House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Twelfth Report

THE FOREIGN AFFAIRS COMMITTEE HAS AGREED TO THE FOLLOWING REPORT:

FCO ANNUAL REPORT

1. In June, the Foreign and Commonwealth Office (FCO) published its Departmental Report for 2002, setting out its performance over the previous 12 months, as well as its plans for the period to 2003/04, together with financial and budgetary information, including spending projections.[1]

2. In the last Parliament, the Foreign Affairs Committee conducted an inquiry each year, using the FCO Annual Report as a basis for scrutinising the administration and expenditure of the FCO.[2] This is the first occasion on which we have had the opportunity to continue that practice.

3. On 16 July we heard oral evidence from Sir Michael Jay KCMG, Permanent Under-Secretary of State, and other senior officials at the FCO.[3] The written evidence we received from the FCO in response to specific questions we posed is published together with this Report.[4]

4. In this Report, we consider first the form and content of the Annual Report itself; then administrative issues, notably the response to the events of 11 September and entry clearance; plans relating to the country's worldwide diplomatic presence; the results of the 2002 Spending Review; how the FCO manages its money and its assets; and finally, staffing issues.

Form and content of the Annual Report

5. We are pleased to note that many of the recommendations of our predecessor Committee relating to the format of the Annual Report have been taken into account, and that in general there have been improvements in the Report to both the clarity of presentation of information and the ease of access to this information. Inevitably, in this section we concentrate on aspects of the Annual Report where we believe that there are still improvements to be made. We would not wish our commentary to disguise the fact that in general the Annual Report is well constructed and well presented, and a credit to those who have produced it. We do, however, have continuing concerns about the financial information contained in the Annual Report. We also comment on the presentation of the FCO's objectives, and its use of cost-benefit analyses.

PRESENTATION OF FINANCIAL INFORMATION

6. The financial information contained in the Annual Report is not as well organised, presented or explained as it could be; it contains a number of mistakes; and there is information omitted which in our view it would have been useful to include.

7. Our predecessor Committee recommended in 2001 that "the FCO review how it presents financial information in its Annual Report, with a view to making that information more accessible, more detailed and more relevant to the concerns of those who are likely to use the Report".[5] In its response, the Government promised to "pay particular attention" to this recommendation in future Reports, but noted that "much of the financial information to be presented is prescribed by the Treasury".[6]

8. Chapter 2 of the Annual Report contains "Key Financial Information". This information is indeed important, but much of it—summary resource plans in particular[7]—will be incomprehensible to the lay reader. It is counter-productive to provide this information at such a prominent position in a document which is intended to be read by the general public. Most other Government departments do not do so, so it cannot be a requirement imposed by the Treasury. Information currently tucked away at the back of the Annual Report, on FCO budgets broken down by Departmental objective, is likely to be far more interesting—or at least more meaningful—to the average reader.[8] It would be more useful if this information were given prominence. We recommend that the FCO ensure that financial information given prominence in future Annual Reports is accessible to the lay reader.

9. Bald information on Departmental Expenditure Limits and Annually Managed Expenditure is by its nature not easily comprehensible. But this is not helped by the way in which the information has been presented. Other Government Departments—the Department for International Development, for example—present this information in a more readily digestible format.[9] We recommend that the FCO re-examine the format in which it presents financial information, to ensure maximum readability and accessibility.

10. The way in which financial information is distributed throughout the Annual Report is also more confusing than helpful. Figures are provided at the beginning of chapters 5-13 of the Annual Report, on expenditure for each of the FCO's objectives. Further figures are provided at Tables 34 and 35 of the Annual Report on FCO budgets by objective.[10] It is unclear from the Annual Report what if any relationship these sets of figures have to one another. The FCO has explained to us in writing that the two sets of data cannot easily be compared, and that, as required by the Treasury, one set of figures gives total spending on each objective, with the other setting out how much of this money has been contributed by taxpayers.[11] This does not appear to be explained in the Annual Report itself. We recommend that the FCO ensure that in future Annual Reports there is adequate explanation of the basis on which financial information is calculated.

11. The financial information provided in the Annual Report is not only difficult to understand, but moreover is not always correct. In response to our written questions, the FCO has discovered that the information provided at Tables 34 and 35 of the Annual Report is inaccurate.[12] There also seems to be a problem with the pie charts at the beginning of Chapters 5-13. According to the FCO, these pie charts are "associated" with the tables that appear with them.[13] If so, this is an association that eludes us. In Chapter 9, for example, the figures given in Table 9 suggest that in 2000/01, FCO expenditure on Impact/Respect amounted to 33 per cent of the Office's total expenditure by objective.[14] In the "associated" pie chart, however, the proportion is given as 20 per cent.[15] We recommend that the FCO take greater care to ensure that future Annual Reports contain correct financial information before going to press.

12. We wrote to the FCO, asking why it had not provided in the Annual Report information on "past and projected expenditure for each of the commands, and for each major post abroad" as our predecessor Committee had requested.[16] The FCO explained in reply that "resource accounting and budgeting encourages Departments to allocate expenditure in order to achieve objectives, rather than by country", that "the FCO is not organised and managed on a purely geographical basis" and that "geographical and Post data can be compiled accurately only after the end of the financial year, too late for inclusion in the Departmental Report".[17]

13. The FCO has provided us with information on the top 20 posts by spend for 1999/2000 to 2001/02 and with figures for the FCO's resource budget by command for 2001/02 to 2003/04.[18] We appreciate that a breakdown of spending by posts and by command cannot give a full picture of the FCO's finances. Nonetheless, we find the information provided to us by the FCO useful as a rough indication of its geographical priorities. We recommend that the FCO seek, within the boundaries of Treasury guidance, to include in future Annual Reports the most up-to-date information that it holds on spending by posts overseas and on the FCO budget broken down by command.

DEPARTMENTAL OBJECTIVES AND SERVICE DELIVERY AGREEMENT

14. The FCO's objectives and Public Service Agreement (PSA) targets are set as part of each biennial Spending Review, in agreement with the Treasury. The FCO's most recent set of objectives and PSA targets was agreed in July 2002, after the publication of the Annual Report. The substance of these is considered below.[19] The objectives and targets for 1998 and 2000, together with a useful analysis of progress, are set out separately.[20] But there is no analysis of how and why the objectives and targets changed between the two dates. This is surprising, in the light of the undertaking given by the FCO to our predecessor Committee to underline changes in objectives so that comparisons can be made.[21]

15. We asked the FCO to explain to us how the PSA targets agreed in 1998 relate to those agreed in 2000. Their response is set out in the written evidence accompanying this Report.[22] We find it useful to be able to see at a glance how the FCO's priorities shift over time. We recommend that the next Annual Report should contain a comparison between the FCO's public service agreement targets as agreed in 2000 and in 2002, and that similar comparisons should appear in subsequent Reports.

16. The FCO's Service Delivery Agreement (SDA) explains how the Office intends to meet its targets. Although this information is available on the FCO's website,[23] it does not appear in the Annual Report itself. The Annual Report presents an opportunity for the FCO to set out its stall to the public, and it is therefore right that it should contain an explanation of how the FCO intends to achieve its goals. We welcome the FCO's undertaking to publish their Service Delivery Agreement in future Annual Reports.[24]

COST-BENEFIT ANALYSES

17. The benefits that diplomacy can bring at relatively little financial cost are not always widely known or appreciated. In response to a recommendation from our predecessor Committee, the Annual Report contains an analysis of the costs and the benefits of various activities which the FCO has been carrying out over the past year.[25] We are pleased that the FCO found the exercise "extremely helpful" as a way "in which we [the FCO] can measure our output and demonstrate the value which we do add".[26] We believe that by doing its utmost to explain to the public the benefits that it brings, the FCO can raise the profile of diplomacy, and the level of respect that such work commands. We recommend that the FCO should publicise, in future Annual Reports and elsewhere, the benefits that it has achieved at relatively little financial cost, and that it should also be prepared to admit where projects have failed to produce the benefits expected of them, with an explanation of why this was the

case.

11 September Response

18. The FCO's response to the events of 11 September is rightly prominent in the Annual Report. We have discussed in detail policy aspects of the United Kingdom's response to those events in our Report on Foreign Policy Aspects of the War against Terrorism.[27] But the response at an administrative level was no less crucial. As the Annual Report explains, this involved providing immediate information and assistance to the families of British victims, and changing security advice for British citizens around the world, as well as co-ordinated and global action "to bring the perpetrators of the 11 September atrocities and their backers to justice, and to prevent a recurrence."[28]

19. The immediate response was indeed impressive. 24-hour consular emergency units were established in London and New York on 11 September itself, and on the same day members of the Counter Terrorism and Security Policy Departments set to work on a round-the-clock basis. On 14 September a separate 24-hour consular planning cell was established in the FCO. On 16 September the Consulate-General in New York set up a family centre, followed on 17 September by a media centre.[29] The FCO provided assistance to more than 250 people who visited New York after 11 September, and a full-time unit of Protection Officers has been set up to meet the continuing needs of victims' families.[30]

20. It is clear that in the aftermath of the events of 11 September FCO staff worked at hours and under conditions which were far from routine. We are pleased to repeat here our appreciation expressed in our Report on British-US Relations of the hard work and dedication of FCO personnel,[31] and to observe that the swift response by the FCO to the events of 11 September was achieved thanks to its staff at all levels.

CRISIS PREPAREDNESS

21. The events of 11 September and the ongoing war against terrorism have underlined the need for the FCO to be in a state of heightened preparedness for future crises. One of the consequences of the fall of the Taliban in Afghanistan was the need rapidly to re-establish a diplomatic presence in that country. Sir Michael identified in oral evidence some of the key factors affecting the FCO's ability to do this, noting that although the United Kingdom had been one of the first countries to set up an embassy in Kabul,

"looking back on it, we would like to have been able to set that up a little bit more quickly and a bit more fully than we did. One of the lessons there again goes back to the flexibility of the diplomatic response. Can we find ways in which we can have almost a rapid-reaction embassy, rather as the Department for International Development respond very quickly to disasters abroad? Can we work out ways in which we have the communications, the people and the linguists ready at very short notice to deploy a diplomatic presence overseas when faced with a situation like Afghanistan? We are working on that at the moment."[

22. Peter Collecott, Sir Michael's deputy, explained that the two main constraints to rapid deployment of diplomatic staff are premises and personnel. In Kabul, "the physical nature of the compound there imposed restraints on the degree, the timing and the speed with which we could put in place the communications and other equipment that we would want to operate normally."[33] One solution suggested to us was "20 ft. containers which are fitted out as offices and which would provide some secure, rather quick alternative to the long process of finding new buildings and making them secure".[34] We recommend that the Government, in its response to this Report, should set out what progress has been made in expediting the FCO's response time to the need to establish new diplomatic premises overseas, with particular reference to the use of containers.

23. As for personnel, the new Prism management system, which we discuss further below,[35] is intended to help in the rapid identification of staff with the necessary skills, background and language.[36]

24. The United Kingdom's diplomatic staff retire not later than the age of 60, which is earlier than in some other diplomatic services. A number take on outside appointments, others who remain physically and intellectually fit do not draw on their reservoir of experience. We recommend that consideration be given to establishing a register of former diplomatic staff prepared to be brought out of retirement for limited periods to respond to crises such as that in Afghanistan.

25. We have heard that the FCO's diplomatic response post 11 September "was somewhat more ad hoc than we would wish".[37] In the circumstances, this is hardly surprising. But we were also reassured that the FCO is better prepared now for an emergency situation than it was last September:

26. However, despite Sir Michael's assurances, the FCO's ability to respond to a crisis remains less than entirely satisfactory, at least at the level of personnel deployment. This was confirmed by the aftermath of the terrorist attack on Bali on 12 October. In a statement to the House on 21 October, the Foreign Secretary said that he was "very sorry that shortcomings in getting sufficient extra staff on the ground in Bali early enough last week exacerbated the terrible burden that the families were under in any event".[39] We asked a former Head of the Diplomatic Service, Lord Wright, whether he believed there is a need for the FCO to develop a rapid response capability. He saw merit in the idea, "but in a sense I think what you need is a flying squad of counsellors ... people who can counsel the victims and their relations and that is a very specialised task which I would see as being quite a difficult one for Foreign Office officials to conduct themselves."[40]

27. One way of meeting the need for such specialist assistance might be for the FCO to maintain a register of appropriately qualified people who would be prepared to travel at short notice to the scene of an emergency; another might be for the FCO to work closely with charitable organisations which already possess the relevant expertise. Certainly, to be better prepared for future crises, and for future unexpected opportunities, is one of the central challenges facing diplomacy in a more uncertain world. We recommend that the next Annual Report should report progress on the development of systems for responding to international crises and for the rapid deployment of serving or retired diplomatic, consular or other personnel in response to changing circumstances worldwide.

SECURITY OF STAFF OVERSEAS

28. The security of staff overseas has been an ongoing concern of ours, and of previous Foreign Affairs Committees. This concern has an added dimension in the light of the events of 11 September 2001 and the subsequent security threat to British interests in Pakistan, which led in May to a reduction in the number of diplomatic staff posted there.

29. We sought reassurance from Sir Michael that the FCO is sufficiently resourced to provide all staff overseas with the appropriate level of protection. He told us that "one way or another, ... we would ensure that we had the money so that our staff had the close protection we judge necessary. After September 11th, there was, as you can imagine, a tremendous increase in security requirements worldwide ... we increased our security spending quite markedly in order to meet that. That was an absolute requirement. That will continue to be so."[41] This is no less than we would expect. The security of staff must be an absolute priority.

30. We would be concerned, however, if the FCO were having to reduce spending in other areas in order to fund its security costs. We note that Peter Collecott told us that "money is, of course, an issue. We have to fund the close protection teams in all but the very shortest timescale."[42] We recommend that the Government set out in its response to this Report how the FCO has been funding its increased security costs since 11 September, to what extent these costs have been met by new money, and to what extent by scaling back other activities.

31. In its last Report, our predecessor Committee commented that the killing of Brigadier Stephen Saunders in Athens in June 2000 "underscored the vital importance of ensuring through a process of constant review and the taking of precautionary measures that the United Kingdom's representatives abroad are adequately protected from terrorist or criminal attack".[43] We were encouraged by the news in July that arrests had been made and charges filed in Greece in connection with the murder, apparently following substantial assistance from the British authorities.[44]

SECURE COMMUNICATIONS

32. For a diplomatic mission to operate effectively, secure communications are vital. Our predecessor Committee, during its inquiry into Sierra Leone, criticised the Government for failing to supply secure communications equipment to diplomatic staff who had been required to vacate their usual premises at short notice.[45] Both technology and the Government's preparedness seem to have improved since then, with the availability of shrink-wrapped satellite telephone units, and the provision of properly secured alternative premises where there is a serious risk that a mission might need to be vacated at short notice.[46] Consideration might also be given to the circumstances in which it might be appropriate to relocate in the embassy of a friendly government, particularly that of an EU partner. We recommend that the FCO include in its response to this Report updated information on its ability to provide secure communications facilities to its diplomatic staff, wherever they may be in the

world.

Entry clearance issues

33. Our predecessor Committee commented last year on the "serious problem" of delayed replies to Members' letters relating to entry clearance cases.[47] The Visa Correspondence Section at the Joint Entry Clearance Unit (JECU) has a target of answering 90 per cent of Members' correspondence within 15 days. In 2000, only 50 per cent of letters were answered within this time scale;[48] in 2001, 78 per cent of responses were answered on time.[49] We note this progress, but are nonetheless a little surprised that the target has not been met, given the assurance to our predecessor Committee in evidence last year that "since the turn of the year we have acted on the advice the Committee gave, and we have over 91 per cent response rate on time".[50]

34. The tone this year seems to be rather more cautious. We were told that "this is an issue which we are going to have to continue to work at in those same old ways to, if you like, grind down the problem and make ourselves more effective and more efficient and get the number up from 78 to as near 90 as we possibly can".[51] We look forward to further progress in this area.

35. Visa-issuing posts are often the first contact that overseas nationals will have with the United Kingdom. This is only one reason why attention should be given to the treatment of people who apply for visas at British posts overseas. It is important that applications should be processed as quickly, efficiently, humanely and fairly as possible. We acknowledge the improvements made by posts such as Istanbul in reducing waiting times for visas.[52] Just as important as speed, however, is that those applying for visas are treated politely, professionally and with dignity. We welcome Sir Michael's statement to us that "any case is unacceptable if people are not treated well".[53]

Co-location

36. The FCO has been exploring ways of expanding its diplomatic presence while limiting the costs associated with establishing free-standing fully staffed missions. We are certainly in favour in principle of innovative and experimental projects. One relatively conventional solution being employed is co-location—sharing facilities with other organisations, usually diplomatic missions from other countries. An example is the building currently under construction in Dar es Salaam, designed to house the British, Dutch and German diplomatic presences, as well as offices of the European Commission.[54] In some locations, where a prominent British presence is not felt to be appropriate, such projects are eminently sensible. They can reduce the costs associated with the construction and maintenance of buildings, as well as outgoings on security and other

services.

37. Sir Michael has alerted us to a more unusual co-location project, on which we have subsequently received written evidence from the FCO.[55] This is a project to open an FCO office in the French Embassy compound in Niamey, Niger, to be staffed for one week a month by an officer travelling from the British Embassy in Abidjan, with cover for the rest of the month by a locally engaged officer—what Sir Michael has described to us as "an extremely effective way, at a low cost, of getting influence in a country which may become increasingly important in Africa".[56] There are also plans to base an officer full-time for one year in the US Embassy in Monrovia, Liberia.[57]

38. We have our doubts about whether an effective diplomatic presence can be achieved by working out of another country's embassy for one week a month. This is an innovation, however, and it is under trial in a country in which until now no UK-based diplomatic staff whatsoever have been present. We would be concerned if the British presence in any country were scaled back in favour of this sort of project. We conclude that the FCO is right to consider whether there are ways in which it "can deploy [its] network of posts overseas more flexibly or more efficiently",[58] but that it must guard against any risk that attempts to meet efficiency targets set by the Treasury might jeopardise the effectiveness of its diplomatic and consular activities.

Spending Review 2002

39. The results of the Spending Review for 2002 were announced on 15 July, the day before we heard oral evidence from Sir Michael in connection with this inquiry. The Review provides for an increase in FCO spending (excluding conflict prevention) of £219 million per year between 2002-03 and 2005-06, equivalent to growth of 2.8 per cent per year after inflation. Sir Michael described the settlement to us as "somewhere between respectable and good".[59]

2002 PUBLIC SERVICE AGREEMENT TARGETS

40. New Public Service Agreement targets have been agreed with the Treasury as part of the Spending Review. The nature of the FCO's work means that the success of many of its targets is difficult to measure objectively—how, for example, it will "reduce tension in South Asia" or "strengthen European security". Where success is easily measurable (and often where it is not), it is usually the case that the FCO is only one contributor among many. It aims for example to "secure agreement by 2005 to a significant reduction in trade barriers", but whether or not this particular target is achieved may in the event have little or nothing to do with the activities of the FCO. It is a target shared not only, as stated, with the DTI and DfID, but also with the Governments of numerous other countries, international organisations, businesses and pressure groups. We conclude that the objectives and targets set out in the 2002 Spending Review reflect with relative accuracy the work and aims of the FCO, but that it is hard to envisage how the FCO's contribution to achieving (or failing to achieve) these aims can be realistically assessed.

41. One new target relates to the reduction of opium production in Afghanistan—a goal which is given new salience by recent news of a record opium harvest there.[60] This reflects a new prominence given in the work of the FCO to the fight against international crime, drugs and people-trafficking. Under questioning, Sir Michael stressed that the FCO will be contributing to this target, not achieving it single-handedly, but we remain uncertain as to how significant or effective this contribution will in fact be.[61] We recommend that the next Annual Report should explain how the FCO has contributed to the reduction of opium production in Afghanistan over the previous twelve months.

GLOBAL OPPORTUNITIES FUND

42. A new Global Opportunities Fund (GOF) is one of the main purposes for which extra resources have been made available in the 2002 Spending Review. Sir Michael has told us that the Fund aims to "support British interests overseas", focussing on "economic governance, human rights, promotion of democracy and the fight against drugs and crime".[62] Sir Michael was unable to tell us how applications for money from this new Fund will be made. [63] Indeed, we have been unable to get a clear idea of how the GOF will work in practice, and the sorts of projects that it will be sponsoring. A number of the areas on which the GOF will be focussing—democracy building, human rights and good governance, counter-terrorism and the fight against drugs and crime—would also seem to fall within the scope of the pre-existing Human Rights Project Fund and Conflict Prevention Funds. We recommend that the Government clarify in its response to this Report how the Global Opportunities Fund will work, the sorts of projects that it will sponsor, how applications for funding will be made, and what differentiates the GOF from pre-existing sources of project funding.

CHEVENING SCHOLARSHIP PROGRAMME

43. During our recent inquiry into Turkey, we were dismayed to discover that the resources available to fund Chevening scholarships—awarded by the FCO to outstanding overseas graduates for post-graduate study in the United Kingdom—were so limited that the FCO was having to reduce allocations to a country as important as Turkey. We recommended in our Report at the time that "the Government find a means of raising Chevening allocations to Turkey to their former level, either by the redistribution of available funds or by applying to the Treasury for an increased total allocation in the next public expenditure round".[64] We are therefore delighted that additional funding for Chevening Scholarships was agreed during the 2002 Spending Review.

BBC WORLD SERVICE AND BRITISH COUNCIL

44. We and previous Foreign Affairs Committees have consistently attached great importance to the work of the BBC World Service and British Council. Wherever we travel in the world we make it our business to inquire into the work of the Council and the World Service, and normally visit their premises and meet their staff. In many of our inquiries, we take evidence from both bodies. We have long been deeply impressed by the value for money which both the World Service and British Council give in promoting the objectives of the FCO overseas. In the context of the war against terrorism, the reach of the World Service and British Council is crucial. For example, the World Service is the primary information source in Afghanistan.[65] The British Council is a key player in strengthening dialogue with the Islamic world.[66]

45. We took oral evidence from the Director of the BBC World Service and from the Chairman and Director-General of the British Council on 7 May.[67] Both organisations bid for substantial extra funds in the 2002 Spending Review. Following the evidence session, we wrote to the Foreign Secretary, giving our support for the acceptance of the bids in full. We also support—and are pleased that the Government has continued—ring fencing of funding for the British Council and BBC World Service.

46. We are delighted that both organisations in the event received a substantial uplift in real terms, which they welcomed.[68] The World Service bid for an uplift of £72 million over three years and will receive £48 million. The British Council bid for an extra £58 million over the same period, and will receive an increase of £28 million. During our evidence session, the World Service and British Council were unable to tell us how their plans would be affected if their bids were not met in full.[69] We recommend that the Government set out in its response to this Report how the plans of the BBC World Service and British Council have been affected by the results of the 2002 Spending Review.

BBC WORLD TELEVISION

47. For historical reasons, BBC World Television is not supported by public funds: the licence fee does not pay for it, and there is no grant-in-aid as there is for the BBC World Service's radio and Internet services. It is a self-financing commercial operation, funded by advertising and subscription. Our predecessor Committee has noted the international reputation that BBC World has for the objectivity and depth of its reporting,[70] but has also expressed concern that cuts affecting the worldwide operation of BBC World might "have caused irreversible damage" and have a "harmful effect ... on the media profile of the United Kingdom abroad".[71]

48. The Guardian newspaper reported on 22 July that the Government was considering altering the funding arrangements for BBC World Television to allow it to draw on public funds.[72] Given the financial problems which BBC World is experiencing under the current funding arrangements, with losses reported at £15.3 million in 2001-02, such a change would in our view be welcome. We recommend that the Government, in its response to this Report, provide a full statement on its intentions regarding public funding of BBC World Television.

1 Foreign and Commonwealth Office 2002 Departmental Report: The Government's Expenditure Plans 2002-03 to 2003-04, Cm 5413 (henceforth 'the Annual Report'). Back

2 Most recently, the Ninth Report from the Foreign Affairs Committee, Session 2000-01, Foreign and Commonwealth Office Annual Report 2001, HC 428. Back

3 Ev 63-80. Back

4 Ev 80-92. Back

5 HC (2000-01) 428, para 8. Back

6 Foreign and Commonwealth Office, FCO Annual Report 2001, Cm 5212, July 2001. Back

7 Annual Report, Tables 2 and 3, pp 19 and 20. Back

8 Annual Report, Tables 34 and 35, p 167. Back

9 Department for International Development, DFID Departmental Report 2002, Cm 5414, April 2002. Back

10 Annual Report, p 167. Back

11 Ev 50, Question 4. Back

12 Ibid. Back