FCO Performance and Finances - Foreign Affairs Committee Contents

Further letter from Simon Fraser CMG, Permanent Under-Secretary of State, Foreign and Commonwealth Office

I am writing to update you on the latest FCO management issues. This letter covers the period August to December 2010.


The FCO Departmental Business Plan was published on the No10 and FCO websites on 08 November. The plan sets out the FCO's departmental priorities, structural reform plan, expenditure and our commitment to transparency. I sent a copy of this to the Committee ahead of the hearing on Financial Performance in November. We have started to publish transparency data, including monthly implementation updates on our Structural Reform Plan. We have also produced a fuller Implementation Plan which will be the key internal document underpinning our business planning work.

Heads of Mission are currently drafting Country Business Plans which will run from the beginning of next financial year and will cover the four-year SR10 period and for which they will be held responsible. The Country Business Plans set out the work of each Sovereign Post to deliver the Government's Foreign Policy Priorities. They encompass all of HMG's activity in country, reflecting the requirement in the National Security Strategy and Strategic Defence and Security Review that Ambassadors and High Commissioners will lead closer coordination of all UK work overseas.


In December I launched the Diplomatic Excellence initiative, which will be our programme for reform and modernisation of the FCO over the next four years. It will replace the High Level Change Plan, which closed at the end of 2010. The Diplomatic Excellence Programme will have three interlinked goals of first class foreign policy and diplomacy, a strong global network and a strong and skilled workforce. It will build on the gains we've made over the last few years on leadership, management, diversity in the broadest sense, and the modernisation of our corporate functions, but place a strong, renewal emphasis on driving forward excellent policy making and diplomatic skills across the FCO in London and abroad.


The Foreign Secretary and the FCO Board are agreed that resource allocation and spending should be guided by the new priorities the Foreign Secretary has set for the FCO; by his wish to sustain a strong global network; and by our determination to keep our staff safe, secure, and well equipped. As I set out in my letter to you following the November hearing the Foreign Secretary has also required us to continue to seek efficiencies and look for ways to reduce costs.

I have already written to the Committee on the outturn of the Spending Review. Since then we have been preparing internal budget allocations in line with the priorities set by the Foreign Secretary. We aim to agree final allocations for 2011-12 shortly. The Board has also discussed indicative allocations for 2012-13 to 2014-15 and intends to agree them early in the new year so Directors and Posts can plan for the longer term.


In October/November we assessed the FCO's performance against the standards set out in the National Audit Office (NAO) Financial Management Maturity Model for the Public Sector with which the Five Star Finance Programme is aligned. In tandem, the NAO carried out their own independent assessment.

Our self-assessment concluded that, on balance, the FCO is operating at the 4.5* level. In some areas such as governance and leadership and decision-making, we found that the FCO is performing above the 4.5* level. In others, such as training and the reporting of our in-year working capital management, we found that we are operating below the 4.5* level. We recognised a challenge in maintaining standards against a constantly changing background and frequent staff rotations.

The NAO validated this finding, commenting that the FCO is "meeting the majority of the requirements of 4.5* by November though this is not consistent across the network."

Our and the NAO full assessment reports will be put to the FCO Board in January 2011 along with recommendations for next steps.


The majority of our CSR07 Value for Money projects continue to deliver on or above their targets and overall the programme remains on course to deliver forecast savings of £190 million across the FCO family. Cumulative results to date are £156m against a family target of £144 million.

On 15 November the Chief Secretary to the Treasury announced that Departments would no longer be required to report formally to HMT against the previous Government's CSR07 efficiency target. However we will continue to track the programme internally until the end of the current financial year/CSR period in line with our commitment to utilise our resources as efficiently as possible.


We have been working with Whitehall Partners to agree a new charging model for the next few years, based on cost-sharing principles. The objective is to produce a simpler charging arrangement that will reduce bureaucracy whilst ensuring that the FCO is fairly compensated for the risks and contingent liabilities it carries for others on the overseas platform.


In September the FCO Top Risk register, which is made up of the most significant risks from both the Strategic policy risk list and the Operational risk list, was updated. After consideration by the Board we removed the operational risk (IT Systems) leaving three operational risks on the Top Risk register:

  1. Physical, Technical and Personnel Security;
  2. Resources; and
  3. UKBA.

A new policy risk (Sudan) was added to the existing risks top level (Iran, Afghanistan, Pakistan, Terrorism, Middle East Instability, Horn of Africa, Overseas Territories, Litigation, EU, Turkey, and Economic Outlook).

At the December update, new strategic risks on the Eurozone and the Korean Peninsula were added. The operational risk on Resources was downgraded and the strategic risks on Turkey, EU, Economic Outlook and Litigation were also removed.

The FCO Board continues to discuss individual risks in depth at its monthly meetings to make sure these risks are being effectively managed.


On 29 April 2009 the FCO and Home Office Permanent Secretaries signed a Memorandum of Understanding on the integration of the FCO and Identity and Passport Service (IPS) passport operations. IPS agreed to take responsibility for the policies, finances and oversight of the FCO's passport operation from 1 April 2011.

The strategic case for unifying the two passport operations is straightforward. Having two UK passport services is clearly less efficient than one. Through economies of scale and by eliminating duplication, the cost of the overseas passport service will fall from £42m a year to under £20m a year. And having two UK passport services with two sets of security procedures makes us more vulnerable. As the cost and security around passports continue to increase, these changes will allow us still to offer a passport service to British nationals living abroad - and even bring down the fees we charge.

IPS and FCO are currently negotiating an Accord that will govern the full integration of the two passport operations after 1 April 2011 and set out the future shape of the overseas passport service.


As set out in the FCO's new Business Plan, the FCO and UK Border Agency have committed "to control migration to secure the UK's borders and to promote the UK's prosperity." Recent collaboration has included work on the first measures to implement the government's commitment to introduce an annual limit on non-EU migration while continuing to attract the brightest and best to build Britain's prosperity.

Following the Spending Review and in recognition of the successful close working arrangement, the UK Border Agency has agreed to continue funding the FCO's Migration activity until March 2013. We have also secured cross-Government agreement to continue the quadrilateral (UKBA/FCO/DIFD/Ministry of Justice) Returns and Reintegration Fund until March 2015. This Fund is integral to the UK's efforts in increasing the return of foreign national prisoners and failed asylum seekers and helping them reintegrate more effectively in their countries of origin.


In September, the FCO signed a contract with Cable and Wireless Worldwide (C&WW) to introduce improved global telephony, data and videoconferencing services (the Echo programme) across the network between early 2011 and summer 2012. Echo is a collaborative procurement and delivery programme involving the FCO, UK Border Agency (UKBA) and the Department for International Development (DFID). It has the potential to deliver savings to the FCO of up to £90m through lower cost technologies, call charges, support costs, and shared infrastructure. Staff can also expect to see new and enhanced services, including unclassified video conferencing facilities at 130 Posts and greater capabilities for flexible working.

In the light of recent events, and in response to a request from the National Security Adviser, the FCO is undertaking a review of all measures in place to protect our information to ensure these continue to be robust and proportionate. We are working with recipient departments of FCO data to confirm with them that appropriate measures are in place for any onward handling or distribution. We continue to take the protection of our information seriously, and comply with the Cabinet Office Security Policy Framework (SPF), which covers all areas of security, including technical, physical, procedural and personnel security.

We have completed the final two deployments of our new Firecrest IT system (Beijing Visa Section and Alexandria) and the global upgrade to Outlook 2007.


I promised to inform the Committee of any liability following the flood at our Embassy in Madrid in late January. We have now settled the claim in the sum of €331,954 which represents a saving of over 18% compared to the original claim of €405,457.

We completed a major project to provide a new embassy and residence in Tbilisi in September/October at a total project cost of £16.7 million. The location of the previous embassy in the centre of Tbilisi was unacceptable on security grounds, and the new build provides us with a modern, fit for purpose platform from which to deliver the government's overseas priorities in Georgia.

I should also note that we have also secured approval from HM Treasury and from the Foreign Secretary to go ahead with projects to provide new embassy buildings in Tel Aviv and Jakarta, at an estimated cost of £19 million and £29.5 million respectively. Both these projects are security-driven; you will recall that James Bevan, Director-General Change and Delivery, mentioned the Jakarta project as a high priority during the Committee's evidence session on 24 November. I should be glad to write with further information on any of these projects if the committee wishes.

I attach at Annex A our report for properties sold and purchased in the second quarter of financial year 2010-11. One purchase not included in our last report is also included for the first quarter of the current financial year.



As you are aware, a second terrorist attack took place against an Embassy vehicle on 6 October 2010. Since the attack a number of additional security measures have been taken, including a further reduction in staff numbers, the development of a quick reaction force and an operations centre, and an additional security manager.

The threat is likely to remain high for the foreseeable future and there is a limit to how much we can mitigate the threat to staff travelling around Sana'a, even in armoured vehicles. Therefore urgent work has begun to provide temporary, secure staff accommodation on the well-protected Embassy compound, at an approximate cost of £2 million, which will be met by re-prioritisation of our capital budget this financial year. We are looking urgently at a project to house staff securely in the longer term. We will keep the FAC informed of progress.


Keith Luck, Director General for Finance, left the FCO in December on the expiry of his fixed term contract. I have decided to reorganise the operational side of the FCO in London under a single DG level Chief Operating Officer. James Bevan has now assumed this role. Our Finance Director, Alison Currie, has joined the FCO Board of Management.

6 January 2011

Sale DatePost Property TypesSale Price £
July to Sep 201001/07/2010 StockholmResidential 532,559
02/07/2010Dar es Salaam Residential532,560
08/07/2010Copenhagen Residential807,472
14/08/2010Canberra Residential956,923
10/09/2010The Hague Residential299,055
13/09/2010Kuala Lumpar Residential4,593,039
27/08/10Ottawa Residential513,108
30/09/2010Washington Residential749,144

Purchase Date PostProperty Type Purchase Price £
April 201001/04/2010 WarsawResidence3,349,473

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Prepared 11 February 2011