Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 600 - 619)



  600. That is all very interesting but it does not actually answer my question which was what can the British government and/or the European Community do to increase the growth of retail trading in the e-commerce?
  (Mr Tutcher) It has started to do some things in terms of the e-communications Bill currently going through and we are expecting Royal Assent later on in the spring. That we believe will provide enhanced confidence and trust that security measures are in place. There is a downside we believe in that the RIP Bill may well have a detrimental effect overall in that people may not trust the system they are using; it may add an additional overhead into the service provider community delivering those services to businesses and, therefore, our concern is that the UK may not be as competitive in what is now becoming a global market place. The EU, therefore, has a role and the government needs to prompt the EU—and is doing so through the EU initiative, I think—to have equivalent standards across Europe and what we would like to see is equivalent standards across the world. Another example would be how you treat tax from an e-commerce perspective. It is treated in-country or wherever the server is sourced? If we start to have differences across the world—and we have to recognise that we are in a competitive environment here in the UK—we want to be the best place to trade electronically but so does Ireland, France and every other country, and most of the Third World countries see it as a great opportunity to pull e-commerce away from the existing power base which is western Europe and the United States. So harmonisation should be a priority for the government.

  601. Is that going to sell another car, for example?
  (Mr Tutcher) Ultimately it may well do.

Baroness O'Cathain

  602. They do not want to sell cars; they want to cut down emissions.
  (Mr Wilsdon) To come back to your question, it is somewhat premature to say that retail e-commerce has failed—

Lord Skelmersdale

  603. I said by comparison, which is what Mr Tutcher said earlier.
  (Mr Wilsdon) Yes, but obviously, if the predictions for the take-up of initially PCs then digital TV and mobile phones are correct then I think we are just at the very beginning of a genuine explosion. That said, it is obviously wrong and foolish for government or for business or anyone to pretend we are all going to suddenly buy everything online. Sometimes in the rhetoric of dot-com entrepreneurs and of government there is this sense that we may as well pack up the high streets and go home, and we are all going to be sitting there tapping away, which is ridiculously naive. There are very negative developments that could arise out of the growth in retail e-commerce if we think, for example, about the impact on high streets and particularly rural shops. You could end up with what we might call the digital doughnut where you have inner cities and people tapping away at home on their computer, with most of the shops having shut down, who go out at the weekends to retail leisure parks to enjoy the weekend social experience of shopping. That is obviously the worst case scenario but there are other ways you can evolve retail e-commerce alongside conventional commerce that would be far more beneficial to society. We are interested at looking at those different opportunities and charting the best way forward.
  (Mr MacGillivray) It is a very concrete observation which is something that has already happened and we hope the results will be taken seriously. The Department of Trade & Industry and the Department of Environment, Transport and the Regions have asked to us look into differentiating a little about which types of commerce over the internet are environmentally and socially beneficial and which are not, and if they take note of that then the role of government will be much clearer because hopefully they will realise it is not their job to promote all and sundry kinds of e-commerce willy nilly but, if they want to use their influence for social progress and environmental sustainability, they will be able to differentiate a little more clearly than they do now, whether you are buying a Mig fighter pilot on, for example, as opposed to some sort of dematerialised music online where you can see some instantaneous benefits. So we hope people will take note of a little bit of clarity by this time next year.


  604. On this point, are there any emergent findings yet?
  (Mr Wilsdon) No. The project started in February so it is still far too early. We are very grateful for the chance to tell you about what we are doing.

  605. So there is nothing you can tell us immediately?
  (Mr Wilsdon) We cannot give you any concrete recommendations as yet.

Lord Cavendish of Furness

  606. Could I bundle three questions into one? The first is I do not have a feel for the technical side and I would like to ask about the e-technology world and how many players with the same sort of capitalisation are operating? What sort of competition is around? Secondly, you gave an example of who might be disemployed when you talked about the decimation of the supplier chain, so you have those people and you can say whether they are likely to go into the jobs created—there is a plus or minus balance sheet there. Experience suggests that the poor do not benefit from anything new and I do not know what is different about this. Furthermore, there has been another trend which started in America and came here but which is probably not in mainland Europe which is governments creating a lot of competition at the bottom of the labour market so that you do not get strikes. Again, I would have thought this would mean an exaggerated effect of the supply chain being decimated; the bottom end of the labour market not getting help made worse because that labour market is not getting so competitive. Thirdly, there is a growing expectation put around by all politicians that people deserve and have coming to them greater protection and greater redress, and surely this is going to reverse that and will hit, again, the poor who are least able to cope?
  (Mr Tutcher) From a competition point of view with regard to the technology that drives what we are doing, there are companies ranging from Microsoft as the largest through Sisco, the next, right through Oracle, ourselves, right down to very small players and the common theme from what you are saying is that the poor generally do not benefit from new areas. The bottom line is that the cost of entry into this kind of market place is amazingly low compared to historical new market places and there is plenty of evidence of entrepreneurial individuals and small companies here in the UK who have established themselves and are making a great success in this market place.

  607. Entrepreneurs always bubble up, do they not?
  (Mr Tutcher) Maybe they do. I think the opportunity for people to do that is much greater in this market place than previously so I think there is a large cross-section of technology companies who are involved. To date there has not been any company who has been able to establish itself in the same way as Microsoft has and the PC, what one might call a very dominant market share, partly because the internet is all about open standards and about sharing information about companies and partnering, so I think there is a real opportunity here for UK companies to establish themselves on a world market base and we already have one of those in Psion/Simbia who have a great piece of technology. I think, therefore, that there is real competition. I would not want to see us doing anything that would clearly reduce the amount of competition we have because choice is good for the consumer, and it is innovation that derives from that. So it all comes down to the cost of entry being very low.
  (Mr MacGillivray) One observation is that if you wanted to do something very soon before our findings come out, you might invite an organisation called First Tuesday to come and give evidence—


  608. We have.
  (Mr MacGillivray)—and hear what their view is on whether this revolution is intended to benefit the poor or not because we certainly have not had all that much response from them in terms of contributing to this study, so far.

  Baroness O'Cathain: I am not surprised.

  Chairman: They are very much into the free market and I do not think sustainability actually figures at all.

Baroness O'Cathain

  609. "The poor we can live without".
  (Mr MacGillivray) One of the things that came out of the discussion organised by the Fabian Society yesterday lunchtime was that so far the social entrepreneurship in this area has been a bit lacking and we had hoped to find over the course of our studies some real examples of interesting new ideas coming up intended for social benefit primarily—even maybe not for profit. Some of the material around so far is a bit dull and I think that is recognised in the government's report. There are some rather worthy community internet projects not likely to captivate low income people. Quite a lot of energy needs to go into that and we hope we will stir up enthusiasm for that. It is lagging behind a bit at the moment.
  (Mr Wilsdon) On the point about First Tuesday, I read with interest First Tuesday's submission to you and I was very interested to see the role they think government had in all of this. One of our target audiences out of this process is very much that dot-com community, those young entrepreneurs driving a lot of this. What we would like and hope to achieve is some engagement from them in the social and environmental opportunities in the technology that they are promulgating. As we have said, we had real difficulties when we were setting this up; we put a lot of effort into getting one or two start-ups to join the consortium of companies and met with a stoney wall of silence, really, and government certainly has a role here in calling on these entrepreneurs to raise their sights from their IPO or their next million pounds through share options, or whatever, and to start thinking about their responsibilities as business men and business women to society in a wider sense. That is certainly what we want to push. We, and NEF for that matter, work with progressive companies on these issues and there is no sign yet that these new companies are starting to feel pressure from stakeholders to take these things on board and we want to urge them to do that.

Lord Cavendish of Furness

  610. But are they going to get jobs by the expansion of e-commerce? I have not heard a suggestion that they will.
  (Mr Tutcher) Our view is that you have to be adding value in whatever you do, so if you are involved in a relatively low value/low value add industry then you have to find other ways of servicing your customer or for that customer to come to you and there are plenty of other organisations round the world who will do that in your place if you cannot do that, which means you may need to find another niche. Our belief is that the net result is that there will be jobs lost but jobs gained elsewhere by virtue of the low barriers of entry into this new market place but you have to be skilled to be able to go and do that. So it comes back to the education point.

  611. I am not happy. The question is that unemployment is a vile and horrible, almost universal, problem. I think the anxiety has been expressed here that this could create it and growth will not help the very people pushed out. They are at a different level and are not necessarily the entrepreneurs. However cheap it is, of course there will be some. I am trying to get a feel of the impact of unemployment which we are just coming out of. Is there going to give another twist to the old problem of unemployment?
  (Mr MacGillivray) I do not think there is a straight answer to that. One possible effect you could imagine is a shift from people working in the service sector to manufacturing. For instance, if you take the case of books, which is one of the areas that is beginning to succeed now in the UK, you would imagine there will be a loss of jobs in bookshops and an increase of jobs in distribution centres, packaging up books in these very large distribution centres that hold a lot of titles. Now you might argue that (a) they might be different people, because the craft of being a bookseller is not the same as the craft of being a distribution packager and (b) that it sounds as though it is going to be a less desirable job, so it is certainly possible to plan out, theoretically at least, some negative effect there. On the other hand, you can also start to think about some improved jobs as well in terms of some of the distribution work that already goes on so we will try and have a look at that.

Lord Paul

  612. One of the advantages spoken about e-commerce business-to-business or e-commerce retail is that it will bring costs down. I am seeing in my own business that the costs of purchasing have come down, but on the other hand the costs have gone down on selling so I am not sure who wins in the end. Listening to Mr Tutcher talking about and the saving of the 3 per cent, would this not lead to a lot of companies going into bankruptcy which will create more and more monopolies? If there are no antimonopoly laws and no competition laws, where is the business going to be? In the end, would the consumer not pay much more, after a lot of bodies lost lying on the way? Secondly, the Lisbon summit ended giving figures of 20,000 more jobs for Britain. What is the guarantee? Why not China? Why not India? Is it pie in the sky? Here we are losing jobs in the manufacturing industry partly because of dot-com. Everybody knows the prices are cheaper, etc, but then we hear that there will be 20,000 more jobs. There might be 20,000 jobs but are they all going to be in Britain? Thirdly, and I find this specially worrying, dot-com business is in fashion and, as Mr Tutcher said, a lot of Indians are involved in it. For the last year I have had a request every week from somebody wanting to start a company saying that he has done a lot of work and would I be the chairman, and I have been declining every week for this reason only: that if it does not take off all those expectations that you are going to be a billionaire overnight will disappear. What is the answer to these young boys and girls, working very hard to set up these businesses? They almost think I am arrogant that I do not want to accept their chairmanship but I genuinely ask whether it is for real.
  (Mr MacGillivray) On the guaranteeing of jobs, at the moment, certainly, a lot of the jobs are not virtual and therefore they need to be done in Britain if the market is in Britain. For example, book distribution is not something that can be out-sourced to India—certainly yet—until we become more virtual five/ten years down the line so currently there is a reasonable guarantee that a large majority of the jobs being generated need to be close to the market. One very important potential source of not necessarily new jobs but of safeguarding existing jobs is if a clever solution can be worked out for the future role of post offices in the UK as centres for e-commerce, e-government and so on, and the performance and innovation unit is looking at various solutions at the moment and is going to report in July on this. It does not seem at the moment clear what the solution is but there are 20-30,000 post offices with an uncertain future and there ought to be something pretty concrete coming out of e-commerce to make the future look brighter for them and, again, rooted in the UK—at least until we start thinking about out-sourcing benefits administration to other countries, which I hope would be somewhere off.

  613. I am not sure I agree with you. If there was another dot-com for selling books, you could have this system anywhere in the world. You could have a warehouse in Jersey because you will not have any tax, so what makes it a necessity for having it in Britain?

  Baroness O'Cathain: You are talking about the delivery, are you?

  Lord Paul: When I say delivery—

  Baroness O'Cathain: Well, the post office is ideal.

Lord Paul

  614. But the books have to come from somewhere.
  (Mr MacGillivray) Yes. One view long term is that books get printed very close or maybe they never get printed at all and get down-loaded on to screens but certainly, at the moment, certainly best sellers get printed pretty close to where they are going to be bought because they weigh too much to get freighted around. Thirdly, a lot of people say that only 30 per cent, if that, of dot-coms are going to make it so you should only accept three out of ten offers of chairmanship and choose very carefully!

Lord Faulkner of Worcester

  615. Could I press Mr Wilsdon on a quote he gave to The Guardian which you were brave enough to include in your evidence where you say, "The jury is still out on whether the digital economy will evolve into a powerful ally of sustainable development, or a spur to greater social exclusion and environmental destruction." It is one or the other and you are on that jury, so which way would you be voting?
  (Mr Wilsdon) The entire purpose of our project is for us to find out and I think it would be wrong to prejudge the research we are going to do. Our disposition, if you like, going into the inquiry was to focus on the opportunities. The Green movement traditionally is often accused of being luddite about new technologies; we are not trying to hammer e-commerce or the potential that it offers society. We very much want to go with the flow, if you like, of all the great new innovations that it brings about but just to make sure that government and business is looking at some of these wider impacts.

  616. What more do you think government can do to achieve sustainable development as part of this process?
  (Mr Wilsdon) That is a very big question. There is a lot government needs to do and obviously we will be recommending specifics in key areas. Take transport, for example. You read the Transport White Paper and, unless I missed it, there is no reference in there at any point—or even in John Prescott's subsequent ten year transport strategy that came out last November—to the impact of all of this on transport and it seems to me a glaring lack of joined-up government. It is obvious that out of this local distribution we could have the white van man taking over. There will be people buzzing books and groceries and Heaven knows what all over the place. Equally, it could be very positive in terms of people reducing the amount of time they need to get in their cars to go shopping. DETR are funding in part the work we are doing and we are grateful to them. I think certainly the people in government who are looking ahead and thinking strategically long term about transport trends in the UK need to be taking this very seriously and I do not yet see much evidence of that. The same applies to planning and a number of areas. There is very little clarity at the moment on what this means for energy use. There are obviously sectors where what we call dematerialisation, reducing the energy material flow into goods and services, can be achieved through e-commerce. For instance, on-line banking or down-loading MP3 records rather than going and buying a piece of plastic in a record shop. In a wider sense there are all sorts of energy savings that could arise, particularly through business-to-business e-commerce, as we improve supply chain efficiency in environmental terms as much as economic terms, but there is a lot of uncertainty and a great need for joined-up government in this area.


  617. You have already identified some recommendations you could make. One was that Mr Prescott's White Paper for the next ten years did not have anything about e-commerce in it.
  (Mr Wilsdon) That would be me speaking from Forum for the Future. Our inquiry process will come up with recommendations from us as a consortium. There are a number of things that I as a representative of an environmental NGO could say that I think government should or should not do, for example, freight. Obviously this e-commerce could dramatically increase the international flow of goods. A lot of those would come by plane and we all know the impact that aviation is already having on global warming and the predictions for the percentage contribution that aviation is making to global warming will obviously go up. Unless government and international regulatory authorities get the fiscal structures right around aviation—tax aviation fuel or whatever—e-commerce could create a negative environmental impact in that sense. There are lots of specific examples we could give.

Baroness O'Cathain

  618. I am going to twist this round again now. I am fascinated with what you have said and that you have got together to do this study. You have some real hard hitters supporting you, like BP Amoco, BT, Ericsson, Kingfisher, The Post Office, NatWest Group, Nationwide Building Society, Royal & Sun Alliance, Sun Microsystems, Unilever, etc, etc. They, of course, if they were approached by a group of young people like you, enthusiastic and into sustainable energy and development and really thinking about the planet, will say "Yes, this is a good thing to do", but do you think they are fully engaged in this process? Quite seriously, inertia is setting in to large organisations and it will just be seen as a nod in the right direction, "Get the community resources budget, give them a few hundred thousand let them get on with it", I would like to know what your views are. Secondly, jobs. Can I suggest to you three young people that you really do not understand the impact of unemployment, the real social impact of unemployment, in areas other than the places you see and also that, hand in hand with the impact of the fact that now some 39 per cent of households in this country are single person households, do you think that e-commerce is a good thing to try and push for all these people, so that they become even more socially excluded by staying in their own homes? I see in your document you talk about people not travelling as much and not going by car but shopping is their one way of social inclusion. Secondly, we have all these great projections about how much you can buy on the net—for instance, all your groceries—but 39 per cent of households do not buy very many groceries and they use their shopping expeditions as socially inclusive operations, so there are a lot of social implications here and I am just wondering if these big hitters are going to help you on all of that.
  (Mr Wilsdon) Certainly we can ask John Tutcher as a representative of one of the corporates to give his view. From our perspective, we are a charity; we do a lot of work with big business—and we are not just young people—well, we three are but Jonathon Porritt heads up my organisation, and he is getting a bit more grey around the ears these days! So far as the businesses that we work with are concerned, we only really go to businesses if they seem to us to have a genuine engagement in these issues. Obviously one can argue about the extent to which that is PR driven and the extent to which it is genuine. The reality is that in most corporations there are people who are committed who are trying to push these issues and people who are not. Certainly a number of the companies you mention that we are working with, BP Amoco, BT, Sun—several of the companies in the consortium—do have very good track records in this area, particularly on the environment, and it is that track record that has attracted us to going and approaching them about these issues. There is always a danger, however, in that in the think tank, charity world you need funding and support to do this kind of work. Government very generously has given us some money but that is dependent on us getting matched funding from the corporate sector, so we are always dependent on the philanthropic support of progressive businesses, and we are very grateful to them for that.
  (Mr MacGillivray) There are a couple of promising signs; one is that we are asking the companies to commit more than just money because money is quite easy for them to commit, especially such modest sums as we are asking for on this project. We are asking for time as well which is much more of a crunch and those organisations are all committed to be active in the research process and to provide time, which I always take as an indicator of how serious people are. Also some of these organisations are up against it in one way or another and, particularly for the Post Office, Nat West and BT, this would be a time when you would not expect them necessarily to be messing around with frills so I think there is an indication that they take this very seriously and even when times are hard they are prepared to go this route. On the downside, we notably have not managed to get a food retailer on to the project despite trying quite hard and your points about some of the easy assumptions about the benefits, particularly for single parent households, of shopping on-line with people just being driven deeper and deeper into their homes by this and the idea of the internet meaning no provision needs to be made for disabled people, another very important group who could lose out here, need to be challenged and we need to go and talk to some other companies who are not sponsoring this and work on them.


  619. As one of the subscribers, Mr Tutcher, would you like to make a point?
  (Mr Tutcher) It is interesting to note that some of the retail organisations today that are considered to be successful are actually going in the reverse direction. If you look at, for instance, Gap, they have a very successful online business and a very successful bricks business and I think the generally held view is you have to have a balance of those two to be a success. Without being able to see the conclusions that will come out of this project, I do not think we see a Doomsday scenario that says that the high street is going to close down, so people will still have interaction at a shopping level. The experience inside my own company so far is that people use on-line shopping, particularly retail shopping, to take some of the chore out of the things you buy every week, maybe some of the heavier items, and most of the people who get all those things delivered to work—which is where it happens today—still go to the supermarket to buy some of the luxury goods, so they still continue to shop and interact. Clearly, one of the outputs from this project will be to look at is there an increase in the number of people who are staying at home for longer rather than coming out. Going back to one of the earlier points, it is interesting to note that, which is a US organisation, actually does have a UK organisation——so there is a requirement to do that locally which does have an impact on employment in some way, and we have discussed that. In terms of single households, rhetorically the jury is very much out on that. We as an organisation have the ability to work flexibly, so there are some days I can work at home, I can log on to the system, I do not go into the office. I suspect, as the ability to do that increases, and some of that is driven by the cost of access and by the availability of band width and those things, as that becomes much more readily available the opportunity to work at home will increase. Inside Sun Microsystems, people still go into the office because they still want interaction.

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