Letter to the Chairman of the Committee
from the Permanent Under Secretary of State, Foreign and Commonwealth
Office
FCO QUARTERLY MANAGEMENT LETTER
This letter covers the period January to March
2008.
STRATEGIC FRAMEWORK
The Foreign Secretary and I briefed Members
of the Committee on our new Strategic Framework. Since then, we
have been talking to our Whitehall partners about those policy
areas where we will be reducing our own resource input in order
to focus on our four policy goals. We have made it clear that
our network of Embassies and High Commissions remains a platform
to serve the whole of the British Government and that our Ambassadors
will continue to lead and support work on all HMG's key priorities
in the countries in which they serve. The response from Whitehall
partners has been positive.
DEFRA have accepted the principle that they
should lead on the international as well as domestic policy on
sustainable development (SD). We have previously dealt with SD
and business issues in the same team. As we wind down SD, we have
been talking to BERR about a few policy issues (eg investment
policy and bribery/corruption) which would fit better with their
objectives, and which they have agreed to take on.
We have assured SOCA that our Ambassadors will
continue to facilitate their work on drugs and international crime
and help SOCA operational staff to understand the local political
context of what they are doing. Our programme spending on drugs
and crime will taper off over the next 2-3 years, allowing SOCA
time to build up their own programme spend.
On science and innovation, we have reached agreement
with DIUS on sharing funding that will enable us to keep the network
at its current size and with the same level of programme funding.
We have also agreed that the FCO will maintain an intelligent
interest in science, and I propose to build this into our strategic
planning structure and will keep you and the Innovation, Science,
Universities and Skills Select Committee informed of progress.
CAPABILITY REVIEW
The Capability Reviewers are coming back for
a 12 month assurance review this month. We have continued to pursue
progress in the four key action areas identified in the original
review (ie FCO role; leading change; strategic human resource;
business planning) as we prepare for their visit.
We updated our High Level Change Plan in March
(annex A[13])
to reflect progress in the individual change programmes. In particular
we have added a new programme "Greening the FCO" which
is working to ensure that all aspects of the FCO's operations,
both in UK and overseas, are managed sustainably. Since the programme
has been established we have held an external review of our ISO
14001 certified Environmental Management System, updated our Environmental
Policy Statement on Operations (available on the FCO website)
and (a small but symbolically important point) ended the use of
bottled water for meetings and functions in London and Hanslope
Park.
UKVISAS' MERGER
On 17 January David Normington, the Permanent
Secretary at the Home Office, and I signed the Memorandum of Understanding
governing UKvisas' move into the new UK Border Agency, which took
effect on 1 April. The MOU was sent to the FAC under cover of
a letter dated 31 March from Kim Howells and Liam Byrne about
the transfer and the impact on parliamentary scrutiny. The MOU
affirms the FCO's continued role on visa and wider migration policy,
including through a new Ministerial Strategy Board on which the
FCO Minister for Migration will sit. It ensures that the Agency's
overseas operations will remain integrated within our network
of overseas posts, with Agency staff overseas remaining under
the overall authority of our Heads of Mission. FCO staff will
continue to be able (and encouraged) to apply for jobs in the
new operation, both in the UK and overseas. We are close to finalising
Service Level Agreements with the Agency on the details of the
finance, estates, human resources and IT aspects of the merger.
MERGER OF
THE FCO AND
THE IPS PASSPORT
OPERATIONS
A draft joint FCO/IPS Outline Business Justification,
examining the case for merging the home and overseas passport
operations, was submitted to FCO Change and Investment Boards
in February as planned. Following their approval of the proposal,
a presentation was given to the FCO Board proposing the gradual
hand over of responsibility for passport services to the IPS from
April 2009 to the end of the CSR period. (The FCO will retain
responsibility for emergency travel documents and act as a service
provider to the IPS for full passports.) This was then presented
and, following detailed discussion, endorsed at the Board's meeting
on 29 February. At the same time the IPS Investment Forum and
Management Board supported the concept of integration but requested
further analysis of the costs and benefits. The IPS Management
Board met on 2 April 2008 to reconsider the strategic case for
integration, which they continue to support, but have requested
a full impact and risk assessment to be completed before a final
decision is taken.
In January we offered to share the Outline Business
Justification and accompanying Executive Summaries with the FAC,
we are writing separately on this matter in the context of the
government response to the FCO DAR 06/07.
In the meantime the Passports Next Generation
Programme is continuing to rollout a more structured and streamlined
approach to delivering passport services overseas, where possible
in alignment with IPS policy in the UK (eg. we have recently started
to introduce interviews into the process). It is also developing
a new system supported by a suite of online services that will
issue secure emergency travel documents as well as replace BRIT,
the first generation biometric passport processing system. Most
importantly, this system will be constructed with IPS business
and technical requirements in mind paving the way for the eventual
integration of systems and the hand over of operations to the
IPS post 2011.
We accept that the introduction of interviews
and, when it is eventually introduced, secondary biometric enrolment
may in some countries require customers having to travel long
distances to obtain a passport. Repatriation of passport printing
to the UK towards the end of 2010 may also result in an increase
to the current average two week turnaround (over and above the
need for interviews and enrolment). But for a majority of applicants
the ability to deliver passports quickly by secure courier should
mean that we continue to compare favourably with most other countries.
Safeguarding personal identity remains of paramount
importance to both the FCO and IPS but we must balance this against
an acceptable level of customer service and the cost of delivering
that service. With IPS we will continue to explore ways to minimise
the inconvenience to customers for example through the use of
online services, remote interviews and commercial partnerships
to provide global access to application and enrolment facilities.
Given the global nature of the British diaspora and the distance
between Posts, our aim is to offer overseas customers a similar
service to that provided by other countries and as close as possible
to the service provided by IPS in the UK. We will also continue
to examine how other countries run their overseas passport operations
(we know for instance that nearly all EU partners and other major
countries have repatriated passport production) and overcome the
ever increasing challenges around security and identity management.
SHARED SERVICES
PROGRAMME
We appreciate the Committee's continued interest
in the work of the Shared Services Programme. The Programme is
the largest, most complex and in some ways most challenging of
the FCO's change programmes. Transforming the way in which we
deliver our corporate services is vital if we are to achieve our
overall aim of a modernized FCO, with more staff delivering our
policy goals and serving the public. Given the overall importance
of the Programme to the FCO we invited the OGC to conduct a Gateway
0 Review during April.
Overall the OGC gave the Programme a Red (take
immediate action) rating. Such a rating is not unusual at this
stage of a complex transformational change programme. The overall
rating reflects the highest rating of the individual recommendations.
Of the ten recommendations, three were rated Red. These three
recommendations focus on the shape of the Programme, its governance
and the need to establish an "Intelligent Client" Function
for the North West Europe Facilities Management contract. We welcome
the OGC's findings and are taking action on them. We are strengthening
the leadership of the Programme, under a more Senior Programme
Director. He and his team will be reviewing the Programme in detail
in the light of the OGC's findings. We will update the Committee
with a note of progress in the next quarterly round up.
FCO SERVICES
When I wrote to you on 18 January, I explained
the progress we had made in enabling FCO Services to move to Trading
Fund status. I am pleased to report that we implemented the change
on 1 April, following a debate on the FCO Services Trading Fund
Order in Committee on 18 February.
FCO Services has continued to perform strongly
this year, despite the significant changes taking place and, in
their latest customer survey, maintained their customer rating
of 84 per cent. The organisation continues to embed new business
processes.
For the FY 08/09, we have agreed a set of six
challenging targets for the new Trading Fund as follows:
— An in-year surplus before interest
and tax of at least £1.3 million;
— a Return on Capital Employed of at
least 3.5% (weighted average);
— a Wider Market revenue growth of
10% on that achieved in 2007-08, assessed on a normalised baseline;
— a customer satisfaction rate, derived
from an independent, qualitative survey of at least 85% satisfied
or very satisfied;
— a utilisation rate of revenue earning
staff of at least 65%; and
— a contribution to the FCO's Comprehensive
Spending Review commitments by delivering £2 million of cash
savings, achieved through price stabilisation.
These were announced to both Houses in a Written
Ministerial Statement on 18 March. FCO Services will report to
Parliament on its progress against these targets through its 2008-09
Annual Report. I understand that the Committee will be visiting
Hanslope Park this summer, and that you will be taking oral evidence
from the Chief Executive on 9 July.
ACTIVITY RECORDING
To improve our information on how our people
spend their time, the FCO has successfully piloted an Activity
Recording system in nine overseas posts and in two home departments.
Starting from 1 April this year the new system will collect data
quarterly on all FCO and locally engaged staff, at home and overseas,
against a set of activity codes linked to the new Departmental
Strategic Objectives (DSOs).
Activity Recording has the following objectives:
— to enable us to measure how effective
we are in delivering our DSO priorities, thereby supporting better
informed decision-making on the deployment of staff;
— it will allow us to measure the split
between front-line and back-office activity to drive forward the
efficiency programme;
— it will tell us how much time we
spend on providing services for other Departments, to enable us
to recover the correct costs;
— it will meet an HMT requirement,
enabling us to reclassify our overseas front-line activity (currently
classed as administration) as programme spend; and
— it will provide reports at various
levels of the organisation on the deployment of staff and the
activities they are engaged in.
PSAS AND
DSOS
We have reached agreement with HMT on the outcomes
(targets) that will underpin our 8 DSOs during the CSR period,
and for which the FCO's performance will be measured. Each DSO
owner is in the process of finalising their outcomes, for which
they are held responsible, ready for publication on the external
FCO website. The CSR'07 DSO framework being published on 1 April
(annex B[14]).
Work on PSA 30, "Reduce the impact of conflict
through enhanced UK and international efforts" (for which
the FCO leads) is advancing well. We are close to completing the
design of a set of detailed and rigorous targets that will help
us measure our efforts against the four indicators of the PSA.
These are being agreed across Whitehall. We will keep you updated.
In April the Prime Minister's Delivery Unit
(PMDU) will undertake a baseline assessment of HMG's ability to
deliver the PSA. This review is designed to strengthen delivery
from the outset of the CSR period and will cover the work of the
FCO, MOD, DfID and the Stabilisation Unit. The FCO continues to
play a lead role in shaping the other PSAs, for which we are a
Delivery Partner.
RISK
Staff expertise in risk management continues
to grow, largely due to the recent focus on reforms to the FCO's
business planning process. In the last quarter, we have held six
Business Planning and Corporate Performance Management courses
in London and four in overseas posts. In addition, we have provided
risk training on two Heads of Mission courses and one Management
Officers' course. As a result, over 90 staff have received training
in risk identification and management.
The FCO's operational and strategic risks are
reported through our risk management framework. When updated in
March, the Top Risks Register included six operational risks (physical
security, resources, internal financial controls, IT systems,
UKvisas, and FCO change) and nine strategic risks (terrorist attack,
Iran, Afghanistan, Iraq, EU Reform Treaty Ratification, Pakistan,
Kosovo, Zimbabwe, and Sudan). The Board also discusses individual
risks in depth at its monthly meetings, the most recent of which
focused on the EU Reform Treaty (January) and Pakistan (February).
FCO BUDGET
We have allocated the funds flowing from the
Comprehensive Spending Review to our overseas Missions and London
Directorates. This will see very substantial increases in resources
(by 2010-11) for:
— Counter-terrorism: an additional
£39.5 million pa, to fund more staff (primarily in key posts
abroad) and programmes.
— Afghanistan: an additional £15
million.
— Climate change: an additional £21.5
million.
And smaller increases in resources going into:
— Counter-proliferation: an additional
£3.5 million.
— Conflict: an additional £4.1
million.
— International institutions: an additional
£0.6 million.
Around 60 staff will be transferred from European
Posts and another five from the Americas to bolster work in key
countries on the new Strategic Framework, including significant
uplifts in staff working in front-line positions in the Middle
East and South Asia. This process will also lead to the creation
of around 40 new diplomatic staff positions, backed up by some
70 locally engaged staff, across the FCO network to build the
relationships that will be needed to exercise real influence on
the climate change debate throughout the world. There are no plans
for additional Post closures.
FIVE STAR
FINANCE PROGRAMME
The Five Star Finance Programme is on track
with good progress in the last quarter. Our performance reached
the 3 star level at the end of February. The main improvements
were: the successful completion of the 2007-08 third quarter accounts;
and faster implementation of audit closure reports.
We are rationalising our central finance structure
from April and continuing the work to have fewer, better trained
resource management units to improve financial management across
the network. We have recently recruited 10 trainees who will begin
their accountancy training programme in autumn 2008. We now have
clear projects to have simpler and more effective structures for
our IT financial systems. The next major milestone is to close
the 2007-08 FCO account more quickly and to a higher standard,
so the Comptroller and Auditor General can issue an audit certificate
by the end of June.
THIRD GENERATION
FIRECREST (F3G)
Rollout of our new IT system, F3G, started as
planned in the UK on 17 March 2008 following the successful completion
of testing. By 31 March we had installed over 500 computers. Rollout
is progressing as planned and we have received positive feedback
from users. Our plans for overseas rollout remain on track. F3G
will be deployed to our overseas pilots (Athens, The Hague and
Tbilisi) this summer. This will be followed by rollout to the
rest of the network, commencing with our European posts, from
September 2008. Rollout is not due to complete until mid 2010.
However, the Board is keen to complete the rollout more quickly,
both in the UK and overseas, to enable all staff to take advantage
of the benefits of the new system as early as possible.
DATA HANDLING
AND INFORMATION
RISK MANAGEMENT
We wrote to the Information Commissioner on
three occasions to inform him about potential personal data losses.
The personal data which may have been lost was contained in five
missing diplomatic airfreight packages containing among other
material 36 visa appeal documents; one missing diplomatic airfreight
package containing 15 passport applications; and one missing laptop
belonging to an honorary consul that contained personal details,
mainly names and addresses, of seventy consular assistance cases.
The companies concerned are still searching for these missing
packages (a tiny fraction of the more than 100,000 airfreight
packages we send and receive every year). As immediate mitigating
action I have written to all Heads of Post instructing them to
ensure that their staff are handling and despatching mail according
to procedures. And detailed guidance has been sent to our consular
experts reminding them of the need to handle personal data with
care and respect. I have also set up a longer-term review of our
airfreight services to ensure that we are minimising the risks.
HUMAN RESOURCES
Since January 2008, UK-based staff have been
applying for leave and recording sickness absences themselves
(monitored by line managers) on PRISM, our electronic management
information system. This has given us, for the first time, a central
up-to-date record of leave taken (and outstanding leave liabilities),
and a more accurate picture of short and long-term sickness absence.
It has also reduced paper-based processes and administrative costs.
VIP SUITES
In his Written Ministerial Statement of 4 March,
the Foreign Secretary announced to Parliament that the FCO and
BAA (previously British Airports Authority) had agreed new arrangements
for the use of VIP suites at Heathrow and Gatwick airports. There
is no FCO-funded provision of VIP facilities at any other UK airport.
Following a commitment made to the Treasury
in the Comprehensive Spending Review, the FCO reviewed the use
of these facilities, and agreed with BAA new commercial arrangements
for the terminal suites, which BAA will pilot from 1 April. Similar
commercial arrangements will also apply to the VIP suite at Gatwick.
The new arrangements will achieve savings of some £2 million
a year and end a public subsidy which was not consistent with
Treasury policy. The changes mean the majority of current users
will see an increase to existing charges and some users may experience
charges for the first time.
The agreement reached with BAA should mean that
VIP suites will continue to be available, and that the risks of
reciprocal action for British VIPs using foreign airports are
mitigated. In the UK the FCO will pay for VIP suites for high-level
visitors invited as guests of the United Kingdom. In the event
of reciprocal charging by other countries, the FCO will pay for
suites we need for official travel by Members of the Royal Family
and FCO Ministers.
The FCO will continue its operational control
of the Royal Suite at Heathrow and similarly pay for high-level
visitors invited as guests of the United Kingdom. All other users
of the Royal Suite will be subject to full economic recovery charges,
made payable to the FCO.
LEADERSHIP CONFERENCE
In March, the FCO held its annual Leadership
Conference at the QEII Conference Centre. In addition to all our
Heads of Mission and the top team from London, seventy UK-based
and local staff, nominated for their leadership skills and potential,
joined us. The theme for the Conference was Delivering the
Strategy.
THE ESTATE
In February we moved into newly leased offices
for the British Trade and Cultural Office in Taipei and into our
new Embassy and Residence in Doha. The Embassy building in Doha
incorporates a number of sustainable features and has been praised
by the Carbon Trust for the sustainability of its design. New
offices for our three missions in Geneva (Mission to the UN and
International Organisations, Delegation to the Conference on Disarmament
and the Consulate General) were formerly opened in March by Lord
Malloch-Brown.
The FCO Audit and Risk and Investment Committees
have considered an independent report on the Islamabad/Karachi
construction project, involving the liquidation of the contractor
Britannia Contracting Services Ltd. They have commissioned an
action plan on the recommendations contained in the report. I
will be able to update you further in my next letter.
The FCO Board recently considered the FCO's
policy on the sale of Ambassadors' Residences. It concluded that
the FCO should continue to retain Residences which are cost-effective
and suitable. This will be a great majority. There will continue
to be cases where selling properties is right and brings a range
of benefits. In 2007-08 the FCO is set to generate about £14
million through estate asset recycling. Ambassadors' Residences
will be included in the sales programme where they are insecure
or no longer fit for purpose or cost effective—as recently
demonstrated by the marketing of the Residence in Lisbon (Lapa).
The Board welcomed the approach and agreed this was a sensible
way forward. We will continue to brief the Committee on proposals
for significant sales.
I enclose our quarterly report listing the properties
sold and purchased in the third quarter of Financial Year 2007-08
(annex C). As with the previous quarter we have included the transaction
currency, the FCO's monthly exchange rate, and the equivalent
sterling gross sale receipt. None of the properties sold were
the Residence of a Head of Mission. The new Vice Consulate in
Ibiza was acquired in order to provide suitably sized and secure
premises for one of our busier consular posts.
Sir Peter Ricketts
28 April 2008
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