The hon. Lady is absolutely right—she understands those issues extremely well from her work on the Foreign Affairs Committee and more widely before joining it. That loss of language skills is partly a reflection of just how stretched the FCO is in getting people to the right place, and getting the best people into vacancies to cover the policy challenges we face. An office that is not stretched so tautly has the capacity to get the language skills of its staff up to the necessary standard. Until now, those skills have been the envy of every other diplomatic service in the world. In the last Parliament, it was the priority of William Hague as Foreign Secretary to address that. Serious measures were put in place to try to do so, but the evidence the Committee is taking shows that if it is getting better, it is doing so in a minute way that does not reflect the need for real improvement. That reflects just how tautly the office is being managed under the current budget conditions.
There will be more pressure on the capital budget than usual. The Government response to our report points out that the Foreign Office capital budget will remain “flat”. It says that the FCO will need to fund requirements that cannot be met from the capital budget by disposing of assets, and warns that it may need to call on the Treasury reserve for some large projects. The Foreign Office quite rightly is expected to achieve value for money when disposing of assets, but the ability to do so will partly depend on market forces. As we know from the FCO supplementary estimate, it has already had to call on the Treasury reserve to cover a shortfall that it says is
“due to adverse market conditions in the Far East”.
The FCO IT system, Firecrest, is failing and presents a serious operational risk. Major investment is needed, but that has been stalled during the spending review process. The FCO is going to have to fund its tech overhaul programme from its existing budget: difficult choices will have to be made on procurement, bearing in mind the need for resilience and the particular security requirements of the Department. Careful project management will be needed, and I can only point out that the whole of the public service does not exactly have a shining record in that field. I hope the Foreign Office can help to redress that.
My second key point concerns official development assistance expenditure and the need to rationalise resource allocation. The Committee highlights in the report our uneasiness at the consequences of depending ever more on expenditure that qualifies as official development assistance, and which therefore scores against the Government’s commitment to invest at least 0.7% of gross national income in international development. That risks, and indeed is, skewing the Department’s expenditure away from countries that are not eligible for ODA spending, regardless of where our foreign policy interests lie. For instance, 97% of the funds available under the new human rights funding programme, the Magna Carta fund, are for spending in ODA-eligible countries. When we queried that in oral evidence with the Minister and her officials, we were given the impression that there was some flexibility to divert funding towards non-ODA countries, but we need clear answers. Trying to replace the significant sums the Government have put forward for human rights in the Magna Carta fund with very constrained bilateral funds will not wash. It would be quite unacceptable and counterproductive for human rights programme funding to be virtually denied in non-ODA-eligible countries such as Russia and Israel, and Saudi Arabia and other Gulf states. I hope the Minister can give me some reassurance on that point.
Human rights expenditure is not the only example of how ODA eligibility can determine the Foreign Office’s activities. The current chief operating officer, Deborah Bronnert, told us that the Foreign Office’s non-ODA budget was under particular pressure, and that if there were to be cutbacks in the overseas network, it would have to look first at cutbacks in subordinate posts in developed countries. It hardly plays well with our prosperity agenda if that is where we need to go in terms of our trade and economic relations.
The British Council, which plays a unique role in promoting an understanding by different peoples and nations of what the UK can offer, faces the possibility of losing all grant in aid for work in countries that are
not ODA-eligible. It is looking to cross-subsidise to some extent from other areas of its operation, but the net effect is a decline of our soft power and influence in several growing economies and countries, not least where there are political and human rights concerns.
I have similar concerns about the move within the Government to more pooled funding between Departments. The conflict, stability and security fund, which is currently worth £1.033 billion per year, will increase to £1.33 billion by 2019-20, and a new prosperity fund is being created, worth £1.3 billion. Substantial sums of money have been allocated following a process of negotiation between Departments, and I welcome the concept of a more holistic and integrated approach to funding where Departments are working in different ways towards the same ultimate aims, but the Committee should look carefully at how the FCO fares, for instance when sharing the conflict, stability and security fund with two Departments whose budgets as a proportion of total Government expenditure are both protected.
Finally, the Foreign Office delayed its response to our report until it had received its settlement letter from the Treasury, but I was disappointed that the FCO did not supply the settlement letter, which I understand sets out more detail of the sums available to the Foreign Office from year to year within the period covered by the spending review. In fact, none of the departmental settlement letters has been published. At the moment, we just have rounded figures for budgets for 2015-16 to 2019-20, without any lower-level detail. Will the Minister therefore undertake to supply the Foreign Office settlement letter to the Committee, so that we may publish it and place that essential information in the public domain?
My conclusion relates to the shape of the Foreign Office in the years to come. In his letter responding to our report, the Foreign Secretary said:
“There is more that can be done to strengthen the FCO and build up its world class capabilities. To help achieve this, I have commissioned an internal review of the FCO exploring how we can be more expert, agile and focused on our key priorities. The review will set out a vision of the organisation the FCO should be by 2020.”
I invite the Minister to tell us a little more about that review. Will it be a fundamental review of how the Foreign Office is structured, how priorities are ordered and how staff are deployed; or will it be a motherhood and apple pie statement of vision and aims, full of things no one could disagree with?
In conclusion, the Office remains overstretched and underfunded for the tasks it faces. Its actual funding base is dysfunctional, and if it does not actually distort policy decisions, it certainly means that resource allocation is no longer aligned with actual British interests.
2.10 pm