Form of the Departmental Annual Report and related papers

1.  Given the scale of its efficiency programme, we recommend that in its next Annual Report the FCO considers devoting more space to reporting progress on meeting its efficiency target. (Paragraph 8)

Comprehensive Spending Review settlement

2.  We conclude that the Comprehensive Spending Review 2007 (CSR07) settlement for the FCO, one of the tightest in Whitehall, risks jeopardising the FCO's important work. We recommend that in its response to this Report the FCO sets out what impact an average real annual reduction in its budget will have on its programmes over the CSR07 period. (Paragraph 21)

3.  We recommend that in its response to this Report the FCO set out what items of one-off and time-limited expenditure were excluded in the baseline for calculating the FCO's CSR07 settlement and the grounds on which it was considered reasonable to exclude them. (Paragraph 22)

4.  We conclude that it was wrong that the FCO had much of its activity defined as administration during the Spending Review 2004 period and that the reclassification of £300,000,000 for front-line diplomacy activity from "administration" to "programme" expenditure is to be welcomed. We recommend that in its response to this Report the FCO clarify what the outcome was of its discussions with the Treasury on this point. (Paragraph 24)

5.  We conclude that the FCO should not have to meet the growing cost of international subscriptions without a corresponding increase in its budget and recommend that in its response to this Report the FCO also set out whether its budget was raised accordingly for the CSR07 period. (Paragraph 25)

6.  We conclude that the estates security programme begun in Spending Review 2004 must not be disrupted, since it affects the safety of staff. We recommend that in its response to this Report the FCO explains whether it has received the funding it requires to continue this programme and that it breaks down how the £183 million in capital additions will be used. (Paragraph 26)

Measuring performance

7.  We recommend that in its 2007-08 Annual Report, the last report covering its performance against its SR04 PSAs, the FCO provide more evidence to support its assessments against target indicators. We are disappointed that the FCO was unable to assess its performance against all but one of its consular targets in its Annual Report because the IT system was not able to produce the data required. We find it surprising that Compass was not designed with this functionality and we recommend that in its response to this Report the FCO inform us of progress in adding this functionality to Compass. (Paragraph 34)

8.  We recommend that in its response to this Report the FCO set out what representations it has made to other EU Member States in order to try to reach a common position on Kosovo. (Paragraph 42)

9.  We welcome Lord Ashdown's positive assessment of the FCO's work in Bosnia and Herzegovina, in particular his praise for the Ambassador and other Embassy staff. Nevertheless, it appears that sufficient progress is not being made in the state. We recommend that the FCO urge its EU partners to drive forward constitutional change in Bosnia and Herzegovina, in particular by sending out more positive messages about the prospects for the state's eventual accession into the EU if certain reforms are carried out and Karadzic and Mladic apprehended, if in that country. (Paragraph 50)

10.  We are very concerned that almost half of the total budget for the Global Conflict Prevention Pool was spent in Iraq and Afghanistan in 2006-07. We conclude that the FCO should not have to direct funds away from long-term conflict prevention into crisis management. We recommend that the FCO should receive funding from the Treasury contingency reserve for the civilian costs of crisis management in Iraq and Afghanistan. (Paragraph 53)

11.  We were disappointed not to have been consulted on the FCO's draft targets far earlier in the process and recommend that the FCO in its response to this Report set out why this was not done. (Paragraph 58)

12.  We welcome the fact that it was the FCO, rather than DfID or the MoD, that led on developing the new PSA on conflict. This sent an important signal that the Government was committed to diplomacy as the best form of conflict prevention. We also welcome the new structure of the target, which appears to avoid over-reliance on quantitative measures or purely narrative assessment. We recommend that in its response to this Report, the FCO sets out the extent to which the NGOs and academics it consulted influenced the final conflict Public Service Agreement and any lessons learned from this consultation process. We also recommend that the FCO consults widely on the development of its future targets. (Paragraph 63)

13.  We conclude that the current system of performance targets is less appropriate for the FCO than it is for other departments, and may absorb time which could be better spent on core functions. We also conclude that ten strategic priorities is too many. We recommend that both targets and priorities be simplified and reduced in number and we hope that the FCO's consultation on the "new diplomacy" will assist in this process. (Paragraph 69)

14.  While we welcome greater joined-up working between the FCO and other Government Departments, we recommend that should be a clear recognition across Whitehall, including from the Prime Minister's Office, of the FCO's responsibilities for foreign policy and are disappointed that Simon McDonald was unable to appear before us after his appointment as special adviser to the new Prime Minister. (Paragraph 76)

Operational efficiency

15.  We recommend that the FCO keep us informed about progress of the Future Firecrest Programme, including giving us advance warning if there are likely to be further delays to its introduction. (Paragraph 81)

16.  We recommend that the FCO sets out in its response to this Report exactly how it plans to identify the additional posts it needs to relocate to meet its Lyons target. (Paragraph 85)

17.  We conclude that although the Shared Services Programme has great potential for efficiencies, it also carries some financial and operational risks. We welcome the fact that the Programme has had an OGC Gateway 0 review and recommend that the FCO share the review's findings with us. We also recommend that the FCO confirm whether the Treasury has provided funding from its Restructuring Fund to meet short-term redundancy costs related to the Programme. (Paragraph 91)

18.  We recommend that the FCO and UKTI work together to ensure that any reduction in FCO management and support costs that occurred as a result of UKTI reducing its presence in a post is recorded as accurately as possible in order to prevent any double counting of FCO and UKTI efficiencies. (Paragraph 96)

Measurement and leadership

19.  We welcome Sir Peter Rickett's commitment to improving management capability in the FCO, in particular signs that the FCO is opening up competition for senior management roles to professionally qualified, experienced individuals from outside the FCO. We recommend that in its quarterly management reports to the Committee, the FCO continue to update us on progress against the four key areas for action highlighted in the Capability Review. (Paragraph 105)

20.  We are not convinced that the decision taken by the FCO Board in April 2007 to hold back money from some of its programmes will not have affected their work. We are especially concerned about the possible impact on bilateral projects and the Global Opportunities Fund. We recommend that in its response to this Report the FCO set out these programmes' current financial position and whether money has been recommitted to them. (Paragraph 109)

21.  We welcome the faster closure of the FCO's accounts and the steps being taken to improve financial controls and management in the FCO. We recommend that the FCO keep us updated on the progress it is making in this area, including its Five Star Finance programme. (Paragraph 118)

22.  We welcome the fact that the FCO's Strategic Risk Register now better reflects potential sudden demands on its resources, such as Iraq, and we recommend that in its response to this Report the FCO explain to us its proposed changes to the Register. We also recommend that the FCO share with us the recommendations of its Internal Audit Department's review of the FCO's risk management framework and the action it is taking as a result. (Paragraph 123)

23.  We welcome Sir Peter Rickett's stated objective of reducing the FCO's dependence on management consultants. We recommend that in its response to this Report the FCO set out the exact areas, in which it is currently being assisted by outside expertise, where it plans to build internal skills and the expected savings in consultancy costs. (Paragraph 127)

24.  We recommend that there should be discussions of both foreign policy and corporate issues at the Senior Leadership Forum and Annual Leadership Conference. (Paragraph 130)

25.  We conclude that the FCO's rejection of the NAO's recommendation to offer expert mediation to those individuals whose complaints initiated the review of grievance procedures sends the wrong message about its commitment to improving its procedures. We recommend that the FCO reverses this decision. (Paragraph 133)

FCO Services

26.  We welcome the benefits that have been realised since FCO Services became an Executive Agency. However, we are concerned that once it transforms into a Trading Fund and becomes increasingly reliant on non-FCO clients, there is a risk that the quality of its services to the FCO may decline. We recommend that the FCO put safeguards in its Terms of Business and Service Level Agreements with FCO Services to ensure that it will be able to obtain good quality services from FCO Services at a reasonable price. (Paragraph 139)

27.  We recommend that the FCO reconsiders the proposal to close its language centre. High quality language training is a vital part of successful diplomacy and we are not convinced that it will be successfully delivered by an outsourced model. In particular we are concerned that there appears to be a significant drop in the number of staff receiving language training over the last two years. (Paragraph 145)

28.  We are concerned about the impact on staff morale of the redundancies related to FCO Services' new business strategy. We recommend that the FCO inform us whether it has formally assessed staff morale in FCO Services and the results of any such survey. (Paragraph 149)

Diplomatic representation overseas

29.  We welcome the increases in FCO staff in high priority places, such as Afghanistan, India and China. However, we do not think such redeployments should be decided without consideration of the impact on the FCO's network as a whole. We note the apparent success of the Zero Based Review of the FCO's European network and repeat the recommendation in our previous Report that the FCO should carry out a Zero Based Review of its entire network. We also recommend that in its response to this Report the FCO set out whether the CSR settlement will enable it to sustain higher level activity in Afghanistan in the longer term. (Paragraph 154)

30.  We welcome the FCO's decision to invest in premises in Mumbai. However, we are concerned by the decision to put building projects on hold while there is a major review of asset sales. We reiterate our recommendation in last year's Report that the FCO should base sales solely on the merits of each case rather than on a revenue raising target. (Paragraph 161)

31.  We recommend that in its response to this Report the FCO give a public update on its latest plans for the Ambassador's residences in Dublin. We also recommend that it explain who was responsible for the failure to carry out an invasive survey of Marlay Grange prior to acquisition. (Paragraph 166)

32.  We are disappointed that there does not appear to have been a joined-up approach to the future of the Defence Attaché network, with the FCO simply taking a unilateral decision to withdraw its contribution to funding in order to reduce demands on its budget. We recommend that the Government reconsider the decision to make cuts to the Defence Attaché network, which is critically important to several Government departments and agencies, in order to ensure that the network has the necessary funding to perform all its roles effectively and efficiently. (Paragraph 172)

33.  We welcome the publication of the consular strategy and the many new initiatives that have been established in consular services since the NAO's review. In particular we were impressed by the new Consular Crisis Centre. However, the FCO must ensure that its planning includes the risk of an increase in demand for support from other EU Member States' nationals. We recommend that in its response to this Report the FCO inform us how it is managing this risk. (Paragraph 178)

34.  We are concerned that the FCO's change programme for passports may mean British passport applicants overseas have to travel long distances to give biometric data and for interviews. We welcome the consideration the FCO is giving to using commercial partners to collect biometrics and to remote alternatives to interviews. However, we believe the FCO should also have a target for the maximum distance applicants will have to travel and we recommend that it develops such a target. We also recommend that the FCO share with us the business case for merging the overseas passport operation with the Identity and Passport Service, when it is brought to the FCO Board in November 2007. (Paragraph 183)

35.  Given the basic weaknesses in VFS' online facility, we agree that it should not be reopened. We are particularly concerned that, according to the findings of Costelloe Baker's independent investigation, UKvisas did not follow best procurement practices nor adequately respond to prior warnings of the security weakness. We welcome the action set out in the FCO's response to the investigation. In particular we conclude that it is vital that UKvisas carry out an audit of all its commercial partners' data security procedures. We recommend that UKvisas share the results of this audit with us. (Paragraph 188)

36.  We are concerned by the cost of calls to Posts on outsourced lines managed by Abtran Ltd. While we understand why Posts with high levels of inquiries might wish to outsource phone-handling, we find it unacceptable that British nationals are having to pay as much as an average of £8.00 to call the British Embassy in Canada. We recommend that in its response to this Report, the FCO share with us the process of procurement leading up to the central framework contract with Abtran. In particular we would like to know whether it considered the likely average call charges and whether these charges are limited in the contract. (Paragraph 192)

Transparency and openness

37.  We were very disappointed by the previous Foreign Secretary's decision to withdraw a commitment to send us a quarterly management report. We welcome the fact that under the new Foreign Secretary this decision has been overturned. We remind the FCO that the other aspect of the commitment made to the Committee, was an assurance that we would be sent information, particularly key management papers, on a systematic basis. We recommend that in its response to this Report, the FCO set out whether it now intends to send the Committee key papers being considered by the FCO Board, such as the "Top Risks Register" (Paragraph 198)

38.  We recommend that the decision to ban valedictory telegrams should be reversed, other than in respect of comments about the governments to which the outgoing Ambassadors or High Commissioners are accredited or comments likely to cause diplomatic embarrassment. (Paragraph 208)

Public Diplomacy

39.  We conclude that it appears that the BBC World Service has been able to play a positive role as an observer on the Public Diplomacy Board without affecting its editorial independence. However, the Board must also respect the operational independence of the British Council. We recommend that the Board focus on developing strategies rather than discussing the detail of operations. At the same time, the British Council must ensure that it keeps the BBC World Service aware of its activities, particularly those that have the potential to be broadcast. (Paragraph 215)

40.  We welcome the fact that there has been an increase in contacts between the British Council and FCO ministers and senior officials since the decision was taken that the Permanent Under-Secretary should not sit on the British Council's Board and recommend that this increase in contacts should be sustained. (Paragraph 218)

41.  We conclude that the decision to pilot targeted activity for public diplomacy activity is to be welcomed and support the approach of selecting three very different strategic priorities for the pilots. (Paragraph 222)

42.  We recommend that the FCO keeps us informed of possible proposals for the shared evaluation framework. (Paragraph 225)

43.  We recommend that in its response to this Report the FCO share with us the findings of its review of the Chevening programme and explain the basis on which Posts will be able to select scholars for the Chevening Programme. (Paragraph 229)

British Council

44.  We recommend that the British Council presents income data by country in both tables and piecharts in its next Annual Report. (Paragraph 231)

45.  We welcome the British Council's increased audience figures, in particular the huge rise in its remote reach. However, three of its corporate outputs are still below target. We recommend that the FCO set out in its response to this Report what steps the British Council is taking to ensure it meets these targets the following year. (Paragraph 242)

46.  We recommend that in its response to this Report the FCO set out what safeguards are in place to ensure that the British Council meets its 2007-08 efficiencies target without reducing its effectiveness. (Paragraph 246)

47.  We welcome the fact that the British Council has further defined its aims beyond the 1934 objective. However, we conclude that China and Russia should be a major part of the British Council's strategy and recommend that the British Council refers to these countries in its four objectives. (Paragraph 254)

48.  We welcome Lord Kinnock's confirmation that the British Council's shift in resources out of Europe will not involve a reduction in funding for activities in Bulgaria, Romania or Turkey and his reassurance that British Council operations in the Balkans will continue to receive increased resources. We recommend that in its response to this Report, the FCO clarify whether it has any concerns about the extent to which the Council will be able to achieve its objectives and retain control of projects when relying on partners. (Paragraph 259)

49.  We recommend that as part of its shift of resources into the Middle East, North Africa and South and Central Asia, the British Council should be aiming to expand its English language teaching work. We recommend that, as well as strengthening links with countries' education systems, this expansion should include providing cheaper or free places for English language lessons in the highest priority areas, such as Afghanistan. (Paragraph 261)

50.  We accept that in some circumstances it may not make financial sense to keep traditional library or teaching facilities open and we welcome the expansion of virtual educational services as a means of reaching a wider audience. However, we recommend that the British Council ensure that in any alternatives it provides to direct language training or library services, it is made clear that the British Council is the source of the material. (Paragraph 267)

51.  We welcome the successful activities the British Council has been able to carry out in Russia, against a background of obstruction from the Russian authorities. We recommend that in its response to this Report, the FCO set out what representations it has made to Russia to urge it to conclude a Cultural Centre Agreement as soon as possible. (Paragraph 275)

52.  Given that the British Council is facing a real reduction in its total budget over the three year CSR07 period, we recommend that in its response to this Report the FCO set out whether the Council will now have to divert funding from more activities than previously planned in order to fund the additional investment in its Reconnect programme. We conclude that the Council should also have received additional funding for restructuring in this period so that it could achieve greater successes more quickly. We also recommend that the Government give a firm statement that it would be willing to give the British Council additional resources to further improve the security of its estates if it faced unexpected security issues during the SR07 period. (Paragraph 280)

BBC World Service

53.  We welcome the BBC World Service's performance over the last financial year, in particular its record audience figures, achieved against increasing worldwide competition. However, there are areas where improvement is required, including scheduling and marketing in Africa and partnerships in Latin America and parts of Eastern Europe. We recommend that in its response to this Report, the FCO update us on the Service's progress on these areas. We also recommend that the Service keep us informed of any new targets it develops for measuring the impact of the web. (Paragraph 291)

54.  We conclude that the BBC World Service's investment in improving its distribution system is to be welcomed. (Paragraph 294)

55.  We recommend that the FCO should support the BBC World Service by also making representations to the Indian government about removing restrictions on FM broadcasts. We also recommend that both the FCO and BBC World Service should make representations to All India Radio about the potential weakening of radio as a medium if it is not liberalised. (Paragraph 297)

56.  We conclude that we can find no evidence to support claims that the BBC Russian Service was weaker than the main BBC news. However, we also conclude that the development of a partnership with the international arm of a Russian state broadcasting network puts the BBC World Service's reputation for editorial independence at risk. (Paragraph 301)

57.  We agree that it is sensible to focus resources in China on those media that are less subject to jamming. However, this must not be treated as a signal that the UK is giving up on persuading the Chinese government to make media more accessible. We reiterate our recommendation in our East Asia Report that the Government should make strong representations to China about this issue. (Paragraph 304)

58.  We recommend that any decision to close further language services should be driven by declining audience need and reduced impact, and not by an arbitrary savings target. (Paragraph 309)

59.  We welcome the BBC World Service's strategy to move from being a radio broadcaster into a multimedia network. However, this will require a joined-up approach with the rest of the BBC's services. We recommend that in its response to this Report, the FCO set out what consultations it has had with the Service about this new strategy and what measures the Service is taking to ensure clear editorial lines and a coherent mix of services. (Paragraph 315)

60.  We welcome the confirmation of £15 million annual funding for the Farsi language television service and an extra £6 million to extend the BBC Arabic television service. We also conclude that the BBC World Service should have received additional funding in CSR07 for its planned new investments and redundancy costs and recommend that in its response to this Report the FCO set out what the outcome was of the Service's discussion with the Treasury on this point. (Paragraph 322)