1. The Foreign Affairs Committee has a remit to examine the "expenditure, policy and administration" of the Foreign and Commonwealth Office (FCO) and its associated bodies.[1] Most of our scrutiny activity takes the form of inquiries into the FCO's work on a particular theme or in a specific country or region. However, every year, we also carry out an inquiry which takes an overall view of how the FCO is managing its resources, using the FCO's Annual Report as our starting point. This Report continues this annual series of inquiries, examining the FCO's Annual Report for the period 1 April 2006 to 31 March 2007.[2]

2. In our Report on the FCO's 2005-06 Annual Report we made recommendations on a wide range of issues.[3] These included the FCO's relations with Parliament, the quality of its management and leadership, its performance against efficiency and Public Service Agreement (PSA) targets, and the work of its consular services. We also looked at the FCO's public diplomacy and the performance of the British Council and the BBC World Service.

3. This year a key area of interest for us has been the 2007 Comprehensive Spending Review (CSR07). We held our evidence sessions in June and July, when negotiations on the settlements and related new targets under the CSR07 for the FCO, the BBC World Service and the British Council were well underway. Details of the final settlements and targets were announced on 9 October 2007.[4]

4. Our inquiry also spanned a change in Prime Minister. In his reshuffle, the new Prime Minister, Rt Hon Gordon Brown MP, altered the leadership of the FCO. We welcome Rt Hon David Miliband MP to the post of Foreign Secretary and the other new members of the FCO's ministerial team.

5. As part of our inquiry, we have taken oral evidence from Sir Peter Ricketts, Permanent Under-Secretary (PUS), Dickie Stagg, then Director General, Change and Delivery, Keith Luck, Director General, Finance, and David Warren, Director, Human Resources, FCO, as well as Rt Hon Lord Kinnock of Bedwelty, Chair, Martin Davidson, Chief Executive, and Margaret Mayne, Director of Finance, British Council and Nigel Chapman, Director, and Ms Alison Woodhams, Chief Operating Officer and Finance Director, BBC World Service. We are grateful to them for their evidence.

6. In a departure from our previous inquiries on the FCO's Annual Report, we decided also to hear from witnesses outside the FCO and its associated bodies. We asked Sir Ivor Roberts, former Ambassador to Italy and San Marino and author of a leaked valedictory e-gram critical of the FCO, to give evidence on the Department's performance over the last financial year. We also invited Rt Hon Lord Ashdown of Norton-sub-Hamdon, High Representative for Bosnia and Herzegovina until 31 January 2006, to discuss the FCO's work in the Western Balkans. His evidence has helped us to put together a case study on the FCO's performance against its PSA on conflict prevention. We would like to thank both Sir Ivor and Lord Ashdown for taking the time to give us their views.

Form of the Departmental Annual Report and related papers

7. The FCO's Annual Report for 2006-07 was published on 9 May 2007. The main section of the report is structured around the FCO's ten Strategic Priorities and is very well-presented, with a good mix of prose, tables and graphics. Last year we expressed disappointment that the FCO had discontinued the practice of including cost-benefit analyses in its reports. We recommended that the analyses should be reintroduced.[5] In its response, the FCO said that cost-benefit analyses were not a mandatory requirement of the Treasury but agreed to include them where they could provide useful information not detailed in the performance assessment against PSA targets.[6] This year's report includes five such tables.

8. At 182 pages, the 2006-07 report is slightly longer than the 2005-06 report. There is a lot of narrative in its main section, but only two pages of the report detail the work the FCO has done to improve its efficiency. The FCO's efficiency programme (which we consider in Chapter 4 of this Report) involves 27 different projects. 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.

9. The FCO, has, for the first time, made available a html version of the report on its website. It has further improved accessibility by offering to produce the Annual Report in alternative formats for anyone who requests them.[7] We applaud these steps. The FCO has also continued last year's practice, which we welcomed,[8] of attaching a DVD to the Annual Report. This year, the Annual Report includes the DVD shown at the FCO's 2007 Leadership Conference,[9] which discusses the impact of globalisation and the FCO's work in helping to deliver Strategic Priorities.

10. We have also received from the FCO various other documents, reporting on its financial performance or on its expenditure proposals. These include the FCO's Supplementary Estimates Memoranda, in which the FCO explains why it is seeking approval of changes in the spending plans already agreed. In last year's Report we drew attention to the fact that the 2006 Spring Supplementary Estimates Memorandum failed to comply fully with Treasury guidelines or to explain adequately the background to or the effects of the changes being proposed.[10] There was evidence of improvement in the 2006 Winter Supplementary Estimates and 2007 Spring Supplementary Estimates Memoranda, but there were areas where more information could have been provided.[11] We wrote to the FCO with specific suggestions and it has assured us that future memoranda will take our comments into account.[12] We are grateful to the Committee Office Scrutiny Unit for helping us to analyse these financial documents and the CSR07 settlements.

11. We corresponded with the FCO on its Autumn Performance Report[13] too. As well as asking for evidence to support certain assessments of PSA targets, we requested more information on efficiency reporting.[14] In response, the FCO told us that the efficiency section of its Autumn Performance Report had been approved by the Treasury. Nevertheless, the FCO agreed to expand this section in next year's report to ensure more detail was included on how efficiency savings were being delivered, particularly with respect to new or modified projects, as well as additional information on the quality measures being used.[15] We welcome this commitment.

2   Foreign and Commonwealth Office, Departmental Report 2006-2007, Cm 7099, May 2007 Back

3   Foreign Affairs Committee, Eighth Report of Session 2005-06, Foreign and Commonwealth Office Annual Report 2006-07, HC 1371 Back

4   HM Treasury, Meeting the aspirations of the British people: 2007 Pre-Budget Report and Comprehensive Spending Review, Cm 7227, October 2007 Back

5   Foreign Affairs Committee, Eighth Report of Session 2005-06, Foreign and Commonwealth Office Annual Report 2005-06, HC 1371, para 6 Back

6   Foreign and Commonwealth Office, Response to the Eight Report from the Foreign Affairs Committee 2005-06, Cm 7008, January 2007 Back

7   Ev 62 Back

8   Foreign Affairs Committee, Eighth Report of Session 2005-06, Foreign and Commonwealth Office Annual Report 2005-06, HC 1371, para 4 Back

9   We consider the FCO's leadership forums in Chapter 5. Back

10   Foreign Affairs Committee, Eighth Report of Session 2005-06, Foreign and Commonwealth Office Annual Report 2005-06, HC 1371, para 9 Back

11   Ev 47 Back

12   Ev 56 Back

13   Foreign and Commonwealth Office, Autumn Performance Report: A review of progress towards the FCO's Public Service Agreement and Efficiency targets 1 April- 30 September 2006; available at www.fco.gov.uk/ Back

14   Ev 27 Back

15   Ev 28 Back