'We will drag company law into the 21st century'

PATRICIA Hewitt is taking the Department of Trade & Industry by storm. In Labour's first term, it was a bed of nails which only once - for a brief period under Peter Mandelson - showed any signs of breaking away from the dominance of the Treasury.

Hewitt, widely regarded as one of the smartest and hardest working of the 'Blair babes', is changing all that. In six months at the DTI, she has moved rapidly to try to make it relevant again. She has forcefully taken on the vexed issue of 'fat cats' and payment for failure on Britain's boardrooms and is bringing in advisers from the private sector at the highest levels in her department.

Hewitt held her own, and kept her cool, on the 'red tape' controversy in a finger waving confrontation with Digby Jones, director-general of the CBI, at its annual conference in Birmingham this month.

Speaking in her spacious office high up in the DTI building, Hewitt shows determination to push the envelope on some of the most contentious issues facing her department at a time of economic slowdown. There will be no support for failing companies. Instead she plans to direct the DTI's £1bn annual budget for assisting industry towards encouraging innovation and technology - reinforcing this week's pre-Budget tax allowances for research.

Hewitt believes the plethora of Government support schemes for business has become too complex and is looking to a new high-level team of business advisers - effectively her own group of non-executive directors - to help streamline the way the department operates and spends. 'I want the DTI to be run more like a well-rounded business,' says Hewitt.

She expects her new advisers (the first could be in place within weeks) to help her and her senior officials to set strategy. Her practical hands-on style - involving the business community rather than shunning them - is a contrast to her predecessor Stephen Byers.

She believes her new advisers could be invaluable in improving the use of public funds. 'I want to start with the support we give to industry, because that is the sharp edge of the economy and that's where things are particularly tough at the moment. There are too many different schemes. It is too difficult to get the support you need. We need to become more customer focused.'

Controversial schemes

SOME schemes, such as 'launch aid', have become highly controversial. Rolls-Royce is currently under investigation by the European Union competition authorities over Government help for developing a new aero engine. Hewitt says: 'It is money very well invested. We are making the investment rather than the banks, because banks are simply not willing to make such a very long-term investment. This is not the old kind of industrial subsidy where Governments were pouring money down a black hole marked company debt.'

From now on funds will be directed at promising businesses with heavy emphasis on 'science, technology and innovation'. As for rescues of firms in trouble, such as Marconi, the DTI chief makes it clear that she has received no request for assistance, but if she did, there is little doubt that she would hang tough.

'I don't think it's our job to rush in every time a company is in difficulty and say, Can we get you out of this mess? Can we prop you up?' Marconi plants adjoin her Leicester constituency. Hewitt says: 'Marconi failed to read the market and failed to see the downturn in telecoms coming as quickly as other people.'

Sounding more like a Tory than the socialist firebrand of her youth, she adds: 'We cannot run an industrial policy on the basis of reacting to crisis.'

Unusually for a senior British cabinet minister, Patricia Hewitt is a product of Australia, although one would hardly know it listening to her precise Oxbridge accent. She went to a small private school in Canberra. Her father Sir Cyril Hewitt was a senior civil servant who became an academic and businessman, in later years working for Rupert Murdoch's airline Ansett.

After a year of university in Australia, Hewitt looked for a greater academic challenge and won a place at Newnham College, Cambridge, following in the footsteps of her grandmother and great aunt, who studied there a century ago. It was a big step. 'Canberra in those days was a very, very small town,' she says. 'Most of the girls I went to school with were daughters of public servants.'

After her Cambridge days, Hewitt was something of a radical, working for Age Concern and the National Council for Civil Liberties before drifting into party politics as an assistant to Neil Kinnock. Along the way she collected some corporate experience at Andersen Consulting.

Now 52, she married barrister William Birtles in 1981 and has a 15-year-old daughter and a son age 12. Juggling a 75-hour-a-week ministerial job and a young family can be a strain. 'Family balance is something I struggle with every day of the week,' Hewitt says. She manages 'with difficulty'. Now that she has the whole department to run (she was previously e-commerce minister) the task is trickier.

'It's a hell of a lot easier if you're part of a family like mine, where both my husband and I are doing work we love. We're in well-paid jobs and obviously we have got some help at home. That's easier than women I represent in my constituency, who are juggling work and family with less money.'

Offensive pay-offs

WHEREAS the DTI has been wary of the issue of board pay, Hewitt is tackling it with fortitude. She recognises that Britain needs to encourage a culture in which 'entrepreneurs who take risks get exceptional return'. But payment for failure is a different matter, which can cast business in a bad light - as the offensive pay-offs at British Telecom and Marconi have shown.

Hewitt hopes to have a short bill, which encourages best practice on pay issues, ready before Christmas. It will give big shareholders the chance to vote separately on the remuneration reports of public companies for the first time. This is intended to reinforce the responsibility of shareholders on pay issues.

'It is a matter for shareholders and I hugely welcome and support the increase in shareholder activism,' she asserts. 'Investors tend to be sleeping partners in companies. It is important that they play a more active role in securing really effective management.'

Over the longer haul the role of directors will be dealt with through company law. 'We are going to have to drag it from the 19th century to the 21st century. The powers of shareholders, and the responsibilities and powers of directors, including non-executives, are central to the reform.'

For someone so firm about turning the culture of the DTI around, Hewitt treads warily around the European issue which has divided Labour at the highest levels. She knows there is a strong pro-euro constituency among Britain's largest exporters. She says the euro has not been 'the number one' issue raised with her by business. But she acknowledges that the 'weak euro', as she puts it, 'is making it very tough for our exporters and primarily our manufacturers'.

Instinctively Hewitt favours joining the euro. It is in the interests of our business and particularly our exporters to join a successful single currency, providing we are clear that we have a sufficient degree of convergence. 'We've got to be certain that the five economic tests are met.'

The Trade Secretary's equivocation on the euro suggests someone unwilling to rock the boat. This is an exception. On most issues Hewitt is proving brave and smart, recognising the need to create a business-friendly department at all levels, but one willing to take on thorny issues.

After Byers, she is a breath of fresh air.