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CONTENTS
Sections 1-3 are for Secretary of State Only
1. PRINCIPAL PRIVATE SECRETARY BRIEF
1.1. Proposed timetable of initial phone calls/ meetings for
Secretary of State
2. PERMANENT SECRETARY BRIEFS
2.1 Introduction to the Department
2.2 Immediate Priorities. Detail as follows:
HT1a
HT1b
HT1c
HT2
HT3
HT4
HT5
HT5a
HT6
HT7
HT8
HT9
HT10
HT11
3. MEDIA NOTE
Current Credit Conditions
BERR’s response to Economic Challenges
Global Economy Core Narrative
LloydsTSB-HBOS Merger
British Energy
Low Carbon Vehicles
Employment Strategy
EU Employment Law (Working Time)
Launch Investment
Government Response to Killian-Pretty
Review of Planning Application System
Independent Review of Postal Market
Post Office Card Account (POCA)
Business Support Simplification
BERR Finances and loss of End Year
Flexibility (EYF) implications
4. THE DEPARTMENT
4.1. BERR Core Brief
4.2 Management Board & Heads of Management Units
4.3
44
45
46
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BERR Business Plan 2008-2011
Economic and Productivity Core Brief
BERR Response to Economic Challenges
Key Delivery Partners and their contribution to our
Objectives
5. KEY POLICY ISSUES
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
Globalisation
Business Creation and Growth (UKTI Strategy)
Manufacturing Strategy
5.3.1. Advanced Low Carbon and Electric Cars
Enterprise Strategy
5.4.1. Supporting Small Business during Economic
Downturn
Business Support Simplification Programme (BSSP)
BERR Service Transformation
Regional Issues:
5.7.1 Implementing the Review of Sub-National Economic
Development and Regeneration (SNR)
5.7.2 European Structural Funds Delivery and Reform
5.7.3 Regional Accountability
5.7.4 Regional Development Agencies (RDA) Evaluation
Project
Skills
Digital Switchover
Next Generation Broadband
Better Regulation across Government
5.11.1 Regulatory Budgets
5.11.2 25% reduction in administrative burdens target
5.11.3 Anderson Review of Guidance
5.11.4 Consumer Law Review
5.11.5 Communication
DOHA
BERR EU Strategy
Employment Strategy
5.15
5.16
5.17
5.18
5.19
5.20
5.21
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5.14.1 Vulnerable Workers
EU Employment Law Agenda
Simplification Plan — reducing administrative burdens
of BERR regulation
Implementation of Companies Act 2006
Draft Competition Bill
5.18.1 Competition Bill (Private Actions part)
Post Office Network
Royal Mail
Insolvency Service:
5.21.1 Rising numbers of corporate insolvencies
5.21.2 The companies act inspection into MG Rover Group Ltd
6. GROUP BRIEFS
The following briefs are available on briefing@berr:
Better Regulation Executive
Business Environment Unit
Enterprise and Business Group
Export Credit Guarantee Department
Fair Markets Group
Finance Group
Legal Services Group
Operations Group
Shareholder Executive (ShE)
Strategic Policy Analysis Group
UK Trade and Investment (UKTI)
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THE DEPARTMENT
BERR CORE BRIEF FOR NEW MINISTERS
BERR aims and management structure
BERR’s role is to help to ensure business success in an increasingly
competitive world. The Department leads work to achieve three of the
Government's Public Service Agreements:
« PSA ‘1 Raise the productivity of the UK economy
« PSA6 Deliver the conditions for business success in the UK
« PSA7 Improve the economic performance of all English regions and
reduce the gap in economic growth rates between regions
BERR is also a key delivery partner for three further PSAs (lead department in
brackets):
e PSA 2 Improve the skills of the population, on the way to ensuring a world-
class skills base by 2020 (DIUS)
e¢ PSA 8 Maximise employment opportunity for all (DWP)
e PSA 27 Lead the global effort to avoid dangerous climate change (Defra)
BERR’s Departmental Strategic Objectives, listed in the Business Plan at
Flag 4.3 set out how we ensure business success in an increasingly
competitive world.
The Departmental structure is illustrated at Flag 4.2, in the Mangement Board
and Heads of Management Unit organogram.
Workforce numbers
The parts of the core Department retained in the Machinery of Government
(MoG) change currently have a headcount of just over 2,000 staff (Full Time
Equivalents), plus just over 4,000 in our Executive Agencies (Insolvency
Service and Companies House). The old DTI was one of the few departments
in Whitehall to achieve its 2004 spending review staff reduction targets and to
do so ahead of schedule — cutting headcount by 25% by April 06 (two years
early).
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The breakdown of staff across the Department is as follows:
rast Stream Business Environment Beller Regulation
2% Unit Executive
1% 3%
Shareholder Executive \ Enterprise & Business
2% —__> - Group
~ Da. —_—_— 16%
Legal Services Group \
9%
ProjectPoo! I
ia Energy Group
16%
Operations Group
19%
Fair Markets Group
16%
Strategic Policy Analysis, 6
Group
3%
B Ministerial &
\\_ Parliamentary Support
Team
2%
Finance & Strategy Group
4%
BERR’s Delivery Partners
BERR is supported by a wide range of organisations in creating a more
competitive Britain and one that can respond to the challenges of the future.
These partner organisations play a critical role in delivering its strategic
priorities for business, consumers and employees.
Many of these bodies are funded by BERR. Others generate their own funds
or receive public funds through other routes. All of them work closely with the
Department on shared objectives.
Our delivery partners include Executive Agencies such as Companies House,
executive Non-Departmental Public Bodies such as the Regional
Development Agencies, non-Ministerial Departments such as OFT and
advisory bodies such as the Low Pay Commission. The key delivery partners
and their contribution to BERR’s Departmental Strategic Objectives are shown
on the chart at Flag 4.6.
Managing the Department
Our seventh departmental Strategic Objective is to Provide the professional
support, capability and infrastructure to enable BERR’s objectives and
programmes to be successfully delivered. This summarises the aim of the
Department's Corporate centre and it includes legal, economic, statistical,
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finance and human resources advice. The Corporate Centre leads work to
maximise the Department's capacity, by making the most of our resources
and find the savings we agreed to make over the current spending review
period. It also leads work on building our capability.
High Level Finance
(NB: This is the situation as at 2 October, before the formation of the
Department of Energy and Climate Change. The situation will have changed
as a result of the mifgrationof the energy portfolio.)
BERR’s financial situation is very tight. Since the CSRO7 Settlement, the fiscal
position has significantly worsened and the use of any EYF (End Year
Flexibility), beyond that guaranteed in the Settlement letter for NDA, is
extremely unlikely to be agreed. Without access to EYF it is considerably
more difficult to fund pressures arising in-year.
BERR’s Comprehensive Spending Review settlement set our Departmental
Expenditure Limits (DEL) for 2008-11 as set out below:
2008/09 I 2009/10 I 2010/11
Total DEL £3.38bn I £3.33bn I £3.33bn
Capital DEL £1.23bn_ I £1.23bn I £1.23bn
Resource DEL £2.15bn I £2.11bn I £2.10bn
Of which:
Near Cash Control
Total I £2.04bn I £2.00bn I £2.00bn
Non Cash} £109m £107m £97m
Admin Control Total I £332m £324m £316m
The Department's DEL is heavily constrained by the scale of the ring fences
within it. Around 70% of the total DEL is ringfenced (that means it can only be
spent on the specific thing it was allocated for) leaving a non-ringfenced
budget of just over £1bn.
Almost all of the ringfenced DEL goes to our delivery partners, including, for
example, £1,535m to the Nuclear Decommissioning Authority and £536m for
BERR’s contribution to the Regional Development Agencies.
Expenditure limits are allocated to the Department's objectives and the pattern
of expenditure will be broadly similar over the CSRO7 period:
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Professional
Clean, safe and Support, capabifty
competitively. 49d infrastructure
priced energy ~ 74m
£144m
Free and fair
markets —.
£236m
ther regulation
£4m
Government as
a shareholder
£305m
Admin budget Managing
£332m energy liabilities
£1,802m
Business creation
and growth
£608rn
Administration Budgets
One area of budgetary pressure, particularly for 2010-11, is around
administration budgets. In order to protect policy resource and ensure we can
continue to deliver, we have a programme of cuts in corporate overheads,
particularly information and communications technology and accommodation.
We have also announced minor restructuring in some corporate centre areas.
Further savings will be needed in 2010/11.
Capability Review
All Government departments now undergo regular Capability Reviews, which
provide external assessment, advice and challenge of the way they are led
and managed. Capability reviews aim to improve the capability of the Civil
Service to meet today’s delivery challenges and be ready for tomorrows.
The Department is to have its second full Capability Review in November
2008. The first Review, as the Department of Trade and Industry, published
on 13 December 2006 alongside a response to the review from the
Department's Management Board, highlighted:
e Strengths in delivery, with the Department coming out as one of the
top departments in Whitehall in this area;
e Our impressive record of analysis and use of evidence;
e Success in making efficiency savings.
The Review also identified areas where the Department needs to improve to
meet the challenges that lie ahead. The Management Board worked with the
Review Team to identify the improvements needed and are taking action in
the following areas:
Clarity and standards: Ensuring that the Department's vision, role and
purpose drive the performance of every unit and individual in the organisation.
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Leadership: Building on our leadership development work, developing a
motivated workforce confident of their ability to influence across Whitehall.
Working through the delivery chain: joining up better with our delivery
partners.
A capability stock take in February 2008 recognised that BERR has made
significant progress to build its capability in these areas. The key challenges
are to increase our influence with other government departments and to build
our reputation with the business community as a department that delivers for
them.
The BERR Communications Strategy and People Strategy are key ways in
which we are building our capability in the areas identified.
The BERR Communications Strategy is aimed at increasing reputation and
pride.
e Externally, we are working to increasing our reputation as a
Department (including what it means to be the “voice for business”
within Government): with the media, a range of other key stakeholders
and with other government departments;
e Internally, we want to clarify BERR’s raison d’etre (including what it
means to be the “voice for business”), increase pride in the Department
and establish a strong base for ambassadorship.
Our People Strategy is to create a high performing department by:
Building our leadership capability.
Managing our people to achieve high performance.
Developing and deploying the skills and talents of our people.
Working in partnership with our employees to develop and sustain a
diverse, motivated and proud workforce.
This strategy is delivered by line managers at all levels in the organisation
working with HR professionals.
Departmental Governance
The key body for making corporate decisions is the Department's
Management Board. Its role is to provide corporate strategic leadership to the
Department. This involves in particular:
« Working with Ministers to set the Department's Strategy and allocate
resources;
e Agreeing business plans, and monitoring Departmental performance;
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e Assessing risks/issues which could undermine the Department's
strategy/business plan;
e Assessing Departmental capability and plans for the future; and
e Setting standards, values and controls.
The Management Board is chaired by the Permanent Secretary. Its other
members are the Directors General, the Chief Executive of UK Trade and
Investment and 3 non-executive members. They are Arnoud de Meyer, Brian
Woods-Scawen and Roger Urwin. The Management Board is supported by 3
Corporate Governance Committees:
The Executive Committee takes decisions on strategic, department-wide
internal management issues, for example broad decisions on resource
allocation.
The Operating Committee decides on BERR processes and resources
relating to people, planning, IT, property, communication and project
management.
The Audit and Risk Committee supports the Permanent Secretary as
accounting officer by providing advice and assurance on: risk assessment and
mitigation; governance; external and internal financial reporting; financial
control; and internal audit assurance.
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World background
Recent years have seen rapid expansion and change in the world economy.
Cross-border flows of goods, services and capital have accelerated to new
highs. In 2007, the volume of world trade rose by 6.8% per annum; world
inflows of foreign direct investment grew by 38% in 2006. Further, a number of
highly populous, rapidly growing emerging economies have begun to make
their presence felt on the world economic stage (table 1).
Table 1: Growth Rates — annual percentage change in GDP and world trade
us Euro
UK Japan China India Brazil
Zone
Russi World World
a GDP __ Trade
2006 2.9 2.8 2.9 24 14.41 9.7 3.8 74 5.0 9.2
2007 2.2 2.6 3.1 21 11.4 9.2 5.4 8.1 49 6.8
Source: IMF World Economic Outlook
April 2007
Global growth was strong in the late 1990s, with the US-led boom in ICT and
the accompanying optimism in financial markets. With the end of this boom,
global growth and trade slowed sharply in 2001 (2.2%) and 2002 (2.8%),
before recovering in 2003 (3.6%). Global growth was similarly strong in 2004
(4.9%), 2005 (4.4%), and 2006 (5.1%), boosted by low global interest rates.
Growth during this period was particularly strong in China and India. Global
growth, however, slowed marginally to 5.0% in 2007, in the wake of the global
credit crunch, and is expected to come in at around 4.0% per annum in both
2008 and 2009. But within this, a large number of developed economies are
forecast to grow much more slowly in 2008 and 2009 than in the recent past.
After growing rapidly in the late 1990s, the US economy slowed sharply in
2001 before entering a recovery that steadily picked up pace, with annual
GDP growth reaching 3.6% in 2004, before falling to 2.9% in 2006. The US
has, however, been especially hard hit by the sub-prime mortgage crisis, and
the subsequent global credit crunch that this sub-prime crisis triggered, and
the US economy grew by just 2.2% in 2007. US growth is expected to remain
subdued for some time: US GDP growth is forecast by the IMF to come in at
1.3% in 2008 and 0.8% in 2009. Aside from the credit crunch, commentators
also remain concerned about the sustainability of the US' twin current account
and fiscal deficits. A disorderly correction of these deficits poses a significant
risk to global growth, especially if it involves a sharp slowdown in US
consumption.
10
Euro zone GDP has, until recently, grown reasonably robustly, coming in at
2.8% in 2006 and 2.6% in 2007 and the Euro zone and the EU27 were widely
believed to have been relatively less adversely impact by the sub-prime crisis
and the global credit crunch that followed — certainly compared to the US and
the UK. But, more recently, the relatively robust economic performance of the
Euro zone and the EU27 has stumbled — in part due to the strong Euro which
has undermined the competitiveness of European exports — and in 2008Q2,
euro zone GDP declined 0.2%, compared with the first quarter, driven by falls
in GDP in Germany and France of 0.5% and 0.3%, respectively. Meanwhile,
Eurozone interest rates remain at a seven-year high of 4.25%, as inflation
remains above the ECB’s comfort zone.
As noted above, world economic growth has been enhanced in recent years
by rapid growth in two of the world’s most populous countries: China and
India. After high average annual growth in output since the late 1980s, by
2006 China accounted for 15% of world GDP, second only to the US. India’s
economy has also grown rapidly in the last four years, accounting for 6.3% of
the world economy in 2006, a similar proportion to Japan. Meanwhile, profits
from oil have continued to enrich states in the Middle East, and, increasingly,
Russia, and these countries have also increased their profile on the world
stage — including through their Sovereign Wealth Funds. However, since mid-
2007, growth in some of these regions has also slowed — albeit by much less
than growth in developed economies — in the wake of the US sub-prime crisis
and the global credit crunch that followed, and rising global commodity prices,
especially international oil prices. With this in mind, the IMF project global
GDP growth to moderate to 4.1% in 2008 and 3.9% in 2009.
UK economy
Output
In common with a number of developed and developing countries, the rate of
expansion in UK GDP has slowed in recent quarters in the wake of the global
credit crunch, and HMT (Budget ‘08) now expects whole-year GDP growth to
come in at between 1% - 2%% in 2008 and 2% - 2%% in 2009. The IMF
(August ‘08), meanwhile, is now forecasting that the UK will see growth of
1.4% in 2008 and 1.1% in 2009 (down from 1.8% and 1.7%, respectively,
forecast in July ‘08). The revised estimate for UK GDP growth in 2008Q2,
compared with 2008Q1, was zero (0%), down from last month's provisional
estimate of 0.2%, and indicating that quarterly GDP growth has now stalled.
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Growth of GDP at market prices
At 2003 prices, seasonally adjusted
SN
a2 at a2 af a2 a @ of a2 a a a a a @
01 01 02 02 03 03 04 04 05 05 06 06 07 O7 OB
[=Change from previous quarter. —— Change from a year earlier
Source: ONS, SPA-EA
Looking at GDP in more detail, consumption has for some time now
accounted for a significant proportion of GDP (currently around 62% in real
terms). However, the credit crunch, falling house prices, and issues
surrounding access to credit, particularly access to unsecured borrowing have
hit consumer confidence recently. This appears to have impacted on
consumer spending in certain areas — though the picture is not entirely clear-
cut. While high-end ‘big ticket’ purchases have reported fallen, discount stores
appear to be fairing much better than their higher-end counterparts. Retail
sales volumes, as a whole, recovered slightly on the month of July 2008,
however, many traders report that they expect trading conditions to be difficult
going forwards.
Continuing the pattern of the last 30 years, and reflecting patterns seen in
other major economies, manufacturing’s share of total UK output has fallen
in the recent past - from 23% of GDP in 1990 to 13% in 2006. This has been
mirrored by a roughly equal and opposite rise in the share of the service
sector.
This long-term decline in the share of manufacturing in total output
notwithstanding, the manufacturing sector as a whole performed robustly in
2008Q1, increasing output by 0.4%. However, the ongoing economic
slowdown has made the environment less benign for domestically orientated
manufacturers in particular, and, now increasingly, export-orientated
manufacturers. The most recent ONS figures suggest that in 2008Q2,
manufacturing output fell by 0.8% on the previous quarter, which also chimes
with more subdued reports from recent business surveys.
Labour market
The UK labour market has performed well over the last decade-or-so with
substantial gains in employment and reductions in unemployment in the
second half of the 1990s and early 2000s largely sustained in recent years. At
74.8% in the three months to June, the working age employment rate is close
to its historical high. The unemployment rate was 5.4% in the three months to
June 2008, up 0.2 percentage points from the first quarter, although
unchanged on a year earlier.
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76% 6.0%
Employment rate (LHS)
‘Unemployment rate (RHS)
5.5%
75%
5.0%
74%
45%
73% 4 4.0%
Mar-00 Mar-O1 Mar-02. Mar-03 Mar-04 Mar-05 Mar-06 Mar-O7 Mar-08
Source: ONS, EMAR
The working age economic inactivity rate was 20.9 per cent in the second
quarter, unchanged on the first quarter but down 0.3 percentage points from a
year earlier.
This is close to its average over the last three decades.
Prices and interest rates
Driven by commodity (food and oil) price rises, inflationary pressures have
picked up recently. In the twelve months to July, the Consumer Prices Index
(CPI) rose by 4.4%, up from 3.8% in the year to June, and well above the
upper threshold of the Government's 2.0% target rate. According to the Bank
of England’s latest Inflation Report, released shortly after the July inflation
figures, annual CPI inflation will rise to around the 5% later this year, before
falling sharply in 2009, to a little below the target rate, by the turn of 2010.
Against this backdrop of elevated inflationary pressures and flat output growth,
the Bank of England’s Monetary Policy Committee voted in August to maintain
the official Bank Rate paid on commercial bank reserves at 5.0%. August
marks the fourth consecutive month with no change in the monetary policy
rate.
Trade
UK exports and imports have risen strongly over the last couple of decades.
However, in recent years the value of our imports has exceeded the value of
exports, resulting in a trade deficit. And the wider ‘current account’
measure, which includes net income from overseas investment, has also
run into deficit.
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Monthly balance of trade
"' Seasonally adjusteq
‘Aug 04
Nov 04
Feb 05
May 05
‘Aug 05
Nov 05
Feb 06
Feb 07
May 07
‘Aug 07
Nov 07
Feb 08
May 08
May 45% ok KONA
Goods - = = ~Services
Source: ONS, SPA-EA
Goods and services
Although the current account deficits reflects the fact that the UK is spending
more than it is earning, it also reflects the attractiveness of the UK as an
investment location, as investment, both in stocks and shares and FDI, largely
form the counterpart to the current account deficit.
Productivity
The central medium term economic objective of the Government is to raise
prosperity and living standards. The best measure of prosperity is GDP per
head, which shows the level of profits and wages produced by the economy
for each person living in it. In the latest available OECD comparisons, for
2006, the UK had a GDP per head of $32,989, which following strong growth
in recent years is higher than France and Germany, and the EU and OECD
average, and around three-quarters of the US figure.
Prosperity depends on both employment and on how much those employees
produce - their productivity. Productivity is also a critical determinant of UK
competitiveness and hence is central to the UK's response to globalisation.
The UK has longstanding productivity gaps with key competitor nations (the
US, France and Germany) in terms of both the main measures of productivity,
output per worker and output per hour worked. Good progress has been made
in closing these gaps in recent years, and on output per worker the gap with
Germany has been closed. Progress has also been made in narrowing the
gap on the output per hour worked measure. Between 1996 and 2006, the
output per worker gap with France fell from 19 to 10 per cent, with Germany
from 13 to 0 per cent, and with the US from 31 to 28 per cent. The output per
hour worked gap with France fell from 25 to 17 per cent, with Germany from
30 to 17 per cent, and with the US from 24 to 19 per cent.
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UK trend productivity growth (per hour worked) is estimated to have grown by
2.4 per cent per annum over 1997H1-2006H2, compared with 1.9 per cent per
annum over the previous two cycles (1978Q1-1986Q2 and 1986Q2-1997H1).'
These improvements in productivity performance have coincided with the UK's
very strong recent employment performance, which might have been
expected to lower productivity growth. Equally, while our main European
competitors, France and Germany, have benefited from higher productivity,
employment rates are lower and unemployment rates are much higher than
those in the UK. The UK has managed to improve productivity without
compromising its employment objectives.
‘ The latest Treasury estimates, cited in Budget 2008.
15
BERR RESPONSE TO ECONOMIC CHALLENGES
Current Economic Climate
These are challenging times for business, with issues surrounding access to
credit, falling house prices, and plummeting consumer confidence continuing
to weigh on business. More recently, elevated global commodity prices,
especially international oil prices, have increased the cost of living and put
pressures on many businesses' margins. Some sectors — like finance and
banking, commercial property, house-building, and retail - appear already to
have been hard-hit. Manufacturing output has also declined in recent months,
affected by slowing domestic demand and subdued demand in key export
markets. The slowdown in general economic activity that appears to be
gaining ground in Continental Europe (where output declined 0.2% in the Euro
area in the second quarter), and the potential effect on the economy of the
crisis in the financial markets that re-erupted in September, points to
potentially even more challenging times for UK business going forward.
The difficulties that many businesses are facing are also feeding through to
employees and consumers. Whilst employment remains close to record levels
and the labour market is well placed to respond to economic challenges
(partly because of the strong growth and labour market reforms of the last
decade), there have been recent signs that performance is weakening.
Unemployment is beginning to rise, and there are dangers that the current
wage moderation may not continue and this could lead to job losses as
economic activity slows. Consumers are also being affected by reduced
access to credit and higher prices, and are likely to rein in spending owing to
greater economic uncertainty, in part caused by increased labour market
uncertainty.
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About BERR
BERR’s key objective is to ensure that UK businesses can be successful and
develops policy in line with this aim. Successful businesses deliver long term
economic growth for the UK, and BERR ensures that the UK remains a
competitive and attractive place to do business. BERR provides a key cross
government role as the ‘voice for business in Government, listening to what
business is saying, and providing an intelligent filter to these views. In
creating the conditions for business success we are balancing the needs of
business with those of consumers, employees and investors.
What we are doing to help business with short term
challenges
BERR continues to monitor the UK and world economy, to understand the
economic conditions facing business, employees and consumers. Annex A
sets out the most recent analysis of the UK economy.
Across the department, we review our policies to ensure that they are robust
to achieving our objectives in all economic conditions. The following BERR
policy areas have been identified as being of particular relevance in the
current economic climate.
Enterprise
e Business Link is providing advice and resources for businesses to help
them beat the credit crunch; and healthcheck resources to help improve
finance and business administration
e Business Link is also developing new advice to help firms cut energy costs
and increase energy efficiency
e Increased funding for the Business Debtline - free confidential
independent advice to small businesses with cashflow/debt problems
e We have renewed the emphasis on prompt payment and further advice to
businesses on credit management issues
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BERR is strengthening of the Small Firm’s Loan Guarantee (significantly
more money and extending the eligibility to more businesses) and £50m
expected to be committed in the current round of Enterprise Capital Funds,
managed by Capital for Enterprise Ltd (CfEL)
BERR work to increase awareness of the national mentoring network
BERR has been working with the Olympic Delivery Authority, RDAs and
Devolved Administrations to open up Olympic supply chains, assisting
businesses, including via Business Link support, across the UK to secure
contracts — up to 75,000 business opportunities.
The Enterprise Strategy committed to a more robust assessment of any
new legislation affecting small firms (employing fewer than 20 people) by
considering different options and also to identifying where existing
legislation could be simplified for small firms.
Regulation
The Better Regulation Executive within BERR leads the regulatory reform
agenda across Whitehall and is:
o working with OGDs to ensure that the approach departments are taking
to tackle the current economic challenge includes a review of whether it
is possible to accelerate simplification measures or slow down the flow
of new regulatory measures to reduce the costs faced by business.
BRE will review departments immediate proposals, together with HMT;
o consulting on introducing a system of regulatory budgets which, if
implemented, would provide better prioritised regulation by government
departments; greater transparency on the impact of regulation; better
maximisation of the benefits of regulatory interventions and
minimisation of the costs; and greater scrutiny of regulatory proposals;
There are also a number of deregulatory measures in the pipeline, as set
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out below.
Measure Effect
Already in force
Consumer Regulations simplifying consumer protection legislation entered
Protection from into force in late May 2008 - 23 pieces of overlapping legislation
Unfair Trading were repealed or amended, leaving in place a general duty not
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Regulations
to mislead consumers. Major reductions in consumer detriment
and significant admin burdens reductions.
October 2009
Reduction of capital
order
This is further progress in completing the Companies Act 2006
and introduces the solvency statement route which will allow
private companies to reduce share capital without reference to
the court. It will lead to a further significant tranche of admin
burdens savings being realised (approx £70m pa).
Regulatory
Enforcement and
Sanctions (RES) Act
2008
Commencement of various parts of the RES Act gives the Local
Better Regulation Office statutory powers to promote more
consistency across local authorities in the way they enforce
regulations and work with central government. It also provides a
framework of administrative sanctions that will allow regulators
to tackle non-compliance and introduces a duty for specified
regulators not to impose or maintain unnecessary burdens.
April 2009
Employment Bill
This should enter into force in April 2009. It overhauls
workplace dispute resolution and together with new Acas
dispute resolution services will deliver £150m in admin burdens
reductions. The Bill also introduces tougher penalties for
agency and NMW enforcement, which has also been welcomed
by business.
Flexible working
The aim is for this measure to enter into force in April 2009 with
the potential to deliver up to £100m of admin burdens
reductions.
Employment
e John Hutton signalled that after the Agency Workers agreement no further
major piece of employment legislation will be introduced. This should apply
to any proposals instigated outside BERR.
e BERR aims to ensure that overall employment legislation is reduced,
existing and proposed regulation such as the Agency Workers agreement
are implemented effectively and that advice and guidance provided to
businesses and individuals is both clear and simple
e Weare looking at ways of reducing barriers to employing more people and
improving productivity through promoting good working practices and
constructive employee engagement
Consumers
e Since 2006 BERR has funded around 500 advisers supplying free face to
face debt advice and provides £1m p.a. for the National Debtline.
19
Funding the Citizens Advice to roll out a national programme this year to
raise awareness among low-income consumers of the savings that can be
made by switching energy supplier and/or payment method.
The proposed Competition Bill is due to be consulted on in the autumn.
The changes are intended to facilitate claiming redress for consumers and
businesses and improve the UK’s merger control regime. They should
results in lower prices, wider choice and help deter anti-competitive
behaviour.
EU and International Trade
BERR is implementing Services Directive which will make it easier for UK
businesses to enter new markets and is worth £4-6 billion per year to the
UK creating 81,000 jobs. We are also negotiating Directives to further
liberalise energy and telecoms sectors to reduce costs for consumers. Full
liberalisation of network industries is expected to be worth £52-66 billion
across the EU.
We are working with the Commission to reduce administrative burdens by
25%, expected to be worth around £30 billion to EU businesses.
BERR is also working with the Commission and Member States on the
development of a Small Business Act that is focused on embedding the
Think Small First and better regulation principles in EU policy-making, as
well as facilitating SME access to finance and helping smaller businesses
benefit more from the opportunities of the Single Market
BERR is ensuring companies are taking advantage of the potentially cost
saving EU duty suspensions regime for components. This helps
manufacturers compete against imports of finished products by allowing
the duty-free import of components that are not made in the EU.
BERR is working with Europe to have strong state aid rules that help
create a level playing field for business.
BERR is working to ensure the UK is well-placed to take advantage of the
opportunities presented by globalisation in the longer-term, for instance:
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o Pursuing open trade policies to ensure UK businesses and consumers
continue to benefit from liberalisation, which include seeking to
influence the global trade environment, institutions and regulations.
o Continuing to work towards a positive Doha Development Deal which
would boost the global economy by € 120 billion.
UKTI
UKTI has ongoing targeted marketing strategies to enhance the global
brand of the UK's strong offers in key sectors — Financial Services, ICT,
Creative Media, Life-Sciences and Energy. Strategies on advanced
engineering and climate change are being developed.
UKTI has moved resources to 17 high growth markets (including China,
India, Brazil and Russia) and deployed a team of private sector specialists
to assist UK companies to take advantage of the opportunities in these
markets, which can help them achieve greater resilience in their revenue
streams in the current economic climate.
UKTI is planning a targeted marketing campaign for the autumn to
encourage companies to diversify their export markets, by promoting the
opportunities in markets which continue to grow faster than others.
UKTI will develop a new package of support to help companies increase
their internationalisation capabilities, which will provide access to a highly
flexible package of public and private sector support designed to help
innovative companies (both manufacturing and services) with 2-10 years
export experience grow their businesses through entering new overseas
markets. They will be offered:
o Strategic and tactical advice together with practical support to identify
and access overseas opportunities
o Specialist private / public sector advice and skills development to help
companies internationalise.
UKTI will put in place a new, focused initiative on value chain access.
building on current value chain activities. We will deliver a clearly defined
package of support for companies, especially SMEs, with an active focus
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on identifying relevant value chain opportunities, backed up with tailored
help and advice to help them compete effectively for this business.
UKTI is developing a series of programmes to maximise the impact of the
Olympic Games on British business and the UK economy and to
demonstrate that the UK is the place to do business.
Sectors
BERR engages with a range of sectors and gathers a range of intelligence to
help us understand how the current economic environment is impacting on
them, and how our policies can support them. Some specific examples are
provided here:
BERR has started to work more proactively with the banking sector,
including a meeting between Brian Bender and other senior BERR officials
and the British Banking Association. BERR is also involved in the
Professional Services Global Competitiveness Group, which is co-chaired
by Kitty Ussher at HMT and Sir Michael Snyder
BERR's Construction Unit has two initiatives to secure cash flow in the
construction industry:
o Using the public sector's weight as a major customer of the industry
(the public sector accounts for about 40% of the industry's output) to
ensure that cash flows through the (often quite extended) construction
supply chain. BERR has worked with OGC to develop and implement
a Fair Payment Charter and Guide to fair payment practices.
o BERR is aiming to improve operation of Part 2 of the Housing Grants,
Construction and Regeneration Act that regulates payment and dispute
resolution terms in construction contracts. Draft clauses for technical
scrutiny were published last month.
Retail
o Shriti Vadera has recently met the British Retail Consortium, Asda,
Sainsbury, Tesco and John Lewis to help Government better gauge the
impact of the current economic conditions on the retail sector, and John
Hutton met the British Retail Consortium (along with other business
groups) on 2 October.
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o BERR is working with OGDs to try to ensure that current economic
conditions in retailing are taken into consideration when considering
introduction of new regulatory burdens (eg on sale of alcohol or use of
plastic bags) on the sector.
Regions
The Government has a range of regional budgets. For BERR, the main
regional budget lies with the RDAs, who have a budget of around
£2,219m, of which around £500m comes from BERR.
The nature of the devolution arrangements mean that the RDAs allocate
funding against their priorities which they set on the basis of their local
knowledge (set out in their Regional Economic Strategies and Corporate
Plans). They do have flexibility to respond to changing economic
conditions and priorities, and local knowledge means that they are able to
reflect the local economy's needs.
In addition, to ensure that the RDAs are well set to respond, HMT and
BERR have launched two initiatives during the summer.
o Regional Funding Advice was launched on 30 July. This is a
consultation seeking the regions views about the appropriate allocation
between the existing regional budgets. This is a medium term process,
designed to elicit better prioritisation over structural reform spending.
o Regional Economy. HMT and BERR have been working with the RDAs
in July and August to produce regional economy documents which set
a framework for helping the RDAs and regional partners to identify the
current state of their economies, and calibrate appropriate responses.
BERR is co-ordinating a regional monthly intelligence assessment which
will use RDAs business intelligence to generate a better understanding of
the evolving state of the regional economy.
In October/November, BERR will complete an evaluation into the £15bn
spent by the RDAs, which will shed much more light on ‘what works’ and
the value for money of their interventions.
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Other areas with potential new announcements
The new Manufacturing Strategy - 'New Challenges, New Opportunities’ - was
published on 8 September 2008. It sets out the views of Government on what
the sector needs for success in the long term - including seizing the
opportunities of the low carbon economy, supporting skills, realising overseas
opportunities, and improving the perceptions and understanding of
manufacturing. The new framework is intended to inform a dynamic process
that will shape further new policies and programmes going forward. It builds
on the 2002 manufacturing strategy and the 2004 stakeholder review.
Policy Reviews
BERR is also involved in a number of Reviews that are due to report
throughout the rest of 2008. The recommendations with these Reviews may
provide further opportunities to support business at the moment. We will
consider the recommendations in the light of the current economic climate
before any implementation.
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Review Name Description Due To Report
Caio Review of
Broadband
The next phase of broadband UK: Action
now for long term competitiveness,
concluded that Broadband has become
essential platform for access to
information, knowledge and services
across the world. And recommended that
UK Government define a framework for
delivery of fast broadband in the UK,
Launch initiatives to remove obstacles
and facilitate investments, Benchmarking
progress and invest contingency plan
Reported
September 2008
in
Review of Public I The Review examined the role of the PSI
Services
Reported
2008
July
Industry
(PSI)
in the UK, including its contribution to the
UK economy, and made a number of
recommendations as to how government
policy could better support its future
development.
Government
response
autumn 2008
due
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Supporting Innovation
in Services
This report, developed in partnership with
DIUS and NESTA, is based on a series of
industry-led reviews of the retail,
construction, logistics, internet services
and environmental services sectors. It
identifies service sector themes, barriers
to growth and the Government actions
necessary for a_ thriving, competitive
service sector. Findings cover technology,
standards, skills and Government's role in
championing innovation in markets.
Reported August
2008
Killian/Pretty Review
of the planning
application process
Independent reviewof the end-to-end
planning application process and
recommend areas for simplification and
burden-reduction
October 2008
Anderson Review of
Guidance
Independent review into the best way to
deliver clarity and certainty in Government
generated guidance, focusing initially on
employment law.
The review will focus on potential to give
small business greater certainty that when
they have followed guidance that they
complied with the requirements of the law.
Autumn 2008
Glover review of
SMEs and Public
Procurement
Inquiry into the barriers small firms face in
winning public sector contracts, to make
recommendations on the necessary
action to reduce these.
Autumn 2008
BERR Consumer Law
Review
Root and branch review of consumer law,
with workstreams on legislation,
enforcement, and empowerment/redress
— leading to a Green Paper
December 2008
Innovation and Growth Teams
BERR has two “Innovation and Growth Teams” that bring together business
and Government to consider and make recommendations on policies that will
promote the competitiveness of specific sectors. These are:
. Industrial Bioscience Innovation and Growth Team (due to report in
April 2009)
. Automotive Innovation and Growth Team (due to report in Spring 2009)
BERR is also
reviewing
implementation of recommendations by the
Bioscience Innovation and Growth Team, which reported in 2005, and will
make further policy recommendations in the light of the review.
Value for Money
25
It is right that we should focus on the short term challenges associated with
the current economic difficulties. However, these difficulties will not last for
ever. We need, therefore, not only to ensure that the government's short term
responses are consistent with our longer term vision and objectives and also
that we are in a position to introduce the appropriate policies when the current
problems subside.
And in responding to the current economic challenges, BERR has remained
focused on continuing to deliver against our priorities (as set out in our DSOs
and PSAs) and our value for money commitments. BERR has been tasked
with making annual savings of 3% on our core programme budgets and 5%
annual savings in our administration budget equivalent to savings of £307
million in 2010/11. These savings will be made in three main areas: core
programme and capital budget; efficiency savings in corporate services and
BERR’s agencies and NDPBs; and through service transformation.
While BERR is a relatively small department in net budget terms, with a
departmental expenditure limit of £3.3bn, we have a disproportionate impact
on business and thereby on the growth of the economy via our policies,
including the better regulation agenda. BERR and its delivery partners are
focusing on where we can have the biggest impact, which means not only
working towards long term economic growth, but also ensuring we are
supporting business in meeting current economic challenges.
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HOW OUR DELIVERY PARTNERS HELP US DELIVER ON OUR
STRATEGIC PRIORITIES
a Promoting the creation and growth of business and a strong
enterprise economy across all regions
- Office of Communications (OFCOM)
Public corporation
Ofcom is the independent regulator and competition authority for the UK’s
communications industries, with responsibilities across television, radio,
telecommunications and wireless communications services. Ofcom is also
responsible for the management of the civilian wireless radio spectrum.
o Staff employed - 800
- The Postal Services Commission (Postcomm)
Non-Ministerial Department
The Postal Services Commission is an independent regulator, established in
2000 to ensure the provision of a universal postal service throughout the UK:
and to further the interests of postal users by developing competition, where
appropriate. It licenses postal operators, and also controls the price and
service quality of (Royal Mail's) universal services.
o Staff employed - 63
- Postwatch (closing end Oct 08)
Executive NDPB
Postwatch represents the interest of business as well as individual users of
postal services. It acts as the voice of the consumer in all postal matters,
ensuring that customers get the best possible service at realistic prices.
o Staff employed - 90
- Regional Development Agencies
Executive NDPBs
The Regional Development Agencies enable sustainable economic
development in the English regions. They produce regional economic
strategies for their areas and undertake various programmes aimed at
producing regeneration and improving skills and competitiveness in the
region.
a Advantage West Midlands (AWM)
+ Staff Employed - 327
a_ East of England Development Agency (EEDA)
+ Staff employed — 223
a East Midlands Development Agency (EMDA)
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+ Staff employed - 347
a London Development Agency
+ Staff employed — 488
a North West Development Agency (NWRDA)
+ Staff employed — 402
o
One North East (ONE)
+ Staff employed -446
a South East England Development Agency (SEEDA)
+ Staff employed — 342
o
South West of England Regional Development Agency
(SWRDA)
+ Staff employed — 303
a Yorkshire Forward
+ Staff employed - 428
- Capital for Enterprise Ltd
CfEL delivers and manages the Government's financial interventions in the
SME sector, applying its knowledge and understanding of small and medium
sized businesses and the financing environment in which they operate.
Additionally CfEL will inform and improve the quality of Government policy
initiatives through its close involvement in the market.
o Staff employed - 13
a___ Delivering free and fair markets, with greater competition, for
businesses, consumers and employees
- ACAS (Advisory, Conciliation and Arbitration Service)
Executive NDPB
ACAS aims to improve organisations and working life through better
employment relations. It delivers a high quality employment relations service
to businesses and individuals in Great Britain. ACAS is required by statute to
offer conciliation to all employment tribunal claimants and respondents. It
provides up to date information, independent advice, high quality training and
it works with employers and employees to solve problems and improve
performance.
o Staff Employed - 789
- Companies House
Executive Agency
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Companies House is an agency of BERR and has two main functions. The
first is to incorporate and dissolve companies, and to register the information
they have to make public in exchange for the benefits of limited liability. The
second is to make information filed by companies available to searchers, who
may take information as end users or as middle-men in the business
information industry.
o Staff employed - 1,085
- Competition Commission
Executive NDPB
The Competition Commission is an independent NDPB set up by the
Competition Act 1998. It is independent of Ministers apart from a small
number of cases involving defence, national security and the media.
It conducts in-depth inquiries into mergers, markets and the regulation of the
major regulated industries (relating to sectors such as utilities, postal services,
railways, airports, air traffic control and financial services. Every inquiry is
undertaken in response to a reference made to it by another authority, usually
the Office of Fair Trading. It has no power to conduct inquiries on its own
initiatives.
o Staff: 150
a Competition Service
Executive NDPB
The Competition Service funds and provides support services to the
Competition Appeal Tribunal which hears appeals in respect of competition
related matters.
o Staff employed — 18
- Financial Reporting Council (FRC)
The Financial Reporting Council (FRC) is the UK's independent regulator for
corporate reporting and governance. Its aim is to promote well-founded
confidence in corporate reporting and governance in the UK.
o Staff - 76
- Hearing Aid Council (Executive NDPB)
Executive NDPB
The Hearing Aid Council (HAC) is responsible for setting standards of
professional training, performance and conduct for individuals and companies
involved in the assessment of hearing loss and the subsequent sale of hearing
aids in the private sector.
o Staff employed - 7
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- The Insolvency Service
Executive Agency
The INSS is an executive agency, with responsibility for administering
the insolvency regime in England and Wales. This includes administration
of individual (bankruptcy) and corporate insolvencies through the Official
Receiver, director disqualifications and bankruptcy restrictions, regulating the
insolvency profession, paying statutory redundancy payments to employees
of companies in formal insolvency, conducting fact finding investigations into
companies where there is a public interest to do so through the Companies
Investigation Branch and providing detailed practical information on insolvency
procedures. The agency also manages director disqualifications and
redundancy payments in Scotland.
o Staff - 2564
- Low Pay Commission
Advisory NDPB
The Low Pay Commission (LPC) was established by the National Minimum
Wage Act 1998 to advise the Government about the National Minimum Wage.
It’s remit is set each year by Government. It is asked to make
recommendations including rate recommendations, taking into account the
impact of the minimum wage on the economy. It has a long-term research
programme which includes fact-finding visits to all parts of the country.
o Staff-9
- National Consumer Council (NCC)
Executive NDPB
The NCC, and its sub-councils the Scottish Consumer Council and Welsh The
NCC, and its sub-councils the Scottish Consumer Council and Welsh
Consumer Council, aims to put users at the heart of public services. It strives
to ensure that markets work for consumers, that disadvantaged and
vulnerable consumers get a fair deal and generally achieve more sustainable
consumption.
o Staff employed - 35
- Office of Fair Trading (OFT)
Non-Ministerial Department
The OFT is the UK's consumer and competition authority with a mission to
make markets work well for consumers, and plays a leading role in promoting
and protecting consumer interests throughout the UK, while ensuring that
businesses are fair and competitive.
The OFT’s goal is to make markets work well for consumers. To do this it
enforces competition law and consumer protection law and investigates the
operation of markets
o Staff employed - 650
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- SITPRO Simplifying International Trade
Executive NDPB
SITPRO is the UK's trade facilitation agency and is working to simplify the
documentation and procedures for the international movement of goods.
o Staff employed - 9
a Ensuring the reliable supply and efficient use of clean, safe and
competitively priced energy
- Energywatch (closing end Oct 08)
Executive NDPB
Energywatch is the independent statutory body representing the interests of
gas and electricity consumers. It provides advice on consumer matters to
Government and to the industry regulator. Energywatch investigates
complaints that consumers have been unable to resolve with their supplier
and provides advice on a range of energy issues.
o Staff - 216
a_ Ensuring that all Government Departments and Agencies deliver
better regulation for the private, public and third sectors
- Local Better Regulation Office
Company limited by guarantee
The LBRO’s key role is to reduce burdens on business without compromising
regulatory outcomes, working in partnership with local authorities, national
regulators and departments to drive up the quality of local authority services
- Better Regulation Commission
Advisory NDPB
To advise the Government on action to reduce unnecessary regulatory and
administrative burdens; and, ensure that regulation and its enforcement are
proportionate, accountable, consistent, transparent and targeted.
o Staff employed - 8
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KEY POLICY ISSUE QQ fic
Globalisation oS SSS SSS SS Nie pice
Key Issues — :
¢ Ensuring the UK is well placed to respond to the challenges of globalisation by raising our
competitiveness and productivity. Concerning the latter, BERR has the lead on an overarching
PSA target, with HMT and DIUS, to raise the productivity of the UK economy.
¢ The need to better communicate with business, OGDs and the general public, to create a better
understanding of the opportunities globalisation can present for UK firms and consumers, whilst
recognising the potential difficulties, so as to ensure that support for globalisation is maintained
and that there isn’t a backlash against globalisation.
e Ensuring BERR plays a leading role in Whitehall and beyond in providing thought leadership and
setting the policy agenda on globalisation.
Context
¢ Globalisation is ‘the process through which an increasingly free flow of ideas, people, goods,
services and capital leads to the integration of economies and societies’.
¢ The latest wave of globalisation has led to, and continues to lead to, profound transformations in
both developed economies like the UK and developing economies - with the latter group,
particularly China and India, increasing their share of global output, trade, and investment in recent
years.
¢ This rapid growth of emerging economies provides substantial potential opportunities for the UK -
with new markets for our exporters and investors and cheaper, more diverse goods and services
for our consumers. There are, however, challenges associated with globalisation - such as job
losses in the UK as production is relocated to lower cost economies, concerns about adverse
environmental impacts, etc. - and negative public perceptions linked to these challenges.
e Recent financial market difficulties have been transmitted through international linkages, resulting
in a global credit squeeze and slowdowns in GDP growth across countries. Whilst it is still hoped
these impacts will be short lived, they also present new challenges to the government, through
maintaining a positive picture on the subject, and taking positive policy steps to ensure the UK
remains well placed to deal with the new subdued environment.
e In order to fully exploit the opportunities afforded by globalisation and minimise the potential
downside risks associated with it, it is essential that the UK responds by raising our productivity
and competitiveness. This means continuing to make progress in key areas such as: entrenching
and maintaining macroeconomic stability; promoting an enterprise culture; strengthening
innovation; improving skills; ensuring fairness through a flexible welfare state; and promoting
sustainable development, including through effective multilateral action.
« Budget 2006 set out a strategy to promote the UK's long-term strengths in the global economy,
with a focus on raising productivity growth. The five drivers of productivity - investment, innovation,
skills, enterprise and competition - are thus central to the promotion of the UK's long-term
strengths in the global economy. BERR leads on the PSA to raise the productivity of the UK
economy.
¢ Responding to the challenge of globalisation is core to BERR’s purpose — and is supported by all
BERR’s objectives and PSAs.
e In February 2008, BERR launched a paper, “Globalisation and the Changing UK economy”, which
outlined the process of globalisation, the changing UK economy, and discussed the policy
response to an increasingly globalised world.
e BERR plays a central role in the main cross-departmental body working in this area, and has
undertaken activities to relaunch and expand the Permanent Secretaries’ Group on Globalisation.
BERR provides the secretariat for the Group.
Future Challenges
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« The communications challenge. There is a need to highlight the potential benefits of globalisation
to the UK - such as new markets for our exporters and investors and cheaper, more diverse goods
and services for our consumers.
¢ Within Whitehall, positively building on the work of the Permanent Secretaries Group on
Globalisation.
Here, the newly drafted core scripts on Globalisation will require effective dissemination.
e Increased engagement with OGDs, especially those whose policy areas are affected by
globalisation, will help formulate a more robust message.
Key Players Relationship Map
allengers
Some UK trade unions —
particularly those whose
members have been hit by off-
shoring of production to lower
cost economies.
Elements within other
governments who advocate
the protection of ‘national
champions’
Some OGDs may have policy
priorities that are challenged
by globalisation, and so
require engagement.
Some NGOs - particularly with
respect to trade liberalisation
and adverse environmental
changes associated with
globalisation.
Neutrals
Key Milestones
Issue / Feb ‘08
policy
area
Jul
08
Aug
‘08
Sept
‘08
Oct ‘08 Nov ‘08
2009
onwards
The Publication of
opportunities I ‘Globalisation
and and the
challenges of I changing UK
globalisation. I economy’.
First
draft of
paper
on
global
value
chains
Paper on the
‘opportunities
afforded to the
UK by the
Rise of India
and China.
Possible joint
BERR-CBI
paper on
globalisation for
the next Perm
Secs’ dinner
with the CBI's
international
board
Final draft of
Paper on
global value
chains.
Work on
globalisation
and the
regional
economic
performance
PSA.
Perm Secs’ Group
on Globalisation.
First meeting of the
working level group in
support of the Perm
Secs’ Group.
Second meeting of the
working level group in
support of the Perm
Secs’ Group. (BERR);
(BERR);
(HMT);
Meeting of the Perm Secs"
Group, likely to discuss:
1) core scripts on globalisation
2) The opportunities to UK
business afforded by the
growth of new markets
3) financial globalisation
4) Potential issues for trade,
and trade negotiations post-
Doha (BERR);
5) Sovereign Wealth Funds
and the role of the sate
(HMT)
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EY POLICY ISSUE
Business Creation and Growth
Key Issues
e UK Trade & Investment’s (UKTI) five-year Strategy
e Integration of Defence and Security Organisation into UKTI
Context
e UK Trade & Investment (UKTI) brings together the work of the Department for Business, Enterprise
and Regulatory Reform (BERR) and the Foreign & Commonwealth Office (FCO) on international
trade and investment. In July 2006, in response to the 2006 Budget Statement which put UKTI at
the heart of the government's response to the challenges and opportunities of globalisation, UKTI
published its five year strategy, “Prosperity in a Changing World”.
¢ The UKTI strategic objective is “By 2011, deliver measurable improvement in the business
performance of UKTI's international trade customers, with an emphasis on innovative and R&D
active firms; increase the contribution of foreign direct investment to knowledge intensive economic
activity in the UK, including R&D; and deliver a measurable improvement in leading overseas
markets as the international business partner of choice.”
¢ UKTI has challenging corporate targets for trade and investment, which ensure they deliver
economic benefits for the UK economy. Through its performance measurement and monitoring
data UKTI can demonstrate :
e Last financial year, UKTI’s services delivered an additional £3 billion bottom-line benefit to our
clients
e Latest independent monitoring survey results in the year to end Q1 2008/09 show that UKTI
assisted 19,800 individual companies to exploit opportunities in overseas markets. Some
16,100 of these were innovative companies.
e 56% of all businesses assisted improved their business performance as a result of UKTI
support.
e UKTI achieved 73% quality and 77% customer satisfaction across all its trade services.
¢ UKTI exceeded its inward investment target with 549 investment projects of which 182 were high
value. The UK remains the number one location in Europe for Foreign Direct Investment and saw a
10% increase in new investment projects. A record 1,573 investment projects were won, marking a
fifth consecutive year of growth. The UK was the top global defence exporter in 2007. It won a
record £19 billion ($19bn) of new business and a 33% market share of the world market.
UKTI Strategy, Prosperity in a Changing World
UKTI's five-year Strategy has three key themes:
e Anincreased effort on marketing the UK as the place in which and with which to do business;
e More effective partnership between all those with a role in presenting the UK overseas in the
business context;
« A greater focus on those companies, sectors and markets which offer the greatest potential to
make a difference. We want to make sure that UKTI's limited resources make the maximum
impact.
e The underpinning economic evidence published alongside the strategy indicated that UKTI efforts
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were best focused on:
* providing access to key contacts and networks overseas, and strengthening the social networks
underpinning bilateral business connections;
e strengthening the internationalisation capabilities of innovative and high growth businesses;
¢ providing access to information which the private sector would be unable or unwilling to provide;
¢ facilitating strategic cooperation among UK businesses, including showcasing UK capabilities in
new markets and strengthening the UK's reputation in key markets and sectors.
UKTI’s Strategy embedded these areas of focus and included
e targeting of innovative and R&D intensive businesses
* reinforcing resources in high growth markets to develop relationships and highlight opportunities
for UK business
e and high level international marketing strategies to strengthen UK reputation in key sectors and
markets.
Defence and Security Sector
e On 1 April 2008 the responsibility for defence export support transferred from MoD to UKTI to form a
new group called the UKTI Defence & Security Organisation.
Key current challenges
e Integration of Defence and Security Organisation into UKTI.
Future Challenges
e Delivery of commitments set out in UKTI’s five-year Strategy
e Anincreased focus on supply chain initiatives
e Launch of Advanced Engineering and Low Carbon marketing strategies in early 2009
e Implementing the conclusions of the joint reviews of RDA/DA overseas presence for inward
investment and of UKTI regional trade delivery
Key Players Relationship Map
Neutrals
HMT: Supportive of
Strategy.
DAs: Participating in the
UKTI-led coordination of
inward investment activity
overseas, as far as their
devolved powers allow.
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Key Milestones
Issue / policy Sept ‘08 Oct Nov Dec I 2009/10...
area ‘08 ‘08 ‘08
Issue 1 Appointment of I Appointme I 1. SLA Cross-Whitehall anti-corruption
Integration of Chair, Defence I nt of Chair, I Review with Agenda (common industry
DSO into UKTI Advisory Group I Security MOD 2. standards)
Advisory Relocation of
Group UKTI DSO
staff
Issue 2 Manufacturing Development of supply chain
Increase focus on I Strategy initiative (April 2009)
supply chain published
initiatives
Issue 3 UKTI to launch marketing
UK Sector strategies for Advanced
Marketing Engineering and Low Carbon
Strategies marketing strategies (early 2009)
Issue 4 1. Full roll-out of new coordinated
Implementing the arrangements with RDAs and
conclusions of the DAs in overseas inward
joint reviews of investment markets (April 2009)
RDAJDA overseas. 2. Full implementation of
presence for “enhanced Dual Key"
inward investment arrangements with RDAs on trade
and of UKTI delivery in the English regions
regional trade 3. Joint UKTI/RDA/DAs Trade
delivery and Investment Summit
(June/July 2009)
KEY POLICY ISSUE ~
Manufacturing Strategy
Key Issues
«¢ Implementation of the new Government's Manufacturing Strategy launched by the PM and
Cabinet members on 8 September 2008 in the West Midlands.
Key Facts/Other Sector Unit initiatives
Manufacturing Strategy Review 2008
e The Strategy had a high profile launch at the Jaguar Car Plant in the West Midlands on the 8th
September, involving the PM, and the SoSs for BERR and DIUS.
« The Review was driven by the need to ensure Government's support for manufacturing reflects
changes to the manufacturing environment (including the increasing importance of global markets
and new opportunities presented by the low carbon economy).
Key Themes
Headline policy proposals include:
5 key dynamics were identified in the Review as changing the current landscape of manufacturing, and
offering great opportunities for UK manufacturing, namely:
. Global Value Chains - that the manufacturing process is a series of separate operations
networked across the globe.
. Technology Exploitation - Ensuring companies have the necessary support to exploit new
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technologies and are able to keep pace with the uptake and diffusion of technologies, which have
increased dramatically.
. Intangibles - that manufacturing is no longer the investment in machines and factories - its now
the less obvious factors such as skills, R&D and brands.
. People and Skills - ensuring the right skills set and the ability to attract people into
manufacturing.
. Low Carbon Economy - see below for more details — this agenda is having an increasing
influence on manufacturing and presents major opportunities for UK manufacturers.
Low Carbon Economy
« The Manufacturing Strategy includes a chapter on low carbon. This focuses on how UK
manufacturing industry can capitalize on a move to a low carbon resource efficient economy by
supplying the goods and services required where the UK might have a competitive advantage. For
example, Renewables could create up to 160,000 jobs and nuclear up to 100,000. Companies can
capitalise on the UK's economic, demographic and geographical advantages, providing natural lead
markets for wave and tidal power for example.
Key deliverables in the Manufacturing Strategy are as follows:
Key initiatives for each of the dynamics are as follows:-
1. Globally fragmented value chains
. UKTI will allocate new resource to help 600 UK companies identify and exploit manufacturing
value chain opportunities in China and India. Intellectual Property Office will provide advice and
guidance on protecting and exploiting intellectual property in these markets.
2. Accelerated pace of technology exploitation
. Advantage West Midlands and the East Midlands Development Agency will deliver a new
purpose-built Manufacturing Technology Centre at Coventry providing industrial scale demonstration
facilities. Projected £130 million investment from private and public sector over 10 years.
. Technology Strategy Board - additional investment of £24m into research central to high value
added manufacturing
3. Investment in intangibles: using British lead in design, brands, services
. The Government will expand “designing demand” service especially for SME’s which enables
them to win new business with design advice and will support new design skills alliance to ensure
designers are meeting manufacturers needs.
4. Investment in people and skills
. 1500 new apprenticeships for manufacturing in addition to 9000 announced recently by DIUS.
1500 will be in novel scheme where larger manufacturers, with government support, will train more than
they need themselves for smaller companies who do not have the resources. 10,500 new
manufacturing apprentices adding to current 80,000
. Establish Manufacturing Insight, a body tasked with making the public perception of
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manufacturing reflect the reality, ensuring young people are aware of the exciting career opportunities
available e.g. less than a third of electronic engineers go into manufacturing
. Launch a Manufacturing the Future campaign in schools to promote manufacturing careers
prospects for young people - building on the recently introduced engineering diploma for 14-19 year
olds
. Simplify skills system — Memorandum Of Understanding signed at the same time as the launch
commits all those who interface with manufacturers to provide this immediate and seamless access to
comprehensive and straightforward skills service and manufacturing will be the pilot for the UK
Commission for Employment and Skills simplification recommendations.
5. Transition to low carbon economy-green collar jobs
. The Government will produce in 2009 an integrated low carbon industrial strategy bringing
together government levers and activities to help manufacturers identify market opportunities and
support them in becoming global leaders
. The new Office of Nuclear Development will work to develop the UK nuclear supply chain so it
can maximise the high value added captured by UK in our nuclear programme and, as we have first
mover advantage, capture export markets from the global nuclear renaissance - akin to 1970's north
sea oil exploration which created UK offshore industry which is still a world leader and major export
earner
. The Government will also establish the Office for Renewable Energy Deployment which will
address barriers to deployment including helping to develop the UK supply chain
. Support the development of advanced low carbon vehicles (including new pilot programme for
electric cars) - Number 10 is applying urgent pressure on this particular issue (see Advanced Low
Carbon and Electric Cars brief for full information Flag 5.3.1)
Stakeholder management
e The key focus for engagement with stakeholders was a set of Regional Manufacturing Events,
arranged jointly with the Regional Development Agencies, covering the nine RDA regions in the
North, Midlands and South of England. More than 300 people attended the events, providing
Ministers with the opportunity to hear first hand, key messages, around the dynamics for change
underpinning the Review. Views expressed were registered and noted, as policy and narrative
around the strategy was being developed.
« A Ministerial Advisory Group provided expert input into the review and has a core membership of
CBI, TUC, EEF, RDAs, TSB and selected industry representatives. Ministers were extremely
grateful for the valuable input from the Ministerial Advisory Group into the policy development
process. There has yet to be a decision on the function of the group following the delivery of the
new strategy.
Background
¢ Manufacturing makes a vital contribution to the UK economy, adding over £150bn a year to the
economy. The UK has the sixth largest manufacturing output of any country, and manufacturing
accounts for 13% of UK GDP, around half of exports, almost 3 million jobs, and three quarters of
the UK spend on business research and development.
e In 2002 DTI published the first manufacturing strategy for over 30 years, based on raising
investment, applying science and innovation, world-class practice and a high level of skills to create
a high value manufacturing sector.
e In 2004 a progress report on the Manufacturing Strategy was published, leading to an Action Plan
setting out key priorities of macroeconomic stability, investment, science & innovation, best
practice, skills and education, modern infrastructure and market framework.
e A key success of the manufacturing strategy has been the creation of the Manufacturing Advisory
Service. Through regional delivery MAS is providing manufacturing companies with direct access
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to practical advice and hands-on support from experts. It plays a vital role in helping UK
manufacturers to improve productivity in an increasingly competitive global economy. Since 2002
and the creation of the MAS, Government and RDAs have invested £90m in the service, helping
24,000 firms. In addition, £559 million of added value has been generated from MAS interventions.
Context
e The volume of exports of UK manufacturers increased by 36% between 1997 and 2007.
¢ In 2005, China produced 7% of the world’s cars, half of the world’s colour TVs, and 70% of the
photocopiers. According to the FCO, the US will continue to be the world’s dominant national
economy (in terms of nominal GDP) in both 2015 and 2025. By 2015, China is likely to have just
eclipsed Japan, to become the second-largest economy globally. By 2025, the Chinese economy is
forecast to be much larger than the Japanese economy.
¢ The UK has many world-class manufacturing companies which are rising to the challenge of
globalisation.
¢ In 2007 our Automotive sector produced more than 1.75 million vehicles,
e Our Aerospace industry has a turnover of over £19 billion and has invested £2.53 billion on R&D in
2006.
e Our pharmaceutical industry invested £3.9bn in R&D in 2006 and 15 of the world's current best
selling drugs originated in the UK.
New high-tech sectors are emerging:
e UK Environmental Industries is expected to grow from £25 billion in 2005 to £34 billion in 2010 (42%
growth from 2005) and on to £46 billion by 2015.
¢ Our Bioscience industry is the 2nd biggest in the world (to the US) accounting for 24% of new
European biotechnology drugs in late stage clinical trials, more than any other country.
Future Challenges
Major challenges
Key issue is to ensure that the Manufacturing Strategy delivers. It needs to match expectations and
maintain the support that it achieved at the launch.
It is only in recent years that the UK has begun to close the manufacturing productivity gap with our key
competitors in the G7.
At the same time the costs of basic raw materials have been volatile - this year saw at one point a
nearly 50% increase in the price of oil.
But manufacturers — especially high technology manufacturers - have shown it is possible to succeed.
The UK’s manufacturing exports rose from £145bn in 1997 to £178bn in 2007, and the UK continues to
attract more inward investment in manufacturing than other European countries.
Key Players Relationship Map
Challengers Neutrals
e Treasury — Budgetary e List key stakeholder
Constraints organisations
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The Ministerial Advisory Group, which acted as a sounding board for Ministers in developing the 2008
Manufacturing Strategy Review, contained the following stakeholders:
Essential people to meet in first weeks
MANUFACTURING, MATERIALS & ENVIRONMENTAL INDUSTRIES
Importance
Person & Job
Title
Company/Organisati
on
Timing
Rationale
Highly
desirable
Martin Temple
Chairman
EEF
As soon as possible
The EEF is a key
departmental
stakeholder on
manufacturing and
a wide range of
related issues
involving employers,
energy, etc.
Regular bilateral
meetings with SoS
well as with MinisteI
for Competitiveness.
Martin Temple is also
a key member of th}
Ministerial AdvisoryI
Group on
Manufacturing.
[oy
Highly
desirable
Philippe Varin
Chief Executive
Corus
As soon as possible
Largest steel
producer in UK, no
owned by Tata of
India. Key concerns
about implementati
of EUETS
EI
Highly
Desirable
Brian Jackson
Chair of EMDA
East Midlands
Development Agency
As soon as possible
Lead DA on
manufacturing
Highly
Desirable
Brendan Barber
General
Secretary
TUC
As soon as possible —
as part of general
discussion on other
policy areas.
Key contributor to
policy on
manufacturing.
Desirable
Merlin Hyman
Director
Environmental
Industries
Commission
Leading TA in the
environmental
industries arena with
strong links to SPADs
etc
Desirable
Richard
Lambert
Director-
General
CBI
CBI is a key
departmental
stakeholder on
manufacturing
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Key Milestones
Issue / policy I Sept ‘08 Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Issue 1 Launch of
Manufacturing
Strategy
Review Report
Issue 2 New BERR
ministers
Issue 3
Issue 4
Issue 5
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Key Policy Issues Supporting Brief
Priority Issue Lead Official
Advanced Low Carbon and Electric Cars_I DG / HMU — Mark Gibson/Simon Edmonds
Context
.
>
Manufacturing Strategy — success and sustainability of UK automotive industry >
innovation of advanced low carbon vehicle technologies (including for Electronic Vehicles)
manufacture of high added value components and vehicles > green-collar jobs >
strategic recommendations by New Automotive Innovation and Growth Team, March 2009
Diversity of UK’s automotive market and manufacturing base; design engineering,
manufacturing and export of internal combustion engines a major global strength
Announcements for Manufacturing Strategy
o Providing more than £90m of funding for UK research, development and
demonstration of low carbon vehicles over the next 5 years. And in addition dedicating
£20m to provide lead markets for low carbon vehicles through the use of strategic
public procurement;
o Committing central government departments and their executive agencies to achieve a
fleet average of 130g CO2/km or less for new car purchases within the next 3-years.
co Taking forward a study on issues relating to the development and commercialisation of
vehicles with electric drive including looking at how to maximise the benefits to the UK
economy;
o Assessing the impact on the electricity system of the widespread use of electric
vehicles and ensuring we have the capacity to support a new charging network
o Collaborating internationally and holding an international meeting of experts in the
autumn to encourage the creation of the right consumer market and agree industry
standards;
o Working to remove any barriers in the planning system to facilitate the rapid-roll out of
the necessary infrastructure
o Announcing an extra £1m for Cenex, the UK’s automotive centre of excellence for low
carbon and fuel cells technologies, to enable them to continue to act as a critical agent
for change assisting UK industry build competitive advantage from the shift to a low
carbon transport economy.
Key Facts: Supporting Key Facts: Opposing Policy/Issue
Policy/Issue
e PMstatement at G8 Summit (9 July)
highlighting a role for electric
vehicles (EVs) in transport > PM's
subsequent breakfast meeting at
Motor Show on 22 July stating his
aim for Britain to be a global leader
in the market for advanced low
carbon vehicles
e Jeddah process —> reducing
dependence on oil > BERR/DfT to
arrange international meeting of
experts in the autumn to discuss
creating a market for advanced low
carbon cars and to agree industry
standards — declaration at
December London Oil Summit
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Next Steps
e Renewable Energy Strategy > renewables target of 15% by 2020 — surface (essentially
road) transport renewables target of 10% by 2020 — sustainability issues with first generation
bio-fuels — exploring alternative opportunity for electrification of transport > BERR/DfT study
underway looking at viability of EVs in the market and impact of EVs on the Grid > possible
announcements of incentives in PBR > RES March 2009
e Tackling climate change -> drive to improved vehicle efficiency > EC proposed Directive
“COz from Cars” aiming for fleet average sales by manufacturer of <130gCO2/km by 2012 >
“most important regulatory issue the European automotive industry has ever faced” > UK
stated longer-term ambition 100gCO2/km by 2012 — “super-credits” for advanced low carbon
vehicles?
1. Secure “niche manufacturer” provision in “CO2 from Cars” regulation to safeguard
future of Jaguar LandRover.
2. Agree cross-Whitehall position on “super credits”, No.10 to take forward with
Fr/De/EC for possible inclusion in “CO2 from Cars” regulation
e Host successful international meeting of experts.
e Ensure continuing success of Low Carbon Vehicle Innovation Platform to promote transfer of
know-how into manufacture of high value added components and systems.
Future Challenges
e Avoid picking winners or backing particular business models (e.g. Project Better Place)
¢ Safeguard, refresh and retain diversity of inward investments by global vehicle manufacturers
« Government response to NAIGT report March 2009 — likely action required but will it be
affordable?
« Reinvent the UK’s automotive supply industry in a post-internal combustion world (20-years+)
e Hollowing out of supply chain and threat of losing mobile investments to low cost countries
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[Lead Official
Mark Gibson/Adam Jackson —
Enterprise Strategy
Key Issues
e¢ Government's renewed Enterprise Strategy published with Budget 2008.
e Vision to make the UK the most enterprising economy in the world and the best place to start and
grow a business over the next 10 years.
Context
e Government's record to date on enterprise is good. There are record numbers of businesses — 4.7
million at the start of 2007, over 970,000 more than in 1997. SMEs now employ 13.5 million, 59.2
per cent of the total private sector workforce. A strong SME sector is critical to the health of the UK
economy.
¢ — Globalisation, involving massively increased flows of goods, services, technology and ideas,
presents challenges and opportunities to those enterprising individuals and businesses who are
able to compete successfully in global markets. While ahead of many European competitors in
terms of enterprise, on a number of key indicators we trail the US. The US has more businesses
per head than the UK and more US businesses achieve quicker and higher growth than in the UK.
If we matched the US in terms of number of businesses per 10,000 adult population, we would
have an additional 850,000 businesses.
e The Government therefore published a renewed Enterprise Strategy in March 2008 which sets out
over 50 commitments. The 10 year Strategy builds on the work of the 2004 Action Plan (‘A
Government Action Plan for Small Business” — completed in 2007) and aims to encourage business
growth. It promotes a supportive business environment and encourages a strong entrepreneurial
culture through a framework of five enablers of enterprise: A Culture of Enterprise; Knowledge and
Skills; Access to Finance; Regulatory Framework; and Business Innovation.
e The Strategy reinforces the role of innovation as a driver of enterprise and complements the
Government's new Innovation Strategy “Innovation Nation’, published at the same time.
e The Strategy also considers the wider benefits of enterprise and aims to ensure that all sections of
society can benefit from a growing and dynamic economy. Specific measures are targeted at
bringing social and economic benefits to more deprived parts of the UK and at groups, such as
women and ethnic minorities, who are currently under-represented in enterprise.
e This work contributes to the Departmental Strategic Objective “Promote the creation and growth of
business and a strong enterprise economy across all regions’ and PSA 6 “Deliver the conditions
for business success in the UK’.
« Progress is being made on all commitments in the Strategy and we are working closely with RDAs,
other delivery partners and OGDs to ensure successful delivery.
e To help develop the 2008 Strategy, Ministers met around 600 small business owners and
entrepreneurs in a series of regional events to hear their ideas for what more Government can do
to further enable thriving UK entrepreneurship and SME business growth. Publication of the
Strategy was high profile for Government and both the Chancellor and the PM hosted meetings
with a number of successful entrepreneurs.
Future Challenges
¢ In the annual BERR survey of key corporate stakeholders, the Enterprise Strategy was recognised
as a strong accomplishment for BERR in its new Voice for Business role. We will need to ensure
we continue to positively engage with key stakeholders, primarily through the Small Business
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Forum (provides informal mechanism for Ministers to engage with key enterprise representative
bodies — Confederation of British Industry (CB)I, Institute of Directors (loD), British Chambers of
Commerce (BCC), Federation of Small Business (FSB), Forum of Private Businesses (FPB),
Engineering Employment Federation (EEF) - and individual entrepreneurs, and to demonstrate
successful gains.
e Publication of the Enterprise Strategy is not the end of the story and continuing to develop new
policy proposals to help SMEs, particularly through an economic downturn, will be critical for
stakeholders.
e Stakeholders were supportive of the Strategy but note that delivery is key. We therefore need to
ensure that the RDA’s deliver the policy commitments outlined in the Strategy.
Key Players Relationship Map
Challengers Neutrals:
All key stakeholders will e Social Enterprise
expect on-going active Coalition
engagement and
delivery of the Strategy.
Key Milestones
Date Milestone
October 2008 Publication of the report of Anderson Review on regulatory guidance.
Publication of report of Glover Review on public procurement.
Announcement of government commitment to tackle late payment by
government departments.
Announcement on availability of provision of Innovation Vouchers.
Launch of National Policy Centre for Women's Enterprise
Launch of Women’s Enterprise “Spark an Idea” media campaign.
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November 2008 Global Entrepreneurship Week (17-23 November).
Launch of First University Enterprise Networks.
Consultation on Regulatory Budgets ends.
December 2008 Women's National Mentoring Network anticipated to be operational.
Introduction of public departmental accountability, initially for secondary
legislation, for regulating small businesses.
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Supporting Brief Lead Offici
Supporting small businesses during economic Mark Gibson/Adam Jackson
downturn
Key Issues
e Enterprise Strategy contained a package of measures to help small firms — including measures of
direct help to businesses in the current economic climate. Government is also considering further
ideas to help SMEs in coming months.
« The Government's record to date on enterprise is good and we are in a strong position. There are
record numbers of businesses — 4.7 million at the start of 2007, over 970,000 more than in 1997 and
SMEs now employ 13.5 million, 59.2 per cent of the total private sector workforce.
« The Government's renewed Enterprise Strategy published with the Budget provided a framework
which aims to encourage business growth, provide a supportive business environment and a strong
enterprise culture and to help enterprising businesses compete successfully in a global economy.
e Specific measures that are of particular help to small businesses in the current economic climate
include:
Providing improved advice to business
> National mentoring network - Increasing awareness of existing mentoring programmes and
raising awareness of the opportunities and benefits for both mentor and mentee alike.
> Helping small businesses prepare for investment — New business product to be launched in
the autumn. Helping businesses understand the different forms of finance and how to access it
successfully (being able to pitch their business plan to investors).
>» Business Debtline — Government and banks have agreed to more than double funding for the
‘Money Advice Trust’s Business Debtline’ service by 2010/11. The debtline provides free
confidential independent advice to small businesses with cash flow/debt problems in GB.
> Business Link — Providing dedicated credit crunch advice focusing on managing finance and
increasing efficiency. It offers extensive range of resources to help businesses plan, prepare and
protect against a financial downturn (http://www.businesslink.gov.uk/creditcrunch).
Increasing opportunities to access finance
> Small Firm’s Loan Guarantee - increasing the amount of lending available by £60million to a
total of £360million for this financial year (2008/9); and extending the eligibility of the scheme to
businesses with growth ambitions that are more than five years old.
> An additional £30million made available to stimulate the delivery of mezzanine finance
> Enterprise Capital Fund - Current round to select fund managers underway. Around £50million
expected to be committed, specifically for small high growth businesses
Managing cash flow
> Help with handling Late Payments - Government published “Preventing Late Payment” and
“Handling Late Payment”, available on Business Link website www.businesslink.gov.uk;
>» Cash flow - More advice to help businesses keep the cash flowing is contained in the
Government endorsed leaflet by Institute of Credit Management from:
http://www.creditmanagement.org.uk/.
>» Factoring - Factoring is an important source of finance for many businesses, particularly during
the credit crunch. Government contracts had previously presented significant barriers to
factoring. The Enterprise Strategy announced that the restrictions on assignment of debt would
be removed. This has now been implemented.
Future Challenges
e¢ Monitoring the current situation for small businesses in real time.
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« Ensuring we continue to develop new, innovative measures to help SMEs face and survive an
economic downturn.
e Ensuring that we have a strong, coherent message to present to the small business community of
package of measures.
¢ Need to be able to demonstrate that measures in the Enterprise Strategy and new ideas have
helped to support small businesses.
Key Players Relationship Map
Challengers
All key stakeholders will
expect on-going active
engagement . Delivery
of new ideas to support
small businesses
through an economic
downturn will be critical.
Neutrals
Key Milestones
Date
Milestone
August 2008
Publication of the UK Survey of SME Finances (2007) — Cambridge
University
September 2008
Publication of the World Bank's Ease of Doing Business survey.
Publication of BERR’s Annual Small Business Survey (2007)
Receipt of new innovative proposals from accredited lenders for the use of
the Small Firms Loan Guarantee (SFLG) scheme to improve accessibility
for SMEs.
October 2008
Publication of the report of Anderson Review on regulatory guidance.
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Publication of report of Glover Review on public procurement.
Announcement of government commitment to tackle late payment by
government departments.
Proposals to provide further help to small businesses in the current climate
— for possible inclusion in the PBR.
November 2008 Publication of Business Start-ups and Closures: VAT Registrations and De-
registrations (2007)
Consultation on Regulatory Budgets ends.
December 2008 Bid appraisal and following due diligence Third Round Enterprise Capital
Funds managers will subsequently be appointed
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‘KEY POLICY ISSUE)
Business Support Simplification Programme
(BSSP) I
)G) / Janice Munday (HM
Key Issues
¢ Delivering PM commitment in 2006 Budget to reduce non-tax business support schemes from
around 3,000 to no more than 100 by 2010, and make Business Link (BL) the main way
business will access support.
¢ Collaborative effort led by BERR involving many stakeholders (Government Departments,
RDAs, Local Authorities and business) with conflicting views.
¢ Tight timetable for delivery - and still need to agree for PBR when in 2010 products will need
to close or notice of closure given as well as content of 23 October announcement on
products, closures and brand.
¢ Delivery critical to BERR’s reputation, including with key business stakeholders. Need to:
e Get buy-in from local authorities
¢ Assure business that this is about increasing effectiveness not cutting support.
¢ Turn BL’s current high customer satisfaction ratings into a broader awareness of the
service, improving brand reputation and usage.
e Prevent future re-proliferation of schemes.
BSSP is:
e Across-Government initiative making publicly-funded business support easier for businesses
to access, more effective and better value for money. It contributes to a number of BERR
PSAs, including three cross government led by BERR (PSA 1,6&7).
Business Link is:
« The Government's multi-channel brand for delivering support to business. The service
consists of three channels: an on-line service delivered through businesslink.gov.uk, a
network of advisers throughout England and a national contact number.
e BL’s current performance is high with over 856,000 businesses receiving support from
advisers over the 12-month period ending March 2008. The Customer Satisfaction levels also
remain high with 88% of customers saying they were either satisfied or highly satisfied with
the services they received.
Context
e About £2.5 billion of public money is spent each year by central, regional and local
government bodies on direct business support. Research has shown that businesses
receiving support and advice are more likely to grow and flourish.
e But little co-ordination, numerous schemes and multiple providers, makes it difficult for
businesses to know what best meets their needs. Neither is it cost effective to deliver.
e Business wants support to be easier to understand and access. BSSP will deliver this.
Where are we now?
e Anew portfolio of business support products has been developed
e New capabilities are being built into BL offer to deliver the BSSP portfolio
e Shared marketing and branding framework for the new products has been developed
e RDAs are coordinating the transition of schemes to the new portfolio, and a Transition
Management Board, chaired by Martin Temple of the EEF, is in place.
e First new product has been launched - rest will be by March 09.
Future Challenges
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e¢ We will announce the full portfolio line-up in Oct 08, and are now working to finalise the
product specifications and delivery arrangements.
e Martin Temple will give interviews to the FT and Local Government Chronicle to help address
business and local authority concerns
e Weare researching business perceptions of the BL brand. This will feed into plans to enhance
the service and market BL to customers
e We will roll out new national qualifications for BL advisers and front line customer service
teams over the next year improving the consistency and standards of advice available to
customers.
« Wewill integrate the first tier of support from both UKTI and DEFRA into BL, using it as the
primary access channel for the more specialist services they offer to business.
e¢ Wewill incorporate the business support offered by remaining OGDs, ensure that the portfolio
is flexible to a downturn in the economy, and takes account of the restrictions attached to EU
funding streams.
e We will get agreement on governance principles and structures for the post-transition phase,
and seek to prevent re-proliferation of new business support
Key Players Relationship Map
Neutrals
¢ Some Individual LAs ¢ Some Individual LAs
« DCMS, DfT, MoD, DH
Key Milestones
Issue / policy Sept 08 I Oct 08 Nov 08 Dec 08 2009
ED (PSE)
clearance on
branding,
portfolio
announcement x
and ‘go live’
starts
ED (PSE)
clearance on
monitoring & xX
evaluation
Product wave 2
and 3 ‘go live’ xX xX
Transition to Remaining products ‘go
new portfolio: live’ old products closed o1
merged.
BERR Service Transformation
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Key Issues
¢ Ensuring that businesslink.gov functions effectively as the Government's prime web portal for
business, and ensuring that BERR meets the Government's 95% target for website convergence &
rationalisation. We will use this process to improve the customer experience for businesses
interacting with government.
¢ Improving the performance of telephone contact centres in the BERR family, and halving avoidable
contact by 2011. This will lead to improvements in the business processes and savings in the
money we, and our customers, spend on transactions and exchanging information.
¢ Leading on successful cross-Whitehall Service Transformation projects to deliver benefits to
business, such as reducing the administrative burden of importing and exporting through the
International trade Single Window, and providing a portal for businesses to access public
procurement tenders.
Context
¢ The model for Service Transformation across Government is based on the November 2005 report
Transformational Government, Enabled by Technology strategy and the subsequent December
2006 report by Sir David Varney Service Transformation: A better service for citizens and
businesses, a better deal for the taxpayer which was published alongside the Pre-Budget Report.
e Sir David Varney, the Prime Minister's adviser on Public Service Transformation, has recently put
to permanent secretaries and ministers the case that the Government is not doing well enough to
improve its services. We are not keeping up with the increasing expectations citizens have as they
experience different models of service delivery in the private sector; we do not co-ordinate the
demands for information or the delivery of services sufficiently well; we are not sufficiently adept at
using technology, especially web technology, to bridge this gap. 55% of people don’t know where
to start to find the service they need, and 50% say Government information is hard to understand.
Service Transformation therefore aims to put the customer first.
¢ Service Transformation is about designing services around the needs of citizens and businesses,
providing modern efficient services, and ensuring that we have the capability to deliver. The aim is
to provide services that are easy to access, simple to understand and use, and secure so that
customers find it easy to comply with rules and regulations and can access services and
carry out transactions in as few steps as possible.
e Service Transformation covers citizen and business transactions (e.g. filing company accounts),
interactions (e.g. calling a contact centre or visiting a local office), and information requests
(e.g. how to get an export licence, or finding a Business Support product.) It does not cover the
delivery of inward facing business services such as finance and personnel functions.
e Key Government Actions to Deliver the Varney Recommendations
= Engaging more with citizens and businesses and putting customer insight at the heart of
service design in order to ensure that we deliver customer focused services.
= Grouping Service Delivery around customer needs and life episodes and not government
services, departments and policies to provide a service that suits the way people live their
lives.
* Rationalising Service Delivery by radically reducing the number of websites (with Directgov
and Businesslink.gov becoming the primary web channels for citizens and businesses);
reducing the array of phone lines and improving contact centre performance; re-organising
front offices to make it easier and simpler for customers to deal with Government.
= Making best use of the Government’s information asset by managing identity and data to
personalise services, reducing duplication, improve security and speed up transactions.
e A Service Transformation Agreement (STA) was published in October 2007 as part of the
Comprehensive Spending Review settlement. Each department has submitted a Service
Transformation Plan detailing key activities under a number of headings. The Service
Transformation Agreement contains two government wide progress measures. These are:
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= Improving processes - reducing avoidable customer contact - by 50% by 2011
= Building better online services — migrate more than 95% of citizen and business e-
services to direct.gov and businesslink.gov by 2011
A list of BERR websites to close, along with any exceptions have also been agreed with BERR
Ministers and the Cabinet Office. Progress on delivering against both measures will be monitored by
the BERR Service Transformation Board and reported to the Government wide Delivery Council and
Contact Council.
Future Challenges
e Web convergence and other Service Transformation policies will raise questions about the
Department's relationship with delivery partners and the extent to which we can influence them in
co-ordinating service delivery and maintaining a customer-centric point of view. Challenges will
come over the life of the programme as we increase pressure for change.
Key Players Relationship Map
Challengers Neutrals
e BERR Delivery Partners
are supportive of aims
but have concerns on
the implications for their
market presence.
Essential people to meet in first weeks
Sir David Varney (PM’s Special Advisor on Service Transformation)
Key Milestones
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Issue 1 Negotiations March 2011 Final Deadline for website
with direct.gov rationalisation
and
businesslink.gov
Issue 2
Issue 3 PBR TTSW Research
Announcement I Project (Joint
(inc. possible HMT)
projects)
ational economic -
NR)
Key Issues :
e BERR and the Department for Communities and Local Government (CLG) are jointly responsible
for implementing the SNR.
. However, there is not currently agreement between the two departments on how we should
proceed following a recent consultation exercise. This results from each department seeing the
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issues in terms of their core interests, CLG — housing, spatial planning and local government, and
BERR - economic growth and the needs of business.
e Weare concerned that CLG may be developing options independently that may negatively impact
on regional development agencies (RDAs) and be badly received by business.
e Subject to the resolution of these issues, we will be legislating during the next session — through a
CLG Bill — to put in place those reforms that require primary legislation.
Context
e The SNR was carried out by the Treasury, CLG and BERR to inform CSRO7 and focussed on
how to strengthen economic performance in regions, cities and localities throughout the country,
as well as tackling persistent pockets of deprivation.
« The review was aimed at helping to deliver the regional economic performance public service
agreement (REP PSA) led by BERR.
« The review recommendations focused on:
> Empowering local authorities to promote economic development, with greater flexibility, stronger
partnership working with other agencies, and better incentives for achieving economic growth.
> Supporting local authorities to work together, through pooling resources, responsibilities and
targets at the sub-regional level.
> Streamlining the regional tier of governance outside of London. This includes asking more
effective and accountable RDAs, working with local authorities, to prepare a new single strategy
for the region, which will bring together existing economic and spatial strategies
> Reform central government's relations with regions and localities.
e Following the publication of the review in July 2007 BERR and CLG were tasked with delivering
its recommendations.
¢ Aconsultation was held between March and June on whether and how to implement some of the
key recommendations. We are aiming to publish a Government response to this in September
(Cabinet Office guidance says that the Government should publish a response to consultations
within 3 months of the close of the consultation).
e It has also been announced that the BERR Select Committee will be conducting an inquiry into
the RDAs and the implications the SNR may have for their role.
Future Challenges
e The immediate challenge is to reach an agreement with CLG on the detail of the policy following
the recent consultation — there remain differences of opinion between our departments. We need
to do this in order to publish a Government response to the consultation.
+ The new structures will take time to put in place and during this transition period we need to
ensure that the existing system, particularly in relation to spatial planning, continues to operate —
we are already hearing from the RDAs and others that the delays in implementation are impacting
on business as usual and retention of staff.
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Key Players Relationship Map
Essential people to meet in first weeks
e Ameeting with the Secretary of State for Communities and Local Government to agree a way
forward.
Challengers
Business representative
organisation (CBI, loD
BCC, EEF and FSB) —
concerns over larger
role for local authorities
Local Authorities in the
South — concerns over
RDAs taking on regional
planning role
Social, economic and
environmental partners
— concerns over loss of
role in regional
assemblies and focus
on economic growth
Neutrals
Treasury — interest
lessened following
publication of initial
review
Other Departments —
DfT positive about some
recommendations,
DEFRA negative about
focus on economic
growth, others largely
uncommitted
RDAs — publicly positive
but privately have
concerns
Key Milestones
Issue / policy I Oct
area 08
Dec 2009/10...
‘08
actual date of
introduction to
be confirmed
approach chosen
strategies
2009 — Royal Assent of Bill if legislative
2010 ~ earliest possible dates for first regional
Future Options
There are a number of possible future options that could be put in place and have been considered by
Officials. They are:
¢ Implement the SNR in full, as originally planned, through legislation
e Implement some SNR recommendations (either through legislation or administrative means) but
not others
e Implement the SNR with minimal or no legislative change
¢ Do not implement the SNR and return to the status quo
KEY POLICY ISSUE
pean Structural Funds delivery and reform
I Tom Walker
Key Issues
* Ongoing debate on the future of the EU Structural and Cohesion Funds (SCF)
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« RDA management of new European Regional Development Fund (ERDF) programmes in
England
¢ Closure of old SCF programmes
Context
¢ For the period 2007-13 there are 2 EU Structural Funds operating in the UK: European
Regional Development Fund (ERDF) and European Social Fund (ESF). Both are designed to
help economic development and promote employment in the poorer regions of the EU as well
as regions facing structural difficulties.
¢ For the 2007-2013 programming period, the UK will receive approximately €9.4 billion (2004
prices) in comparison with €16.6 billion for 2000-2006. This includes €2.6 billion in
“Convergence” funding for its poorest regions (Cornwall, West Wales & the Valleys and the
Highlands & Islands), and approximately €6.2 billion in “Competitiveness and Employment”
funding for other regions.
e All the new Operational Programmes have been approved by the Commission and are
starting to be implemented. Financial allocations are made for each year and must be spent
(or lost) within 2 years (“N+2”)
e The RDAs are taking over responsibility for the regional management of 2007-13 ERDF in
England, under delegated authority from CLG, which is the Managing Authority. CLG has
been criticised by the RDAs for being slow in putting systems in place for the new
programmes
¢ CLG is negotiating with the Commission on the extent of clawback of Funds for old
programmes, due to irregularities.
e The UK published its vision for the EU Budget in June 2008, including that the Structural
Funds should be focused increasingly on the poorer Member States, and should not be
available as they currently are in every region.
e The House of Lords Select Committee “A” published its Report on the future of the Funds in
July 2008. The Government's reply was given Ministerial approval at the beginning of
October.
Future Challenges
e The UK’s line on the future of the Funds is not shared by most other Member States.
e Itis opposed by the Scottish Executive.
e RDA management of the new ERDF Programmes.
e Successful closure of the old programmes (due to be completed by March 2010). CLG may
try to offload financial liabilities onto BERR.
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Essential people to meet in first weeks
None.
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Key Players Relationship Map
Challengers Neutrals
European Commission e CLG
Most other EU ¢ Northern Ireland
Governments Government
Scottish Executive « German Federal
Local authorities Government
DWP/DIUS/DCFS (on
some issues)
Key Milestones
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Future of the HMG response Informal ‘Spring — Commission paper on Cohesion’
SCF to Lords enquiry Council of EU Policy post-2013
Regional
Commission Ministers
Green Paper and
consultation on
Territorial
Cohesion
Closure of old Due March 2010
SCF
programmes
EU budget ‘Commission Spring 2009 — Commission's vision paper on
. budget budget review
review conference
Key Issues
quarterly
e BERR SoS jointly manages with the network of Regional Ministers, the SoS CLG which meets
e¢ Regional Select committees and regional grand committees were announced in July 2008 for
each English region outside London.
Context
e Over the past year, Regional Ministers have provided a crucial link between Government and
regions — being an advocate for their region in Whitehall and representing the Government
within their region.
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e Regional Select Committees were announced in the Governance of Britain Green Paper.
e The Modernisation Select Committee held an inquiry into Regional Accountability looking at
what the most appropriate structures were for enhanced regional accountability/scrutiny.
e¢ Mod Com reported on 10 July and the Government responded on 21 July agreeing with the
recommendations for regional select and grand committees
e The focus of select committees will be primarily on the RDAs and the regional strategy
Future Challenges
« An adjournment debate was held in Jan 08 to discuss the role of the Minister for the West
Midlands where Conservatives accused Regional Ministers of visiting more Labour
constituencies than Conservative and suggested that public money may have been used for
party political ends.
¢ The Government will bring forward detailed proposals on regional committees to the House in
the autumn, including changes to standing orders.
¢ There is a high likelihood that BERR regions Minister will be involved with the grand committees
and may possibly be called to give evidence at the regional select committees.
e It should be noted that there were over twenty contested votes at ModCom’s meeting to agree
the report, with Conservative Members not content with the inclusion of the recommendation for
regional select committees (preferring instead a light-touch model based solely around grand
committees) and the Lib Dems, while supporting select committees, opposing the principle of
party breakdown being on a national rather than regional basis. Mod Com members of both
parties therefore voted against the report as a whole.
Key Players Relationship Map
Challengers Neutrals
e Conservatives (Select °
Committees and
Regional Ministers)
Lib Dems (political make
up of Select
Committees)
Essential people to meet in first weeks
Network meeting with the Regional Ministers probably within first month or two.
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Key Milestones
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Issue 1 Debate in the Regional Select [ Regional Select Committees start inquiries
House on Committees
Regional established Regional Grand Committees to hold 1-2
Committees meetings per year
Issue 2
Issue 3
Issue 4
Issue 5
KEY POLICY ISSUE ~
Regional Development Agencies (RDA) Evaluation _I Mark Gibson (DG) /Philippa Lloyd (HMU)
Project —
Key Issues
¢ BERR is the contract holder for the RDA Evaluation Project, which is seeking to provide a robust
assessment of the benefit of RDA interventions for regional and national economies.
e PricewaterhouseCoopers (PwC) have been contracted by BERR to manage the project and will
publish nine Regional Evaluation Reports and a National Evaluation Report.
¢ The reports are due to be delivered by 30 November 2008.
¢ Delivery critical to the RDA’s reputation, with increasing political and press pressure being exerted
regarding their functions and effectiveness.
¢ BERR Select Committee will be conducting an inquiry into the RDAs. The RDA evaluation project
will have an important role in this inquiry.
The results of this project could have implication on the future functions of RDAs
Context
¢ Ministers decided in October 2007 that BERR should take control of the RDA evaluation
programme. This was to give greater reassurance to Ministers that a robust assessment of RDAs
effectiveness would be in place before the next spending review and alongside any National Audit
Office (NAO) value for money enquiry.
¢ Officials have arranged robust governance and extensive stakeholder management processes,
which are essential as this project is one of the largest and most complex evaluations ever
undertaken by BERR or DTI.
¢ The first stage of the project involved Price-Waterhouse Coopers (PwC) undertaking a thorough
audit of existing RDA evaluations to identify gaps in coverage. The second stage involved the filling
of these gaps through the commissioning of further evaluations. In almost all cases these
evaluations were carried out by RDAs consultants, with PwC serving as quality assurers.
e For the purposes of the Impact Evaluation Report a minimum target of 60% of each RDA's eligible
spend from 2002/2003 — 2006/2007 was set. The 60% figure covers RDA programme spending
only, excluding;
* administration,
= legacy programmes (expenditure prior to creation of the Single Pot in 2002-03),
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= spending on national programmes (programmes that are only administered by
RDAs).
e PwC will publish nine Regional Evaluation Reports, providing an independent assessment of the
effectiveness of each of the RDAs in improving their region's economy, and a National Evaluation
Report, providing an independent assessment of the effectiveness of the RDA network as a whole
in improving the national economy. Both reports will be submitted to BERR on the 30" November,
although initial drafts will be available in the second half of October.
¢ The NAO are undertaking a value for money study of RDAs which concentrates on three key areas;
Strategic fit of RDAs, project appraisal approach, land planning and management. RDA evaluation
data on regeneration will feed into this study. The study should report by April 2009.
Future Challenges
« The immediate challenge is to provide a robust assessment of the benefit of RDA interventions
complete within the tight time scale
« The key future challenge is what long-term use the evaluation reports will have and their
implications for the future of the RDAs.
Key Players Relationship Map
Challengers Neutrals
e None e None
Essential people to meet in first weeks
None
Key Milestones
Issue / Oct Nov 2009/10...
policy area __I ‘08 ‘08
RDA Evaluation _I Regional and national PwC publish their Regional I Public Accounts
Project conclusions to Ministers I and National Evaluations I Committee scheduled
Reports (April)
RDAs appear at Select Sign-off from Minister on
Committee both regional and national
reports
SOS at Select Committee
Key Issues
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e Implementing World Class Skills
Context
e World Class Skills 2007 - Govt's response to Leitch Review of Skills. Established demanding
trajectory and PSAs at all skills levels. BERR is a partner in delivery of DIUS’ skills PSA.
e Establishment of the UK Commission for Employment and Skills (UKCES) from April 2008,
with advisory and executive functions: advice to Govt on progress towards World Class Skills,
simplification of employment and skills system, executive responsibility for reform and re-licensing of
Sector Skills Councils. BERR is a co-sponsor along with DIUS, DCSF, DWP, HMT, Devolved
Administrations.
e Demand-led reform agenda — reform of skills system to reflect economically-valuable skills and
qualifications that business values. Train to Gain is the DIUS flagship service to provide employers
with support for qualification-based training and management and leadership support for SMEs.
Sector Skills Councils are central to raising employer investment and demand and supply-side
reform by influencing the qualifications framework, specialisation of FE and establishment of
National Skills Academies.
e Skills implications of Business support simplification— skills products will be through Train to
Gain Service and the primary access channel will be Business Link. RDAs will manage skills and
business support brokerage service from April 2009, through a wider Business Link service.
Ensuring high performance and quality of service will be a challenge for RDAs as resources for
brokerage will be reduced and transition costs in some regions will be significant.
e Further institutional upheaval will potentially introduce more complexity; in 2010 the Learning and
Skills Council is to be replaced by 2 separate funding agencies reporting to DCSF and DIUS anda
National Apprenticeship Service.
e Skills Implications of SNR -proliferation of local / sub-regional partnerships, local Employment and
Skills Boards, need to fit with development of Multi Area Agreements and Regional Economic
Strategies’ skills priorities.
Future Challenges
e UKCES must deliver on SSC reform and relicensing; as co-sponsors BERR actively supports that
work. Timescale is ambitious, with recommendations to Ministers due by end of 2009. Risk of
Commission being given new and additional tasks by Govt impacting on their original priorities.
Sponsoring Ministers may be asked to approve potential new functions for UKCES eg governance
of Investors in People.
¢ RDAs will be challenged to ensure the Business Link service delivers the skills outcomes demanded
to meet the Train to Gain Plan for Growth and the PSA trajectories. The service will need to manage
the implicit conflict between the demand-led, impartial service and pressure for brokers to deliver
“learners starts” in a way that is not visible to the customer. As primary access channel, Business
Link will be at the heart of employer engagement for governments offer on employment skills and
business support. Strong referral protocols at regional level will be essential to deliver a joined up
comprehensive service for employers; the Manufacturing Strategy will feature this.
e Sectoral/spatial - we need to ensure that SNR’s emphasis on planning and prioritisation at the sub-
regional level, through the creation and utilisation of Employment and Skills Boards (ESBs) within
Multi Area Agreements, is joined up with the regional and spatial strategies and sectoral
prioritisation. We are working with other Govt departments to produce good practice principles for
ESBs.
« Voluntary versus regulatory approach — business has concerns that if progress towards World Class
Skills is judged to be insufficient, government will move on other regulatory approaches such as
right to time to train, training levies or increasing licence to practise arrangements. Legislation is
currently being prepared for the right to request time off for training.
Key Players Relationship Map
Challengers
Neutrals
¢ List key stakeholder
organisations
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Essential people to meet in first weeks
None for Skills, although if Ministers meet business representative organisations, skills issues may be
raised. A meeting with Sir Mike Rake Chair of the UKCES would be a later priority.
Key Milestones
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Issue 1
Issue 2 BRE
performance
review
Issue 3
Issue 4
Issue 5
Business Link's integrated brokerage service goes live in April 2009
Future Options
Outline alternative positions to current approach:
¢ Ministerial room for manoeuvre
e Options for policy/tactical shift
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Key Issues
e Joint responsibility of BERR and DCMS. Programme is on time and on budget — public funding
limited to £803m ring-fenced in the Licence Fee. But first region switches starting this November—
plenty of scope for problems to arise before programme completion in late 2012.
¢ BERR leads on consumer protection e.g. ownership of the ‘digital tick’ certification mark,
identification of competent aerial installers, alleged misselling of analogue TV sets, availability of
easy-to-use equipment.
e Digital Switchover will enable spectrum to be used more efficiently, freeing up capacity for new
services. Ofcom, through its Digital Dividend Review, is managing the process of offering the freed
up spectrum to the market — auction scheduled for summer 2009. There is tension between
delivering switchover safely and achieving the “optimum” outcome of the DDR
e The Public Accounts Committee reported on switchover in June, focusing on the Help Scheme
(DCMS lead) and misselling of equipment. The Government's response is due in October. We have
a good story to tell.
Context
« Between 2008- 2012, television services in the UK will go completely digital, TV region by TV
region.
e Almost all EU countries will complete switchover by end 2012 — four countries already have.
e Although the Government is responsible for the policy of digital switchover, including the timetable,
and the establishment of a Help Scheme for the elderly and those with serious disabilities, the
implementation is managed by Digital UK, an independent not-for-profit company set up by the
broadcasters.
¢ 87.2% of UK households already have Digital Television (terrestrial - 39%, satellite - 36.6%, cable
— 12.5%) on at least one set — take up is well ahead of projections.
¢ — In 20085, it was estimated that switchover would bring quantifiable benefits to the UK economy of
£1.7bn in NPV terms. Ofcom has also estimated that the reuse of spectrum released through
switchover could have a total value to society of £5-10 billion over 10 years.
e Until analogue services are switched off, digital services through an aerial are not available to
around 20% of households.
Future Challenges
e Border TV region is the first to switch starting with the Selkirk transmitter in November 2008. 16
main transmitter projects will be active in 2009, stress-testing the programme management
e Switchover in London is due to be completed in time for the 2012 Olympics, but Tyne Tees and
Ulster are later. Domestic or European pressure to change the switchover timetable can be
expected but would be complex to deliver.
¢ Television technology is developing — plans are already being put in place to upgrade the terrestrial
network for High Definition TV in parallel with switchover, but such changes will need careful
handling with consumers,
Key Players Relationship Map
Challengers Neutrals
There is no opposition to
the policy nationally. Some
backlash from the award of
the Help Scheme basic
tion contract in the
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Essential people to meet in first weeks
None for Secretary of State
Key Milestones
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Issue 1 Switchover of Switchover in West Country, Wales, Granada
the Selkirk in 2009
transmitter
Issue 2
Issue 3
Publication of
the HMG
Issue 4 response to the
PAC report into
switchover
Issue 5
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Priority Issue Lead Official
e Next Generation Broadband e Sam Sharps
Review
Context
Government commissioned Francesco Caio, former CEO of Cable and Wireless, to
carry out an independent review into the barriers to investment in next generation
access (NGA) to broadband, and whether there was any evidence to support
intervention by Government. Next generation broadband, with speeds up to 100Mbps is
seen by many as vital to the future of the economy.
The Review is due to deliver in September and will make a number of recommendations
that may help to bring down to cost of deployment of NGA and therefore enhance the
business case for investment. Government will be expected to respond in due course.
Key Facts: Supporting Key Facts: Opposing Policy/Issue
Policy/Issue
« Some recommendations likely to be met with
« Limited evidence of roll out of some opposition by OGDs — most notably,
NGA in the UK to date, compared CLG and Defra may oppose the
with other countries. recommendation regarding the deployment
¢ BT and Virgin have announced of fibre overhead and DfT may oppose the
some level of activity but yet to recommendation on streetworks. Officials
progress beyond this are working with them on this
e No evidence that the UK is being
disadvantaged by the lack of
NGA, and therefore no real case
for Government intervention at this
time.
e« However, intervention may be
necessary at some point in the
future should the market not
deliver.
e Review likely to make a number of
recommendations which will
impact on policy.
Next Steps
e Review due to be published on 12 September.
e Itis expected that Government will respond to the recommendations of the
Review in the pre-budget report
KEY POLICY ISSUE Lead Official oe :
j DODO OG GG i Vine evecttive Chair of the Better Regulation € Executive
Better Regulation across Government is William Sargent, who works 2-3 days a week.
_I Jitinder Kohli is the Director General/Chief Executive.
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Key Issues
e BERR is responsible for driving the Government’s programme for better regulation — including
the flagship commitment to deliver a 25% reduction in what it costs business and charities to
administer regulations by 2010 (‘the administrative burden reduction target’).
¢ We work with departments to (a) simplify existing regulations, (b) ensure that new regulations
are genuinely necessary and minimise burdens on businesses, the third sector and public
sector workers and (c) change attitudes and approaches to regulation among regulators to
help them become more risk-based.
e On (a), Departments are all due to publish simplification plans by the end of the year. These
plans will set out what initiatives departments are taking forward to reduce the burdens for which
they are responsible. We need to be demonstrate that the Government remains on track to deliver
25% reductions across Whitehall. Key to this is BERR’s own plan — where there is a real risk that
the department will fail to deliver its promised reductions (John Alty and Simon Towler lead on
this area).
e On (b), live issues at present include minimising the effects of implementing the EU Agency
Workers Directive (BERR lead). We are also watching developments closely with regard to the
Competition Bill (BERR lead), the Pensions Bill (DWP lead), No 10’s Alcohol Strategy, and
GEO's Equalities Bill. Key areas for the near future are around Climate Change (DEFRA lead)
and the Energy Strategy (BERR lead)
¢ Weare currently consulting on regulatory budgets (a new cap on how much regulation
departments can bring in). While the consultation does not close until 12 November, we would
welcome a steer from you on this high profile and politically extremely contentious policy area.
e BERR also initiates our own projects to improve key areas on regulation. You will need to be
sighted on (a) the Anderson review of guidance, (b) the Killian/Pretty review of planning and
(c) the Consumer Law Review — all due to publish in the next 8-12 weeks.
¢ On (c) the Regulatory Enforcement and Sanctions Act received Royal Assent in July. It aims to
modernise the way that local authorities and national regulators regulate,and there remains
considerable work to make it a reality on the ground. We are also leading external reviews of
regulators, and are revising a statutory code which requires regulators to act in a risk-based
manner, helping businesses to comply with regulation rather than routinely penalising small
breaches that cause little or no harm.
¢ We also work with the European Commission and other member states to ensure that the EU
takes forward an ambitious programme of regulatory reform. There is now an EU target to reduce
administrative burdens by 25% by 2012.
e Communication and raising the perception of regulation is a key challenge and priority for the
BRE over the next 18 months — 2 years. Historically, the BRE’s focus has been on policy and
delivery however, going forward we need to communicate what is being done, or has been done,
so that people, particularly businesses, can see and feel the difference the agenda is making for
them.
e We have also done some thinking on the better regulation agenda post 2010 — and would like
to discuss this with you in the coming weeks.
Context
Business and public sector workers alike complain strongly that regulation and bureaucracy get in
their way. Common complaints are that there is too much red tape; the pace of change is too much;
it’s difficult to find out what to do; much of it does not make sense; and business/public sector
workers don’t have the time to focus on their core role. The largest non-tax areas of regulation faced
by business are employment law, health and safety, planning law and consumer law — in the future,
regulations to address climate change will become increasingly important.
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Concern about the regulatory burden is not new — and Governments have attempted to address this
issue a number of times. However, few have made real progress. Our agenda is focused on making
regulations as effective and easy to comply with as possible, not on out-and-out de-regulation. This
has shifted the focus to ensuring that the protections offered by regulation do not come at a
damagingly high cost to business, rather than attacking the protections themselves. There are some
signs that this current attempt is now working — business groups remain warm about our efforts,
and survey data on business perceptions of regulation is slowly beginning to improve. The key to
success seems to be measurement and much greater transparency — eg departments have to deliver
a 25% reduction in what it costs business to administer regulations.
Our work contributes to the CSRO7 PSA 6: Deliver the conditions for business success in the UK, and
a BERR DSO on better regulation. We are publicly committed to making progress on seven
measures:
e Administrative burdens reduction across 19 government departments, consisting of a 25%
reduction for the majority of departments by 2010. Includes BERR target to deliver 25% reduction
in measured admin burdens by 2010
e Proportion of businesses (and voluntary sector organisations) who believe that "most regulation is
fair and proportionate" in five policy areas — employment law, tax law, health and safety, planning
law and company law
e Flow of regulation: total benefit/cost ratio of regulations coming forward over time
e Performance of local authority regulatory services as measured by the national indicator (to be
agreed in 2008)
¢ Overall performance in the World Bank "Doing business" survey and OECD surveys of the policy
environment
e Proportion of bureaucracy and red-tape which the public sector front line believes to be
unnecessary
e Reduction in data stream requirements from central government to the public sector frontline by
2010. Includes 30% cross-Government target to reduce burdens on front line public sector staff.
Supporting Brief Lead Official
e Regulatory Budgets e Neil Warsop
Context
Regulatory budgets will impose a cap on the total amount of new cost departments can place
on business through regulation. This will provide a way to directly manage the flow of new
regulation across government, which is currently lacking. It goes beyond the administrative
burden reduction target because it not only covers those administrative costs, but all costs of
regulation.
Budgets will be net of the measures that depts are publishing in their simplification plans — so
the cost of new regulation being introduced by a dept can be offset by the cost savings that it
has already identified.
e Weare currently consulting on the system, with a view to starting a shadow rollout in April
2009 and the full system in April 2010. While the consultation does not close until 12
November, we would welcome a steer from you on this high profile and politically
contentious policy area.
e As aresult of its controversial nature, the Prime Minister, Alistair Darling and John Hutton
have been closely involved in the policy.
Key issues:
e The government has committed to excluding regulation regarding climate change from
the budget. This decision has been unpopular with business, who believe that it is a
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loophole in an otherwise solid system. We will need to manage both the definition of
‘climate change regulation’ and how it is controlled, to ensure that this exemption does
not undermine the system
e In order to go live with a shadow system in April, we need to make decisions this Autumn
even though the consultation closes in mid-November. This is a very tight timescale,
which may well slip if we get into difficulties with other departments.
e We intend to provide budgetary allocation to departments in December, and so we need
departments to analyse how much budget they require now. However, the quality of
analysis is weak, and you may need to encourage other Secretaries of State to ensure
that their officials correctly identify the likely regulatory flow over the next few years.
e John Hutton has publicly stated that his "ambition would be to set a regulatory budget as
close to zero as possible." Our initial analysis shows that this is achievable, although
there is a high risk that departments will argue for a budget set far higher.
Next Steps
e Over the course of the consultation, which asks both ‘whether Regulatory Budgets
should proceed and ‘how’ they should operate, officials will continue to develop the policy
with a view to:
* gaining approval from the ED Committee to implement a system of Regulatory
Budgets in the Autumn of 2008;
* set the levels for an initial regulatory budget and draft a guidance document setting
out how the system will operate by early 2009; and begin a pilot period of ‘shadow
running’ in April 2009.
Supporting Brief Lead Official
e 25% reduction in administrative burdens e¢ Mark Hammond
target
Context
e In 2005 the Government committed to measure and reduce what it costs business in
time, money and effort to do the form filling, provide other information and handle
inspections associated with regulations (the “administrative burden” of regulations).
e The Administrative Burdens Measurement Exercise conducted in 2005-06 determined the
cost of administrative burdens facing business and the voluntary sector was £13.4 billion.
In autumn 2006, Government departments announced agreement to cutting these annual
costs by a net 25% by 2010. To show progress towards this target, departments agreed
to publish annual rolling simplification plans.
e Simplification is the term given to measures that will reduce the cost of regulation to
frontline business, the third sector and public services. These measures must reduce
regulatory burdens without removing necessary protections.
e Simplification Plans are published annually. The second round was published in
December 2007, which together identified savings in administrative burdens of £3.5
billion by 2010. Of this, over £800 million of annual net administrative burdens have
already been delivered.
e While the Government has measured and set a target for reducing administrative
burdens, simplification plans also report progress in reducing the policy costs of
regulation. Policy costs are the costs of complying with the policy intent of regulations,
not just the associated red tape. Policy costs would be controlled for the first time if we
introduced Regulatory Budgets (see below).
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e It is worth noting that HMRC’s targets to reduce administrative burdens are different to
those of other departments as HMRC is not considered to be a typical regulator. As the
UK has a relatively low tax admin burden compared to other EU countries, their targets
focus on the areas that cause the largest burden or irritation to business.
Key issues:
e Overall, the Government is on track to meet its 2010 target but we need to keep pressure
on departments to deliver their simplification promises and to manage the costs of new
regulations.
e Within this, the December 2007 Simplification plan showed BERR just about meeting
25% target. John Alty and Geoff Dart have provided you with a separate brief on this
topic. Any failure by BERR (which is the largest business regulator as well as the
champion of better regulation) to meet its departmental target would be embarrassing,
and would undermine the credibility of the programme.
e Since the programme started there has been a small positive move in business
perceptions of regulation. Effective communication of very practical ways in which the
programme is making life easier for business is essential.
e There has been some criticism of the way in which administrative burdens are measured.
We have some ideas of how to resolve this, and will be putting these before you soon.
e The NAO is due to publish a report in October looking at the value for money of the
Admin Burdens programme. We have seen the final draft of this report and are broadly
content with it.
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Next Steps
e The third round of simplification plans, showing progress towards the 2010 target, will be
published in December. A number of departments’ simplification plans are back loaded,
with most of the reductions being implemented and measured in the later stages of the
programme, it is essential that these remain on track to ensure the Government's target is
met. This is especially true of BERR’s own plan.
e We have been working up plans for this programme post-2010, when our current target
expires. We will be providing you with these soon.
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Supporting Brief Lead Official
« Anderson Review of Guidance e Jennifer Smookler!_ GRO ;
Context
There are an estimated 4.7 million private sector small and medium sized enterprises
(SMEs) in the UK (businesses with less than 250 employees). They account for 99.9% of all
enterprises, and more than half of the employment (59.2) and turnover (51.5%) of the UK.
These businesses consistently tell government that they have a real problem understanding
and complying with regulations, in particular with employment, health and safety and tax
issues. Government guidance can be difficult to follow, inconsistent and does not guarantee
that, even if you follow the guidance, you will be complying with the law. 75% of small and
medium-sized businesses say it is difficult to find information about which regulations apply
to their business, compared to 58% of large businesses. Three fifths of small and medium
sized business employers see regulation as one of the obstacles to their success. In
addition, businesses spend at least £1.4 billion a year paying for external advisers to help
them to comply with regulations, a significant regulatory cost.
Key Issues
Sarah Anderson, a small businesswoman and former member of the Small Business Council
and the Better Regulation Taskforce is leading this Review, which is looking at how to give
SMEs greater clarity and certainty on how to comply with regulation. This will:
(a) reduce the burden to business of understanding how to comply with regulation;
(b) reduce non-compliance and its associated costs to business, government and
individuals; and
(c) improve the poor perception by SMEs of the government's regulatory regime.
The Review is focusing on five key issues identified by SMEs as barriers to their use of
government guidance: certainty, clarity, consistency, cost and accessibility.
We are developing ideas towards:
« Ways of guaranteeing government advice where enforcement is by the state (i.e.
compliance with advice would be regarded as compliance with the law)
e Incentivising the use of insured advice helplines on employment law
e Improving the number of businesses using Businesslink.gov.uk
« Giving greater weight to the existing Code of Practice on Guidance and applying it to
existing guidance
The Review was launched as part of the Enterprise Strategy this March.
Next Steps
The review is due to report in November 2008.
Some of the ideas emerging from the Anderson Review may have significant cost
implications (£40-50 million), and you will need to decide whether you think this is a
acceptable amount to spend.
Supporting Brief Lead Official
Consumer Law Review Anne Willcocks — BRE/CCP!_
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Context
« The UK is widely acknowledged to have one of the best systems of consumer
protection in the world. However, our legislation has accumulated over decades and
is complex and fragmented. The government's recent administrative burdens
measurement exercise found over one hundred pieces of primary and secondary
legislation attached to consumer law, imposing costs on business of around £1.25
billion per year.
e At the same time, new technologies and the opening of global markets are posing
opportunities and challenges for businesses and consumers alike. As markets
change, rules can become outdated. We need to ensure the law is sufficiently flexible
and future-proof to deal with change.
e The government has done much in recent years to improve the other two key pillars
of the consumer protection regime — enforcement, and consumer empowerment.
However, challenges remain to make better use of enforcement resources and
strengthen its consistency and effectiveness, particularly on internet enforcement.
Empowerment is among the best in the world in many respects, but there is scope to
improve consumer information and access to redress.
e Given the increasing complexity of markets and choices, we also need to ensure
vulnerable consumers are sufficiently protected and supported.
Key issues
e The Consumer Law Review is looking at whether there are new approaches which
could deliver better outcomes for consumers, whilst at the same time reducing
unnecessary burdens for business and promoting fair and competitive markets.
e In particular, the review is looking at :
e whether greater use can be made of principles rather than prescriptive legislation;
e what enforcement structures and practices are needed so that resources are
focused on areas of greatest detriment; and
e whether enhancing consumer empowerment can provide incentives to help
consumers get a fair deal and reduce burdens on business.
e The review was launched in July last year as part of the Government's ‘Next Steps on
Regulatory Reform’.
Next Steps
The review issued a call for evidence which closed on 31 July, and the team is currently
analysing the responses.
The review is due to report by the end of the year. Decisions will be needed in the
autumn on the extent and nature of the review's recommendations, particularly on
legislation. There is scope and support for simplification of legislation, but there is also
concern about the cost of change on the part of business.
KEY POLICY ISSUE ; Lead Official
Supporting Brief yD LeadI Official — :
_Communication d _I* Louise Buckle
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Free and Fair Markets - Doha Development Agenda I Claire Durkin
Key Issues
e« A World Trade Organisation (WTO) Ministerial negotiation on the Doha Development
Agenda (DDA) was held in Geneva on 29 July. The talks made significant progress, but
eventually broke down. The Prime Minister has been personally involved in follow on work to
capture the progress that was made in Geneva and maintain the momentum that was
generated.
Context
High-level summary of Key Policy Issue:
e The current Round of WTO trade talks, the DDA, was launched in 2001. Negotiations
cover agriculture, services, Non Agricultural Market Access (NAMA - or industrial
goods), environment, rules, trade facilitation (e.g. improving customs procedures), It was
agreed that all negotiations would form part of a “Single Undertaking” - WTO members
would have to accept or reject the whole package when the negotiations conclude.
¢ Since then negotiations have been intermittent and varying in intensity, and have stalled
several times. Over the past year though good progress has been made, which enabled
Pascal Lamy DG, WTO) to call a Ministerial in July, with the aim of agreeing the
agriculture and NAMA dossiers.
e This Ministerial made significant progress on many of the most difficult aspects of the
negotiations, as well as securing some real indications of future ambition on services.
However the meeting broke down without reaching a final agreement.
e Given the progress made, there has been a very broad willingness among the WTO
membership to capture this and to maintain the momentum of the talks, with a possible
view to reconvening Ministers before the end of the year (and the arrival of anew US
administration).
¢ The Prime Minister has been very involved in these efforts - since the talks broke down
he has spoken with several key players (including Pascal Lamy, Peter Mandelson (DG
Trade), Presidents Bush and Lula and PM Singh) about the importance of capturing the
progress made and ways to maintain the momentum to try and secure a deal.
« The UK is consulting key interested parties about the ways in which we can make the
progress we want to see before the next US Administration takes office. This may
include a Leaders meeting in the margins of the UNGA MDG meeting in New York in
September to test and galvanise political will to complete the Round. The joint
BERR/Dfid Trade Policy Unit (TPU) has been developing plans (in consultation with
ODGs) for this meeting if it is to go ahead.
Future Challenges
e We need to ensure that the WTO membership do in fact sign up to capture the progress
that was made in Geneva. This will be challenging. In particular, the US has stated that
what they signed up to was a careful balance, indicating that any changes will tear apart
this balance. In contrast, it is unclear whether India really signed up to the package in the
first place.
e Achieving a real shift in political will, particularly in the US and in India, will not be
straightforward. Without such a shift, the chances of success are minimal.
« Trade policy is a matter of Commission competence. Serious effort will be needed to
maintain the EU dynamic. Good coordination in Geneva secured sufficient support for
the Commission, but we will need to maintain this over the coming months to ensure the
Commission has the right level of flexibility to fully engage in any future Ministerial. This
will not be easy with an actively hostile French Presidency.
e Technical discussions need to continue in Geneva to try and resolve a range of difficult
issues including the Special Safeguard Mechanism (which protects developing country
farmers from import surges), cotton (where the EU may also come under pressure),
bananas and NAMA sectoral agreements. All have the potential to be real deal breakers.
We must continue working to manage these.
KEY POLICY ISSUE Lead Offici
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BERR EU STRATEGY
(& EU SERVICES DIRECTIVE IMPLEMENTATION)
Key Issues
« BERR’s EU Strategy is to facilitate open, fair and competitive markets - making the EU Single
Market and EU Better Regulation priorities a reality for businesses and citizens and creating jobs
and growth
e EU Strategy has two parts:
- Part 1, Short Term: specific EU priority issues that can be delivered by existing European
Commission (which will be replaced in 2009) on Opening Markets; Supporting Business; and
Improving the business environment
- Part 2, Long Term: presenting to the incoming Commission and new MEPs (both appointed in
2009) and other EU Member States a compelling vision of economic reform for the EU post
2009/2010
- BERR is committed to consulting with, and taking account of, the views of BERR’s business and
other key stakeholders in its implementation of the EU Strategy, as well as liaising closely with other
Government Departments
- Ahigh level BERR Ministerial EU business advisory group (chaired by BERR Minister for EU
Competitiveness, with business and other stakeholder members) has been established to steer
long term implementation of the strategy — first group meeting will be on 16 October 2008
- EU Services Directive: Adopted by EU in December 2006 (after lengthy negotiations), UK on
target to
implement by December 2009 deadline.
Context
e The BERR/FCO Global Europe business conference (speakers included the PM and BERR SoS)
on 14 January 2008 signalled a shift in emphasis for government and business from EU
institutional reform to action on developing EU policies for jobs and growth
e Following up the 14 January event, a meeting of BERR Ministers agreed that anew BERR EU
Strategy should be produced in order to influence firstly the current Commission and MEPs (up to
2009) and the incoming new Commissions and MEPs (to be appointed in 2009)
« The EU Strategy complements and contributes to BERR’s PSA 6 (Deliver the conditions for
business success in the UK) and the Fair Markets Business Plan Objective on Opening markets in
Europe and internationally
e Possible constraints are BERR’s ability to influence the priorities and timetable of the current
Commission and MEPs to match our EU priorities, which will also apply to the new Commission
and MEPs to be appointed in 2009
¢ EU Services Directive: A key EU Single Market priority for UK as the services sector accounts for
70% of EU GDP but only 20% of intra-EU trade — this Directive aims to open up the EU services
market. Member States required to remove barriers to cross border service provision that cannot
be justified in terms of the directive and set up Points of Single Contact that will enable users to
find out about the relevant rules and procedures for doing business and to apply remotely for any
necessary licences or authorisations
Future Challenges
* To continue to promote an EU economic reform and open markets agenda through BERR
Ministerial engagement at EU Councils and meetings with the Commission and MEPs in the
face of opposition from more protectionist EU Member States
e Ensure that incoming Commission and MEPs in 2009 maintain momentum of EU economic
reform and focus on measures to increase EU competitiveness
e EU Services Directive: Ensure effective implementation in UK by December 2009 deadline and
to continue to influence other Member States so that they also open up their markets by
implementing effectively and on time . Also need to set up mechanisms to ensure that future
legislation and administrative processes comply with the Services Directive.
Key Players Relationship Map
Provide high-level picture of who they are and how they feel about the overarching Major Policy Issue
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Challengers Neutrals
« EU Member States:
Sweden (support on
some issues), Germany
Essential people to meet in first weeks
EU Commissioners (either early meeting or early phone call): Verheugen (Enterprise), McCreevy
(Internal Market); Mandelson (Trade); Kroes (Competition); Spidla (Employment); Piebalgs (Energy);
Reding (Information Society e.g. telecoms)
EU MEPs: Gary Titley (Leader of Labour Group); Arlene McCarthy (Chair of Internal Market and
Consumer Protection Committee)
EU Ministers: Lagarde (Economy Minister, France); Glos (Economy Minister, Germany); Vizjak
(Economy Minister, Czech Republic —- EU Presidency Jan-June 2009)
Key UK stakeholders: Richard Lambert (CBI); Brendan Barber (TUC); Miles Templeman (IoD); David
Frost (BCC); Roland Rudd (Business for New Europe — key pro-EU business organisation)
Key Milestones
Provide key milestones covering the identified supporting issues / policy areas
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Issue 1: BERR SoS I EU EU Czech EU Presidency starts on
Short term EU_ I visit to Ministerial Comp’ness 1 January 2009
Strategy Brussels, 13- I Conference I Council, 1-2
14 Oct to on Clusters, December
meet key 13-14
Commission I November French EU
ers and 2008 (Shriti I Presidency
MEPs Vadera ends 31
attending) December
BERR/FCO
Global
Europe
conference.
London, 17
November
Issue 2: First meeting Draft BERR I Present BERR EU long term strategy
Long term EU of BERR EU EU long term I and make early positive influence
strategy Ministerial strategy with new Commission and new
business “Manifesto” I MEPs to be appointed in mid 2009
advisory to be
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group on 16
October
finalised, end
December
(for
completion
and BERR
Ministerial
approval by
mid 2009)
Issue 3:
EU Services
Directive
EU Services Directive
implementation date - December
2009
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e¢ Employment law and policy is a highly political part of future domestic and European
agenda. ER manages, with SPADs, BERR’s relationship with TUC.
e Priorities: implementing the Warwick agreement (and managing new proposals) and
delivering the simplifications to employment law and administrative burden reductions
promised without diluting employment rights and protections. Key themes: protecting
vulnerable workers (better enforcement of existing rights) and making compliance easier for
good employers.
e The “Warwick Agreement” (July 04) ranged over a broad spectrum of topics across
Government and was subsequently transposed into the manifesto. Success at Work
(March 06) set implementation of the core Warwick employment commitments in the wider
context of the labour market. It was a definitive statement of the governments delivery for
the workplace in this Parliament. Ministerial committee serviced by No10 has been
monitoring progress in cooperation with the chair of the Labour party — majority of new
rights now in place. John Hutton speech to Fabian Society on 29 May spoke of ‘ending the
era of regulating’. A new ‘Warwick agreement’ was made in July 2008 — need to manage
expectations.
e Key policy areas include: implementing outcomes from the Vulnerable Workers Forum
which involved TUC, CBI and individual business and unions, plus all the workplace
enforcement bodies. Setting the rate for the NMW — government evidence to the LPC
Autumn. Employment Law Simplification and targeting rogue businesses — Employment
Bill (before Parliament) crucial for delivery of simplification plan and administrative burden
savings particularly delivery of Dispute Resolution changes and new simpler penalty regime
for NMW. Family-friendly agenda/Strategic Challenges — extending the right to request and
bringing in Additional Paternity Leave. Maintaining flexible labour markets and balance
between TUC/CBI when other departments seek to use employment law to achieve their
aims including pensions, skills, equality. European social law including future of the opt out
from the working time directive, agency work directive. Migration. Relationship with Acas,
independent but wholly funded by BERR.
Key Facts: Supporting Policy/Issue Key Facts: Opposing Policy/Issue
« UK best EU Member State for ease of I * CBI and TUC broadly happy with plans to save
employment law (WB). approximately £430m (out of BERR’s total of
« Employment is at a record level with £1.9bn) for the administrative cost savings.
28.9 million people in work (2.5
million more than in 1997) and
unemployment close to its lowest
levels for over twenty years.
« TUC pressing for delivering on
Warwick1 and still pressing for more
rights.
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Next Steps
e Juxtaposing implementation of manifesto commitments with challenging admin burdens
and simplification targets. Risk that commitment to not diluting employment rights will be
challenged.
e The Bill goes to Committee 14-23 October.
A number of early decisions will be needed, including:
e Warwick ‘one off increase in weekly limit for redundancy pay
e Tipping
¢ Trawlermen
Supporting brief Lead Official
Vulnerable workers Matthew Hilton
Context
e ‘Success at Work - Protecting Vulnerable Workers, Supporting Good Employers’ (March
2006) committed Government to protecting vulnerable workers. Fair framework of basic
workplace rights, including the right to a minimum wage, a right to 24 days paid leave
(being increased to 28 days from 1 April 2009), and the right not to be forced to work
more than 48 hours a week on average. The challenge now is to ensure that vulnerable
workers benefit from those rights.
e The report of BERR’s Vulnerable Worker Enforcement Forum was published in August
together with the Government's action plan for addressing the enforcement issues
raised in the Forum.
e The TUC ran its own Commission on Vulnerable Employment(CoVE). Its terms of
reference were wider than those of the Forum (which was focused on improving
enforcement of the existing framework of workplace rights). The final CoVE report was
published in May.
Key Facts: Supporting Policy/Issue Key Facts: Opposing Policy/Issue
¢ The Forum report demonstrated CoVE recommendations which are not being
government's commitment to helping I pursued:
vulnerable workers. The package
includes: Government to enforce a broader range of
employment rights
e A sustained, three year, government-
led campaign to raise vulnerable « The emphasis in the UK is on individuals
worker awareness of basic taking action to assert their rights, if
employment rights and encourage the necessary through reference to an
reporting of workplace abuses. employment tribunal. This allows the UK to
avoid the prescriptive legislation and Labour
¢ Establishment of a single telephone Inspectorates common in other EU states.
gateway to the enforcement bodies
through which vulnerable workers will I ¢ The Tribunal system is currently being
be able to report abuses and access improved following a review by Michael
advice on the rights enforced by Gibbons.
government. This will significantly
simplify and streamline the current Extend gangmaster-style licensing to other
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five helplines.
Action to tackle the legal information-
sharing barriers that, for some of the
enforcement bodies, prevent
inspectors passing information to
each other. This will enable better
targeting of the worst employers.
A Fair Employment Enforcement
Board chaired by the Employment
Minister bringing together the
enforcement bodies and independent
experts to improve and co-ordinate
enforcement activity.
Measures in this session’s
Employment Bill will increase the
penalties that can be imposed on non-
compliant employers; ensure that
workers underpaid the minimum
wage get fair arrears; and strengthen
the enforcement bodies’ investigatory
powers.
Two vulnerable worker pilots led by
the TUC and Marketing Birmingham
were launched in June 2007 to
identify practical ways of improving
the advice and support available to
vulnerable workers and their
employers at local level. The pilots
will run until April 2009.
There will be a third round of the
Union Modernisation Fund with a
focus on projects which will improve
support for vulnerable workers.
sectors
e Employment agencies operating outside the
agricultural and food processing sectors are
already subject to regulations enforced by
the Employment Agency Standards
Inspectorate (EAS).
e The Government does not currently intend
to extend licensing but to prioritise effective
enforcement of the existing law, not
introduce new regulation. Government will
do this by taking steps to strengthen the
EAS and raise its profile.
e The number of employment agency
inspectors has been doubled and provisions
in this session’s Employment Bill will give
the EAS stronger powers of investigation
and access to stronger penalties.
¢ The Vulnerable Worker Enforcement Forum
heard contrasting views on an extension of
licensing from union and business and
representatives of Citizens Advice.
Next Steps
BERR to take forward action plan from Vulnerable Worker Enforcement Forum report.
Establishment of Fair Employment Enforcement Board — first meeting in November.
Priority Issue — ; Lead Official - 2
EU Employment Law agenda \sathew Alten, >> > D>
Context
e Strategic: EU term ends in 2009 and with much business still unfinished, including
Reform Treaty, both Commission and Parliament (EP) are in a hurry and in legacy mode.
An ambitious French Presidency is also determined that the EU will make its mark. EU
discussions bring out tensions between openness and competitiveness as the most
appropriate response to globalisation and more protective/protectionist approaches.
Employment law (which provides EU minimum workplace standards) is one of the key
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fault lines, dividing member states; the Council and the EP and the Social Partners
(Business and Trade Unions). Working Time (WTD) and Agency Work (AWD), both
critical elements of UK labour market flexibility have kept the EU in deadlock for several
years — and kept other initiatives in check. But, following UK domestic agreement on
Agency Work and with France changing tack to work with the UK (and Germany), the
Council and Commission have agreed ways forward on both Directives as a package. But
the EP now has to agree. This will be difficult; MEPs, especially from left of centre groups
(including the EPLP), and from those countries not supporting agreements in Council will
try to reverse gains — particularly on Working Time where they are likely to target the opt-
out. Priority is to influence EP (both directly and through others) and ensure other
Member States hold steady in the Council. With pressure to agree quickly, keeping good
outcomes on both dossiers will need significant political and diplomatic efforts.
b) There is some risk the EP mood could be influenced by recent trade union outcry
(shared by some MS) following ECJ judgements on posted workers. Unions are
concerned that by not requiring the application of localised (only of national) collective
bargaining provisions EU rules for posting of workers allow for “social dumping” — and is
evidence of an EU not doing enough to protect its workers.
c) With time running out and no new employment legislation to show for it the
Commission is pressing for changes to existing laws — including on European Works
Councils (EWCs) and on Work Life Balance (maternity/parental leave and associated
measures). EWC changes are expected to be agreed quickly (following an EU social
partner intervention) which will be seen as positive action by the EP — but some family
measures could well split both MS and EP leading to more difficult discussions.
Detail
e Working Time Directive (WTD): the most divisive and longstanding issue. For most, the
practical priority is to resolve the legal problems around on-call time and compensatory
rest resulting from the SiMap/Jaeger ECJ judgments, but the real political battle has been
around retention of the opt-out. A qualified majority of 22 Member States has now
accepted it will be retained — but with additional safeguards. It is this element — but
possibly also other areas such as the SiMAP/Jaeger solution - that will come under the
most sustained attack in the EP.
+ Agency Workers Directive (AWD): dormant until resurrected by the Portuguese
Presidency as a ploy to get agreement on WT. The sticking point was the “equal
treatment” qualifying period — but MS using collective agreements could effectively
rewrite Directive terms. The UK domestic agency work agreement provided another way
forward for MS without that tradition. We understand EP likely to quickly agree AWD
(which has enjoyed ETUC support) — thus breaking the direct link with WTD.
e Posted workers — current PWD facilitates cross border provision of services across the
EU. To prevent unfair competition and protect posted worker rights, certain but not all
minimum terms and conditions must apply to a posted worker. As some collectively
agreed terms fall outside this definition the ECJ has found against unions taking action to
force the application of localised collective rights. This has led to accusations of the EU
being responsible for social dumping and undermining of union rights. The Commission is
not minded to change the PWD but is providing for an EU discussion, in the autumn, on
the implications of the ECJ judgements.
e European Works Councils - unusually EU Social Partners have written to the French
Presidency proposing agreed changes to the Commission proposal to amend the current
Directive. This is likely to facilitate a quick agreement between MS and within the EP.
The UK will focus on trying to achieve some detailed technical amendments to avoid
unintended consequences which could cause future problems for the wider Information &
Consultation agenda. An agreement in the Council under the French Presidency is likely
to set a positive tone in Europe.
e Work Life Balance measures — EU social partners have agreed to negotiate an
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agreement on parental leave (which once started they must complete in 9 months). But
the Commission expected to issue proposals on 1 October including on extending
maternity leave and providing full salary throughout, flexible working, and protections
around maternity related dismissal. Such measures may prove controversial and divide
MS - for the UK whilst generally supportive of the principles there is a risk that the detail
could bring risks to UK policy approaches and bring opposition, particularly from small
business.
Key Facts: Supporting Policy/Issue
Key Facts: Opposing Policy/Issue
e UK has very good story to tell on
flexibility and fairness in the labour
market - including high employment, low
unemployment and a framework of basic
rights for all workers not just employees.
e The WTD opt out is key element of
flexible labour markets and personal
choice. It is estimated to be worth £bns
to the UK economy and approx 3.3m UK
workers chose to work more than 48hrs
per wk.
e HMG has agreed with CBI/TUC ona
formula providing for equal treatment
after agency workers have been ina
particular job for 12 weeks.
e Recent ECJ judgments on the Posted
Workers Directive properly reflect the
objectives of the Directive in balancing
the protection of workers rights and
ensuring the freedom to provide services
within the single market. Would not wish
our domestic industrial relations
framework to be unsettled by these
recent judgements — and will work with
interested parties to examine them and
as necessary take action to protect UK
position.
e Working parents now have more choice
and support than ever before to help
balance childcare with work in ways that
benefit employers, employees and their
children. This has been taken forward
sensibly without stifling economic growth,
enabling employers to benefit from the
widest possible pool of talent available.
e TUC opposed to the WTD opt out — this is
likely to be the most difficult argument in the
EP
¢ Unions remain convinced that the ECJ
judgments allow for social by giving posted
workers only minimum terms and conditions,
not those set out in local collective
agreements. They are also concerned that
unions might be hampered from taking
collective action in cross border disputes as
they now have to ‘prove’ that the action is
justified and proportionate.
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Future Challenges
¢ Top priority: maintain the Council agreements on AWD and WTD - or ensure any changes
proposed are consistent with UK red lines most particularly to enable full implementation of
the domestic agreement on agency work and to retain a workable opt out to WTD
e Avoid that concerns about posted worker rules undermine AWD/WTD agreements or
otherwise lead to any unwelcome measures
e Achieve EWC outcome that doesn’t undermine business adaptability
e Achieve outcomes on Work Life Balance that don’t undermine UK family friendly policy — nor
lead to increased burdens on business
« Once the new Commission and EP are in place maintain EU focus on jobs and growth,
employability, fairness and flexibility. Strive for ‘better regulation’ and resist harmonisation of
EU employment law.
¢ Continue to manage risks of any EC work on enforcement & review of existing laws.
Key dates / events
* 9 October EU Forum looking at
e 14/15 October European Council
lications of ECJ judgement (PWD
e 11/12 December Employment Council
e 15/16 December Employment Council
© 22 December end of 3 month EP process and possible 2 Reading deal under French
Presidency. Process can either be extended by max one month or move to Conciliation
between Council and EP.
2009
e 4January Czech Presidency
e 22 January final deadline for second reading deal; or move to EP/Council conciliation
process (which must be completed within a maximum 8 weeks from start)
« End March latest expected conclusion of Conciliation
e 4-7 May last EP Plenary
« June EP elections
e 1July Swedish Presidency
« 1November new Commission takes office
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Context
1. BERR (and all other depts) to reduce administrative burdens by 25% by 2010. BERR
responsible for approx 1/3 of government total (excluding tax).
2. Details of how Departments will achieve 25% target are set out in annual simplification plans.
Second plans (SP2) Dec 2007, third plan (SP3) due Dec 2008. SP2 showed BERR just about
meeting 25% target.
3. SP3 will set out progress on key measures delivering reductions including; the Companies Act
2006, Unfair Commercial Practices Directive (UCPD), improved Dispute Resolution
procedures in the Employment Bill and improved employment law guidance. Increased
confidence that target will be achieved but still challenging.
4. Departmental simplification plans are also a vehicle for reporting on wider better regulation
initiatives — e.g. implementation of the Services Directive.
Key Facts: Supporting Policy/Issue
e BERR admin burdens baseline approx
£4.2bn — 25% is £1.05bn (net of new
burdens imposed since May 2005).
¢ Target reductions:
- Companies Act 2006 - over £300m
- UCPD regs - £216m
- Employment Bill and new dispute
resolution services - £150m
- Employment law guidance - £365m from
several workstreams.
¢ Total delivery to date about 9% net of new
burdens — mostly from CA06 and UCPD
e New admin burdens just over £100m —
most of the burdens predating this
exercise. New burdens in pipeline before
2010 are small.
e Plans generally regarded by stakeholders
as addressing the right policy issues —
delivery is acid test though.
Key Facts: Opposing Policy/Issue
e Employment law — some stakeholders
sceptical about guidance delivering large
reductions and challenge of delivery is great.
£10m is being spent on targeted promotion
and measurement of impact.
e Level of admin burdens reductions arising
from UCPD implementation being validated
with stakeholders — but changes are genuine
policy changes.
* Complaints from business (e.g. BCC) that
policy cost (not admin burden) on business is
high and growing. Bad news on policy costs
could obscure progress on admin burdens.
Proposed system of regulatory budgets will
help.
e Concern about measures with potential to
impose new admin burdens shortly after target
date — e.g. Agency Workers Directive.
e Any slippage in delivery either in time or
amount would jeopardise ability of BERR to
meet target. Efforts to find additional admin
burdens reductions mitigating this risk.
Future Challenges
¢ Biggest delivery challenge remains employment law guidance projects — measurement exercise
is in the field. Flexible working deregulation measure out to consultation.
« UCPD figures need to be validated with business stakeholders — planned for September 2008.
e Establishing whether there are additional admin burdens reductions to be scored and if so at
what level — before publication of SP3 in December. Also whether there are new burdens to
take into account from new employment strategy.
Impending decisions
¢ Content of SP3 to be finalised — 1* draft to BRE in September and Ministers shortly afterwards.
Publication due in December.
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Key Players Relationship Map
Challengers
BCC most likely to
challenge admin
burdens methodology —
more concerned about
policy costs. Want more
radical deregulation.
TUC promoting
employment law policies
imposing new burdens.
Essential people to meet in first weeks
Senior representatives of key stakeholders - as above — but a meeting on this subject alone is not
required — worth raising as part of a more general meeting with these key players.
Neutrals
National Consumer
Council — support efforts
generally, but have
expressed concern that
efforts are overly
focussed on reducing
burdens on business.
With TUC want greater
acknowledgement of
benefits of regulation
Key Milestones
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
Admin SP3 SP3 CCDs April 09, Oct °09, April
burdens clearance. publication I 10 —new measures take effect.
reductions 1 Oct (with other I Dec 2009 — Simplification Plan 4
Common Department I published
Commence s’ plans). May 2010 — Target date for
ment Date achieving 25% net reduction in
—new admin burdens.
measures
take effect
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Key Issues
Companies Act 2006 commencement timetable
The Minister of State for Competitiveness, Stephen Timms announced on 7 November 2007
that the commencement date of 1 October 2008, for some provisions of the 2006 Act, would be
delayed to 1 October 2009. This was to take account of the Registrar of Companies risk
assessment of the time needed to complete necessary changes to Companies House systems
and processes to meet the new requirements of the Act.
Provisions which will still be commenced in October 2008 include the new procedure for private
companies to make capital reductions supported by solvency statement and removal of the
restriction on restoring to the register companies dissolved before 1969.
Other issues
e Estimated to deliver benefits to business of around £250 million a year.
e Main controversial policy areas during the Bill were directors’ duties and narrative reporting.
« Business was concerned that the statutory duties will increase directors’ potential liability
and result in excessive paper trails.
e Lobby groups (under umbrella of Corporate Responsibility Coalition) wanted directors to
have duties to the environment etc. as well as to the company, and wanted all large
companies (not just quoted companies) to produce an enhanced Business Review.
Context
e The 2006 Act modernises and simplifies company law in a way that makes it more
accessible and easier to understand. The changes made by the Act were based on the
recommendations of the independent Company Law Review commissioned with the task of
looking at this in 1998. It introduces a range of deregulatory measures, with particular focus
on small companies, which have been widely welcomed by business.
e Itintroduces a statutory statement of directors’ general duties, which provides greater clarity
on what is expected of directors. It also introduces narrative reporting/Business Review
provisions to encourage meaningful strategic, forward-looking information to enable
shareholders to hold the directors accountable, without imposing disproportionate
administrative burdens on business.
Future Challenges
e Implementation of all provisions in Act and secondary legislation by 1 October 2009
(Ministerial statement made on implementation timetable 13 December 2007)
e Majority of remaining secondary legislation to be made or laid in draft by end of 2008.
Parliamentary debates will require substantial Ministerial attention between September 2008
and March 2009 to meet the publicly announced commencement timetable.
* Companies House need to complete major changes to systems to incorporate new changes
resulting from the Act. New software system CHIPS being used as basis for development of
changes. Main risk to project remains slippage in delivery of system changes.
e Managing the pressure to include requirements in the DEFRA Climate Change Bill for
mandatory reporting of carbon emissions. No case has been made for such requirements,
and the admin burdens are likely to be significant. Report Stage is expected in early
October.
There is currently no reason that we would not be able to meet these challenges as our project
delivery plan remains on track.
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Key Milestones - Companies Act 2006 implementation timetable
We will quickly provide any new Minister, with company law within his or her portfolio, with a
detailed overview of regulations requiring Ministerial approval between September 2008 and
early 2009, including the potential timetable for Parliamentary debates. The milestones
provided below give a brief overview of what is a packed timetable, which the Government has
committed to publicly. Slippage would impact negatively on UK Business, particularly in
preparation for the next AGM season.
Issue / policy I Oct Nov Dec Early 2009
area ‘08 ‘08 ‘08
Companies Act I Final Commencement Parliamentary Further Parliamentary
2006 Order to be made. debates on regulations I debates on
implementation affirmative to be laid affirmative
Further regulations to regulations. or made. regulations.
be laid or made. Consequential
Amendments
order and other
regulations to be
made/laid in draft.
KEY POLICYISSUE [Lead Official
Draft Competition Bill = I John Alty/ David Saunders:
Key Issues
e¢ We have LP clearance for a draft Competition Bill in the next Session. We anticipate bidding for a
Bill in the Fifth Session
e Aneffective competition regime is important to productivity, resulting in more efficient allocation of
resources, lower prices and better quality goods and services. This is especially pertinent given
the current economic climate.
e Proposals fall into two areas:
e Private actions — making it easier for consumers and businesses to get access to redress
(if necessary through the courts) for any damage they have suffered from anti-competitive
behaviour. This should deter anti-competitive behaviour as well as empower consumers. .
« Improvements to procedures under which the competition authorities investigate
Mergers and Markets, to the benefit of business as well as the authorities.
Context
e The 2001 White paper Productivity and Enterprise: A World Class Competition Regime set out
a blue print for improving the regime. Reforms, including legislation in the shape of the
Competition Act 1998 and the Enterprise Act 2002 have resulted in the regime now being
ranked among the best in the world.
e The OFT published a consultation on private actions in Nov 07 to establish whether parties
harmed by anti-competitive behaviour had access to redress (one of the White Paper
principles) — it demonstrated that private actions were rarely used by consumers and small
businesses - thus a strengthening of private actions was required (see supporting brief).
Review of the regime has also pinpointed changes to the merger and market investigation
procedures which could usefully be made.
e The Chancellor announced the consultation in the Pre Budget report of October 07.
« The consultation has been delayed, initially due to discussions with the Ministry of Justice over
the form of the proposals, and latterly due to a desire to await publication of the Civil Justice
Council's Report on Improving Access to Justice through collective actions, as agreed with the
Leader of the House of Commons (who has her own agenda in wanting to introduce similar
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proposals on private actions in discrimination cases).
e Draft Bill Status was granted by Leader of the House of Commons in July 08 with the proviso
that the draft Bill is published before Easter Recess 2009.
e The proposals in the draft Bill will contribute to delivery of DSO3: Deliver free and fair markets,
with greater competition, for businesses, consumers and employees
Future Challenges
« Time frames are very challenging as the draft Bill needs to be published before Easter Recess
2009 — and we have yet to issue the consultation document.
« Need to resist some colleagues’ desire to extend principles of our proposals to other areas of
the law.
« Managing the CBI as far as possible, as their members are likely to face claims for
compensation and because they fear similar reforms could later be introduced in more
unwelcome areas e.g. employment law..
Key Players Relationship Map
Challengers
CBI (although support thrust of merger
proposals)
Neutrals
.
Key Milestones
Issue / policy area Oct Nov Dec 2009/10...
‘08 ‘08 08
ED Clearance for
Consultation launch
Publish Draft Bill Before Easter Recess
2009
Key Issues
e £1.7bn Govt funding package in place to support network to March 2011. But shape and size of
network beyond 2001 needs to be agreed by end 2009 to secure state aid clearance for funding.
e Programme to close up to 2,500 branches offset by 500 new ‘outreach’ services (e.g. mobile
offices) well advanced — As at 2 September, decisions on only 7 out of 42 local consultations
outstanding.
e Judicial Review (JR), challenging legality of BERR closure decision on grounds of breach of
Disability Discrimination Act duties, goes to Court 8-10 October.
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« DWP decision on successor to Post Office Card Account to be announced in October. If POL does
not win the new contract, closure of a further 3,000 post offices predicted.
Context
e Post Office Ltd (POL) is a heavily loss-making subsidiary of Royal Mail Group Ltd and operates
the Post Office network. Operates on arms-length commercial basis from HMG under Postal
Services Act 2000.
¢ Lifestyle and technological changes are reducing post office usage — direct debit, benefits into
bank accounts and people doing transactions online. As a result, a purely commercial network
would only be 3-4,000 branches.
e HMG provided £2bn of funding to POL between 1999 and 2006 to support the non-commercial
network. Any HMG funding for POL requires state aid clearance from the European Commission.
A further £1.7bn package was put in place in May 2007 following a public consultation on the
future of the network. It includes an annual £150m subsidy. The funding package is designed to:
o make the network stable and sustainable at around11,500 branches through the
compensated closure of 2,500 branches.
o return POL to profitability (post subsidy) by 2011.
e The closure programme is being implemented by POL through 42 local consultations. Decisions
on only 7 local consultations still to be announced. Physical closure of all branches scheduled to
be completed by December, though a small number will carry through to the New Year.
« JR case turns on whether we took into account our disability duties in formulating the current Post
Office policy. It is a question of whether substance or process is more important: we will win if the
Court focuses on the substance of the policy (inherently designed to protect Post Office access for
vulnerable people), but are at a significant risk of losing if process is deemed more important.
Future Challenges
The major challenges are:
e NAO study into the current funding and closure programme: report and PAC hearing due
spring 09.
¢ Decisions on post 2011 shape and size of the network and funding levels
¢ Political and media fallout if POL does not win POCA successor contract
e _Reputational impact on BERR if JR claim is successful.
Key Players Relationship Map
Challengers Neutrals
National Federation of Sub ¢ Postcomm
postmasters (NFSP) ¢ Postwatch/Consumer
jabs panies eae * Focus
'S more widely
e AU « OGDs
European Commission
Alan Cook — Managing Director, POL
George Thomson — General Secretary NFSP.
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Key Milestones
Final closure decisions
announced
Issue / policy area Oct 08 Dec 08 Mar 2009 onwards.......
Network Change Final closures apart from
Programme JR decision a short ‘tail’ of offices NAO report and PAC
hearing
Shape and size of
funding beyond 2011.
POL state aid
clearance of post 2011
funding
Decision on post-2011
network size and
associated funding
required by end 2009
DWP POCA successor
decision
Announcement of
decision expected
Future Options
e The independent (Hooper) review on mail services market may offer scope to review/recast
relationship between POL and the rest of RMG, if desirable.
Lead Official — eee
Lovegrove/Susannah Storey
Key Issues
¢ Government's response to the Independent Review
e Royal Mail's existing large pension deficit and expected larger deficit following next valuation in
2009 (to c£7 billion)
¢ Royal Mail's financial performance in difficult market conditions
e Recruitment of new Chairman to replace Allan Leighton in March 2009
¢ Directors’ incentives/remuneration
Context
e BERR (Shareholder Executive) has direct responsibility for HMG shareholding in Royal Mail
Holdings plc. Its subsidiary Royal Mail Group Limited comprises the RM letter business and
Parcelforce. Post Office Limited is a subsidiary of RM Group Limited and operates the nationwide
network of post offices (see separate brief on POL). SoS holds a special share in Holdings which
means that SoS consent is needed, inter alia, for the Directors’ remuneration framework and Board
appointments. Postcomm is the independent sector regulator. Postwatch (to be merged into a new
organisation, Consumer Focus, in October 2008) is the consumer body.
e Royal Mail's financial position is fragile. It has a £9bn turnover but made operating profits of only
£162m in 2007/8 (expected to rise to £275m in 2008/9). The pension fund requires cash payments
of c£800m per annum (c£250m to address the current deficit). The company needs to reduce costs
by transforming its network but progress has been slow so far. Market conditions are also difficult
with competitors targeting big mailers although the fall in volumes of letters sent (due to e-
substitution) is more damaging to Royal Mail. A finance framework comprising debt facilities of
£1.2bn and an escrow account of £850m was put in place in 2007 to support the transformation of
RM and to support the pension fund (in deficit at around £3bn at the time) respectively. The
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relationship between the RM management and the CWU is poor. The union recognises that
change is needed but obviously wishes to safeguard its members’ interests. The CWU has
threatened (but not balloted) industrial action on pension reforms introduced in April this year. It is
also expected to resist Mail Centre closures such as those recently announced in Liverpool and
Crewe.
e John Hutton announced an Independent review of the Postal Market in December 2007. The
Chairman is Richard Hooper (ex-Deputy Chair of OFCOM) supported by Dame Deirdre Hutton
(Chair, Food Standards Agency) and lan Smith (ex-CEO Taylor Woodrow). The Review's terms of
reference are to assess the impacts of liberalisation, explore trends in future market developments
and consider how to maintain the universal service obligations in the light of the trends and
developments identified. It is due to report this year (the “autumn” likely October).
Future Challenges
« Review Panel’s recommendations
e Increase in pension deficit and Trustees demand for higher payments into the fund
¢ Difficult market conditions — falling letters volumes with more people preferring to use digital
communications rather than post
¢ Finding a suitable candidate to replace Allan Leighton
e Pace of Royal Mail’s implementation of its transformation plan
Key Players Relationship Map
Relationships with key players can be inconsistent. RM has poor relationship with union and
Postcomm.
Challengers Neutrals
CWU e Postwatch (Consumer
Unite Focus from October
Postcomm 2008)
Royal Mail
EU Commission
Essential people to meet in first weeks
Richard Hooper/Deirdre Hutton/lan Smith — Independent Review
Allan Leighton/Adam Crozier — Royal Mail
Billy Hayes - CWU
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Key Milestones
statement (not
consulting is
Issue / policy I Oct Nov Dec 2009/10...
area ‘08 ‘08 ‘08
HMG Iteration with HMG Response if 12 week consultation route taken,
Review Team. ~either a consultation ends and policy statement made.
response to consultation
Review Publication of document or Legislation to implement recommendations.
Final Review moving direct to
Report. a policy Possible state aid notification to tackle pension
deficit.
Long Term
Remuneration I incentive Plan
potentially
controversial)
Royal Mail Sift of Submission of Announcement New Chairman takes up post in March/April
a, candidates suitable 2009
Chairman candidates to
SoS
Directors’ Submission on
into current
2007 funding wi
favourable)
tic that it
Pensions ‘Actuarial valuation (March 2009 June 2010).
State aid Possible
i tigati decision by EC
investigation (cautiously
Future Options
Ministers will have to decide whether to accept the recommendations of the Independent Review (which
may be controversial and unpalatable to some stakeholders) and whether to issue a consultation
document or issue a policy statement before implementation.
Regardless of outcome of the Review, the pension deficit will need to be addressed if the actuarial
valuation next year means that the Trustees demand higher payments into the fund (which RM will not
be able to afford).
Supporting Brief
Rising numbers of corporate
insolvencies
Lead Official
Stephen Speed - Chief Executive Insolvency
Service
Context
the economy.
Corporate insolvencies have been at a consistent level over the past 3-4 years but have
recently shown a rising trend. Administrations are up 60% year on year while with
liquidations up 15% and receiverships up 129%. Although there is no evidenced reason
for the recent rise, it is likely that it will be linked by commentators to the general state of
There have been some calls for the UK to adopt the Chapter 11 system used in the USA.
Key Facts: Supporting
Policy/Issue
The first two quarters of 2008 have
seen appreciable quarter on quarter
Key Facts: Opposing Policy/Issue
Some stakeholders consider that the UK system
does not work for large restructurings. Some
stakeholders consider that the UK system would
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increases in corporate insolvency
procedures, notably for creditors’
voluntary liquidations, receiverships
and administrations. Before this, the
trend in liquidations had been fairly
flat for a number of years. It is too
early to say whether recent quarters’
figures represent the beginning of a
longer term upward trend but, for
corporate insolvencies as a whole,
there are no recent legislative
changes that would be expected to
underlie the increases and it is more
likely, therefore, that the numbers are
largely driven by general economic
conditions impacting on trading
conditions.
Chapter 11 is an insolvency process
and if adopted would not reduce the
number of insolvencies. The
Enterprise Act reformed
administrations to promote the rescue
culture and reduce the costs of the
process. Chapter 11 is an expensive,
litigious process which encourages
companies to survive when they are
unprofitable and should fail. It can
distort the market.
The latest annual figures for company
liquidations and, separately, for other
corporate insolvencies are only about
half of the levels reached during the
recession of the early 1990's.
be better if it enabled companies in administration
to seek finance to aid their restructuring (called
DIP finance or post commencement finance)
Next Steps
For Insolvency Service - Additional an:
time will be required to identify consistent trends in particular industry groups.
For Insolvency Service and BERR - ri
a large scale corporate failure that would gain wide publicity and highlight the risk of large
scale job losses.
Consider with BERR colleagues the adequacy of the corporate insolvency regime and
whether any proposals for reform should be made.
alysis of sectoral information over a longer period of
isk analysis to be prepared to cover the possibility of
Supporting Brief
The companies act inspection into
MG Rover Group Limited
Lead Official
Robert Burns — Inspector of Companies
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Context
MG Rover went into administration in April 2005 with the loss of over 6,000 jobs at the
car manufacturing site at Longbridge (SW Birmingham) and further job losses in the
company’s supply chain and the wider West Midlands area. The actions of the
management of the company (the Phoenix Four) are the subject of an ongoing
investigation, by Company Inspectors (appointed on 31 May 2005 by the SOS under the
Companies Act 1985). The investigation into MG Rover is continuing.
Key Facts: Supporting Key Facts: Opposing Policy/Issue
Policy/issue The Secretary of State asked the inspectors to
report back to him as quickly as possible and in
a form that will enable the report to be made
public. Although Ministers have been asked
repeatedly when the inspection will conclude we
do not think it would be helpful or constructive to
speculate. It would raise expectations.
The public interest required that the
issues raised by the Financial
Reporting Review Panel and
developments after 2003, when the
last accounts were published, be
looked into by independent
investigators.
The Secretary of State decided that
there was sufficient public interest to
warrant the appointment of inspectors
pursuant to section 432 of the
Companies Act. However, the
inspectors are “masters of their own
procedures’ as far as the
investigation is concerned. They meet
with BERR officials regularly in order
to monitor progress and to ensure the
momentum of the investigation is
maintained. The inspectors are
seeking to complete the report as
quickly as possible, with due regard
for the fairness of procedures, and to
the thoroughness of the task.
Total cost of the inquiry as at 31 July
2008 was £13,065,059 (broken down
as £10,675,503 in costs, £443,696 in
disbursements and £1,945,860 in
VAT). These costs are essentially the
time costs of the legal inspectors and
the accounting inspector, plus his
team.
Next Steps
The inspectors have sent their provisional criticisms, to those they intend to criticise, a
process which will inevitably take time. The Inspectors are very aware of the risk of
challenge from the Phoenix Four, or possibly other players, as to the fairness of the
inspection process.
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