Further memorandum submitted by the Foreign
and Commonwealth Office
FCO SERVICE DELIVERY AGREEMENT
Letter to the Parliamentary Relations
and Devolution Department, Foreign and Commonwealth Office, from
the Clerk of the Committee, 3 March 2003
In its Report on the FCO Annual Report 2002[5],
the Foreign Affairs Committee asked the Government to set out
what progress the FCO has made towards identifying areas in which
its 2.5% efficiency savings per annum target for 2004-06 can be
made, and how the target will be met in full if the areas identified
do not produce the required efficiency savings.
In its response[6],
the Government gave some examples from "a wide range of ideas"
but did not provide a full list of the areas of expenditure in
which the savings are expected to be achieved. Neither did it
answer the Committee's question about how the target will be met
in full. This information does not appear to be available elsewhere:
the FCO Autumn Performance Report 2002, published at the end of
last week, deals with Public Service Agreements (PSAs) but not
with Service Delivery Agreements (SDAs); the FCO website appears
to have no scorecards for this SDA.
I would be grateful to receive, not later than
24 March, a fuller statement on exactly where and how the FCO
intends to achieve its 2.5% efficiency savings per annum target
over the period 2004 to 2006, and what plans it has to meet the
target in the event that the areas identified for those savings
do not produce them.
Clerk of the Committee
March 2003
Letter to the Clerk of the Committee from
the Parliamentary Relations and Devolution Department, Foreign
and Commonwealth Office, 2 April 2003
Thank you for your letter of 3 March asking
for a fuller explanation of how the FCO intends to achieve its
annual efficiency target of 2.5% over the period 2004-06, and
what plans we will put in place to meet the target if efficiencies
are not realised.
The 2002 Spending Review provided funding for
new FCO priorities but did not include an uplift to compensate
for annual increases in UK inflation. This is mirrored in our
internal resource allocation: Directorates are given funds to
meet new requirements and challenges but are expected to manage
without compensation for inflation. This means that, in effect,
the 2.5% efficiency savings are budgeted in—Directorates
will need to achieve annual efficiency savings of about 2.5% if
their budgets are not to be eroded in real terms by rising prices.
It is therefore for each Directorate to decide
how best to achieve 2.5% efficiency savings each year. Directorates
have produced efficiency plans which show how they plan to meet
the target. Some of the measures proposed include:
— Streamlining overseas entry clearance
operations thereby allowing more entry clearance applications
to be processed within existing resources;
— Leasing cheaper properties and using
them more efficiently;
— Refocusing of publications and TV
products on strategic messages;
— Telephony installation costs to be
contained within budget—no uplift for inflation;
— Reduction in the use of agency staff
through more efficient deployment of existing staff;
— Surrender of staff slots for redeployment
elsewhere following the introduction of new IT equipment.
Because the efficiency savings are already budgeted
in, the savings are, for the most part, sure to be fulfilled—the
only question is whether they are met through efficiencies or
through cutting activity. The aim, of course, should be the former;
and efficiency plans will be monitored to encourage Directorates
to achieve savings while maintaining or increasing outputs. The
outputs themselves will be monitored through our performance management
system, the results of which are reported routinely to the Treasury
and to Parliament in the Departmental and Autumn Reports.
The centrally held UK pay budget reflects activity
levels in the Directorates, which are, as explained above, already
subject to efficiency targets. Application of separate Efficiency
Targets to the pay budget would therefore be double counting and
would mean that we would be unable either to meet the demand for
new activities, which remains high, or fund the 2002 pay settlement,
which was agreed with the Treasury and was necessary for FCO remuneration
to remain competitive.
Over the next three years the FCO will also
undertake a rolling programme of efficiency studies to identify
further potential savings across the organisation. Examples include
savings on residential accommodation overseas, procurement and
ICT working methods. FCO Services (the support arm of the FCO)
is also in the midst of a comprehensive business transformation
programme which should improve performance and achieve efficiency
savings.
Parliamentary Relations & Devolution Department,
Foreign and Commonwealth Office
April 2003
5 Twelfth Report from the Foreign Affairs Committee,
Session 2001-02, Foreign and Commonwealth Office Annual Report
2002, HC 826. Back
6
Government Response to the Twelfth Report of the Foreign Affairs
Committee, Session 2001-02, Foreign and Commonwealth Office Annual
Report 2002, CM 5712. Back
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