Select Committee on Foreign Affairs Minutes of Evidence

Supplementary Memorandum from the Foreign and Commonwealth Office in response to further questions from the Committee

Q 1.   What information does the Government hold on US aid to countries of the former Soviet Union under the Nunn-Lugar Act? Is the Government pressing the US to reverse its cuts in funding under the act? If the cuts are not reversed, will the Government propose that the EU make up the shortfall?

  1.  The Government does not hold information on US aid to countries of the former Soviet Union under the Nunn-Lugar Act other than that which is already in the public domain. Factual information about Cooperative Threat Reduction (CTR) programmes (usually known as Nunn-Lugar, although that term more accurately refers only to Department of Defense programmes) is available from the websites of the Defense Threat Reduction Agency, State Department (Russia page) and Department of Energy, at the following addresses.—index.html

  2.  Work is still underway in Congress on the Administration's budget request for Financial Year 2002, which included a proposed reduction from $872M to $774M for Department of Energy funding. Department of Defense and State Department funding for Cooperative Threat Reduction would be comparatively unchanged. Congress has yet to respond to the request.

  3.  We are in close touch with the US about non-proliferation programmes. We attach great importance to the significant contribution that the US has made to non-proliferation in the former Soviet Union with nuclear, chemical and biological weapons projects, and we are keen that this should continue.

  4.  We do not wish to pre-judge the outcome of the US funding review. The Government co-operates closely with our EU partners and with Russia to tackle the environmental, security and proliferation threats posed by the former Soviet Union's nuclear legacy. We have allocated a cross-departmental budget of £83.8m for the years 2001-2004 for this purpose. We have also committed £12m over three years to chemical weapons destruction and biological non-proliferation projects in Russia.

  5.  EU countries already contribute to Russian non-proliferation projects. The UK Government does not hold information on bilateral non-proliferation programmes of assistance between individual EU member states and Russia. The EU itself is contributing around 6.5 m euros per annum through the Common Foreign and Security Policy budget to non-proliferation projects in Russia. This is split between destruction of stocks of chemical weapons and the secure disposal of nuclear fissile material. We judge that it would be difficult for the EU to make up any potential shortfall in US funding, given that the mooted $98m cut in Department of Energy programmes alone is many times greater than the current total EU budget for this area. Our response to changes in US non-proliferation funding, including our approach to EU non-proliferation funding, will necessarily depend upon the decision to be made by Congress in this regard.

Q 2.   What is the Government's policy on the Outer Space Convention 1967? Is the Government aware of any proposal by the US to amend the Convention in order to accommodate missile defence, or for any other reason?"

  6.  We are parties to and support the Outer Space Treaty. The Treaty prohibits the deployment of weapons of mass destruction in space and military activity on the moon and other celestial bodies.

  7.  We are not aware of any proposal by the US to amend the Treaty in order to accommodate missile defence, or for any other purpose. None of the proposals we have seen put forward by the US for a missile defence system would violate the terms of the Outer Space Treaty. These proposals include the deployment of space-based sensors, and continued research into two space-based systems utilising a laser and a "hit-to-kill" interceptor. Neither system under research would fall into the category of a weapon of mass destruction nor would it be intended for deployment on celestial objects. It should be noted that the US has made no decisions on what missile defence system it will deploy.

Q.3  Further to the supplementary paper already received on the UK's diplomatic estate in the US: please supply more detailed information on the location, role and value of the US properties sold so far in 2001-2002; please supply similar information on the planned disposals of US properties up to end of FY 2003-2004; and please set out more fully the criteria which are applied to such sales in general, and how they have been applied in the cases of San Francisco and New York residences in particular.

  The location, role and value of the US properties sold so far in 2001-2002 and the planned disposals up to the end of FY 2003-2004.

  8.  A list of the properties in the FCO Estate in the USA which have been or are due to be sold, in the financial years 2001/2002, 2002/2003 and 2003/2004 is attached at Annex A[5]. The list gives the function of each unit of accommodation and its location.

  9.  Except for houses for Heads of Mission, individual units of residential accommodation are not reserved for officers in a specific job. Housing is allocated by the Post, to a standard which is appropriate to the officer's grade, function and family circumstances, in accordance with guidelines laid down in Diplomatic Service Procedure.

  10.  The table shows totals for the proceeds of sales to date and for estimated future receipts from sales. It is not FCO policy to reveal details of price and other terms agreed in individual sales transactions, as these may be commercially sensitive, even after a sale has been agreed.

How are properties selected for disposal?

  11.  Apart from the obvious trigger of staff reductions or other changes in operational requirements, disposal may be prompted by various types of under-performance.

The estate is monitored through a set of Key Performance Indicators (KPIs) which help to identify under-performing properties. The KPIs are assessed and updated from data obtained from the routine (triennial but with annual updating) estate revaluations carried out by independent professional experts. They address various aspects of the performance of individual properties:

    —  Whether the economic potential of a property is being fully exploited by the FCO;

    —  Whether a property asset is providing an adequate return on capital invested, as measured in terms of rent savings;

    —  How the Annual Resource Cost (ARC) of a freehold property (i.e. the capital charge and depreciation costs) compares with the cost of leasing an equivalent alternative;

    —  How the size of residential accommodation compares with the standard for the grade of the officer housed;

    —  What density of occupation we achieve in our offices;

    —  How the net useable floor space in office buildings compares with gross internal area;

    —  Whether buildings are in good condition and;

    —  Whether properties are fit for purpose (e.g. compatible with needs of modern IT) and provide adequate security.

  12.  The benchmarks that we apply within the KPIs are:

    —  the Treasury's Test Discount Rate (6% per annum calculated in constant prices);

    —  the average rent in the local market for that type of property;

    —  the FCO's local rent ceiling for a particular grade of Diplomatic Service (DS) officer and ;

    —  the FCO's space standard for a particular grade of DS officer.

  13.  Any individual KPI can be compared with the average (calculated across a region or worldwide) for the same type of property on our estate, to determine whether the property in question is above or below average.

  14.  The KPIs are not however treated as conclusive in themselves, and the FCO is careful to arrive at a balanced overall picture of a property before reaching any firm conclusions. Underperforming KPIs will therefore prompt a fuller examination of a property's performance, including a check on the accuracy of the underlying data. If under-performance is then proven, and is not counter balanced by significant benefits, disposal (or further development of a property to intensify its use) may be considered.

How do the KPI's apply in the cases of the Residences of the Consuls-General in New York and San Francisco?

  15.  In both cases the main issue has been the capital value of the property, and hence its Annual Resource Cost. In addition, the Residence in San Francisco is some 240 % bigger than the FCO's normal space standard for a Head of Post of the grade in question. While the representational areas of the house are operationally very effective and well used , the bedrooms and private residential areas of the house are much bigger than necessary.

  16.  In the case of New York, the CG's apartment was last valued, informally in March by a local agent, at US$ 15 million (£ 10.55m). This figure would produce an annual capital charge of £633.000, in addition to which the Treasury levies a depreciation charge of £211,000 per annum (total £844,000). A more suitable property, approved by the Consul General, can be purchased for US$ 9.3 million (£6.57 million), producing a combined capital and depreciation charge of only £525,600 per annum, so there can be little doubt that moving makes good sense for the taxpayer. In San Francisco the total capital charge (ARC and depreciation) on the present Residence is £743,000. We have yet to identify a suitable alternative property for the CG in San Francisco. We shall only dispose of the present property if we can identify a suitable alternative which both meets all the operational requirements of the Post and offers value for money to the taxpayer.

Foreign and Commonwealth Office

November 2001

5   See Evidence, p 47. Back

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