Examination of Witnesses (Questions 180
- 199)
TUESDAY 29 JUNE 2004
SIR MICHAEL
JAY KCMG, MR
DICKIE STAGG
CMG, MR SIMON
GASS CMG CVO AND
MR DAVID
WARREN
Q180 Mr Chidgey: It seems you are
describing Stuart Jack's review findings on the vulnerability
audit of all the posts. Do we know yet when that vulnerability
audit is going to be completed?
Sir Michael Jay: It is ongoing,
as they say. Immediately after Istanbul we urgently reviewed the
security of all our overseas posts, in the immediate aftermath
of Istanbul, and we authorised all our posts to make certain immediate
remedial measures, which they thought necessary to increase their
security—things like anti-shatter film on windows and so
on. We also authorised additional expenditure on areas such as
perimeter security. This was in order to ensure that all our posts
were able to make the immediate security measures needed to enhance
their security. Also, we responded to specific incidents which
arose. You mentioned Tehran, Mr Chidgey, and as a result of the
attacks on the embassy in Tehran we have installed bulletproof
and bomb blast windows there. Clearly there was a need to do that
and we authorised that straightaway. We have also re-prioritised
our estate budget—which takes us back to estates—so
that the emphasis on our estate management and our new-builds
and our refurbishments over the next few years is going to be
driven largely by security; probably 70% of our investment will
be security driven. Those decisions will be taken on the assessment
of the risk and the vulnerability and the threats to our posts,
case by case by case. So, in a sense, we are in the process of
implementing the approach set out in Stuart Jack's report.
Q181 Mr Chidgey: Have you set yourself
a timescale, Sir Michael, when you can be satisfied that the basic
security measures that have been identified have been implemented
in all our posts overseas?
Sir Michael Jay: I do not think
I am ever going to be satisfied that all our posts are quite safe.
Q182 Chairman: Okay, but you surely
have a programme?
Sir Michael Jay: We have a programme
and we are drawing up that programme now. We clearly need to see
what comes out of SR2004 and the reserve bid we put in that to
ensure we do have enough money for security. The Treasury have
been sympathetic to this and I think if that succeeds we continue
to implement a programme, which I believe will lead to adequate
security for our posts. But I am never going to be complacent;
every time the phone rings at 10.30 at night I think it is an
attack on one of our posts.
Q183 Mr Chidgey: A final question:
does the budget that you are bidding for to introduce these security
measures in our posts worldwide appear as a separate budget line
in your bid for the funding for the Foreign and Commonwealth Office?
Is it identifiable? Will we know if it is not met in your bid?
Sir Michael Jay: It is separate,
it is identifiable; it is, as I say, worked out on the basis of
what we believe we need to ensure that we can fulfil our duty
of care. I cannot foretell what is going to come out of the SR2004,
but, subject to the views of Simon Gass, I guess it would be readily
identifiable.
Mr Gass: It would not be readily
identifiable in our accounts as a separate line of expenditure,
but it is readily identifiable in our spending review bid to the
Treasury.
Q184 Mr Chidgey: We will know what
you have asked for and we know what you get.
Mr Gass: We will certainly know
that.
Mr Chidgey: So will we!
Q185 Sir John Stanley: I would like
to continue on more or less where David Chidgey finished. You
say, Sir Michael, in your conclusion on the non-classified part
of your paper on security, "As the UK remains engaged across
an uncertain world we must be prepared for considerable security
challenges. On terrorism we are in for the long haul. To meet
these challenges the FCO will need to continue to keep strong
emphasis on security and ensure that the current efforts to enhance
security can be fully implemented."[20]
What is the ballpark figure, which presumably you must have estimated,
as to the cost of fully implementing the enhanced security that
has been recommended to your Department?
Mr Gass: At present our security
budgets are divided up into different compartments; it goes partly
into our estate budget, partly into our central security budget,
partly into our geographical budget. That figure at the moment
is somewhere in the region of £50 million to £60 million
a year. We believe that in order to undertake the mixture of estate
builds, where we feel that we need to move a location, or to heighten
the defences of a building which we already have, we might be
looking at a figure of about £60 million a year for the next
three or four years.
Q186 Sir John Stanley: So we are
talking about quarter of a billion pounds, effectively—that
sort of order of magnitude?
Mr Gass: I am talking about 50,
60 existing plus an additional 60, so about £120 million
a year.
Q187 Sir John Stanley: On the basis
of an extra £50 million or £60 million a year over four
years we are talking about an extra quarter of a billion roughly,
are we not?
Mr Gass: Yes.
Q188 Sir John Stanley: That is the
capital side, presumably.
Mr Gass: No, that includes both
capital and running costs.
Q189 Sir John Stanley: So in the
running costs you were including what must be substantially rising
costs on security guards, close protection teams, security companies,
security services, all of which are current expenditure items,
presumably?
Mr Gass: Yes.
Q190 Sir John Stanley: Can you give
us again some sort of ballpark figure as to the uplift you need
to cover those revenue costs, with basically paying your security
people from local employed security guards to the obviously very,
very high cost British close protection teams?
Mr Gass: I cannot off the top
of my head give you a breakdown of the £60 million as between
capital and running costs, but my recollection is that it is more
capital than running costs, but exactly how much the running costs
are for guarding as opposed to small works that might not be capital
works, I cannot tell you instantly.
Sir Michael Jay: I have the rough
figures for this year broken down, which are about 23 and a half
million for central security budget, which I take it is capital?
Mr Gass: It is a mixture of capital
and running costs.
Sir Michael Jay: Two to three
million for armoured cars, £13 million for guarding and £17
million for the security element of our estates projects. That
gives a rough breakdown of this year.
Q191 Sir John Stanley: Would you
expect that breakdown to be carried through over the next four
years—those sort of rough proportions?
Mr Gass: I think in terms of the
increase, Sir John, my expectation is that the guarding costs
would not rise as much as the capital costs, and the main reason
why we need a very large sum on top of our existing budget is
primarily because there are a number of properties around the
world which we feel are never going to be capable of being protected
to the standard which we think is necessary, and therefore we
are going to have to move locations and build. Therefore, of the
£60 million the dominant part of it is capital cost for removal
of buildings. Where we are on guarding is that in most cases we
already have what we feel is an adequate guarding level. That
may change over a period of time; there may be more that we can
do in particular areas, which we cannot at the moment. The largest
constraint on us is the ability to undertaken some pretty meaty
new-builds for embassies in vulnerable locations.
Q192 Sir John Stanley: Sir Michael,
could you tell us the approach that your Department is following
towards the Treasury in bidding for this broadly quarter of a
billion pounds extra which you are going to need on security over
the next four years? Clearly if you did not get the money or you
were obliged to fund that, which I take it you regard as being
absolutely essential expenditure, by cut-backs on your mainstream
business, this is going to have a pretty devastating cost for
the Foreign Office. So how far are you taking the line with the
Treasury which I, and possibly others in the Committee, might
feel would be a reasonable line, that this is a totally exceptional
item that has been forced on your Department by world circumstances,
totally outside your own control, and that it would be wholly
wrong to emasculate the Foreign Office's mainstream activities
to deal with the worldwide security issues created by terrorism,
and surely this should be a matter for central government funding
out of the Contingency Reserve?
Sir Michael Jay: I think you have
put the case very well, if I may say so, Sir John. That is very
much the line we have been taking with the Treasury, both over
the next two years in putting forward a case for funds from the
Reserve, and also in our bid for SR2004 for the three-year period
that will begin in 05/06. I do detect from the conversations that
we have had with Treasury officials there is an understanding
of this position, although I cannot predict the outcome of SR2004.
I agree with you entirely that our overseas network has to be
secure so we have to find the money to make it secure and if we
do not have the money to make it secure, as it now is, then we
will have to think about how we structure our network to ensure
that what we do have is secure. I believe that the Treasury understand
this argument and I hope very much that we will have an outcome
which we will find satisfactory and enable us to fulfil our duty
of care. But we are advancing precisely those arguments.
Q193 Sir John Stanley: So you are
making it quite clear that these are exceptional items, unforeseeable
items and areas outside your own control and, as has been the
normal way under successive governments, this is a matter for
the Contingency Reserve?
Sir Michael Jay: Would you like
to talk about the technical points about the Reserve for the next
couple of years, Simon?
Mr Gass: Yes. We are seeking access
to the reserve, Sir John, for this year and next year. I cannot
remember, I have to confess, whether the precise figure is £60
million in those two years, but it is for a substantial sum. We
are also seeking, under the Spending Review, an addition to our
baseline for security expenditure of approximately £60 million
in each of the three years of the Spending Review.
Q194 Sir John Stanley: Clarify that,
if you would. What you said in that reply, as I understood it,
for the first two years you are taking the whole of the additional
£60 million a year, you are seeking that out of the Contingency
Reserve, but are you then saying that beyond that you are looking
to get an overall increase in your baseline and then, assuming
you get it, you are then going to finance the security spending
out of an increased baseline if you get it; is that what you are
saying?
Mr Gass: Correct, but that baseline
increase is a baseline specifically for security. This is not
just a general FCO baseline out of which we are hoping to get
£60 million; this is a specific bid.
Q195 Chairman: Sir Michael, in respect
of the financial management, I think most of the questions we
would like to ask we can submit by means of written questions.
So I will just take one area, and that is ring fencing. As I understand
it, both the British Council and the BBC World Service currently
submit their own Spending Review submissions to the Treasury via
the FCO. The principle of ring fencing for both organisations
was established in the Spending Review 2000. I guess they would
argue that it does give them a certainty in terms of financial
planning. Can you tell us a little about the new proposal in this
current financial round, this "top slice" fund? How
will that operate and how is it consistent with the principle
of ring fencing the budgets of the World Service and the British
Council?
Sir Michael Jay: I am not sure
I am familiar with top slicing fund. What I would say as far as
the British Council is concerned, we are constantly discussing
with the British Council how we might work more closely with them
on public diplomacy in order to ensure that we are realising the
synergies amongst us, and I think we have made quite a lot of
progress in that through the Public Diplomacy Strategy Board which
ensures there is greater coherence than I think was the case in
the past between us and Visit UK, BBC World Service and others.
Q196 Chairman: Are you saying that
there is no provision for a top-slicing fund?
Mr Gass: Mr Chairman, as far as
I know there were some ideas which were put forward at one stage
for an increased fund for public diplomacy involving both Foreign
Office and British Council money. To the best of my knowledge
that is not a proposal which has been pursued; it was a proposal
for discussion and is not, as far as I know, part of any proposal
which is being pursued in the context of this argument.
Q197 Chairman: Are you prepared to
give us an assurance that so far as you were concerned the principle
of ring fencing those two budgets remains intact?
Sir Michael Jay: I am not aware
of any proposals to change that in the context of the present
spending round, but I do think we have constantly to be looking
at how we can ensure that there is proper synergy between us and
the British Council, and I think we need to keep it constantly
under review.
Q198 Chairman: We are at a very late
stage of the Spending Review. If there were still such proposals
still extant you would know?
Sir Michael Jay: I would expect
so.
Q199 Chairman: You would, would you
not?
Sir Michael Jay: Spending rounds
have a habit of producing surprises at the end, Mr Chairman, and
that is my experience. I am a little bit cautious in being absolutely
certain about this.
20 Please refer to the letter from the Foreign Secretary,
dated 23 June 2004, regarding the FCO internal review, Ev 80 Back
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