Letter to the Chairman from the Permanent
Under-Secretary of State, Foreign and Commonwealth Office
SIR PETER
RICKETTS' (PUS, FCO) EVIDENCE
SESSION 29 OCTOBER
2008
Thank you for your letter of 7 November requesting
information on a number of points that were covered during the
evidence session and on others that there was no time to cover.
PART I, SUBJECTS
ON WHICH
SIR PETER
RICKETTS PROMISED
TO WRITE
FURTHER
(A) The "drugs and crime" areas
where there has been a reduction in overall programme spend
As part of prioritising our policy effort and
programmes in the strategy refresh, the lead for international
drugs and crime work passed to the Home Office, which holds the
domestic lead. We shall maintain a smaller Drugs and Crime Team,
providing policy advice to operational agencies and tasking our
network to help deliver HMG's objectives. Our focus is now at
the strategic level, where the FCO can best add value (foreign
policy expertise, building relationships with partner countries,
and creating effective multipliers through EU). We are working
closely with Partners across Government (PAGs) to define the threat
from drugs and crime to UK and decide how/where best to tackle
it overseas. Savings from cuts in London-based staff and programme
funds were redirected to higher priority activity. Funding to
assist cross-government efforts has been confirmed for the next
three years, providing Partners across Government with a timescale
within which to seek alternative sources of funding for activities
traditionally funded by the FCO's Drugs & Crime Programme
(DCP). £3 million was allocated to the DCP for FY 2008-09,
half the FY 2007-08 allocation of £6 million. This will reduce
to £2 million in FY 2009-10 and FY 2010-11 before ceasing
from FY 2011-12. We understand that no replacement funding has
yet been identified. Remaining DCP funds are targeted at reducing
harm to the UK from Class A drugs (heroin and cocaine) and financial
crime. We give priority to projects in the Caribbean, Latin American,
South Asian and West African regions. Funding for counter-narcotics
work in Afghanistan does not fall under the DCP and was not affected
by the strategy refresh decision. Those issues are covered in
mid-year reviews of DSOs and the outcomes of those reviews.
(B) The Issues covered in mid-year reviews
of DSOs and the outcomes of those reviews
On 09 October the FCO Board spent a full day
reviewing progress against the FCO's Departmental Strategic Objectives
(DSOs). The review consisted of face-to-face interviews between
the Board and the eight DSO owners. The Board met again on 16
October to discuss the outcome of the review. An in-depth assessment
showing progress against our eight DSOs and each of their underpinning
outcomes will appear soon in our Autumn Performance Report (December
2008); hard copies will be sent to the FAC in due course, but
I enclose now a summary of ratings for each outcome (see Annex
A).[24]
Some cross-cutting themes emerging from the review included: the
effect of the recent shift of resources in the network; the need
to reduce the weight of our programme governance procedures on
our ability to deliver projects, while ensuring rigorous oversight
of the expenditure of public funds; our relationships with our
Partners across Government and our operation as "one team"
overseas, following the conclusion of the new Service Level Agreements;
and the ongoing need to improve budget management to achieve a
5 Star rating. The Board also recognised the critical importance
of leadership throughout the organisation, from Heads of Mission,
Directors responsible for DSO delivery, regional and corporate
service Directors, and, of course, the Board itself; the organisation
is performing well on this measure in many areas, but there are
some in which it could do better. The Board's overall conclusion
was that the DSOs are bedding down well and are now driving more
of our activity, and that the review process is getting better
each time and giving the Board a more accurate picture of how
the FCO is performing.
(C) Clarification as to where there are currently
no FCO Ambassadors or High Commissioners
Where there is no resident diplomatic mission,
a Head of Mission from a neighbouring Country is accredited on
a non-Residential basis. A list is enclosed at Annex B.[25]
We continue to make use of PAGs, including DfID funded staff,
in countries where we have no resident DS representation, to take
action on our behalf on an informal basis when the need arises.
However there are at present no countries where PAGs are formally
exercising diplomatic functions in the absence of resident DS
representation. There is a full list of the countries where DfID
are represented in their annual report.
(D) Progress with internal disciplinary proceedings
against Derek Pasquill
The standard FCO Misconduct Procedures were
followed after the criminal case against him was dropped. Derek
Pasquill attended a Disciplinary Hearing on 19 August 2008. The
Panel substantiated the allegations of gross misconduct and summarily
dismissed Derek. Derek appealed and his appeal was heard on 22
September 2008. The appeals hearing officer upheld the panel's
decision to dismiss. Derek has a right of appeal to the Diplomatic
Service Appeals Board (DSAB). Whilst no appeal has formally been
lodged, Derek has indicated that he will do so.
(E) The FCO's view on compensation for UK
victims of Libyan Semtex
Both the Prime Minister and the Foreign Secretary
have considered the matter of compensation for UK victims of Libyan
sponsored IRA attacks carefully. When it became clear that negotiations
were taking place between the US and Libya towards a bilateral
compensation agreement, we made diplomatic representations to
the US Government. We urged the US Government to include in the
list of recipients of any compensation package the UK claimants
who had brought cases in US courts against Libya for its past
sponsorship of IRA terrorist acts. But in the event this proved
not to be possible. We understand from the US Administration that
a key reason for this was their view that international and US
law do not permit the US Administration to espouse the claims
of foreign nationals. Another relevant factor in the US Government's
decision was its assessment of how likely it would be that the
claims would fall within the jurisdiction of US courts, and how
likely it would be that they would succeed. With regard to bilateral
negotiations with Libya on compensation, the Government's position
remains that we will not enter into this type of discussion with
Libya. Libya has answered questions about its involvement with
the IRA in 1995 to the satisfaction of the then Government. For
its part, Libya now considers the matter closed and has made it
clear to us that it would be strongly opposed to re-opening it.
With the UK's support Libya has now re-engaged with the international
community and is a partner on many issues vital to our national
interest, including counter terrorism cooperation. The Government
in no way condones Libya's past sponsorship of terrorism nor underestimates
the suffering caused by IRA atrocities during the Troubles. Ministers
have the deepest sympathy for the victims of Libyan sponsored
IRA violence. The Government recognises that it is essential to
acknowledge and address the suffering of victims as a necessary
element in the process of reconciliation in Northern Ireland.
Since 1998 the Government has invested more than £20 million
in victims' initiatives. This money has supported a range of projects
which have provided among other things financial support for victims'
groups; the establishment of a memorial fund to which individuals
can apply for help; and two specialist trauma centres. The Committee
has written separately to the Foreign Secretary requesting a detailed
memorandum on the issue of compensation for victims of Libyan-sponsored
IRA terrorism. We will be providing the Committee with this information
by their deadline of 1 December.
(F) FCO expenditure on Commonwealth Scholarships
Sir Peter Ricketts promised to write in response
to Sir John Stanley's question (Q259) about funding for the Commonwealth
Scholarships and Fellowships Plan (CSFP). The Department for International
Development has increased its funding by £1 million this
year to £15.93 million and will increase it further to £17.43
million in 2009-10 and £17.5 million in 2010-11. This is
for developing Commonwealth countries. The Foreign and Commonwealth
Office is giving £2.05 million this year for scholars from
developed Commonwealth countries and will pay the continuing costs
of existing scholars over the next two years (about £1.05
million in 2009-10 and £400,000 in 2010-11), but will stop
funding new scholars from 2009 onwards. Sir Peter explained in
evidence our reasons for doing this. However, the Department for
Innovation, Universities and Skills will give £400,000 in
2009-10 and again in 2010-11 for 3-year doctoral awards, because
the availability of funding for PhD students from developed Commonwealth
countries is important to the competitiveness of UK universities
in attracting the best international research talent. It follows
that total Government funding for the CSFP is £17.98 million
this year (as against £16.98 million in 2007-08) and will
be about £18.88 million in 2009-10 and £18.3 million
in 2010-11.
PART II, SUBJECTS
WHICH THERE
WAS NOT
SUFFICIENT TIME
TO COVER
ON 29 OCTOBER
(G) Are there any significant differences
between the Corporate Services Programme and the Shared Services
Programme?
Yes. In his letter of 3 October 2008 to the
FAC Chairman Sir Peter Ricketts explained the background to our
decision to close the Shared Services Programme. As that programme
progressed, it became clear that the our business processes were
not yet sufficiently standardised or simplified to move them into
Global Shared Services Centres. So we decided to close thatprogramme
and to concentrate instead on (i) improving our business processes,
policies and tools through simplification, standardisation and
streamlining; (ii) consolidating our corporate service transactions
initially in a UK shared service centre, and (iii) pursuing more
regional forms of management—such as the facilities management
contract we've signed for the UK and North West Europe—where
that makes business sense.
(H) What lessons has the FCO learned from
mistakes made in the construction of FCO housing in Pakistan?
The independent report on the Islamabad and
Karachi Housing project made 17 recommendations to improve delivery
of construction projects. We are addressing each of these but
I should highlight the work done on three key areas:
Contractor appointment:
— We have in place a more robust risk
management system to check and approve the suitability of contractors
and their supply chain.
— Official Journal of the European
Union (OJEU) compliance statements will in future be included
in business cases for major construction projects.
Project management:
— We are reviewing our Service Level
Agreement (SLA) with FCO Services to improve the management and
control of contracts.
— Project Execution Plans are now mandatory
for all major projects and are subject to review throughout the
delivery life cycle.
Financial management:
— We have re-engineered our payment
processes to help ensure that contractors receive prompt payment
for work carried out.
— Tendering procedures have been reviewed
and are now fully compliant with the FCO's internal purchasing
guidelines.
(I) Has any further progress been made on
the possible reacquisition of Glencairn? What estimates are there
of the cost of such a reacquisition?
Since Sir Peter Ricketts last wrote to the Committee
on this subject [in July], Park Developments have agreed to the
Ambassador's continued occupation of Glencairn rent free to 30
April 2010. This arrangement represents value for money and meets
our needs until a permanent solution is found. Should the solution
be to reacquire Glencairn, we will look to acquire the premises
at market value.
(J) Will the FCO be able to meet its target
of achieving five stars in its finance programme by the end of
the financial year?
No. We believe that we should achieve 5 Star
during 2009-10. A key element of 5 Stars is the delivery of management
information in seven days after the month end. This milestone
is dependent upon the implementation of a new management information
tool, which is scheduled to be implemented in early 2009-10. We
currently rate 3.5 Stars. CIPFA FM recently undertook a review
of this programme and agreed with our rating, subject to making
some additional quick wins. The programme is making tangible improvements
to the FCO and many of these lessons are now being shared in a
Cross Whitehall Business Improvement Group (established by the
5 Star Programme). Through consultation with other government
departments and external advisers, we have raised the "bar"
for 5 Stars ie made it more difficult to achieve. This reflects
the reality that financial management is improving across many
Government departments and to be "Best in Whitehall"
is becoming tougher. Additional initiatives have been brought
into our 5 Star Programme.
(K) What is the FCO's current budgetary position?
What plans were made to deal with the Treasury's withdrawal of
support for the Overseas Pricing Mechanism?
The FCO's current budgetary position is as shown
in the table below. Figures are taken from the Winter Supplementary
Estimates 2008-09, which are due to be published on 18 November.
Following the Treasury's withdrawal of funding for OPM, we immediately
began to consider options for managing our foreign exchange exposure.
This included forward purchase of certain currencies. We took
advice from commercial banks and the Bank of England; explored
what our partners in government were doing; and consulted independent
financial experts. Proposals were made to the FCO's Finance Committee
and HM Treasury and in May 2008 approval was given to hedge using
simple "outright forward" contracts. To date we have
contracted with the Bank of England to buy 80% of our net US Dollar
and euro exposure up to October 2009. The principles we have applied
to managing our foreign exchange exposure are to (a) maximise
budget certainty, (b) be low risk and non speculative, (c) hedge
a maximum of 80% of net foreign exchange exposure, and (d) recognise
that the "do nothing" option is itself speculative and
potentially high risk. "Outright forward" hedges are
zero premium and guarantee an agreed exchange rate for a given
volume of currency on a given date in the future—hence providing
absolute budget certainty. As a result of the hedging, we know
that we will have the foreign currency funds to finance our activities
in this FY; but we will face a tougher challenge in 2009-10.
|
| 2008-09 | £000s
|
|
| Resource DEL | 1,979,547
|
| Capital DEL | 206,060
|
| Less Depreciation* | 105,050
|
| Total DEL | 2,080,557
|
|
| *Depreciation, which forms part of Resource DEL, is excluded from total DEL since capital DEL includes capital spending and to include depreciation of those assets would lead to double counting.
|
(L) How are the FCO's Value for Money Projects progressing?
What are the implications of your changes to the Shared Service
programme on your planned efficiency savings in that area?
We are making good progress against our VFM targets for the
current year. In terms of our value for money projects the decision
to close the shared services programme will have no impact on
our ability to achieve delivery of the targets that we have agreed
with HM Treasury. See also our response to (G) above. In his letter
of 3 October 2008 to the Chairman Sir Peter Ricketts explained
the background to our decision to close the Shared Services Programme.
As that programme progressed, it became clear that the anticipated
benefits of global shared services were not achievable.
(M) What progress has been made on UKTI's assumption of
responsibilities for defence trade promotion?
The UKTI Defence & Security Organisation was formed on
1 April 2008 and co-located with UKTI on 3 November in Kingsgate
House in London. The new organisation is responsible for assisting
defence and security exporters as they seek to enter overseas
markets or maintain their current position with overseas customers;
many of whom are Governments. UKTI DSO is working to assist UK-based
companies achieve success in the current year, in a transparent
and responsible manner. Support services continue to be delivered
by military and civilian personnel, including some staff on loan
from the Ministry of Defence (MOD), with an unparalleled knowledge
of the defence and security sectors. A new Security Directorate
has been created to enhance the support given to this expanding
sector. Transferring responsibility for defence trade promotion
to UKTI is expected to enhance the Government's commitment to
the industry, which will now have access to the full network of
UKTI services. Further details are published in the 2008 UKTI
Corporate Plan.
(N) Does the new structure of conflict prevention funding
better target long term conflict prevention?
Yes. The new Conflict Prevention Pool (CPP), formed from
a merger of the Africa Conflict Prevention Pool (ACPP) and the
Global Conflict Prevention Pool (GCPP), was established to focus
on more strategic conflict prevention work. A separate Stabilisation
Aid Fund (SAF) was set up to focus on post-conflict stabilisation
work specifically in Afghanistan and Iraq and thus to help prevent
Pool spending becoming skewed towards funding current operations
at the expense of investment in long term conflict prevention.
There are now fewer and larger programmes, focused on those areas
of most interest to the UK and where the UK can make the greatest
impact. The eight CPP programmes (six regional and two thematic)
are based on a shared analysis of conflict risks and tri-departmentally
agreed strategies. This ensures a more targeted and strategic
approach. However, we have retained the flexibility to move funding
between and within regions according to need. We have also established
a reserve to deal with emerging needs as and when they arise,
thereby avoiding the need to cut long term activity in the face
of a crisis.
(O) What impact has the collection of essays on public
diplomacy published by the FCO had on public diplomacy work? Was
it intended that it should result in changes to the Public Diplomacy
Board's operation?
Our aims for the collection of essays on public diplomacy
we published earlier this year (under the collective title Engagement)
were to move the public diplomacy debate forward, to energise
the FCO and PD partners around the agenda, and to establish the
FCO and the UK as a leading thinker on the theory and practice
of public diplomacy. While it is difficult to measure the precise
impact of any one publication, we believe it is helping us to
achieve those aims. The publication was not intended to change
the Public Diplomacy Board's operation, but rather to help inform
the Board's decision making process.
(P) To what extent is there a "gap" on the ground
between the Public Diplomacy Board and public diplomacy work on
the ground?
The Board is responsible for agreeing overall public diplomacy
strategy, advising on resource allocation, and for performance
management and monitoring. As such it sets the agenda for our
"on the ground" public diplomacy. A current practical
example of this is the two year public diplomacy pilots approved
by the PD Board and jointly run by FCO and British Council staff
in selected countries, and on which regular reports are submitted
to the PD Board.
(Q) What progress has been made on the rollout of Future
Firecrest?
In the UK, the first stage of Third Generation Firecrest
(F3G) rollout is almost complete. This has involved deployment
of over 4,450 new desktop computers with Vista, Office 2007, and
iRecords—our new records management system. The final stage
of UK deployment is scheduled to take place next year. The start
of F3G deployment overseas has been delayed while defects identified
during our testing are being rectified; on current plans we anticipate
deployment to our pilots in December, but we will not confirm
our "go live" date until we are confident that all the
defectshave been fixed. We still aim to complete deployment by
the end of 2009.
Sir Peter Ricketts has cleared this letter in draft; this
incorporates his comments.
20 November 2008
24
Ev 177 Back
25
Ev 179 Back
| 
