Second Report: Merging success: Bringing together the FCO and DFID

Given the gap between the merger and the reporting date of the Integrated Review, the FCDO risks operating for months without clear strategic direction, which will be compounded by the likely productivity dips which follow departmental mergers. The FCDO is being created to bring coherent strategy to UK foreign and development policies at a time of global change, so establishing clear objectives at the departmental level is essential to ensure that the UK’s unified international policy is understood by those who are implementing it. We recommend that the Foreign, Commonwealth and Development Office consults with Parliament before publishing a clear set of strategic objectives by the end of September to ensure its staff and stakeholders understand its purpose, function and direction.

For the Government to deliver on its stated aim of more accountable development spending with a greater focus on the national interest, it should establish and deliver on a clear strategy for communicating its interpretation of the ‘national interest’ to Parliament, institute regular reporting to Parliament, and be explicit in the ways in which the FCDO will help deliver it.

The FCO and DFID have shared ministers since February 2020, which may provide the model for ministerial portfolios in the new Department. However, it is not yet clear how many Ministers will serve in the new Department, whether the existing joint portfolios will be replicated, nor whether responsibilities will be divided in a new way. We recommend that the Government publishes a list of expected ministerial roles, with overviews of their portfolios and the reasoning behind these portfolios, before 1 September.

In the interests of accountability, the Government should explain the process that led to the decision to merge the FCO and DFID. We ask that the Government publishes the findings of its consultation, including a list of contributors and the timeframe in which it was executed. (Paragraph 14) Staff and Skills

To integrate the Departments successfully, the new PUS must have the skills and experience necessary to effectively oversee both diplomatic and development projects. Above all else, they must have exceptional knowledge and experience of change management and major project delivery to allow them to oversee a merger of this scale. We recommend that the selection criteria for the new Permanent Under- Secretary include experience of: major project management, responsibility for large budgets, multilateral diplomacy, and leadership of change in a large organisation. Given the political importance of the position and the increasing role of No. 10 in senior civil service appointments, we recommend that consideration be given by the Public Administration and Constitutional Affairs Committee to pre-appointment hearings for the PUS of the merged Department and, potentially, other similar roles. (Paragraph 16) 16 Merging success: Bringing together the FCO and DFID

The strength and reputation of the UK’s world-class aid delivery is in large part due to the skills and experience of DFID staff. We recommend that the Government makes staff retention a priority and implements a clear strategy for retaining DFID staff with valuable technical and programming expertise. This will require recognising DFID’s unique character as a Whitehall Department and preserving the ethos. There should also be clarity on how the Government intends to resolve any remuneration differentials between the two Departments before the 1 September merger date.

We welcome the Foreign Secretary’s assurance and his pledge to engage with staff throughout this process, but clarity on the nature of future roles is needed as soon as possible. We recommend that the Government presents a clear plan to staff over which specific roles will change, and which will be lost, by 15 September. The Government should also maintain the exemption on foreign passport restrictions for UK-born officials with Irish passports.

Diplomacy and development require different but complementary skillsets; it is vitally important that staff are clear on what specific skills staff will need to develop in order to undertake their responsibilities effectively and to progress in the new Department. Early indications should be given as to the skills and competencies that staff throughout the merged Department will be expected to develop for their new roles. We recommend that the Government makes staff development a priority, and outlines a programme for wellbeing support and the type of training that will be necessary for career development by the end of September. The 2021 FCDO staff survey will be one way in which the Committee will monitor the Government’s success on these areas.

We welcome work being done to increase in-country collaboration, and believe that in-country leadership of projects should be enhanced, not diminished. The new Department has the opportunity to build on examples of excellent in-country work completed by both the FCO and DFID, and to build on existing cooperation between the two Departments. While the structure of the new Department is not clear, it is important that it continues to show strong in-country leadership on both diplomatic and development projects, and that this merger is taken as an opportunity for greater cooperation between these areas, rather than greater competition. We recommend that the FCDO’s ODA programming continue to be led by in-country UK staff, who have strong local knowledge and networks. (Paragraph 26) Spending and Transparency

The merger presents an opportunity for the FCO to learn from DFID’s positive record on transparency, and to be more proactive in publishing details of project expenditure. We recommend that the UK sets ambitious new commitments to aid transparency, to be reviewed on an annual basis. In its first year, the FCDO should strive to achieve a score of ‘Very Good’ on transparency of aid spending, as assessed by the Aid Transparency Index. The Government’s Development Tracker tool should also be maintained, as an effective way of accounting for aid spending to the public. (Paragraph 29) Merging success: Bringing together the FCO and DFID 17

To ensure this goal is achievable, all staff in the FCDO working on development should have a thorough understanding of the international aid transparency frameworks and standards they are working towards. We recommend that all FCDO staff working on development projects or overviewing diplomatic outreach where aid is an element of the relationship, receive comprehensive training on the International Aid Transparency Initiative Standard.

We believe that, as the Government is maintaining its commitment to spending 0.7 percent of GNI on ODA, the current level of scrutiny on ODA spend should also be maintained. The Independent Commission for Aid Impact (ICAI) has shown itself be an effective and reputable vehicle for the scrutiny of the UK’s ODA spend. We recommend that the Government commits to maintaining ICAI as an independent body for scrutinising the UK’s overseas aid spending. Parliament should continue to be able to make full use of the important work of ICAI in scrutinising ODA spending; a dedicated select committee should have responsibility for all aspects of coordination and cooperation with ICAI.

The Government has made clear that the intention of the merger is not to save costs but has suggested better value for money is available through it. This could be through reducing administrative costs. We recommend that the Government reports on the short-term costs as well as any anticipated long-term savings, no later than six months after the merger is completed.

Ministers have suggested that the merger will deliver better value for money on overseas spending of UK taxpayer money, but have not clarified how this greater value will be delivered. The Government should provide a detailed explanation of how this merger will provide greater value for money on spending, and how it reached this conclusion in the absence of the findings of the Integrated Review.

As the aim of the merger is to harmonise UK foreign and development policy, it is essential that the Government does not focus solely on the ODA spend of the FCDO, but ensures that the new Department has responsibility for the coordination of ODA spending across Whitehall. In its response to this report, we ask the Government to set out the ways in which ODA spending by other Departments will support the delivery of the UK’s international objectives.

It is also important that the alignment in aid and diplomacy is not used as an excuse to roll back the reforms that have ensured the UK’s IMF and World Bank positions are still staffed by individuals with experience of multilateral aid and major project management, whose skills will now be housed in the FCDO. (Paragraph 37) 18 Merging success: Bringing together the FCO and DFID