Barry Gardiner
Main Page: Barry Gardiner (Labour - Brent West)(12 years, 5 months ago)
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The hon. Member for The Cotswolds (Geoffrey Clifton-Brown) is absolutely right; there has been no debate on UKTI—not only in this Parliament but in the entire previous Parliament. It is indicative that the hon. Member for South Thanet (Laura Sandys) and I, who have both run businesses, have initiated this debate.
Can the hon. Gentleman explain to me, as a new MP, why, in the whole period of the previous Parliament, trade and export seemed to get so little coverage and interest from Ministers or Government Back Benchers?
I could, but I would rather refer the hon. Gentleman to the pamphlet that I wrote on the matter following the general election. I fear that if I were to begin on the point now, it might take up more time than we have available.
If the UK is to emerge from its current economic stagnation, it must do so by trade. The opportunities from trade and investment lie not only in our own abilities but in the accurate assessment of the economic opportunities in, and performance of, other countries. We have seen a definite shift in economic power. With the rise of India, China and Brazil, there is a new global dynamic, so there are now new global opportunities. We have seen the eurozone’s problems, as it struggles to pull itself out of recession. In the past 15 years, the United States has adjusted to refocusing its attention more towards the Pacific than the Atlantic. In those circumstances, we have seen the benefits of Indian companies, such as Tata Global, investing in British companies such as Tetley. We have seen the benefits of British companies, such as BAE, expanding overseas and, in doing so, boosting our economy.
It is imperative that we have the skills and institutions that can facilitate such investments. We need an organisation that can identify opportunity overseas and channel UK companies in a co-ordinated supply chain to meet it; one that can source overseas investors and persuade them that UK companies are the perfect fit for their investment to yield above-sector returns for them and for new jobs and growth in the UK. That organisation should be UKTI. The redoubtable hon. Member for South Thanet has illustrated that UKTI is, in its current state, not yet that organisation. It lags behind other countries’ organisations in promoting investment abroad and at home.
Before the hon. Gentleman advances his idea of what UKTI can do—I agree with everything that he has said so far—should a critical part be not just about where the opportunities are now and in the short-term future? The UKTI must be able to play a strategic role, with the Government, for the so-called N11 countries. We must seize the opportunity to be the first to the field with infrastructure, airline routes and so on.
The hon. Gentleman makes an absolutely perfect point. I am very happy to acknowledge it and support exactly what he says. UKTI should not simply be looking at the present, and it should not simply be looking at the short to medium term. It should have a strategic overview of where the UK’s trade and investment interests lie into the foreseeable future—that is absolutely right.
Does the hon. Gentleman agree that if we get one thing out of this debate, it is that UKTI needs to be encouraged to benchmark itself against the very best similar organisations in the world? With great respect to my hon. Friend the Member for South Thanet (Laura Sandys), let us not benchmark against the French—we will get into the same problems that they have—but go to Asia and look at Singapore and Hong Kong to see what they are doing for their countries.
I think that I should just take interventions and not make my speech, because every one of them is excellent. The hon. Member for The Cotswolds is right. I disagreed with him on his earlier points about RDAs, but on this point I agree: benchmarking and international comparators are essential if we are to see what we are doing. Also, there must be much closer scrutiny, performance management and benchmarking within UKTI to ensure that we are delivering what we promised. I will mention accountability in that sense later.
I am just giving my hon. Friend another opportunity.
A relevant point made in my Select Committee’s report last year was that a problem with UKTI is that it has been focused on measuring processes, rather than outcomes. Doing the latter is far more difficult. Does my hon. Friend agree that to assess its effectiveness, we have to find some mechanism by which we can measure UKTI’s impact?
I would that every debate I participated in shed as much light on the subject as this one appears to be doing, without my saying a word. My hon. Friend, who chairs the Business, Innovation and Skills Committee, speaks with great knowledge on the subject and has pinpointed one of the key problems. It is a problem not simply for UKTI but for government as a whole. Government is keen to measure outputs, but reticent about measuring outcomes. That process transformation is required, as my hon. Friend’s Select Committee has pointed out.
While Germany and France bolster their economies with effective trading bodies, UKTI presents itself to those who use it as slack, unfocused, inefficient and even, in some cases, a deterrent to investors. Consider what Dr Wu Kegang, chief China adviser to the British Chambers of Commerce, told the BBC last year. He said that Chinese investors
“have no idea how to enter the British market. They don’t know how to build business channels inside the UK to promote their innovative brands and products”.
Global economic power is shifting from west to east and UKTI is failing to adjust adequately to the new reality. The UK is falling behind in investment in BRIC countries; inward foreign direct investment is dropping; and our global share of trade has slumped. Recently, the news has been dominated by the difficulties that British companies are facing in securing contracts over their foreign competitors. Just last month, BAE lost out to the French company, Dassault Aviation, for a contract with the Indian air force worth £7 billion to the UK economy. We cannot afford to lose, and we should not be losing, such a contract.
I am concerned and want to ensure that we get the facts correct. The preferred bidder has been identified. We have not given up the fight. There is a lot more to do. We need to get that clear. I understand what the hon. Gentleman is saying, but I want to make sure that it is known that we are not yet out of this fight.
I am delighted that I was able to provoke the Minister’s intervention, because that is exactly the fighting talk that I wanted to hear. The hon. Member for South Thanet started by talking about your both being on the beaches, Mr Amess, and clearly the Minister is still fighting on them, so that is good.
This is a time when the UK should be taking every advantage afforded it to it. The difficulties created by recession and the crisis in the eurozone are considerable. That is why we need to expand our horizons, seeking new and innovative ways to attract investment and finding opportunities abroad. UKTI and British industry, generally, possess some remarkable advantages, many of which have been mentioned by the hon. Lady in her opening remarks. We enjoy significant cultural, historic and economic ties with many countries currently experiencing economic growth. London is the world’s financial capital, and we have a long and proud history of manufacturing.
With the right attitude, focus and know-how, UKTI can provide a firm footing for Britain to re-establish economic growth. As it stands, however, it is failing. The UK has lost market share in trade and investment. According to the Office for National Statistics, foreign companies invested £32 billion in the UK in 2010—a decrease of £16 billion from 2009. More significantly, because some people may challenge that on the basis of the recession, that was the lowest value since 2004. In 2010, outward foreign direct investment by UK companies decreased to £23 billion—the lowest FDI outflow in 16 years.
One might claim that recent events in the eurozone and the United States have impacted on such figures, but the statistics for the so-called BRICs are just as unimpressive. The United States remains the biggest recipient of outward UK investment. India, whose economic growth has topped 7% almost annually for the past 10 years, is down in 18th place, while China, the world’s largest economy, is 24th. Between now and 2030, GDP in the BRIC countries as a proportion of world GDP will increase by 40%, yet more than 65% of UK trade is done in north America and Europe. Indeed, British involvement with emerging economies has been waning. The UK dropped from seventh to fourth in the list of India’s largest export markets, but went down to 22nd place for imports from number three and now accounts for just 1% of all imports into India. We are the sixth largest manufacturing economy in the world, yet we represent just 1% of India’s imports. If that is not cause for shame and alarm, it should be.
There is a lesson in this and a stark warning. As with many other countries, there is a large diaspora from India in this country. We have a history unique to that part of the world and we share many common languages and traditions, yet we seem—perhaps there is a role for parliamentarians from all parties, as well as Ministers—to be failing to build long-term relationships. Does the hon. Gentleman agree that, in that way, we may be able to play a small part?
The hon. Gentleman is right. Indeed, for precisely those reasons, I set up the all-party parliamentary group on UK-India trade and investment a number of years ago, to take advantage of the constituency links that he and the hon. Member for South Thanet have mentioned. We must capitalise on these things. They are the stuff of which business is made. Business is made not simply by good products and good marketing, but by people and contacts and by people who are able to go out and get business and do the deal. Someone might have the best product in the world, but if they do not have such a relationship, things will not happen. That is the hallmark of successful business.
In my constituency, more than 130 languages are spoken in our schools, and in one school, in a class of 29 children, 21 different first languages are spoken. Coming from such a constituency, I echo the sentiments expressed by the hon. Member for Enfield North (Nick de Bois). It is upon the experience, contacts and family connections of my constituents and, I presume, his that we must build a much stronger trade relationship.
This question must be asked of UKTI: why are emerging markets not at the forefront of British investment now? It should be UKTI’s role to facilitate investment abroad. The statistics reflect UK companies investing where it is easy, not where they can maximise return and not with an eye to future market share. That has a knock-on impact for British trade generally. The UK’s share of global exports has fallen from 5.3% in 2000 to 4.1% in 2010—a long-term trend of decline, I agree, since the 1950s. In the same decade, however, German exports grew from 8.9% to 9.3%. Meanwhile, our goods exports have grown by only 1% per annum, compared with 3% in the US and 5% in Germany.
A report conducted by Ernst and Young for the CBI noted:
“UK outflows are concentrated on the EU and the US, with negligible investment going to high-growth economies.”
The failure properly to engage with emerging markets is, however, not limited to the BRICs. There are no stated bilateral trade targets for Egypt or South Korea, despite both countries being designated as high-growth markets in UKTI’s current five-year strategy. There are also no stated bilateral trade targets for Bangladesh, Indonesia or the Philippines.
Although it is, of course, unfair to blame all those things on UKTI, they serve to underline the organisation’s inefficiencies. UKTI has masked its weaknesses through a lack of accountability. The figures provided in its own reports show little consistency, and there is a great deal of obfuscation regarding the allocation of resources and staff. There is also little or no clear delineation of duties or responsibilities between UKTI, the Foreign Office, the Department for Business, Innovation and Skills and the Treasury. The result is an overlap in what the various Departments do and, I assume, a duplication of effort. That lack of organisational clarity gives way to inefficiencies and a failure properly to undertake functions.
The evidence from business—I stress that it comes from business—is that UKTI is not an unuseful organisation, but it could do much more. In a survey conducted by the National Audit Office, 30% of respondents mentioned receiving some benefit from UKTI, but 40% indicated they had received no benefit at all. In a survey of exporters conducted by the CBI, only 12.8% of respondents described UKTI as excellent, while the verdict of 15.4% of respondents was that it was unsuitable or poor, and many organisations, of course, did not respond at all.
UKTI claims that for every pound invested in it, £22 is returned to the British economy—I am not indulging in flights of fantasy—but in UKTI’s own survey of British exporters working through UKTI, 46% of respondents indicated they would have achieved the same outcome without using UKTI. Let us not come out with silly statistics showing that for every pound that goes into UKTI, £22 comes back to the British economy, when UKTI’s own survey tells us that most people think they would have achieved exactly the same result without using UKTI. We have to be honest with ourselves if we are to make a proper analysis of the organisation and put those defects rights.
There is a dearth of credible financial and structural information available on UKTI. The National Audit Office stated that UKTI cannot measure its effectiveness or account for its expenditures because of a lack of accurate information. Our own National Audit office is saying that. The Government allocated an additional £45 million to UKTI in 2011, and it is most concerning that we are pouring money into a body that, according to the National Audit Office, has no oversight or accountability.
Evidence from within British industries has highlighted the failure of UKTI’s approach. Eight of UKTI’s 10 board members have no background in business, thus undermining the organisation’s ability effectively to identify investment opportunities and support inward and outward investors. Again, I refer to Ernst and Young’s CBI report, which states:
“more could be done to link UKTI and embassy staff to the plethora of trade associations operating in local markets.”
The hon. Gentleman has hit on a vital point. Will he consider the scheme originated by Lord Heseltine to encourage more members of UKTI to go on secondments in industry, and vice versa? In fact, we should do more of that throughout the civil service, so that it has the ethos of trade within it.
I am always happy to listen to a freeman of the city of Liverpool, as I understand the noble Lord now is. Of course secondments and exchanges, such as those that the hon. Gentleman mentions, are sensible and important, but it would be better for people to have real commercial experience in the first place. That goes back to the remark the hon. Member for South Thanet made in opening the debate: however intelligent someone is, a first in classics from Oxbridge does not qualify them to do business or run UKTI. We have some brilliant civil servants, but if they do not have hands-on experience of running a business, filling in VAT forms, hiring and firing people or doing all the things that the Minister, the hon. Lady and I have done, they will find it difficult to get down to enabling others to do them.
The testimony of ADS, which represents the UK aerospace, defence, security and space industries, is particularly telling. Despite UKTI’s defence and security sector being larger than all its other sectors combined, ADS has observed that there needs to be a reorientation towards the BRIC countries and an increase in the number of sector specialists. The City of London corporation raised similar concerns over its UKTI sector. It identified a
“reduced...capacity limiting ability to support the delivery of overseas initiatives”
and commented:
“reduced resources for UKTI are having a detrimental impact on the effectiveness of UKTI in encouraging inward investment”.
Such comments provide valuable feedback from service users; this is not about Her Majesty’s Opposition or Back Benchers quibbling and cavilling. We are simply highlighting what service users are saying, not because we wish to embarrass UKTI, talk down British industry or undermine the Government and the Minister, but because we share the concern that Britain is not punching at the weight that it should be—or, far less, above it.
All institutions, but particularly Government institutions, should be accountable, and the debate has given us a valuable opportunity to highlight UKTI’s role, so I pay tribute to the hon. Member for South Thanet for her inspiration in initiating it. Our intention has been to provide constructive criticism and to create wider awareness in Parliament of UKTI’s role in promoting UK trade and investment. Evidence from industry and recent experience are instructive. It is clear that we must redouble our efforts to attract investment and ensure that UKTI is properly funded, fully accountable and working effectively.
Mr Amess, you are managing to overcome a difficult health condition, and we appreciate that. We are delighted to be under your guidance.
This debate has been informed and cosmopolitan. I take it on the basis of constructive criticism; that is how things should be. There has been an element of entente cordiale, certainly between one or two hon. Members present. It is refreshing to have had people who have been in business and who have been part of chambers. My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) and I worked on the issue in opposition, and he brings his own business experience to the area. My hon. Friend the Member for South Thanet (Laura Sandys), whom I congratulate on securing this debate, also has her own expertise in the field, which was notable in her remarks. I will come on to some of them in a second. A number of other colleagues, to whom I will refer as I try to respond to the points raised, have shown both interest in and knowledge about the subject.
It is rather peculiar, as was highlighted by several hon. Members, that there was no debate at all in the previous Parliament. That is to be regretted. While my diary secretary will perhaps not want me to encourage too many such debates on a regular basis on behalf of the trade Minister, it has been demonstrated that this House has an important and positive contribution to make to an important part of our economy.
I am not the Minister responsible for trade, but I want to respond to a number of key points that have been raised, and I will personally ensure that the chief executive of UKTI will pick up on the specific points raised, and I will have a conversation with the noble Lord Green. I know that he takes such matters seriously, and I want to ensure that, while he is unable to be present, he can pick up the flavour and character of the comments, particularly those regarding the involvement of MPs, which several people have talked about. They are absolutely right, and I will address those points under the heading of the national export challenge. My hon. Friend the Member for Witham (Priti Patel) highlighted the need for MPs to engage positively, to be close to the business community in their area, district and chamber, and to be a good conduit. That is an important point. It alludes, in many ways, to the point that I will come on to about the broader role of chambers, which I know is of special interest to my noble Friend—sorry, my hon. Friend—the Member for The Cotswolds. [Laughter.] It has been a long afternoon. I anticipate such matters. Perhaps I should say “senator” in due course.
The Government have made it clear ever since the election that we have to rebalance the economy. Members have rightly pointed out that we cannot have an effective trade and investment organisation if we do not have the right balance in the economy. We have seen an improvement—20% year on year now—in car production in previous months, which demonstrates that if we get the overall investment and balance of the economy right, it will start to feed through into good trade figures. That is an important aspect. If we are to have sustainable growth, we need to rebalance the economy; it needs to be broader and more resilient. That will draw through on international trade and investment.
As Members have rightly said, we are a nation with a proud heritage of looking outwards to different markets and opportunities. It is vital that we rebuild our export capability and ensure that by improving the business environment here at home, whether through reforming the tax system, getting a skilled work force in, strengthening the role of innovation or cutting red tape, we not only enable our businesses to export but make Britain a far more attractive location for those who are looking for a place to invest. It is a virtuous circle in that regard, and an important one that we need to reflect on.
Hon. Members are right to say that there are good parts in the current situation and there are challenges. Companies in this country have to win new business—I will come on to markets in a moment—and to ensure that we get more businesses engaged in that process. It is worrying how small, compared with the German Mittelstand and other countries, is the proportion of small businesses that engage in export markets. As a number of hon. Members, particularly the hon. Member for Brent North (Barry Gardiner) and my hon. Friend the Member for The Cotswolds, said, we need to start to change the culture. It is not just about going to the traditional markets that we have always gone to in the past 10 or 20 years. We have to go to the fast-growing markets, not just in the east but in the south of the global economy—I can say that from our point on the globe. We have tended to overlook Africa. The Chinese have not been so short-sighted; they have always had a canny process about it. It is therefore important that we think beyond traditional trading partners.
In a sense, that returns me to the point about the use of the diaspora in this country, which was excellently made by the hon. Member for Brent North and my hon. Friend the Member for Enfield North (Nick de Bois). Those communities are here, and it is right to raise the question about how Whitehall, not just UKTI, engages those communities to strengthen our cultural and economic ties abroad, so that we make the best use of all the talent in our country. There is a big issue regarding what Whitehall does and how that works. Certainly, to someone who is a relative newcomer to Whitehall, that is important.
I am grateful to the Minister for the way in which he is taking on board and synthesising the constructive criticisms that have been made.
Does the Minister agree that in taking groups of people out from this country, it is important that we take a complete supply chain to the prospective client country? Instead of simply taking out individual companies, we should look to put together supply chains that can meet the infrastructural, other developmental and business needs of that country, and show that within the UK, we can manage an entire supply chain for it.
Absolutely. One of the key elements of the Automotive Council road map we developed is demonstrating the depth, but also the gaps, in the supply chain, and our ability to recruit substantial prime investment. We are all familiar with the good news across the automotive sector. Part of the issue is then about how to strengthen tier 2, tier 3 and so on. That is why, when I go to the Paris motor show or the Berlin air show—as jolly and entertaining as it may sound to those who do not go, it is a very carefully worked programme—I talk to the key tier 2s and tier 3s, making it clear to them that not only do we have good indigenous businesses but we have growing markets for the components they generate, in which they may wish to invest. That supply chain thinking is very important.