The FCO and the Spending Review 2015

Yasmin Qureshi Excerpts

Tuesday 1st March 2016 Commons Chamber

[Crispin Blunt]

I absolutely agree with the hon. Gentleman, and we look forward with interest to the motivation of the Scottish National party, and how it will vote, given its differing attitudes to the differing Unions in which Scotland finds itself.

Anyone attending this debate might ask why, if the Foreign Office was one of the winners from the spending review—or at least not a loser—we have sought this debate. My reply is that no one should underestimate the scale of the challenges that the UK and its allies are facing in the world today. Even with a protected budget, the Foreign Office will struggle to address those challenges. Of course we have a range of capabilities to deal with direct threats to our national security, including armed forces, diplomacy, economic policy, cyber-operations, and covert means, but in terms of sheer value for money, it is diplomacy, and the capacity to bring crises to a peaceful resolution in partnership with others, that must be the preferred solution. A diplomatic solution to a crisis, rather than one that descends into the use of armed force saves an absolute fortune, as well as avoiding the huge humanitarian cost that accompanies a failure to preserve the peace. It is my view that we should increase the Foreign Office budget to enhance that capacity and help to head off crises before they flare up.

The threats to the UK’s security and wellbeing are at an unprecedented level. As we said in our report, we cannot recall a more complex and challenging policy-making environment in recent decades—an environment that includes Syria, Daesh, Libya, Russia, the South China sea, Israel, Palestine, North Korea, Iran and Turkey, to name but a few.

That is before we take into account the requirements of the other two pillars of the Foreign and Commonwealth Office: the agenda for prosperity and consular services. In its response to our report, the Office acknowledges that there will be

“new work, including increasing spending on the Overseas Territories and hosting the presidency of the EU in 2017.”

That might be an interesting presidency if we are on the way out after 23 June.

Inexplicably, however, the Government’s response says nothing about potentially the greatest call on its resources: a British exit from the European Union. If the country votes out on 23 June, a huge effort will be needed to disentangle the United Kingdom from its existing commitments and to work on new trade arrangements, to name but one element of the work that will need to be undertaken. A very large part of that effort will fall on the Foreign Office, yet the Committee has found little or no evidence that the British civil service is making any sort of contingency plan in the event of a Brexit. We now have a date for the referendum, and Brexit is not a remote possibility but a very real prospect in the hands of the electorate and the competing campaigns. I therefore urge Ministers and their officials to begin planning, and not just in outline, for the consequences of a decision by the British people to leave the European Union. It would not just be a question of drafting in a few extra people to prepare new treaties. We will need to strengthen our bilateral relationships by increasing our presence in larger EU member states, reopening subordinate posts that have been closed or downgraded over the last five years, and picking up capabilities, particularly trade capabilities, that are currently the competence of the European Union. We should at least understand what the bill will be and prepare to address it if it happens.

[Yasmin Qureshi (Bolton South East) (Lab)]

On the hon. Gentleman’s point about increasing the number of personnel to deal with Brexit, the Committee recently said that about a quarter of staff in the middle east, eastern Europe and central Asia do not have the requisite language skills, and that the number of people who have those language skills is decreasing. That is another way in which the strength of the Foreign Office to deal with international issues is being reduced.

[Crispin Blunt]

The hon. Lady is absolutely right—she understands those issues extremely well from her work on the Foreign Affairs Committee and more widely before joining it. That loss of language skills is partly a reflection of just how stretched the FCO is in getting people to the right place, and getting the best people into vacancies to cover the policy challenges we face. An office that is not stretched so tautly has the capacity to get the language skills of its staff up to the necessary standard. Until now, those skills have been the envy of every other diplomatic service in the world. In the last Parliament, it was the priority of William Hague as Foreign Secretary to address that. Serious measures were put in place to try to do so, but the evidence the Committee is taking shows that if it is getting better, it is doing so in a minute way that does not reflect the need for real improvement. That reflects just how tautly the office is being managed under the current budget conditions.

There will be more pressure on the capital budget than usual. The Government response to our report points out that the Foreign Office capital budget will remain “flat”. It says that the FCO will need to fund requirements that cannot be met from the capital budget by disposing of assets, and warns that it may need to call on the Treasury reserve for some large projects. The Foreign Office quite rightly is expected to achieve value for money when disposing of assets, but the ability to do so will partly depend on market forces. As we know from the FCO supplementary estimate, it has already had to call on the Treasury reserve to cover a shortfall that it says is

“due to adverse market conditions in the Far East”.

The FCO IT system, Firecrest, is failing and presents a serious operational risk. Major investment is needed, but that has been stalled during the spending review process. The FCO is going to have to fund its tech overhaul programme from its existing budget: difficult choices will have to be made on procurement, bearing in mind the need for resilience and the particular security requirements of the Department. Careful project management will be needed, and I can only point out that the whole of the public service does not exactly have a shining record in that field. I hope the Foreign Office can help to redress that.

My second key point concerns official development assistance expenditure and the need to rationalise resource allocation. The Committee highlights in the report our uneasiness at the consequences of depending ever more on expenditure that qualifies as official development assistance, and which therefore scores against the Government’s commitment to invest at least 0.7% of gross national income in international development. That risks, and indeed is, skewing the Department’s expenditure away from countries that are not eligible for ODA spending, regardless of where our foreign policy interests lie. For instance, 97% of the funds available under the new human rights funding programme, the Magna Carta fund, are for spending in ODA-eligible countries. When we queried that in oral evidence with the Minister and her officials, we were given the impression that there was some flexibility to divert funding towards non-ODA countries, but we need clear answers. Trying to replace the significant sums the Government have put forward for human rights in the Magna Carta fund with very constrained bilateral funds will not wash. It would be quite unacceptable and counterproductive for human rights programme funding to be virtually denied in non-ODA-eligible countries such as Russia and Israel, and Saudi Arabia and other Gulf states. I hope the Minister can give me some reassurance on that point.

Human rights expenditure is not the only example of how ODA eligibility can determine the Foreign Office’s activities. The current chief operating officer, Deborah Bronnert, told us that the Foreign Office’s non-ODA budget was under particular pressure, and that if there were to be cutbacks in the overseas network, it would have to look first at cutbacks in subordinate posts in developed countries. It hardly plays well with our prosperity agenda if that is where we need to go in terms of our trade and economic relations.

The British Council, which plays a unique role in promoting an understanding by different peoples and nations of what the UK can offer, faces the possibility of losing all grant in aid for work in countries that are not ODA-eligible. It is looking to cross-subsidise to some extent from other areas of its operation, but the net effect is a decline of our soft power and influence in several growing economies and countries, not least where there are political and human rights concerns.

I have similar concerns about the move within the Government to more pooled funding between Departments. The conflict, stability and security fund, which is currently worth £1.033 billion per year, will increase to £1.33 billion by 2019-20, and a new prosperity fund is being created, worth £1.3 billion. Substantial sums of money have been allocated following a process of negotiation between Departments, and I welcome the concept of a more holistic and integrated approach to funding where Departments are working in different ways towards the same ultimate aims, but the Committee should look carefully at how the FCO fares, for instance when sharing the conflict, stability and security fund with two Departments whose budgets as a proportion of total Government expenditure are both protected.

Finally, the Foreign Office delayed its response to our report until it had received its settlement letter from the Treasury, but I was disappointed that the FCO did not supply the settlement letter, which I understand sets out more detail of the sums available to the Foreign Office from year to year within the period covered by the spending review. In fact, none of the departmental settlement letters has been published. At the moment, we just have rounded figures for budgets for 2015-16 to 2019-20, without any lower-level detail. Will the Minister therefore undertake to supply the Foreign Office settlement letter to the Committee, so that we may publish it and place that essential information in the public domain?

My conclusion relates to the shape of the Foreign Office in the years to come. In his letter responding to our report, the Foreign Secretary said:

“There is more that can be done to strengthen the FCO and build up its world class capabilities. To help achieve this, I have commissioned an internal review of the FCO exploring how we can be more expert, agile and focused on our key priorities. The review will set out a vision of the organisation the FCO should be by 2020.”

I invite the Minister to tell us a little more about that review. Will it be a fundamental review of how the Foreign Office is structured, how priorities are ordered and how staff are deployed; or will it be a motherhood and apple pie statement of vision and aims, full of things no one could disagree with?

In conclusion, the Office remains overstretched and underfunded for the tasks it faces. Its actual funding base is dysfunctional, and if it does not actually distort policy decisions, it certainly means that resource allocation is no longer aligned with actual British interests.