Examination of Witnesses (Questions 113-225)|
Simon Fraser CMG, James Bevan, Keith Luck
24 November 2010
I welcome members of the public to this session of the Foreign
Affairs Committee. It is the second and last evidence session
of the Committee's inquiry into the Foreign and Commonwealth Office's
performance and finances.
Our witnesses today from the Foreign Office
are the Permanent Under-Secretary of state, Mr Simon Fraser; the
Director General of Finance, Mr Keith Luck, and the Director General
of Change and Delivery, Mr James Bevan. I give a warm welcome
to you all and thank you very much for coming along. Apologies
for the delay, but there was a Division in the House at 2 o'clock,
which set us back by 15 minutes.
Can I open the batting? Mr Fraser, is there
anything that you want to say by way of an opening statement?
Simon Fraser: No, Chair, unless
you would like me to. I think that it would be easier to move
on to questions.
Q114 Chair: So you're quite happy
to go straight into questions. Thank you.
What is described as the FCO family will face
an overall cut of 24%. However, if the BBC World Service is excluded,
that falls to 10%, and if the cuts to the British Council are
excluded, that falls to 6%. So why has the focus been more around
24% and 10%, rather than the actual 6% cut that it will really
Simon Fraser: I think that the
situation is, in fact, that 24% is the figure for the overall
cut for the FCO family, which are the FCO, the British Council
and the World Service. However, in the fourth year of this spending
round the World Service will be taken out of the FCO family, and
therefore an amount that would have been spent on the World Service
in that year will no longer be relevant. So that is 14%, hence
the difference between 24% and 10%. That figure of 10% is the
real cut at the end of four years for the FCO family, which will
then be the FCO and the British Council. The British Council figure
is part of the overall figure.
Q115 Chair: But you do agree that
if you take away the British Council, which is a bit of a compartment
on its own, the Foreign Office and the diplomatic effort will
only be cut by 6%?
Simon Fraser: No, Chair. It is
cut by 10%. In effect, the settlement is flat cash over the four-year
period. We will get the same in cash terms over the four-year
period as we have now, if you exclude the World Service in year
4. That flat cash translateson the expectation of UK inflationto
about a 10% real cut over the four-year period. The British Council
element is part of that overall figure.
Q116 Chair: I haven't got a calculator
with me, but the net FCO budget for 2010-11 is £981 million
and, in 2011 prices, for 2014-15 it is £925 million, which
I am advised is a 6% reduction.
Simon Fraser: Shall I ask Mr Bevan
to respond to that, as he was involved directly in the negotiations
and may be able to give a clearer explanation that I have given?
James Bevan: I think the first
thing to say is that the thrust of your question, Chair, is absolutely
right. There are different settlements for the three members of
the FCO family, so the overall effect, taking into account inflation,
is a real cut of 25% in the Foreign Office's allocation to the
British Council by year 4. The effect on what we would grant the
World Service in year 4, although it is being taken over by the
BBC, will be a 16% real cut. The underlying point of your question,
which is that the core Foreign Office is being cut in real terms
by less than that, is absolutely right. There are good reasons
for that, which the Foreign Secretary took into account when he
made his decisions.
Q117 Chair: Are the two figures
I gave you£981 million and £925 millioncorrect?
James Bevan: I'm afraid I don't
recognise those figures. The figures I have, which come from the
Chair: The figures come from the resource
DEL budgets for the Foreign Office, but let's not dwell on this
now. Will you confirm to us in writing whether I have got that
right or wrong?
James Bevan: Of course.
Q118 Mike Gapes: Following the
Chair's original question, the presentation of this, certainly
in the Daily Mail and a number of other newspapers, was
that the FCO cut would be 24%. Was that a deliberate exercise
that you employed to try to take the heat off when other Departments
were being cut by big amounts? Did you give the impression that
the FCO would be cut by 24%, even though in reality it will be
cut by either 6% or 10%?
Simon Fraser: The 24% figure was
the figure the Chancellor himself used on the day.
Mike Gapes: I am aware of that, but presumably
he did so in consultation with the FCO and the Foreign Secretary.
Simon Fraser: The 24% was the
figure that the Chancellor himself used on the day, Mr Gapes,
and there were discussions and negotiations over a period of weeks
leading to that day. Of course, the discussion on the handling
of the BBC World Service came relatively late in that negotiation.
The 24% figure was the figure that the Chancellor himself identified
at the end of that negotiation.
Q119 Mike Gapes: Okay, but clearly
some parts of the family have been more badly treated than other
parts of the family, to use that phrase.
Simon Fraser: As Mr Bevan has
said, decisions were made by the Foreign Secretary on how to apportion
the cuts in the overall budgets between the different elements.
It is true to say that the Foreign Office budgets themselves,
in the period before the spending round, came under very severe
pressure as a result of, for example, the loss of exchange rate
protection. It is also true that over recent years, because of
ring-fencing, the proportion of the overall FCO family budget
that went to the World Service and the British Council grew as
a proportion of the whole. In fact, what we have done through
that arrangement is bring it back into line with what it was before.
So, there are a number of reasons why the decisions were taken.
Q120 Mike Gapes: You have mentioned the
Overseas Price Mechanism. You'll be aware that in the last Parliament
the Committee was very critical of the previous Government's abolition
of the Overseas Price Mechanism and actually recommended in a
report produced just before the election that it should be re-established
or that an alternative mechanism should be put in place to protect
the FCO from suffering severe financial consequences as a result
of exchange rate fluctuations. Personally, I am pleased that something
has been done on that, but I am unclear about whether it is equivalent
to what was there before. Will you give us some more detail about
this new foreign currency mechanism and how it will work?
Simon Fraser: I'll ask Mr Bevan
to give you the details on that.
James Bevan: What's happened is
that we have secured the restoration of the most important part
of the old Overseas Price Mechanism. It is a new mechanism that
will protect the purchasing power of our budget against foreign
exchange fluctuations. It protects a greater part of the Foreign
Office's budget against foreign exchange fluctuations than the
previous Overseas Price Mechanism. In that sense, it is a significant
improvement on what we had before. What this mechanism does not
do, which the old Overseas Price Mechanism did, is protect us
against differential inflation overseasinflation over and
above UK inflation happening abroad that eats into the value of
our budget. The old overseas price mechanism protected us against
some, but not all, of that. Again, that was part of the negotiation
and we settled on what we thought was overall a very good outcome
for the organisation.
Q121 Mike Gapes: So therefore
if inflation in some other countriesperhaps in some important
partners of ours that have growing economies, such as India, Turkey
or Brazilgoes up faster than UK inflation, you are still
going to have a problem, because that won't be compensated for.
James Bevan: Yes. That's one reason
why dealing with this budget will be more challenging than it
might appear from the 10% overall figure in year 4.
Q122 Mike Gapes: Is it particularly
difficult because sterling is at a very low value at the moment
internationally, or does that make no difference?
James Bevan: The most important
thing for us is to have a degree of planning stability in terms
of the overall value of our budget overseas. One of the things
that hurt us most when we lost the overseas price mechanism was
not the loss in actual value of the Foreign Office budget that
resulted from sterling declining; it was the inability to predict
what the value of our budget would be on any given day, because
the exchange rate moved.
Q123 Mike Gapes: Are you still
purchasing foreign currencies in advance?
James Bevan: Perhaps Mr Luck can
say a word about that.
Keith Luck: The answer to that
is no. In October, the Treasury did advise that we should cease
purchasing any more forward currency or entering into any more
arrangements. Indeed, that was with the knowledge that the foreign
currency mechanism was coming into place.
Q124 Mike Gapes: Do you still
have some past contracts that you've got to get rid of?
Keith Luck: We do, indeed. From
Octobera couple of months agothe contracts extend
out to what would have been a full year's worth of forward purchase.
If you recall, we did a 12th every monthramping down for
almost two years' time. Those contracts will now be allocated
to the peacekeeping budget. The foreign currency mechanism doesn't
cover the peacekeeping budget. That's been moved off our baseline,
but those contracts, in so far as they support dollar or currencies
that the peacekeeping budget will find useful, will novate across
to that particular budget.
Q125 Mike Gapes: You'll still
be purchasing foreign currency for the peacekeeping budget for
the foreseeable future?
Keith Luck: We won't. In terms
of managing it, the arrangement is that it has moved off our baseline,
so it's nothing to do with the Foreign Office.
Q126 Mike Gapes: So who will?
Keith Luck: The MOD has the capability
and the capacity. It will carry on doing that and managing the
foreign currency implications for the peacekeeping budget.
Q127 Mike Gapes: Presumably you
are now able to set budgets in local currencies without as much
worry. Does that give you any benefits?
Simon Fraser: That is exactly
the benefit that we have now achieved. Our posts can budget in
local currency, and we know that we can cover that budget, because
if sterling depreciates against their currency, we would get compensation.
The other side of the coin is that if sterling appreciates, we
would repay money to the Treasury. Therefore, coming back to your
earlier point about whether it matters at what level sterling
is when the scheme is introduced, it does not matter because it
works symmetrically both ways.
Q128 Mike Gapes:
When we went to Washington, for exampleabout 18 months
or a year agowe were very shocked, because locally engaged
staff were being told to go on to a four-day week. Will that be
less likely now because of this change?
Simon Fraser: I think that the
particular circumstance then was that the Foreign Office was seeking
to make some very dramatic short-term savings for two reasons.
First, we didn't have the overseas exchange mechanism in place
when sterling devalueddepreciatedand secondly, we
were asked to make additional savings in-year in this financial
year. So there were some fairly acute circumstances. One of the
consequences was, indeed, that local staff were asked, I think,
not to work a four-day week but to take some unpaid leavea
furlough arrangement. That is a reasonably normal arrangementit
is not unusual in the United States, although it is not desirable.
Yes, it is indeed our hope that, now we have the new settlement,
we will have more stability in our planning around the network.
That will enable us to avoid having to take short-term and unforeseen
measures of that sort.
Q129 Mr Watts: When you were asked
about the 24%I think it was on three occasionsyou
quoted the Chancellor. What figure would you put as a departmental
reduction in the budget?
Simon Fraser: I think that the
Chancellor's figure was the correct figure. If you look at the
budget, at the end of four years there is a 24% cut. It is important
to note that part of that relates to the removal from the Foreign
Office's budget of the World Service in the fourth year. Therefore,
it is fair to say that the effective real cut in the Foreign Office
budget overall, which includes the British Council, is a 10% real-terms
cut. That is a rather indicative figure because, as we have already
said, there will be additional costs that we will have to meet.
We are not covered for differential inflation. There are additional
costs, including, for example, the cost that we would incur to
help fund the Olympics, which we will have to meet from within
that budget. We will, in fact, have to do more. Therefore, we
will have to find a significant level of savings.
Q130 Mr Watts: But you do accept
that, if you take out the BBC figure and the British Council figure,
your figure drops to 6%?
Simon Fraser: I'd like to work
through the figures exactly. It is true that the British Council
figure is a 25% cut in its budget but, of course, that is a relatively
small part of our overall budget. So I am not sure that it leads
to a 6% conclusion for the FCO. We would need to give you a precise
version of that figure, which I do not have in front of me.
Q131 Mr Watts: So it would have
been better and clearer had those figures been broken down in
the way that I have suggested rather than give the impression
that your Department's reduction was 24%.
Simon Fraser: On the day that
the announcement was made, the figure of 24% was used. If you
take out the BBC World Service, the figure that we are working
with is an effective 10% cut. Within that, there is a 25% cut
for the British Council, but that is a relatively small part of
the whole so I do not think that the consequence of that is to
bring us down to 6%. I do not have the precise figure of what
the FCO core minus the British Council is.
Q132 Mr Watts: Can you let us
Simon Fraser: Yes. I am happy
Q133 Chair: We'll supply you with
the little graph of figures that we have in front us. It will
explain how we arrive at 6%.
Q134 Mr Roy: In relation to the
transaction costs that have been incurred in various countries,
how would the Committee know how much the costs were in various
countries? I ask that because today I have received a written
reply to a written answer that said that I could not be told because
the costs were prohibitive. How therefore would the Committee
as a whole be able to judge and see what those costs were?
Simon Fraser: The costs of?
Q135 Mr Roy: The actual transaction
costs. Obviously there are various costs in various countries.
When I asked what those costs were, the written answer said that
it was cost prohibitive to tell me. Therefore, how will the Committee
be able to find out the costs?
Simon Fraser: I'm sorry. I do
not think that I fully understood the question. This is in relation
to a FOI request?
Q136 Mr Roy: Yes. Therefore,
if I as a Member cannot find out the individual costs in a country,
how would this Committee be able to find out?
Simon Fraser: We are able to provide
you with figures on the costs of our operations in different countries.
But if it is the cost to find the answer to a specific question,
that is calculated in the UK. If it exceeds a certain amount,
according to the rules, we do not pursue it. That is the case
whether it is in the UK or overseas.
Q137 Mr Roy: Perhaps I'll write
to you because that was not the answer that I got to my written
question today. They told me quite clearly that it was cost prohibitive
to answer. Therefore, as a member of this Committee, I would
like to find out.
Simon Fraser: I'm very happy to
come back on paper, if you would like to set it out.
Q138 Mr Roy: Thank you very much.
Can I carry on in relation to official development
assistance, and the cost? Vernon Ellis, the Chair of the British
Council, told the Committee that at present £40 million of
the British Council grant is classified as ODA, but that that
could be increasedhis wordsstill further. How much
of the increase in the FCO family's contribution to the ODA will
come from the British Council and the BBC World Service?
Simon Fraser: Part of our settlement
is that we agreed to increase the amount of our spending across
the Foreign Office that will be contributing to ODA, and therefore
to the national target to increase our overall ODA contribution.
We are going to be doubling that contribution from the FCO. That
will come from a number of areas of activity: partly from our
programme activity in the Foreign Office; partly from subscriptions
to international organisations that are counted against ODA; partly
from some aspects of our front-line diplomatic activity in developing
countries; and partly, indeed, from activities of the British
Council. All those activities have to be eligible to be counted
as ODA spending, according to the OECD rules. We are now looking
at how we are going to put that overall amount together. Mr Bevan
might want to comment further on the composition of that.
James Bevan: As the Permanent
Secretary said, what the settlement does is require the Foreign
Office family effectively to double the amount that we score as
official development assistance. At the moment, the answer to
your question is that the Foreign Office family currently scores
about £130 million a year as ODA, of which roughly £90
million is from the Foreign Office and £40 million is, as
I think you said, from the British Council. We need to double
that and we anticipate doing that by working with the British
Council, so that it moves from around £40 million to between
£90 million and £100 million a year ODA spend, starting
next financial year. We will move from our current £90 million
to about £150 million.
Q139 Mr Roy: Can I just clarify?
How much additional spending on new activity is required to meet
the ODA target, outwith the World Service and the British Council?
James Bevan: The Foreign Office
core, outwith the British Council and the World Service, has to
go from our current ODA spend of about £90 million this year,
to about £150 million ODA spend, starting next financial
year, and maintain that for the four years of the spending review.
As the Permanent Secretary said, the way we are going to do that
is partly by maintaining existing Foreign Office activities that
already count as ODA, of which the main one is our programme activitymoney
that pays, for example, for our low-carbon high-growth programme
for scholarships for students from developing countries. We will
maintain those programmes, with some adjustments, and we will
do some additional ODA activity that we have not done previously,
which will probably include some more programme activity. There
will be a proportion, which we have not yet finalised, where we
will reclassify as ODA activity that we have not previously scored
as ODA. We will do that by agreement with the OECD, which decides
what does or does not qualify.
Q140 Mr Roy: So there will be
that reclassification, but will there be any extra spending?
James Bevan: Yes, there will be
three elements. There will be sustained spending on many of the
things we already spend on, which do count as ODA. There will
be increased spending on things that we currently score as ODA,
but where we will do more activity: the best example, I think,
is spending on programmes. The third category is some reclassification
as ODA of activity that we have not previously classified as such,
but which the OECD tells us we can legitimately classify as ODA.
Q141 Mr Roy: On that point, why
has the FCO family failed to categorise accurately its ODA spend
in the past?
James Bevan: Partly because we
have been a very small player. The Foreign Office spends about
2% of the UK's ODA spend. Obviously, the vast bulk of that comes
from DFID. As it became clear when we went into the negotiation
that a likely requirement would be that we should increase our
own ODA spend, we wanted to make absolutely sure that the way
that we did that was legitimate. That meant talking to the OECD,
which is the body that decides what is and isn't legitimate; and
talking to DFID, which is the key player in the UK.
Together we came to the conclusion that there
were areas of our existing spend, of which the main one is diplomats
in developing countries directly contributing to development,
which we could legitimately score as ODA and had not been, and
which, as we now understand, various other countries already classify
as ODA. It seemed to us right that we should include that in futureright,
both in terms of telling the UK's story, which is a good one,
and in terms of the UK taxpayer, ensuring that every penny that
they're spending is being properly classified.
Q142 Mike Gapes: Can I just clarify
this? Does this mean that expenditure that was previously done
by the FCO is now paid for from the DFID budget, or does it mean
that DFID's budget spend, and therefore the 0.7% target, will
not need to be increased as much to meet the international OECD
definition and that, therefore, in effect, what would have been
DFID's spend on poverty reduction programmes or other thingsfor
example, in Africawill no longer be needed to meet that
target, because your expenditure on other areas, and the British
Council's expenditure, is now counting towards meeting that target?
James Bevan: No, I think
Q143 Mike Gapes: No to both?
James Bevan: The overall picture
is that the Government are committed to meeting the 0.7% GNI target
by 2013. The main way that they are going to do that is by a very
substantial increase in DFID's budgetan extra £3 billion
or so by 2013. In addition, the Foreign Office will contribute
a little bit more than it previously had, which will help get
us to that target. But the additional ODA that we are contributing
will go from about £90 million to about £150 million,
so you just need to
Q144 Mike Gapes: Can I put it
another way? If you had not changed your definitions of FCO spending,
presumably the DFID budget would have had to increase by more
to meet the UN target.
James Bevan: If we were not doing
legitimately additional ODA from next year, then yes, DFID would
have needed to spend more.
Mike Gapes: Thank you.
James Bevan: But most of what
we are doing next year is additional ODA activitynew activitywith
a small proportion of reclassification.
Q145 Mike Gapes: I understand
that, but I think you gave me an answer
Simon Fraser: Of course, the target
is a Government target, not a DFID target.
Mike Gapes: I understand that.
Q146 Mr Ainsworth: I find it quite
extraordinary. I know the pressure that has been on for some long
time to ensure that all ODA spending was properly classified,
therefore meaning that targets could be reached, because we've
been struggling to reach the target that we set ourselves. Yet
we can continue, after all this time, to find new ways of reclassifying
money. Don't you think that I'm entitled to feel that that's a
Simon Fraser: I don't know if
Mr Bevan wants to comment further. I think that the issue here
is that we have a clear desire to contribute as much as we can.
Q147 Mr Ainsworth: And you didn't
have that previously?
Simon Fraser: In the context of
this spending review, there was a particular discussion relating
to the FCO's contribution and that target. In that context, we
are examining carefully all the ways that we can meet the requirement
that has been laid on us in this spending round to increase our
contribution. That's where we are.
James, do you want to add anything about where
we were previously, prior to this spending round?
James Bevan: I think all I'd add
is that the OECD defines ODA. It does that in a clear way. It's
essentially financial flows to developing countries in cash or
in kind, which directly contribute to development. But the way
that different countries have interpreted that has varied widely
and still does. As I said, some countries score a lot more of
their activity as ODA than others. The UK has always had a pretty
restrictive definition, for good reasons.
I think what happened was that, when we had
the conversation with OECD and DFID about how we would score additional
ODA if we were to get that mandate from the appropriate spending
review, we established that there were ways that we could score
things that we are currently doing that we had not previously
Q148 Mr Ainsworth: Moving on,
can I understand what's happened with regard to the conflict pool?
We've separated out the conflict pool from the FCO bottom line
and it is £178.5 million. Is that right?
Simon Fraser: The conflict pool
has indeed been increased in this spending round. It sits, as
I understand it, on DFID's baseline. It draws the money down from
the Treasury and then allocates the money to the MOD and the FCO,
which are other participating Departments, to fund the activities
in the pool. So, it remains a tripartite pool, and DFID is the
primary responsible Department.
Q149 Mr Ainsworth:
It's been separated out from the FCO baseline, then.
Simon Fraser: It's not on the
Q150 Mr Ainsworth:
Why was that done?
Keith Luck: I was just going to
add, that's no change. That is as under the previous spending
review. The significant change for uswhich, as a result,
will reduce the exposure and the risk that the Foreign Office
is open to in terms of managing its budgetis that the peacekeeping
budget has been removed from our baseline, so there'll be no Request
for Resources 2 in the coming spending review.
Q151 Mr Ainsworth: So, the peacekeeping
budget is a separate amount of money.
Keith Luck: It is indeed.
Q152 Mr Ainsworth:
How much is it?
Keith Luck: It's nominally £374
million, and it is held by the Treasury. It comes directly out
of the Treasury reserve and is then allocated to whichever DepartmentMOD,
DFID or usto spend.
Q153 Mr Ainsworth: Conflict prevention
and stabilisation are due to rise to more than £300 million.
Does that include spending from the stabilisation unit?
Simon Fraser: I believe it does.
Q154 Mr Ainsworth: So, what percentage
increase are we planning in conflict prevention and stabilisation
over the period?
Simon Fraser: The totals over
the period go from £256 million to £309 million, which
is an increase of £50 million. It is quite a considerable
increase in percentage terms.
Q155 Mr Ainsworth: When are we
going to allocate that to the four separate programmes? Is there
any proposal on that yet?
Simon Fraser: I don't immediately
know the answer to that question. Allocation will need to be decided
collectively by the three Departments concerned, now that we know
what the actual amount is and we look at what our options are
for spending it.
Q156 Mr Ainsworth: And what timetable
have you got for that?
Simon Fraser: Now we've got the
Strategic Defence and Security Review under our belts as well,
which helps us because it sets some new parametersfor example,
for DFID spending in relation to some areasand we can,
I think, move forward. I can't tell you the exact details, but
I'm happy to come back with some more specific information on
the process for allocating the money.
Q157 Sir Menzies Campbell: You
won't be surprised to learn that the BBC World Service has a number
of friends on the Committee, as I am sure it has in the Foreign
Office. We've had a letter dated 22 November from Mr Horrocks.
Has a copy reached you in advance of today, Mr Fraser?
Simon Fraser: I think I have received
Q158 Sir Menzies Campbell: In
the letter, he effectively says that when unavoidable cost increases
such as those arising from the BBC-wide pensions deficit are taken
into account, "the like-for-like savings which need to be
made in our"that is the World Service's"existing
and ongoing services is more than 25% by 2014-15". Do you
agree with that calculation?
Simon Fraser: The 16% figure that
was agreed by the Secretary of State did indeed include some provision
to cover some of these additional costs, particularly in relation
to pensions. So, they are included in the 16% figure. It is therefore
true that there are some additional costs, which will accrue to
the World Service and which will have to be met. But if I may
say so, that is true pretty broadly across Government. For example,
in the Foreign Office, as we have just indicated, we know that
we are going to have additional costs to meet differential inflation
costs around the world and we know that we're going to have to
find additional money to fund the Olympics. So, the World Service
is not alone in this, and that was taken into account in the decision
that the Foreign Secretary made.
Q159 Sir Menzies Campbell: Broadly,
the answer to my question is yes, but the position for the World
Service is the same as, for example, for the Foreign Office.
Simon Fraser: I think that it's
yes, but I don't think that it is exceptional in facing those
sorts of additional pressures in the environment we're in.
Q160 Sir Menzies Campbell: Coming
on to another matter, the friends of the World Service, both in
the Foreign Office and on the Committee, were, shall we say, rather
taken aback by the events that resulted in the transfer of the
responsibility for the World Service to the BBC budget, along
with, of courseit is sometimes forgottenBBC Monitoring,
which is to be another charge to the BBC budget. How is the Foreign
Office going to retain a role in setting the objectives, priorities
and services of the World Service once the financial responsibility
passes to the BBC?
Simon Fraser: That is a very important
question. I want to underline and agree with you that the Foreign
Office and the Foreign Secretary consider the BBC World Service
an extremely important organisation and an extremely important
part of our, if you like, national projection internationally.
So we are extremely concerned that the World Service should continue
to function effectively. In that context, the terms of the agreement
under which the Foreign Secretary will continue to set priorities,
objectives and targets for the World Service, along with the BBC's
management, remain in effect, as indeed does the provision that
he has formally to agree to any proposals for opening or closing
Sir Menzies Campbell: Closing a particular
Simon Fraser: So, the terms of
the relationship remain unaffected, other than in the sense of
who holds the purse strings.
Q161 Sir Menzies Campbell: May
I say, perhaps in rather less fanciful terms than I did on a previous
occasion, that if it comes down to a dispute between light entertainment
and the World Service, it will be the board of trustees of the
BBC that determines which is to prevail?
Simon Fraser: It will be they
who are responsible for funding, but, as I have said, the decisions
will have to be made in consultation and discussion with the Foreign
Secretary and he would have formally to agree to any closures.
It is important to underline that, in meetings with the Foreign
Secretary, both Sir Michael Lyons and Mark Thompson made clear
their commitment and support for the World Service, and indeed
their intention to maintain funding for the World Service to enable
it to carry out its projected plans.
Q162 Sir Menzies Campbell: But
they've got a flat licence fee for six years, haven't they?
Simon Fraser: Yes.
Q163 Sir Menzies Campbell: It
is inevitable that that budget of the BBCindeed, I think
it is accepted almost as a purpose of the flat licence feewill
come under very considerable scrutiny and pressure.
Simon Fraser: Well, I think all
budgets are coming under a lot of pressure. Of course, the Foreign
Office has a flat cash budget itself over a similar period, so
that is not particularly unusual. I have, since we are referring
to correspondence, been in correspondence with the head of the
BBC World Service myself, who has given me his assurance that
he believes that the BBC is committed to providing the sort of
level of funding, or indeed more, to the World Service in the
fourth year of this settlement than
Q164 Sir Menzies Campbell: But
he gave the Committee the same assurance. I am just trying to
look ahead to the reality of the position in, say, 2016 if there
were circumstances in which the budget of the BBC came under very
substantial pressure, it was unable to raise its licence fee and
was forced, to put it colourfully once more, to choose between
Mr Bruce Forsyth and the World Service.
Simon Fraser: Well, Sir Ming,
that is a legitimate point, but I'm not sure that it is a question
that I can answer as Permanent Secretary at the Foreign Office
in the sense that a decision has been made and it was a cross-Government
decision about the future funding of the BBC World Service. What
is important is that the sort of concerns that you have expressed
were expressed by the Foreign Secretary and by the Foreign Office.
We have done our utmost to ensure that they have been registered,
and I believe they have.
Q165 Sir Menzies Campbell: In
that case, can I just round this off by asking, what is going
to be the level of continuing interest taken in the BBC World
Service by the Foreign Office? How would you characterise and
describe that, so that we can measure what you say today against
performance in the future?
Simon Fraser: I think I can say
without any hesitation that the level of interest of the Foreign
Office will remain high as it is now. It is, as I have said, an
extremely important part of our national ability, if you like,
to project our values in the world. It is a very important part
of Britain's presence in the world, and of course we, as the Foreign
Office, are very mindful of that. It is a part of the broader
soft power projection of this country. But, in a way, it is extremely
important and the BBC World Service has always made this point
that full editorial independence should be maintained and that
there should be a clear sense of the independence of the World
Service, and we must preserve that. To some extent, this new funding
arrangement might re-enforce that.
Sir Menzies Campbell: Thank you.
Q166 Chair: Mr Fraser, do you
accept that this inevitably means a reduction in services by the
Simon Fraser: I don't think I
can comment on that because I certainly have not seen any proposal
at the moment for a reduction in services.
Chair: If the budget is reduced quite
substantially, it must inevitably mean that. Given that the Foreign
Office still has a sayan aspectin the editorial
side, is that not something that you should look at?
Simon Fraser: We certainly will.
If we receive a proposal that involves the reduction in services,
then of course we would engage in that discussion. Informal contacts
do go on between the BBC World Service and the Foreign Office
to think about the future priorities of the organisation. It is
fair to say, and I think it is correct to say, that the World
Service's offer has changed over the years, both in terms of the
way it provides information and the services that it operatesthe
language services, for examplereflecting political change
and different priorities and developments around the world, so
I don't think we should assume that the closure of services is
automatically a bad thing. What is important is that there is
a proper process to ensure that the service that is offered is
one that we believe is appropriate and effective in terms of the
projection of our national voice in the world.
Q167 Mr Baron: Can I pursue that
point, if you don't mind, Mr Fraser? The director of the World
Service has clearly stated that there will have to be some service
cuts and some services should close. Looking around the world,
I am not conscious of any cuts to other countries' world services.
The Foreign Secretary has quite rightly talked about the importance
of soft power and promoting a British presence abroad, and the
World Service is an integral part of that. Do you not think it
a slight madness that we are forcing cuts on the World Service
at a time when, more than ever perhaps, a British presence abroad
Simon Fraser: I think it's very
important that we have an effective projection and presence abroad.
As I have said, the World Service is a very important part of
that. That doesn't necessarily mean that the same offer of services
needs to be applied at all times. It may be that some new services
are required and some others are no longer required. I do have
to point out that, in the present public finance environment,
it is hardly surprising that there should be pressure on the budget
of the BBC World Service, as there is on virtually all public
Q168 Mr Baron: Looking forward,
given the interest that the Foreign and Commonwealth Office will,
quite rightly, retain in the output of the BBC World Service,
and picking up a point made earlier, precisely how do you see
the relationship working between the trustees of the BBC and the
Foreign Office? To put it more crudely than Sir Ming did, it could
come down to quite a choice between "Match of the Day"
or funding the World Service. The pressure on the trustees could
be quite significant. What sorts of mechanism have been put in
place to regulate this relationship between the Foreign Office
and the trustees, or are we just winging it for the moment, given
that we have four years to get there?
Simon Fraser: Of course, that
relationship is going to evolve as things change, and in a sense
it will develop, but we do already have very close relations.
We have mechanisms in place. There is frequent contact and discussion
with the World Service through the Foreign Office through our
communications directorate, but also at ministerial level and
at senior official level. I myself am in frequent correspondence
and contact with Mr Horrocks, the Foreign Secretary is in contact
both with the trustees and with the Director General, and I shortly
am to have a meeting with the Chief Operating Officer of the BBC,
so I think those contacts are effectively in place. I also believe
there is a strong commitment on both sides to avoid the sort of
circumstance that you have described. In other words, I think
there is a clear understanding of the importance of the World
Service and the need to protect its capacity to provide the appropriate
level of service.
Q169 Mr Baron: Before we get to
the four-year pointjust looking at the practicalities of
the situation that has been forced on the BBCservice cuts
will be proposed, according to the Director of the World Service.
It will be very difficult for the Foreign Secretary to say no
to proposals to cut services, given the budget targets that have
been forced on the BBC World Service.
Simon Fraser: If I may, I would
rather wait until we have had some proposals, so that we can see
what they are. There is a range of ways in which the BBC World
Service, like any other organisation faced with these circumstances,
can achieve savings. For example, the BBC World Service informed
me some time ago that it was already prepared to make 15% efficiency
savings. It will be able to make efficiency savings, as we are,
and it may have to or wish to address some of the services. It
may wish to propose the closure of services, but I have not yet
received such a proposal and I would not like to speculate on
what it might be.
Q170 Mr Watts: To pursue the same
questions as my colleagues, is it legally binding on the BBC to
use the money that has been earmarked for the World Service for
that purpose? If the circumstances changed and the BBC found itself
in a poorer position, could it ignore that? Secondly, if there
is a negotiation, which you said there would be, between the Foreign
Office and the BBC about the type and delivery of service, who
has the final say?
Simon Fraser: On the first point,
under the present arrangements, the funding for the BBC World
Service is ring-fenced within the Foreign Office budget. When
it transfers to the BBC, there will not be a formal ring fence,
but there is a commitment from BBC senior management to maintain
the funding of the World Service for the level of activity that
it is proposing. That is an agreement, not with the Foreign Office,
but between the DCMS and the BBC.
On your second pointwho has the final
wordthere is a clear understanding that there has to be
a written, formal agreement between the Foreign Secretary and
the BBC if there is a proposal to close specific services.
Q171 Mr Watts: What happens if
there's no agreement?
Simon Fraser: According to the
rules, if there's no agreement, there can't be a closure.
Q172 Mr Watts: And how will it
be funded? The point I'm trying to make is that, if a proposal
is made that is not seen to be acceptable by one party or the
other, how will you break that deadlock when you've already reduced
the budget and we know that there isn't enough money to continue
to do what you're already doing?
Simon Fraser: I don't accept that
we know that at this point. If there is a proposal and there is
not full agreement, there will be negotiation and discussion until
agreement can be found. That is the way that this will have to
Q173 Mr Watts: That's one way
of looking at it. Or the BBC could just decide that it will cut
the budget somewhere else, because it is not bound legally.
Simon Fraser: Indeed, it may do
Q174 Mr Watts: What you've got
is a deal that you hope will be okay, but there's no guarantee
that it will be okay, because there's no legally binding agreement.
Simon Fraser: There is no ring
fence for the funding of the World Service once the funding transfers
to the BBCthat is correct.
Q175 Chair: Mr Fraser, I hope
it has become apparent from the questions we are putting to you
that there is a lack of clarity at the moment. On this very point,
you said that you would wait until a proposal was initiated. Who
would initiate the proposal, the Foreign Office or the BBC?
Simon Fraser: There are continual
contacts between us and the BBC World Service because we have
a commitment to engage in setting its priorities and to discuss
them with the Foreign Secretary. Those contacts go on between
the Foreign Office and the World Service. I think that any proposal
to close services would come from the World Service side, not
from the Foreign Office.
Q176 Mike Gapes: When the Foreign
Secretary came before us, he seemed to be quite pleased with the
new arrangement with the World Service, but when the World Service
came before us, it seemed to be pretty uncomfortable with it.
I understand that the BBC was given an ultimatum that it take
over paying for either the licence fee for the over-75s or for
the World Service. I am interested to know who came up with the
World Service idea. Did it originate in the Foreign and Commonwealth
Office, the Treasury, the World Service or the BBC?
Simon Fraser: I'm afraid
I'm not able to answer that question, Mr Gapes, because I wasn't
involved. I don't know at what point the idea arose. I don't think,
in a sense, that that is particularly germane to the finance and
performance of the Foreign Office. It is a broader question that
relates to the funding of the BBC.
Q177 Mike Gapes: Okay, but following
the question from Mr Watts, I put it to you that if BBC licence
payers are told that they are paying towards a service in languages
that they don't understand and broadcast to areas where they cannot
receive it, it might be rather difficult to explain why that should
be the case. Isn't this a rather uncomfortable botch that has
been pushed through at the last minute?
Simon Fraser: I don't think it
is. I wouldn't describe or characterise it as that, Mr Gapes.
I think that the arrangement we have made is a satisfactory one.
It is true that we will have to see how it is carried forward
in the future after this spending round. Of course, the World
Service is not just about providing services to people in languages
that they don't understand. I don't know whether you are as much
of an insomniac as I am, but I am an avid listener to the World
Service throughout much of the night, on some occasions. It has
a pretty broad following and support.
Q178 Mike Gapes: Yes, but BBC
Persian television, for example, or BBC Arabic television, which
are services that the FCO was keen to have established, are clearly
not available to the vast majority of British people in terms
of understanding or following them. Don't you see that there is
a possible contradiction?
Simon Fraser: There is an issue,
but of course taxpayers fund the Foreign Office just as much as
they fund the BBC licence fee. That service has been provided
at taxpayers' expense in the past, as it will
Mike Gapes: No, the taxpayer doesn't
Chair: Order. We are drifting into a
political debate. This hearing is about the finances of the Foreign
Q179 Mr Baron: Mr Fraser, let
me turn to the British Council, which does a very good job promoting,
among other things, a greater understanding of British interests
abroad and so forth. From the figures we have, it appears that
it is taking a real-terms cut over the period of something like
25%. Can you understand our concern? The BBC World Service and
the British Council seem to be responsible for delivering a fair
chunk, if not the bulk, of the FCO family's savings during the
period of the spending review. I accept what you are about to
say about the British Councilit is a relatively small amount
of money in the big scheme of thingsbut taken together
in the sum, it creates the impression that the World Service and
the British Council have more than suffered from the cuts. Do
you sympathise with that?
Simon Fraser: I would reiterate
the point that it is a relatively small part of the overall budget.
Secondly, I would reiterate the point that over a period of years,
as a proportion of the overall FCO family budget, it has increased
because of ring-fencing and protection within a diminishing overall
budget. If indeed there is a relatively slightly higher demand
on them this time, that only recalibrates the relativities. Having
said that, it is important to note that both the World Service,
and the British Council in particular, are able to increase their
revenue-raising abilityto some extent, they can compensate
for the cuts through commercial means. The Foreign Office does
not have that ability. There are ways in which they can mitigate
Q180 Mr Baron: Okay. I take your
point, and we discussed that with representatives from the British
Council when they were in front of us. They have the ability to
develop commercial interests that would, or could, compensate
for the cuts in the budget. Are you at all concerned that pursuing
more commercial interests maymayor could tarnish
the brand somewhat? We discussed that at the time, and there was
an element of concern within the British Council. Do you have
any view on that with regard to any safeguards that need to be
put in place? I know that a lot of this is about informal talks
and contacts, but there is a concern out there that that could
happen and a very good brand could be tarnished.
Simon Fraser: I absolutely share
your view that it is important to preserve the brand of the British
Council. It is a very strong and valuable brand and we must strive
to preserve it. Having said that, I don't think that asking the
British Council to look at ways of increasing its revenues through
commercial means needs necessarily to lead to that result. We
can do that while preserving its brand.
Another point relating to that, is that the
British Council, in particular, is quite dependent on its relationship
with the Foreign Office network around the world. So, to the extent
that we have talked about the impact on its budget and on the
FCO budget, there is, in fact, a mutually supportive relationship
between the two organisations. We would like to go further in
seeing to what extent we can achieve savings together through,
for example, co-locating premises or sharing back-office services,
while at the same time not threatening the independence of the
British Council brand. We need to be sensitive to that.
Mr Baron: Thank you.
Q181 Mr Watts: You face a £25
million cut in your capital budget. What is the impact of that,
and can you give us some demonstration of which schemes will be
cut as a consequence?
Simon Fraser: May I ask Mr Bevan
to answer that?
James Bevan: The settlement gives
us an average of about £100 million capital every year for
the four years, which is for the whole of the family, including
the Council and the World Service. As you say, that is a significant
drop from our previous allocation. However, we did also agree
with the Treasury that, as part of the settlement, we would be
allowed to raise an additional £100 million capital a year
through recycling assets, which we could plough back into investments.
So, we can sell buildings that we no longer need, and we can use
the capital that we generate in that way to invest in new buildings.
The bottom line is that it will be a tight four
years, in terms of our capital allocation. We intend to do some
quite ambitious recycling. We're looking at a target of £50
million a year recycling to plough back into the operation, but
it will still be tight. In terms of what that means, we want to
prioritise and there are a few main things to highlight. The first
is buildingseither building them or acquiring them in places
where we need them to protect our staff; a good example would
be somewhere such as Sana'a, which is a very dangerous place,
where we probably need a better building. Then, there is investment
in other security, such as hardened vehicles and other measures
that protect staff in dangerous places. Finally, there is investment
in the modern ICT that we need as an organisation to be able to
communicate effectively. So, while the settlement does not give
us all the capital we want, we think it does give us all the capital
Q182 Mr Watts: Are you confident
that the shortfall can be made up from sales of assets that you
have already got?
James Bevan: I am confident that
we can meet the asset recycling target that I mentioned of £50
million a year.
Q183 Mr Watts: When you say recycling,
do you mean sales?
James Bevan: We are talking mostly
about selling off buildings that we no longer need, or where we
want to downsize, and generating a net additional capital income
of £50 million a year. That is ambitious, but I am confident
we can achieve it. I am also confident that, when we put that
together with what we have got in the settlement itself, provided
we prioritise carefully, that will give us the basic capital that
we need for the next four years.
Q184 Mr Watts: Can you assure
the Committee that the safety of staff will not be put at risk
by that sort of sale or cutting in capital programme?
James Bevan: Yes because, as I
have said, our top priority in allocating not only capital, but
other resources will always be the safety and security of our
staff. If we were to conclude that we could not adequately protect
the safety and security of our staff in a given placefor
example, because we could not afford a building that we neededwe
would recommend to the Foreign Secretary that we withdrew those
people, so they were not under an unacceptable threat.
Q185 Mr Watts: Finally, can you
give us an example of the things that won't happen, which you
had planned to do?
James Bevan: On the capital side,
I think there are going to be quite a lot of buildings that we
would have wanted to build or acquire, but which we will not.
We have not yet made a decision, because the Foreign Secretary
has not made a decision, about the overall allocation of resources.
However, we have a whole spreadsheet of projects that are in the
highly desirable category because they will give us modern, fit-for-purpose,
better-value-for-money offices around the world. In my judgment,
we are unlikely to be able to afford those in at least the first
couple of years because we want to prioritise projects that are
about keeping people safe and secure.
Q186 Rory Stewart:
The Foreign Office has had a pretty miserable track record in
flogging off the family silver with its building sales over the
past 20 or 30 years. It is perhaps second only to the Church Commissioners
in its ability to get rid of great historic sites with slogans
such as "fit for purpose" and "modern." It
has essentially ended up with a series of slightly second-rate
and embarrassing buildings that, although we feel they are modern
and secure, people in the countries concerned often feel are a
bit of a comedown for Britain. We can see that all the way from
Kabul to Jakarta. How will we ensure that we won't continue the
trend of the past three decades with your next round of reallocations?
James Bevan: First, we are not
going to sell off the icons. The embassy in Paris is a classic
example of a building that pays its way because it is so effective
as a representational tool. There are, as you and members of the
Committee know from your visits, a bunch of other buildings across
the world that are neither iconic, nor fit for purposein
some cases they aren't even safe. Those are precisely the kind
of buildings that we want to get out of and downsize into more
modern, appropriate accommodation.
Finally, in answer to Mr Watts, Jakarta comes
into the category of places in which we have both a real security
threat, which we don't feel comfortable with, and buildings that
aren't currently fit for purpose. A project to build a new safer
embassy and office compound in Jakarta would be top of our list
when we come to look at priorities.
Simon Fraser: I recently came
to this job, and I would like to say that I feel that it is probably
true that the estates management record of the Foreign Office
over quite a long period of time may have left something to be
desired. I fully take the message from the NAO report on that
last year. We have taken those steps that we can take, and we
have introduced a number of measures to improve our performance.
Mr Bevan has led that effort.
I absolutely take the point about the desire
not to sell off valuable properties. On the other hand, we need
an ambition for efficiency, modernity and health and safety for
our staff across the world. The latter of those is a legal requirement,
so we have to get the right balance in managing the estate.
Q187 Ann Clwyd: I am intrigued
by the conclusion of the report of the previous Foreign Affairs
Committee, which concluded that some of the cuts that you were
making then were unacceptably disrupting, curtailed the Department's
work and represented a threat to its effectiveness. What notice
did you take of that report? It seems to me that these cuts are
even more severe, so how did you react to the previous Committee's
observations? In light of those, how are these further cuts justified?
Simon Fraser: Are you referring
to the cuts that were made in-year in the current financial year?
Ann Clwyd: Yes.
Simon Fraser: The first point
is that those cuts had to be made, because they were part of the
Foreign Office's contribution to the Government's wider purpose
of seeking to reduce the deficit.
Q188 Ann Clwyd: Do you not think
that you rolled over too easily?
Simon Fraser: All Departments
were asked to make a contribution to the £6 billion target,
and the Foreign Office made its contribution. I don't think that
it's a question of being rolled over. We had to find a £55
million contribution to that target, which we did in a number
of ways. We sought to do it in a way that had the least deleterious
impact on the operations of the Foreign Office, but, clearly,
there were some areas in which we had to make reductions. One
of those, for example, was our in-year programme spend, in which
we agreed an £18 million reduction, which, almost inevitably,
will have some impact on our ability to do things, but I think
that that is an inevitable consequence of the circumstance. I
assure you that, in making our savings and efficiencies, we have
sought to do as much as we can through the reduction of so-called
overhead and back-office costs while protecting our front-line
activity wherever we can.
Q189 Ann Clwyd: Can you tell us
how much of the savings in the administrative spend will come
from the core FCO budget, and how much will come from administrative
savings at the British Council and the BBC World Service?
Simon Fraser: You're talking here
about our 33% requirement to find administrative savings in the
four-year period ahead. That means that we have to find, I think,
£66 million of savings over that period. We are going to
do that through a pretty ruthless focus on improving our corporate
service performance and looking at other aspects of our organisation
in order to drive out inefficiency. We have to find that within
our FCO core budget. Mr Luck will correct me if I am wrong, but
my understanding is that the World Service and the Council are
classified as programme spend, and will therefore need to seek
their own administrative efficiencies. But they will not be counted
against the FCO target.
Keith Luck: That's right. It's
£66 million over the four years, and we have some plans in
place to achieve that. Indeed, we have had a successful and good
track record in exceeding efficiency targets in recent years.
Q190 Ann Clwyd: You said in your
letter that some of your administrative savings will come "in
more equitable sharing of the costs of corporate services provision
across Government Departments overseas." Will this deliver
actual savings to the public purse, or are you simply reducing
your administrative budgets by passing on some costs to other
Simon Fraser: The issue there
is that in a number of countries around the world, different Departments
are represented and possibly have duplicate arrangements, into
which we could drive greater efficiency through co-location and
the sharing of common services. If we achieve that, that will
be a saving, in the sense that it will achieve the administrative
saving and/or help us to put more money into the delivery of actual,
what we call front-line activities.
Q191 Chair: Can you clarify one
point? As you say, many of the savings have come from the FCO's
corporate services programme. This was set out in your letter
of 12 November, and it is key to delivering a 33% reduction in
your administration spend. We've got the impression that that
is on a 2008-09 baseline. Can you confirm that the 33% administrative
spend saving will be against a 2010-11 baseline?
Simon Fraser: Mr Bevan conducted
this part of the negotiations.
James Bevan: The answer is yes.
It will be against this financial year.
Q192 Chair: Where did we get this
impression it was 2008-09?
James Bevan: I can't answer that.
Chair: Fair enough.
Q193 Rory Stewart: Can I bring
you on to staff? The Foreign Office has one of the most unique
and impressive reputations in the world, and a lot of that is
based around our UK-based diplomats. Yet there is a sensewe
are getting this from the PCS and elsewherethat morale
has been hit quite hard by some of the benefits cuts, and people
are not sure about their futures within the Office. What are you
doing to make sure that people are as proud and excited about
being diplomats today as they were 10 or 20 years ago?
Simon Fraser: That's a very important
question. The reason for that is, as you say, that we have a very
good reputation, and we need to preserve that; we are determined
to do that. Also, of course, our staff are our real assetthat
is what we do; we are a people organisation. We have to have our
people enthused and positive.
What I'd like to say on thatI will ask
Mr Bevan to fill in more detailis that we have just had
the headline results of the cross-civil service staff survey,
which looked at all these issues. You might not be surprised to
hear, given the events of the last year, that we're expecting
a fairly considerable hit on the staff engagement scores. Indeed,
they have taken a slight dip. Last year it was 69% for the overall
positive engagement, and this year it has gone down to 66%. In
the circumstances, that is a pretty positive result, which gives
me some encouragement that although, as you rightly point out,
there are issues causing concern, nevertheless we have maintained
enthusiasm and engagement in the organisation. I don't know whether
Mr Bevan wants to give more detail.
James Bevan: Thank you. As the
Permanent Secretary has said, we participate, as does every other
Department, in an annual survey of our staff. We have just got
this year's initial results. The first thing to say is that there
was the highest response rate that we've ever had as an organisation.
It was 88%. Response rates tell you something about people's belief
that change will happen if they bother to vote, so that was encouraging.
It was actually the highest response rate of any Department except
for one, DFID, which had 89%we'll beat them next year.
What was interesting on the substance was, as
the Permanent Secretary has said, that there was a slight drop
in the overall positive scores about working for the Foreign Office,
but not a very big drop. It was, on average, between 1 and 2%.
The overall figures are still, in relative terms, impressive.
The vast majority of our people think that what they do is really
important. They are proud to work for the organisation and they
want to stay in it. Those numbers are starting to soften, and
I think we know some of the reasons for that, but we will need
to keep going over the next few years to continue to improve what
we can improve, and to manage what we can't.
Q194 Rory Stewart: As people who
are more on the administrative or operational change management
side, how do you engage with the very unique culture of policy
stream diplomats? They have, in particular, their reputation for
language expertise and country expertise, their ability to get
on with foreigners and their representational functions, which
are all things that are very difficult to measure. There is a
culture where, over the past five to 10 years, people have sometimes
felt that people have been promoted on the basis of their performance
in management tests and boards, and that if you were a traditional
country or language expert, you were being marginalised by people
who were perhaps slicker with the jargon.
Simon Fraser: The first thing
that I would say is that I regard myself as somebody who has come
up through the policy streams of the Foreign Office. I'm sure
that Mr Bevan does as well. So, with respect, I don't really recognise
the distinction between the two sides of the Office that you paint,
Mr Stewart. I think it has been important in recent years that
the Foreign Office has made some pretty impressive strides in
improving its management and its leadership. Those sorts of things
are reflected in these figures.
On the other hand, it is also very important
that we maintain those unique skills in diplomacy, policy, international
activity, languages and negotiation that you described. Certainly,
the Foreign Secretary has placed a high emphasis on that since
he has come to office, which I entirely applaud. We are seeking
to ensure that as we look forward, building on the achievements
that we've made in terms of the organisation, we have a very clear
focus on what we call diplomatic skills and excellence. So, for
example, we will be increasing the money that we spend on language
training, we will be ensuring that there are very strong policy
processes in place in London, and we will be ensuring that the
excellence of our missions overseas, which, by the way, Ministers
have commented on positively since coming to office, is maintained.
I entirely accept that we have to have a clear focus on the core
purpose of the Foreign Office, which is diplomacy.
Q195 Rory Stewart: How concretely
are you going to change promotion to the very senior levels in
management to reflect this new initiative of the Foreign Secretary?
Simon Fraser: I don't believe
that it is necessary to do so, because promotions within the Foreign
Office are done in a transparent and merit-based way.
Q196 Rory Stewart: Sorry, but
let me push that point. There has been a huge culture shift in
the kinds of transparent, merit-based things that you are looking
for when promoting people. There has been a shift over the past
decade from one sort of person to another sort. The kinds of things
that are proving to be stumbling blocks for people who seek to
be promoted to senior management positions are often more their
management skills than their policy skills. How could you re-weight
the system, so that if someone was genuinely a brilliant Arabist,
with an astonishingly deep understanding of the culture and the
history, that counted strongly in their favour, as against somebody
else who might be an efficient administrator?
Simon Fraser: What we need to
ensure is that we have the right balance of the two. When you
are appointed to a senior diplomatic position, of course you have
very senior diplomatic responsibilities, but you also have senior
management and leadership responsibilities, including the management
of money and of people. What we are striving to do is achieve
the promotion of people who have the appropriate balance of those
skills, but not either at the expense of the other. That is our
ambition. I think it is the correct ambition.
Q197 Rory Stewart: So you are
not going to change in any way the sorts of things you are looking
for in a promotion in order to reflect the Foreign Secretary's
Simon Fraser: We are seeking to
ensure that the people we promote to senior positions have the
range of competencies that we have established as being appropriate
to that position, but of course we are going to give very heavy
weight to the diplomatic expertise, including, for example, language
and regional experience, to which the Foreign Secretary rightly
attaches a lot of importance. But not at the expense, I would
argue, Mr Stewart, of people's ability to be responsible stewards
of public funds and good leaders of their teams, and people having
that broad range of skills. For me this is about the balance of
the skills of the leader.
Q198 Mr Watts: The balance includes,
does it not, the things that my colleague, Mr Stewart, raised,
but also the ability to actually act on behalf of Britain as far
as business is concerned? One of the things that we heard from
the Foreign Secretary was that he wanted more emphasis on that.
You didn't mention that. Is there a change? Are you looking for
different people? Is it something that you are going to have to
do with training or recruitment policy? It seemed to us, from
what the Foreign Secretary said, that he was looking for a completely
different type of person than had perhaps been in the Foreign
Simon Fraser: I myself spent six
years in the European Commission doing trade policy, and a year
and a half as Permanent Secretary in the Business Department,
so I feel that I speak with some experience on this. I think it
is important that the Foreign Office has a clear, commercial mindset
in the way that it approaches its business and the development
of relations around the world. That is one of the diplomatic skills,
among others, that Mr Stewart identified, and that we need to
promote. I think that diplomats and good heads of mission should
be perfectly capable of conducting and pursuing commercial diplomacy
on behalf of the Government. I don't therefore necessarily think
that we need to be looking for a wholesale introduction of different
people. It is more about the mindset of the organisation and making
sure that people think in a certain way and are trained to do
certain types of activity. There are, of course, some jobs in
which more specialised professional backgrounds outside the Foreign
Office, in other parts of the public service, or outside the public
service may be appropriate, and we will bear that in mind. In
some cases, we will seek actively to bring in those with that
Q199 Rory Stewart: The two major
changes that seem to be happening in the staffing are the 2.5%
reduction in the UK base staff every year during the CSR period,
and a corresponding push to have more locally engaged staff. How
are you going to manage that change? I understand that most of
the locally engaged staff are coming in at administrative levelambassadors'
assistants and various others. How are we going to make sure that
that pretty dramatic change in both UK and overseas staffing isn't
going to have an effect on the culture and performance of the
Simon Fraser: There are slightly
different questions in that, Mr Stewart, but clearly we have a
work force strategy already in place that will help us, over a
period of time, to manage down the size of our overall work force.
We need to do that in order to meet our budgetary requirements,
because people are our most expensive asset. One of the ways that
we have been doing that is to look at the opportunities available
to us to employ locally engaged people overseas in some jobs where,
in the past, UK-based diplomats were placed. There are a number
of reasons for doing that. It is, in most cases, cheaper to do
that. In addition to that, sometimes you can attract highly qualified
people with strong local contacts and experience who actually
add to our ability to perform. It can actually enhance our performance,
in some cases, but you are absolutely right that we have to be
very aware of the overall impact of these changes, in terms of
the overall shape of our service.
We now have a service that is more than two
thirds locally engaged staff, so we have to bear that in mind.
There are some cases in which it's not appropriate to take these
steps because, for example, there are security or other concerns
that prohibit it. And, of course, we need to have the right number
of British diplomats overseas who are seen as British diplomats
in their relations with foreign Governments. There are a number
of factors to take into account. I hope we're striking the right
balance, but the concerns you raised are absolutely legitimate
ones. Mr Bevan has been closely involved in that process over
time, so he may want to add something.
James Bevan: I just want to illustrate
where it can work really well, because the Permanent Secretary's
absolutely right that we still have to front up with senior British
diplomats to the world. I visited Karachi a year ago. We have
a young Pakistani political officer employed in Karachi who is
not just cheaper but far better than I could be in that position,
because he speaks the language, he understands the networks, he
knows who's influential and who isn't, and he can move around
that environment in greater security than a British diplomat could.
That's an example of where the Foreign Office is winning by employing
somebody like that. But equally, in Islamabad, if you want to
go into the Foreign Ministry at a senior level, clearly a High
Commissioner has to go in, and it's got to be a British diplomat
fronting for us if we want to get the result we want.
Q200 Mr Roy: Can I come in on
localisation? It seems to me to be a rather sensible idea, but
the problem you've got there is that the negative to localisation
is the job prospects of young people in this country. Has localisation
brought, for example, a lowering of morale for recruits to the
FCO, who now see a diminishing market for their work abroad?
Simon Fraser: At the moment, we're
operating in an environment of an overall recruitment freeze in
the civil service, so we can't actually recruit young people in
this country at the moment. But you're absolutely right that,
of course, there are structural implications for policy shifts
of this type. That is why I referred to our work force strategy.
We have to try to make sure that we are giving people appropriate
expectations, creating the opportunity to manage careers and creating
opportunities for people as circumstances change. We are seeking
to do that, but it is true that at the junior levels, there is
a perception that there are fewer opportunities for people to
go overseas now than there were several years ago in some of the
Q201 Mr Roy: Is that a perception
or a reality? Surely it's the reality.
Simon Fraser: I said it is true.
It is a fact to which we are having to adjust.
Q202 Mr Roy: How, then, does the
younger member of the FCO get experience abroad if those jobs
are already taken up? Does that mean that the first time they
actually go abroad is when they get a more senior position? Surely
that's not advantageous.
James Bevan: As you said, Mr Roy,
it's a fact, not a perception. The way to illustrate that is that
even five years ago, if you were a junior UK Foreign Office employee,
you could expect to spend two successive postings abroad and one
posting back in London. The ratio is now one abroad to one in
London. We've been very clear with our staff, as the Permanent
Secretary says, about the reasons for that.
That is a changed expectation. It doesn't apply
to everybody. The one exception to the recruitment freeze imposed
on all Government Departments across Whitehall is a cross-Whitehall
agreement that we will continue to take in so-called fast stream
entrants, who are graduates who are particularly talented. Those
are still following the historic career path of coming into the
Foreign Office for a year or two and then going off abroad for
their first experience. The people who are being hitthe
ones you're talking about, Mr Royare our more junior staff,
who may have joined the Foreign Office previously with an expectation
of a greater percentage of time spent abroad. That's now diminishing.
203 Mr Roy: Okay.
Lastly, apart from the quality or lack of quality, is the cost.
Two years ago, it was stated that the savings would be £14
million; last year it was said it was £12 million. Now I
understand we're talking about £10 million. Does that mean,
therefore, that someone's got their sums wrong and actually, this
is not the great big idea that they thought it was?
James Bevan: I don't think so.
I would need to see the figures to be clear what we are talking
about. We are continuing with programmes of localisation, which
are continuing to save us significant amounts of money. For example,
we are in the middle of a programme of localising about 120 management
officer slots overseas. Some of those are currently occupied by
UK staff, but in a couple of years they will be completely localised.
That is already saving us a significant amount, and it will save
us at least £9 million a year once it is complete. So, that
is an ongoing process.
Q204 Mr Roy: Okay. Would you be
able to write to the Committee just to clarify the costs?
James Bevan: Of course.
Q205 Mr Baron: I am going to turn
to the network of posts, but before I do I will ask a quick question,
following on from earlier ones, about policy versus managerial
skills when it comes to the promotion of individuals. The answer
given was that we need a balance, and one can understand that
as it is a very reasonable answer. But the danger of such a balance
is that managerial skills will always be looked at first, because
we live in an age of bureaucracy, box-ticking and all the rest
of it. Isn't the answer that it comes down to team work at the
end of the day? You can have somebody who is a brilliant Arabist
leading your mission, wherever that may be, as long as the team
around him have the appropriate skills, whether those are managerial,
budgetary or financial. That would be the answer, because you
are looking at the mission as a sum, rather than as just one individual.
Simon Fraser: I don't recognise
the description of policy versus management, which is an important
thing to say, because my point of balance is important in my perception
of where we should be going. I agree with you that you need a
mix of skills in any organisation, including any mission, but
the head of mission sets the tone for the organisation, as does
the head of any organisation. It is therefore important that our
heads of mission demonstrate a broad range of skills. Of course,
not everybody will be the same, and we need brilliant Arabists,
Sinologists and experts on Latin America. We need such cadres
of experts, and we need to reinforce those cadresthat is
a fair point. For example, we need to improve our language skills
in areas where they may have dropped away a bit, and we will do
that. Those traditional diplomatic skillslanguages, negotiation,
interaction with people and being an impressive representative
of your countryare absolutely critical, but they are not
everything, in my view. Therefore, we need to try to train our
people, to coach them and to give them the opportunity to have
a broad range of skills. Where particular individuals have particular
strengths, we look to backfill those strengths with complementary
strengths in the staff around them.
Q206 Mr Baron: Thank you for that.
On the network of posts, I don't think there is any doubt that
on paper it is good value for money, particularly compared with
near neighbours, such as France, which has double the budget for
a similar number of posts. But in this world of budgetary restraint,
one has to look at how viable posts are. The Foreign Secretary
has made it very clear that he believes that having a presence
on the ground is terribly important, and I think we all agree
with that. He once came up with the figure that the cheapest 40
posts would save only something like £2 million or £3
million anyway. Mr Fraser, in your letter of 12 November you suggested
that we had to examine the existing network of posts to see whether
it adequately meets the new realities. Can you expand on that?
What are the new realities that the FCO will use to judge the
adequacy of its network of posts?
Simon Fraser: I am not sure whether
I used the word "realities" or "priorities".
Q207 Mr Baron:
"Realities" is my understanding.
Simon Fraser: My view is that
the Foreign Secretary has taken a very clear position, which is
that he wants us to maintain a network of diplomatic posts that
has global reach. He believes that that is one of the top priorities
for the organisation, and we agree with that. We are now in the
process of looking at the priorities that he has set for the organisation
in the period ahead, looking at our resource allocation in the
spending round and looking at how we are going to fund that network
to support those priorities. We are going through that process
right now, and we will make recommendations to Ministers on the
future of the network in the coming weeks. I hope that that will
be before the end of this calendar year. I think the Foreign Secretary's
view does not mean that we have to stick with the network we have.
Our view and, I think, his view is that we should look at the
future priorities and realities in the world and in particular,
for example, emerging marketsthose areas where economic
growth and greater political weight are shifting in the worldand
we should try to ensure that our future network is geared in that
direction. For example, we may want to open some new posts and
we may want to close some other posts to fund that, because our
finances are a bit of a zero-sum game. That's what I mean when
I say we need to look at and plan for new realities over the next
four years, but also beyond the next four years, in terms of our
understanding of the way the world is developing.
Q208 Mr Baron: Yes. I want to
push you a little more, in the sense that although you're looking
at that at the moment, we know what the new realities or priorities
are. They are the promotion of soft power, the emerging markets
or emerging economies coming through and the emerging countries,
both politically and economically. You've suggested a change or
a shift in emphasis from some regions to others. Can you give
us any more details on that? How long is that reassessment going
Simon Fraser: As I said, we are
working on that now. Mr Bevan and I have been discussing it, and
I hope that we will be in a position to make recommendations to
our Ministers about our resource allocation in the office as a
whole, including funding for the network, before the end of this
calendar year, because we need to be in a position by the beginning
of the next financial year to begin to make those changes when
the new spending round cuts in. It is, of course, worth saying
that although we will be looking to allocate resource towards
new priorities, there are some limits on the extent to which we
can shift resource around, because we have a lot of static assets
and also because, to go back to Mr Stewart's point, there are
some places, such as Afghanistan and Iraq, where the cost of our
post is very high because of security concerns, but they are critically
important commitments for the organisation and therefore we can't
flex resource easily out of some of those commitments.
Q209 Mr Baron: Just one quick
remark in response. A presence on the ground is terribly important
if you're going to promote trade.
Simon Fraser: Yes.
Q210 Chair: Very specifically
on the question of posts, how is co-location with DFID going?
Can we have an update on that?
Simon Fraser: We are actively
pursuing that with DFID and, indeed, we are talking to other Government
Departments. One of the things I would like to draw your attention
to, if I may, Chairman, is the language in the Strategic Defence
and Security Review about how we are going to try to increase
the co-operation and co-ordination between different Government
Departments represented in countries overseas under the overall
leadership of the Ambassador or High Commissioner. I think that's
quite an important thing for us to pursue, and we're working with
other Departments on that. One aspect of that will be attempts
to increase co-location. With DFID, I think we now have 36 co-locations
in operation, and we're discussing more, so we've made quite good
progress on that and I hope we can make further progress.
Q211 Chair: Is any sharing of
corporate functions going on?
Simon Fraser: That comes within
the same categorythe attempt both to improve our co-ordination
and to drive down our costs.
Chair: Mr Fraser, I wanted to draw this
session to a close at 4.30. It is now 4.18. We have a number of
questions on the business plan for 2011 to 2015. We'll make a
start, but I suspect we won't cover all the ground. They fall
into the category of questions that can be dealt with in writing,
but let's make a start. Frank will lead off on this.
Q212 Mr Roy: In May, the coalition
announced five foreign priorities, and in July the Foreign Office
and Prime Minister announced three priorities. In relation to
the structural reform plan, isn't that confusing for the people
in the FCO?
Simon Fraser: Mr Roy, that is
a very important question and I'm grateful to you for asking it.
The Foreign Office, like all Departments, was requested to produce
a business plana published business planthat reflects
the particular priorities represented in the coalition agreement,
and that is what we have done. That was the plan published on
8 November. But I think it's important to say that that does not
reflect all the activity of the Foreign Office. The objectives
identified there include one to protect and promote national interests.
There's one on Afghanistan. There are also objectives on the machinery
of government, policy in Europe and soft power. Those are important,
but the Foreign Office does a lot of other things.
We came to the conclusion that in order to do
our internal business planning and allow our Posts around the
world to set their priorities, we needed an internal set of priorities
that went a bit further. They subsumed those but added others
so that we could allocate our activities and our funding to them,
and be accountable for our funding against those. That is why
we came up with this set of what we call "The FCO's Priorities",
which are encapsulated in a poster that we have just produced.
They talk about what we seek to do and indentify these three priorities
of security, prosperity and consular services. That is a more
comprehensive description of what the Foreign Office is going
to be doing.
Q213 Mr Roy: So that is what the
FCO wants as opposed to the coalition?
Simon Fraser: No, the coalition
priorities are subsumed within this. I would say that these are
the priorities against which I hope you will hold us accountable,
as you rightly should, in the proper use of our resources.
Q214 Mr Roy: Okay. More specifically,
you are devising lots of metrics to measure your impact indicators.
How are you developing these and what is the cost? How will you
judge from these indicators whether the FCO's priorities are being
Simon Fraser: May I answer briefly
then ask Mr Luck to come in? In the published business plan a
number of milestones are identified, and we are required to report
every fortnight and every month against those. We have just submitted
our first report this week on our performance against the milestones,
and I am happy to say that we haven't yet missed any. Beyond that,
we have a further exercise to identify indicators with the Treasury,
which Mr Luck may be able to tell us more about.
Keith Luck: We do indeed. As the
Permanent Secretary has implied, we have some activity recording,
and we have looked again at our activity codes and what we record
against the new priorities and the internal implementation plan
that the Permanent Secretary has referred to. Our proposal is
that as of Q3the end of Decemberwe will be recording
again our activity against these new priorities, in line with
the new settlement and spending review results that are implemented
from 1 April.
Chair: Turning to FCO performance for
2009-10, a question from Bob Ainsworth.
Q215 Mr Ainsworth: You have a
new programme that you introduced in 2007 called "Five Star
Finance". How far has the development of that gone? Potentially,
if it measured up, there was to be a new phase to be designed.
Will you be able to go further down that road with the cuts that
are being imposed on the Department?
Simon Fraser: Can I just say a
word and then ask Mr Luck to back this up? I think that the Five
Star Finance programme has been a very important programme for
the Foreign Office. A few years ago we were in a situation in
which we didn't have effective financial management processes,
and we didn't have effective, reliable financial information.
We have made huge strides on that. That is really important to
run the organisation and a lot of the credit for that actually
goes to Keith Luck, who came to the organisation with a specific
brief to achieve this. We have made further progress, and maybe
I could ask him to update you on where we now stand.
Keith Luck: Thank you very much.
We have indeed made further progress; it has been an important
programme of driving improved financial management across the
Foreign Office. Indeed, based on recommendations from this Committee
and the Public Accounts Committee, it is being used as a model
with other Government Departments for them to use the same sort
of really focused, programme-based approach.
That said, the final phase is to achieve four
and a half stars by July. We think we just about got there in
July of this year, but we asked the National Audit Office to come
in and do an evaluation. It is currently doing that, and its indicative
report was presented to my programme board earlier this month.
We are clearly somewhere in that territory between four and five
stars, but it will probably be December before the NAO can come
down with a firmer figure. Based on its recommendations, we then
decide how much effort to continue in trying to get to five stars.
You can appreciate the declining utility in return for the investment
made around that.
This is a good opportunity to tell the
Committee that on Monday we achieved recognition under the Chartered
Institute of Management Accountants awards. We were runner-up
in the public sector category for the Five Star Finance programme
so it also has brand recognition and so on.
Q216 Mr Ainsworth: What you appear
to be indicating is that any further roll-out or development is
effectively going to have to be self-funding and that there is
a law of diminishing returns, and those are decisions that you
are about to take depending on whether the return would justify
Keith Luck: We'll take the decision
on whether to continue dedicated investment in the team and the
effort based on the NAO's report, offset of course by other priorities
and pressures within the organisation. It is fair to say that
we have achieved many of the objectives that we set out to achieve,
and, as the Permanent Secretary has indicated, financial managementand
good management of resources more generallyis much more
firmly embedded in the organisation and is part of our leadership
toolkit. When it comes to the number of accountants, almost a
quarter of our finance staff are now professionally qualifieda
significant change from where we were only a few years ago.
Q217 Mr Ainsworth: Facilities
management outsourcing in India and the Asia-Pacific region was
supposed to deliver savings of, I think, between £7 million
and £15 million. Where are we with that? How are we measuring
James Bevan: Shall I take that
one? The answer is that we have just signed a contract for facilities
management in Asia-Pacific, covering things such as the management
of our buildings, security, gardening, maintenance and so on.
The contract goes live on 1 April next year. You're absolutely
right on the anticipated savingsbetween £7 million
and £15 million over the seven-year lifetime of the contract.
It is important to say that we are not doing
this just to save moneyalthough we expect it to save moneywe're
also doing it to cut the overall work force and to ensure that
our staff remain focused on diplomacy, which is our core purpose,
as Mr Stewart rightly reminds us. We also want to ensure that
we have the same standards of maintenance across our network,
because where we have not had such contracts we have seen widely
varyingsometimes worryingly sostandards of maintenance
and health and safety, and we want to ensure that those are properly
We will ensure that we drive those savings out
by, first, putting them in our budget for the next four years,
so they have to be made. Secondly, we've enlisted the support
of our heads of mission and ambassadors in the region, who will
help us to ensure that it happens. Thirdly, in London we have,
under me, a facilities management client unit that tracks whether,
and is responsible for ensuring that, those savings are realised.
Q218 Mr Ainsworth: And you have
structured the contract in such a way as to ensure that those
savings will be made, so you won't be coming back to the Committee
in years to come saying, "We had to adjust and make savings
elsewhere because the contract simply didn't deliver what we anticipated".
James Bevan: We have done a great
deal of research and cost-benefit analysis to assure ourselves
that it will deliver the savings that we've predicted. I very
much hope that you will hold us to account for their delivery.
Q219 Mr Roy: The
memorandum to us from the National Audit Office stated that the
value of assets of residential land and buildings was nearly £900
million. We know from recent press criticism that the luxury of
some of the residencies has a question mark against it. Will you
seek to lessen that type of criticism of such luxury through your
planned asset sale?
Simon Fraser: We constantly seek
to reduce the opportunity for that sort of criticism, much of
which is in my view unjustified. We do have an estate around the
world and it is true that some of it is very impressive. The value
of the Ambassador's house in Rangoon is about £26,000, so
I hope you will recognise
Q220 Mr Roy:
The same as the average in my constituency.
Simon Fraser: We also have people
operating in very difficult circumstances around the world. Of
course, a lot of the cost in many of the places we are in is attributable
to essential security provision for our staff, and that comes
at a very high price. Having said that, while of course we need
to preserve the estateand its prestigeon behalf
of the country, we are also seeking to ensure that we demonstrate
very efficient use of that estate. Increasingly, for example,
we have sponsored events taking place in our buildings, financed
by companies and others. We are allowing them access to those
prestigious environments in order to promote commercial and other
British interests. That is very common practice.
Q221 Mr Roy: In the residencies?
Simon Fraser: Yes, in the residencies.
For example, the residence in Paris is heavily used for those
Mr Roy: Very expensive?
Chair: Last questions.
Q222 Mr Watts: As well as the
spending review, cutting capital budgets and revenue budgets,
you lost some of your flexibility from 2010 and 2011. How will
that loss of flexibility affect your planned or future use of
Keith Luck: The new spending review
is clear in stating that end-year flexibility is no longer available
for Departments. There might be some exceptions on that on capital
items where the Treasury recognise the lumpiness of some of those
expenditures. There will be some reduced flexibility on account
of not being able to access EYF in quite the same way that we
did. That comes back to us having to manage our cash and resources
as best we can. Indeed, our track record in spending the budget
fully is goodwe were at less than 1% last year. I think
that we continue to manage within a range of plus or minus 1%,
even in the current financial year.
Q223 Mr Watts: Do you expect that
to reduce the overall budget, or will people just stay within
the disciplines of each individual budget and make sure that there
is not an underspend at the end of the year?
Keith Luck: End-year flexibility
has always been on the underspends accumulated. It had got to
the position where that was unsustainable given the wider issues
facing the country and the need to reduce the deficit. It does
mean that we need to ensure that every pound spent is spent well
and that the value is maximised for our spend.
Q224 Mr Watts: But it does not
necessarily mean that that will be the case. If you lose the flexibility,
but you allow the people to spend within the budget heads, all
you will get is that every one who is in charge of a budget makes
sure that it is spent by the end of the year. That is why I was
asking whether you expect to make savings on the overall budget
at the end of the year, or whether you think that the same amount
will be spent, but that it will not be spent in a flexible way.
Simon Fraser: We are obliged to
spend our budgets within plus or minus 1% of the total that we
are set. That is the target that we are required to meet.
Q225 Mr Watts: You were required
to do that before, when you had the flexibility on moving them
at the end of the year. What makes you think that you will be
any more successful this time?
Simon Fraser: I hope that we will
be successful, because, as we have been discussing, we have better
financial performance and management. Of course, it is very difficult
for us, because we spend money in many currencies in many places
around the world, and it is a very complicated organisation. To
be frank with you, financial management in this organisation is
difficult. I have come from a Department with a budget of £22
billion, which is much larger than the Foreign and Commonwealth
Office's budget. However, actually controlling the budget in the
FCO is a rather more complicated exercise.
Chair: On that note, we wish you well.
I need to draw this meeting to a close. We have a couple of questions
outstanding on winter supplementary estimates and savings in 2010-11
and we will write to you about that. We would be grateful if you
could put the answers in writing. Thank you very much indeed.
I am going to move the session to a private session, so I must
ask members of the public to leave, but thank you very much for