Letter from the Permanent Under-Secretary
of State, Foreign and Commonwealth Office, to the Chairman of
the Committee
FOREIGN AND COMMONWEALTH OFFICE: MANAGEMENT
ISSUES
1. Following my letter in September I am
writing with the latest quarterly update on FCO management issues.
This letter covers the main developments over the quarter October
to December 2007.
STRATEGY REFRESH
2. Ministers and the Board have worked to
review the FCO's Strategy, with the aim of giving the FCO greater
strategic focus (the Foreign Secretary's letter of 7 December
refers). We would be happy to brief the Committee more fully on
the emerging conclusions.
COMPREHENSIVE SPENDING
REVIEW
3. The FCO's Comprehensive Spending Review
settlement provided us with new money for work to counter terrorism
and pursue the Government's counter-radicalisation agenda. It
also increased the funds available to us for capital works to
ensure the safety of our staff overseas, maintain a modern, efficient
and secure global ICT network and press ahead with ensuring our
overseas Estate is fit for purpose, including going ahead with
the building of a new Embassy in Afghanistan. The efficiency programme
agreed with the Treasury as part of our settlement will also ensure
that the FCO will have the money we need to make a difference
on the most important foreign policy issues, to continue to deliver
excellent services to the public, and to modernise.
4. The Foreign Secretary explained in his
letter of 7 December that we would be working to align the resources
flowing from the CSR with our new strategic policy framework.
We aim to deliver a strategic shift in resources to deliver the
new policy goals. Our programme spending will be more closely
geared to delivering these policy goals, with a significant growth
in total funds from £66 million in 2007-08 to £109 million
in 2010-11. This will be matched by big increases in front-line
staff numbers working on these key policy areas in priority countries.
As the Foreign Secretary has already indicated, this will involve
moving staff away from developed countries, primarily Europe,
to those where they can add greater value, primarily in Asia and
the Middle East, where we plan to increase UK-based policy staff
by about a third.
EFFICIENCIES
5. The FCO was able to deliver the funding
for these new enhanced activities partly through additional money
received in the CSR but mainly as a result of the benefits from
the FCO's CSR Value for Money plans. We are continuing to work
on developing these. The main thrust of the programme is set out
in the FCO's VfM Delivery Agreement, a copy of which is attached
at Annex A. Further information, including on the individual projects
making up the plan, will be set out in the FCO's Departmental
Report.
6. The FCO is also making good progress
in delivering the SR04 Efficiency Plan. The Treasury will shortly
be publishing figures for delivery by departments up to the third
quarter of 2007-08 on Gershon Efficiencies and Lyons relocations.
I am confident the FCO will meet or exceed its targets in all
three areas (savings, headcount reductions and relocations).
SERVICE LEVEL
AGREEMENT (SLA) WITH
OTHER GOVERNMENT
DEPARTMENTS (OGDS)
7. Our posts around the world provide a
base for staff from many other Government Departments as well
as the FCO itself. We are currently negotiating a new SLA with
those Departments which will govern the terms and conditions for
those staff, and new charging arrangements for services which
the FCO provides to Whitehall departments. Our aim is to offer
attractive terms and conditions to other departments, to help
ensure that the FCO's global network of Embassies remains the
natural base for the Government as a whole overseas. We hope to
agree the final text shortly, to allow for the introduction of
the new SLA from 1 April 2008.
FIVE STAR
FINANCE PROGRAMME
8. We have established a Five Star Finance
Programme to improve our ability to manage our resources effectively.
Our aim is that FCO Finance will be regarded as one of the best
finance functions in Whitehall; and that we will move to simplified,
streamlined and standardised processes. A number of individual
projects have been defined with tangible milestones to enable
the FCO to transition from our existing self-assessed 2.5 star
to 5 stars by April 2009.
9. This Programme also supports our intention
to reduce the number of staff across the network who are undertaking
transaction processing activity, and is forecast to deliver a
£2 million per annum saving (as defined in our CSR) in its
own right. To date a slimmer structure for the Finance Directorate
has been defined; quarterly accounts have been developed for Quarter
2 and Quarter 3; and a number of initiatives to increase the skills
of finance staff have been launched.
CAPABILITY REVIEW
10. On 19 October the FCO Board met with
Gus O'Donnell, Cabinet Secretary, and members of the Capability
Review Team to review progress in the six months since publication
of the Capability Review report on the FCO. The meeting discussed
progress made under each of the Key Action Areas (KAAs) identified
in the plan. Ahead of the meeting, the Cabinet Office conducted
its own stocktake and prepared a report, which is attached as
Annex B to this letter.
11. Overall the outcome was positive. Gus
O'Donnell expressed confidence in the significant progress being
made in delivering the Capability Review Implementation Plan,
in particular with KAAs 1,2 and 4—the FCO's distinctive
contribution, leading change and Business Planning—but he
pressed for further attention to be given to developing HR as
a strategic management function.
12. Progress on the 4 Key Action Areas between
October and December has been as follows:
Key Action Area 1: a clear articulation of the
FCOs distinctive contribution
13. A major objective of the exercise to
Refresh the FCO's Strategy has been to provide the FCO with greater
clarity on its role and where it can add the greatest value. This
has drawn on inputs from FCO staff, our partners across Government,
and other key stakeholders. We are confident that the new strategic
framework we have been developing achieves this objective.
Key Action Area 2: leading change
14. The framework for the FCO's change programme
is outlined in the High Level Change Plan. The latest version,
Version 3 is attached as Annex C.[5]
This gives all staff an overall vision of what the Board plans
to achieve in terms of a modernised FCO. The Change Committee
and Change Unit are now fully established. The focus for 2008
will be on delivery. The Change Unit are reporting monthly to
the FCO Board on the status and progress of the 11 major change
programmes set out in the High Level Change Plan.
Key Action Area 3: HR as a strategic function
15. We agreed with the Reviewers that more
needed to be done on this area. There had been some progress including
further professionalisation of the HR function, positive action
to better harness the skills and expertise of LE staff (including
the LE Staff Strategy) and the opening up of all SMS jobs to Whitehall
trawl. In addition, HR have launched a talent management exercise
for all SMS and some Band D staff. Most important of all, we have
developed and published for our staff a new Strategic Workforce
Plan, designed to identify the skills and number of staff required
in the FCO in five years' time and beyond. This is attached at
Annex D. It will be a key tool in managing our people (including
our recruitment) more strategically over the next few years.
Key Action Area 4: Business Planning and resource
allocation
16. A new process has been trialled, giving
a clearer picture of resources/priorities match. All Strategic
Priority owners now have worked up Business Plans and are being
held account for delivery of these plans by the Board. In January,
a Business Planning exercise for 2008-09 will be launched. This
will ensure business plans reflect the revised priorities brought
out by the Strategy Refresh. Work is underway to ensure we can
measure progress of planned activities against delivery.
TRANSFER OF
DEFENCE EXPORT
SUPPORT FROM
DESO (THE DEFENCE
EXPORT SERVICES
ORGANISATION TO
UK TRADE & INVESTMENT
(UKTI)
17. As part of the machinery of government
changes announced on 25 July, responsibility for defence export
support is transferring from DESO (part of the Ministry of Defence)
to UKTI. The Government announced on 11 December that this transfer
will take place on 1 April 2008 and provided details of the plan
to implement the change.
18. From 1 April 2008, a new unit will be
established within UKTI responsible for supporting defence and
security exports. The provisional name is UKTI Defence and Security
Group. It will be staffed initially by a mixture of civilian and
military personnel transferring from MOD to UKTI, some of whom
will transfer permanently, with others coming on loan. Those on
loan will fill posts which it is judged require specific defence
experience and they will therefore be replaced, when needed, by
personnel from MOD. Other staff will transfer permanently from
the MOD to UKTI and staff based overseas will transfer to UKTI
(via the Foreign and Commonwealth Office).
19. The new unit will continue to deliver
services meeting the needs of overseas customer governments and
to industry. It will have a global reach using the wider knowledge
and resources of the UKTI network, promoting a UK brand as much
as individual defence and security products and companies.
20. The new unit will be in UKTI with continuing
strong links to the MOD, including the engagement of Defence Ministers.
Overall Ministerial responsibility will rest with the Minister
for Trade and Investment (Lord Digby Jones). The unit will be
accountable to the UKTI Executive Board and its head will report
to UKTI's Chief Executive.
UKVISAS MERGER
21. Since I last wrote to the Committee
the Government has published its report "Security in a Global
Hub", establishing the UK's new border arrangements, including
the new UK Border Agency. This will bring together all the work
of the Border and Immigration Agency, Customs detection work at
the border from Her Majesty's Revenue and Customs (HMRC) and UKvisas.
It will report jointly to the Home Secretary and the Chancellor
of the Exchequer on its work at the border—managing the
flow of goods and people. UK Visas will thus change from being
a joint FCO/Home Office operation to part of the new Border Agency.
A key objective in making this change is to improve the effectiveness
of the overall border operation.
22. The FCO and Border and Immigration Agency
will sign a Memorandum of Understanding on the practical arrangements
in January. The MOU provides for a continuing role for the FCO
in visa and migration policy discussions and decision making.
FCO staff will continue to work in the new operation, at home
and abroad. We are continuing to work closely with the relevant
Government Departments in coordinating the transitional arrangements
and will keep the Committee informed of progress. Visa issuing
will continue to be a major part of the work of many of our Posts,
and I am keen that FCO staff should continue to be involved in
visa work.
BIOMETRICS
23. Over 1.1 million visa applicants have
had their biometrics collected overseas. The Biometric checks
have identified over 11,000 visa applicants who have previously
been fingerprinted in the UK in connection with immigration cases
or asylum applications. In the last three months, 400 applicants
who tried to swap their identity were discovered and refused visas
as a result of the checks. All applicants for visas for the UK,
irrespective where they apply, are required to submit their biometric
data. Biometrics are checked by the Immigration and Asylum Fingerprint
System (IAFS) in the UK and a result returned to posts overseas
in time to inform the visa decision.
FCO SERVICES
24. When I wrote to you on 25 September,
I referred to the NAO's review of FCO Services' fitness to trade
as a significant milestone that we were about to face as part
of FCO Services' journey to Trading Fund (TF) status. The NAO
have now completed their review, while the OGC have completed
a final Gateway Review of our readiness for FCO Services' transition.
The consultation exercise, to which I also referred, has now been
completed and the responses analysed.
25. Both the NAO and OGC reports highlighted
that we have made significant progress in our preparations for
FCO Services' change of status and are on track to make a successful
transition on 1 April this year. The responses from the consultation
exercise indicate broad support for the move. FCO Services is
working hard to embed the new commercial disciplines necessary
to operate successfully as a business-focused organisation. And
in the FCO we have made further progress in developing our capability
as an intelligent client, putting in place a new customer governance
structure and streamlining our procurement processes.
26. However, our relationship is not a purely
commercial one; FCO Services' fundamental reason for existing
remains to support the operation of the FCO. The FCO has a strong
vested interest in the success of FCO Services as a Trading Fund.
As such, we are strategic partners, with shared objectives and
mutual interests.
27. We have recently endorsed FCO Services'
new Corporate Plan for the next five years. This provides a clear
and comprehensive blueprint for the future. FCO Services will
continue to work closely with the FCO to meet our ongoing needs,
guaranteeing in particular the provision of those secure services
that are business-critical to us. At the same time, FCO Services
will continue to develop its expertise in secure services and
grow business in those areas with non-FCO customers.
28. The changes taking place within FCO
Services are substantial and we are aware of, and monitor through
a range of feedback channels, their potential impact on staff.
I have visited Hanslope Park and held a meeting for all FCO Services
staff there. Other Board Members visit regularly. We are working
hard to involve staff across the organisation in the change process
and to give them the training and support they need to adapt to
the demands of the new environment.
29. FCO and HM Treasury Ministers have now
given approval for FCO Services' move to TF status next April.
The necessary Statutory Instrument and explanatory memorandum,
together with the Consultation Response analysis and an Impact
Assessment of the move to TF, will be laid before the House shortly.
LANGUAGE TRAINING
30. As foreshadowed in my letter of 25 September,
our in-house language training function, run by FCO Services,
closed on 2 October. Four teaching staff remained in order to
complete the delivery of two hard language courses that ended
in mid-December.
31. New outsourced language training Framework
Agreements have since been awarded to 15 suppliers and the first
courses under the new agreements started on 19 November. There
will be two to five different training providers for each of the
60 main FCO languages. The Frameworks are for four years and will
allow greater flexibility of supply than the earlier model, while
maintaining quality at a reasonable price. I am pleased to note
that a number of our former teaching staff who formed their own
companies to bid for the supply of language training services
under the new arrangements have been successful in doing so.
RISK
32. During the last quarter the FCO has
continued to focus on making the risk management process more
coherent and accessible. A central part of that focus has been
the delivery of training on risk to over 40 members of staff,
including Heads of Mission, Management Officers, and staff involved
in the business planning process. This has helped to create broader
understanding and ownership of the risk process amongst staff
in London and overseas.
33. Our risk management framework continues
to feed information from posts overseas through to the FCO Board,
informing the Board's quarterly reviews of the operational and
strategic risks which make up the Top Risks Register (TRR). When
last updated, the TRR included six operational risks (Physical
Security, FCO Resources, Internal Financial Control, IT Systems,
UKvisas, and Change) and seven strategic risks (Iraq, Terrorist
Attack, Iran, Afghanistan, EU Reform Treaty, Pakistan, and Kosovo).
Our response to the Committee's Report on the FCO Annual Report
2006-07 also contains the FCO Internal Audit report on the TRR.
FUTURE FIRECREST
34. Our major new IT system, Future Firecrest,
is going through testing and remains on track for the main UK
rollout starting 17 March 2008. Overseas pilots are on track for
8 July 2008 with the first stage of overseas rollout (Europe)
beginning 30 September 2008. Opportunities to complete the rollout
ahead of current plans are being investigated.
ESTATES
35. I enclose our quarterly report listing
the properties sold (Annex E) in the second quarter of Financial
Year 2007-08; there were no purchases. As with the previous quarter
we have included the transaction currency, the FCO's monthly exchange
rate, and the equivalent sterling gross sale receipt.
36. None of the properties sold were the
Residence of a Head of Mission. The property in Seattle was, however,
the Consul General's Residence and reflects the changes to the
FCO overseas network announced in the House by the then Foreign
Secretary in 2004.
37. In my last letter I undertook to inform
the Committee once the final balance of funds for the sale of
offices in Asuncion had been received. The transaction has now
been completed and the gross sale proceeds total £187,000.
I am writing separately on the recovery of damages from Britannia
Contracting Services Ltd in connection with the project in Islamabad
and Karachi.
Peter Ricketts
18 January 2008
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