House of Commons Foreign Affairs Committee
Departmental Annual Report 2010–11
Eleventh Report of Session 2010–12
Report, together with formal minutes, oral and written evidence
Ordered by the House of Commons to be printed 20 March 2012
HC 1618 Published on 13 April 2012 by authority of the House of Commons London: The Stationery Office Limited £15.50
The Foreign Affairs Committee
The Foreign Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Foreign and Commonwealth Office and its associated agencies.
Current membership Richard Ottaway (Conservative, Croydon South) (Chair) Rt Hon Bob Ainsworth (Labour, Coventry North East) Mr John Baron (Conservative, Basildon and Billericay) Rt Hon Sir Menzies Campbell (Liberal Democrat, North East Fife) Rt Hon Ann Clwyd (Labour, Cynon Valley) Mike Gapes (Labour, Ilford South) Andrew Rosindell (Conservative, Romford) Mr Frank Roy (Labour, Motherwell and Wishaw) Rt Hon Sir John Stanley (Conservative, Tonbridge and Malling) Rory Stewart (Conservative, Penrith and The Border) Mr Dave Watts (Labour, St Helens North)
The following Member was also a member of the Committee during the parliament:
Emma Reynolds (Labour, Wolverhampton North East)
Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.
Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including news items) are on the internet at www.parliament.uk/facom. A list of Reports of the Committee in the present Parliament is at the front of this volume.
The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume.
Additional written evidence may be published on the internet only.
Committee staff The current staff of the Committee are Mr Kenneth Fox (Clerk), Mr Eliot Barrass (Second Clerk), Dr Brigid Fowler (Committee Specialist), Ms Zoe Oliver-Watts (Committee Specialist), Mr Richard Dawson (Senior Committee Assistant), Jacqueline Cooksey (Committee Assistant), Vanessa Hallinan (Committee Assistant), and Mr Alex Paterson (Media Officer).
Contacts All correspondence should be addressed to the Clerk of the Foreign Affairs Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 6394; the Committee’s email address is [email protected]
Departmental Annual Report 2010-11 1
Contents
Report Page
Summary 3
Conclusions and recommendations 5
1 The Spending Review 2010 9
2 The Implementation of SR2010 10
3 The FCO’s Overseas Property Network 15
4 Staffing 20 Staffing and Personnel 20 European External Action Service 21 Staffing of Overseas Posts 22
5 Future governance of the World Service 24
6 The British Council 28
Formal Minutes 32
Witnesses 34
List of printed written evidence 34
Departmental Annual Report 2010-11 3
Summary
Despite the impressive performance of the Foreign and Commonwealth Office in representing the UK’s interests across the globe with what is, in Governmental terms, a particularly small budget, we believe that the FCO is under-funded. This situation has been exacerbated by the Spending Review 2010. The lack of detail provided by the FCO and the BBC World Service as to exactly how the spending reductions target set by SR2010 will be met is disappointing. Our last Report into the FCO’s Performance and Finances concluded that the Spending Review 2010 may “have a very damaging effect on the Department’s ability to promote UK overseas interests.” The evidence we have received suggests that this is proving to be the case. We have concerns about the steps taken by the FCO in the past year to adjust to its reduced budget: reductions in the deployment of UK-based staff overseas and the planned programme of property sales will have a detrimental impact on the ability of the UK to protect its interests overseas.
The FCO’s programme of property sales is extremely optimistic, and the plans adopted to meet this target are hampered by Treasury rules on spending which will harm the FCO’s ability to sell a large proportion of its overseas network and reinvest the proceeds elsewhere. Treasury budgetary rules must be loosened if the FCO is to ensure value for money for the taxpayer.
The establishment of the European External Action Service (EEAS) will place a strain on the FCO’s resources. The Government should produce an assessment on whether the EEAS has to date been a help or hindrance to the FCO in promoting and safeguarding the UK’s interests.
While we welcome the appointment of Lord Williams of Baglan to the post of “International Trustee” with responsibility for the BBC World Service and give him our full support, we maintain our earlier belief that a formal concordat governing the World Service’s budget and output should be drawn up setting out the World Service’s independence from budgetary pressures elsewhere in the BBC. The Government should monitor the role and performance of the International Trustee after 2014 when funding responsibility for the BBC World Service will be formally transferred from the FCO.
The budget cuts faced by the British Council – the largest cuts of any member of the “FCO family” – will lead to the Council becoming a substantially different organisation by the end of the Spending Review period. The greater emphasis that the British Council will place on commercial activity risks a diminution of the UK’s influence and soft power. This change is regrettable but understandable given the reduction in the FCO’s grant-in-aid. While we give a cautious welcome to the British Council’s plans, care must be taken to avoid the British Council becoming predominantly an international English language school rather than a promoter of the UK’s reputation, culture and influence.
Departmental Annual Report 2010-11 5
Conclusions and recommendations
1. Despite the impressive performance of the Foreign and Commonwealth Office in representing the UK’s interests across the globe with what is, in Governmental terms, a particularly small budget, we believe that the FCO is under-funded. This situation has been exacerbated by the Spending Review 2010. In this context, we conclude that the lack of detail provided by the FCO and the BBC World Service as to exactly how the spending reductions target set by SR2010 will be met is disappointing. While there is no doubt that meeting the targets set by the Spending Review will be challenging and will require much planning and forethought, it is equally disappointing that the FCO has not yet planned how a reduction of £40 million, or over one-third, of its programme spending will be achieved. (Paragraph 13)
2. Given the lack of detailed plans available for scrutiny we do not at this time pass further comment on the overall strategy pursued by the Foreign and Commonwealth Office and the BBC World Service in meeting its budget reductions, except to reiterate our earlier conclusion that SR2010 may turn out to have had a very damaging effect on the Department’s ability to promote and safeguard UK interests overseas. We would expect information on how the FCO and the BBC World Service plans to reduce its spending throughout the Spending Review – including information on which services or programmes are to be curtailed – to be made available to us in response to this Report. We further recommend that both bodies continue their current welcome practice of writing to us in advance of major announcements and changes to their respective organisations. (Paragraph 14)
The FCO’s Overseas Property Network
3. The “Network Shift” represents a substantial change in the FCO’s global footprint. The recalibration of FCO posts towards growing regional powers and expanding economies is a welcome move, but we regret that this change comes at the expense of, rather than being supplementary to, posts elsewhere. We note that the FCO intends the Network Shift to be resource neutral and that it should not impact on the Department’s financial performance in this, or future, years. (Paragraph 20)
4. We conclude that the FCO’s internal target of achieving £60 million of assets sales per year, and reinvesting this sum back into the overseas network, must be considered extremely optimistic; for this target to be reached, the FCO will need to sell, every year of the spending review period, properties with a total value three times the total value of those properties sold in 2009-10. We believe that the FCO will not be able to reach this target without inflicting serious damage on its overseas network. We will monitor developments in this area closely and we therefore recommend that the FCO henceforth provide regular updates of progress towards meeting the Department’s internal sales and reinvestment target. (Paragraph 26)
5. We further conclude that recently introduced Treasury rules mean that the FCO clearly has incentives to sell property early in the financial year and invest it straight afterwards regardless of market conditions, in order to get “the money out of the door” rather than having to return funds to the Treasury. We do not believe that it
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will be possible for the FCO to ensure value for money for the taxpayer under such conditions, and there must be a strong case for greater flexibility in the application of these rules. We recommend that the Government change the Treasury’s rules in this instance and allow the FCO to carry forward proceeds from asset sales from one year to the next within the Spending Review period giving the FCO more time to reinvest the proceeds in new assets. (Paragraph 27)
6. We have long believed that, if we are adequately to scrutinise the FCO’s performance in managing its overseas properties, we need to be told in advance of the Department’s plans. The agreement of the FCO to inform us of properties which it plans to sell, rather than just those that have been sold, on a quarterly basis is welcome. However, our conclusion in last year’s Report that the FCO’s internal sales target “may create an unwelcome incentive to sell historic or prestigious buildings” has been substantiated by the refusal of FCO officials to rule out unequivocally the sale of iconic or nationally important overseas posts in the life of this Parliament to finance new capital investment. We recommend that, in its response to this report, the FCO rule out the sale of any iconic or nationally important property in the lifetime of this Parliament. Alternatively, if the FCO does intend to sell such buildings in the life of this Parliament, we recommend that the FCO highlights any iconic or nationally important properties when it fulfils its commitment to provide the Committee with a list of properties it plans to sell. (Paragraph 32)
Staffing
7. The “Diplomatic Excellence” programme, and the consequent emphasis on increased skills for UK diplomats, is welcome. However, we question whether it will be able to reverse the long-term trend for the FCO to emphasise “management” over “traditional” diplomatic skills. We recommend that the FCO view the “Diplomatic Excellence” programme as the start of a process which will ultimately lead to a re- prioritisation of diplomatic skills within the FCO; such a process may eventually require a change in promotion criteria. (Paragraph 37)
8. We acknowledge the Foreign Secretary’s commitment that the EEAS will not be a substitute for UK delegations overseas. However, the EEAS will impact on the FCO’s capacity to promote and safeguard the UK’s interests overseas. A recruitment freeze on the FCO throughout the Spending Review period will see a reduction in FCO headcount; at the same time the FCO aims to ensure that UK diplomats are working within the EEAS. The establishment of the EEAS will therefore place further strain on the FCO’s resources. We recommend that, in response to this Report, the FCO sets out the number of UK-based staff it hopes will enter the EEAS and how this cohort of talented UK staff based in the EEAS will impact on the FCO’s ability to conduct foreign policy. We further recommend that in its response to this Report, the FCO provides an assessment as to whether to date the establishing of the EEAS has been a help or a hindrance to the FCO in promoting and safeguarding the UK’s interests. (Paragraph 40)
9. We conclude that the decision to reduce the number of overseas postings for UK- based FCO staff is an error. We believe that our conclusion last year that the spending reductions demanded by the SR2010 could “have a serious effect in terms
Departmental Annual Report 2010-11 7
of the UK’s relations with other countries, out of all proportion to the amounts of money involved” is borne out by this move. This decision, driven by the desire to save the relatively small sum of £30 million per annum, highlights the strain that successive spending reductions have placed on the FCO’s operations. (Paragraph 44)
10. Aside from the lost opportunities for junior UK-based staff and the consequent and acknowledged harm to staff morale, we conclude this decision could also reduce the ability of the FCO to react to crises overseas. Events of the past year have shown how vital it is that the FCO can respond quickly to developing crises with a cadre of trained staff with experience of the relevant country and region. That the FCO is voluntarily choosing to reduce this resource is a highly questionable decision; we recommend that the Government find the relatively small sums needed to reintroduce overseas postings for A and B Band staff in order to ensure that the FCO possesses the skills and experience to respond to developing crises overseas. (Paragraph 45)
Future governance of the World Service
11. We have reported already to Parliament on the World Service’s plans to adjust to a reduced Government grant-in-aid by reducing services. In response to our Report, the FCO allocated additional funding to the World Service in order to preserve some important services. We do not intend to expand upon our earlier Report conclusions here, except formally to welcome the additional money allocated by the FCO to the World Service in June 2011. (Paragraph 51)
12. In our Report earlier this year, we made a firm recommendation that a formal concordat giving the Foreign Secretary the power to stipulate a minimum level of service provision and strengthening BBC World Service representation at the highest levels of BBC governance was necessary if the World Service was to be protected from financial pressures originating elsewhere in the BBC. We are disappointed that the Government rejected our recommendation. However, we have noted Lord Patten’s assurances that the more “informal” governance arrangements to be put in place can provide the level of budgetary protection the World Service needs. This places a large responsibility on the performance of the International Trustee and we seek assurances that the support shown by Lord Patten to the World Service is shared by all members of the BBC Trust. (Paragraph 52)
13. We plan for our evidence sessions with the Chairman of the BBC Trust and the International Trustee to become an annual arrangement. The transfer of funding responsibility to the BBC from the FCO will inevitably reduce Parliamentary oversight of the World Service by preventing the tabling of written or oral questions to Government Ministers on the performance of the BBC World Service. In this context, we welcome the assurances from Lords Patten and Williams that the transfer of funding responsibility for the BBC World Service from the FCO should not diminish this Committee’s oversight of the operation of the World Service. If from our regular sessions it becomes clear that the governance arrangements are not working adequately, we reserve the right to again recommend that the more formal concordat, as we originally recommended in April 2011, be immediately drawn up and adopted. We further recommend that the Foreign Secretary do not rule out
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using his influence, as the man who currently holds the purse strings, to insist that Lord Williams’ role be amended to give him, ex officio, a place on the BBC Executive Board. (Paragraph 53)
The British Council
14. In last year’s Report we concluded that the SR2010 financial settlement would put the British Council’s budget under “great strain” and “may well trigger some fundamental rethinking of the role and work of the Council”. One year later, we conclude that this is indeed the case. The planned reductions in the Council's presence in the developed world have been directly attributed to a reduction in the FCO’s grant-in-aid and the wider changes announced by the British Council in response to the sharply reduced grant–in particular the much greater emphasis on commercial activity–will lead to the British Council becoming a substantially different organisation by the end of the Spending Review period. (Paragraph 62)
15. We stated last year that SR2010 posed a significant challenge to the British Council and we are pleased to see this challenge tackled and a plan put in place to adapt to a change in financial circumstances. However, we remain concerned that such an emphasis on commercial activity will detract from the British Council’s primary purpose to “build engagement and trust for the UK through the exchange of knowledge and ideas between people worldwide”. We accept that in many ways commercialisation of the British Council is unavoidable and driven by decisions made by central Government, but nevertheless we remind the British Council that it must place its primary purpose at the core of all its activity, commercial or otherwise, and must not become predominantly an international English language school rather than a promoter of the UK’s reputation, culture and influence. (Paragraph 63)
Departmental Annual Report 2010-11 9
1 The Spending Review 2010
1. As part of the Foreign Affairs Committee’s remit to examine the “expenditure, policy and administration” of the Foreign and Commonwealth Office (FCO), it has been our practice– and that of our predecessor Committees – to carry out an annual inquiry into the FCO’s Departmental Annual Report. This inquiry has scrutinised how the FCO has managed its resources and the Department’s overall performance. We have performed similar scrutiny on the two main bodies funded via FCO grant-in-aid, the British Council and the BBC World Service.
2. Accordingly, we resolved that this year’s inquiry into the Departmental Annual Report 2011 would focus on the implementation of the spending reductions laid out in the Spending Review (SR2010) by the FCO and its associated bodies. On 2 February 2011, we produced a substantial Report into the FCO’s Performance and Finances with a particular focus on the outcome for the Foreign Office and its associated bodies of the Spending Review 2010.1
3. As part of this inquiry, we took oral evidence from Simon Fraser CMG, Permanent Under-Secretary, Matthew Rycroft, Chief Operating Officer, and Iain Walker, Deputy Finance Director, FCO; Lord Patten of Barnes, Chairman of the BBC Trust, Peter Horrocks, Director, Richard Thomas, Chief Operating Officer, and Jim Egan, Controller, Strategy and Distribution, BBC Global News; Sir Vernon Ellis and Martin Davidson, Chairman and Chief Executive respectively of the British Council. Given our particular interest in the new governance arrangements for the management of the BBC World Service,2 we took further oral evidence, as part of this inquiry, from Lord Williams of Baglan, the BBC Trust’s newly appointed International Trustee. In addition, we have received 23 items of written evidence, and briefing papers prepared by the House of Commons Scrutiny Unit and the National Audit Office. We thank everyone who contributed to this inquiry.
4. In our Report, published on 2 February 2011, and produced in the immediate aftermath of the Spending Review, we concluded that the FCO was a “major departmental loser” in the Spending Review and that the spending cuts demanded by the Spending Review had the potential to do serious harm to the FCO’s ability to promote the UK’s interests overseas. This inquiry, dealing chiefly with the immediate implementation of the spending cuts demanded by the Spending Review 2010, indicates that our initial conclusions were correct.
1 Foreign Affairs Committee, Third Report of Session 2010-11, FCO Performance and Finances, HC 572 2 See: Foreign Affairs Committee, Sixth Report of Session 2010-12, The Implications of Cuts to the BBC World Service, HC 849.
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2 The Implementation of SR2010
5. The large spending reductions demanded of the FCO and its associated bodies by the SR2010 should not be seen in isolation but instead as part of a long-term pattern of reductions in the FCO’s budget. Giving evidence to us as part of our inquiry into British foreign policy and the “Arab Spring”: The Transition to Democracy, Lord Malloch-Brown, a former FCO minister, described the previous Government as embarking on:
the strangest model of cost-cutting ... which was that you expand programme and investment but cut headcounts and buildings, basically. This fell astonishingly disproportionately on the Foreign Office, which is all people and some rather grand buildings. The whole model of Treasury-driven cuts over the previous Government cut into the bone of the Foreign Office.3
In 2009-10, the then Permanent Secretary, Sir Peter Ricketts, told our predecessor Committee that “pretty drastic” measures were needed if the FCO was to remain in budget that year. Together with our colleagues on the Committee of Public Accounts, we and our predecessor Committees have reported on the FCO’s progress in implementing a series of planned, and unplanned, spending cuts.4
6. The FCO’s difficulties in this area are compounded by the distinctive characteristics of the FCO’s budget:
• The FCO’s budget is already small. Less than 1% of Government spending is on the Foreign and Commonwealth Office, and the entire spending of the FCO, including grants to the British Council and BBC World Service, is less than the spending of Kent County Council.5
• A relatively large proportion of the FCO’s spending is inflexible because it is committed to staff salaries, buildings and grants to other organisations such as the BBC World Service rather than programme spending. The FCO is further responsible, along with the Treasury for paying the UK’s subscriptions to the UN and other international organisations.6 The NAO estimates that less than half of the FCO’s total budget is available for “direct spend”.7
7. We noted the long-term trend of reductions to the FCO’s budget in our Report last year and concluded that “cuts to the core FCO budget even of 10% may have a very damaging effect on the Department’s ability to promote UK interests overseas, given that these will
3 Oral evidence taken before the Foreign Affairs Committee on 31 January 2012, HC (2010-12), 1672-iii, Q141 4 See for example: Committee of Public Accounts, Forty-Eighth Report of Session 2010-12, Spending reduction in the Foreign and Commonwealth Office, HC 1284 5 Oral Evidence taken before the Foreign Affairs Committee on 8 September 2010, HC (2010-12), HC438-I, Q 15 6 Subscriptions to International Organisations are split on a 40/60 basis between the FCO and the Treasury. According to the NAO, subscriptions to international organisations cost the FCO £0.17billion in 2010-11. This was 6.5% of its total budget. 7 A Summary of the NAO’s work on the Foreign and Commonwealth Office 2010-11, National Audit Office, September 2011, page 8
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come on top of previous cuts to the FCO’s budget in the very recent past.” Given the scale of the task that faces the FCO and its associated bodies we were keen to monitor throughout this Parliament the effect of SR2010 on the core performance of the FCO, BBC World Service and British Council, staffing levels in those organisations, and the Department’s overseas network.
The Foreign and Commonwealth Office
8. In evidence to this year’s inquiry, The Foreign Office told us that it would implement the spending reductions demanded by SR2010 by acting in three main areas or “strands”:
• The Estate strand: “we are seeking to make £34m savings in our annual estates and security running costs. As part of this we are currently reviewing the scale and level of residential accommodation we provide overseas.”
• The Corporate Services strand: “The majority of this saving will come from reducing our numbers of locally-engaged support staff; and, where possible, consolidating corporate functions into regional hubs or bringing them back to the UK to maximise efficiency.” Simultaneously, the role of locally-engaged staff will change and their use in other areas will increase, “The localisation of corporate services and support positions overseas is delivering benefits – annual savings of £12m by March 2012.”
• The Human Resources strand: reducing staff costs by “reducing to a minimum the number of junior staff posted overseas from London, by removing or reorganising their positions or recruiting locally”. The FCO estimates savings of £30 million per year from this process.8
9. The majority of the money allocated to the FCO by the Treasury is not available to the FCO as direct spend. 44% of the FCO’s budget is spent on grants to various outside organisations: to the BBC World Service (approx. 10%), the British Council (approx. 7%), contributions to the cross-Governmental conflict prevention pool (approx. 20%) and the UK’s subscriptions to international organisations (a further 6.5%).9 A further large proportion of the Department’s budget must be allocated towards the upkeep and maintenance of the FCO’s overseas network. Changes to the Department’s overseas network were announced on 11 May 2011 and are analysed below. However, even accounting for these other demands on the Departmental budget, a significant proportion of the FCO’s budget remains discretionary and is allocated to the programme budget. It is this area, of discretionary or “direct” spend, that is likely to see the largest reductions in spending.
10. Simon Fraser, Permanent Under-Secretary, FCO was unable to tell us exactly how the SR2010 would impact on the FCO’s discretionary spending. He told us:
8 Ev 40-41, paras 12 and 14 [Simon Fraser CMG] and Letter to the Committee from Simon Fraser CMG dated 23 February 2011 9 Summary of the NAO’s work on the Foreign and Commonwealth Office 2010-11, National Audit Office, September 2011, page 8
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For the programme budget, which is discretionary expenditure on different aspects of foreign policy, we have made plans to reduce it over the spending round period. It is currently around £140 million. The Foreign Secretary has said that that will have to come down over the spending round period to a figure not lower than £100 million, but we have not yet planned precisely how that will happen.10
We were further told that where decisions had been made, it was too early to say what the impact on the Department would be as the FCO was only at the beginning of the “implementation phase” and “further difficult decisions” would have to be taken. Despite this, he was “confident” that the FCO would adapt to the spending reductions demanded in the Spending Review 2010.11
BBC World Service
11. Like the FCO, the BBC World Service faced a long series of budget reductions even before the Spending Review 2010. In evidence to our inquiry this year, Lord Patten noted that:
Although the World Service has sometimes been protected from the most savage instincts of the Treasury public spending division, you could not say that it had done fantastically well over the years in the allocation of public funds.12
The cuts announced by the BBC World Service in immediate response to the Spending Review came after a period of “lean” spending for the World Service. The BBC World Service’s initial response to the SR2010 was announced in January 2011. Under these plans, the BBC World Service announced the full closure of five language services, the end of radio distribution in a further seven and a phased withdrawal from “most” short wave and medium wave distribution. This would lead to 650 post closures by 2014-15, 480 in that financial year. We reported extensively on these changes in April 2011.13 Following the publication of our Report, the Foreign Secretary announced further funding for the World Service to mitigate some of the effects of the initial budget reduction. In a letter to us of 20 June 2011, the Foreign Secretary announced funding of £2.2 million per annum until 2014- 15 which would continue the operation of the BBC Arabic Service; further funding for the World Service under the Arab Partnership;14 and an arrangement whereby the Government agreed that if the World Service’s contributions to the wider BBC’s pension deficit were less than the £13 million already provided by the FCO, the World Service would be able to keep the surplus. We were told in November that this surplus equates to
10 Q 3 11 Qq 1-5 12 Q 113; See also: Q 114 and Q 117 13 Foreign Affairs Committee Sixth Report of Session 2010-12, The Implications of Cuts to the BBC World Service, HC 849 14 The “Arab Partnership” is a direct aid programme to those countries which have overthrown dictatorships during the ‘Arab Spring’. It provides funding to organisations in these countries which are working to promote democracy, political pluralism and good governance. The UK has pledged £110 million over four years to the Partnership.
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extra funding of £9 million over the spending review period. Some of this surplus has allowed the maintenance of the BBC Hindi shortwave service for at least one year.15
12. As a result of the changes announced in June, the BBC World Service’s savings target over the Spending Review period has been reduced from £46 million to £42 million. The World Service estimates that the changes announced in January, and subsequently revised in June, will save approximately £30 million. A further £12 million of savings will have to be found over the next two financial years. We asked Peter Horrocks, Director, BBC World Service, where he anticipated these cuts would come from. He told us that plans to meet the £12 million target were neither finalised or announced, but he did not rule out further reductions in services.16
13. Despite the impressive performance of the Foreign and Commonwealth Office in representing the UK’s interests across the globe with what is, in Governmental terms, a particularly small budget, we believe that the FCO is under-funded. This situation has been exacerbated by the Spending Review 2010. In this context, we conclude that the lack of detail provided by the FCO and the BBC World Service as to exactly how the spending reductions target set by SR2010 will be met is disappointing. While there is no doubt that meeting the targets set by the Spending Review will be challenging and will require much planning and forethought, it is equally disappointing that the FCO has not yet planned how a reduction of £40 million, or over one-third, of its programme spending will be achieved.
14. Given the lack of detailed plans available for scrutiny we do not at this time pass further comment on the overall strategy pursued by the Foreign and Commonwealth Office and the BBC World Service in meeting its budget reductions, except to reiterate our earlier conclusion that SR2010 may turn out to have had a very damaging effect on the Department’s ability to promote and safeguard UK interests overseas. We would expect information on how the FCO and the BBC World Service plans to reduce its spending throughout the Spending Review – including information on which services or programmes are to be curtailed – to be made available to us in response to this Report. We further recommend that both bodies continue their current welcome practice of writing to us in advance of major announcements and changes to their respective organisations.
15. The lack of detail provided by the FCO and the BBC World on the broad strategy they will follow to meet the SR2010 spending reductions prevents us passing comment upon the FCO and the BBC World Service’s plans. Accordingly, we present the evidence we have received to the House without detailed analysis. However, we draw the House’s particular attention to the following areas of interest which we will address in the following chapters:
• The FCO’s Overseas Property Network and the “Network Shift”;
• Staffing;
15 Letter to the Committee from Rt Hon William Hague MP, dated 20 June 2011. Available on the Committee’s website. 16 Qq 129-130
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• The future governance arrangements for the BBC World Service;
• The performance of the British Council.
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3 The FCO’s Overseas Property Network
16. Notwithstanding the lack of detail available from the FCO about how the Spending Review 2010 will shape the Department, it is apparent that substantial changes will occur to the FCO’s overseas property network. Major changes will be made to both the number and location of posts, and to how these posts are staffed.
17. Separate to any programme of property sales demanded by reductions in the capital budget, the FCO has also announced a large change in its overseas network. This “Network Shift” was announced as “a substantial reinvigoration of the diplomatic network to make it ready for the 21st Century”. In an oral statement to the House in May 2011,17 the Foreign Secretary set out the changes that would occur to the overseas network over the life of this Parliament, including:
• 30 more staff to be placed in India and “up to 50” in China;
• New embassies to be opened in El Salvador, Kyrgyzstan, South Sudan, Madagascar and Somalia;
• A “significant expansion of diplomatic strength” in Brazil, Turkey, Mexico and Indonesia;
• Seven new consulates-general to be opened in emerging powers;
• Additional staff in a further 18 countries; and
• A closure of “subordinate posts in Europe outside capital cities” and a withdrawal of diplomatic staff from some posts.
18. These changes will lead to 72 extra UK diplomats and 107 extra local staff being employed in overseas posts. The FCO told us that because of “a need to build up language capability” the announced changes would not take place until 2013-14.18 The FCO states that the “Network Shift” is expected to be resource neutral; the £15 million cost associated with the Shift will be met from the closures and reductions in European subordinate posts, a reduced presence, especially in security, in the posts in Afghanistan and Iraq and a reduction in administration costs across the network.19
19. The Permanent Under-Secretary, Simon Fraser, told us that the Network Shift involved a re-allocation of 8% of the FCO’s diplomatic resources and aimed to transfer the UK’s diplomatic power to the emerging economies and countries which would be important to the UK’s interests in the next ten or twenty years. He suggested that the timetable for the “Shift” was flexible and to a degree was dependent on the security situation in Iraq and Afghanistan. If the security situation in these countries did not improve and the FCO was
17 HC Deb 11 May 2011, col 1166 18 Ev 41, para 16 19 HC Deb 11 May 2011, col 1166; See also: Ev 41, para 19
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unable to reduce the security overheads associated with these posts, “it could have an impact on the speed with which we are able to make the redeployment.”20
20. The “Network Shift” represents a substantial change in the FCO’s global footprint. The recalibration of FCO posts towards growing regional powers and expanding economies is a welcome move, but we regret that this change comes at the expense of, rather than being supplementary to, posts elsewhere. We note that the FCO intends the Network Shift to be resource neutral and that it should not impact on the Department’s financial performance in this, or future, years.
Recycled assets
21. The FCO’s capital budget will halve over the Spending Review period, with most of the reduction to have been achieved in the financial year 2011-12. The table below sets out the FCO’s capital budget over the Spending Review period:
baseline £m nominal 2010-11 2011-12 2012-13 2013-14 2014-15 Capital 200 107 102 102 98
22. Giving evidence to last year’s inquiry, Mr James Bevan, the then Director General, Change and Delivery at the FCO described the FCO’s capital settlement as “tight” and one which did not give the Department “all the capital we want, [but] all the capital we need”.21 The capital budget, as set out above, assumes that the FCO will sell capital worth a net £10 million each year of the spending review period.22 Separate to these arrangements, the FCO has negotiated with the Treasury an agreement that capital gained through “recycling assets” (i.e. money raised from selling buildings) could be reinvested by the FCO into the network. The agreement allows for “up to £100 million” in recycled assets to be retained each year. The FCO aims to generate and reinvest £240 million over four years under this arrangement at an average of £60 million per year.23
23. By any measure, this internal target of asset sales – £240 million over four years – must be viewed as ambitious. The FCO’s global network has an estimated value of £2 billion.24 The FCO’s property sales target therefore involves the sale of over 10% of the network by the end of the Spending Review period. The FCO’s internal target of average annual sales of £60 million will require a 300% increase on the level of sales it achieved in 2010–11, when property worth £19.4 million was disposed of under a similar “recycled assets” scheme.25 Moreover, the £240 million that the FCO aims to release for reinvestment
20 Qq 27-28 21 Foreign Affairs Committee, Third Report of Session 2010-12, FCO Performance and Finances, HC 572, Qq 181-184 22 Ev 46 [FCO] 23 Qq 33-34 24 Q 34 25 Committee of Public Accounts, Forty-Eighth Report of Session 2010-12, Spending reduction in the Foreign and Commonwealth Office, HC 1284, Ev 17
Departmental Annual Report 2010-11 17
through capital sales amounts to over half its capital budget over the Spending Review period.26 Thus, the FCO is effectively relying on asset sales to fund a significant proportion of its capital plans.
24. The reliance of the FCO’s capital plan on asset sales adds an inherent degree of uncertainty into the FCO’s capital planning process. A significant proportion of the FCO’s funding for capital plans is not available from the beginning of the financial year but is instead dependent on sales of other parts of the network. This makes financial management a difficult task, as Mr Rycroft told us:
asset sales are lumpy ... you get a big amount when you make a big sale, and you cannot be sure that you are going to get exactly £5 million in each month of each financial year for the four years, and we are not on track to do that.27
A further problem faced by the FCO will be that the Department is selling large swathes of its overseas network across many different countries and legal systems. As Matthew Rycroft put it, there is the complexity of selling part of a global network, for example, local laws prevent posts being bought or sold and in some countries the FCO is not allowed to own property.28
25. Finally, and perhaps most crucially, the FCO’s ambitious plans are hobbled by Treasury rules which mean that the FCO needs to time its asset sales and acquisitions carefully to avoid losing sale proceeds to the Treasury. The FCO’s agreement with Treasury only allows for “up to £100 million” in recycled assets to be retained each year. Even when the FCO receives less than £100 million in assets sales in any given financial year, there are restrictions on the Department carrying forward proceeds from asset sales from one year to the next to fund capital investment in future years. As Mr Rycroft told us:
We need to make sure that in each financial year, we do not sell too much, because if we sold more than we then spent, that would be money lost from our estate—it would go back to the centre, to the Treasury.29
In a subsequent letter to us, Simon Fraser confirmed that, “The settlement itself does not allow the FCO to carry forward any proceeds from asset sales into future financial years.” However, Mr Fraser did note the existence of the “Budget Exchange” system which has replaced the “End Year Flexibility” system. “Budget Exchange” allows Government departments to carry forward some underspend from one year to the next. Under this system, the FCO can carry forward “2% of its capital allocation to the next financial year”30 which in the FCO’s case is around £2 million. However this amount must be set against a target of annual sales of £60 million.
26 Total capital budget over four years of spending review period = £409 million. Capital generated by asset sales of £240 million will therefore represent 58% of the Department's capital budget. 27 Q 34 28 Q 34 29 Q 34 30 Ev 46
18 Departmental Annual Report 2010-11
26. We conclude that the FCO’s internal target of achieving £60 million of assets sales per year, and reinvesting this sum back into the overseas network, must be considered extremely optimistic; for this target to be reached, the FCO will need to sell, every year of the spending review period, properties with a total value three times the total value of those properties sold in 2009-10. We believe that the FCO will not be able to reach this target without inflicting serious damage on its overseas network. We will monitor developments in this area closely and we therefore recommend that the FCO henceforth provide regular updates of progress towards meeting the Department’s internal sales and reinvestment target.
27. We further conclude that recently introduced Treasury rules mean that the FCO clearly has incentives to sell property early in the financial year and invest it straight afterwards regardless of market conditions, in order to get “the money out of the door” rather than having to return funds to the Treasury. We do not believe that it will be possible for the FCO to ensure value for money for the taxpayer under such conditions, and there must be a strong case for greater flexibility in the application of these rules. We recommend that the Government change the Treasury’s rules in this instance and allow the FCO to carry forward proceeds from asset sales from one year to the next within the Spending Review period giving the FCO more time to reinvest the proceeds in new assets.
The sale of iconic properties
28. The scale of property sales envisaged over the next four years caused us to fear that the FCO would be forced to sell iconic or otherwise nationally important buildings to meet the internal sales target and to fund necessary capital investment. We recalled the commitment we had received during last year’s inquiry that the FCO would not meet its sales target by “sell[ing] off the icons”.31 This commitment appears to be have been diluted. Mr Matthew Rycroft, Chief Operating Officer at the FCO, ruled out the sale of so-called “designated” buildings in the first financial year of the spending review period, but beyond that he was less confident. He warned us that “As time goes on, Ministers will face some difficult decisions” and that “it will be difficult to live within our settlement in this area”.32
29. The FCO has informed us, and our predecessor Committee, of sales of the FCO’s overseas network on a quarterly basis since the 2003-04 Parliamentary Session. These quarterly letters have been reported to the House as evidence to our annual “FCO Performance and Finances” inquiries. In addition to informing the House of recent property sales in this fashion, our predecessor Committee was occasionally informed in advance and in confidence of upcoming sales of particular importance; for example, in 2006, the then Committee was informed of plans to sell the British Embassy compound in Bangkok. The FCO has recently reiterated its commitment to report sales to the Committee, and through the Committee, the House, on a quarterly basis.33
31 Foreign Affairs Committee, Third Report of Session 2010-12, FCO Performance and Finances, HC 572, Q 186 32 Q 36 33 Ev 41, para 12
Departmental Annual Report 2010-11 19
30. While the efforts of the FCO have been welcome and useful, we remained concerned that, given the scale of property sales over the next four years, by being informed of property sales only after they are completed, we were unable to provide adequate scrutiny of the FCO’s property management programme. We were particularly concerned that Parliament was not informed in advance of sales of iconic or otherwise nationally important buildings. We felt that a decision to sell such a property needed to be shared with this Committee as early as possible and definitely before the completion of any sale. We accordingly wrote to Simon Fraser on 15 November 2011 requesting that, in addition to the information provided in his quarterly letters, we be provided, in the strictest confidence and on an annual basis, with information of planned property sales.
31. Mr Fraser replied to us on 28 November 2011 pledging to include in his quarterly letters information on those properties which had recently been placed on the market, as well as those which had been sold. However, the asking price of those properties would not be made public as this “would harm the taxpayer’s interest if we were to reveal what we assess the property could fetch”. Mr Fraser further pledged to consult the Foreign Secretary on how best to inform Parliament of the sale of “designated” buildings. The first list of properties which had been placed on the market by the FCO in the previous three months arrived as an Annex to the FCO’s quarterly “Management Issues” letter of 26 January 2012 which is published as evidence to this inquiry; his letter further contained a commitment to “provide, in the strictest confidence, a list of properties which [the FCO is] considering selling in the coming year, on an annual basis”. 34
32. We have long believed that, if we are adequately to scrutinise the FCO’s performance in managing its overseas properties, we need to be told in advance of the Department’s plans. The agreement of the FCO to inform us of properties which it plans to sell, rather than just those that have been sold, on a quarterly basis is welcome. However, our conclusion in last year’s Report that the FCO’s internal sales target “may create an unwelcome incentive to sell historic or prestigious buildings” has been substantiated by the refusal of FCO officials to rule out unequivocally the sale of iconic or nationally important overseas posts in the life of this Parliament to finance new capital investment. We recommend that, in its response to this report, the FCO rule out the sale of any iconic or nationally important property in the lifetime of this Parliament. Alternatively, if the FCO does intend to sell such buildings in the life of this Parliament, we recommend that the FCO highlights any iconic or nationally important properties when it fulfils its commitment to provide the Committee with a list of properties it plans to sell.
34 Ev 60 [FCO]
20 Departmental Annual Report 2010-11
4 Staffing
Staffing and Personnel
33. The long-term reductions in the FCO’s budget has undoubtedly led a reduction in the number of staff employed by the FCO. As Lord Malloch-Brown put it to us, the Government has, over a long period, reduced spending on staff and buildings in favour of programmes. This has disproportionately damaged the FCO and led to a concern that the quality of political analysis and amount of understanding of developments in a region has correspondingly fallen. We put these points to Simon Fraser, drawing particular attention to the ability of the FCO to accurately predict and react to the “Arab Spring”. While he agreed that “there was always room for improvement” he was confident the FCO “did have people with regional and linguistic expertise” in Post. Mr Fraser further noted that, to strengthen the FCO’s performance in this area, the FCO was increasing its language training budget by 60% over two years to £4.8 million with a particular focus on Arabic and Mandarin. This increased funding was part of the FCO’s “Diplomatic Excellence” programme.35
Diplomatic Excellence
34. The “Diplomatic Excellence” programme is promoted by the FCO as the means to “enhance the cutting edge abilities and diplomatic skills ... skills in negotiation, analysis, difficult languages, economics and policy making.” In addition to the increased funding available for language training and the re-opening of the FCO’s in-house teaching centre, the programme has also seen the establishment of a new Economic Unit and the launch of Commercial Diplomacy courses, the creation of the Locarno Group of former Ambassadors and senior officials and a doubling of days allocated to FCO staff training.36
35. While these measures were welcome, it was not clear how much impact the “Diplomatic Excellence” programme would have on the FCO’s performance and culture. We had previously criticised the FCO’s emphasis on “management” as opposed to “diplomatic” skills37 and we were unsure whether the “Diplomatic Excellence” programme would change this. Mr Fraser suggested that the provision of the programme was part of wider package of measures based on creating:
a very strong sense in the Office at the moment that we are putting a lot of weight on the quality of policy advice, policy thinking and people’s contribution to that.38
He further suggested that there may be a case for creating “more opportunity for people who perhaps stand aside a bit from the management structure and who are specifically
35 Q 92 36 “The best diplomatic service in the world: strengthening the Foreign and Commonwealth office as an institution”, Speech by the Foreign Secretary, 8 September 2011. See also: Ev 54 [FCO] 37 See: Foreign Affairs Committee, Seventh Report of Session 2010-12, The Role of the FCO in UK Government, HC 665, para 164 38 Q 95
Departmental Annual Report 2010-11 21
taken on to develop those particular [“traditional” diplomacy] skills”.39 However, he disagreed with a suggestion that the best way to promote these skills was by changing the promotion criteria to emphasise competence in these areas:
I don’t think it would be appropriate to change the appraisal system in the Foreign Office, which is basically a competence-based system at the moment, because it has served us well and it gives a common base against which everybody can be assessed. That is important, and changing it would take a long time and would absorb a lot of administrative effort.40
36. The “Diplomatic Excellence” programme will be open to all FCO staff – both UK-based and locally-engaged – including the “about 20 ... policy entrants” who will enter the FCO under the civil service fast-stream. The fast-stream is the one exception to the recruitment freeze that is otherwise in place throughout the FCO.41
37. The “Diplomatic Excellence” programme, and the consequent emphasis on increased skills for UK diplomats, is welcome. However, we question whether it will be able to reverse the long-term trend for the FCO to emphasise “management” over “traditional” diplomatic skills. We recommend that the FCO view the “Diplomatic Excellence” programme as the start of a process which will ultimately lead to a re- prioritisation of diplomatic skills within the FCO; such a process may eventually require a change in promotion criteria.
European External Action Service
38. The European External Action Service has been established as a single service bringing together departments and officials currently in the European Commission, departments and officials currently in the Council Secretariat, and seconded national diplomats, under the authority of the EU Representative for Foreign Affairs and Security Policy (Baroness Ashton of Upholland). The EEAS presently contains around 3500 staff in 130 missions. According to Baroness Ashton, most of these staff were previously “Commission officials who were sent to different countries to do essentially economic and development work”, but there is a requirement that one-third of the staff be made up of diplomats from member states’ foreign services who will be seconded to the EEAS for a period of up to eight years.42 Baroness Ashton went on to explain the role of the EEAS in relation to the foreign services of member states:
The European Union missions do a different job. First, they try to co-ordinate what is going on between the different member states. Secondly, they are responsible for the development aid from the European Union that is spent in those countries.
39 Q 95 40 Q 96 41 Q 75 42 Oral evidence before the Foreign Affairs Committee on 21 November 2011, HC 1642-I, Qq 19-21. Available on the Committee’s website.
22 Departmental Annual Report 2010-11
Thirdly, they try to sort out trade agreements on behalf of all 27 and they try to work on some of the security and other issues that we have, so they are not replicating.43
39. The Government has been keen to stress that the establishment of the EEAS should not impact on the UK’s foreign policy, staffing and the maintenance of UK posts overseas. Announcing the “Network Shift” in May 2011, the Foreign Secretary clarified that:
Although we are working closely with the new European External Action Service and ensuring that talented British candidates enter it, there is not and will never be any substitute for a strong British diplomatic service that advances the interests of the United Kingdom. We can never rely on anyone else to do that.44
40. We acknowledge the Foreign Secretary’s commitment that the EEAS will not be a substitute for UK delegations overseas. However, the EEAS will impact on the FCO’s capacity to promote and safeguard the UK’s interests overseas. A recruitment freeze on the FCO throughout the Spending Review period will see a reduction in FCO headcount; at the same time the FCO aims to ensure that UK diplomats are working within the EEAS. The establishment of the EEAS will therefore place further strain on the FCO’s resources. We recommend that, in response to this Report, the FCO sets out the number of UK-based staff it hopes will enter the EEAS and how this cohort of talented UK staff based in the EEAS will impact on the FCO’s ability to conduct foreign policy. We further recommend that in its response to this Report, the FCO provides an assessment as to whether to date the establishing of the EEAS has been a help or a hindrance to the FCO in promoting and safeguarding the UK’s interests.
Staffing of Overseas Posts
41. One of the few concrete announcements made on the future structure of the FCO concerns the staffing of overseas posts. On 23 February 2011, Simon Fraser wrote to inform us of a plan to end nearly all overseas FCO postings for most junior UK-based staff (A and B Band staff). By April 2015, the number of A and B staff posted abroad will fall from 450 to a figure “in the region of 50”. In his letter, Mr Fraser said that this change was due to a need to reduce costs and to changes in the structure and role of the FCO including the “localisation” of many administrative roles. The FCO estimate that this plan will save “up to £30 million a year”.45
42. The PCS Union has been critical of this plan. They noted that the estimated £30 million a year saving was small compared to efficiencies that could be gained in areas such as IT and estates management. They went on to argue that the greater localisation of posts would reduce the number of staff with experience of working abroad and hence reduce the FCO’s capacity to respond to a crisis.46
43 Ibid. Q23 44 HC Deb 11 May 2011, col 1166 45 Letter to the Committee from Simon Fraser CMG dated 23 February 2011. See also: Ev 47 46 Ev 63, paras 10 and 16
Departmental Annual Report 2010-11 23
43. We put these points to Simon Fraser. He told us that the decision was “difficult” and has had a harmful effect on staff morale. He confirmed that a chief driver of the decision was cost:
frankly, it is a business model that we can no longer afford. It is an expensive thing to do, to post somebody overseas, and if you can recruit somebody locally, the average saving on a posting—the average net gain to the Office when you have paid the locally engaged person—we calculated as about £100,000 a year. It is quite a significant saving for us, which is what has forced us down this route.47
Mr Fraser acknowledged the PCS’s argument that this change would harm the FCO’s ability to respond in a crisis, telling us that, “these are perfectly legitimate concerns about the resilience of the our work force structure that we need to address”. However, he suggested that the negative effects of this change would be mitigated by a combination of short-term overseas postings for junior staff and greater fluidity and promotion prospects for junior (A and B Band) staff into Band C, “which will be the band at which people will travel abroad more frequently.”48
44. We conclude that the decision to reduce the number of overseas postings for UK- based FCO staff is an error. We believe that our conclusion last year that the spending reductions demanded by the SR2010 could “have a serious effect in terms of the UK’s relations with other countries, out of all proportion to the amounts of money involved” is borne out by this move. This decision, driven by the desire to save the relatively small sum of £30 million per annum, highlights the strain that successive spending reductions have placed on the FCO’s operations.
45. Aside from the lost opportunities for junior UK-based staff and the consequent and acknowledged harm to staff morale, we conclude this decision could also reduce the ability of the FCO to react to crises overseas. Events of the past year have shown how vital it is that the FCO can respond quickly to developing crises with a cadre of trained staff with experience of the relevant country and region. That the FCO is voluntarily choosing to reduce this resource is a highly questionable decision; we recommend that the Government find the relatively small sums needed to reintroduce overseas postings for A and B Band staff in order to ensure that the FCO possesses the skills and experience to respond to developing crises overseas.
47 Q 74 48 Qq 74-79
24 Departmental Annual Report 2010-11
5 Future governance of the World Service
46. In April 2011, in our Report The Implications of cuts to the BBC World Service, we expressed our concern that, under proposed governance changes to the World Service– which will take place in 2014 once funding responsibility for the BBC World Service transfers from the FCO to the wider BBC–the World Service would not be sufficiently protected against demands on its budget from other areas of the BBC network. We were not convinced that the requirement for the Foreign Secretary to approve any service closures represented, in itself, adequate protection against downward pressures on the World Service budget. We recommended that before 2014 the Government and BBC should draw up a detailed concordat making detailed provision for funding and governance arrangements, stipulating the minimum levels of service provision which the BBC would have a formal responsibility to fund. We further recommended that the Foreign Secretary should ensure that the World Service was adequately represented at the top levels of BBC management by ensuring that the Director of the World Service was represented ex officio on the Executive Board of the BBC Trust and that the to-be- appointed International Trustee was given the specific responsibility of representing the interests of the World Service within the wider BBC.49
47. In its response to our Report, the Government mostly rejected our recommendations. Instead the Government stated that:
Once the funding moves to the Licence Fee, the Government believes that the proposed new World Service Operating Licences, issued by the BBC Trust, will enable the public and Parliament to see the proposed level of service required from, and funding available to, the World Service.
Further, the Government was not willing to use its current influence as paymaster of the BBC World Service to insist that the Director of the World Service was represented ex officio on the BBC Executive Board.50 Instead, in its response to our Report, the BBC World Service noted an ongoing review into BBC governance looking at “whether the governance arrangements for the BBC’s international service—including the World Service—are appropriate given the new funding arrangements.” This review recommended the creation of the post of International Trustee with a specific responsibility for the BBC’s international public services, including oversight of the BBC World Service. This trustee would chair “a specific committee of the Trust to oversee the BBC’s international public services, including the BBC World Service”.51 On 1 December 2011, Lord Williams of Baglan began a four-year term as the BBC’s International Trustee.
49 Foreign Affairs Committee, Sixth Report of Session 2010-12, The Implications of Cuts to the BBC World Service, HC 849. 50 Foreign Affairs Committee, Second Special Report of Session 2010-12, The Implications of Cuts to the BBC World Service: Responses from the Government and the BBC to Committee’s Sixth Report of Session 2010-12, HC 1058, page 10 51 BBC Trust, “Review of BBC Governance”, July 2011, page 7
Departmental Annual Report 2010-11 25
48. According to the Government response to our Report, once funding responsibility for the BBC World Service transfers from the FCO to the BBC, then the Broadcasting Agreement and Financial Memorandum currently governing the relationship between the FCO and BBC will cease to be applicable. Instead, an Operating Licence for the World Service will be issued by the BBC Trust. This Licence will give the Trust the responsibility for setting out the most effective delivery of the World Service and will consequently reduce the FCO’s oversight of the World Service considerably. The BBC Trust will set the budget of the World Service, define its remit and scope and need only “agree with the Foreign Secretary” the World Service’s objectives and targets.52 While the Foreign Secretary must approve any service closures, nothing in the Licence makes provision against the possible Hobson’s Choice we warned of in our earlier Report where the Foreign Secretary is told, “You can have a Russian Service or you can have an Arabic Service, but you cannot have both because we are not prepared to fund both”.53
49. We discussed these new arrangements with Lord Patten of Barnes, Chairman of the BBC Trust; we were concerned at the lack of Ministerial and Parliamentary influence on the future decisions of the World Service. In particular we asked whether he would consider introducing measures to either ring-fence the World Service’s budget within the BBC or elevate the Director of the World Service to a place on the Executive Board. Lord Patten did not support formal measures such as these, stating a preference for the present, more informal arrangements:
Certainly for the time being, I would like to be able to demonstrate, without tying my hands, that the Trust could be shown to be a sensible guardian and custodian of the World Service. On the question of the composition of the executive committee ... I think that the existing arrangements, where the head of news for the BBC takes responsibility for the World Service as well, should be sufficient.54
He suggested that the arrangements to be put in place, while not providing the World Service with formal protection measures, would ensure adequate security for the World Service’s budget and would be responsive to the demands of both Government and Parliament:
I am not sure it [a budgetary ring-fence] would be a very good idea, and I am not sure that it would be the best way of justifying our commitment to the World Service to licence fee payers as a whole. I think that if it was apparent to the Committee and to other friends of the World Service that we were not doing right by the World Service, there would probably be a great deal of pressure – indeed, probably the sort of pressure that we could not resist – for us to do that.55
Peter Horrocks told us that the new governance arrangements, while less comprehensive than those we had recommended in April, were “more extensive and substantial than those for any other part of the BBC’s services” and that the committee looking at the BBC’s
52 Ev 71 53 Foreign Affairs Committee Sixth Report of Session 2010-12, The Implications of Cuts to the BBC World Service, HC 849, para 81 54 Q 116 55 Q 116, see also: Q 113
26 Departmental Annual Report 2010-11
International Services, to be chaired by Lord Williams, was, as far as he was aware, “the only sub-committee of the Trust that is looking at a specific part of the BBC’s delivery of its services”.56
50. Despite these assurances, we remained concerned at the governance arrangements put in place. We therefore took further evidence from Lord Williams of Baglan, the appointee to the newly-created post of “International Trustee”, on 21 February 2012. Lord Williams told us that, until the handing over of funding responsibility to the BBC in 2014, his main role was to develop the new Operating Service Licences which will set the proposed levels of funding available to, and output required from, the World Service.57 He suggested that the creation of the post of International Trustee was overdue, because “I do think that there has been a lack of oversight, in a sense. If there had been an International Trustee, frankly I think management could have been taken to task for some of the cuts that have been made”,58 and his appointment was much needed in order to revitalise and rejuvenate the World Service:
Morale has taken a big hit as colleagues have seen services closed, colleagues departing and so on. We need to stabilise the World Service and to establish ourselves on a much firmer footing, which I think we have. I am guardedly confident that we can maintain the service as it is for the coming few years at least.59
He was confident that in his role he would have access to senior decision-makers within the BBC, both formally in board meetings, and informally, when “They will meet with me at my request ... I detect no reluctance at all on the part of colleagues in senior management positions to meet with me; quite the opposite in fact”.60 He stated that his role and the access it would grant him within the BBC would prevent the services the World Service provided being systematically reduced: “I did not accept this post to be involved in further salami cutting ... of the BBC World Service.”61
51. We have reported already to Parliament on the World Service’s plans to adjust to a reduced Government grant-in-aid by reducing services. In response to our Report, the FCO allocated additional funding to the World Service in order to preserve some important services. We do not intend to expand upon our earlier Report conclusions here, except formally to welcome the additional money allocated by the FCO to the World Service in June 2011.
52. In our Report earlier this year, we made a firm recommendation that a formal concordat giving the Foreign Secretary the power to stipulate a minimum level of service provision and strengthening BBC World Service representation at the highest levels of BBC governance was necessary if the World Service was to be protected from financial pressures originating elsewhere in the BBC. We are disappointed that the
56 Q 138 57 Q 203 58 Q 219 59 Q 206 60 Q 213 61 Q 206
Departmental Annual Report 2010-11 27
Government rejected our recommendation. However, we have noted Lord Patten’s assurances that the more “informal” governance arrangements to be put in place can provide the level of budgetary protection the World Service needs. This places a large responsibility on the performance of the International Trustee and we seek assurances that the support shown by Lord Patten to the World Service is shared by all members of the BBC Trust.
53. We plan for our evidence sessions with the Chairman of the BBC Trust and the International Trustee to become an annual arrangement. The transfer of funding responsibility to the BBC from the FCO will inevitably reduce Parliamentary oversight of the World Service by preventing the tabling of written or oral questions to Government Ministers on the performance of the BBC World Service. In this context, we welcome the assurances from Lords Patten and Williams that the transfer of funding responsibility for the BBC World Service from the FCO should not diminish this Committee’s oversight of the operation of the World Service. If from our regular sessions it becomes clear that the governance arrangements are not working adequately, we reserve the right to again recommend that the more formal concordat, as we originally recommended in April 2011, be immediately drawn up and adopted. We further recommend that the Foreign Secretary do not rule out using his influence, as the man who currently holds the purse strings, to insist that Lord Williams’ role be amended to give him, ex officio, a place on the BBC Executive Board.
28 Departmental Annual Report 2010-11
6 The British Council
54. The British Council received what it calls a “challenging” settlement in the Spending Review 2010. By the end of the Spending Review period, the amount of funding provided by the FCO in the form of direct grant-in aid will reduce from £185 million to £154 million, a 26% real-terms reduction by 2014-15. As well as a reduction in the absolute amount, an increasingly greater proportion of the FCO grant must be allocated towards Official Development Assistance (ODA)-eligible activity. By 2014-15, ODA-eligible activity will account for two-thirds of the FCO grant-in-aid. Martin Davidson, the British Council’s Chief Executive, told us that the cumulative effect of these changes would leave the British Council a substantially different organisation:
In 2010-11 the FCO grant accounted for 27% of our income and 73% was earned income – in other words we earned £3 for every £1 provided by Government. By 2014-15 this will have changed to 16% FCO grant and 84% earned income, so that for every £1 the taxpayer invests in us we will be earning £5.62
Three years ago, the FCO’s grant constituted around one-third of the British Council’s income.63
55. Before the Spending Review 2010, the British Council was already implementing measures to reduce its costs. This spending reduction programme was necessitated by a reduction in FCO grant-in-aid of approximately 10% or £20.8 million between 2007 and 2011. As a result of this spending cut, the British Council reduced its physical overseas network, emphasised commercial activities in some areas and initiated an efficiency programme based around the transfer of some back-office functions to the new Shared Services Centre in Noida, India with a consequent reduction in staffing levels in the UK. In order to adapt to the spending settlement in the SR2010, the British Council anticipates further effort in these areas through to the end of the Spending Review period.
The efficiency programme and the Noida centre
56. The British Council intends that 35% of the required savings will be via increased efficiency and the savings generated by the transfer of back office functions to Noida, India. This process has so far seen the loss of 165 finance and administrative jobs throughout the British Council’s network (not just the UK).64 These job losses are part of a wider reduction in staff numbers; according to its Annual Report, the British Council has lost 290 UK- based staff over the past financial year. These reductions have been concentrated among lower-grade employees. During this period the proportion of UK-based British Council staff classed as “senior management” has increased from 13 to 16% over this period.65 The PCS Union notes that the previous efficiency programme saw UK staff numbers fall by
62 Ev 81 63 Q 168 64 Ev 82 65 British Council Annual Report 2010-11, March 2011, page 108. Available the British Council’s website.
Departmental Annual Report 2010-11 29
35%. It further notes that temporary workers now represent 20% of the British Council’s UK-based staff.66
57. Correspondence with the Council suggested that in 2010-11, £5.6 million was saved from the transfer of back-office functions to India. Improvements in the performance of the Noida centre are expected to result in annual savings of £7.4 million by 2012-13 and by 2015, be a part of a 20% reduction in running costs.67 However, while the British Council plans for this efficiency programme to account for over one-third of the savings demanded under SR2010, the Council admitted to ongoing concerns about this move and the performance of the Noida centre.68 Mr Davidson said that a failure to improve the performance of the Noida centre would have implications for the rest of the British Council’s savings programme.69
A new emphasis on commercial activity
58. During last year’s inquiry, Simon Fraser, Permanent Under-Secretary at the FCO, told us that part of the reason why the British Council was facing larger reductions to its budget than those faced by the FCO and BBC World Service was the ability of the British Council to generate income via commercial activity.70 In 2010-11, the British Council earned £492 million, mainly from English teaching and examinations and commercial partnerships. This currently represents around 70% of the British Council’s total income. The British Council aims to increase its revenue from earned income by between 9 and 15% annually, or 55% over four years to £748 million by 2014-15.71 The Council’s commercially generated income in 2010-11 increased only marginally from 2009-10.
59. Martin Davidson told us that, given the overall reduction in FCO grant-in-aid and the demand that a greater proportion of this grant be allocated to ODA-eligible activity, “virtually the full weight of the loss of FCO grant will fall on the developed world”, mainly on British Council operations in western Europe and East Asia. Sir Vernon Ellis, Chairman of the British Council agreed, warning of a “strain” on Council activities in East Asia. To compensate for the reduction in FCO grant to these areas, the British Council will place a greater emphasis on commercial activities–examinations and commercial partnerships–in the developed world. The British Council hopes that the increased commercial revenue can be directed towards cultural activities that were previously funded from the FCO grant-in- aid. In 2010-11, the British Council used £11 million of its commercially generated income to supplement cultural activities throughout its network; in this year it is planned that £7-8 million will be redistributed in this way.72
66 Ev 83, para 11 67 Ev 82 and Ev 78, para 2.3 68 Qq 180-182 69 Q 182 70 Foreign Affairs Committee, Third Report of Session 2010-11, FCO Performance and Finances, HC 572, Ev 36 71 Ev 78-79, paras 1.3, 2.4 and 3.1 72 Qq 172-175 and Qq 196-197
30 Departmental Annual Report 2010-11
Reduced geographic coverage.
60. During last year’s inquiry, Sir Vernon Ellis spoke of the “rationalisation” of British Council operations in some countries and a move to a “hub-and-spoke” model.73 The British Council’s corporate plan states that the Council will also “continue to bring in ‘lighter’ models of operation” and “office and even country closures will almost certainly be necessary”. Changes to its overseas network are expected to reduce the British Council’s costs by £41 million.74 Despite the statement that country closures will almost certainly be necessary, there has been no net decrease in British Council offices over the past financial year.75
61. In our evidence session this year, Mr Davidson clarified what was meant by “rationalisation”:
We are, however, looking very carefully at the nature of our network, and our expectation is that for a number of our smaller operations we will become a very much smaller organisation—probably down to one or maybe only two people in some of the smaller countries.76
The PCS Union has been critical of this plan. In evidence to us it claims that:
These “new models of working overseas” translate into the classification of the countries in which the British Council operates as “low”, “medium” or “high” priority. Over half are “low priority”. Many of these will be reduced to a staff of just two or three, with no UK-appointed staff in country. The assumption is that an online, digital presence will in many cases replace the very real, long-term cross- cultural human engagement that the British Council has been facilitating and nurturing for over 75 years.77
Sir Vernon Ellis told us that the areas which would be “rationalised” and where operations would be reduced in size would be those parts of the world receiving less in the way of FCO grant-in-aid, namely East Asia and western Europe.78
62. In last year’s Report we concluded that the SR2010 financial settlement would put the British Council’s budget under “great strain” and “may well trigger some fundamental rethinking of the role and work of the Council”. One year later, we conclude that this is indeed the case. The planned reductions in the Council's presence in the developed world have been directly attributed to a reduction in the FCO’s grant- in-aid and the wider changes announced by the British Council in response to the sharply reduced grant–in particular the much greater emphasis on commercial activity–will lead to the British Council becoming a substantially different organisation by the end of the Spending Review period.
73 Oral evidence taken before the Foreign Affairs Committee on 3 November 2011, HC 572-i, Q5 74 “British Council Corporate Plan 2011-15”, page 22 75 Q 165 [Sir Vernon Ellis] 76 Q165 [Martin Davidson] 77 Ev 82, para 8 78 Qs 173-174
Departmental Annual Report 2010-11 31
63. We stated last year that SR2010 posed a significant challenge to the British Council and we are pleased to see this challenge tackled and a plan put in place to adapt to a change in financial circumstances. However, we remain concerned that such an emphasis on commercial activity will detract from the British Council’s primary purpose to “build engagement and trust for the UK through the exchange of knowledge and ideas between people worldwide”. We accept that in many ways commercialisation of the British Council is unavoidable and driven by decisions made by central Government, but nevertheless we remind the British Council that it must place its primary purpose at the core of all its activity, commercial or otherwise, and must not become predominantly an international English language school rather than a promoter of the UK’s reputation, culture and influence.
32 Departmental Annual Report 2010-11
Formal Minutes
Tuesday 20 March 2012
Members present:
Richard Ottaway, in the Chair
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Mr Frank Roy Ann Clwyd Sir John Stanley Mike Gapes Rory Stewart
Draft Report (Departmental Annual Report 2010-11), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraph 1 read and agreed to.
Paragraphs 2 and 3 read, amended and agreed to.
Paragraph 4 read.
Amendment proposed, at the end, to add “We conclude that given the key role of the FCO in furthering and safeguarding the UK’s national interests, the Government should increase its Spending Review settlement for the FCO”. –(Sir John Stanley.)
Question put, That the Amendment be made.
The Committee divided.
Ayes, 3 Noes, 5
Ann Clwyd Mr Bob Ainsworth Andrew Rosindell Mr John Baron Sir John Stanley Mike Gapes Mr Frank Roy Rory Stewart
Another Amendment proposed, at the end, to add “We conclude that given the key role of the FCO in furthering and safeguarding the UK’s national interests, the Government should reconsider its Spending Review settlement for the FCO”. –(Sir John Stanley.)
Question put, That the Amendment be made.
The Committee divided.
Ayes, 4 Noes, 4
Mr John Baron Mr Bob Ainsworth Ann Clwyd Mike Gapes Andrew Rosindell Mr Frank Roy Sir John Stanley Rory Stewart
Departmental Annual Report 2010-11 33
Whereupon the Chair declared himself with the Noes.
Paragraph agreed to.
Paragraphs 5 to 12 read and agreed to.
Paragraph 13 read, amended and agreed to.
Paragraphs 14 to 30 read and agreed to.
Paragraph 31 read, amended and agreed to.
Paragraphs 32 to 38 read and agreed to.
Paragraph 39 read, amended and agreed to.
Paragraphs 40 to 42 read and agreed to.
Paragraph 43 read, amended and agreed to.
Paragraphs 44 to 49 read and agreed to.
Paragraph 50 read, amended and agreed to.
Paragraphs 51 to 62 read and agreed to.
Summary read, amended and agreed to.
Resolved, That the Report, as amended, be the Eleventh Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.
Written evidence was ordered to be reported to the House for printing with the Report, together with written evidence reported and ordered to be published on 18 May, 11 October and 15 November 2011 and 24 and 31 January 2012.
[Adjourned till Tuesday 27 March at 10.00 am.
34 Departmental Annual Report 2010-11
Witnesses
Tuesday 8 November 2011 Page
Simon Fraser CMG, Permanent Under-Secretary of State, Matthew Rycroft, Chief Operating Officer, and Iain Walker, Deputy Finance Director, Foreign and Commonwealth Office Ev 1
Tuesday 22 November 2011
Lord Patten of Barnes, Chairman, BBC Trust Ev 19
Peter Horrocks, Director, Richard Thomas, Chief Operating Officer, and Jim Egan, Controller, Strategy and Distribution, BBC Global News Ev 23
Sir Vernon Ellis, Chair, and Martin Davidson CMG, Chief Executive, British Council Ev 30
Tuesday 21 February 2012
Lord Williams of Baglan, International Trustee, BBC Trust Ev 36
List of printed written evidence
1 Simon Fraser CMG, Permanent Under-Secretary of State, FCO Ev 40; Ev 47; Ev 50; Ev 54; Ev 58 2 Rt Hon William Hague MP, First Secretary of State, Secretary of State for Foreign and Commonwealth Affairs, FCO Ev 43 3 Foreign and Commonwealth Office Ev 46 4 Public & Commercial Services Union Ev 62; Ev 82 5 BBC World Service Ev 65 6 British Council Ev 78; Ev 81
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Foreign Affairs Committee: Evidence Ev 1
Oral evidence
Taken before the Foreign Affairs Committee on Tuesday 8 November 2011
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Mr Frank Roy Sir Menzies Campbell Sir John Stanley Ann Clwyd Rory Stewart Mike Gapes Mr Dave Watts ______
Examination of Witnesses
Witnesses: Simon Fraser CMG, Permanent Under-Secretary of State, Matthew Rycroft, Chief Operating Officer, and Iain Walker, Deputy Finance Director, Foreign and Commonwealth Office, gave evidence.
Q1 Chair: I welcome members of the public to this Simon Fraser: The budget breaks down into different session of the Foreign Affairs Committee. It is part of areas. For example, in our administrative budget we our inquiry into the FCO Performance and Finances. have to find a 33% saving over the period, as do other Today’s witnesses are Simon Fraser, Permanent departments, and that means about £100 million a year Under-Secretary of State at the Foreign Office, of savings. We are going to tackle that through Matthew Rycroft, Chief Operating Officer, and Iain changes to the overseas postings policy for some of Walker, Deputy Finance Director. I extend a very our junior staff; by making economies in our overseas warm welcome to you all. Thank you very much for accommodation budgets, in effect reducing the coming along. amount of money we spend on accommodating staff Mr Fraser, we are well aware of the reduced budget overseas; and by finding further savings in our support of the Foreign Office. Are you confident that you can functions—what we call our corporate services operate within the budget that has been set out? programmes. For the programme budget, which is Simon Fraser: Yes, I am confident that we will be discretionary expenditure on different aspects of able to achieve the savings that are required during foreign policy, we have made plans to reduce it over the spending round period—and I would be happy to the spending round period. It is currently around £140 talk about those in more detail—but clearly that will million. The Foreign Secretary has said that that will involve very difficult challenges for us. The have to come down over the spending round period to implementation of the savings programmes will not a figure not lower than £100 million, but we have not be simple, but in answer to your question, I believe yet planned precisely how that will happen. that we have, over the last year, set some clear priorities for ourselves. We have set out a clear plan Q4 Chair: Are you getting just as many bangs for for what we need to do to meet the savings—in our fewer bucks now? work force, in our estates spending and in our Simon Fraser: I would like to think that we are. The corporate services programmes—and I believe that it other side of this is that we have launched a is possible to achieve the savings that we need. programme which we call Diplomatic Excellence, an initiative across the office to focus on excellence in Q2 Chair: Are you experiencing any difficulties at our foreign policy, diplomacy and all other aspects of all in this? our work. The aim of that is to ensure that while we Simon Fraser: The way the timing works out is that are dealing with these challenging financial and we are at the beginning of the implementation phase, administrative issues, we do not lose focus on the which we have to deliver over the next three years, so primary objective of foreign policy and diplomacy. To we have had to make some quite difficult some extent, the past year speaks for itself in terms of announcements to our staff about what the savings the challenges that the Foreign Office has faced, will entail. As I said, we are now beginning to which I believe for the most part we have responded implement them; what we need to focus on now is to effectively. being clear that we have the systems in place to evaluate, to implement and to deliver those savings. Q5 Chair: Are all the programmes worked out now? As I said, it will be difficult—I have no illusions about Can you see how you are going to hit the targets? that—and it will be particularly difficult towards the Simon Fraser: I shall ask Matthew Rycroft to end of the spending round period. comment in more detail, as he is the person responsible for delivering the different aspects of the Q3 Chair: Can I dig into this a bit? What savings programmes, but we have a clear plan that programmes have you stopped or adjusted to meet will lead us to hit the targets. I am not saying it will be the budget? easy to do that—it will require some further difficult cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 2 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker decisions, and some of it will be quite tough on Q12 Sir Menzies Campbell: Did they apologise? members of the staff—but we can get there. Simon Fraser: I am not aware that there was an Matthew Rycroft: The total size of the running cost apology—I cannot recall. From our perspective, it was savings that we need to make per year by the fourth a regrettable incident, but in the real world it did not year of the spending round period add up to £100 actually change the financial situation for us. million, which is divided into roughly equal thirds between estates, corporate services and human Q13 Sir Menzies Campbell: And they did not then resources. I am confident that we have in place a brief to the opposite effect of the original briefing? structure to deliver those savings. I set up an Otherwise, we would not have formed a view that you operations committee that has the job of overseeing had, in fact, been fined. the implementation of that programme and evaluating Simon Fraser: I am not aware that there was any its impacts, and ensuring that the numbers add up. For further public comment from the Treasury. now, I am confident that the corporate services part of that change is ahead of schedule, and the estates and Q14 Mr Watts: Can I just be clear about your the HR parts of it are coming up to schedule, with the decision not to bid for extra resources? It seemed to vast majority of the savings, as Simon said earlier, be linked to the fact that you thought that had you bid falling in the later years of the spending round period. for extra resources, this elusive fine may well have been implemented. Was that the motivation, or not Q6 Chair: Thank you. Mr Fraser, it was reported really? earlier this year that the Treasury had fined the Simon Fraser: I really don’t know what the Foreign Office £20 million. What on earth was all motivation was in the end, but the fact is that we did that about? not make the bid in the spring estimates, so in the end, Simon Fraser: It arose from a regrettable incident in no measure was taken. It is true to say that the which the outgoing chief executive of UKTI wrote a Treasury was not happy with the wording of the e- rather injudicious e-mail about the Foreign Office mail that was written by the chief executive of budget, which led to questions being raised in the UKTI—and nor were we, frankly. Treasury about the way we were managing our budget towards the end of the financial year. The fact is that, Q15 Mr Roy: Do we have a copy of that e-mail? like all departments, we re-prioritise spend as we go Simon Fraser: Well, it was quoted in the press. along, to ensure that we are managing our budget to target. As a result of that, the Treasury briefed that it Q16 Mr Roy: Yes, but can we get a copy of it? was fining the Foreign Office £20 million in the spring Simon Fraser: I do not know if I have ever seen the supplementary estimates. That is not, in fact, the case: original e-mail. the Foreign Office did not, in the end, request additional funding, because we worked out that we Q17 Chair: Perhaps it could be attached to the note did not need it. I do not know the details of how that when it is written. arose within the Treasury, but the fact is that there Simon Fraser: The key phrase that caused concern was no fine. was one that said the Foreign Office was seeking to get money “out of the door” at the end of the financial Q7 Chair: So there was no reduction in your year, whereas in fact what we were seeking to do— budget—I imagine that “fine” is a media word. through challenge programmes that we had set up— Simon Fraser: There was no reduction in the budget. was to reallocate funds that were unspent to foreign Departments sometimes ask for additional resource at policy priorities. For example, we shifted money at that point in the year, and we decided not to ask for it. the end of the year to support the rule of law in Afghanistan, to counter-piracy measures and to Q8 Chair: Could you let us have a note on the details additional investment in the overseas territories— of that? which, given that we are required to come within 1% Simon Fraser: I would be happy to do that. of our budget either way, is the normal way in which departments seek to ensure that we are spending our Q9 Mr Roy: Is that not misleading to the public, if money effectively on priority areas. they say they are going to fine you and then they don’t, and if they had no intention of doing so? Q18 Mr Watts: Surely it is not normal practice for Simon Fraser: I would not want to comment on that. the Treasury to issue a statement saying it will fine a That is for the Treasury. department x amount of money and for that department not to ask for clarification about the Q10 Mr Ainsworth: What explanation could there reasons for this public statement and, at the end of the be other than Treasury boasting? process, to have no clearer idea of where that came Simon Fraser: I really do not know what the motive from or why it was put forward, and no explanation may have been. from the Treasury whatsoever. That cannot be normal practice. Q11 Sir Menzies Campbell: Did you discuss it with Simon Fraser: Well, as I said, I did seek actually the Chancellor or the Chief Secretary? clarification from the Permanent Secretary at the Simon Fraser: I discussed it after the event with my Treasury, who responded to me. opposite number in the Treasury, the Permanent Secretary. Q19 Mr Watts: But you got none. cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 3
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Simon Fraser: I do not have in my mind the full, Q22 Mr Ainsworth: So you shove the money out absolute detail of that exchange, but I did make the the building? point that I thought that it was unfortunate that the Simon Fraser: No, we reallocate the money to foreign briefing had happened. policy priorities with the approval of the Foreign Secretary. I gave you some examples. Q20 Sir Menzies Campbell: What business was it of the outgoing chief executive of UKTI to make Q23 Chair: I think we will draw this little bit to a comments about the way in which the Foreign Office close now. Mr Fraser, it would be helpful if we could was dealing with its budget? have a note. Simon Fraser: This was an internal correspondence Simon Fraser: Yes. within UKTI, because since UKTI works with us— the chief executive of UKTI was, and is, a member of Q24 Chair: Preferably with a copy of the e-mail the FCO board—it is actually of interest to UKTI if attached. the Foreign Office is reallocating resources, because Simon Fraser: I will do my best to find a copy of the UKTI might be able to contribute to that, benefit from e-mail. it or align its expenditure with it, so I think that is actually a legitimate interest. Q25 Ann Clwyd: May I just ask about the e-mail? Chair: I think we can wait for the note. Q21 Mr Baron: Without wishing to draw this out too Ann Clwyd: No, the point I want to make is that the long, but just to broaden it slightly, to what extent Treasury recently told me that they do not keep copies does the “use it or lose it” policy exist or pervade of e-mails. I wanted a copy of an e-mail that I had sent to the Treasury, and I was told that they do not thinking within the FCO? That is certainly one of the keep copies of e-mails, so I will be interested to know key messages that came across in this case: “If we whether you do. don’t spend the money somehow”—this was the root Simon Fraser: This is, of course, a UKTI e-mail, not cause of the e-mail—“then we’ll lose the allocation a Treasury one. for next year.” To what extent is there that sort of Ann Clwyd: Yes. approach in the Department? How pervasive is it? Simon Fraser: I will ask Iain Walker to talk about the Q26 Chair: On the network shift, you are realigning detail of this, if I may, but the fact is that government a lot of your overseas services, focusing on a number departments are required to manage their resource of different targets. Is that costing you any extra expenditure to within, ideally, 1% of the overall money? figure. If we overspend, clearly we are penalised, and Simon Fraser: The network shift is a programme we if we underspend excessively, it is deemed that we are have introduced to reallocate diplomatic resource over not making the best use of public funds. Therefore, the spending round period to what we call, essentially, we seek to manage the expenditure to the target figure emerging powers. We have looked at countries that or headline figure that we have. In the past, there was we believe will be more important in the world and a system whereby one could roll forward—through for British interests in 10 or 20 years, let’s say. We what was called end-year flexibility—a proportion of have undertaken a shift of what amounts to about 8%, spend if it was not spent. That was then withdrawn. I think, of our diplomatic resource, which we plan to There is now a new system, which has been shift over the period of the spending round, towards introduced in this spending round, whereby in one those countries. That involves an extra 72 UK-based year of the spending round, departments are allowed diplomats and an extra 107 local staff to those to carry forward some of their budgetary underspend, countries. We plan to do that in a resource-neutral way by agreement with the Treasury. Could I ask Iain by, as the word “shift” implies, shifting resource in Walker to give you more detail on that? our diplomatic presence in the world. We will, for Iain Walker: Yes, that is right. The arrangement that example, reduce the diplomatic resource, the Foreign in essence replaces or takes the place of end-year Office resource, that we have in subsidiary posts in flexibility is called budget exchange, which is a Europe—not in sovereign posts, not in embassies in similar arrangement, whereby if we forecast capitals, but in some subsidiary posts in other cities. accurately at the end of the third quarter what our We hope also to achieve a saving over this period in outturn will be, we can take forward up to 1% or 2% the very considerable overheads that we have in our of our forecast spend. posts in Afghanistan and Iraq, a lot of which are Just to echo Simon’s earlier points, at the start of the security overheads, which are very, very high. In that year we obviously undertake pretty comprehensive way, we will liberate resource to fund the new business planning and allocate our resources in line deployments in what we call the emerging powers, with that, and throughout the year we report monthly most notably China and India, but also Brazil, to the board on how we are performing against Mexico, Turkey, the Gulf and a range of other delivery of those plans. We have just gone through countries. that for the mid-year periods, but certainly from the halfway point in the year, we would certainly look at Q27 Chair: We saw for ourselves the expansion in reprioritising funding to ensure that it will utilise the Brazil. resources that we have to best deliver the foreign As I understand it, a lot of the cost comes from policy aims that we were set at the start of the period. Afghanistan and Iraq. 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Ev 4 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker progress in Afghanistan as we would like, could that Matthew Rycroft: That was the previous financial have a knock-on consequence financially? year, I think. Simon Fraser: As I said, it is designed to be resource- neutral, so if we are not able to liberate resource— Q31 Mr Baron: Right, that was July 2011. What you clearly, we have to maintain our very important are talking about is the target from April 2012 diplomatic priorities in Afghanistan and Iraq, and we onwards? may not be able to reduce the cost of that operation— Matthew Rycroft: No, I am talking about a target from it could have an impact on the speed with which we April 2011 to March 2015 of £240 million. I think the are able to make the redeployment. Therefore, the £25 million figure—Iain might correct me—refers to answer to your question is yes, we have to manage the previous financial year, the one that ended in both the supply and the demand of resource. March 2011. Iain Walker: In our assessments letter from the Q28 Chair: But so far, so good? Treasury, we have an allowance of up to £100 million Simon Fraser: So far, so good. We have already taken that we can recycle per annum. The £60 million per steps in the European network to make plans for the annum is obviously within that £100 million per redeployment there. We are looking at the future of annum allowance. our work in Iraq and Afghanistan, but, of course, that depends on a number of policy decisions that will be Q32 Mr Baron: I am quoting Mr Fraser, and I think made in the coming months and years. he should be allowed a say. He goes on to say: “This target was managed downwards internally in-year and Q29 Mr Baron: Within the overall reduction of the we achieved disposals of £19.4 million”—but we are FCO budget I believe there is a 50% cut in the FCO’s talking about the previous tax year. capital budget, but there is an allowance whereby if Simon Fraser: That was the previous financial year, you make property sales they can be recycled back at the end of the last spending round. into the capital budget. About a year ago we were told that the guidance was up to £100 million and the Q33 Mr Baron: Right, but from April 2011 onwards target, so to speak, was £50 million. Most recently, the target is £60 million of disposals a year to be Mr Fraser, back in July I think you told the Committee recycled back into the capital budget? that the target had been revised down to £25 million Simon Fraser: That is our internal target. from the £50 million that had been indicated to the Committee in November last year. Why the change, Q34 Mr Baron: Right, okay. The indication in the and what implication does this have for the FCO’s previous year was that it was going to be higher. Was capital budget? there a reason why you fell short? Forget the £60 Simon Fraser: Do you mind if I ask Matthew Rycroft million going forward, there was initially talk of £50 to answer that, because he is the person most directly million and you came in with £19 million, according responsible for managing this programme? to the latest figures I have in front of me. Was there a Matthew Rycroft: You are right, Mr Baron, that our reason for that shortfall? What implication is there capital allocation as part of the spending round going forward? How confident are you that you are settlement has reduced, in round numbers, from £200 going to meet that £60 million target without selling million to £100 million, but on top of that we are able, some iconic buildings around the world? as you say, to recycle assets from our estates. Our Matthew Rycroft: You are right that it is a challenging target over the four years is £240 million, so on task, partly because of the complexity of selling any average £60 million in each of the four years. We can estate in the current market, but partly also because recycle that so that we can build new embassies or we have a global estate and our needs in each country spend capital money on other estates, or other in which we are represented are different. In some projects, to top up the £100 million. countries around the world, we are not allowed to own We have a programme for each of the four years, property, we only rent it; in other parts we have a including the current one, that needs to be in largely owned, rather than rented, estate. We need to balance—in other words, we need to make sure that make sure that each country and region, and then the we sell the same amount of estate assets as we then world, has a proper asset management plan that allows reinvest in our network. The target is £60 million: it us to take these sorts of decisions. has not reduced from £50 million to £25 million; it Asset sales are lumpy—in other words, you get a big fact, it has gone up from £50 million to £60 million, amount when you make a big sale, and you cannot be so I do not recognise the figure from July. Our target, sure that you are going to get exactly £5 million in which is an internal target that we are very happy to each month of each financial year for the four years, share, is to sell £60 million-worth of assets, broadly and we are not on track to do that. However, we have speaking, in each of the four financial years and to flexibility within the four years to do more or less in reinvest that amount. any given financial year, depending on our operational requirements to build new properties or spend new Q30 Mr Baron: That may be the target, but, if I may, capital and the state of the estates market in each let me quote to you from Mr Fraser’s letter, which country. We are not committed to selling exactly £60 refers to an “Agreement with HMT to allow the FCO million in each of the four years, but we are seeking to recycle up to £25 million from asset sales back into to get as close to £240 million as we can over the full its budget.” four-year period. cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 5
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
We need to make sure that in each financial year, we Mr Fraser, I was intrigued to see the section on pay do not sell too much, because if we sold more than and bonuses in letter, DR30, that you sent to our we then spent, that would be money lost from our Chairman, in which you talk about various bonuses estate—it would go back to the centre, to the Treasury. that have been paid out. It is intriguing to me because Being in global property is a very expensive business. Members of Parliament are no longer able to pay Our total estate is more than £2 billion in value. We bonuses to their staff, even if they want to recognise could ill-afford to make mistakes like that. outstanding achievement, which you mention in your letter. I just wonder how you manage to protect Q35 Mr Baron: You can tell from our line of bonuses for the civil service when Members of questioning that there is concern in the Committee Parliament are not able to protect their own staff. about the FCO being able to fulfil its very full range Simon Fraser: The Foreign Office bonus scheme is and, if you believe the Foreign Secretary, its enhanced part of the broader civil service bonus scheme, which role at the same time as making cuts. With these cuts, is agreed between the Cabinet Secretary and the in property sales, there is a worry that you will have Government; we are in conformity with that. For to sell some iconic buildings and lose a footprint, to a example, we were able last year to pay bonuses to certain extent—I know the difference between owning 25% of our senior staff within a limit of 5% of the and renting. Is your view that £240 million over four pay bill, although in fact we spent less than 5% of the years is perfectly achievable without any impact at all pay bill on those bonuses; and to our staff in what we on the FCO’s role? call the delegated grades, we were able to pay a range Matthew Rycroft: I am confident that in the first of bonuses for performance which varied—I must say financial year we can make £60 million of sales these are not large amounts of money—from £645 to without impacting on any designated building, as we a maximum of £2,800 on their performance. That was call them—those that are iconic or historic. again consistent with the civil service overall bonus scheme. Q36 Mr Baron: The early cuts are usually the easiest, though, aren’t they? Q39 Ann Clwyd: A slight contrast with the position of Members of Parliament. The Independent Matthew Rycroft: As time goes on, Ministers will Parliamentary Standards Authority says that if we face some difficult decisions. We will give them want to pay a bonus, it should be something in the advice based on the best professional estates advice, region of a £20 shopping voucher. Obviously that does as well as on other aspects of our estate in order to not apply to you. make sure that we get, as the Chairman said, the best The Foreign Secretary told us that more administrative bang for our buck in terms of our estate, but it will be work overseas will be done by locally recruited staff, difficult to live within our settlement in this area. yet your written evidence states that the number of Simon Fraser: May I add one comment, because this locally engaged support staff will be reduced. Can you is an important line of questioning? There is no doubt explain that? that in this and other areas, balancing our aspiration Simon Fraser: It is a confluence of two policies, if to be a very effective Foreign Office and diplomatic you like. First we have a policy of what we call service with the requirements to manage these savings localisation, which is essentially to increase the will be a challenge. We have a plan that we can number of functions overseas—both policy functions deliver, but we will have to be really careful in in some cases and support functions—that are carried monitoring its implementation over time. out by locally engaged people. For example, more than two thirds of our overall work force now consists Q37 Ann Clwyd: A note prepared for the Committee of people employed overseas. There is that trend in by the House of Commons Scrutiny Unit highlights our overall work force shape, but within that we have, the fact that your administration budget has increased as part of our corporate services programme, been by 8% from last year across the FCO and, in the same reducing, to the extent that we can, some of the basic period, your spending on programmes decreased by support functions, which has resulted in a reduction, £10 million. Why has the administration budget in some cases, of the numbers of locally engaged staff increased when the spending on programmes has in some of those functions. I think that explains the gone down? apparent inconsistency. As we try to achieve Simon Fraser: I am not sure that I recognise those savings—for example, in areas such as gardening, figures. Certainly, as things stand between last year support for the residences and so forth—we are and this year, our programme spending has decreased reducing the numbers of people in those functions. only from £141 million to £139 million. It is true, as I said at the beginning, that it will probably have to Q40 Ann Clwyd: Are locally engaged staff given the decrease further over the spending round period, but same protections as UK staff? it has not decreased by the figure you mention, Mrs Simon Fraser: Locally engaged staff are recruited in- Clwyd. As for the increase in our administration country in accordance with the employment law of budget, I am not sure where that figure comes from that country. Under the Vienna convention, they do either. not enjoy the same full diplomatic immunities as diplomatic staff who are posted from the home Q38 Ann Clwyd: We will have to take it up with the country to the host country. We are very conscious of House of Commons Scrutiny Unit if there is a dispute that. In some cases we need to be very careful in over the figures. thinking about the nature of the work that we ask cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 6 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker locally engaged staff to do. Indeed, you rightly different in each country, depending on the property identify an issue about which we have to be very market and depending on our operational careful as we employ more locally engaged staff. requirements. Overall, we are moving neither out of owned and into rented nor out of rented and into Q41 Ann Clwyd: I heard recently of a locally owned. We are seeking to reduce both our rented and engaged member of staff in a country who was a our owned budgets for our estate, which is why some human rights activist and was arrested, and I of the decisions are difficult, but overall, we are not wondered what kind of protection we offered. People seeking to sell off in order to then face a massive will not be involved in such work if they do not have increase in our rental budget, which we would not be that protection. able to afford. Simon Fraser: You are right. That is one of a number Sir Menzies Campbell: Thank you. of cases that we have had over a period of years. That was a case this year in which a member of staff was Q44 Mr Roy: Can I take you back to something that indeed accused of inappropriate behaviour in the area you said about staff bonuses? As you say, 25% of of human rights in his country. We have supported senior staff received a bonus. Is that correct? that member of staff and we have resolved the issue Simon Fraser: The maximum number of senior in that case, but it clearly underlines the point you are management staff who are allowed to have a bonus making that we have to be careful, particularly in is 25%. some countries. For example, locally engaged staff working on human rights issues are clearly potentially Q45 Mr Roy: What was the bonus that they got in exposed and we have a duty of care to them in that relation to their salary—in other words, was it 10% of respect. their salary? A further question is: what percentage of other staff received a bonus, and what percentage of Q42 Sir Menzies Campbell: Could I direct your their salary did they receive? attention to the annex to your letter of 28 March, Simon Fraser: I think that about 90% of the junior which sets out the property sales in October to staff received some sort of performance-related December 2010 and January to February 2011? I will bonus—yes, 90%—so we have deliberately skewed not ask you for a line-by-line analysis of these, but I our bonus system within the Foreign Office, where we noticed that three properties in Washington were have discretion, towards the junior staff. disposed of. Were those properties in use and, if they were in use, was it then necessary to make other Q46 Mr Roy: Yes, that is the number, but what was arrangements for the staff who were occupying them? that in relation to the salary: 90% of people got a I take it these were outright sales, so if you were bonus, but did that bonus equate to, for example, 5% making arrangements for other staff, you would be in of their wages, and did the 25% of senior staff get and around Georgetown trying to find reasonable 10% of their salary? rents. Simon Fraser: I do not have the figures here, but I Simon Fraser: I will ask Matthew Rycroft to can certainly clarify that for you. Within the senior comment but, of course, our work force overseas staff, there was an overall ceiling placed on a moves and, if you look at the staff figures overall, our Department that it could not be more than 5% of the staff is reducing. Certainly, the number of UK-based overall pay bill for those staff, and we pay different staff going overseas is reducing, so we do not amounts depending on the level of the different grades necessarily have the same requirement for property. for the senior staff; for the junior staff, obviously the Having said that, Matthew might want to comment in amounts were different. If you want me to make a more detail. comparator of what those bonuses were in relation to Matthew Rycroft: Every quarter, the Permanent the overall remuneration of our staff, I would have to Secretary sends you a list of all the buildings that we come back to you with that detail. have sold around the world. Without going through each one on that list, which I do not have in front of Q47 Mr Roy: I want to find out if there is a disparity me, the majority of the residential buildings we sell between the senior staff and everyone else, in relation are those where there is no longer a requirement for to the percentage of the salary they got as a bonus. any building of that size in that city. Occasionally, we Simon Fraser: Of course, 75% of them got no bonus. sell in order to buy something else but, as I say, in the majority we do not buy something else, because we Q48 Mr Roy: Yes, but if 25% of them got a 15% or do not need as many buildings, or at least we do not 5% bonus on their salary, and the 90% got only 2% need as many owned buildings. on their salary, that is what I am trying to find out. Simon Fraser: I think that is not the case, but I am Q43 Sir Menzies Campbell: In some cities—I am happy to clarify for you. thinking of both Washington and New York—the sale of an existing property, if it has to be accompanied by Q49 Mr Roy: That is good. Thank you. rental, could actually turn out to be less economically Moving on to the previous savings programmes, the efficient than keeping the buildings. NAO has commented that previous saving measures Matthew Rycroft: Referring back to the answer to Mr made no plans to ensure that the cuts were not later Baron’s question, we now have in each country what reversed. Are such measures in place now? we call an asset management plan that does exactly Simon Fraser: We had a discussion with the Public that sort of equation. The answer to that equation is Accounts Committee about that in relation to the cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 7
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker savings that were made in the last financial year when Q52 Mr Roy: You are confident that the efficiency we, like other departments, were required to make in- savings will not damage the core business and front- year savings. The Foreign Office was faced with two line service? things: first, the savings that had to be made because Simon Fraser: The whole thing is designed so that there was no cover for exchange rate fluctuation in what we might call our footprint overseas—our 2008Ð09, which meant that the Foreign Office was impact and reach overseas—is not affected and our suddenly faced with a real budgetary problem in diplomacy can therefore continue. continuing its operations overseas; and secondly, a requirement for further in-year savings on all Q53 Mr Roy: When will that evaluation be made? departments after the election in the last financial year. Simon Fraser: It will be made at the end of the The cuts that we were discussing were, if you like, spending round. There is no plan to close any emergency measures, which perhaps explains why it embassies. was difficult to look at them as strategically as one would have liked to. The difference between then and Q54 Mr Roy: At the end? Would you not do an now is that we have a four-year spending round evaluation halfway through? period; we know what our settlement is and we hope Simon Fraser: We will continuously evaluate it as we it will remain stable. We are therefore able to make go along, but we will not know the final result of our plans over a period of time, which enables us to plan until the end of the spending round. ensure that the way we make our savings has the Matthew Rycroft: We are doing a six-monthly minimum amount of adverse impact on our front-line evaluation of the £100 million running costs savings diplomatic activity, and to put in place more effective programme. The first of those is in December, because measures to monitor and evaluate those programmes, we started the operations committee in June; after that, which is what Matthew, through his operations it will be every six months. committee, is doing. It is a fair comment from the PAC—we have taken it Q55 Mr Roy: This Committee has been very on board and I very much agree with it—that the interested in the Middle East and North Africa and Foreign Office needs to improve its culture of what has been happening there over the past couple evaluation and monitoring in its management of years. In September 2009, as part of the savings programmes. That is something that we are very programme, the Middle East and North Africa concerned about. We have already, in our programme directorate proposed a reduction of 3.7% of its budget, spending, as opposed to our administrative spending, which is £2.7 million. How did that impact on the introduced a new system under the chairmanship of directorate’s ability to anticipate and react to, for Mr Lidington to make— example, the Arab Spring? Simon Fraser: I do not think that it impacted on the Q50 Mr Roy: Will you report on the effectiveness of directorate’s ability to anticipate the Arab Spring. those new systems? Clearly, the directorate did make clear that political and social conditions were such in the region that we Simon Fraser: We will be happy to do so. As I have could expect some sort of disturbance and difficulty— said, in a sense these programmes are only just indeed, our ambassador in Egypt was clear in kicking in, so perhaps we can come back to that later. suggesting that that would be the case. What was difficult to anticipate was precisely how and when that Q51 Mr Roy: The Comptroller and Auditor General would happen, and indeed we did not anticipate that. has warned against the FAC making “oversimplistic cuts damaging value for money”. Have you heeded Q56 Mr Roy: I asked about the ability to anticipate that warning? and react. Simon Fraser: That goes back to my point that the Simon Fraser: In terms of reaction, we have cuts that he was referring to in that report were made considerably increased and shifted resources into our under emergency conditions. We have sought to Middle East work. ensure that in the savings programmes we are implementing now, we have the minimum impact on Q57 Mr Roy: Yes, but at the time you were cutting our core business, which is foreign policy, diplomacy £2.7 million. Did that have an adverse effect on your and consular service in our network around the world. ability to react? I understand you could have put We are not cutting any posts—indeed, we are opening money in now, because there are already cuts in place. six new embassies and we are doing the network shift Simon Fraser: I do not believe it did, Mr Roy, I have described, which is resource-neutral in and of because we shifted resources from other parts of the itself. That means that we have to focus on cutting Foreign Office to reinforce our Middle East operation, our administrative costs, as well as, I am afraid, both in posts overseas and in London. We also decided reducing and making changes to the conditions that in the light of that not to make any further reduction we are able to offer our overseas staff. For example, in our Middle East allocation of resources in the residential costs will be driven down, which means network shift, which we had been considering. We that residences and staff accommodation overseas will decided not to do that. We have frozen that for the be less generous than in the past. In addition to this is time being, while we look at how this plays out. We the difficult decision to reduce the number of overseas will review the resource requirements in the region. postings, we are able to offer some of our support staff For example, we have had to increase significantly the in support functions— resource we have in Libya. We need to be flexible— cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 8 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
flexibility is the name of the game in reacting to our UK-based staff numbers over that period. At the future crises. moment we have about 8,500 locally engaged staff. I cannot predict exactly how that will play out. It will Q58 Mr Baron: Can I eke out a little more detail on probably remain fairly static; that is my expectation. the issue of posts versus the sale of buildings? We Therefore, the proportion of locally engaged to UK- have talked about a £240 million target over four based will increase somewhat. years; we have talked about six-monthly reviews and the need for flexibility and so forth. In this evidence Q61 Mr Ainsworth: The main union, PCS, session, we have heard that the number of buildings anticipate that you will have to cut staff by 20%, not both owned and rented is going to go down. We have 10%. Why? also heard evidence to suggest that postings are going Simon Fraser: That is reducing the overall head- to stay the same, if not go up. There seems to be a count. We are not actually making anybody redundant. slight contradiction. I accept that there are more We have no intention of making anyone buildings in one country perhaps and so on. Can you compulsorily redundant. clarify what you mean by that? I suppose I am leading on to ask whether an evaluation has been done of the Q62 Mr Ainsworth: You anticipate that you will not effect it will have on our footprint, the target of £240 have to make any compulsory redundancies? million. If anything, over the next four years, I hope Simon Fraser: We do not expect at present to have to there is going to be a need for more not less make any compulsory redundancies in our UK-based diplomacy, which has to involve people on the staff. ground. Simon Fraser: It is important to distinguish between Q63 Mr Ainsworth: So why does your main union posts and postings. When we talk about posts, we talk think you are going to be cutting by 20%? about the number of diplomatic missions we have; we Simon Fraser: We may have to reduce the number of have 145 or so sovereign posts and more than 100 staff, but since we have a recruitment freeze in place posts in other cities. We are not reducing that network, our work force is reducing because people are retiring certainly not sovereign posts. We may withdraw some or leaving and not being replaced. So, by natural Foreign Office resource from subsidiary posts in processes, our work force is reducing. Europe, but they will still be open for business doing consular and commercial work as required. We will be reducing the number of postings, particularly of Q64 Mr Ainsworth: So you think the staff will junior UK-based staff, so we may have fewer UK- reduce by what percentage over the period? based staff in some of those missions, and we may Simon Fraser: By 10%. We are looking at the recruit more people locally to support that. The moment at our work force strategy. I might ask important thing is that we are able to carry out the Matthew to comment on that, but we are looking in functions that we feel we need to do, with the right detail— skills, appropriate to each country. It is important that we achieve that. Q65 Mr Ainsworth: Sorry—10% including natural wastage? So the union are just wrong? Q59 Mr Baron: Do you feel confident you can do Simon Fraser: I was not aware that the union had that, Permanent Secretary, despite the fact that you quoted that figure, but I don’t think that that’s the case. have to find £240 million of savings and, as has been indicated, the number of both your rental and fully Q66 Mr Ainsworth: I am trying to get to what you owned properties is going to diminish quite plan. significantly? Simon Fraser: Our current plan is to reduce the UK- Matthew Rycroft: Not necessarily the number of based work force by 10% over the period of the buildings, but the total value. spending round, to be achieved by what you may call Iain Walker: To clarify, in terms of savings, it is £240 natural wastage. We have no plan for any compulsory million of assets that are being recycled, so we are redundancies of UK-based staff at present. Do you selling £240 million of assets that will then be want to add anything, Matthew? reinvested into our estates. Matthew Rycroft: Just to confirm that that 10% Mr Baron: Right, okay. reduction is achieved in our projections by the combination of the recruitment freeze at the two most Q60 Mr Ainsworth: Can we move on to the overall junior bands plus a voluntary early severance scheme, staffing implications of the programme that you have which we continue to run, and the normal rate of been obliged to put in? How many staff do you have people retiring. now? How many are you going to lose and over what period of time? How are you going to manage that, Q67 Mr Ainsworth: You are all unaware that the and who will? Where is the likely impact going to union are saying that you will have to lose 20%? You fall? didn’t even know that they were saying that? Simon Fraser: We distinguish between what we call Simon Fraser: I was not aware that they had said UK-based and locally based staff. At present, we have those particular things. 5,000 UK-based staff and we are proposing over the period of this spending round to reduce that to about Q68 Mr Ainsworth: Is there any internal 4,500. Therefore, there will be a 10% reduction in communication in the FCO? cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 9
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Simon Fraser: I have frequent meetings with the how the Office works and in the way it’s been unions. I have had several meetings with them myself, bringing some of that expertise to bear. As Matthew but that issue has not arisen. said, there will always be a requirement for some form of consultancy for our short-term needs, particularly Q69 Mr Ainsworth: It seems a little surprising to around IT and other technical work. me that they are making that assumption and you are Simon Fraser: I think we share the view, Mr completely unaware of it. Ainsworth, that the civil service as a whole became Simon Fraser: It surprises me. too prone to using consultants and that there are other ways of doing it. There are probably advantages in the Q70 Mr Ainsworth: Okay. Can I ask about pressure on resource that we have, provided we find consultancies and temporary staff? First of all, I am alternative ways of accessing new expertise. It is just trying to understand whether there has been a nevertheless true that some areas, like IT, are being reduction. It seems to some degree, from the briefing forced to look at simpler, less high-performing we have had, that there’s been a reduction in solutions than in the past, but that is one consequence consultancy work over the last couple of years. Could of the times we are in. you confirm that? In other areas such as training, as well, we have had Simon Fraser: The figure that we spent on to reduce the level of external consultancy, coaching consultants in the last financial year was just over £29 of staff, and so forth. We are looking at alternative million—sorry, that was in 2009Ð10. In the last ways of doing that—through internal mentoring and financial year that has been reduced by about one third internal forms of coaching—so we are, in a sense, to a figure just under £20 million. having to cut our cloth slightly differently. Mr Ainsworth: £19.2 million. Simon Fraser: £19.2 million, and we anticipate that Q74 Ann Clwyd: Can I go back to the evidence sent in the current financial year that will fall to about £15 to us by the union, PCS? I do not know whether you million. So we will be halving the spend over two have seen it, but one of its main points is that, “Ending years. That is our projected figure. nearly all overseas postings for more junior grades risks the FCO going back to being an elitist Q71 Mr Ainsworth: What are the implications of organisation with the Diplomatic Service staffed from that? Are you internalising some of the work that was a narrow section of society which does not reflect the being done by consultants, or are you just reining back diversity of the wider UK population.” What would on pieces of work that you were commissioning? your response to that be? Matthew Rycroft: We are reining back on seeking to Simon Fraser: It is true that we had to make this procure consultants wherever we can do the work in- difficult decision to reduce very considerably the house. There are certain functions which we do not number of overseas postings we are able to offer to have the necessary technical expertise to do in-house, UK-based staff in those more junior grades. There are and for which it is more cost-effective for Government two reasons for that, essentially. First, frankly, it is a as a whole to buy in the work. The IT technical area business model that we can no longer afford. It is an is a good example of that, but even in that area our expensive thing to do, to post somebody overseas, and budgets are reducing. Our consultancy spend will if you can recruit somebody locally, the average never reduce to zero, but it will carry on reducing saving on a posting—the average net gain to the through a combination of things that we are just not Office when you have paid the locally engaged doing at all, and things that we are doing more cost- person—we calculated as about £100,000 a year. It is effectively. quite a significant saving for us, which is what has forced us down this route. Q72 Mr Ainsworth: What are we losing from that In taking that step, we have been very conscious that cutback on consultancy and technical staff? it impacts significantly on the expectations of junior Matthew Rycroft: All of our budgets reflect the fact people in the Foreign Office, and we have to find new that we live in a tight budgetary environment and that ways of giving them opportunities to gain experience, our settlement, as we say, was tough but fair. In every to do interesting things, to get overseas experience, area of spend, rightly, we are pushing down or cutting and an expectation that they can rise within the out anything that can be done in a more cost-effective organisation. We are working very hard on that at the way. Consultancy spend is a good example of that, moment. We have published something called our A but it is by no means the only one. and B band charter, which sets out a new offer to staff—for example, more short-term attachment Q73 Mr Ainsworth: You are not able to give the overseas—and in that way, we hope to continue to Committee any indication of the things we are losing attract a broad and diverse range of people into the as a result of that cutback? Foreign Office, and to give them good career Iain Walker: We have recruited a number of people prospects. from the private sector to run some of those activities It is true that when you look at our diversity statistics, that perhaps in the past have been done by we have more diversity in our junior grades than in consultancy. A lot of our experience in, for example, our senior ranks. We were very conscious of that in facilities management is people who have come from making this decision, and we have to ensure that we the private sector and are running that on behalf of work hard to avoid the undesirable consequence that the FCO. It is not simply a case of stopping entirely you have identified as potentially flowing from this what we are doing, but there has been a change in decision. We are very aware of it. cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 10 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Q75 Sir Menzies Campbell: To some extent, you response, to some extent, may depend on the have answered, to Mrs Clwyd, the line of questioning familiarity the people being redeployed have with the I was going to embark on a moment ago. However, region or country. How can you ensure that people you have a responsibility for career development and will have familiarity? you have a need for it, because you have to create a Simon Fraser: That is one issue that has arisen, and cadre of people who in due course are eligible and it is a legitimate question. For example, we had to capable of fulfilling the most significant postings, like make deployments of emergency consular teams Washington, the United Nations, New York, Bonn and during the North African crises. It is very desirable to Paris. How far do you think the policy of reducing have a number of people with experience of consular opportunities for more junior staff to serve abroad will work in difficult places who are prepared to travel at have an effect, over the long term, on the quality of short notice to do those jobs. A lot of those are people people available to do the most significant things on who have worked in our more junior grades, and behalf of the Foreign Office? therefore there is a risk that some of that expertise Simon Fraser: First of all, we are continuing to will be lost. Again, we must look at ways of making recruit what are called policy entrants or, in the civil sure that we give people experience of that work. We service, fast-stream entrants. That is the one exception could probably make more use of locally engaged we have to the recruitment freeze. We are bringing staff in some of those functions, too. But I would not into the organisation about 20 people a year who are seek to hide the fact that these are perfectly legitimate what you might call fast-streamers, so that channel concerns about the resilience of our work force remains open. structure that we need to address. Nevertheless, we have increasingly and deliberately in I want to underline that this has been a very painful recent years tried to ensure that we create decision for the organisation and for many people in opportunities for other people coming through to rise it, and it was made in full awareness of that fact. We from more junior ranks to senior positions. There are really value those staff. The contribution that our a number of examples of people doing that. As I said junior grades make is very great, which is why I am earlier, it is important that we find new ways of concerned that we should continue to be able to offer creating those opportunities and incentivising people them, in different ways, attractive career to join, and stay in, the Foreign Office. I think we can opportunities. do it, but we will have to be creative. The fact is, we may have had a business model that was good in the Q78 Sir Menzies Campbell: So far as is known, has past, but we will have to change it and work hard to that policy had any impact on the number of people mitigate the potential consequences. applying to be recruited into the Foreign Office? Simon Fraser: I do not think that we yet have any— Q76 Sir Menzies Campbell: In relation to incentives well, of course, we are not recruiting, so the answer and opportunities, I think you mentioned the to that is no. possibility of short-term postings. Is that because they can be done without spouses, sweethearts, the pet Q79 Sir Menzies Campbell: labrador and everything else that goes with— That does not stop people writing letters if they want a job. Simon Fraser: It reflects a number of things, the first of which is the increasing requirement for flexibility Simon Fraser: No, but it has clearly had an impact in our overseas deployments because of the nature of on morale in the organisation. I would not want to how diplomacy is changing. It reflects the fact that hide that. A number of people are unhappy, even you can give junior staff valuable experience working angry, that this decision has had to be made. I expect overseas, for example, in replacing someone who is that that will be reflected, for example, in the results on leave in a post for a couple of months. That can be of our staff survey, which have begun to come in. We a very significant learning experience and you can shall have to take that very seriously and work hard give people a diversity and a range of experiences. at it. It will take time to convince people that we really That is one example. are concerned to create different types of opportunities We have also introduced a new diplomatic skills for them. It is a challenge for the leadership of the foundation course to train younger people in the basic organisation. skills of diplomacy. It is also worth mentioning that we are significantly increasing the promotion Q80 Sir Menzies Campbell: A moment or two ago, opportunities out of bands A and B into band C, which you acknowledged the responsibility we have towards will be the band at which people will travel abroad locally recruited staff, in particular, with regard to the more frequently. We are significantly increasing the attitudes of domestic Governments, and one number of people going through our assessment and illustration of that has been put to us. I want to look development centres. We have introduced a new at security from a slightly different point of view— accelerated promotion scheme for people out of those not just the security of locally recruited staff, but the grades. I hope that we will create more upward motion security of the job and of the material and information and, in a sense, the recruitment freeze has helped us that is handled in any particular post. There must to do that. inevitably be a reduction in the level at which you can allow locally recruited staff access to classified Q77 Sir Menzies Campbell: When a crisis arises information. Indeed, the more sensitive the and you have to devote more resources than usual to a information, the more significant that restriction particular region or country, the effectiveness of your would have to be. cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 11
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Simon Fraser: I wish to make an initial comment and how far and to what extent our response to the Arab then invite Matthew to comment on the matter, Spring in the future would necessarily be different? because he has been leading some work at the Office Simon Fraser: I don’t think the savings programmes about different ways of working to respond to changes have impacted significantly because, as I said, we are in the work force. Since you raised the question of at the start of these programmes. It is difficult to know security, if you don’t mind I want to take this exactly how much the Arab Spring has cost, but we opportunity to pay tribute to the staff in terms of calculate that the net cost to the Foreign Office’s physical security. One of the things we have done in administrative budget is somewhere in the region of the Foreign Office in the past few months is to get £7 million, which is not vast in terms of our more systematic and frequent reports of the security administrative cost. We have redeployed staff incidents that arise in the network around the world. temporarily to cover, but of course we would have To be honest, it has been an eye-opener to me to see been employing those staff anyway; it is a question of the frequency with which incidents arise, and it is very how you use your staff. important to bear that in mind. There are obvious As I said earlier, we have put on hold any decision cases—like in Nigeria recently and in Kabul—but about our Middle Eastern network resourcing, so that actually, the incidence of crime in posts in Latin we can take stock of that, maybe in a year’s time. But America and Africa, for example, is quite significant. I think it will be possible for us to manage these There are issues that staff have to face, and this is one changes, if we need to, in a way that will not of the things that is part of the package we offer to significantly affect our capability in that region. We them about physical security. But your question was will have to make choices, of course, about priorities. primarily about information security. In a sense, the austerity measures that we are taking Sir Menzies Campbell: Yes, it was. are going to force us to do that. Simon Fraser: Could I ask Matthew to respond? Matthew Rycroft: Could I just add one broader point? Matthew Rycroft: This was part of the I was very struck during the heat and the height of the implementation of the decision to reduce the number Arab Spring by the extent to which we were relying of postings of junior staff. We have looked at each on fantastic contributions by junior staff and by local and every function that those staff have been carrying staff in our posts. You really saw the value of having such a committed work force, even at the time when out overseas to see whether there are different ways very difficult announcements were being made. As of doing those functions in the future, and there are. Simon said earlier, we hugely value the work they are Some of those functions can be done remotely from doing. They respond to these sorts of crises with a the UK, rather than in every post. For instance, with huge amount of energy, and they were able to help us, new IT, certain IT functions can be done from the UK as an organisation, to meet what were very difficult rather than by someone in every post. challenges at that time. Some functions can be done regionally: rather than being done in every single post, they can just be done Q83 Sir Menzies Campbell: I think some of my in hub posts. And some functions can be done by local colleagues want to ask questions, but, having listened members of staff. But you are right: there are security to your evidence so far, I cannot resist the observation constraints about that, because certain functions have that to maintain the range and quality of the activities to be done by people cleared to a certain level of of the Foreign Office of this country in the foreseeable security classification. Only some members of local future is going to be a very stern task indeed. staff have those sorts of clearances, so we have to be Simon Fraser: I think it’s going to be a difficult very sure about the security judgments that we are challenge. I do think that we have a good plan. We taking in each of those cases. We are going through have a very good understanding with Ministers about that now, and I am confident that we have in place a the priorities and we have a lot of united commitment package of changes to the way we work that will in the organisation, but there are challenges in terms allow us to continue to live with an acceptable level of management—both staff management and resource of risk in terms of things like information security. management—which are not insignificant.
Q81 Sir Menzies Campbell: Do you recognise the Q84 Ann Clwyd: I am looking at the figures on the risk that a locally recruited person may be subject to cost of the evacuation of British nationals and others subornation by the domestic Government, with a view from the Middle East. There is Egypt, Libya and to persuading them to provide information that is Bahrain—£280,000 for Bahrain. Why did we decide domestic to us to the domestic Government? to evacuate British nationals from Bahrain? Can you Simon Fraser: That risk has always existed. Of break down that cost of £280,000? course, if you have more staff, I suppose it is easier. Simon Fraser: If we think back to the time, the But we place clear limits on the access of local staff Foreign Office mounted some effective evacuation to classified, sensitive information. plans in Egypt and Tunisia, which helped a lot of people. In Libya, the Foreign Office came under some Q82 Sir Menzies Campbell: We have had some criticism for being about a day late, perhaps, in references to the Arab Spring. In general terms, how mounting the evacuation from Tripoli. In the light of have these policy proposals impacted upon the that, we were very keen not to repeat that experience. Foreign Office’s response to the Arab Spring? I One of the lessons we learned was that we have to appreciate that not all the policies are fully identify clearly the point at which you trigger a move implemented, but can you take a view as to exactly to chartering aircraft to get people out. In that, there cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 12 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker is always a risk that there will be redundancy in the Mr Baron: Hundreds of years before. offer you make. Ministers took a very clear view that, Simon Fraser: But it is a really important thing, in the circumstances, we should be prepared to take which members of this Committee have alluded to in that risk. In the case of Bahrain—and indeed later on the past and we agree. We need a cadre of people in, in Japan—there were instances in which, in bringing for example, the Middle East, who really have out British citizens, we chartered aircraft that were not expertise, can read the runes and give us good advice. full. There is always that risk of additional cost, which The second thing, of course, is to give the advice has to be weighed against the risk of not providing an fearlessly, even when it might be unwelcome advice, adequate service in times when expectations—in the to be honest in your assessment and to ensure that public, media and Parliament—are high about the you fulfil your responsibilities—diplomats and civil level of service we provide in consular cases. servants—in that respect. I would like to think that we did that. Q85 Ann Clwyd: Are there arrangements in place The other lesson is that we need to be, if possible, for possible further evacuations? more flexible in our ability to move resources quickly, Simon Fraser: One of the interesting things we did both in London and in the region. We need to think was a quite detailed report of lessons learned on the perhaps less in terms of the traditional model of procedures for evacuation in the light of that people doing long postings—four years in one place experience, as a result of which we have put in place and then back to London—and need to be able to do more effective procedures in terms of management more of what the Foreign Secretary described as structures, the clarity of triggers for making decisions expeditionary diplomacy. We mounted a mission very on chartering aircraft, better provision for call rapidly in Benghazi, for example, and we have handling and things like that. I think we have learned mounted one very rapidly in Tripoli, drawing on the some very valuable lessons. Actually, we had a chance Foreign Office and other departments. to put them into practice only two weeks ago and in Perhaps my last point on what we have learned would the past week in the case of Thailand, where we be that it is absolutely essential to work across mounted a full emergency evacuation capability in our Government. If the Foreign Office, DFID, MOD, the crisis room and our post, in case we had to mount a Cabinet Office and others are not working together, major operation, and we deployed one of our consular you do not get effective policy response, and you have rapid deployment teams to the airport in Bangkok. to be able to move from crisis management to Fortunately, we did not have to do that evacuation, stabilisation to reconstruction seamlessly across but we were able to test our procedures, and I think departments. they are stronger now. Ann Clwyd: Thank you. Q87 Mr Baron: Very briefly, you talk about cross- Government co-operation, and that is obviously Q86 Mr Baron: Looking forward, Permanent absolutely right, but to what extent does it go beyond Secretary, you say that you are putting on hold your that? I ask that in the sense that I assume you are spending plans for the region, for understandable pleased that the Government announcement of cuts to reasons with regards investment. What are the key the World Service has been reversed, certainly with lessons you have learned over this period—I am regards to the Middle East service. Do you have any talking about the Arab Spring in general—when it strong feelings on that going forward, in the sense that comes to informing your decisions going forward although the cuts have been reversed, would you like about future spending? There is a general impression us to go further? It is a cliché now, but there is the that we were slightly unsighted and perhaps slow to importance of winning the story, as well as winning react in one or two places. No doubt we did a lot of the— good things as well, but taken in the sum, what key Simon Fraser: I think that the World Service is very lesson have we learned going forward and how will important. I am pleased that we have been able to that impact on future spending plans? reach an agreement and that that agreement involves, Simon Fraser: We are actually in the process of as you say, some additional funding for the Arabic having a report written by one of our senior Middle Service. The BBC World Service is a very important, East experts on lessons that we should learn from the but independent, voice for Britain in the world and experience of the Arab Spring. That is currently being that is very important. So far as the World Service’s drafted, so if you like, I could come back to you with relationship with the Foreign Office is concerned— more detail in due course, but there are already a you know that in the final year of the spending round number of lessons. I do not think I would agree it will be transferred off our budget. During this overall that we were slow; actually, I would say that spending round, it will constitute 14.5% of our budget, overall, with some possible exceptions, the Foreign which is entirely consistent with the proportion of our Office has handled these crises well. I would like to budget that has been allocated to the World Service. think that that was the case, though clearly, there are In fact, it is rather larger as a proportion than it was important lessons. in 2000Ð08. I hope that we have reached a sensible, I think that one lesson we take is the importance of balanced solution on that question. having people who really understand countries, know Mr Baron: Thank you. the languages of those countries and have the right contacts in those countries. That is not a new lesson— Q88 Mr Watts: You talk about, in some respects, we have been learning it since 1979 in Iran and giving up some of the cherished things that happened before— in the past, such as being able to put more junior staff cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 13
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker in overseas posts and the experience that came from Simon Fraser: I am happy to. Sir John, we have a that. You take the point that that will not be possible risk-management process in the Foreign Office, which with the budget cuts and that you will have to look at we are working hard at, where every month the different ways of achieving your aims and objectives. Foreign Office board looks at what we consider to be Does the review look at partnership with other the top policy and operational risks for the Foreign European countries, or perhaps with Commonwealth Office. In my recollection, instability in the Middle countries and our European partners, to provide some East has featured quite prominently in that for a services in some parts of the world collectively, rather number of years. Of course, specific aspects of that, than trying to find a way around what you and other such as the Iranian nuclear risk, are also identified. It members of the Committee might think are second- is something we have been conscious of. Indeed, if I rate options? I do not think there is another option for can go back almost 10 years to my own time as putting people in the post to get the experience that director of strategy in the Foreign Office, I remember they need. Is that part of the thought process? after the Iraq war quite a lot of work being done by Simon Fraser: There are a number of aspects to that. me and ambassadors in the region, looking at the We are still maintaining a number of postings overseas material that was coming out of the United Nations for junior staff. We are working with other about the human development aspects of the Middle government departments, such as UKBA, which has a East. number of overseas posts into which Foreign Office The clear conclusion was drawn that, if there were no staff can be posted. In those ways we can have process of political reform, the likelihood of political, partnership with other departments and other parts of social and economic pressures rising and causing Government overseas. That follows on slightly from political instability was high. We pursued a policy of the last question. We are building that. In addition to promoting internal reform, working with regimes, that that, we increasingly work collectively with other is true, but in the expectation that that was the best countries in aspects of foreign policy. In some areas way to guarantee or support stability in the region we have co-location with European or Commonwealth through internal change. So, that is something we countries to help us to reduce costs. There are a have been aware of for some time. More recently, number of instances of that. We are looking at all the again the Middle East department in the Foreign ways we can reduce our costs and increase our impact Office identified this as an issue, and set up its Arab in diplomacy. partnership approach about 18 months to two years Iain Walker: By way of example, Matthew referred ago precisely to address these questions. earlier to the regional plans that we are doing with I would not share your description of the Foreign estates. If we take the example of Africa, we Office being caught cold by these developments. It is completed our co-location in Ghana and in Juba with true that we did not predict accurately when, where or DFID. We have plans in place in Maputo and how those pressures might burst out. It would have Freetown. In the case of the British Council, it is in a been nice if we had. I am not going to hide behind compound in Addis. In terms of other Governments, the fact that other people did not, because that is a in Madagascar, we share with German members of different matter. Were we surprised when it happened? staff, and we share with the French in Freetown. That I do not think we were particularly surprised in the is the specific example of Africa, but it gives some round when it happened; we were surprised that it colour to the argument. started in Tunisia in the way that it did. I do not think anybody was able to predict in detail the pattern that Q89 Sir John Stanley: Mr Fraser, in the previous sea flowed on from that. change political events worldwide—I would count the Arab Spring as a sea change political event—such as the end of the apartheid system in South Africa and Q90 Sir John Stanley: None of us has a huge gift of the end of communist hegemony in Eastern Europe, prophecy, but I think you would agree that the FCO, the Foreign Office was always clear that sooner or like every other country’s foreign office or state later they were going to happen and they were on its department—I acknowledge that straight away—did risk map. It could not give a date; but it was clear that not foresee the degree of spontaneous combustion in they would happen. the quest for freedom and human rights or its When we come to the Arab Spring, I do not recall a geographical reach. I think you would acknowledge single submission to this Committee from the Foreign that. Office in this Parliament or the previous Parliament— Simon Fraser: I agree. whether an open submission or a classified assessment of your top risks, which we were provided with in the Q91 Sir John Stanley: Okay. In your previous previous Parliament—in which there was any evidence to us you said: “We [the FCO] need to make reference whatsoever to the possible breakout of a sure that we have the people with the language and street revolution for freedom and human rights in regional expertise to be able to help us understand and North Africa and the Middle East. My question is: influence events in the region.” Do you believe that why was the Foreign Office caught cold on the Arab when the Arab Spring began and in the run up to it, Spring? the Foreign Office had the people with the language Chair: Mr Fraser, before you answer that, you have and regional expertise in North Africa and the Middle dealt with this once already, before Sir John arrived, East to understand and influence events in the region? but perhaps you could go over it again. Simon Fraser: I think we do have people. cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 14 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Q92 Sir John Stanley: No, did, before the Arab basis of that discussion. I think that is a really Spring broke out. important function for a Ministry. Simon Fraser: I think we did have people with regional and linguistic expertise. Broadly speaking, I Q94 Rory Stewart: Permanent Under-Secretary, I think that is the case around the world. We have been was speaking to a band C officer recently who said working for some time to strengthen our Middle East that the Diplomatic Excellence initiative was cadre. We have focused on Arab language skills, as something that he appreciated, but he did not feel he one of our identified priorities, along with Mandarin had much incentive to focus on it in terms of his and, interestingly enough, other languages such as career. His sense was that in order to get promoted to French, where we feel we need more people fluent in the jobs he wanted, he needed to focus on displaying those. I would say that we had people with the management skills—what he really needed was a job necessary expertise, but we could always have more. where he could prove that he could manage a couple We are focusing more on language training; we are of people—and that all this stuff about diplomatic increasing our language training budget by 60% over excellence was interesting to him, but in terms of two years, with a particular focus, among other things, ruthless career prospects it was a bit of a distraction. on Arabic. Simon Fraser: Well, he’s half right. Part of Diplomatic Excellence is being excellent in Q93 Sir John Stanley: We come back to Iraq, in management of resources and people. We are here part: do you feel satisfied that the FCO has the before you to give account of our management of ability—not merely of individuals with the necessary resources and people today. But half or maybe more language and cultural background and historical than half of diplomatic excellence is also excellence knowledge in place at the requisite embassies, but in in, if you like, what you might call the traditional London—to assess what comes back from those skills of foreign policy making and diplomacy. It experts and compile an informed national policy depends on what the individual’s role is in the Foreign view? You may have an expert who knows all about Office. If that person is on a policy job, then clearly I Libya or Iraq, but is the system in place back here in hope they feel they will be appraised and their Whitehall to assess the significance of what they are performance will be assessed on the quality of their saying and recognise the importance to national policy work, the advice they give and the foreign policy of what they are saying? understanding they show in that area, as well as in the other aspects of their performance in relation to Simon Fraser: I believe it is. I also believe this is an leading their team and participating in the corporate area where there is always room for improvement. management of the organisation. There have been a number of improvements in the way that we handle the strategic management of Q95 Rory Stewart: If we take as read the foreign policy and the understanding of foreign policy management skills and assume that this is an essential in Government, as well as in the Foreign Office. The and necessary part, rather than coming back to that National Security Council in itself is one of those again and again, it seems as though at the moment the improvements, because it brings together a Diplomatic Excellence initiative is largely concerned community of foreign policy experts, the intelligence with providing courses, training and seminars, and agencies and analysts to have a collective view and to helping staff to develop their skills—at least, a lot of discuss the analysis of events around the world. I the publications you have given us on that, and the think that is very important. Within the Foreign Office expenditure of £1 million, have been dedicated itself I have put a very heavy focus, with the support towards that. Is it possible to do more in shifting the of the Secretary of State, on increasing our strategic culture of the Office to reward people for spending policy thinking. time in rural areas, to reward the quality of their I think it very important that a Foreign Ministry has a reports and thinking, to reward them for their range powerful collective policy-making capacity and that it of contacts with locals, to reward them for intense is not just left to individuals dealing with different academic study and to go beyond what seemed to me parts of the world to work individually on their area. sometimes to look like an added training course? So I have focused on and built up what we call the Simon Fraser: First of all, Diplomatic Excellence is Policy Unit. I have introduced something called the something for the whole organisation—it’s not only Strategic Policy Group within the Foreign Office, for that not very large proportion of the organisation where the senior people meet every two weeks to that does those sorts of functions. It also has to be discuss one or two issues on the basis of papers, so relevant to our locally engaged staff, so people that we look collectively at what I would call cross- working in the organisation need to understand how cutting issues. Recent examples of that would be what they do contributes to the excellence of the consideration of the future of our relationship with organisation as a whole. I, as the Permanent Under- France in some areas of foreign policy, looking Secretary, have to promote an initiative within the together at analysis of where American foreign policy organisation that is relevant to all people in the is heading, looking collectively at the UK’s organisation. relationship with China—those are just some Having said that, I think it’s really important that examples—so that people from across the Office who people who are in policy jobs of the sort you describe are responsible for different aspects of those agendas are motivated and rewarded for the excellence that come together and we form more of a collective view, they show in those jobs. As I have just discussed, and then put collective advice to Ministers on the there is a very strong sense in the Office at the cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 15
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker moment that we are putting a lot of weight on the Matthew Rycroft: Can I just add one thing? When quality of policy advice, policy thinking and people’s you are trying to make a cultural change to a global contribution to that. That is something I am seeking organisation, or a mindset change to everyone in that to promote. organisation, the Permanent Under-Secretary pulling In the field, we are doing what we can to make sure levers, as you put it, is one way of doing that, but it that people are motivated and encouraged to get out is not the only way by any means. Through the from the buildings to develop a range of contacts and Diplomatic Excellence campaign, we are seeking to to use their language and other skills to have the right give many other leaders in the organisation the networks. That is very much what we are seeking to leeway, the flexibility and the authority to shape that do. You would like us to do more in that sense, and campaign for their parts of the organisation. For heads one of the things, Mr Stewart, that you have been of mission particularly, ambassadors, we have given advocating is the idea that we should somehow create them a broad framework, but really encouraged them more opportunity for people who perhaps stand aside to shape it for their own local circumstances. That has a bit from the management structure and who are therefore allowed them to pull certain levers, if you specifically taken on to develop those particular skills. like, rather than only the Permanent Under-Secretary That is something we could look at. We certainly need being able to do so. to support and reward people who bring that expertise, that degree of deep knowledge of countries, into our Q97 Rory Stewart: Just to conclude on this, the organisation. answer to the band C policy officer who is worried that a focus on these kinds of policy issues is not Q96 Rory Stewart: Apart from you, as a leader of going to help their promotion is that the organisation the organisation, putting emphasis on this and saying will be looking at its appraisal process and its that it is important, what institutional, bureaucratic appointment process to ensure that the message is and administrative structures or levers do you have in passed to people seriously interested in policy that that place to achieve that cultural change, either through will help their promotion prospects. promotion or redefinition of core competencies or Simon Fraser: I think the answer to the band C officer reward structures? What actual tinkering with the way you quote is that they have not actually quite got it in which the organisation works can be brought in to right. While we will continue to place emphasis on make these things a priority for policy staff? good management, we are absolutely looking— Simon Fraser: We have done a lot in terms of particularly in that grade and up—for people who changing the way that we operate in the Office. Under show initiative, interest and expertise in policy. We the Diplomatic Excellence programme, which has are a Foreign Ministry: we exist to do foreign policy three strands, one of which we call first-class foreign and the execution of that policy through diplomacy. If policy, we have introduced a whole range of different we forget that that is our core business, we do so at ways of doing foreign policy work. For example, there our peril. I hope that message is being transmitted is much more external challenge: we have much more clearly through the organisation. From what you say, contact with people bringing external challenge to the it appears that we have more work to do. organisation. The Strategic Policy Group I have I do not myself believe that the best way to do that is mentioned. There is the strengthening of the Policy necessarily by changing technical or mechanical Unit at the heart of the organisation. There is much things. I actually think—this goes back to the point more systematic use of contact with alumni. The that Matthew made—that this is about the culture that Foreign Secretary will shortly be having the first is set for the organisation by the leaders of the meeting with his new group of alumni advisers: organisation. The Foreign Secretary has given a very people who have worked in the Foreign Office, gone clear steer on this, and we are seeking to support that. out and come back. In those ways, we are actively I refer you to his speech of 8 September, which I think strengthening the focus on foreign policy thinking. you were present at, in which he talked about his I don’t think it would be appropriate to change the vision for the Foreign Office and how he thought that appraisal system in the Foreign Office, which is we should be conducting foreign policy and basically a competence-based system at the moment, diplomacy. I am absolutely 100% aligned with that because it has served us well and it gives a common vision. base against which everybody can be assessed. That is important, and changing it would take a long time Q98 Rory Stewart: Finally, on business plans, most and would absorb a lot of administrative effort. We of us have just returned from Turkey, where we saw have plenty of other things, as we have discussed an example of very ambitious targets being set—in today, to focus on. particular, the trade and investment target seemed to While looking at people’s core competences, we be a doubling of UK trade and investment with should also look at their expertise, both when making Turkey in the next three and a half years, which is an appointments and when appraising their performance, increase by some £8 billion to £9 billion over three and we should make sure that the balance is right. I and a half years. How do you as a manager make agree with you, Mr Stewart, that it may be the case sense of that kind of target? How do you resource it? that in the past that balance has shifted a bit towards How do you assess whether that target is realistic and rather generic competences, in some cases, rather than what levers do you have to deliver it? focusing also on the specific expertise that the Simon Fraser: That is a UK Trade & Investment individual brings. If that is the case, we need to make target, and it is the responsibility of UK Trade & sure we redress that. Investment to deliver that target. That question is most cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 16 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker appropriately put to Nick Baird, who is the chief embrace and use in the interests of better foreign- executive of UK Trade & Investment. policy making. Our internal policy unit and the The Foreign Office will support UK Trade & strategic discussion that we do within the Foreign Investment through our commercial diplomacy Office in a sense is designed to feed that, to make sure activity to help it to meet those targets. Such targets that we are giving the best possible quality collective are not usually applicable to most areas of foreign input to the Government through the papers that we policy, where evaluation of your results or your put together and present to the Council. I see that as outputs is more difficult. It is important that our heads part of the same machine. of mission in post around the world nevertheless have a business plan, which flows from the Foreign Office’s Q100 Mike Gapes: Is that solely a FCO paper, or do overall plan, and that they then set themselves you consult with other departments before you priorities and targets for their work in the country. present it? My view is that it should very much be up to the head Simon Fraser: It would depend on the subject. Often, of mission to advise us on what matters most in a in the National Security Council, a paper from the particular country, to set their own plan and, to the Foreign Office is requested. It is discussed at senior extent that they can, to allocate their own resource in official level—what is called “NSCO”, the officials’ the country to achieve those purposes. Provided that meeting where Permanent Secretaries sit together. So the head of mission has agreed that with the regional all the papers are actually discussed across the director in London, I, as Permanent Secretary, am Government before they go to ministerial level. We happy with that. I think we should delegate that are building collective advice in that way. authority as much as we can to empower our heads of On your question about the inherent tensions in mission who, after all, are very able people. They are foreign policy between, for example, human rights, employed to do a job for us, so we should let them do potentially, and commercial interests, that has always the job. been there. But one of the advantages of having this In that sense, I hope that that will enable us to have sort of discussion is that we can look at those issues. simplified business planning—we are not requiring For example, when we talk about China in the Foreign them to do different plans ever year; we are doing it Office or in the National Security Council at the officials level group, we have in the room people who for a four-year period—in which the person on the are principally interested in the security aspects of that ground can call the shots. We will monitor those relationship alongside people who are principally plans—at the moment, we are in the process of doing interested in the economic aspect of that relationship. a six-monthly review of our business plans—in, I Therefore, there is a much fuller, more balanced would like to say, a not too intrusive way in the centre discussion so, if there are potential conflicts between to make sure that we are satisfied that the organisation those agendas, they can be properly aired. That makes as a whole is aligned, around the world, to deliver the for better policy making. headline priorities which are in the purpose and the priorities that the Foreign Secretary has set. Q101 Mr Watts: Can I take you back to consular services? What percentage of your budget is spent on Q99 Mike Gapes: May I take you back to your consular services? Leading into that, why do you think answer to Sir John Stanley, when you referred to a the Prime Minister had to apologise over the collective policy-making capacity and the strategic evacuation of British citizens from Libya? Were that policy unit? I think that those were the phrases. How apology and the failure of poor service linked in any does that relate to the fact that Government has way to previous cuts? established a National Security Council? Linked to Simon Fraser: Consular services are supposed to be that, we were talking about the Arab Spring. You self-funding. We make charges for some aspects of touched on the UKTI setting its own targets. Is not our consular work and therefore that helps to balance there sometimes a contradiction to the human rights the books. If you look at the figures that we have for and democratic transformation agenda, and the our consular budget, they look disproportionate to increasing trade and stable environment for the British some other aspects of our spending, and that is the business agenda? Is that reconciled within your reason why. strategic policy unit or do you have to deal with that Mr Watts: And did we cut them? through the National Security Council? How does Simon Fraser: There has been a slight deficit in your top management’s vision of the world fit in with recent years so we have, for example, had to adjust the other areas? some of the charging regimes in some areas. Simon Fraser: The National Security Council, which Iain Walker: We have an obligation to manage that brings together Ministers and senior officials from as a flat amount with HMT, but yes, we are currently departments that have an interest in international and running at a slight deficit with plans in place to bring national domestic security issues, is a very good that back. We spend £140 million on supporting our development. The Foreign Office welcomes that. The British citizens. majority of the papers that go to that body actually Simon Fraser: About the apology, the fact was that come from the Foreign Office, so we supply on the day in question, we were unable to get the information and advice to it. It is a way in which the aircraft that we had in place into the air sufficiently Foreign Office can actually influence decision making rapidly, so we were late in getting the consular across Government. Far from seeing it as a threat to evacuation mounted for Libya. People have a right to the Office, I see it as something that the Office should expect the best possible service and the Prime cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Foreign Affairs Committee: Evidence Ev 17
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Minister felt it appropriate to apologise. In the end, the support that Ministers give through leading trade we were able to make amends and we successfully delegations and so forth, but that is only part—a very mounted the evacuation of British citizens and, important part—of a wider picture. indeed, citizens of other nationalities from Libya, both Mr Watts: When the Trade Minister or the Prime by commercial means through the airport, and in some Minister arrives in Turkey and sets an ambitious target cases, where people were inaccessible, with the for doubling trade, he has no idea whether that target support of the Ministry of Defence where that was is achievable. He has just picked out a figure from the necessary. air. He says as he leaves, “This is what we want to achieve,” and moves on. Q102 Mr Watts: Without putting words in your Simon Fraser: Sometimes it is a good idea to set mouth, Mr Fraser, you are saying that it was not down ambitious targets. Once they have been set, it is for to previous cuts; it was down to a lack of planning by UKTI and the embassy concerned to work out how to the Foreign Office to foresee that it may well have to pursue them and put the resources behind them. I do evacuate people quickly from a part of the world. It not have precise figures, but there have been did not have any plans in place to do that. significant increases over the past year in the volumes Simon Fraser: I would not quite go that far. There of our exports to China and India, I believe. I do not were various factors. It came on the back of a major think we have yet met the full targets, but we are on evacuation operation in Egypt and Tunisia at a the way to doing so. weekend in which we were dealing, in consular terms, with an earthquake in New Zealand, a crisis in Q104 Mr Watts: The business people we met in Bahrain and, suddenly, a crisis in Tripoli. I think it Turkey had no idea about how the new target was was a consequence of overstretch in the system— going to be met; they saw very little change from what indeed, we need to learn the lessons about our had happened previously and they did not understand capacity in that sense. That combined with perhaps a how that target had been set or what procedures were failure on our part to understand the way in which the in place to achieve it. Having targets is all well and evacuation from Libya would be a different challenge good, but behind that target needs to be the resources from the evacuations from Egypt and Tunisia, which placed at the disposal of people. We did not see that, were easier operations; and with—to be honest—bad or that there was a clear idea, other than doing what luck that an aircraft broke down on the tarmac and they had done previously, that was going to make that was unable to take off. sort of difference. There was a range of factors and we have to learn Simon Fraser: I think it is right that you must have a the lessons from them. One of those goes back to the strategy and a plan to deliver your ambition. That is question that Mrs Clwyd asked about redundancy and very important. The Foreign Office has to work with whether you are prepared to spend more in order to other departments—UKTI and BIS in particular—to assure the service, with the risk that you spend more promote that activity under the leadership of than you need to. Ministers, notably Lord Green, of course. On the point of business not feeling any difference, Q103 Mr Watts: Moving on, we have heard a lot to be honest I am surprised to hear that. I have had about commercial diplomacy and the shift in emphasis discussions with a number of senior business men towards using our position around the world to recently in which they have said, I think without promote our trade. How successful is that shift? We exception, that they have perceived a tangible have just come back from a visit to Turkey where improvement in the Foreign Office’s focus on we got the impression that the Minister arrived in the commercial support for businesses around the world. embassy, pronounced the sort of growth in trade he I will not do so now, but I could cite a number of wanted to achieve, and then got on the plane and did specific cases in which very senior chief executives the same somewhere else, without having any real have written or commented thanking us for support in plan or strategy for implementing that wish to see landing specific deals. I hope we are getting that right, trade doubled in Turkey, for example. Are we wrong although we can get still better at it and I entirely to believe that? Is there a strategy or a plan? Are recognise that it needs to be in a context of a resources being put in place to help the embassy deliverable programme of activity in different achieve that very ambitious target? countries. Simon Fraser: It goes back to the question about targets and the relationship between the Foreign Q105 Mr Watts: Let me just try something on you. Office and UKTI in trade and investment promotion It needs a different mindset among people who are and commercial diplomacy. UKTI has a strategy working out in our embassies to be more proactive in containing some clear priorities on what it wishes to business. Does it surprise you that the ambassador in achieve and where it will focus. It works with us. The Brazil, for example, is driving a Mercedes car, when Foreign Office supports that through its commercial he is supposed to be the most senior person promoting diplomacy activity, which is broader and is described trade in Brazil? It seems strange to us; we do not in a leaflet that we have published, of which I have a believe that the French ambassador would drive a copy. A Charter for Business describes what the German car. Foreign Office will do, which is more about helping Simon Fraser: It does not surprise me in a sense. The businesses to understand different markets—advising question is: what is a British car in a global economy? how to operate in those markets, who to talk to, and We could look at the ownership of Jaguar Land Rover the political risks. Part of that, as you rightly say, is and draw our own conclusions. I think the cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG01 Source: /MILES/PKU/INPUT/017434/017434_o001_th_HC 1618-i corrected oral evidence 081111.xml
Ev 18 Foreign Affairs Committee: Evidence
8 November 2011 Simon Fraser CMG, Matthew Rycroft and Iain Walker
Government car fleet here in London uses Toyotas. I years. There used to be a requirement for people am not sure it surprises me. What is important is that always to drive British vehicles, but that was relaxed our ambassadors are actively engaged in the field in some years ago. I am happy to see exactly where we promoting opportunities for British business in the are with it now, but I think we also need to bear in market they are working in. mind the practicalities of operating in different places around the world. Q106 Mr Watts: Isn’t it about promoting goods that are produced in the UK? The Toyotas are produced in Q108 Sir Menzies Campbell: There is an element of the UK; the BMW the ambassador drives is not. security involved, is there not? There are some Chair: Actually, I think it was a Lexus he was countries where it is necessary, without going into too driving. much detail, to provide a car that is a little more Mr Watts: It was not produced in the UK. resistant than is necessary elsewhere. You always have Sir Menzies Campbell: It’s a posh Toyota. to take that into account, so that none of our people is at unnecessary risk. Q107 Mr Watts: Yes. There are choices, if you are Simon Fraser: There are many issues involved. Of promoting something. I asked you whether the French course, the provision of secure and armoured vehicles or the Germans would drive a car produced anywhere is one of them. We do have a very considerable fleet but in their own country. The suggestion is that they of those. It is probably true that most of those are would not. Do we need to have a different view from Range Rovers and Land Rovers, although I do not our ambassadors? Is that something you will look at have the specific figures. Do you know, Iain? to see whether we are maximising the opportunities to Iain Walker: I’m not sure.1 promote British goods in overseas territories? Chair: Mr Fraser, thank you very much indeed. We Simon Fraser: I cannot comment on the policies of appreciate your coming along. It is not the most other Governments or foreign services. I think it is glamorous of areas of the Foreign Office but it is one important that people drive suitable vehicles. There is of the most important. The diligent way you and your a number of factors relevant to the decision, included colleagues have answered the questions is much what is best suited to the local conditions and what appreciated. support can be given for servicing and maintenance of Simon Fraser: Thank you. vehicles. I am happy to look at the policy, which I think has been changed a number of times over the 1 Note by witness: There are around 200 such vehicles in total. cobber Pack: U PL: COE1 [SO] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Foreign Affairs Committee: Evidence Ev 19
Tuesday 22 November 2011
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Mr Frank Roy Sir Menzies Campbell Sir John Stanley Ann Clwyd Rory Stewart Mike Gapes Mr Dave Watts ______
Examination of Witness
Witness: Lord Patten of Barnes, Chairman, BBC Trust, gave evidence.
Q109 Chair: May I welcome members of the public clearly to licence fee payers why they should be to this second and final evidence session of the paying for the World Service, rather than that cost Committee’s inquiry into FCO Performance and being met by the taxpayer. I do not myself regard that Finances? It is focusing on the work and performance as an excessively difficult job. of the FCO’s associated public bodies—namely, the We will establish an international committee in the BBC World Service and the British Council. Trust, which will be chaired by a newly appointed I am delighted to welcome, as our first witness, Lord trustee, Lord Williams, whom members of the Patten of Barnes, the Chairman of the BBC Trust. Committee will, I am sure, know. He is himself an ex- Lord Patten, you kindly volunteered yourself to come member of the World Service, an academic, a senior and speak to us today, and that is very much UN official and a senior adviser to Foreign Ministers appreciated, because you are relatively new in the and to a Prime Minister, so he is very well qualified post. As the World Service is in transition, we are for the task. When we become responsible financially particularly interested in your attitude to it and your for the World Service in 2014, we will set out an approach. Is there anything you would like to say by operating licence spelling out the objectives and way of opening remarks? purposes of the World Service, which we will agree Lord Patten: I would just like, very briefly and with the Foreign Secretary. I am sure we will explain without I hope sounding too servile, to thank the things from time to time to the Committee, whenever Committee and its predecessors for always taking it wants to talk to us about the World Service. It is such an informed and robust interest in the well-being important that we should be as open as possible to of the World Service. It has not always been as well this Parliament and the Assemblies and Parliaments treated as I would have liked, both as a Minister and around the United Kingdom. subsequently, but the Committee has always been a very strong supporter of what is undoubtedly one of Q111 Chair: On this point about the agreement with the most important and influential things we do the Foreign Office, you are well disposed towards the around the world. So I would like to thank you very World Service, as is the Committee, but if you were much and particularly, of course, to thank you for succeeded by someone less well disposed, would the helping to secure the extra funding we received earlier agreement effectively protect the World Service? in the year. What is the shape of the agreement going to be? Lord Patten: If I were followed—as I cannot imagine Q110 Chair: How do you see your role? As happening—by an egregious philistine, and the Trust Chairman of the BBC Trust, how do you see your role savaged the budget of the World Service, I imagine as far as the World Service is concerned? that the Foreign Secretary and this Committee would Lord Patten: I have probably used the World Service make their views about it strongly known. In the more than any previous holder of my office or of realms of political reality, I cannot imagine that the similar offices, so I begin with a very high personal BBC Trust and the executive would be allowed to get regard for the importance and value of the World away with short-changing the World Service. Service in helping, to quote from the public purpose At the same time, I am sure that the Committee of the BBC, to explain the United Kingdom, or at least understands that, given the flatline licence fee its values, “to the world and the world to the UK”. settlement and pressures elsewhere, we cannot, hand The BBC licence fee payer, whom we represent at the on heart, guarantee to spend a great deal more on the Trust as the strategic authority for the BBC, has in the World Service. However, I have made it absolutely past from time to time been responsible for funding clear that the budget in 2014 will be one we seek the World Service, and for the past few years that has to maintain. been done by the taxpayer through the Foreign Office grant—not always with the most indulgent generosity, Q112 Mr Watts: Lord Patten, you say you don’t it has to be said. I hope that we can ensure, as a Trust, think it is a difficult task to convince the general that the World Service is adequately funded in the public that it should pick up the bill. What evidence future. Both I myself and the director-general of the have you to support that? Might it not be the case that BBC have made it clear that we wanted to retain the the public will see it as a stealth tax, and the reason, funding of the World Service. We will have to explain perhaps, that they have not got quality programmes on cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Ev 20 Foreign Affairs Committee: Evidence
22 November 2011 Lord Patten of Barnes their main stations—because they are now subsidising could not say that it had done fantastically well over other areas? the years in the allocation of public funds. Lord Patten: Some may argue that we should be I think that we will be careful and, I hope, appropriate spending more on “Strictly Come Dancing” than guardians of the quality of the World Service. I am shortwave Hindi services in Andhra Pradesh. very happy to talk to the Committee regularly about However, the evidence is quite strong that, if the case our objectives—what we are seeking to do. Every year is put to people, they understand the importance of the we will publish a report on the World Service, and BBC World Service. every five years we will carry out a thorough review Let me give one obvious example. There was a of it. I am sure that this Committee will also want to Chatham House-YouGov poll not long ago that see my colleague, Lord Williams, with some indicated that opinion-formers had a particularly regularity. benign view of the World Service, and thought it was Chair: I am pretty sure that we would like to take the most important example of our influence around you up on both those offers. the world. Members of what is rather wretchedly called the ordinary British public, while they did not Q114 Sir Menzies Campbell: You mentioned place it higher than some of our other manifestations “Strictly Come Dancing.” On a previous occasion, the of international influence, certainly gave it a high Committee concluded that one of its apprehensions rating. was that the situation might turn into a contest If you look generally at polling evidence, it suggests between Mr Robin Lustig and Sir Bruce Forsyth. Does that one of the principal attributes that people accord that not illustrate the fact that in these matters, the BBC is its role in explaining this country to the ultimately, there will have to be a financial judgment world, and the reverse. I think one should build on by the Trust of which you are chairman, and that there that. It will need argument, and occasionally it will will be a number of competing priorities and the require taking on some of the more populist—though World Service will not enjoy any special protection? not always popular—views of the tabloids, in the face It will have to compete among other parts of the BBC of whom we should not be too cowardly on other output to ensure that it has the funding to remain the subjects, too. force that you have described and that you obviously Chair: Hear, hear. Sir John Stanley. support. Lord Patten: It is true that it will be competing to Q113 Sir John Stanley: Lord Patten, it has always demonstrate its priority importance, but we should not seemed to us in this Committee that one of the key kid ourselves that it has not competed in the past. I used to be the assistant Minister in negotiating the protections of the World Service was that there was Foreign Office’s annual spending settlement. In those to be ministerial accountability to Parliament and this days, before most of you were born— Committee, by virtue of funding through grant in aid Sir Menzies Campbell: That’s very generous of you. from the Foreign Office. Indeed, our view was Lord Patten: Back in the mid-1980s, it was clearly absolutely confirmed in this Parliament when, as a the case that the World Service was competing with result of the acute pressure that this Committee the British Council and the budget for the Foreign brought to bear, the Government’s initial serious cuts Office establishment. In a sense, it was in competition to World Service funding were significantly reversed. with the number of gardeners in Vienna or the estate How do you respond to the view that in the absence elsewhere. I do not think that the BBC World Service of that direct ministerial accountability, the World always came out as well as it might have done from Service is now much more vulnerable? We can bring those discussions about competing priorities. you in front of this Committee, but that is very The BBC is hugely proud of the World Service. I have different from a situation in which Ministers know just come back from Washington, where, among other that if they cut the World Service, there will be a things, I spent a day with the World Service and our major row on the Floor of the House and in this BBC bureau in Washington. In America and Committee. elsewhere in the world, the World Service is hugely Lord Patten: So there would be if a chairman of the well regarded, and I think that the Committee knows Trust and a director-general connived at cutting World that in addition to the Committee being concerned Service funding. This is not just a display of my about the cuts in the World Service last year, the State customary modesty, but I think that the Foreign Department and our colleagues in America are very Secretary is in a much stronger position than a concerned about these matters as well. I do not think chairman of the Trust or a director-general. If we were that all the Americans’ similar services, such as Voice to behave irresponsibly towards the World Service, of America, have an audience, in aggregate, as big as this Committee and the Select Committee of the the World Service’s. DCMS would make their views robustly clear. I think that the World Service is regarded by the BBC I wholly acknowledge the role that the Committee as a whole as one of the jewels in our crown, and as played in securing additional funding, in particular for part of our objectives in the next few years—not least our Arabic services, earlier in the year. But I got a run in order to survive the debates about the future of of the figures—I don’t have them in front of me—for broadcasting in this country in reasonably good spending on the World Service over a longer period, shape—one of our tasks will be to demonstrate the and, as I said earlier, although the World Service has distinctiveness of the BBC and the particular qualities sometimes been protected from the most savage that the BBC offers, which are not just about reach. instincts of the Treasury public spending division, you Of course it is important that people should watch our cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Foreign Affairs Committee: Evidence Ev 21
22 November 2011 Lord Patten of Barnes programmes as well, but, in addition to making high- and also recruiting a new trustee to chair that quality entertainment programmes, we have to committee. I would have thought that the international demonstrate that the BBC can do some things that the committee in the Trust, chaired by Lord Williams and market will not do itself. including some of my colleagues—on which the director of the World Service would have a part, I am Q115 Sir Menzies Campbell: Will there be an sure—should be a sufficient institutional guarantee, operating licence for BBC Monitoring at Caversham? but I think you could have the head of the World Lord Patten: There will have to be a licence covering Service on the executive board of the BBC and still BBC Monitoring. I went to visit them the other day; not do it justice financially. Indeed, if I had a run of they are in a slightly different category, and the initial figures in front of me, I could probably demonstrate task, I think, is for us to demonstrate, not least that now. internally, the importance and value of the monitoring service to our overall journalistic activity, as well as Q118 Rory Stewart: What will you do to ensure that to other branches of Government, where, of course, the international trustee really has teeth and power? In monitoring is extremely highly valued. the past, they have not. It is not a new job; there have been international trustees in the past. Q116 Rory Stewart: Lord Patten, would you Lord Patten: No, it is a new job. It is certainly true consider putting in place real governance protection that in the past there were members of the governing for the World Service—either putting the director of body of the BBC who had Foreign Office the World Service on to the executive board, as used backgrounds, but the governing body did not have the to be the case, or ring-fencing the budget to ensure same regulatory or strategic role as the BBC Trust, so that there is a level below which World Service this is a new role. I was particularly pleased by the funding cannot drop? quality of the applicants for it, and I was delighted Lord Patten: Would I consider those things? Well, on that Lord Williams was chosen. I am sure you will the second thing first, I would consider it, but I am know what an extremely capable man he is. not sure that it would be a very good idea, and I am not sure that it would be the best way of justifying Q119 Rory Stewart: Can I just push again on the our commitment to the World Service to licence fee question of how you make sure they have real teeth payers as a whole. I think that if it was apparent to and authority? They can be on the board and they can the Committee and to other friends of the World chair a committee, but what about when it comes to a Service that we were not doing right by the World real fight to protect the World Service? Again, this Service, there would probably be a great deal of comes back to the Chairman’s first point: you are pressure—indeed, probably the sort of pressure that obviously very well-disposed. We agree with you that we could not resist—for us to do that. Certainly for it is unlikely that your successor will, in your words, the time being, I would like to be able to demonstrate, be an egregious philistine, but this seems a very good without tying my own hands, that the Trust could be opportunity really to tighten the structures, to ensure shown to be a sensible guardian and custodian of the that whatever happens in the future—whether this World Service. Committee is around, or whether you are—the World On the question of the composition of the executive Service has more protection than what you seem to be committee, that is not, of course, one of my talking about, which are largely informal protections. responsibilities. I think that the existing arrangements, You are saying, “Well, the trustee is a good person. where the head of news for the BBC takes The Foreign Secretary, I am sure, will get involved. I responsibility for the World Service as well, should be am sure the Committee will be upset. The Foreign sufficient, but in a moment you will doubtless want to Secretary is more powerful than the chairman and ask the head of the World Service or the director- governors”, but is there nothing more that we can do general what they think of that idea. at the moment to really give teeth, force and definition to protecting the World Service? Q117 Rory Stewart: Can I come back on that one Lord Patten: It may be that I suffer from a more time? We have pursued this, both in the professional deformation, having spent five years of Committee report and with Mark Thompson. There my life in Brussels, but during that period, I became was a significant demotion of the director of the World increasingly hostile to the notion that there were Service off the executive board and the replacement always institutional fixes to issues that very often were by the director of news, so, for example, when John a matter of political and personal will. I will have to Tusa ran the World Service he was on the board, and prove it to the Committee and its successors, although the head of the World Service no longer is. Is this not I probably just mean this Committee, but I do not an opportunity to move the head of the World Service think that personally I need any tightening—on this back on to the board, to reflect its new position within issue at least, although perhaps I do physically—or the BBC and your overall responsibility for the that those responsible for the World Service will find World Service? themselves having to fight me or the other members Lord Patten: The director-general certainly could do of the Trust. The proof of that will be how we operate that, although he is facing a Trust that is insisting that and how the World Service operates. he should reduce the number of senior management I do not think there is any institutional fix that could in the BBC and streamline senior executives. I think produce a large dollop of additional cash for the BBC you should notice that we are establishing, because of World Service, but I believe that we can at least retain our new responsibility, a new committee in the Trust the funding that the BBC World Service gets at cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Ev 22 Foreign Affairs Committee: Evidence
22 November 2011 Lord Patten of Barnes present. Although that does not mean that there will As far as audiences are concerned, there is an not occasionally be other adjustments in services, it additional issue. Overall, the audience for what we should enable us to continue to run a very good are doing in radio, television and online has held up service and enable us fully to integrate the whole of remarkably well, and in some areas—online, for our news gathering across the BBC. That is something example—it has been growing dramatically. that people in the Arabic service, the Persian TV Sometimes, it is our traditional services that are really service and others look forward to happening. making an impact, hence, I guess, those signs you see in demonstrations in Syria saying “Thank you BBC”. Q120 Mr Baron: Lord Patten, I do not think that What is also having an impact on our audiences is the there is anyone in this room who is not supportive of fact that, in some emerging or poorer parts of the the World Service. We all know that in this world, the audience for radio is shifting as digital increasingly pervasive information age, winning the technology has an impact on those countries. story will be just as important as winning the conflict, People—for example, in Pakistan—who might have if not more so. Soft and smart power will become been listening to radio in the past are now more likely increasingly important, to the advantage of those to be watching television, which obviously has an countries that can resource it properly. Looking at the impact on audiences for Urdu and Pashto in a part of BBC’s figures, weekly listening audiences are falling, the world that I guess Mr Stewart knows better than in large part perhaps because of the cuts. That is a any of us. The figures will show you that the worry, particularly across the Arab world; in audiences have not been holding up, which is a point Afghanistan I understand that audiences have fallen that I know my future colleague Lord Williams wants by a third, if you believe the figures, and perhaps a to deal with. little bit more in Pakistan. I put it to you, however, There are all sorts of explanations for what happens that for a relatively small amount of money we are to the Service and, I am afraid, all sorts of reasons for losing major audiences globally. why the Service has not always been given the Contrast that with one or two of the other government attention it should. I hope that, although not programmes, such as international aid, where we are philosopher kings, we can at least be a little more sending £1.2 billion to India—a country that has its assertive in making the case for the World Service. own rearmament programme, space programme and indeed aid programme—and there appears to many to Q121 Mr Baron: May I briefly press you a little on be a disconnect. I am not asking you to be critical of the wider context? Quite understandably, you have the Government, but I am asking why you think there fixed on the structures and the priorities within the is that disconnect in this country. The cuts to the BBC, but as I suggested—and I know you agree— World Service and the Council, and to our soft power friend and foe alike do not comprehend the apparent capability generally, are beyond the comprehension of disconnect. You have worked in Brussels, you have friend and foe alike, not only in this country but been in Government and you are where you are now. abroad. Why is there that disconnect? What more can Why do you think, at a government level, there is we do to try to repair it? As I say, I am not asking a disconnect? you to be critical of Government, but I am asking for Lord Patten: I think that over the years—you are some suggestions. encouraging me to go into areas that are beyond the Lord Patten: That is, as people say when playing for time, an extremely good question. I suppose that short scope of a BBC Trust chairman—we have lost some of government by philosopher kings we are always of our self-confidence about the importance of the going to find ourselves in a situation where the values that we have not always exemplified, but tried allocation of spending is not always as rational an to exemplify, to other people around the world. It has enterprise as we would like. Over the years, I have been consistently true—now you’ve got me going— been a huge admirer of both the British Council and of public debate in this country that it is focused on the World Service, and I have written and lectured price, rather than value. The World Service and British about them both. It may be that I have a tin-plated Council have been among the victims of that. Higher tongue, but neither my eloquence—such as it is—nor education has been a victim of that as well, and it still that of others seems to have made much difference to is. There are still some things that this country does what has happened to the funding of two institutions better than anybody, and to a remarkable extent we that represent, in many respects, the best of British, have not cherished them as much as we should. To an and which are hugely admired overseas. extraordinary degree, we keep re-examining them as The Chatham House YouGov poll that I mentioned though there was something wrong with them, rather earlier showed what informed commentators in this than wrong with us. country think of the World Service. As the Committee May I say one further thing about the development has made clear to me, we have now to put the case budget? The Committee will know that the BBC for spending money on the World Service at a time World Service Trust, which is independent of the BBC when people will see expenditure on other services Trust and the executive—it is our independent abated. Two or three members of the Committee have charity—has received a grant of £90 million from written to me about the funding of local radio, and DFID, which is about £81 million of new money, and while we consider those requests for additional confirmation of another £9 million over five years. funding we are also considering requests for more That goes to important development work, some of funding for the World Service. Somehow, one has to which I hope will be of assistance overall to what we balance these things. are doing. cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Foreign Affairs Committee: Evidence Ev 23
22 November 2011 Lord Patten of Barnes
Yesterday I was at the Reuters Institute for the Study senior pay related to median earnings, which was one of Journalism in Oxford listening to a lecture by of the central features of Will Hutton’s suggestions on Baroness Onora O’Neill. The World Service Trust has top pay, and which is one of the proposals in the just provided two more scholarships for journalists Compass pay report this morning—and I think we are from poor developing countries to come to study and the only public body to have done so—and that will do research projects there. Although most of the work be steadily reduced. It is both a cap on the pay of the is developmental and does not really support our director-general in relation to median earnings and a programming, about £4 million will come into our cap on the average of the senior executives in relation programming, which will be of some modest to median earnings. I have also argued that we should assistance, too. reduce the number of those who are in the senior Chair: That is a very welcome grant. management pool from 3.5% to 1%, and that target has been accepted. Q122 Ann Clwyd: I started my working life at the We have also said that, for the future, there will be no BBC, in the World Service in particular, so I am a further payment of private health to senior managers. great supporter. I am also a member of the National It seems that it is entirely wrong that senior managers Union of Journalists, and I know the NUJ feels very should get personal health cover and that nobody else sore about the cutbacks. They make a point about should. The director-general has just made an senior management perks, as they put it—just the car announcement about car allowances, which is that no allowances for senior managers costs £3 million a new recruits will get car allowances and that those year. They ask why those perks should continue to be will be gradually withdrawn as well. So I think that paid when most of the senior managers live in central what has been undoubtedly a toxic issue we are London. Some of them do not drive cars, and some of dealing with pretty strongly, and I would like to think them do not have licences. At a time when journalists that that example would be followed by some others, have been particularly hard hit by the cuts, they ask too—in fact, quite a lot of others. why these perks are allowed to continue unchallenged. Lord Patten: First of all, I have spoken to Q123 Chair: Lord Patten, we have already kept you representatives of the unions even though, in the beyond your scheduled time slot. Thank you very Trust, we do not have executive responsibility for much indeed for coming along here. We will certainly personnel relations, but I recognise that there will be take you up on your offer to come again as and when a lot of journalists in the 2,000 or so who will lose required, but in the meantime, we wish you well in their jobs as a result of the licence fee settlement and your position and particularly as far as your its implementation. That means 2,000 mortgages and responsibilities relate to the World Service. 2,000 families with blighted expectations and hopes, Lord Patten: Thank you very much. I am sure that which is a worry. It is happening elsewhere in the Michael Williams would want pretty early in his economy, and I think people realise why the BBC has period as a trustee—like me he has become a Cross had to pull in its belt. Bencher in the House of Lords, which is a new Against that background, I have made it clear that we experience for both of us—to come and talk to this have to deal robustly, which is the usual adverb, with Committee pretty quickly. the whole question of senior management pay, Chair: Thank you. numbers and perks. We have introduced a cap on
Examination of Witnesses
Witnesses: Peter Horrocks, Director, Richard Thomas, Chief Operating Officer, and Jim Egan, Controller, Strategy and Distribution, BBC Global News, gave evidence.
Q124 Chair: I welcome our witnesses to our next some amelioration in the funding from the Foreign session, which is still on the World Service: Peter Office. There is also the role that was played in Horrocks, the Director of BBC Global News, who is helping the circumstances of the DFID grant, which accompanied by Richard Thomas, the Chief Operating was previously discussed. Although it has modest Officer of BBC Global News and Jim Egan, the benefit to the World Service, it is still of significant Controller, Strategy and Distribution, at BBC Global benefit to World Service audiences, so we appreciate News. I welcome you all very much indeed. Mr that. Horrocks, quite a lot has happened since we last saw you. Is there anything you would like to say by way Q125 Mr Roy: Mr Horrocks, a year after the of opening remarks? spending review, what has its impact been, and what Peter Horrocks: Briefly, since we last spoke in do you think its impact will be at the end of the three- March, and as the Committee is aware, it has been a year period? stretching year organisationally and of course Peter Horrocks: Its most obvious impact is in the loss editorially, given world events. I should say that we of audience and the loss of valued staff. I would like are in a somewhat better position than we were when to pay tribute to my staff for having performed we last spoke. I echo Lord Patten’s appreciation of the magnificently this year, given world events, when they involvement of the Committee in the report that you have had to go through such an enormous change and produced, and of the subsequent debate, which led to significant loss of people. The audience level has cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Ev 24 Foreign Affairs Committee: Evidence
22 November 2011 Peter Horrocks, Richard Thomas and Jim Egan dropped. It has not dropped as much as we originally but it is welcome. It is important to understand that it thought it might, because we adapted the plans, but does not directly put back in any of the money lost as nevertheless it has dropped by about 15 million on a result of the FCO funding; it is funding separate previous years. It has actually dropped from 180 items. million to 166 million—that is 14 million. Q129 Mr Watts: The World Service will have to Q126 Mr Roy: And the loss of staff—what were the make another £12 million in cuts over the next two numbers there? years. Where will those cuts come from? Peter Horrocks: We announced 451 post closures. We Peter Horrocks: They will come from continued announced 480 originally, and we adapted that to 451. further reductions in distribution costs, some of which There have been about 300 redundancies in the UK— have been achieved through some smart procurement a very significant loss of staff. However, we very and contracting. They will come through savings that deliberately carried out that redundancy programme we can achieve through integrating our programming as quickly as possible. Painful as it was, we thought in our new building, which I know a number of that the best thing was to get through that as fast as members of the Committee have visited. We will be we could, and then start to rebuild. We are looking able to work across teams, both in the World Service forward next year to moving into the new languages and between the World Service and the headquarters at Broadcasting House, where the BBC’s news operation, which is currently based in Television domestic news and World Service operations will be Centre. That will create some savings. coming together. As the BBC chairman indicated, that There may need to be some adjustments in the scope is going to be a real opportunity for World Service of some of the services as well. We are making some journalists to broadcast more widely, including into savings in World Service English in the next financial the UK. Of course, next year we have the London year, but the rest of it will come in the following Olympics, which is a great opportunity for us financial year. We have got a little bit of time to work editorially. through how to make those savings. We hope we We are also starting to make small investments in might be able to bring that £12 million figure down a some new services. For instance, in Pakistan and little bit. Nevertheless, it is important to understand Africa, we are exploring launching low-cost television that there will still be further savings that have to be programming in partnership with local broadcasters. made. We hope to start to see the audience rebuilding. We have a target for the BBC’s global news services as a Q130 Mr Watts: It is a work in progress, then. whole, the World Service, and the commercial Peter Horrocks: Yes, it is. We have some definite services in television and online to move towards 250 ideas of how to do it, but we have not got finalised or million. We are 30 million short of that at the moment, announced plans yet. but we really intend to get there. We will be rebuilding, and that is very much the message that I Q131 Mr Watts: After that two-year period—after want to give to my staff: we have gone through a those cuts—do you anticipate any further cuts being tough, stretching and difficult time, but now is the made in the BBC World Service? chance to rebuild. Peter Horrocks: The commitment that the BBC chairman has made to the sustained funding of the Q127 Mr Roy: May I ask you about the recently World Service is really important and provides some announced funding from DFID? What will the underpinning. However, we are, in that period, facing impact be? the increased costs of the BBC’s pension deficit, Peter Horrocks: The DFID funding is not for the core which will mean that there will need to be some news services that the World Service provides. The further savings. We are looking at the period as a DFID funding helps to support journalism training in whole and trying to mitigate that as much as possible, the 14 countries that are within the scope of the grant, but we cannot rule out the need for some further and it also provides for programming about health savings once we are funded by the licence fee. issues, informing people about their lives through Richard Thomas: The other impact is obviously dramas and factual programming, but not through inflation. The forecast over the next five, six, or news programming. A proportion of that however many years means that you are always programming will appear on World Service airwaves, having to manage inflation within a fixed licence fee so that will be a benefit for World Service audiences or fixed income from the Government. and will help to sustain those services. It does not, however, put money back into the core news services Q132 Mr Watts: Touching on the outside influences that were cut as a result of the FCO CSR. on your budget, the annual review said that you were able to achieve your aims, objectives and savings, Q128 Mr Roy: Are there any indications that the partly down to the strength of the pound and the World Service will continue to receive funding from euro—their stability. How much of a problem would DFID, even after funding responsibility transfers to it be if the pound and the euro became more volatile? the BBC? How dependent are you on a stable currency—both Peter Horrocks: Yes, because the grant from DFID is the euro and the pound? a five-year grant, so that encompasses the period when Richard Thomas: It is always an issue, given that we the World Service will become licence fee funded. We have a fixed income. We spend about £20 million of do not know whether that will continue beyond that, our income in foreign currency—most of it the dollar cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Foreign Affairs Committee: Evidence Ev 25
22 November 2011 Peter Horrocks, Richard Thomas and Jim Egan or the euro. In the short term, we hedge it, so that we Q137 Ann Clwyd: On those who had to return to are protected and we know what exposure we have. their home countries because their visas had expired, Obviously, in the longer term, if the pound falls, we have you had any feedback as to what has happened would have to make additional savings to manage to those who have gone, particularly to countries that within a fixed income. they may not have wanted to return to? Peter Horrocks: We absolutely share the Committee’s Q133 Mr Watts: This year, the World Service has anxiety about the potential position of those incurred £20 million of exceptional restructuring journalists if they were here in exile, or if they might costs. What do those costs comprise? be subject to any kind of mistreatment if they went Richard Thomas: Those are the costs of the back. We worked very hard on each of those redundancies that Peter talked about. Obviously, every individual cases, and I am happy to report to the year, because of inflation or whatever, we often make Committee that no one has been forced to go back to a certain amount of redundancies. As this was such a a country to which they did not wish to return. There large announcement, we classed them as exceptional were five people who were made compulsorily in the accounts and made a provision of about £20 redundant and who returned to their country of origin, million. but all absolutely happily. For instance, one went back to Mozambique and one to Barbados. They were all Q134 Mr Watts: How much of that is redundancy individuals who were happy to return, so we have no costs? one who is in a position where they might need to Richard Thomas: Practically all of it—about 99% of apply for special leave to remain. That is a very it. The rest is the odd training scheme for people who positive outcome from what was a potentially are leaving and that sort of thing. difficult position.
Q135 Mr Watts: Will the “Delivering Quality First” Q138 Ann Clwyd: I wonder if you have any concept programme impact on the World Service? Will that of the relationship that will exist between Lord initiative have an impact? Williams—the new trustee—and yourselves, because Peter Horrocks: It does not directly impact on it, he will have some kind of oversight role, particularly because our funding envelope was determined for the over the World Service. current period by the comprehensive spending review, Peter Horrocks: Yes. He has not yet taken up his and was then determined as Lord Patten indicated. position, so we will wait to see how Lord Williams However, some of the proposals in “Delivering wishes to shape it, but I think you had some Quality First” are for greater integration. In a way, it indications from Lord Patten about how it will work. is the reverse side of the savings that the World I think it is worth saying, on the arrangement that the Service is expecting to make by integrating across the BBC Trust is putting in place, in which a committee new BBC news group. For instance, through the looks at international services, that is, as far as I am language service journalists working in English and aware, the only sub-committee of the Trust that is delivering to UK as well as international audiences. It looking at a specific part of the BBC’s delivery of its is linking together those two things. There will be services. Lord Williams knows the World Service well further changes as a result of it, but “Delivering already, so he will not need too much time to be Quality First” does not reduce the funding level for brought up to speed, but exactly how he wishes to use the World Service. those mechanisms in setting the objectives, priorities Chair: Thank you. Ann Clwyd? and targets, and how that interaction with the Foreign Office will work in future is clearly for Lord Williams. Q136 Ann Clwyd: May I ask you for a breakdown I look forward to hearing his suggestions. on the redundancies? Where are they? I know that journalists have been particularly badly hit. Q139 Ann Clwyd: When do you expect him to start Peter Horrocks: Do you mean in terms of which work? services and which languages are being supported? Or Peter Horrocks: He starts on 1 December. do you mean the different categories of people? Ann Clwyd: Categories of people. Q140 Ann Clwyd: How confident are you that, Peter Horrocks: Between journalists and marketers following the transfer of funding responsibility, the and back office? My recollection is that approximately announced governance changes will prevent the loss two thirds were journalists. Richard, can you help me of the World Service’s individual identity? on that? Peter Horrocks: As I think I said, the governance Richard Thomas: Yes, I think that is about right. We arrangements that have been put in place are more can obviously give you a full breakdown and send that extensive and substantial than those for any other part to you, but in the other third, there are probably about of the BBC’s services, so that is a mark of the another 50 studio managers and about 30, I would importance that is placed by the BBC on the World guess, support staff in finance or marketing—places Service. As Lord Patten said, it is that governance at like that. They are particularly in the language the highest level by the BBC Trust, with that overall services, because they did a lot of their changes up strategic responsibility, that is the most important front, and, as Peter said, the closure of another 19 thing. posts in World Service English was announced last However, it is also clearly important that the culture month. We will give you a proper breakdown, but it and identity of the World Service is retained while is roughly in that sort of proportion. working in a much more integrated way, because that cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Ev 26 Foreign Affairs Committee: Evidence
22 November 2011 Peter Horrocks, Richard Thomas and Jim Egan integration, for me, is not about diluting or reallocate some money for investment in new areas. diminishing the importance of the World Service. The Our Persian television channel has increased fact that World Service language service journalists in audiences by a quarter over the past year, despite Pashto or Urdu, for example, will be appearing more extreme difficulties in getting that signal into Iran, often on our global English and UK English output is which is a very, very significant operational problem a real advantage for the World Service. It is an that we have. advantage for the career development of those There are definitely changes within services. I would individuals, but most importantly, it is an advantage not pretend that we do not have problems in some for audiences, because they are going to be hearing a individual services in our audience, but overall, we wider range of perspectives. continue to deliver twice the audience for every pound For me, the advantage of the strong governance invested than the American broadcasters, for example, mechanisms that are being put in place is that it and much more than that compared with the budgets should not mean that the World Service needs to be for the Dutch, German and French international as separate from the rest of the BBC as it has been. It broadcasters. can integrate to its advantage, and the advantage of the wider BBC. Q142 Mr Baron: Okay, point taken. Perhaps I am being devil’s advocate unfairly, but you look at what Q141 Mr Baron: You were in the audience earlier is happening to your listening numbers across North when we discussed with Lord Patten decreasing Africa and the Middle East, and there seems to be a audience numbers and so forth, which is obviously a picture emerging that you are losing—dare I use the concern for everyone. Looking at the figures, a back- terminology?—market share. Nobody has come back of-an-envelope analysis would suggest that you are to me questioning the drop in the figures—a three- losing audiences at a rate faster than that implied by quarter drop in Pakistan, a 75% drop in your listening the cuts. Take Afghanistan, for example, where I think audience, or the drop in Afghanistan. You focused on your audiences are down by a third. According to the the cuts, but these drops in audience would suggest last survey in 2008, your audience in Pakistan is down that there is a bigger issue here. You have talked about by as much as 70% to 75%. Meanwhile, in Iraq there the cuts, but are there other issues at stake, for seems to be a growing view that your competitors are example the competition? Is al-Jazeera gaining on rated higher on awareness, reach, objectivity, you, so to speak? relevance and so on. One accepts that there have been Jim Egan: Al-Jazeera has performed extremely cuts, and you will be fully aware of the Committee’s strongly, particularly over the past few years and views on those cuts, but putting the cuts to one side, during the events in the Arab-speaking world. There I put it to you that there perhaps seems to be a bigger is growing competitive intensity on the supply side, problem here. Is that a fair comment? which comes from both the established international Peter Horrocks: Let me deal with the generality and broadcasters I mentioned, plus new Government- then ask Jim Egan, who has specific responsibility in funded broadcasters, with whom, frankly, we do not this area, to pick up. Our analysis shows that if it had have the resources to compete. Part of my role not been for the cuts, the audience would have gone involves seeking to place BBC programming on up. You are, of course, right that there have been falls, domestic radio stations, and we are just unable to but you are not taking into account the increase in respond to initiatives by the Chinese in particular. audience in other areas. For instance, there has been They will pay very significantly for their growth in the audience for our Russian online service; programming to be carried, rather than BBC there has been growth in our Arabic television programming, which we will never pay to have audiences; and there has been substantial growth for carried, because we believe in the underlying quality. World Service English across the globe, but particularly in the United States. You have to offset Those supply-side issues are significant and add to the those reductions, which are usually to do with changes issues that we have on the demand-side to do with the in audiences’ technological use—listening to other changing way that people consume media and so on. devices or watching television. Mr Egan might want In the Arab-speaking world, shortwave listening is to pick up some of those specifics. now lower in Egypt than listening to radio by satellite. Jim Egan: It is certainly the case that audiences went In other words, it is very, very small. down last year by 14 million, as Mr Horrocks has indicated. I am not sure that that is a disproportionate Q143 Mr Baron: Okay. If I may, let us just broaden decline in audience size. In fact, if you were to remove this out slightly and focus on Iraq, Afghanistan and some of the changes we had to make because of the Pakistan. To what extent are the BBC World Service’s reduced budget, we actually experienced growth in fortunes linked to the perception on the ground of our audiences in other areas, but certainly within some what is actually happening with the interventions? It services, including both Pashtu and Urdu, we have seems to be a bit of a coincidence—perhaps I am experienced falls of about a third over the recent reading too much into this—that in Iraq, Afghanistan period. More than anything else, that is to do with and Pakistan the BBC seems to be struggling, and al- ongoing decline in shortwave listening, as different Jazeera seems to be gaining on you. Is there a forms of media are available to people. connection there with what is happening on the We seek, within the reduced budget that we have, to ground? Are you picking that up? respond to that not just by persisting with the services Peter Horrocks: You mean a political reason for it? that we have, but by making the difficult decision to Mr Baron: Yes. cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
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22 November 2011 Peter Horrocks, Richard Thomas and Jim Egan
Peter Horrocks: Or the relationship that the audience Peter Horrocks: Presumably because of our hiring might have to the UK? policy and the mix of staff that we had. We were also Mr Baron: Yes, because your black holes seem to be using our staffing more effectively by recruiting more in those three countries. people around the world and moving staff from Peter Horrocks: I think that is a coincidence, rather London, which is obviously a higher cost, to lower- than causation. That would be my judgment. We could cost operations internationally. That reflected that certainly go and look into that. We certainly have not shift. picked up anything in terms of how our brand is perceived that is specific to Britain at all. We are seen Q146 Mr Ainsworth: There are two questions. First, as being independent of that, because of our editorial you knew that some kind of cuts programme was track record—when we cover those stories, we reflect coming, so why was any increase encouraged or all perspectives. I think it is much more to do with allowed? Secondly, surely you could not have changes in technology and the fact that people are managed to sustain that slight increase and that listening less on shortwave. In some of those places, lowering of staff costs without considerable it is harder to get alternative signals to people. We reductions in hourly rates. have an extensive network of FM transmitters in Richard Thomas: There is also a definition question. Afghanistan. In Pakistan, we have a number of We had to include—I may have got this figure partners, but there are difficulties with the regulator wrong—about 150 people who were on freelance there. We are dependent on business relationships contracts, who previously were not included in the within Pakistan, so that may have some impact at the staff definition in the annual report but who are now regulatory level. It is certainly not the case from any in. They are people who were probably always evidence that I have seen that it is about audiences working for the World Service, but they were formally turning away from the BBC, either because of our classed as staff in this year’s report. editorial record or because of any perception of a relationship with the UK more generally. It is to do Q147 Mr Ainsworth: I see, so it is a structural issue. with specific broadcasting issues. Has there been a reduction in packages for entry- level staff? Q144 Mr Baron: Final question, briefly. Do you Richard Thomas: No. It is a definition question about believe that the measures you have put in place, which who is included in the staff numbers. There was a you have touched on in answering these questions, change compared with the previous year, but I can check on that for you and give you the numbers. will now arrest the decline relative to the competition? Mr Ainsworth: Can you give us the detail, please? Have we reached the bottom now? I know it is a Richard Thomas: Yes. difficult question, peering into the future, but do you have confidence now that your decline in audience numbers, particularly across this region, has been Q148 Mr Ainsworth: And can you also give us arrested? something on staff conditions for entry-level people and the trend there? Peter Horrocks: It is very hard to judge, but if the Richard Thomas: You mean salaries? partnerships that we outlined earlier—television Mr Ainsworth: I mean that lots of media partnerships in particular—come off, we should be organisations are paying people peanuts, which is able to arrest that decline. Of course, it is not as having a strange impact on the kind of people who ambitious or strategic a plan as the one that we put come into journalism. I wonder whether the BBC is, forward to the Foreign Office before the to the same extent, doing the same thing. comprehensive spending review. The Committee Richard Thomas: Obviously, we have not been might remember that we had aspirations to launch a recruiting many people; we have been losing them, as full Urdu television service, but we cannot afford that we have already discussed. But, yes, I will give you with the funding that we have. We wanted to do the something on starting salaries. same in sub-Saharan Africa. The offerings that we will be creating will be high quality, but they will not Q149 Mr Ainsworth: Okay. One of my colleagues be as extensive as the channels that we launched for raised the issue of the exceptional restructuring costs. Arabic and Persian. Nevertheless, we think that we How on earth do you justify Mr Hugh Saxby receiving can arrest that decline and really start to drive forward £229,000 in compensation on his way out the door with these new services. Of course, on online and and Mr Jeremy Timmins receiving £313,000? Those mobile, which is growing very fast, we are in a very are fairly substantial multiples of their salaries. good position to take advantage of the very significant Richard Thomas: That is the BBC terms, or at least uptake in smartphone and mobile phone usage that is it was—it is something that is being looked at at the happening in developing parts of the world. moment. They had very long service, which gets Mr Baron: Thank you. computed into their payment on leaving the BBC.
Q145 Mr Ainsworth: In your most recent annual Q150 Mr Ainsworth: How does that compare with report for 2010Ð11, you show a very slight increase in the terms of ordinary employees of the World Service? staff, or at least in full-time equivalent staff, but your Peter Horrocks: The same formula is applied. There staff costs decreased by £4.5 million. Why was there are similar formulas in other parts of public service. that increase, and how on earth did you manage it The Committee will be aware that that is being with £4.5 million less? debated both for the civil service and for other public cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
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22 November 2011 Peter Horrocks, Richard Thomas and Jim Egan services. As Mr Thomas has indicated, the BBC is Q155 Mr Ainsworth: And that better-than-expected looking at that as well, because they are substantial position has resulted in what? costs that do not go to benefiting our audiences. That Peter Horrocks: Well, it means that the savings that is something that we want to address. Equally, these we still have to find are lower than they would are agreements and terms that have been offered to otherwise be. So, rather than £12 million, we would staff over a long period. One has to think carefully have been finding £16 million of further savings. So about how to change them, but there is no question that is probably lower levels of editorial cuts than that they are high costs. there would otherwise have been.
Q151 Mr Ainsworth: How can they be standard Q156 Mr Ainsworth: But you are not able to tell us when one of them is 6.5 times base salary and the what was saved that would otherwise have been lost? other is 5.2 times base salary? Peter Horrocks: It would probably be predominantly Peter Horrocks: We will need to come back to you journalists’ jobs, I would say, because we are making on the detail, but they are all numbers with a standard the maximum savings that we can on the distribution formula. There will be reasons to do with the specific side and the maximum saving in back office and marketing and finance and those kinds of areas. So the circumstances—how long their pay in lieu of notice main area that is left is journalists’ jobs, so we are was, or whatever it might be—that have created that, better off to the tune of £4 million a year at the end but they are all done according to a standard formula. of the grant-in-aid period than we would have been because of some of these financial shifts that we have Q152 Mr Ainsworth: Some grand negotiation that been discussing. takes place with mates at the top of the organisation at the public’s expense, because all of that came from Q157 Mr Ainsworth: Is there a particular service the grant in aid from the FCO, didn’t it? that as a result of that better-than-expected position Peter Horrocks: Yes. It is all done according to a has been saved? standard formula, but we will come back to you with Peter Horrocks: No. The only identified alterations the detail. are the ones to do with the £2.2 million that the Foreign Office provided, which helped us to be able Q153 Mr Ainsworth: You received some money to rescind some of the changes to the schedule for from the FCO with regard to the pension fund deficit, Arabic, and also the funding that we put in to restore and the FCO then agreed that, if the deficit was dealt the Hindi shortwave service and also to fund part of with for a lower figure, you could keep the additional the output for Somalia. Those were all specific things money and use it for the World Service. I think that that we altered, compared with the originally was £9 million over the three-year period. How is that announced plan. This improvement in the longer-term £9 million being spent? financial position, as I have said, helps to improve the Richard Thomas: We did not receive extra money. future position. It does not relate to things that we The extra money from the FCO was the £2.2 million have specifically announced as cuts here. a year for three years for Arabic, and they gave us an extra £3 million towards restructuring costs in March Q158 Mr Watts: Mr Egan, you mentioned in answer this year. That may be the £9 million that— to Mr Baron’s question that there are some areas where you are losing audience. You obviously monitor that. Would it be possible to provide the Committee Q154 Mr Ainsworth: In January this year, they said with the details of where the biggest drop is and what that you were to receive £13 million per annum to is happening to your competitors, so that we can see help with the deficit in the BBC pension fund. who the competitors were and how their audience was Richard Thomas: That is within the settlement; it is either dropping or increasing to give us some idea not an extra. It is within the 16% real-terms reduction. about the key areas of influence that perhaps we need Mr Ainsworth: They then said that, if your to concentrate on? contribution to the deficit was less than £13 million, Jim Egan: Certainly on a service-by-service basis I they would not claw back that £13 million. can give you a breakdown of increases and decreases Richard Thomas: Yes. over the year. I can also tell you how we go about Mr Ainsworth: And your contribution to the deficit measuring audiences. I can generally give you an was only £4 million. indication of what we think some of the explanations Peter Horrocks: No, that is not right. might be for those audience losses, where we have Mr Ainsworth: Is that not right? dropped audience, but I won’t be able to attribute that Peter Horrocks: It is correct that the pension deficit directly to other competitors. contributions are lower than we thought they were going to be, and so the £9 million that you referred to Q159 Mr Watts: You can’t do that? They don’t is the amount across the three years of grant in aid; publish the figures? that is the improvement in the position. So the savings Jim Egan: I don’t think so, no. We are not able to that we need to achieve, originally announced as being trace where audience members may have gone and £46 million over the three-year period, now sit at £42 what they may now be listening to or watching on a million. So we are better off than we would have been. specific basis, but for the bigger markets where we are We still have to make the £12 million of further experiencing particular competitive challenges I can savings that was referred to before. give you a general breakdown. cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Foreign Affairs Committee: Evidence Ev 29
22 November 2011 Peter Horrocks, Richard Thomas and Jim Egan
Q160 Ann Clwyd: I was interested in why you were Q162 Mr Baron: It is still relatively small, isn’t it? being outperformed by your competitors in Iraq, Peter Horrocks: It is still relatively small and, as you because there was always very great support for the say, the £2.2 million, compared with the original BBC in Iraq from 2003 onwards. What is the reason announcement of £46 million of savings, is also for this, because Al-Jazeera was kicked out of Iraq for relatively small, but those are important a period? Is that something that you could address? improvements and they make the position slightly Jim Egan: The audience loss in Iraq is primarily a easier than it was. We still have significant further radio audience reduction, so that won’t be down to savings to make and we have some structural shifts, Al-Jazeera directly because we are not competing with but we are starting to see those improvements and them on radio. It is down to the general significance those new services being developed, and partners of competition—that Iraq, like many other markets willing to take those. It has undoubtedly been a very around the world, is going through a process of rapid difficult period, and next year is the year when I really licensing of radio stations which people domestically hope we can start to turn the corner, and that things may prefer to listen to at times for their news and will lift off. current affairs, rather than to what the BBC, the Americans, the French or others have to offer. So it is Q163 Mr Baron: Very briefly, can I perhaps push generally to do with domestic competition and also you a little further? We have tried as a Committee to ongoing changes in the way that people consume their do what we can and we have had some effect. Do you media. It is not an Al-Jazeera specific situation in Iraq. think the World Service should be doing more itself Peter Horrocks: I might just add that it could be to lobby within the organisation to get more money? useful for the Committee to be aware of some You say the £4 million out of the £90 million is a information that has been published by the minimum, and we will be interested to see what the Broadcasting Board of Governors, the body that is figure ends up at, but those are still breadcrumbs from responsible for international broadcasting in the US. the table, in what we all recognise to be a terribly Although they performed less well than us, they important service, particularly in North Africa and the suffered from similar trends and then improvements, Middle East at the moment. The figure is too small, I largely to do with changes in shortwave and radio would suggest to you—you know it is too small. What listening habits. Although we tend to think of our will the World Service do to do more and lobby harder competitors as the other international broadcasters, in on this matter? Can it do any more? practice the listener will probably turn to a local music Peter Horrocks: Within the BBC—you have had the or talk station that is talking about their local vicinity. discussion with Lord Patten—the underwriting of our That is the real competition that we face, which is funding for the years when we come into the licence why working with those partners and rebroadcasting fee is clear. We will be working with DFID to our news on those services is so important as fewer maximise, as far as we can, as much of the benefit of people access the BBC directly for radio. In television that grant to the World Service’s audiences as and online, we are broadcasting more often directly to possible. The last area in which we can certainly help people, and that is obviously preferable, but when we ourselves is through commercial activity. The BBC are not getting audiences in that way, we have to be Trust has now approved some initial proposals to smart about how we try to access those audiences. introduce advertising on World Service language websites. That should bring in some income in the Q161 Mr Baron: Mr Horrocks, may I just return to future, so there are things we can do to help ourselves. a point Lord Patten briefly touched on? It was about We are in an extremely tight public funding the World Service Trust grant of £90 million made environment and we have stressed, as have the from DFID. The reaction to it has been mixed. Committee and Lord Patten, the importance of the Obviously, the International Development Secretary is World Service. That message has come through very extolling its virtues and so forth, but the bottom line clearly. We have to face the realities of the funding is—correct me if I am wrong—that the World Service position we are in, maximise the sources of funding will only get some £4 million of that. You may be that we have, and use our ingenuity and the efforts able to correct me on that figure. Then, we have had of our staff, who have been brilliant in these adverse a Government reprieve of £2.2 million for the Arabic circumstances, to really build for the future. service. Those are still, I would suggest, crumbs from Chair: Mr Horrocks, Mr Thomas and Mr Egan, thank the table, given the cuts you have had to endure. Do you all very much indeed for coming along. As you you think you should be doing more as an know, we are supporters of the World Service, but, as organisation to bang the drum about the importance you gathered from the questioning, we want to know of the role you are playing in the Arabic service, or at where the money is going. We will continue our the very least, getting more of this grant, rather than robust oversight of the World Service but, in the just £4 million from £90 million? meantime, you have our best wishes, and thank you Peter Horrocks: The £4 million is a minimum, and very much for coming along. we intend to maximise the benefit of that grant to the Peter Horrocks: That is appreciated, Chair, and World Service’s audiences as far as we can. That is thanks to the Committee as well. the amount that we already know will go into World Service output. cobber Pack: U PL: CWE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02
Ev 30 Foreign Affairs Committee: Evidence
Examination of Witnesses
Witnesses: Sir Vernon Ellis, Chair, and Martin Davidson CMG, Chief Executive, British Council, gave evidence.
Q164 Chair: I welcome our witnesses from the Q165 Chair: We are under no illusion about that on British Council for the third and final session of the this Committee. You believe that you have effectively morning. They are Sir Vernon Ellis, the Chairman, and coped with the reduction in the budget. Have you had Martin Davidson, the Chief Executive. A lot has to close any posts at all? happened since we last saw you. We have on our Sir Vernon Ellis: We have had no net decrease. We travels made a point of visiting British Council offices have closed two locations in Africa, but we have also overseas, but we would very much like to hear from opened two new ones. you. Sir Vernon, would you like to make some Martin Davidson: We are, however, looking very opening remarks? carefully at the nature of our network, and our Sir Vernon Ellis: If I may, briefly, as it might help expectation is that for a number of our smaller frame a few questions. This is my second appearance operations we will become a very much smaller here as I have been in the role for 18 months, having organisation—probably down to one or maybe only come to it anew. I have to say at the beginning that I two people in some of the smaller countries. However, am more impressed than ever by the importance of we do believe that it is critically important that we our work and the impact it makes. I believe we make maintain a presence, because once you are out of a a real impact on the agendas of prosperity, security country, going back in is very much more difficult. As and international influence in the UK. Moreover, I Sir Vernon said, a year ago, we probably would have think we provide very good value for money. talked about potentially closing Tunisia. Clearly, in It is interesting because globally there seems to be retrospect that would not have been a very good idea. an increased recognition of the importance of cultural Sir Vernon Ellis: There are new models that we are relations, particularly by the emerging powers. For implementing—a sort of hub and spoke to ensure that example, the Confucius institutes of China have now we have the coverage in the smaller countries, but grown to 300 centres in 90 countries since 2004. They albeit with a smaller presence on the ground. aim to have 1,000 centres by 2020. In my view, there is a need for us to do even more, and that would Q166 Chair: I am grateful to Frank Roy for provide an even greater return for Britain. reminding me about the situation in Afghanistan and As you know, we faced overall a 26% cut in this Kabul. What is the position there? Is the office spending round. We responded with a step change in functioning all right? Are they getting themselves efficiency and focus. On efficiency, there has already back on their feet? been an impressive amount of cutting of costs in Martin Davidson: Yes, and thank you, Chairman. anticipation of the cuts, even before I started. That Clearly it was a traumatic and vicious attack on the process will continue and further savings are locked British Council’s offices. The compound where we in through the plan to 2015. However, I think by 2015 were located has essentially been completely we will reach the end of savings that can be made just destroyed, and we have therefore moved our offices through improving our efficiency. I think we can only back into the embassy. The ambassador there has been fund future growth after that by growing considerably extremely generous in giving us space, and we are more our income from income-producing activities. It now negotiating with the Foreign Office to try to take is worth noting that by 2015 there will be a ratio of permanent space within the confines of the £6 million earned income to £1 million grant income. international group of embassies around the British On focus, we have worked hard in two areas: the embassy. We are committed, however, to maintaining focus of our organisation, where we have simplified our presence there, and, indeed, one of the young to concentrate on those core areas of English teachers who was actually under attack in our education and the arts; and geographically on those compound has returned to Kabul and has taken up her areas where we can most make an impact, while also job again. She is extremely committed to staying retaining our basic structure of 110 countries. there. Obviously, we have to concentrate on areas such as Chair: Great. When we were there, we had a good emerging markets, but we cannot always forecast visit to the offices, and please convey our best wishes where will be important. For example, who would to them. have thought, with the Arab Spring, how important it was that we had a location in Tunisia just a year ago? Q167 Mike Gapes: Can I take you back to your Right now, I think there is an overall alignment of our opening remarks? You said that, for every pound priorities with the national interest. It works quite well invested by the UK taxpayer, £6 would be generated despite all the stresses and strains, but I think it will by British Council activities. The written memo you be hard to retain that alignment if the level of grant have sent us gives the impression that that is already were reduced still further. the case. Can you clarify that? How do you calculate I will end with a quote. The Libyan Transitional that figure? Council Chairman Abdul-Jalil told the Prime Minister Sir Vernon Ellis: From memory, in 2014Ð15 16% of that the “Libyan people will never forget British our revenues will be from grant in aid, and the Council officers within Libyan territory and its remaining 84% would be from income-producing effective role in spreading culture among the Libyan activities—contracts, English language teaching, etc. people.” I think that is a good reminder of what we If I recall, I may have noticed that there are two are about. different figures in the memorandum. It says 5:1 at cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
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22 November 2011 Sir Vernon Ellis and Martin Davidson CMG one point, which I think is the current ratio, and later Q172 Mike Gapes: Related to that, is there not a on it infers 6:1; but the correct figures are 5:1 now danger that you might end up compromising the and 6:1 in 2014Ð15. reputation of the British Council because of commercial associations or because you are seen to be Q168 Mike Gapes: At the start of this financial basically a high quality English language organisation, period, according to my calculation of the figures I rather than a UK plc organisation? have seen, 29% of your total spending was coming Sir Vernon Ellis: I think that is something to be aware from the taxpayer, but it is going to reduce to 16% by of, but I would want to emphasise something: not all 2014Ð15. Is that correct? our income is of the nature of, say, commercial Martin Davidson: That is correct. Looking over the English language teaching. For example, the work we five or six-year period, it was about 33% or 34% three do in India—Project English, which is a massive years ago. This year, it will be about 26% or 27%. By amount of work teaching master trainers who then the end of the spending review period, we expect it to teach teachers and have a huge reach in India—is be 16% if we are able to make the income growth we funded under contracts with individual Indian state are planning for. governments. Some of the work we do—for example, on DFID projects for the social justice system in Q169 Mike Gapes: Sir Vernon alluded to the fact Nigeria—consists of income-producing activities, but that if this figure reduced further, there might be a they are well aligned with pursuing the kind of image problem with regard to presumably the branding or of Britain, the values we stand for and the the influence of the UK. How can the impact of the promulgation of what we do, even though the income role of the UK Government, through the Foreign and comes from a different source. That is not to deny the Commonwealth Office, be maintained if you are underlying tenor of your question, which is a risk. basically raising your funding overwhelmingly, and by Martin Davidson: Could I perhaps add that one of the an increasing amount, from commercial activities? things that is very important is that we also take Sir Vernon Ellis: That is, if I may say so, a good income that we earn from the commercial activities question. Of course, this change in ratio arises from and apply it very directly into the cultural relations two things: one, the reduction of grant and the other, wraparound. This year we expect to take £11 million the increase in income. That income is already from income generated and apply it directly into what previously would have been FCO grant activity. We absolutely essential to keep us going in Europe, to are planning at this stage to take some £7 million or where we basically have to shift to cover our costs. £8 million next year to do the same thing. You have to couple with this also a question about the increasing proportion of our grant which goes to ODA1 activities. Whether it is by excellent planning Q173 Mike Gapes: You are getting less grant from by the executive or a bit of luck as well, it sort of the Government for spending in the developed world? works at the moment. My feeling of strain is not so Sir Vernon Ellis: Correct. much from branding or image, although that is a consideration, but from whether the geographical Q174 Mike Gapes: So you are reducing your coverage will follow and whether the whole emphasis footprint in Europe and East Asia on that basis, but of the organisation has to be even more dedicated to you are presumably then generating income in those raising money, rather than to some of our fundamental same areas? operations, which are putting a cultural relations Sir Vernon Ellis: Correct. wrapper around what we do around the world. Q175 Mike Gapes: Is that just to fund the activities Q170 Mike Gapes: From what I have seen here, your in those areas or is it to fund activities in other parts income from commercial activity barely increased in of the world? the past year, yet you have a target to increase it from Martin Davidson: The impact of the ODA 9% to 15% per year. Are you then putting yourselves denomination of a significant proportion of our grant into a very vulnerable position if you are not able means that virtually the full weight of the loss of FCO necessarily to sustain that? grant will fall on the developed world. That means we Sir Vernon Ellis: There are risks. There were some will have to change the shape of our operations, as particular reasons—the ending of some contracts— you say, in western Europe and in East Asia. What we why it did not go up last year. At the moment we are are planning to do is to build an effective income- reasonably confident of doing it, but I think you are generating set of activities, wrapped around with right to say that this is an area of risk. cultural relations activity of the kind that would Martin Davidson: There are some technical reasons previously have been funded through the FCO grant. why the total turnover of the organisation dropped last If we are successful, we will of course also wish to year, which involve the way in which we recognise take some of the money and apply it to other parts of contracts within our accounts. On a like-for-like basis, the world. I think it is critically important, if we are the total turnover rose, but only by a small amount. going to avoid the challenge that you have made—not to be seen as purely a commercial teaching organisation—that we have the wraparound. Q171 Mike Gapes: Could you give us more information on that? Q176 Mike Gapes: This is my final question. We Martin Davidson: Certainly. visited the British Council operation in Turkey two or 1 Overseas Development Assistance three weeks ago. I was struck, first, that there was cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Ev 32 Foreign Affairs Committee: Evidence
22 November 2011 Sir Vernon Ellis and Martin Davidson CMG only one UK-based person working there. All the staff savings in the organisation. Those savings will largely were locally recruited, predominantly from the be from reductions in our accounting and support staff Turkish population, although some, I suspect, were in the global network, rather than here in the UK. British people living in Turkey. I was also struck by As far as the impact on the UK is concerned, we made the branding—there was a lot of branding about the 448 job reductions here in the UK in the period from Olympics, but I did not notice any branding about the 2009 through to the beginning of this year, of which UK as such or the British Council as such. Is there approximately 50%—I will need to write to give you not a danger that as we move to situations where we the exact figure—were within our accounting and have very few British personnel, and we have support services, principally from staff here in the UK overwhelmingly an educational, English-language and staff in Manchester. The wider reduction is, of focused, commercial generating organisation, we course, through reductions in other support service might lose that branding? centres in other parts of the world. Martin Davidson: The point that you are making is very important. In Turkey, part of the reason why you Q178 Sir Menzies Campbell: Can you remind us of perhaps got that impression was that, because of the those other support service centres? London— security situation we were required to retreat back into Martin Davidson: We had London, Poland, Beijing, a back-office environment, which meant that there Mexico City and Delhi. Essentially, Delhi had the was not a great deal of public visiting. The global centre. opportunity we very much identify is to move out of that and have an effective public presence again. We Q179 Sir Menzies Campbell: All in, how many will need to think about how we begin to brand that, posts have gone from those centres? so that it becomes clearly a British Council, and a Martin Davidson: I do not have the figure British cultural entity, not simply a commercial one. immediately. I will be able to let you have it, however. Sir Vernon Ellis: Can I add a couple of comments very quickly? On my travels, I have been to Turkey Q180 Sir Menzies Campbell: I presume an as well, and I know exactly what you mean. I think assessment has been made of efficiency. Has any elsewhere that would be less typical, however, external assessment been made of that? because there is a lot of British Council branding on Martin Davidson: The NAO has visited a couple of the building, in the offices and at the front desk. I times. They have obviously been very concerned think that is all good; I think we should keep that right about the effectiveness of the operation. We are up there and, in fact, increase it. planning to look at the efficiency of the actual savings The second question related to non-UK staff, and here in the early part of the new year. of course there is a balance to be struck both on cost and on local understanding. I do not see necessarily Q181 Sir Menzies Campbell: You say that you have that that is in conflict with branding. I have worked not reached 35%, or at least I infer from what you say with a company in which we increasingly moved from that you haven’t reached 35%. expats to local staff, and those local staff will Martin Davidson: It would be true to say that we have promulgate the brand just as aggressively as the not yet reached 35%. previous home-country staff did. Q182 Sir Menzies Campbell: Can you give us a Q177 Sir Menzies Campbell: Mention of India rough indication of where you may be? draws my attention back to the fact that you intended Martin Davidson: I cannot immediately, but our to move back-office functions from London to India— forward plans are to reduce our platform costs by a I think you told us that last year—and that you further amount over the next three years, very much expected to save some 35% of the savings required by based on this. At the moment, the service centre is the spending review. I have a series of questions. Has focused on accounting and IT, but we will be looking that begun? How far has it progressed? How many to move other functions into that. Indeed, we are British-based posts have gone as a result? How does beginning to look at whether we can offer services to the quality of the back-office provision compare with other organisations through that. when it was locally based here in London? Martin Davidson: The business support service centre Q183 Mr Watts: Mr Davidson, does that make sense in Noida in India was opened in May last year, and it for UK business? Because of the cuts that have been has been working extremely effectively. It is important driven by the Government, we now have 224 posts to recognise that it is not just replacing staff here in being deleted at a time of high unemployment. Quite the UK, but it is actually replacing staff in five frankly, the Government has made savings in one area regional centres around the world. It is centralising all but increased costs in others by paying benefits to the accounting support for the whole organisation, so people who do not need to be paid benefits. Is there the savings are considerable. At the moment, the any discussion on the rationale going on between you centre is working effectively but probably not and other departments? How do you view the fact that delivering the full set of savings that we want it to you are adding to the massive increase in over the coming period. We felt it was absolutely unemployment that we are seeing? critical that we maintained the safety and security of Martin Davidson: Obviously, we recognise the point our accounts first of all in making that shift. We that you are making. We are faced with a very believe we have been able to do that effectively. We challenging financial environment. We were will now be looking to begin generating further essentially employing some relatively expensive staff cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
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22 November 2011 Sir Vernon Ellis and Martin Davidson CMG to sit in Trafalgar Square and do accounts receivable promoting the United Kingdom. One solution might work. be to ensure that your locally engaged staff are guaranteed more time in the United Kingdom, so that Q184 Sir Menzies Campbell: Doing a very good those 40-odd people we met in Ankara have at least job, I have no doubt. visited the UK and can credibly talk about it and Martin Davidson: They were doing a fantastic job, represent it to you. Are you able to put any money and I would not wish to say anything to undermine towards that, guaranteeing that more of your locally that, but it was an extremely expensive way of engaged staff come back to the UK? delivering that. As an organisation, we would like to Martin Davidson: One thing we are doing as part of focus on offering jobs for young British people that the reform of the organisation is building what we call will be able to deliver much more centrally to our core global teams. Our arts team, our English language purpose. For example, at the beginning of this year team or education team is not simply those people we established an English-language teacher training sitting in Manchester or London, but also includes course to train young British graduates. We supported those people sitting in Ankara, Kabul or Paris, that training and then we assisted them in finding jobs. wherever it might be. So there is a much closer That is something that we would like to repeat. connection between those individuals and the work We have, for the first time, introduced an internship that we do globally. We also draw on their expertise. programme. I recognise there is quite a lot of That will, of course, include visits to the UK, more controversy around intern programmes, but we took meetings and activities involving those staff. They some young graduates for six to eight weeks over the become much less deliverers of a set of programmes summer period to give them an effective designed elsewhere and much more central to the understanding of the sort of work that we do. There is design of those programmes themselves. something important that the British Council can do to support employment opportunities for young British Q187 Rory Stewart: Is there anything you can do to people, but we will be able to do that more effectively formalise it? Let’s say you were able to save money if we continue to grow our English-language teaching by replacing UK-based for locally engaged staff, work, build a demand for young British graduates to could you, in making that financial calculation, set take those jobs and provide support in training them. aside a budget to ensure that that locally engaged member of staff had a guaranteed visit to the UK Q185 Rory Stewart: Not very long ago, nearly half within the first 12 months of their contract, or your budget came from the Government. We are now something of that sort? moving to a situation where five sixths of it is not Martin Davidson: I don’t think we have done that in going to come from Government. Have you a way of precisely that form. We would certainly expect that differentiating between the pot of money you get from of our more senior staff—not the entire cadre—who the Government and your commercial activity in increasingly have professional qualifications and are terms of how you spend it? In other words, are you delivering a professional role within the organisation. able to keep the Government money for particularly I would be very surprised if the vast majority of those non-profitable enterprises and finance the rest off the back of commercial activity? was not having at least one visit, if not more, to the UK a year. Martin Davidson: That is something we are very conscious of. As we continue to grow our income Sir Vernon Ellis: That is an interesting point, because from other sources, we have to be careful that we do I grew up in a company in which we kept going a not allow there to be a mix of those two sources of centralised physical training presence—even though money. First, obviously for Fairtrade purposes, but some viewed it as hideously expensive—purely for also to ensure that we use the Government money for the social reasons of bringing them to a headquarters the purpose for which it was granted. We have a clear function and meeting each other. That is good. It does firewall between our uses of money. happen: there was a meeting of the global arts team We are also developing a policy that is now available quite recently in Britain, which I visited. Of course, publicly on our website for fair competition and state in this world of electronic communications there is a aid, to ensure that we do not compete unfairly. Our lot of communication. I was on a conference call expectation is that in the next period our investment yesterday with China about UK Now, our UK arts in what would traditionally perhaps have been festival next year. There is a lot of very active live Government-funded English language work should collaboration between the team in China, which increasingly come from our retained income, from our includes local as well as British people, and the team activity. If we don’t do that there is always the in Britain. perception that we are somehow subsidising our commercial activity from the Government grant. Q188 Rory Stewart: My final point begins with a Keeping that separation is going to be very important, real tribute to Paul Smith who has done incredible and, of course, being able to inform both the Foreign work in Kabul; he is a very impressive man. What is Office and the Committee what we are doing with the the British Council able to do more formally to public money we receive. support the promotion of UK education? We talk all the time about growth. People are obsessed with the Q186 Rory Stewart: If you are going to go to more idea that British higher education in particular is locally engaged staff, one of the challenges is to something that could generate an enormous amount ensure that they can act genuinely as people for the country. It could almost be the economic cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
Ev 34 Foreign Affairs Committee: Evidence
22 November 2011 Sir Vernon Ellis and Martin Davidson CMG future. Are you really able to put the resources the reasons for that. If we came along next year and towards reinforcing that multi-billion pound venture? it went down again, you would be right to probe on it. Martin Davidson: It is one of our absolute core areas of work around the promotion of the UK—particularly Q190 Mr Baron: Would that account for the quite the UK’s higher education system. The nature of dramatic drop in reach in your own figures in North international higher education is changing. It is about Africa and the Middle East? It was something like 25 not just attracting people to study in this country, million down to 6.5 million in just over a year. critically important though that is, but building links Sir Vernon Ellis: That was a very specific thing to do that allow universities to deliver courses overseas and with the Darwin programme. potentially to establish centres or, in one or two cases, campuses overseas. We are working very closely with Q191 Mr Baron: Does the Darwin programme Universities UK, UKTI and BIS to get the focus right. account for all of that? The demand is absolutely enormous. I have recently Sir Vernon Ellis: I don’t know about all of it. We come back from Kurdistan and Palestine and, even in might want to give you detailed figures—Martin, do those places, the demand for a British contribution to you know? the development of their own higher education system Martin Davidson: The Darwin Now programme is a is very high indeed. Ensuring that the British significant proportion of that. But equally, towards the universities are able to respond adequately to that is a last quarter of the financial year, it became much more challenge. Of course they are themselves faced with difficult to broadcast in that part of the world. Those some significant financial challenges at the moment. two reasons together account for the reduction. Certainly, the higher education institutions in this country are very seized by both the opportunity and Q192 Mr Baron: Before you came in, we were the expectation of a greater level of involvement, questioning the World Service, because it has had a which is placed on them from overseas. The challenge dramatic drop in its audience in North Africa and the for us is: can we actually meet the huge demand? That Middle East, which it thinks is purely an issue of demand is growing very rapidly indeed at the moment. coincidence. Are you reading anything more into your Sir Vernon Ellis: So, “Can we do more?” is the loss of reach? question. Martin Davidson: I don’t think so. Obviously, this is Martin Davidson: The answer is yes, and we are something that we keep a track on. The key measure putting more resources into it in the coming period, that we tend to look at first is engagement, because which is why we are focusing on education, that is face to face and the heart of what we, as an particularly higher education, as one of the three key organisation, do. Reach and the broadcast are areas. critically important. Sir Vernon Ellis: And we recruited someone to head Taking the Near East and North Africa as a case in that area up from outside with a very good track point, we are clear that the demand for English record in both higher education and working language teaching materials through broadcast is overseas—South Africa in this instance. rising rapidly. We have programmes such as “English by radio” for students, and “teach by radio”, which is Q189 Mr Baron: Your corporate scoreboard, aimed at teachers. Both those programmes are getting according to your annual report, at least, is looking increased pick-up, as is our music programme, good. Most indicators are on a par, if not Selector. So there are good signs that those very improvements. One of the more important ones, specific programmes are working. Also, our global reach—people met and so forth—which is collaboration with the BBC on television English was presumably the bread and butter of your business at initially aimed at Iran, but is now being picked up by the end of the day, has shown a decline of some 11% other countries in the region, which indicates that globally. Why is that? there is a very healthy demand. Sir Vernon Ellis: You have to look at this over a trend The issue for much of the reach is when domestic basis. There are two measures here. One is broadcasters pick up and relay some of the other engagement and the other is reach. The engagement activity that is going on. I am not aware of a feeling is people we physically deal with, and that has gone that there is a systemic drop in that, but it is obviously up 60% in one year. The reach, digital radio and TV something that we are looking at. broadcast, has gone down 11%, although it is up on Sir Vernon Ellis: If I can expand, direct engagement the year before. That figure will go up and down. is up 60% in that region. We were listening to the When I first arrived I said that we should be careful questions on that issue, and they were good questions. about measuring like this because it could be very On English, as Martin mentioned, we aim to reach influenced by a major television programme in China 8 million people through that programme. Under the or a big campaign like the Darwin thing in the Middle Education and Society project, we have a programme East, and indeed it was. At the fringe of this, you get to widen opportunities for employability, which has a a one-off broadcast that inflates the thing and that can social media and TV broadcast element, and through go up and down. It is useful to have, and we should which we aim to reach 12 million people. have it over a period. If, over a period, the figure is This is terribly important. We have to find ways of not going up, we are losing part of our reach and I scaling our reach. There is no doubt about the would like to see it keep going up. It would be quite tremendous demand on the ground for English dangerous to look at it in too much detail in one year. language and other programmes in places like Syria The two specific reasons that I mentioned were both and Egypt. But we can leverage that and make an cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG02 Source: /MILES/PKU/INPUT/017434/017434_o002_th_HC 1618-ii corrected oral evidence 22 Nov.xml
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22 November 2011 Sir Vernon Ellis and Martin Davidson CMG impact through these new—well, not so new now— education—those terms focus perhaps on sub-Saharan media, and we have to do it. Here are some figures, Africa, rather than East Asia. Our engagement figures let’s see if we can make it. We should be looking at and our figures on growth of engagement are premised an uptake, and if we are not doing so, you are right to upon our success in both income generation and ask us why. partnership.
Q193 Mr Baron: In other words, those drops are Q197 Mr Baron: Finally, would it not make good one-offs rather than anything endemic on the ground, sense to run with your winners, as well as to try to the politics or anything like that? tackle those areas where you are seeing quite a sharp Martin Davidson: We don’t see anything systemic at decline in reach? Here you have a winner—you have the moment. talked about the importance of English and so forth— and yet you seem to be cutting back your resources. Q194 Mr Baron: Moving on, in your annual report, Martin Davidson: The problem we have is that, as an overall satisfaction with the British Council was more increasing proportion of our grant is focused on ODA, than 80%, yet fewer than 60% of people would particularly in East Asia, it requires us to reduce the recommend it. Is that something that worries you? level of Government grant. We simply do not have the Why is there that disconnect? grant that we can put in at the same level, so we will Martin Davidson: Those are slightly different figures. have to find alternative ways to boost our work there The recommendation is the net promoter score, which, through that development of income. as you are probably aware, is a standard score in the outside world. The two figures are broadly the same Q198 Ann Clwyd: You told us in May that the desire in effect, because the net promoter is the difference to learn English was very high among young between those who would not and those who would. Palestinians. We obviously benchmark this, and the Martin Davidson: Yes. recommendation score is within the range of what we understand to be world-class performers. For example, Q199 Ann Clwyd: You also have difficulties the Apple iPhone has 69%, Amazon has 70%, the operating in Gaza, particularly. Could you tell us the banks have 0%, and insurance companies are rather situation now? below 0%. Martin Davidson: I came back from Palestine last week. I was in Jerusalem and Ramallah. Q195 Chair: What about Parliament? Unfortunately, I was not able to get to Gaza. I was Martin Davidson: We haven’t asked that question. opening our public presence in Ramallah, which you Mr Baron: I suggest you don’t. might recall we closed when it was burned down Martin Davidson: Within those very technical terms, about five years ago. For me, it was tremendous to be these are good; they are not absolutely top of the back there and present. We are discussing, at the range, but they are well within the good to excellent moment, opening our English language teaching, and area. I hope that we will have English language teaching reopened in both Jerusalem and Ramallah, and Q196 Mr Baron: Finally, Sir Vernon, you talked potentially other parts of the West Bank, by April. about the importance of monitoring engagement rather That is the focus we have at the moment. than reach. Engagement in East Asia has risen quite Gaza is significantly more difficult. We do not have substantially according to your figures, and yet— ease of access there, but one thing we did do while I correct me if I am wrong—you are planning to reduce was there was have a reception for British alumni. We the amount of Government grant to that area. What is had a physical reception in Ramallah, where the logic behind that? something like 120 people turned up, and we also had Sir Vernon Ellis: I think that is an example of the a reception in Gaza, where about 100 people turned increasing strain, to be honest, in trying to balance the up, and the two were linked by video conference. For need to balance the grant—to increase the portion of me, it was a very important moment to see those 100 ODA and say, “Where can we spend it?” I think that people who had studied in the UK and wanted to be East Asia is an element where that strain might be associated with the UK—who were prepared to turn beginning to show, but you may be able to give a out and be publicly seen. I think that there is a huge more precise answer, Martin. opportunity. I am pressing my colleagues to look at Martin Davidson: There continues to be a huge reopening the public presence in Gaza. At the demand for English language across East Asia and I moment, we still feel that there are probably security think much of the significant engagement will come problems which would make that very difficult, but from that. Perhaps an important point on which we we still have the back office there, we still have our have not touched is that we are also premising much staff there and we are continuing to work there. of our increase on partnership, which is not simply Chair: Sir Vernon, Mr Davidson, thank you very sponsorship, but also working with other organisations much indeed. We value the work that you are doing on working together in some of those areas. For and thank you very much for coming along and example, we are working with BP on an education explaining it. We look forward to seeing you again programme in Indonesia and we have just signed a in future. new agreement with Microsoft on ICT and cobber Pack: U PL: COE1 [SE] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG03 Source: /MILES/PKU/INPUT/017434/017434_o003_db_HC1618-iii corrected 210212 Lord Williams.xml
Ev 36 Foreign Affairs Committee: Evidence
Tuesday 21 February 2012
Members present: Richard Ottaway (Chair)
Mr Bob Ainsworth Andrew Rosindell Mr John Baron Mr Frank Roy Sir Menzies Campbell Sir John Stanley Ann Clwyd Mr Dave Watts Mike Gapes ______
Examination of Witness
Witness: Lord Williams of Baglan, International Trustee, BBC Trust, gave evidence.
Q200 Chair: May I welcome members of the public Lord Williams: I think it is a very important role and, to the final evidence session of the Committee’s frankly, with retrospect, it was an oversight that it did inquiry into the Foreign and Commonwealth Office’s not exist before. There was an international governor performance and finances? It is intended that it will when we had a Board of Governors, but this is the be a short session with Lord Williams, who is the first time the Trust has appointed an International recently appointed BBC Trust’s International Trustee. Trustee. My obligations and responsibilities are Lord Williams, is there anything you want to say by principally with regard to the World Service way of opening remarks? obviously, but also with regard to BBC Monitoring Lord Williams: If I may, I would like to say a few and world television news. words. First, I thank you and the Committee for If I may say so, I think the Trust needs someone with inviting me so soon in my tenure. experience, not necessarily of the BBC, although I On Thursday this week, as you know, the Prime have a considerable amount of such experience, but Minister will host an international conference here in of the world in which we live and of the key regions London on Somalia, bringing together more than 50 to which the BBC World Service broadcasts on radio, countries and international organisations. It will attract online and on television. One of my roles, which you considerable media interest, but no one will follow it have focused on in your report and various sessions, more closely than the BBC Somali service. It was is with regard to the governance of the World Service, founded in 1957, and is now more than half a century and we need to put structures in place in that respect. old. It has for years been one of the few institutions that binds all Somalis, and is followed by more than Q203 Chair: Thank you. In that report, we concluded 90% of the diaspora, including the many Somalis who “that a formal concordat should be drawn up between live here in the UK. It is a striking example of the the Government and the BBC Trust, to make detailed continued relevance of the BBC World Service, and provision for future funding and governance one of the reasons why we can still be proud of it as arrangements for the World Service. We recommend the most respected and trusted international that this concordat give the Foreign Secretary not only broadcaster, whose reach still surpasses key the final decision over service closures, but also the competitors. right to stipulate minimum levels of service provision Mr Chairman, I thank you and your colleagues, and which the BBC will have a formal responsibility to your predecessors on the FAC for the continued and fund.” The Foreign Office rejected the formal robust support that the Committee has always lent to concordat in that proposal and instead supported the the BBC World Service. Your reports have been proposed new World Service operating licences. Are especially important in the difficult economic context you going to have an input into these operating of the days in which we live. I take this opportunity licences? to say that I look forward to working closely with you Lord Williams: Very much. That is a critical part of and your colleagues in the coming years. my role. To put it in context, the operating licence will only come into operation in April 2014, when the Q201 Chair: Thank you. We think the World Service funding of the World Service transfers from the grant is particularly important. We did our own inquiry into in aid to the television licence fee. At that point, or it, and persuaded the Government partly to reverse before that, we will prepare an operating licence, some of their initial decisions. which will be rather similar to the operating licences Lord Williams: In fact, I read very carefully your that are given to the various branches of the BBC now, report of April 2011, I believe, in the days when I was whether we are talking about Radio 4 or BBC 2. It putting together my application to be the International will cover the remit and scope of the World Service, Trustee. I found it somewhat sobering at times, but the objectives and priorities, the languages that it frankly, it committed me even more to apply for the broadcasts in and also—a word I am never terribly post. comfortable with—the “platforms” on which it operates: on radio, on television, online and so on. Q202 Chair: Okay, you’ve got the job. What do you That will be discussed with the Foreign Secretary and see as your role as the International Trustee? How the Foreign Office in advance. I met the Foreign would you define it? Secretary William Hague on 8 February and discussed cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG03 Source: /MILES/PKU/INPUT/017434/017434_o003_db_HC1618-iii corrected 210212 Lord Williams.xml
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21 February 2012 Lord Williams of Baglan it briefly with him then. Obviously we will be in touch editors, which I think will be there. It is something with the Foreign Secretary and officials in the run-up that I personally and my committee will keep a very to that transition. In a way, it seems to me that the close watch on. There will be annual reviews of the operating licence—I hope that there will be a chance World Service and, periodically, thorough, complete to meet with you and your colleagues before then—is reviews—every several years. It is a challenge. It was a sort of road map for the World Service. one of the first things I thought about when I came close to being appointed—how one will do this. Q204 Sir Menzies Campbell: If you have read our It is also worth saying that there will be many report, as you obviously have, Lord Williams, you will advantages from drawing together for the first time all know that—putting it rather colloquially—in the the various parts of BBC News. You know very well minds of the Committee it came down to this that one of the public purposes of the BBC is to bring question: if it is a choice between World Service the UK to the world, and the world to the UK. My expansion and “Strictly Come Dancing” for the Trust, how confident can we be that the interests of the personal view is that we have not always been good World Service will be properly reflected in the in the BBC, or not as thorough as we should be, at decision making? To put it equally colloquially, if it bringing the world to the UK. In terms of reportage— is a choice between Mr Robin Lustig or Sir Bruce spot news—the BBC is very good. In terms of Forsyth, as we must now describe him, how confident following through a story, sometimes, frankly, the can we, the public and our listeners throughout the BBC could do somewhat better. world be that, through what will undoubtedly be a There are also many economic advantages in bringing period of austerity for the BBC, the kind of range and together the various news operations. Many times in quality that the World Service has previously provided the past when I worked for the BBC, in the ’80s and will still be available? ’90s, and when I was a UN official in Cambodia and Lord Williams: Well, Robin Lustig is a friend, so I Bosnia, I saw—dare I say it?—an enormous amount leave that to one side. I do not know Sir Bruce of overlapping of BBC coverage and correspondents Forsyth. The fact of my appointment and the coming from various branches of the BBC with little establishment of a post of an International Trustee is co-ordination between the various divisions. in the first place an important step forward. The Chair, Lord Patten, obviously has a strong personal Q206 Sir John Stanley: Lord Williams, you said that commitment to the World Service. I find I have strong support on the World Service in the Trust meetings the World Service is going to continue to require the with my other trustees, whose responsibilities are with attention of this Committee, and I am sure it will, but regard to the national service, as it were. In the the great benefit of the previous system, under which meetings that I have had with the managing director the World Service was a free-standing, grant-in-aided Mark Thompson and with Peter Horrocks, the director body, was that Ministers were accountable to this of the World Service, the commitment that we need is Committee. There was transparency. We could see there. We are also establishing—the first meeting will precisely what the cuts were. There was total clarity be at the end of this month—an international of role for this Committee in that context. Under the committee of the Trust, which I will chair and which new system, is not the great danger to the World will meet on a regular basis and look at what the Service that there can be a series of salami-slicing cuts World Service is doing across the piece, as it were. to it because of the competing pressures for resources The question that you raise is a valid one, but just as from within the BBC, and that the effectiveness of there are obligations in regard to Radio 3 or Radio 4 the World Service can gradually, almost silently, be or to BBC 2, now there will be obligations in the diminished without those salami cuts becoming very operating licence on the World Service. It is important visible or apparent even to this Committee? that competent and robust structures of governance Lord Williams: Sir John, thank you for the question. will be in place and I think they are being put in place, Of course, we have two years before this transition but it is equally important—I’m sure this will come takes place. I appreciate what you say. It has from the Committee—that the World Service obviously crossed my mind that the oversight you had continues to demand your attention. with regard to calling Ministers before the Committee will perhaps not be there in the future. But frankly I Q205 Sir Menzies Campbell: As you know, the did not accept this post to be involved in further provision of news by the BBC is being aggregated salami cutting—you put it well—of the BBC World under one roof, essentially. The World Service speaks with a different tone from, for example, 5 live. How Service. I have taken the opportunity to go round will it be possible to ensure that that particular tone is Bush House and meet people from various language maintained when all the news provision comes under services. Recently, on a private visit to Indonesia, I one roof? met the BBC colleagues there. We have been through Lord Williams: It is a good question and one that, a very difficult period in the World Service. Morale frankly, I was apprehensive about. It is one of the first has taken a big hit as colleagues have seen services things I discussed with Peter Horrocks and with Helen closed, colleagues departing and so on. We need to Boaden, the director of Global News. We need to stabilise the World Service and to establish ourselves retain the authenticity and the authority of the voice on a much firmer footing, which I think we have. I of the BBC World Service. I think that can be done. am guardedly confident that we can maintain the It will need to have the dedicated support of the service as it is for the coming few years at least. cobber Pack: U PL: COE1 [E] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG03 Source: /MILES/PKU/INPUT/017434/017434_o003_db_HC1618-iii corrected 210212 Lord Williams.xml
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21 February 2012 Lord Williams of Baglan
Q207 Chair: What is your relationship with the you go and talk to Peter Horrocks and maybe in six director of the World Service? It is not quite like months’ time I might meet you”? chairman and chief exec, is it? Lord Williams: They will meet with me at my request. Lord Williams: No, it isn’t. I knew Peter Horrocks a There is no difficulty in doing that at all. I detect no little before accepting this post. He has brought an reluctance at all on the part of colleagues in senior enormous amount of experience in the BBC to his role management positions to meet with me; quite the as Director of World Service from his work opposite in fact. domestically, particularly as editor of programmes such as “Panorama” and “Newsnight”. I meet fairly Q214 Mike Gapes: So you couldn’t tell me how regularly with Peter Horrocks and from time to time, often that will be, or has it not been tested yet? when the World Service is discussed on the agenda of Lord Williams: I think it hasn’t been tested yet, the Trust meetings, he will be there before the whole perhaps. At every meeting of the Trust, which meets Trust. It is a very important relationship and I will be monthly, there are colleagues, and Mark Thompson working closely with him in the coming weeks and and other members of the senior directorate come months. along. So far I have only attended two meetings, I think—no, three meetings: December, January and Q208 Chair: You are just working closely, rather February—but each time, although the meeting is than having you above him and him underneath. dealing with all the responsibilities of the BBC, I have Lord Williams: Well, I did not necessarily want to put asked Mark Thompson various questions about the it that way, but the international committee and the World Service. For example, at the last meeting I Trust as a whole has an oversight on the BBC. In my raised the question covered in your report of April case, it is particularly in regard to the World Service. 2011, with regard to what we used to call stringers, correspondents in the field, and what is envisaged with Q209 Mike Gapes: You have said that your regard to them in the future. international committee has these, as I understand it, quarterly meetings. Is that right? Q215 Ann Clwyd: Lord Williams, the Committee Lord Williams: We haven’t met yet. I took up my post has noticed the substantial decline in the audience for in December, and the first meeting will be at the end BBC Arabic. Given your background in the Middle of February. We are going to meet again in April and East, how concerned are you about that and what do we will need to judge the pace then. you intend to do about it? Lord Williams: I have been concerned about that Q210 Mike Gapes: Apart from those meetings, although, as a result of the political tumult that has which, as I understand it, involve five members of the swept the Arab world from the Maghreb to the Gulf, Trust—is that right? our figures have now recovered well, thankfully. I Lord Williams: Correct. understand that the Committee will visit Egypt and Libya next week, so I hope that you will have an Q211 Mike Gapes: You have said that you will have opportunity both to meet with BBC colleagues there meetings with various figures within the BBC. You and, even more importantly, to discuss with some of have already mentioned Lord Patten, Mark your Egyptian and Libyan interlocutors how they Thompson, Helen Boaden and Peter Horrocks. How perceive the BBC. For example, in Libya, since the confident are you that you will get regular access at downfall of Muammar Gaddafi, I think the BBC is your request at times that you need, rather than having now on FM in key cities such as Tripoli, Misrata and to just wait for the formal meetings to take place? Benghazi, which would have obviously been Lord Williams: The formal meetings are important unthinkable in the days of Gaddafi. Similarly, I think and the informal meetings are just as important. It will we have quite good coverage in Egypt. be part of my duty to meet with the BBC and with I think you know that I have spent four of the past World Service colleagues, who are in Bush House for five years in the Middle East, the last three as the the next several months and then later they will come UN Under-Secretary-General based in Beirut with a to W1, which will be a little more convenient in some regional remit. My sense is, from the ubiquitous cab ways, because it is so near the Trust’s offices. At any drivers to senior officials and politicians, that the BBC time I can go and meet with the various language is still watched, listened to and read online on a very services of the BBC. I mentioned that I met with the regular basis. Obviously, there is competition—one Indonesians, luckily in Jakarta, but I also have met thinks above all of al-Jazeera, in terms of television— with them in Bush House and with the Chinese, the but I think the BBC still holds its own. Russians and so on. Q216 Mr Baron: Lord Williams, I suggest to you Q212 Mike Gapes: My question is not about meeting that in this information age the winning of the story the service; it is about meeting the people who make is going to be just as important as the winning of the the decisions within the BBC structure. conflict, and yet here in this country at the moment Lord Williams: Well, I meet with those, both formally we seem to be cutting back on our soft power and informally fairly regularly too. capability—cuts not only to the BBC World Service but to the British Council and various other aspects. Q213 Mike Gapes: But how is that arranged? Do As an International Trustee, are you simply going to you say to Mark Thompson, “I need to see you,” and manage this decline, or are you going to try and do he says, “Fine, I will see you?” or does he say, “Well, something about it? cobber Pack: U PL: COE1 [O] Processed: [20-03-2012 15:28] Job: 017434 Unit: PG03 Source: /MILES/PKU/INPUT/017434/017434_o003_db_HC1618-iii corrected 210212 Lord Williams.xml
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21 February 2012 Lord Williams of Baglan
Lord Williams: Hopefully not, or I would not have and I regret them—some I bitterly regret—and I do taken the position otherwise. To be frank, and I have think that there has been a lack of oversight, in a mentioned your report of April 2011, when I prepared sense. If there had been an International Trustee, myself for the interview with Lord Patten and frankly I think management could have been taken to colleagues I reflected very seriously on precisely what task for some of the cuts that have been made. you have just put to me, Mr Baron. There were other opportunities that I might have taken up, but the Q220 Mr Roy: Lord Williams, you are paid £36,000 World Service means a lot to me personally. I worked a year for two days’ work— for eight years as a journalist and editor, from ’84 to Lord Williams: I am sorry, Mr Roy? ’92, and I was on the board of what was then called the BBC World Service Trust, which is now BBC Q221 Mr Roy: You are paid £36,000 a year for two Media Action, between 2000 and 2006. I have seen, days a week of work, which is far more than most of from Cambodia to Bosnia and from Indonesia to my constituents earn for full-time employment. Who Lebanon, the impact that the BBC still has—the are you accountable to and who will measure whether impact of, as the Charter describes it, “bringing the you have been worth that type of salary? UK to the world” and vice versa. If this country is to Lord Williams: Well, like all members of the Trust, I continue to have a global role, in my mind that is have taken a 10% cut, so it is actually £32,000 for impossible without a key role for the BBC World two days’ work, but I have to say, Mr Roy, I wish it Service. was two days’ work. There is no way that I can put the work that I am doing into two days—that is my Q217 Mr Watts: Lord Williams, some people would experience so far. It is difficult for me to do less than regard you as an insider. Why do you think that you three and a half days. were appointed to this position? Do you think that you have the robust ability to defend the World Service if Q222 Mr Roy: Who will measure that success or it comes under attack, and to promote it in the future? otherwise? Who will make sure that that money is Lord Williams: I hope so, Mr Watts. The question of accounted for, that we are actually getting our why I was appointed you should perhaps take up money’s worth back? directly with Lord Patten. I would mention, as I have, Lord Williams: I think you will get your money’s however, my past experience with the BBC. I think worth back. that is valid, although it is actually 20 years ago that I left the BBC as an employee—in 1992—and I was Q223 Mr Roy: Who measures that? a board member of the World Service Trust. I am not Lord Williams: In the first place, I report to Lord sure whether that is quite an insider. I have done many Patten, as Chair of the Trust. He is the person I am things in my life and career: I have been special most responsible to. adviser to two Foreign Secretaries, Robin Cook and Chair: Lord Williams, time is up. Thank you very then Jack Straw; and for many years I have been a much indeed for coming along. We hope that you will United Nations official. I am not sure whether that go to war on behalf of the Trust, as Dave Watts put means I am an insider, but I think that these are all it, and we also hope that we have regular contact with experiences—even when I have been based here in you. You may find us particularly helpful at times, and the UK—in which I have had an international remit, please don’t hesitate to come and share any difficulties if you like. In fact, the whole of my career since with us. If necessary, we can always meet informally university has been with regard to— to discuss these matters. Lord Williams: Thank you very much, Chair, and I Q218 Mr Watts: Would you go to war, if you need appreciate what you have said. I hope that it will not to, to defend the World Service? come to going to war with the BBC senior Lord Williams: Go to war? management, but I will be in the front trenches and I count on your support. Q219 Mr Watts: Yes, with your colleagues. How Chair: Well, we don’t want to go to war with you. robust will you be? The choice is yours. Thank you. Lord Williams: Yes. You know, we can look at the Lord Williams: Thank you very much. past and at some of the decisions that have been taken, cobber Pack: U PL: CWE1 [SE] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Written evidence
Written evidence from Simon Fraser CMG, Permanent Under-Secretary of State, Foreign and Commonwealth Office In advance of the formal evidence session on 8 November, I am submitting a memorandum which addresses the terms of reference that were published for this hearing.
Implementing the SR10 Settlement 1. The Spending Review (SR) 10 settlement for the FCO is “tough but fair” given the wider fiscal challenges faced by the Government. In order to implement the SR10 settlement, whilst protecting the FCO’s network of diplomatic posts and our frontline diplomatic effort, the FCO has put in place a wide-ranging programme of savings to our running costs. We estimate that the FCO will need to achieve £100 million of annual savings by 2014–15. In addition, we will remove the costs associated with work that we will no longer carry out, such as the administration of passport services overseas. The savings that we are making in our support functions fall to the following three areas of our work: Human Resources; our Estate; and Corporate Services. 2. To deliver the required savings, each of these areas is drawing up and preparing to implement detailed plans, which highlight the ways in which the savings will be made. The three savings programmes are overseen by the FCO’s Operations Committee, which will ensure delivery, monitor progress and avoid double counting. 3. We are also working closely with DFID and HMT to ensure that the FCO meets its ODA target. We are on course to meet the target this year.
FCO Workforce and Diplomatic Excellence 4. In March we informed the Committee of our intention to reduce the number of overseas FCO postings for our most junior UK-based staff (Band A and B). Our aim is to focus more of our expensive UK based resource overseas onto front line diplomacy and ensure that the FCO will continue to provide a world-wide diplomatic service. 5. Reducing the numbers of junior staff overseas, will save us up to £30 million a year. In reality, the opportunities for overseas postings for our junior staff have been reducing over the last few years. As the structure and role of the FCO changes, and given the demand for significant changes, we can no longer offer the range of jobs overseas that we used too. 6. We are now working with each Post to agree specific plans to manage this transition so that savings can start to be achieved from 2012–13. In parallel we are identifying new ways of doing the tasks presently undertaken by these staff to ensure that we are able to maintain the operational effectiveness of our embassies overseas. We are also working to create new opportunities for junior staff to gain experience of working in Posts abroad. 7. We have launched a Diplomatic Excellence initiative for all staff which inter alia places greater emphasis on helping staff to develop their skills in negotiation, analysis, difficult languages, economics and policy- making. The initiative applies to all our staff working within the FCO in the UK and at all our posts overseas. Heads of Mission and Directorates have been encouraged to adapt Diplomatic Excellence for their specific context. 8. The FCO Board and Ministers have endorsed a review of our training strategy to deliver Diplomatic Excellence priorities. We are continuing to refocus our efforts on such areas as international policy skills, geographical and other foreign policy expertise. We also continue to emphasise the importance of staff developing strong management and leadership skills. In particular, the FCO is continuing to enhance the FCO’s skills in languages. In his speech on 8 September, the Foreign Secretary announced his intention to reopen a language centre in the Foreign Office. On 31 August he wrote to Cabinet colleagues to invite closer cooperation between departments on languages, and FCO officials are now following this up with colleagues from other departments. We hope that this initiative will strengthen collaboration between government departments to pool expertise, increase language capability and improve efficiency. 9. We are determined to continue to equip staff with the policy understanding and expertise required by our future senior diplomats. As part of this, the FCO has launched a Diplomatic Skills Foundation Programme for junior staff which includes a range of initiatives to learn about the FCO, including opportunities for short term placements overseas. This will ensure all junior staff have the opportunity to continue to develop the skills and tools they need to operate to the high standards required at all levels of the FCO.
The FCO Estate 10. Our overall aim is an overseas estate which is appropriate for our work, secure, and supports the FCO’s 21st century front line priorities—and which represents good value for money for the taxpayer. 11. In line with recommendations made by the NAO and the PAC we have been making progress over the past year in improving the management of our overseas estate. The FCO Board approved a new global estates cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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strategy last year which includes a new property asset management planning structure to help us ensure that we match the estate to the needs of the business and to identify where we can make savings in our running costs. We have recruited specialists to help run our estates and security and to support FCO staff overseas. We have also taken steps to improve the quality of data we hold on our overseas estate and to ensure that space efficiency measures are factored into our estates planning. 12. Against this background we are seeking to make £34 million savings in our annual estates and security running costs. As part of this we are currently reviewing the scale and level of residential accommodation we provide overseas. We have also set ourselves a challenging Capital recycling target. We will need to continue to recycle property assets to achieve our goals but cannot give out our disposal plans in advance as this would affect the value we realise. We will continue to report sales to the Committee on a quarterly basis. 13. The FCO is working with other government departments to rationalise and consolidate HMG operations overseas. To assist with this, the FCO has lowered what it charges other departments for operating on its platform overseas.
Corporate Services 14. Approximately one-third of the £100 million savings which we will need to make by 2014–15 will come from restructuring corporate services sections in our overseas posts. The majority of this saving will come from reducing our numbers of locally-engaged support staff; and, where possible, consolidating corporate functions into regional hubs or bringing them back to the UK to maximise efficiency. The localisation of corporate services and support positions overseas is delivering benefits—annual savings of £12 million by March 2012 and services delivered by professionally-skilled and experienced local staff. So far, 95 out of a planned 140 positions have been localised. Recent evaluation suggests that corporate services teams continue to provide appropriate levels of service for our staff at posts whether led by UK or locally-engaged staff.
Network Shift 15. Since the Foreign Secretary’s announcement to Parliament in May, there is progress to report in all areas of our Network Shift. The deployment of an extra 72 UK diplomats and 107 local staff in the fastest growing cities and regions is underway. 16. We have conducted a consultation with our Whitehall partners on our plans to deploy an extra 50 staff in China. The proposal will see most new staff going into existing posts; some of them will have roving responsibilities to target specific cities and regions. We will need time to build the language capability and expect to have the new resources in place for 2013–14. In India we have developed our plans to deploy up to 30 extra staff; we expect to have completed the first part of the expansion by the end of 2011–12. 17. In South East Asia we have been seeking to appoint up to 16 UK diplomats over this summer to fill the new slots. We have allocated six of the slots to Indonesia and Vietnam and have distributed the rest evenly across the Philippines, Malaysia, Thailand, Burma, South Korea, North Korea and Mongolia. We are also reinforcing our local teams in the region with up to 26 new slots. Recruitment is underway to expand the Latin America prosperity officer network by nine UK diplomats and to deliver the Turkey shift. 18. The new Embassy in San Salvador should open by April 2012. In Africa the new Embassy in Juba is already in place and operating on the DFID platform. The setting up of a fully functioning new Embassy in Kyrgyzstan is at an advanced stage. 19. For the Network Shift to be broadly resource neutral we are developing plans to deliver around £15 million savings from our European subordinate posts, and overheads in Iraq and Afghanistan by the end of 2014–15. We have put in place a governance structure to manage the savings and network shift to ensure they are in balance by the end of the Spending Round and prevent the savings impacting on our capacity to deliver the foreign policy priorities or staff morale.
Financial Management 20. In January 2011 the FCO Board agreed budget allocations for Financial Year 2011–12 and indicative allocations for three further years to 2014–15. This has allowed the organisation to begin planning before the start of the financial year both for this year and for the remainder of the SR period. 21. The FCO Management Board continues to monitor regularly the Department’s budget and to reprioritise in-year resources in order to seek the best value for the tax-payer and to achieve the Government’s foreign policy priorities. For example, the Arab Spring—and events in Libya in particular—has inevitably put pressure on the FCO budget this year. We are working to reprioritise spending to meet these unforeseen costs from within our existing budget. 22. This is the first year of operation of the new Foreign Currency Mechanism (FCM) which was agreed with HMT during the Spending Round. FCM helps to protect the FCO against foreign currency fluctuations giving the FCO greater certainty of spend. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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23. The FCO has launched a Financial Excellence initiative which aims to embed good financial management across the FCO and to strengthen the capacity and capability of the FCO. This is designed to build upon our successful Five Star initiative and will contribute to our Diplomatic Excellence by further enhancing our ability to provide the strategic focus and analysis needed to support the FCO Board and Ministers. As a result of these initiatives, the FCO was, once again, among the first government departments to lay its Annual Report and Accounts before Parliament this year.
Commerical Diplomacy 24. In May 2010 the Foreign Secretary stated that one of the FCO’s three objectives would be to “Build Britain’s prosperity” by increasing exports and investment, opening markets, ensuring access to resources, and promoting sustainable global growth. The FCO consulted business about the work we were already delivering or could develop in the future to help achieve this objective. The Foreign Secretary launched an FCO Charter for Business in May 2011, which set out our seven commitments, which the network is now implementing. 25. Economic and commercial work is therefore viewed by staff as a core part of our bilateral engagement and, as a result, our diplomatic work. FCO staff are working increasingly closely with UKTI colleagues, “prosperity” teams have been created in some posts to ensure we are working increasingly together to achieve common objectives. Resources from the network shift will help this work. Commercial work is therefore integrated as part of our day to day work and adds to our understanding of the UK’s bilateral relations and global picture.
British Council 26. In 2010–11 the British Council engaged over 30 million people worldwide and reached a further 600 million through digital media, radio and television. Turnover totalled £693 million: £190 million Grant-in-Aid (GIA) funding and £503 million through their own programmes and services. Under SR10 Grant-in-Aid will reduce to £180.0 million (2011–12), £171.0 million (2012–13), £162.0 million (2013–14) and £154.0 million (2014–15). 27. The British Council Corporate Plan for 2011–15 sets out ambitious plans including major organisational transformation. They will focus on areas where they make most impact; English, arts and education, and society. Climate change remains an important part of the content of GIA-funded programmes. 28. The Corporate Plan commits to savings of £76 million whilst maintaining an extensive network overseas that gives priority to countries of strategic importance to the UK. They plan to invest £200 million to increase income and enable major cost reductions including: bringing in lighter models of operation overseas; expanding coverage of their shared service centre; implementing a second phase of UK cost reductions; building cost- sharing partnerships. 29. The FCO has undertaken an active role in the British Council’s Corporate Plan to ensure it supports HMG’s international priorities. The FCO Permanent Under-Secretary now sits on the British Council Board of Trustees.
BBC World Service 30. The original settlement to the BBC World Service under the Spending Review was both fair and proportionate. The 16% cut in funding over the period, while challenging, is consistent with settlements provided to other publicly funded bodies, and was also proportionate to the savings the BBC will make as a whole under the licence fee settlement. The Foreign Affairs Committee will have seen the Foreign Secretary’s Written Ministerial Statement of 22 June. He announced that, in response to the events in North Africa and the Middle East, he would provide additional funding of £2.2 million per annum to enable the World Service to maintain the current level of investment in the BBC Arabic Service. In addition the FCO is providing funds for specific projects for the BBC Arabic Service and the BBC World Service Trust from the Arab Partnership Initiative. 31. The BBC World Service has already achieved or committed circa £30 million of savings per annum, leaving a further £16 million of savings per annum which will be realised by further changes to their distribution network; language services; English language and back office/operations. 32. The BBC itself has underlined its long-term commitment to the future of the BBC World Service through contributing significant funds towards the World Service restructuring costs. The reduction in the World Service’s planned contributions to the overall deficit will enable the World Service to release an extra £9 million over three years to mitigate the impact on services of the reduction in the budget. 33. We continue to work together with the World Service and the BBC Trust to ensure that the World Service retains its global influence and reach in a rapidly changing world. 13 October 2011 cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Letter to the Chair of the Committee from Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs Thank you for your letter of 23 May regarding the 2011–12 Memorandum for the Foreign and Commonwealth Office’s Main Estimate. You requested an explanation of why the FCO’s Administration Budget in the Estimates Memorandum is higher in each year than set out in the Spending Review 2010. The difference between the two sets of figures is due to ring-fenced depreciation, which is included in both the Estimates Memorandum and the Main Estimate Administration Budget but is not included in the Spending Review 2010 (Table A11). This is because depreciation is not currently used by the Office for National Statistics in measuring the fiscal aggregates and as such does not directly impact on the Government’s fiscal mandate or on the level of Public Sector Net Debt or Public Sector Net Borrowing. Table A11 effectively measures the spending in RDEL,1 which directly contributes to the Government’s fiscal consolidation. However depreciation is part of the FCO control total and therefore must be included in the Main Estimate table: £ million 2011–12 2012–13 2013–14 2014–15 Spending Review 2010 (Table A11) 229 212 196 182 Ring-fenced depreciation 19 18 19 20 Estimates Memorandum 2011–12 248 230 215 202
The Committee also asked for further information on how budgets within the FCO are allocated together with an explanation of any variances greater than 10%. At the start of each financial year budgets are allocated first to Directors General, then to Directors, then to Heads of Mission taking account of the FCO’s priorities. Specific budgets and allocations can change during the year for a variety of reasons as part of the Department’s routine financial management, to ensure that public money is being put to best use and to achieve the Government’s priorities, in line with Treasury guidance on Managing Public Money. The FCO is committed to the Government’s transparency agenda and will be publishing much of this detail, including information on individual transactions over £25,000 as they occur through the year. This will include regular updates to our Business Plan every quarter, which will include information about spending devoted to front-line delivery, the British Council, the BBC World Service and Conflict Prevention spend not covered by the Written Ministerial Statement that I laid before the House on 1 February. The first of these updates will be published on the FCO website shortly. In addition, the FCO Resource Accounts annually provide a breakdown of how the Department has spent its budget against its parliamentary control totals and the Government’s Foreign Policy Priorities. However, publishing preliminary allocations would risk providing a misleading picture both to the Committee and to foreign partners who may misinterpret this information. I am pleased to confirm that in future the FCO is committed to providing an explanation of all such variances over 10% in relation to Programme spend, which is a centrally administered budget. 14 July 2011
Supplementary written evidence from the Foreign and Commonwealth Office FOREIGN AFFAIRS COMMITTEE: 8 NOVEMBER 2011 When I appeared before the Committee on 8 November, I offered to provide further material on the following: — 2010–11 Spring Supplementary/UKTI email. — Staff Bonuses. — Staff numbers. — Flag Cars.
2010–11 Spring Supplementary/UKTI email The FCO aims to spend within 1% of its budget each financial year. Both the National Audit Office and the Public Accounts Committee have highlighted how, in recent years, the FCO has significantly improved its financial management and has put in place rigorous procedures for tracking its spending throughout the year. This has allowed us to forecast spending more accurately and to reprioritise our in-year spending in response to external developments. 1 Resource Departmental Expenditure Limit cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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As part of the FCO’s regular budget monitoring process, the FCO Board and Ministers continually examine whether our initial budget allocations remain the best use of departmental funds to further the Government’s foreign policy priorities whilst also ensuring value for money for the taxpayer. They reprioritise and reallocate funds as necessary. UKTI is closely linked to the FCO and shares some of our objectives. Its Chief Executive sits on the FCO Board participates in this process. In 2010–11, underspending in some areas enabled us to reprioritise resources to a number of foreign policy priorities including funds to counter piracy and additional support for our Overseas Territories. Each year, the FCO agrees a Spring Supplementary Estimate with HMT before it is presented to Parliament. This includes any additional resources to which we are entitled under our Spending Round Settlement. Examples of these include: (a) funds relating to Emergency Disaster Relief costs; (b) the Consular Premium; and (c) HMT’s share of the UK’s contribution towards international subscriptions such as the UN Regular Budget. In December 2010, we provided HMT with our initial estimates of what we intended to claim during the Spring Supplementary Estimate. Given the current fiscal environment and as we were forecasting that we would spend within our Parliamentary control totals, the FCO subsequently decided not to claim for all the items to which it was entitled. I can confirm that the FCO received funds of £64 million in line with our CSR07 Settlement in the Spring Supplementary. This was £0.7 million less than we initially bid for. The FCO had also claimed £15 million of funding on behalf of the tri-departmental Conflict Pool. Of this, we received £0.55 million. HMT scrutinise all bids during this process very carefully and Departments rarely receive in full all the additional funds they claim. As I made clear at the hearing, I consider the e-mail written by Andrew Cahn (the former CEO of UKTI) to be inappropriate. As requested, a copy of the e-mail is attached to this letter. It was leaked to the press in January 2011. This was after the FCO had submitted its Spring Supplementary bid and did not affect the level of funding we received. I am not in a position to comment on what was said about this by Treasury sources.
Staff Bonuses The FCO pays non-consolidated performance related pay (bonus) to staff in line with Government policies on public sector pay. A close and effective link between pay and performance is a key element of the pay arrangements for the civil service and forms an integral element of the reward package for staff. Such payments have to be re-earned each year and are paid primarily as non-consolidated performance payments, and so do not add to future pay or pension costs. For senior civil servants (SCS), pay is managed by the Cabinet Office and based on recommendations by the Senior Salaries Review Body. In 2011–12, based on 2010–11 performance, 25% of SCS staff are able to receive performance -related pay. Limits were also set on the maximum amount payable by grade. These were £10,000 for SCS1, £15,000 for SCS2 and £17,500 for SCS3 staff. The Cabinet Office also directed that the average payments made to staff, by grade, would be less than the maximum rate. The FCO board set payment levels at 90% of the maximum. The amounts paid to the eligible 25% of SCS staff in the FCO, in percentage of salary terms were: Grade Bonus as % of Salary SCS1 Up to 15% SCS2 Up to 14% SCS3 Up to 13%
The total amount spent on such payments by the FCO for staff in the SCS was £885,855 or 2.3% of our SCS paybill. For staff below the SCS, the FCO has delegated authority from HM Treasury to set its pay and reward policies, within central government policy on public sector pay. This allows departments to build up a pot of non-consolidated money to be paid as performance-related pay. This currently stands at 3.15% of the pay bill, representing approximately £5 million in 2011. Of this sum available, 10% is set aside and given to individual Directorates to use for in-year performance awards. SCS staff are not eligible for in-year performance awards. The remainder is used for performance-related pay with the amounts payable negotiated with our trade unions. We have made a conscious policy decision, supported by the trade unions, to target a greater proportion of the funds available to our junior staff (as a percentage of their salaries), and to spread the awards more widely. In terms of numbers of recipients, around 95% of staff will receive Performance Related Pay in 2011. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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The amounts for 2011 are: Effective Box Effective Effective (3) or marking Exceptional (1) (2) lower A1 £1,805 £1,080 £720 £0 A2 £1,990 £1,190 £795 £0 B3 £2,205 £1,320 £880 £0 C4 £2,415 £1,445 £965 £0 C5 £2,605 £1,560 £1,040 £0 D6 £2,805 £1,680 £1,120 £0 D7 £2,990 £1,790 £1,195 £0
In percentage of salary terms the awards are: Grade Bonus as % of Salary A1 Up to 11% A2 Up to 11% B3 Up to 10% C4 Up to 9% C5 Up to 8% D6 Up to 7% D7 Up to 6%
Flag Cars FCO policy is for Posts to source vehicles and flag cars in particular from companies associated with the UK where local factors permit. The FCO is aware that the use of British made vehicles offers an important opportunity to market UK products and services. This is an important consideration influencing our decisions. For example, the Embassy and Consulates-General in China and Hong Kong are currently in discussions with Jaguar Land Rover over the provision of Jaguars to serve as flag cars as part of a Sponsorship agreement with Jaguar Land Rover China. However, this desire has to be matched against the necessity of ensuring value for money for the UK taxpayer. As such, it is not always possible for our Posts to use British Cars overseas. This could be due to a combination of factors including the availability, purchase price, the cost/availability of servicing and maintenance or local environmental factors.
Staff Numbers At the evidence session, Committee Members stated that the Public and Commercial Services Union had submitted written evidence that they feared that our SR10 Settlement may result in a 20% reduction in the Department’s UK workforce over the period. I did not recognise these figures at the time, and had not seen the papers, but have now had the opportunity to view the union’s written evidence. I would like to reassure the Committee that the FCO’s own workforce plan estimates that UK Based staff numbers will decrease by approximately 10% over SR10. The FCO intends to achieve this by a combination of our recruitment freeze, natural wastage and by running voluntary redundancy schemes. No compulsory redundancies are currently planned, although I cannot give an absolute guarantee that this would not be reviewed if our financial circumstances change during the Spending Round period. 6 December 2011
COPY OF ANDREW CAHN’S E-MAIL From: Archibald Duncan (MPST DG) On Behalf Of Cahn Andrew (UKTI) Sent: 12 November 2010 10:09 To: UKTI Executive Team Subject: FCO Money Available I had a chat with Nick Baird last night. The FCO is heading for an underspend and wants to get money out of the door. If we can spend money in this financial year on a one off basis then we can have at least £1million. Can you think what we might do with such money. In the past it would have been marketing but Cabinet office restrictions may make that difficult. I don’t suppose that we can do inward investment stuff, could we? Could we do a mini inward investment conference for example? Could we use it for our leadership conference? Perhaps to provide funds for all of our staff to go out and visit companies and do promotional events in the cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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week of the leadership conference? Could we offer BDVs to each post for use before April on the grounds that that is their most consistent complaint? Could we just give selected posts £50k each to use locally for promotional purposes? Can Curtis coordinate this please? It would be good to go back to Nick by the end of next week. But I have a meeting at 14:00 on Monday which will be the first cut at resource allocation in the FCO for subsequent years. IT would be good if I could indicate then a ball park figure of what we might spend in this financial year. Andrew
Further written evidence from the Foreign and Commonwealth Office CAPITAL BUDGET AND ADMINISTRATION EXPENDITURE 2010–11 Thank you for your letter dated 14 November 2011 asking for further information on the Foreign and Commonwealth Office’s (FCO) capital budget and our administration expenditure during 2010–11.
Capital Budget The FCO’s 2010 Spending Round (SR10) Settlement includes the following allocation for Capital each year: Baseline £m nominal 2010–11 2011–12 2012–13 2013–14 2014–15 Capital 200 107 102 102 98
The Settlement assumes that the office will make £10 million in asset disposals each year. Baseline £m nominal 2010–11 2011–12 2012–13 2013–14 2014–15 Asset Disposals 10 10 10 10
However, HMT have encouraged us to consider further asset disposals and as an incentive to do so have agreed that the Department may retain up to £100 million in such receipts each year. As we said in evidence to the Committee, the FCO currently believes that it will need to raise in the region of an additional £240 million over this SR period from asset sales to meet our requirements for Capital. The proceeds will be reinvested in modernising the FCO Estate to help make it appropriate for our future needs, including funding our Network Shift, physical security and necessary health and safety expenditure. In addition, the proceeds will be used to improve our IT systems in order to reduce our running costs and increase the flexibility of our staff. The Settlement itself does not allow the FCO to carry forward any proceeds from asset sales into future financial years. However, the Government has announced a replacement for the previous “End Year flexibility” system called “Budget Exchange”. Subject to certain conditions, “Budget Exchange” will allow any department to carry forward up to 1% of its Admin SR10 allocation and 2% of its Capital allocation to the next financial year.
FCO Administrative Expenditure The change in administrative expenditure between 2009–10 and 2010–11 reflects a number of factors including: (a) An increase of £14 million in staff costs (as per Note 7 of the report). This is largely explained by an increase in terminal benefits, particularly those paid to our locally engaged staff in 2010–11. Much of this was to fund staff exits that will help enable the FCO to live within its means as they reduce by 10% (at least) in real terms over the course of the Spending Review period. (b) A decrease of £20 million in receipts (as per Note 10). This difference reflects a change in methodology in how charges to other government departments were calculated during this period. In addition, receipts from other departments were exceptionally high in 2009–10 at £70.3 million. 2010–11 (62.4 million) saw receipts at a level closer to that of 2008–09 (60.7 million). Spending in 2010–11 also included a number of one-off items, such as the Papal visit, and there will also have been an element of necessary spending that was deferred in 2009–10 following the decline in the value of Sterling during this period and the withdrawal of the Overseas Price Movements (OPM) Mechanism. 8 December 2011 cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Letter to the Chair of the Committee from Simon Fraser CMG, Permanent Under-Secretary of State, Foreign and Commonwealth Office FCO Management Issues I am writing to you with the latest quarterly update. This letter covers the period from January to March 2011.
Middle East and Japan Crises As I told the Committee at your hearing on 16 March, the sequence of crises in the Middle East and in Japan has stretched our organisation. Our staff have responded admirably, volunteering in large numbers to work in our policy and consular crisis teams in London and overseas. We are considering what changes we need to make to our staffing, structures and procedures to respond to such challenges in future and will be happy to share our conclusions with the Committee in due course.
Security The crises in the Middle East have thrown up a range of security challenges reflecting the differing nature of the security threat in each country. We have redeployed our security resources from across the network, sometimes at short notice. Seven of our global cadre of (currently) 59 Overseas Security Managers have been redeployed to Middle Eastern countries in crisis or to locations nearby, such as Valletta. They have bolstered the resilience of the embassy teams and allowed front line staff to focus on political and consular work. Where needed, we have diverted equipment such as armoured cars from posts where the threats are not as immediate. Following events in Tunisia, Egypt and Libya we are monitoring the situation closely in the rest of the region. We are keeping a particularly careful eye on Yemen, where our staff in Sana’a have been subject to two terrorist attacks in the last year and where the threat remains at its most severe. We have provided an extra security officer and reduced total staff numbers and visitors, and stepped up our contingency planning. We are also pushing ahead, subject to developments on the ground, with our project to provide temporary secure “pod” accommodation for our staff on the Embassy compound, to reduce the exposure of staff living elsewhere in the city. The security of our staff in the Middle East will continue to require and receive our closest attention.
Junior Staff Overseas I wrote to you on 23 February setting out our intentions over the next four years to end nearly all overseas FCO postings for our most junior UK-based staff (our A and B Band staff), leaving only a limited number of positions at this grade. We are doing this because we need to find savings in order to sustain and strengthen our frontline diplomatic capacity around the world, and because it reflects our future operational needs. A consultation process with the Trade Unions and our staff is now underway. While we do not believe anything will emerge from this which will lead us to a radically different outcome, we will be looking at all suggestions, particularly on how we can continue to offer all A and B Band staff an attractive career in the future.
Future Provision of UK Passports In my last letter I said that the Home Office’s Identity and Passport Service (IPS) and the FCO were negotiating an accord which would govern the full integration of the domestic and overseas passport operations. We have now signed that accord. This will unify the provision of passports to UK nationals at home and abroad under IPS, bringing all overseas passport production and processing back to the UK by April 2013. The benefits for the customer will be a more consistent service, a more secure passport, and in due course a cheaper one too. Overseas customers will still apply and receive their passport by courier, as they have for some time. For a small number of customers where legal or security constraints preclude use of couriers, we will continue to use the diplomatic bag. We do not expect any significant change to speed or standard of service. The transfer of business will take place in three phases: firstly the transfer of authority from the FCO to the IPS on 31 March, subject to the Prime Minister’s approval of a Machinery of Government Transfer; secondly, bringing back the printing of passports to the UK in the summer of 2011; and finally repatriating processing of all passport applications by 2013, which will mark the final transfer of all passport business to IPS. We estimate that repatriating the passport service to the UK will save around £20 million per year. Our posts overseas will continue to provide Emergency Travel Documents for those who need to travel urgently or for use in a crisis. This will remain an important part of the consular support that the FCO will continue to offer British nationals overseas. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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London 2012 In January we appointed an FCO Director for the 2012 London Olympic and Paralympic Games. Andrew Mitchell—currently Ambassador in Stockholm—will be responsible for ensuring that the FCO makes the most of the opportunity offered by the Games to promote the UK’s international interests and reputation. Andrew will also oversee the FCO’s Games-time responsibilities for visiting Heads of State and Government, assist UK Trade and Investment in securing a lasting economic legacy and lead the international dimension of the FCO’s 2012 crisis preparedness and response.
Business Planning The FCO Departmental Business Plan is being revised following an open consultation with the public and public bodies. The final version will be published on 1 April, with further information added later in the year once the data is available for this financial year. Our Heads of Mission are finalising their Country Business Plans. These are due to start from 1 April and cover the four years of the Spending Review period. I recently met my opposite numbers in Whitehall and agreed a set of principles to guide close co-operation in-country across departments to ensure maximum impact for HMG.
Top Risks Register Middle East instability was a strategic risk on last quarter’s register. At the March update we adjusted this to Middle East and North African instability. The other strategic risks in this updated register are Iran, Afghanistan, terrorist attack, Pakistan, Eurozone, Overseas Territories, Horn of Africa and the Korean Peninsula. We have added Consular and Staff Morale to Security as the top operational risks. The FCO Board continues to discuss risks to make sure they are being effectively managed.
Five Star Finance Programme We expect to receive shortly the NAO’s final report containing its independent assessment of progress under the 5* Finance Programme, confirming the NAO’s Emerging Findings report from December 2010 that the FCO has in broad terms reached the 4.5* level. As planned, the 5* Finance Programme itself has now ended. The aims of achieving further improvements beyond the 4.5* level are now being incorporated into our Financial Excellence initiative for financial management in the FCO which mirrors the Diplomatic Excellence initiative introduced in 2010. We intend that this approach will further embed good financial management at all levels throughout the FCO and enable us to maintain a high level of ambition for our financial management performance as an organisation.
NAO Report on Spending Reductions The NAO will shortly publish a report on how the FCO managed the process of making spending reductions during 2009–10. You will recall that the department had to make considerable in-year expenditure cuts during this period as a result of sterling’s fall and the adverse exchange rates following the removal of the Overseas Price Movements (OPM) Mechanism as part of the 2007 Comprehensive Spending Round. I am pleased to say that the report, while identifying some lessons and areas we could improve, concludes the process was well led by the FCO Board and carried out in a manner which achieved value for money for the taxpayer.
Charging Arrangements for other Government Departments From 1 April this year we will introduce new charging arrangements for other government departments who wish to base their staff on the FCO platform abroad, based on a new flat fee arrangement. We think it will be better for everyone: simpler, more predictable and better value for money, and involving much less bureaucracy. We hope it will give all government departments a strong incentive to be based in our posts—which makes the best sense operationally and in terms of overall value for money for the UK taxpayer.
Information Technology In my last letter I referred to the signature of the contract with Cable and Wireless Worldwide (CWW) to deliver Echo, the new network providing telephony, data and videoconferencing services to the FCO and our partners the UK Border Agency (UKBA) and the Department for International Development (DFID). The Echo Programme’s pilot phase started at the beginning of January and will conclude at the end of April. As of 11 March, four of the nine FCO pilot sites plus one DFID pilot site had moved to Echo telephony and/ or data services. Roll out has been slower than originally expected, with two Echo pilot posts experiencing lengthy service outages. As a result, the deployment schedule is running approximately eight weeks behind schedule. Our ICT team is assessing how best to address this. As part of this the FCO has agreed a contractual amendment with outgoing service supplier Global Crossing which provides significant new flexibility, allowing the programme to deploy to larger posts earlier and which saves the FCO money. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Information Security
We have now completed the review I referred to in my last letter of measures in place to protect our information, to ensure these are robust and proportionate in light of the Wikileaks incident. We assess that within the FCO’s systems and those of other government departments with whom we work there is good compliance with HMG’s security standards and sensible mitigations in place to prevent major data losses. We are taking action to address any potential weaknesses.
Estates
We are continuing to rationalise the overseas and home estate where doing so gives us better value for money and operational benefits.
In my last letter I mentioned our new embassy in Tbilisi. We have now successfully negotiated the early surrender of the lease of our old building, reducing our liabilities to the landlord (rent, service charge and dilapidations payable to August 2013) from £1.258 million to £808,000—a reduction of £450,000 or 35%.
In Baku we have completed a £5 million security-led rationalisation project to provide better blast protection to our property. As part of this we also surrendered three floors of the office block in which the Embassy is located, giving us a net rent saving of US$611,700 (£380,200) per annum.
Because of the crisis in Libya, we have been obliged to suspend an £11 million capital project to convert the Ambassador’s residence in Tripoli into offices. HM Treasury approval has been sought to write off the costs to date, which have been limited to £933,000. We will use the project information gained to date if and when we need to resurrect the project in the future.
The project to construct a new embassy in Jakarta is temporarily on hold while negotiations continue with the Indonesian authorities on the building permit enabling us to start on site. Our Embassy in Jakarta is fully engaged in resolving this issue.
Since I last wrote we have completed the sale of 11 properties. I enclose the details at the annex. Next year brings a further challenging programme of asset sales and preparation for this is under way.
Chief Operating Officer
Matthew Rycroft, previously our Director for Europe, took over from James Bevan as our Chief Operating Officer on 28 March. James will be moving to another Diplomatic Service appointment. 28 March 2011
Annex
PROPERTY SALES AND PURCHASES Sale Date Post Property Type Sale Price £
Oct–Dec 2010: 05/11/2010 Ibadan Amenity 810,688 15/11/2010 Kampala Residential 429,472 17/12/2010 Washington Residential 342,034 01/12/2010 Washington Residential 982,780 19/11/2010 Washington Residential 856,176 19/10/2010 Ottawa Residential 231,429 30/11/2010 Canberra Residential 727,460 19/11/2010 Canberra Residential 410,427 13/10/2010 Brussels Residential 373,587
Jan–Feb 2011: 04/02/2011 Canberra Residential 1,360,472 22/02/2011 Dar es Salaam Residential 1,074,490
There were no properties purchased from October 2010–February 2011. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
Ev 50 Foreign Affairs Committee: Evidence
Letter to the Chair of the Committee from Simon Fraser CMG, Permanent Under-Secretary of State, Foreign and Commonwealth Office FCO Management Issues I am writing to you with the latest quarterly update. This letter covers the period from April to June 2011. It is rather longer than average, reflecting a busy period and progress on a number of fronts.
Diplomatic Excellence Overview We have made good progress in this period in establishing our “Diplomatic Excellence” programme for reform and improvement of the FCO. We have an ambitious agenda for the next four years. It’s rooted in our determination to be a first class foreign service in every respect: policy, diplomacy, public service, leadership, management, efficiency. We aim to improve our strategic reach through our network; strengthen our core diplomatic skills and expertise as a service; make sure we put our resource in the places that will matter most for the UK in the future; strengthen our front line diplomacy; work more closely with other parts of Government to have a coherent, effective national foreign policy; and do more to support UK business and economic growth. This starts with clear purpose and priorities. They are: an active and distinctively British foreign policy to advance UK interests and values, with three core priorities: UK security, UK prosperity and consular service to UK nationals. Next comes clarity on resources. We now have this for the four years of the Spending Round. We are facing a squeeze like everyone else, but have enough to work with if we are rigorous. We have recently taken steps to match our ambition to our resources through some big decisions. We have decided on a network shift towards new powers: China, India, Brazil, Indonesia, Mexico, Turkey and others. We are opening five new Embassies and closing none. We have restructured Programme spend, which will have to fall, to our priorities. We have set up clear, strategic and sustainable savings programmes to save £100 million running costs per year from estates, corporate services and our work-force structure. These savings will protect the front line. We propose to invest more in the key skills of diplomacy: thinking about and understanding the world; giving clear strategic advice to Minsters; reinforcing our expertise in regions and countries; boosting our language training; putting more staff into key policy directorates in London; strengthening our economic expertise and training staff in negotiating. One of our priorities for the next months will be working better with others in and out of Government in London and abroad: in the National Security Council; through our new Network Board; drawing in former diplomats and building closer ties with business. Through these efforts we aim to give confident overall leadership to the work of HMG in the world. We are learning and applying the lessons from the recent consular crises: better information; clear crisis procedures; more modern people tracking and call handling; assertive and directive decision making; more agile deployment from London and overseas. These points were covered in our recent report on consular evacuation procedures. The rest of this letter sets out in more detail progress on various aspects of this overall programme.
Leadership Conference In May we hosted our annual Leadership Conference for Heads of Mission and senior staff in London. The theme of the conference was “Diplomatic Excellence: FCO 2015”. It aimed to build collective agreement on what the FCO should do to fulfil the Foreign Secretary’s vision of a bold and activist foreign policy. It also aimed to encourage the FCO’s leadership to take ownership of the Diplomatic Excellence initiative. We were lucky to have key note speeches from the Prime Minister, Foreign Secretary, Chancellor, Chief of Defence Staff and a live secure video link to Aun San Suu Kyi in Rangoon. Our evaluation showed that after the conference over 90% of participants had a “good” or “very good” understanding of the future vision of the Foreign Office, and over two thirds felt “confident” or “very confident” delivering this through Diplomatic Excellence, double the pre-conference score. Overall ratings were high, with many participants describing this as the best ever of these conferences. We also included a full morning of parliamentary engagement and would like to strengthen this element further for next year’s Conference. I would be pleased to discuss how we can do this. It is also worth noting that this Conference was delivered for less than a third of the cost of last year’s Conference by bringing its organisation completely in-house.
Network Shift The Foreign Secretary set out a plan for the future of Britain’s diplomatic network over the next four years in his announcement of 11 May. It involves strengthening the network, expanding our connections with emerging powers and helping to secure growth for the economy through increased trade. We plan to open new cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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embassies in Kyrgyzstan, South Sudan, Madagascar, Somalia, and El Salvador; and increase our presence in China (up to 50 staff) and in India (up to 30 staff). In addition we plan to increase our diplomatic strength in Brazil, Turkey, Mexico, Indonesia, Vietnam, Philippines, South Korea, Thailand, Malaysia, Taiwan, North Korea, Mongolia, Burma, Pakistan, Caspian Region, Chile, Argentina, Colombia, Panama, Peru, Nigeria, Angola and Botswana. The whole package is designed to be cost neutral. We plan to fund the expansion by gradually reducing our diplomatic footprint in Iraq and Afghanistan, and by reducing our staff in some posts in Europe. We will fully maintain our embassy network across Europe but we will withdraw diplomatic staff from some subordinate posts, while retaining UK Trade & Investment and consular staff in many cases.
Junior Staff Overseas In my last letter I set out our intentions to end the great majority of overseas FCO postings for our most junior UK-based staff (Bands A and B). This is a difficult and with some staff controversial proposal. However our consultations with the Trade Unions and staff did not produce any reason why we should not continue towards implementation of our plan, which is a core element of our overall budget reduction plan to meet our SR10 settlement as well as our future workforce structure planning. The FCO Board agreed to go ahead with the project on 26 May. We will work closely with Heads of Mission to agree post-specific plans to manage the transition. The change will be a gradual one over 4 years and no staff will be short-toured as a result of this decision. We continue to involve all staff in discussions on how we can offer junior staff an attractive career. We have launched a “Charter for A and B Band Staff” and a new Diplomatic Skills Foundation Programme which, in conjunction with the Diplomatic Excellence initiative, will ensure that junior staff continue to have the opportunity to develop the skills and tools they, and the FCO, need to succeed in the future. I enclose a copy of the Charter.2
Pay and Bonuses We have concluded negotiations with the Trade Unions on this year’s delegated grades pay round. Our offer was limited by the need to remain within the boundaries of the pay freeze and HMT guidance. The Unions formally rejected our offer, without ballot, on the grounds that they are politically opposed to the pay freeze. We have, therefore, decided to implement our pay offer without their agreement. Despite the pay freeze, those of our staff who earn less than £21,000 will receive an increase of between £250 and £500 per annum, with the very lowest paid receiving the most. We will also pay performance related awards to the delegated grades using a similar structure to last year which is, again, weighted towards the lower paid. Most staff whose performance qualifies them for a bonus will receive between £800 and £1,600. The highest performance bonus paid to any member of staff in the delegated grades will be under £3,000. As in previous years we will continue to run in year bonus schemes to recognise outstanding achievement. This year it will include additional funds to recognise the exceptional efforts made by staff during the recent series of crises. Both schemes adhere to HMT guidelines. Staff in the Senior Management Structure remain under a pay freeze. Cabinet Office guidance for 2011 allows for only 25% of Senior Civil Servants to be paid a bonus. We have now completed the appraisal moderation process that determines which 25% of SMS staff will receive a bonus. We will pay them 90% of the maximum allowable under the guidance: £9,000 for SMS1, £11,250 for SMS2 and £13,500 for SMS3.
Training, including Language Training We are continuing to improve the learning and development opportunities available to staff in line with Diplomatic Excellence priorities. We have allocated around £350,000 over the next eighteen months to fund a series of secondments of UK diplomats to work for short periods in the Foreign Ministries of other EU Member States, particularly future Presidencies. This will improve our ability to influence and negotiate with colleagues across Europe. We launched five new lunchtime/after-work language training courses in Arabic in June, with approximately 70 officers enrolled. There are now lunchtime and after-work language courses running for staff in the UK in Mandarin, Arabic and French, with approximately 200 officers enrolled. We will add refresher classes for existing Russian speakers to this programme in the near future.
Estates Since I last wrote we have completed the sale of five properties and purchased two. I enclose the details as an annex. One of these purchases was the new Ambassador’s residence in Zagreb, which totalled €3.4 million (£2,911,509 million). This purchase will result in a rental saving of €207,000 (£181,256) p.a. and a move to a more fit-for-purpose property. 2 Not published. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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The new Embassy project in Jakarta has now begun, following delays awaiting the building permits. We have completed five projects including a new glazing and seismic strengthening scheme in Islamabad. There are currently over thirty other committed schemes in progress.
Facilities Management The contract for outsourcing facilities management for our Asia Pacific and India posts that we signed on 1 November 2010 takes effect from 1 April 2011 for seven years with a potential for extension(s) up to a further three years. The fixed price cost of approximately £70 million over seven years covers 28 posts in 14 core countries (Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam). We envisage significant benefits including allowing other government departments to source services under the FCO contract in line with our drive to improve efficiency and value for money.
Moving out of the Old Admiralty Building As the Foreign Secretary announced to Parliament on 11 May, the FCO intends to move to a single site in London over the next two years. We will be moving our staff out of the Old Admiralty Building in a phased process, and the resulting reduction in our running costs will contribute towards our administrative savings of £100 million per year. This project will involve some changes to the use of space in our flagship HQ in King Charles Street, and it will also involve moving some tasks which do not need to be done in London to our offices in Milton Keynes and Hanslope Park. We expect that the OAB will be re-used by another government department in future, as the public sector estate across London is restructured to reduce costs. I am committed to using this estates move to enhance the standard of accommodation for our staff in King Charles Street.
Security Events in North Africa and the Middle East continue to generate security concerns. The UK Special Representative’s Mission in Benghazi has required a significant level of security management. We have engaged a private security company and deployed armoured vehicles and armed guards to protect the mission. Our Embassy Chancery and Residence buildings in Tripoli were attacked by elements of the regime or their sympathisers on 1 May. The buildings were looted and torched, causing considerable damage. Our Embassy in Yemen has drawn down to a minimum core of staff, in case we need to evacuate the mission at short notice. For greater security and co-ordination, the staff have relocated to the partially completed more secure accommodation in the embassy compound. Work to complete these will resume as soon as the situation allows. We have withdrawn staff dependants from Damascus in the light of the upsurge in violence in Syria and reduced staff movement around the country. Once the situation in Syria has stabilised we will review our planning for a new, more secure mission and residence there. In Jakarta, barriers outside our Embassy that provide additional protection in the event of a vehicle bomb were unilaterally removed in May following a long running dispute with the city authorities. As a result, staff worked from fall back locations for a time before an agreement was reached for crash resistant bollards to be fitted outside the Embassy to provide protection. As the Foreign Secretary instructed, we reviewed the security of all our posts carefully following the death of Osama Bin Laden and are continuing to monitor the situation closely.
Top Risk Register From April we changed our risk management framework, moving to a system where risk register entries are escalated and updated in response to events, rather than in accordance with a quarterly timetable. The FCO Board now reviews the Top Risk register every month to make sure these risks are being effectively managed. We have also introduced new elements of external think tank challenge to our internal assessment of risk.
Five Star Finance Programme We have now received the NAO’s final report containing its independent assessment of progress under the 5* Finance Programme, confirming the NAO’s Emerging Findings report from December 2010 that the FCO has in broad terms reached the 4.5* level. As planned, the 5* Finance Programme itself has now ended. The aims of achieving further improvements beyond the 4.5* level are now being incorporated into our Financial Excellence initiative introduced in 2010. We intend that this approach will further embed good financial management at all levels throughout the FCO and enable us to maintain a high level of ambition for our financial management performance as an organisation. In June I gave evidence to the PAC with Matthew Rycroft and Alison Currie on the implementation of the FCO’s in year cuts in 2009/10. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Information Technology Echo In my last letter, I provided an update on progress on delivery of Echo, our new network providing telephony, data and video conferencing services to the FCO and our partners the UK Borders Agency (UKBA) and the Department for International Development (DFID). The Echo Programme was reviewed by the Office of Government Commerce under the Gateway 4 (“Readiness for Service”) process in April and received an Amber/Green assessment, denoting that significant risks have been identified and are being addressed. The Review concluded that Echo “is being managed in a sound and effective way under an appropriate governance regime, but as with any project of this scale and complexity there are areas where improvements could be made”. An action plan is in place to take forward the Review team’s recommendations. Echo completed its pilot phase on 13 May, nearly eleven weeks later than planned. It is currently approximately half way through its Phase 1 rollout, with 17 Posts connected to the new network as of 10 June. The FCO has obtained assurances from our principal supplier, Cable & Wireless Worldwide, that they will increase the resources devoted to delivering Echo with the objective of making up the delays to date; and we have put in place a series of additional measures including close monitoring of progress against contractual milestones to support this process. I have instituted a process of scrutiny of the project by the FCO Board.
Enterprise Resource Planning and Global Desktop The contracts for the FCO’s Enterprise Resource Planning (ERP) system, “Prism”, with Cap Gemini, and the global desktop service, “Firecrest”, with Hewlett Packard, expire in January and February 2012, respectively. We have created a joint Re-procurement Programme to reduce costs, avoid duplication of processes and look for potential synergies. The Programme underwent a Cabinet Office Efficiency and Reform Group (ERG) Review in May, receiving an “Amber” status. An action plan is in place to take forward the six recommendations which were about scope, business change and risk management.
FCO Corporate Governance: New Sub Committee Structure In the last few months we have streamlined our corporate governance. Under the new structure we have replaced most of the Board’s sub-committees with a new Operations Committee, chaired by the Chief Operating Officer. It meets fortnightly and reports monthly to the FCO Board. Its purpose is to ensure on behalf of the Board that all the decisions are being taken that need to be taken and that they do not conflict: to meet our savings targets and live within our settlement, to support the foreign policy front line with the right IT, estates, HR and other corporate policies, and to take responsibility for investment decisions. The Audit and Risk Committee is unaffected by this change. A separate Human Resources Committee will continue to exist in its current form because it is an effective way for staff to contribute to matters that affect them most closely through a the mechanism of grade representatives. The Operations Committee will also provide core support for the new Network Board. The Network Board brings together key FCO and Whitehall partners as part of a more inclusive approach to developing our global network overseas. Its first meeting was in June, and it will meet quarterly.
Departmental Business Plan, Annual Report and Quarterly Data Summary Following the open consultation with the public and public bodies, the updated version of the FCO Departmental Business Plan was officially published on 13 May on the No.10 website. The Business Plan is accompanied by a Common Areas of Spend annex, which identifies key spends for all government departments. These two documents are supported by a Measurement Annex, highlighting the definitions for measuring the FCO’s input and impact indicators which is available on the FCO website. Like other government departments, the FCO has worked with the Cabinet Office Efficiency Reform Group (ERG) on the development of the departmental Quarterly Data Summary (QDS) which provides indicators on spending and performance. The FCO continues to report on its foreign policy performance through the monthly returns on progress against the Structural Reform Section of the Departmental Business Plan and annually through our Annual Report and Accounts. I signed the Annual Report and Accounts on 24 June. These were published and laid in Parliament on 30 June. The Accounts reveal a Departmental Expenditure Limit underspend of just over 1% of our budget. 12 July 2011 cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Annex
PROPERTY SALES AND PURCHASES Sale Date Post Property Type Sale Price £ March 2011: 20/03/1011 Nairobi Residential 1,705,834 29/03/2011 Washington Residential 211,465
April–May 2011: 13/04/2011 Seoul Residential 1,211,045 25/05/2011 Kampala Residential 396,393 31/05/2011 Oporto Office & Residence 6,069,910
Purchase Date Post Property Type Purchase Price £ March 2011: 16/03/2011 Nairobi Residential 1,482,000 18/05/2011 Zagreb Residence 2,911,509
April–May 2011: There were no properties purchased during April or May 2011.
Letter to the Chair of the Committee from Simon Fraser CMG, Permanent Under-Secretary of State, Foreign and Commonwealth Office
FCO Management Issues
I am writing to you with the latest quarterly update. This letter covers the period from July to October 2011.
Diplomatic Excellence Overview
We continue to embed our Diplomatic Excellence agenda. It is an initiative for all staff in the FCO in the UK and in all our posts overseas. The main development this quarter was the Foreign Secretary’s speech of 8 September3 on strengthening the FCO as an institution. We have encouraged all Posts and Directorates to adapt Diplomatic Excellence for their specific/local context and are encouraged by the response.
Some of the achievements over the past three months include: Policy: we have set up alumni groups to make better use of the expertise of existing and former FCO staff, including the Locarno Group of former Ambassadors and senior officials. We have held high-level policy challenge sessions, re-examining HMG policy on for example the Arab Spring, Iran and Saudi Arabia. We have launched a £1 million Expertise Fund to develop geographic and thematic expertise, which is now fully subscribed. We established a new Economics Unit linked to Policy Unit, and have strengthened our training by launching Commercial Diplomacy courses, more language training and offering more e-learning courses, lunchtime seminars and bulletins. People: an updated Strategic Workforce Plan is in preparation to ensure we have a workforce of the right size, shape and skills to meet current and future needs. We are seeking to raise performance through more rigorous appraisal writing. We are road testing across the FCO three aspirational FCO values, linked to Diplomatic Excellence, which are “taking responsibility”, “encouraging innovation” and “working together” to achieve excellence and make a difference. Network: The programme to achieve £100 million per year of efficiency savings is on-track and monitored monthly by our Operations Committee. The network shift is underway—to open six new Embassies and boost our presence in the emerging powers. We now have Instant Messaging and Echo (new telephony, data and video conferencing) and SharePoint sites (collaborative workspace) are being rolled out.
Looking ahead, our work on Diplomatic Excellence includes developing a representative network of Diplomatic Excellence Champions to help shape this initiative across the FCO and engage with key Whitehall partners whose staff are on our platform, to improve cooperation. We intend to hold a one day global virtual conference in November.
The rest of this letter gives more detail on the main themes. 3 http://www.fco.gov.uk/en/news/latest-news/?view=Speech&id=652930982 cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Network Shift Since the Foreign Secretary’s announcement to Parliament in May, there is progress to report in all areas of our Network Shift. The deployment of an extra 72 UK diplomats and 107 local staff in the fastest growing cities and regions is underway. We have conducted a consultation with Whitehall partners on our plans to deploy an extra 50 staff in China. The proposed uplift will involve most new staff going into existing posts; some of them will have roving responsibilities to target specific cities and regions. We will need time to build up language capability and expect to have the new resources in place for 2013–14. In India we have developed our plans to deploy up to 30 extra staff; we expect to have completed the first part of the expansion by the end of 2011–12. In South East Asia we have been seeking to appoint up to 16 UK diplomats over the summer to fill the new slots. We have allocated six of the slots to Indonesia and Vietnam and have distributed the rest across the Philippines, Malaysia, Thailand, Burma, South Korea, North Korea and Mongolia. We are also reinforcing our local teams in the region with up to 26 new slots. Recruitment is underway to expand the Latin America prosperity officer network by nine UK diplomats and to deliver the Turkey shift. The new Embassy in San Salvador should open in March/April 2012. In Africa the new Embassy in Juba is already in place and operating on the DFID platform. The setting up of a fully functioning new Embassy in Kyrgyzstan is at an advanced stage. For the Network Shift to be broadly resource neutral we are developing plans to deliver around £15 million savings from our European subordinate posts and as we reduce over time our diplomatic footprint and security overheads in Iraq and Afghanistan, which is very large relative to the rest of the network.
Employment Tribunal Cases The outcome of a review of Overseas Allowances in 2009–10 has been the subject of Employment Tribunal cases supported by the PCS and Prospect trade unions. Following detailed negotiations agreement has been reached between the Administration and the PCS and Prospect unions on a package of additional measures related to the review. The unions will now ballot their members on the package. If agreed, the Employment Tribunal cases will be withdrawn. The settlement will cost approximately £1.8 million per year and approximately £2.3 million in one-off payments. Even with these revisions the allowances review will save the taxpayer about £8.2 million per annum.
Training, including Language Training Since my last letter, the FCO Board and Ministers have endorsed a review of our training strategy to deliver Diplomatic Excellence priorities. We are continuing to refocus our efforts on such areas as foreign languages, international policy skills, geographical and other foreign policy expertise. We will also give a greater emphasis to strategic thinking, negotiating and influencing. The £1 million “expertise fund” that we established this financial year is enabling Posts and Directorates to deepen specific knowledge or expertise, for example through participation in short courses or conferences. We are doubling the number of days spent on staff training on policy skills, including a new, one day Introduction to International Policy Skills course for our more junior staff. As part of our aspiration for Diplomatic Excellence, we also continue to give very high priority to staff developing strong management and leadership skills. We are refining our training to support them to do so. Our approach to building capability is not based solely on formal training courses. We are promoting mentoring and coaching, so that staff can have better opportunities to learn from more experienced colleagues. My Board colleagues and I are championing this approach through a range of new initiatives. For example, I will hold regular sessions during the year with junior staff who have taken our new Introduction to International Policy Skills course, run a “leadership learning set” for about a dozen staff who are preparing for promotion to senior management roles, and lead a series of lunch-time learning sessions on policy work in London. In his speech on 8 September, the Foreign Secretary announced plans to reopen a language centre in the Foreign Office. On 31 August he wrote to Cabinet colleagues to invite closer cooperation between departments on languages, and FCO officials are now following this up. We hope that this initiative will strengthen collaboration between government departments to pool expertise, increase language capability and improve efficiency.
Estates I covered estates management issues in some detail in my letter of 16 September to Margaret Hodge.4 Since I last wrote to you we have completed the sale of seven properties (see annex for details). We continue to re-invest this capital in the FCO’s overseas estate, with over 30 committed schemes and a growing pipeline of 20 new projects in development. As part of our drive to reduce costs overseas, in August we completed the move to new offices in Chicago and have made a rental saving of approximately £250,000 per annum. 4 Not printed. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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We are also looking hard at ways in which we can bear down on the existing cost of renting accommodation overseas. The aim is to reduce the existing annual expenditure by £9.2 million (ie by 20%) by the end of SR10. We think that this can be achieved by a combination of measures and without compromising on the health, safety and security of our staff or their operational effectiveness. We are currently consulting staff worldwide on how best to achieve this, with a view to introducing a new policy from the start of the next financial year.
Security The security threats we have faced this year have been more intense and wide-ranging than at any time in recent memory. There is no sign of this abating. The situation in the Middle East and North Africa continues to present particularly difficult challenges. There is still a high level of violence in Syria and Yemen. The situation in Yemen is especially tense, with a risk of widespread civil conflict. Our embassy in Sanaa is already strongly protected but we are strengthening our defences further, including with additional armed guarding. In Libya, we have provided extensive security in support of our new mission in Tripoli. We expect to be based in a hotel for an initial period while we assess longer term options. We are arranging a specialist explosive ordnance disposal team to assess and clear our damaged mission before any further work is done on the building. In Kabul, the British Council offices were targeted on 19 August in a complex attack involving a number of attackers and lasting eight hours. Although three of our guards were sadly killed, our layered defences worked well, holding the attackers at bay and preventing further casualties. The terrorist threat in Kabul has increased significantly in recent weeks. We have also seen sharply increased security threats in Nigeria and Karachi. In the UK, our security team is gearing up to manage the security challenges we will face from the Olympics, with several major events taking place close to FCO buildings.
Financial Excellence We have made good progress in implementing our Financial Excellence initiative. This aims to embed good financial management across the FCO and to strengthen Finance Directorate. It will further enhance the Directorate’s ability to provide the analysis, insight and financial leadership needed to support the FCO Board and other FCO colleagues in their strategic decision-making.
FCO Country Business Plans and Programme Work In July, the Board approved a new review process for our internal annual Business Planning cycle. The Mid- Year Review will take place in October/November. This will provide an opportunity for our Posts and Directorates to assess whether they are on target to meet their objectives and, where necessary, to revise and update their Business Plans. These reviews will be considered by the Management Board. Following a review of our strategic programmes in 2010, we established a Policy Programme Evaluation Board (PPEB) to ensure that the FCO’s discretionary policy programme funds are effective in delivering our Foreign Policy Priorities and also represent value for money. The PPEB oversees the monitoring and evaluation of these programmes and makes recommendations to the Foreign Secretary for improvement. The first meeting was held in July 2011 and was chaired by Mr Lidington, Minister of State for Europe.
Information Technology Echo Echo is our new network providing telephony, data and video conferencing services to the FCO and our partners the UK Borders Agency (UKBA) and the Department for International Development (DFID). By the end of August, we had completed 44 deployments.
Enterprise Resource Planning and Global Desktop The FCO also continues to take forward work on procuring the successors to our Enterprise Resource Planning (ERP) system, “Prism”, and our global desktop service, “Firecrest”. We have taken steps to ensure service continuity during the contractual exit periods, pending further consideration of our requirements under the FCO’s IT and ERP strategies. The Re-Procurement Programme will procure a Service Management and Integration (SMI) supplier to manage both the successor Prism and Firecrest contracts, together with other existing ICT contracts across the FCO. This approach is intended to promote both improved business functionality and administrative savings. We are working closely with the Cabinet Office. It is our intention that the successors to both Firecrest and Prism will be major enablers in ensuring that the FCO becomes the platform of choice for other UK government departments overseas. Together the Echo and Re-Procurement Programmes will contribute to the FCO’s commitment to reduce the support costs for our ICT systems by 30–40% over the current Spending Round. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Overseas Passports Since the handover of responsibility of the overseas passport business to the Identity and Passport Service on 1 April 2011, the next phase of integration has continued at pace, entailing the repatriation of passport book printing to the UK. For the Regional Passport Processing Centres in Dusseldorf, Hong Kong, Madrid, Paris, Wellington and Washington, and at the stand-alone site in Dublin, all passports are now being printed at a De La Rue facility in UK and returned to the customer by DHL under a central delivery contract. Over 15,000 passports a month are now being printed in the UK. This represents an important milestone. Repatriating printing has removed the need to ship, store, and account for, blank passport stock around the world. This brings significant security and cost benefits. I wrote to you on 14 July to let you know about delays in the processing of passports at our regional passport processing centres in Dusseldorf and Washington. A backlog of applications had built up following systems failure in April (affecting all processing centres), the introduction of centralised printing for Dusseldorf in May and a sustained higher than average demand in Washington. We took immediate action to remedy the situation and to keep customers informed. We deployed additional IT and staff, including volunteers from the Identity & Passport Service, to both Posts. We updated websites daily, introduced a dedicated passport hotline for customers in North America and provided free calls to Careline, the passport telephone enquiry service. As a result Dusseldorf was able to return to issuing passports within normal advertised target times by the end of July. Washington achieved this by the end of August. Following reviews carried out in both Posts action is already in hand to prevent a recurrence. We are re- examining our management information to predict surges in demand, recruiting and training additional staff in Washington and putting in place arrangements to enable us to deploy temporary staff quickly and effectively.
Corporate Services Programme In line with our SR10 settlement, we have continued work to save running costs from corporate services by consolidating activity into a smaller number of regional corporate services centres. We have begun work on setting up one such centre for the whole Asia Pacific Region, to be based in Manila. We have agreed the first of a series of moves for some of our London-based staff, as part of our planned move out of the Old Admiralty Building. We have had extensive consultations with staff and have completed an Equality Impact Assessment for the move.
FCO Services Although economic conditions remain challenging, FCO Services is trading strongly and is currently on course to meet its formal Ministerial targets, set out in a Written Ministerial Statement to both Houses of Parliament earlier in 2011. As the organisation has now been operating as a trading fund for three years, the FCO Board has commissioned a review of the relationship between the FCO and FCO Services. It is due to make its recommendations later this year. FCO Services are working on developing three areas—Electronic and Protective Security, Estates and Secure Construction, and Secure ICT Solutions. Focussing on these areas will allow FCO Services to capitalise on opportunities in its local and international markets. FCO Services is also developing strategies that complement the Government’s security and efficiency agendas. A current example of this is the work being done to provide secure Cloud computing to government customers. 13 October 2011 cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Annex PROPERTY SALES AND PURCHASES Sale Date Post Property Type Sale Price £ June 2011: 10/06/2011 Washington Residential 212,029 20/06/2011 Lusaka Residential 819,673 20/06/2011 Lusaka Residential 495,473 30/06/2011 Seoul Residential 1,921,384
July 2011: 29/07/2011 Belmopan Residential 86,233
August 2011: 02/08/2011 Lilongwe Residential 182,580 26/08/2011 Seoul Residential 1,570,575
There were no properties purchased during June, July & August 2011.
Letter to the Chair of the Committee from Simon Fraser CMG, Permenant Under-Secretary of State, Foreign and Commonwealth Office FCO Management Issues I am writing to you with the latest quarterly update. This letter covers the period from November 2011 to January 2012.
Diplomatic Excellence Overview It’s just over a year since we launched Diplomatic Excellence—our reform and modernisation agenda supporting our ambition to be the best Diplomatic Service in the world. Some highlights of progress against the three core themes of Diplomatic Excellence: Policy: We are benefitting greatly from the expertise coming from our alumni. We have launched a programme aimed at improving economics knowledge and skills for all staff and are making better use of our network of economists in London and overseas. We are offering a new International Policy Skills course for staff at junior grades. Our new and improved diplomatic reporting service, Diplomatic Telegrams (DipTots), provides us with a powerful tool to lead UK international policy, and will help us to promote the FCO’s policy role and reputation in Whitehall. We have created a central quarterly customer group survey to measure what Whitehall contacts think of our foreign policy making. And we are ensuring that the FCO leads the way on foreign policy issues in the National Security Council (NSC) through horizon scanning and future agenda-setting, contributing strategic think-pieces, as well as papers on individual issues. We are giving greater clarity to our Whitehall partners about the FCO’s role on Prosperity by being clearer about accountability within the FCO, agreeing how we will work with them and how we will measure success. We are also developing a cadre of Prosperity officers overseas as part of the network shift (see below). And our new Business Engagement. Strategy will make our relationships with business more systematic and strategic. We are leading the Emerging Powers initiative in Whitehall, focussing on where collective resources can yield the most significant benefits to UK prosperity and security through our relations with the emerging powers, aligning resources with priorities, and developing an evaluation framework to measure success. People: We are refocusing on expertise in countries, regions and languages by: launching a Languages Excellence Programme aimed at advancing UK foreign policy objectives through improved foreign language training; increasing language training times to produce excellent speakers,; and continuing to collaborate across government on language learning, including planning the new FCO Language Centre. The “expertise fund” continues to provide tailored training to develop geographic and thematic expertise. Our updated Strategic Workforce Plan will ensure we have a workforce of the right size, shape and skills to meet current and future needs and will improve our ability to respond flexibly to new priorities and to fill key staffing gaps. Network: Our programme to deliver £100 million per year of efficiency savings continues on track, as does our network shift which is resulting in positive changes to our operations overseas. The rest of this letter gives more detail on some of the main corporate themes. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Human Resources We have overhauled our Strategic Workforce Plan to shape the FCO’s UK-based workforce, and for the first time to take a harder look at our LE staff cadre, for the rest of this Spending Round period. The FCO is shrinking in terms of UK based staff numbers and it is changing shape with the bulk of staff now moving to the middle, operational Bands rather than in the lower, support Bands. The Plan aims to achieve an overall reduction in UK based staff headcount of around 10% over the period and to develop stronger centralised management controls to ensure affordability. The challenge remains to shift our staff resources to areas of constantly evolving demand, and the Plan will improve our ability to respond flexibly to new priorities and to fill key staffing gaps. Work to reduce the number of junior UK-based staff overseas, set out in my letter to you of February last year, is progressing well. We recently agreed to retain 52 (out of some 350) of the overseas posts at A and B Band level which were within the scope of this programme and to create 10 new C4 posts as a result of regionalisation or the merging of more than one role at Post, We also agreed to create 158 new locally engaged roles globally. In addition to these jobs, junior FCO staff will continue to have opportunities to bid for UK Border Agency jobs overseas, and to get experience of working overseas through short- term attachments. This work is part of our drive for efficiency and a sustainable future workforce, and will deliver £23 million of the £100 million per annum efficiency savings we require. As I mentioned in my February letter, we have introduced a new Accelerated Promotion Scheme. This aims to allow our most talented junior staff to reach the more senior levels of the Diplomatic Service more quickly than in the past. As a result of this Whitehall-wide Scheme, 14 successful candidates from the A and B bands will be joining Band C in 2012. The FCO had the highest number of passes of any Department that participate in the scheme. This is very gratifying. We are keen to evaluate the impact of these and other changes. We are using the Staff Survey to monitor them. Our most recent results show the majority of scores holding up well, despite these changes and the economic environment, which is having a direct impact on all staff. The scores for many questions remain broadly the same as last year’s, with some being one or two points lower. There are one or two areas of greater concern which I and the FCO Board are looking at closely. We continue to perform well above the Civil Service benchmark in the majority of themes covered in the survey. Our overall engagement score is 66% compared to the Civil Service average of 56%.
Training, including Language Training Complementing our formal language training, we now have lunchtime classes running in London to support officers to develop and maintain skills in Arabic, Mandarin, French and Russian, with Spanish, Brazilian Portuguese and French for Policy Work classes to be launched shortly. We have been working with other Whitehall Departments to increase cooperation on language training. For example, since I last wrote, the FCO has successfully concluded procurement on behalf of all interested Whitehall departments for languages e- learning. Rosetta Stone was awarded this contract in early January. By leading an HMG-wide approach, we were able to achieve better value (both in terms of costs and staff time) for the Departments involved.
Autumn Statement The Chancellor’s Autumn Statement announced that public sector pay awards will average 1% for each of the two years following the end of the current pay freeze and that departmental budgets will be adjusted in line with this policy. As a consequence, HM Treasury announced (Hansard: 8 Dec 2011: Column 37WS) that the FCO’s Departmental Resource DEL budgets (excluding depreciation) will be reduced by £3 million and £7 milliion in 2013–14 and 2014–15 respectively.
Network Shift Implementation of the Network Shift programme, announced to Parliament by the Foreign Secretary in May, has continued and we are on track to complete the shift in resources by April 2014. Our Ambassador to the new mission in Bishkek, Kyrgyzstan will take up post in February. Our mission in Cote d’Ivoire has been upgraded to a full Embassy and a Charge appointed, pending the arrival of the Ambassador in the Spring. We have upgraded our missions in Calgary, Canada and Recife, Brazil from Trade Offices to British Consulates General. The expansion plans for the existing networks in China, India (an extra 50 and 30 staff respectively), South East Asia and Latin America are progressing well, with recruitment to all these areas proceeding in line with our timetable; and the new Embassy in El Salvador on schedule to open in 2012. We are now beginning to evaluate how this extra resource is contributing to delivery of our foreign policy priorities. We are also considering the impact of the £100 million administrative savings programme we have put in place. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Crisis Response The Foreign Secretary will be informing Parliament shortly of the actions we have taken to improve our crisis response systems following the Review of Consular Evacuation Procedures. We have made good progress on this, including developing a clear crisis command and decision-making structure, and training up London Crisis Response Teams made up of trained staff from across the FCO. These systems were tested— successfully—in our responses to the Bangkok floods crisis (October), Tehran Embassy crisis (November), and the Italian cruise ship (January).
Iran Evacuation We successfully evacuated all UK based staff from our Embassy in Tehran following the violent incursion of Iranian militants onto the Embassy compounds on 29 November, Although the damage to property and personal effects was significant, none of our staff was seriously injured and the operation itself will form the model for future evacuations. We are continuing to offer support and assistance to our locally engaged staff, many of whom showed great courage and loyalty during the incursion.
Security The tempo of incidents and the risks to our people and network from a variety of threats remain high. For example, in the past three months rockets have landed in, or near to, our missions in Baghdad and Sanaa; car bombs have exploded close to our missions in Bahrain, Baghdad, Damascus and Kabul; and we have had to close temporarily, or place on an emergency footing, a number of our missions due to credible threat, including those in Abuja, Islamabad, Karachi, Kuwait, Kinshasa and Damascus. We believe that our overall security regime continues to provide reasonable risk management, but this tempo of incidents is a real cause for concern.
Top Risk Registar In December the FCO Board reviewed the full Top Risk Register (TRR) to make sure that risks are being identified and managed effectively. In October and November the FCO Board saw a TRR summary. Before the Board met in December, the Policy Risks on the TRR were scrutinised by the Strategic Policy Group and the Operational Risks were scrutinised by the Audit and Risk Committee in order to provide the Board with assurance that the right risks were being escalated to the TRR. This process ensures that the main risks are being effectively managed.
Estates Your letter of 6 December requested that we include an update on our overseas property network in this quarterly review. Please find a list of properties we have sold, purchased, and placed on the market in the annex attached. In addition, the Committee has asked whether we could provide a list of properties we plan to sell this year. Committee members will appreciate that the further into the future we look, the less we can be definitive about any particular decision. But we would be happy to provide, in the strictest confidence, a list of properties we are considering selling in the coming year, on an annual basis. This would ensure the interests of taxpayers remain protected, and in some cases those of our staff.
Information Technology Work continues to complete deployment of Echo, the new telecommunications network linking the FCO, our partners and our overseas Posts. By December 2011, 81 FCO sites (45% of the total) had wholly or partially migrated onto the new platform. Since my last update we have reviewed the Echo Programme Business Case and confirmed that the FCO remains on track to realise a gross annual operational saving of £16.1 million (51%) over the lifetime of the Echo contract.
Information Management Following a written statement to Parliament by Mr Lidington in November, the FCO has published on its website a timetable for the transfer of files from former colonial administrations to The National Archives over a two year period. This is in line with the Foreign Secretary’s commitment to Parliament made last May.
Corporate Services Programme Progress with the Corporate Services efficiency programme continues. A review of the FCO’s global communication capability is being implemented: The first wave of moves for London-based staff out of the Old Admiralty Building has begun. Posts are reviewing levels of corporate services resourcing in response to the first global benchmarking exercise for in-country corporate services. The Corporate Service Centre (CSC) has been working closely with the Cabinet Office on the cross Government review of shared service centres and continues to drive efficiency both for the FCO and HMG. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Move of Legalisation Office The Legalisation Office in Milton Keynes will be moving in February from its premises in Norfolk House to the Corporate Services Centre in Northgate House. The closure of the public and business counters on 1 April 2011 and shift to a next day postal service created a large unused area in the Norfolk House office. By taking up vacant space in the CSC, the move is in line with the FCO Estates Strategy and will reduce costs. All this will mean for customers is simply a change of postal address with no change in service levels. As well as a physical move, the overall operational management of the Legalisation Office will transfer to the CSC. This will increase resilience in terms of recruitment and peak period staffing, allowing Consular Directorate to focus on core business and the CSC to find further operational efficiencies through their expert processing skills.
FCO Services Despite the pressures of the economic climate, FCO Services continues to maintain a robust pipeline of work. Financially the organisation is in a better position than the same time last year as they move towards a forecast revenue target of £129 million (against an actual outturn of £102 million in 2010–11), and they are confident that the 2011–12 Ministerial financial targets will be met. In my last letter to you I mentioned that the FCO Board had commissioned a review of the relationship between the FCO and FCO Services. Following a successful first three years trading, it was intended to provide clarity on the Trading Funds relationship with, and the services provided to, the FCO. The results of the review include moving to a more commercial relationship between the FCO and FCO Services, and strengthening the governance structure between the two which we are addressing. A further review will be undertaken in three years.
FCO Country Business Plans and Programme Work The first Mid-Year Review of our new internal Business Planning process took place in October and November. The Review saw Directors General interview their fellow DGs and Directors, to assess whether each Directorate General was on target to meet objectives, and reassess these objectives in line with developments. The Executive Committee of the FCO Board considered the outcomes of the Review in November and a paper was presented to the Supervisory Board in December. The Policy Programme Evaluation Board met in November, and considered the report from the first Programme evaluation conducted under its auspices. The Board approved the report and made recommendations for improvements to the evaluation process. They will meet again in February when they will decide on a schedule of evaluations for the coming year. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Annex PROPERTY SALES AND PURCHASES Property Sales Sale Date Post Property Type Sale Price £ September 2011: 21/09/2011 Warsaw Residential 195,425 October 2011: 06/10/2011 Warsaw Residential 178,575 21/10/2011 Mumbai Residential 1,968,198 22/10/2011 Mumbai Residential 2,116,554 28/10/2011 Dublin Residential 348,848 November 2011: There were no properties sold in November
Property on the Market Post Property Type Post Property Type Berlin Residential Pretoria Residential Colombo Compound Pretoria Residential Copenhagen Residential Pretoria Residential Gaborone Residential Pretoria Residential Guatemala Residential Pretoria Residential Kampala Residential Pretoria Residential Lisbon Residential Pretoria Residential Monserrat Residential Pretoria Residential New York Residential Skopje Land Palma Residence Tel Aviv Residence Panama Residential Vienna Residential Portimao Residence Warsaw Residence Pretoria Residential Windhoek Residential
Property Purchases There were no properties purchased during September, October and November 2011. 26 January 2012
Written evidence from the Public & Commercial Services Union Summary of Main Points 1. Spending cuts will see the FCO cut their UK-based workforce by an anticipated 20% by 2014–15. This level of job cuts will leave the FCO overstretched and will damage the UK’s diplomatic capability, reduce the level of consular services for UK citizens overseas and harm the overall effectiveness of FCO operations in turn risking damage to the UK’s national interests abroad. 2. Plans to cut 400 UK-based posts from the FCO’s overseas network, nearly a quarter of all UK-based posts overseas, will place those UK staff who do remain at posts under greater pressure in having the responsibility for carrying out the full range of duties HM Embassies and Consulates are expected to perform. 3. Working Differently at Posts overseas is envisioned as producing annual savings of £30 million. The FCO however does not yet have solutions in place to do this in a manner which will not jeopardise security or levels of service delivery. 4. Ending nearly all overseas postings for more junior grades risks the FCO going back to being an elitist organisation with the Diplomatic Service staffed from a narrow section of society which does not reflect the diversity of the wider UK population.
Impact on Staffing Levels 5. As a result of the spending review the FCO is being asked to find savings of around £100 million per year in running costs over the spending review period. A big chunk of these savings will come from cutting posts amongst the Diplomatic Service (DS) and Home Civil Service (HCS), mainly through cutting posts from the FCO’s overseas network. 6. According to the FCO Strategic Workforce Plan (SWP) published in 2010, there was due to be a 10% reduction in DS and HCS staff numbers (total as at 1 January 2010 4,480) up to 2015. These figures were produced before the latest spending round. In a draft 2011 SWP, the FCO conceded that due to the 33% reduction in admin spend the workforce reduction by 2015 would be greater than 10%. The FCO has yet to produce a final 2011 SWP with revised staffing figures up to 2015. However some assumptions can be made. There are plans to eliminate 400 posts from the overseas network by 2015. An early release programme run cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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this year has so far led to over 120 staff leaving. Natural wastage rates are anticipated by the FCO to be around 6% and there is still an ongoing recruitment freeze. There are also 33% admin savings to be fully realised by 2015. Based on all this PCS believes it is a fair assumption to say that over the spending review period 2011–12 to 2014–15 there will be at least a 20% reduction in FCO staffing levels amongst UK-based staff. 7. We believe this level of cuts will inevitably damage the FCO’s overall operational effectiveness. It will also limit the FCO’s diplomatic capability, its ability to offer consular services for UK citizens overseas and its overall ability to protect and promote UK interests abroad. 8. One of the main methods used to reduce posts will be through plans to eliminate nearly all overseas postings performed by more junior grades. These will be reduced from 450 to around 50 “essential” jobs by the end of the spending review period. 9. During a consultation with PCS, the FCO claimed these jobs can be reduced by a combination of eliminating certain tasks currently performed in Posts, working differently and through localising posts. They said all this would not harm frontline UK diplomacy or the level of consular services to UK citizens abroad and would save £30 million annually. 10. PCS raised serious concerns about these plans during the consultation process. There had been no proper review of all FCO operations overseas to justify such a large scale loss of jobs or to assess the likely impact on operations of doing so. The criteria used in limiting the number of junior jobs seemed vague and did not take into account that a significant number of the jobs they proposed to cut were either frontline diplomatic jobs or were involved in carrying out high security tasks. The projected savings of £30 million a year did not seem robust and it was clear that bigger savings to running costs could be realised through changes to estates and IT. 11. PCS also pointed out ending nearly all postings for more junior grades overseas would inevitably damage staff morale but perhaps more importantly would lead to a lack of experience amongst UK diplomatic staff which would over time damage UK diplomatic capability. 12. The difficulties this could cause are demonstrated by the recent Arab Spring which required the FCO to send Rapid Deployment Teams to North Africa and the Middle East. The ability to send diplomatic staff overseas at short notice depends on having sufficient numbers of staff with experience of working overseas. Eliminating most overseas posts for more junior grades will limit the ability of the FCO to respond to future crisis situations. 13. These concerns were shared by the FAC (Third Report on FCO Performance and Finances, February 2011), who also noted in their report on “The Role of the FCO in UK Government—April 2011” that the loss of more overseas posts should not be used as a quick way to make savings at the expense of long term diplomatic capability.
Working Differently 14. In order to make these job cuts the FCO has set up a Working Differently Group, chaired by Matthew Rycroft, the FCO Chief Operating Officer, to look at the activities that junior staff currently undertake overseas which require a high level of UK security clearance and see which roles can be dispensed with. PCS understand that these tasks include support and maintenance of classified IT systems, security activities at Embassies and handling of the unclassified diplomatic bag. The ultimate plan is to retain small numbers of junior staff, pass necessary essential tasks to more senior UK-based cleared staff or security clear (locally) locally engaged staff to perform these tasks, with some functions remotely monitored from the UK; the latter outcome is the FCO’s preference as it is the cheaper option. As you can see, it begs the question of how the FCO can make the wide ranging decision it did and then seek solutions of how to implement it after the event. It is hardly a good example of evidence based policy making. 15. In the follow up work described above, the FCO has made many assumptions about reforming FCO security and IT processes and practices. We believe many are not deliverable given the FCO’s less than sterling success with major change projects. Some of the technology needed to do this will be cutting edge and thus untested. Our view is it’s inevitable that in some cases work will drift upwards to more senior staff meaning that they will be taken away from frontline diplomatic activities which ironically the FCO claims is the reason for making these radical changes in the first place. 16. However equally worrying for PCS is that the FCO will increasingly rely on locally cleared foreign nationals to protect the UK’s national assets and technology. The level of security clearance for local staff is far less stringent than for UK-based staff who are all cleared to DV level. We also have particular concerns around foreign LE nationals preparing and dispatching unsupervised the unclassified diplomatic bags back to London. The FCO has decided to take a risk management approach to these problems which essentially means it offloads the risks to hard pressed staff at Posts. This will significantly increase the risk of a major security incident. 17. FCO senior management has written to all posts urging them to come up with ideas on how savings can be made through working differently. A number of posts have not responded. We suspect this is because they do not believe they can make the sort of changes required to bring about annual savings of £30 million without cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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seriously jeopardising effective and secure operations at their posts. The FCO’s response has been to tell Directors to instruct posts to go further with proposals for cost cutting. This suggests changes being driven from the centre being forced upon unwilling Posts and also the risk that the FCO will simply not be able to deliver the £30 million annual savings.
18. The FCO says it intends to make final decisions on which posts overseas will be cut or localised by December 2011. These decisions will be made in part on the basis of a few small pilot projects on delivering IT support in classified areas and as yet unfinalised plans on technical changes which would help posts to work differently. PCS does not believe the FCO will be in a position by December to make sound decisions on where posts can be cut or localised without jeopardising security or service delivery. PCS once again calls for a thorough review of all operations at post to take place first and that no posts should be cut or localised until it can be demonstrated that working differently will not jeopardise national security or service delivery.
Impact of Job Cuts on Staff Morale
19. The impact on morale amongst junior staff and the FCO as a whole as a result of the planned job cuts has been considerable and damaging. PCS received many hundreds of representations from our members who felt that the FCO no longer valued them and that senior management were out of touch with what their staff did. Many junior staff have seen their career prospects removed at a single stroke. Many joined the FCO in the expectation that they would spend the majority of their career working for their country overseas; such an expectation attracted the highest quality staff in Whitehall, that will now change. Junior staff are the backbone of the FCO. Some of our most senior Ambassadors started their careers as junior officers that is unlikely to happen again. They gained valuable experience serving overseas in more junior posts giving them a better understanding of all FCO operations. Many members now tell us they will leave the FCO when the economic climate improves. We believe them.
20. While the FCO is investing some time and effort in mitigating some of the impacts on junior staff through for example, the new Diplomatic Skills Foundation Programme, it has been viewed with cynicism by staff. A recent initiative—the Short Term Attachments Scheme Overseas is not being taken up in great numbers. We are also concerned that this scheme discriminates against those with caring responsibilities.
21. Another major concern amongst staff is that the removal of more junior grades overseas will mean extra work drifting upwards to more senior colleagues. The FCO produced a report looking into the impact of an earlier programme of localising management officer jobs at Post previously performed by UK-based staff. It found that work did drift upwards, mainly because locally engaged staff were not security cleared to carry out many tasks. It also found that great demands were placed on senior staff in terms of having to train and help new staff. The FCO admitted this was a problem but was unable to offer any solutions to this.
22. The worry is that with job cuts and localisations now planned on an even bigger scale, more senior staff at Posts will be left to carry out an even greater range of tasks, put under increased pressure and taken away from carrying out more front line diplomatic work. PCS members in more senior posts have expressed real concerns to us about this.
Diversity in the FCO
23. Finally, PCS has noted with concern the Equality Impact Assessment, which the FCO commissioned on the decision to end nearly all overseas postings for more junior grades, had unsurprisingly drawn attention to possible negative diversity impacts in the future. Of the grades where overseas postings will now all but end, 23% of Band A2 staff and 14% of Band B staff compared with 10% in the FCO overall are Black Minority Ethnic (BME) staff. 61% of Band A2 staff and 52% of Band B staff compared with 44% in the FCO overall are female. This points to fewer opportunities for BME and female staff working for the FCO overseas. We have seen little evidence of what the FCO plans to do to mitigate against this. Indeed we think there is a genuine nervousness amongst senior management about how it will pan out in the future. PCS believes that it is inevitable that these changes will lead to a more elitist FCO which is not truly representative of modern Britain and taking the FCO back to the bad old days when staff serving overseas tended to come from a less diverse background.
24. These concerns are heightened by plans that in future Band A & B staff will not be able to join the Diplomatic Service but will only be Home Civil Servants. Given the figures above, this points to be the Diplomatic Service as a whole becoming less diverse. This situation may become worse as at the moment while there is a general recruitment freeze, staff are still being recruited to the Diplomatic Service through the fast stream graduate recruitment programme. Such graduates have a tendency to come from a particular socio- economic background. 14 October 2011 cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Written evidence from BBC World Service Throughout a challenging year, BBC World Service continued to deliver high quality multilingual, multi- platform journalism, including coverage from our uniquely global perspective of major international news stories such as the ongoing global economic crisis, the Arab Spring, the NATO operation in Libya, the military operation in Afghanistan, and the earthquake and tsunami in Japan, whilst at the same time implementing a difficult savings plan as a result of the Government’s Spending Review. It was also a momentous year in that the method of funding the World Service post-2014 changed—as part of the Spending Review it was agreed that from April 2014 BBC World Service would be funded by the Licence Fee, rather than via Grant-in-Aid from the Foreign and Commonwealth Office. This will enable World Service to strengthen its reputation for independence and to benefit from the longer-term financial certainty the Licence Fee mechanism provides. The BBC appreciates the Committee’s scrutiny of the impact of the Spending Review on the World Service in its special report earlier in the year, which led to a Government review and the allocation of some additional funds to the World Service. Following that detailed examination of World Service restructuring plans, and the World Service’s submission to the Committee for its Arab Spring inquiry, this submission focuses on three areas: — a round-up of developments in 2011—editorial and operational, including audience figures, editorial achievements, details on journalists under threat, and an update on distribution and future strategy; — progress with Spending Review implementation plans; and — a section on the World Service and the wider BBC, including an update on the move to new headquarters at Broadcasting House, implications for the World Service of the BBC’s Delivering Quality First (DQF) announcement, and an update on developments in relation to the move to Licence Fee funding.
2011 Developments—Editorial and Operational Audience figures update — BBC World Service announced in July 2011 that its audience had fallen by 14m in the past year, mainly as a result of the changes to language service production and distribution following the Spending Review. The overall audience estimate for the year was 166 million, down from 180 million the previous year. However there were solid improvements in some core areas of World Service which reduced the net effects of the cuts. — BBC World Service online audience figures rose by 40% over 12 months, with the number of weekly unique users up to 10.2 million, with Spanish, Arabic, Persian, Russian and Turkish in particular increasing the number of unique users to their sites. Reach on the World Service mobile sites increased an impressive five-fold to 450,000 a week, and usage of online video content continues to grow. — BBC World Service English radio audiences went up 10% on the previous year with a total weekly reach of 43 million. The audience in the US alone rose to 10 million. — Despite the cessation of broadcasts on 648MW, latest RAJAR figures show that BBC World Service English radio reached 1.5 million in the UK, up from 1.3 million in the same quarter last year. — The audience for World Service vernacular TV services increased to 18.6 million with BBC Arabic TV audiences increasing by 2 million to 13.5 million viewers. — BBC World Service rated equal to or higher than its closest international competitor in 78% of key reputational indicators. — A recent survey by Chatham House5 showed opinion-formers believe that the BBC does more to serve Britain’s interests around the world than any other institution or activity—74% said BBC World Service followed by the armed forces (42%), Britain’s diplomats (39%), the intelligence services (35%) and the UK’s overseas aid programme (33%). — The overall global weekly audience for the BBC’s international news services, including commercially-funded BBC World News television and bbc.com, is 225 million.
The Arab Spring—World Service coverage and impact As described in the BBC’s written evidence for the Committee’s Arab Spring inquiry, the Arab uprisings and recent events in Libya have been comprehensively covered by BBC World Service. The BBC’s range of outlets, languages, journalistic expertise and reputation for accuracy, balance and impartiality ensured audiences turned to it in large numbers from the start of the turmoil. Radio and TV offered uninterrupted rolling news coverage during the height of the protests, and BBC Arabic’s interactive TV programme Nuqtat Hewar (Talking Point) was extended from three times a week to daily. This and other programmes on the English radio network, such as World Have Your Say carried on conversations across the Arab world which sought to make sense of the crisis, bringing insight and context, and challenging opinions. 5 The Chatham House—YouGov Survey 2011—British Attitudes Towards the UK’s International Priorities cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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BBC Arabic online audiences went up by 300% at the height of the Egyptian protests and mobile sites showed an equally impressive growth with a 274% increase. Makeshift projection systems showing BBC Arabic TV were erected by protesters in the capital cities of various Middle Eastern countries, and BBC Arabic radio broadcasts were relied on when TV or online was disrupted. BBC Arabic television was sporadically jammed in Libya and Egypt. Photographs sent to the BBC depicted demonstrators in Syria holding up a sign which read “Thank you BBC”.
In August, World Service on FM radio was launched in the Libyan cities of Benghazi, Misrata, and, from 25 October, Tripoli. Programming is principally in Arabic, with the addition of World Service English Newshour programme once a day.
When the news of Colonel Gaddafi’s death broke, the BBC’s Gabriel Gatehouse was the only UK broadcaster in Sirte at the site where Gaddafi was killed. BBC Arabic, BBC Persian and BBC World Service English quickly went to live rolling news. Dozens of public radio stations across the United States dropped scheduled programmes to take the World Service’s rolling coverage. Online, World Service teams responded within minutes of the breaking news that Gaddafi had been captured providing audiences with live pages of the unfolding story.
Covering Syria remains a challenge as international journalists are generally banned—though BBC Arabic managed to film exclusive footage, which was used across the world, of the military operation in the Syrian city of Jisr al-Shughour, and later in the year both Lyse Doucet and Sue Lloyd-Roberts gained rare access to Syria, and delivered first-hand accounts of the tension in the country.
Other editorial highlights — World Service radio provided rolling coverage of the devastating earthquake and tsunami in Japan. The live page online was compelling and comprehensive and generated huge web traffic. In a special programme on Japan, World Have Your Say received calls from 60 countries, a record number. — In early May one story dominated the news, and World Service English radio transferred to rolling news on the day the death of Osama Bin Laden was announced. The live event page online included reactions and details as they emerged with contributions from a wide range of journalists. World Service local knowledge and expertise also shone through, with BBC Persian and Pashto reporters getting instant reactions to events and teams in Kabul, Islamabad and London contributing across all output. World Service coverage received praise, with the New York Times referring to its capability to use locally based global journalism. — In June a Power of Asia season was launched across all outlets. BBC Burmese, Chinese, Hindi, Indonesian and Vietnamese jointly produced a debate on the economic success of East Asia, highlights of which featured on World Service English. Newshour explored the changing relationship between the US and China in a co-production with a partner station in Portland, Oregon which was also used on bbcchinese.com and the Today programme in the UK. — The end of June was dominated by the Greek debt crisis, with extra hours of business output from Athens, Berlin and London. Coverage of the ongoing global economic crisis continued with special programmes Has Western Capitalism Failed?, an insightful series of “think pieces” by guest contributors on Business Daily, and Why the Eurozone is Suffering, an innovatively-explained video versioned in multiple languages for World Service websites. — There was comprehensive coverage of Sudan on air and online as the south of the country prepared for its referendum on whether to secede from the North. Special online pages pulled together photos, analysis and maps of Africa’s largest country. World Service journalists shared expertise and resources to provide audiences with insights on the historic significance of the vote and the issues facing Sudan in the run up to the referendum. Newshour was co-presented from Juba on the first day of voting; BBC Arabic held a special Question Time in Khartoum. — In February, Burma’s pro-democracy leader Aung San Suu Kyi took questions from audiences around the world for the first time on World Have Your Say. Later in the year, BBC Persian interviewed her, with help from BBC Burmese, ahead of the sixth-month anniversary of her release from house arrest. A journalist from BBC Burmese reported from inside Burma for the first time in nearly 20 years. And from September, bbcburmese.com is no longer blocked in Burma. — In September BBC World Service launched special radio broadcasts to serve the Somali-speaking population affected by famine and drought in the Horn of Africa. Particularly aimed at the refugees in Kenya, Ethiopia, Djibouti and Yemen, as well as internally displaced persons in Mogadishu and other locations in Somalia, the lifeline broadcasts bring a wealth of information on how to get access to food aid and health services, on safety on the roads, advice on legal matters, nutrition, water and sanitation. — Herve Ghesquiere, one of the two French journalists held hostage for 18 months in Afghanistan, told Newshour on his release that he was a huge fan of the programme and listened almost every day whilst in captivity. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Awards The quality of World Service programming was recognised, with a number of prestigious awards going to its programme-makers: — In April, at the International Media Awards 2011 BBC Arabic correspondent Nada Abdel Samad and BBC Urdu’s Dilawar Khan Wazi received the Cutting Edge award for media professionals who have recently risen to prominence through the outstanding quality of their work and their balanced and considered coverage, and Feras Killani, Goktay Koraltan and Chris Cobb-Smith, BBC Arabic staff arrested and beaten in Libya, won the Special Joint Award for Press Freedom. — BBC Arabic also received two honour certificates from the Egyptian Film Society, one for its coverage of events in Egypt, and one for the documentary A Revolution’s Diary. — At the One World Media Awards, India’s Microcredit Meltdown won the radio prize for “uncovering a shocking story which challenged the accepted wisdom”. — At the Sony Radio Academy Awards in May, the World Service collected a silver for its coverage of last summer’s FIFA World Cup, and bronzes for Newshour and Afghanistan’s Dancing Boys. The BBC’s Matthew Price won gold as News Journalist of the Year for his coverage of Haiti. — In addition, commercially-funded BBC World News America won an Emmy award for Inside the North Korean Bubble beating ABC’s Good Morning America and CBS’ Sunday Morning. — And in the same week BBC News online won the top Online Journalism Award for “general excellence in online journalism”, beating the New York Times, Wall Street Journal and Al Jazeera English.
Staff under threat BBC World Service continued to deliver and defend independent journalism, with BBC journalists often working in difficult and in some cases highly dangerous conditions. The BBC had to deliver the worst possible news to family and staff when BBC stringer, Ahmed Omed Khpulwak, was killed in southern Afghanistan’s Urozgan province in July. He had been working in the local Radio/TV building in the provincial capital, Tarin Kot, when the building came under attack. An ISAF inquiry later found that he was killed by a US soldier in a case of mistaken identity. A BBC World Service reporter in Tajikistan, Urunboy Usmonov, was detained based on alleged links with extremist group Hizb ut-Tahrir. Following representations by the BBC and FCO he was released pending trial. The trial began in August and in October found him guilty. He was sentenced to three years, with an amnesty, and has launched an appeal. The BBC believes he is innocent. Messages of support have come from around the world, including from the Broadcasting Board of Governors (BBG) in the US. The FCO issued a statement saying it had strong reservations about the ruling against Mr. Usmonov and the conduct of the trial, and called on the Tajik authorities to uphold the internationally recognised norms of journalism. BBC Arabic’s Feras Killani, Goktay Koraltan and Chris Cobb-Smith were arrested by pro-Gaddafi forces in Libya and subjected to multiple beatings and mock executions. In addition, BBC Arabic correspondent Mohammad Ballout was injured while covering events in Bani Walid, Libya. He was preparing to go live on air when he and other journalists were targeted by sniper fire. In Yemen BBC Arabic correspondent, Abdullah Gorab, was physically assaulted. There were plenty of other reminders of the risks journalists face in doing their job during the Arab uprisings. A BBC Russian crew was beaten while covering a demonstration in Belarus. The cameraman, Max Lomakin, underwent several weeks of tests for his injuries. Despite the attack, the crew managed to file on the demonstration for the whole BBC from Belarus.
Problems encountered in Iran The levels of intimidation and bullying, as well as attempts to interfere with the World Service’s independence, reached new levels in Iran—particularly following a documentary about the supreme leader Ayatollah Khamenei on BBC Persian TV: — The jamming by the Iranians of international Persian language TV stations, such as BBC Persian TV and the Voice of America’s Persian News Network intensified. The BBC and other international broadcasters have called on governments and international regulatory bodies to put maximum pressure on Iran to desist. — In addition, relatives of some Persian TV staff have been intimidated by the authorities. In some cases passports have been confiscated and threats made. Relatives have been told to tell the BBC staff to stop working for the BBC and return to Iran. — Six independent documentary makers whose films have appeared on BBC Persian TV were arrested in Iran, even though they had never been employed or commissioned by the BBC. Three have since been released. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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These actions and threats against the BBC have been accompanied by a dramatic increase in anti-BBC rhetoric. The BBC has called on the Iranian government to repudiate the actions of its officials, and has requested the British and other governments take all appropriate means to deter the Iranian government from all these attempts to undermine free media.
Distribution update The key strategic challenge for the World Service is to remain relevant to audiences as choices proliferate. Composition of its reach is changing fast: short wave radio—the historic foundation of audiences—is in decline but radio remains strong and is increasing via FM broadcasts and partnerships. World Service’s TV services have grown—the Arabic service is now the largest language service by audience, thanks to its 24-hour TV presence—and online and mobile audiences are also increasing rapidly. BBC World Service has continued with its ambitious efforts to expand through local partnerships with domestic radio stations. Examples include seven new Nigerian FM partnerships with a combined weekly audience of over 17m, and eight new partnerships in Nepal since the cessation of short wave. New relays will be launched in Democratic Republic of Congo before the national elections in November. Agreement was also reached for BBC language feeds to be preloaded on Huawei and Nokia mobile handsets globally. Plans to expand TV programme activity have progressed, building on the success of the existing Turkish TV bulletin offer. World Service launched its first TV programmes in Urdu, in partnership with Express TV, Pakistan’s number two channel, with a series of debates among university students covering their fears and aspirations for their country. The programme was hosted in Pakistan’s major universities and was well received by both partner station and the student community in general. It was also carried by FM partner station, Josh FM, in Pakistan’s largest city Karachi. The potential impact of the Express TV partnership is huge as most urban households (90%) now have access to cable television, but no local news provider currently delivers on this medium the quality, analysis and authority that the BBC offer, which research suggests the audience would warmly welcome. World Service strategy over the next few years is to develop further cost-effective TV partnerships such as these, which offer the prospect of large audiences and high impact at relatively low cost. Despite reduced budgets World Service has sought to set aside limited funds for this purpose to enable it to retain a strong and impactful presence in the increasingly competitive markets in which it operates.
Spending Review Implementation Plans—Update on Progress Following the 16% cuts to BBC World Service announced as part of the Government’s Spending Review in 2010, the World Service announced a significant restructuring plan in January which included the closure of five language services, the ending of radio broadcasts in seven languages, and a withdrawal from short wave and medium wave in others. In addition, there was a reduction in English programming and cuts to support areas, which averaged 33%. The original restructuring plan resulted in savings to an annual level of £46 million by the end of the last three years of FCO funding. Subsequently, the FAC report on The Implications of Cuts to BBC World Service, together with considerable political and public concern, led to a Government review of the cuts and on 22 June 2011 the FCO announced additional funding for the World Service of £2.2 million per annum for the next three years. At the same time, the BBC Trust announced that an additional £9 million over three years would be made available (with the majority of benefit coming in 2012–13 and 2013–14). BBC World Service has developed a strategic plan in response to these developments, which is subject to formal BBC Trust approval. The main elements are outlined below. The additional funding has offset some of the Spending Review savings requirement and will allow a small increase in the level of investment in new services. As a consequence, the revised savings target for 2014 is £42 million, down from £46 million. The savings announced in January came to £30 million, so the World Service needs to find a further £12 million of savings over the next two years, and will therefore have to continue with most of its plans. However, the additional funding has enabled World Service to mitigate some of the planned post closures, and will provide support for services, including the Arabic, Hindi, Somali and English services. —InArabic, the majority of the additional funding has been invested in programming in order to best serve the audience and sustain a rich mix of news, debate, current affairs programming and interactive discussions. In addition, BBC Arabic TV is moving from being a rolling news station to one which provides its audiences with a wider agenda which addresses the interests of the younger generation in the Arab world. — Importantly this funding, together with the new rota patterns being introduced, will allow the World Service to retain the flexibility to change the schedule at any time to react to events. There will also be more investment in bilingual newsgathering in Arabic and English, and a number of notices of redundancy at BBC Arabic have been withdrawn. —InHindi, we are going to be able to restore a morning programme and maintain an evening one, and there has already been an increase in posts in Delhi to support this. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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—InSomali, the new money funded the dawn transmission on a permanent basis.
BBC World Service English Radio Further plans for World Service English, setting out the savings requirement for 2012–13 arising from the Spending Review, were announced in October. The new savings targets for World Service English are significantly lower than originally announced, largely due to the additional funding announced in June, and will mean that around 10 fewer posts will need to be closed. However, savings of £1 million in 2012–13 still need to be found. Many of these will come from back office efficiencies. The other main changes include: — Merging The World Today and Network Africa—a new programme combining the two will go on air either in April next year or soon thereafter. — There will also be changes to Global News Wire, which will be sited with the Newswire team in Broadcasting House, bringing together the teams responsible for co-ordinating incoming video, audio, copy and user generated content both from internal sources and around the world. With these and other changes, including to research, planning and presentation operations, there will be an overall loss of 19.5 posts from World Service English. In 2013–14 an extra £4 million savings will be required, in addition to those already delivered. A further announcement on the impact of these savings will be made by the end of next year. However, from April 2013 World Service English will have been joined in its new headquarters in Broadcasting House by the operations of BBC News for domestic audiences. This will enable savings to be delivered through closer collaboration with BBC News, for example through the creation of a joint studio operations team. There will also be closer collaboration between World Service and BBC News’ Newsgathering department through an integrated approach, although savings will take longer to realise.
Overall post closures BBC World Service announced the closure of 480 posts (389 in UK) on 26 January. This has subsequently been revised down to 451 (375 in the UK). The number of actual redundancies in the UK is currently forecast at 299, of which 113 are compulsory. These have been reduced through the closure of vacant posts, a large number of volunteers for redundancy and the mitigation of some of the previously announced savings plans. The majority of staff made redundant as a consequence of the January announcement left between August and October 2011. As described above, BBC News announced the closure of 19.5 posts in respect of savings required in World Service English for 2012–13, which were not announced in January. The Committee requested an update on staff on work visas who are being made redundant. Originally we had 13 members of staff with work permits facing redundancy. Of those 13, three have been redeployed within the BBC, five have taken voluntary redundancy and the remaining five have had to be made compulsory redundant. The five individuals who have been made compulsory redundant have returned to the following countries: Morocco, Barbados, Macedonia, Kyrgyzstan and Mozambique. None of the individuals have raised any specific concerns about returning to their home countries. The BBC has continued to meet with BECTU and the NUJ to resolve the industrial dispute over compulsory redundancies in BBC World Service and BBC Monitoring which led to strike action earlier in the year. Recent discussions have led to an agreement on ten redeployment commitments on the condition that the ongoing disputes with the NUJ and BECTU were called off. As a result the NUJ “work to rule” has now ended. However, a dispute in BBC Arabic continues and is unresolved at the time of writing. In summary, the World Service is currently on track to deliver the 2011–12 and 2012–13 headcount and non-headcount savings that were announced in January, and original targets have been reduced by the receipt of additional funding from FCO.
BBC World Service and the wider BBC Update on the move to Broadcasting House BBC World Service’s move to new purpose-built headquarters at Broadcasting House together with colleagues from BBC News will strengthen BBC journalism by bringing the best of the BBC’s global capability to both UK and overseas audiences. The expertise and diversity of view of World Service teams will be shared with domestic news, and World Service staff will benefit from new opportunities working across BBC news output. Already, as integration plans progress, World Service journalists are leading in significant areas of the world where they have a wealth of experience—for example, the Arabic Service provided a range of content for domestic News during the Arab Spring. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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At present the World Service move to the new headquarters is on time and on budget. The World Service expects to start paying a cash rent on 1 July 2012. Engagement with staff on training, new ways of working etc is building up as moves will start early in 2012. Bush House must be vacated before the Olympics in order to have enough time to decommission the building for handover on 30 November 2012. Much of the work now is going into integration with BBC News and developing new ways of working, both to enhance the output and deliver savings. This will be a longer term project as News will not complete its move until the end of 2012, but the World Service will need to get concrete savings into the 2013–14 budget.
“Delivering Quality First” announcement and its impact on BBC World Service The Committee will be aware that on 6 October Mark Thompson announced the proposals that have been put to the BBC Trust as the BBC’s response to the Licence Fee settlement under the banner “Delivering Quality First” (DQF). The proposals have been made in response to the need for the licence fee-funded BBC to save 20%–16% in cuts and efficiencies, with 4% intended for re-investment and new activities. The key elements of the proposals as they affect BBC World Service are: — A commitment that BBC World Service Grant in Aid funded posts will not be directly affected by DQF savings announcements (although there will be some impact as part of wider organisational changes). — A statement from the DG that DQF plans will allow the BBC to put money back into World Service from 2014. — The creation of one single BBC newsgathering operation—including an integrated multilingual, multiplatform overseas operation, bringing together newsgathering and language services resources and reporting. — The appointment of bilingual correspondents in Gaza and Ramallah, Islamabad, Lagos, Nairobi, Beirut, Jakarta and Havana. — There will be changes to the way breaking news is prioritised—ensuring that for international stories, after filing a short text report for all services, channels and platforms, the correspondent’s priorities will then be with BBC World News, BBC World Service and relevant language services (unless the story has a significant impact for domestic audiences). — BBC World Service English daily news staff will come together with the rest of BBC News under one BBC Newsroom. — A commitment that the unique characteristics of World Service English and languages will not be lost in the move to Broadcasting House. In a speech to News staff on 6 October Helen Boaden, Director News, said: “…And understanding different audiences will be especially important in W1 as Network News and the World Service operation move in. I don’t want anyone saying that the unique characteristics of World Service English and the Language Services were somehow lost in their move from Bush. Indeed, to ensure that the interests of the Language Services are fully heard and that my Board has a better balance between UK and Global services, the Controller, Languages, Global News, will become a regular attendee on the News Group Board.” In the same speech she also announced the formal appointment of Peter Horrocks as her deputy for international news services. — All radio and television studio managers and operations teams within the News group will come together in one new operation.
Transfer to Licence Fee funding In July the Chairman of the BBC Trust, Lord Patten of Barnes, announced that the Government and the Trust had agreed that an International Trustee would be appointed to the BBC’s governing body. This Trustee would have a specific responsibility for the BBC’s international services. The move was taken, in part, to reflect the new funding responsibility for the World Service, which would transfer to the licence fee from 2014. A new Trust committee with oversight of the BBC’s international news services will be established, chaired by the International Trustee. From 2014–15, the existing documents that govern the relationship between the BBC and FCO—the Broadcasting Agreement and Financial Memorandum—will cease. An amendment to the existing Agreement, laid before Parliament in September 2011, sets out the main components of a new operating framework from 1 April 2014. Under the new arrangements the BBC will continue to have full editorial and managerial independence and integrity in the provision of the World Service, and the BBC will decide the most cost effective and efficient way of delivering the World Service. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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The BBC Trust will be responsible for defining the position of the World Service within the overall strategic direction of the BBC. The Trust will have responsibility for setting the budget of the World Service and for assessing the performance of the BBC Executive in delivering it. The Trust will agree the objectives, priorities and targets for the BBC World Service with the Foreign Secretary. The opening and complete closing of any language service will also require the approval of both the BBC Trust and the Foreign Secretary. Under these new arrangements, the BBC Trust will issue an Operating Licence for the World Service. This Operating Licence will: — define the characteristics of the World Service, including its remit and scope; — set out how the World Service will contribute to the promotion of the BBC’s public purposes; — set out the languages in which the World Service will be provided; — specify the objectives, priorities and targets for the World Service, as agreed with the Foreign Secretary; and — specify the budget for the World Service. Under the new arrangement the Trust has a requirement to undertake a full review of the World Service at least every five years. The existing requirement for an annual meeting between the Chairman of the BBC and the Foreign Secretary, to review the performance of the World Service, continues. The BBC Trust plans to draft the detailed Operating Licence over the next 12 months, in good time before the World Service is fully funded by the licence fee. Separately, the BBC is engaging with the FCO on how the relationship will function up to and following the change in funding arrangements.
Conclusion Despite the disruption of the structural changes that took place throughout the year, and the reduced funding, the quality of World Service’s output, and the dedication and bravery of its journalists, stood out in an increasingly competitive global media environment. Short wave radio, the platform that has historically been strongest for the World Service, continues to be reduced as FM radio, television and mobile phones offer an attractive alternative, even in less developed markets. BBC World Service has responded to this by investing in new platforms, with focus on online and mobile in many languages, as well as TV partnerships where possible. And exciting new ways of working have been developed in anticipation of the move to Broadcasting House, such as the pioneering video production unit which will be staffed by producers from many languages, who will take the best stories from around the world and make videos in their native language and in English. In addition, BBC World Service engaged more with its audiences—on issues that mattered and affected people’s lives, through radio, TV and online, with investment in some of its highest quality and best-known radio programmes, like World Have Your Say. There are many challenges ahead, however the BBC strongly believes that the World Service will retain its place as the world’s most respected and most trusted broadcaster. 4 November 2011
Supplementary written evidence from BBC World Service 1. Breakdown of Redundancies by Grade
Grades Total Leavers 31 3/4 425 59 5/7 3 623 7 141 7L 831 8/9 14 920 cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Grades Total Leavers 10 12 11 7 SM 8 Total 294
These figures do not include redeployments (61), natural wastage (28) and international post closures (78).
2. Staff Numbers and Staff Costs (a) Salaries and Wages costs The £4.1 million reduction between 2009–10 and 2010–11, was made up of three main factors, only one of which results from changes in headcount. On the non-headcount changes, allowances and overtime payments were reduced, but the bigger factor was that as well as saving around £0.7 million by not paying bonuses for the 2010–11 financial year, the decision not to pay bonuses for 2009–10 was made after the 2009–10 accounts were finalised, which meant that the 09/10 bonus accrual was released in the 2010–11 accounts, leaving a £1.4 million difference between the two years. The remaining £2.2 million reduction in the paybill resulted from savings for the final year of the 2007 CSR—posts were held vacant in anticipation of savings to be announced in 2011—and transfers of staff to other divisions (who move off the World Service payroll). BBC WS Salaries & wages £m Comment Salaries & wages in 2009–10 Annual Review 67.5 Salaries & wages in 2010–11 Annual Review 63.4 Difference 4.1
Made up of: Fall in allowances & overtime costs 0.56 No impact on headcount Bonus accrual made in 2009–10 but released in 1.37 No impact on headcount 2010–11 Variances on basic pay costs 2.22 Some headcount relationship 4.15
(b) Headcount Movement The £2.2 million reduction outlined above did not lead to a net reduction in the annual average staff number because of two offsetting factors: — 63 freelancers based overseas were reclassified as staff in December 2009. This had 4 months of effect in 2009–10 but the full 12 months in 2010–11. The treatment of their costs did not change as a result of this, but the headcount increased by 42 as a result. This was the classification difference referred to at the Committee hearing. — Some posts which had been vacant in 2009–10 (with work done by overtime or agency staff) were filled in 10/11, leading to higher staff headcount.
3. Salaries for Entry Level Staff World Service has not been taking on many new staff in the last year, but starting levels recorded for new joiners over the last two years are as follows: Year Role Basic Total 2011 Assistant Content Producer £27k £30k Producer £30k £34k Broadcast Journalist £28k £32k
2010 Trainee Producer £22k £26k Broadcast Assistant £18k £22k Broadcast Assistant £21k £25k Researcher/Programme Assistant £20k £24k
4. Redundancy Terms The BBC’s standard terms for redundancy are: one month’s pay for each year of service, capped at 24 months. Therefore, anyone with 24 years service or more, will get two years pay as their redundancy payment. These terms are currently under review. The payments to the two individuals are made up of the redundancy, cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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calculated on this formula, plus pension augmentation (see below), again calculated on a standard formula, plus notice payments. All are in line with standard terms and conditions which are applied to all BBC members of staff in redundancy.
Pension Augmentation for redundancy leavers prior to 31 March 2011: Ordinarily, pensions are reduced by an early payment reduction if they are paid before normal pension age (the size of the deduction depends on each individual’s circumstances). However, prior to March 31st 2011, when an Old or New Benefits member of the BBC Pension Scheme left the BBC at the instance of the employer eg redundancy, if they were age 55 or over and had at least two years’ pensionable service, the BBC could award an immediate unreduced pension at its discretion. The cost paid into the BBC Pension Scheme by the business to cover the reductions was known as Pension Augmentation. This no longer applies as of March 31st 2011.
5. Audience Increases and Decreases (all figures are weekly reach) Service 2010 2011 Notes World Service 180m 166m Overall numbers are down. The 2010 Spending Review settlement meant that cuts have been made to services, languages and platforms. Where services have closed, wholly or in part, their audiences have not been counted in this year’s global estimate. This has resulted in a loss of 16.8 million weekly, mainly radio listeners. There have been increases in some other countries, meaning that overall the global audience estimate for World Service has decreased by 14.1 million. Had audiences affected by service cuts not been removed, the overall audience estimate would have increased this year to around 184 million. The calculation included the following cuts: Service Closures AM cessation Portuguese (Africa) Swahili SW Caribbean Nepali SW Serbian Indonesian SW Albanian English SW to Russia and MW 648 Macedonian Kyrgyz Cuts to Broadcast hours on SW End of radio Hindi SW Russian Arabic SW Ukrainian Mandarin Chinese Turkish Azeri Vietnamese Spanish Total service estimate across all markets Areas of growth 2010 2011 Hausa Service 19.9m 23.1m Nigeria updated (only North measured): Hausa audiences recovered from decrease in 2010. English Service 39.3m 43.2m USA: new carriage for BBC World Service content via (Radio) partners helped increase audiences to 9.9 million, up 2.6 million. Canada: increased to 1.7 million for any BBC World Service content online and on radio in English. (No previous radio estimate). Bangla Service 8.2m 9.1m Bangladesh: broadcasts via the partners network replaced (Radio) declining short wave audiences and also drove FM audience growth; overall weekly reach up 300,000. On FM partners weekly reach was up 1.6 million, reflecting the growing importance of FM. Arabic Service (TV) 11.6m 13.5m Iraq: estimate increased from 3.8 million to 4.2 million mainly due to increases for BBC Arabic television. Also worth noting that we picked up a Persian TV audience in Iraq too. Decline (outside of service cuts) cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Service 2010 2011 Notes Persian Service (Radio 8.0m 4.8m Afghanistan: overall listening to (any language) BBC radio across all markets) was down by 3.6 million to 6.2 million (2006 vs 2010 fieldwork). Biggest declines for Persian radio in Afghanistan—down from 7.0 million to 3.9 million weekly. More detail: All international broadcasters in Afghanistan saw declines. More people have access to consistent electricity especially affluent, Persian/Dari speakers. Local stations are also doing well. The research highlighted some important changes to the landscape: 1. The launch of Tolo TV’s news channel indicates that commercial players are keen and ready to enter the market. 2. Investment in media has resulted in the growth in FM audiences, especially for local station Arman FM. 3. The sheer rapidity of change inside Afghanistan represents a significant challenge. The BBC continues to provide an essential news service and heavily influence the media scene. BBC Persian TV has picked up an audience of 0.6m. 4. With the growth in outlets observers have noted a rise in self-censorship among the national broadcasters. Urdu Service (Radio 10.2m 6.9m Pakistan: Urdu short wave audiences have decreased from 5.1 across all markets) million to 1.6 million since the last survey in 2008. Pashto audiences in Pakistan actually saw increase. More detail: Declines were among the SW audiences with some increases among BBC MW and FM partner audiences. SW reach declined in all regions surveyed apart from Balochistan. Other key findings: 1. BBC is the third largest radio station in Pakistan after Radio Pakistan and 101FM. 2. Pakistan is a TV market, Aaj TV and APNA all performing strongly. 3. Internet remains nascent at 3% using weekly nationally. 4. Listening via mobile phones was highlighted as important trend, including listening to BBC via FM on mobiles.
6. Competitor Information—Focus on Al Jazeera Availability Al Jazeera Arabic is widely available on TV, online, mobile, social media, throughout the world. Al Jazeera Arabic has a suite of channels from children’s channels to sports networks in Arabic. They had the 2010 World Cup rights in the Middle East. Currently Al Jazeera is available in English, online and on TV offering news and current affairs. They are continuing to grow their distribution and face significant challenges, mainly due to negative reputation gained in the past. Al Jazeera has voiced ambitious plans for expansion across the “Global South” this is reflected in its editorial agenda on both news channels as well as in its bureau roll out and investment. These include: — Al Jazeera Balkans launched on 11th November 2011, promoting itself as the only “regional” broadcaster in the area. — Al Jazeera plans to launch a TV channel in Swahili for East Africa, in Turkish in 2012 — Aggressive expansion planned in India via distribution deals. Sean Powers, an associate professor of communications at Georgia State University in the United States, who has written extensively on Al Jazeera, says the network openly seeks to tap into Muslim-majority countries and markets it believes are hungry for a news agenda that is better tailored to their interests. In this way, he says, “Al Jazeera’s current expansion plans make good business sense. But at the same time, Powers acknowledges that in the long term, Al Jazeera is eager to tug the geopolitical centre of gravity away from Europe—and closer to the Arab World.” Source: cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Editorial Al Jazeera Arabic editorial positioning has remained since launch “The opinion and the other opinion”. The editorial style is “impassioned”, reflecting the Arabic audience preferences. During the Arab Uprisings they have focussed on providing rolling news and specific content on the “revolutions”. Al Jazeera English has taken a different approach. Their stated mission is “to provide independent, impartial news for an international audience and to offer a voice to a diversity of perspectives from under-reported regions”. (Source: http://bit.ly/rSvCb1) They have been focussing on promoting their presenters (including David Frost and Rageh Omar). They are considered to be confident and very competent in their delivery. Al Jazeera offer a range of current affairs alongside news including documentaries, Listening Post and Witness.
Arab Uprising Al Jazeera has been criticised by some commentators for its initially “muted” coverage of protests in Bahrain. (Source: BBC Monitoring) During the Uprisings Al Jazeera launched a channel called Al Jazeera Mubashir (Live) which streams live feeds from across the region alongside comments, SMS and so on from the audience. Anecdotal evidence suggests it was popular especially on Fridays. This was alongside a series of programmes endeavouring to “own” the revolution. The “Arab Uprising” has seen Al Jazeera footage used across news networks globally.
Reputation Arabic: Whilst Al Jazeera is widely watched, it is not uniformly regarded, for example in Saudi Arabia, recent data indicates that Al Arabiya is the most trusted regional Arabic TV news channel. English: Al Jazeera is still considered a little “renegade” but indications are that it appeals to left leaning, worldly, well educated audiences who are open and seek out news from another perspective. Its audiences may feel the Western broadcasters are limited in the range of news and voices offered. 16 December 2011 cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Audiences during the Arab Uprising Arabic Service Weekly Audience Estimate: 33.4m (up from 21.6m pre-uprising), TV24.4m (up from 13.5m), Radio 10.1m (down from 11.5m), Online 1.6m unique users (NielsenFeb 2011 –Not from survey) BBC Arabic TV increased its audience during the Arab Uprising. Independent surveys conducted during the Arab protests in Egypt, Iraq, Saudi Arabia, Lebanon and Morocco indicate that BBC Arabic TV almost doubled its audience, in all markets which saw protests.
This audience update outlines results from independent surveys conducted as part of the International Audience Research Program conducted by the BBG (Broadcasting Board of Governors). The results are representative of the adult (15+) population of each market. All surveys were conducted during the Arab Uprisings in the first half of 2011. BBC Arabic TV audience (Egypt, Iraq, Saudi, Jordan, Lebanon and Morocco) % weekly reach +8.6% 18.4
9.8
BBC (Arabic) Previous estimate 2011
Performance headlines:
The biggest increases were Egypt was the only market surveyed where the protests seen in Egypt, the only led to a full scale revolution and the BBC Arabic TV market surveyed which audience quadrupled. witnessed a revolution. This was the biggest increase in audience across all surveyed markets BBC Arabic TV saw BBC Arabic TV saw its weekly audience substantioal growth in .... increase by almost a quarter in Iraq markets which witnessed ....by almost four per cent in Morocco protests. ....more than double in Jordan ....more than double in Saudi Arabia Changes to the audience Lebanon was the only market that BBC Arabic did not were mopre subdued in experience growth in. Audiences declined slightly year- Lebanon, which witnessed no on-year, though interest in regional events was high with direct action at home. people turning to pan Arab stations. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Online & Radio audiences
Listening to BBC Arabic radio The only market to experience any real growth was Lebanon (offline) was generally on par where the audience increased by around 50 percent and the across all markets we BBC is available on FM. analysed. However, the BBC is also available on FM in Iraq and Jordan and did not see growth in these markets. This indicates that radio listening in these markets is not crisis driven. This is likely to be as a result of most people having access to TV and the Arab Spring being a highly visual news story. Traffic to the Arabic site Online, BBC Arabic saw tremendous growth as a result of the peaked in February when the Arab Spring with visitors to the site and page impressions Egyptian riots took place. peaking in february and remaining high in March.
Who were the audiences?
Audiences have increased Overall the profile remained unchanged because the increase in among men and women in viewership was uniform across the age groups. the same proportions, and The BBC Arabic TV audience are generally male “news across the age categories. snackers”, with an average age of 34 years. The audience remains Audiences to BBC Arabic were highly educated, with radio skewed towards the particularly skewed to higher educated groups. TV tended to over educated and affluent. index amongst those with secondary level education and above. Focus on Egypt BBC Arabic TV viewers in The BBC Arabic TV audience are twice as likely to use their mobile Egypt lead very active phone for emails, internet, social networks and for receiving news digital lives on their via SMS on a weekly basis. mobiles and in the They are three times more likely to read (and comment on) blogs blogosphere. every week. More than a third of BBC 29% of BBC Arabic TV viewers access a social networks each Arabic TV viewers are week compared to 18% among the Egyptian national average. weekly internet users and More than a third (36%) of weekly BBC Arabic TV viewers use the 80% of these are using internet each week (national average 21%) social newtorks each week. BBC Arabic TV viewers are All these activities remain niche among the general population. more likely to be listening BBC Arabic audience members are more likely to be found doing to radio on their mobiles, them. podcasts and watching • Weekly radio listening on mobile: 7% Vs. 4% national average. mobile TV. • Podcasts: 7% Vs. 4% national; Mobile TV: 4% Vs. nat. avg. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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Why did they turn to us?
BBC is used as a ‘fact checker’ Recent studies have shown that the persisting political in times of crisis. instability and unrest in the Middle East has led to greater need for relaiable information. Two major drivers for this are the pace of events which has resulted in uncertainty, and concerns over security.
Audiences have increased their repertoire of channels and the BBC is widely being used as a “fact checker”. This is something we have seen in other markets with audiences seeing news on other TV channels or on Facebook but not trusting it until it has been verified by the BBC.
Written evidence from the British Council 1. Summary 1.1 The British Council continues to make a major contribution to the UK’s prosperity, security and international influence, through harnessing the appeal of the English language, UK arts, education and society. 1.2 The Spending Review provided a challenging settlement for the British Council with a real terms cut of 26% in grant funding in the period up to 2014–15. Our grant is reducing from £185 million in 2010–11 to £154 million in 2014–15. In addition, we are required to increase our contribution to the UK’s Overseas Development Assistance from £90.8 million in 2010–11 to £97.9 million in 2014–15. By 2014–15, this will amount to 66% of our FCO grant, leading to a refocusing of our programmes. 1.3 We have consistently taken a tough approach to efficiency and value for money. We achieved £21 million savings between 2009 and 2011, including a reduction of 30% of our staff in the UK. The settlement for 2011–15 will require further cuts and savings totalling £70 million. To offset this, we will focus on significantly increasing our earned income in English teaching, examinations and from development contracts, by over 50% to £748 million. We are also working hard to increase income from partnerships by 75% to £65 million by 2015. FCO grant will reduce as a proportion of our income from 27% in 2010–11 to just 16% in 2014–15. 1.4 Despite the very tough financial climate, in 2010–11 we continued to increase the impact of our work. We engaged directly with over 30 million people, an increase of over 10 million on the previous year, and reached a further 578 million through broadcast and digital media. By 2015 our transformation programme will enable us to reach 640 million people worldwide. We will earn over £5 for every £1 the taxpayer invests in us, enabling us to increase our impact for the UK and making us one of the most cost-effective public organisations in the UK.
2. Transforming the British Council to Achieve More with Less Public Funding 2.1 We responded quickly to the worsening global economic situation in advance of the Spending Review and to the serious erosion of our overseas purchasing power as a result of the declining value of sterling. We embarked on a major transformation programme and made savings of £21 million between 2009 and 2011. This was achieved by overhauling our support services and UK operations, creating a Global Shared Services Centre in Noida (India), increasing the role of regional hubs and reducing our UK staff numbers by 30%. 2.2 The Spending Review settlement is very challenging for the organisation with a real terms cut of 26%. In addition, we continue to receive no protection from currency fluctuations, as the Foreign Currency Mechanism which is in place for the Foreign and Commonwealth Office does not apply to the British Council. However, our track record in delivering large savings and our entrepreneurial approach leave us well placed to respond. We are determined to increase our impact, despite a reducing grant. This will, however, require fundamental changes to our operating models and the skills and capacities we need. 2.3 We will achieve additional efficiencies in support services and make further reductions in staff numbers, as well as reducing or stopping some programmes. These will deliver a further £70 million in savings by 2014/ 15. Building on the success of our previous efficiency programmes, this will allow us to maintain our global network and continue to increase the impact of our work for the UK. Our most significant transformation to date, completed in May 2011, was the successful transition of our IT and Finance services to a new global delivery model, underpinned by the Shared Services Centre in India. We now have a range of cost effective and quality support options which can be more easily tailored to fit future requirements. We also join up with cross-Government platforms, procurement and joint working where it meets our business needs and cuts costs. We are co-located with the FCO and other government departments in 30 cities around the world; we have recently contracted Cable and Wireless to provide connectivity on an FCO framework; and we are using DFID’s established framework contract for HR information services. By 2015, our platform costs will reduce by more than 20% as a proportion of total expenditure to 15% from the current level of 19%. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:45] Job: 017434 Unit: PG04
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2.4 Our target is to increase income from paid for services by between 9 and 15% annually. By 2014–15, Government grant will represent just 16% of our overall income. Over the four year period, we will invest the surpluses generated from our full cost recovery work to deliver new and more efficient models of operation. We also plan to increase our income from partnerships by 75% to £65 million by 2015. This will bring increased access to intellectual as well as financial resources and will build organisational profile, market penetration and delivery capacity. 2.5 We are introducing an improved suite of digital products to increase our impact even further. We are also developing new products for each of our business areas and incorporating an expanded social media dimension. By 2015, our digital platforms will connect us to 140 million people.
3. The British Council’s Ambitions for Increased Impact and Income Generation 3.1 The British Council has an excellent track record in providing quality paid services, including English and exams, to over two million people around the world. Expansion of our income-earning services will significantly increase our impact for the UK. We will decrease our Government grant spend in the developed world, especially in East Asia and Europe. Over the next four years our ambitious plans will see earned income rise to £748 million—an increase of 55%. 3.2 There is great unmet demand for access to UK Culture, educational opportunities and qualifications—an estimated one billion people are learning English globally—which we are well placed to provide. The fact that many people are able and willing to pay for services gives us the opportunity to reach more people and gain further influence for the UK at a time when Government resources are decreasing. English teaching, for example, plays a vital role in connecting people to the UK and helping to underpin trading, tourism and educational links. 3.3 By 2015, we will teach 70% more learners in an expanded network of teaching centres covering 50 countries and offering a wider range of UK exams to candidates worldwide. For example, in East Asia our English language programmes will combine digital delivery and the establishment of six new centres by 2015, to reach 500,000 teachers and 36 million learners. 3.4 Planned expansion of our paid-for services is underpinned by established policies and controls to ensure Fair Trading. We ensure that grant-funded activities are strictly separated from income-earning work. 3.5 The surpluses generated from our income-earning activities are re-invested in our cultural relations programmes, both in English and examinations and in the other areas of the British Council’s work, such as Education & Society, and the Arts, increasing our impact and support for the UK’s long term prosperity, security and influence.
4. The British Council’s Vital Contribution to UK Prosperity, Security and Influence Economic benefit for the UK 4.1 Our work creates links between people in the UK and around the world, building trust. This increases the likelihood that people will enter into business relationships with the UK, study in the UK, or visit the UK.6 There is also a body of academic research which demonstrates a direct link between increases in trust and improvements in economic performance. The trust generated for the UK by the British Council’s activities has a value of £1.2 billion for the UK economy or over £6 for every £1 invested by UK taxpayers.7 This is in addition to the other economic benefits described below. 4.2 We build an attractive international image for the UK, creating the conditions for the success of UK businesses. Research undertaken this year by Chatham House recently placed the English language, education and culture as the top three factors in supporting the UK’s overseas reputation.8 We promote these great UK assets around the world, last year engaging with over 30 million people directly, an increase of over 10 million on the previous year. We also reached 578 million through digital media, radio and television. 4.3 The British Council plays a major role in support of high value education exports. Last year, working with HE institutions, we helped to attract over 400,000 international students to the UK. International student recruitment has an annual value to the UK economy of £9.8 billion. We are also the UK’s leading body for developing international Higher Education partnerships, building UK research capacity and helping to generate international earnings for UK institutions. 4.4 In the past year, our English and exams activities brought us into direct contact with two million people. We supported individuals to fulfil their aspirations while consolidating the reputation of the UK as a source of educational opportunities and supporting UK businesses in their pursuit of exports and investment. Around the world we administered 2.5 million exams in the last year—worth £50 million in export earnings for UK exam boards. We also continue to play a major role in supporting the UK’s creative industries which contribute £17 billion to the UK economy annually. 6 Recent You Gov research undertaken on behalf of the British Council has demonstrated a clear link between trust and a willingness to do business with the UK, visit the UK or study in the UK. 7 This value has been derived by applying a methodology developed by the Swedish Institute and externally validated in the UK. 8 Chatham House YouGov Survey 2011 cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:46] Job: 017434 Unit: PG04
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4.5 Through our programmes we are improving the UK’s connections with key emerging powers. We worked with the FCO and UKTI on the development of the UK Pavilion at the 2010 Shanghai Expo, providing 1,857 performances at the Pavilion. It has been estimated that UK exports to China grew by over 40% during the period of the Expo, generating an additional £2 billion for the UK. We are following up on this success in 2012 with UK Now the largest festival of UK arts ever held in China. This will include over 100 events to engage business leaders, influencers and public audiences in 10 major Chinese cities. In addition, UKBrasil, due to be launched in 2012, will use the opportunities arising from the Olympic handover, to expand the UK’s relationships with Brazil. It will bring together resources from government, business and leading national institutions to create a series of high impact projects in the arts, education and science. As a result, key decision-makers in 12 Brazilian cities will have a greater awareness of the UK. 4.6 We are working closely with the FCO to ensure the 2012 Olympic Games are effective in enhancing perceptions of the UK, including through the GREAT campaign. We are providing an international dimension to the Cultural Olympiad, and making a major contribution to the international legacy. Through International Inspiration, delivered with UNICEF and UK Sport, we have this year exceeded our 2012 target of enriching the lives of 12 million young people in 20 countries through the power of sport. 4.7 The British Council’s work builds the skills of people in the UK by delivering international experience and skills, and expanding horizons, enabling the next generation of business leaders and UK workforce to effectively participate in the global economy. We are the National Agency for EU mobility programmes in education and training—Comenius, Erasmus and Youth in Action, enabling 350,000 young people annually to gain international experience and skills. Last year alone we engaged with 3.2 million people in the UK. Our Connecting Classrooms school linking programme has now supported over 1,200 UK schools link with schools in 50 different countries. Participating schools work on joint curriculum projects improving teaching standards and attainment. We also deliver the Language Assistants programme, providing UK schools with language tutors from around the world, while at the same time offering UK students the chance to teach English abroad. In the past year, we placed over 2,500 Language Assistants in schools in the UK, making a big contribution to the teaching of languages. This summer we ran two pioneering Chinese “immersion courses” for UK Primary School children with HSBC. This involved Year 6 pupils spending a week learning about Chinese language and culture, opening young people’s minds to issues of globalisation and international engagement.
Supporting the UK’s response to the Arab Spring 4.8 We have responded fast to the significant developments in the Middle East and North Africa. We are working with new governments, emerging political and business decision makers and young people to support educational reform, skills and employability, and to give a voice to the generation of young people who are shaping their countries’ futures. For many years we have engaged with millions of young people across the region, building their skills and confidence, and widening their aspirations. We are active in civil society across the 17 countries of MENA, with long-established networks, reaching well beyond governments and the traditional elites. Last year, we engaged or reached 5.5 million people in the region; including over 600,000 in Egypt alone. Many of those who have engaged in, or been touched by our programmes are now forging new political settlements and building a new future for Egypt, Tunisia and Libya. We are focusing our work in the region on English language, education and skills, youth leadership and arts—addressing core issues highlighted in the Arab Spring. 4.9 The demand for English language skills across the region is vast; over 44 million people are studying English. It provides access and engagement with the UK and wider world in every sector, supports economic and social development, and is a critical skill for learning and employment. Importantly, it also provides cherished access to external ideas. With 20 Teaching Centres across 18 cities in 13 countries in the region, last year we directly taught well over 250,000 hours of English to more than 100,000 students. 4.10 Across the region, we have kept our programmes running and our offices open as much as possible this year. We closed only where obliged to do so by security conditions and reopened as soon as possible. In Egypt and Tunisia we stayed open with senior UK staff in-country throughout the revolutions, though we evacuated and then returned more than 100 staff and their families. In Libya we were forced to close our office in February and evacuated more than 70 people (UK staff and their families). However we continued to broadcast LearnEnglish radio. Most of our Libyan staff are now once again working in British Council premises. We are preparing to formally re-open as soon as the security situation allows (if possible, before the end of 2011). We have committed an additional £1m of funds to re-launch our Libya programmes in line with National Transitional Council priorities. The Ministry of Education has asked us to re-instate our large-scale English language reform projects, to support the secondary and tertiary sectors, and to expand Skills for Employability project to support policy reform. At the Ministry’s request, we are now preparing an outline of an international scholarship scheme for former rebel fighters. In Syria we have remained open with our senior UK staff in country throughout the uprisings, though we evacuated UK-recruited English teachers and their families. 4.11 We are working closely with the FCO and DFID to maximise the UK’s impact, particularly through the Arab Partnership Initiative, for which we are running seven projects in the region. Our Widening Opportunities for Employability programme, part-funded by the Arab Partnership Initiative, will expand vocational training for young people in Egypt and Tunisia. The project will train 10,000 young people directly, engage with 60,000 via social media, and 12 million through a skills TV programme over the course of two years. The English for cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:46] Job: 017434 Unit: PG04
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the Future programme is expected to reach 8 million people across the region this year, up from 5.7 million in 2010/11. This teaches learners directly through TV, radio, newspapers and the internet. Our online services are increasingly popular and last year around 35,000 a day accessed these materials via our social media provision. It is also influencing national policies for English language teaching and supporting teacher training. Young Arab Voices is a two-year programme promoting skills and opportunities for youth-led dialogue and debate in Egypt, Tunisia and Jordan. It will allow 25,000 young people to participate in structured debate via 80 sustainable debate clubs and with the support of a network of trained facilitators. A further 500,000 people are expected to take part online.
Contributing to international development 4.12 In support of the UK’s commitment to overseas development we are increasing our programmes in developing and post-conflict environments. Our work supports development via improving skills, including English language teaching, support to education systems, and society programmes. We have a challenging target to deliver £97.9 million (66%) from our grant-funded programmes by 2014–15 as a contribution to the UK’s overall development assistance. 4.13 Research by Euromonitor published this year shows a link between English language skills and economic benefits. It also shows a 10–50% salary gap between those who have English and those who have not, as well as a link between the level of English and overall average earnings. There is also an important need for English for post-conflict stabilisation and as an aid to participation in international fora. 4.14 We increasingly provide English by radio and TV broadcast, and by mobile phone. Our TeachingEnglish Radio series has been broadcast in Africa to nearly seven million listeners, developing the skills of teachers of English. We also provide English teaching for mobile phones, with 1.5 million SMS subscribers in Asia, Africa and Latin America this year. We will scale this up to reach over 15m people. With BBC Persian TV we have co-produced a series of topical programmes for young adult learners, who have little exposure to English usage in everyday life. First broadcast on BBC Persian TV in July, and linked to our LearnEnglish website, Word on the Street enables us to showcase contemporary life in the UK to large-scale, highly dispersed target audiences. Open University Worldwide are distributing the series; broadcasting agreements are now in place in five countries; others are in preparation. A second series will be launched in April 2012. 4.15 In Afghanistan, our schools programme has involved over 11,000 students and teachers in joint curriculum projects with UK schools. We continue to provide military staff with English training and Ministry of Education English supervisors with training in modern methods of English teaching. We have responded with determination following the tragic attack on the British Council office in Kabul in August 2011 and have sustained all our major programmes, operating from a temporary office in the British Embassy Compound. We are delivering a £23 million programme to strengthen civil society organisations and improve the Afghan government’s accountability, responsiveness and respect for human rights. 4.16 In Burma, our activities are carefully calibrated with DFID and FCO in order to ensure we can respond effectively to change. Our work focuses on developing leadership skills in civil society. Over 3,500 people visit our libraries and offices in Rangoon and Mandalay every week. Tens of thousands of change agents within local communities are reached through our Pyoe Pin (new growth) project funded by DFID and SIDA. 4.17 Earlier this year we opened an office in South Sudan and will support this fledgling state through conflict prevention, security and democratisation projects. Our programmes are supported by the EU, DFID and MOD and include an English for development project, which strengthens governance by improving English language skills among people working in the judiciary, police and army. 4 November 2011
Supplementary written evidence from the British Council At our appearance before the Foreign Affairs Committee earlier this month I promised to send the Committee some additional information in response to questions asked by Members.
Income Trends The Committee picked up on an apparent reduction in the British Council’s overall income from £707 million in 2009–10 to £693 million in 2010–11. This is due to a change in accounting treatment which means that from 2010–11, contracts for which we act as Agent are no longer included in our accounts. These Agent contracts had a value of £16 million in 2009–10 and in 2010–11 and we expect the value to remain constant up to 2015. I would also like to clarify the levels of grant funding relative to projected earned income through to the end of this Spending Review period: in 2010–11 the FCO grant accounted for 27% of our income and 73% was earned income—in other words we earned £3 for every £1 provided by Government. By 2014–15 this will have changed to 16% FCO grant and 84% earned income, so that for every £1 the taxpayer invests in us we will be earning £5. cobber Pack: U PL: CWE1 [E] Processed: [03-04-2012 12:46] Job: 017434 Unit: PG04
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The Move of Corporate Business Support Services to India Committee Members requested an overview of the staff reductions and movement of posts associated with the establishment of our new shared services centre in India. I can confirm that this involved a reduction of 165 finance and administrative posts in the UK and elsewhere in the global network. 141 new jobs were created in the new centre in Noida, India, and an additional 36 posts were transferred to Noida from our Delhi office. I also promised details of the savings achieved by the move. In 2009–10 the savings made were £3.5 million, rising to £5.6 million in 2010–11 and are expected to be £6.4 million in 2011–12, a cumulative saving of £15.5 million. Additional savings of £1 million are expected to be realised in 2012–13, resulting in recurring annual savings of £7.4 million. Both Vernon Ellis and I appreciate the Committee’s interest and attention and value the opportunity to answer Members’ questions about our strategy, programmes and performance. I look forward to receiving the Committee’s report in due course. 30 November 2011
Written evidence from the Public & Commercial Services Union: the British Council Summary of Main Points 1. As a result of restructuring and budget cuts, between 2009 to 2014–15 the British Council will have lost over 50% of its UK-based workforce. This huge level of cuts has left the British Council overstretched, reduced the quality of its work and lead to it abandoning some activities. The end result is to cause significant damage to its role of promoting cultural relations with the rest of the world, a key part of maintaining the UK’s global influence. 2. New models of working overseas will mean in many parts of the world (eg sub Saharan Africa) the British Council will have only a token physical presence in country, reducing UK influence in these countries. 3. The high level of job cuts and organisational change in recent years has badly affected staff morale with staff increasingly overworked and increasingly disenfranchised.
Evidence 4. The British Council has yet to recover from the approximately 35% cut in UK staff numbers that occurred under the auspices of a redundancy programme that ran 2009–11. 5. Whilst staff levels have been significantly reduced, the amount of work has remained largely constant. This has led to overstretched employees, reduced quality of work and complete abandonment of some activities (eg removal of public access and/or elimination of country-specific “local cultural relations” activity in certain overseas operations). We believe this will—in the medium to long-term—prove detrimental to the UK’s international standing. 6. Alarmingly, the situation is now set to worsen; the British Council’s recently-published Corporate Plan 2011–15 confirms the current objective of “implementing a second phase of staff reductions in the UK (we have already reduced post numbers by about one third) with a smaller HQ by 2014–15” (page 39). Discussions between PCS and British Council management have revealed that those UK posts to be cut over this planning period will amount to another 25%. 7. The driver behind this is also clearly stated in the Corporate Plan: “The FCO grant reduction, the loss of the DFE grant, the likely impact of inflation, the continuing weakness of sterling and the need to find money for investment mean that we need to save about £70 million of grant costs annually by 2014–15, £26 million of this from 2011–12.” 8. Another cost cutting measure cited in the Corporate Plan relates to how the British Council operates overseas. It sets the objective of “reducing costs throughout our overseas network through new models of working, although office and even country closures will almost certainly be necessary.” These “new models of working overseas” translate into the classification of the countries in which the British Council operates as “low”, “medium” or “high” priority. Over half are “low priority”. Many of these will be reduced to a staff of just two or three, with no UK-appointed staff in country. The assumption is that an online, digital presence will in many cases replace the very real, long-term cross-cultural human engagement that the British Council has been facilitating and nurturing for over 75 years. A concrete example is Sub-Saharan Africa: the UK’s presence and activity will decrease just as China’s continues to grow exponentially. Again, we believe this is harmful to the UK’s long-term interests. 9. The Corporate Plan also promises to off-shore more jobs to India: “further exploitation of the Global Shared Services Centre in Delhi taking over more support functions for the worldwide network”. This refers to outsourcing more work from the UK to a wholly-owned subsidiary call centre in India. We are not persuaded that this offers a real cost benefit to the UK, particularly when unemployment is already rising so rapidly. cobber Pack: U PL: CWE1 [O] Processed: [03-04-2012 12:46] Job: 017434 Unit: PG04
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10. Staff morale has suffered at the British Council and disenfranchisement remains a risk while job security is so lacking. Recently some staff whose overseas postings were coming to an end were advised that they may find themselves at risk of redundancy after their posting ends. This will deter staff from undertaking temporary postings just when their flexibility is most needed. 11. Similarly UK-based staff struggle to re-engage not just because they are overloaded but also because they see themselves as having ever fewer opportunities to make a greater contribution due to the ever-increasing reliance on agency workers (who now make up approximately 20% of the workforce). 24 October 2011
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