FCO performance and finances 2013-14

We recommend that the FCO give an assurance that any compulsory redundancies in the next Spending Review period would not entail a decrease in the number of staff providing direct policy support.

The FCO should, in response to this Report, set out its strategy for ensuring that vacancies for key posts are filled promptly and by staff of the necessary calibre.

We believe that the head of the UK’s representation in any particular country should only be a non-FCO career employee in the most exceptional circumstances. However, we welcome the reassurance by the Permanent Under-Secretary that he would expect a Head of Mission always to be employed as an FCO employee. We believe that any other arrangement would obscure an otherwise clear line of accountability, from heads of mission to the Permanent Under-Secretary to FCO Ministers.

It is unacceptable for Government departments to place constraints on the disclosure of information which directly concerns public expenditure, is not internal policy advice, and which we suspect is neither commercially confidential nor likely to present a security risk if disclosed.

The FCO must continue to ensure that the Department is an attractive place to work and that it can compete with other high-prestige employers to attract high-quality applicants. Maintaining a tradition of excellence will be key, but we believe that the FCO cannot entirely overlook pay and benefits. The FCO could either seek to eliminate the pay differential between the FCO and comparable Government departments: that would require Treasury dispensation and might cost £20 million, maybe spread over a period of five years or so; or it could put more resources into safeguarding the benefits and allowances which are most valued by staff.

The cuts imposed on the FCO since 2010 have been severe and have gone beyond just trimming fat: capacity now appears to be being damaged. The next Government needs to protect future FCO budgets under the next Spending Review. The FCO already spends less per head of population than foreign ministries in our closest comparator countries. The majority of the FCO’s expenditure is either ring-fenced or 6 The FCO’s performance and finances in 2013–14 non-discretionary, and so its scope to make savings is limited. If further cuts are imposed, the UK’s diplomatic imprint and influence would probably reduce, and the Government would need to roll back some of its foreign policy objectives. In short, the FCO would need to aim to do less.

We recommend that the FCO, in its response to this Report, explains how it plans to use diversity factors as a “legitimate consideration in appointment decisions”, if it has ruled out the use of positive discrimination.

Persistent under-achievement on diversity targets has the potential to drain morale and risks damaging the reputation of the FCO as an employer and service provider. The problems do not appear to reflect institutional barriers but rather a lack of confidence among women that they have the same opportunities for career development and advancement as their male colleagues. We would expect the measures already in hand to have an effect, if not an immediate one; and we endorse the principle that the FCO should continue to make appointments on the basis of best person for the job. The FCO will, however, need to continue to demonstrate that cultural change is under way, if women in the FCO are to feel confident that they can make it to the top of the organisation.

The Chancellor’s target for the value of UK exports in goods and services to reach £1 trillion by 2020 is very demanding: it appeared unrealistic at the time it was set and it is proving to be so now. We do not believe that a major reallocation of FCO staff and effort would necessarily help to reach that target; nor do we believe that such a rebalancing would be desirable. We believe that the Government should set a new, more realistic target for UK exports, and it should expect other Government Departments to play their part in helping to reach it.

We recommend that data on sponsorship for events hosted by the FCO in the UK is included in disclosures on corporate sponsorship.

We welcome the assurances from the Department that no special favours are granted to companies which sponsor FCO activities.

The value of sponsorship currently being raised by the FCO hardly justifies the reputational risk to the Department, nor does it appear to compensate adequately for the undoubted value that sponsors receive on behalf of the taxpayer. We encourage the FCO to derive greater value for the taxpayer by extracting more from commercial sponsors, on the understanding that all sponsorship (not just deals with a value of over £5,000) should be transparent and should be published by the FCO on a rolling basis, rather than being held over to the Annual Report and Accounts.

pdf 9 Nominal outturn figures have been deflated into 2013-14 prices. We used the GDP deflators from the Autumn Statement, December 2014 update. See https://www.gov.uk/government/statistics/gdp-deflators-at-market-prices- and-money-gdp-december-2014-autumn-statement 10 Outturn figures for 2007-08 were taken from the FCO Annual Report and Accounts 2012-13, HC 32,1 July 2013, page 25, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/318816/Annual_Report_2012- 2013_-_update_June2014.pdf 11 Forecast figures were taken from the February 2015 FCO Supplementary Estimates (HC 1019), pages 399 to 412, and adjusted to 2013-14 prices. See www.gov.uk/government/uploads/system/uploads/attachment_data/file/405331/supplementary_estimates_2014- 15_print_with_corrections_slip.pdf 12 Six bodies are listed on page 127 of the FCO Annual Report and Accounts 2013-14 as falling within the FCO accounting boundary: Wilton Park, The Great Britain-China Centre, The UK China Forum, The Marshall Aid Commemoration Commission, The Westminster Foundation for Democracy, and the BBC World Service. 10 The FCO’s performance and finances in 2013–14 Table 2: FCO ‘Core’ Resource DEL Outturn from 2007–08 to 2014–15 (in 2013–14 prices) (figures in £m) 2007– 2008- 2009– 2010– 2011– 2012– 2013– 2014– 08 09 10 11 12 13 14 1513 (forecast) Total 1,595 1,776 1,835 1,871 1,825 1,753 1,751 1,686 Resource DEL for Core Department (exc. BBC & British Council) Less: Depreciation 83 91 114 109 128 129 160 147 Conflict 421 504 507 542 553 493 474 516 prevention & peacekeeping Resource DEL 1,090 1,180 1,214 1,220 1,144 1,130 1,117 1,023 for Core Department

The capacity of the FCO to perform its role of protecting and promoting the UK’s interests and values overseas relies upon: • The existence of a corps of sufficient highly competent and motivated staff; • Efficient methods of gathering information, from the widest possible range of sources within any given foreign country, on attitudes to the UK, opportunities for the UK, and threats to the UK’s interests; • An ability to analyse that information and to form the best possible understanding of how the UK’s interests might be safeguarded and its values promoted; • The ability to command respect amongst opinion-formers within a foreign country or in international institutions, and thereby to carry influence in promoting the UK’s values; and • A platform from which staff can operate. By “platform” we mean the physical premises occupied by staff, both in London and abroad, as well as the facilities which equip staff to do their job effectively (professional development, effective performance management, daily-use tools such as IT services, and back-office functions).19 Staffing

The overstretch point, alluded to by the FCO’s 2013 Departmental Improvement Plan published in June 2013, is significant and led us to warn in our report last year on the FCO’s Performance and Finances that the FCO machine was being “worked to the limit” and was in danger of trying to do too much at a time when capacity was being limited.24

Those concerns about overstretch have not dissipated and are widely shared. Sir Simon Fraser said that “there is a risk of considerable stretch in the Office, and staff feel that and tell us about it”.25 When FCO Heads of Mission gathered in London for their Leadership Conference in May 2014, they identified relieving overstretch as the most important challenge to address in the year ahead,26 and the issue was also discussed by the FCO Supervisory Board during the course of the year.27

To pursue a target of a 10 per cent reduction in headcount by March 2016 at a time when demand for policy advice is acute, and when staff are already under pressure from what Sir Simon described as “more or less continual crisis in world events”28 seems perverse. Sir Simon admitted that “because of the pressures on the organisation”, the FCO had “decided that it was important to seek to maintain the workforce”, but he then added “except for the 10 per cent long-term trajectory reduction”, which highlights a marked contradiction in FCO policy.29

We also note the possibility of compulsory redundancies at the FCO in future. Sir Simon Fraser confirmed to us that there were no current plans for compulsory redundancies among UK-based staff, although there had been “at least 500” redundancies among locally-engaged staff over the past year. He did not, however, rule out compulsory redundancies of UK-based staff during the next Spending Review.30 It is not obvious to us what scope there is for the FCO to make compulsory redundancies other than on the grounds of consistently unacceptable performance. We recommend that the FCO give an 22 Q1 23 FCO written evidence, see answer to question 8 24 FCO performance and finances 2012-13, Sixth Report, Session 2013-14, HC 696, Summary and paragraph 25, http://www.publications.parliament.uk/pa/cm201314/cmselect/cmfaff/696/69602.htm 25 Q2 26 FCO Improvement Plan 2014, July 2014, page 21, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332896/FCO_2014_Improvement_Plan .pdf 27 See Foreword by Richard Lambert, the Lead Non-Executive member of the Supervisory Board, FCO Annual Report and Accounts 2013-14, page 7. The Supervisory Board is formed of Ministers, senior FCO officials and non-executive members, and advises on strategic issues affecting the FCO’s operations. See FCO Annual Report and Accounts 2013- 14, pages 7 and 75. 28 Q 3 29 Q 12 30 Q 12 The FCO’s performance and finances in 2013–14 15 assurance that any compulsory redundancies in the next Spending Review period would not entail a decrease in the number of staff providing direct policy support.

One of the more acute manifestations of overstretch is the difficulty sometimes faced by the FCO in filling key roles, typically those which are especially demanding in terms of hours or workload. The FCO 2014 Improvement Plan says that “there remains a disconnect between corporate and operational requirements—demand for staff continues to run ahead of supply in high priority business areas”.31 Sir Simon Fraser was candid in telling us of “a slight change in people’s attitudes” towards taking on difficult jobs.32 He said that the FCO “depended very much on people’s readiness to go above and beyond the call of duty” and that staff were now sometimes saying that, given the pressure and the rewards associated with a particularly demanding vacancy, they would be less inclined than previously to put themselves forward.33

The FCO told us in May 2014: [We have] introduced further changes into our appointments system, to help us get the right people into the right jobs, and so that we can meet our operational requirements and support our ambition to be agile and expert. The changes include … a more directive approach on filling some roles, and freezing inward interchange at certain grades to balance workforce flows.34 This would suggest that the FCO is trying to address the challenge of filling key roles by actively steering staff towards key posts rather than relying on open competition. The FCO should, in response to this Report, set out its strategy for ensuring that vacancies for key posts are filled promptly and by staff of the necessary calibre. Expertise

We have been alert, through the course of this Parliament, to suggestions that the FCO’s local knowledge and expertise in understanding foreign countries is not what it once was. We heard two striking examples, one from a former FCO Minister and another from a former senior Ambassador: • Lord Malloch-Brown told us in January 2012 that the UK had lost its previous Arabist “touch and feel” for the Middle East. He said “although the British Ambassadors I met in the region were still of a very high calibre, they had much smaller political teams per country than in the past. In that sense, it is correct to say that they could not dig down 31 FCO Improvement Plan 2014, July 2014, page 17, www.gov.uk/government/uploads/system/uploads/attachment_data/file/332896/FCO_2014_Improvement_Plan.pdf 32 Q 13-14 33 Ibid 34 “Letter to the Chairman from Sir Simon Fraser, Permanent Under-Secretary, Foreign and Commonwealth Office, on FCO management issues, January to March 2014, dated 12 May 2014”, Committee’s website 16 The FCO’s performance and finances in 2013–14 deep enough”. Lord Malloch-Brown ascribed this to cuts under both this Government and the previous one.35 • Sir William Patey, British Ambassador to Iraq in 2005–06, to Saudi Arabia from 2007 to 2010, and to Afghanistan from 2010 to 2012, said at a recent event at Chatham House: I think it’s probably true that our ability to have the in-depth knowledge and take the time to have the depth of analysis is gradually diminishing. I mean budget cuts and cuts generally have reduced the amount of time that an ambassador or an embassy have to take the time to reflect. I mean the days of having a second or a first secretary travel up country for a week or two and get to know the local tribes and maybe write an interesting report for the ambassador and keep it, just clock it away as we might need that one day, that is becoming increasingly impossible. There is just too much else going on and so that time that you can take, the resource involved in accumulating that depth of knowledge is, we’re losing that.36 Both men made an explicit link between shortage of manpower and the FCO’s capacity to gather and analyse information.

The FCO's difficulties in dealing with the Ukraine crisis have also attracted particular comment. Sir Nigel Sheinwald, a former Ambassador to the US, for example, was quoted in the Financial Times on 14 November 2014 as saying that "When the Ukraine crisis happened, there was a problem in the Foreign Office, the old Cold War cadre of people just wasn't there".37 Edward Lucas, a Senior Editor at The Economist, made a similar point when giving evidence to us in September 2014 on Ukraine and Russia. He said that “[the FCO] kind of gave up in 1991: we thought it was over and wound down the terrific analytical capacity we had".38

To some extent, the scaling-down of the FCO’s resources in Russia and Eastern Europe after the end of the Cold War can be seen as the result of a rational decision to re-allocate resources to where they were most needed at the time. Sir Simon Fraser took this view, while accepting that there was now “less depth of Russia expertise” in the FCO than in the 1990s.39 He acknowledged that it would be important to address the shortfall now, given that dealing with Russia was going to be one of the big strategic challenges in the near future.40 35 Q 106 and 141, evidence given on 31 January 2012, British foreign policy and the ‘Arab Spring’, Second Report of Session 2012-13, HC 80, http://www.publications.parliament.uk/pa/cm201213/cmselect/cmfaff/80/80.pdf 36 “21st Century Diplomats: The Changing Role of British Diplomats”, 22 January 2015, Chatham House, see www.chathamhouse.org/sites/files/chathamhouse/field/field_document/2015012221stCenturyDiplomats.pdf 37 “Britain’s Foreign Office loses direction as cuts loom”, FT Online, November 2014 38 Evidence given by Edward Lucas on 3 September 2014, Russia and Ukraine, HC 629, Q19 39 Q 81 40 Q 81 The FCO’s performance and finances in 2013–14 17 Languages

Criticism of FCO expertise has commonly centred on an apparent decline in proficiency in foreign languages, something which we have drawn attention to repeatedly over the years. A succession of witnesses have noted a shortfall in proficiency in Arabic in the FCO. To take just two: Lord Malloch-Brown told us in 2012 that Foreign Office languages were “in crisis” and that even with a mainstream language such as Arabic, the cutbacks that have occurred are key”.41 Sir Oliver Miles42 saw it as “deplorable” that “too many positions” in the FCO in the Middle East and North Africa region were occupied by non-Arabic speakers.43

Proficiency in Russian is also seen as a weak spot: Sir Tony Brenton, a former UK Ambassador in Moscow, told the House of Lords EU Sub-Committee on External Affairs that British diplomacy towards Russia and elsewhere has suffered because of a loss of language skills, particularly in the Foreign Office. There was quite a lot of complaint in Whitehall after the annexation of Crimea that the Foreign Office had not been able to give the sort of advice that was needed at the time. I think that is regrettable and it marks a change from when I was there.44

It is alarming that the strongest criticisms that we hear about FCO capability relate to regions where there is particular instability and where there is the greatest need for FCO expertise in order to inform policy-making. We also note that the percentage of ‘speaker slot’ posts45 occupied by someone possessing the specified level of proficiency in the required language (a measure known as “Target Level Attainment”) is currently just 38 per cent overall, and in the same key regions it is lower still: 28 per cent in FCO posts in the Middle East and North Africa region, and 27 per cent in Russia and Eastern Europe.46 41 Q 121, evidence given on 31 January 2012, British foreign policy and the ‘Arab Spring’, Second Report of Session 2012-13, HC 80 42 Former Ambassador to Libya and former Head of the FCO’s Near East and North Africa Department 43 Written evidence to the Committee’s inquiry into The role of the FCO in UK Government, HC 665, Session 2010-12, http://www.publications.parliament.uk/pa/cm201012/cmselect/cmfaff/665/665vw17.htm. See also evidence given by Robin Lamb on 22 January 2013 - Q63, UK’s relations with Saudi Arabia and Bahrain, Fifth Report of Session 2013-14, HC 88, 12 November 2013, www.publications.parliament.uk/pa/cm201314/cmselect/cmfaff/88/88.pdf 44 See Q32, transcript of evidence taken before the House of Lords Select Committee on the European Union, External Affairs (Sub-Committee C), 24 July 2014, http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-sub-c-external-affairs- committee/eu-and-russia/oral/11587.html 45 Each “speaker slot” carries a requirement for facility in that language to a specified level. That might be 'confidence' level, at which someone would be able to deal confidently with routine everyday issues in the local language, or at a higher 'operational' level, roughly equivalent to degree level, or at 'extensive' level, representing the most advanced level of fluency. 46 FCO memorandum answer to Q 10, see http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/foreign-affairs-committee/the- fcos-performance-and-finances-in-201314/written/15560.html 18 The FCO’s performance and finances in 2013–14

The Permanent Under-Secretary readily acknowledged that the low levels of Target Level Attainment in foreign languages were unacceptable and said that Heads of Mission and FCO Directors had been given “very clear instructions” that people should be given time to do their language training and were given strong incentives to do so—both carrots and sticks.47 We note the actions being taken by the FCO to make clear to staff what is expected of them and to demand higher levels of proficiency in certain posts.48

In past reports, we have repeatedly drawn attention to the dangers of allowing language proficiency among FCO staff to erode. Whatever the root causes of this decline, we are heartened to see that the Permanent Under-Secretary has gripped the issue and has made a clear personal commitment to reversing the trend. One of the clearest indications of a turnaround would be improved performance in language exams, and we encourage our successors to monitor this area closely. Overseas opportunities for UK-based staff

Knowledge and expertise at senior levels of the FCO is an accumulation formed over many years of service in the UK and abroad. Heads of Mission who have spent their career within the FCO—the vast majority—have experience of living and working within different cultures, and in different political and social environments. As we observed last year, opportunities for UK-based staff in relatively junior policy grades to work overseas are an essential part of acquiring that knowledge and experience which is carried forward to senior levels of the organisation.49 It is important that those opportunities should not be eroded. We note that the balance between UK-based staff working in the UK and those working overseas has been relatively constant over the last six years, at a roughly 62%/38% split.50 A small downward trend since 2012 is likely to be attributable to the recent marked reduction in overseas postings for staff in administrative grades.51

Last year we questioned whether the FCO’s openness to an increase in the use of locally-engaged staff in front-line and policy roles might reduce opportunities for UK- based staff. Sir Simon Fraser reassured us then that any such increase could be accommodated without damaging the career prospects of UK-based staff, and that the number of diplomatic positions overseas for UK-based policy staff was in fact increasing.52 However, the FCO declined to give us a guarantee that a greater use of locally-engaged staff in future would not at some point lead to a decrease in overseas positions for UK-based 47 Q 78 48 FCO response to the Committee’s Sixth Report of Session 2014-15, published as Cm 8797, response to recommendation 12 49 FCO performance and finances 2012-13, Sixth Report of Session 2013-14, HC 696, paragraph 35, http://www.publications.parliament.uk/pa/cm201314/cmselect/cmfaff/696/696.pdf 50 FCO written evidence, answer to written question 4 51 See FCO performance and finances 2011-12, Fifth Report from the Committee, Session 2012-13, HC 690, paragraph 40 52 FCO performance and finances 2012-13, Sixth Report from the Committee, Session 2013-14, HC 696, paragraphs 34 and 35 The FCO’s performance and finances in 2013–14 19 staff at policy grades. It did nonetheless state that it would “not undermine the first-hand experience and knowledge base” of its UK-based staff.53

All FCO posts at SMS grades54—including most ambassadorships and many deputy head of mission posts—are advertised across Whitehall.55 The FCO listed eleven posts which were, or would shortly be, headed by people who had not spent their careers in the FCO.56 Sir Simon Fraser confirmed that these staff were (or would be) FCO employees; but when asked whether there might come a day when a Head of Mission was not an FCO employee, he saw no reason why that should occur. He told us that the FCO “runs the overseas network” and added that “Heads of Mission and ambassadors report to the Foreign Office. That is their institutional home, so if people want to come in and take those jobs, they should come in and become part of the Foreign Office”.57

There is also interchange from other Government departments at middle-ranking grades. Sir Simon Fraser told us that there had been an increase in the number of inward secondments from other departments, and that the FCO benefited from their expertise. He recognised, however, that the FCO needed to nurture “the skills and the people who are making a long-term contribution as British diplomats”, and to maintain “opportunity for them as well”.58

While we recognise that it is in the FCO’s interest to draw, to a limited extent, on experience from outside the organisation, we have sometimes been surprised to find key, sensitive posts occupied by people who have not spent their career in the FCO. We also find that the practice of appointing Heads of Mission from outside the FCO on the basis that they are the best applicants for the posts concerned brings into question the adequacy of the FCO’s staff development. We believe that the head of the UK’s representation in any particular country should only be a non-FCO career employee in the most exceptional circumstances. However, we welcome the reassurance by the Permanent Under-Secretary that he would expect a Head of Mission always to be employed as an FCO employee. We believe that any other arrangement would obscure an otherwise clear line of accountability, from heads of mission to the Permanent Under-Secretary to FCO Ministers. 53 Government response to the Sixth Report from the Committee, Session 2013-14, recommendation 8, published as Cm 8797 54 Equivalent to the Senior Civil Service 55 Q5 56 Ambassadors in Athens, Jakarta, Sofia and Sarajevo; High Commissioner in Sydney and Deputy High Commissioner in Mumbai; Consuls-General in New York, Ho Chi Minh City, Guangzhou and Sao Paulo; and UK Permanent Representative to the EU in Brussels. See written evidence from the FCO, answer to written question 21 57 Q 59 58 Q 5 and 15 20 The FCO’s performance and finances in 2013–14 Staff morale

The FCO’s 2013–14 Annual Report and Accounts state that “overall, morale is generally considered to be high”.59 It is true that the FCO consistently scores significantly higher than the Civil Service median for percentages of staff who are proud to work for the Department, who see it as a great place to work, and who feel motivated.60 The FCO, however, recognised concerns about pay, and the Annual Report recorded that staff morale was “a static amber risk” on the FCO’s Top Risk Register, given the continuing constraints on pay.61 Staff pay

The FCO, in its 2014 Departmental Improvement Plan, reported that the majority of staff are dissatisfied with their pay and benefits package. Only 33 per cent of staff felt that their pay adequately reflected their performance, and only 26 per cent believed that their pay was reasonable compared to that for people doing a similar job in other organisations.62 FCO staff pay was frozen for two years, in 2011–12 and 2012–13, and was subject to an average increase of one per cent in 2013–14, in line with the Government’s public sector pay restraint policy.63 Pay: comparison with other Government Departments

There is a significant difference between rates of pay for FCO staff and rates for staff in what might be called comparable departments, such as the Department for International Development and the Department for Business, Innovation and Skills. For instance, the minimum pay for a Grade 7 employee in the Department for International Development in 2013 was £49,500,64 whereas it was £43,500 at the FCO.65 Sir Simon Fraser told us that in some key grades, the median of FCO pay is “somewhere in the region of 10 to 12 per cent below median pay of those Departments”.66 He added that there were “historical reasons for that”, the main one being that the FCO had moved very early to remove incremental pay increases when the Treasury had asked Departments to do so. Others had done so rather less speedily and, as a consequence, pay for FCO staff had fallen behind pay for staff in other departments.67

This discrepancy has emerged as a major obstacle to full implementation of the ‘One HMG Overseas’ initiative, under which the Government plans to derive benefits (including 59 FCO Annual Report and Accounts 2013-14, Governance Statement. page 73 60 Civil Service People Survey 2014 61 FCO Annual Report and Accounts 2013-14, Governance Statement, page 74 62 FCO Improvement Plan 2014, page 11 63 Pay was frozen for staff in SMS grades for three years, from 2010 to 2013. 64 HC Deb, 01 December 2014, UIN 215749 [Commons written answer]; figures rounded up to the nearest £500. 65 “FCO staff and salary data”, www.gov.uk/government/publications/foreign-office-staff-and-salary-data; figures rounded up to the nearest £500. 66 Q 7 67 Ibid The FCO’s performance and finances in 2013–14 21 savings) from bringing together on a single premises or “operating platform” in any one foreign city the various UK Government departments and agencies operating there. Significant progress has been made on various aspects of the programme, but not on harmonisation of pay between staff working for different departments. Deborah Bronnert, the Chief Operating Officer at the FCO, told us that “the pay issue in particular will be very hard to crack”.68

Sir Simon agreed that the disparity in pay between the FCO and other Government departments was “undesirable and illogical”, but he emphasised that it was not within his “power to unilaterally increase the pay of FCO staff” as he simply did not have the resources from the Treasury to do so.69 He said that he was talking to colleagues in the Treasury about how the situation might be remedied.70

We asked the FCO to supply a copy of research that it had commissioned from an external researcher on comparing pay between the FCO and other Government departments.71 The FCO offered to share the research, but it asked to do so on condition that we did not publicise the contents, as other Government departments had required the FCO to give an undertaking that the report would not be publicised. We rejected those conditions. It is unacceptable for Government departments to place constraints on the disclosure of information which directly concerns public expenditure, is not internal policy advice, and which we suspect is neither commercially confidential nor likely to present a security risk if disclosed. We chose, however, not to pursue the matter, as enough information was already in the public domain to illustrate the pay disparity.

We asked the FCO how much it would cost to remedy the differences in pay, to the point where FCO staff would receive equal pay to staff doing comparable jobs in other Government departments. The FCO estimated, on the evidence available, that raising FCO median pay so that it was in line with median pay for comparable departments operating internationally would mean an increase to the FCO annual pay bill of approximately £20 million—which we calculate to be an increase in total staff costs of 3.4 per cent.72 Reduced benefits of working at the FCO

It may be that dissatisfaction reported in the staff survey also stems, in part, from a sense that many of the benefits and attractions of working for the FCO have been trimmed or have declined in value. For instance: 68 Q 9 69 Q 9 and 11 70 Ibid 71 Q 7 72 Including associated costs such as pension costs and National Insurance contributions. See answer to Q 2 of supplementary written evidence from the FCO. 22 The FCO’s performance and finances in 2013–14 • The number of overseas posts for FCO staff in administrative grades has been cut substantially, reducing the opportunities for staff in these grades to work abroad;73 • Residential premises for most FCO staff overseas are likely to be humbler than in the past. The new Residential Accommodation Policy for UK-based staff working overseas is intended to reduce spending on rented residential accommodation by 20 per cent over the Spending Review period. The “ceilings” for rentals payable by the FCO have been lowered,74 and the likely consequence is that affordable properties will be smaller or less central, and less prestigious; and • Allowances paid to recognise proficiency in languages have remained static for years. A recent review of language allowances concluded that allowances paid to postholders in ‘speaker slots’ should remain unchanged. This decision was based on a number of factors, including pressure to remain within the HM Treasury one per cent pay cap rule, and strong fields of applicants for speaker slots.75 Conclusion on pay and morale

The pay differential between the FCO and comparable Government departments is not going to go away. For as long as there are compensations and significant non-financial benefits in working for the FCO—the chance to spend much of your working life overseas, prestige, a good standard of living while overseas, allowances—the discrepancy is less noticeable. But if those benefits are perceived to be diminishing (and for some grades they have largely disappeared), then the current dip in morale could become more established and could lead to a lessening of commitment amongst staff. Ultimately, if the FCO becomes a less attractive place to work, more and more of the brightest and best will apply elsewhere.

The FCO must continue to ensure that the Department is an attractive place to work and that it can compete with other high-prestige employers to attract high-quality applicants. Maintaining a tradition of excellence will be key, but we believe that the FCO cannot entirely overlook pay and benefits. The FCO could either seek to eliminate the pay differential between the FCO and comparable Government departments: that would require Treasury dispensation and might cost £20 million, maybe spread over a period of five years or so; or it could put more resources into safeguarding the benefits and allowances which are most valued by staff. 73 See FCO performance and finances 2011-12, Fifth Report from the Committee, Session 2012-13, HC 690, paragraph 40 74 See FCO performance and finances 2012-13, Sixth Report from the Committee, Session 2013-14, HC 696, paragraphs 11 and 12 75 FCO written evidence, answer to written question 11 The FCO’s performance and finances in 2013–14 23 Overall conclusion on FCO spending and impact on capacity and workforce

We do not dispute that the FCO needed to play its part in the general retrenchment instigated by the 2010 Spending Review. The FCO was dealt a difficult hand, and Ministers and senior management have, on the whole, played it skilfully. We continue to see evidence in some overseas posts of a depth of knowledge and a well-developed relationship with civil society organisations and representatives. However, we believe that the scale of the cuts required from the FCO has been excessive and that damage to the institution has resulted. The FCO’s budget is a tiny element of Government expenditure, but it makes a disproportionate contribution to policy-making at the highest level, including decisions on whether to commit to military action. To impair the FCO’s analytical capacity for the sake of a few million pounds could be disastrous and costly.

Unless staffing at overseas posts is protected, further reductions in staffing levels overall are likely to lead to either a reduction in complement at overseas posts, or a significant shift in the balance between UK-based staff and locally engaged staff, in favour of the latter. Neither option seems to us to be palatable: the first would almost certainly reduce opportunities for staff to get away from the diplomatic “bubble” and acquire the depth of knowledge about local attitudes that must inform policy-making, while the second would be likely to reduce the opportunities for more junior staff in policy grades to get the experience which is essential to qualify them for service at the highest levels of the Diplomatic Service.

The cuts required by the 2010 Spending Review have also had an impact on the UK’s overseas platform, even though admirable efforts have been made to expand the number of posts under the Network Shift announced by the previous Foreign Secretary in May 2011. That expansion took place at the expense of a number of subordinate posts in Europe and of the UK’s diplomatic footprint in Iraq and Afghanistan. We have previously questioned the wisdom of closing the British Embassy office in Basra;76 and in October 2014 we noted the view of senior figures in the Kurdistan Region of Iraq that the UK’s failure to secure proper premises in Erbil77 had given a poor impression of the UK in comparison to other countries which had opened permanent offices in the city.78

The cuts imposed on the FCO since 2010 have been severe and have gone beyond just trimming fat: capacity now appears to be being damaged. The next Government needs to protect future FCO budgets under the next Spending Review. The FCO already spends less per head of population than foreign ministries in our closest comparator countries. The majority of the FCO’s expenditure is either ring-fenced or non-discretionary, and so its scope to make savings is limited. If further cuts are imposed, the UK’s diplomatic imprint and influence would probably reduce, and the 76 See FCO performance and finances 2011-12, Fifth Report from the Committee, Session 2012-13, HC 690, paragraph 19 77 The Consulate-General operates out of a business hotel on the outskirts of the city. 78 See UK Government policy on the Kurdistan Region of Iraq, Eighth Report from the Committee, Session 2014-15, HC 564, paragraph 62 24 The FCO’s performance and finances in 2013–14 Government would need to roll back some of its foreign policy objectives. In short, the FCO would need to aim to do less. The FCO’s performance and finances in 2013–14 25 3 Diversity at the FCO

The FCO launched its first ever strategy on diversity, entitled ‘Fairness for All’, in November 2008.79 The strategy was based on four key themes that were designed to drive the mainstreaming of equality and diversity further into every aspect of FCO business. The key themes were: • To create a more inclusive FCO culture; • To provide stronger leadership and accountability; • To bring in and bring up diverse talent, based on merit; and • To better represent the communities it serves.80 This section of the report considers the last of these four themes in detail.

As part of the FCO’s drive to be more representative of the community, the Department set targets in 2008 to increase the proportion of women, black and ethnic minority and disabled staff in senior management. The targets were: • 28 per cent of FCO senior management to be women; • Five per cent of senior management to be people from minority ethnic backgrounds; and • Five per cent of FCO senior management to be disabled people. The aim was to achieve these targets by April 2013;81 but, in the event, all were missed, and at the time of writing this Report, the FCO had still not met any of them. Table 4: ‘Fairness for All’ Diversity Targets Diversity targets for senior management (SMS grades) Group Target November 2008 December 2013 (last (baseline) reported) Women 28% 20.1% 25.4% Black and ethnic 5% 3.9% 4.4% minority staff Staff with disabilities 5% 2.2% Not reported* *December 2013 figure for staff in senior management grades with disabilities not reported due to low response rate Source: NAO Departmental Overview 2013–14 We focus in this report on representation of women in senior management in the FCO. 79 “The FCO’s Inclusion & Diversity Strategy 2008-13: Fairness for All Strategy”, November 2008, www.gov.uk/government/uploads/system/uploads/attachment_data/file/11859/FCO_DI_2008- 13_FINAL_Jan09_doc.pdf 80 Ibid 81 Ibid 26 The FCO’s performance and finances in 2013–14 Missed targets

The FCO senior management structure is made up of four grades: SMS 1, SMS 2, SMS 3 and SMS 4. The table below, which is reproduced from the FCO’s written evidence, shows the number of women in each senior management grade for the last six years:82 Table 5: The Number of FCO UK Based SMS (Senior Civil Service) female staff, 2008 to 2014 (headcount) Grade 2009 2010 2011 2012 2013 2014 SMS 1 62 61 66 69 75 82 SMS 2 14 15 13 17 16 18 SMS 3 3 3 3 3 4 6 SMS 4 0 0 0 0 0 0 Total 79 79 82 89 95 106 Source: Foreign and Commonwealth Office (Dates are as 31 March 2014) The number of female senior managers has increased by 34 per cent in the past six years, from 79 in March 2009 to 106 in March 2014. The most noticeable rise took place in the most recent financial year, when 11 women had either been promoted from lower ranks of the FCO or brought in from outside into the SMS grades. Despite this progress, the proportion of women in senior management in March 2014 was 26.2 per cent and still below the ‘Fairness for All’ representation target of 28 per cent.83

The Civil Service published a diversity strategy in July 2008, in which it set targets to increase the representation of women in senior management. The targets were: 34 per cent of staff in top management posts to be women;84 and i) 39 per cent of the Senior Civil Service (SCS) to be women. Thei iF)CO has opted not to benchmark its performance against either of the Civil Service targets. It has not tracked progress against the first objective at all; and on the second target, the FCO set its mark 11 per cent lower than the Civil Service milestone. The FCO does not compare favourably with some of its Whitehall partners, most notably DFID. Not only did DFID achieve the 39 per cent target for women in the Senior Civil Service; it tracked, monitored and exceeded the other target on women in top management posts. 42 per cent of DFID directors were women in December 2013.85

FCO performance in promoting women to the very top posts has been disappointing. Only 19 per cent of the top two senior management posts are occupied by women. Only 6 out of the 29 positions in SMS 3 are held by women, and in the highest and best-rewarded branch of the diplomatic tree (SMS 4), there were no women (out of a possible three 82 FCO written evidence, answer to written question 2 83 As at 31 March 2014, there were 404 people in FCO senior management. See FCO Annual Report and Accounts 2013- 14, page 44 84 Top management posts were defined as Director and above 85 “DFID Diversity and Inclusion – Annual Report 2013-14”, DFID, page 19, www.gov.uk/government/uploads/system/uploads/attachment_data/file/339639/Diversity-Inclusion-Annual-report- 2013-2014a.pdf The FCO’s performance and finances in 2013–14 27 positions).86 In the history of the FCO, no woman has ever held a post at the highest grade (SMS 4). There are a number of ‘glittering posts’ in which there has never been a woman head of mission: Washington, Paris, Tokyo, New Delhi, Permanent Representative at the UN in New York and Permanent Representative at the EU in Brussels;87 and no woman since at least 1984 has been Ambassador in Rome, Bonn/Berlin, or Ottawa.88 Out of 125 people appointed to Head of Mission posts in 14 BRIC or emerging market countries between 1984 and February 2014, just nine were women.89 The list of women appointed comparatively recently to high-profile posts includes Dame Mariot Leslie, the UK’s Permanent Representative to the North Atlantic Council since April 2010, Dame Nicola Brewer, High Commissioner in South Africa from 2009 to 2013, Dame Anne Pringle, Ambassador in Moscow from 2008 to 2011, and Barbara Woodward, appointed as Ambassador in Beijing in August 2014. Addressing barriers

FCO officials told us that it was “regrettable” that the ‘Fairness for All’ targets had been missed, and they acknowledged that it had “some catching up to do”.90 The FCO identified a number of key barriers that were still preventing the progress of women: • Difficulty maintaining a work-life balance in senior roles; • Reconciling work with caring responsibilities; • The difficulties of partners finding employment when accompanying their diplomatic spouses overseas; and • Self-confidence.91 Deborah Bronnert, the new Chief Operating Officer at the FCO, told us that there was still a misconception across the Office that women did not see themselves in an ambassadorial role and that it was still perceived as a role for a man.92 Some of these problems, particularly ones related to confidence, still appear to be linked to historic policies of discrimination, such as the marriage bar.93 Although it was lifted in 1972, Ms Bronnert told us that it still casts a long shadow over the FCO.94 86 FCO written evidence, answer to written question 2 and FCO Annual Report and Accounts 2013-14, page 46 87 “Review: The slow progress of women in the diplomatic service” by Dame Nicola Brewer, The World Today - Chatham House, June and July 2014, page 48-49 88 HL Deb, 24 February 2014, col WA 170 89 BRIC/emerging market countries: China, Russia, India, Indonesia, Saudi Arabia, Egypt, Brazil, Argentina, South Africa, Nigeria, Australia, Canada, New Zealand, and Turkey. 90 Q 19 and 20 91 FCO supplementary written evidence, answer to written question 5 92 Q 20 93 Up until 1972, the FCO required female staff to resign from the Diplomatic Service if they became engaged to be married. 94 Q 20 28 The FCO’s performance and finances in 2013–14

We were given assurances that that the FCO was working hard to remove the remaining barriers blocking the progress of women. In its written submission, the FCO outlined its “radical policies” for improving diversity.95 These included: Extending tour lengths for disabled staff beyond five years; i) Using diversity factors as a legitimate consideration in appointment decisions; and ii) Allowing interview panels to be composed of staff at different levels, including more junior staff members. iii) In addition to these “radical” policies, the FCO said that it would run communication campaigns to encourage talented people from under-represented groups to consider a career in the FCO; run targeted coaching and mentoring schemes to help support the advancement of existing staff from underrepresented groups; make diversity and inclusion a key focus in the Leadership Conference sessions for senior staff; and encourage staff to complete unconscious bias training.96

We questioned whether any of these policies were as “radical” as the Department had claimed. It appeared to us that many of these ideas had been discussed and implemented by many different organisations for many years. Sir Simon, in response to this assertion, told us that the “absolute principle of appointments has to be…the best person for the job”. He categorically ruled out the possibility of “positive discrimination in terms of actual appointments”.97 It is not clear to us therefore what is meant by the FCO in its policy of using “diversity factors as a legitimate consideration in appointment decisions”.98 We recommend that the FCO, in its response to this Report, explains how it plans to use diversity factors as a “legitimate consideration in appointment decisions”, if it has ruled out the use of positive discrimination. More positive signs

The FCO has argued that it has built good foundations for improvement in the past few years, and it appears to be confident that it is heading in the right direction. Sir Simon Fraser told us that the “single biggest and most important achievement” was the shift in culture of the organisation, and that diversity had been taken away from being something that is purely seen in terms of numbers and targets into something that the FCO genuinely understands is in the interests of efficiency and high performance.99 This has become “well- entrenched” and would “drive real change” in the future.100 95 FCO written evidence, answer to written question 3 96 FCO supplementary written evidence, answer to written question 4 97 Q 23 98 FCO written evidence, answer to written question 3 99 Q 23 100 Ibid The FCO’s performance and finances in 2013–14 29

We have also seen signs that the FCO is willing to experiment: Jonathan Aves and Katherine Leach have been job-sharing the role of Ambassador to Armenia since 2012, on a four month on/off format.101 Ms Bronnert told us that the Department encouraged job- sharing and indicated that there were other examples of this happening in the Department, including job shares at senior levels of the FCO. Ms Bronnert claimed that perhaps in this area, the FCO had been radical after all.102

There have been signs of positive change on increasing representation at some of the key decision-making functions of the FCO: five out the 11 members of the FCO Management Board are women; and on the Senior Appointments Board, which makes recommendations for all ambassadorial appointments, there are four women and three men.103 New targets

The FCO has set new diversity targets for its under-represented groups, including an aim to have 39 per cent of senior management to be women by 2019.104 The FCO Board has also set a new target to have 24 additional female Heads of Mission overseas by 2017, from its baseline of 39 female Heads of Mission in 2013 to 63 in 2017.105

These targets are challenging. On the assumption that the number of senior managers at the FCO remains at the current level of 404, the FCO would have to promote 52 more women into senior management, either from the lower ranks of the FCO or directly from outside in the next five years. We note that: • Talented women in junior ranks would have to be retained in order to build a corps suitable for promotion into senior management; • A low churn rate of senior managers would place additional pressure in meeting the target. With less staff turnover, fewer positions would become available for women to occupy; and • If staff turnover remains at current levels, on average 12 vacancies would become available each year. Even if none of the people at SMS grades leaving the Department between now and 2019 were women, the FCO would need to appoint 10 or 11 women each year into the vacant positions that become available, in order to meet its target. On that basis, the FCO would have to appoint, on average, 86 per cent female candidates into these positions each year. 101 “British Ambassador to Armenia”, Gov.uk website, www.gov.uk/government/people/james-aves 102 Q 23 103 Q 21 104 Q 19 105 “2014 Diversity and Equality Report”, FCO, page 4, www.gov.uk/government/uploads/system/uploads/attachment_data/file/306569/FCO_Diversity_and_Equality_Report_ 2014_-_FINAL__25_April_2014__for_publi___.pdf 30 The FCO’s performance and finances in 2013–14

Persistent under-achievement on diversity targets has the potential to drain morale and risks damaging the reputation of the FCO as an employer and service provider. The problems do not appear to reflect institutional barriers but rather a lack of confidence among women that they have the same opportunities for career development and advancement as their male colleagues. We would expect the measures already in hand to have an effect, if not an immediate one; and we endorse the principle that the FCO should continue to make appointments on the basis of best person for the job. The FCO will, however, need to continue to demonstrate that cultural change is under way, if women in the FCO are to feel confident that they can make it to the top of the organisation. The FCO’s performance and finances in 2013–14 31 4 Trade and Economic Diplomacy

One of the three key responsibilities of the FCO relates directly to growth and promoting UK prosperity.106 The FCO states in its Annual Report and Accounts for 2013– 14 that it will work towards this objective by increasing exports and investment, by opening markets, ensuring access to resources and promoting sustainable global growth.107 Through its network of offices overseas, the FCO plays a key role in improving export performance by engaging in range of activities which create conditions for growth, such as lobbying to remove trade barriers on behalf of the UK. Export target

In March 2012, the Chancellor of the Exchequer announced a government-wide ambition to double exports to £1 trillion (£1,000 billion) by 2020, from £488 billion in 2010.108 The Government committed to help businesses maintain market share in advanced markets while providing assistance to secure increased exports to new, fast- growing emerging economies. The FCO and UKTI, a non-ministerial department of both BIS and FCO, were identified as key contributors to achieving the new export target.

Since 2010, the value of UK exports has increased by £50 billion, with “strong” growth in China, Mexico and the Republic of Korea.109 The Prime Minister has said that UK exports to China have more than doubled since 2009, and that “at £1 billion a month, they are growing faster than France or Germany”.110 The Office for National Statistics has published data on UK exports which demonstrate good performance in some of the other major emerging markets, such as Brazil and India.111 From 2010 to 2013, UK exports to Brazil grew by 19 per cent, reaching £3.9 billion in 2013, and exports to India totalled £8.1 billion in 2013, representing an increase of 13 per cent over the four year period. However, overall exports remained fairly flat in 2012 and 2013. UK exports and services increased to just £506.5 billion in 2013 from £495.3 billion in 2012, an increase which was significantly lower than the Government would have anticipated in order to meet its £1 trillion export target.112 UK exports will need to grow by 10 per cent year-on-year to meet the target by 2020.113 106 FCO Annual Report and Accounts 2013-14, page 10 107 FCO Annual Report and Accounts 2013-14, page 23 108 “Budget 2012”, HM Treasury, HC 1853, March 2012, page 43, www.gov.uk/government/uploads/system/uploads/attachment_data/file/247119/1853.pdf 109 FCO Annual Report and Accounts 2013-14, page 23 110 “UK and China agree £14 billion of trade and investment deals”, Government press release, 17 June 2014, www.gov.uk/government/news/uk-and-china-agree-14-billion-of-trade-and-investment-deals 111 “United Kingdom Balance of Payments – The Pink Book, 2014”, Office for National Statistics, 31 October 2014, Part 3: Geographical Breakdown, www.ons.gov.uk/ons/rel/bop/united-kingdom-balance-of-payments/2014/index.html 112 FCO Annual Report and Accounts 2013-14, page 15 113 “Supporting UK exporters overseas”, National Audit Office, 16 October 2013, HC 732, page 15, www.nao.org.uk/wp- content/uploads/2014/10/10258-001-FCO-and-UKTI-Book.pdf 32 The FCO’s performance and finances in 2013–14

Sir Simon Fraser admitted that the export target was a challenging one and a real stretch, but was careful to avoid saying whether he thought the UK would achieve the target within the set timeframe.114 Forecasts from the International Monetary Fund and Office for Budget Responsibility (OBR) were less circumspect. Both organisations have indicated that the UK is unlikely to achieve exports of £1 trillion by 2020, with the OBR estimating that UK exports will not even reach £800 billion.115 Factors influencing UK export performance

The National Audit Office published a report in 2013 on supporting UK exporters overseas, in which it pointed to a number of factors that influence the UK’s export performance, most of which are uncertain and largely outside the control of the UK Government. These include: • weaknesses in the global economy; • changes in exchange rates; • changing commodity prices; • changes in the monetary policy of other nations; • fluctuations in global demand; and • political and security issues affecting overseas markets, such as events in the Middle East.116 The NAO also highlighted the need for greater coordination across Government departments to maximise the utility of export promotion activities. The FCO has identified some policy areas which are creating problems for UK businesses. For instance, delays in getting UK visas may discourage business leaders from overseas visiting the UK. We have been told this directly when meeting business leaders and representatives overseas.117 The FCO has argued that extending the ‘three to five day visa service’, for example, to some other countries might help remove some of these barriers.118 Ultimately, this is a matter for the Home Office.

The Chancellor’s target for the value of UK exports in goods and services to reach £1 trillion by 2020 is very demanding: it appeared unrealistic at the time it was set and it is proving to be so now. We do not believe that a major reallocation of FCO staff and effort would necessarily help to reach that target; nor do we believe that such a rebalancing 114 Q 24 115 “Supporting UK exporters overseas”, National Audit Office, HC 732, 16 October 2013, page 15 116 “Supporting UK exporters overseas”, National Audit Office, HC 732, 16 October 2013, page 15 117 See for instance, UK-Turkey relations and Turkey’s regional role, Twelfth Report from the Committee, Session 2010- 12, HC 1567, paragraph 24; also The UK’s relations with Saudi Arabia and Bahrain, Fifth Report from the Committee, Session 2013-14, HC 88, paragraph 60. 118 “Public Accounts Committee - Minutes of Evidence”, HC 709, 6 November 2013; See Q 105, www.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/709/131106.htm The FCO’s performance and finances in 2013–14 33 would be desirable. We believe that the Government should set a new, more realistic target for UK exports, and it should expect other Government Departments to play their part in helping to reach it. Commercial sponsorship

It has been a long-standing policy of the FCO to encourage private companies and other organisations to provide financial support for some of its activities. Sponsorship has been provided in two main ways, either through direct cash payments or by means of ‘in- kind’ assistance, such as embassies and offices having the use of companies’ facilities or products. Receipts of sponsorship in excess of £5,000 for events held in overseas offices have been disclosed in the FCO’s Annual Reports and Accounts, including some details of the type of event being held, the form of sponsorship and the names of the companies involved.119

In 2013–14, the FCO disclosed £271,500 (£110,000 as cash payments) in sponsorship for hosting 20 events at overseas posts.120 Of these events, the Queen’s Birthday celebrations proved to be most popular: the FCO received over £188,000 for 10 parties, an average of nearly £19,000 per party.121 Commercial sponsorship subsidised close to 30 per cent of the total cost of these activities to the taxpayer.

The FCO’s decision to seek corporate sponsorship has attracted some criticism: press reports have claimed that the Queen’s Birthday parties have been turned into trade fairs and that the “Queen’s Birthday has been put up for sale”.122 As well as the immediate reputational risk that comes from negative press, there are a number of other issues that need to be considered when discussing sponsorship: • Accountability and transparency: ensuring that all sponsorship–both in cash and ‘in kind’ - has been properly accounted for and disclosed in the Annual Report. Sponsorship for events held in London was not disclosed in this year’s Annual Report. • Threat to integrity: sponsorship might place Ministers and diplomatic staff under an obligation to outside individuals and organisations that might seek to influence them in the performance of their official duties; • Issue of privileged access: sponsors may be afforded opportunities to obtain privileged access to Ministers, senior diplomatic staff and other assets of the Department, in a way that gives them advantages, and disadvantages others. 119 FCO Annual Report and Accounts 2013-14, page 34; figures rounded up to the nearest £500. 120 Ibid 121 Ibid 122 “There’s a whiff of sleaze coming from William Hague’s Foreign Office”, The Telegraph online, 19 June 2014, www.telegraph.co.uk/news/uknews/queen-elizabeth-II/10909264/Theres-a-whiff-of-sleaze-coming-from-William- Hagues-Foreign-Office.html 34 The FCO’s performance and finances in 2013–14

We challenged the FCO on all of these aspects during the course of the inquiry. On the issue of accountability and transparency, the FCO has indicated that it has requested information from its posts and directorates on corporate sponsorship in excess of £5,000, including for events held in the UK.123 It is not clear whether this new data would be disclosed in the Annual Report and Accounts. We recommend that data on sponsorship for events hosted by the FCO in the UK is included in disclosures on corporate sponsorship.

Sir Simon Fraser told us that commercial sponsorship from private companies helps to defray the cost to the taxpayer of holding some of these major events, and that only very limited publicity is made available to sponsors.124 Embassies and High Commissions are instructed by the government to promote British business at all possible opportunities; no special favours are given to the companies that sponsor events.125 Sir Simon confirmed that careful consideration is given to the companies who are allowed to sponsor events, and although some of these companies are not based in the UK, these companies provide jobs in the UK.126 We welcome the assurances from the Department that no special favours are granted to companies which sponsor FCO activities.

The FCO needs to consider carefully the accusations that the dignity of the Department has been jeopardised by seeking commercial sponsorship. We acknowledge the force of argument that sponsorship could amount to, or be perceived as, an attempt by outside organisations to ‘buy’ influence of the FCO. We conclude, however, that appreciable public benefit can be derived from commercial sponsorship of FCO activities: it reduces the burden on the taxpayer by bringing in funds from outside of the public purse; and partnerships with private sector sponsors are a valuable means of promoting British industry abroad. Sponsorship can be used to maximise the utility of events held by the FCO, which can help to sustain, rather than diminish, the reputation and integrity of the Department. However, the value of sponsorship currently being raised by the FCO hardly justifies the reputational risk to the Department, nor does it appear to compensate adequately for the undoubted value that sponsors receive on behalf of the taxpayer. We encourage the FCO to derive greater value for the taxpayer by extracting more from commercial sponsors, on the understanding that all sponsorship (not just deals with a value of over £5,000) should be transparent and should be published by the FCO on a rolling basis, rather than being held over to the Annual Report and Accounts. 123 FCO supplementary written evidence, answer to written question 7 124 Q 33 125 Q 39 126 Q 38 and see FCO supplementary written evidence, answer to written question 7 The FCO’s performance and finances in 2013–14 35