Adapting the Foreign and Commonwealth Office's global estate to the modern world - Public Accounts Committee Contents

Examination of Witnesses (Question Numbers 20-39)


  Q20  Mr Bacon: Will you tell us when you do?

  Sir Peter Ricketts: Of course.[1]

  Q21  Mr Bacon: Can I move on to Madrid. What happened here? Did the Ambassador leave the bath on? It is a brand new building, high rise. "We are seeking to establish the facts and the size, if any, of any FCO liability." Is there an FCO liability?

  Sir Peter Ricketts: Potentially, yes. This is our new office building on the 40th floor of a brand new office tower in Madrid. We are almost at the top and there was some fault which led to the sprinkler system coming on, I think overnight, and therefore a lot of water.

  Q22  Mr Bacon: So did somebody light up and have a cigar or something?

  Sir Peter Ricketts: I think it was probably a power cut or something that triggered the sprinklers that then put a lot of water down which then seeped down through other floors of the building and therefore there is a potential claim against us, I fear. Since HMG's policy is not to insure but to self-insure as it were, we are potentially facing a liability. We are looking at the moment into whether it is our liability or somebody else's.

  Q23  Mr Bacon: Is the liability to the owner of the building or to the other tenants?

  Mr Croney: The liability applies to the building and to other occupiers and a range of other people.

  Sir Peter Ricketts: This is very unsatisfactory because it is a wonderful new embassy in a brand new building but there seems to have been this fault with the fire alarm sprinkler system.

  Q24  Mr Bacon: Perhaps you can update us on that when you know the liability. It will be interesting to know who it was you soaked.

  Sir Peter Ricketts: We will. A number of other embassies below us and then I think some private companies.

  Q25  Mr Bacon: So long as you were at the top.

  Sir Peter Ricketts: I think we are.

  Q26  Mr Bacon: Sir Peter, you used to be ambassador to NATO. One of the other points in your letter is about co-locating the British embassy in Brussels and UKREP. In fact, we visited the offices there. Was any thought given to co-locating all three missions, the NATO mission, UKREP and the British embassy to Belgium in the same place?

  Sir Peter Ricketts: Yes, thought was given to it. First of all, this is an example of where we have been able to reduce the size of our embassy. We had a bilateral embassy in downtown Brussels which was increasingly empty as we took diplomats away and moved them elsewhere. When we refurbished our EU mission we created a floor into which we put the embassy, which is much better for the embassy because it is then alongside a much bigger FCO operation, and we have significant economies of scale there, and we were able to get rid of that bilateral building. We did think about NATO. All NATO delegations are operating out of the NATO HQ building out by the airport and it did not seem sensible to move ours and be the only one which was not co-located with the rest. In fact, NATO is building a new building for the entire Alliance in which we have contracted for some space so we have left it with a separate mission.

  Q27  Mr Bacon: Is the same true in Italy? The Committee visited Italy and I had not realised there were three missions to Italy: the Holy See, the Italian republic but also the United Nations organisations there. Is there a building in Rome to which all the United Nations organisations belong in the same way or is there scope for economies of scale there?

  Sir Peter Ricketts: I think I had better check that, unless somebody else knows here.[2] On the Vatican, our small mission in the Vatican does operate out of the same areas and compound as the embassy.

  Q28  Mr Bacon: The ambassador lives in a garret and having had personal experience of that I can say it is extremely good value for money.

  Sir Peter Ricketts: Indeed it is and we had an exchange about this at my last appearance. I think I then wrote. The Vatican will not allow the ambassador to the Vatican to live on the same premises as the ambassador to Italy, so that is a mandatory thing. On the UN mission, I am not conscious we have anything other than maybe one or two people supporting the UN operation there. There have been examples in Vienna and in Geneva where we have multiple missions in the same city and we are looking at all of those to see whether we can get economies by putting them together.

  Q29  Mr Bacon: Mr Croney, it says in the Report that you are professionally qualified and indeed Sir Peter described you as that at the beginning. I have searched in vain for the nature of your professional qualification. Are you are Chartered Surveyor?

  Mr Croney: Yes, I am a Chartered Surveyor.

  Q30  Mr Bacon: Marvellous and you are Head of FCO Estates. This is very encouraging and first class. I remember when we saw NHS Estates a while ago and the chap in charge was not a Chartered Surveyor and I remember thinking it was a bit odd. This is most encouraging. Sir Peter, part five, which deals with working with other government organisations, has a number of references to the lack of information. In 5.4: "The FCO was unable to provide information on how the amount other organisations are charged has changed over time or comprehensive figures on the number of staff from other organisations using the FCO estate", and then a bit later it says that the FCO is unable to assess whether co-location is successful and whether there is scope to extend the use of properties. It just sounds like there is an enormous information vacuum.

  Sir Peter Ricketts: To be frank, Mr Bacon, I was as surprised as you that we were not able to supply this information. The fact is that we have not collected the information on that basis before and therefore it is not available. I do not have any difficulty in assessing whether co-location is successful. My view is that in almost all cases co-location is better than having a British embassy and British government offices strewn across cities. Like you I am frustrated that we do not have this data. I think part of the purpose of updating our management information is to make sure that the next time we come to the Committee we will have that data and we will be able to tell you more precisely the numbers of staff from other government departments. My sense from going around our embassies around the world is that there are increasing numbers of other government department staff working in our embassies, as globalisation means more and more departments have an interest—for example Beijing is now full of people from other departments—so I am frustrated that we cannot give you a better answer than that.

  Q31  Mr Bacon: When it says in the Report in 5. 3 that there were 175 teams identified by the National Audit Office from other government organisations that were operating in the same location as them but not within FCO offices, you can always find—and indeed some of them are set out in the Report—reasons why other government organisations might be separate, like business and security and diplomatic and legal status and so on. Presumably, most of those could be got round if it were essential for financial reasons, including, I notice, the British Council's status as a charity or commercial body in some countries precludes it from operating from the FCO premises. Surely that can be changed to suit in each location if required, could it not?

  Sir Peter Ricketts: Yes it could and indeed in some locations they are co-located with us. When you refer to the 175, I suspect quite a lot of those are British Council offices. Over the years the Council has chosen not to be part of the embassy, partly because what they want is maximum public access and minimum security so they can get as many people in for English language classes or using the library or the internet, and so what they are looking for is a slightly different thing from what embassies offer. In high security places they are with us. I suspect it is mainly that and probably some DFID offices which are still separate from us in parts of Africa for example.

  Mr Bevan: The only other thing I would add is another reason why the British Council prefer, if they can, to be away from our embassies is because they do not want to appear to be an arm of the British Government.

  Mr Morse: You can see the breakdown there if you turn over the page. We actually give the breakdown of the numbers over the page and you can see them in figure 13.

  Sir Peter Ricketts: It is indeed largely the British Council I think that are operating by choice off our premises.

  Q32  Mr Bacon: The point I was making was force majeure may cause various organisations within government, if financial constraints are what we expect them to be, to make changes. Would you expect to see the amount of co-location increasing in the next two or three years?

  Sir Peter Ricketts: I think financial pressures will push in that direction, yes.

  Q33  Mr Bacon: The FCO needs to consider reputational issues when assessing the suitability of potential tenants. I am not sure if this is really a question for the NAO but does that mean the reputation of potential UK government tenants or does it mean other private tenants in those countries?

  Mr Banfield: Other private tenants.

  Q34  Mr Bacon: You would be happy subject to their business requirements to have any UK government organisation co-located with you?

  Sir Peter Ricketts: Yes, I think so.

  Chairman: Thank you, Mr Bacon. David Curry?

  Q35  Mr Curry: Sir Peter, if I try and deconstruct the management structure for running the estate, I am not quite sure whether the thrust is to make the Foreign Office more expert at running buildings or to look more and more externally to people to run it who have their own expertise such as Mr Croney. If I joined the Foreign Office as a bright graduate, hopefully from Oxford, in my early 20s, what chances would I have of receiving some training in issues rather than the romantic bit of the Foreign Office, which I probably joined to do, in the mucky business unromantic bit, like running the estate, and how important would that be to my promotion to do well in that if it existed?

  Sir Peter Ricketts: You would probably have joined to be a diplomat and running the estate probably would not have been your top priority. I will come back to the specific point in just a second. My feeling is that we should turn to professionals for the delivery of specific functions like finance, like estates, like human resources, like IT. We should not pretend that diplomats can become amateur surveyors, so I think a cadre of professional staff to ensure that we are delivering to the highest standards is right. If you join the Foreign Office I think your responsibility is to develop yourself as a leader of the entire operation so that when you come to be an ambassador you are capable of implementing whatever the Estate Strategy is and to make sure that your team is producing the data, managing the projects well and ensuring that we do not overspend.

  Q36  Mr Curry: This gets us back into the interface immediately, so we have Mr Croney and he has to design a strategy, and that strategy has to take into account some really quite difficult things, like the expectations of Britain's footprint in the world—

  Sir Peter Ricketts: Absolutely.

  Q37  Mr Curry: —for a generation, which is, after all, a question partly of political will, partly of political perception and partly accident, and I suppose a lot of it is to do with money, so he cannot run it like Land Securities. He is running a different sort of operation. He is then dependent upon Foreign Office people, is he, in the post to implement that? He does not have his own network of people capable of taking or instructed to take those decisions overseas?

  Sir Peter Ricketts: That is right. We are thinking about setting up a regional network of estates professionals so that at least in Asia, in Africa and in the Americas there is a regional estates expert who can help ambassadors and there are technicians who can go around and survey posts and check that they are doing what they need to do. You are right, this is absolutely at the heart of our business really. We have 260 different places around the world and every one is different. They are operating in different legal and cultural environments, and so there is no one statement you can make about the FCO estate that will apply to all places around the world. Therefore the ambassador and his team have to be the people who are actually implementing it on the ground.

  Q38  Mr Curry: Let's take Washington DC. All the embassies in Washington own slices of Bethesda, for example, because they house their people in it. To what extent is that estates operation able to work independently? Over the last two years I imagine large numbers of houses could have been bought up extremely cheaply in the United States given the subprime crisis. Does somebody have the autonomy to do that or when the market is good can they say it is a very good time to sell, there is real demand? To what extent are you running a business and to what extent is that business able to be run locally? If you do it well, do you keep any of the proceeds?

  Sir Peter Ricketts: It is an excellent question and I shall nominate the answer to Mr Bevan.

  Mr Bevan: Firstly, we do have an annual asset sales programme which we adjust according to a target in terms of millions of pounds' worth of capital that we want to bring in. We try through that programme to identify those properties that we can sell and we try to be intelligent salesmen and sell when we think we can get a reasonable return so we factor that in.

  Q39  Mr Curry: So you are not trying to hit a target for sales which might lead you to selling in poor conditions in order to meet the target?

  Mr Bevan: We are trying to hit a target each year which we need to sustain the business (because we reinvest the capital that we produce) but we try to make sure that the target we set and the specific properties that we sell take account of the market conditions so that we get good value for money.

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