House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Second Report

1 Introduction

1. The annual Departmental Report of the Foreign and Commonwealth Office (FCO) for the period 1 April 2004 to 31 March 2005 was published in June 2005.[1] Scrutiny of the FCO's expenditure and administration is an important part of the work of the Foreign Affairs Committee (FAC). When, following the general election of 5 May, the Committee was appointed on 11 July, one of our first priorities was therefore to look at the FCO's Departmental Report. We heard oral evidence on 26 October 2005 from the Permanent Under-Secretary and FCO officials and followed up numerous points in writing. The oral and written evidence is published with this Report.

2. We also heard oral evidence from the British Council, from the BBC World Service and, in February 2006, from Lord Carter of Coles, who at the invitation of the FCO and the Treasury carried out an inquiry into public diplomacy. It had been our intention to publish that evidence and our observations on it with this Report. However, due to the late publication of Lord Carter's report, we were obliged to decide whether to delay our own Report, or to produce two Reports. We have chosen to publish a separate Report on Public Diplomacy in the coming weeks.

Form of the annual Departmental Report and related papers

3. Overall, we welcome the format of the FCO Departmental Report 2004-05 as being largely in line with the Foreign Affairs Committee's previous recommendations and generally fit for purpose. We note, however, that over the past six years, the report has doubled in size, from 119 pages in 1998-99, to 240 in 2004-05. Less than one quarter of this increase can be attributed to changes sought by the FAC: the inclusion of cost-benefit analyses and 'lessons learned' sections, which in total account for 27 pages of the latest report. The bulk of it appears to be due to a tendency for the narrative parts of the report to expand year by year, and to the consequent need to break up this dense prose with yet more photographs. Unfortunately, this can detract from the report's main function, which is to inform Parliament and the public about the FCO's performance against its objectives and to account for its stewardship of public funds.[2] We are not unhappy with the quality of the report, which is well-written and which rewards the inquisitive reader. We do, however, believe that clearer presentation of information could make the report more fit for purpose.

4. The annual Departmental Report is not the only document produced by the FCO to convey important information about its use of public resources. Chief among the others are the Autumn Performance Report (discussed above), the Resource Accounts, the Efficiency Technical Note, and memoranda on main Estimates and on supplementary Estimates. We note that in its first Autumn Performance Report, reviewing progress towards Public Service Agreement (PSA) targets, the FCO—in common with other Whitehall Departments—has adopted a 'traffic light' presentation of its performance: green for "fully on course;" amber for "generally on course;" and red for "not on course."[3] This gives a commendably clear and immediate indication of progress, which is backed up by more detailed explanations of exactly what is being achieved or, in some cases, what is not being achieved, and why. In some ways, the Autumn Performance Report is a more user-friendly document than is the Departmental Report. In just 64 pages, it communicates all the key information.

5. We conclude that the presentation of the FCO's performance against its Public Service Agreement targets in the Autumn Performance Report is an improvement over the presentation of similar information in the annual Departmental Report.

6. Publication of the Resource Accounts for 2004-05 was considerably delayed by problems with the new management information system, Prism. We discuss these problems in greater detail below.[4] The FCO told us that "issues relating to the implementation of the [Prism] system led to a slippage in the timetable we set ourselves".[5] The timetable originally set by the FCO was to sign the Accounts off at the end of September. We were informed of the slippage in early October and the timetable was adjusted by one month, which meant that signing-off was then expected in late October. However, further 'slippage' occurred. Eventually, the Accounts were signed off on 30 November, laid before the House on 19 December and printed copies were available only in mid-January.[6] Unfortunately, this was too late for us to scrutinise them closely, without delaying our own exercise further. We conclude that the delay of over two months in signing off and publishing the FCO's Resource Accounts for 2004-05 was excessive and that it had the unacceptable consequence of depriving Parliament and the public of an important tool for exercising scrutiny. We recommend that the FCO explain in its response to this Report what caused this delay and why it missed even the revised target for signing off its accounts.

7. The FCO's latest Efficiency Technical Note was published at the end of November 2005.[7] The Note sets out how the FCO envisages making the 2.5 per cent efficiency savings in its core (i.e. excluding British Council and BBC World Service) expenditure agreed as part of the 2004 Spending Review. It describes 21 separate efficiency projects, including in respect of each a summary of the scale of savings expected, how they will be achieved and how they will be monitored. This is a useful document, and it should be increasingly useful for anyone seeking to track the FCO's efficiency savings over time.

8. Estimates memoranda are supplied to, and published by, this Committee. In these memoranda, the FCO explains to Parliament why it is seeking authority to spend or appropriate sums of public money. Historically—and the FCO is not alone in this—government departments' Estimates memoranda have been uninformative and difficult to understand. The FCO's memoranda have been less clear and helpful than those of some other departments. The Committee has previously corresponded with the FCO, seeking improvements in these memoranda.[8] We are pleased to note that there have been some improvements in recent Estimates memoranda, although we think they could be made more helpful still.[9]

9. Each year, the Foreign Affairs Committee looks closely at the Departmental Report produced by the FCO and also at these other reporting documents. On this occasion, we have also been able to use the report of an efficiency and effectiveness study commissioned by the FCO from Collinson Grant Limited, a firm of management consultants, and an internal FCO report on lessons learned from the Prism management information project (the 'Ling report'). We consider both documents in section 3 of this Report, Efficiency and effectiveness.

Assessing performance

10. As we have already noted, the FCO is responsible for reporting to Parliament its performance against its Public Service Agreement targets. However, the FCO faces considerable challenges in doing this. Most of its work is difficult to assess using quantifiable targets. Although most of its public service work—performing functions such as the issuing of visas and passports—can be assessed in that way, the successes or failures of the United Kingdom's diplomacy cannot be measured by numbers. Many of the FCO's PSA targets can only be ascertained by making, as the FCO itself admits "subjective, qualitative assessments of progress."[10] Moreover, in the majority of its targets the FCO is far from being the only—or even the main—actor exerting influence. In many cases, there are so many pressures and influences being brought to bear on a target that it is difficult if not impossible to have any certainty over whether achievements or failures can be attributed to action or inaction by the FCO itself or to other actors and other factors. For example, the following indicator applies to PSA target 3 ("An international system based on the rule of law, which is better able to resolve disputes and prevent conflicts").

Nepal

The 'data source' for this indicator is described in the following terms:

11. As anyone who has followed events in Nepal would expect, this indicator is currently set at 'red'—not on course. The APR states that "The King's efforts to consolidate his grip on power have reduced the prospects for peace. However, the Maoists have announced a cease-fire […]".[13] We do not suppose that either of these developments can be attributed to the efforts of the United Kingdom's diplomats. This calls into question the utility of the indicator—if not of the target itself, in relation to which two indicators stand at red, eight at amber and only two at green. In our view, it really is not within the gift of the FCO to secure achievement of this target; the best the FCO can do is to work with others towards it. The same applies to many other targets.

12. The unsatisfactory nature of this tick-box approach to PSA targets is, moreover, exacerbated by an increasing tendency for the targets to be measured by outcome rather than by input or output. We question whether such targets always provide an appropriate mechanism for measuring the FCO's performance. We conclude that performance targets defined in terms of inputs and outputs may often be more appropriate for the FCO than targets based on outcomes, particularly where a target is based on outcomes which it is beyond the capacity of the FCO to deliver. We recommend that the FCO discuss with the Treasury the potential for redefining some of its targets and performance indicators accordingly.

13. The FCO told us last October that a review by the National Audit Office of the data systems underlying its PSA targets was still under way.[14] We recommend that in its response to this Report the FCO publish a summary of the results of the NAO's review of the data systems underlying its PSA targets, together with its commentary on how it proposes to implement any conclusions reached by the review.

A year of two presidencies

14. The Foreign Affairs Committee in the 2001-05 Parliament looked at all the FCO's Departmental Reports during that period, and reported on each of them. In its Report on the 2003-04 report, the Committee looked ahead to the forthcoming United Kingdom presidencies of the G8 group of nations and of the European Union. The Committee was concerned lest the expense of administering these presidencies should lead to cuts elsewhere in the FCO's budget.[15] The Government responded to the Committee that "Through a combination of prudent financial management and additional resources provided by HM Treasury, we are confident we can do this without cutting other work on our strategic priorities."[16]

15. The two presidencies ended on 31 December 2005, so now is the time to take stock. We recommend that in its response to this Report the FCO provide a full breakdown of the costs of the G8 and EU presidencies, how they were met, and whether the diversion of resources to service the presidencies led to any adverse consequences for its other work.

1 Foreign & Commonwealth Office, Foreign and Commonwealth Office Departmental Report 1 April 2004-31 March 2005, Cm 6533, June 2005 Back

2 The Departmental Report does not contain a statement of its purpose. Back

3 Foreign & Commonwealth Office, Autumn Performance Report 2005, Cm 6709, December 2005 Back

4 See paras 62-72. Back

5 Ev 8 Back

6 Foreign & Commonwealth Office, Resource Accounts 2004-05, HC 776, December 2005, available at www.fco.gov.uk Back

7 See Foreign & Commonwealth Office, Technical Note, available at www.fco.gov.uk Back

8 Written evidence to the Foreign Affairs Committee, Miscellaneous matters, HC (2004-05) 489, Ev 14, 15, 22, 23 Back

9 Ev 82, 86 Back

10 Ev 12 Back

11 Foreign & Commonwealth Office, Autumn Performance Report 2005, Cm 6709, December 2005, p 16 Back

12 Ibid Back