Select Committee on Foreign Affairs Minutes of Evidence

Examination of witnesses (Questions 120-139)



  120. He said you could start measuring success—and you talked about diplomatic websites—in the number of hits, for example. Do you do that sort of thing? Do you assess the hits?
  (Sir John Kerr) Yes, we do.

  121. Do you do a league table?
  (Mr Reddaway) 780,000 page impressions for the websites of the posts and the FCO per week.

  122. They would presumably vary enormously.
  (Mr Reddaway) Yes.

  123. Do you have targets? Do you say to a post, "You have not had many hits this month"? This seems to be Mr Leonard's theme.
  (Mr Reddaway) We do have a target for quantity. We are not sufficiently advanced in collecting our information to know precisely who is targeting but obviously we would encourage opinion-formers and decision-makers to come to us for authoritative information on the UK.

  124. I think this went a bit further than re-inventing the wheel, Sir John. He said if you take Seattle and the way the alternative society hijacked the agenda, or the French beef ban, there are publics which affect our interests much more than even governments can and that you have to somehow find a means of reaching the publics. Do you think this is something more than just re-inventing the wheel?
  (Sir John Kerr) Yes, I am sorry, I was talking about the techniques of diplomacy. It has never been a closed or smoke-filled rooms profession. It has always had to go out there. You may remember Sir Nicholas Henderson's great success during the Falklands War in America when he was on every morning show on American television, up against the Argentine ambassador, and did very well and did us rather a lot of good. Let me start with Belgrade. I was very struck to see how Milosevic fell. The fact that Milosevic was going to fall was pretty certain, the timing was not altogether surprising, but the method was very striking. It was the internet which called out the demonstrators who got him down. The television stations were not showing what was going on, the radio stations were not carrying what was going on, but people all across the country knew what was going on because they were on the internet. I was very struck by Charles Crawford's answer to the Committee's question when you asked him if he needed a post in Podgorica. Maybe he does, we do not know, but his first answer was, no, they are all on the internet, we can talk to them on the internet in Montenegro, a half hour flight away. On Seattle, I think you can over-egg the argument a bit. Mark Leonard has a point, but about half the crowd on the streets of Seattle were demonstrating against the World Trade Organisation and the idea of another round because they said that WTO was too powerful, and about half were demonstrating because they said that WTO was not powerful enough. There is a mixture of people out there and I think you need different techniques and some of them you certainly need to talk to more, which is one of the reasons why we, the Foreign Office, talk a lot more to NGOs than we did when you were with us. We are much closer to the Oxfams and Amnesty Internationals than we were 20 years ago. I think that is an extremely good thing. We have an interchange in both directions. We understand how they work much better and we bring them in to advisory fora in the Office in a way which would not have happened 20 years ago. I just do not want you to take the point too far. I think we do need another WTO round. I think free trade is good for us, and I think that those who believe that free trade is good for us and who think we do need another WTO round are going, in a way, to have to face down the special interests that say no for environmental reasons, or for labour law reasons, or for protectionist reasons, or because, if they were honest enough to say, it is because they think free trade is not really very good for you. I think that being close to the interest groups is not enough; you need to listen to them, you need to understand what they are saying, but in some cases you have to decide that they are wrong.

  125. The second witness we had was Mr Reich from the Royal Institute of International Affairs. He actually took apart, in his evidence, on page 28 of the Foreign Office report. Page 28 on UK/US relations and said that there are now no longer necessarily vital interests coinciding, particularly the Bush Administration, it is hemispheric, it is looking to the Americas. He described the so-called special relationship over the last 40 years as being a season of coincidental common interests which now had all disappeared one by one, and that in fact the United States, the US/Europe, US/UK relationship was not anything special at all in the way he has described on page 28, and that the US certainly did not look to us as a bridge with the European Union in any shape or form. He basically assaulted our perception that we were bit players and said we should in fact just concentrate on becoming very good commercial diplomats and get on with the job of defending the narrower British national interest. Do you think he has got a point? Do you think the Bush Administration is actually going to be dramatically different in that sense?
  (Sir John Kerr) No, I do not think he has got a point at all, I am afraid. I do not know him, but I look forward to reading his evidence. When I was Ambassador in America I do not think I ever used the phrase "special relationship", because the American relationship with Israel, or with Ireland, or with Canada, or with Mexico is also special, but I was struck by the strength of the relationship with us. I thought it was if anything rather stronger than when I first knew America, which was in the 1960s and 1970s—rather stronger because it had become more organic. Reagan/Thatcher, or Clinton/Blair, or Kennedy/Macmillan, that is excellent, but that is the icing on the cake. What had changed was a much greater organic economic link between the two countries. In the mid-1980s, when I was Head of Chancery at Washington, I believed the theory about the tectonic plates and Pacific drift, and all that stuff which we all theorised about in the mid-1980s; but it absolutely did not happen. The United States had not got fixated with the Pacific. What did happen was that the Japanese stopped buying up America and the British bought up America instead. There is 200 billion dollars worth of British investment in America. There is 200 billion dollars worth of American investment in the UK. 40 per cent of all American investment abroad is in Europe and 40 per cent of all the American investment in Europe is in Britain, which is great, and that is not just stock, that is flow as well, year on year it goes on happening. There are millions of people in both countries whose employer lives in the other country. Also, of course, tourism has taken off too. Millions of British people go to Florida for their holidays now. Of course, the generation that fought in the war now has nearly gone, but it has been replaced. The historical link, an emotional link, has been replaced by an economic link which also is not without some emotional tie. So I would say the transatlantic relationship is very strong indeed, and I do not think that will be changed by the change of Administration in America. People like Colin Powell, Donald Rumsfeld, Dick Cheney, George Bush know Britain extremely well, they are people who will naturally want to talk to the British. And there is a very strong American interest in the health of the British economy. It is crucially important to all these Americans that have their operation here, and I think they will go on regarding us as people who are arguing for an open European Union, a non-fortress Europe; and I think they will go on feeling it is very important that we should be at the core of that Europe, so that their investments in Britain are not in an outer tier of the European Union. However, I think that there is no reason to expect any decline in what is an extremely strong relationship, and a rather stronger one then in the 1970s when I first knew America.

  126. In that case, why is it that if you look at the total diplomatic resources spent on Western Europe in the 15 European Union countries, which tot up to £40 million worth of Foreign Office money, in the United States, an economy and indeed a nation or a continent of the same size, we only spent £20 million? Do you think that the balance of your resources is out of kilter in that case? Why is it half the European expenditure?
  (Sir John Kerr) I suppose, because people think, erroneously, of course that Americans speak the same language as us, whereas the French, the Germans and the Italians demonstrably do not, they may also think there is less of a role for embassies in helping there.

  127. So you think language is the reason for twice the cost?
  (Sir John Kerr) No, but there are a lot of countries in Europe. We also have a lot of posts in America, and we have been increasing the posts. In the last three years a number of posts have opened in America. We have opened posts in Denver, in Calgary and in Monterrey, for commercial reasons. We are increasing our commercial effort in America. It is very cost effective and it is growing. In Europe, yes, we have been increasing our number of posts but for different reasons. With the encouragement of the Committee, we have been strengthening our posts in the Caspian and the Caucasus, we have been opening new ones in places like Pristina and in Banjaluka. I do not recognise the numbers, Ted. You may be absolutely right about the 20/40.

  128. They were in a Parliamentary Answer.
  (Mr Collecott) Then they must be right.

  129. If you say you are opening new posts in the United States, why are you closing the residence in San Francisco, which everybody feels passionately about?
  (Sir John Kerr) We have absolutely no plan whatsoever to close the consulate general in San Francisco.

  130. No, the residence.
  (Sir John Kerr) Opinion differs on the house. I believe the present incumbent is using it extremely well, that is absolutely clear. But I am not myself 100 per cent sure that its sort of home counties 1920s atmosphere is exactly right for a Silicon Valley.

  131. American silicon valley people I have met think it is marvellous, that it is different and fascinating.
  (Sir John Kerr) I do not know. There is a big issue lurking under this, which is asset recycling. I think it is very good that we have a deal with the Treasury whereby, if we sell capital abroad, we can use it for our investment budget.

  132. If you sell it, you have to give it to the Treasury, do you not?
  (Sir John Kerr) I do not have to give it to the Treasury, it comes back to me and I can spend it, whereas in the old days I had to go on my knees and ask the Treasury if I wanted to buy something and I had to give them the money if I sold something. So I think all property abroad should be assessed regularly to see, against key performance indicators, whether it is delivering. That is quite a valuable property in San Francisco. It is also, in my view, a slightly old-fashioned property, so I think it needs to be looked at.

  133. The BTI thinks it is valuable too. In their note to us they say: "The Consul General's Residence has therefore been an integral part of our operation. A variety of events have been held there .... We estimate that on average about 2000 people a year attend functions", etcetera. I was very surprised at how powerfully and strongly BTI came out in favour of this 1920s something residence.
  (Sir John Kerr) I am not surprised at all. It will not astonish you to know that I saw that letter before it reached even you, Ted. Its terms are absolutely correct. I believe every word of it. It is very important that we have a prestigious showcase, particularly for commercial work, in the city of San Francisco. The offices we have are small. That is fine, provided that we have somewhere else to hold the big party or the big event. I do not know if you know the apartment in Chicago?

  134. I have never been to any of these places.
  (Sir John Kerr) There is something to be said in America for going for what we have in Chicago, which is a duplex apartment on the 49th floor, with a staggering view of the lake. It varies. Maybe we are not quite right with our Great Missenden image in a San Francisco house.


  135. But you are re-branding away from the 1920s image? The decision is made, is it?
  (Sir John Kerr) No decision has been made, no. And if we find something in San Francisco which we think would be better, we had better consult Mr Rowlands, I guess.

Mr Maples

  136. On this question, I was going to ask you about the impact of resource-based accounting which, for some departments, one can see makes a lot of sense. I know you may have some unique and esoteric difficulties, in that you do own some extremely valuable historical properties, and I do not know how you value your property, for example, in the Champs Elysées which we discussed. Is this enabling you to make sensible decisions, or distorting the way you make decisions? Are you required to make some account for some notional return on the value of the embassy in Paris, whether it is in Paris or not? Can you tell us briefly how that works, and whether you think it is creating sensible incentives or perverse incentives?
  (Sir John Kerr) I think they are sensible. I think Peter thinks they are sensible. I worked for a time for the Treasury, of course, so I may have a de«formatium professionnelle here. I think the idea of paying a capital charge—6 per cent on all our stock—is perfectly reasonable. I think it forces us to address decisions which we probably should always have taken. We made a large sum of money the other day by selling the bits of the garden of the house in Singapore which you cannot see from the house, a very large sum of money. Much the same as we got through our change in Dublin where we have moved, or are moving, to a rather nicer house than we had, through a quirk in the planning law the development value of the land we had was huge; there was no development value on the land we had bought, it was simply a piece of estate. So this sort of decision is not one which would necessarily have been what my predecessor 50 years ago would have sat at his desk thinking about, but I think it is rather good that I should be obliged to do so, because we are sitting on about £1.6 billion of stock. Perverse incentives could arise. I do not think it is yet. Peter, do you want to address incentives? Is there a serious risk?
  (Mr Collecott) I am not conscious of perverse incentives at the moment certainly in that area. Sir John has talked about the incentives to look very carefully at what our capital stock is and the degree to which not only the current expenditure that we make but also the capital we are employing are being employed effectively in pursuit of our objectives—that has got to be what it is about—and therefore the degree to which we have to look at selling some assets and buying other assets. It also has positive incentives in terms of decisions not so much for residences but more for offices and should we rent or should we buy. That depends entirely on the particular country you happen to be in and the type of building that there is available, and until now we have not really had in our hands the right kind of tools, the right kind of budgets, to say what is the right decision, what is the right decision to make in those circumstances. So I think it is forcing us to look at our capital assets, to make proper decisions about whether one should employ capital or running costs to satisfy a particular need to achieve a certain objective. We have no prejudice either way, we are not prejudiced in favour of selling buildings in order to rent or buying buildings in order to save on rent.

  137. I am encouraged that you are both so sanguine about this. If I can pursue this in a little bit more detail. If one took the British Embassy compound in Tokyo, the Tokyo compound, if I can call it that, that must be phenomenally valuable. I do not know what Tokyo real estate is worth now but when I was lucky enough to visit there a couple of years ago the Royal Palace in Tokyo was worth the same as the United States. If you start to take a six per cent return on capital value from real estates in Tokyo and compare that with what you could get for that in other countries around the world, does that not start to lead you to decisions that maybe we should do something very different in Tokyo because through the artificial consequences of this account it allow us to get a bigger bank rather than something else. That is the sort of thing I am concerned with.
  (Sir John Kerr) In principle, yes. But the Tokyo example does not work. We do not own it, we rent it from the Imperial family.

  138. It is a long lease?
  (Sir John Kerr) It is, at an extremely low rent.

  139. The lease is very long.
  (Sir John Kerr) It is up for renewal now. I do not know what the precise terms of the lease are but I know that we are renegotiating the rent now. I do not know what its value is in our capital account but it has no development value at all, because (a) we do not own it and (b) if we did, it would not be possible to build on it. As you know, it is just across the water from the Imperial Palace, absolutely marvellous place to occupy but not somewhere where even an avid property investor like me could put up a skyscraper. If, on the other hand, we did own it and if it would not have caused huge unhappiness to the Japanese Imperial Family if we were to sell it, say if we moved to some other part of town and we did own it, then I think it is quite right that the taxpayer should require us to think seriously, to do a cost benefit analysis about whether that much of the nation's capital stock should be there or whether we should be required to downscale. Fortunately the question does not arise because it does not have that kind of developmental value.

  Chairman: Sir John, I will be coming back to personnel matters including security but to follow up the asset matters I have question from Mr Chidgey and then Sir John.

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