Written evidence from the Foreign &
Commonwealth Office
As promised by James Bevan, here is our working on
the 10% cut to the core FCO over the SR10 period.
The cut to the FCO family as a whole is
projected to be 10% in real terms by 2014-15, taking account
of UK inflation and removal of funding for BBC World Service (BBCWS)
in that year. (This 10% figure is accepted. It is HMT's not the
FCO's, and in the settlement letter)
Within that the effective cut to the FCO itself
is also around 10% real:
As we understand it, the FAC's calculation is as
follows:
- The FCO's core resource budget for the SR10 baseline
is £981 million. The working is: £1,491 million less
£100 million depreciation gives £1,391 million cash,
less £229 million for the BBCWS and £181 million for
the British Council (BC) gives £981 million.[4]
- This baseline of £981 million will rise
to a core budget in 14/15 of £1,016 million. Here the working
is: £1,289 million Resource Budget[5]
(ie excluding capital) less £124 million depreciation gives
£1,165 million cash, less £149 million ring-fenced for
the BC, gives £1,016 million.
- On the projected level of inflation for the SR
(roughly 10%), that £1,016 million equates to around £925
million at today's prices, which equals a real terms cut (£981
million to £925 million) of around 6%.
That is factually correct. But the real situation
is also more complex than that. Within the core figures are allocations
in the FCO budget to fund the UK's subscriptions to International
Organisations. They are ring fenced by HMT and the FCO is legally
obliged to pay them. The allocations for the FCO for this purpose
for each year of the SR period are £102 million pa. We will
have to pay the whole £102 million pa and (increasingly)
more out of our budget as subscriptions rise over the SR10 period.
This Financial Year the bill for the FCO is expected to be £132
million and we expect it to be around £150 million by 2014-15.
(Under the SR agreement with HMT we split costs above £102
million, with HMT paying 60% and the FCO 40% from elsewhere in
our budget.) When you take these anticipated costs of subscriptions
to International Organisations (IO) into account, the predicted
cut to the core FCO budget which we actually control (ie less
IO subscriptions) is just under 10%:
The FCO budget after removal of IO subs (which
are a legal obligation) goes from £849 million in the Spending
Review baseline (£981 million-£132 million)[6]
to an effective £764 million (that's £1,016 million
less 10% for inflation, making £914 million; less £150
million makes £764 million) in FY 14/15 after inflation.
That is a drop of £85 million from £849 million which
equates to a 10% real cut.
The other point that you covered with James Bevan
was about the BBCWS's share of the FCO family budget. As James
confirmed, the Foreign Secretary was making a comparison in the
hearing last week between the BBCWS's share of the FCO Resource
budget in 2007-08, at the time of the previous Spending
Round and what it will be at the end of the period about to start.
(The Foreign Secretary referred to "the full period in which
the FCO has had to make spending reductions, which started under
the previous Government".)
So in 2007-08, the BBCWS grant in aid was £222
million against an FCO family Resource Budget excluding depreciation
of £1,565 million. That is 13%. The share has grown to 15%
of our budget this year. In 2013-14 it will again be £222
million out of a Resource Budget (excluding depreciation) of £1427
million. That equates to 14.4%. Even 2014-15 figures—hypothetical
since BBCWS funding will be transferred to the BBC Licence Fee
for 2014-15—would produce a figure of 14.1%. Hence the point
that the BBCWS share of the FCO Family Budget will still be equal
(in fact more than equal) to where it was in 2007-08. (And these
numbers do not factor in the significant impact on FCO purchasing
power of foreign exchange losses.)
I hope this information will be useful for the committee's
inquiry.
25 March 2011
4 We have used Baseline, because that was the basis
for SR comparisons. The estimated 10/11 numbers are very similar. Back
5
RDEL-the figure in the FCO Settlement Letter Back
6
The equivalent figures forecast for Financial Year 2010-11 are
almost identical: £983 million-£132 million = £851
million. Back
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