The Role of the FCO in UK Government

Supplementary Written Evidence from Alastair Newton

The Role of the FCO: Initial Statement

1. The FCO and the City

I should start by underlining that I shall be giving evidence in a purely personal capacity as a former member of HM Diplomatic Service; and that my views are not necessarily a reflection of those of my current employer and/or other organisations with which I am associated.

Members of the Committee may well be familiar with Christopher Meyer’s book Getting Our Way which offers a number of thoughts which are, I believe, relevant to this enquiry. Notably:

· Reference to Lord Palmerston’s famous comment that "Our interests are eternal and perpetual, and those interests it is our duty to follow" (page 5) – cited by Christopher as the principal basis upon which the FCO’s priorities should be determined;

· Recognition at many points in Christopher’s text that trade remains central to our economic wellbeing; and,

· Christopher’s confession (at page 232) that; "For all its interests, trade was not my natural habitat".

Drawing on those points in order, I would argue as follows:

· The continuing importance of our financial services industry to the UK economy is such that its promotion and well-being internationally can reasonably be counted among our "eternal and perpetual interests";

· Consistent with that, the Diplomatic Service does indeed devote considerable resources to trade and investment promotion, including in financial services;

· But Christopher is far from an isolated example of a senior British diplomat for whom trade – and perhaps especially financial services – is not a "natural habitat".

All these points – but perhaps particularly the third – are highlighted by the fact that, for the second time in a little over a decade, the FCO is currently looking to recruit from the City for arguably its most important financial services-related post, that of HM Consul General New York/Director General UKTI USA – a post for which I was invited to bid despite the fact that the Office encouraged me into early retirement in 2005 from the post of Director UKTI USA!

The effort in the late 1990s to recruit from the City ended in failure – significantly, I understand, because the package on offer was not sufficiently generous to attract a City high flyer. I wish the FCO better fortune this time – although I am sure any City candidate of similar general calibre to senior FCO (or BIS) staff who might be considered for this post would have to take a significant cut in salary.

It would therefore be sensible, in my view, for the FCO to equip itself adequately to staff posts where knowledge of financial services is a prerequisite. I believe the following five (low cost) measures would help enormously in this respect:

· Reinstate the programme of secondment to the City which lapsed a year after my own secondment to Lehman Brothers immediately prior to my New York posting;

· If this too has lapsed, reinstate regular senior FCO staff meetings with the Governor and senior staff of the Bank of England (initiated by the then PUS in 1998);

· The FCO’s Director-General Europe and Globalisation (presently Nick Baird) to host regular roundtable lunches with senior people from the City;

· The FCO actively to participate in the LOTIS Committee of TheCityUK; and,

· Perhaps most important – but most difficult – of all, effect a culture change so that FCO high flyers no longer consider that trade is not "real" diplomacy but see it as a priority national interest where the FCO can make a real difference.

2. The FCO and the EU

Overall, I believe that the FCO – indeed, Whitehall as a whole since the FCO is only a fraction of the team effort – does a pretty good job of representing UK interests in Europe. Certainly both Brussels bureaucrats and other EU MS diplomats respect our representation and representatives.

Indeed, it would be fair to say that the UK has and continues to play a particularly important role in trade policy (eg the FCO’s current PUS, Simon Fraser, was chef de cabinet to the Trade Commissioner for some years). And, as far as the City’s interests are concerned, HM Treasury is a genuine heavy-hitter in Ecofin and other relevant committees.

That said, our most important diplomatic front is and will remain Europe and there is always room for improvement, eg:

· Support more high flyers from across Whitehall to take secondments to the Commission and the European Council Secretariat;

· Support as strongly as some other EU MS do the careers of our nationals in Europe’s bureaucracies – from the very bottom of the ladder upwards;

· Remember that building a consensus – or at least a qualified majority – in Europe is not just about France and Germany but also about relations with smaller MS (something to which lip service has long been paid by the DS but…..);

· More effort with European parliamentarians would probably pay dividends post-Lisbon.

One further thought which some of my former colleagues may consider heretical. With the exception of the WTO where community competence rules, Europe – all too often speaking with many voices – punches significantly below its weight on the international stage. The EU now has an external service which is here to stay despite the fact that its role, especially relative to Member States’ diplomacy, appears ill-defined. Is it time for the UK to devolve more "high diplomacy" to Europe and to devote more of its resources to issues which clearly are of national rather than European interest, notably trade and investment promotion?

2 February 2010