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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 795-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE FOREIGN AFFAIRS COMMITTEE
FOREIGN AND COMMONWEALTH OFFICE ANNUAL REPORT 2006-07
Tuesday 26 June 2007 SIR PETER RICKETTS, DICKIE STAGG, KEITH LUCK and DAVID WARREN Evidence heard in Public Questions 1 - 100
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Foreign Affairs Committee on Tuesday 26 June 2007 Members present: Mike Gapes (Chairman) Mr. Fabian Hamilton Rt hon. Mr. David Heathcoat-Amory Mr. John Horam Mr. Eric Illsley Mr. Paul Keetch Andrew Mackinlay Mr. Malcolm Moss Mr. Greg Pope Mr. Ken Purchase Rt hon. Sir John Stanley ________________ Examination of Witnesses
Witnesses: Sir Peter Ricketts KCMG, Permanent Under-Secretary and Head of the Diplomatic Service, Dickie Stagg, Director General Change and Delivery, Keith Luck, Director General Finance, and David Warren, Director Human Resources, Foreign and Commonwealth Office, gave evidence.
Q1 Chairman: Good afternoon. Could members of the public please turn off their mobile phones, and if you have a problem, take the batteries out? This is an annual event where the Department comes before us to discuss its annual report. Although we know you very well, Sir Peter, this is your first appearance before us in your new capacity, and no doubt the first of many. We are very pleased that you are here today. Perhaps you will introduce your colleagues and then we will open with a question from Sir John Stanley, who wants to ask about a particular area, and then we will get into more general activities. Sir Peter Ricketts: Thank you very much indeed, Mr. Chairman. I am accompanied by two faces that will be familiar to you, Mr. Dickie Stagg on my left, who is our director general for corporate affairs and has appeared before you a number of times, and Mr. David Warren, our director of human resources. Mr. Keith Luck, a new face, is our director general of finance, who started life as a professional accountant in the private sector and has spent time with local authorities and the Metropolitan police before coming on to our board at the beginning of the year. Q2 Sir John Stanley: Sir Peter, before the Foreign and Commonwealth Office unilaterally terminated its cost-sharing agreement with the Ministry of Defence on the defence attaché network worldwide earlier this year, did your Department have discussions with the Cabinet Office and other relevant Government agencies as to the implications of that move? Sir Peter Ricketts: No, Sir John. That decision was taken in the FCO because, like all Departments, we are under real pressure from the Treasury to show efficiency savings. We therefore had to look at the totality of our expenditure and make some prioritisation choices. One choice that we made was that the £10 million or so a year that subsidised the defence attaché network was not a priority for FCO funds. We took the view that it was entirely right that the MOD should fund the defence attaché network for defence purposes, but we did not feel that that was a high priority use of FCO funds, and so we took the decision. I discussed it with my counterpart in the MOD and we are making arrangements for transitional plans, but it was an FCO decision. Q3 Sir John Stanley: Sir Peter, I am dismayed and very surprised that your Department did not engage in the wider consultations to which I have referred. Did your Department not reflect on the wider national security implications of such a decision? If it did not, surely it should have, and consulted the relevant Government agencies. Sir Peter Ricketts: We certainly reflected within the FCO. We have a set of strategic priorities that we are funded to deliver. The MOD is funded to deliver defence priorities and we concluded that the money that we were subsidising for MOD defence attachés around the world was not a priority for FCO funds. We co-operate and work extremely well with the MOD, and that has continued since this decision-it has not affected the good co-operation between us-but we have concluded, and the Foreign Secretary agreed, that the MOD should decide on the disposition of the defence attaché network. Q4 Sir John Stanley: Are you saying that the FCO's current view is that the defence attaché network contributes very little to its responsibilities and objectives? Sir Peter Ricketts: I am saying that I believe it serves primary defence objectives, and it is therefore right it should be funded by the MOD. Defence attachés continue to work in close co-operation with FCO-funded parts of our missions abroad, but we concluded, yes, that the funds that we had been providing, frankly, were not delivering high-priority outcomes for the FCO. Q5 Sir John Stanley: Finally, will you remind the Committee of the conclusions in Lord Franks's report, following the Falklands war, as to the main sources of information of our post in Buenos Aires about the whereabouts of the Argentine navy in circumstances in which significant cuts in that post had been made by the then Conservative Government? Sir Peter Ricketts: I cannot, I am afraid. Q6 Sir John Stanley: If you consult the reports, Sir Peter, you will find that Lord Franks concluded that, as a result of the cuts, the main source of that critical information was the local press reports. I hope that I have made my point. Sir Peter Ricketts: You certainly have, Sir John, and I will reflect on it, but I believe that the MOD and the FCO are co-operating very effectively. As a result of this decision, the MOD has had to review internally the disposition of its defence attaché network. That is something that we will work with it on, but it has clarified where the priority lies between the FCO and the MOD in terms of functions and embassies. Q7 Mr. Keetch: I absolutely, totally agree with what Sir John Stanley has said, and I find this cut in our overseas capability frankly astonishing. Sir John is a former Armed Forces Minister, and all of us on the Committee know of the close relationship between defence and foreign policy, and that some of us sometimes cross the line from one field to another. The reality of what you are saying is that the FCO has built a little castle, put a moat around it and said, "We aren't going to support defence capability in our embassies overseas," in a way that could be disastrous for foreign policy. Sir John related it to the Falklands conflict. I think it was the direct withdrawal of a defence attaché in South America that achieved that. Are you saying that the FCO no longer has any view or influence on, or suggestion at all about where we should have a defence attaché, given that a defence attaché provides not only defence advice to the ambassador but eyes and ears to go and look at things in a way that, with the greatest respect, a diplomat, accountant or someone in charge of human resources cannot do? This country gets involved in great export opportunities throughout the world involving legitimate defence exports; are you saying that you are going to take support away from defence attachés in those posts and leave them solely on the MOD budget? Sir Peter Ricketts: I am saying that the promotion of defence exports seems to be properly a call on MOD resources, not FCO resources. I go back to where I began: we are under pressure, as are other Government Departments, to find efficiency savings, so we have to scrutinise every pound that we spend. We have concluded, and the Foreign Secretary agreed, that the £10 million or so that we have been using to subsidise military offices and defence attaché posts abroad would be better spent on core FCO business supporting our 10 strategic priorities. Q8 Mr. Keetch: So, core FCO business includes supporting laudable things like the Westminster Foundation for Democracy for political party training, British culture and all sorts of other trade and investment operations through UK Trade and Investment, which I support, but it does not include helping to have somebody in post who can recognise one kind of missile or submarine from another? Is that what you are saying-that that is no longer a foreign policy priority for the Foreign Office? Sir Peter Ricketts: I am saying that the funding of military officers serving abroad should be a call on MOD budgets. Mr. Keetch: I am astonished. Q9 Mr. Purchase: I do not think that this is catastrophic, but I worry that it might be indicative of the lack of co-ordinated approaches across the Government, not just the FCO and the MOD. I am concerned that you say that it is £10 million-worth of savings, for a function that you do not think is necessarily central to what you are doing, or even peripheral to what the FCO does overseas. If I were to become the Chancellor of the Exchequer tomorrow, why should I not just take £10 million from you and give it to the MOD to carry on with that function? Sir Peter Ricketts: We will try to persuade the Chancellor that this is a sensible decision about prioritisation of available FCO money, and that we believe that we have higher priority calls on it than the subsidy to the defence attaché network. I would be very happy if the FCO had no pressure on it for efficiency savings, and could continue the subsidy and continue the defence attaché network as it has been. However, given the pressures that we are under, I think that it is right that the MOD should look at the disposition of the defence attaché network, on the basis of the resources that it feels it can put into it. Q10 Mr. Purchase: I want to know, if I may, why a function that has worked for a number of years is suddenly deemed, during an efficiency drive, to be no longer necessary? Has that function now ceased completely? Sir Peter Ricketts: No, the function continues. We have, I think, subsidised about 30% of the cost of the defence attaché network, so 70% of it remains funded by the MOD. The MOD will be concluding whether it wants to reduce the total number of defence attachés around the world, which is one possibility, or to increase the funding to keep the same number. I think that actually the MOD has taken the opportunity to have a critical look at how many defence attachés it has around the world, and where they are deployed. It is always a good thing to keep that kind of issue under review. Chairman: Andrew Mackinlay, very briefly, then we will move on. Q11 Andrew Mackinlay: I am not unsympathetic to what you have said, to the extent that I do not think that the FCO budget should necessarily promote the sale of arms-that may be a decision for other Departments-but surely there could be some occasions, such as with an emerging country, where, as a foreign policy objective, we want to get the armed forces up to good standards, with interoperability and so on. Is there not a case, rather than talking about defence teams and defence attaché budgets, for that to be on a merit basis? There might be some occasions when, properly and legitimately as a foreign policy objective, you should be making a contribution, and other cases where you say to the Ministry of Defence, "No, that is inappropriate." It seems that our discussion of the past few minutes has made the issue appear black and white. I do not know the position of Montenegro, but by way of example, presumably we want to ensure that its armed forces are signed up to good ethics and are robust and have interoperability. They are probably even coming into NATO. Sir Peter Ricketts: I do not mean to make it sound as black and white as it has sounded over the last five or 10 minutes. I agree that there are shared interests between ourselves and the MOD over things such as supporting the growth of democratically accountable armed forces and improving their capability and so on. That is something that we talk to the MOD about all the time. The MOD is kind enough to go on discussing with us how it will dispose of its defence attaché assets around the world. We have funds through the global conflict prevention fund that we can use to help training attachments and fund courses in these countries. So it is not completely black and white. However, having taken this decision to take our subsidy away from the DA network, I am not inclined to go down the road of funding some but not others. That would introduce more ambiguity. We should co-operate together on a common strategy for achieving what you are talking about, yes, and that is happening. Q12 Chairman: I now move on to more general issues. Sir Peter, the FCO board decided its negotiating strategy with the Treasury for the comprehensive spending review in November 2006. Having decided that strategy, can you tell us how the negotiations are going? Are there any particular difficulties or sticking points? And are you optimistic that you will get what you want? Sir Peter Ricketts: It would be unwise of any official around Whitehall to be too optimistic, Mr. Chairman. Thank you for giving us the opportunity to bring you up to date on the CSR process; it seems to have been going on for some time. Perhaps I could start by saying that I strongly believe that the FCO is a more efficient organisation than it used to be, that we give good value for money, and that the case for the global presence that the FCO provides in a globalising world is one that is of real value to the Government. If we look back over the last couple of spending rounds, the FCO's budget has been growing more slowly than that of most other Government Departments, so we have been working in those spending rounds to find the type of efficiencies that you have just been talking about. We have also been making some tough choices about where we deploy people, including moving people away from Europe towards India and China, and so on. At the same time, the demand on us from other Government Departments for the use of our embassy facilities around the world and the demand from members of the public for the consular and visa services that we offer continues to rise. So we are facing growing demands for our services. However, we recognise that the FCO cannot be exempt from the drive across the Government for efficiencies. In his last Budget, the Chancellor set out that he was looking for all Departments to cut their administration budgets to find efficiencies of 5% and to cut overall budgets by 3%. Those were his targets. The Foreign Secretary has had a number of discussions with the Chief Secretary to the Treasury, and we have tried to offer a way of meeting those targets that does not involve making significant cuts in our overall global presence. We believe that there is a means of achieving that objective. On the 5% reduction in our administration costs, which all Government Departments have been asked to produce, we have said to the Treasury that we will strive to make those cuts provided that it is prepared to define our administration costs as they do those of other Departments. I say that because, for some reason that I do not fully understand, at the moment all FCO activity pretty much counts as administration, so the cost of our ambassador in Kabul or in Baghdad counts towards our administration costs, which for most people in other Departments is their support costs or perhaps their HQ costs. We are trying to agree a definition of our administration costs that would allow us to reduce them by 5%, largely through moving towards a shared services model for our support services abroad. We can talk more about that, if you like. Chairman: We will come to that later. Sir Peter Ricketts: Regarding the 3% overall cut in the budget, given that we are an organisation that is very heavily dependent on manpower-people are our main cost-that is a much more difficult target to meet. In our view, it would be feasible to meet that target if the Treasury recognised one very large element in our budget, which is the subscriptions to international organisations that lie on our account. So the UK subscriptions to the United Nations, NATO, the Organisation for Economic Co-operation and Development and other international organisations are all part of our budget, and the subscriptions have been going up much faster than our budget. That is a big constraint, so we are also discussing that with the Treasury. The third area that we are in discussion with the Treasury about is our capital requirements, because the cost of keeping our people secure in embassies around the world at a time of rising threats is mounting. Therefore, we need to have enough capital to meet our key security costs around the world. I think that those are the three areas where we are actively trying to cut costs. Negotiations continue, and are likely to continue for some months yet. Q13 Chairman: Summarising what you are saying, you have increasing costs of membership of international organisations, which are not under your control and cannot be under your control because they are international organisations, and yet the Treasury regards your overall budget as the place where the efficiency savings have to be made. So the efficiency savings that you are expected to make on things that are under your control are of considerably higher proportions than this 5% figure. Sir Peter Ricketts: That is exactly right. Q14 Chairman: Therefore, other Government Departments that do not affiliate to international organisations in the same way-they do not have to pay a contribution to the UN or other international organisations-do not have the same pressures on them. Sir Peter Ricketts: We pay the subscription on behalf of the Government as a whole, and our budgetary allocation for that has not kept pace with the rising subscription levels. So as the British economy becomes stronger and the costs of our subscriptions rise, we must find further savings. That is the current position. Q15 Chairman: Of course, we also as a country have a commitment to help the UN with regard to various activities that are additional to the budgeted contribution to the UN system. Sir Peter Ricketts: Indeed we do. For example, that includes peacekeeping and other UN activities. One final additional cost on that front is that both the UN and NATO are building new headquarters buildings, for which all countries have to subscribe, including the UK, and that comes from the FCO capital budget. Q16 Chairman: Perhaps you should talk to the Ministry of Defence about getting some of that money from the defence budget. Sir Peter Ricketts: That is a very good idea. Q17 Chairman: May I ask you about security? What proportion of your bid for an increased budget relates to making our embassies, residences and representations in other countries secure to meet modern standards against terrorism? Sir Peter Ricketts: It is a very substantial proportion of it, but I am not sure that I can give you a precise figure. Q18 Chairman: Perhaps you could send us a note. Sir Peter Ricketts: I will. Our estates budget is driven very largely by security. In other words, we are replacing embassy buildings and residences that are insecure and it is extremely expensive to find places that are far enough back from the road and built to an adequate standard for security, so security is the driver. Let me write to you, if I may. Q19 Chairman: Clearly, the Committee will be concerned if the country's effectiveness internationally is seriously damaged because we have to, quite rightly, protect our staff, but thereby undermine our level of representation. We will come on to the question of posts and the footprint later on, but for the record, I wish to flag up that those are matters of deep concern. Sir Peter Ricketts: I appreciate the Committee's concern and will be happy to write. Q20 Mr. Horam: On the question of security, in the 2004 spending review, the FCO received an additional £200 million for security. Do you expect to receive any additional amount for security in the current spending round? Sir Peter Ricketts: I think that we received an additional £60 million for each of the three years of the spending review, which is about £120 million in total. [Interruption.] May I correct the record, Mr. Chairman? That figure should be £180 million. We have made good use of that, and as a result, we have a number of embassy properties that are much safer and more secure than they were. Q21 Mr. Horam: I was trying to get at whether the issue of security outwith the restraints that are imposed on you by the Treasury, which we have been discussing. Is that a separate item or is it within that overall envelope? Sir Peter Ricketts: We are not at present being offered the additional sums that we were offered in the last spending round, but we need something of almost that magnitude, if not quite at that level, to continue to make inroads into the list of posts that are not currently secure. Dickie Stagg: May I add a small point? In the 2004 spending review settlement, we put in a particular bid for security in the immediate aftermath of the attack on the consulate in Istanbul. There was a rather specific set of issues related to that attack, which we wanted to try to prevent from being repeated elsewhere. But I think that Sir Peter made a fair point about the case for additional security expenditure going forward. Q22 Mr. Horam: Which still exists? Dickie Stagg: It does. Sir Peter Ricketts: Unfortunately, the list of posts that need attention on the security front is still considerable. Q23 Mr. Horam: May I move on to public service agreements, which relate to the issue of Treasury management? It is rather ironic, in the light of your decision on defence attachés, that the Treasury is actually promoting the idea of cross-departmental working on public service agreements and cross-departmental public service agreements. How does that affect you? Do you have a number of public service agreements where you are working with, for example, the MOD or the Department for International Development and do you have a number which are individual to you alone? Is that how it works? Sir Peter Ricketts: The approach to public service agreements in this spending round is different from how it has been in the past and the Treasury's intention is that all public service agreements should be cross-departmental so that, instead of having some that apply to only one Department and some that are joint, there will be a much smaller number and they will all be cross-cutting, which seems to me to be a good idea because public service agreements are- Q24 Mr. Horam: So how many did you have before that revolution in public service agreements and how many do you expect to have? Sir Peter Ricketts: We had nine in the last spending round and expect to be associated with three or four in the coming spending round. Q25 Mr. Horam: So the number will fall? Sir Peter Ricketts: The number across Government will fall. We will lead Whitehall's work on the conflict PSA. We can talk more about that if you like. We will be associated with a number of other PSAs, on migration, on counter-terrorism and on sustainable development, for example. Q26 Mr. Horam: Are those now under way? Sir Peter Ricketts: They are now under discussion among Whitehall Departments, to be finalised when the CSR is announced in July. Q27 Mr. Horam: On the one that you are leading, on conflict prevention, you are having discussions with various non-governmental organisations, academic community think-tanks and so on. How does that work? What do you expect to get from those organisations? Sir Peter Ricketts: We have always found that the conflict PSA is the most difficult PSA about which to get sensible performance measures that mean something. They do not just measure activity, such as the number of conferences held or of peacekeepers deployed; they try to get at, in a meaningful way, whether what the FCO is doing has an effect on conflict regionally or globally. In the CSR 2004 PSA on conflict, we made an effort to produce good measures, although I am not sure that they were all that good. In this PSA, we are trying to have both a quantifiable sense of how much conflict is going on in the world and what Departments can do about it, and some more specific milestones for the individual programmes that we will pursue, to show that we are making some progress towards stability in individual countries. That will involve a mixture of working with places such as the university of British Columbia, which has a model for measuring conflict globally, and referring to more specific milestones that apply to the activity of our Department. Through them, we will try to focus on the outcome that we achieve, rather than just measure processes. Q28 Mr. Horam: Do you think that public service agreements are intrinsically more difficult for the Foreign Office than for other Departments? Reducing waiting lists in the health service, for example, has a measurable outcome. It is much more difficult in your case, because you are dealing with less tangible things. Sir Peter Ricketts: We can use them well for our service delivery work, such as consular and visa work. We can have PSA targets for that. Q29 Mr. Horam: But not for conflict prevention. Sir Peter Ricketts: I personally think that conflict prevention is one of the most difficult areas. It is a policy area and an area in which, with the best efforts in the world, the British Government are only one player, and the FCO is only one of the British Government players, trying to effect peace in the Middle East or in Afghanistan. That does not mean to say that what we do is irrelevant; I hope that it is not, but we have always found it difficult to measure how much of an impact we make. For this PSA, we are putting serious effort into a better set of performance measures, which will then be common to us, DFID, the MOD and the Cabinet Office, and should therefore ensure that all Departments are working together in this area. Q30 Mr. Horam: I must say that I am rather unconvinced by the amount of work that you have to put into something that is inherently rather difficult to your point of view. How does a PSA, as you have described it, relate to your strategic objectives? Sir Peter Ricketts: In the last spending round, there was a fairly close, but not complete, match between our 10 strategic priorities and the now nine PSA targets, as demonstrated in our departmental report. The match was not complete because the targets were set in 2004 and lagged behind the development of our strategic priorities, which included the addition of climate change, for example. It was an imperfect overlay of one on the other. In the next spending round, there will be far fewer targets, so they will not cover anything like the full spectrum of the Department's strategic priorities, but will all be geared to- Q31 Mr. Horam: They will not cover all your strategic objectives? Sir Peter Ricketts: They will not cover all 10 strategic priorities. We will be left with a set of 10 departmental strategic priorities and, like other Departments, a much smaller number of PSA targets, which will be geared to identify targeted bits of our activity. I hope that that will be more helpful to us, because it will point us to areas of joint working with other Departments. Q32 Mr. Heathcoat-Amory: May I pursue the point about public service agreements and their measurement? You have described rather well, Sir Peter, how the outcomes may be beyond your control. There may just be fewer wars one year, and therefore measuring you on outcomes might not actually reflect your efficiency and the effort that you put in. We have been told in answers to written questions that the Departments will be "moving away from the measurement of inputs, towards outcome-based measures wherever possible". In a sense, we are moving in the wrong direction. Can you not find a better way of measuring inputs and outputs, and persuade the Treasury accordingly? Sir Peter Ricketts: Mr. Heathcoat-Amory, I am not sure I agree that we are moving in the wrong direction. We can easily measure inputs; in a way, that is the simple part of it. We can report to Parliament on how many visits we have made, how many conferences we have held, how many calls ambassadors have made around the world and all the rest of it. That does not tell you very much about what the FCO has achieved in terms of preventing conflict. Although it is much more difficult, it is more relevant if we hold ourselves to account on outcomes from all this work-what do we actually achieve from it? Difficult as it is, my own feeling is that it is right that officials should be told to account for what it is they actually change in the world. That is the way that work across Whitehall on these PSAs is going. Q33 Mr. Heathcoat-Amory: But you may be just lucky. Those outcomes might be influenced beneficially by factors entirely unconnected with your efforts, but you are going to be judged on them by the Treasury. That seems rather perverse, particularly since we are moving further in that direction. Sir Peter Ricketts: I recognise your point that sometimes you get outcomes without a great deal of input from the UK. But I repeat what I said: measuring inputs measures enthusiastic work by Departments; it does not really measure whether that is achieving anything. If you want to take a view on whether all this activity is worth while, and whether it is a higher priority for funding than something else, holding us to the hard discipline of saying, "What are we are actually changing in the world as a result of this?" is worth doing, even though it is difficult. Q34 Mr. Heathcoat-Amory: May I ask you a little more about how you manage your Department? It must seem occasionally that you are being managed by the Treasury. May I bring Mr. Stagg in here, because I think he is the manager responsible? Incidentally, I am delighted to see him again. I think I last saw Mr. Stagg when he was an incredibly energetic private secretary about 15 years ago, so I am very pleased that he is now managing the Foreign Office. Mr. Stagg, how do you see your relationship with the Treasury? Yours is an old and very big Department, but it seems to be an appendage of the Treasury's accounting and management techniques. Dickie Stagg: All Departments are subject to the same sorts of control by the Treasury. The Treasury is responsible overall for deciding whether Government money is being spent effectively and the taxpayer is getting good value. I think we have to have some mechanisms and those revolve around outputs, which, as others have said, are much easier for some to measure than for others. Clearly, if you are running a trust hospital or building a road, you can judge the effectiveness of your activity quite well. For the consular visa operation, which I am also responsible for, I think we have developed fairly clear PSA targets-we can measure them and get clear guidance as to whether we are delivering what people expect and want. In terms of foreign policy, that is difficult, as you and Sir Peter have being discussing, but the reality as I see it is that the Treasury has an approach that involves giving Departments money to achieve things, not in order to make inputs into things. Therefore, we have to have some mechanism for measuring, however imperfectly, whether we are getting something out of the money that the taxpayer is putting in at the top of the machine. We have to try to find some way to do that, and I think any thoughts from people around the table would be very helpful because we do not disagree at all about the difficulty, but I think that the Treasury and ultimately the British taxpayer would say, "Well, we want to know where this money is going to." The relationship is not a marriage made in heaven, but it is reasonably sensible and grown-up. Q35 Mr. Heathcoat-Amory: So you are happy about that. May I ask you about the use of consultants? It is sometimes observed that we suffer from too many consultants, who come in and borrow your watch and then tell you what the time is. Do you suffer from that in the Foreign Office and is it an influence of the Treasury on you? Dickie Stagg: I will have a stab at my answer, then anyone else can join in. From my point of view, the whole term is quite difficult to define. In the answers that we have been giving Parliament about the use of consultants, the large bulk of the money, by far the biggest single sum, is spent on Hewlett Packard, which is our IT partner in developing a new global desktop system. Whether you define it as a consultant is really quite an interesting and esoteric question, but I am absolutely sure that we need to have some high quality, private sector input into that process. So my perspective is that, in general, we get a good deal from them, but I am sure that there are examples where we have not got as much out of consultants as we would have hoped. Sir Peter Ricketts: Perhaps I may add to that. I would like, during my time in this job, to see our dependence on consultants go down. I think we ought to be trying, where we can, to grow expertise in the Department that can take on some of the roles that consultants are rightly and inimitably helping us with at the moment, such as our IT programmes. I would like to see that decline over time. Q36 Mr. Heathcoat-Amory: May I ask you a specific question about the global conflict prevention pool? I understand that the pool is shared with the MOD and the Department for International Development, and there is one for preventing global conflict, but most of it seems to have been spent on Iraq and Afghanistan last year, which cannot be said to have been a huge success, as both are the subject of very high-intensity wars. Is there a danger that we actually use that preventive money in firefighting to deal with wars that we may not have started but have not been able to stop, rather than looking ahead in places such as Latin America and elsewhere to prevent future wars? Sir Peter Ricketts: Thank you, I think that that is a very interesting question. My answer is, essentially, yes, I think that there is a danger of what you describe and it arises because of a long-standing problem in funding arrangements in Whitehall, which means that the Ministry of Defence, when conducting operations, is funded from the Treasury reserve for its operational costs, but the FCO is not. So we have to find the civilian costs of crisis management, such as in Afghanistan or Iraq, either from reprioritising our existing budget or from the conflict prevention pool. Those are the only sources of money that we have got. The convention is that we cannot go to the Treasury reserve for our in-year short-term costs for crisis response, which we are now deeply engaged with. We have people at risk in Baghdad and Basra, in Kabul and Lashkar Gah, who are effectively on operations and who need security, protection and money to survive in those very difficult environments. The only place we can get that, if we cannot find it from within our own budget, is the conflict prevention pool, so the result has been that more and more of the money in the pools has been allocated to the short-term requirements, and less and less to the long-term requirements. I think that, over time, we need to find a better way of ensuring a cross-government approach to these crisis-management arrangements, to make sure that all Departments, including the FCO, DFID and the MOD, can respond to short-term crisis needs. We also need to maintain the pools for the longer-term conflict preventing work that I think they were originally conceived for. It seems that it is a frustration that is under active discussion, but we have not solved that problem. Q37 Chairman: May I just pick up on something that Mr. Stagg said? He referred to the ability to measure performance on visa and consular work, but we are in the position of knowing that the FCO was unable to assess its performance on six out of its seven consular targets, because data in the consular annual return were not available. Could you explain why that was? Dickie Stagg: There are two slightly different things involved, mine was a conceptual comment about the possibility of measuring- Q38 Chairman: Conceptually, you could, but in fact you have not. Dickie Stagg: In practice, we have had a difficulty because the main IT system, Compass, used by our consular operation does not have as part of its functionality the ability to suck out directly details about the activity undertaken by staff. That is in the process of being changed, and by the autumn we will have it working properly. As a result, only at that stage will we have an accurate picture of the six targets to which you refer, other than customer satisfaction, which is handled separately. Q39 Chairman: So this is an IT problem? Dickie Stagg: Yes, I think it is, to be honest with you. Q40 Chairman: May I switch to another IT problem? I understand from the efficiency savings forecast relating to those areas that there has been a delay. The annual report states that the efficiencies were reduced because the delay in the roll-out of the Future Firecrest programme to early 2008 meant that your savings would come not in this review period, but in the next one. Can you explain why that was and why it appears that while you were developing this programme, the Cabinet Office suddenly changed its security requirements, causing further difficulties? Is this not all a mess? Sir Peter Ricketts: I will start with the general point and then pass over to Mr. Stagg. I do not think that it is a mess, Mr. Chairman. It is unfortunate that we were just on the point of investing in Future Firecrest when the security authorities changed the rules on IT systems that could be connected to the internet and the security arrangements needed for them. When they come across evidence, the security authorities have a duty to ensure that the rules take account of it and none of us wants to be responsible for lapses in IT security. However, it did confront us with a problem. Sorting the problem out has caused delays and extra expense, but when we roll out Future Firecrest at the end of this year and into early next year, it will be secure and will perform the function that we need it to. You are quite right that as a result of that, it has not been possible to achieve the efficiency savings we hoped for in this spending round period. Dickie Stagg: I will just add a couple of points. The reason for the delay is that we had to redesign the entire system fundamentally. That was something put on us by the Cabinet Office security experts-for understandable reasons, as there was very strong evidence that attempts were being made, in lots of ways, to use the internet as a way in to our wider systems. We had to protect them, so a perfectly rational judgment was made, but that involved us having to make difficult decisions about how to reconfigure our system, given that many of our staff want to have access to both ends for their work-to the confidential tier, and to the internet. We had to design a new style of structure that separates the confidential tier from the rest and allows only those working at the universal tier access to the internet. That was a very complicated piece of redesign. Q41 Chairman: Let us be clear-the original timetable for Future Firecrest will not be met. Dickie Stagg: No. Q42 Chairman: And there will be additional costs as a result of the changes that you had to introduce. Dickie Stagg: Correct. Q43 Chairman: And the consultant on this is Hewlett-Packard. Dickie Stagg: Yes, although I do not think that consultant is quite the right word. It is the private sector partner that we are working with. Q44 Chairman: Who is going to pay the additional cost? Is that just a hit that you have because this is a decision that you have taken, or will you get compensation in some form from elsewhere in Government, or will the consultants-the people working with you-meet part of the cost? Dickie Stagg: I do not think that we will get help from the rest of Government, who will think that we were merely following Government rules and are just unlucky that we happened to be at that particular stage in our procurement when the rules were changed. I do not think that we will get a sympathetic hearing on that, but I would welcome support from other parts of Government. We are trying to work with Hewlett-Packard to minimise the cost. We are having a contract variation negotiation at the moment, which we hope will conclude in July. We believe that we will be able to make these changes at a cost well below that forecasted nine or 12 months ago, through some quite creative input from Hewlett-Packard and our own IT people. Q45 Chairman: How much would that be? Dickie Stagg: It is a negotiation on which it would be rash to share my hand with you before we reach the end. Q46 Chairman: Can you give me a rough ball-park figure? Dickie Stagg: I would rather write to you, as we shall be able to do during the course of next month when we have the outcome. Q47 Chairman: We will certainly get a note. Are we talking about a significant percentage increase? Dickie Stagg: It is a significant increase. I am sorry to be hedging. We are involved in quite a delicate commercial negotiation. Q48 Chairman: All right. We shall pursue it in writing and, hopefully, we shall get some more information. Dickie Stagg: You certainly will. There is no desire to hide information from the Committee. It is merely that we have three or four weeks more of the negotiations. Q49 Chairman: I am sure that if we do not get it, the Public Accounts Committee will be after you as well. Sir Peter Ricketts: We will certainly provide you with the information, Mr. Chairman. Q50 Chairman: I shall move on to some other issues relating to efficiencies and the discussion about the relocation target of posts. Under the Lyons process, you have a target of 450 people to be relocated by the third quarter of December 2010-11. I understand that 156 posts still need to be identified. Have you identified them and will you meet your target? Dickie Stagg: Yes, we are on target to have the relocations complete by the end of calendar year 2010. The actual number that we have now reached is a bit higher than the figure you have because we have moved a few more people since then. We are around 200. We have had a negotiation discussion with the Office of Government Commerce. It managed the process and it is happy that we are on track to deliver it by the deadline. Q51 Chairman: The 450 posts include about 200 relocated British Council posts. Is that correct? Dickie Stagg: That is right. Q52 Chairman: Was that always your intention or is it a way in which to massage the figure? Dickie Stagg: It is not a way in which to massage the figure, Chairman. It is merely a reflection of the rules within which the Treasury makes us work, whereby our own non-departmental public bodies are counted in the figures for better or for worse. In some areas, that makes life more difficult for us. In others, it makes it slightly easier for us. Q53 Chairman: So the fact that the British Council decided to have a major reorganisation was helpful to you? Dickie Stagg: In this context, certainly Chairman. Keith Luck: May I add a footnote? We had a plan to relocate 150 IT staff-in fact, some of our Hewlett-Packard colleagues. Although the relocation did occur and it was in our plan, it was ruled out by the Office of Government Commerce. Q54 Chairman: So your actual figure, including the British Council, would have been greater. Keith Luck: It would have been significantly greater-by 200. Q55 Mr. Keetch: Why was it ruled out? Keith Luck: On the basis that they are partners working with us on the project rather than direct employees of the Foreign Office. Dickie Stagg: I was personally involved in a long negotiation with the Office of Government Commerce about the definitions. I personally found it slightly unusual that people who are clearly very much part of our organisation in most ways, although not long-term, permanent civil servants, are excluded, and the British Council's back office alterations are included, but those are the rules. Q56 Mr. Keetch: So you can treat your staff at the British Council in one way, but you cannot treat Hewlett-Packard staff who are effectively seamless working with you in the same way? Sir Peter Ricketts: It is an Office of Government Commerce accounting issue, I think-what they count in, and what they count out. Q57 Chairman: I think that we shall read "Alice in Wonderland" on our way home. Q58 Mr. Hamilton: May we move on to financial management? In the minutes of the FCO board meeting for April, you show that the FCO is facing pressure on its budgets in the current financial year 2007-08. The minutes state that that is due to "new commitments" since allocations were made in 2005 and "ongoing uncertainties around visa and consular income". I understand that you are also holding back £10 million from the bilateral and global opportunities funds. Will you give us an assessment of your current financial situation for this financial year? Sir Peter Ricketts: Yes, indeed. As you say, we had a careful discussion about this in the board. We are now in the third year of the 2004 spending round, so the budget allocations are three years old. A great deal has happened in those three years-for example, the creation of a wholly new post in southern Afghanistan, the great expansion of our embassy in Kabul, a number of other additional calls on our embassies around the world, and so forth. At the outset of the financial year, when it also became apparent that we would not have a great deal of end-year flexibility from the previous financial year because we had spent efficiently and effectively almost all the money from that year, we had to take a look at what we were committed to and what funds we had, and bring the two into alignment. That was the discussion in the board; we recognised that we needed to be prudent and not risk finding out halfway through the year that we were running out of money and would therefore need to do a crash operation to stop programmes in mid-year. We concluded that it was better to hold back some money from the programme budget and to ask our directors general to save a bit of administration costs money, so that we would be on course for a full spend but not an overspend for the year. If it turns out, as the year goes on, that we are underspending a bit, we will of course restore the money to the programme budgets; but this was an in-year budget adjustment discussion, which seemed to me to be prudent. Q59 Mr. Hamilton: Have you assessed the impact of holding back the £10 million from the global opportunities fund? Sir Peter Ricketts: We certainly did, in the board. When we considered that, we assessed the impact of holding money back from that and from the bilateral funds, and we concluded that we could do it without doing violence to programmes that were already committed. Provided we took the decision by mid-year, we would be able to recommit some of the money if we found that we still had it. Q60 Mr. Hamilton: In the April board meeting minutes, you state that there is an urgent need to improve the quality and timeliness of financial data. To what extent will the additional controls that you have agreed with the National Audit Office address that? Sir Peter Ricketts: I will ask Mr. Luck to respond in detail. One of the great benefits that we have is that the Prism management information oracle tool is now working effectively around the world. That has meant, for example, that we were able to spend much more efficiently last year, and therefore come much closer to a full spend. That was good budgeting, but it meant a tighter discipline on ourselves because we had less underspend to help us through this year. Perhaps, Keith, you could comment on the NAO controls? Keith Luck: If I may add that we have worked with the National Audit Office on the detailed financial controls? It is very useful in the management of our accounts; and although it will not of itself necessarily speed up the production of the accounts, it will improve and enhance their quality. We are taking action in other areas, combining a number of change programmes within the finance function, probably under a programme that we seek to approve called five-star finance, and we will be taking some specific action to improve the timeliness and quality and completeness of the board reports-and those reports that go to our budget holders across the organisation. Prism has been an extremely useful tool, and we are now in a position to leverage the benefit of having an IT system that is common across our network and to develop the functionality that you would expect to see in well-managed and well-run organisations. The NAO controls were a useful exercise. I think that you have now received a copy of the report produced earlier this month, and our intention is to embed those controls wherever they do not exist in our global processes; and we are taking forward a whole suite of work to review the controls and to ensure that they are exactly as we have agreed with the National Audit Office. It has been a very useful piece of work; indeed, looking back on its history, I think it was even suggested by this Committee. Q61 Mr. Hamilton: Finally, I shall concentrate on fraud. Unfortunately, fraud tends to happen in large organisations from time to time. The last major fraud that we were told about was in Tel Aviv. We have now heard about the fraud at our embassy in Santo Domingo, in which an accountant apparently stole £190,000 over two years. During our last annual report inquiry, we were told that the fraud was allowed to take place because of non-application of prescribed procedures, rather than gaps in the control framework. Can you tell us what lessons you have learned from the latest fraud in Santo Domingo, and what you will do to try to prevent any further fraud from occurring? Sir Peter Ricketts: May I start and then ask Keith Luck to continue? The issue is one of real concern to me, Mr. Hamilton. It is one of the things that keeps me, as the accounting officer, awake at night. We are a worldwide organisation with a lot of very small missions. There may be fraud going on anywhere. I am not complacent, but I am reassured that year on year the amount that we appear to have lost through fraud has fallen: £957,000 in 2004-05, £646,000 in 2005-06 and £344,000 in 2006-07. I absolutely agree that that is still far too much. You are right to point to Santo Domingo. In Tel Aviv, we have pursued restitution vigorously. In the past few days, we have obtained a civil court judgment that has given us all the assets of the individual who committed the fraud, including pension fund and apartment, I believe. That is not full restitution for the fraud, but we have been given everything the person has. That sends a signal that we will rigorously pursue restitution, as we are doing in Santo Domingo as well. It was a worrying thing to have discovered fraud in Santo Domingo. I shall let Mr. Luck discuss in more detail the lessons that we have learned, but it is clear that some of our checks and controls were not applied, and that has led to the fraud that we have now discovered. That is another example of the need for rigorous application of all the checks. We also have an assurance through Prism that we will be much better protected from fraud if Prism rules are followed properly and rigorously. Keith Luck: Indeed, ever greater vigilance is required. In the opening remarks, there was an indication that the possibility of fraud would always be with us, particularly in a global organisation that operates around the world as we do. In Santo Domingo, the controls that should have been in place were not applied or fully exercised, thereby leading to that particular fraud. However, we have learned a number of things from the fraud, particularly around seeing bank statements. We immediately wrote to all embassies to ensure that they saw the originals of bank statements, and the originals, not copies, of bank statements now come into our accounting centre in Milton Keynes. In due course, I would like to move to a position where we can actually see the bank account details from the centre and have banking arrangements regionally or, indeed, globally around the world. Q62 Mr. Hamilton: Many of us have internet banking facilities, and I imagine that they are available in some countries. Do you use that facility? You would then be able to check centrally, could you not? Keith Luck: Absolutely, and our intention under the shared services programme is to do precisely that, but we run up against some peculiar technical difficulties with internet and electronic banking, particularly around the security constraints that were referred to earlier; for example, the use of Firecrest. In the past few months, we have engaged actively with the Treasury, which is keen to run pilots with us. Oslo is particularly keen, as is Washington, for internet banking. Ultimately, though, we want banking arrangements rationalised across the office so that we can work from the centre with a number of banking providers across various regions. If we could see the bank accounts from the centre, we would not have to rely on paper records being posted back to the centre. One of the lessons that we have learned is to track those very carefully. We have focused our financial compliance unit on the high cash posts. Indeed, a feature of the Santo Domingo fraud was that there was a sense of ever-increasing cash balances, and that has become a red flag to us. Indeed, when our internal audit teams and the National Audit Office do a visit now, we ask them to follow through with four specific checks to highlight precisely the sort of fraud that we found at Santo Domingo. There is no complacency on our part and it keeps not only Sir Peter awake, but myself. We have ever greater vigilance. Q63 Andrew Mackinlay: Is Prism working? Sir Peter Ricketts: Prism is working. Q64 Mr. Keetch: Sir Peter, perhaps in the few minutes before we have a vote, which we are expecting any moment, I can ask you about risk assessment? As you know, in our last report on your annual report of 2005-06, we made the point that we were rather surprised that Iraq and the middle east had not been identified by the Foreign Office as being in your top five strategic risks. You responded to us by saying that you would reform the way in which you calculated those risks to make it more effective. We read from your unclassified minutes of the FCO board of 27 February that you have now accepted some recommendations from your internal audit department's review of the FCO risk management framework. We also see that on 20 April 2005 you have put Iraq as No. 5 on the strategic risks of the FCO. Could you share with us any of the other recommendations of the internal audit department in terms of how you identify or calculate either your strategic risks or other aspects of policy? Sir Peter Ricketts: Thank you Mr. Keetch. You are right that in light of the Committee's observations on our top risks and the way that we set them out, we went back and thought about it again. We concluded that it did make sense to have Iraq among our top risks. We designed the strategic risk register for internal purposes, to deal with a number of different sorts of risks within the organisation and to ensure that the board was happy that those risks were being properly attended to and mitigated. They included, for example, risk through conflict and crisis, through terrorist attack and through humanitarian crisis-all the sorts of risks that might lead to a need for new resources or cause reputational damage to the FCO. In terms of the way that we run the business, we have a separate set of operational risks for financial controls and other aspects of the way that we run our business and our money. We were concerned that we should not proliferate a larger and larger number of issues on our strategic risk register because the longer it gets, the less useful it is, to the point where it just becomes a chore rather than a useful management tool. We were reluctant to keep adding risks of the same nature that did not add to our sense of whether the organisation had the right risk management arrangements in place. The internal audit review of our risk management arrangements concluded that they were satisfactory. It came up with a number of specific points about the communication of risks and what we were doing about them through the organisation. The board is keeping those regularly under review. With something like the Middle East peace process, we could list it as a strategic risk, but it is actually a risk that is well known and fully managed in the FCO; we have been working on it for years. With an issue such as Afghanistan, Iraq or Iran, there is more likelihood of a sudden crisis demanding more FCO resources, and it is therefore the sort of risk that the board thinks we ought to keep under regular review. Q65 Mr. Keetch: May I ask what I hope is not a stupid question, but is the question of a layman? I am sure that if I were to go into High Town in Hereford in my constituency and ask 20 people what was one of the big strategic risks for the UK, Iraq would be number one or two on their list. I have to respond to my constituents; we, as Members of Parliament, have to respond to the concerns of our constituents. Do you think that the public would expect Iraq to almost invariably be one of the top five strategic priorities of the FCO? Should public opinion not be taken into account when deciding what ought to be your strategic concerns and risks? Sir Peter Ricketts: Yes, I accept the force of your point and, in the light of what the Committee had to say to us about the risk register, we went back and looked at it and concluded that you were right. We now have Iraq on our strategic risk register because it clearly is a significant risk to the FCO in terms of reputation, commitment of resources and risk to staff. That is why it is there and I fully accept your point. Q66 Mr. Pope: I want to ask a couple of questions about FCO Services, which last year became an Executive agency. Next year, it will become a trading fund, which can generate income. Could you explain how the accountability arrangements will work in that period of transition? The written submissions that we have seen refer to FCO Services being "subject to greater commercial disciplines and greater commercial flexibility". I wonder how that marries with the separate statement that the Foreign Secretary will retain overall strategic direction. Those two statements do not seem to sit comfortably together. Could you explain how the arrangements will work and whether they will change as FCO Services becomes a trading fund? Sir Peter Ricketts: Yes, I will. The arrangements will change. As accounting officer, I am still accountable to Parliament for FCO Services while it remains an Executive agency. It is part of the FCO group of activities, which also includes Wilton Park. The chief executive of FCO Services has some accounting officer responsibilities, but I am essentially accountable to Parliament for FCO Services having proper accounts that are properly constructed. When it becomes a trading fund, that relationship will change. It will no longer come under the FCO group of families; it will account separately to Parliament for its resources and it will be audited separately by the National Audit Office. It will have more of an arm's length relationship with the FCO. I think that the Foreign Secretary will still have strategic oversight for setting its objectives and overall targets, but the chief executive will be separately accountable to Parliament. Q67 Mr. Pope: That is helpful. FCO Services seems to be doing really well. When it was an internal part of the FCO, it was losing money. In the past year, it has increased revenue from non-FCO customers by 3.4%; it has increased customer satisfaction by 10%; it has reduced trade debts by £17 million; and it is argued that it will make efficiency savings of 15% of total costs in the next five years. Are those improvements due to the fact that it has become an Executive agency? If so, why is that the case? Why could not those improvements have been made when it was run internally? Sir Peter Ricketts: Perhaps I shall answer, as I have been involved with FCO Services for the past five years. What has happened is that we have changed some of the organisation's incentives so that there is now a bigger incentive for people to operate in a more businesslike way. We have got the FCO working more efficiently as a customer. Previously, there was a slightly cosy relationship in which people would scratch each others' backs; now, there is a much more transparent, commercial relationship in which people know what they are paying for in goods and services. The arrangements are much more likely to be robust if people get a satisfactory service in return for their money. As FCO Services moves to become a trading fund, we believe that that position will become even more clear-cut. In addition, we have brought in a new chief executive and senior management team in the past 12 or 14 months, which has helped to give the organisation new focus and energy. That has helped it to deliver more effectively. Q68 Mr. Pope: May I move on to language services? I am sorry to jump from one thing to another. The FCO has decided to close the language centre, with projected savings of £1 million to £1.5 million a year. It seems to me that there is quite widespread concern about that, certainly among Members of Parliament to whom I have spoken, not only on this Committee. When we travel abroad as a Committee, we are struck by how brilliant at languages our diplomats are. That really makes a difference. The fact that, in any country that we visit, the vast majority of our senior diplomats speak the local language fluently has tangible benefits, albeit that they are difficult to quantify, for the UK. I am concerned that that might be put in jeopardy for what seems to be, frankly, a very small saving; okay, it is taxpayers' money, but it is a saving of only £1 million a year that could put in jeopardy the immense diplomatic good will that we enjoy from having very well-trained linguists in the FCO. That is something that I am concerned about. Is that concern shared? And are you confident that there will not be damage to the linguistic ability of our diplomats? Sir Peter Ricketts: Thank you very much, Mr. Pope. Let me say first of all that I commit myself 10% to this Committee to maintaining the excellence of our language speaking abilities in the FCO. I think that you are completely right to express this concern. I believe that 94% of our heads of mission speak the language of the country that they are accredited to, and other key people in embassies do as well. I make a commitment to you that we will maintain excellence of language ability in the FCO. I also want to say that we are genuinely grateful for the work over many years of the dedicated staff that we have in the FCO language centre, who have taught many of us languages, myself included. Two pieces of work came together so that we made this decision. One was a review that we did, with wide consultation of users of the language centre in the FCO, on how we teach languages. It concluded that it would be more efficient to use more group training; that it would be better to have more immersion abroad, because that is the best way of getting up to high levels of language capacity; that we should devolve the budget for language teaching to our geographical directors, so that they could make sensible decisions about what they needed; and that we should particularly focus on ensuring that when a head of mission and other key people go to embassies, they have a really high level of language ability. That review was one piece of work that examined how we carried out language training. The second piece was in the FCO Services context. FCO Services looked at the language school, benchmarked the costs against private sector providers and concluded that the school was not commercially viable in the way that it was being operated. Compared with private sector providers, it was actually more expensive-I think that we have said that it was between 15 and 40 per cent. more expensive-and productivity of staff was lower. That is not a criticism of the staff, because having a full-time member of staff who is a language teacher depends on there being a regular supply of students in order to maintain the teacher's productivity. We found that our requirements rose and fell, depending on who was being posted and whether they already spoke the language or needed training. So we concluded from those two pieces of work that FCO Services was not willing to continue with the language centre because it did not regard it as commercially viable. We then had a choice. We could have taken the language centre back into the FCO and run it as part of the FCO, but given the lack of commercial viability and the changing nature of our need for language training, we concluded that our comparative advantage is not in running language schools; it is in being diplomats and in speaking languages well. Therefore, we concluded that it would be a better use of public money to outsource the language teaching requirement, while making sure that we maintain standards and quality and that we can continue to offer the same level of language access to other Government Departments and Members of the House who wish to have it, but on a private sector basis rather than maintaining an in-house language school. Unfortunately, that will mean the prospect of redundancies, and we are going through that process carefully now, because we want to be good employers and follow absolutely best practice in that area. I wanted to explain that decision fully because I know that there has been concern in the House and I do not want to leave any impression that we are somehow short-changing language training in the FCO. Frankly, the efficiency savings are not the only reason or even the main reason for the closure; the main reason is to have the most flexible and efficient way of teaching languages. Q69 Mr. Pope: I am grateful for that response, Sir Peter, because my own concern is not one of a philosophical nature about who provides the service, but is entirely about outcomes and about ensuring that our senior people in posts abroad maintain the very high level of language ability that they currently have. As far as I can see, their level of language ability is far higher, for example, than that of any other country in the European Union. I have a specific question. The number of staff receiving language training seems to have decreased sharply over the last two to three years. In 2004-05, 405 Foreign Office staff received language training, and in 2006-07 that figure had declined to 252. I am puzzled by that decline. Is that because the process of moving towards in-country language training has commenced, or is there another explanation for the sharp decrease in the number of people receiving language training? Sir Peter Ricketts: May I ask Mr. Warren to respond to that question? David Warren: There will be a number of reasons why the figure is so volatile. In a sense, the number of people receiving language training will reflect what the business tells us it needs. As Sir Peter said, we are committed to providing high quality language training; the underlying principle of the reforms to language training is to concentrate our training on those who really need to speak the language, in some cases to a much higher quality and proficiency than they have done hitherto. Several factors go into a fluctuation in the numbers receiving language training, one being the number of posts; we are localising slots and not deploying UK-based diplomats. Another factor is that we are reusing diplomats who have existing language skills. In some cases we are recruiting diplomats with language skills. We are fast-tracking diplomats with the specific language skills that we want at the recruitment stage. There are a variety of reasons why the number fluctuates; we are not looking at any systemic or structural decline in the numbers receiving language training. Q70 Andrew Mackinlay: There are reports that staff morale is low. In any organisation there are some who are happy and some who are constantly discontented, but I believe that data are available, following one of your internal examinations, which showed a disturbingly low sense of morale among staff. Can you comment on that? Sir Peter Ricketts: That is not my sense, Mr. Mackinlay, although perhaps people do not tell me. I travel around quite a bit, as I know the Committee does, and I always make a point of talking to local staff as well as UK staff. My impression is that there is a lot of enthusiasm in the organisation, a lot of the sense that the organisation is doing valuable things, a lot of willingness to volunteer-I am always impressed that we get so many volunteers to go to the really difficult places-and a real sense of commitment. Q71 Andrew Mackinlay: In a valedictory e-gram, one of your colleagues wrote that "too much of the change-management agenda is written in Wall Street management speak already discredited by the time it is introduced. Synergies...best practice, benchmarking, roll out, stakeholder, in power, silo-working, fit for purpose, push back, and deliver the agenda are all prime candidates for a game of bullshit bingo"-those are his words, not mine-"a substitute for clarity and succinctness. A personal aversion is the utopian mission statement-so 1980s-which should be dispensed with rather than affronting me every morning on my Firecrest screen, and even appearing on my pay slip." Was he talking rot? Sir Peter Ricketts: He is a distinguished former member of the Diplomatic Service. Q72 Andrew Mackinlay: You recall it? Sir Peter Ricketts: I do indeed, sir. He speaks from the vantage point of someone on the point of retirement-I would guess the retirement age of 60 or somewhere near it-and I do not think that that is the impression of all the younger members of staff. Of course you can poke fun at management speak, which I try to avoid where I can, but the idea that the civil service is trying to manage itself in modern ways, make efficient use of public money and open itself up to the same disciplines as the private sector is not stupid, actually, and it is a pity to suggest that it is. I have great respect for the individual concerned, who was a fine diplomat, but the younger generation coming on behind him are much more comfortable looking at the public service in that way. Andrew Mackinlay: I am happy to leave it there. Later on, we will come to relations with Parliament. Q73 Chairman: We have been talking specifically about FCO Services. How would you assess morale there, given the reductions in jobs that we have been discussing? Sir Peter Ricketts: It is always going to be difficult when you have an organisation that is going through a period of real, profound change, as FCO Services is, with some reductions in numbers. Equally-Mr. Pope was quoting the figures for the sense of progress-let me say that it is increasing the amount of work it is doing outside the Government and improving satisfaction with what it is doing from its customers, including the FCO. There is a real sense of purpose in the organisation now. When it is through the transformation, which is going to be difficult, there will be quite a sense of pride that it has converted itself from an internal department of the FCO into a trading fund that can go out in the market and do good work against the competition-which I think it will. It offers some really top class services in the areas that it has concentrated on. There is a very strong, forward perspective for FCO Services, and that will lift morale. Dickie Stagg: I want to make a point from the side of FCO Services, as I have been its sponsor for much of the past five years. I know that it is aware that the Committee is interested in going to Hanslope park, which is its core base, and I know that it would take such an indication of the Committee's interest in that aspect of its work, rather than more traditional foreign policy, as a very positive signal. Q74 Chairman: It is in our list of things that we have to do as a Committee. We have visited a number of places recently within your structures, and we hope to visit more. Sir Peter Ricketts: We welcomed you to the consular centre very recently. If it were possible to put this other visit into your programme, it would be enormously appreciated. Q75 Mr. Heathcoat-Amory: I would like to raise the question of subscriptions to international organisations. There is a table at the back of your report on page 141, which lists our subscriptions. They range from paying for the Great Ape Survival Project to the World Tourism Organisation. Often, of course, they are not paid for by the Foreign Office, but by other Departments, which, presumably, monitor the effectiveness of these contributions. I am particularly interested in the contribution to the International Atomic Energy Agency, which this Committee recently visited in Vienna. It said that it was facing only an inflation-based increase in its subscription from the UK in the coming year. However, that does not come from the Foreign Office-it comes from the Department of Trade and Industry. I do not need to tell FCO officials about the importance of the IAEA in the context of Iran. In my view, about the only hope is to try to enforce its rules and back it up in efforts to separate civilian use from military use. However, is it not slightly alarming that this all comes under the DTI? You have not got an obvious interest in that aspect of the agency's work. Sir Peter Ricketts: The DTI probably lead in Whitehall on civil nuclear issues, including those in the UK. There will be aspects of the IAEA's work about civil nuclear regulation in the UK and other western countries that will mainly be of interest to the DTI. The FCO, and indeed the whole Government, certainly have a strong interest in the IAEA's effectiveness in Iran. I would need to look into the matter, and perhaps come back to you in writing about whether keeping the organisation's budget to zero real growth-an inflation-only increase-has been assessed against that very important national need. With regard to many international organisation subscriptions, we try very hard to keep budget increases down to inflation or even below inflation if we can, because international organisations have a tremendous tendency to grow, to extend their activities and to require more and more money. When such sums come out of departmental budgets-the UN and others come out of ours-Departments have a very real interest in keeping strong discipline over their budgets. I referred to that point earlier. That said, may I take away the point about the IAEA's work in Iran and write to you? Q76 Mr. Heathcoat-Amory: If you would, because the Iranian issue is of great interest to this Committee, as you know. I would like to know what discussions took place in your Department and the DTI, because our ambassador in Vienna was under instruction to limit the increase. I am completely with you about the dangers of mission creep as a result of international bureaucracies, but in this particular case, if there were creep into Iran, I think that we would all be rather grateful. If I may, I would like to raise another matter about our network of posts overseas. Again this is crucial. In the past, this Committee has been critical about post closures, and the Foreign Office was perhaps a little slow going into new areas of the world. Meanwhile, there are very big historic embassies in which, perhaps, some of your best staff serve. We are always in danger of lagging behind international development in deployment terms. What is surprising is that there is no discussion of that in your report. This is the second time that that has happened. Can you explain why you do not discuss it and justify the allocation of your valuable staff overseas? Sir Peter Ricketts: If there is no discussion of the matter, it is an oversight and we should correct it. We have done a lot of work, and we will be doing more, on the right shape for our overseas network given the opportunities and threats ahead of us. We have been making some considerable changes. They have not involved post closures so much as movement of staff away from the classic west European embassies and towards places such as India and China. From memory, we have moved about 25% of staff out of posts in Europe, or working on Europe in the FCO, towards places such as China, which has seen a 10% increase in staff, and India, which has also seen a 10% rise. We will have increased the size of the embassy in Afghanistan by about 50% to reflect the scale of UK interests there. We now have large missions in Iraq. We have increased the size of embassies in countries such as Brazil, which are involved in global issues. Therefore, there is a considerable movement of staff without involving the closure of major posts. If I understood your implication correctly, I agree with the thought that we should be doing more of that. If you look carefully at where FCO staff add most value these days, it is probably not in posts in western Europe, but in posts that are further away, where language skills are required, where the working environment is difficult or where there are conflict issues. Over time, that is the trend that you will see in the FCO. I think that we should be driven in that direction by trends in other Departments' engagement with overseas, because very largely they can now take care of their own interests around Europe. They have the right links with their counterparts in Europe, but they need embassies and staff in places such as China and India in which they cannot operate separately. That is the trend that we will see, and I think that it will accelerate under the pressure of tight resources and a growing demand for the FCO to engage in a whole range of global issues, such as climate, energy and migration. Q77 Mr. Heathcoat-Amory: Will you undertake to analyse that in next year's report? Will you then give us a report on how staff are being redeployed and how you see that developing in the years ahead, so that you can match your human resources to the requirements on the ground and the pursuit of British interests, wherever they may be? Sir Peter Ricketts: I will undertake to do that and to keep the Committee informed in between departmental reports if we are taking decisions on that. Q78 Chairman: Before I bring in Paul Keetch on a different area, may I ask you a question, Sir Peter? In a period in which other Departments are getting increased resources and you are under pressure to reduce a number of posts, thereby withdrawing from some countries in the Commonwealth and elsewhere, is it not time to adopt a UK-post approach? That would mean, for example, that the Department for International Development, which has a much bigger budget than you and a bigger footprint in Africa, could take up some of the slack of funding the representation in countries abroad. That would ensure that there was a UK post in those countries, even if there is no longer Foreign Office-funded diplomatic representation. Surely it is absurd that we are not represented by a diplomat in countries such as Swaziland, Lesotho, Madagascar, Vanuatu and places in the Caribbean, and yet we have projects that are funded by HMG and people who are in that country for considerable periods of time. Sir Peter Ricketts: Essentially, I agree. We should not be thinking of FCO posts, but of HMG and UK posts. You will find that 10 or 11 Government Departments have staff in many of our posts from the law enforcement agencies, the Ministry of Defence, the Department for International Development and the Department for Transport. In Africa, we have an agreement with DFID to try to co-locate wherever we can, so that we are working together on the same compound, sharing transport and life support arrangements, and getting the best value for money possible. I am sure that that is the right way to go. In many of our posts around the world, FCO staff are a minority, and a majority now come from other Departments. So the idea of a platform, of which we are only the small but enabling part, is increasingly going to be true. Q79 Chairman: But there are places where we are not there at all any more, or we have an honorary consul. Swaziland, for example, has just appointed one. Is it not time that we started to think in a more imaginative way, so that we have an embassy or high commission, even if it is not funded through the Foreign and Commonwealth Office? Sir Peter Ricketts: Also, thinking imaginatively, there are all kinds of ways in which we can be more innovative about the way we do things, in terms of visiting embassies, which involves people who are based in a neighbouring country spending a certain amount of time in a smaller country. My only reservation is that if we have a British representative resident in a country, they have to be ready to take on the full range of things that might happen. If a member of staff from DFID were going to be the British representative in the country, they would have to be prepared to deal with a terrorist attack, a consular emergency, a hostage taking, an abduction, a natural disaster or any of the things that can happen and that can require the British representative to take on a wider role. That would be essential, because you never know what is going to happen or where. In the end you have to have confidence that a British representative will take on the totality of what might happen. That said, I basically agree with you, Mr. Chairman. I think that there are imaginative ways in which we can be present in the world without necessarily being there in the form of a classic embassy. Mr. Stagg might want to add to that, but I think that it is an important point that we will increasingly have to think about as resource pressures mount. Dickie Stagg: I would add one small point, referring back to the Future Firecrest discussion. One of the benefits of the new structure is that we have an agreement with DFID that it will move towards our platform from 2010-11, because we will have a lower tier with less security. That will meet its business needs in a way in which it finds our current structure does not, so there is a FCO/DFID silver lining on that front. Q80 Mr. Keetch: To follow on from the Chairman's excellent line of questioning, if you have a post that is FCO-led and people from the DTI, DFID or wherever are involved, presumably you ensure that you charge those Departments for the services that they are getting from that post? Dickie Stagg: Yes, it is a big issue because, as ever in a quasi-commercial relationship, there tend to be different perspectives on what is a fair price. But we are keen to ensure that those who are working with us from other Departments are paying their share of the overall costs. Q81 Mr. Keetch: And you would do the same if there were people from the Scottish Executive, the Welsh Assembly Government or the west of England tourism development council? Dickie Stagg: Yes, there is a more-or-less standard service level agreement, which we would apply to any and all that wanted to come along. Obviously, it can get difficult if you have a fixed building and you get too many people wanting to share it, but in principle we have very clear rules, which are accepted by others. Indeed, Prism has been helping us to clarify the underlying costs of the operation so that we can charge those costs out. Q82 Mr. Keetch: I am grateful. May I ask about the estate, because we are always interested to receive your quarterly reports about what buildings you have sold off? We know that in July to September 2006 you sold residences in Tel Aviv, Kingston, Bordeaux and Nassau for £1.59 million, and bought something in Palma for £570,000. We were also delighted that after our visit to Mumbai, excellently led by our colleague Mr. Illsley, you took on our recommendation that we needed better accommodation there, and you splashed out on a new building to the extent that we have been told that you cannot afford any more of your building programme. After accepting our wonderful recommendation, what have you put on hold as a result of investing in Mumbai, as well as investing in Baghdad and Kabul, which now seem to be your three principal areas of expenditure? Sir Peter Ricketts: There is a great deal happening on the estate side, but you are absolutely right. You are also right to underline how expensive it is to take on accommodation that is secure for our staff in a place that is booming, such as Mumbai. The Committee was absolutely right to urge us to make the move and to take on space that is adequate for us in the long term. However, that is extremely expensive. I think that it is costing us about £30 million to rehouse the mission in Mumbai with adequate accommodation, both because Mumbai is booming and property prices are rocketing and because we need security measures. Given the size of our capital budget, we cannot get many Mumbais out of a year's worth of estate budget. Coming back to what I said earlier, we are genuinely squeezed doing the things that we really need to do in the estates operation. That said, we manage it very actively and do what we can to realise capital by selling assets where they are no longer essential to us, or where a lot of value is locked up that we can perhaps use elsewhere. We are following rules laid down by the Chancellor, who has asked all Departments to look at their capital asset base and see whether they can do more recycling. That is managed by our investment committee, which is chaired by Mr. Stagg. Perhaps Mr. Stagg can elaborate on what we have had to put on hold in order to pay for expensive but high priority items such as Mumbai. Dickie Stagg: The sorts of places at the top of our list, other than the ones just referred to, are the likes of Warsaw, Jakarta, Tbilisi and Sarajevo. We manage that by seeing when we have the opportunity to take action, which we very much had in Mumbai at the time of your Committee's visit. For example, in Jakarta, which is a high security risk post, for reasons that you will understand, there is a site that we want to buy and have been negotiating for over the past 18 months. However, there are complications over the title, so the money is waiting to be spent until we are sure that the site is going to be ours, if and when we go through with the deal. We are looking to buy a plot in Sarajevo, but we want some assurances from the local authorities on its title and on the removal of ordinance on the site before we acquire it. Those are complicated issues. Those are the sorts of projects that might be impacted on by the decision to move to Mumbai, which is very urgent as you collectively know as well as me. Q83 Mr. Illsley: Perhaps we should console ourselves: I think that 30 of the 100 richest people on the planet live in Mumbai, which is probably why the real estate is so expensive. Sir Peter Ricketts: We are in a competitive market. Q84 Mr. Illsley: I am sure. Will that stretch on the budget lead to any short-term decision to sell other parts of the estate to balance the books by the end of the year? Is there a worry that that is likely to happen? I fear an issue arising, such as the New York or the Dublin situation, where you are rushed into a sale in order to meet a target imposed upon you, and therefore, lose out by having to sell an asset that, ordinarily, you would not have wanted to sell at that time. Sir Peter Ricketts: I am very conscious of that risk. I do not want to go there, if it can be avoided. The answer is that we are not looking at sales in desperate urgency, but we have to look at opportunities to sell parts of the estate in order to help provide the money for the higher priorities. We are bidding vigorously to the Treasury for more money next year. It is our programme, and the Treasury is bound to look to us to do some of it by realising some of the capital that we have locked up in estates around the world. We have learned lessons from the past and will aim to do that sensibly in order to ensure that we get proper value. If that takes a bit more time, it will have to take a bit more time. However, certainly, we will come to the Committee to inform you on decisions on asset sales while I am in this job. The one that is going through at the moment is in Madrid, where we are leaving an empty building that is not satisfactory and moving to good quarters in a new build office building and selling the original site, for which we will get capital value. Exactly when we get it will depend on the market. We will need to let that take its course. Q85 Mr. Hamilton: Sir Peter, you will know that the predecessor took quite an interest in some of the previous sales. One example is the sale of property in San Francisco, on which we had a special hearing. In looking at when and how we sell properties overseas on the estate, does the FCO consider the huge value that some of those properties have not only for our country, but for our diplomatic work? An example is the residence in Cape Town, which attracts massive numbers of members of the South African Government and Members of the Parliament. Other estates have enormous value to the work that we do, beyond their financial value. Do you consider that when you look at those possible sales? Sir Peter Ricketts: Yes, we certainly do. This can only be subjective, but we try to look for assets that have a high value but are relatively low priority. That is what we are looking for. Of course, the highest value and lowest priority assets have been sold already, so it is a progressive process. However, we would also need carefully to consult Ministers, who pay much regard to the issues that you raised about the wider value to the nation of some of our key properties. Q86 Chairman: Sir Peter, we have so many subjects that we still want to touch on-I am afraid that we are going to have to write to you on some of them-so I would like to move to asking you about overseas passport operations. Under the new arrangements, what is the average distance that you would expect people to have to travel for interview? Sir Peter Ricketts: Gosh! You have floored us, Mr. Chairman. Q87 Chairman: Perhaps you could write to us on that. Dickie Stagg: Absolutely, we could probably write a little more fully than that and describe the sort of concept that we are going to introduce. Q88 Chairman: Is it going to take longer for people to get their passports under the new arrangements? Dickie Stagg: Yes, there will be an increase in the time between application and receiving the passport. Q89 Chairman: How much more? Dickie Stagg: For most applicants, it will be a matter of two or three days for them to get a passport back. Of course, it depends hugely on where they are and how close they are to one of our consulates. Chairman: We will get a note on that, I hope. Q90 Mr. Hamilton: Sir Peter, in May 2007, you closed the online service for facilitating Visa applications from India, Nigeria and Russia after a security breach. I know that members of the previous Committee visited the VFS facility in Delhi during the last Parliament. Lord Triesman has announced an independent investigation, which I understand began earlier this month. However, I want to know what steps you are taking to ensure that there will be no further breach of security of visa applicants' personal data, because that is pretty serious, is it not? Sir Peter Ricketts: It certainly is and, as you said, we responded very quickly to it by appointing Linda Costelloe Baker as our independent inquirer with a remit to lay a report before Parliament before the summer recess, so that we can learn the lessons very rapidly. As you have said, however, we took immediate action on the relevant parts of the VFS website. Perhaps Mr. Stagg will fill in the detail on that. Dickie Stagg: The action that we took was to get the websites closed down so that there were no longer being used. They were already, in a sense, part of our historical arrangements with VFS. We have now signed new contracts with it and with CSC for the global delivery of visas starting in April this year. So, we have moved into a new contractual environment in which they will be replacing those systems anyway, but the VFS system in India, as you say, had been breached or broken-I am not sure what the correct term is-by one person that we know about. Q91 Mr. Hamilton: Let me just interrupt you. Who takes responsibility for the breach of security? Is it VFS, which is a contracting company-a commercial organisation, as I understand it-or is it the Foreign Office? Dickie Stagg: I have to be quite careful about getting into the legal area here, but in principle and from our point of view, it was contracted to provide an online application service that was meant to meet all our requirements, and it appears that that is not what happened. I would rather wait until the piece of work being done by Miss Costelloe Baker is reported before trying to say where the responsibility lies, as that is one thing that she is looking into. Q92 Chairman: We will pursue that with you in writing over the next few weeks. May I move on to ask you about the results of the capability review, which found that strategic and change management need improvement in the FCO? Does that mean that you have not made much progress since the previous Collinson Grant review? Sir Peter Ricketts: No, it does not mean that. It means that we have a very ambitious series of change programmes going on that cover the shape of our network, which we have talked about, a shared services programme to reduce the cost of our back-office functions, the future Firecrest programme, and improving the way we do finance. We also have important reforms going on in the consular and visa side, and UK Trade and Investment is introducing a new strategy. Everywhere you look in the FCO, a lot of change is going on. The capability reviewers were not disputing the need for that change; indeed, they suggested that we might need to be more radical than we had planned, but they were concerned to ensure that we had the resources in place to be successful and that we had the capacity to manage that change effectively. We are responding to that vigorously. Mr. Heathcoat-Amory paid a glowing tribute to Mr. Stagg, for which I am grateful; unfortunately, he is moving on shortly to become our high commissioner in Delhi, one of the most important jobs in the service. He is being replaced by James Bevan, who will have a rather reconfigured job. He will be responsible for change; his job will be director general for change in the service delivery. He will have a director working with him, recruited from the civil service, who has a lot of experience in managing change projects, and he will have a unit with more capacity. A committee of the board will oversee the change programme. We found the capability review very useful from that point of view; it galvanised us to make sure that we had the resources needed to pull together all the various changes and to ensure that they are coherent. Q93 Andrew Mackinlay: You will recall the fear of your staff when involved in grievance procedures. The matter eventually came before the National Audit Office. The NAO produced a report, and you wrote to the Committee indicating that you accepted the NAO recommendations. You acknowledged the deficiencies found in the grievance procedures. However, you rejected one of the recommendations. It was in respect of the three people who had initiated the NAO review, and it said that independent arbitration should be set up to deal with those three aggrieved people. You rejected that recommendation, which caused some dismay. It seemed that the NAO had found deficiencies in the stewardship of the grievance procedures, and it had found them through the initiative of the three aggrieved people. The NAO was not adjudicating on those three cases, but it did suggest that there should be an independent system of mediation, and you rejected that. That seems demonstrably unfair. It also seems that you were acting as judge and jury. What say you to that? Sir Peter Ricketts: First, the NAO report showed that our grievance procedures, as they existed before September 2004, had flaws. The NAO picked them up, and we recognised that. The NAO also found that the new arrangements that we introduced from 2004 onwards were an improvement. It came up with some additional ways to improve them further, and we accepted 15 of the 16 proposals. As you say, the 16th was for further mediation with the three members of staff to whom you refer. We thought long and hard about that, and we concluded that in those three cases we had been through all the steps that any good employer could reasonably be expected to have gone through-that we had done everything that could be expected of us. In those circumstances, it was not right to accept mediation. We concluded honestly that it would not add to what we had already been through over a number of years. We thought seriously about that, and we would never have decided not to accept a recommendation of the NAO without serious thought. These were advisory recommendations and in the end, as the management of the organisation, we had to take a view on whether mediation would add to what we had already been through with these particular members of staff. That is the conclusion that we reached. Q94 Andrew Mackinlay: I invite you to pause for a minute, step back and look at this. You have reiterated your view and are quite firm in it. Indeed, I would almost expect you to be firm in your view, but the NAO has taken a different one. An independent assessment has been made, there is no finding in favour of the aggrieved people and it just says that, as good employers, you should allow this to happen, so it is breathtaking that you, as a Government Department, or any employer, should be saying, "We are good employers, we have looked at it and we don't think anything should change." I return to it: you are being judge and jury. Is there not a case, even now, for you to reflect on this and follow the recommendations of the NAO? It looks, on the face of it, extraordinarily arrogant to ignore this. Sir Peter Ricketts: I certainly do not seek to be arrogant, Mr. Mackinlay-quite the reverse. I am always ready to reflect further on everything, but we have thought quite carefully about this. I wonder if I can ask Mr. Warren, who has been even more closely involved in this to- Q95 Andrew Mackinlay: No disrespect to Mr. Warren, but he is the judge and jury that I am referring to. He is the man who had stewardship over this matter. He dealt with it diligently and to the best of his ability, but he is also the man who is saying to you, "I am not going to agree to this independent review because I have decided on the matter." Sir Peter Ricketts: I wonder if I could ask him just to respond. David Warren: Thank you. I understand the point that Mr. Mackinlay is making. This was an exceptionally difficult issue for us. The NAO made it clear in its report that it did not have the legislative power to examine specific grievances. The report was on our grievance procedures and the value for money of our procedures, and individual cases were outwith its terms of reference. As Sir Peter has said, we found the report extremely valuable. It is worth pointing out that it found good things and bad things in our old procedures. It found more good things in our new procedures, but it quite rightly invited us to address ways in which we could strengthen things, and we are doing that. The only issue of contention between us and the NAO was this specific recommendation, and we make no secret of that. It was reflected in the discussions that we had with the NAO, which we found valuable. The NAO invited us to consider-and made it clear that we were at liberty to reject-the suggestion that we should reopen old cases that we considered to be closed and should invite independent mediation to resolve issues that we no longer considered to be disputes. It is an important point of principle for us that, having gone through what we believe are exhaustive and very careful processes, and having done all that any responsible employer could reasonably be expected to do to resolve these disputes, we believe that we have done all we can. I offer that humbly to the Committee as a genuine statement of what we believe we have done as an employer. We believe, in those circumstances, that it would not be correct to reopen these cases, which we believe to be closed. We said that to the NAO. I recognise that that leaves an issue of disagreement, as it were, between us and the NAO. However, the NAO was content for us to respond in that way, as this was a report to FCO management. Q96 Andrew Mackinlay: Is that the final word on the matter or will you review it? David Warren: That is the final word on the matter. We believe that these issues are closed. Q97 Chairman: I think that we need to move on, Mr. Mackinlay. In the five minutes left to us, can I just ask you about public diplomacy? We are taking evidence tomorrow from the BBC World Service and the British Council. Are you satisfied with the operation of your new public diplomacy board, which was established quite recently? What were the reasons for the choice of three particular strategic priorities as the focus of the pilots on public diplomacy that you have established? Sir Peter Ricketts: Yes, we are satisfied. We think that the public diplomacy board has developed very well as a forum where we at ministerial level. The BBC and the British Council can come together, with others involved, to ensure that the activities of the BBC and British Council in particular are well lined up with the strategic priorities that we in the FCO are pursuing. We do that without cutting across the World Service's editorial independence or anything like that, but while ensuring overall strategic coherence. We think that that is working well. We chose the three particular pilots because we wanted separate, quite different sorts of area to test whether a more targeted approach could achieve something. The ones we chose: climate, democratic development and governance, and the economic and business link to UK Trade and Investment, seemed to us to be quite different areas, where public diplomacy could work in different ways, but each of them were important tests to see whether the money that the Government were spending could actually achieve something useful. So they were chosen for their variety as test cases, really. Chairman: Thank you. Mr. Mackinlay, do you want to take the last question? Q98 Andrew Mackinlay: On parliamentary relations? Yes. Your predecessor, Sir Peter, volunteered to give us some management information-I have the quote here; brevity will not allow me to deal with that, but I think that you are well rehearsed in this-and yet you snatched it back. Why would you do that? I understand that it now has the imprimatur, as it were, of Margaret Beckett. Is that personal to her? If we asked you again on Friday, would you revisit it with a new Minister? I am not being sarcastic, I assume that there will be a new Minister. What is your personal view? Your predecessor gave us an undertaking that he would make these things available. He went to great lengths-I have a whole screed here of how he was poring over the Committee saying, "You can have this information, delighted to let you have it," and then, under your stewardship, the Committee is refused the management information. Chairman: You are talking about the quarterly reports? Sir Peter Ricketts: Particularly the quarterly reports? I think, to be fair, Mr. Mackinlay, your Committee gets an enormous amount of management information about the FCO- Q99 Andrew Mackinlay: That was not my point though, was it? Your predecessor came to us and said, "You can have this, I am going to give it to you". He was almost forcing it through the letterbox- Sir Peter Ricketts: I do not believe that the Committee is under-resourced in terms of management information. In fact, I think probably that what we offer the Committee compares favourably with what any other Department engages their Select Committee on, and quite rightly. I am very committed to working in an open and transparent way with the Committee. If I may say so, we very much value the Committee's interest and oversight, and the fact that, when you travel, you engage so well with our staff. I looked at the amount and volume of information that we have supplied for the Committee over the years, and it is very, very substantial. Q100 Andrew Mackinlay: Nobody is arguing about that. Sir Peter Ricketts: There is a line over which we believe it is not wise to go, which is that it is up to us in the FCO to manage the organisation and, of course, for you to hold us to account and scrutinise us for the way we do that. If Margaret Beckett was concerned, then I would share her concern that sharing with you on a routine basis all our management papers would inevitably involve you in the management of the organisation, because they have commercial sensitivity, staff sensitivity, and so on. Routine supply of all management board papers seemed to us to cross a line. We also took the view that, given all this information that we supply to you on a very regular basis, adding a quarterly management letter from the permanent secretary would not add materially to the flow of information available to you. That was Margaret Beckett's strong view and I also believed that that was the case, given how much we share with you. However, if you believe that a quarterly letter is of real importance to the Committee, may I take that back as an issue and reflect further on it? Andrew Mackinlay: We do. Chairman: I am grateful to Peter. Can we wrap it up there? You have covered a lot of ground, as have your three colleagues. We will, no doubt, be pursuing a number of issues with correspondence; some of those we were not able to get around to raising today. Whatever happens tomorrow and on Thursday, and whoever we will be dealing with as a Minister in the future, we know that, at least for the foreseeable future, we will be dealing with you in your present role and we look forward to seeing you again in future, thank you. Sir Peter Ricketts: Thank you very much, Mr. Chairman, and the Committee.
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