CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 145-i

HOUSE OF COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE THE

FOREIGN AFFAIRS COMMITTEE

 

FCO DEPARTMENTAL ANNUAL REPORT 2008-09

WEDNESDAY 9 DECEMBER 2009

SIR PETER RICKETTS KCMG, JAMES BEVAN and KEITH LUCK

 

Evidence heard in Public

Questions 1 - 115

 

 

Oral Evidence

Taken before the Foreign Affairs Committee

on Wednesday 9 December 2009

Members present:

Mike Gapes (Chairman)

Sir Menzies Campbell

Mr. Fabian Hamilton

Mr. David Heathcoat-Amory

Mr. John Horam

Mr. Eric Illsley

Mr. Paul Keetch

Andrew Mackinlay

Mr. Malcolm Moss

Sandra Osborne

Mr. Ken Purchase

Sir John Stanley

Ms Gisela Stuart

 

Examination of Witnesses

Witnesses: Sir Peter Ricketts KCMG, Permanent Under-Secretary, James Bevan, Director General Change and Delivery, and Keith Luck, Director General Finance, FCO, gave evidence.

Chairman: Gentlemen, welcome. Peter, you have been before us many times. We have also known your colleagues, Mr. Luck and Mr. Bevan, in different incarnations. This is obviously the last time in this Parliament that we will have you before us to talk about the annual report, so we may ask you some questions to get an overview of how things are, as well as specific questions.

Sir Peter Ricketts: May I thank the Committee for being willing to delay my appearance here to allow me fulfil my Chilcot inquiry obligations over the last couple of weeks?

 

Q1 Chairman: We understood why you had to do that. It is not a problem.

I shall begin by asking you about the main purpose of having an FCO annual report. We noticed that there is quite a large number of glossy photos in this year's volume one, and that there isn't an index. We wondered why that is the case. Is it because this is much more orientated to presentational public relations than policy?

Sir Peter Ricketts: The primary purpose of the report is to enable Parliament to hold us to account for our stewardship of the Department over the year. That is why we have striven now to publish the report with the accounts together, so that there is a complete report on the work of the Department for the year. It has a secondary purpose, which we have also tried to achieve, which is a wider public explanation of the work of the FCO. Over the years, as you say, it has become a bit more glossy, with the intention of being a bit more accessible. I wrote to you, Mr. Chairman, a few weeks ago, to suggest that in the current economic climate and with pressure on budgets on all sides, it was perhaps time to think again about that and to go back to a rather simpler document that would have the same content to the same standard, and would be serving Parliament's requirement to have the report hold us to account. We could perhaps divert some of the money that goes into this into a better web presentation of the FCO. We print quite a lot of copies of this. I don't get much impression that it makes the impact that we hoped outside Parliament and the FCO.

 

Q2 Chairman: How many hard copies do you produce?

Sir Peter Ricketts: I know we spent £50,000 on it, so I think we probably produced several thousand copies.

 

Q3 Chairman: Who is the audience for the hard copies?

Sir Peter Ricketts: We have sent copies to all our posts in the world for use in promoting the FCO around the world, and we have used it with other stakeholders in the UK who are interested in the FCO. I am not sure how much impact it has, to be honest, which is why we were proposing to move next year to a simpler version and to put more effort into our website, which does attract a lot of attention.

Chairman: Thank you for that. I will bring in Gisela Stuart.

 

Q4 Ms Stuart: Money. The 2007 comprehensive spending review sets out the budgets. In 2007-08, the Government spent £586 billion; the FCO received £2.1 billion of that, and DFID received £5.4 billion. The following year, 2008-09, Government overall expenditure went up by 7% to £620 billion. However, what happens to DFID? It manages to spend £5.2 billion, and the Foreign Office has a cut of 8% down to £1.9 billion. To begin with, would you like to comment on what seems quite a disparity between the spending of DFID and the Foreign Office?

Sir Peter Ricketts: I don't recognise the sharpness of the cut in the FCO budget in those figures, and I would need to do some research on that. Essentially, over the past two spending rounds, it has been flat or less than flat in real terms. Our budget, if anything, has been slightly declining in real terms. The Government have a commitment to increase the budget for DFID to 0.7% of GDP, which means that each year it goes up significantly towards 0.7% and there is still some way to go. It is Government policy that DFID's budget should rise pretty sharply, and in the past two spending rounds it has been Government policy that the FCO budget should be slightly below real terms, in cash. That is what we have had to manage with.

 

Q5 Ms Stuart: Can you think of another European country that spends more on its international development than its Foreign Office representation?

Sir Peter Ricketts: I can't produce you a country immediately. Each country does it differently. Some countries combine it in one department, some have one department with two separate parts and others, like us, have a separate department. I would need to research exactly how it compares, but I know that this Government have a very clear commitment to the 0.7% target, and you can see that in the DFID figures.

 

Q6 Ms Stuart: This Government also have a clear commitment that international development is not meant to be a tool of foreign policy. Can you think of another country that is prepared to make such a huge financial commitment abroad while avowedly saying that that has nothing to do with foreign policy?

Sir Peter Ricketts: I haven't looked at how other countries explain their development policy. I am very familiar, however, with this Government's development policy, which is, as you say, that it should be in a clearly separate Department with a separate Cabinet seat. But the Departments are linked together; I would not want to leave the impression that DFID and the FCO operate in completely separate universes. We are co-operating very closely, although we are separate Departments.

 

Q7 Ms Stuart: But would you say that DFID's rather narrow definition of poverty relief has never caused you any problems?

Sir Peter Ricketts: No, I wouldn't, but I would say that, over the past five years, DFID has put a lot more effort and time into the link between development and security, and is working very closely with us, first in Iraq and now in Afghanistan, on that spectrum between development and security.

 

Q8 Ms Stuart: So would I be wrong in saying that, if we were to take another look at the definition of DFID's primary purpose and widen it, that may actually help the Foreign Office in doing its job properly abroad?

Sir Peter Ricketts: I don't think it's for me to comment on DFID's purposes. I think that anything that lets DFID and the FCO co-operate more successfully on that spectrum between conflict, security and development is good.

 

Q9 Ms Stuart: Just one more question, which relates to exchange rates. The National Audit Office states that "the Treasury looks to [the] FCO to factor in exchange rate changes as a part of resource allocation decisions." There seems to be a clear assumption that that is something you should do. I wonder, however, given the recent changes, or the recent quite dramatic fall in the value of sterling, whether that assumption is still justified. Also, can you tell us a bit more about what kinds of problems that is causing you practically on the ground?

Sir Peter Ricketts: I can certainly tell you the sorts of problems it is causing us. That statement by the Treasury is not one that I feel comfortable with, given the volatility of sterling since the spending-round settlement, which has seen it fall by 25% against many of the major currencies. I think that is a very difficult degree of volatility to handle in a budget such as that of the FCO; it spends more than 50% in foreign currency, and it has one of the smallest budgets in Whitehall.

We have, as the NAO report describes, had a significant hit on our capacity to operate abroad. In the first year of the spending round, it was about £60 million; this year it will be around £100 million; and in the next year, we forecast that it will be something like £120 million out of a budget, to run our posts overseas, of £830 million. That is a very significant hit. We have had some partial help from forward purchasing of currency, but, as we have discovered, that is not by any means a panacea.

 

Q10 Ms Stuart: But you've stopped doing that, haven't you?

Sir Peter Ricketts: No, we are continuing to do it. The problem is that, if you buy for one year in advance and sterling falls, the purchases you made a year ago are now at a very low level. That is having an impact on our budget. We have to stop a lot of activity this year in order to come within our parliamentary control totals. I think the NAO report describes some of the things we have done. We have stopped whatever programme activity was not committed, stopped most of our training and cut into our travel and our hospitality for posts overseas. Moreover, local staff have not had overtime payments or, in some cases, pay rises, and some are on involuntary unpaid leave or four-day weeks. We have a real problem within the budget at the current levels of sterling.

 

Q11 Chairman: Sir Peter, isn't this absolutely deplorable? Do you expect any amelioration of the situation from the Chancellor later today?

Sir Peter Ricketts: I don't know what the Chancellor will announce later today. We are finding it difficult. My obligation, as an accounting officer, is to run the FCO with the money that Parliament gives me. We are having to do what is necessary to do that. We are certainly in discussion with the Treasury about the position in which we find ourselves, and the Foreign Secretary has been in detailed discussion with Treasury Ministers about that. I am not conscious of what will be in the announcement to Parliament later today.

Chairman: We'll come on to some of the specifics of this later on.

 

Q12 Mr. Purchase: I'll not be specific, then, but clearly this is a time when Departments really do have to live within their budgets. As the exchange rate phenomenon is making life particularly difficult, can you assure us that you have in place, or are beginning to put in place, plans that would allow you to keep the front-line services moving while at the same time achieving those reductions that are necessary to stay within the budget?

Sir Peter Ricketts: Yes, I can assure you that we are focusing very hard on that. Because we have had the past two spending round settlements, which require us to reduce our overall administration costs and spending, we are already in the habit of looking very hard at every pound we spend, and doing it as efficiently as possible. We absolutely accept that there is pressure across public spending and that we must be part of that, and we have done a lot in the past few years, as the Committee will have seen from its travels, to make posts more effective, find ways of saving money, sharing services and reducing unnecessary spending. These additional pressures are coming on top of a period of several years during which we have already been making significant efficiency savings, and the scope, therefore, to save the necessary money through efficiency savings is limited. However, it is absolutely the case, Mr. Purchase, that we are seeking to live within our budget, while preserving what the Foreign Office does that is most important.

 

Q13 Mr. Purchase: Is it possible at this stage to tell us whether your preferred philosophy is to take out complete parts that you feel do not offer the best return for our endeavours, or to make salami slices across the service, bit by bit? Do you have a preferred approach to this yet?

Sir Peter Ricketts: No, we don't have a clear plan for this, partly because we are still in discussion with the Treasury about the budget for next year, but I think the board and Ministers would be absolutely clear that our primary asset is our global network of embassies and consulates-our capacity to reach every country in the world, either for foreign policy or to help British citizens in terms of consular assistance. That is what we will seek to preserve. That is, I think, our particular asset, and I know that the Foreign Secretary would agree with me that we should seek as far as possible to preserve that global network. We therefore first have to look at our so-called back office-our support functions-for savings, while trying to preserve the embassy network.

 

Q14 Sir Menzies Campbell: Sir Peter, you are not just cutting fat or muscle, you are cutting bone, isn't that right?

Sir Peter Ricketts: I think we've got rid of the fat, quite honestly.

 

Q15 Sir Menzies Campbell: In the previous period of austerity to which you referred us a moment or two ago?

Sir Peter Ricketts: We have been living on pretty thin rations for at least a couple of spending rounds, and we have, therefore, cut fat and are having to prioritise our activities.

 

Q16 Sir Menzies Campbell: Does that prioritisation take the form of identifying those countries, and perhaps those allies, with whom we wish to be particularly closely connected, compared to others whose relative importance may be less now than it was, say, five or 10 years ago? Are you having to make decisions about the importance of effort in a particular part of the world, or indeed a particular country?

Sir Peter Ricketts: We have indeed been doing that already. As part of the exercise we did a couple of years ago, we have, for example, thinned out diplomats from our embassies in Europe, not because Europe isn't important but because there are other ways of doing the business in Europe, and we have been expanding our embassies in China, India, South Africa, Brazil and in countries such as Afghanistan. So, there is already a shift in that direction. We haven't taken final decisions about next year yet, but I think we will have to continue to take those sorts of considerations into account.

 

Q17 Sir Menzies Campbell: We may go into some more detail about this, but the Committee, as you know, visited the United Nations and then Washington just a few weeks ago, and I think that we were all rather taken aback by the extent to which effort in the Washington embassy was being directly affected by the sorts of considerations that you have just described. How do you make an assessment of the point at which that front-of-house effort is prejudiced, and what flexibility have you to try to retrieve a situation? Let's take the United States as a general illustration. Do you have any flexibility at all to enable you to try to change the conduct of our efforts in the United States?

Sir Peter Ricketts: We have a degree of flexibility about the priority that we can give the US network over other parts of FCO work. For example, Ministers could decide that they wanted to devote more of the available money to the US and that money would have to come from somewhere else, which would imply that there would be less money for somewhere else. Therefore, we would have to do that as part of setting the budget for the next year.

Those are very difficult choices because, as I said, I think that we have already removed the excess. Therefore a decision to give more money to one part of the overseas network means a decision to take money away from somewhere else. There are no obvious candidates for that. So our flexibility is limited, Sir Menzies, if we are going to accept the current range of responsibilities that the FCO has.

 

Q18 Sir Menzies Campbell: And the final responsibility for that allocation of money and responsibilities presumably rests with Ministers?

Sir Peter Ricketts: It rests with the Foreign Secretary, yes.

 

Q19 Chairman: Peter, you referred to discussions with the Treasury about the financial position of the FCO. Do you think that the conclusions will be reached in time for the start of the next financial year, or is it likely that your discussions with the Treasury will take longer than that?

Sir Peter Ricketts: I can't answer that, Mr. Chairman. I think that it is possible that the discussions will continue for some time yet.

 

Q20 Chairman: Potentially beyond the next general election?

Sir Peter Ricketts: I think we will keep raising the problems that we have; if necessary, we will do so beyond the next general election and into the next spending round.

Chairman: Okay. Thank you. Paul Keetch.

 

Q21 Mr. Keetch: My question is on a related subject, which is the financing of the UK's support for international civilian missions. As you know, it is the Foreign Office that is the lead Government Department for this part of our activity overseas. I understand that it is covered by public service agreement 30. Some £556 million is allocated for that work. We hear all the time from the Prime Minister, the Foreign Secretary and the Defence Secretary, and rightly so, that once the war fighting is over, the peacekeeping side-building up the police force and the judiciary-is vital to nation-building. It is clear that that peacekeeping work is something that we need to maintain, in places like the Balkans. If we get it wrong, we see on the streets of our constituencies the results of that failure.

In March, the Financial Times said that, as a result of cutbacks in international missions, there was "the first sign of the economic crisis eroding the UK's foreign policy clout." Indeed, the Foreign Secretary also said in March in a written statement that, because of the huge increase in peacekeeping costs and the exchange rate issues that we have already discussed, costs had risen by about 50% in this budget compared to the 2008-09 budget. The Committee saw for itself, when some of us were recently in the Balkans, that we have now withdrawn virtually all of our personnel from Kosovo and from Bosnia and Herzegovina.

My question to you is this. I know that there is some support from other UK Government Departments for this civilian mission work-from the Ministry of Defence and, to a degree, from DFID-but the bulk of the cost of providing these police officers and this judicial support comes from your budget. Is it not time that the Home Office and perhaps even the Ministry of Justice also supported our efforts overseas, because if our efforts out there work, and very often they do work, there is a direct decline in the problems that we may face at home as a result of the efforts overseas?

Sir Peter Ricketts: Thank you very much, Mr. Keetch. Your factual analysis is absolutely right. We still spend a lot of money-£550 million-on peacekeeping and post-conflict work. A very large amount of that money goes into assessed contributions. We are the fourth largest payer for UN peacekeeping around the world and of course a large amount of our discretionary effort now goes into Afghanistan, where we have 80 civilians in the provincial reconstruction team in Lashkar Gah, which is a very expensive place to have civilians.

So we are still spending a lot of money, but it is focused on the UN peacekeeping contributions and our contributions to Afghanistan. That has meant a lot less money for discretionary spending in other parts of the world, including the Balkans, as you said. The number of British police personnel seconded to UN missions, for example, has gone down quite significantly.

The conflict money is a pool provided by the three Departments-FCO, MOD and DFID. I will certainly take away your idea of appealing to the home Departments to consider contributing, given the implications for law and order here.

Mr. Keetch: Good luck.

Sir Peter Ricketts: I don't guarantee that that will be successful, but I think it's a very fair point.

 

Q22 Mr. Keetch: The point needs to be made that if these missions are successful, and they have been in many places, there is a direct benefit to the home Departments as a result of reduced crime, and I am sure that you will make that point.

You mentioned UN peacekeeping operations. As my colleague, Sir Menzies, said, we were in the UN just the other week, and this issue about the UK's contribution to UN missions overseas was made: as you have said, we are the fourth largest contributor. What efforts are we making with other countries in the world that perhaps have slightly better economic situations than our own, and who have aspirations to play a greater role in the UN, to try to persuade them to make a slightly higher financial contribution? We have certainly been given evidence in the past suggesting that some countries almost earn money out of UN peacekeeping operations and that it is part of their national income, whereas we in the UK do our bit on the war-fighting side and the peacekeeping side as well as in the financing. We should do that, because we are a member of the P5, but I would also hope that we are trying to encourage other countries to play a greater role as well.

Sir Peter Ricketts: I can assure you we are. We negotiate hard every year over both the levels of the budgets, to make sure they are not unnecessarily high, and the shares between member states, to try to take account of the fact that there are fast-growing economies in the world that could bear some more of the burden than they do. I think that you are right that the growth of UN peacekeeping is not in itself a bad thing. Often, UN peacekeeping forces can do a very good job, but their financial burden on our available money is becoming very serious.

 

Q23 Mr. Heathcoat-Amory: Sir Peter, this country has always run a global foreign policy with a corresponding spread of posts throughout the world. We have heard that your budget is being reduced, even though the aid budget is being increased, and you have outlined some of the staff economies you are having to make. Do you anticipate having to close any posts in the foreseeable future and, if so, how many?

Sir Peter Ricketts: As I have said, Mr. Heathcoat-Amory, we regard our global network of posts as the Crown jewels of the FCO. It is what we offer to Government that is unique, as no other Government Department has a global network of missions around the world, so we will do everything we can to protect our capacity to operate globally. We have not taken any decisions on post closures. I wouldn't rule it out, because the tightness of the budget we have at the moment means we have to look at every option, but those would need to be discussed with Ministers and then Ministers would have to present those to Parliament. We have not taken any decisions on that up to now.

 

Q24 Mr. Heathcoat-Amory: But a responsible organisation must be planning. You know the budgetary pressures and have described them. Do you not know the posts that you might be shutting, or do you know them and are not telling us?

Sir Peter Ricketts: We don't know them. We have not done an exercise on which posts we might need to close. The board is still in the middle of preparing budgets for next year and we do not have a list of posts. I am very conscious, of course, that staff in posts would be the first to be affected by any such decisions, so we would want to be very sure that we had developed the right list and communicated it to staff. There is no secret list of posts to close. We will look at that, among other ways of saving money, over the next month or two.

 

Q25 Mr. Heathcoat-Amory: Another pressure you are now under is the establishment of the external action service under the Lisbon treaty. Planning on that has been going on for many months and it is now in place. That, we know, will include secondments from national diplomatic services. Do you know the number of staff that you will be transferring to the new European foreign policy body and, if so, how will this impact on your diplomatic staffing overseas representing this country?

Sir Peter Ricketts: I do not think it will have an immediate or particularly heavy impact on that. My own view of the external action service is that it will be fairly gradual in its implementation, in the sense that from the start, when Baroness Ashton presents her proposal and it is decided, what will exist will be the existing network of Commission delegations around the world, which is there anyway-130 countries have Commission delegations. They will change their name and some of their functions to be responsible to Baroness Ashton and the new external action service. That will not immediately create a whole lot of openings for member state diplomats. I think the posting of member state diplomats will be a gradual process.

To answer your question, I think by the time the external action service is fully up and running in a couple of years, we would expect to have something in the order of 25 British diplomats as part of it-not all necessarily diplomats, but British officials, some from the Foreign Office and some perhaps from other Departments. Against the scale of the Department and other Departments in Whitehall with international interests, I do not think it will be a major diversion. Indeed, it will be a good and interesting secondment opportunity for a small number of our staff.

 

Q26 Mr. Heathcoat-Amory: I remember when the Committee went to South Korea, we met a clearly able British ambassador, but we were told out there that there was a noticeable lack of diplomatic thrust. That was exemplified, for instance, by the call from the United States President to congratulate the newly elected South Korean President, but there was complete silence from the Foreign Office. Are you confident that we will be able to maintain our global reach in quality and quantity and number of posts, with the combination of the external action service and the budgetary pressures that you are now under?

Sir Peter Ricketts: I think the budgetary pressures are far more serious in that than the external action service. I think they put a question mark over whether we can maintain the number of people we have abroad. Irrespective of the number of posts, there will be an issue about the size of posts, and there will have to be further reductions in the size of posts. I do not see the external action service as adding greatly to that pressure. I think it is doing a complementary job, and the number of people from the UK who will need to be involved in the first two or three years is not that great.

 

Q27 Mr. Horam: Sir Peter, you said in response to a question from Sir Menzies that you are switching resources from Europe to other parts of the world. I obviously understand the reasons for that-other parts of the world are becoming more important, and you have this resources problem. When we were in Stockholm and Tallinn earlier this year, they explained the new Nordic-Baltic network. Is that done for financial reasons, and how does that save money?

Sir Peter Ricketts: Perhaps I will ask Mr. Bevan to respond. My immediate answer is that it was done, as much as anything else, to look for efficient ways of operating in the world with a smaller number of people, so saving money is part of it, but it is not the only answer.

James Bevan: That's right, and that model of what they call a distributed network, where all the ambassadors in a particular region collectively agree on policies and collectively seek to implement them, is being mirrored in other parts of world now.

 

Q28 Mr. Horam: Where else are you doing it?

James Bevan: We are encouraging individual regions to decide for themselves whether it works. In the Middle East, for example, we are seeing take-up equally-

 

Q29 Mr. Horam: Where in the Middle East?

James Bevan: I can't give you the particular countries right now, but I shall be happy to supply that to the Committee later.

 

Q30 Mr. Horam: I should be interested to know that, and just where you are, because it fits in with what David Heathcoat-Amory was saying about where exactly the pinch is coming.

James Bevan: In addition to that, we are rolling out and experimenting with other, alternative ways of being effectively represented-laptop diplomats, one man in an hotel room with a mobile. Some of our smaller missions that are not in capital cities are headed now by locally engaged staff rather than British diplomats, and there are roving ambassadors who move out from London.

 

Q31 Mr. Horam: What is a roving ambassador?

James Bevan: Someone-for example, a special envoy-who would be sent from the UK to deal with a particular country or a particular issue, but who would not be permanently based in the country concerned. As the Permanent Secretary says, much of that is driven by a wish to do better, but increasingly it is also being driven by a wish to cost less.

 

Q32 Mr. Horam: A point on this-they would say this, wouldn't they?-is that some European staff in various capitals say that it is all very well to cut back on Europe because you want to expand elsewhere and because of resource restraints, but the truth is that with a European Union of 27, it is that much more difficult because you must do more networking to get agreement among 27 than with, say, eight or nine 15 or 20 years ago. Actually, there is more work involved of the ambassadorial networking kind than before, and it is argued that we should make do with less. Do you take that point?

Sir Peter Ricketts: Mr. Horam, you are describing the problem of trying to prioritise the work of the Foreign Office against the demands and the opportunities that are there throughout the world. Yes, if resources were less of a constraint I would want to have larger embassies in Europe because a lot of important work can be done there. If we have to go for reductions in the resources in Europe I would make sure we had an ambassador in each place so that we could do the networking, and I would look at reducing the support services to them by finding ways of doing that on a regional basis or by reducing other things. But to keep an ambassador there who can go and lobby for Britain-absolutely.

 

Q33 Mr. Horam: A final question on this resources issue. You have the overseas price mechanism which was set in place by the Treasury to deal with the exchange rate fluctuations.

Sir Peter Ricketts: Indeed.

 

Q34 Mr. Horam: You suffered from this because sterling was high until 2007 so you paid the money back to the Treasury. At the point when you began to lose out, the Treasury cancelled the overseas price mechanism. Don't you think that was extraordinarily brutal, even by Treasury standards?

Sir Peter Ricketts: To be fair to my Treasury colleagues, it happened before sterling fell.

 

Q35 Mr. Horam: So they did not know.

Sir Peter Ricketts: I think, probably, it was not done knowing that sterling was going to fall six months later.

 

Q36 Mr. Horam: An educated guess would be that if it rises it tends to fall afterwards.

Sir Peter Ricketts: It was certainly removed at the end of a long period where sterling had been strong and six months later sterling fell sharply.

 

Q37 Mr. Horam: But you have lost out both ways?

Sir Peter Ricketts: We have lost out both ways.

 

Q38 Sir Menzies Campbell: You are describing a period of great uncertainty, Sir Peter. We know that the people you employ are smart people. They will have made certain judgments themselves about the possible consequences. I understand the sensitivity of discussing some of these issues, but is there any evidence of an impact on the performance or morale of Foreign Office staff as a result of the uncertainty you have described?

Sir Peter Ricketts: First of all, Sir Ming, maybe I can take the opportunity to pay tribute to our staff. We are operating in a time of real uncertainty, as well as a time of enormous foreign policy pressure. We now have the Afghanistan conference to organise in London in six weeks' time and many, many other foreign policy priorities. I think the organisation has responded extremely well to the sort of pressures it is under. The Committee travels and you meet the staff and you will have your own impression. My impression is that people understand that we have to make our contribution to the need to reduce public spending. I think people are worried about the uncertainties. We have just completed a staff survey this year and Mr. Bevan can perhaps give you a couple of the headlines from that. I'm very proud of the way that the organisation is responding to these really difficult pressures.

 

Q39 Sir Menzies Campbell: For my own part and, I am sure, on behalf of the Committee, I would echo your judgment about the quality of people and their dedication. If one's future appears to be the subject of some general speculation, it takes a very remarkable person not to be affected in some measure. I should be very interested to hear what Mr. Bevan has to say.

James Bevan: We have just done a staff survey of all our staff, both at home and abroad, and we do it every year. It shows that morale has taken a dip. We discussed the reasons for that but the key indicators are what are called the engagement scores, which define how proud or committed people are to work for an organisation. Our engagement scores went down compared with last year. So, asked, "Are you proud to work for the Foreign Office?", 79% of our staff still say they are, which is good, but it went down 5% compared with what it was last year. Asked whether they would recommend the Foreign Office as a great place to work, it went down 7%, compared with last year, to 63%. So there are metrics that show there is a dip in morale. That said, I think it was a lower drop than many of us expected, given the stresses on the organisation, but the numbers are still very high in terms of commitment. So the score for pride in working for the organisation, which is 79%, is more than double what you get in some other Government Departments. So that tells me that we have an organisation that is experiencing pain; it is stressed, but it is still very resilient and very committed to doing the job.

 

Q40 Sir Menzies Campbell: And recruitment, just to finish?

James Bevan: Recruitment remains good. We have no problem attracting people. The survey also showed that despite these difficulties, the vast majority of our staff want to carry on working for us.

Chairman: We do have some questions that we would like to put on the staffing issue, but rather than jumping in now I would rather we carried on where we were.

 

Q41 Sandra Osborne: Apart of the effect on staff morale of all these cutbacks and efficiencies, there must be an impact on the actual service and our standing as a country in terms of our foreign policy. How would you say that has been affected?

Sir Peter Ricketts: I do not think that there has been that impact. I think the reductions and cutbacks this year have not stopped our diplomats around the world doing the key jobs that they should be doing. It has not stopped our consular people being able to offer their support to British citizens, so I do not think, as yet, it has had an impact on our effectiveness as an organisation. If they continue, I am sure that it will.

 

Q42 Sandra Osborne: There is a current inquiry into US-UK relations. It has been clear from several witnesses that they would regard any further cutbacks-for example, in the US-as having a major impact on relations in that regard. Would you agree with that?

Sir Peter Ricketts: I think the more we cut back, the more there will be an impact. Yes, I accept that. But I do not believe there is evidence that what we have had to do so far this year has had a significant impact, and I think that is again a tribute to the way staff have responded to these pressures and kept up the key work, and made sure that has not fallen off.

 

Q43 Mr. Illsley: Just coming back to your Treasury colleagues' priorities, as you mentioned to my colleague, John Horam, the implication of the paper that the Committee has received from the National Audit Office is that the Treasury thinks that the Foreign Office should decide where to allocate its resources partly by assessing where the exchange rate risk may be lower. Would you say that that is the case?

Sir Peter Ricketts: That may be their view. I find that quite hard to turn into operational effect.

 

Q44 Mr. Illsley: Are you of the opinion that you are going to have to look at areas where the risk is low rather than where your priorities lie, or are you still going to try and attempt to meet the priorities?

Sir Peter Ricketts: The second of those. I am quite sure the Foreign Secretary, with our advice, will want to put his resources where he thinks the priorities are. The exchange rate movements are something we have to take into account. I do not think you can allow foreign exchange to drive foreign policy.

 

Q45 Mr. Illsley: You have mentioned already that you are in negotiations with the Treasury, and I think you hinted that those negotiations could go on for some considerable time. Are you alone in this or are you in negotiations with the Treasury and other Departments that have a non-sterling spend? Is there a group discussion on this, or is each Department being treated individually?

Sir Peter Ricketts: There is a group discussion on some aspects. I think the Foreign and Commonwealth Office budget is probably particularly badly hit by the fall in sterling because we have got the largest exposure. We have more than 50% of our budget in foreign currency. Other Departments-DFID-tend to make their programme allocations in sterling, so they are less affected. The Ministry of Defence is affected, but it obviously has a much bigger budget and its exposure is mainly to dollars. So I think we are particularly affected by the overseas price movement issue, but we are working together with DFID and the MOD, for example, to be as effective as we can in our support services abroad. We are also working with the British Council on that. The international Departments are working together to try to be as efficient as possible abroad. I think the particular sterling weakness issue impacts us more.

 

Q46 Mr. Illsley: Is there any scope for involvement of the Departments in the charges that you allow before the use of overseas posts by perhaps passing some of the increased cost on to those Departments?

Sir Peter Ricketts: That is also an area we have been doing a lot of work on. Mr. Luck might want to comment on that.

Keith Luck: Indeed, we do try to pass some of these costs on to other Departments. Excluding the UK Border Agency, we have recovered some £37 million from other Government Departments that sit on our platform. But actually they are under the same sort of financial pressures and are finding it difficult to find additional resources to cover the exchange rate losses and the impact of the loss of the OPM that we are suffering as well.

Sir Peter Ricketts: Other Departments find us expensive as a place to operate from, because they have to pay their share of security costs and other costs. Equally, we believe that the embassy is the best place normally to have all the different parts of HMG's operations overseas, and so we have a lively discussion with Departments about sharing the costs. We are expected to apply the Treasury's full economic cost formula, which other Departments tend to find is very expensive, although it does reflect the genuine costs that we have. It is an ongoing debate.

 

Q47 Mr. Illsley: One of the suggestions from the NAO paper is that security costs could be one of the areas that are a risk, so the idea that other Departments should pay extra in that respect is not unreasonable.

Sir Peter Ricketts: Well, no, exactly. The security of our staff has to come first, and that is expensive. Threats in many countries have risen, so that has to be factored in.

 

Q48 Chairman: May I ask about your financial management? The proportion of your finance staff with professional qualifications is expected to increase, but it is going up to only 17% by the end of this year, against a Whitehall average of 14%. You contracted an outside company to provide advice on exchange rate management options. Why did you do that? Was it because you felt that you lacked the necessary expertise or was it for other reasons?

Sir Peter Ricketts: I will ask Mr. Luck to comment on our financial management issues more generally, on which we've recently been examined by the Public Accounts Committee as well. The reason for taking professional advice on foreign exchange is that we want to be very, very careful in using public money and making forward purchases of foreign currency. We have all along approached this in a very cautious way. We do not want to find ourselves in front of the Committee being asked about speculation or having made poor decisions on these very important things. We actually pay a relatively small amount to a professional company to make absolutely sure that we have professional advice on forward purchasing, which involves big sums. I don't know whether Mr. Luck wants to add anything.

Keith Luck: To add to that, I'm pleased that you've noticed the increase in the number of people training as accountants in the organisation and in broader financial management. But Treasury Management skills are a particular specialism, and we didn't have that in the organisation, so we have asked an external organisation to work with us. The NAO report described the various proposals that we put to the Treasury and the mechanism for mitigating the loss of the overseas price movements mechanism. Actually, that organisation's contract with us is now tiny. It consists of making sure that our Treasury Management policy documents are up to date, that we are complying and that our people have somebody they can go to-the two or three individuals who work on this area-if they need particular advice at a particular time. But the contract is quite tiny now.

 

Q49 Chairman: In previous years, there was a tendency sometimes to underspend at the end of the financial year. Recently, however, you seem to have dealt with that problem. Is that because of the major financial pressures that you are under, which mean that you can't underspend because you can't even provide enough resources for what you've got to do?

Sir Peter Ricketts: I think there are two things at work, Mr. Chairman. One is that we have better financial management information-definitely. One of the reasons why we were traditionally an underspending Department was that we didn't have good, effective financial management numbers, so everyone tended to play safe and underspend a bit to avoid the worse crime of overspending. The culmination of that was that we underspent every year. A combination of improved financial data, which allow us to take decisions in year-if one part of the organisation is underspending, we can see that and move money to another part-and, on top of that, the huge pressures that we have talked about has cured the problem of our being an underspending Department. Last year, we just came in more or less on a full spend. This year, we are struggling.

 

Q50 Chairman: The House of Commons scrutiny unit suggests that your underspend in 2008-09 will be about £69 million or just over 3%, compared with 6% the previous year. Does that mean that you might run out of money in February next year?

Sir Peter Ricketts: Of that 3%, a very large part is annually managed expenditure, which Mr. Luck can explain better than me. It relates to things such as dilapidations on our buildings-it is not our cash, core budget. On our core budget, we came within a whisker of a full spend, so that shows, partly, the pressure that the organisation is under. We will do our level best to come up with a full spend this year as well. However, that 3% underspend was largely money that we were not able to control, I think it's fair to say.

Keith Luck: It is. I've very little to add to that, Mr. Chairman. In fact, that 3% includes things like the revaluation of some of our assets and losses or gains on the disposal of those assets. It is not really items within the budget that the board, management and Ministers can control. It is Annually Managed.

 

Q51 Andrew Mackinlay: It seems to me that there are others who will perhaps listen to our deliberations this morning. I do not think that you and your colleagues have amplified the problem you have with subscriptions to big organisations such as the United Nations. You are simply not the masters of those and they are not even in line with inflation, regardless of moves on sterling. There are simply higher subs that you have to meet. Can I invite you to place on the record your position on that?

Sir Peter Ricketts: Thank you, Mr. Mackinlay. We do face upward pressures, particularly on our UN and NATO budget subscriptions, which go up by more than inflation. The UN subscription is payable in dollars, so that brings a heavier load on us. We have an agreement with the Treasury to share the cost, with 60% from the Treasury and 40% from the FCO above a certain baseline. There is therefore cost-sharing with the Treasury. None the less, the inexorable rise of UN subscriptions puts further pressure on our budget. There is little we can do about it. We participate as one of around 191 countries in the annual UN budget negotiations. I am sure that we weigh heavily in those discussions, but in the end it is a consensus decision.

 

Q52 Andrew Mackinlay: It wouldn't just be the UN. You do not have to list them, but it includes the Organisation for Security and Co-operation in Europe and presumably NATO.

Sir Peter Ricketts: There is a NATO budget element.

Andrew Mackinlay: There are probably things I have never heard of.

Sir Peter Ricketts: The Commonwealth.

Andrew Mackinlay: The Council of Europe. It goes on. In a sense, we need to understand that and the public need to understand it.

 

Q53 Ms Stuart: Buildings. In 2008-09, the FCO generated £61.5 million by selling land and buildings. Almost £40 million came from the sale of the embassy in Madrid. Given that times are hard and, as Ming Campbell said, we are cutting into the bone rather than just dealing with the fat, can this Committee have the same assurance that you gave the National Audit Office that you will not contemplate the sale of any premises in order to save money, but that such decisions will be based on the needs of our foreign representation?

Sir Peter Ricketts: I can certainly give you the assurance that anything we do will be justified and make sense on its merits. I certainly don't foresee us selling major iconic British buildings in major capitals, which are so useful to us in projecting Britain. However, there will always be opportunities to sell buildings that are underused, obsolete or extremely valuable when compared with the benefit they bring us. We will look to sell more of those in line with the Government's policy on greater asset disposals. That will help give us money to put into, for example, health and safety works, security works and modernising our buildings around the world. As far as possible, we would like to move towards buildings that are more flexible, that can be adapted more easily to changing needs and the changing requirements of other Departments, and that move away from the rather inflexible buildings we have.

You mentioned Madrid. I happened to be there last Friday. We sold a rather old and tired building in the centre of town just before property prices declined sharply. We have provided the embassy now in the top floors of a fantastic, modern office tower in a wonderful position. The lift in staff morale and effectiveness is tangible. People are really happy to be in open-plan, modern office accommodation. That shows what can be done by careful asset disposal and re-providing.

 

Q54 Ms Stuart: But in terms of the overall strategy, can you say a little bit more? I fully accept that some buildings become inappropriate to use and incredibly expensive. The Public Accounts Committee commended you for a policy of hiring out premises in Italy for functions and so on. How much are you thinking about using embassy buildings for non-embassy purposes in order to raise revenue?

Sir Peter Ricketts: We do that a lot. A lot of ambassadors hire out their residences or the entertaining space in their embassies for British companies doing product launches or promotions. We charge them for it, so we do get some revenue. It will never be more than quite a small proportion of what it cost to run these buildings, but we will maximise our revenues from that. We will certainly make sure that the buildings are used to full extent for promoting Britain. Where we identify the buildings that we have been talking about, where we can make a sale and use money for higher priorities, we will do so. In the current climate and in line with the Government's policy on asset disposal, we will be doing more of that, but we shall obviously keep the Committee closely informed.

 

Q55 Ms Stuart: I have a very specific question on Moscow. If you want to give a written answer, that is fine. I gather that the work has been completed, but that the main contractor is now fighting bankruptcy. What is the final position on how much that is costing us?

Sir Peter Ricketts: That is roughly the position. This is the renovation of the residence in Moscow. An historic 19th-century building is being completely renovated. I think that the ambassador is moving back in shortly. A Turkish company has been doing the works on it. It has now completed but, as you say, it has gone into liquidation since then.

 

Q56 Ms Stuart: What is the final bill for that work?

James Bevan: It is about £13 million, but we can write to the Committee as soon as we can provide the figures.

 

Q57 Ms Stuart: About £13 million-against a £10.6 million estimate?

Sir Peter Ricketts: There has been an increase in the cost and that is partly because when we began to restore the old building, we found that more work was needed than was originally anticipated. But let us send the Committee a note on that.

 

Q58 Mr. Purchase: On the question of the sale of property to bring you new resources, what arrangements are there with the Treasury for the use of those funds that come from a sale producing capital? Are you just allowed to use the capital without further reference to the Treasury, or is there some arrangement whereby you have to get agreement for how you might use that funding? Is there any pressure now to pay the whole of the sale proceeds into the Treasury?

Sir Peter Ricketts: No, there is not. The Treasury accepts that, when we sell assets, we can recycle the money for our own uses-up to a certain ceiling, which is a relatively high ceiling.

 

Q59 Mr. Purchase: Can you recall what it is?

Sir Peter Ricketts: It has recently increased, I think.

Keith Luck: The target set for the current spending review period is £50 million. We have actually exceeded that already. The idea is that, every time it is more than 20% of the original target, we go back to the Treasury. As Sir Peter has said, there has been no problem in being allowed to recycle those extra proceeds, but it goes up by 20%, in effect.

 

Q60 Mr. Purchase: From time to time, the Government arrange for the sale of unwanted and unused assets to assist the national picture. Are you in some way, other than for this cap, exempt from that?

Sir Peter Ricketts: I think that the Treasury recognises that, given our budget pressures, if we can help to meet some of them by selling some assets, it will allow us to do that. If we sold an enormously valuable asset, I am sure that we would then have to have a discussion with it about what proportion we kept and what proportion went back to the Exchequer. At the sort of levels we are talking about, it accepts that it recycles to us.

Chairman: We now move to some staffing questions.

 

Q61 Andrew Mackinlay: We have all been slightly embarrassed. We are politicians who vote this money and expect it to work the diplomatic equivalent of the miracle of the loaves and the fishes. That is what is happening. We should acknowledge that we MPs vote for this money or the type of resources. Earlier this morning, we touched on the locally engaged staff and you indicated to us-we were aware of it; it is really embarrassing-that we have even had to ask some staff to take unpaid leave to square the books. That is a real embarrassment to us. Flowing from that, it begs the question whether it would be tolerable in any comparable situation in the United Kingdom. I put it to you in the sense that it would not. At the very least, there would be one hell of a row with the trade unions, and possibly industrial action. Yet local staff are, if you like, taking the burden of our foreign policy, our desire to project. Putting it simply, it seems unfair. The question that flows from that is about rights. I do not mean only the rights of those the people who are hit by the need to take unpaid leave and so on, but rights generally. The domestic industrial relations law would obviously apply, but presumably we have our UK standards.

There are two questions. The first is the economic one. The second is about rights, and about representation and protection for staff around the world. They should be entitled to UK industrial relations norms, grievance procedures, rights of appeal, representation and so on. Discuss.

Sir Peter Ricketts: First, I share your uncomfortable feeling at some of the measures that have had to be taken. I accept that absolutely.

The factual position is that when we employ local staff, we employ them under the local labour law of the different countries of the world. That varies, of course. What would be possible and perhaps appropriate in one country would not be the same in other countries. For instance, the four-day working week in the US network is under US labour law. I gather it is something that has happened quite widely in the US economy over the last year or two. In other parts of the world, people are taking other steps.

I do not think that we can operate on the principle that our staff around the world are all employed under British labour law. What we must provide is appropriate protection for staff in each of the countries where they are employed. For example, in the US and I think in most other countries, there is an active local staff association in the embassy, which provides representation for the local staff, has full access to the ambassador and the management team in the embassy, and which works with the embassy management board. They are part of the running of the embassy, and involved in decisions on resource allocation around the US network. That is the norm now around the world, and we would certainly want to fully involve our local staff in decisions about allocation of resources.

There are different ways in which we can provide for proper staff representation, but it is important that we do so. Again, I admire the loyalty and commitment shown by our local staff through these very difficult times. I want to get to a position as soon as I can where posts have certainty about their budgets in local currency for the year ahead, so that they are in a sense protected from movements of sterling during that year. Then post management, in consultation with local staff, can plan the year.

 

Q62 Andrew Mackinlay: Thank you for that. I understand that the United States has good industrial relations law, although it may be different from ours; our colleagues there also have critical mass. In some of the more obscure parts of the world we have fewer locally engaged staff because they are smaller missions. Will you consider finding ways, at minimal cost but nevertheless maximum effectiveness, of giving those people some protection? I am not talking about cutbacks but simply good grievance procedures, discipline and so on. It seems to me that it is very difficult to give them what they are entitled to in terms of natural justice. How is it done? Can it be improved?

Sir Peter Ricketts: Mr. Bevan, will you answer this very important point?

James Bevan: In addition to the basic provisions that we are obliged to provide under domestic legislation where we are, we also try, as the permanent secretary says, to ensure that local staff associations are encouraged and supported; that they flourish and are given time and support to form and operate. We make sure that our ambassadors and senior UK management know that it is part of their job to consult the local staff on any issues, including those that affect their terms and conditions.

Beyond that, in addition to the monetary offer, we try to offer a better package than some local employers. As for the job itself-the challenge and the reward-we have been much more innovative in the last few years. We are now promoting people from local staff into some really challenging senior jobs. On investment in learning and development for local staff, we invest far more in our staff generally than a private sector company does. We have increased the amount of investment in training and development for local staff, including bringing some of them back if necessary. At its most basic level, we are creating an environment in which local staff are treated with dignity and respect and get the recognition and reward. Many local staff say to me when I travel around the world, "I am not working for you for the money, but because it is a great job, I am treated well, and I feel that the overall package is a good one."

Sir Peter Ricketts: If things go wrong, we would certainly want our local staff to have access to all the opportunities of whistleblowing and raising complaints at any level necessary.

 

Q63 Sir John Stanley: Sir Peter, it is clear that the Foreign Office is now hugely dependent on its locally engaged staff. An answer that the Foreign Secretary gave our Chairman showed that over half of the Foreign Office staff-10,000 out of some 16,000-are locally engaged. It is also becoming clear that in some countries, the governing regime is using bullying, intimidation, threats and worse against our locally engaged staff as a means of exerting pressure-coercion-on the British Government. Having seen this tactic being used blatantly in Russia, why, when the same tactic was employed by the Iranian regime, were no steps taken by the Foreign Office to confer diplomatic immunity under article 38(1) of the convention on our locally engaged staff in Tehran?

Sir Peter Ricketts: I would need to respond in writing to the detail of that. Our local staff in Tehran have behaved magnificently under the unacceptable pressure that they have been put under. As you know, one member of staff has been sentenced to four years in jail for doing what we regard as normal activities. Others have been prevented from returning to work and have been subject to what you rightly described as bullying and harassment. May I write to you on the specific issue of the application of the Vienna convention, because I am not informed about that? But I think that it has shown that in one or two countries, there is a particular problem. I don't think that that invalidates our approach of relying significantly on local staff in many countries around the world. I mentioned my visit to Madrid last week. Some 80% of the staff working for us in Spain are local staff. There are some British staff of course, as well as many Spanish staff, and they do a fantastic job. In many countries of the world, that model works well. But problems that we have had in the two countries you referred to show that there are limitations.

 

Q64 Sir John Stanley: Whilst we will of course be very glad to have your response to my question in writing, I am, if I may say so, somewhat disappointed that you cannot respond to my question, given the fact that I posed that very question in the debate we had in the House of Commons on Iran on 9 July, and given that the issue was followed up in the letter on 22 July that I received from the Minister of State. I am disappointed that you cannot offer the Committee any response as to why, given the experience the Foreign Office has had in Russia, no steps were taken, as is permissible under Foreign Office rules-it is a power given to the head of post-to try to provide protection through diplomatic immunity to our staff in Tehran. I also want to say that I am disappointed that you cannot respond to the Committee, given the very clear statement made by the Minister of State in his letter to me, in which he said: "I must emphasise that I am confident that none of the locally engaged members of staff who were recently detained in Iran have engaged in any illegal or improper behaviour." So here we have a case where our locally engaged staff, in Foreign Office Ministers' views-those words would not have been written lightly­-are 100% innocent of any impropriety or illegal behaviour. Yet you cannot give an answer to my question as to why steps were not taken in the light of what happened in Russia to give some of our locally engaged staff the diplomatic immunity that could have been sought for them under article 38.1 of the convention.

Sir Peter Ricketts: I apologise for my inability to respond in detail to that. I do not want to mislead the Committee by giving it an answer that is not properly prepared. I absolutely endorse the words in the letter from the Minister of State that we are entirely confident that our local staff behaved properly. That is why we have been urging the Iranians throughout this period-and we continue to do so-to accept that they did nothing wrong, to pardon Mr. Hossein Rassam, who is facing a prison sentence, and to allow the others to return to work in the embassy. I would like to come back to you in writing on the specific point about the application of the Vienna convention.

 

Q65 Sir John Stanley: Could you respond to a more general question, which I would suggest is now the key policy issue for the Foreign Office? Given our experiences in Russia and in Iran, what is Foreign Office policy to try to provide, under the convention, a greater measure of diplomatic immunity to others of our locally engaged staff round the world who may face the sort of treatment that our staff have experienced in Russia and Iran?

Sir Peter Ricketts: I don't have evidence that pressures have been applied to our local staff of the kind that have happened in Russia and Iran-most particularly in Iran.

 

Q66 Sir John Stanley: Do you rule it out in China?

Sir Peter Ricketts: I can never rule anything out.

 

Q67 Sir John Stanley: Should we be thinking about China or other such countries?

Sir Peter Ricketts: Always ready to reconsider.

 

Q68 Sir John Stanley: Zimbabwe?

Sir Peter Ricketts: In Zimbabwe, which I visited recently, there was a strong, vigorous presence of local staff in the embassy, who I did not sense felt under any particular threat from the regime. Of course it is possible. In countries such as China, we have a large, local staff community who do excellent work for us, not just in Beijing but around China.

I would like to be clear about the possibility of taking the steps that you have described, without the agreement of the receiving state under the Vienna convention, which I suspect would play a part in decisions about what to do regarding immunity. On the legal position, I need to do further research and write to you. I recognise the risk that you raise, but in my experience, I don't think that we have found it a problem, apart from the specific case of Iran, and to some extent Russia. However, in Russia, there has been as much pressure applied to our UK-based staff as there has been to locally engaged staff.

 

Q69 Sir John Stanley: In your letter, will you indicate whether you are thinking ahead and trying to anticipate locally engaged staff elsewhere being exposed to such risks?

Sir Peter Ricketts: Certainly I will.

 

Q70 Mr. Hamilton: Sir Peter, may I carry on with the theme of our staff? I echo the remarks that you made earlier about the excellence of Foreign Office staff, and the pressures that they are under given the current financial climate. I have one or two questions relating to points that you made earlier about recruitment. Has the recruitment of staff of graduate level coming into the service been affected by the financial crisis and the squeeze on your budgets?

Sir Peter Ricketts: In terms of quality of staff, no.

 

Q71 Mr. Hamilton: And numbers of applicants?

Sir Peter Ricketts: Actually, in the last year in which we were recruiting, last summer/autumn, we took in almost a record number of graduate-level entry staff-what we call our C band staff. We took in over 40 people, which is more than we usually take, because we find that there is an increasing demand in the FCO for staff of that level. We are taking fewer staff at lower levels, and for the next year or two, we will need to look carefully at how many we take in the light of budget pressures. Until now, we have continued to recruit our graduate-level entry staff at an even faster rate than we have in the past.

 

Q72 Mr. Hamilton: That is encouraging. To continue with the excellence and quality of staff that you normally have, you need to have a flow-in from the starting point.

Sir Peter Ricketts: Absolutely. We must not have a gap in our human capital for the future. I agree with that.

 

Q73 Mr. Hamilton: May I move on to promotion and career prospects within the Foreign Office? Do you see the budgetary constraints forcing people perhaps not to be promoted and there being fewer posts that they can apply for and a general slow-down for people in the possibilities for promotion within the service? Would that, in turn, lead to some of your brilliant staff looking-we touched on this earlier-for careers outside the Foreign Office if they become frustrated because they cannot see their careers develop within the Foreign and Commonwealth Office?

Sir Peter Ricketts: I have a number of reflections on that, and my colleagues may have as well. I think that over time the FCO will get a bit smaller, given the budgetary pressures. That will be true of other Departments as well. I saw the Prime Minister's speech on Monday talking about reductions in the size of the senior civil service across the civil service. But, in comparison with other Departments, we shall go on having more senior staff than most, because we have this range of ambassador posts. Some of the ambassador posts have come down in their level of seniority, but none the less we have a large number of senior civil service posts because of our ambassadorial spread. So, the career prospects for staff joining us now are very good. I think that they will go on being very good.

The shape of the organisation will change over time and we are finding that we need fewer operational level entry staff-what we call our B band staff-because of the sorts of jobs that they were doing around the world, some have been localised and the UK Border Agency is doing the work in different ways. The shape of the organisation will change, but the career prospects for bright graduates joining us now are still very good. We will still need a broad spread of ambassadors and senior officials well into the future.

 

Q74 Mr. Hamilton: You mentioned the numbers of graduates that are coming in at entry level and that the quality is still very good. Are you increasing the diversity of people coming in, from all backgrounds within the United Kingdom? Is that continuing?

Sir Peter Ricketts: Absolutely, we are. Mr. Bevan, do you want to say a word about that?

James Bevan: Yes, but not as much as we would like. If you look at the figures over the past 20 years, there is a significant increase in terms of women and ethnic minorities coming in. We still do not attract as many applicants from those currently under-represented minorities as we would like. We make very active efforts to go out and find people to recruit at graduate level. We also look at the talent pools elsewhere in Whitehall, and more widely. We opened our senior management structure to external competition a couple of years ago, so we have another opportunity to bring in fresh talent that way. But we are not satisfied where we are and will keep going aggressively.

 

Q75 Mr. Hamilton: That is really good news. May I just continue from the theme that Sir John started and developed so well, and express my own concern about the pressures on some of our locally engaged staff? Obviously, I am not going to repeat what Sir John said about Tehran, but I certainly agree with every word he said.

When we were in Israel and the Occupied Territories earlier this year, we were with Richard Makepeace, our consul-general in East Jerusalem, and met some of the locally engaged staff. It is a slightly different pressure on them-no pressure from the authorities in terms of what they do or in the possibility of arrest or pressure through those staff on the British Government. But their inability to travel from where they live to where they work was having a huge impact, so we were told, on the work that they could do in the consulate-general in East Jerusalem. Is there anything that you can do from London to put pressure on the Israeli Government to allow those locally engaged staff to get quickly to their place of work without harassment, so that they can carry on doing the excellent job that they do for the Foreign and Commonwealth Office and for our important diplomacy overseas in the Middle East?

Sir Peter Ricketts: I think you signal an important issue, which applies of course to Palestinians more widely, and our local staff are caught up in the wider restrictions that Palestinians are under in terms of access to East Jerusalem and, indeed, from one part of the West Bank to another. I do not know if we have specifically pressed the Israelis to allow for improved access because they are local staff members working for the consulate. I can certainly make inquiries to see whether we have done so or whether there is the possibility of doing so, but I think we are equally concerned about the restrictions that apply to Palestinians generally in their access to East Jerusalem. This is a part of that wider problem.

 

Q76 Mr. Hamilton: We would agree with that, of course. Sorry, my last question. The point that Sir John made about diplomatic status-the Israeli authorities would not stop diplomats going through the various checkpoints. If our staff were able to have that diplomatic status under the agreement-I can't remember which particular international agreement it was-surely that would help them quite a lot.

Sir Peter Ricketts: Let me look into that as part of the answer I've undertaken to give Sir John and I will cover that as well.

 

Q77 Mr. Moss: Given the increasing share of locally engaged staff and your desire to integrate those staff with the UK-based staff, and given that locally based staff probably have a lower level of security clearance, have you assessed any potential increase in risk, considering the greater access now of all employees to the new IT system-the F3G system? We're told that, now, locally based staff have access to confidential material through their own terminal. Have you made an assessment of increased risk here and what are you going to do about it?

Sir Peter Ricketts: Most certainly, we keep that in mind very much as part of the considerations. There will always be some jobs in embassies that local staff can't do for security reasons, as you say, but we are becoming increasingly an organisation that is open and where much of our work does not need to be at a high security classification. The design of our new F3G computer system is intended to reinforce that, because we have two completely separate parts of it: a part that is what we call the universal tier, which is up to restricted level, and then the confidential tier, which is completely separate from it. So it allows many members of staff, including local staff, to have access to a modern, flexible IT system that allows them to do their work, but it doesn't give them access to the confidential tier, which has to remain for fully DV-cleared staff, UK-based staff. But more and more of the work of more and more of our embassies can be done in unclassified areas of the embassy, using the unclassified part of our computer system, so we're trying to minimise the barriers that security creates between local staff and UK staff. We've been running a campaign that we call "One Team", which is to try to emphasise how much we can work together and minimise the areas where inevitably there will be differences.

 

Q78 Sandra Osborne: Could I ask you about staff morale as far as bullying, harassment and discrimination is concerned? In the staff survey of 2008-I know that Mr. Bevan referred to the 2009 survey, which has not yet been published-17% of all FCO staff reported experiencing this, and it was only 11% on average across Whitehall. Also, 20% of locally based staff reported this, as opposed to 14% of UK-based staff. How do you explain this relatively high level of reporting of harassment and bullying?

Sir Peter Ricketts: First, can I say that I find it absolutely unacceptable? It's something that we are worried about and working on. We are very, very keen to see that we get to the bottom of it and root out whatever the problems are. Mr. Bevan can give you details of where we are in the 2009 staff survey. To our real disappointment, that number has not come down very significantly. It has come down from 17 to 16%, which is not good enough, so we have to continue to tackle this problem seriously.

Part of it is understanding exactly what is going on here. We put together bullying, harassment and intimidation, and I need to understand more about what are the actual problems that staff are reporting there, because any suggestion of bullying or harassment is completely unacceptable. Indeed, we are prepared to take staff out of positions abroad and bring them home if we see evidence of behaviour that is bullying or harassment, and we have done that, so we're trying to send the strongest signal we can, which is taking people out of their postings and bringing them back to London if we see evidence of that. I don't know whether Mr. Bevan wants to add more detail.

James Bevan: On the question of why it's so high, I have three answers. I think the main reason it's high is that it's happening. There is enough evidence to confirm that there are significant and completely unacceptable levels of that behaviour going on in our organisation. I think a second reason why we're getting those high figures, though, is that we're actually going out and encouraging people to talk about it and put it on the table, rather than hide it away, as may have been the case in the past, so people are more prepared to say, "I'm experiencing bullying."

The third reason it's happening-we have quite strong evidence for this-is that as we strengthen the way in which we manage poor performance, which we have not been good at in the past but are getting much better at, there is a recognised phenomenon where an officer who for a long time has been underperforming is tackled for the first time in the right way by a line manager and asked to improve their performance will turn around and accuse the line manager of bullying. When that happens, we investigate, and often we find that it is not bullying but professional, correct management of poor performance. I think it is very important to disaggregate the data and do the studies, which we will do on the latest data.

In terms of what we are going to do about it, as the permanent secretary was saying, we have reaffirmed the policy of zero tolerance, and we expect all the leaders in our organisation-heads of missions and our directors in London-to make sure that that is what happens. We are providing help and support to staff who experience such behaviour to deal with it, and we have just introduced a new arrangement which will come alive at the beginning of next year where, if the line manager is unable to help the officer who is experiencing unacceptable behaviour, there will be an independent person, either abroad or in London, whom they can call for advice and support.

Finally, we are actually pursuing hot spots of very high reported behaviour of this kind. We did that last year and will do it this year. We will pursue the matter with the individual posts or directorates concerned and establish what is happening. In some cases, we have pursued that to the extent of withdrawing staff from post if we are convinced that they have been guilty of unacceptable behaviour, and in some cases it has led to disciplinary action against staff. We will stick with a very tough approach to dealing with this.

 

Q79 Sandra Osborne: The trade union does not agree with the explanation that allegations are resulting from tackling poor performance, for example. Can you tell me how many formal grievances have been raised by staff in relation to that?

James Bevan: I would need to check that and write to you. We have not, as far as I am aware, had very many formal grievances raised in the case that you are describing.

 

Q80 Sandra Osborne: So if people were coming forward, would you not expect more formal grievances to be raised?

James Bevan: Do you mean formal grievances raised because an officer who was being performance managed thought that they were being bullied?

 

Q81 Sandra Osborne: In any case. If people feel more able to come forward than in the past, would you not expect there to be more formal grievances?

James Bevan: I see. We do have a process where the first report is obviously to the line manager, if an officer feels that they are being bullied. If the line manager is unable to help, or if the officer does not feel that they are getting the right support from the line manager, we have an employee assistance programme which people can call for advice and support. We have found that rather remote, though-it is a phone line. That is the reason why we decided to introduce, from the start of next year, the new assistance that I described. What we are calling a dispute resolution counsellor will be able to offer one-to-one support to an officer who experiences bullying.

We have not found traditionally that our officers want to pursue these allegations through, if you like, the more formal mechanism of grievance, and that is one reason why we encourage our staff to recognise bullying and speak up when they feel that they are experiencing it.

 

Q82 Sandra Osborne: One last question, Mr. Chairman. I understand that there was an independent survey following the 2008 staff survey which showed that reported levels of discrimination, bullying or harassment tended to be higher among the staff at lower grades, disabled staff and minority ethnic groups, black staff in particular. That is quite an indictment of the personnel situation, surely. What is your explanation for that? What action do you intend to take?

James Bevan: First, you are right. We were so concerned by the 17% figure from the last survey that we commissioned a more detailed analysis of what the data were telling us, and they told us that, by and large, the allegations tend to relate to junior officers who feel that they are being bullied by senior officers and to local staff who sometimes feel that they are being bullied by UK staff, and that there is a higher prevalence of reported experience of this behaviour from black minority ethnic and other minority groups.

One thing that I have done is to meet with representatives of the black staff to talk through why they think this is happening. I have to say that there were some very convincing stories which resulted in my writing to all our heads of mission abroad to say that we are particularly concerned at the high levels of reported behaviour affecting black and minority ethnic staff and that we wanted to crack down on it absolutely to make sure that it reduces next year. The task for us now is to analyse the latest data in the new survey and see if that has happened. If it has not, we will have to keep going.

 

Q83 Sir John Stanley: Sir Peter, you will be familiar with the Daniel Fitzsimons case, which I want to raise because it poses a very major policy issue for the Foreign Office. If I can just read this in for the record, from The Independent on 1 September, "A British military contractor accused of shooting dead two of his colleagues in Iraq was hired despite being sacked from another security firm and having a long history of psychiatric illness...Daniel Fitzsimons, 29, is in Iraqi custody facing charges of premeditated murder after the shooting of fellow ArmorGroup colleagues Paul McGuigan and Darren Hoar and wounding Iraqi worker Arkhan Mahdi. If convicted he faces execution."

I do not expect you to comment on that particular case, Sir Peter, unless you want to, but the issue that I am raising with you is how it has come about that the Foreign Office is placing multi-million pound contracts with private military companies whose recruitment procedures are clearly patently inadequate.

Sir Peter Ricketts: The need to have private military companies to provide security for our staff in Afghanistan and Iraq, I think, is clear. We can't expect our staff to work in these countries, in these conditions, without protection, and the British Army does not have the capacity to provide the protection; so we need to go to the market and hire private military companies to do this. There are several private military companies around that we use, some in Iraq, some in Afghanistan. Of course we are extremely concerned to make sure that their recruitment and management practices are up to the standards we require. We make quite sure in our contracts that that is clear with them. I think the particular case that you refer to-Mr. Fitzsimons-was not a contractor working for the British Government.

 

Q84 Sir John Stanley: But surely ArmorGroup-I think we know it from our own experience in the Committee-has a number of substantial contracts with the Foreign Office.

Sir Peter Ricketts: ArmorGroup does, yes, of course. This is one employee of ArmorGroup, which is a very large organisation, and I think they have responded appropriately to this affair. I don't believe that should rule out ArmorGroup from any consideration for contracts with us, but it does underline the importance of having the right contracts, and the right understandings with companies about the staff that they recruit, and how they manage them.

 

Q85 Sir John Stanley: So are you saying to the Committee that the Foreign Office's policy, before it awards contracts to private military companies, is that it satisfies itself in the case of each and every contract that the recruitment procedures are such that someone who has previously been sacked by a private security firm for unreliability and has a history of psychiatric illness would not be able to get through that company's recruitment procedures?

Sir Peter Ricketts: What I am saying to the Committee is first of all that these companies, including ArmorGroup, we believe, are serious companies-that they take their responsibilities seriously. I am sure they are learning the lessons from this incident for the way that they recruit and manage their staff. Yes, in letting these contracts, which are major expensive contracts, we go into considerable detail with the management about the recruitment of staff and the management of the staff that they provide to work on our contract. Because we are in the position of quite a major employer for these companies we have some considerable influence over them. It is for the company to ensure that they have the right way of dealing with these incidents. I think it is for us to ensure through the contract that we have absolute clarity with the company about the standards that we expect.

 

Q86 Sir John Stanley: Are you satisfied, as of now, that the standard contractual terms you're entering into, with contracts for private security companies, as far as you can be assured, protect the Foreign Office against an undesirable individual being recruited into the complement of that firm-obviously in a weapon-carrying and live ammunition situation?

Sir Peter Ricketts: Yes, I am as sure as I can be. We have recently retendered the contracts for guarding and for close protection of our staff in Iraq, and we went through an exhaustive process of comparing three or four different companies, including against the sorts of criteria that you're talking about, Sir John. So it is very much part of the evaluation we do before we let a contract, yes.

 

Q87 Mr. Horam: Briefly, Sir Peter, because we are running out of time, what thought has been given to seconding FCO staff to the European External Action Service? What is happening on that front?

Sir Peter Ricketts: This is one I responded to Mr. Heathcoat-Amory on earlier. My expectation is that the External Action Service will start with its in-place forces-as the military would say-in other words, the Commission staff around the world staffing up Commission offices. Over time, there will be opportunities to send member state diplomats or other officials to work in the External Action Service.

 

Q88 Mr. Horam: Have you established any particular process for doing that inside the FCO?

Sir Peter Ricketts: That will be part of the proposal that Baroness Ashton has to make as High Representative on the establishment of this External Action Service, but we expect that when member state diplomats join it, they will go as what are called, I think, in the jargon of Brussels, temporary agents. In other words, they will go on secondment to the European Union, paid for by the European Union on its terms and conditions of services, and we are expecting somewhere in the region of 25 UK diplomats to be involved by the time the thing is fully staffed in a couple of years' time. So, I don't expect a large number to be moving straight across. This is similar to the process we already have of seconding Whitehall officials to the EU institutions.

 

Q89 Mr. Horam: So, just the same?

Sir Peter Ricketts: The same arrangement.

 

Q90 Chairman: Have you written to Baroness Ashton with any specific proposals about how this organisation might be set up?

Sir Peter Ricketts: Indeed, I have spoken to her about it. We have briefed Baroness Ashton. She will, of course, be a European Union High Representative, but she is well briefed on the British approach.

 

Q91 Chairman: We are obviously, as a Committee, very interested in this area and we hope to meet her in her new role. If we could have access to information on what the Government's position is, that would be very helpful.

Sir Peter Ricketts: Let us send you a note about that, Mr. Chairman.

 

Q92 Ms Stuart: Just a very small question. In previous years there has been the suggestion that because for our diplomats and a lot of our civil servants English is their first language, and they have a pretty poor record of acquiring second and third languages to a level of high competence, they are sometimes held back from getting jobs in Brussels. Is this something that worries you in terms of getting the secondments? I think it would apply to our diplomats as well-that they have to have at least three languages in which they are fluent.

Sir Peter Ricketts: I am not sure that that principle will apply. That certainly applies in the Commission, I think. For promotion in the Commission you have to have native language plus two, I think. I don't know whether that will apply in the External Action Service.

 

Q93 Ms Stuart: Could you send us a note?

Sir Peter Ricketts: I'll cover that as well. Our main aim is that people being seconded to the External Action Service should be chosen on merit. We don't want to see people being chosen on the basis of geographical quota, or on other sorts of considerations except merit. Merit needs to include language skills, but it shouldn't be exclusively that. I'll cover that in our note to you.

 

Q94 Chairman: Just one brief question about the Turks and Caicos Islands. Governor Wetherell was here this week, and I met him yesterday. We understand that there is a team of advisers to support the Governor in the run-up to July 2011. How is that organised? Some concerns have been expressed in some publications in TCI, and also in communications. We get lots of communications from TCI since our report and now our inquiry, probably more than from most places in the world, and given its population, certainly more per head. There is some concern expressed about the dangers of too strong a direct rule, and a kind of neo-colonial approach. How would you counter that?

Sir Peter Ricketts: Gosh. First of all-

Andrew Mackinlay: You don't actually accept that, do you?

Chairman: No. that accusation has been made and it would be interesting to have on the record your response to it.

Sir Peter Ricketts: I was going to respond that we have inevitably a colonial rather than a neo-colonial relationship with TCI, I suppose. Of course, the Committee has done important work on TCI, and Gordon Wetherell is now having to carry a heavy load in the current circumstances. As the Committee knows, we have sought from around Whitehall a number of officials with expertise in particular areas in which the Governor needs help in maintaining his temporary stewardship of affairs there. I don't believe that we have sent the numbers that would give rise to the sorts of suspicions you raised, Mr. Chairman; indeed I would be worried if we had. We need to continue to work to give Gordon Wetherell the support he needs in terms of expertise from Whitehall to get him through this very difficult period. I think we are covering the main requirements, but I wouldn't think we were at the level where anyone could say we were trying to take the place over. Our clear intention is, as you know, to return it to elected rule as soon as we can.

 

Q95 Andrew Mackinlay: I have been going on about Overseas Territories for some time, so I was pleased that Turks and Caicos cropped up. On the question of Bermuda and the United States, the US State Department and the White House did not understand what a United Kingdom Overseas Territory was because they sent these people from Guantanamo without any reference to you folk. Can you tell us to what extent was there one hell of a row, and do they understand it now? It is a very fundamental and serious matter that was not given the oxygen here in the United Kingdom. It was an affront by the United States to us, and they should have known better. Do they now know better, and can we be sure it will not happen again?

Sir Peter Ricketts: I would never use an undiplomatic term like a serious row, but I think that the US Administration are clear that we were not prepared to accept the way in which that matter was dealt with. That was also partly to do with the Bermudan authorities, who dealt with the US on a matter that was clearly to do with foreign affairs, which is reserved to the Governor. It was a problem both in terms of the State Department and of Bermuda. In total, our responsibility for foreign affairs was not respected in that case. Yes, I think that the State Department does now understand the special status of Overseas Territories.

 

Q96 Chairman: And there is no question of any other Uighurs or other people being sent from Guantanamo to any other Overseas Territories?

Sir Peter Ricketts: I certainly have no information of more Uighurs coming to any Overseas Territory, no.

 

Q97 Chairman: We will no doubt look at that closely in future. Can I ask you now some questions about senior appointments? Can you outline the process by which the Foreign Office has decided that there will be no new Minister to replace Lord Malloch-Brown and the reallocation of portfolios? Clearly, the current ministerial team is a bit short and under considerable pressure. As the permanent secretary, are you happy with that?

Sir Peter Ricketts: The allocation of Ministers to Departments is something for the Prime Minister. As permanent secretary, I will work with the ministerial team that is deployed to the Foreign Office.

 

Q98 Chairman: I understand that you will work with what you have. My question is how did we get to the position that we now have one fewer Minister in the Department than we had.

Sir Peter Ricketts: I don't want to seem evasive, but that must be a question for the Prime Minister. It is the Prime Minister who decides on the number of Ministers and who they are. So we are working with the ministerial team that we have.

 

Q99 Chairman: Okay. Can I then go to the future? Given that we are going to have a general election, are you preparing discussions in detail with the Opposition on issues such as the non-proliferation review conference next year? How much discussion do you have at official level with the shadow Cabinet and the other parties?

Sir Peter Ricketts: One of the benefits of our constitutional arrangements is that the civil service is permitted to engage with the Opposition in the run-up to an election so that the civil service is informed of the thinking of the Opposition as well as the Government party. As part of that, yes, I have had a number of discussions with Mr. Hague, and I have undertaken that I will keep those confidential and I feel I should respect that.

Chairman: I am not asking you about the content.

Sir Peter Ricketts: I have had a number of discussions with Mr. Hague.

 

Q100 Chairman: Have you also spoken with the Liberal Democrats?

Sir Peter Ricketts: I haven't, but I would be very willing to.

 

Q101 Chairman: The Government have also appointed a number of people as special representatives on issues such as climate change, peace-building, Afghanistan and Pakistan. Does that present any difficulties for you in terms of the relationship with people within the structure of the Government and the Department? Is there any difference in the way in which you behave towards a special representative who has come from a diplomatic background as opposed to someone who has come from academia or politics?

Sir Peter Ricketts: There are different sorts, as you suggest, Mr. Chairman. Some of them are simply senior officials who are added to the existing structure to cope with a particular surge in work. For example, Sherard Cooper-Coles, our special representative to Afghanistan, is simply one more senior official adding extra capacity in that area. The politicians, such as Mr. McConnell, Geoff Hoon, who is working on the NATO strategic concept for us, and Des Browne, who was doing some work on Sri Lanka, give us specific amounts of time to do rather targeted things, which normally involve travelling and overseas representation. They add to our capacity to deal with particular problems. I don't think we have any particular problem working with them.

 

Q102 Chairman: Do they have to clear what they do with you or with the Foreign Secretary? How does that work?

Sir Peter Ricketts: The political special representatives are normally either the Prime Minister's or the Foreign Secretary's special representative. They effectively work under the authority of the Prime Minister or Foreign Secretary. In practice, they work closely with officials. For example, if Jack McConnell is travelling, he usually takes an official with him. He is therefore an extra multiplier for us in our diplomatic work overseas.

 

Q103 Mr. Heathcoat-Amory: Sir Peter, you have mentioned some of the special representatives. We are also told that Mr. John Ashton will be the Foreign Secretary's special representative for climate change. Another is Rear Admiral Neil Morisetti, one of the Department's climate and energy security envoys. You have also appointed a chief scientific adviser and you already mentioned Geoff Hoon, Mr. McConnell and others.

I find this very confusing. You are under immense budgetary pressure, you are losing staff abroad and are having to send people on unpaid leave-and it is getting worse-yet you are taking on a confused mixture of envoys, some of whom do not report to the Foreign Secretary, but are based in the Foreign Office. I think that you are behaving like a giant NGO. Where is the clarity of purpose? Are you not becoming a sort of dumping ground for unwanted-perhaps they are wanted, but they're certainly very expensive-personnel, over whom you rarely have any vestigial control, to solve problems elsewhere?

Sir Peter Ricketts: Let me reassure you, Mr. Heathcoat-Amory, that such people are effectively senior officials. John Ashton is a member of the diplomatic service who had been on secondment or unpaid leave doing climate change work and came back to us, but is still effectively a senior FCO official, as is Sherard Cooper-Coles on Afghanistan. The political representatives are not expensive because we do not pay their salary, we simply pay their expenses when they travel abroad for us. They provide some extra capacity, for example for representation at international conferences or to spend more time in a country than a Minister could and get into the detail. They therefore provide a valuable extra resource for us at very little cost, because we simply pay the additional travelling expenses for them.

 

Q104 Mr. Heathcoat-Amory: Yes, but you support these people. For example, Mr. McConnell first wanted to be high commissioner in Malawi and then changed his mind. He is now the Prime Minister's special representative for peacekeeping-I am not sure how successful he is being. He is supported by your Department and that is an expensive undertaking. You may not be paying his salary, but he is on the books, he has an office and you have to service him, listen to what he says and send him abroad or whatever. Are you not worried that that will go down very badly with your permanent staff, all of whom are having their careers blighted by cutbacks? At the same time, you are supplying facilities for a whole lot of other people who you clearly didn't want, but who have been imposed on you. It is not clear to this Committee who they report to and what they are doing. It is making our job difficult as well.

Sir Peter Ricketts: I wouldn't go as far as to say that people's careers are being blighted. I hope we can avoid that. I do not feel that there is confusion about their reporting lines. Jack McConnell certainly reports to the Prime Minister and to the Foreign Secretary. As you said, we provide him with a degree of support, but that is one part of one official's time. For that, we have the opportunity of having Jack McConnell spending more time than a Minister would be able to spend in Africa, for example, dealing with difficult African peacekeeping issues. From where I sit, it does not feel as confused or as difficult as you suggest.

 

Q105 Mr. Heathcoat-Amory: And you think you're speaking for all your staff in saying that? There's no disquiet about these special representatives and others who are working out of your Department, clearly doing jobs that were previously done by your staff and your diplomatic service. Is there no problem with staff morale, no criticism, and are you entirely happy with these arrangements?

Sir Peter Ricketts: I have heard no criticism and, indeed, now we have our chief scientific adviser, he is bringing in a capacity we didn't have and that wasn't being done before. It is a net addition for us, in terms of professional capability.

 

Q106 Sandra Osborne: As well as special representatives, as you know, the Committee has taken a close interest in the appointment of people from outwith the diplomatic service to senior diplomatic posts-we recently interviewed Baroness Amos. The Constitutional Reform and Governance Bill, currently going through Parliament, has an amendment that would cap at three the number of political appointments to senior diplomatic posts. If this was agreed by Parliament, would it be welcomed within the diplomatic service?

Sir Peter Ricketts: As you know, we have had the practice for many years of the Prime Minister making a limited number of appointments in the diplomatic service. That is in the diplomatic service Order in Council, which is the power that successive Prime Ministers under different Governments have used. Of course, it is never easy for staff in the profession to see people coming from outside, but we have always worked well with the political appointees we have had and we are working very well with Baroness Amos now. I think I will leave it to Parliament to decide what to put in the legislation. All I can say, from where I sit, is that where political appointments are made under this power, we do everything in our power to work effectively with the appointees.

 

Q107 Sandra Osborne: So you don't see the value in capping it at three?

Sir Peter Ricketts: I don't want to venture into a territory that is Parliament's territory to decide.

 

Q108 Mr. Horam: The former Foreign Secretary, Lord Hurd, in a House of Lords debate on foreign policy in February 2009, said that "the Foreign Office in London-which is what I am mainly talking about-is ceasing to be a storehouse of knowledge providing valued advice to Ministers and is increasingly an office of management, management of a steadily shrinking overseas service... My main concern is that the Foreign Office in London has been hollowed out. I believe that it should, once again, consist of and produce a reserve of knowledge that can put advice from overseas posts in a strategic context, hold its own in arguments with the Prime Minister and with No. 10." It is not only Lord Hurd who has been saying that. That is a flavour of the views of many other people who have given evidence to the Committee. How do you respond to that?

Sir Peter Ricketts: I have the greatest respect for Lord Hurd, with whom I worked as an official for many years, but in this case I do not agree with him. I see every day the FCO at the heart of policy making on a whole range of difficult, important, fast-moving and complex issues, and leading Whitehall work on it. I do not really recognise the description "hollowed out". It is true that there are fewer people working in the FCO now than there probably were when Lord Hurd was Foreign Secretary, but the advances in IT mean that our ambassadors are absolutely central in the policy-making process. Whenever the Foreign Secretary has an office meeting to talk about the Middle East, Afghanistan, Iraq or Iran, the ambassador will be on a secure video teleconference, joining that conversation. So the ambassador's capacity to be part of policy making is greater than it was. IT means that when any policy is being thought about or developed, the embassy or consulate involved will be part of that policy making.

I think we are working much more effectively, using the very strong talents we still have for understanding and knowing about abroad in our embassies. They are part of the policy-making process in London. So I do not think the phrase "hollowed out" reflects the reality. The reality is that the FCO in London, working with our ambassadors, is still a real storehouse of knowledge and experience of abroad.

 

Q109 Mr. Horam: Would you agree that the involvement of the Prime Minister's office in No. 10 in foreign policy matters has increased over the years?

Sir Peter Ricketts: I think it has been increasing for generations. I think back to the second world war and the person who was most concerned with foreign policy in those days was the Prime Minister. The Prime Minister has had a leading role in foreign policy for generations. In terms of numbers, No. 10 is not expanding. It is a reality now that Heads of Government are very heavily concerned in foreign affairs, yes, but they depend very much on the FCO for support. They have tiny numbers in No. 10 and the Prime Minister is advised by us on a wide range of foreign policy.

 

Q110 Chairman: What about the national security strategy? Has that made any difference to what you do?

Sir Peter Ricketts: It is useful in setting a broad context for a lot of the work that we do and in drawing together the work of the Home Office, as well as the Department for International Development, the Ministry of Defence and ourselves on a whole range of issues. It certainly gives a context to the work I do, which is as the leading official on public service agreement 30 on conflict work. So yes, it is helpful as a broad context for our work.

 

Q111 Chairman: You have just re-established a strategy unit. Is that just a re-badging of the policy planning unit that you used to have?

Sir Peter Ricketts: Yes. It is the policy planning unit, plus our research analysts. We have put them together, so that instead of having two separate groups we have them in one directorate, but there is no other change. It is still the same reason why we set up the policy planning staff again three or four years ago when I arrived: to give us-exactly responding to Mr. Horam's point-enough intellectual capacity at the centre of the organisation to be sure that we were covering all the major issues.

 

Q112 Chairman: Have you assessed its impact yet?

Sir Peter Ricketts: It hasn't really been in existence long enough to assess its impact, but we will do so.

 

Q113 Chairman: Finally, a few very quick questions. The UK Border Agency, which most MPs have a great number of dealings with-I won't go into that-is now under the Home Office. Are you satisfied that UK policies on issuing visas and visa operations give sufficient weight to foreign policy implications? We occasionally get complaints from foreign Governments, or foreign politicians, about the difficulties that business men have in getting visas to come to this country. In some contexts, that is seen as some diplomatic slight and can cause complications. Do you think the Home Office and the Border Agency really understand the foreign policy implications of delays on visas?

Sir Peter Ricketts: I might ask Mr. Bevan to respond, because he leads the work in the Foreign Office on UKBA and migration.

James Bevan: Thank you. Yes, I think we are. Clearly, we are in a situation where the Government have been very clear, over the last period, that they want to tackle illegal immigration very effectively, while at the same time facilitating legitimate travel. UKBA recognise, with us, that those are both parts of its job. So I think we are clear on the strategy. On how it works, we have a very effective partnership. I sit on the UKBA board. There is daily contact between more junior officials on either side. Our staff are seconded to our respective organisations. We have a migration directorate in the Foreign Office that works on a daily basis with UKBA on the policy and operational issues. From where I sit, it does work. That does not mean that there are not sometimes different perspectives from the Home Office side or the Foreign Office side, but where those exist we have normally managed to resolve them through dialogue. At a practical level, the corporation is getting increasingly impressive. There was a good example last week. We managed to return a series of foreign national prisoners to Jamaica, which we had been waiting to do for a good time. That was the result of the Home Office and UKBA helping to identify and collect those prisoners, and the Foreign Office negotiating the prisoner transfer agreement with Jamaica and then working on the ground to make sure that it happened.

 

Q114 Chairman: So I can take it that if people complain about student visa problems and delays in getting to courses in this country, the Foreign Office is able to effectively persuade UKBA and the Home Office to take those concerns seriously?

James Bevan: Yes. That is a very good example. We did have concerns earlier this year, following the introduction of the new points-based system, that legitimate student numbers had gone down and we raised those with UKBA. It looked at some of the ways in which that system is being implemented, made some adjustments, and the numbers of legitimate students coming to the UK are now back up to the levels that they were previously.

 

Q115 Chairman: We do have some questions about public diplomacy, but given the time I think we will send you those in writing. Just briefly, are you happy with the planned restructuring and the revamp of your public diplomacy and structures that are coming through?

Sir Peter Ricketts: Yes, Mr. Chairman. We can respond in more detail in writing. I know that Chris Bryant has written to the Committee, but I think the ministerial oversight is good and the fact that we are now a campaigning organisation needs to be reflected in our structures for dealing with that.

Chairman: Thank you. Sir Peter, may I take this opportunity to wish all your staff a very merry Christmas? The Committee will be working very closely with you for the rest of this Parliament, but this is our final session with you on the annual report. We certainly welcome the co-operation we get whatever we are doing, whether it is in this country or abroad, and the hard work that we know that people in the FCO put in liaising with Parliament and assisting us in our work.

Sir Peter Ricketts: Thank you, Mr. Chairman. I will certainly pass that on to our staff. In return, may I reciprocate the warm thanks for the spirit in which the Committee works with all our staff around the world and in London? Thank you.

Chairman: Thank you very much.