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

Examination of Witnesses (Question Numbers 60-79)


  Q60  Mr Mitchell: One of the problems I see from the Report is that other organisations, the British Council, BIS, other departments, think you are charging them too much. Why can the charges not be abated?

  Sir Peter Ricketts: Perhaps I will ask Mr Bevan, who is the great expert on that, to respond.

  Mr Bevan: We are bound by the principle agreed with the Treasury, which we do not contest, that we should be charging the full economic cost to other government departments when they want to base in our embassies. When you calculate that full economic cost it will always be much more expensive than a commercial rate because we are often in a premium location, we are providing a secure location which in some places is extremely expensive. We are not just charging them the marginal cost of providing accommodation, we are charging them the cost of the invisible support that we also provide to them, so making arrangements for their accommodation and managing their staff.

  Q61  Mr Mitchell: Let me stop you there and ask the Treasury, why are you insisting on such high charges? Why not insist on marginal rent?

  Mr Gallaher: We are insisting on the full economic cost to be charged.

  Q62  Mr Mitchell: Why?

  Mr Gallaher: They are not necessarily high charges; they are the costs of the service that the Department is providing.

  Q63  Mr Mitchell: If it is a prestige premises with high security charges, which have got to be borne in mind, why insist on the full economic cost?

  Mr Gallaher: Because we have always insisted that departments charge the full economic cost for their services to other government departments.

  Q64  Mr Mitchell: In this case you are assisting organisations which are exporting for Britain, battling for Britain, in that endeavour.

  Mr Gallaher: There is currently a Shared Services Group looking at these issues working with the FCO and other main players who operate overseas and we are looking at the issue, which I mentioned to the Chairman, that there is an obvious tension between the full economic cost and the cost to the taxpayer. We are looking at it. At the moment we do have this rule which is if we start being lenient on one department in one area others will want the same treatment and it will be hard to police.

  Sir Peter Ricketts: Could I add one point, Mr Mitchell? Subject to agreement with Treasury, in some ways it would be quite attractive to cut our costs and get more people in. The risk to me is that it leaves a hole in my budget because I have the fixed costs of the embassy that stay. If we go to reduced costs for other departments I am left with the rest, so that is not all that attractive from my point of view. I would much rather get the overall cost of our operations down overseas if I could and, therefore, the more of us in embassy premises the better actually.

  Q65  Mr Mitchell: Let me approach it from the other angle now. We see that the EU is now building up its own framework of embassies and representation, its own effective foreign service. Why can they not either hire out space to them or muck in with them in common premises?

  Sir Peter Ricketts: I think we may muck in with them in time to come. As I said, right now what is happening is offices that used to be Commission offices are becoming EU offices, so not much is changing in terms of the buildings, but over time, for example in somewhere like Africa, in small countries, if there was an EU operation there I would be very interested in putting one British diplomat or two British diplomats in to a wider operation. I think that would be very cost-effective. Maybe, as you say, we can make space for an EU representative. I think we have done that in places like Baghdad where they do not have many options and we have brought them in. They have paid the full economic cost and we have rented them some space in our embassy in Baghdad. I think over time probably we will move in that direction.

  Q66  Mr Mitchell: Perhaps it is a bit churlish for MPs who tend to be lavishly entertained in embassies around the world, and certainly I have been, to start then coming home and attacking them for waste. When you see many of the embassies, it does seem that they are there for prestige reasons, we have got those buildings in areas for prestige reasons, and this is a kind of relic of the great power status which we once had but no longer have. Perhaps you could give us a note on how many of the premises that we are now in we were in in 1950 when we were a much bigger power.[3]

  Sir Peter Ricketts: Yes, we could, Mr Mitchell. I am a bit in trouble because at your last session I promised Mr Bacon that we would not sell any of our prestige residences that do so much for Britain's reputation around the world.

  Q67  Mr Mitchell: Does that apply everywhere?

  Sir Peter Ricketts: No.

  Q68  Mr Mitchell: Or just in places we want to be particular mates with, like the US?

  Sir Peter Ricketts: I think we look at every different capital on the merits. There are some times when we have got a building which is obviously too big for us any more, obviously no longer relevant to what we need to do, and then we can look at selling it. I did promise, and I am sure all foreign secretaries would agree, that we should retain the big prestige properties we have often owned for 150 years, let alone 50 years, which we can use every day to promote Britain. The number of commercial events that are held in the embassy in Paris or the embassy in Washington or the embassy in Tokyo are enormous and they are really good platforms, but that does not mean to say every building we have ever owned in the world we should always go on owning, I think that would not be a sensible estate strategy.

  Q69  Mr Mitchell: Why do you not collect data on space and its use? I see in paragraph 3.2 there is a system called Pyramid which is a database to record and monitor overseas properties.

  Sir Peter Ricketts: Yes.

  Q70  Mr Mitchell: "Of the 188 posts who responded to our survey", say the NAO, "almost a third did not use Pyramid and most posts we visited only updated Pyramid twice a year ... A number of Pyramid records were inaccurate ... Property suitability assessments have not been updated since 2006 ... Details of office net internal areas were inaccurate and incomplete ... ". Why do you not have accurate data for all your embassies?

  Sir Peter Ricketts: We must have. This is not adequate, it is not acceptable. I think it has been useful actually, if I may say, for the NAO to do this Report because it has been a wake-up call for us. We are determined that we will get these returns on our database up to 100% and we have got an action plan to achieve that. To be fair, we do have a good sense of the properties that we own. I think that many of the weaknesses in the database are properties that we rent, and sometimes we only rent them for two years, three years, four years, and they do not get properly on to the database and properly counted. Even that is not good enough, I agree. I agree with you that we must get this database properly up-to-date and it must have all the facts on it about usage of space and so on.

  Q71  Mr Mitchell: Why do your chaps need more space than is provided for public servants in the UK? The maximum office space there is 12 square metres per person. Your chaps, being public school chaps, might expect something better than that, but why are they entitled to bigger premises and more office space than their counterparts back home?

  Sir Peter Ricketts: Fewer and fewer of them come from public school, Mr Mitchell, I promise you.

  Q72  Mr Mitchell: We have not got Mr Davidson to ask you the proportion of public school chaps.

  Sir Peter Ricketts: Indeed.

  Q73  Mr Mitchell: It was my vision.

  Sir Peter Ricketts: The highest morale embassies I have been to are the ones where they are working in open plan, in modern offices, as if you were in a high specification office in the UK. It costs an awful lot of money, for the reasons we have just been discussing, to convert embassies one-by-one to that standard because we have to bring in UK-cleared contractors to do all the refurbishment, to make sure that the building remains secure when they finish and we can only do it one-by-one.

  Q74  Mr Mitchell: Are open plan offices universal on the estate?

  Sir Peter Ricketts: No, far from it. When we have got it, it is really good. We are moving in that direction whenever we can. There are some of our grander buildings that are expensive to convert like that and there is only a limited pool of manpower to do it. We are only moving slowly. The aim is to be working in functional modern offices, even if it is inside an old historic building.

  Q75  Chairman: As you know, Sir Peter, in response to Austin Mitchell, our Committee has a settled policy that we should not ask you to sell our historic residences for narrow cost grounds. I do want to return to the point Mr Mitchell was making to you, Treasury. This is about the full cost recovery that you require. I still do not think we are at the bottom of this. It does seem absurd to us that some of our Foreign Office buildings, prestigious buildings, are lying half empty because of a narrow full cost recovery mechanism, a bureaucratic mechanism that you are asking of the Foreign Office. Something is better than nothing, is it not? You should be doing some more joined-up thinking with the Foreign Office and other government departments to ensure better use of this office space so that you get more use of it and Sir Peter is not compromised by it in any way.

  Mr Gallaher: We are certainly working with the Foreign Office and part of this Shared Services Group to try to bottom out this issue and this problem. We are certainly not sitting on our hands. We are actively engaged in this Group at the moment.

  Chairman: Thank you very much.

  Q76  Mr Carswell: One or two people have touched on this, Sir Peter. The Lisbon Treaty obviously allows the EU an overseas diplomatic presence and this means, as you say, there will be a physical EU global estate. You have said that you are willing to offer to share some of our estate. You might say that having pooled our sovereignty the FCO is happy to try and now pool our embassies. Could you tell me when and where you are looking to pool our embassies with the EU?

  Sir Peter Ricketts: I think in response to Mr Mitchell I was speculating in the future. I have no plans at the moment at all to let out any of our space to the EU. My main point was that if there was an EU mission somewhere where we were not represented and there was an opportunity to put one British diplomat into an existing EU operation, that is something we might consider. The answer to your question is we have no current plans to do that.

  Q77  Mr Carswell: I think you used the phrase that there may be instances where we would be happy to "muck in" with them and you talked about small African countries where there is a limited presence where we would be happy to have some pan-EU presence. Is that right? Which African countries did you have in mind?

  Sir Peter Ricketts: I would not exclude it. For example, in Liberia I think our one British diplomat works out of the German embassy, if I am not wrong. It would not be unprecedented, but I have got no plan to do that with any EU delegation. I would rather see how this new EU External Action Service settles down before making any plans like that.

  Q78  Mr Carswell: At the moment you do not plan to pool any of our embassies?

  Sir Peter Ricketts: I have no plan to do that.

  Q79  Mr Carswell: If you were to pool our embassies, what would be the advantages in doing so? You said you would be interested in looking at it. What would be the advantages? Cost obviously, but what else?

  Sir Peter Ricketts: If I may say, "pooling our embassies" is your phrase, not mine, I do not think I have ever spoken about that. What I can see as a possible advantage is if there is an EU delegation office working in a country where we are not represented it could be cheaper to have one British diplomat working there sharing common support services with that delegation rather than establishing our own separate embassy.

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