House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Minutes of Evidence

WRITTEN QUESTIONS AND ANSWERS

Letter to the Head of the Parliamentary Relations and Devolution Team, FCO, from the Clerk of the Committee, dated 8 June 2006

Dear Chris,

I attach a list of questions to which I would be grateful to receive answers prior to Sir Michael Jay's appearance before the Committee later this month. If the answers are to feed into the preparations for the oral evidence session, I will need them not later than close of play on Thursday 22 June. In the event that some answers are not ready by that date, it would still be helpful to receive a response on those that are ready, with the remainder following as soon as possible thereafter.

In view of this truncated timetable, which is a result of the late publication of the DAR 2005-06, I have attempted to reduce the burden on those dealing with the response to these questions by limiting their number. I will, however, need to write further on a number of possibly less urgent but nonetheless important issues, to which we will be seeking a response by the Summer recess.

The Committee also wishes to receive:

— A copy, or summary, of the regulatory reform "simplification plan" [the FCO's submission to the Committee of 3 October 2005 noted that this was expected by to be ready in January 2006.]

— A copy of the conclusions of the FCO's Financial Management Review [in the FCO's submission to the Committee, a "final report" was anticipated in November 2005.]

— The results of the formal review of the Global Opportunities Fund [this was anticipated in the FCO's submission to the Committee to take place "at the end of 2005-06".]

Yours,

Steve Priestley

Clerk of the Committee

QUESTIONS ARISING FROM THE FCO RESPONSE TO THE COMMITTEE'S REPORT

1. In reply to Recommendation 13, the FCO response states that an internal investigation into the satellite telephone fraud "is nearing completion". The Committee wishes to receive a copy of the report of this investigation, if possible before the oral evidence session on 28 June.

What are the revised procedures that the FCO has put in place to avoid a recurrence of the Bahrain fraud?

(a) briefing for MPs undertaking their official Parliamentary duties, including overseas trips with select committees, CPA delegations or IPU delegations;

(b) briefing for MPs travelling with all-party Parliamentary groups; and

3. The overall response rate during the data collection phase of the Collinson Grant review was 89% in the UK and 93% overseas. What was the response rate (a) among members of the Senior Management Service and (b) among Board members?

4. The Committee wishes the FCO to reconsider its response to Recommendation 36 and to release the documents about the Embassy to the Holy See, referred to in that Recommendation.

QUESTIONS ARISING FROM THE DEPARTMENTAL ANNUAL REPORT 2005-06

5. The March 2006 White Paper (Active Diplomacy for a changing World, Cm 6762) identified nine new "strategic international priorities" (p 28), and brigaded under each of these a number of "specific aims" (pp 52-59). Why does the DAR not address these new priorities and aims? To what extent does the FCO expect these to be the basis of any new PSA targets in the 2007 Spending Review?

What are the FCO's proposals for involving the Committee in formulating those objectives and targets?

6. In regard to the SR-2002 PSA-4C, the FCO reports that it has been unable to develop a new tool for measuring conflict levels (2006 Annual Report, p 137). The Report notes the "inherent difficulties in measuring potential sources of future conflict and conflict prevention outcomes" and that a "final assessment . . . will be made in Spring 2008" (p 112). What work is the FCO doing to develop a means of being able to make that assessment of the outcomes of its Conflict Prevention work in 2008?

7. The SR-2002 PSA on Conflict Prevention included assessments which used statistics on the number of casualties and refugees, although most of these were not carried over into the SR-2004 PSAs. Why do SIPRI/IISS casualty statistics still form part of the assessment of the situation in Nigeria (2006 Report, p 114), and why not for other conflict areas?

8. SR-2004 PS-A4AK envisages agreement on EU financing arrangements for 2006-13, with spending at 1% of EU GDP (2006 Report, p 117). With the UK Presidency having overseen a budget deal in 2005, why is this PSA still assessed as "amber/on course" rather than as a (red or green) settled outcome?

Similarly, why is PSA-4AL still amber, when changes to the CAP were agreed in December 2005 and a commitment secured for a review of CAP in 2008-09 (which falls after the PSA time-horizon)?

9. SR-2002 PSA-7A1 is assessed as "red—not met" because there were 99 "functioning democracies" at the end of the SR-2002 PSA period, compared with the target of 105 (2006 Report, p 140). The 2005 Autumn Performance Report, only six months before the end of the PSA period, also assessed the number to be six short of the target. On what basis did the APR assess this as "amber—generally on course"? What six countries did the FCO expect to become functioning democracies during that last six months of the PSA period?

Similarly, which four countries did the FCO expect to achieve impartial judiciaries during the last six months of the PSA period in order to avoid the PSA-7A3 assessment becoming red by the time of the Annual Report?

10. What changes took place in the six months between the 2005 Autumn Performance Report and the 2006 Annual Report to support an improvement in the assessment for constitutional reform of the Overseas Territories from "red" to "amber/green—met/ongoing" (Annual Report p 152; APR p 52)? Why were the APR and Annual Report assessments not "red", given that the target related explicitly to a position that had to be reached by March 2005?

Conversely, what changes in that six month period supported a revision from "amber" to "red" for Overseas Territories' environment commitments (SR-2002 PSA-11B)?

Letter to the Clerk of the Committee from the Head of the Parliamentary Relations and Devolution Team, FCO, dated 22 June 2006

THE FAC'S REPORT ON THE FCO'S DR 2004-05

Dear Steve,

Thank you for your first letter of 8 June requesting information in advance of Michael Jay's appearance before the Committee on 28 June. I have pleasure in providing the information you requested and for ease of reference I have included our responses immediately below your questions.

We are working on the additional questions covered in your second letter of 8 June and we will respond as you requested before the Summer adjournment.

DOCUMENTS/SUMMARIES/CONCLUSIONS THAT THE COMMITTEE WISHES TO RECEIVE:

A copy, or summary, of the regulatory reform "simplification plan" [the FCO's submission to the Committee of 3 October 2005 noted that this was expected by to be ready in January 2006.]

As part of the Government's Better Regulation programme, the first drafts of departmental simplification plans were submitted to the Better Regulation Executive (BRE) of the Cabinet Office in January 2006. This was followed by a period of redrafting in consultation with the BRE. On 5 June 2006, BRE issued revised guidance to all Departments which makes a further redraft necessary. The FCO simplification plan is therefore not ready. We are working to a deadline of November 2006 for clearance by the Panel for Regulatory Reform (PRA) and for publication of the final plan. A copy of the plan will be made available to the FAC as soon as it is agreed by PRA.

As the FCO has little legislation, our simplification plan is focussed on simpler services to the public (mainly visa and consular services), and the burdens on our front line consular and visa staff. As consular and visa services are self financing, the savings resulting from the plan will accrue to users of our services, and will be reflected in the level of fees charged to recover the costs of running the services rather than appear as cash savings to the FCO.

A copy of the conclusions of the FCO's Financial Management Review [in the FCO's submission to the Committee, a "final report" was anticipated in November 2005.]

I attach a summary of the main themes and conclusions arising from the Financial Management Review conducted with HM Treasury, which was the document that was distributed to the FCO Board. A similar review was carried out by the Treasury with all government departments. These reviews were carried out on the basis of finding a mutual understanding between the Treasury and the Department concerned of how financial management could be improved and were not for publication. A number of committees have been similarly provided with a summary of the main themes and recommendations.

The FCO Financial Management Review (FMR) is part of a cross-government review of financial management announced at the time of SR 2004. It was carried out using an agreed financial management framework for all departments, focusing on:

— Accountability structures, planning and budgeting.

— Production and use of financial information.

— The effectiveness and efficiency of the finance function.

— Relationships with HM Treasury.

The FCO review was carried out from August to November 2005 by a team consisting of officials from HM Treasury, the National Audit Office, Food Standards Agency and FCO. It was a collaborative exercise carried out in consultation with FCO officials.

The Review concluded that the FCO have made good progress in improving their ability to manage resources against objectives and that a large number of further reforms are in train which have the potential to deliver a step-change in performance. The Review Team noted that recent improvements and reforms already underway included:

— The FCO's 2003 strategy set out clearly its strategic priorities and associated PSA targets. The priorities were well understood and provided a framework for resource allocation. Policy and resource responsibilities would be aligned from April 2006.

— The Board's committee structure and corporate governance represented best practice with skilled non-executive Directors playing a leading role.

— The Board was receiving a monthly management information pack that had a high-quality structure, with the content improving as the Prism Oracle system was implemented.

— The commitment to faster closing of the 2005-06 accounts, aimed at bringing forward the audit completion date by four months.

— Support for the Board's plans to devolve most pay budgets to DGs from 2007-08.

— Evidence of lessons learnt from the early stages of the Prism programme, of firm Board control of the remaining global rollout project and of benefits starting to be delivered.

— Recognition of the need to simplify and standardise many of the FCO's business processes and of steps being taken to do so.

The report concluded that the key challenge was to ensure the practical delivery of this high-level vision. This required leadership and commitment not just to the vision but also to the significant changes in behaviour and working practices that would be needed to deliver it.

In terms of areas for improvement, the four overarching themes for the FCO were:

— A stronger, more strategic role for the Board in financial management and business planning.

— Better project management and Board impetus to work on cross-cutting business change, ICT and efficiency initiatives.

— High quality management information, appropriate skills and incentives at all levels to improve the way the FCO is run.

— The Board needed to be supported by a better and stronger finance function with wider reach and greater weight.

On the first theme—the role of the Board—the FMR underlined the need for full financial analyses of costed options, as better quality management information from Prism was generated and used. The Review supported further work and early decisions, supported by robust business cases, on "hub and spoke" options for service delivery currently being piloted in Italy and Spain and planned for the US.

In relation to driving business change and efficiencies, the Review highlighted that the Board should intensify efforts to get full benefits from ICT investments, including Prism and future projects. It also expressed support for measures to identify and spread finance and HR process efficiencies across the FCO network.

The Review also looked at the production and use of management information. It concluded that there should be less use of "off line" and instead the global network of PRISM should be fully exploited. The report noted the importance of spreading and embedding financial skills throughout the organisation in line with the rest of Whitehall using the new Professional Skills for Government framework. Accredited resource management experience was especially important at senior level.

The final main theme was the role and status of the finance function within the FCO. The Review recommended that resource management units should be accountable to the Finance Director as well as individual Directors General. There were also recommendations about the role and status of the new Finance Director who should be a finance professional in line with HMT recommendations.

The report recommended that the FCO carry out its own review of the finance function.

The FCO is actively pursuing all the Review's recommendations, in timescales agreed with HM Treasury.

The results of the formal review of the global opportunities fund [this was anticipated in the FCO's submission to the committee to take place "at the end of 2005-06".]

The review of the FCO's discretionary programme budgets, including the Global Opportunities Fund, will shortly be finalised, and the FCO Board will discuss it on 7 July. We will share it with you thereafter.

QUESTIONS ARISING FROM THE FCO RESPONSE TO THE COMMITTEE'S REPORT

The FCO's Financial Compliance Unit report forms part of the ongoing consideration of disciplinary action and cannot be released without prejudice but the Comptroller and Auditor General's formal report on the matter to the House of Commons will, we understand, be issued shortly.

What are the revised procedures that the FCO has put in place to avoid a recurrence of the Bahrain fraud?

FCO procedures have been put into place to tighten our management of the Chevening scheme. We now require all FCO Chevening Officers to maintain a database of selected scholars separate to that kept by the British Council. The authority to administer an award form (Chev 2) has been amended. The FCO Chevening Officer's signature is now counter-signed by another Diplomatic Service officer confirming that the expenditure of £20,000 or more can take place. Both officers are now required to initial all pages of the form. This ensures that no details can be substituted. The British Council must only administer awards approved on Chev 2 forms. FCO Chevening Officers have been instructed that award letters must be prepared on headed notepaper by the Post. Details must be checked with the selection database beforehand. Letters of congratulation sent by Ambassadors or High Commissioners must not be sent out until the award letter has been prepared and the details checked.

2. In reply to Recommendation 23, the response publishes the red, amber, green list of FCO activities. Who drew up the list? Which of the "red" activities does the FCO agree should be stopped completely? Which of the "amber" activities does the FCO agree should be curtailed or reviewed? With specific reference to activities related to the work of Members of Parliament, under which colour group would the FCO place: (a) briefing for MPs undertaking their official Parliamentary duties, including overseas trips with select committees, CPA delegations or IPU delegations; (b) briefing for MPs travelling with all-party Parliamentary groups; (c) briefing for MPs acting in their own capacity?

The Red Amber and Green List referred to was produced by officials inside the FCO during 2004-05. It was intended to suggest areas that might be stopped or given less priority by geographical departments in London. The list was seen by Collinson Grant who calculated the potential savings if the list were implemented in full. However the Board did not adopt the list and it is not FCO policy. The FCO does not "classify" activities on the list according to any colour scheme (Red, Amber, Green).

Activities directly impacting on external stakeholders, such as the work of Members of Parliament, have continued as usual. Geographic departments have been free to use the list for internally focused activities and have stopped a formal requirement for Annual Reviews, facilitating former ambassador travel/access and devising programmes for visiting Heads of Post.

Our relationship with Parliament and its Members is a high priority for the FCO and we always seek to be open and helpful to Committees, delegations, all party groups and individual Members. We do not use the red/amber/green classification in the Collinson Grant report in deciding what briefing to give Members.

Our policy on briefing the different categories of Members the Committee asks about is as follows:

Briefing for MPs undertaking their official Parliamentary duties, including overseas trips with select committees, CPA delegations or IPU delegations

Officials should provide written or oral briefings when requested by select committees travelling abroad and by outgoing IPU or CPA delegations.

Briefing for MPs travelling with all-party Parliamentary groups

Officials should help all-party Parliamentary groups where practicable. They should be ready to offer unclassified written briefing and an oral briefing if specifically requested.

Briefing for MPs acting in their own capacity

Officials should be as helpful as possible in providing factual oral and written briefings, while being careful not to compromise their official impartiality. Officials should judge the resources they are able to allocate to such briefings in the light of their strategic priorities and the potential benefits to their objectives of such work.

(a) The data set produced by Collinson Grant at the end of their review indicates that responses were received from 85.5 Senior Management Structure (SMS) officers based in the UK. Details are not available of the total number to whom forms were sent. Hence it is not possible to give a precise figure for the SMS response rate, although it was in excess of 80%.

(b) Responses to the Collinson Grant review were treated anonymously. Hence the dataset that was produced for the FCO at the end of the review does not allow identification of individuals, nor does it give details of who did not respond. This means that Board members cannot be identified.

4. The Committee wishes the FCO to reconsider its response to Recommendation 36 and to release the documents about the Embassy to the Holy See, referred to in that Recommendation.

We have re-considered the decision not to release documents about the Embassy to the Holy See. The reasons given earlier for declining to release the documents still stand and, as such, we consider that it remains inappropriate to release these documents.

QUESTIONS ARISING FROM THE DEPARTMENTAL ANNUAL REPORT 2005-06

What are the FCO's proposals for involving the Committee in formulating those objectives and targets?

The FCO's Departmental Report is an account of the FCO's performance from 1 April 2005 to 31 March 2006 and during the reporting period the FCO was working to its eight Strategic Priorities identified in the 2003 White Paper. On 28 March 2006 the Foreign Secretary published a new White Paper revising the strategic international priorities—Active Diplomacy for a Changing World (Cm 6762). These will be reported on in next year's Departmental Report, which covers the period 1 April 2006 to 31 March 2007.

Sir Michael Jay wrote to the Chairman of the FAC on 12 January 2006 to advise the FAC that the FCO were reviewing the strategic priorities, and to invite the Committee's views. We continue to welcome the FAC's interest in the strategic international priorities, and in particular their announcement that they will conduct a review of the White Paper to assess its continuing relevance to a constantly changing international situation.

We expect the 2006 White Paper and the subsequent announcement of a Strategic Priority on climate change to form the basis of the 2008-11 PSA (as the 2003 white paper informed the 2005-08 PSA). The next review of strategy is due in 2008 and it is possible that any significant changes would be reflected in our new PSA (the FCO is committed to reviewing the UK's international priorities (FCO's strategic priorities) every two years to ensure they remain relevant). We welcome the FAC's interest in and views on our PSA targets. PSAs are proposed to HMT and we will take into account any views made. We will start negotiations with HMT later this year on the 2008-11 PSA.

Conflict prevention is a complex area in which to measure outcomes. The SR02 report underlined the inherent difficulties. In the light of this experience, and accepting the limitations, FCO, MoD and DFID, the three Departments who jointly own the Conflict PSA, decided in agreement with HM Treasury, to report against the SR04 target using primarily narrative reporting, assessed against a narrative, rather than a statistical, baseline. To inform this reporting, the three Departments are drawing on a wide range of sources, both from within HMG and from international organisations and NGOs.

Separately, HMG is working with partners in the framework of the OECD Development Assistance Committee, to examine how to develop improved methodologies for evaluating the impact of conflict prevention interventions.

Given the difficulties in measuring conflict prevention outcomes in purely statistical terms, FCO, MOD and DFID, the three Departments who jointly own the Conflict PSA, decided, in agreement with HMT, to report against the SR04 using primarily narrative reporting, drawing on a wide range of sources. But for some of the PSA sub-targets, statistical reports from SIPRI/IISS continue to be a source of relevant data.

In the specific case of Nigeria, the number of conflict related deaths was considered a useful indicator of the effectiveness of Nigeria's local and central government institutions in mediating in and managing conflict. SIPRI/IISS reports were used because they were seen as a reliable way of measuring that. This statistical reporting is accompanied, as the recent FCO Departmental Report shows, by a broader narrative assessment of political developments bearing on conflict risk in Nigeria.

Similarly, why is PSA-4AL still amber, when changes to the CAP were agreed in December 2005 and a commitment secured for a review of CAP in 2008-09 (which falls after the PSA time-horizon)?

The amber rating for SR-2004 PS-A4AK reflects the fact that whilst significant progress has been made towards achieving the objective, we will continue to pursue budget discipline, regional policy reform, and protection of the UK net position in discussions between now and the end of PSA period. These include discussions to give effect to the revenue side of the December agreement (known as the Own Resources Decision), and our preparatory work for the 2008-09 review of the EU budget.

Similarly, the amber rating for SR-2004 PSA-4AL reflects the fact that we will continue to make the case for reform of the Common Agricultural Policy in various fora. These include discussions about individual CAP regimes (eg reform of the EU fruit and vegetables regime), discussion in the WTO, in preparation for the 2008 review of the 2003 CAP reforms, and in preparation for the 2008-09 budget review.

The Committee correctly notes that these targets were highly unlikely to be achieved before the end of the PSA period. The indicator was shown in error as amber. Nonetheless, the assessments in the Autumn Performance Report were intended to reflect the fact that there had been real progress made towards achieving both indicators. The narratives were intended to bring out the fact that an exclusive focus on the headline target figures did not capture the positive trends on both targets to which FCO activity had contributed. For example, under indicator A1 the APR stated: "While we would not currently expect to achieve this target, the overall trend over the period of the PSA has been positive and there has been a significant increase in the number of countries implementing systems, processes and procedures widely accepted to be necessary in a fully functioning democracy".

We are grateful to the committee for this opportunity to correct this error.

Conversely, what changes in that six month period supported a revision from "amber" to "red" for Overseas Territories' environment commitments (SR-2002 PSA-11B)?

On the indicator relating to constitutional reform in the Overseas Territories target, as a result of a typographical error in the internal guidelines, "amber/green" was incorrectly included as the traffic light. The correct colouring should have been "red" because, as the narrative explained, the target dates could not be met.

The error also affected the colouring of the traffic lights for the overall assessment of the Overseas Territories target and the fourth target indicator (on economic development). Both of these should have been "amber/red" and not "amber/green", as some of the target/target indicator elements were met but not others. Again the narrative to which the traffic lights were attached set out correctly the position in terms of meeting the target/indicators.

The decision on extension of the relevant multilateral environment agreements to the individual territories rests with the OT Governments, rather than the UK Government. During the reporting period, despite earlier hopes, it became clear that the extension of the Conventions could not be achieved in 2006. Therefore the traffic light was moved from "amber" to "red".

We are grateful to the committee for the opportunity to correct this error.

Yours sincerely,

Chris Stanton

Parliamentary Relations and Devolution Team

Letter to the Head of the Parliamentary Relations and Devolution Team, FCO, from the Clerk of the Committee, dated 8 June 2006

Dear Chris,

Further to my letter of earlier today, I am now able to enclose a list of further questions on matters arising from the Departmental Annual Report 2005-06, to which the Committee would appreciate answers before the Summer adjournment. There is also one question (Q9) for which a longer timeframe may be appropriate.

Yours,

Steve Priestley

Clerk of the Committee

QUESTIONS ARISING FROM THE FCO RESPONSE TO THE COMMITTEE'S REPORT

1. According to Table 5 [p 80] of the 2006 Departmental Annual Report, in 2005-06 "information and computer technology" efficiencies were £2.3 million compared with a planned figure of £4.7 million. What are the factors behind this shortfall? To what extent are delays with the Prism computer system reducing the level of otherwise expected ICT efficiencies, in each year 2005-06 to 2007-08?

2. In the 2006 Annual Report, two classes of "Administration" costs show large increases in provision for 2006-07, compared to that given for 2005-06 in last year's Departmental Report. The "centrally controlled administration budget" (£571 million) increase by 20% and "locally controlled administration costs" (£257 million) by 50% (Table 15, p 89). To what extent are these increases the result of changes in the way costs have been brigaded under different Administration headings, and to what extent do the changes represent additional cost?

3. The 2006-07 provision for receipts for visa and other services provided at Consular Offices (2006 Report, Table 15) shows a 77% increase on 2005-06 given in last year's Departmental Report. To what extent is the increase attributable to:

(a) increases in visa applications; and

(b) the restructuring of visa fees?

The budgeted receipts of £254 million are expected to be less than costs of £285 million (2006 Report, p 90). To what extent are costs planned to be covered by receipts in 2006-07 for:

(a) visa services; and

(b) other consular services?

What was the actual coverage of costs under each of these headings in 2005-06?

The fees charged for visa applications were restructured in the Consular Fees Order 2005, which came into force on 1 July 2005. Why did the FCO not undertake a Regulatory Impact Assessment of the changes (2006 Report, p 82)?

4. The 2005 Departmental Report did not include details of the "iVisas Biometrics Programme" (valued at £70 million) because it had not then started (2005 Report, Table 16, footnote 4). Similarly, the 2006-07 capital projects table (Table 16) in the 2006 Departmental Report does not include it, although the Report reaffirms the FCO's commitment to a global roll-out of biometric visas from October 2006 (p 24). With the project expected to be underway in 2006-07, why does Table 16 not include details of this project?

What progress has been made to date on the iVisas Biometrics Programme?

What is the estimated average cost of collecting and processing biometric data for biometric visas? What proportion of the £254 million visa/consular service budgeted receipts and £285 million costs (2006 Report, p 90 and 91) are for providing biometric visas?

The Committee would like cost and timescale details for the Visas Biometrics Programme, brigaded under the same heading used in Table 16.

5. The 2006 Annual Report notes that revenue from property sales is now fully "recycled" back into the estate (p 75). Against that background, what are the factors producing a fall in the value of residential land and buildings and fixtures and fittings of over £200 million between 2004-05 and 2005-06 (Table 11)?

6. Three estate building projects in Table 16 of the 2006 Annual Report have start dates prior to 2005, but had not been listed in the previous 2005 Report—Colombo, Sana'a, and Doha. Why were these projects not reported in the 2005 Report?

7. Table 18 of the 2006 Departmental Report notes the contributions of different government departments to various UN programmes. To what extent do the figures in Table 19, on non-UN programmes, include contributions made by government departments other than the FCO?

The Table 19 non-UN programme costs for 2005-06 are £133.5 million (2006 Report, p 101). To what extent does this reflect a real increase in expenditure from the £26.3 million reported for the previous year in the 2005 Report (Cm 6533, Tables 19 and 20 combined)? How, if at all, do the non-UN programmes listed in Table 19 of the 2006 Report differ from those covered in the 2005 Report?

8. SR-2002 PSA-2 on reducing tensions subsumes individual assessments for a range of regions, many of which are rolled over into the SR-2004 PSAs. Why were Sri Lanka, Ethiopia/Eritrea, Ivory Coast and Angola—which were assessed as "red"—dropped from the SR-2004 PSAs?

SR-2004 PSA-3 on Conflict Prevention includes the security situation in nine regions/countries, but excludes India/Pakistan and Sri Lanka which were assessed in the similar PSA-2 of SR-2002. Why were these two regions left out of the SR-2004 PSA?

Overall, the SR-2004 PSA is assessed as "amber" ("on course"), despite "reds" for three areas. What would the FCO's assessment have been had the situation in India/Pakistan and Sri Lanka still been included in the PSA?

9. The Committee wishes to receive a finalised assessment of the Efficiency Programme performance for 2005-06 (2006 Annual Report, Table 5), once the FCO has been able to complete its assessment by the Autumn, along with any revision to the planned savings for 2006-07 and 2007-08 made at that time. The Committee wants an explanation about the process involved and timescales needed in estimating and then finalising the efficiency assessments. If, once the firmer data are available, some classes of efficiency continue to show a fall in cumulative annual savings (as is currently the case in regard to "reductions in low priority activity"), the Committee would wish to have an explanation.

Letter to the Clerk of the Committee from the Head of the Parliamentary Relations and Devolution Team, FCO, dated 12 July 2006

FCO DEPARTMENTAL REPORT 2005-06

Dear Steve,

I have pleasure in providing detailed responses to the questions you raised in your second letter of 8 June.

Q1. According to Table 5 [p 80] of the 2006 Departmental Annual Report, in 2005-06 "information and computer technology" efficiencies were £2.3 million compared with a planned figure of £4.7 million. What are the factors behind this shortfall? To what extent are delays with the Prism computer system reducing the level of otherwise expected ICT efficiencies, in each year 2005-06 to 2007-08?

Answer

The reason for the shortfall in ICT efficiencies in 2005-06 is that the ICT target set at the beginning of the implementation period double counted some of the benefits delivered by Prism which had also been included in other efficiency projects eg Procurement efficiencies and HR reductions within Corporate Services.

Efficiencies enabled by Prism in 2005-06 totalled £4.4 million against a planned outturn figure of £4.7 million set at the beginning of the implementation period. Of the £4.4 million, £2.3 million is shown in the table under ICT efficiencies and the remaining £2.1 million appears under other projects.

The ICT projects are now expected to deliver £8.2 million of efficiencies in 2007-08 against an initial planned outturn figure of £24.7 million. This shortfall is not due to delays in Prism. It is caused by the double counting in the targets of some Prism benefits and the delay in Future Firecrest implementation due to additional security requirements.

The FCO has introduced a number of new efficiency projects to bridge this gap and is confident of meeting its overall target.

Q2. In the 2006 Annual Report, two classes of "Administration" costs show large increases in provision for 2006-07, compared to that given for 2005-06 in last year's Departmental Report. The "centrally controlled administration budget" (£571 million) increase by 20% and "locally controlled administration costs" (£257 million) by 50% (Table 15, p 89). To what extent are these increases the result of changes in the way costs have been brigaded under different Administration headings, and to what extent do the changes represent additional cost?

Answer

The main reason for the increase in gross expenditure is the increasing costs of the consular and visa operations, which are fully funded by income, and the uplift in the FCO's administration budget in Spending Review 2004.

The differences between the methodology used in each year account for some of the increases on the individual lines mentioned. The split in the table dates back to the old Estimates structure when more expenditure was centralised. For 2006 we therefore categorised the information by budget holder type to reflect devolution of budgets. The Estates line, for example, now only includes expenditure for which Estates Directorate hold the budget and not all estates related expenditure. This has the effect of increasing the local administration costs in the table. Locally controlled administration costs have also risen because of the transfer of £20 million from non-cash to cash to compensate for the reclassification of furniture from capital to administration.

Q3. The 2006-07 provision for receipts for visa and other services provided at Consular Offices (2006 Report, Table 15) shows a 77% increase on 2005-06 given in last year's Departmental Report. To what extent is the increase attributable to (a) increases in visa applications and (b) the restructuring of visa fees?

Answer

The 2005-06 Main Estimate figures took a conservative view of consular and visa income, and matching expenditure, in drawing up the Main Estimate to ensure that we did not end up with an income shortfall leading to an overspend.

Forecasts of activity are regularly reviewed in the light of actual demand and a final adjustment was made in the Spring Supplementary to reflect our final expectation of increased cost and income. The initial income of £144 million in the Main Estimate was increased to £197 million in the 2005-06 Spring Supplementary. This compares to a forecast income of £254 million in the 2006-07 Main Estimate.

The increased income over 2005-06 is due to both continued increase in demand for visas, currently running at 8% growth per annum, and the rise in both consular and visa fees implemented on July 2005 to fund initiatives such as biometrics, control strengthening and increased quality assurance. We will provide a quantification of the individual impact of these once the 2005-06 Accounts are finalised.

Q3. Cont. The budgeted receipts of £254 million are expected to be less than costs of £285 million (2006 Report, p 90). To what extent are costs planned to be covered by receipts in 2006-07 for (a) visa services and (b) other consular services?

Answer

The budgeted receipts are less than the forecast costs because the FCO has £32 million in its baseline allocation from Treasury to reflect the Consular premium element of passport fees collected by the UK Passport Service which are paid into the Consolidated Fund. The FCO's budget will be adjusted by any change in consular premium collected by the UKPS in the 2006-07 Spring Supplementary. In addition there are some £7 million of visas issued for which no fee is recovered.

Under Fees and Charges Guidelines, fees have been set to recover the full economic cost of providing the service.

Q3. Cont. What was the actual coverage of costs under each of these headings in 2005-06?

Answer

The schedule 5 costs and income for 2005-06 are currently being prepared and are due to be finalised and signed of by the Permanent Under Secretary in July 2006. We will provide these figures to the FAC once the 2005-06 Accounts have been finalised.

Q3. Cont. The fees charged for visa applications were restructured in the Consular Fees Order 2005, which came into force on 1 July 2005. Why did the FCO not undertake a Regulatory Impact Assessment of the changes (2006 Report, p 82)?

Answer

Increases in visa fees are not a result of a new policy proposal needing primary legislation and Cabinet Office guidance states that Regulatory Impact Assessments are not required if statutory fees are increased by a predetermined formula. UKvisas is mandated by HM Treasury to cover the costs of issuing visas and HM Treasury has agreed the formula used to set fee increases.

Q4. The 2005 Departmental Report did not include details of the "iVisas Biometrics Programme" (valued at £70 million) because it had not then started (2005 Report, Table 16, footnote 4). Similarly, the 2006-07 capital projects table (Table 16) in the 2006 Departmental Report does not include it, although the Report reaffirms the FCO's commitment to a global roll-out of biometric visas from October 2006 (p 24). With the project expected to be underway in 2006-07, why does Table 16 not include details of this project?

Answer

The Biometrics programme was omitted from Table 16, as the FCO does not have any capital provision for the Biometrics project in the Main Estimates. However, the Home Office plans to include a £10 million transfer to the FCO in the Winter Supplementary Estimate to cover capital expenditure on Biometrics in 2006-07 and a further transfer is expected to be included in the Spring Supplementary Estimate, pending Home Office Group Investment Board consideration of the Full Business Case in November.

Q4. Cont. What progress has been made to date on the iVisas Biometrics Programme?

Answer

Initial proof of concept pilots in Sri Lanka and East Africa were set up in 2003-04, with Vietnam, the Netherlands and the Democratic Republic of Congo added in 2005. The results of these pilots have been invaluable in informing the design of the global system. The major difference in the pilots and what is proposed in the global roll-out is the tranfer mechanism and the time it takes to match fingerprints against the Home Office Immigration and Asylum Fingerprint Service database and relay the results back to our overseas posts.

Since the UKvisas Biometrics Programme was set up in April 2005, a fast and secure system has been developed, together with the supporting business process changes. The global system will ensure accessibility, quick, simple and discreet data capture from applicants and biometric information matching that enables responses to be sent back to Posts within 30 minutes of the applicants' data being entered on the system.

Plans for global roll out are now being finalised and we are presenting these to Ministers in July. Roll out will begin in Autumn 2006 and will continue until the end of 2007.

Q4. Cont. What is the estimated average cost of collecting and processing biometric data for biometric visas?

Answer

We estimate that the average incremental cost of processing a biometrically enabled visa (as opposed to a non biometric one) will be between £5-£6. We are undertaking an activity based costing exercise to further validate this costing.

Q4. Cont. What proportion of the £254 million visa/consular service budgeted receipts and £285 million costs (2006 Report, p 90 and 91) are for providing biometric visas?

Answer

In agreement with HMT we set worldwide fees to recover costs. We do not expect to create either a surplus or a deficit at this time. Under HMT Fees and Charges Guidelines we are not allowed to cross-subsidise different visas. Under Net Administration Costing Regime principles, we expect the costs of providing the service to equal income. Actual costing information by post for 2005-06 are not yet available to confirm this figure. This actual data should be available in September 2006.

Total income from global visa fees 2005-06 £163,361,565

Total visa income for the 11 Posts taking part in the biometrics "proof of concept" pilot £9,111,815

Pilot posts' income as a percentage of global visa fee receipts 5.58%

Q4. Cont. The Committee would like cost and timescale details for the iVisas Biometrics Programme, brigaded under the same heading used in Table 16.

Answer

Long term capital projects 2006-07 (capital costs only)

Project: UKvisas Biometrics Programme: Year started 2005

Current estimate of completion End-2007

Current estimate of capital cost *£65.6 million

Expenditure in previous year *£3.2 million

Estimated provision 2006-07 *£31.8 million

To be spent in future years *£30.6 million

*As part of an evolving programme and in developing the full business case we are currently evaluating our costs and looking closely at projected expenditure.

Q5. The 2006 Annual Report notes that revenue from property sales is now fully "recycled" back into the estate (p 75). Against that background, what are the factors producing a fall in the value of residential land and buildings and fixtures and fittings of over £200 million between 2004-05 and 2005-06 (Table 11)?

Answer

The forecast value of residential land and buildings shown in the 2005-06 report was not updated during the preparation of the report, and is therefore incorrect. We regret the error and apologise for any inconvenience caused. I attach a table (annex A) showing the provisional figures for 2005-06. The FCO's draft Resource Accounts 2005-06 show that the value of residential land and buildings has increased from £554 million at 31 March 2005 to £697 million at 31 March 2006. The change reflects acquisitions and disposals and changes in property values recorded in the property revaluation process.

Given the many uncertainties in this area (RICS guidelines specifically preclude surveyors from providing projections of future property values) we will base this table on a steady state assumption in respect of property assets for future years.

Q6. In regard to the SR-2002 PSA-4C, the FCO reports that it has been unable to develop a new tool for measuring conflict levels (2006 Annual Report, p 137). The Report notes the "inherent difficulties in measuring potential sources of future conflict and conflict prevention outcomes" and that a "final assessment . . . will be made in Spring 2008" (p 112). What work is the FCO doing to develop a means of being able to make that assessment of the outcomes of its Conflict Prevention work in 2008?

Answer

We covered this question in my reply to you of 22 June.

Q7. Three estate building projects in Table 16 of the 2006 Annual Report have start dates prior to 2005, but had not been listed in the previous 2005 Report—Colombo, Sana'a, and Doha. Why were these projects not reported in the 2005 Report?

Answer

The start dates prior to 2005 given for the estate building projects in Colombo, Sana'a and Doha indicate when preliminary work commenced. These projects were not included in the list of long term capital projects in the 2005 Annual Report because the main construction contracts had not been let at the time of publication.

Q8. Table 18 of the 2006 Departmental Report notes the contributions of different government departments to various UN programmes. To what extent do the figures in Table 19, on non-UN programmes, include contributions made by government departments other than the FCO?

Answer

Table 19 shows UK contributions to non-UN peacekeeping. Peacekeeping expenditure is funded from the peacekeeping element of the Global Conflict Prevention Pools. All expenditure in this table is therefore joint-funded by FCO, DFID and MoD.

Q8. Cont. The Table 19 non-UN programme costs for 2005-06 are £133.5 million (2006 Report, p 101). To what extent does this reflect a real increase in expenditure from the £26.3 million reported for the previous year in the 2005 Report (Cm 6533, Tables 19 and 20 combined)? How, if at all, do the non-UN programmes listed in Table 19 of the 2006 Report differ from those covered in the 2005 Report?

Answer

The 2005 and 2006 tables on non-UN peacekeeping have been drawn up on different bases. The 2005 table only included International Tribunals and OSCE peacekeeping activity whereas the 2006 table shows all non-UN peacekeeping. The attached table (annex B) restates the 2005 table on the same basis as 2006 using final outturn figures.

Q9a. SR-2002 PSA-2 on reducing tensions subsumes individual assessments for a range of regions, many of which are rolled over into the SR-2004 PSAs. Why were Sri Lanka, Ethiopia/Eritrea, Ivory Coast and Angola—which were assessed as "red"—dropped from the SR-2004 PSAs?

Q9b. SR-2004 PSA-3 on Conflict Prevention includes the security situation in nine regions/countries, but excludes India/Pakistan and Sri Lanka which were assessed in the similar PSA-2 of SR-2002. Why were these two regions left out of the SR-2004 PSA?

Answer

The Committee correctly notes that the FCO's SR02 PSA target on Reducing Tension (PSA 2) was rolled forward into a number of SR-2004 PSA targets, but primarily the Conflict Prevention (PSA 3) target. When the SR04 Public Service Agreement targets were drafted, the FCO agreed with HM Treasury that it was not practical to include all individual countries and regions of concern within the SR04 PSA reporting framework.

When the SR04 Conflict Prevention (PSA 3) target was devised, the three Departments sharing responsibility for delivery (FCO, DFID and MoD) agreed with Treasury nine focus countries/regions as representative of HMG's conflict related priorities. The criteria for selection was based on:

— level of UK government expenditure;

— potential for the UK to make a significant contribution;

— potential risks of involvement;

— UK's key priorities; and

— political context within which the UK was working.

India/Pakistan, Sri Lanka, Ethiopia/Eritrea, Ivory Coast and Angola were assessed under the SR02 Reducing Tension (PSA 2) target. Angola and Sri Lanka were considered under the SR02 Conflict Prevention (PSA 4) target.

Although these countries did not meet the criteria for inclusion on the representative lists of focus countries/regions, the FCO continues to work with them. Detailed performance monitoring ceased against some areas of our work to streamline and focus the SR04 PSA targets more closely with our strategic priorities.

Q9c. Overall, the SR-2004 PSA is assessed as "amber" ("on course"), despite "reds" for three areas. What would the FCO's assessment have been had the situation in India/Pakistan and Sri Lanka still been included in the PSA?

Answer

Baseline data, sources of data and indicators of success were not set for India-Pakistan and Sri Lanka as part of the SR04 Conflict Prevention PSA target, so any assessment would be hypothetical. However it is likely that, given the situation in India-Pakistan and Sri Lanka at the time of the assessment (January 2006), the overall assessment would remain "amber—on course".

Q10. The Committee wishes to receive a finalised assessment of the Efficiency Programme performance for 2005-06 (2006 Annual Report, Table 5), once the FCO has been able to complete its assessment by the Autumn, along with any revision to the planned savings for 2006-07 and 2007-08 made at that time. The Committee wants an explanation about the process involved and timescales needed in estimating and then finalising the efficiency assessments. If, once the firmer data are available, some classes of efficiency continue to show a fall in cumulative annual savings (as is currently the case in regard to "reductions in low priority activity"), the Committee would wish to have an explanation.

Answer

Details of how efficiency gains are measured for each of the FCO's efficiency projects is provided in the Efficiency Technical Note, published on the FCO's website (and also attached at annex C[1]). The timescale required for reliable figures varies from project to project, but should be available in the Autumn once reports have been produced from the audited accounts. In line with the advice in the NAO report "Progress in improving government efficiency" (February 2006), the FCO is verifying the figures for the efficiency gains it has achieved to date.

The target and planned outturn figures in table 5 on page 80 of the FCO's Departmental Report are based on the initial efficiency plan. These are consistent with figures published in the FCO's Efficiency Technical Note and as such have not changed over time. These figures are not the current forecasts of what these streams will deliver. The estimated outturn figures are based on the latest forecasts. These figures are an estimate of what has been actually delivered rather than what was initially planned.

The FCO has added savings from additional projects to some of the workstreams, partly to fill the gap caused by the ICT workstream not meeting its target (see answer to question 1). The "Reductions in low priority activity" workstream has two new projects, namely "Alternative Representation" and "DSI Restructuring" which were previously contingency projects, and delivered £6.6 million of efficiency savings in 2005-06. Hence the reductions in low priority activity worksteam as a whole is already in excess of the 2007-08 target of £4.5 million. This £6.6 million will continue to be delivered in future years. Efficiency gains are not recorded unless we are confident that they are sustainable ie that they can be maintained beyond the SR04 period.

Yours sincerely,

Chris Stanton

Parliamentary Relations and Devolution Team

Annex A: FAC Question 5

Table 11

FOREIGN AND COMMONWEALTH OFFICE CAPITAL EMPLOYED (£ MILLION)

	2000-01	2001-02	2002-03	2003-04	2004-05	2005-06	2006-07	2007-08
	Outturn	Outturn	Outturn	Outturn	Outturn	Provisional Outturn	Projected	Projected
Assets on balance sheet at end of year Fixed Assets Intangible		0	2	1	1	0	0	0
Tangible	1,250	1,262	1,246	1,227	1,254	1,483	1,483	1,483
of which: Non-residential land and Buildings	495	561	568	478	492	589	589	589
Residential land and Buildings	471	491	471	540	554	696	696	696
Information Technology	42	31	46	54	40	42	42	42
Plant and machinery	12	13	12	14	14	16	16	16
Vehicles	13	13	13	25	21	18	18	18
Antiques & works of art			20	19	19	20	20	20
Furniture & fittings*	126	103	71	55	43	0	0	0
Assets in the course of construction	91	51	45	43	71	102	102	102
Wilton Park						1	1	1
Current Assets
Stocks	12	10	10	8	9	7	7	7
Debtors	127	149	144	140	226	243	243	243
Cash at Bank and in hand 17		15	72	39	76	130	130	130
Creditors <1 year	-125	-83	-126	-97	-250	-339	-339	-339
Creditors >1 year		0	-33	-32	-32	-31	-31	-31
Provisions	-27	-30	-30	-47	-66	-67	-67	-67
Total Capital Employed	1,254	1,325	1,285	1,240	1,217	1,427	1,427	1,427

*With effect from 1 April 2005 Furniture and Fittings have been reclassified as administration expenditure.

Annex B: FAC Question 8

UK CONTRIBUTIONS TO NON-UN PEACEKEEPING 2004-05

SUB-SAHARAN AFRICA

Programme/Activity Final Spend 2004-05

Assessed Contributions

Country/Region

Sudan AU Mission 2,240,000

Sub-Total 2,240,000

Functional/Thematic

Rwanda Trib ICTR 4,408,625

Sub-Total 4,408,625

Total Assessed 6,648,625

Non-Assessed Contributions

Country/Region

Sudan Nuba Mtn Monitors and VMT 725,639

Sub-Total 725,639

Functional/Thematic

Sierra Leone Special Court 2,000,000

Sub-Total 2,000,000

Total Non-Assessed 2,725,639

Sub-Saharan Africa Total

9,374,264

GLOBAL (NON SUB-SAHARAN AFRICAN)

Programme/Activity Final Spend 2004-05

Assessed Contributions

Country/Region

Albania OSCE 271,356

Bosnia EUFOR 0

Bosnia EUMM 517,000

Bosnia EUPM 2,485,000

Bosnia-Herzegovina OSCE 818,350

Croatia OSCE 510,034

Georgia ESDP 283,000

Georgia OSCE 1,305,606

Kosovo OSCE 2,794,344

Macedonia EUPOL Proxima 1,426,000

Nagorno-Karabakh OSCE 73,732

Sub-Total 10,484,422

OSCE—Former Programme Activity

Armenia OSCE 92,966

Azerbaijan OSCE 108,967

Belarus OSCE 63,913

Estonia Mil Pensions OSCE 9,917

FRY (Inc Montenegro) OSCE 470,385

Kazakhstan OSCE 105,557

Kyrgystan OSCE 134,861

Macedonia OSCE 906,264

Moldova OSCE 104,620

Tajikistan OSCE 277,168

Turkmenistan OSCE 77,411

Ukraine OSCE 74,395

Uzbekistan OSCE 113,397

Sub-Total 2,539,821

Functional/Thematic

ICC Criminal Court 5,154,495

Yugoslavia Tribunal ICTY 6,238,756

Sub-Total 11,393,251

Total Assessed 24,417,494

Programme/Activity Final Spend 2004-05

Non-Assessed Contributions

Country/Region

Albania OSCE 106,565

Bosnia EUPM 4,403,630

Bosnia OSCE 674,151

Balkans (Bos/Kos) PSO 86,500,000

Croatia OSCE 246,204

ESDP Fact Finding ESDP 46,000

Georgia OSCE 899,975

IPU CivPol Mission Costs 185,655

IPU (DPA tax payments) CivPol Mission Costs 0

Iraq-Jordan CivPol Mission Costs 10,774,592

Kosovo OSCE 1,028,656

Macedonia EUPOL Proxima 294,579

Middle East Jericho Mon Mission 722,072

Middle East EU Mon Group 0

Nagorno-Karabakh OSCE 71,693

Yugoslavia EUMM (Other) 325,572

Sub-Total 106,279,343

OSCE—Former Programme Activity

Armenia OSCE 0

Azerbaijan OSCE 53,004

Belarus OSCE 53,835

FRY (Inc Montenegro) OSCE 378,653

Kyrgystan OSCE 64,637

Macedonia OSCE 714,671

Moldova OSCE 65,543

OSCE Secretariat OSCE 289,341

Tajikistan OSCE 0

Turkmenistan OSCE 53,112

Sub-Total 1,672,796

Functional/Thematic

Khmer Rouge Trib KRT 500,000

Sub-Total 500,000

Total Non-Assessed 108,452,139

TOTAL GLOBAL (NON SUB-SAHARAN AFRICAN) 132,869,633

TOTAL NON-UN PEACEKEEPING £142,243,897

1 Not reprinted-available at http://www.fco.gov.uk Back