2 FCO spending and capacity
Spending by
the FCO
5. The budget cuts imposed on the FCO by the 2010
Comprehensive Spending Review (2010 Spending Review) were proportionally
some of the greatest imposed on any Government department.[3]
The Spending Review set out a 10 per cent[4]
real terms reduction in the resource budget (24 per cent[5]
real terms reduction if the transfer of funding for the BBC World
Service to the BBC Licence Fee is taken into account), and a 55
per cent reduction in capital spending over the four-year Spending
Review period. The Spending Round 2013, which set out government
spending for the 2015-16 financial year, required the Department
to administer a further real terms reduction of 6.3 per
cent[6] to the
resource budget.[7]
6. In order to provide context, we set out below
an analysis of FCO spending, based on actual resource outturn,
for every year of this Parliament and for the three years prior
to 2010-11, to illustrate the financial challenges FCO management
have faced over the course of the Spending Review period.
7. The Spending Review settlements do not include
costs relating to peacekeeping, conflict prevention or depreciation
and impairments. However, resource departmental expenditure limit
(RDEL) outturn figures taken from the Annual Report include these
items of expenditure. In order to make a like-for-like comparison
with the Spending Review, Tables 1 and 2 have deducted these costs
from total RDEL outturn.
8. Table 1 shows outturn for the FCO 'family', which
includes spending by the FCO 'core' Department, the British Council
and the BBC World Service. The last row of Table 1 provides outturn
figures on the same basis as the Spending Review settlement.
Table 1: FCO Family Resource DEL Outturn from
2007-08 to 2014-15[8]
(in 2013-14 prices)[9]
(figures in £m)
| 2007-08[10]
| 2008-09 | 2009-10
| 2010-11 | 2011-12
| 2012-13 | 2013-14
| 2014-15 (forecast)[11]
|
Total Resource DEL
| 2,059
| 2,252
| 2,304
| 2,319
| 2,252
| 2,193
| 2,156
| 1,833
|
Less: |
| | | |
| | | |
Depreciation | 83
| 91 | 114
| 109 | 128
| 166 | 181
| 147 |
Conflict prevention & peacekeeping
| 421 | 504
| 507 | 542
| 553 | 493
| 474 | 516
|
Resource DEL (on Spending Review basis)
| 1,555
| 1,657
| 1,683
| 1,668
| 1,571
| 1,534
| 1,501
| 1,170
|
Table 2 shows outturn for the FCO core Department,
which relates to spending on the diplomatic and administrative
functions of the Department and of its sponsored bodies,[12]
and which excludes Grant in Aid funding to the British Council
and the BBC World Service. The last row of Table 2 provides outturn
figures on the same basis as the Spending Review settlement.
Table 2: FCO 'Core' Resource DEL Outturn from
2007-08 to 2014-15 (in 2013-14 prices) (figures in £m)
| 2007-08
| 2008-09 | 2009-10
| 2010-11 | 2011-12
| 2012-13 | 2013-14
| 2014-15[13] (forecast)
|
Total Resource DEL for Core Department (exc. BBC & British Council)
| 1,595
| 1,776
| 1,835
| 1,871
| 1,825
| 1,753
| 1,751
| 1,686
|
Less: |
| | | |
| | | |
Depreciation | 83
| 91 | 114
| 109 | 128
| 129 | 160
| 147 |
Conflict prevention & peacekeeping
| 421 | 504
| 507 | 542
| 553 | 493
| 474 | 516
|
Resource DEL for Core Department
| 1,090
| 1,180
| 1,214
| 1,220
| 1,144
| 1,130
| 1,117
| 1,023
|
9. The FCO is forecast to exceed the planned cuts
imposed by the 2010 Spending Review, for both the FCO Family and
core FCO:
· The 2010 Spending Review planned for a
24 per cent reduction to the FCO 'family'
budget. Spending is, however, forecast to fall by 29.9 per
cent in real terms (see Table 1) over the 2010
Spending Review period, from £1.668 billion to £1.170
billion: 5.9 per cent more than initially agreed
in the settlement;
· 'Core' FCO was earmarked to be cut by
10 per cent in the 2010 Spending Review settlement.
FCO 'core departmental' spending, however, is forecast to fall
by 16.1 per cent in real terms, from £1.22
billion in 2010-11 to £1.023 billion in 2014-15 (see Table
2), which is 6.1 per cent more than initially agreed
in the settlement.
10. The FCO budget has a number of distinctive features.
Firstly, it is small in comparison to that of other departments.
In 2013-14, the FCO ranked 15th out of the 20 major
Whitehall departments in terms of resource spending and accounted
for just 0.6 per cent of total government expenditure.[14]
The FCO spent approximately a quarter of the sum spent by the
Department for International Development and less than six per
cent of that spent by the Ministry of Defence.[15]
11. Secondly, there are a number of areas of FCO
expenditure that are difficult to reduce because they are not
under the Department's control or are ring-fenced. In 2013-14,
these included:
a) Spending on peacekeeping and conflict prevention
(£474 million): the Conflict Resources Settlement funds
conflict pool and peacekeeping expenditure within the Department.
It is separate from the Department's main budget and is ring-fenced
from it.
b) Grant-in-aid (£407 million): The
Department provides grant-in-aid financing to the British Council
and BBC World Service, as set out in the 2010 Spending Review
settlement. Funding for these bodies is ring-fenced.
c) Subscriptions to international organisations
(£156 million): the UK is a member of a number of international
organisations for which the Department pays the UK's share of
the running costs. These costs are not decided by the Department
and have to be paid regardless of spending allocations by HM Treasury.
d) Depreciation and impairments (£181
million): this sum is not transferred from the Consolidated
Fund under the supply procedure as cash but is a notional sum.
It is an accounting concept which represents the decline in the
value of assets used during the year. It reflects resources used
by the Department based on past events, rather than actual cash
spent in year, and so it is not possible to spend it on any other
budget lines.[16]
Areas of uncontrollable and ring-fenced expenditure
limit the ability of the Department to accommodate cuts or manage
their finances flexibly by transferring costs between budget lines.
Any overspend on non-discretionary items of expenditure (such
as international subscriptions) has to be covered by budget lines
from other elements of the FCO budget. These other areas of 'discretionary'
spending totalled £940 million in 2013-14, accounting for
44 per cent of the FCO's total resource DEL outturn;
a significant proportion of this was committed to staff salaries
and estates costs, which are largely fixed for a given year and
change slowly.
INTERNATIONAL COMPARISON
12. The House of Commons Library has, at our request,
compared FCO spending to that of equivalent departments in other
countries. Comparisons are rarely exact, as corresponding ministries
in other countries often have different functions, so the figures
below should be treated with some caution. To make the figures
more comparable, for countries where the foreign ministry is responsible
for spending on overseas aid, aid spending has been stripped out.
Table 3: Foreign Office spending comparisons
International comparisons with similar bodies, excluding
aid spending where body is also main aid agency
| Spend in local currency
| Spend in £ millions
| Rank of Spend
| Spend per head (£)
| Rank of Spend per head
| Year spending relates to
|
USA | US $ 25.0bn
| 17,469
| 1 |
55.7 | 1
| 2014 |
Finland |
0.38bn
| 284 |
10 | 52.5
| 2 |
2015 |
New Zealand | NZ $ 461m
| 219 |
11 | 49.5
| 3 |
2014-15 |
Canada | CAD $ 2.52bn
| 1,404 |
6 | 40.2
| 4 |
2013-14 |
Germany |
3.64bn
| 3,202 |
3 | 39.1
| 5 |
2014 |
France |
2.82bn
| 2,305 |
4 | 36.3
| 6 |
2015 |
Australia | AUS $1.77bn
| 811 |
8 | 35.7
| 7 |
2014-15 |
UK (FCO)
| £2.18bn
| 2,183
| 5
| 34.3
| 8
| 2013-14
|
Ireland |
163m
| 137 |
13 | 29.9
| 9 |
2015 |
Sweden | Krona 1.9bn
| 151 |
12 | 15.8
| 10 |
2015 |
South Africa | Rand 5754.3m
| 787 |
9 | 15.0
| 11 |
2014-15 |
India | Indian Rupees 9,662 crore[17]
| 4,027 |
2 | 3.3
| 12 |
2012-13 |
Source: Figures compiled by the House of Commons
Library[18]
Table 3 shows that, based on spending per head of
population, the UK spends a similar amount to France on foreign
office functions, but less than Germany and considerably less
than the United States. The FCO ranks eighth out of the 12 countries
listed, with only Ireland, Sweden, South Africa and India spending
less per head.
Effects of cuts on FCO capacity
13. The capacity of the FCO to perform its role of
protecting and promoting the UK's interests and values overseas
relies upon:
· The existence of a corps of sufficient
highly competent and motivated staff;
· Efficient methods of gathering information,
from the widest possible range of sources within any given foreign
country, on attitudes to the UK, opportunities for the UK, and
threats to the UK's interests;
· An ability to analyse that information
and to form the best possible understanding of how the UK's interests
might be safeguarded and its values promoted;
· The ability to command respect amongst
opinion-formers within a foreign country or in international institutions,
and thereby to carry influence in promoting the UK's values; and
· A platform from which staff can operate.
By "platform" we mean the physical premises occupied
by staff, both in London and abroad, as well as the facilities
which equip staff to do their job effectively (professional development,
effective performance management, daily-use tools such as IT services,
and back-office functions).[19]
STAFFING
14. The Department's Strategic Workforce Plan, drawn
up in late 2011, envisaged an overall reduction in headcount of
UK-based staff[20] of
10 per cent between 2011 and 2015. The FCO's 2013 Departmental
Improvement Plan noted that "decisions of Ministers to expand
our network and the sustained pressure to deliver an ambitious
policy agenda", together with concerns about overstretch,
had led the FCO to increase temporarily the supply of staff to
fill gaps; and it acknowledged that the Department was not on
track to meet the 2015 deadline for the 10 per cent headcount
reduction.[21] In November
2013, Mr Matthew Rycroft, then the FCO's Chief Operating Officer,
told us that the Department had extended that deadline by one
year, to the end of the 2015-16 financial year, and the Permanent
Under-Secretary confirmed to us in November 2014 that the FCO
was on course to meet that target.[22]
The baseline figure used by the FCO is an average staffing figure
for 2010-11, of 4,824 full-time equivalents (FTE), and the target
for 2015-16 is 4344 FTE.[23]
15. The overstretch point, alluded to by the FCO's
2013 Departmental Improvement Plan published in June 2013, is
significant and led us to warn in our report last year on the
FCO's Performance and Finances that the FCO machine was being
"worked to the limit" and was in danger of trying to
do too much at a time when capacity was being limited.[24]
16. Those concerns about overstretch have not dissipated
and are widely shared. Sir Simon Fraser said that "there
is a risk of considerable stretch in the Office, and staff feel
that and tell us about it".[25]
When FCO Heads of Mission gathered in London for their Leadership
Conference in May 2014, they identified relieving overstretch
as the most important challenge to address in the year ahead,[26]
and the issue was also discussed by the FCO Supervisory Board
during the course of the year.[27]
17. To pursue a target of a 10 per cent reduction
in headcount by March 2016 at a time when demand for policy advice
is acute, and when staff are already under pressure from what
Sir Simon described as "more or less continual crisis in
world events"[28]
seems perverse. Sir Simon admitted that "because of the pressures
on the organisation", the FCO had "decided that it was
important to seek to maintain the workforce", but he then
added "except for the 10 per cent long-term trajectory reduction",
which highlights a marked contradiction in FCO policy.[29]
18. We also note the possibility of compulsory redundancies
at the FCO in future. Sir Simon Fraser confirmed to us that there
were no current plans for compulsory redundancies among UK-based
staff, although there had been "at least 500" redundancies
among locally-engaged staff over the past year. He did not, however,
rule out compulsory redundancies of UK-based staff during the
next Spending Review.[30]
It is not obvious to us what scope there is for the FCO to make
compulsory redundancies other than on the grounds of consistently
unacceptable performance. We recommend that the FCO give an
assurance that any compulsory redundancies in the next Spending
Review period would not entail a decrease in the number of staff
providing direct policy support.
19. One of the more acute manifestations of overstretch
is the difficulty sometimes faced by the FCO in filling key roles,
typically those which are especially demanding in terms of hours
or workload. The FCO 2014 Improvement Plan says that "there
remains a disconnect between corporate and operational requirementsdemand
for staff continues to run ahead of supply in high priority business
areas".[31] Sir
Simon Fraser was candid in telling us of "a slight change
in people's attitudes" towards taking on difficult jobs.[32]
He said that the FCO "depended very much on people's readiness
to go above and beyond the call of duty" and that staff were
now sometimes saying that, given the pressure and the rewards
associated with a particularly demanding vacancy, they would be
less inclined than previously to put themselves forward.[33]
20. The FCO told us in May 2014:
[We have] introduced further changes into our
appointments system, to help us get the right people into the
right jobs, and so that we can meet our operational requirements
and support our ambition to be agile and expert. The changes include
a more directive approach on filling some roles, and freezing
inward interchange at certain grades to balance workforce flows.[34]
This would suggest that the FCO is trying to address
the challenge of filling key roles by actively steering staff
towards key posts rather than relying on open competition. The
FCO should, in response to this Report, set out its strategy for
ensuring that vacancies for key posts are filled promptly and
by staff of the necessary calibre.
EXPERTISE
21. We have been alert, through the course of this
Parliament, to suggestions that the FCO's local knowledge and
expertise in understanding foreign countries is not what it once
was. We heard two striking examples, one from a former FCO Minister
and another from a former senior Ambassador:
· Lord Malloch-Brown told us in January
2012 that the UK had lost its previous Arabist "touch and
feel" for the Middle East. He said "although the British
Ambassadors I met in the region were still of a very high calibre,
they had much smaller political teams per country than in the
past. In that sense, it is correct to say that they could not
dig down deep enough". Lord Malloch-Brown ascribed this to
cuts under both this Government and the previous one.[35]
· Sir William Patey, British Ambassador
to Iraq in 2005-06, to Saudi Arabia from 2007 to 2010, and to
Afghanistan from 2010 to 2012, said at a recent event at Chatham
House:
I think it's probably true that our ability to
have the in-depth knowledge and take the time to have the depth
of analysis is gradually diminishing. I mean budget cuts and cuts
generally have reduced the amount of time that an ambassador or
an embassy have to take the time to reflect. I mean the days of
having a second or a first secretary travel up country for a week
or two and get to know the local tribes and maybe write an interesting
report for the ambassador and keep it, just clock it away as we
might need that one day, that is becoming increasingly impossible.
There is just too much else going on and so that time that you
can take, the resource involved in accumulating that depth of
knowledge is, we're losing that.[36]
Both men made an explicit link between shortage
of manpower and the FCO's capacity to gather and analyse information.
22. The FCO's difficulties in dealing with the Ukraine
crisis have also attracted particular comment. Sir Nigel Sheinwald,
a former Ambassador to the US, for example, was quoted in the
Financial Times on 14 November 2014 as saying that "When
the Ukraine crisis happened, there was a problem in the Foreign
Office, the old Cold War cadre of people just wasn't there".[37]
Edward Lucas, a Senior Editor at The Economist, made a
similar point when giving evidence to us in September 2014 on
Ukraine and Russia. He said that "[the FCO] kind of gave
up in 1991: we thought it was over and wound down the terrific
analytical capacity we had".[38]
23. To some extent, the scaling-down of the FCO's
resources in Russia and Eastern Europe after the end of the Cold
War can be seen as the result of a rational decision to re-allocate
resources to where they were most needed at the time. Sir Simon
Fraser took this view, while accepting that there was now "less
depth of Russia expertise" in the FCO than in the 1990s.[39]
He acknowledged that it would be important to address the shortfall
now, given that dealing with Russia was going to be one of the
big strategic challenges in the near future.[40]
Languages
24. Criticism of FCO expertise has commonly centred
on an apparent decline in proficiency in foreign languages, something
which we have drawn attention to repeatedly over the years. A
succession of witnesses have noted a shortfall in proficiency
in Arabic in the FCO. To take just two: Lord Malloch-Brown told
us in 2012 that Foreign Office languages were "in crisis"
and that even with a mainstream language such as Arabic, the cutbacks
that have occurred are key".[41]
Sir Oliver Miles[42]
saw it as "deplorable" that "too many positions"
in the FCO in the Middle East and North Africa region were occupied
by non-Arabic speakers.[43]
25. Proficiency in Russian is also seen as a weak
spot: Sir Tony Brenton, a former UK Ambassador in Moscow, told
the House of Lords EU Sub-Committee on External Affairs that
British diplomacy towards Russia and elsewhere
has suffered because of a loss of language skills, particularly
in the Foreign Office. There was quite a lot of complaint in Whitehall
after the annexation of Crimea that the Foreign Office had not
been able to give the sort of advice that was needed at the time.
I think that is regrettable and it marks a change from when I
was there.[44]
26. It is alarming that the strongest criticisms
that we hear about FCO capability relate to regions where there
is particular instability and where there is the greatest need
for FCO expertise in order to inform policy-making. We also note
that the percentage of 'speaker slot' posts[45]
occupied by someone possessing the specified level of proficiency
in the required language (a measure known as "Target Level
Attainment") is currently just 38 per cent overall, and in
the same key regions it is lower still: 28 per cent in FCO posts
in the Middle East and North Africa region, and 27 per cent in
Russia and Eastern Europe.[46]
27. The Permanent Under-Secretary readily acknowledged
that the low levels of Target Level Attainment in foreign languages
were unacceptable and said that Heads of Mission and FCO Directors
had been given "very clear instructions" that people
should be given time to do their language training and were given
strong incentives to do soboth carrots and sticks.[47]
We note the actions being taken by the FCO to make clear to staff
what is expected of them and to demand higher levels of proficiency
in certain posts.[48]
28. In past reports, we have repeatedly drawn attention
to the dangers of allowing language proficiency among FCO staff
to erode. Whatever the root causes of this decline, we are heartened
to see that the Permanent Under-Secretary has gripped the issue
and has made a clear personal commitment to reversing the trend.
One of the clearest indications of a turnaround would be improved
performance in language exams, and we encourage our successors
to monitor this area closely.
Overseas opportunities for UK-based staff
29. Knowledge and expertise at senior levels of the
FCO is an accumulation formed over many years of service in the
UK and abroad. Heads of Mission who have spent their career within
the FCOthe vast majorityhave experience of living
and working within different cultures, and in different political
and social environments. As we observed last year, opportunities
for UK-based staff in relatively junior policy grades to work
overseas are an essential part of acquiring that knowledge and
experience which is carried forward to senior levels of the organisation.[49]
It is important that those opportunities should not be eroded.
We note that the balance between UK-based staff working in the
UK and those working overseas has been relatively constant over
the last six years, at a roughly 62%/38% split.[50]
A small downward trend since 2012 is likely to be attributable
to the recent marked reduction in overseas postings for staff
in administrative grades.[51]
30. Last year we questioned whether the FCO's openness
to an increase in the use of locally-engaged staff in front-line
and policy roles might reduce opportunities for UK-based staff.
Sir Simon Fraser reassured us then that any such increase could
be accommodated without damaging the career prospects of UK-based
staff, and that the number of diplomatic positions overseas for
UK-based policy staff was in fact increasing.[52]
However, the FCO declined to give us a guarantee that a greater
use of locally-engaged staff in future would not at some point
lead to a decrease in overseas positions for UK-based staff at
policy grades. It did nonetheless state that it would "not
undermine the first-hand experience and knowledge base" of
its UK-based staff.[53]
31. All FCO posts at SMS grades[54]including
most ambassadorships and many deputy head of mission postsare
advertised across Whitehall.[55]
The FCO listed eleven posts which were, or would shortly be, headed
by people who had not spent their careers in the FCO.[56]
Sir Simon Fraser confirmed that these staff were (or would be)
FCO employees; but when asked whether there might come a day when
a Head of Mission was not an FCO employee, he saw no reason why
that should occur. He told us that the FCO "runs the overseas
network" and added that "Heads of Mission and ambassadors
report to the Foreign Office. That is their institutional home,
so if people want to come in and take those jobs, they should
come in and become part of the Foreign Office".[57]
32. There is also interchange from other Government
departments at middle-ranking grades. Sir Simon Fraser told us
that there had been an increase in the number of inward secondments
from other departments, and that the FCO benefited from their
expertise. He recognised, however, that the FCO needed to nurture
"the skills and the people who are making a long-term contribution
as British diplomats", and to maintain "opportunity
for them as well".[58]
33. While we recognise that it is in the FCO's interest
to draw, to a limited extent, on experience from outside the organisation,
we have sometimes been surprised to find key, sensitive posts
occupied by people who have not spent their career in the FCO.
We also find that the practice of appointing Heads of Mission
from outside the FCO on the basis that they are the best applicants
for the posts concerned brings into question the adequacy of the
FCO's staff development. We believe that the head of the UK's
representation in any particular country should only be a non-FCO
career employee in the most exceptional circumstances. However,
we welcome the reassurance by the Permanent Under-Secretary that
he would expect a Head of Mission always to be employed as an
FCO employee. We believe that any other arrangement would obscure
an otherwise clear line of accountability, from heads of mission
to the Permanent Under-Secretary to FCO Ministers.
Staff morale
34. The FCO's 2013-14 Annual Report and Accounts
state that "overall, morale is generally considered to be
high".[59] It is
true that the FCO consistently scores significantly higher than
the Civil Service median for percentages of staff who are proud
to work for the Department, who see it as a great place to work,
and who feel motivated.[60]
The FCO, however, recognised concerns about pay, and the Annual
Report recorded that staff morale was "a static amber risk"
on the FCO's Top Risk Register, given the continuing constraints
on pay.[61]
STAFF PAY
35. The FCO, in its 2014 Departmental Improvement
Plan, reported that the majority of staff are dissatisfied with
their pay and benefits package. Only 33 per cent of staff felt
that their pay adequately reflected their performance, and only
26 per cent believed that their pay was reasonable compared to
that for people doing a similar job in other organisations.[62]
FCO staff pay was frozen for two years, in 2011-12 and 2012-13,
and was subject to an average increase of one per cent in 2013-14,
in line with the Government's public sector pay restraint policy.[63]
Pay: comparison with other Government Departments
36. There is a significant difference between rates
of pay for FCO staff and rates for staff in what might be called
comparable departments, such as the Department for International
Development and the Department for Business, Innovation and Skills.
For instance, the minimum pay for a Grade 7 employee in the Department
for International Development in 2013 was £49,500,[64]
whereas it was £43,500 at the FCO.[65]
Sir Simon Fraser told us that in some key grades, the median of
FCO pay is "somewhere in the region of 10 to 12 per cent
below median pay of those Departments".[66]
He added that there were "historical reasons for that",
the main one being that the FCO had moved very early to remove
incremental pay increases when the Treasury had asked Departments
to do so. Others had done so rather less speedily and, as a consequence,
pay for FCO staff had fallen behind pay for staff in other departments.[67]
37. This discrepancy has emerged as a major obstacle
to full implementation of the 'One HMG Overseas' initiative, under
which the Government plans to derive benefits (including savings)
from bringing together on a single premises or "operating
platform" in any one foreign city the various UK Government
departments and agencies operating there. Significant progress
has been made on various aspects of the programme, but not on
harmonisation of pay between staff working for different departments.
Deborah Bronnert, the Chief Operating Officer at the FCO, told
us that "the pay issue in particular will be very hard to
crack".[68]
38. Sir Simon agreed that the disparity in pay between
the FCO and other Government departments was "undesirable
and illogical", but he emphasised that it was not within
his "power to unilaterally increase the pay of FCO staff"
as he simply did not have the resources from the Treasury to do
so.[69] He said that
he was talking to colleagues in the Treasury about how the situation
might be remedied.[70]
39. We asked the FCO to supply a copy of research
that it had commissioned from an external researcher on comparing
pay between the FCO and other Government departments.[71]
The FCO offered to share the research, but it asked to do so on
condition that we did not publicise the contents, as other Government
departments had required the FCO to give an undertaking that the
report would not be publicised. We rejected those conditions.
It is unacceptable for Government departments to place constraints
on the disclosure of information which directly concerns public
expenditure, is not internal policy advice, and which we suspect
is neither commercially confidential nor likely to present a security
risk if disclosed. We chose, however, not to pursue the matter,
as enough information was already in the public domain to illustrate
the pay disparity.
40. We asked the FCO how much it would cost to remedy
the differences in pay, to the point where FCO staff would receive
equal pay to staff doing comparable jobs in other Government departments.
The FCO estimated, on the evidence available, that raising FCO
median pay so that it was in line with median pay for comparable
departments operating internationally would mean an increase to
the FCO annual pay bill of approximately £20 millionwhich
we calculate to be an increase in total staff costs of 3.4 per
cent.[72]
Reduced benefits of working at the FCO
41. It may be that dissatisfaction reported in the
staff survey also stems, in part, from a sense that many of the
benefits and attractions of working for the FCO have been trimmed
or have declined in value. For instance:
· The number of overseas posts for FCO staff
in administrative grades has been cut substantially, reducing
the opportunities for staff in these grades to work abroad;[73]
· Residential premises for most FCO staff
overseas are likely to be humbler than in the past. The new Residential
Accommodation Policy for UK-based staff working overseas is intended
to reduce spending on rented residential accommodation by 20 per
cent over the Spending Review period. The "ceilings"
for rentals payable by the FCO have been lowered,[74]
and the likely consequence is that affordable properties will
be smaller or less central, and less prestigious; and
· Allowances paid to recognise proficiency
in languages have remained static for years. A recent review of
language allowances concluded that allowances paid to postholders
in 'speaker slots' should remain unchanged. This decision was
based on a number of factors, including pressure to remain within
the HM Treasury one per cent pay cap rule, and strong fields of
applicants for speaker slots.[75]
CONCLUSION ON PAY AND MORALE
42. The pay differential between the FCO and comparable
Government departments is not going to go away. For as long as
there are compensations and significant non-financial benefits
in working for the FCOthe chance to spend much of your
working life overseas, prestige, a good standard of living while
overseas, allowancesthe discrepancy is less noticeable.
But if those benefits are perceived to be diminishing (and for
some grades they have largely disappeared), then the current dip
in morale could become more established and could lead to a lessening
of commitment amongst staff. Ultimately, if the FCO becomes a
less attractive place to work, more and more of the brightest
and best will apply elsewhere.
43. The FCO must continue to ensure that the Department
is an attractive place to work and that it can compete with other
high-prestige employers to attract high-quality applicants. Maintaining
a tradition of excellence will be key, but we believe that the
FCO cannot entirely overlook pay and benefits. The FCO could either
seek to eliminate the pay differential between the FCO and comparable
Government departments: that would require Treasury dispensation
and might cost £20 million, maybe spread over a period of
five years or so; or it could put more resources into safeguarding
the benefits and allowances which are most valued by staff.
Overall conclusion on FCO spending
and impact on capacity and workforce
44. 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. We
continue to see evidence in some overseas posts of a depth of
knowledge and a well-developed relationship with civil society
organisations and representatives. However, we believe that the
scale of the cuts required from the FCO has been excessive and
that damage to the institution has resulted. The FCO's budget
is a tiny element of Government expenditure, but it 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.
45. Unless staffing at overseas posts is protected,
further reductions in staffing levels overall are likely to lead
to either a reduction in complement at overseas posts, or a significant
shift in the balance between UK-based staff and locally engaged
staff, in favour of the latter. Neither option seems to us to
be palatable: the first would almost certainly reduce opportunities
for staff to get away from the diplomatic "bubble" and
acquire the depth of knowledge about local attitudes that must
inform policy-making, while the second would be likely to reduce
the opportunities for more junior staff in policy grades to get
the experience which is essential to qualify them for service
at the highest levels of the Diplomatic Service.
46. The cuts required by the 2010 Spending Review
have also had an impact on the UK's overseas platform, even though
admirable efforts have been made to expand the number of posts
under the Network Shift announced by the previous Foreign Secretary
in May 2011. That expansion took place at the expense of a number
of subordinate posts in Europe and of the UK's diplomatic footprint
in Iraq and Afghanistan. We have previously questioned the wisdom
of closing the British Embassy office in Basra;[76]
and in October 2014 we noted the view of senior figures in the
Kurdistan Region of Iraq that the UK's failure to secure proper
premises in Erbil[77]
had given a poor impression of the UK in comparison to other countries
which had opened permanent offices in the city.[78]
47. 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. The next Government needs to protect
future FCO budgets under the next Spending Review. The FCO already
spends less per head of population than foreign ministries in
our closest comparator countries. The majority of the FCO's expenditure
is either ring-fenced or non-discretionary, and so its scope to
make savings is limited. 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.
3 Only the Department for Communities and Local Government,
HM Treasury, Department for Environment, Food and Rural Affairs
and Business Innovation and Skills faced deeper cuts (in terms
of percentage falls in budgets) than the Foreign Office. See Spending
Review 2010, page 10. Back
4
"Spending reduction in the Foreign and Commonwealth Office",
National Audit Office, HC 826, 29 March 2011, para 4, http://www.nao.org.uk/wp-content/uploads/2011/03/1011826.pdf Back
5
"Spending Review 2010", HM Treasury, Cm 7942, October
2010, page 10, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/203826/Spending_review_2010.pdf
Back
6
The FCO's budget excluding Official Development Aid reduces by
7.8 per cent. Back
7
"Spending Round 2013", HM Treasury, Cm 8639, June 2013,
page 10, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/209036/spending-round-2013-complete.pdf Back
8
Outturn figures for the period 2008-09 to 2013-14 were taken from
the FCO Annual Report and Accounts 2013-14, HC 17, 1 July 2014,
, page 128, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/325896/FCO_Annual_Report_2013-14.pdf
Back
9
Nominal outturn figures have been deflated into 2013-14 prices.
We used the GDP deflators from the Autumn Statement, December
2014 update. See https://www.gov.uk/government/statistics/gdp-deflators-at-market-prices-and-money-gdp-december-2014-autumn-statement Back
10
Outturn figures for 2007-08 were taken from the FCO Annual Report
and Accounts 2012-13, HC 32,1 July 2013, page 25, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/318816/Annual_Report_2012-2013_-_update_June2014.pdf Back
11
Forecast figures were taken from the February 2015 FCO Supplementary
Estimates (HC 1019), pages 399 to 412, and adjusted to 2013-14
prices. See www.gov.uk/government/uploads/system/uploads/attachment_data/file/405331/supplementary_estimates_2014-15_print_with_corrections_slip.pdf Back
12
Six bodies are listed on page 127 of the FCO Annual Report and
Accounts 2013-14 as falling within the FCO accounting boundary:
Wilton Park, The Great Britain-China Centre, The UK China Forum,
The Marshall Aid Commemoration Commission, The Westminster Foundation
for Democracy, and the BBC World Service. Back
13
Forecast figures were taken from the February 2015 FCO Supplementary
Estimates (HC 1019), pages 399 to 412, and adjusted to 2013-14
prices. See www.gov.uk/government/uploads/system/uploads/attachment_data/file/405331/supplementary_estimates_2014-15_print_with_corrections_slip.pdf Back
14
Based on a comparison of Resource Delegated Expenditure Limit
(RDEL) outturn in 2013-14, only the Law Officers' Department,
the Department for Energy and Climate Change, the Department for
Culture, Media and Sport and the Department for Environment, Food
and Rural Affairs spent less than the FCO in 2013-14. See Public
Expenditure Statistical Analyses, HM Treasury, July 2014, Cm 8902,
Table 1.3, page 20, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/330717/PESA_2014_-_print.pdf Back
15
Ibid Back
16
"NAO Departmental Overview: The performance of the Foreign
& Commonwealth Office 2013-14", National Audit Office,
November 2014, page 11, www.nao.org.uk/wp-content/uploads/2014/11/The-performance-of-the-foreign-commonwealth-office-2013-14.pdf Back
17
A crore is a unit in the Indian Numbering System equal to ten
million (10,000,000) Back
18
House of Commons Library compiled this information from the following
sources: Ireland, Foreign Affairs and Trade (excluding aid), approved
expenditure for 2015 163 million; France, Action extérieure
de l'État-2015 budget (credits, excluding CAS pensions
& development aid) 2.818 billion; Germany, Auswärtiges
Amt (Federal Foreign Office)-2014 budget 3.638 billion euro;
Australia, Department of Foreign Affairs and Trade (excluding
aid), 2014-15 estimated expenses AUS $1.77 billion; New Zealand,
Ministry of Foreign Affairs and Trade, estimated actual appropriation,
2013-14 NZ$461m; Canada, Ministry of Foreign Affairs and International
Trade (before merger with aid agency), 2013-14 net operating cost
CAD$ 2,515.044m; United States, US State Department, net cost
fiscal year 2014 US $25.008 billion; South Africa, Department
of Foreign Affairs, 5,754.3 million rand estimated expenditure
for 2014-15 (includes some aid spending); India, Ministry of External
Affairs ?9,662 crore (?96,620,000,000) (may include some overseas
aid); Finland, Ministry for Foreign Affairs appropriation (excluding
development branch) 379.075 million euros 2015; Sweden, International
Cooperation 1.9 Krona billion budgeted for 2015; United Kingdom,
FCO Total Managed Expenditure outturn for 2013-14 from HM Treasury,
Public Spending Statistics Nov 2014; Population data for all countries
is from OECD Stat and is for 2012; Exchange rates were adjusted
for price differences between countries for 2013 (using GDP PPPs
from OECD Stat) Back
19
FCO Annual Report and Accounts 2013-14, page 9, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/325896/FCO_Annual_Report_2013-14.pdf Back
20
Core FCO staff, recruited and employed by the FCO under central
terms and conditions, and based in the UK but sometimes posted
overseas. Back
21
FCO Departmental Improvement Plan 2013, 18 June, page 15, www.gov.uk/government/publications/foreign-commonwealth-office-departmental-improvement-plan/foreign-commonwealth-office-departmental-improvement-plan Back
22
Q1 Back
23
FCO written evidence, see answer to question 8 Back
24
FCO performance and finances 2012-13, Sixth Report, Session
2013-14, HC 696, Summary and paragraph 25, http://www.publications.parliament.uk/pa/cm201314/cmselect/cmfaff/696/69602.htm Back
25
Q2 Back
26
FCO Improvement Plan 2014, July 2014, page 21, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332896/FCO_2014_Improvement_Plan.pdf Back
27
See Foreword by Richard Lambert, the Lead Non-Executive member
of the Supervisory Board, FCO Annual Report and Accounts 2013-14,
page 7. The Supervisory Board is formed of Ministers, senior FCO
officials and non-executive members, and advises on strategic
issues affecting the FCO's operations. See FCO Annual Report
and Accounts 2013-14, pages 7 and 75. Back
28
Q 3 Back
29
Q 12 Back
30
Q 12 Back
31
FCO Improvement Plan 2014, July 2014, page 17, www.gov.uk/government/uploads/system/uploads/attachment_data/file/332896/FCO_2014_Improvement_Plan.pdf Back
32
Q 13-14 Back
33
Ibid Back
34
"Letter to the Chairman from Sir Simon Fraser, Permanent
Under-Secretary, Foreign and Commonwealth Office, on FCO management
issues, January to March 2014, dated 12 May 2014", Committee's
website Back
35
Q 106 and 141, evidence given on 31 January 2012, British foreign
policy and the 'Arab Spring', Second Report of Session 2012-13,
HC 80, http://www.publications.parliament.uk/pa/cm201213/cmselect/cmfaff/80/80.pdf Back
36
"21st Century Diplomats: The Changing Role of
British Diplomats", 22 January 2015, Chatham House, see www.chathamhouse.org/sites/files/chathamhouse/field/field_document/2015012221stCenturyDiplomats.pdf Back
37
"Britain's Foreign Office loses direction as cuts loom",
FT Online, November 2014 Back
38
Evidence given by Edward Lucas on 3 September 2014, Russia
and Ukraine, HC 629, Q19 Back
39
Q 81 Back
40
Q 81 Back
41
Q 121, evidence given on 31 January 2012, British foreign policy
and the 'Arab Spring', Second Report of Session 2012-13, HC 80 Back
42
Former Ambassador to Libya and former Head of the FCO's Near East
and North Africa Department Back
43
Written evidence to the Committee's inquiry into The role of the
FCO in UK Government, HC 665, Session 2010-12, http://www.publications.parliament.uk/pa/cm201012/cmselect/cmfaff/665/665vw17.htm.
See also evidence given by Robin Lamb on 22 January 2013 - Q63,
UK's relations with Saudi Arabia and Bahrain, Fifth Report
of Session 2013-14, HC 88, 12 November 2013, www.publications.parliament.uk/pa/cm201314/cmselect/cmfaff/88/88.pdf Back
44
See Q32, transcript of evidence taken before the House of Lords
Select Committee on the European Union, External Affairs (Sub-Committee
C), 24 July 2014, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-sub-c-external-affairs-committee/eu-and-russia/oral/11587.html
Back
45
Each "speaker slot" carries a requirement for facility
in that language to a specified level. That might be 'confidence'
level, at which someone would be able to deal confidently with
routine everyday issues in the local language, or at a higher
'operational' level, roughly equivalent to degree level, or at
'extensive' level, representing the most advanced level of fluency. Back
46
FCO memorandum answer to Q 10, see http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/foreign-affairs-committee/the-fcos-performance-and-finances-in-201314/written/15560.html Back
47
Q 78 Back
48
FCO response to the Committee's Sixth Report of Session 2014-15,
published as Cm 8797, response to recommendation 12 Back
49
FCO performance and finances 2012-13, Sixth Report of Session
2013-14, HC 696, paragraph 35, http://www.publications.parliament.uk/pa/cm201314/cmselect/cmfaff/696/696.pdf Back
50
FCO written evidence, answer to written question 4 Back
51
See FCO performance and finances 2011-12, Fifth Report
from the Committee, Session 2012-13, HC 690, paragraph 40 Back
52
FCO performance and finances 2012-13, Sixth Report from
the Committee, Session 2013-14, HC 696, paragraphs 34 and 35 Back
53
Government response to the Sixth Report from the Committee, Session
2013-14, recommendation 8, published as Cm 8797 Back
54
Equivalent to the Senior Civil Service Back
55
Q5 Back
56
Ambassadors in Athens, Jakarta, Sofia and Sarajevo; High Commissioner
in Sydney and Deputy High Commissioner in Mumbai; Consuls-General
in New York, Ho Chi Minh City, Guangzhou and Sao Paulo; and UK
Permanent Representative to the EU in Brussels. See written evidence
from the FCO, answer to written question 21 Back
57
Q 59 Back
58
Q 5 and 15 Back
59
FCO Annual Report and Accounts 2013-14, Governance Statement.
page 73 Back
60
Civil Service People Survey 2014 Back
61
FCO Annual Report and Accounts 2013-14, Governance Statement,
page 74 Back
62
FCO Improvement Plan 2014, page 11 Back
63
Pay was frozen for staff in SMS grades for three years, from 2010
to 2013. Back
64
HC Deb, 01 December 2014, UIN 215749 [Commons written answer];
figures rounded up to the nearest £500. Back
65
"FCO staff and salary data", www.gov.uk/government/publications/foreign-office-staff-and-salary-data;
figures rounded up to the nearest £500. Back
66
Q 7 Back
67
Ibid Back
68
Q 9 Back
69
Q 9 and 11 Back
70
Ibid Back
71
Q 7 Back
72
Including associated costs such as pension costs and National
Insurance contributions. See answer to Q 2 of supplementary written
evidence from the FCO. Back
73
See FCO performance and finances 2011-12, Fifth Report
from the Committee, Session 2012-13, HC 690, paragraph 40 Back
74
See FCO performance and finances 2012-13, Sixth Report
from the Committee, Session 2013-14, HC 696, paragraphs 11 and
12 Back
75
FCO written evidence, answer to written question 11 Back
76
See FCO performance and finances 2011-12, Fifth Report
from the Committee, Session 2012-13, HC 690, paragraph 19 Back
77
The Consulate-General operates out of a business hotel on the
outskirts of the city. Back
78
See UK Government policy on the Kurdistan Region of Iraq, Eighth
Report from the Committee, Session 2014-15, HC 564, paragraph
62 Back
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