Examination of Witnesses (Question Numers
20-39)
FOREIGN AND
COMMONWEALTH OFFICE
21 OCTOBER 2009
Q20 Mr Curry: Presumably the Ministry
of Defence is in the same position as you. It has to have contracts
for providing kit overseas and contributing to projects overseas.
Sir Peter Ricketts: The MOD have
done a forward purchase of dollars for many years but no other
currency.
Q21 Mr Curry: But they do it separately;
there is not a sort of joint purchasing authority.
Sir Peter Ricketts: They do do
it separately. We have set up our own arrangements because we
are covering a larger spread of currencies but over time I would
see lots of value in other departments clubbing together with
us to do it together because DFID, the other major international
department, I do not think do any forward purchasing, so there
is scope actually for better inter-departmental working.
Q22 Mr Curry: Correct me if I am
wrong factually on this question, please, but am I right in thinking
that staff working overseas, for example in Washington, are paid
in sterling and get the current rate for their salaries?
Sir Peter Ricketts: Yes. UK staff—because
we have locally employed staff who are paid in dollars—are
paid in sterling, they are UK civil servants, they pay tax in
this country and they get allowances on top of that which can
be adjusted to compensate for the exchange rate.
Q23 Mr Curry: Somebody who was, say,
sent to Washington four years ago would have done very well, would
they not, in terms of their dollar salary? Their replacement sent
six months ago would be significantly worse off, am I right?
Sir Peter Ricketts: No, because
there is a compensating factor which is the allowances that people
get to ensure that it is adjusted.
Q24 Mr Curry: We have heard that
before if I may say so. I am refreshed to know that we are not
the only ones ...
Sir Peter Ricketts: We have a
very vigorous system for ensuring that allowances are paid with
full propriety and regularity but there are overseas allowances
which are adjusted for the cost of living in the country, so if
sterling is very strong and the dollar is very weak then your
overseas allowance is less. If sterling is extremely weak and
the dollar is very strong then overseas allowances are greater,
so there is that compensating mechanism.
Q25 Mr Curry: People who are doing
the same job would broadly speaking find themselves in the same
financial position irrespective of what the exchange rate happened
to be doing at that time.
Sir Peter Ricketts: That is the
idea; it should be neutral as far as they are concerned.
Q26 Mr Curry: Again, correct me if
I am wrong factually, does not the Foreign Office have a tremendous
hierarchy of accommodation in the sense that if you have a certain
status you get accommodation with three bedrooms as it were and
if you are a bit lower you get two and a half bedrooms and a new
sofa. You get a dining room table made of beech if you are a certain
level. Just explain it, if you go to an overseas post you find
that according to the ranking of staff that gives an entitlement
to a certain quality of accommodation. Is that false or is that
correct?
Sir Peter Ricketts: It used to
be more true than it is now; we have got more egalitarian recently.
What tends to affect space is the size of your family so you can
have a more junior officer with four children so they will get
a larger place and a single but more senior person might be in
a small flat.
Q27 Mr Curry: On the whole you buy
your real estate, do you not, or do you rent?
Sir Peter Ricketts: We have a
mix.
Q28 Mr Curry: What is the proportion
in let us say the major capitals?
Sir Peter Ricketts: It varies
a lot actually. In some it is almost entirely owned and in others
it is largely rented, but we need a degree of renting because
we have got to have some flexibility. Again, if you have a single
person replaced by somebody with five children you need to have
different sizes of place.
Q29 Mr Curry: Are you continuing
to buy accommodation or have you moved now to a system where you
would normally expect to rent?
Sir Peter Ricketts: We are not
buying much now, partly because it is very inflexible. Once you
have bought a house you have to put somebody into the house whatever
size of family they have got.
Q30 Mr Curry: Let us take the United
States as an example. We all know what has happened with the sub-prime
crisis over the last few years. Presumably you could have more
or less bought Bethesda quite cheaply.
Sir Peter Ricketts: Indeed, if
we had the money.
Q31 Mr Curry: Were you not tempted
at that stage to say looking ahead, this is a good opportunity
to perhaps settle our costs for the future?
Sir Peter Ricketts: You are absolutely
right, these are the sorts of things we need to work with. I am
hoping that Alan Croney, our new Estates Director, will help us
with that. It is a bit moot at the moment because we are very,
very short of money to buy anything; all the capital we have got
is going into these security builds that we are needing to do
in places like Harare or Islamabad or Baghdad. The amount of capital
we have to be able to make those choices is very limited at the
moment.
Q32 Mr Curry: Even on normal accommodation
there is a quite heavy security bill but I suspect you probably
cannot just hire local contractors to do things because of the
security concerns.
Sir Peter Ricketts: That is a
concern in embassy buildings; on residential accommodation we
can use local contractors but what we do do though is make sure
they come up to UK health and safety standards. In many countries
in the world if you hire something the electricity is not up to
our standards and so we have to go in and do work on that. That
is another cost of renting, unless you rent for a long time. Where
we are working in embassies we need to be careful to use UK contractors
for reasons that you will understand.
Q33 Mr Curry: In terms of your consular
network, does the same apply there?
Sir Peter Ricketts: Yes, absolutely
the same, there is no distinction, we are all part of the same
organisation.
Mr Curry: If I have time later I will
come back if that is all right.
Q34 Mr Bacon: Sir Peter, we have
travelled a bit with this Committee and I with another committee
have been to various embassies around Europe and elsewhere. It
is often striking how impressive are the individuals one meets
as ambassadors and if you were a government official or a minister
visiting you would want exactly the sort of briefing which they
seem to provide to a Committee like us, it is an extremely impressive
service. What I also find heartening is that you are sitting there
with two chartered accountants or two management accountants,
but qualified accountants, because your predecessor Sir Michael
Jay came before us once and when asked what his reflections were
on his job he, having been a very senior ambassador indeed—one
of the most senior—then had the job that you now have of
running the Department and he said, which I thought was incredibly
illuminating, he was surprised how difficult it was, as if the
background you get in learning about statecraft and how to brief
ministers in capitals of the world is good preparation for running
a large organisation with 16,000 employees in 240 offices in 100
countries when plainly they have got very little to do with one
another. You are still in charge but you must rely on these managers
around you quite a lot. Am I right in saying, did you hire Mr
Luck after you took over?
Sir Peter Ricketts: I did.
Q35 Mr Bacon: Did you take a conscious
decision to look for a manager with a financial management background
who was qualified?
Sir Peter Ricketts: Absolutely
I did, yes, but also following the advice of this Committee and
other committees that we should make sure that we had qualified
finance people.
Q36 Mr Bacon: It is marvellous to
know that someone is listening because I have been banging on
about this for years. There was a time when 23% of principal finance
officers only had a financial qualification and I gather from
the Treasury the figure is now well over 90%. I would like to
pursue with the Treasury if I could a bit further the questions
that the Chairman asked about how you are spreading this around
Whitehall. You said in answer to the Chairman that you are trying
to tell departments to look at the Foreign Office, but how do
you do that? Do you send them an email or do you actually have
seminars with other departments where you force them to confront
the fact that it is possible to improve your financial management?
Mr Gallaher: The Financial Reporting
and Management Group in the Treasury holds regular seminars with
financial directors and with the departments every quarter, every
six months and we will take the message back from this particular
hearing and point out the example of the Foreign Office. Certainly
we will get the message across to other departments that there
is something worth looking at here.
Sir Peter Ricketts: Mr Bacon,
there is also quite a strong finance directors network around
Whitehall now so I hope that we are feeding our ...
Q37 Mr Bacon: You all meet up, do
you, Mr Luck?
Mr Luck: Indeed, and I sit on
the Finance Leadership Group—the chair is John Thompson
the head of Finance Profession.
Q38 Mr Bacon: He started at Norfolk
County Council so it is no wonder he is doing so well.
Mr Luck: He did indeed. Perhaps
I should point out that as part of our Five Star Finance programme
we are keen to act as a beacon and share good practice, and one
of the things that my colleague Tim Gardner has done is set up
a business improvement group where he brings together people from
across Whitehall who are interested in working on a real tangible
issue—they decide whatever it is each meeting—and
share good practice.
Q39 Mr Bacon: I would like to ask
a question about how you cost things because for an organisation—shall
we say one of the defence procurement bodies—it is relatively
easy to say this is how much hardware we got and this is the associated
software, the people that went with getting it, and the total
cost was therefore X plus Y equals Z. The Foreign and Commonwealth
Office is a rather sophisticated professional services organisation
and it is not nearly as easy to pin down where the costs are.
If you are, say, a middle-ranking diplomat in Washington working
on trade issues or something you are going to be spending part
of your time on steel tariffs and part of it on general bilateral
trade with the UK. How do you begin to come out with a figure
that gives you a sense of what it is costing your department to
do X or to do Y, because unless you can do that in the climate
that we are entering how are you going to come up with informed
choices as to where you rationalise? You might just come up with
easy choices which may not be the best choices.
Sir Peter Ricketts: You are absolutely
right and we have also got to have a system that is not so time-consuming
to fill in that people will not do it. If you ask people to fill
in a system saying what they are doing every half an hour, like
a solicitor would, you will not get diplomats to do that.
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