairman: I want to talk about the principle, the level of engagement. You are saying British business must do its bit?

Lord Davies of Abersoch: We need British business to be more engaged on cross-border trade with India. I am pushing it very hard with the CBI. I spoke to the CBI international group about it. I am speaking to business leaders and we need more engagement.

Q210 Mr Oaten: The point about the Duke of York and the Royal Family is very well made - incredible assets which many other of our competitors do not have. I wondered to what extent you work with them, you brief them, and to what extent you actually demand of the Royal Family get involved? How close is the coordination you have with them on this? Are there a set of individuals out there that you would like to get involved in helping to go and sell the UK; and do you practically go out and seek them and try and get them on board for this?

Lord Davies of Abersoch: Basically, on India I met with Patricia Hewitt, the new chairperson of the India-Britain Business Council, ten days ago and the whole conversation was about how do we raise the level of engagement? So we have got a plan and we are working on that. I do work and meet regularly with the Duke of York and we have a travel schedule. I had him meet ten high performers out of UKTI about ten days ago; it was a really good meeting where he wanted to know what else he could be doing to help business; he has subsequently written to us and asked for ideas from each of the ten. They also had great feedback from him on what else we should be doing. It is constant dialogue and I think that is very important, because if there was not that would be bad - but there is.

Sir Andrew Cahn: We agree before the year starts a budget with the Duke's household. We discuss with him in great detail what trips he should make; we agree them. I am a member of the Royal Visits Committee which agrees the programme of visits overseas for the Duke of York; and we are now in discussions with the Duke of York's office about how to evaluate what he does.

Q211 Mr Oaten: This is part-funded then?

Sir Andrew Cahn: We fund it. We do not fund his air travel; we fund the other parts of the visit. The Duke of York also does some visits on behalf of the Foreign Office which we do not fund; those are non-trade related. His trade promotion visits we fund; we task; we evaluate. We work very closely with the Duke's office.

Chairman: I would also pay my own tribute to the Duke's work as well.

Q212 Mr Bailey: You have several times mentioned in a complimentary vein the British Ambassador's Network launched in October last year. Could you briefly summarise just the initiatives it has taken so far, where it has been to and what it has done?

Lord Davies of Abersoch: Inevitably these are busy individuals who have their own careers and jobs et cetera - 18 of them. I think generally we have got a couple of people who work on helping them in UKTI. We were having a discussion about it with the executive team of UKTI yesterday. We are talking to business and academic individuals who have got a wide range of experience, and what we try and get them to do, and there are great examples, is give talks and promote business. I think that individuals like Paul Skinner, Malcolm Grant and Terence Conran have done a great job in selling the story. As always, as with all things, we are learning as we go along. It has been going some time; they have done over 40 engagements in 15 countries, but I need more from them: and if that is reported and that becomes the headline out of this that is great; because we need them to do more to help us; because the more the merrier really. It is working well and we are learning many lessons as we go along.

Q213 Mr Bailey: I am interested in looking at the individuals involved. Obviously business and education are highly represented there. When we were in the UAE we were told there were huge opportunities in education, which is obviously served through this network, but also health. I would not pretend to know the individual competences of all the members there, but it would seem to me on looking at them that we are light in terms of the health service and, if you like, the health sector in general. Given the potential for developing health services throughout the world, do you not feel that is an issue that might be addressed?

Lord Davies of Abersoch: I absolutely agree. I think with health, the NHS, we have got outstanding excellence and innovation that Paul Drayson and Lord Darzi were talking about at a launch yesterday. I think there is more that we can do to work with the NHS. I was one of the keynote speakers with Lord Darzi at the NHS Forum that was held recently, which had about 5,000 attendees; so I think we need to export that excellence and I think there is more that we can do. I think the same is true on education. I think we are doing a good job. I met with David Greenaway, the new Vice-Chancellor of Nottingham University, about ten days ago to look at creative ways that we can do more on education. The reality is, however, it is already a big export for us.

Q214 Chairman: I want to return to that in more detail later on.

Lord Davies of Abersoch: There is more that we can do but there are two sectors and they are important; we are giving them priority in UKTI; and I think we have got marketing strategies for various aspects; so we have a life sciences, marketing strategy; and I think we really do need to sell our NHS capability more.

Q215 Mr Bailey: I would just finish by emphasising that point, because I do feel that in education the Ambassadors Network does reflect the importance of this and the progress that we are making on it. I am not sure that it reflects the potential that there is within the Health Service and the providers' industry that we have here.

Lord Davies of Abersoch: I agree; I think we should look at it. I chair a university in North Wales, Bangor. It is not just the foreign students coming into the universities; we have excellence in the sector and we need to make sure that we are marketing it.

Chairman: I do emphasise Adrian's point. There is no-one in the Business Ambassadors Network who does life sciences, which is surprising given the importance of life sciences to the UK economy and the potential as well.

Q216 Mr Wright: On UKTI, when we had Lord Jones before us he made a very good case for more resources that were needed for UKTI. The 2009 Budget announced that there was £10 million of the £750 million strategic Investment Fund particularly earmarked for UKTI to spend on promoting UK sector expertise both in the UK and abroad. How much is this in comparison to what is currently spent?

Lord Davies of Abersoch: It is always a bonus on discovering you are getting more money. It does not happen very often, I am told, so I took that as a welcome sign that everybody realised the strategic importance of UKTI. Let me reassure you that the £10 million will be very, very carefully spent. Andrew can give you a bit more detail. Clearly for some high value events we have allocated already some money towards those high value events and Andrew can talk about those in more detail. I think that is one aspect. I think what we do not want to do is spend the money on extra staff. I think it is much more important that we go for high value events and initiatives.

Sir Andrew Cahn: We were given £10 million and that certainly was extremely welcome, and we took it as a sign of confidence in UKTI, but it is only for two years: it is £5 million this financial year and £5 million for next financial year. The first thing we wanted to ensure was that we did not set up a scheme which would fall off a cliff in two years' time. We tried to find activities which will have a real impact on British exporters and inward investors during the recession and as we come out of it, but which we can stop in two years' time. That is why we are promoting particular events. One example is we believe one of the sectors where Britain is particularly strong - in fact globally leading - is the security sector: it is growing; it is growing rapidly; there is still a huge demand; and we thought we could do better for the sector. We are going to try and create a sort of Farnborough event - Farnborough is for the aerospace and we want the equivalent for the security sector; and we are going to try and create that in two years so that by the third year it is self-funding and self-sustaining. That is a good example of what we are trying to do. We are going to try and set up a Global Britons Network; that is tapping in to the thousands of people around the world - business people and people doing other things-who are Britons living overseas but are friendly and want to help Britain; and also to those who are foreigners who are alumni of our universities or our schools and who are friendly to us. Again, we think we should be able to set that network up and make it largely self-sustaining in two years. Lastly, I am going to be doing some marketing to try and encourage British companies who are not exporting to export-those SMEs in particular who are finding the recession really challenging and who could benefit from markets overseas which are still growing. We are having a marketing campaign to try and help them and target them.

Q217 Mr Wright: I am pleased with that last question because just recently I had the pleasure to open an extension of a local business which is exporting across the world at which the eastern region and UKTI representatives were there. One of the things that came out of that was the fact that your representatives were saying those businesses did not understand UKTI and did not know that they existed. From that particular point of view, I am hosting a business breakfast later this year with the assistance of UKTI about exporting our way out of recession so local businesses, SMEs, understand it. That is a problem in itself. Whilst I understand that this money is going out to promote so people can visit trade shows et cetera and so forth as they have done in the past, is not the job as well of UKTI to actually get out there into those localities to explain to the small businesses, who are not aware of the opportunities abroad, to actually go forward? I understand, Lord Davies, you cannot visit every corner of the UK. Perhaps sometimes when you are talking about a region like the eastern region, it is a massive region in terms of area but there are niche markets in certain places which really have not been impacted by UKTI?

Lord Davies of Abersoch: I do not think we should be defensive about this at all; it is a hugely difficult task to cover over four million SMEs, whether you are an RDA or UKTI. I think there is closer and closer partnership, which was evidenced at the dinner the other night in Derby, with UKTI and the RDAs. We had to spread the message through our regional offices and through the RDAs that small businesses can export and can do it without having to travel the world searching for markets. I think one of the challenges for small businesses is that we have to bring these markets, as far afield as places like Algeria and others I have been to, to the companies. We need to find better ways continuously of bringing opportunities to small companies, and that is exactly what we are doing. I think it is a good opportunity to mention Alan Sugar, whom I saw for the first time in a ministerial capacity yesterday. I think that is one thing that Sir Alan can do, which is to basically go round and do workshops with Business Link and with small businesses selling the virtues of exporting. I think that is exactly how we are going to use him.

Q218 Mr Wright: Do you then consider that the RDAs should be the vehicle to give more promotion? In terms of how the UKTI's ability can go there, whose responsibility would that be?

Lord Davies of Abersoch: UKTI has to bring the international markets to the corporate sector. At the end of the day we also have to work in partnership with the RDAs.

Q219 Mr Wright: Can you just explain to us what the Fiscal Compass Programme is and what it has accomplished since it was launched?

Lord Davies of Abersoch: It is basically an attempt to give corporates access to the spending programmes. Governments across the world are spending huge amounts in the fiscal stimulus. I think we have had over 200 enquiries from companies that want advice and access to some of the fiscal stimulus programmes around the world. Launched in March; early days; but so far so good. I think the target is to get about a thousand companies by March of next year so, so far, encouraging.

Q220 Mr Wright: Where would you consider the priority markets that we should be concentrating on?

Lord Davies of Abersoch: Inevitably places like China - where I am off to in about ten days, and we have done a huge amount on getting access and really understanding how the Chinese are spending money; the US; markets like Saudi. There are a few of them we have prioritised and are working with those companies.

Q221 Chairman: I get confused - I really do-about UKTI's country priorities. You just named the US which in the submission to the Committee was not on the list; China was, of course, together with 16 others; and now we have France, Spain and places added to the list as the Fiscal Compass Programme. I get really confused. There seem to be all kinds of different priorities which emerge from time to time, and actually when you pin it down I am not sure whether it shifts the whole amount of resource around the world anyhow, where you define the resource and those priorities.

Lord Davies of Abersoch: I think we categorise 17 high growth markets. The criteria for those was market size, potential for growth, political and economic importance and the strength of their scientific and research base. We match the profiles against our UK capabilities. We have those 17 markets; and then separately we also have a sector approach in UKTI, because you need industry experience; but one should never forget that the UK trades with the US in a huge way. When you look at foreign direct investment into the UK about 35% of all the projects are still coming from the US. The danger is that we put all out eggs into some high growth markets but forget the euro and the US. I think we have got a clear strategy to focus and develop business and trade with the high growth markets; but at the same time we need to make sure that we are not losing touch and contact with the US.

Q222 Chairman: It is an impossible task. You have got to keep everyone happy. That is the trouble. Everyone wants a different priority from you so they have got priority for us?

Lord Davies of Abersoch: No, I think we are very clear: we have got 17 high growth markets, but at the same time we have got to make sure we do not ignore the big markets that are giving us a huge amount of trade and foreign direct investment today.

Sir Andrew Cahn: We have staff in 98 markets around the world, and many of them are very small but they provide an essential service to British companies. We decided on the 17 high growth markets back in 2006 because, as Lord Davies said, we did a pretty solid piece of modelling and decided those were the key growth markets for the future; and we transferred staff from other markets round the world to there. They are priority in the sense that we put new resource in there. America remains, as Lord Davies says, absolutely key to us and it will continue to be the main source for foreign direct investment. It continues to be, after Europe, the main attractive market for our exporters. It is a huge priority but we are not shifting new resource into America. The key issue for us is how much resource do we put into Europe? We currently have, for historical reasons, a very large amount of resource in Europe. Many of our exporters want us to keep that resource there; but if we are to help our exporters explore new markets and get into the growth markets of the future we have got to look to those markets and not just to Europe. It is, of course, trading things off, but we do have a clear set of priorities as to where we shift our new resource to.

Q223 Chairman: We are going to go to France and Italy to see the operations there quite soon to assess whether we think that is making an appropriate contribution. You do have 2,400 staff at HQ and 1,300 overseas, is that right? Not at HQ but in the UK?

Sir Andrew Cahn: No, we have 2,400 staff altogether. We have 1,400 staff overseas, and we have about 700 staff in headquarters; we have about 400 in the regions. The staff in headquarters, quite a lot of them are frontline staff. As you know, we now are responsible for defence and security, and the large majority of the defence and security staff are based in London but travel a great deal and are overseas a lot. Indeed, quite a lot of my other headquarters staff do that.

Q224 Chairman: We are not going to ask you about defence and security because that seems to be going very well. So we are not going to ask you questions about that but we should touch wood indeed, Lord Davies! We were very grateful to the response to our letter about Saudi Arabia. We came back very, very impressed by the UKTI operation in Saudi Arabia. I had constituency experience of it, doing fantastic work for a constituency company, and yet we saw a hopelessly overworked group there and we were grateful for the letter you sent us. When we do go around the place, I am concerned quite often that I see UKTI staff having to meet Treasury requirements to recoup income and spending all their doing OMIS reports which are deskbound jobs which anyone could do; it does not have to be the added value that a government employee can bring to the post. They are losing opportunities to go out and network and really build value. Are you really getting the best out of overseas staff?

Lord Davies of Abersoch: It is interesting and we are chuckling because I asked the very same question yesterday with the execs. What has charging done; is it adding enough? The reality is that the response has been very robust from everybody within UKTI. It has helped make it more of a performance culture; it has helped people realise the cost of what they are producing. We had a very robust debate yesterday, and I think that the team believe that this is not the time to increase charges and put a burden on corporates; but we are producing, what, £3 million or £4 million of revenue and I know it is a small amount but it has had a profound impact on the culture and made people realise the value of their services. The team is very keen to maintain it.

Q225 Chairman: I think you are being told what they think you want to hear. I do not think you are being told the truth.

Lord Davies of Abersoch: No, it is the other way round.

Q226 Chairman: We have talked to UKTI staff on the ground and they complain time and time again about the deskbound nature of their jobs because of the OMIS report system and they wish they did not have to do it. They said it could be subcontracted to people elsewhere in the market who could do the job just as well, and they are not providing the added value for UK exporters they think they could if they were freed from these ridiculous shackles. They may tell you something different but they tell something else behind your back.

Lord Davies of Abersoch: Look, I think in any business, any walk of life, you have got to have accountability; you have got to have clear reporting. What I have found in six months in UKTI is that there are very clear performance guidelines, very clear reporting. Yes, we can always improve the paperwork around the reporting; but I think UKTI is producing great value-£16 for every £1 invested; I think the staff do a great job.

Q227 Chairman: Agreed.

Lord Davies of Abersoch: So I think the charging has improved the performance culture.

Q228 Chairman: I think this is something I want to challenge you on quite firmly; because I am quite clear your staff privately do not think that. The OMIS reports in particular are an extraordinary burden on them,

Sir Andrew Cahn: The OMIS reports are highly valued by our customers. They add great value to British exporting. I heard you say that it could be done by the private sector. In many posts overseas there is nobody else to do this work. What the OMIS report is built upon is exactly the networking and the knowledge of the local markets that our local staff have.

Q229 Chairman: We heard that OMIS reports were locking people at their desks and stopping them develop the local knowledge and networking so essential to inform them.

Sir Andrew Cahn: I would argue that is overstated. However, I was trying to offer you one crumb of comfort, which is that we do have one different model which we are using in China, where we use the China-Britain Business Council as a contractor; they do much of this work and the idea is indeed to leave our own staff free to do more government to government work, networking and so on. That is an interesting experiment; it has proved quite successful; and we will see how far we can move. I think in most markets it really is not possible to set up an organisation like the CBBC to do it; and there are not private sector contractors on the ground.

Lord Davies of Abersoch: Hopefully, every time you visit somewhere and you get that sort of feedback you will give it to me and I will have a look at it.

Chairman: Sometimes they tell us things they do not want attributed, of course, that is the trouble!

Q230 Mr Oaten: I do want to talk about the RDAs which you have mentioned quite a few times this morning as having a key role in the whole process. You also keep talking about banging the drum for the UK and the importance of selling the UK. Is there not, bluntly, a contradiction in those two statements? In that every time you use and have an RDA they are not banging the drum for the UK, they are banging the drum for the West Midlands, Scotland, Wales, wherever their own vested interest is? Are we not losing a great opportunity here in that this incredible UK brand that we should be out there fighting for is being diluted by the RDAs all doing their own separate thing?

Lord Davies of Abersoch: I think on international promotion that is UKTI's job. Trade promotion that is what we do. I think a while ago there was a danger that the RDAs might have duplicated what we had and started opening offices everywhere. I think the Arthur D. Little report was very clear that that was not happening; that they were coordinated. So I think our role in trade promotion is very clear. When I had just arrived into the job one of the first questions I had is: is the competition between the RDAs somehow devaluing the proposition for inward investors? I do not think it is. I think they have to be careful - a bit of competition between the regions I think is healthy, providing they overall come together and are coordinated, and I think that is happening more and more. I think inevitably there is a bit of competition but, as I said, I think that is healthy.

Q231 Mr Oaten: Do you really want that competition played out in public in a conference in the middle of Asia somewhere, because that is what has been happening?

Lord Davies of Abersoch: No. I will give you a good example of how we are addressing that. On China I wanted, together with the team, to make sure that we really brought everyone together and so I called a meeting of the CBI, the Institute of Directors, trade associations, the RDAs, got them all in a room and agreed a clear strategy for China and how we are going to tackle that market. I think in certain key markets we do need to bring the RDAs together; but it is not just the RDAs; it is the Chambers of Commerce; it is the CBI; because the danger is that everybody does something slightly different. In that regard I think one of my challenges, one of the Department's challenges, is to really bring together information about the depth and diversity of the British economy, so that every ambassador, every MP and every business person has got that level of data. We are putting that together as we speak. I think we are getting better on co-ordination and on the key markets we are bringing everyone together.

Q232 Mark Oaten: Would there come a point where you would intervene and say to two or three RDAs, "Listen, you are not welcome. We do not want three of you there. You have to decide that maybe this is a country where the West Midlands, for example, has the expertise and the lead and you should be there and it is not a place for one of the other RDAs"?

Lord Davies of Abersoch: On international activity I think they tend to work it out and have a good working relationship between each other. I do not think there is huge argy-bargy between them.

Q233 Mark Oaten: Are you concerned about the overseas offices issue or do you think that is being tackled?

Lord Davies of Abersoch: No, I think that is being tackled. If that expansion of international offices had carried on in a huge way, duplicating costs, I think that would have been a problem, yes. There is no evidence that that is happening and in fact, when you look at the co-ordination internationally, it is very good.

Q234 Mark Oaten: You mentioned that you have got 1,000 or so staff working in 98 countries, is it, that you are in?

Sir Andrew Cahn: We are in 98 countries, 1,300 staff.

Q235 Mark Oaten: Does that include in that figure those that are also there from the RDAs or is that on top?

Sir Andrew Cahn: No, it does not. The RDA offices, and these are very small offices; it is usually one person or two, and indeed with one person very often a locally engaged person who is doing other things, are, of course, focusing on inward investment. They are not focusing on trade promotion. We do the trade promotion; our staff do that. The overseas offices of the RDAs are there to attract inward investment to their particular region, but in fact the RDAs are looking at these offices now quite critically and I think we will find, very much as Lord Davies said, that it is not that they are expanding; indeed, they are even beginning to contract. The other thing I would say is that, following the Arthur D Little report, we have worked very closely with the RDAs to improve co-ordination because what Little said was that it is not that all the critics are wrong. It is not bad; there is not significant duplication, but they did propose a whole series of changes we could make to improve co-ordination and ensure that there was not duplication in the future. We have done that, we have had some pilot projects with the RDAs. They are completed. We are now doing that elsewhere. I am reasonably confident that we work very closely with the RDAs and we get efficient use of public money.

Lord Davies of Abersoch: And that includes the devolved administrations.

Q236 Mark Oaten: I was just about to ask. Is there a separate case to be made in Scotland?

Lord Davies of Abersoch: They do a bit of trade promotion. At the dinner the other night we talked about how do we make sure that we are all together as one and we had a great discussion. What we need to do more of with the RDAs, and I do bang the drum - I am going to sound like Digby now - on this issue, is that we really do need to showcase British success, whether it is life sciences, whether it is healthcare, whether it is pharmaceuticals, creative industries, you name it. We had a great discussion with the RDAs last week about how we bring these success stories together and sell them. I think that is quite a challenge.

Q237 Chairman: I will bring Mark in again in a second on education but before we do that can I just ask one other question on the RDAs? I have heard criticism in the past of regional export trade promotion visits organised by RDAs on a cross-sectoral basis. What I hear from the industry bodies is that the outward missions that work are the ones based on sectors, not regions, which are focused on a particular industry. I think you are making progress again in co-ordinating this but it does seem to me that that is a very strong message that I have heard across a wide range of industry sectors, "Please don't let the RDAs do regional export trade promotion visits". Do you agree with that analysis and, if you do, is the situation getting better?

Lord Davies of Abersoch: I do; I am a big believer in sectoral experience and speciality, and we have got that in UKTI. We have sector boards, advisory boards. I meet with them regularly now with the sector chairmen and in fact all the chairmen together. I think you need that industry focus and I am taking an ICT, a technology group, to China in two weeks' time. I think that is very important for promoting business, so I agree with you.

Q238 Chairman: But are the RDAs doing the regional promotion now?

Lord Davies of Abersoch: They are doing it more and more as a sectoral approach with us.

Chairman: Just as I have encouraged what you said about the attempt to co-ordinate their overseas activity more generally in answers to Mark Oaten, I am very encouraged by what you have just told me about that too and I think it is very important to keep that process going.

Q239 Mr Wright: You mentioned, Lord Davies, that you are going to China and are taking an ICT group. How do you pick that group? How do you pick the business or the individuals that you take?

Lord Davies of Abersoch: I am not sure exactly the names of the people coming with me but I looked at the programme yesterday. UKTI offices will have spoken to the regional offices about who has got an interest in which business; they would know from their own database. UKTI obviously has a huge database of exporters, and we have talked to the CBI. We would work with those sorts of organisations to make sure that we do it together. It is the other way round as well. The Chinese technology and mobile industry came over; the minister of technology was over and brought half a dozen companies two weeks ago. In conjunction with other ministers and industry groups I hosted a get-together and then they toured various parts of the UK, eight companies, looking at British excellence in mobile and ICT.

Q240 Mr Wright: I would be interested to see the list of the companies that are represented on that and the geographical spread because I have this theory that invariably, when you do something with the regions, they will probably go for the easy fix. For instance, in the eastern region they will probably go to Cambridge because it is recognised as a centre of excellence. My SMEs are on the periphery. One particular company is right at the top of their particular market in electronics but they will probably be left at the extremities because it is easier to go to Cambridge where you have got hundreds of companies that will probably fit those criteria.

Lord Davies of Abersoch: It is a good example. On a visit that I did (I have been to Cambridge) there were, I think, 50 or 60 companies that were invited from across the region for a discussion about some of the challenges they were having. It is never perfect but I do think we tap into SMEs right across all the regions. Inevitably, some of the meetings are held in the big centres.

Q241 Chairman: I have just one other question before Mark comes in about trade promotion, the thorny question of trade fairs, trade shows, exhibitions. Your trade show access programme has increased the number of grants for which an individual company can apply. Has the budget gone up as well?

Sir Andrew Cahn: The budget is the same. What we did was relax the conditions. We had introduced a limit to the number of times a particular company could get a grant, and that was a sensible thing to do because there were some companies who were, if you like, living on grants for years and years, and what we wanted to do was introduce a company to a trade show, help them get there and then help them get on their own feet. We relaxed the conditions because, the external world being tougher and colder, fewer companies were coming forward. We wanted to track more companies and I think we decided that perhaps we had tightened the screw a little bit too much. We listened to what the approved trade organisations, the ATOs, said to us and they argued that conditions should be relaxed, so we did that.

Q242 Chairman: Do you test the effectiveness of participation in trade shows? We have heard criticism again from ambassadors that some British companies sit on the stool and just wait for them to come to them, whereas others research the market, do a good job, go out and meet people, use the excuse of a platform to penetrate a market.

Lord Davies of Abersoch: Absolutely. We have our pin system which evaluates all of our activities, including trade shows. I think trade shows get some pretty good -----

Q243 Chairman: So if a company uses a trade show well they are more likely to get another grant than the company which does a trade show badly?

Lord Davies of Abersoch: No. If a company is eligible it is eligible. It is a good question and I do not think I have a very good answer for you. What we certainly do do is try and follow up on where we see things have not worked properly and try and change things. If a company is eligible for a grant it would be quite difficult to say no, they could not have it. What we might do is try and give them additional advice. For example, when you go to trade shows the key thing is the preparation. Usually you need to get an OMIS - dare I say that from your earlier remarks, but if you get an OMIS at the same time as you go to a trade show and you get potential partners to meet when you are over there then you will find that you get much more out of it. If a company has not done well we will try harder next time to help them do that.

Q244 Chairman: I agree absolutely with that.

Lord Davies of Abersoch: The other thing I was going to add is that we are aiming to help over 4,000 businesses participate in shows. What we hear is that the numbers are down; on the other hand people are more serious about doing business. It is a valid question about whether they are really doing a good job once they get there. I had realised the huge value that industry puts on trade shows. That has been a learning for me in the job. I visited the mobile show in Barcelona, I visited the air show in Paris, and you realise how much trade is transacted at these shows. I think we need to make sure that we are supporting them, but I agree: we need to make sure that they are using the money effectively.

Chairman: I remember our ambassador in Hungary some years ago when we visited him there said that he was struck by the number of people who complained about the ineffectiveness of trade shows and when he went to check it was they who were being ineffective and using the platform badly. It was not the trade show's fault or UKTI's fault; it was the company's fault. You want to make sure they are not living off grants; they are not the companies you want to be sending to trade shows.

Q245 Mark Oaten: One sector which we do not talk about a great deal but has been very successful in winning international business is the education sector. We have had a quarter of a million overseas students coming in in recent years. Are you concerned that that is under threat because of the new immigration points-based system for overseas students coming into this country, which I hope you are familiar with? If you familiar with it you will understand that the sector is very concerned. I declare an interest. I worked for a lecturer at Wroxton College that brings a lot of American students over and they are already seeing, as a result of this new regime, a fall in interest from applicants for the next academic year, and this could be damaging when it is quite a useful bit of UK business being done abroad.

Lord Davies of Abersoch: I met with the colleges of further education to discuss this, amongst other things, two weeks ago. In certain cases there are some issues. I have tabled those with the Home Office. I have a meeting coming up on it. I agree with you: nobody should underestimate the importance of education. Foreign students are hugely important to the British economy. I think that is well understood. I hate to do a plug for BIS now but I think there is a huge advantage in having education skills, et cetera, with business, and that is very much one of the conversations that is going on in the department at ministerial level. We have to make sure that we continue to attract foreign students. I am well aware of the issues and where there are issues we are tackling them.

Q246 Mark Oaten: Just to probe you a little bit more, I could not quite understand whether you have had the meeting with the Home Office.

Lord Davies of Abersoch: I have. I am having another one.

Q247 Mark Oaten: Can you give me a flavour of what representations you are making to them about this?

Lord Davies of Abersoch: The flavour has been that there have been a few instances where the processing of the applications has not been up to the standard they would like and we have corrected those. The Home Office are very aware.

Q248 Mark Oaten: It is a little bit more than a processing issue, is it not? As I understand it, they have been asking students to demonstrate that they have got the cash up front and sometimes present the cash up front in advance of a year's worth of study. Does not the fact that they have to be marked and registered and assessed in every single lesson that they take part in to demonstrate that they are genuine students, even though that can involve sometimes 70 lectures and being assessed on every single one of those lectures strike you as being a ridiculous burden?

Sir Andrew Cahn: Perhaps I could come in here. There is no doubt that the new points-based system and the various arrangements surrounding it have led early on to an increased number of rejection of applications by students for visas. Quite clearly there was a problem. We have made representations and Lord Davies has, as he said. I have also had a number of meetings with the UK Borders Agency, including with Lin Homer, the Chief Executive, who has been very responsive to the points we have made. I know also that Lord Mandelson, who is after all responsible for this area, is making representations at a higher level. I had yesterday evening a conversation with our ambassador in Beijing who was very exercised by this. He was very concerned early on that the number of Chinese students who were being rejected was very high. He intervened. He worked very closely with the UKBA staff. That is rectified. That position in China has changed and we do not have a problem in China. There are some pockets of difficulty, I understand, around the world. I think there are still problems getting the system working perfectly, it is not wholly bedded down, but the really difficult issues early on, and there was a very high rate of rejections, have been sorted out.

Lord Davies of Abersoch: And we have been very involved in it.

Mark Oaten: I will let it rest at that point but with the responsibility we have in this sector I think we will probably want to check it again.

Q249 Chairman: We will.

Lord Davies of Abersoch: Absolutely.

Q250 Chairman: Can I just add a couple of questions to that? There is no doubt that the USA lost a lot of ground after 9/11 when it closed it borders effectively, and British universities did very well in that period of time to pick up the students who would have gone to the States. We cannot afford messages to go out that we are turning into the States; we just cannot afford it. The damage will already to an extent have been done in markets, but the real test comes in August. That is the high processing time for these applications so I hope your optimism is proved right come August.

Lord Davies of Abersoch: I think it will be.

Q251 Chairman: Can I just put another thought in your mind? The outsourcing of visa operations away from consulate staff into semi-commercial operations often makes it more difficult for ambassadors and high commissioners to intervene if there is a problem with a visa. I think it is a particular problem in some of the far eastern markets and it is also a problem for business travel as well, where a businessman is not getting a visa and the ambassador finds it now more difficult to sort out the dilemma.

Lord Davies of Abersoch: It is not my area of specialism but clearly any comments you have got directly on that I will take away.

Mark Oaten: As long as we revisit it.

Q252 Chairman: Can I ask a more general question about education, before I pass on to Tony, on the opportunities for British universities overseas? When this Committee looked at this, having come back from India where it emerged, it was a major requisite of the Indian Government that we got more engaged. We saw a certain coolness, I think, in the higher education sector from some big names to get involved. That seems to have changed quite a lot in the last three or four years. I sense that British universities are now quite fully engaged in overseas markets and are probably going about as fast as they reasonably can while keeping their eyes on their main task of educating in the UK. Do you share that view or do you think they need to make more progress?

Lord Davies of Abersoch: You will be aware that Lord Mandelson met with vice chancellors recently. I think that was a very good dialogue around some of the issues the universities have got. There is no doubt that some of the universities, Nottingham being a good example with Ningbo and one or two others they have done, have created campuses and have been very successful. There are only a few universities who are able to do that. On the other hand, we should make sure, and we are doing, that we have a constant dialogue going on with the universities. As I said earlier, I am Chair of one of them. I think it is hugely important, the international liaison. The reason I met with Nottingham was to see what else we could be doing in UKTI to help educational establishments and we have now got a sector looking at education in general.

Q253 Chairman: I think Nottingham's ambitions are very large in China. It is quite brave.

Lord Davies of Abersoch: So are some of the other universities'.

Chairman: There are issues about whether or not they have overreached themselves. I hope that is a misplaced fear.

Q254 Mr Wright: Can we turn to the subject of Doha? How likely do you think it is that, following the changes in India after the elections, it will result in a conclusion on the Doha trade negotiations and what steps are going to be taken to persuade the US and the EU to make concessions towards India on the subject of agricultural subsidies, which is the main sticking point as far as the round is concerned?

Mr Thomas: I think two things have significantly shifted the levels of optimism about whether we can conclude the round. The first was the G20 summit that took place here in London, where all the countries who were represented signed up to a clear sense that the Doha deal had to be done, and that momentum was carried forward into the G8 talks where members of the Committee will have heard the Prime Minister explaining yesterday that there had been agreement from all the leaders to seek a conclusion to the round by 2010. The other thing that has also shifted the levels of optimism is, as you say, the election in India where there clearly is a determination by the government in India to be part of the solution in terms of the Doha Round. There is a sense that a lot of the technical work that was necessary on the special safeguard mechanism, which was a key concern for the Indians, has now been done in Geneva and in other capitals. The next obvious moment for that momentum hopefully to continue to grow is the APEC summit this month, but the absolutely pivotal moment will be the run-up to and then discussion at the Pittsburgh summit, the next round of the G20 summit. The Indians are hoping to host a discussion on the Doha Round which was welcomed by G8 leaders and I think is an extremely positive sign about their appetite to do a deal. Pascal Lamy, when I saw him last week, was optimistic that he would be able to bring ministers back to Geneva to do a deal. He thought the earliest would be mid October, more likely a little later in the year, so I think there has been a series of moves which gives us a renewed sense of optimism that a deal on modalities can be done, but there is still a lot of work to do, particularly, I think, in the United States where we are beginning to hear again some of the voices in the United States who are supportive of a deal, but frankly I think we need to do more and we need to hear more supporters, from the White House down to people on the Hill, talking up the benefits for the US as well as the international community more generally of a deal on Doha.

Q255 Mr Wright: In terms of what you said was the commitment following the G20 summit, it is fair to say that ever since the round started in 2001 every international summit has declared exactly the same thing, that they are going to push ahead. What makes this so different? Is it the fact that we have had American elections as well so there may be a change of policy there? Is it the fact that we have had the recent European elections and the elections in India as well? Is there a change of policy you see that makes this different from what we have seen over the last eight years?

Mr Thomas: Certainly you need to look at the progress that was made in July last year. Pascal Lamy said he thought we had got about 75% of the way towards a deal. The G20 summit that took place in October last year in Washington did provide significant political momentum and revised texts on agriculture and industrial goods access were circulated at the time. What those texts unfortunately did not provide in Pascal Lamy's view was quite enough political momentum in the discussion around those texts to bring ministers back to Geneva. There was then an inevitable hiatus while the Americans elections took place, while the new American negotiating team were in the process of being appointed, and you have to give time, clearly, for the new White House to begin to think through the issues. That obviously coincided with the Indian elections and our own European elections, so there has unfortunately been a natural hiatus period. I think there is a renewed sense of optimism as a result of the strong messages by the business community at the business summit before the London summit that got delivered to those international leaders, plus the new mood music coming out of Delhi and the determination of Manmohan Singh and the trade minister, now Mr Sharma, who I know Mervyn and Peter have met, but also the fact that the new US administration has signed up, through the sherpa network, through the discussions that Gordon has had with President Obama, to wanting to do a deal on the round. There is clearly a whole series of pieces of work that we still need to do but there is a genuine sense of optimism that we might be able to get a deal done. Mervyn has met the new Indian trade minister.

Lord Davies of Abersoch: I thought the change of mood in India was quite startling. They want to be seen as part of the solution, not the problem, and in my discussions with Anand Sharma there was a real commitment to a deal, and I think that was repeated with Peter Mandelson. I do think that out of every crisis comes an opportunity and out of this financial crisis I think everybody has realised that we are all interconnected, not just financially but trade-wise. We have got to get agreement on trade, we have got to get agreement on financial architecture and climate change and the pressure is on now for the G20 to really deliver something. I am more optimistic now than certainly I have been in the past.

Q256 Mr Wright: So by the end of the year we expect to hear good news that the negotiations have been sound?

Mr Thomas: Mr Wright, in a sense the negotiations are ongoing. The technical level discussions are continuing in Geneva, which is where I was last week. What was striking was the sense that there was more momentum in those technical level discussions. There has also been a series of one-on-one meetings between some of the key countries in the agreement to try and make progress, again, since those elections have taken place, so I would not want to understate the discussions that still have to take place but I think genuinely now that elections have taken place there is a sense that we might be approaching another moment when modalities might be agreed.

Q257 Mr Bailey: Can we turn to the EU-India free trade agreement? Lord Mandelson said earlier on this year that he hoped to have one concluded by the end of this year, and indeed that is the original target date. Your previous comment would indicate that there has been a change of approach with the Indian Government post-election with regard to Doha. Would you say that is the same as far as this particular agreement is concerned?

Mr Thomas: What is clear is that the Indians are prioritising Doha at the moment. That is not to say that discussions on the EU-India free trade agreement are not continuing. There is another round of discussions due this month. Our sense from talking to Cathy Ashton, the Trade Commissioner, is that a timescale at the end of this year looks optimistic but I think there is still a very strong appetite within the EU for FTA discussions. We know from discussions with the CII in the past and previous Indian trade ministers that they do want to do a deal with the EU, and we know there is very significant UK business interest in such a deal, but I think the international focus to date has been very much on can we make progress on Doha. As I say, with the change in the US administration, the change in the Indian administration, the focus of the recent summits has been around the Doha negotiations, which is why I say I think there has been more of a focus in Delhi, and certainly in Europe, on the Doha Round as opposed to this particular FTA. Where there has been encouraging progress is on the EU-Korea FTA and we are quite close to a deal between Europe and Korea. We have to wait and see how the progress in the agreement is translated into legal texts before we can make a final judgment. A number of countries have reserved their position on the broad agreement that has been reached until they have seen those legal texts but that does potentially represent significant new opportunities for UK business and European business more generally.

Q258 Mr Bailey: I think you have partly answered my question insofar as India is concerned. Forgive me; I hope it is a fair interpretation of your response that India would regard agreement on Doha as a bigger prize, if you like, than the EU-India FTA, so how likely is it that any deal will be concluded on the EU-India FTA prior to Doha?

Mr Thomas: I would be surprised if it was agreed before the key headlines of a Doha deal were done. I think there is an appetite both within Europe and the international community more generally to see if we can reach agreement in the coming months on Doha. That does not mean to say that the discussions between the EU and India are not going to carry on; they certainly are, and we would see an EU-India FTA as being complementary to our objectives in terms of the Doha Round. Trade agreements are so complex that it is rash of any minister to be anything other than optimistic about the opportunities for progress. To try and set a specific moment when you think a deal is going to be done is always a risk.

Lord Davies of Abersoch: I think we have to keep the pressure up on reform on telecoms, legal, banking licences, insurance. These are key sectors for British businesses.

Q259 Mr Bailey: So you would still regard it as important to pursue the EU-India FTA even if we did have-and we hope we do have-a successful round of Doha negotiations?

Mr Thomas: Absolutely. We are very clear that we want a Doha agreement to provide a clear set of world trade rules over which can be overlaid a series of further regional trade agreements, and key for the EU is that Peter Mandelson kicked off a new round of FTA discussions when he was Trade Commissioner, of which the Korea one is the one we hope will be signed most quickly. There has been a series of rounds and discussions with the Indians already and so we are making progress on those, but realistically it is likely that we are going to take longer to conclude an EU-India FTA than we are an EU-Korea FTA. As I say, I suspect that such is the focus now on trying to see whether we can reach agreement on the headlines of a Doha trade deal that that is going to mean that the EU-India conversations, whilst they will continue, I suspect will continue into next year rather than the original hope that we might have concluded them by the end of this year.

Q260 Mr Bailey: They are seen as complementary to Doha, not as a substitute for Doha?

Mr Thomas: Absolutely.

Lord Davies of Abersoch: Absolutely.

Q261 Chairman: Do you think Lord Mandelson, if he were speaking in Delhi now, would repeat what he said in Delhi in January, "... the downturn does not reduce the value of a bilateral trade deal, it raises it. The EU and India should call the deal what it would be - a confidence-building economic stimulus package-and sign it before the end of the year". He was speaking before the developments on Doha, I accept, but would he repeat those words now?

Mr Thomas: I think he might use slightly different language in terms of timescale but I think he would still be extremely upbeat about the case for an EU-India FTA. I believe it makes economic sense for India, just as it makes economic sense for the UK and for Europe more generally. I think you do have to get out and make the case as politicians for trade agreements because there are plenty of vested interests who will argue against having a trade agreement and opening up barriers. I would not want to put words into Peter's mouth but I have absolutely no doubt he will be pushing the case for -----

Q262 Chairman: The reason I say that is that Anand Sharma, to whom you referred to earlier, I met recently. He is extremely pro-Britain. He has a very strong positive attitude and so here is a big opportunity to capitalise on. Doha obviously matters but there is a huge opportunity for UK Plc's interests as well out of the Indian elections.

Lord Davies of Abersoch: Absolutely. India is obviously a strong trading partner for us. We have had Indian businesses investing in the UK and vice versa. I think they do need to open up some of their markets and there is a huge appetite amongst UK plcs to invest there, so I think there are huge opportunities and that is why UKTI, working with the Indian Business Council, - and Patricia Hewitt's appointment is a good one-is a big focus.

Q263 Chairman: I like Patricia Hewitt; she is able and she was a talented minister, but should those kinds of organisations be led by politicians? Should they not be led by business people?

Lord Davies of Abersoch: As a senior independent director for BT she had huge experience of India. I remember from my days of working at Standard Chartered that she was a regular visitor from her trade and industry role, so, no, I think she has got a great role and she knows India well.

Q264 Chairman: But I do hear this complaint I repeated from the Indian business side that there is not the same sense of engagement at senior level in British business.

Lord Davies of Abersoch: I think there is always more that British business can do with India but we must not forget that the volume of trade with India is very significant and a very large number of British businesses have large businesses in India.

Mr Thomas: I think, Chairman, that if we can get a deal on the EU-India FTA that will substantially change attitudes even further. As Mervyn says, there is progress, but clearly an FTA would help.

Q265 Chairman: One last question from me. We have talked about the opportunities of places like India but there are threats at present in the global trading environment from protectionism and I want to address this with you. Successive governments, and this one, to its great credit, remain strongly committed to what you describe in the UK Trade and Development Policy Report as to "champion open and fair markets", but that is a bit of a challenge in the current environment, is it not? What do you need to do to champion "open and fair markets" in these difficult times?

Lord Davies of Abersoch: I think you have to name and shame those markets and countries that go protectionist. I was dwelling on that on the way here. Just before coming out I was reading Global Trade Alert's first report (just to show that I am reading this stuff, so I am really a sad person already). I think that protectionism - and it is stating the obvious, we all know - would be horrendous for the global economy. I think the danger in the financial crisis was that certain markets would go very protectionist and I do not think there is any evidence of that. There has been a temptation to put measures in just to protect your own economy. We have not gone down that route internationally. I think we have to keep on banging the drum and saying that we have to have a Doha agreement and we must not go protectionist.

Mr Thomas: Chairman, I wonder if I can add that we have deliberately used the summits that Gordon has attended as Prime Minister to press the case for countries to continue to keep markets open. In a sense the WTO has been given a very specific brief to watch for creeping protectionism. They have published a series of reports, I think their third came out yesterday, on levels of protectionist measures. We have sought to replicate that international effort, not only through launching Global Trade Alert, which Mervyn has just referred to, but you will have seen, and I think you may have participated in, and forgive me if I am getting this wrong, the first ever UK World Trade Week, which is an idea that we have shamelessly poached from the United States. Their world trade weeks were launched in response to the recession in the 1930s, where their politicians increasingly recognised that protectionism was slowing down the opportunity for the US to recover. We think we need to continue to make the case for open markets and World Trade Week is one of the ways in which we do that, and all the different branches of government have played a role in helping to make sure that there were over 50 events, not only in the UK in the regions but outside of the UK, to make the case for open markets and for continuing to avoid protectionism going forward.

Q266 Chairman: I am going to make a confession. It passed me by entirely but I am sure it did a lot of good work.

Lord Davies of Abersoch: It will not next time.

Q267 Chairman: You mentioned Global Trade Alert. I was going to ask when it was going to be set up. It has been set up. What exactly does it constitute? It is bringing together a network of international think-tanks, is it not?

Mr Thomas: The WTO, with respect to the Secretariat, produce relatively dry commentaries on what is happening in terms of protectionist measures. Global Trade Alert, as you say, is a network of think-tanks, academics and leading economists who can be more voluble in terms of their commentaries on protectionist measures or not, and therefore they throw a sharper spotlight on what is happening internationally in terms of particular protectionist measures. They are a way for the business communities to engage in and highlight measures that are taking place in particular countries. It is a way of going beyond the dry WTO reports and increasing the pressure on countries to resist protectionist responses.

Q268 Chairman: Lord Davies, you said there was a need to name and shame. Can you name and shame someone here today for the Committee?

Lord Davies of Abersoch: No, I am not going to do that; I will resist that temptation, but what I would say is that we do need business to have a louder voice on this. Now that I am on this side of the political fence I keep on saying to business leaders that they do need to speak with a louder voice everywhere, internationally, in support of a Doha agreement. The more they are pushing for it in the States and everywhere else the closer we will get to a deal.

Q269 Chairman: The thing that alarmed the Committee slightly earlier in the year was that the relaxation of state aid rules in the European Union seemed to be accompanied by protectionist clauses around that relaxation. I will not name and shame anyone but quite a close neighbour seemed to be guilty of this in particular. Is there any evidence of protectionism in European Union countries at a modest, disguised, subliminal level?

Lord Davies of Abersoch: We are going to put you on the spot right now.

Ms Durkin: I know that there is an active debate on whether or not some of the interventions could be seen as straightforward protectionist measures or inadvertent protectionist measures. What we have sought to do is establish that any intervention within Europe is focused and time limited and with the state aid relaxation we talked about two years and a review of that and drawing back, so while we acknowledge that because of the downturn there are inevitably going to be some actions that would in normal years not be necessary. If they are necessary we will make sure they do not get established and we will review them and very quickly step back.

Mr Thomas: There was concern earlier in the year about a "buy US" policy that appeared to be being promoted. We know that there has been substantial amendment to that policy to keep that approach within World Trade Organisation rules and we have welcomed that.

Q270 Chairman: I am grateful for that. Thank you very much. I do not want Mr Crawford to get away without speaking. That is what I was just deciding.

Lord Davies of Abersoch: I can think of questions for him.

Q271 Chairman: There is a novel idea! Lord Davies, what would you like me to ask Mr Crawford, on the record? Mr Crawford, we were aware of the increased interest in the ECGD's activities and increased funding. Is there anything that you would like to say to the Committee about the contribution you make to British exporters? It is the softest question you will ever get from a select committee chairman, so enjoy it.

Mr Crawford: First of all I should stress that ECGD has responded to the downturn. Inquiries by exporters have gone up 50%. We supported just under £31.5 billion of new business in the last financial year to 31 March. We expect that that will double or even more in this financial year. We have played a key role in helping Airbus aircraft exports. We have historically been supporting 17-18% of their deliveries. It is quite likely that we will support double that in this financial year. We have just closed a consultation on a possible new product to confirm the share risk on confirmations by British banks of UK export contracts, which would take us back into the short-term credit area which was privatised in 1991 but is a topic that exporters have been raising concerns about and the Government will be giving its response shortly. We are responding both to increase in demand and suggestions that we should look at new products that we have not hitherto had to supply.

Q272 Chairman: Do you want me to ask him a question, Lord Davies?

Lord Davies of Abersoch: No. I think the problems in the short-term trade credit market, which were alluded to earlier, have caused huge problems, not just in the UK but right across the world. People focus on the banks but the withdrawal of trade credit has been a big challenge for exporters. We are having a look at the letter of credit scheme which Patrick referred to and we are also doing a medium-term review on what else should ECGB be focusing on. We have an open mind and we are going through a consultation, so in the next two or three months we will come up with some ideas.

Q273 Mr Bailey: From my perspective as a representative of an area with a huge number of SMEs, many of them were quite significantly affected by that. Can I just stress that this consultation needs to be concluded very quickly and very productively.

Lord Davies of Abersoch: I think there are two issues. First, the letter of credit scheme, as we say, will be coming out in the next week or so. There is the separate issue of trade credit and the role of the firms. I am meeting with the two COs next week. I have had a series of meetings on this issue. I think trade credit structurally we need to think about from a European and international perspective and that is why it is important that there is this injection of liquidity through the IFC and through other measures on letters of credit because the withdrawal of letter of credit finance around the world has had a huge material impact on trade, and that is why we are addressing it.

Chairman: Can I just say this in public. We take the absence of criticism as a sign of success and we have heard very little criticism of ECGD. Having said that, of course, the flood gates will open and we will have you back in for a separate inquiry, but so far so good. Gentlemen, there are many other things we could have explored but we have done very well in two hours. We are very grateful to you for your time and trouble. Thank you very much indeed.