Examination of witnesess (Questions 362 - 379)
TUESDAY 23 JUNE 1998
SIR JOHN
KERR, KCMG,
MR ROB
YOUNG, CMG,
MR FRANCIS
RICHARDS, CMG,
CVO, MR MICHAEL
ARTHUR, CMG
and MR ROLAND
SMITH, CMG
Chairman: Sir John,
may I welcome you and your colleagues again to the Committee.
The subject for today is the Departmental Report of the Foreign
and Commonwealth Office. Mrs Bottomley wishes to make a personal
statement immediately.
Mrs Bottomley: Chairman,
I do not intend to question Sir John on matters relating to the
British Council.
Chairman
362. Sir John, we have started late. We
have kept you and your colleagues and the public waiting. May
I apologise on behalf of the Committee for that. We were dealing
with some urgent private matters which had to be dealt with today.
I hope that all concerned will understand that apology. Sir John,
today we wish to cover the human and material resources available
to you as the Permanent Under-Secretary and your colleagues. Before
we turn to that perhaps you would introduce your colleagues to
the Committee.
(Sir John Kerr) Thank you, Chairman. I am accompanied
by Rob Young, Chief Clerk of the Foreign Office, Francis Richards,
who handles defence and intelligence questions and is a Deputy
Under-Secretary, Roland Smith, the Director of International Security
Command, and Michael Arthur, Director of the Resources Command.
Could I also mention sitting behind me somewhere the Editor of
the Departmental Report, Karen Stanton, who did a very good job
writing the report.
363. Sir John, the last year has been probably
one of the busiest for your Department in peacetime history. We
had the Commonwealth Heads of Government meeting, we had the first
six months of this year with the Presidency and many meetings
associated with that, and clearly there was a considerable strain
on the resources of the Foreign and Commonwealth Office. Greater
power status does not come cheaply. May I put it this way, that
the Ministry of Defence is going through a Strategic Defence Review.
They have sought to adjust to the reduced status of the United
Kingdom in the world since the 1960s withdrawal from east of Suez.
Some critics and, we understand, some Treasury critics, who visited
Posts overseas are not convinced that the Foreign Office has yet
gone through a similar recognition of our role in the world. How
do you answer such critics who say that essentially we need in
our foreign policy to go through the same recognition and same
process of readjustment as we have done in the field of defence,
and that this has not been done in terms of resources or personnel?
(Sir John Kerr) Thank you, Chairman. I absolutely
do not want to start any disagreement with Her Majesty's Treasury,
a Department for which I have great fondness, having served in
Her Majesty's Treasury. On many matters Her Majesty's Treasury
are a fount of wisdom. My answer to such criticism if it came
from any quarter would be first that such a downsizing (in the
American phrase) has already taken place. The budget of the Foreign
Office is down by 14 per cent in real terms since the start of
the Major Government. If one were to stick to the inherited plans
from the Major Government it would be down by another 12 per cent
in real terms by the end of the present Parliament. That would
represent a decline in the decade 1992 to 2002 of 24 per cent
in real terms. The UK based staff deployed at home and around
the world are down 25 per cent since Labour were last in office,
although we have since 1990 had to open 29 new Posts due to very
welcome changes in the world, a greater number of independent
states. The Foreign Office spends about 11 per cent of total Government
resources on overseas activity, and UK based FCO staff represent
about five per cent of the Government's total deployment of staff
abroad; of civilian staff abroad about 30 per cent. I would say
there has been a very considerable downsizing. I would also say
that I think there is a danger that downsizing can be taken too
far. I think there are opportunities which the United Kingdom
should be seizing round the world which a process of steady downwards
pressure, well illustrated in the cash tables in the Departmental
Report, will make it very difficult to seize.
364. Can you give us examples of those problems
where the strains are showing?
(Sir John Kerr) I think you can see the difficulties
of running mini-missions in, say, the newly independent countries
of the ex-Soviet Union. If you look at little posts like Tashkent,
Uzbekistan, we try to get by with two staff. If you look at Almaty,
Kazakhstan, we try to get by with three staff, UK based, and some
locally engaged staff as well. It is extremely difficult to behave
in a proactive way, to go out looking for the future leaders of
these countries.
365. Are you able to give comparative figures
of, say, our European partners for those sorts of Posts in the
former Soviet Union?
(Sir John Kerr) Indeed, Chairman. If you take
Tashkent, where we get by with two, the French have 17 French
based staff and the Germans 26 German based staff. They have locally
engaged staff as well. In Almaty we have three, the French have
10, the Germans have 18. I do not think they are getting it wrong.
I think that little posts like these do not really have critical
mass. What happens when you set up a post is that you generate
a lot of demand, which is good. People come to you to learn about
Britain. People come to you to learn about interesting British
businessmen. British businessmen come to you wanting help with
visas for their staff, payment of their contracts. If you are
not very careful, if the post is too small, you are there inside
the building all day. In countries like these we really do need
to be out and about, because what we should be doing is spotting
the opportunities for future business for British firms. We should
be establishing contacts with the people who are in Government
now and are going to be in government tomorrow. For that you need
a rather proactive mission. I am not sure you can do it satisfactorily
at the level of staffing we now have.
366. Given the limited resources and the
Mission Statement of the new Government with priorities somewhat
different from those of its predecessor, to what extent have resources,
manpower, other material resources, been redeployed consonant
with the new priorities?
(Sir John Kerr) The new priorities bite most clearly
in that part of Vote 2, which is our programme spending, which
is not pre-empted by international subscriptions. The larger part
of Vote 2 is pre-empted by international subscriptions, United
Nations subscriptions and others, over which we have no direct
control. We of course have a vote on the size of the UN budget
but we do not have a veto on the size of the UN budget and that
sort of demand-led expenditure means that the amount of free expenditure
on which we are able to make our own choices in London is about
£70 million. That is the amount of money that the Foreign
Office has (leaving aside Vote 3 and Vote 4 on the BBC and the
Council) for programme expenditure abroad. Inside that there has
been quite a large switch of priorities, with heavy new emphasis
on work on human rights, with our new Human Rights Fund, with
our little Commonwealth Human Rights Fund, with our changes to
what used to be called the UKMTAS, which is now the ASSIST programme
with a strong human rights element inside that. There has been
a switch towards conflict prevention; there has been a switch
towards more work on the environment. You can see how the priorities
are already affecting the distribution of resources. The problem
is that the amount of resources available for programme expenditure
is so very small. Vote 2 looks quite big but if you look at it
closely it is nearly all pre-empted by international subscriptions,
leaving about £70 million.
Mrs Bottomley
367. Sir John, if I can refer you to the
objectives of the Department on page viii of the report, certainly
it is an extremely impressive list of objectives but, following
on the Chairman's comments, it is difficult to see how you can
deliver those objectives even within the resources now available,
let alone with further reductions, particularly if we are talking
about some Posts having as few as three people. Can you comment
further on how you can achieve those objectives in anticipated
plans?
(Sir John Kerr) The objectives divide really into
the top five, which are general objectives: pursuing what are
clear United Kingdom goals like international peace and security,
objective one, and the bottom three, which are demand-led: the
protection of UK citizens abroad, entry clearance arrangements
and help for the Dependent Territories. If you take those that
are not demand-led, of course the amount that one spends on pursuing
international peace and security is entirely a matter of decision
and I am not maintaining that if we spent five pounds more the
world would be hugely safer, but I do think it is the case that
money spent on conflict prevention is often money extremely well
spent and moments when the world community has not stepped in
with observers or monitors or some attempt at reconciliation or
mediation, facilitation and negotiation, have often proved extremely
expensive moments. Rwanda is a classic example. The United Kingdom
has spent £100 million in Rwanda since 1994. Would the disaster
in Rwanda have taken place if the UN had put a serious presence
on the ground? I do not know but I think it might not have. The
amount that one devotes to international peace and security, if
I just take objective one as an example, is—you cannot prove
causality. You cannot say that the extra five pounds has prevented
something happening, but that is not an argument for not trying
to spend as much as you possibly can on these kinds of things.
It is in my view money very well spent.
368. I accept Sir John's point, and some
of us have returned from various visits last week and certainly
the group of which I was a part was enormously impressed by the
operation in Nairobi and the way in which they were advancing
human rights. That took manpower and skill and persuasion. It
seems as though the new objectives require more subtlety often
than the previous ones. I do not know whether the Permanent Secretary
would want to comment on some of the recent press cuttings suggesting
that there may be severe difficulties ahead. I noticed for example
The Times contrasting the staffing in the Foreign Office
with the numbers in France or Germany. I do not know if there
is anything more that the Permanent Secretary wants to add in
that context.
(Sir John Kerr) I hope, Mrs Bottomley, you are
not trying to tempt me into any kind of disagreement with Her
Majesty's Treasury.
369. Of course not. I was most impressed
by the Permanent Secretary's nobility of spirit. Having spent
much of this time of year regarding any Treasury official with
loathing and contempt, I admire the Permanent Secretary's attitude.
(Sir John Kerr) Fear is in order. Loathing I am
not sure is in order at all. I come back to what I said to the
Chairman. I think the downsizing has gone a very long way. I was
Head of Chancery in the Washington Embassy in the mid eighties
and I went back as Ambassador in the mid nineties. Our UK based
deployment in the United States was down by a third from the time
I had been there in the mid eighties to the time I went back in
the mid nineties. We had, it is true, increased our locally engaged
staff but not by so much. The Ministry of Defence had not made
any comparable downsizing. The Ministry of Defence establishment
in Washington was larger than the total establishment working
for the Foreign Secretary across the United States, but we have
downsized a very long way. We have in America, for example, four
Posts which have one UK based member of staff—one. One of
them is Seattle. Britain exports to Boeing more than a billion
dollars a year. I am not saying that the man in Seattle is responsible
for Boeing's choice of engines to go on its aeroplanes. Rolls
Royce do that. But the man in Seattle and the little operation—seven
people, and the rest of them are young US people locally engaged—is
extremely valuable to the penumbra of British components firms
who cluster about Boeing. The Microsoft story is there as well.
We do need to have a post on the ground in a place like Seattle.
We get by with one. We would do a lot more good if we had a few
more. We have a one person post in Cleveland, a one person post
in Miami, a one person post in Dallas. In Dallas it is coping
with the retail sector, which in Texas is serious stuff. Houston
is dealing with the oil industry. They share tasks. These posts
have been trimmed to the bone.
Chairman
370. But there will be a substantial penumbra
of locally engaged staff who will do the commercial work.
(Sir John Kerr) The commercial work is all led
by UK based staff and must be led by UK based staff. A lot of
the leg work on export promotion and on inward investment can
be done by locally engaged staff and in the case of the States
on inward investment we are pioneering, with the help of the IBB,
the Invest in Britain Bureau, a system of taking on (on locally
engaged terms) people seconded from UK companies in the UK.
Mr Rowlands
371. Sir John, you have told us so far that
you have downsized about as far as you can go if I have summarised
you rightly. You have said that there is evidence, for example
in conflict resolution, where you could actually save money ultimately
by limiting the size of the crisis, and you have also pointed
out the limits you can achieve with small Posts. As I understand
it, the whole concept of the Comprehensive Spending Review is
to compare the expenditure. It is not just comparing it within
Departments but comparing expenditure between Departments. From
what you have said are we going to be leading into a fundamental
discussion possibly of transfer of money from, say, the Ministry
of Defence to the Foreign Office or vice versa? Is the Comprehensive
Review actually delving into the question of comparative priorities
between Departments?
(Sir John Kerr) Yes. I do not want to be drawn
into a battle with the Ministry of Defence either, but it is the
case that there are papers circulating which look at the overall
balance of our effort abroad and consider whether that balance
matches objectives and priorities on behalf of the Government.
In a way, the pattern of overseas expenditure has grown up like
Topsy and it is important to have a look at it, relating it to
objectives.
372. The Comprehensive Review is actually
trying to produce a rationale to this Topsy arrangement. You led
me to ask this question: you mentioned almost in passing that
of course the Ministry of Defence had not downsized in the United
States in Washington. You made that comparison. Presumably, therefore,
in MOD/FCO considerations, is the DTI also part of this Comprehensive
Review of the overseas investments?
(Sir John Kerr) Yes, of course. I should say about
Washington of course it is very important that the British Defence
establishment should have a close liaison with the American defence
establishment and Her Majesty's Ambassadors in Washington, past,
present and future, would not in any way wish to play down the
value of that. As for the DTI, we of course work extremely closely
with the DTI on an integrated operation on exports and on inward
investment. We are increasing the number of secondments between
the two Departments. I do not think there is a difference of view
between the DTI and the FCO about the priority to be accorded
to commercial promotion, which is the first call on the resources
of the Foreign Office and the Diplomatic Service. That is the
number one priority for our work abroad.
373. I am trying to find out how very different
is the Comprehensive Spending Review procedure from the one we
had submitted to us in the form of the annual report, where each
year you get an annual expenditure determined and you tell us
what you have spent it on, and some projections of where you hope
to spend it. What is different about this procedure from previous
years other than what the Chancellor has already said, that it
is going to be a three-year affair?
(Sir John Kerr) I think the first difference is
a political difference. The new Government decided that it wished
to make a comprehensive and fundamental review inside Departments
just as between Departments. Everything that we have been doing,
everything that every Department has been doing, has been tested
to see if it makes sense to do it, if it can be done in an any
more cost effective way. That is the difference, I think. The
year has been devoted to really quite deep studies. In our case
the studies have involved a large number of working groups, an
exercise that Rob Young has co-ordinated, and of course it started
long before I came back as Permanent Secretary. It has involved
Treasury participation, participation from the centre, it has
involved a certain amount of contact with outsiders, it has been
a rather searching scrutiny subject by subject, so the building
blocks of the Comprehensive Spending Review report have been built
bottom up and that I think is the difference. Everything has been
looked at de novo.
374. If it is fundamental, and again can
I just ask the general question because I realise we are going
to have to wait for publication, has it turned up anything fundamentally
different about the way the office manages, finances and resources
itself?
(Sir John Kerr) I think it has turned up a number
of improvements we can make. I do not think it has turned up anything
which is—
375. Fundamental.
(Sir John Kerr) It has been down to the fundamentals;
it really has been down to the fundamentals, but I do not think
the changes that we will be introducing will strike anybody as
overturning the pillars of the temple. I think the reforms will
be very useful and they will make us more efficient than we were
before. Rob, would you like to add to that?
(Mr Young) No, Chairman, there is very little
to add. We have been through it all extremely thoroughly. The
normal PES round that used to be undertaken year by year before
this Government came in was thorough too but over a much shorter
period, as indeed was the Fundamental Expenditure Review in 1995,
which I think lasted about four months as I recall. This has lasted
a year and no stone has been left unturned in the analysis of
what Government Departments do and why, set against the objectives
which are becoming an increasingly important feature of our lives
as we move towards resource accounting and budgeting.
376. As you mentioned, Mr Young, this is
about the third fundamental review, certainly in my time. Has
it also turned up anything between Departments? Are we going to
see some significant adjustment of resource and expenditure between
Departments in the whole area of our foreign overseas representation?
(Sir John Kerr) I think, Mr Rowlands, we are in
the last stages and I do not think it would be wise for me—you
know, my feelings for the Treasury are very warm—to express
any view on what is likely to emerge within the next few weeks.
Mr Mackinlay
377. Sir John, you have been talking about
the Comprehensive Spending Review which the Foreign Office is
subject to, as with other Departments. Can I isolate something
which is separate from that, and that is the Strategic Defence
Review. We have been told, have we not, by Ministers that the
Strategic Defence Review, one, is complete, whereas the Comprehensive
Spending Review is not. The Strategic Defence Review has been
fed into that but they have done their work, and the Strategic
Defence Review was going to be foreign policy led. My question
to you is: what interface your Department had with the Ministry
of Defence exclusively on the Strategic Defence Review to see
that it was foreign policy led? How was that achieved, what were
the rubrics of that as distinct from its much wider canvas which
is the Chancellor of the Exchequer's baby?
(Sir John Kerr) It was achieved. The mechanisms
by which it was achieved were mechanisms that did not involve
me because I was at the time still in America. Could I ask Roland
Smith to refer to this? Of course we are under the same difficulty
in that we cannot attack the substance of what the Ministry of
Defence have concluded in their review, but I understand your
question is about the mechanisms by which we helped the Ministry
of Defence ensure that it was foreign policy led.
378. Absolutely, but I just want to reiterate
this. Their protestation is that this Strategic Defence Review
is not budget-led, it is quite separate from the comprehensive
spending round, it is foreign policy led, so, ipso facto,
you guys or your colleagues have had a big input in this, I assume,
and I want to know how this was done.
(Mr Smith) Especially in the first stage of the
review there was very strong Foreign Office involvement in working
out what are the future priorities for British foreign policy
that will have implications for British Forces. Of course to some
extent this involves crystal ball gazing because you have to try
to work out what sort of tasks you may require defence forces
for, but there was a strong Foreign Office involvement, including
by the Foreign Secretary personally. That also included three
public seminars, two held in London and one held in Coventry,
at which outside experts were also invited to participate, including
a number of Members of the House, and in which the Foreign and
Defence Secretaries also participated, so that there was not only
a Foreign Office input but also a wider input into the policy
that would lead the review.
379. Yes, but I understand for instance—and
I am repeating terminology I pick up on my visits—that there
is an arc of influence, an arc of interest, as it were. That is
clearly a foreign policy matter as much as a defence matter, perhaps
more so. Are there ever discussions about whether or not, because
of the constraints, you have to reduce your arc of interest or
make it conditional? With respect, it does seem to me that seminars,
as lovely as they are, are not hard stuff. Presumably somebody
has to sit down and say, "Look; whilst we cannot crystal
ball gaze in total, if you are going to have armed forces of X
size you have got to realise that this would limit us in certain
geographical spheres or to the extent that we can have power projection
or"—I forget the terminology that Sir John used, but
you get my drift. I would have thought presumably some very stark
options have to be thrown up to Ministers of both Departments,
do they not?
(Mr Smith) That process is continuing throughout
the review and when the results of the review are published I
think you will see how the foreign policy priorities and the resulting
defence decisions are closely linked and the one built on the
other.
|
