Conclusions and recommendations
1. Despite
the impressive performance of the Foreign and Commonwealth Office
in representing the UK's interests across the globe with what
is, in Governmental terms, a particularly small budget, we believe
that the FCO is under-funded. This situation has been exacerbated
by the Spending Review 2010. In this context, we conclude that
the lack of detail provided by the FCO and the BBC World Service
as to exactly how the spending reductions target set by SR2010
will be met is disappointing. While there is no doubt that meeting
the targets set by the Spending Review will be challenging and
will require much planning and forethought, it is equally disappointing
that the FCO has not yet planned how a reduction of £40 million,
or over one-third, of its programme spending will be achieved.
(Paragraph 13)
2. Given
the lack of detailed plans available for scrutiny we do not at
this time pass further comment on the overall strategy pursued
by the Foreign and Commonwealth Office and the BBC World Service
in meeting its budget reductions, except to reiterate our earlier
conclusion that SR2010 may turn out to have had a very damaging
effect on the Department's ability to promote and safeguard UK
interests overseas. We would expect information on how the FCO
and the BBC World Service plans to reduce its spending throughout
the Spending Review - including information on which services
or programmes are to be curtailed - to be made available to us
in response to this Report. We further recommend that both bodies
continue their current welcome practice of writing to us in advance
of major announcements and changes to their respective organisations.
(Paragraph 14)
The FCO's Overseas Property Network
3. The
"Network Shift" represents a substantial change in the
FCO's global footprint. The recalibration of FCO posts towards
growing regional powers and expanding economies is a welcome move,
but we regret that this change comes at the expense of, rather
than being supplementary to, posts elsewhere. We note that the
FCO intends the Network Shift to be resource neutral and that
it should not impact on the Department's financial performance
in this, or future, years. (Paragraph 20)
4. We
conclude that the FCO's internal target of achieving £60
million of assets sales per year, and reinvesting this sum back
into the overseas network, must be considered extremely optimistic;
for this target to be reached, the FCO will need to sell, every
year of the spending review period, properties with a total value
three times the total value of those properties sold in 2009-10.
We believe that the FCO will not be able to reach this target
without inflicting serious damage on its overseas network. We
will monitor developments in this area closely and we therefore
recommend that the FCO henceforth provide regular updates of progress
towards meeting the Department's internal sales and reinvestment
target. (Paragraph 26)
5. We
further conclude that recently introduced Treasury rules mean
that the FCO clearly has incentives to sell property early in
the financial year and invest it straight afterwards regardless
of market conditions, in order to get "the money out of the
door" rather than having to return funds to the Treasury.
We do not believe that it will be possible for the FCO to ensure
value for money for the taxpayer under such conditions, and there
must be a strong case for greater flexibility in the application
of these rules. We recommend that the Government change the Treasury's
rules in this instance and allow the FCO to carry forward proceeds
from asset sales from one year to the next within the Spending
Review period giving the FCO more time to reinvest the proceeds
in new assets. (Paragraph 27)
6. We
have long believed that, if we are adequately to scrutinise the
FCO's performance in managing its overseas properties, we need
to be told in advance of the Department's plans. The agreement
of the FCO to inform us of properties which it plans to sell,
rather than just those that have been sold, on a quarterly basis
is welcome. However, our conclusion in last year's Report that
the FCO's internal sales target "may create an unwelcome
incentive to sell historic or prestigious buildings" has
been substantiated by the refusal of FCO officials to rule out
unequivocally the sale of iconic or nationally important overseas
posts in the life of this Parliament to finance new capital investment.
We recommend that, in its response to this report, the FCO rule
out the sale of any iconic or nationally important property in
the lifetime of this Parliament. Alternatively, if the FCO does
intend to sell such buildings in the life of this Parliament,
we recommend that the FCO highlights any iconic or nationally
important properties when it fulfils its commitment to provide
the Committee with a list of properties it plans to sell. (Paragraph
32)
Staffing
7. The
"Diplomatic Excellence" programme, and the consequent
emphasis on increased skills for UK diplomats, is welcome. However,
we question whether it will be able to reverse the long-term trend
for the FCO to emphasise "management" over "traditional"
diplomatic skills. We recommend that the FCO view the "Diplomatic
Excellence" programme as the start of a process which will
ultimately lead to a re-prioritisation of diplomatic skills within
the FCO; such a process may eventually require a change in promotion
criteria. (Paragraph 37)
8. We
acknowledge the Foreign Secretary's commitment that the EEAS will
not be a substitute for UK delegations overseas. However, the
EEAS will impact on the FCO's capacity to promote and safeguard
the UK's interests overseas. A recruitment freeze on the FCO throughout
the Spending Review period will see a reduction in FCO headcount;
at the same time the FCO aims to ensure that UK diplomats are
working within the EEAS. The establishment of the EEAS will therefore
place further strain on the FCO's resources. We recommend that,
in response to this Report, the FCO sets out the number of UK-based
staff it hopes will enter the EEAS and how this cohort of talented
UK staff based in the EEAS will impact on the FCO's ability to
conduct foreign policy. We further recommend that in its response
to this Report, the FCO provides an assessment as to whether to
date the establishing of the EEAS has been a help or a hindrance
to the FCO in promoting and safeguarding the UK's interests. (Paragraph
40)
9. We
conclude that the decision to reduce the number of overseas postings
for UK-based FCO staff is an error. We believe that our conclusion
last year that the spending reductions demanded by the SR2010
could "have a serious effect in terms of the UK's relations
with other countries, out of all proportion to the amounts of
money involved" is borne out by this move. This decision,
driven by the desire to save the relatively small sum of £30
million per annum, highlights the strain that successive spending
reductions have placed on the FCO's operations. (Paragraph 44)
10. Aside
from the lost opportunities for junior UK-based staff and the
consequent and acknowledged harm to staff morale, we conclude
this decision could also reduce the ability of the FCO to react
to crises overseas. Events of the past year have shown how vital
it is that the FCO can respond quickly to developing crises with
a cadre of trained staff with experience of the relevant country
and region. That the FCO is voluntarily choosing to reduce this
resource is a highly questionable decision; we recommend that
the Government find the relatively small sums needed to reintroduce
overseas postings for A and B Band staff in order to ensure that
the FCO possesses the skills and experience to respond to developing
crises overseas. (Paragraph 45)
Future governance of the World Service
11. We
have reported already to Parliament on the World Service's plans
to adjust to a reduced Government grant-in-aid by reducing services.
In response to our Report, the FCO allocated additional funding
to the World Service in order to preserve some important services.
We do not intend to expand upon our earlier Report conclusions
here, except formally to welcome the additional money allocated
by the FCO to the World Service in June 2011. (Paragraph 51)
12. In
our Report earlier this year, we made a firm recommendation that
a formal concordat giving the Foreign Secretary the power to stipulate
a minimum level of service provision and strengthening BBC World
Service representation at the highest levels of BBC governance
was necessary if the World Service was to be protected from financial
pressures originating elsewhere in the BBC. We are disappointed
that the Government rejected our recommendation. However, we have
noted Lord Patten's assurances that the more "informal"
governance arrangements to be put in place can provide the level
of budgetary protection the World Service needs. This places a
large responsibility on the performance of the International Trustee
and we seek assurances that the support shown by Lord Patten to
the World Service is shared by all members of the BBC Trust. (Paragraph
52)
13. We
plan for our evidence sessions with the Chairman of the BBC Trust
and the International Trustee to become an annual arrangement.
The transfer of funding responsibility to the BBC from the FCO
will inevitably reduce Parliamentary oversight of the World Service
by preventing the tabling of written or oral questions to Government
Ministers on the performance of the BBC World Service. In this
context, we welcome the assurances from Lords Patten and Williams
that the transfer of funding responsibility for the BBC World
Service from the FCO should not diminish this Committee's oversight
of the operation of the World Service. If from our regular sessions
it becomes clear that the governance arrangements are not working
adequately, we reserve the right to again recommend that the more
formal concordat, as we originally recommended in April 2011,
be immediately drawn up and adopted. We further recommend that
the Foreign Secretary do not rule out using his influence, as
the man who currently holds the purse strings, to insist that
Lord Williams' role be amended to give him, ex officio,
a place on the BBC Executive Board. (Paragraph 53)
The British Council
14. In
last year's Report we concluded that the SR2010 financial settlement
would put the British Council's budget under "great strain"
and "may well trigger some fundamental rethinking of the
role and work of the Council". One year later, we conclude
that this is indeed the case. The planned reductions in the Council's
presence in the developed world have been directly attributed
to a reduction in the FCO's grant-in-aid and the wider changes
announced by the British Council in response to the sharply reduced
grant-in particular the much greater emphasis on commercial activity-will
lead to the British Council becoming a substantially different
organisation by the end of the Spending Review period. (Paragraph
62)
15. We stated last
year that SR2010 posed a significant challenge to the British
Council and we are pleased to see this challenge tackled and a
plan put in place to adapt to a change in financial circumstances.
However, we remain concerned that such an emphasis on commercial
activity will detract from the British Council's primary purpose
to "build engagement and trust for the UK through the exchange
of knowledge and ideas between people worldwide". We accept
that in many ways commercialisation of the British Council is
unavoidable and driven by decisions made by central Government,
but nevertheless we remind the British Council that it must place
its primary purpose at the core of all its activity, commercial
or otherwise, and must not become predominantly an international
English language school rather than a promoter of the UK's reputation,
culture and influence. (Paragraph 63)
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