Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 179 - 199)




  179. Good afternoon, Professor Norton. Many thanks indeed for coming in front of us today and also for being one of the principal authors of what is becoming a bit of a standard practice piece of work throughout Europe. We have been down at Wilton Park over the last couple of days and I think you would have been very gratified indeed to have heard the number of representatives from overseas countries who have had access to this.

  (Professor Norton) Thank you, my Lord Chairman.

  180. They were full of compliments, saying they wished their government was producing something similar.

  A. Thank you.

  181. I think you have seen the questions that the Committee is seeking to establish in due course. We are European Union orientated, but with a topic like this there is no way in which we can stay solely in Europe, we have to go global and some of our inquiries are focused solely within the UK too. I am just wondering if you had your time over again what you might leave out of the report or, on reflection, what you have left out that you now regret is not there and you would wish to put in?

  A. It is an interesting question, my Lord Chairman. I was thinking about that and I think my conclusion was that I would have been much tougher on the need to transform government services not just in the use of technology. What I feel is missing in the approach of government is an understanding of the way in which the tools of e-commerce transform the processes of government themselves. In the current two months from 1 February through to 31 March I am doing 30 different public presentations on e-commerce to business of various sizes. I am at pains to stress to them that much small business in the UK and large business thinks of e-commerce only as a way of taking cost out of the existing way they do business. That is useful but not sufficient. The real prize is changing the nature of the business itself, the business model, and that is equally applicable to public service delivery. I think I and my colleagues underestimated in the report the extent to which Government's role as an exemplar is crucial both in terms of its purchasing, which approaches five per cent of GDP, and in its service delivery, which touches every citizen in this country. If I may tell the Committee a small anecdote. As part of this I felt it was very important to visit the different areas of the UK. I was at a very helpful meeting in Cardiff where a gentleman was, shall we say, politely rude to me. He said, "What on earth do you know about this coming down from London? Why should I worry about this? If the Government were really concerned about e-commerce it would be doing it itself and it is not, so don't waste my time." There was a salutary message in there, my Lord Chairman, and one which I have certainly subsequently taken to heart. I think there are enormous opportunities throughout government and in the public services to change the way services are delivered, eg the way in the Health Service internal markets operate and use the tools of e-commerce both to improve service and at the same time to improve efficiency significantly. It is an interesting double act and I think it can be achieved. I do not think Government as a rule understands the need to change the processes.

  182. The report figured in the debate that was held in the Chamber last night on the Electronic Communications Bill. I do not know if you have spotted that yet. The observation was made that this forms part of the deluge of recommendations from the PIU report which I hope the Minister can confirm are on track. You are saying that the track targets were probably not sharp enough.

  A. I think that is right. I think there is not yet—and I have talked with other colleagues in Government and I think they are trying to address this—an understanding throughout the public services of the need to change the business model in order to take advantage of those things. I think it may get caught in a sort of ghetto of cost-cutting.

  183. If I could just continue with the rest of the quote because I must pick up on this: "In this context perhaps the Minister can also confirm the assessment of the better regulation task force. The 60 different initiatives that are being worked on for IT regulation could lead to 4,000 items of legislation. Whether this flurry of activity will be beneficial in the context of e-commerce only time will tell. Overall, we doubt it." That was the Conservative Party spokesperson's concluding remarks.

  A. I would hate to differ with him, my Lord Chairman, but I would be hard pressed to find much in the PIU report that requires new legislation at all and that was the main thrust of our thesis. The Prime Minister was good enough to accept that for the vast majority of this business it is better to find effective means of industry self-regulation, given the speed of progress in your Lordships' House and in the other place. It simply cannot operate at the speed which is required in the markets versus business and e-commerce. So I am puzzled by the comments of the Opposition spokesman. I certainly do not accept them. Perhaps he is getting his figures from the use of powers by ministers under the e-Communications Bill to change the references to signatures, for example, but I think he underestimates it as the figures I have heard suggest tens of thousands of references in primary legislation. It is not quite the same as he was suggesting in that statement.

  184. I would not want to be unfair to him. They were generally welcoming the Bill. I will certainly draw to his attention your comments from the record. Could I just come back to this point about the performance of the public service area and your indication that you felt that the recommendations were not sharp enough. Do you actually believe that had you set tougher targets there is the capacity to deliver?

  A. No, I do not. I think what one needs there, my Lord Chairman, is a change in culture and a change in thinking. I think merely applying a set of targets would not be the right thing to do. I think there is a need for a fundamental change in direction and thinking throughout the public service. It is far more a question of culture. If we impose a straitjacket of targets without affecting the culture I think we will do more harm than good.

  185. I think the Committee would welcome further comment on that from you because they are very anxious to see e-commerce developed. What do you think are the strengths and weaknesses of the e-Europe document particularly when you compare it with the paper that you have produced?

  A. Very shortly after the report was published I had the opportunity to visit Brussels with representatives of UKREP and visit a number of key cabinets to talk them through this and I found that experience interesting because I believe the one thing that is missing in Brussels in particular, even under the new Commission, is there is still no single point of accountability for this programme. Perhaps one of the recommendations that I believed in most passionately here was the one of appointing a single minister, the e-minister backed by a team led by the E-Envoy and have a single point of accountability. I look to Brussels and I see Commissioner Liikanen with the information society and telecommunications, I see Commissioner Bolkestein with the Single Market, I see Commissioner Byrne with consumer affairs, I see Commissioner Vitorino with the Brussels and Rome Conventions. There is no single point which drives this together as a programme. What I and my colleagues were seeking to do from the private sector was introduce into government the concept of programme management. So all of these have to come together, they have to progress together, they have inter-dependencies and I took that idea to Brussels and it actually met with significant favour in the cabinets of the presidency and also Commissioner Liikanen, but there was deep suspicion in some of the other cabinets. It was very difficult for people to accept they could have a responsibility without direct control of all the resources. So the discussion tended to centre around how can I take the following people from that other directorate into mine as then I can deliver. The world is not like that, particularly not in e-commerce where it touches almost every activity in the Commission. So the idea you might have a single point of accountability and targets set but delivered through a variety of channels seemed to be alien to a number of people but not all. I think it is a good list, but I would like to see some single person perhaps in the cabinet of Monsieur Prodi actually held accountable for delivering this across the Commission and for setting priorities. I think the aspirations are fine. I am extremely worried about the delivery.

  186. What about the aspirations in general terms, do you think they are okay?

  A. I think there are too many. I am sure people argued that about this document as well so I am on weak ground, my Lord Chairman. I would like to see clearer priorities, that would be my wish. There is nothing in eEurope I would disagree with, but I would set a series of priorities there for what could be achieved quickly, what would have knock-on benefits for the other activities and so on.

  187. What would you see in general terms as the main priorities?

  A. That is a very good question.

  188. It is probably unfair.

  A. It is entirely reasonable. I think it is essential to resolve the question of home versus host country and I believe that this is not currently being addressed by the process in Brussels. I think the lack of meeting of minds between the Vitorino side and the Single Market side is significant. I believe there is wishful thinking that the Brussels Convention can be allowed to operate in the way it is currently drafted and that the e-commerce folk, the ISPs, will not take exception to it. I think that is very wishful thinking. In my own personal view—and I stress I am not a lawyer, I am an engineer—I am not even sure the Brussels Convention is a sensible starting point and there is a serious grief there. That would be my highest priority. Behind that I would be looking at things like intellectual property. Again, it is not just an issue for the Commission. You were kind enough to say there are national issues too. I think that goes right back to our schools. If we truly believe we are developing a knowledge-based economy we must generate respect for knowledge and the sensible use of knowledge, its protection, payment for that knowledge and that is a cultural issue and not just a legal issue. We need it here and I am sure we need it across Europe where there are interesting cultural differences on that particular point. May I say what I think we are doing well in Europe as well?

  189. Please do.

  A. I take great pleasure in irritating my American friends, many of them I have known for years, by pointing out that I believe that Europe will overtake the US and, in particular, the UK will in the next few years. We have set some ambitious targets in here and that is because Europe is driving forward the new two key technologies, interactive digital television where the American standard is intellectually challenged, eg it does not work and in third generation mobile telephony where again we have a tremendous lead. There are structural problems for the Americans in catching up with us on both of those issues. I believe that on the technology side and introducing new people to this market through television, for example, we have huge advantages. I would like to balance the criticism with some positive comments.

  Chairman: I will let some of my colleagues come in now. Lord Cavendish?

Lord Cavendish of Furness

  190. Professor Norton, it is very nice to hear your enthusiasm. Can I just press you on one thing. Being tougher on the targets of Government and taking on these things, is it realistic? Having been around local government and a bit of central government, I do not hold in contempt the slowness and cumbersomeness of Whitehall, it serves a purpose and it is driven. Is it really realistic to suppose that it can catch up on that level?

  A. Perhaps I may give an example and to the best of my knowledge this example is true, I have not researched it in detail. I will come to the Health Service. The Government last summer put £300 million-worth of networking technology into the Health Service. One question I asked was what was it going to be used for. I have a particular interest, because my wife is blind, in eye hospitals. I have a close interest in Moorfields Eye Hospital in London. I asked a leading consultant there, "Do you use digital imaging?" Typically it is used when someone has their eyes tested and they look at the image. I said, "Beyond a first consultation where it is clearly sensible for people to meet, what stops you having that digital image taken in Glasgow for someone who lives in Scotland and looking at it over the Net?" He gave me a very simple answer. He said, "My hospital will not get paid unless the patient comes physically over the threshold." That was the most graphic example of needing to re-engineer. So that patient is needlessly brought down to London, which is inconvenient to them and so on and it is simply because we have not got the business model right. That is not being derogatory to people in the Health Service, it is just a recognition that the models do not reflect the tools and technologies which are now available.

  191. Following on from that, you have attached a great deal of importance in this exercise to prudent education. It is more than going to the Treasury and saying, "We want £800 million for education." Finally, if we came to the conclusion that even in a consensus of all-party committees, like ours, the minimum level of regulation which would be desirable is not attainable do you think enough thought is given to the alternative like voluntary taxation, or whatever it happens to be? There is a possibility, is there not, that one might have to say, "We will run up the white flag".

  A. On the taxation issue, in particular, I happen to think that is one of the areas where we have an advantage over our American friends. There was an immense chuckle in Whitehall when our American colleagues decided to join-up en masse with VAT working parties in the OECD. Their problems on sales tax are far more serious than ours. I believe that even the problems we have on the collection of VAT are likely to be soluble within the existing framework, purely by serendipity, because I believe the market is going to require to be effective the use of new intermediaries. Those intermediaries acting on behalf of consumers, for example, may well be the avenue by which Her Majesty's Customs & Excise collect that tax. I believe we can make that model work. I do not believe that our American colleagues are in that happy position. I am not sure if that properly answers your question.

  Lord Cavendish of Furness: It goes some way, thank you.

Lord Chadlington

  192. I should first declare an interest, I am the Chairman of IPR, I am a director of the Halifax and I am also a director of a couple of e-commerce companies. I have two areas of questions to ask you about, the first concerns this very interesting phrase, "ghetto of cost cutting". What I have seen in commercial life is that is where it all started with us too.

  A. Yes.

  193. We broke through it because consumer demand was so enormous and market demand was so enormous that we had to embrace the new technologies, otherwise the profit motive would have meant we would have been out of business. Do you think that the culture change, which we have been forced to welcome in commercial life, could be moved over into organisations such as the Health Service?

  A. It is clearly easy for me to say and quite difficult for others to do, I will give you that caveat. Culture depends on people and by hook or by crook a suitable infusion of people from the private sector with those skills are required—not to, if you like, take over the Health Service, that would be ridiculous—to be able to inject those skills and that knowledge into the refashioning of the Health Service, recognising the very important role of those people who are there. I do not think those skills are going to come by any other means other than injecting people with that experience.

  194. That is my point. I think that is true. You answered our Chairman's question on priorities and you referred to two priorities, first of all, to home versus host countries, I agree with that, and, secondly, the intellectual property argument, I agree with that. I wonder if I could ask you whether or not you felt that there was a difference in the treatment of consumer interests from one part of the EU to another and whether there was really enough attention being paid to that? Would you put that as your third priority or do you not think it is important at all?

  A. I think that is what underlies the whole debate about home versus host, so it clearly is extremely important. I think I would pay tribute to our own Consumers Association here who, in my personal opinion, have been much more enlightened than many of our colleagues in Europe. A potential way forward on this is indeed some kind of cooperation between consumer associations and across borders to give some form of redress, which is not simply a recourse to law, in whatever jurisdiction or whatever country. I think there has been some interesting pioneering done by our Consumer Association in the United Kingdom which is worthy of a lot wider attention in the rest of Europe.

  195. Are there similar organisations in European countries which could be united?

  A. There are certainly similar organisations, however, I do not believe their focus is similar. The way in which the Consumers Association here, for example, has embraced the service `Web Trader' is, to my knowledge, substantially ahead of other European Consumers Associations.


  196. Are there any further examples you can give?

  A. No, I think I am at the limits of my knowledge, I had better stay there.

  Chairman: It is just useful.

Viscount Brookeborough

  197. I must declare an interest because I am a non-executive Director of the Hospital Trust in Belfast. It is not only about the Health Service it is about all of the departments. Even if you do get private sector involvement or expertise it seems to me that it would be very difficult to fund it because the pressures of cost-cutting between the different specialties and hospitals is so extreme. If you had somebody within Government responsible for the extension of IT within all departments how do you think this could be funded? It is obviously a colossal amount of money. Even if you take a single department it would have to be directed in such a way that when the money was distributed it was ring-fencing. You only have to look at the Health Service to know that when money does go to a particular trust or a particular area it does tend to be used for certain other things like cutting waiting lists, which is something topical.

  A. First, in response to that, I would like to accept your point that I was using the Health Service as a lightening rod, I could apply it to many others. The major problem that faces administrators is simply scale. I would look to carve out a piece as a demonstration of the future, of what could be achieved, and then operate it on a scale which is then manageable. How that would be done in administration terms I do not know. All my senses are that the business points that were made by Lord Chadlington are that you do not tackle the whole thing at once, you tackle a piece, you establish success, you establish peer pressure that says, "We have succeeded in this, why are you not?", then let it domino through the service.

  198. Can you give me any examples as to what extent different departments do use e-commerce, if you take road building or transport or whatever within Government?

  A. We would probably have to agree on the definition of e-commerce because there is a great deal of to-ing and fro-ing, you have things like electronic payments which has been used for many years, are they e-commerce or not? My impression, and it can only be that—we did not audit that during this process—is that there are many small-scale activities going on which should be welcomed and extended. Even where there were large-scale activities going on they were not publicly recognised. If I can give an example, this is a public domain story, as part of this process we held some industry round tables, including industry, consumer groups, and charity sectors, and so on. The first of those was actually led by Lord Falconer and he was immediately criticised at the start because the Government were not allowing discounts on tax returns, and things like that, to encourage their use. He looked at me and I looked at him and we said, "The Chancellor has already made a statement to that effect." Nobody in the room knew, not BT or IBM. Admittedly at that stage the Chancellor had not said how much. The principle had been considered and yet nobody knew. I think, perhaps, the administration is its own worst enemy here in not making clear what it has already achieved and what could be achieved.

  Chairman: The same could work the other way, of course. I remember a lot of people did not know when self-assessment was coming in and that they were liable to interest charges.

Lord Skelmersdale

  199. Professor, can I take you away from the realms of government and government organisations for a second by saying that both the Commission and this current Government have taken it upon themselves to give what I can only describe as oomph to the development of e-commerce, the Web, the Internet, the lot. Given that there is already exponential growth in these areas in business and private hands are they wasting their money and if not why not?

  A. Perhaps I can explain the context from my point of view. I am currently pounding the country on behalf of the IOD talking to audiences about e-commerce. In the current two months, beginning 1st February to 30th March, I think I am doing thirty such meetings. My perception from those is—and that is the length and breadth of the whole of the United Kingdom—what we are seeing is the distribution polarising between those businesses and small companies who are recognising what is happening and are, at least, keen to take part. However, there are those who are determined under no circumstances to recognise the threat, I think that is a serious worry. The statistics which the department of Trade and Industry produced last year for the adoption of e-commerce by small business and micro business showed in micro business we had around one third of the adoption of comparable US businesses, an enormous challenge. My role in IOD is to find ways, and we have some planned, to reach those people who are actively avoiding addressing these issues. We cannot force them to adopt but we can, in a sense, force them to confront the issue. That is actually my particular role.

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