The FCO and the Spending Review 2015

David Lidington Excerpts

Tuesday 1st March 2016 Commons Chamber

[The Minister for Europe (Mr David Lidington)]

I thank my hon. Friend the Member for Reigate (Crispin Blunt) and the members of the Foreign Affairs Committee for bringing their report to the debate this afternoon.

From both sides of the House, there was a common theme: the importance of an effective diplomatic service and Foreign Office in advancing and defending the interests of the United Kingdom in the face of multiple challenges in different parts of the world. I thank in particular those hon. Members who paid tribute to the work of individual members of Her Majesty’s diplomatic service. That gives me the opportunity not only to thank those individuals myself, but to put on the record my own thanks and those of the ministerial team for the professionalism and commitment that members of the diplomatic service have shown to us, as they have to previous Governments. They continue to work day in, day out on behalf of the people of this country.

I want to move on to the spending review and the settlement for the FCO, but I cannot quite let the remarks of the hon. Member for Hornsey and Wood Green (Catherine West) go without comment. I completely understand that it is the job of an Opposition spokesman to try to find criticisms to make of the Government—I remember doing that myself some years back—but the degree of amnesia that infected her judgment on this occasion was astounding. It was as if the years from 1997 to 2010 had been airbrushed out of the historical record.

It is worth reminding the House that under the Governments of Tony Blair and Gordon Brown, the Foreign Office’s budget was cut, posts were closed, the language school was axed altogether, the library was scrapped, and we got to the craziest situation of all. After the Treasury had removed the traditional protection arrangement that it had offered against the Foreign Office’s exposure to foreign exchange movements, as a result of the payment of salaries and bills by overseas posts, the hon. Lady’s former colleague, Mr David Miliband, was reduced to having to draft in members of the diplomatic service to establish a hedge fund unit inside the Foreign Office so that the Foreign Office could try and run a hedging operation of its own. I do not want to hear too many lectures from the Labour party about Foreign Office expenditure and sensible budgeting.

The Foreign Affairs Committee and the House as a whole are entitled to ensure that the Government are held properly to account for delivery of their responsibilities in the field of foreign and security affairs. My hon. Friend the Member for Reigate and, I think, the hon. Member for Glasgow North (Patrick Grady) asked about two or three specific items in the estimates. I am going to have to write to them about two of those, but I can give them some satisfaction on the question of the battle of New Orleans, because I have been passed some additional advice. The purpose of the occasion was to commemorate the British dead in that battle and celebrate the 200 years of peace that have followed between the United Kingdom and the United States. The Foreign Office has contributed $215,000; other contributors have included the state of Louisiana and Boeing, and there has also been a significant personal contribution from our honorary consul in New Orleans.

[Crispin Blunt]

While my right hon. Friend is on that issue, can we see how adroit he and his team are? Will he explain what the Foxhound Project is? Is this a welcome addition to the leisure activities of Her Majesty’s Government, or is it expenditure in respect of something else?

[Mr Lidington]

If my hon. Friend is expecting to reopen the debate on field sports, I will definitely disappoint him. That is one of the subjects on which I will write to him and the hon. Member for Glasgow North.

The Foreign Affairs Committee report, published on 20 October last year, came before the publication of the spending review, the national security strategy and the new development strategy in November last year. The report was important, because it contributed to an extremely vigorous public debate about the importance of continuing to invest in our diplomatic resources.

As a number of hon. Members noted, the Chancellor responded in his spending review. He noted in his statement in this place the crucial role of what he described as “our outstanding diplomatic service”, and he announced that the Government would protect the budget of the Foreign and Commonwealth Office in real terms. That is important because, as right hon. and hon. Members across the House have said, an effective and expert diplomatic service is an important element in allowing this country to respond to the international challenges that we face to our interests.

Now, there is no avoiding the fact that, despite that commitment to protect the FCO’s budget in real terms, my right hon. Friend the Foreign Secretary will still have difficult decisions to take about relative priorities in the Department, but that is no more than the challenge that would confront any Secretary of State. We would all like to feel that the budgets available to us were unlimited; in the real world, however, those budgets are finite, and they are constrained by the Government’s overall need to bring down the deficit and address this country’s long history of living beyond its means in terms of the public finances.

The Future FCO review, about which my hon. Friend the Member for Reigate asked me, is designed in part to find ways in which we can secure our objectives as a Department by doing things differently. I have talked briefly to the reviewer, who is also speaking to other Ministers and senior officials, and the purpose of the review is to advise Ministers and senior officials on how the FCO can be more expert, more agile and more focused on its key priorities than it is at the moment.

I expect the review to be in a position to set out its conclusions later this year—by the end of the spring, I hope. We intend there to be a clear vision of how the FCO should look by 2020, so that we can implement changes in the Department to enable us, within the priorities and resources we have, to secure our objectives more effectively and more efficiently than in the past. We also hope that the review will ensure that, where efficiencies can be made, the savings can be channelled straight back into serving the core objectives that the Foreign Secretary has set.

My hon. Friend asked about the spending review letter. The Government’s policy in respect of all Departments is not to publish settlement letters. There is plenty of public information in the spending review documentation and the Chancellor’s speech and answers. The letters are part of ongoing policy discussions, so it is not appropriate that they should be in the public domain at this time.

The overall resource departmental expenditure limit for the FCO will rise in line with inflation in each of the four years covered by the spending review, increasing our funding from £1.1 billion in 2015-16 to £1.24 billion by 2019-20. We believe that this settlement will enable the Department to maintain our world-class diplomatic service, including our network of posts around the world, which host not only the FCO but 32 other Government Departments and agencies. That global presence and continued foreign policy leadership in Whitehall by the FCO will serve to protect our national security, promote our prosperity and project the UK’s values overseas.

In line with the Government’s commitment to spend 0.7% of gross national income on development assistance, the FCO will be allocated additional ODA-eligible resources, more than doubling our spending from £273 million to £560 million in 2019-20. That will enable us to pursue our key foreign policies and to deliver the ambitions set out in the national security strategy and the development strategy.

The hon. Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) asked, very reasonably, how we reconciled the priorities of different Departments and ensured that, as far as possible, they incorporated within an overall agreed Government approach. The answer, in part, is that there are frequent conversations between Ministers in the different Departments dealing with external affairs and between their officials. However, in the broadest sense, the strategic direction on the key elements of the United Kingdom’s external policy is set after discussion by the National Security Council, chaired by the Prime Minister. The NSC brings together the Prime Minister, the Foreign Secretary, the Chancellor, the International Development Secretary, the Defence Secretary and other interested Ministers precisely so that we can agree on an approach that harnesses the different skills of all Government Departments and, at the same time, establishes which Departments are to contribute which resources to that common objective.

The settlement includes increased spending to support the UK’s overseas territories. In order to meet our long-standing commitment to address their reasonable needs, the FCO will co-ordinate a new strategy for the overseas territories and chair a new director-level board to co-ordinate cross-Government activity. Furthermore, as announced by the Prime Minister during the Commonwealth Heads of Government meeting in Malta in November last year, the United Kingdom will host the next such Heads of Government gathering in 2018, and the FCO will co-ordinate that event.

The spending review settlement provides the same budget for Chevening scholarships as in 2015-16 of £46 million per year. Over its 32-year history, that scholarship scheme has built up a large and influential alumni network aligned with the interests of the United Kingdom, and this funding will ensure that that continues.

A number of hon. Members asked about language training and language skills. The FCO language centre was reopened in September 2013 to renew the focus on and investment in languages as a core diplomatic skill, and ensure that we get the right people with the right skills in the right jobs to deliver our objectives. As a priority, we will allocate new funds to improve Mandarin, Russian and Arabic language skills. In 2015, we trained 34 staff in Arabic, 14 in Mandarin and 24 in Russian, as well as 35 in French and 28 in Spanish. I completely accept that more needs to be done, but we are making progress, and there is a very clear commitment to continuing to develop language skills.

In addition, the Foreign and Commonwealth Office will spend up to £24 million over the next four years to increase the presence of its counter-terrorism and extremism experts overseas. In sum, our budget will allow us to focus on our key foreign policy objectives, including tackling Daesh and ensuring security in Europe. It will also allow us to do even more to prevent conflict and encourage stability in fragile states. My right hon. Friend the Foreign Secretary has made it clear that the Department will need to become leaner and build on its core strengths, and reinvest and refocus resources on new priorities. That is the reason for the review, about which I have already spoken, and it is also what lies behind the creation of a new digital transformation unit, the purpose of which is to ensure that FCO officials have access to the latest techniques for using modern technology in their work. After a year in operation, the diplomatic academy is already boosting both broader policy capability and specialist skills.

My hon. Friend the Member for Reigate (Crispin Blunt) asked about the tech overhaul programme. We are planning for its global deployment from 2016 to 2018, and a headline figure of £105 million has been agreed by the FCO board. We believe that the overhaul will provide greater speed, stability and reliability, and, partly by reducing the time currently lost because of inadequate IT systems, increase the productivity of staff members. We are using our IT partner, BAE Systems, to help deliver the tech overhaul to industry best practice standards.

A number of hon. Members asked about human rights. We have taken action to mainstream human rights across the FCO network. The issue remains a priority, but we believe that, rather than it being ring-fenced for a few specialist staff, it should be the responsibility of all British diplomats. More detail of our approach has been provided in our written evidence to the Foreign Affairs Committee’s human rights inquiry, to which my right hon. and noble Friend Baroness Anelay gave evidence on 24 February.

[Tom Brake]

The Minister has mentioned mainstreaming the issue in the FCO, but, as I said earlier, there are 240 people working on human rights, versus 2,900 people working on prosperity. Does he expect that ratio to change significantly?

[Mr Lidington]

The difficulty with providing numbers is that we are talking about not only people who will be in post, but people in desk offices in London who will spend part of their time on human rights and other parts of it on prosperity and advancing British economic interest. I do not think there is a contradiction between the two. When I talk to British businesses about possible investment markets, they frequently tell me that when they assess investment opportunities in a particular country, one of the criteria they use is how good the rule of law is in that country. From a business point of view, they do not want to take the risk of putting money into a place and then finding that, because of corruption, their money, licence or permit is revoked at the behest of some political leader. This is not guaranteed, but a country with an effective rule of law of the kind that will attract inward investment is more likely to have genuinely independent courts and to respect the rights of individuals, so I think that the two go together.

In addition to its resource allocation, the FCO will be provided with a flat cash settlement of £98 million of capital funding per year, to invest in our estate. That will provide further investment across the estate, to maintain our global network and to keep diplomats and other Government staff safe while they work for the UK abroad. Additional capital requirements will be funded from asset sales and the recycling of receipts and, where necessary, through recourse to the reserve.

I have been asked about cross-Whitehall funds. I can confirm that the Government’s spending on international priorities will increase further, with a larger conflict, stability and security fund, a new prosperity fund and more funding for both the British Council and the BBC World Service. The CSSF, through which the FCO funds much of its conflict prevention work, will grow by 19% in real terms by 2019-20 to a total of £1.5 billion a year. That will strengthen our ability to support stabilisation in countries such as Syria, Ukraine, Somalia and Afghanistan, and it will strengthen our response to serious transnational threats, including extremism, serious and organised crime, and illegal migration.

In the conflict, security and stabilisation fund allocations for 2015-16, £400 million were allocated to countries eligible for official development assistance and £633 million to non-ODA countries. The new prosperity fund will be worth £1.3 billion over the next five years, and it will be used to support global growth, trade and stability. That will help us to reduce poverty in emerging and developing countries, and it will open up new markets and opportunities to the United Kingdom. Our diplomatic network helps to facilitate deals for trade and inward investment, to tackle barriers to our own businesses, and to promote open economies and a rules-based international system, which will benefit British business now and in the future.

Funding for the British Council will be protected in real terms, but there will need to be a shift in the balance between ODA and non-ODA funding to support an expansion of the council’s work in developing countries. In addition, the British Council will be able to bid for up to £700 million in additional funding to improve links with emerging economies, help to tackle extremism globally and support good governance.

I was asked about the Department’s human rights work through the Magna Carta fund, and about the balance between ODA and non-ODA countries. The Magna Carta fund has 47 priority countries, the overwhelming majority of which are ODA countries—developing countries. There are four non-ODA countries: Saudi Arabia, Bahrain, Russia and Israel. Those four, as well as being eligible for support from the Magna Carta fund, are eligible for funding streams such as the Arab partnership fund and the CSSF.

I think there has been agreement across the House that a strong diplomatic service and worldwide network are essential for this country to maintain its position in the world. I believe that the Government’s commitment to protect the Foreign and Commonwealth Office budget and provide additional funds for cross-government international activity will ensure that we are able to play a pivotal role, both bilaterally and through the membership of the many international and multilateral organisations of which we are part, in tackling the most important global challenges.

Without wanting to stray too far from the subject matter, I will simply say that I agreed completely with the point made by my hon. Friend the Member for Newbury (Richard Benyon) about how we can amplify the United Kingdom’s diplomatic reach through our active membership of the European Union. I am therefore confident that the outcome of the spending review is good not only for the Foreign and Commonwealth Office and British diplomacy, but, most importantly of all, for the interests of the people of the United Kingdom.