Work of the Committee 2008-09 - Business, Innovation and Skills Committee Contents

1  Introduction


1. This Report summarises the work of the Business and Enterprise Committee (now the Business, Innovation and Skills Committee) in Session 2008-09. In our previous Sessional Report[1], we noted the departmental reorganisation which had created the new Department for Energy and Climate Change, and removed scrutiny of energy from our remit. This year, there has been another change in the machinery of government, to create a new Department for Business, Innovation and Skills, and the Committee has been renamed accordingly. Our remit has been enlarged to include innovation and skills, and the further and higher education sector. There are always difficulties with defining boundaries, but we welcome the fact that innovation policy and business policy have been brought together. We also believe that the inclusion of further and higher education in a large, powerful department could benefit the sector. Moreover, although we recognise that it is inadequate to consider the education sectors solely in the context of their measurable economic benefit to society, it remains true that education is fundamental to any advanced economy. We believe there should be benefits from its inclusion in the Department for Business, Innovation and Skills.

2. The changing departmental responsibilities occurred in June 2009, late in the Session. Our programme is set some way in advance and therefore most of the remainder of the year has been spent dealing with business related inquiries. We expect the balance of our work to change somewhat in the future and we have recently announced a new inquiry into further education funding and the transitional arrangements for the Skills Funding Agency.

3. Last year we set out our aspiration "to combine a programme of strategic long-term inquiries with the ability to be 'fleet of foot'—in other words, to respond quickly to outside events, and produce reports that have immediate impact."[2] This approach has been particularly valuable in the troubled economic circumstances of the last year. We have arranged a series of hearings on financial support to small businesses and one on the Government's response to the economic crisis, and built on these to arrange inquiries into particular policies or programmes when appropriate. We also made sure our regular work addressed themes of current importance, so we chose to scrutinise the Insolvency Service as a Departmental Agency, and focussed our regular inquiry into exports on "Exporting out of recession".

4. But we also considered that crisis management should not be our only concern. Early in the Session we published a "legacy" report on energy policy, an area where the Committee had had a sustained interest.[3] We also followed up the then Trade and Industry Committee's earlier work on Pub companies. In addition, we continued our work on the Post Office network, with a major inquiry into the function and future of the network. We also completed our inquiry into the Higher Value-Added Economy.

5. In the past year we have responded to urgent events. In two cases, described in more detail below, we have commented on Government legislation in time to inform Parliamentary proceedings. More recently, we met in September to consider the Inspector's Report on the Rover group companies, then newly published.

Working methods

6. We are a cross party Committee and proceed by consensus. This Session, we have agreed eleven reports without a single division. This has not prevented us addressing politically charged issues, such as the Postal Services Bill; our aim in these cases has been to examine the evidence given to us, and base our conclusions upon it. We believe this cross party, evidence-based approach, gives our Reports credibility, and adds greatly to their influence.


7. As in previous years, we have been keen to draw on as wide a range of experience as possible in the course of our inquiries. This has meant engaging with the public in novel ways—such as the web forum we ran as part of our Post Offices enquiry—which provided a solid base for that Report. It has also led us to undertake a wide range of UK visits in the course of our work, to make sure that we did not look at matters from a purely Westminster perspective. In the course of our Post Office inquiry we visited Essex, Devon and Cardiff, and held meetings, as well as discussions, with local authorities and a wide range of stakeholders. For our inquiry into the automotive industry, we took the bulk of the evidence in the West Midlands and North West. More recently, we travelled to Bristol to hold meetings both with experts and academics in the aerospace industry.


8. Understanding the wider context in which government works is an extremely important part of our programme. The United Kingdom is part of the global economy. It is one of the world's largest exporters. It is also part of the European Union. This context means that foreign visits are essential to our work. In the last Session we visited the Middle East in connection with enquiry into Exporting out of recession. We also visited Paris, Toulouse and Milan in connection with that inquiry, and also our inquiry into the aerospace and motor sport industries. We also continued our practice of visiting the European Commission once a year for discussions with a wide range of officials. This annual visit gives us the opportunity to assess developments in the European Union, and underpins a great deal of our work programme. For example, on the most recent visit we were able to discuss the postal services directives, EU enlargement and telecommunications policy. Visiting the European Commission gives us background knowledge which could not be gained elsewhere, and we remain extremely grateful to the Commission for facilitating this regular exchange of views.


9. Our staff is very small, and we supplement it by using other expertise. In the course of the Session we were supported by the following specialist advisers: Dr Sibylle Bauer, Maureen Kearney, Mr Julian Maitland Walker, Naomi Nardi and Howard Webber.

10. We were also able to draw on help from the National Audit Office, the House of Commons Library, the Scrutiny Unit and a Hansard Society Fellow. Drawing on such external assistance not only helps us manage a fluctuating programme, it means that we have access to a wider range of expertise than would be possible if we relied on our core staff alone. We are extremely grateful to all those who helped us, but we also record our gratitude to our permanent staff whose hard work and flexibility have enabled us to conduct our work so effectively.


11. Our work depends on the quality of the evidence we receive. It is important that witnesses speak freely, and that they are accurate. We recognise that people will wish to present their case in the best possible light, but we will assess that case on the strength of the evidence they put forward. In one instance last year we felt witnesses had been less than frank.

12. In our report on Pub Companies we noted:

In evidence to us both Mr Thorley of Punch and Mr Tuppen and Mr Townsend of Enterprise Inns made assertions which, on investigation, proved to give a partial picture, or on one occasion were positively false. We recognise that those giving oral evidence may need to simplify a complex picture, and that slips of the tongue may occur, but these repeated slips have undermined the reliability of their evidence.[4]

After the Report was published, Mr Tuppen wrote to us expressing concern about these remarks, which he considered defamatory. We are happy to put on record that it was not Mr Tuppen who made the false assertion referred to (which was promptly corrected by Mr Thorley in further written evidence). We are equally happy to note that, as the Report said, matters may be simplified in oral evidence, and the issue was not whether evidence given had been so misleading that the Committee felt compelled to take action, but whether the nature of the evidence meant that we should approach it with caution. We see no reason to change that judgement.

13. Mr Tuppen's concerns arose from the fact that material published by Order of the House is privileged, and that he had no legal remedy for allegedly defamatory remarks. We take the responsibilities of privilege extremely seriously. For this reason we were measured in our original comments, and also decided not to publish everything submitted on both sides of the debate. In doing so, we saw no reason to extend privilege to matters which were not central to the inquiry, or to personalise our investigation. Mr Tuppen's assertion that he would have taken action if they had been made in a non-Parliamentary context is regrettable.

14. We would also like to record that when Mr Tuppen first contacted us about the remarks in the Report, we told him we were more than happy to publish either his original letters to us on the matter, or a fresh memorandum dealing with it. However, we made it clear that other witnesses had also approached us after publication of the report, asking us to put more material in the public domain, and that, in fairness, we would have to consider their representations also. We believe that this was the correct response, and are disappointed that Mr Tuppen was not content with this approach, which would have enabled his concerns to be put fully in the public domain.

Recurring themes

15. There have been a number of issues which have occurred across different inquiries, or have been raised in many different contexts, which we summarise here.


16. During the economic crisis, the Government launched a number of interventions, such as the Enterprise Finance Guarantee Scheme and the Automotive Assistance Programme. Our scrutiny has enabled us to monitor the design and implementation of these schemes. Although individual Members may have varying views on the effectiveness of some Government actions, the Committee as a whole agrees that the economic crisis has demonstrated the importance of the Government's role both in setting the framework within which private sector decisions are made, and in supporting our industry. Nonetheless, Government is limited to setting the framework within which private sector actors, be they banks or individual companies, can conduct their business. Although Government and Committee scrutiny can influence the overall policy of banks, it cannot and should not affect individual lending decisions. But strong and sustained committee scrutiny remains important. We have taken evidence on bank lending to business regularly throughout the Session; on two occasions we invited banks and business representatives; on other occasions, we included the topic in evidence sessions with Ministers. It is clear that although some individual banks may be sustaining their lending, the availability of credit for small and medium-sized enterprise has diminished, and the terms on which that credit is available have become tighter. It is also clear that, as we said in our Report on the Enterprise Finance Guarantee Scheme,[5] political scrutiny of the level of bank lending, both from the Government lending panel, and from bodies such as this Committee, has gone some way to restraining banks, reducing the amount by which they may have increased their margins, and possibly increasing pressure on them to lend. We intend to continue to keep the terms on which banks offer business finance under review.

17. In the course of our scrutiny, many individuals have provided us with details of their cases. We have great sympathy for those who have lost their businesses as a result of a credit crunch, either directly because of worsening trading conditions, or because banks withdrew lending facilities. Those who provide case studies help us monitor what is happening within industry, and we are extremely grateful to them. Our continued scrutiny is intended to reduce the likelihood that otherwise viable businesses will fail because credit is withdrawn inappropriately. However, just as the Government cannot police every financial transaction, so we as a Committee cannot and should not intervene in individual lending decisions. Sometimes the correspondence we receive suggests that we should prevent banks from making particular commercial decisions. Neither we nor the Government have the power to do so.


18. Another emerging theme this year was the importance of perceptions in ensuring the health of British economic life. Our inquiry into the automotive industry exposed two important issues. First, that the United Kingdom automotive industry remains important, and, in some important areas, world beating. Second, that although the Government acknowledges this, there is a perception that it is not prepared to support the UK automotive industry in the way that other Governments support theirs. We warned that:

The danger is that without a clear government strategy, and sufficient support, valuable skills and capacity will be lost to countries which more clearly demonstrate their readiness to support the industry. In some cases this will be as much about rhetoric and perception as about real levels of support, but the effect will be the same.[6]

19. During this Session we drew our long-running inquiry into what makes a higher value-added economy to a conclusion[7]. One of our key findings was that overemphasising the challenges facing the United Kingdom in itself could lead to economic decline. If the message is given that manufacturing is in absolute decline, when in fact the United Kingdom remains the sixth largest manufacturer of goods in the world, or even that an entrepreneurial career is too risky to be contemplated, then talented people will make their career choices accordingly, and potential trade or investment partners could be deterred. Over the course of that inquiry, the First Secretary of State evolved a new industrial policy; there has been a series of policy papers which, together, are welcome in their assertion of the very real strengths of British business, and the British education sector. The challenge is now to make sure these policies are translated into effective action.


20. In our report on Pub companies[8] we expressed concern about the lack of legal protection against the abuse of bargaining power in commercial contracts, in contrast to consumer law, where the unfair contract terms regulations apply. We remain concerned about this potential problem, which goes far wider than the pub industry. During our work on energy we became aware of serious contractual issues relating to energy supplies to small companies, and the Competition Commission has commented on relations between suppliers and customers. This does not extend simply to the legal system; there may be problems with systems of redress which exclude some companies. In the course of the year we have received complaints about the lack of protection for reasonably sized companies in their relations with banks. This is a complex area. It may be that although the current position has drawbacks, attempts to make changes would make matters worse. This is not something that can be dealt with in a few months before a general election, but we think it would be desirable to establish whether there are widespread concerns about the legal and consumer protections available to smaller companies. This is an important issue and one which we hope will be addressed in the next Parliament.


21. In our final report of Session 2007-08, we drew attention to the difficulties caused when a Secretary of State was in the House of Lords.[9] In subsequent work, we drew attention to the high proportion of BERR Ministers in the House of Lords. The new Department also contains many Lords Ministers: Rt Hon Lord Mandelson, First Secretary of State, Rt Hon Lord Drayson, Minister for Science and Innovation, Lord Davies, Minister for Trade, Investment and Small Business, and Lord Young, Minister for Postal Affairs and Employment Relations.[10]

22. We have structured our programme over the Session to ensure that Lords Ministers give evidence to us on their policy areas; and we are grateful to them for their willing cooperation. However, this does not deal with the problem that they are not available to scrutiny by the House as a whole. In previous years, we proposed that procedures should be developed to allow Ministers in the House of Lords to answer questions from Members in the Commons. In September, Mr Speaker made a speech to the Hansard Society in which he stated his intention to address this issue.

23. It is only fair to add that the Secretary of State has offered to come before us more frequently than usual which we appreciate. Until more satisfactory arrangements are made, we will attempt to draw evidence from Lords' ministers to the House's attention whenever it is relevant.

What have we achieved?

24. Committees have power to call for evidence, hold public hearings, and report. They have no direct executive power. However, this does not mean our work is not effective. Sometimes, a Committee achieves an immediate result; more usually, Committee scrutiny leads to a gradual change in policy, or even in public perception. This may take far longer than the single Session covered by these Reports. Often, results are achieved by repeated inquiries, sometimes taking place over several Parliaments.

25. The work on Energy conducted first by the Trade and Industry Committee, and then by the Business and Enterprise Committee has been effective in creating a consensus that, unless action is taken soon, there is likely to be an energy gap and that the energy market is not functioning efficiently. This in turn has led Ofgem to announce policy changes, such as:

  • rules to prevent unfair pricing;
  • rules to protect small businesses;
  • rules to ensure that direct debits are set fairly, and clearly explained.

Similarly, in our Report Construction matters,[11] we recommended that there should be a Chief Construction Officer. That recommendation was accepted by Government and on 25 November, Mr Paul Morrell was appointed as the new Chief Construction Adviser.

26. Our Report on the Postal Services Bill[12] influenced the formal debates on the Bill in the House of Lords and the wider debate about the principles underlying the Bill. It was effective because it concentrated on the proposals in the Bill itself, and the case the Government made for them, not on Members' individual political positions. The Committee had a very wide range of views about what reforms might be needed to make Royal Mail plc more effective, and to reduce its losses, but easily reached agreement on the inadequacy of the present regulatory framework for postal services, the Royal Mail pension deficit and the need for more clarity over the proceeds from any sale of Royal Mail Group.

27. However, although the Committee's most significant influence is probably felt over the long term, inquiries can also produce speedy results. As a result of our inquiry into the Insolvency Service,[13] extra funding was allocated to ensuring that the Service's work in securing sanctions against individuals was properly publicised. We think this should increase this deterrent effect. The Government has also undertaken to bring forward measures to increase the transparency of insolvency practitioner's pay, so that creditors are better able to challenge excessive claims.[14] In addition, the Insolvency Service is looking at the extent to which practitioners comply with existing standards. This may not be enough, but is a very welcome first step.

1   Third Report of Session 2008-09, Work of the Committee in 2007-08, HC 175, para 2 Back

2   Third Report of Session 2008-09, Work of the Committee in 2007-08, HC 175, para 8 Back

3   First Report of Session 2008-09, Energy policy: future challenges, HC 32 Back

4   Seventh Report of Session 2008-09, Pub companies, HC 26, para 10 Back

5   Tenth Report of Session 2008-09, Enterprise Finance Guarantee Scheme, HC 588 Back

6   Ninth Report of Session 2008-09, Automotive Assistance Programme, HC 550, para 50 Back

7   Eleventh Report of Session 2008-09, Risk and Reward: sustaining a higher value-added economy, HC 746 Back

8   Seventh Report of Session 2008-09, Pub companies, HC 26 Back

9   Fourteenth Report of Session 2007-08, Departmental Annual Report and Scrutiny of the Department for Business, Enterprise and Regulatory Reform, HC 1116 Back

10 Back

11   Ninth Report of Session 2007-08, Construction Matters, HC 127 Back

12   Fifth Report of Session 2008-08, The Postal Services Bill, HC 172 Back

13   Sixth Report of Session 2007-08, The Insolvency Service, HC 198 Back

14   Fourth Special Report of Session 2007-08, The Insolvency Service: Government Response to the Committee's

Sixth Report of Session 2008-09, HC 919 Back

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Prepared 5 January 2010