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We do not dispute that the FCO needed to play its part in the general retrenchment instigated by the 2010 Spending Review. The FCO was dealt a difficult hand, and Ministers and senior management have, on the whole, played it skilfully. However, the cuts imposed on the FCO since 2010 have been severe and have gone beyond just trimming fat: capacity now appears to be being damaged. If further cuts are imposed, the UK's diplomatic imprint and influence would probably reduce, and the Government would need to roll back some of its foreign policy objectives. In short, the FCO would need to aim to do less.
The FCO's budget is a tiny element of Government expenditure, but the FCO makes a disproportionate contribution to policy-making at the highest level, including decisions on whether to commit to military action. To impair the FCO's analytical capacity for the sake of a few million pounds could be disastrous and costly. We recommend that future FCO budgets should be protected under the next Spending Review.
The number of UK-based staff in the FCO will have fallen by 10% over five years; the Department is struggling to fill positions in critical business areas; and many have argued that expertise within the FCO has suffered. It is alarming that the strongest criticisms that we have heard about the FCO's capacity to gain local knowledge, and the most striking evidence of a shortfall in proficiency in foreign languages, relate to regions where there is particular instability and where there is the greatest need for FCO expertise in order to inform policy-making.
Staff morale remains a static amber risk for the Department, given the continuing constraints on pay. There are significant differences between rates of pay for FCO staff and rates for staff in other Government Departments. Dissatisfaction is not necessarily rooted in pay rates alone but also stems from a sense that many of the benefits and attractions of working for the FCO—the chance to spend much of your working life overseas, prestige, a good standard of living while overseas, allowances—have been trimmed or have declined in value. The FCO should either seek to eliminate the pay differential or put more resources into safeguarding the benefits and allowances which are most valued by staff.
The FCO has missed its diversity targets under the 'Fairness for All' programme, and its performance on promoting women to the very top posts has been disappointing. In the history of the FCO, no woman has ever held a post at the highest grade—SMS 4. The problems may not reflect institutional barriers but rather a lack of confidence among women that they have the same opportunities for career development and advancement as their male colleagues. The FCO, in response to these setbacks, has not been complacent and has set out policies to improve performance, including novel ideas such as ambassadorial job-shares. We expect these measures to have an effect, if not an immediate one.
The value of UK exports in goods and services was just £506.5 billion in 2013, significantly lower than where the Government would have expected to have been in order to meet its £1 trillion export target by 2020. The export target is very demanding: it appeared unrealistic at the time it was set and it is proving to be so now. We believe that the Government should set a new, more realistic target for UK exports, and it should expect other Departments to play their part in helping to reach it.
The FCO disclosed £271,500 of commercial sponsorship for events at overseas posts during the 2013-14 financial year; but the value of sponsorship currently being raised hardly justifies the reputational risk to the Department, nor does it appear to compensate adequately for the undoubted value that sponsors receive on behalf of the taxpayer. We encourage the FCO to derive greater value for the taxpayer by extracting more from commercial sponsors, on the understanding that all sponsorship, including sponsorship of events in the UK, should be transparent and should be published by the FCO on a rolling basis.
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