Foreign Affairs Committee: Press Notice

21 March 2010

UK'S GLOBAL STANDING JEOPARDISED BY FOREIGN OFFICE FINANCING CRISIS, WARNS FOREIGN AFFAIRS COMMITTEE

On top of successive tough spending rounds for the Foreign and Commonwealth Office (FCO), the Treasury's decision to expose the Department to the effects of currency fluctuations and the subsequent fall of Sterling have forced the FCO to make cuts which represent a "serious reputational risk to the Department and the UK, and thus a threat to the FCO's effectiveness," warns a detailed report on the FCO's financial situation and management published today by the cross-party Foreign Affairs Committee.

The report explains that the FCO's difficulties are largely the result of the Treasury's withdrawal in 2007 of the Overseas Price Mechanism, which had previously protected the FCO's purchasing power in local currencies from the effects of exchange-rate fluctuations. The change came into effect at the start of the 2008-09 financial year, and was quickly followed by the major fall in the value of the Pound.

Commenting on the report, Committee Chair Mike Gapes MP said:

"For reasons largely beyond its control, the FCO's financial situation has come to represent an unacceptable risk to the Department's ability to perform its functions. The cuts that the FCO has been forced to make have led to unacceptable disruption and curtailment of operations at some key overseas Posts.

"Exchange rates should not drive UK foreign policy. At a time when globalisation is acknowledged as the key phenomenon of our times, it is incongruous that the position of the only government department with a global reach is threatened with erosion. There continues to be a vital need for the FCO to have sufficient resources to enable it to carry out its traditional policy-making functions.

"The new Government should carry out a comprehensive foreign policy-led review of the structures, functions and priorities of the FCO, Ministry of Defence and Department for International Development."

The Committee's report also comments on the creation of the European External Action Service under the EU's Lisbon Treaty, as a development with potentially important implications for the Foreign Office. Mike Gapes said:

"It will be good for the UK to have seconded national diplomats well-represented in the European External Action Service. British officials may be in a strong position to take important jobs there. However, much about the new Service remains unclear. We are pressing the Government to provide more information, and especially to set out how it plans to ensure that the Service does not take over the functions of national foreign ministries. We also want the Government to send us as soon as it is available Baroness Ashton's detailed proposal on the future operation of the Service, since we would wish to have the option of commenting on it before the dissolution of Parliament."

Notes for editors:

1. In addition to the FCO's financial situation and the European External Action Service, the Committee's report considers the size and make-up of the FCO Ministerial team; the Government's use of special representatives and envoys on international matters; the appointment of non-diplomats to diplomatic posts; the UK's contributions to international organisations and post-conflict missions overseas; FCO staffing issues; the FCO's management of its estate; the FCO's communications work; and the FCO's framework of performance objectives.

2. The Foreign Affairs Committee's Report on the FCO's Annual Report 2008-09 is being published at 00.01hrs Greenwich Mean Time on Sunday 21 March 2010 (one minute past midnight on Sunday) and will be the Committee's Fifth Report of Session 2009-10 (HC 145).

3. Read our conclusions and recommendations.

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