TUESDAY 27 FEBRUARY 2007

UKTI

  Q520  Mr Bone: There is always the worry for some people that, when headcounts are reduced, it is not a question of actually reducing the headcount; you just put more people in a different organisation, call them something else and they do not become part of the civil service. That would not be part of your reduction in headcount would it?

  Mr Cahn: No, it absolutely would not. I recognise, Mr Bone, that that has happened in some circumstances but it is not the way we have done things.

  Q521  Chairman: You are, I think, planning to outsource more things, sometimes quite small things. You are bringing a business approach to the organisation and tasks are being outsourced increasingly frequently.

  Mr Cahn: Yes. I am not sure the word "outsource" is quite the right one, Chairman, but you are absolutely right that we are contracting with external organisations to do things. Let me give you one or two examples. We contract with the China British Business Council to provide some services in China, and a very good job they do too, and are well regarded by business. We are contracting with International Financial Services London to deliver some of the services for the City of London strategy, and there are other examples. We are contracting with an organisation called Public Employees Retirement Association to deliver some of the new schemes which we announced in the strategy but I do not regard those as contracting out responsibilities. It is a natural and sensible way of going and finding really expert bodies that can deliver a service for us.

  Q522  Chairman: Are you doing smaller-scale work as well, organising individual exhibitions, that kind of thing?

  Mr Cahn: We have always done that, and any sensible trade promotion organisation would do that. I do not think it is sensible for me to have a huge exhibitions section in the organisation. I purchase those services in.

  Q523  Chairman: Do your staff have the skill to do that purchasing effectively and well?

  Mr Cahn: They do, but they can always be improved, and it is an area for us to focus on.

  Q524  Chairman: Procurement is not an amateur job.

  Mr Cahn: No, it is not an amateur job. It is a difficult job and it is job which the Civil Service has, over the decades that I have been in it, got better at but is not yet perhaps as good as it needs to be.

  Q525  Mr Wright: Moving on to the regional development agencies, we have received some anecdotal evidence that the presence of some RDA offices abroad have been confusing some inward investors. It is probably an issue about which you have come to a conclusion as well because you are currently having a review with the RDAs. Could you give us an update on where that review is?

  Mr Cahn: Yes, Mr Wright, we are indeed having that review. In fact, we are conducting two reviews in partnership with the regional development agencies. The first review is about the overseas offices, as you say, and whether there is any duplication or fragmentation or confusion caused by the RDAs having a network of offices overseas which focus on inward investment. The second review is a review of the delivery of services in the regions, where currently delivery is divided between UKTI, which delivers trade services, and the RDAs themselves, that deliver inward investment services, and the question is whether that is the right structure or not. Progress on that review: the strategy says that we will be reporting in the Spring of next year. I think that is too slow a timetable and I have accelerated it. I hope that we will report in the early Autumn of this year. Lastly, these reviews are going to be evidence-based. As you said, Mr Wright, there is a lot of anecdote around, there is a lot of gossip and there is quite a lot of poor information. We need to take decisions on the way forward on the basis of real evidence, and I, in partnership with the RDAs and the lead RDA is the East Midlands Development Agency we are working with them to get the evidence base so that we can then make the reports, which will, of course, then go to Ministers to take a decision on what to do.

  Q526  Mr Wright: Have you made much progress with the RDAs in accepting the need to withdraw? I do understand my own development agency, the East of England Development Agency, have withdrawn from California this year. Is that a direct response to this review?

  Mr Cahn: I think the RDAs are responding to market signals, and I have now talked to all the different RDAs and most of the chief executives, and there are, frankly, very different views in the RDAs. Some RDAs have come to the conclusion that their overseas offices do not provide value for money and that they would do better working through the UKTI network of embassies and consulates. Some RDAs are in expansionist mode and wish to open new offices. I take the view that I am very pleased that the RDAs wish to invest resources in overseas markets to encourage inward investment. They add to my resources and that is good for UK plc. It is good for attracting inward investment. I think we also have some machinery in place, notably the Committee on Overseas Promotion, which is designed to ensure that we have a coordinated approach. However, I think we could improve matters. I think that there must be scope for UKTI delivering services for the RDAs, delivering what they need, which is services focused on their particular regions, their particular regional economic strategies, their particular brand, their particular concerns, and I believe that we can find a way forward where we provide more of the services for them and where we reduce some of the duplication and fragmentation that I think is out there.

  Q527  Mr Wright: Are you then saying that what should actually happen, perhaps short of the Treasury reallocating the funds that the RDAs spend on overseas offices and investment, that it should come directly through to you?

  Mr Cahn: No, I am absolutely not saying that. Incidentally, this is not and should not be my decision; this will be a decision for Ministers to take in due course, once the two reviews have been completed. My personal view is that there has been a real benefit in the RDA focus on their own regional economic requirements and I would not in any way want to lose that. I do not think there should be a transfer of resources but I do think we need to think more carefully about whether my network and my staff can offer the RDAs the services they need to deliver their own regional economic strategies, and that is the way forward I would like to go. In other words, I would like them to purchase services from me.

  Q528  Mr Wright: You did mention the question of duplication. Are you talking about duplication between the RDAs, from RDA to RDA, or between RDA and UKTI?

  Mr Cahn: The danger is, if you have a number of different representatives in overseas markets, that they compete with each other and that they confuse the target company. If you are, for the sake of argument, a Japanese pharmaceutical company that is wondering whether to site an R&D facility overseas and, if so, whether to put it in France or Britain, it is probably better to have one British message rather than five or six. That is where you can get confusion and duplication. UKTI is location neutral within the United Kingdom. I am equally happy if an inward investor chooses to located in the South West of England or in Scotland or in Northern Ireland or in Wales or in any other English region. I am genuinely neutral. For me, it is a UK success, and that is why I think we do have an important role to play in targeting potential inward investors, saying "Where do you want to go?" and when they say, "Well, there must be a motorway network, there must be this supply of labour, I need to be near this sort of university," I then go and say, "Well, here are three locations which are possible to fulfil those criteria," and I can do that on a neutral basis.

  Q529  Mr Wright: You cannot do that if the RDAs themselves are each chasing pharmaceutical companies. I would imagine that in each of their remits they will be looking at the opportunities, certainly about the university areas, and be chasing the same business. Surely, in that particular instance, it would be better resourced for that money to come through to UKTI to go out and search for that opportunity and then bring it back for the RDAs to look at in terms of the opportunities that they are looking for.

  Mr Cahn: That model certainly could work well. I do not think that the current model need work badly, providing you have good coordination and good will, and it can work sometimes in some markets but I do agree with you, Mr Wright, that there are times, I believe, when there has been such duplication and competition between regions, which does not help but, as I say, at the moment we are operating on the basis of anecdote. I want us to get to a position of operating on the basis of evidence, and that is why we are conducting the reviews. I would not want to come to any conclusions until we have the outcome of those reviews, which will, as I say, genuinely be evidence-based. When we have them, we will know what we are talking about and at that point we will go to Ministers and say "What you want to do?"

  Mr Wright: We are aware, of course, that each of the regions has representatives in America and obviously the others are spread across the rest of the developing nations as well. Would you then agree in the case of, for instance, America and possibly China to a lesser extent that duplication could be regarded as a waste of public resource?

  Q530  Chairman: I know why you are choosing your words carefully.

  Mr Cahn: I am choosing my words carefully because I do want to be precise. I believe that at the moment there may well be more overseas offices than we need. I think it may well be that the evidence in the review leads us to that conclusion. I do not yet know whether that is the case. If it is the case, then I think we should draw some conclusions, and the conclusions would be that we need to have only that number of offices which can really add value but, at the end of the day, this must be a decision for the RDAs. They are given the resources, they must use those resources as efficiently as possible. There is a lot of pressure on them to use their resources efficiently and that may well be the reason that some RDAs have come to the conclusion that they want to close some of their offices down and work through UKTI.

  Q531  Mr Wright: Do you find that is a genuine pattern that is emerging now, that there is more willingness to work with UKTI to get value for money, for one thing, and obviously use the expertise on the other?

  Mr Cahn: We work closely with all the RDAs and, despite the fact that there is quite a lot of gossip around this area, actually I think we have a rather good relationship with the RDAs and we work constructively with them most of the time in most locations. Some RDAs have reached the conclusion that their overseas offices are not good value for money and they are withdrawing; some other RDAs have drawn different conclusions. It will be very interesting to see what the evidence in this review throws up, and it may be that the answer is that it is different for different RDAs or it is different for different overseas markets.

  Q532  Mr Wright: Finally, when an RDA decides to open an office in a particular country, do they go to you for advice or is it a decision that they alone take?

  Mr Cahn: No, they need to discuss it with us and they then need to get the agreement of my Minister to opening that office.

  Q533  Mr Wright: Would you say that that falls in line with what you would require in every case?

  Mr Cahn: What it shows, I think, Mr Wright, is that we already have some mechanisms in place to get coordination. We have that ministerial authority, we have the Committee on Overseas Promotion, which is the forum in which we ensure coordination, and we have pretty good working relationships on the ground. They do not work perfectly in all circumstances and I do believe there is room for improvement, and that is why we decided to have a review.

  Q534  Chairman: That means Ian McCartney has personally to approve the opening of every new RDA office overseas?

  Mr Cahn: They go to Ian McCartney for his approval and he can set conditions.

  Q535  Chairman: So they cannot open an office without him saying yes?

  Mr Cahn: Overseas offices in the past have been opened with other Ministers. In fact almost all the other offices that exist...

  Q536  Chairman: The Trade Minister must sign off before an office can be opened by an RDA overseas?

  Mr Cahn: Yes.

  Q537  Mr Hoyle: What we have heard today is revealing because most people, quite rightly, think that this is wasting taxpayers' money. In fact, most people think it is actually empire building, and if we take the fact that we have seven offices in Australia, who on earth would think that that is a priority? We talk about duplication; I think this really is down to empire building. I know you may not want to go as far as that but I cannot think of any other reason why you would have seven offices in Australia when we are talking about JETCO countries where there may be no representation of our regions. So I really do have a problem with this, and the fact is that, I know my colleague has just touched on the regional agencies, the point that we have representation of Northern Ireland, Scotland, Wales as well as the RDAs. You are saying "Well, we represent the whole of the UK." How much money do you think is being wasted on this duplication?

  Mr Cahn: Interestingly, we are not the only country to be confronted with this problem. When I have met my opposite number chief executives from comparative organisations in Canada, New Zealand, Australia, all of them tell the same story. They are all facing resource constraints, they are all facing interesting issues surrounding inward investment and trade development, but all of them have this tension between the state and the federal level. You can find representatives in this country from US states and US cities; you can find representatives in Britain of Australian states. Ian Fletcher told me before we came in about the oldest representative in this country.

  Mr Fletcher: The oldest representative of the Commonwealth is the Agent General for New South Wales.

  Mr Cahn: So it is not only Britain that has this issue.

  Q538  Rob Marris: Hang on. That was for emigration purposes.

  Mr Fletcher: But now it does trade development and inward investment. It has a long history.

  Mr Cahn: The point I am trying to make, Chairman, is that there is a reason for this tension between the centre and the regions and the devolved administrations, and that is: where do you do your branding, how do you develop your economic strategy within a geographical location and what strengths do you focus on? There is no doubt in my mind that there are some real strengths, for example, in Scotland having its own organisation, branding itself and selling Scotland. The decision we need to take is have we gone too far and have we got suitable machinery in place to ensure that all the different parts coordinate together well? I think it is going to be a very interesting review and it is going to be extremely interesting to see what conclusions are to be drawn.

  Mr Hoyle: But you still agree with me that it is empire building really.

  Q539  Chairman: Some of us in this room would like to have an empire again. Mr Cahn, do you think there is some need for humility about UK plc? We think we are very big players. We have one of the largest economies in the world but I remember when I was in Mumbai some years ago one of the representative bodies there saying, "In the last few weeks I have had representatives from this development agency, that development agency, Scottish Enterprise, the Welsh Development Agency, this, that and the other. Do they not understand the state of Maharashtra is bigger than the entire United Kingdom?"

  Mr Cahn: I agree with you that Britain is a relatively small country. That makes it all the more remarkable that we have such a large economy in global terms, about 5% of the global economy, and it makes it all the more remarkable that we are so successful at inward investment.