UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 735-vii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

BUSINESS, INNOVATION AND SKILLS Committee

REBALANCING THE ECONOMY: TRADE AND INVESTMENT

THURSDAY 10 March 2011

LORD GREEN OF HURSTPIERPOINT, EDWARD DAVEY MP,

SUSAN HAIRD and patrick crawford

Evidence heard in Public Questions 457 - 542

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Business, Innovation and Skills Committee

on Thursday 10 March 2011

Members present:

Mr Adrian Bailey (Chair)

Mr Brian Binley

Paul Blomfield

Katy Clark

Rebecca Harris

Simon Kirby

Ian Murray

Nadhim Zahawi

________________

Examination of Witnesses

Witnesses: Lord Green of Hurstpierpoint, Minister for Trade and Investment, Edward Davey MP, Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills, Susan Haird, Acting Chief Executive, UKTI, and Patrick Crawford, Chief Executive, Export Credits Guarantee Department, gave evidence.

Q457 Chair: Welcome, and thank you for agreeing to appear before the Committee. I know that for two of you this is a repeat appearance. For transcription purposes, perhaps you would introduce yourselves with your titles to the Committee, and then we will get into the questions. Let us go from my left to right.

Susan Haird: I am Susan Haird, Acting Chief Executive of UK Trade and Investment.

Lord Green: I am Stephen Green, Minister of State for Trade and Investment.

Edward Davey: I am Edward Davey, Minister for Employment Relations, Consumer Affairs and Postal Affairs, but I also have some responsibility for trade issues, particularly EU multilateral.

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

Q458 Chair: Thank you. I would reiterate what I have said to other panellists: some of the questions will be specific to one of you. If any of the other panellists wish to add anything, they are welcome, but do not feel that everybody has to contribute to a response to every question. We have a lot of questions and we need to finish at a reasonably civilised time. I shall start with one or two pretty general questions, the first to Lord Green. Welcome to your appointment. How are you going to be "messianic" in promoting UK trade?

Lord Green: I am not sure what the force of the word "messianic" is; sometimes it has to do with apocalypses. First, I am nine weeks into the job and enjoying it enormously. I think this is a huge challenge. We all recognise that the pattern of growth in this economy before the crisis was not sustainable; it was driven too much by consumption fuelled by debt and by Government borrowing, and we know that cannot continue. The economic textbooks tell you that the only other sources of demand in any economy are the net external position, i.e. trade, and investment, so I think this is absolutely crucial to any meaningful understanding of a sustainable growth path for the economy. The trade position of this country has been weak for a long time. The last time the current account was not in deficit was 1984, and for most of the period since the war it has been fragile, to say the least, and getting worse. The challenge is to turn the trade position from being over time a net drag on growth to a net contributor to it.

We have lost share in world markets; so have all the other major countries except Germany, but we have lost it faster than most. This is a significant challenge. I do not know whether that is messianic, but I think this is a collective challenge that is very important for the country as a whole. I do not think there are magic wands to be waved. If there were, they would have been waved by now. An important key to this lies in SMEs. I am sure you will want to talk about this later on.

On investment, we have a good story. We are one of the two or three most popular destinations for foreign direct investment, but our challenge is to make sure we do not lose ground there. We have specific investment needs, notably in public infrastructure, that we need to finance over the next 10 years, so there is a lot of work to be done in encouraging a continued flow of foreign direct investment. That perhaps includes looking at newer sources of foreign direct investment, particularly into the economic infrastructure of the country.

The White Paper sets out some directions for UKTI, which I am sure you will want to explore; some important new products for ECGD, which I think is a significant step; a refocused FCO commercial diplomacy effort, which is also important; and, last but not least, the establishment of a Cabinet sub-committee on trade and investment is a crucial development. This is something to which the Prime Minister is committed. Indeed, when he was talking to me about the job it was something that I thought was a particularly important component of the Government’s commitment, because it enables us on a once-a-month basis to bring Ministers from all the Departments relevant to this task-not only the Foreign Office and BIS but also the likes of the Home Office, Treasury, Department of Energy and Climate Change, Defence, the Department for Environment, Food and Rural Affairs and so forth-round the table with pretty detailed action plans to see through the implications of the White Paper.

Q459 Chair: Thank you very much. It was of course the Prime Minister who said that the Government would be messianic. We have heard from a number of witnesses in this inquiry that the UK has somehow lost its mercantile spirit. It seems to me that we are talking ourselves down. How do you think you can reverse this?

Lord Green: I do not think anybody can reverse this single-handedly, but there is an element of truth in it. "Mercantile" is a word with historical baggage, of course. In particular, if you use the version "mercantilist" it has some negative connotations. The fact is, however, that we need to improve our competitive strength in international markets and do a better job of net external position, for the reasons I have stated. I think that in this there is an issue of collective self-belief about the British.

To use an anecdote to make the point, since I knew I would take on this job in September of last year I have tried to ask friends and acquaintances of mine, even the occasional journalist, how many cars they thought we made in this country. The answer is consistently wrong by a wide margin. There is a widespread impression that we are a de-industrialised economy and it is nonsense. While the glass is not full, it is definitely half-full and not half-empty.

Chair: Yesterday morning at a breakfast meeting I corrected members of the London Chamber of Commerce on this very point.

Lord Green: Good.

Q460 Mr Binley: I want to pursue that, because I am not sure that Governments of all hues have done enough to talk up Britain in this respect. It looks like manufacturing is settling down in almost every country except Germany at about 15%. Britain is well within that range. Our manufacturing base is larger than that of France, and if you look at our export base, so much of it is claimed by Germany but is, in truth, British export, so we ought to talk up this whole thing more. Will you do so?

Lord Green: I shall certainly play my part in this, but needless to say this is a part that we collectively have to play, too. No one person can do this, but we all have to.

Q461 Chair: As a businessman, you will be very well aware that we need some kind of comprehensive strategy to achieve our objectives. So far, we have not had the UKTI strategy. When will it be released, and what would we be expecting to see in it?

Lord Green: I would expect it to be released in April. It has been a little later than originally intended, partly because the White Paper itself was a little later than originally intended and partly because I was new in the job and it seemed sensible to give us a bit of space to get it right. I think that when it emerges it will not be a revolution. I do not think a revolution is required in UKTI; it is a matter of some refocusing, retargeting and refinement, and one or two particular new initiatives. For instance, I think we need to have a more disciplined and structured approach to what you might call relationship management of major exporters and inward investors, and the UKTI should establish a little unit to support that. I am happy to talk more about that because I think it is an important initiative. There are two ends of the scale: on the one hand, there is what we do for big exporters, multinational companies based here and big inward investors, and how we tackle the SME challenge on the other.

Edward Davey: I think the UKTI strategy needs to be seen in the context of the Trade and Investment White Paper itself. The whole of Government has been working on that paper and the strategies and analytical papers that will follow it. The Trade and Investment White Paper, which we conceived back in June/July, has taken up a huge amount of my time, the Secretary of State’s time, Lord Brittan’s time, Lord Green’s time since he has been here and that of other Government Departments. We have had extensive consultation with business, NGOs and investors; we have had our posts across the world feed back information about where other Governments are with respect to trade and investment policy. All that has fed into the paper, so in many ways this gives a very comprehensive overview of the British Government’s position on trade and investment. In the annex you will see a proposal for 18 analytical papers to promote the debate as well as strategies for UKTI. If you read the foreword by the Secretary of State, he talks about the great trade investment challenge.

What we are trying to set out here, as Lord Green says, is that the Government from the Prime Minister down believes that improving our performance here is really important for the whole growth story. That is why we have put so much effort into this paper. I believe both from press cuttings and the responses from around the world that it is having its effect, because while we often focus on the fantastic work that I believe UKTI does to help British business improve its export drive, it must also think about FDI plus trying to improve the multilateral game, whether that is within the single market of the EU, with Doha or EU FTAs. This White Paper seeks to set out the Government’s position in all of those areas.

Q462 Nadhim Zahawi: Lord Green, you mentioned that the current account had not been positive since 1984. Are you confident that you can turn that round and make it positive?

Lord Green: To be clear, I do not think any one person can turn this round. This is a major challenge for the economy as a whole. If may I use what may sound like a cliché, this is definitely a marathon and not a sprint. This is something that will take the economy some time to turn round, in my view probably well beyond the life of this Parliament. If we are to work this, what we need is, first, clearly a cohesive Government approach but also continuity and a sustained effort over quite a long period of time. Do I think it is doable? The answer is yes. Do I think this marathon can be run?

Q463 Nadhim Zahawi: How long is that marathon? Let me push you a bit further on that.

Lord Green: This is something that has been around since the war one way or another, and in stark form since 1984, so, for the sake of argument, let’s say 10 years.

Q464 Nadhim Zahawi: 10 years?

Lord Green: Yes-not less. Do I think we can make some visible improvement earlier than that? Yes, of course. I think there are some quite encouraging signs now, but to be clear, a robust trade position for this country will not come overnight.

Q465 Nadhim Zahawi: Perhaps we can move on to the Trade and Investment White Paper. The British Chambers of Commerce in response to the White Paper has said that, even with the improvements the coalition Government has made, it does not offer the same level of support to SMEs that some of our competitors do. How do you respond to that? In which areas do you think we are lagging behind?

Lord Green: First, historically I think we have lagged behind in credit insurance support. For reasons now lost in the mists of time, ECGD was taken out of providing services that were meaningful for SMEs back in the early 1990s, I think. It is clearly visible on any chart of competitive products from their analogues in France, Germany and elsewhere where the gaps were.

One of the most concrete things in the White Paper is the filling of those gaps with products such as the short-term credit insurance product being rolled out for non-capital goods instead of just capital goods; working capital finance for exports, i.e. pre-shipment and precontract; contract bond insurance and foreign exchange cover. These are all basic products available across the channel and are now being rolled out by ECGD this month and next on a pilot basis. I think that is significant. Time will tell exactly what the level of demand for it is. Indeed, if the level of demand is very high, ECGD will have to gear up its own HR. Its headcount has been run down and building it up is a matter of skilled resources and that will be a challenge, but it is something we have to do.

Edward Davey: If we are talking about support for SMEs, it is not simply about those sorts of products, critical though they are; it is making sure that in key markets SMEs have access to them. If you look at the European single market, though it has been a great success, there is huge potential yet to be unlocked, particularly for SMEs. That is why the White Paper talks about our welcome for President Sarkozy’s initiative of the Small Business Act back in 2008-the Think Small First approach-but says that we have to try to make sure this is implemented.

In the Single Market Act debate that is under way, the British Government is making absolutely clear that small businesses need to be at the heart of that discussion and that getting rid of obstacles to trade for SMEs across the single market is critical. If we are talking about increasing the trade of SMEs currently exporting and trying to get those that have not exported to do so for the first time, clearly the single market is the obvious place for them to start. Maybe it is more difficult for them to go to Beijing first before going to Berlin or Brussels. Therefore, I think the support that BIS, UKTI and the whole of the Government can give to ensure that those markets that should be unlocked across the European Union are unlocked is critical.

Q466 Nadhim Zahawi: That is absolutely right. Surveys of SME organisations talk about the proximity countries as being far more important than some of the sexier ones.

Lord Green: As first steps.

Q467 Nadhim Zahawi: Lord Green, you mentioned, quite rightly, identifying that gap, and you are beginning to fill that gap. Did that come to you proactively from ECGD or did Ministers essentially identify that gap?

Lord Green: At the time I got engaged in this, the process of producing the White Paper was well under way. By the time I got engaged in it, those product definitions were largely there. I think there was a widespread consensus. I remember meeting with Patrick when I was still in my previous incarnation and familiarising myself with the issues. He was talking about the products then with a great deal of enthusiasm. I remember meeting Leon Brittan on the same basis, and in Treasury too there was clear support. So, this is one of those ideas whose time clearly has come. You may say it is a little late, but it has come anyway.

Q468 Mr Binley: I am deeply concerned about this because Governments of both hues have talked at length about providing working capital for SMEs. You mentioned the import of working capital in your remarks, yet it has not happened; the banks have not responded. I speak as chairman of a company in that sector. The banks have made the whole thing much more difficult; conditions have been hardened sizeably, and we have reached the point where SMEs are now not fearful but very apprehensive of going to banks to seek loans. Why is that?

Lord Green: I am just a retired banker.

Q469 Mr Binley: I know that; that is why I ask you the question.

Lord Green: Clearly, it has been an issue, and I have now seen it through both ends of the telescope, because in recent weeks I, who spent a good deal of my career travelling around the world, have said I want to focus on travelling around this country. I have met a number of SMEs in different parts of the country on a series of regional visits, which I intend to continue. It is clear that there are some issues about finance. Sometimes they are about banks and sometimes they are about venture capital, which I think is another subject we need to address.

As far as the banks are concerned, my sense from the past eight weeks, not my previous incarnation, is that there are some difficulties that we need to address. Project Merlin committed the high street banks to a 15% increase in commitments for SMEs specifically. That is a chunk of change. I think you can rest assured that the Government will be breathing down their necks to make sure that those commitments are delivered.

I get the impression-this is anecdotal and it is early weeks for me-that the issue comes into focus particularly when a company is trying to expand its business. The existing relationship ticks over but, for example, when you have a wealth of overseas orders coming in and you need to buy a new machine, extend your plant or do something like that, i.e. take a step function change in the scale of the business, that is when you run into the problem of getting financial support, and I think we need to look at that.

Q470 Mr Binley: I am glad you talked about that because growth costs money, but my experience with the banks now is that they do not have the people who understand that. That is a major weakness right at the coalface, if you like, of our banking system. What can you do as an ex-banker to improve that understanding and make sure that banks understand that growth needs financing, and it needs financing early on in the process?

Lord Green: Indeed, it needs financing early on in the process. Just to park an important point, I think there are also some issues about venture capital that we need to explore, because it is not always a matter of bank finance to get things started.

Mr Binley: I understand that.

Lord Green: In the case of the banks, there is no doubt that there is a trend towards more centralised decision making and more credit scoring. We all know that. We also understand why that is to some extent inevitable, given the complexity of modern life. I need to speak generally and constantly remind myself and you that I am a retired banker; I am not going to speak for any particular institution. I do know that there is a real commitment on the part of the senior managements of the commercial banking arms of the companies concerned to get this right. I have met with some; I will continue to do so.

One specific initiative I want to get under way on a more structured basis than has existed hitherto is some form of structured relationship with UKTI around the country. This exists in some places because the people on the ground have made it exist, but I think we can institutionalise this a bit more where there is a relationship between the local UKTI international trade director and the ITAs and the relevant commercial banking managers in the key centres.

Mr Binley: I am grateful that you are where you are, because you know the business inside out and that is a plus. If I may make one final comment, the need is absolutely urgent if the growth agenda is to succeed. It is absolutely vital. I heard all the fine words, and they are fine words. I am not saying they are just that; I am not accusing you of that, but there is a real need for a deeper understanding in banks and Government has to use some sticks. By golly, if it does not have the sticks now, it never will.

Q471 Rebecca Harris: We talked on Tuesday about the implications of trade policy being an EU competence. Our witnesses said they considered that we had been punching below our weight under previous Administrations. How do you think you can do more to increase our power in the EU realistically, in particular to influence some EU members and members of the International Trade Committee who were characterised as globalisation sceptics?

Edward Davey: I am really pleased that you have raised the issue because it is absolutely critical, not least because some of the potentially easier low-hanging fruit for boosting trade is within the EU, particularly now that the Single Market Act programme is going forward. In terms of the general approach, again there is a whole Government approach to this, so all Departments are making an effort at pushing trade globally but also within the EU. Ministers such as myself, Lord Green and others are paying particular attention. For my own part, I have met Commissioner De Gucht; I speak regularly to Trade Ministers, and just this morning I talked to Dr Pfaffenbach from Germany; there are regular meetings at the Council; and I speak to members of the INTA Committee, so it is a key part of the work that I do.

You are right to stress the fact that not only does the EU have competence for trade policy but, post-Lisbon, for investment policy; there is also the increased role for INTA. I would encourage this Committee to do a little more work on EU trade policy post-Lisbon and the role of the INTA Committee in that. I do not necessarily agree with you that they are all globalisation sceptics.

Q472 Rebecca Harris: I said some were.

Edward Davey: That may well be true, but I am pleased to say there are people who share this Government’s and, I think, this Parliament’s view that we need to have a liberal approach to free trade. I think that members in the Parliament often reflect their Governments’ overall approach-not entirely-and we need to work very hard to try to persuade member states for the Council of Ministers input, and of course the Commission, and ensure that Members in the European Parliament understand the huge benefit of trade to this country and the EU as a whole.

Q473 Rebecca Harris: But presumably, previous Administrations also had plenty of meetings and tried to have some influence. Is there anything in particular? Do we have a new approach and focus? Is there anything that you think you can do better?

Edward Davey: As Lord Green said about trade in general, there is no magic wand, but I think it is a question of intensity and getting in early. One of the reasons we were keen to do the Trade and Investment White Paper was to get out a statement that the Government’s policy was comprehensive and dealt with issues that had been raised in the Commission’s own paper on trade policy. While we broadly welcome the thrust of that-and Commissioner De Gucht has a very liberal, open approach to trade, which is to be welcomed-there are suggestions in the paper about concerns about reciprocity. We are worried that that could be a Trojan horse for protectionist measures, and I think we should be arguing against that particular aspect of the Commission’s paper. Obviously, the proof of the pudding will be in the eating, but so far the work that UKREP and the previous and present British Governments have done to try to promote the single market agenda is important.

We shall soon be celebrating 20 years of the single market. If you look back at the estimates of the potential impact on growth that were made more than 20 years ago in the run-up to the launch of the single market in 1992, some of the more optimistic predictions have not been realised. A recent report showed that there was huge untapped potential-7% of GDP for the UK-if we could manage to unblock all the barriers and obstacles to trade across the single market, so there is a really massive prize to win. We have been playing our part to promote that single market agenda.

When we talk to Ministers, Commissioners and others, we have been trying to communicate a sense of urgency about the Single Market Act. The European economy is not exactly in the fittest state it could be; it needs to have all engines of growth working as hard as they can, finely tuned and fuelled. The worst possible thing is that we should put obstacles in the way of trade among ourselves, so we have to focus on the enforcement of existing agreements. That is the core message that we will try to get over in the Single Market Act. Some of the agreements made have not been properly enforced for a long time. A much bigger push on business-to-business services and mutual recognition of professional qualifications is very much in British interests but also the interests of the single market. There are new areas like low carbon and digital, and there is obviously the emphasis on SMEs for trade in the single market. We have been pushing this very hard. I am slightly loth to say that the previous Government would not have done that; I think it was doing that. I do not want to try to make this a partisan issue, but I think we are going about it with, I hope, some verve and passion.

Rebecca Harris: It was our witnesses who said they thought we had been punching below our weight previously.

Q474 Chair: You mentioned the potential role of the BIS Select Committee in that. We have noted that. May I also say that I think Ministers have a part to play in advertising the role of the EU in our trade policy as well, which is not always as well advertised as it might be.

Edward Davey: On that point, I hope that the coalition Government’s Trade and Investment White Paper cannot have that criticism made against it. Europe is very clearly placed as a key part of the potential growth prospects.

Chair: Shall we say I am not sure it has been fully appreciated?

Q475 Nadhim Zahawi: What you are doing in terms of the single market is all great and good news. Perhaps I may take you beyond that in terms of the rest of the world. Obviously, we want to negotiate through the EU, because we then carry more clout with the rest of the world, but how do you balance that with going up against some of our EU partners in places like China, in terms of support for our own businesses versus, say, German businesses?

Lord Green: I think that is about trade promotion, which is not an EU competence; that is up to us as a Government and the individual businesses to promote their goods and services in China. We are in competition with all of our EU partners as well Americans, Japanese, Koreans and so on. It is up to us to ensure that the support we offer in Beijing, Chongqing or wherever it might be is as good as it can be.

That comes back to some of the things I said earlier. This is about FCO commercial diplomacy; it is about UKTI’s services here, in terms of encouraging exporters to get into the market, and there, in terms of helping them wade through the thickets and undergrowth. It is very much, in the case of China, about city coverage, and not just being in Beijing and Shanghai. I think one way or another we cover seven cities either directly or through CBBC.

Susan Haird: We have staff in four; CBBC more.

Lord Green: I have picked up no evidence to believe that we fall short of what our obvious peers do in these kinds of markets. On the contrary, in many ways I think we get quite a lot of plaudits for how well we do it, which is not to say it is perfect, but the fact is that customer satisfaction surveys produce pretty strong responses; just shy of 80% are either satisfied or very satisfied. You could say it ought to be 95%, and that is true; you cannot rest on 80%, but it sounds like it is something to be enhanced rather than a major problem to be fixed, if I can put it that way, but plainly it is a very competitive business.

Q476 Nadhim Zahawi: I was thinking more about balancing the role of negotiating through the EU and then negotiating bilaterally.

Lord Green: I see what you mean.

Edward Davey: I think Lord Green answered the question in the correct way, in terms of the competencies. The EU has competence on market access, effectively, and multilateral trade, whether it is Doha or EU FTAs with individual countries or regions, but it does not have competence with respect to trade promotion, which is UKTI.

Lord Green: One of the aspects of trade promotion-this falls to the Foreign Office and commercial diplomacy-is to identify key specific market access barriers of a nonprice kind, which are often informal access barriers, and lobby to get those removed on behalf of specific businesses in specific areas.

Q477 Rebecca Harris: How much influence do you think we can have on the WTO through the EU as well? I know you have a strong aspiration that Doha should be completed by the end of 2011. It is not in your gift to do that. Some of our witnesses have joked that they are not sure whether Doha is dead or in the freezer, which is rather worrying, so the question is really about how much direct power you think you have to achieve that aspiration.

Edward Davey: We have certainly argued within the EU that Doha should be a top priority. We have had very willing partners in that across the EU. When I speak to Trade Ministers and the Commission they also agree that Doha should be a priority. I would not say the chances are great but they are there; there is a real window of opportunity this year. Therefore, we and other member states and the EU are working hard to try to bring it about. It featured very highly in the G20 in Seoul; the activity in Geneva has increased this year.
We are taking note of all the different key players: the US, China, Brazil and India. We note the different meetings that different key players have with each other as we try to create momentum.

I can assure you that Lord Green, myself, the Secretary of State, the Chancellor, the Prime Minister-the whole of Government-have this in our sights. You are right that it is not in our control, but we are working with the EU, not against it, and we think it is worth really trying because the potential of £110 billion to the global economy is clearly massive.

Lord Green: There are some things we should be working for in the case of the WTO irrespective of whether Doha is completed: the speeding up of dispute resolution procedures for one thing; getting Russia into the WTO for another. I think that allowing the WTO to have competence in overseeing export controls as well as import barriers will be a helpful new initiative.

I do not know whether Doha will get done. I agree with what Ed has said: this is worth the effort. The chances are not zero; they are certainly not 100%; they are probably not 50%, but they are not trivial and it is worth the effort. But there are other things we should be doing in respect of strengthening the WTO that we should not forget about, whatever happens to the Doha round. We would also support the EU continuing on the parallel track of free trade agreements.

Edward Davey: We could talk an awful lot about the FTAs if you would like because, as we go through the different regions and key countries of the world in the Trade and Investment White Paper, there are a number of opportunities in that regard.

Q478 Nadhim Zahawi: Lord Green, you mentioned the Cabinet sub-committee that you chair. Can you share with our Committee some of the details of what work you have been doing with that committee and how you are encouraging colleagues within their Departments to do the right thing and compel them to give growth the priority it should have? You know as well as I do that it is about human behaviour. When you are running a big organisation everyone says great things in a meeting, but what makes a difference is getting stuff done on the ground. Are you feeding back to the Departments what UKTI are telling you inward investors and businesses want in terms of exports? What is that process so you get beyond just a talking shop?

Lord Green: It is a very well-taken point. First, it is new. The committee has had two meetings, the first of which was to sign off on the White Paper. The second meeting was the week before last, when it looked at the beginnings of some action plans, and I will come back to that. I am chairing it; Ed is the deputy chair, and it has all of the relevant Government Departments represented at ministerial level on it. It is underpinned by an official cross-Departmental committee, which is important for obvious reasons.

It meets monthly and it will have three standing items on its agenda. One is an action plan. What I mean by that is something with which one is familiar, certainly from my previous incarnation. When you want to achieve some change within a complex organisation you have to convert the policy statement into 800 action steps, assign responsibilities, timelines and so forth, and then it is the drudgery of overseeing that and continually refreshing it. That is the central work of the committee, supported by the officials.

There are two other standing items. I do not say they are currently in place in the way I want to see them; we have been going for only two meetings. I want to see a grid of ministerial overseas visits so we can induce an element of coordination of that and ensure that every Minister who goes overseas, with whatever primary purpose-let’s say it is the Health Minister going to Indonesia for a health conference or something-carries with him a brief with the key points we want that Minister to raise on the trade and investment front in Indonesia in that example, and so forth. Everybody tells me that coordinating ministerial visits is not as easy as saying it, but it is important to do it.

I also see the possibility-it is still a gleam in my eye-of being proactive about this; that is to say, identifying a country that we deem to be important and has not had a ministerial visit for some time and tee-ing that up. These are early days but that is a second standing item that I intend to be a central focus of the work of the committee. The third standing item is of a different kind: a monthly report on the most recent trade statistics just to remind us how we are doing, or not doing, and why it is important. In addition, there will be ad hoc items. The next one will be to focus on the multilateral issues that Ed has just been talking about, and so forth. But we have been going for two meetings so far. I have to report that the atmosphere on them is very good. You might say that this is still a honeymoon period as far as I am concerned, and of course that is true. Nevertheless, I start with a very strong sense that everybody wants to work together to get this right, and I hope and believe it will continue that way.

Edward Davey: Clearly, we will not be publishing all the work on the action plans in great detail, but to give you an idea, chapter 4 of the Trade and Investment White Paper talks about the action of the first steps and there are 62 different actions there. That is feeding very much into Lord Green’s committee.

Chair: I welcome all the comments you have made. The Government seems to be making all the right noises about this. However, I continually get feedback from the business community, saying, "Yes, we welcome it, but why is there this policy on visas? Why is there this policy on localism and planning? Why is there this policy on higher education?" In effect there is a gap between those policies and what they see other Departments doing that impacts both on their business potential and the declared growth objectives of the Government.

Q479 Nadhim Zahawi: Chairman, may I pick up that point and make a suggestion? Maybe one of the items that the sub-committee looks at could be Government Departments not doing damage, rather than just doing good, and just flagging up by an amber or red light the damage that they could do. Also, without wanting to add to the complexity of your grid, many parliamentarians and all-party groups go round the world. Some parliamentarians have expertise in particular countries, which could help. Both Rebecca and I had a particular experience of a very good ambassador and UKTI representative, who briefed us for three hours before we began our meetings with officials; we were able basically to talk the same talk, so it was joined up in terms of the priority areas we were looking at and so on. Those kinds of meetings are very useful for parliamentarians. You have a much bigger group of people.

Lord Green: I am glad you mentioned the last point. Last night I was by invitation in one of these committee rooms with a group of Conservative and Lib Dem MPs talking about this agenda and exactly the same point was made. There was a chairman of an all-party parliamentary group present-the group on Saudi Arabia, as it happens. We should make sure that we support parliamentarians on a systematic basis, because I see this as a non-partisan issue. We are all in the same boat on this, and clearly there is an opportunity to make use of all representation that this country has overseas, whether it is parliamentary or governmental.

If I may respond to the Chairman’s point about other issues impacting businesses, of course this is a complex issue. It is part of the agenda of the BIS Department as a whole to make sure that regulation does not unnecessarily get in the way of growth in the business sector. You do not need me to tell you that this is often a complex matter. You mentioned visas in particular. We all know that it is a sensitive and difficult issue. The Government has outlined its framework on work permits; it has yet to do so on the educational side. As to the former, I would say we have landed in a reasonable space but it has to bed down. There are plenty of specific problems that we ought not to allow to happen and we need to find a way to see if we can ensure it beds down in a sensible manner and does not cause unwanted side effects.

On the educational side, I do not think it would be appropriate for me to anticipate what the Government says beyond the general recognition that education is important both directly as an earner of foreign exchange-as an export-and also as a longer-term generator of relationships that are valuable to this country. If I may provide just one anecdote in that respect coming from my previous incarnation, the head of the Chinese banking regulator was a product of the Cass Business School. He speaks fluent English with an English accent. That kind of long-term relationship is clearly extremely valuable to all concerned.

Q480 Chair: I have also seen it in all sorts of areas. Obviously, I welcome your remarks, in particular the idea of briefing Ministers from other Departments when they are paying visits abroad. We may well want to come back to monitor the impact at future meetings as well. I go on to the specific area of the creative industries. Again, if our manufacturing performance is under-recognised, that is equally true of the enormous contribution the creative industries make to the economy. Feargal Sharkey of UK Music was interviewed by us. He was concerned because he did not seem to think that there was any sort of export strategy for the music industry. Given the enormous earner that this is for Britain and the fact that by all assessments Britain is a world leader in this area, what can we do to maximise the benefit from it? When can we expect a dialogue and strategy on it?

Lord Green: First, I recognise that the creative industries are extremely important. I have seen it with my own eyes. I went on the Prime Minister’s trip round the Middle East a couple of weeks ago and there were a number of representatives of not the music industry but the design industry. I have seen it for myself also in Shanghai where last year I visited the Expo three times. The British pavilion was a brilliant example of the product of British creative industries and was awarded the gold award for best foreign pavilion; 7 million visitors, 95% of whom would have been Chinese, went through it over a four-month period. Thus, for an extremely good cost it enabled a large swathe of the Chinese population to see what we mean by British creative strengths. It is apparent to me that this is extremely important; indeed, it is part of a more general point-that services are a higher proportion of our exports than of almost any of our competitors, which is a real reflection of the underlying strength of this sector. I have to say I do not know whether there is a specific strategy for creative industry.

Susan Haird: Yes, there is. We have a creative industries marketing strategy, which UKTI has developed in consultation with the sector advisory group, led by Sir John Sorrell. Under that we seek to promote the UK creative industries sector as a generic group, but also look at sub-sectors beneath it. The number of companies in the creative sector that we have helped has gone up from 350 in 2007-08 to about 1,000 last year. We support a lot of companies exhibiting at major trade fairs overseas. I believe there is a music fair in Cannes that we have supported in the past; there is one called South by Southwest in the US.

We do a lot for the music industry within the context of marketing the creative sector generally. We have produced a film called Love and Money, which has been given wide acclaim. That is a multi-screen film that can be used by our teams around the world and in the UK to promote the creative industry sector.

Q481 Chair: I welcome the comments you make, but they highlight a matter of profound concern to me: notwithstanding the fact that Lord Green has been in post for only a short time, although there is a strategy, the Minister who is to promote that strategy is not aware of it. That is a matter of real concern that needs to be addressed as a matter of urgency.

Lord Green: I will make sure that I am next time.

Q482 Chair: Lord Green, I believe that you chair a sub-committee on trade and industry but there is no DCMS Minister on it. Would you be prepared to look at that, in order to look at the potential for developing that strategy?

Lord Green: I do not think that is correct; there is one.

Q483 Chair: I understand that you chair a Cabinet sub-committee on trade and industry.

Lord Green: That is the one.

Susan Haird: Investment.

Lord Green: Trade and investment.

Chair: I have "trade and industry", but whether it is trade and investment or trade and industry-

Lord Green: John Penrose is a member of it.

Q484 Chair: John Penrose is on it, is he?

Lord Green: Yes.

Q485 Paul Blomfield: I want to follow up the Chairman’s point about the creative industries strategy and express a slightly different concern. It is reassuring from the discussions we have had with the sector to know that is in place. It is a little concerning that the representatives from the sector to whom we spoke were not aware of it. I just wondered what consultation or engagement there was with them in developing it.

Susan Haird: This was done through the Marketing Strategy Board for the creative industries, which Sir John Sorrell chairs. There is a wide range of people on the Marketing Strategy Board drawn from different parts of the industry. Obviously, it is difficult to consult everybody when you are doing things, but we do work with architects, designers and the creative sector generally: music, film-a wide range. I am not sure who was giving evidence.

Q486 Paul Blomfield: Feargal Sharkey, head of UK Music, for example.

Susan Haird: If I remember rightly, there are a number of different bodies that represent different parts of the music industry. It may just be that that individual was not part of it.

Lord Green: As I am the chairman, I will make sure that I get myself up the learning curve before we meet again.

Chair: Paul, do you wish to develop this?

Q487 Paul Blomfield: I will not, but I think it is something we ought to follow up, if not at this stage.

Susan Haird: Would you like me to write to you about the creative industries’ marketing strategy and how the consultation process was done?

Paul Blomfield: On the consultation, that would be very helpful.

Q488 Simon Kirby: If I may mention British business ambassadors, which fits in at this point, clearly there is some design expertise and also some fashion expertise, but if you look at film, video, video games or music, there is a gaping hole. It might be an idea to look carefully at that.

Lord Green: We should look at that.

Q489 Chair: I think the general point is that this is a major part of the British economy that is under-recognised in the policy-making structures that we seem to have within Government.

Edward Davey: Sometimes it is the label that is attached to them. An awful lot of work is done by the whole of Government in the different elements of intellectual property, which is critical to the creative industries. I do not want this Committee to be under any illusion. We place massive emphasis on protecting and promoting intellectual property rights, whether it is within the EU or through the EU competences in our multilateral trade negotiations. I would have thought that was a fundamental issue for the creative industries.

Q490 Chair: We understand this. We will probably be looking at IP as a separate issue. To finish off on the creative industries, I want to turn to the issue of financial support. This appears to be a real problem in this sector because, if you like, intellectual property is much more difficult to assess in terms of asset value than other assets. Do the creative industries qualify for the business growth fund?

Edward Davey: I have to say I am not absolutely sure. I do not see why they should not.

Q491 Chair: Anybody else?

Susan Haird: Is this the fund of which Michael Heseltine is in charge?

Q492 Chair: That is the Regional Growth Fund. This is the one the bankers are putting up.

Lord Green: Oh, that one. I do not know the answer; I do not see why they should not.

Q493 Chair: May I ask Ministers to look at this? The evidence that we received from Feargal Sharkey in particular, but backed up by others, was that the creative growth sector seems to find it almost impossible to access finance from our existing financial services. Obviously, if a business growth fund is to do what it says on the tin, it may need to address that issue.

Lord Green: This is the first time I have done this, but it seems to me the appropriate thing is to look into it and write to you. I have seen nothing to suggest that the bank fund would not support creative industries. We should seek to get that confirmed for you. I would want to end this part of the discussion by echoing what Ed has said: I think this is manifestly an important part of the economy. By its nature it is a very broad sector-we have talked a bit about music but actually it is about architecture, creative design, fashion-and a fairly diffuse one, too.

Q494 Chair: I should like to move to another issue, on which you have probably had some feedback. There are concerns in the business community about the Bribery Act. Can you reassure us that the business concerns about this are understood and recognised, that the guidance to the Act will be clearer than it is at the moment, and that it will not impact upon the ability of British companies to trade and invest abroad?

Lord Green: I can assure this Committee that the Government is committed to the Bribery Act and is aware that the challenge is to produce guidance that is helpful to businesses and is expressed in lay people’s terminology, such that businesses can make use of it. The clear intent is to ensure that businesses can carry on their normal business in an appropriate manner without feeling circumscribed by the Bribery Act in ways that were not intended. The Ministry of Justice is working on the guidelines. When they are finalised they will be issued and there will be a three-month period during which businesses will have the opportunity to digest their implications, and the Act will then come into force. I do not think there is any real voice for saying we should go back on the specific commitment to implement the Bribery Act.

Q495 Simon Kirby: If I may make a small observation, which will be a continuing theme in most of what I say this morning, the Bribery Act is probably less of a problem for big corporations and businesses, because they will have lawyers and experts who will tell them what is permissible and they will have a strategy in place pretty quickly. I am just worried about small and medium-sized businesses, which will not have that support. That is my only observation to you.

Lord Green: I quite agree with you. I think it is likely to be a bigger challenge for SMEs just because they do not have the administrative apparatus to put in place the framework necessary to ensure that they are comfortable complying with it. I am afraid it is an inevitable challenge because you cannot get round the fact that the Bribery Act is coming into being. I do not think there is any real constituency for saying that Britain should go back to looking and feeling on the international side as though it is a bit behind its peers in terms of legislation in this regard.

Edward Davey: It is worth saying that there are many parts of British business that welcome the Bribery Act, and indeed championed it, because they want the enhanced reputation from strong ethical standards and reduced costs to ensure that we play on a level playing field with other countries. I do not detect across Parliament or the business community actual opposition to the fundamental principles behind the Bribery Act, but we need to make sure that the guidance is correct, as Lord Green says. Rushing it would be a really bad mistake, particularly for SMEs-as you said, Simon.

Q496 Paul Blomfield: Clearly, we all share the agenda of promoting trade and investment and growth to drive the economy. Also, UKTI is clearly a key body in delivering that agenda. Are you not concerned that the reduction in its budget will undermine our ability to deliver?

Lord Green: It will provide challenges, of course. In the ideal world you would have more money and therefore be able to support a larger effort, but we are in the context of a spending review, the overall parameters of which we are well aware, where it is felt clearly appropriate that UKTI should play its part alongside essentially all other Government activities. It is up to UKTI to ensure that it does the job as efficiently as possible, which means looking at its back office and protecting the front line as much as possible within the context of resources, which are constrained.

Q497 Paul Blomfield: We have been trying to look at the actual numbers involved. From the conversations we have been having, it seems to us that UKTI is taking a particularly high hit. The question is whether that is counter-intuitive in terms of what we are trying to achieve in delivering growth.

Lord Green: I am not aware that it is taking a particularly high hit. I think it is taking the kinds of reductions that many other Government activities face.

Susan Haird: It is about 25%.

Lord Green: It is 25% over the time frame. There are plenty of other Government activities facing that. In the ideal world you would want a larger budget, because the evidence is that the more you do, the greater the payoff. That would not be true all the way up the curve, but it looks as though we are at a point in the curve where that would be true, but there is the real world in which UKTI operates. I think it is true of any organisation of 2,500 people that there are likely to be opportunities to get more efficient in the context of straitened times.

Q498 Paul Blomfield: Perhaps I may press you on that specifically in terms of what those efficiencies might look like. You have said you have in mind a number of new initiatives, which presumably will require resources. The CBI has made the case that, for example, the Passport to Export programme should be expanded. What is the impact of the changed shape of UKTI to meet the 25% cut-what programmes are to be reduced or cut-and accommodate your other new initiatives?

Lord Green: First, Passport to Export is not something that should be cut. I think there is scope to use more internet-based assisted networking and sharing of experience among SMEs as they get engaged in international markets. I do not think as much of that has happened as could do, and that is an area that is extremely cost efficient. We will face a reduction of the country coverage through ITAs, particularly given what is happening in the RDAs. Nevertheless, UKTI has set itself a target for assisting more companies this year than last year; in other words, we still believe that you can, if you will, wring the sponge and make it more efficient.

The completely new initiatives have to do with things that are quite low-cost in absolute terms, even if they are quite high unit cost. Relationship management, which we talked about a while ago, effectively involves the creation of a new unit, but it is a small number of people. They might be quite high-cost, but they are a small unit of people to support the relationship management of big-ticket exporters and inward investors. I do not think e-networking has a particularly high cost to it, but there is no doubt that if you cut the budget like that you will put the regional network under some stress.

Q499 Nadhim Zahawi: Ms Haird, you told us on Tuesday that the Foreign Office funds for UKTI were published as part of the comprehensive spending review. Your officials have since told us otherwise. Can you shed some light on the situation when it comes to the UKTI overseas budget?

Susan Haird: As I understand it, they have sent to you the overall totals for the spending review. That was sent in yesterday evening. What I gave-it was not published, nor would it be, although I am very happy to make it available to you-was the information post by post, about how much money UKTI would have to deploy in China, India, Brazil and so on. That is what I will send to you as soon as it is settled, which will be in a few weeks’ time. That is settled in consultation with the Foreign Office, as I explained yesterday.

Q500 Nadhim Zahawi: We were told that these were just assumptions and estimates by UKTI but not published, contrary to what we were told on Tuesday by you.

Susan Haird: Maybe I did not use the word "published" in a strictly correct manner. I meant that they were available. They will be in the accounts and so on. The way funding works between us and the Foreign Office is complex. We have some money allocated through a ring-fenced budget, which pays for certain things; we have some money allocated direct to post, which pays for other things; and there are overheads to do with accommodation, the cost of school fees and so on. [Interruption.]

Nadhim Zahawi: That is probably them on the phone, telling you something else.

Susan Haird: That is an overhead. It is complex. What I undertook to do yesterday was disentangle the complexity and give you what I understood you wanted, which was the amount of money available country by country. That money will be a mix of the money allocated to pay for staff and the money allocated, as I explained yesterday, to pay for events that posts have agreed with us they will do to promote particular sectors, like the creative industry sector.

Q501 Nadhim Zahawi: Are the assumptions estimates or real figures?

Susan Haird: What I am going to give you is getting a lot closer to real money. It is not a completely separated out budget; we do not have separate accounting officer responsibility for the Foreign Office money. The chief executive is responsible for UKTI’s programme money that is allocated direct by Parliament. The BIS permanent secretary is responsible for the BIS admin, and the Foreign Office permanent secretary is responsible for the Foreign Office admin budget. We are given money, and it is relatively complex on the Foreign Office side.

Q502 Nadhim Zahawi: I can tell because you have already lost me.

Susan Haird: I lose myself at times.

Lord Green: May I go back quickly to a point with information hot off the press? Creative industries do qualify for the growth fund; it is open to all industries.

Chair: We will note that with interest. Again, we will monitor that.

Q503 Paul Blomfield: I want to follow on from Nadhim’s point, referencing it back to my previous point. I guess that it may not be possible to answer this-perhaps Susan could provide us with the information subsequently-but how many regional trade advisers in posts overseas will be lost through the cuts made in the Budget?

Susan Haird: Overseas we hope not to lose posts. The decline through the spending review is lower on the Foreign Office side than elsewhere. There are ways in which we can save quite a bit of money overseas without cutting headcount, including in particular continuing the policy we have pursued for a number of years of localising posts where possible.

I think I explained when I was here on Tuesday that we have a mix of UK-based diplomats who are posted overseas for a period and locally engaged staff who are recruited for the local knowledge that they bring. Many of them have business backgrounds. For some years now we have been localising fairly significantly, and many of our posts overseas are now headed by locally engaged staff, including the Baltics as a region, which is run jointly out of Estonia and is headed by somebody locally engaged. It is much more cost effective where you can do it. It is not possible to localise every post in every market, nor would we ever want to do that.

As to the English regions, where there is a loss not only of UKTI funding as a result of the spending review but also, as I explained on Tuesday, a loss of RDA funding because the RDA has topped up the spending on trade in those regions, it looks like we will lose about 50 international trade advisers. We believe that there are efficiencies that can be achieved both through smarter use of e-delivery, as the Minister said, and also, for example, by trying to reduce the number of times that trade advisers visit companies and encouraging them to visit the office. There are ways of doing things smartly that will drive up efficiencies.

Lord Green: I make two comments, if I may. First, I welcome the trend to engage staff locally, not merely on cost grounds, because I think that as a general proposition it is probably more effective in getting a real feeling for what is going on in a local market. Secondly, on the English regions we will do what we can in terms of efficiency, but I do not think we should be assuming that there is a kind of alchemy to be performed here. The fact that we are spending less over the timeframe of the spending review will mean a reduction of coverage.

Q504 Paul Blomfield: To ask a brief supplementary, 50 are being lost out of a total headcount of how many currently?

Susan Haird: The total number of international trade advisers at the moment is 265. That number is augmented by the regional trade directors and their deputies, so the total number of staff employed in the regions, as I think I said on Tuesday, is about 300. The international trade directors and their deputies will be customer-facing. There will then be a small support team, not all of whom will be customer-facing. It is a 19% reduction.

Lord Green: It is a non-trivial reduction.

Susan Haird: But we are nevertheless aiming to keep the number of companies we help constant, and indeed increase it, over the spending review period.

Q505 Simon Kirby: Will the increase in local employment and the loss of RDA money disproportionately affect the inward investment part of the business?

Lord Green: Susan might want to add to this, but shifting overseas to locally engaged staff should not affect inward investment promotion. The brief is exactly the same whether the person is locally engaged or a UK expatriate. As far as this country’s coverage of FDI support is concerned, with the abolition of the RDAs we are now in a transition, as you will be well aware, from them to the local enterprise partnerships. As you may have gathered on Tuesday, UKTI is in the process of awarding a contract-the bids are in process at the moment-to cover FDI support for England excluding London, which will bridge or replace the services of the RDAs domestically, but there is no doubt that we are in a bit of a transition.

Q506 Chair: We had some discussion on this issue on Tuesday with the acting chief executive. This is to Susan Haird: to pick up one point arising from Tuesday, you did say in your evidence that some of the UKTI’s work was being contracted out to Business Link. Business Link is being closed, so what arrangements actually are being made?

Susan Haird: What I said on Tuesday referred to the trade side of the house. We have contracts at the moment in the English regions with the likes of chambers of commerce, as I think I described them, Business Link and similar bodies. The arrangements are different according to each region. In the main, the organisations are associated with Business Link rather than Business Link direct. "Business Link" is a bit of an umbrella term. The contract in the English regions will continue.

Just to amplify what was said just now, on the inward investment side I think I explained on Tuesday that we were looking to get efficiencies there as well. Although there is less money because the regional development agencies will have gone, by letting a national contract for the English regions the sector specialists that we will use to promote inward investment and handle actual and potential inward investors will not be bound by geography. They can travel around the UK and put their expertise to use in different regions.

I do not think that on Tuesday we discussed the overseas network. The RDAs currently have quite a number of people overseas. Again, there I think we can achieve considerable efficiencies, because a potential Chinese inward investor, to take an example, does not need to get very specific about regions too early on. I think what we can have are a smaller number of specialists who can cover a broader number of regions, and we can get considerable efficiencies that way.

Q507 Chair: It comes down to the core issue: exactly how will trade advice be given to companies in the region with the demise of the RDAs and Business Link? Could you explain how that will happen?

Susan Haird: Yes. The RDAs were not involved in direct delivery on the trade side. What we had was a system where the international trade directors were co-located with the regional development agency; they agreed jointly a regional international trade strategy. The trade strategy was delivered by international trade advisers on the ground who were employed by the chamber of commerce, let’s say, in a particular region. We would have placed a contract with that chamber of commerce, or more commonly a group of chambers of commerce, and those arrangements are unaffected by the demise of the RDAs, except that the RDAs put in extra funding, which paid for additional international trade advisers.

Q508 Chair: So the structural arrangements should at least still be there, but will have less funding than before?

Susan Haird: Exactly.

Q509 Chair: Could it impact on the structure? The structure may in part be dependent on that funding.

Susan Haird: It will not impact on the structure of delivery, no. The contracts will continue.

Lord Green: It will impact, however, on headcount.

Susan Haird: It will impact on headcount, yes.

Q510 Chair: That was my next question. Will there be as many trade advisers?

Susan Haird: No. This is the 19% reduction in the number of international trade advisers that I described a moment ago. There is no escaping from the fact that there will be fewer people on the ground in the English regions delivering trade services.

Q511 Chair: There will be fewer people delivering that service to companies in the region.

Susan Haird: There will, but we are planning to serve more companies over the spending review period, and to do that by smarter methods of working, including edelivery and the SME-to-SME networking site. We will make greater use of outreach events. To describe what they are, they are held in the English regions sometimes at a time when we have people from overseas posts back home. Take, for example, Asia taskforce events, which we have run in a number of cities around the country. They are designed to encourage companies to export to Asian markets. They will take the form of a plenary session followed by clinics in small groups and then one-to-one surgeries, almost, where the SME can meet people from our post overseas. That can then lead them to go direct to be served overseas as opposed necessarily, unless they so wish, to working with a regional international trade adviser.

The regional international trade advisers work very much with companies that are new to exports through Passport to Export and companies that are moving on, perhaps after a couple of years of export experience, and want to diversify. But a number of SMEs and companies more generally will go direct to our overseas posts either off their own bat or because they will have met us at one of these clinics. There are a number of ways in which we can circumvent the potential impact of the reduced number of international trade advisers, and we shall make every effort to ensure that our customers see no deterioration of service.

Chair: Again, that is something the Committee will want to monitor.

Q512 Nadhim Zahawi: We have heard throughout this inquiry that there is a real need for people in foreign posts at UKTI to have a business background and to be from business. With the budgetary restraints, do you think it is realistic that you will attract those kinds of people from business and pay the salaries that they will command?

Lord Green: As far as the overseas representation is concerned, the shift to locally employed means that quite a lot of the people we do locally employ have business backgrounds, and you can do that simultaneously at reduced cost as compared with an expatriate. I think that is where the challenge comes. Here I have met a number of ITAs and many have business backgrounds.

I think the real issue arises when you want levels of senior leadership within UKTI. I believe that we need more people from the private sector engaged in key positions in UKTI. For example, I would like to see the unit that we have described a couple of times that supports relationship management and big-ticket inward investment headed by somebody we recruit from the private sector, and there plainly you are into considerations of cost per head.

Q513 Chair: A representative from Mercedes, a British business ambassador, said we needed to be more aggressive and pushy in selling ourselves. How do you think you can get this across to your staff? There are I suppose two levels: the governmental level and particularly UKTI level.

Lord Green: I think this affects governmental, UKTI and ECGD level-and British business ambassadors, not to mention the businesses themselves, where part of the challenge here is to get them to take the risk of crossing the water. The first time an SME does it there is a risk involved and it can require some imagination and drive. At ministerial level you can be assured that from the Prime Minister downwards there is a real intent here. The Prime Minister barely loses an opportunity in the public domain to ram home the importance of trade and investment. Last weekend he was effectively saying we should not be ashamed to be called salesmen, so this is a cultural change led from the top.

In the case of UKTI, we are looking at the contract that we have described as being in the process of being awarded. A decision has not yet been made. An element of performance-based incentive will be built into the contract. To the extent that we are successful in recruiting some key private sector people into UKTI, we have to look at their packages and make sure they are competitive, and maybe those have to have some kind of performance-related component. We have to work on the detail of that. I come from an industry where I know how sensitive that topic can be. We have to get it right, but clearly you have to be competitive, and the fact is that most industry has a component of incentive performance in people’s compensation.

More broadly through UKTI, my general impression is that there are many people in it who are energetic, marketing-oriented folk. It is the job of the management of UKTI to ensure that those people are brought into the key positions, with performance appraisals and so forth focused on the degree to which they are able to be proactive and get all the way to closing deals, or support a company all the way to closing deals, so there is a real sense that you are not just about policy; you are about getting things done.

The other area that it is important to dwell on for a moment or two is the Foreign Office in commercial diplomacy. Something of a cultural change needs to be embedded in the Foreign Office. Cultural change in any organisation takes a bit of time and consistent pushing. One of the work programmes being embarked on this year in the Foreign Office is a programme of seminars and support for basically the bulk of the desk officers in King Charles Street, such that they become alert to the implications of commercial diplomacy and what it takes to be successful, both as an individual and as an entity supporting the British trade effort. I think there is quite a lot of work we need to do in that general area. My overall impression of Foreign Office ambassadors in the field is that, if you compare the position now with 10 years ago, we would all say it is much, much better.

Chair: We shall be talking about ambassadors in a moment. We now come to the role of large companies and Ministers in UKTI.

Q514 Simon Kirby: The Trade White Paper talked about a change in emphasis, and Ministers cosying up with certain big businesses. We heard on Tuesday from academics that this had the potential to distort trade. Do you understand that fear?

Lord Green: I think it is important to do it right, but this is not a radical departure; to some extent it is a systematisation of some things that tended to happen naturally. In a way, from my perspective it is taking a leaf out of the way in which any large services company, whether it is a bank or another kind of services company, go about their relationship management of key clients. Of course a large exporter is not a key client of the Government in the same way that a large company will be a key client of a bank, but there are some parallels.

What does a large exporter want? It will want particular support in a particular country when it is coming up to landing an important business deal. I do not know what academic said this but, frankly, it is a rather purist view to say that you do not need that support, because the absolute reality is that the French, Germans, Americans and everybody else do this. If we do not do it we are effectively condemning our big exporters to have one hand tied behind their back as they do it. We absolutely need this.

It has been going on. I certainly would not want to imply that nothing of this kind has been happening over the years. We all know it has been going on. I think there is a case for a more structured approach to it without bureaucratising it such that, for example, you would have a Minister who, on the basis of departmental responsibility plus knowing the person, would be the principal point of contact at ministerial level for the chief executive or chairman of this company when he had an issue in the export domain. It might be any kind of issue, from the trivial to the important. He or she needs to know who to ring up. It is almost as if he has his mobile phone number. The Minister says, "Look, I hear you; I’ll see what I can do," and then there will also be a senior official who works with the Minister to whom the Minister can turn and say, "How can we sort this out for this company?" That is how I see it operating.

Q515 Simon Kirby: To press you, should the emphasis be on big manufacturers who create tax and employment in this country or on global businesses that are based in this country-or is there a difference?

Lord Green: I do not think there is much of a difference in this day and age. First, we should start by not trying to boil the ocean; we should start with the top 10 exporters from this country, or a modest number to start with-they do not have to be British owned-and inward investors, actual and potential. You are looking at inward investors, some of whom may not already be here but who we clearly would like to be here, and again you would have that relationship management approach in place.

I give one named example. Recently I was in Belfast as part of my regional visits. I called on Bombardier while I was there. They have a major investment there and also in Derby. They are a major company worldwide; they are a major employer in this country; and, what’s more, they are very high-tech in the case of Belfast. I know the CEO from a long time back. I think it would be appropriate for him to know that he can always call me if he has any particular issues, but there ought to be the same close relationship with the British High Commissioner in Ottawa and on the ground with the relevant person in Invest Northern Ireland, Belfast and the nearest point of contact for Derby-and a senior civil servant to whom I can talk. If he does call me up to say he has this or that problem I can say to the appropriate official, "Let’s see what we can do to help." There is a risk of making this sound more bureaucratic than I would intend it to be; it is actually practical help.

Q516 Simon Kirby: I understand that entirely. Some other countries, for instance Germany-perhaps you spoke about this on the telephone this morning-seem to have far more success than the UK in encouraging their large companies to piggyback small- and medium-sized businesses. If they open up in China, for instance, they take those businesses with them. I went to China last week. We heard from BT that that was not their intention at all and that they would involve themselves almost entirely with local businesses. Do you not think we could learn something from Germany?

Lord Green: We can certainly learn something from that, because I think big companies have a responsibility to their supply chain. We can swap stories of course, but I think many of the companies I know take their responsibilities to their supply chain very seriously. There are opportunities to help SMEs that are part of the supply chain; indeed, I would have thought it would be in the interests of a big company to help the SMEs that are part of its supply chain. Some of that help can take the form of helping them to get into the foreign markets where they are investing or exporting. We need to ensure that we do as good a job of this as we possibly can.

Edward Davey: The White Paper talks about two initiatives that UKTI will be taking forward: the peer-to-peer online mentoring proposal and the catalyst proposal, trying to use business and academics to champion British business and investment opportunities.

Q517 Chair: To ask a supplementary, is the Government looking at what Germany does in order to get this success relative to the performance of British business? If not, will it do so?

Lord Green: I can assure you that I personally look very carefully at the German model. Germany happens to be a country I know well. As recently as two days ago I attended a dinner where we had a senior consultant from one of the best known German consultancies talking about Mittelstand and how that has prospered and what are the conditions within which it operates, with a view to seeing what lessons we can learn. I think there are some lessons that it is important to learn.

We also have to recognise that we are not Germany and will not become the kind of economic and social structure that Germany is. For instance, as I am sure you are aware, all German companies are required by law to be a member of their local Handelskammer. I cannot imagine it being acceptable within British society to mandate something like that. Therefore, it is just a fact about the way Britain operates that we are into the kinds of arrangements that Susan described, where you are operating round the country with different patterns of support depending on what works in a particular area because you do not have that kind of uniform structure that Germany has had for decades.

I think there are some lessons to be learned about the way they do trade delegations. It appears to be the case that when they do trade delegations they take not only the big companies-I think this goes to your point, Simon-but also a group of SMEs alongside them. We have tended to do it as one or the other, and we may be missing a trick there, which is why I say I think we may have some lessons to learn.

Q518 Simon Kirby: There are developing economies around the world. As these economies mature and look to more service businesses, which we are strong at-it is our ace card-there is complacency in thinking that there will just be a sudden switch.

Lord Green: That would indeed be a complacency.

Q519 Simon Kirby: What I am saying is that even though the German example might be heavy engineering, there is still a lesson to be learned from it.

Lord Green: I quite agree with that. While I do think services are a distinctive competence in this country-it is evident in the numbers-it is 60:40 between the two, so it is still 60 for goods exports, and a good proportion of that is SMEs. There is plenty of scope to do a better job. To answer the Chairman’s question, first we are on the case; secondly, I do not think that a simple-minded replication of Germany is possible, but thirdly, there are clear lessons to be learnt.

Edward Davey: May I say something in addition to everything Lord Green has said? This relates to multilateral trade deals that we need to do and our priorities and focus within those. Quite a lot of previous multilateral trade deals have focused on the export of goods, much less so on the export of services. For example, in the EU-India FTA it is very important that we get greater openness, for the legal profession, the accountancy profession and so on. In all those deals, not just Doha but all the EU FTAs, the importance of service liberalisation is critical.

Q520 Chair: That leads very nicely to my next question, but just before I move to it perhaps I may make the point that, in terms of what Lord Green said, I fully understand that you cannot effectively transplant a business culture from one country to another. I seek reassurance, however, that we are looking at those elements of a different business culture that could be transplanted.

Lord Green: I am happy to give you that assurance. One other obvious area of difference between Germany and this country, which is perhaps worth tabling-this is a tricky one that will not be a quick fix-is that they have famously a superb vocational training and apprenticeship system. We allowed our apprenticeship schemes effectively to collapse in the 1970s. We are now painstakingly starting to rebuild that. That started under the previous Administration and it has continued under this Government. We have a long way to go. If you could turn the clock back, we would all wish we had never allowed it to happen but we did. One of the things we have to learn from Germany is to get back a culture of apprenticeship and the sense that apprenticeship to the engineering industry in particular, or manufacturing more generally, is an aspiration to be looked for.

Q521 Chair: I want to follow Minister Davey’s point about service industries. Just how is the Government looking to support and increase exports of UK services?

Edward Davey: I think the fundamental issue is to make sure our companies have access. That starts at EU level. When we talked previously about the Single Market Act I focused, as did our submission to the Commission, on services, making sure that the services directive is implemented and that the points of single contact actually happen and are of high quality, particularly the interrelationship between the services directive and the directive on the mutual recognition of professional qualifications, which is a very important part of that.

Going beyond that, we have on the table various EU FTAs. Our argument is that in those we should focus on service liberalisation. Obviously, of particular importance is EU-India, but not a lot of attention has been paid to the EU-Canada FTA, which is incredibly valuable to us, particularly with intellectual property rights and the regulatory arrangements between the federal and provincial Governments. That is an area where service liberalisation is very important. But you can go round the different FTAs and each time the element of services-not just legal and accountancy but financial services more broadly-is critical. So, market access.

Q522 Chair: With UKTI and ECGD working with sectoral trade associations and chambers of commerce, basically how can you maintain a consistent message without duplication of effort?

Edward Davey: From the UKTI’s point of view, are you talking about Government assistance and promotion as opposed to market access?

Chair: Promotion.

Lord Green: I am not quite sure I understand the thrust of the question.

Chair: We have various trade associations to do with service industries. Basically, how can Government, ECGD and UKTI co-ordinate their relationships with them in order to achieve better promotion?

Lord Green: I am with you. This is one area where I will plead that I am still in my first nine weeks, but I have met a number of the major ones and I am working my way through a list of meetings that I want to arrange with individual trade associations for different sectors. I have a large meeting with a group of them shortly, and will continue that. I am still formulating my ideas on what opportunities there are to improve and structure relationships and support industry in the process.

I have already mentioned one area where I think there is a real possibility for an improvement, which is structuring the relationship with banks around the country, from local and regional commercial banking manager to local investment and trade director. There will probably be other things. I mentioned venture capital a while back. That is another area where I think UKTI could usefully structure a relationship with the venture capital industry that enables us to be more helpful to SMEs who want venture capital and find it difficult to access it.

We have not talked about this theme at all, but I think it is quite an important one. If you will forgive me, I would just like to elaborate on that point briefly. This country does a better job of using venture capital than some of our continental competitors, but a significantly worse job than America. There are pools of venture capital sitting in America. I do not see why we should not work to help the appropriate SMEs-this is appropriate for only some-access American capital in a way they would find difficult without some guidance from UKTI. To do that UKTI probably needs to equip itself with some specialist resource. That is one of the initiatives that we are currently looking at.

Chair: That is very interesting.

Susan Haird: A couple of UKTI services are contracted out and delivered for us by British chambers of commerce. We do work with chambers of commerce around the country on outreach events, ensuring that we are tapping into their members. As I mentioned, the chambers of commerce deliver the trade services in some parts of the UK for us.

Q523 Chair: Perhaps I may move on to a specific issue. Obviously, security sector exports are growing fast. There has been a complaint that there appears to be a lack of capacity in the export control department to deal with this rising level of exports. Are you aware of this? Is the Government doing anything about it?

Lord Green: I am not aware of a lack of capacity but if there were we would have to address it, because security exports are rising fast. I think they are a very good export industry for us. It is a sad commentary on the times that there is a big market for them, but this is an area where very high-tech competencies in Britain are finding very profitable business overseas, and we should definitely make sure that we do not stand in the way of support for them.

Edward Davey: The export control organisation reports to Mark Prisk. I am not sure whether you have had any evidence from him in any of your inquiries. I know that he wants to ensure that it is operating as effectively as possible and that there is efficiency where it needs to be. He is the Minister overseeing this.

Q524 Chair: We will ask him in due course. I move to RDAs and LEPs. Some of this we have already covered, and I will not repeat it. Is there any concern that there is mission creep in the role of LEPs, particularly with their proposed role in inward investment? We have had some discussion on this already. Given that this was a constant complaint about the RDAs, can you see this happening with the LEPs?

Lord Green: Obviously, it is early days for the LEPs. I have met with three chairmen of LEPs. That is only a subset of them of course, but I have been very impressed by the way they are coming together. They are chairmen who clearly know which way is up and have good business representation. By their accounts, there is good and supportive local authority representation. In all three of the particular cases I have met, there is very good representation of the relevant university engineering faculty on the LEP. It is early days but I think that in those cases they are off to a good start.

Would mission creep mean that they would get in the way of the contract that UKTI let on inward investment? In some senses it would be a nice problem to have, because it would mean everybody was becoming focused on the topic. Overseas, I think it is rather less likely that there would be the kind of problem that we have experienced with the RDAs in some parts of the world, where RDAs have established overseas offices or sent out missions, often not on a properly co-ordinated basis. I have to say-I would have said it even before I got into this job-that the evidence of the external impact of the RDAs was distinctly mixed. I am not a pessimist in this. It is my view that as the thing beds down, LEPs are probably a genuine improvement from the point of view of trade and investment.

Q525 Simon Kirby: On inward investment, we heard from Susan Haird on Tuesday that in trade and investment, there was to be no refocusing between inward and outward investment, and you have said today that the changes in the money available will not alter that either. That said, why has inward investment fallen in the UK?

Lord Green: I do not know specifically from one year to the next why it has fallen. Overall, it continues to be the case that Britain does a reasonable job of attracting inward investment. Some of that is clearly with the support of UKTI. Something like 50% of inward investment projects have some support from UKTI but not all. We need to ensure that we continue to be an attractive destination for inward investment. That is about a variety of things, some of which are readily within the power of Government and some which are broader. Clearly, corporation tax is a feature. I think the story the Government has to tell on corporation tax is one that is widely welcomed. The UK Patent Box announcement was extremely helpful in regard to the overall tax profile as an attractive destination of choice.

There are other matters like public infrastructure. The kindest friends of this country would not say we have a world-class public infrastructure, and there is a task-this goes back to something I said earlier-over the next 10 years to make sure we invest adequately in our public infrastructure: transport, energy, water, waste and broadband. Broadband is very important to the SME world, though not particularly relevant to FDI. One way or another we need to make sure that we are not complacent and continue to support inward investment.

I do not think there is any good reason to believe that we are on a downward trend in terms of loss of share of opportunity. It is the case that the UK brand, if I can use that phrase, is still widely regarded and respected around the world. People do want to invest in this country. When I was on a trip two weeks ago to the Middle East with the Prime Minister I met, together with the chairman of Infrastructure UK, the Qatar Investment Authority. It is very clear that there is potential interest there.

Q526 Simon Kirby: To play devil’s advocate, does Pfizer pulling out of the UK and businesses’ concerns about airport capacity tell us something about our inward investment strategy?

Lord Green: I do not think Pfizer does. I think the position of Pfizer was rather specific to that company’s particular circumstances. I think there is a wider issue about the pharmaceutical industry and the way in which it goes about supporting primary research that affects the whole of the pharmaceutical industry and will impact the research base in this country that is owned by the major pharmaceutical companies. Work is being done on that. David Willetts is the Minister responsible for that. I do not know whether you have taken evidence from him, but there is no point in denying that there are significant shifts going on in the way that industry supports primary research that have implications for the UK. We need to attend to that. I do not think that is evidence of a wider dissatisfaction with the UK as an investment base.

We all know the position on the third runway. The Government has made a decision about Heathrow in particular. I do not think that is up for re-examination. The transport infrastructure ambitions set out in Infrastructure UK make a lot of sense to me. We need to work at it. As I have said, I am afraid there is no magic wand on transport. A lot of things are going on, for example things like Crossrail. We took a long time to get there, but the fact it is now being done helps the image of London.

Q527 Nadhim Zahawi: I want to push you a little further on that. We talk about the UK as being a global hub. I think there is credibility in that claim because we have many things here that are incredibly attractive to inward investors. Not least among them are the fact that we own the language of international trade, and the time zone.

Lord Green: The system of law.

Nadhim Zahawi: Quite right. But Mr Kirby touched on one thing that I think is problematic: transport infrastructure, particularly airports. Heathrow is not fit for purpose. You talk to many businesses. In my previous life in business, you would do anything to avoid going through that hub. The competition will not come from Frankfurt or Paris; it will come from Singapore, Dubai and elsewhere, where they are building five-runway airports on top of what they have currently. We seem to be treading water when it comes to our claim to be a true global hub. I hear what you have just said in response to Simon, but perhaps I may push you a bit further. If we are serious about it, we ought to look at this at some point. If not, we should stop attempting to compete with these other hubs.

Lord Green: Let me push back a bit. I do not think Heathrow is not fit for purpose. I have travelled through Heathrow more times than I have had hot dinners. It is not the world’s leading airport, plainly, but to say it is not fit for purpose-

Q528 Nadhim Zahawi: How many times have you been stuck in the air circling Heathrow?

Lord Green: More times than I have had hot dinners.

Nadhim Zahawi: There you go.

Lord Green: But also over other major airports, too. It is a feature of modern life. I happen to believe that Terminal 5 is one of the best terminals there are. I think that by the time they finish the redevelopment of Terminal 2, the terminal situation in Heathrow will not be too bad at all. The issue clearly is the third runway. The Government has made a decision on that. We will not be in a position where we can compete with airports that have five runways, and we have to be realistic about it.

The second comment is that you are dead right: we are a global hub, and we trade on some very deep-seated advantages in that; you have mentioned some already-there are those that have to do with geography, the time zone, and the English language. I think the legal system is important, as is critical mass. The prevalence of foreign language schools for expatriates who want to come here is important. There is a whole variety of things that add up to a hub. We will not score top in the class in every single parameter. Frankly, we are unlikely to score top of the class in airports, but it is only one of the parameters. We have to be careful not to undersell ourselves, if I may say so. Heathrow is not that bad.

Edward Davey: A point often missed when we are talking about trade and infrastructure is that our ports are very important. I think we will see significant improvements in the infrastructure round our ports and also the services that facilitate trade at the borders, particularly the ports. A lot of work is being done, which is covered in the White Paper, but I think that sometimes we should put rather more emphasis on that kind of thing than is done normally.

Q529 Simon Kirby: Lord Green, are you aware-I am sure you are-of the widespread worry amongst universities and businesses about the change in immigration rules?

Lord Green: Yes.

Q530 Simon Kirby: And have you had-this is possibly the most important and significant question of the morning-some fairly robust conversations with your Cabinet colleagues?

Lord Green: To be clear, I am not a member of Cabinet.

Q531 Simon Kirby: No, but you chair a sub-committee of it.

Lord Green: Yes, and Damian Green is a member of that committee. The process of consultation on education has been completed. The Government is working out what it wants to say and it will announce when it is ready. I think there has been an extremely robust dialogue and conversation amongst the various Government Departments involved in this about making sure we land in a reasonable space given the overall objective of the Government to reduce net immigration significantly.

I think we are all aware of the background to this: the public desire for an approach that the coalition Government now seeks to implement. On work permits, I think we have landed in a reasonable space but we need to ensure that this beds down in a way that does not create unnecessary or ridiculous hard cases, and that we do not shoot ourselves in the foot. We are at an earlier stage in that in education. I can assure you that both I and Vince Cable are very well aware of this as an issue.

Q532 Chair: I want to move on to a very important specialist area: trade finance, in particular the implications of Basel III. We have had evidence from bankers about their concerns on how trade finance will be treated under Basel III. What representations is the UK making to the Basel Committee to prevent a potential reduction in available finance for business?

Lord Green: First, it is the Treasury that represents-

Chair: I recognise that, but obviously BIS has a very strong interest.

Lord Green: Basel III does indeed have a potential, not necessarily an actual, implication for trade finance. Other things being equal, it would require more capital to be held against a trade finance instrument than would have been the case hitherto, and we may need to make sure that does not have perverse effects. Negotiating over Basel III has some characteristics in common with negotiating about Doha through the European Union, i.e. you can make a case but you will not necessarily win it. It is our job to represent the interests of getting this right. The interests are quite complex. There is a public interest in making sure the financial system learns its lessons and is taken forward on a basis that is stable, profitable and liquid, as well as serving the needs of the real economy, and weighing up all the considerations that lie behind that apparently simple phrase is not easy. I can assure you that the Treasury is well aware of the issue and, in the process of discussions, continues to make the point. Would we want to see the whole Basel III agreement unravelling by starting to unpick it, with others unpicking other bits of it? No, we would not, because it is in our interests to have Basel III in and bedded down.

Q533 Chair: I assume you are aware of the research done by BAFT-IFSA on the default ratios of trade finance, which were much lower than any other areas, and that these points are being made.

Lord Green: Yes.

Q534 Chair: I turn to a subject that has been much in the news of late: British business ambassadors. To start with perhaps the obvious one, can you provide us with an assessment of the level of work undertaken by Prince Andrew in his role as a British business ambassador?

Lord Green: Yes, I can. I think Prince Andrew works very hard for the cause. He is an energetic traveller; he has done a number of missions. I have seen him myself; when I was in Davos he was there hosting what I thought was a very successful reception for British business.

Q535 Chair: I stress that my next question is in effect to cover the effectiveness of the full team of British business ambassadors. Basically, how do you think you can measure their success and the strategy? Do you think you are making the most of them?

Lord Green: First, I do not think you can easily measure the success of that kind of role. We are kidding ourselves if we think we can use hard metrics and say that in year x a particular ambassador achieved y and therefore did or did not perform according to standard. This is a much more intangible thing than that. We have refreshed the membership of the British business ambassadors. I had a breakfast with them yesterday, because I chair them on behalf of the Prime Minister. They are a broad-based group. By the way, they do cover at least some members of the creative industry, although we may want to see whether we can add one or two.

What I can report to you from that meeting and a previous meeting last year is that there is an immense amount of enthusiasm and commitment to devote personal time to it. We need to remind ourselves every now and then that they are unremunerated. There is huge enthusiasm for the cause, if I may use that word-the task of making sure that Britain’s trade and investment performance is as strong as it can be. I am very energised and excited by the contribution they appear to be willing to make.

Susan Haird: Since they were set up in October 2008, between them they have done 120 events in more than 35 countries. There are now more business ambassadors than there were before, so one would expect that number to go up quite considerably. We also have the Catalyst organisation that I described on Tuesday, which by next year will consist of 500 people who also fulfil ambassadorial roles for the UK.

Lord Green: And a further opportunity yet to be developed-an idea that came from Ed, in fact-is the notion of using the diaspora in this country of people with connections. South Asia is an obvious part of the world but not the only one. Making use of their connections with and enthusiasm for being in this country as part of support for exports into their countries of origin is something we have not tapped and we should look at.

Edward Davey: I borrowed it from the Swedish Trade Minister.

Lord Green: We are all busy handing out compliments to somebody else.

Q536 Chair: I was going to raise the issue of a representative from the creative industry, but that has previously been made by Simon Kirby and I think it is understood. I would be pleased if you could look at that. I think it is fair to say there were some concerns from Airbus about Sir Roger Bone of Boeing being made a British business ambassador. How do you justify that role when Boeing is an American company with legal cases before the WTO against the EU that profoundly affect Airbus UK?

Lord Green: I might point out that we also have a representative of Mercedes as a British business ambassador.

Q537 Chair: Yes, but I do not think it is bringing court cases against a British company.

Lord Green: That’s as may be, but one should not prejudge court cases. I should like to make three comments that I believe are quite important. First, it is a strength of this country that, when we develop representation like that, we are able to have it as a very international representation. It precisely speaks to the international openness of the hub that we talked about a few minutes ago, which is its distinguishing characteristic. Secondly, they are all members in their personal capacity. Thirdly, Boeing is a significant investor in this country, and provides quite a lot of jobs here and awards quite a lot of business to British companies, so I would not make any apologies for having Roger Bone amongst the ambassadors.

Q538 Chair: That may be a fair point, but equally it seems odd that there is no Airbus representative there.

Lord Green: Like I say, they act in their personal capacity. We do not have all the car-makers represented there either. If we started saying that, we would have a very large group of business ambassadors. We just have to manage this sensibly.

Q539 Chair: I think it is fair to say that there is some concern that this area is not being managed as effectively as it might be.

Lord Green: I do not think I would accept that, with respect.

Q540 Nadhim Zahawi: One point that appears quite stark to us is that the number of people employed in the UK at Airbus is 15,000, whereas Boeing employs 800 or 900.

Lord Green: We have to guard against what happens if Bombardier then says, "Well, in that case we would like to be on it, too." What happens if you say, "Since Mercedes is on it, let’s have…" You can see where this goes if you are not careful.

Q541 Chair: But I think it misses the point. This is a much higher public profile issue than the others, and it creates a perception that is perhaps at odds with what we wish to achieve with the British business ambassadors.

Edward Davey: It is important to challenge that perception when it is wrongly taken. I emphasise what Lord Green says: these people are operating in their personal capacity to support British business in general.

Q542 Chair: I am giving you the opportunity to challenge that perception.

Edward Davey: Thank you.

Chair: I think it is incumbent on this Committee to make it clear to you that there is some disquiet about that. I think that concludes our questioning. I finish by saying that if on reflection you feel that there is any further evidence you would like to give us in response to any of the questions we have asked, please feel free to do so. Thank you for a very helpful and comprehensive range of responses to a very comprehensive range of questions. I also emphasise that we will probably want to come back to you on one or two elements to see how it is actually working. Thank you very much.