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Select Committee on Trade and Industry Second Report

2 Our inquiries in 2005-06

5. The composition of our work programme reflected in large part our intention to examine as many policy areas within the remit of the Department of Trade and Industry as possible in the course of this Parliament, to explore aspects of policy which were of general concern and to revisit areas of departmental activity which had not been reviewed recently. Our programme was developed against the background of the Liaison Committee's guidance on the core tasks that should be undertaken by a Select Committee.

The core tasks of a Select Committee

6. On 14 May 2002 the House agreed a resolution which, among other things, invited the Liaison Committee to establish common objectives for Select Committees.[5] That Committee drew up an illustrative template of objectives and tasks, and requested all Select Committees to publish an annual report on their work which made clear how they had addressed the common objectives, or 'core tasks'. The full list of Objectives and Tasks for Select Committees is attached at Annex 1. The tasks to which we have given priority during 2005-06 involve the examination of Government policy proposals, areas of emerging policy or policy deficiencies, and Departmental expenditure, and the scrutiny of the work of Departmental executive agencies, regulators and other public bodies. Table 2 below summarises how our inquiries relate to the objectives and tasks identified by the Liaison Committee.

Table 2: 2005-06 inquiries set against Liaison Committee criteria

Subject Departmental policy Examination of deficiencies Documents and decisions Expenditure PSAs Regulators and Agencies Legislation and initiatives

DTI Departmental Annual Report 2005 √ √ √

Security of gas supply √

Royal Mail after Liberalisation √ √ √ √

European Commission's negotiating strategy for the World Trade Organisation Hong Kong Ministerial Conference √ √

Work of Advisory, Conciliation and Arbitration Service (ACAS) √ √

Trade and Investment Opportunities with India √ √ √ √

Ofcom Annual Plan √ √ √ √ √

New Nuclear? Examining the Issues √ √ √

Export Credit Guarantee Department's bribery rules √ √ √ √

Work of the Nuclear Decommissioning Agency and United Kingdom Atomic Energy Authority √ √ √ √

Royal Mail Group √ √ √ √

UK dependence on gas and coal imports √ √

Local Energy: turning consumers into producers √ √ √

Reasons for Success and Failure in the UK Automotive Industry √ √

DTI Annual Report 2006 √ √ √

Trade and Investment Opportunities with Mercosur √ √

Manufacturing industry in the UK: skills shortages √ √ √ √

Manufacturing industry in the UK: Marketing UK plc—the Work of UKTI √ √ √ √

Manufacturing industry in the UK: Public procurement √

Implementation of the Report of the Women and Work Commission √ √

Recent developments with Airbus √ √

Strategic Export Controls: Annual Report for 2004, Quarterly Reports for 2005, Licensing Policy and Parliamentary Scrutiny[6] √ √ √

THE DEVELOPMENT AND IMPLEMENTATION OF POLICY AND LEGISLATION

Energy-related inquiries

7. Energy policy was one of the main concerns of the Government in 2006, with a particular focus on how to reconcile the sometimes conflicting requirements of security of supply, environmental concerns (particularly the problem of climate change) and minimising energy costs in order to maintain the competitiveness of business and tackle fuel poverty amongst individuals. We have made contributions to the Government's development of its policy in all these areas, building on the inquiries of our predecessors.

8. Our first Report of this Parliament, on Security of Gas Supply,[7] followed up our predecessors' investigation into gas and electricity price rises in the winter of 2004-05[8] and came to the same conclusion, that gas supplies would remain tight through the winter of 2005-06 and perhaps also that of 2006-07 until new import infrastructure came into operation, with the result that retail gas and electricity prices were likely to remain high. This and our predecessors' Report were tagged to the half-day Adjournment Debate on Security of Energy Supply on 12 January 2006. We received the Government's response to our Report on the day of this debate and co-operated with the Government in making the response available to the House for the debate.

9. We have continued our work in this area by looking specifically at UK dependence on gas and coal imports in the context of the Government's Energy Review, in the course of which we have taken evidence from a range of public bodies, trade organisations, academics and individual companies, including Gazprom.

10. Also in the context of the Energy Review, we have inquired into the issues surrounding the building of new nuclear generating stations, and whether locally generated energy could meet a significant proportion of the UK's electricity and space or water heating needs. We were able to bring forward consideration and publication of our Report on New Nuclear? Examining the issues[9] so that it was available on the day before the Government's Statement to the House on the outcome of its Energy Review consultation. Our Report on local energy generation was published on 30 January 2007.

Future of manufacturing industry

11. The other major area of our work during this Parliament will be a series of inquiries on the broad theme of 'The future of manufacturing industry in the UK'. We launched the first three such inquiries in July 2006: Marketing UK plc—The work of UK Trade and Investment in supporting exporters and encouraging inward investment (which is described in more detail in paragraph 15 below); Public procurement—The scope for government support for UK industry; and Skills shortages—The extent to which such shortages are hindering the development of manufacturing industry, and the role of Government and employers in providing training. Our programme of oral evidence on all three of these subjects, which began in December, will continue in 2007.

International trade policy

12. We have continued to take an interest in the potential development of opportunities for international trade. We obtained written and oral evidence about the European Commission's negotiating strategy for the World Trade Organisation Hong Kong Ministerial Conference. We have maintained a watching brief on developments in the Doha Round of negotiations after that Ministerial Conference.

13. In 2006 we reviewed the prospects for the development of trade and investment between the UK and India, concluding that there is great potential for increasing trade with that country, although UK companies are not taking advantage of the opportunities to the same degree as the UK's competitors. We commended UKTI's 'in-country' team for the support given to businesses to overcome the particular difficulties of the Indian market.

14. We are continuing an inquiry into trade between the UK and Mercosur, covering not only prospects for developing trade with individual countries in South America, but also the possibility of establishing an EU-Mercosur trade agreement, and the role of the UK Government in assisting exporters to the region. We will publish our Report after Easter.

15. As mentioned above, we have also started an inquiry into the role of UK Trade and Investment in promoting trade opportunities for and inward investment in UK manufacturing industry. We chose to look at UKTI at this stage in part because of our findings about its work in relation to trade with India[10] and partly because UKTI launched a new Strategy in July 2006. In particular, we are examining UKTI's Strategy to see whether it will assist in achieving the Public Service Agreement target of delivering "a measurable improvement in the business performance of UK Trade & Investment's international trade customers" and maintaining the UK "as the prime location in the EU for foreign direct investment".

Postal services

16. The standard of postal services and the future of the Post Office network have been matters of concern for several years, and our predecessors did a lot of work in this area.[11] The UK postal market was fully liberalised from 1 January 2006, and we took an early opportunity to examine how Royal Mail was coping with competition and implementation of the Renewal Plan to bring the company back into profit.[12] This inquiry raised a number of issues concerning the company's pension deficit and its plans for investment which could not be resolved at that time; and this fact, together with continuing uncertainty about the future of the Post Office network, led us to undertake a further inquiry into Royal Mail Group in July 2006.[13] We have recently received the Government's response to this second Report and followed this up with oral evidence from the Secretary of State for Trade and Industry on 24 January 2007.

Industry-specific inquiries

17. By undertaking inquiries into the UK's automotive and aerospace industries we continued our predecessors' practice of following a rolling programme reviewing the health of specific industrial sectors and of the Government policies for the support and encouragement of innovation and development as it applies to those industries. In January 2006 we decided to inquire into issues connected with the collapse of MG Rover, but subsequent closures of and shift reductions in UK plants of other automotive companies led us to widen our terms of reference into 'Reasons for success and failure in the UK car industry'. We have finished taking oral evidence on this and will report early in 2007. We have also recently launched an inquiry into the effects of Airbus's recent problems on the UK aerospace industry, with a view to taking oral evidence from the principal parties in March.

Other inquiries into policy

18. We were also keen to examine how other policy proposals examined in detail by our predecessors were being implemented by the Government. Our work on the Export Credits Guarantee Department is described below; in response to our predecessors' recommendation in their Report Jobs for the girls: The effect of occupational segregation on the gender pay gap,[14] we also wished to examine the implementation of the report of the Women and Work Commission by the Government, companies and trade unions.[15] Co-ordination of government policy on gender equality issues is the responsibility of the Women and Equality Unit, which was transferred from the DTI to the Department for Communities and Local Government just after the 2005 general election. We agreed with the Communities and Local Government Committee that we should conduct the follow-up inquiry, and accordingly we have established a sub-Committee which will start taking oral evidence on this issue shortly.

EXAMINING THE ADMINISTRATION OF THE DEPARTMENT

Monitoring of departmental agencies and associated public bodies

19. Although the precise number fluctuates from time to time, there are about 50 Executive Agencies, Non-Departmental Public Bodies, regulators and other associated public bodies under the aegis of the DTI.[16] Some of them—such as the regulators and the consumer protection bodies—contribute regularly to our inquiries. Others have not featured much in our policy-related work, and we have decided to focus especially on these.

20. Our predecessors reported twice into the work of the Export Credits Guarantee Department (ECGD), on the second occasion—amongst other issues—reviewing the ECGD's decision to relax its anti-corruption measures only six months after their introduction.[17] At the time of this second Report, the ECGD was mired in legal difficulties arising from the changes made, and the then Committee recommended that its successors should return to the subject. We did so early in 2006, concluding that, though the consultation process had been badly handled in some ways and some of the changes to the anti-bribery procedures had been ill-considered, in the end the new rules achieved a reasonable balance between rigour and practicability.[18] However, we were dissatisfied with the Government's response to our Report, especially in relation to two issues (the role of agents as a conduit for bribes, and repayment of public monies when contracts are voided because of bribery or corruption); and we made a further report on those particular issues.[19]

21. In January 2006, we also began a series of brief inquiries into the work of various associated public bodies. We chose to start with the Advisory, Conciliation and Arbitration Service (ACAS), and subsequently two linked bodies, the Nuclear Decommissioning Authority and United Kingdom Atomic Energy Authority.[20] We intend to continue with this series in 2007.

22. As already noted, our work overlaps in many areas with that of other select committees. The media and telecommunications regulator, Ofcom, falls to be dealt with by the Culture, Media and Sport Committee and us. Both Committees wished to examine Ofcom's Annual Plan, so we held a concurrent meeting to take evidence from Ofcom's Chairman and Chief Executive in May 2006. This was a success, and we intend to invite the Culture, Media and Sport Committee to repeat this experiment in 2007.

Strategic export controls

23. We continued our contribution to the 'Committee Quadripartite', together with members of the Foreign Affairs, Defence, and International Development Committees. The Committee carries out detailed scrutiny of the Government's controls on exports of equipment and technology with a military application. In August 2006 the Quadripartite Committee published a Report on the Government's Strategic Export Controls Annual Report for 2004 and Quarterly reports for 2005. In 2006 for the first time the Committee took evidence from HM Revenue and Customs and the Revenue and Customs Prosecution Office on the enforcement of export controls.

24. The Reports demonstrated the Committee's interest in a range of issues, including continuance of its predecessor's support for an international Arms Trade Treaty and for tightening controls on those trafficking and brokering arms. The Committee welcomed the Government's decision not to outsource the work of the Export Control Organisation. It also highlighted the increasing use of the Internet to promote and facilitate arms sales, and it concluded that the Government's response to the challenge of the Internet was too passive.

OTHER COMMITTEE ACTIVITIES

25. No major issues arose in the Winter Supplementary Estimates in 2005 or the Main or Winter Estimates in 2006. We wrote to the Department with some minor queries about the Spring Supplementary Estimates and received a satisfactory response. We have not undertaken a comprehensive review of the DTI's Public Sector Agreements (PSAs), but we have commented on progress towards achieving its PSAs in the context of several of our Reports. The Department's expenditure plans, its PSAs and its Resource Accounts were also covered in our formal evidence sessions and subsequent written evidence on the Departmental Annual Reports for 2005 and 2006 with the Permanent Secretary of the DTI in October 2005 and the Secretary of State in October 2006. The transcripts and associated written evidence have been published for both sessions.[21]

VISITS

26. We undertake visits as part of our work programme in order to give us another perspective on issues to be addressed in some of our inquiries. Our visit to India in March contributed significantly to our understanding of the opportunities for and difficulties of conducting trade between the UK and India. In November 2006 we visited Argentina and Brazil to meet, in particular, British businessmen engaged in trade with these countries and to discuss the potential for and different obstacles to achieving increased trade with these countries, the effect of Mercosur membership on both and on the region generally and the merits of multi-lateral and bilateral trade agreements.

27. We continued our predecessors' practice of going to Brussels once a year to discuss with Commissioners and European Commission officials developments on trade and industry issues in the European Union. The agenda for the visit in November 2005 included the WTO negotiations and other external trade issues, and the liberalisation of the EU energy markets.

28. Our visit to the UKAEA's facilities at Culham was especially notable, and influenced our Report on the work of that body, in particular its research into nuclear fusion.

THE RESPONSE FROM THE DTI

29. In general the DTI has been responsive to our requests for information. It is perhaps understandable that the Government's replies to our Reports have been mixed. On some occasions the Government has been able to accept all or most of our conclusions and recommendations, for example on trade with India and the issues surrounding nuclear new build. On others, it has disagreed for policy reasons, for example on some aspects of the Quadripartite Committee's Report on strategic export controls and our criticisms of the removal of government business from the Post Office in our Report on Royal Mail Group. On only one occasion have we disagreed so strongly with the Government's response that we have been moved to return to the matter under consideration, as explained above in relation to the Export Credits Guarantee Department. In general, however, we continued to have a good working relationship with the Department of Trade and Industry .

5 See Votes and Proceedings, 14 May 2002 Back

6 Inquiry undertaken concurrently with the Defence, Foreign Affairs and International Development Committees Back

7 Security of Gas Supply, First Report of Session 2005-06, HC 632-I Back

8 Trade and Industry Committee, Fuel Prices, Twelfth Report of Session 2004-05, HC 279 Back