SIR PETER RICKETTS KCMG, DICKIE STAGG, KEITH LUCK AND DAVID WARREN

26 JUNE 2007

  Q80  Mr. Keetch: To follow on from the Chairman's excellent line of questioning, if you have a post that is FCO-led and people from the DTI, DFID or wherever are involved, presumably you ensure that you charge those Departments for the services that they are getting from that post?

    Dickie Stagg: Yes, it is a big issue because, as ever in a quasi-commercial relationship, there tend to be different perspectives on what is a fair price. But we are keen to ensure that those who are working with us from other Departments are paying their share of the overall costs.

  Q81  Mr. Keetch: And you would do the same if there were people from the Scottish Executive, the Welsh Assembly Government or the west of England tourism development council?

  Dickie Stagg: Yes, there is a more-or-less standard Service Level Agreement, which we would apply to any and all that wanted to come along. Obviously, it can get difficult if you have a fixed building and you get too many people wanting to share it, but in principle we have very clear rules, which are accepted by others. Indeed, Prism has been helping us to clarify the underlying costs of the operation so that we can charge those costs out.

  Q82  Mr. Keetch: I am grateful. May I ask about the estate, because we are always interested to receive your quarterly reports about what buildings you have sold off? We know that in July to September 2006 you sold residences in Tel Aviv, Kingston, Bordeaux and Nassau for £1.59 million, and bought something in Palma for £570,000. We were also delighted that after our visit to Mumbai, excellently led by our colleague Mr. Illsley, you took on our recommendation that we needed better accommodation there, and you splashed out on a new building to the extent that we have been told that you cannot afford any more of your building programme. After accepting our wonderful recommendation, what have you put on hold as a result of investing in Mumbai, as well as investing in Baghdad and Kabul, which now seem to be your three principal areas of expenditure?

    Sir Peter Ricketts: There is a great deal happening on the estate side, but you are absolutely right. You are also right to underline how expensive it is to take on accommodation that is secure for our staff in a place that is booming, such as Mumbai. The Committee was absolutely right to urge us to make the move and to take on space that is adequate for us in the long term. However, that is extremely expensive. I think that it is costing us about £30 million to rehouse the mission in Mumbai with adequate accommodation, both because Mumbai is booming and property prices are rocketing and because we need security measures. Given the size of our capital budget, we cannot get many Mumbais out of a year's worth of estate budget.

    Coming back to what I said earlier, we are genuinely squeezed doing the things that we really need to do in the estates operation. That said, we manage it very actively and do what we can to realise capital by selling assets where they are no longer essential to us, or where a lot of value is locked up that we can perhaps use elsewhere. We are following rules laid down by the Chancellor, who has asked all Departments to look at their capital asset base and see whether they can do more recycling. That is managed by our investment committee, which is chaired by Mr. Stagg. Perhaps Mr. Stagg can elaborate on what we have had to put on hold in order to pay for expensive but high priority items such as Mumbai.

  Dickie Stagg: The sorts of places at the top of our list, other than the ones just referred to, are the likes of Warsaw, Jakarta, Tbilisi and Sarajevo. We manage that by seeing when we have the opportunity to take action, which we very much had in Mumbai at the time of your Committee's visit. For example, in Jakarta, which is a high security risk post, for reasons that you will understand, there is a site that we want to buy and have been negotiating for over the past 18 months. However, there are complications over the title, so the money is waiting to be spent until we are sure that the site is going to be ours, if and when we go through with the deal. We are looking to buy a plot in Sarajevo, but we want some assurances from the local authorities on the title and on the removal of ordinance on the site before we acquire it. Those are complicated issues. Those are the sorts of projects that might be impacted on by the decision to move in Mumbai, which is very urgent as you collectively know as well as me.

  Q83  Mr. Illsley: Perhaps we should console ourselves: I think that 30 of the 100 richest people on the planet live in Mumbai, which is probably why the real estate is so expensive.

  Sir Peter Ricketts: We are in a competitive market.

  Q84  Mr. Illsley: I am sure.

    Will that stretch on the budget lead to any short-term decision to sell other parts of the estate to balance the books by the end of the year? Is there a worry that that is likely to happen? I fear an issue arising, such as the New York or the Dublin situation, where you are rushed into a sale in order to meet a target imposed upon you, and therefore, lose out by having to sell an asset that, ordinarily, you would not have wanted to sell at that time.

  Sir Peter Ricketts: I am very conscious of that risk. I do not want to go there, if it can be avoided. The answer is that we are not looking at sales in desperate urgency, but we have to look at opportunities to sell parts of the estate in order to help provide the money for the higher priorities. We are bidding vigorously to the Treasury for more money next year. It is our programme, and the Treasury is bound to look to us to do some of it by realising some of the capital that we have locked up in estates around the world. We have learned lessons from the past and will aim to do that sensibly in order to ensure that we get proper value. If that takes a bit more time, it will have to take a bit more time. However, certainly, we will come to the Committee to inform you on decisions on asset sales while I am in this job. The one that is going through at the moment is in Madrid, where we are leaving an empty building that is not satisfactory and moving to good quarters in a new build office building and selling the original site, for which we will get capital value. Exactly when we get it will depend on the market. We will need to let that take its course.

  Q85  Mr. Hamilton: Sir Peter, you will know that, in the past, the Committee has taken an interest in some of the previous sales. One example is the sale of property in San Francisco, on which we had a special hearing. In looking at when and how we sell properties overseas on the estate, does the FCO consider the huge value that some of those properties have not only for our country, but for our diplomatic work? An example is the residence in Cape Town, which attracts massive numbers of members of the South African Government and Members of the Parliament. Other estates have enormous value to the work that we do, beyond their financial value. Do you consider that when you look at those possible sales?

  Sir Peter Ricketts: Yes, we certainly do. This can only be subjective, but we try to look for assets that have a high value but are relatively low priority. That is what we are looking for. Of course, the highest value and lowest priority assets have been sold already, so it is a progressive process. However, we would also need carefully to consult Ministers, who pay much regard to the issues that you raised about the wider value to the nation of some of our key properties.

  Q86  Chairman: Sir Peter, we have so many subjects that we still want to touch on—I am afraid that we are going to have to write to you on some of them—so I would like to move to asking you about overseas passport operations. Under the new arrangements, what is the average distance that you would expect people to have to travel for interview?

  Sir Peter Ricketts: Gosh! You have floored us, Mr. Chairman.

  Q87  Chairman: Perhaps you could write to us on that.

  Dickie Stagg: Absolutely, we could probably write a little more fully than that and describe the sort of concept that we are going to introduce.

  Q88  Chairman: Is it going to take longer for people to get their passports under the new arrangements?

  Dickie Stagg: Yes, there will be an increase in the time between application and receiving the passport.

  Q89  Chairman: How much more?

  Dickie Stagg: For most applicants, it will be a matter of two or three days for them to get a passport back. Of course, it depends hugely on where they are and how close they are to one of our consulates.

  Chairman: We will get a note on that, I hope.

  Q90  Mr. Hamilton: Sir Peter, in May 2007, you closed the online service for facilitating Visa applications from India, Nigeria and Russia after a security breach. I know that members of the previous Committee visited the VFS facility in Delhi during the last Parliament. Lord Triesman has announced an independent investigation, which I understand began earlier this month. However, I want to know what steps you are taking to ensure that there will be no further breach of security of visa applicants' personal data, because that is pretty serious, is it not?

  Sir Peter Ricketts: It certainly is and, as you said, we responded very quickly to it by appointing Linda Costelloe Baker as our independent inquirer with a remit to lay a report before Parliament before the summer recess, so that we can learn the lessons very rapidly. As you have said, however, we took immediate action on the relevant parts of the VFS website. Perhaps Mr. Stagg will fill in the detail on that.

  Dickie Stagg: The action that we took was to get the websites closed down so that there were no longer being used. They were already, in a sense, part of our historical arrangements with VFS. We have now signed new contracts with it and with CSC for the global delivery of visas starting in April this year. So, we have moved into a new contractual environment in which they will be replacing those systems anyway. But the VFS system in India, as you say, had been breached or broken—I am not sure what the correct term is—by one person that we know about.

  Q91  Mr. Hamilton: Let me just interrupt you. Who takes responsibility for the breach of security? Is it VFS, which is a contracting company—a commercial organisation, as I understand it—or is it the Foreign Office?

  Dickie Stagg: I have to be quite careful about getting into the legal area here, but in principle and from our point of view, it was contracted to provide an online application service that was meant to meet all our requirements, and it appears that that is not what happened. I would rather wait until the piece of work being done by Miss Costelloe Baker is reported before trying to say where the responsibility lies, as that is one thing that she is looking into.

  Q92  Chairman: We will pursue that with you in writing over the next few weeks. May I move on to ask you about the results of the capability review, which found that strategic and change management need improvement in the FCO? Does that mean that you have not made much progress since the previous Collinson Grant review?

  Sir Peter Ricketts: No, it does not mean that. It means that we have a very ambitious series of change programmes going on that cover the shape of our network, which we have talked about, a shared services programme to reduce the cost of our back-office functions, the future Firecrest programme, and improving the way we do finance. We also have important reforms going on in the consular and visa side, and UK Trade and Investment is introducing a new strategy.

    Everywhere you look in the FCO, a lot of change is going on. The capability reviewers were not disputing the need for that change; indeed, they suggested that we might need to be more radical than we had planned, but they were concerned to ensure that we had the resources in place to be successful and that we had the capacity to manage that change effectively. We are responding to that vigorously.

    Mr. Heathcoat-Amory paid a glowing tribute to Mr. Stagg, for which I am grateful; unfortunately, he is moving on shortly to become our High Commissioner in Delhi, one of the most important jobs in the service. He is being replaced by James Bevan, who will have a rather reconfigured job. He will be responsible for change; his job will be Director-General for Change and Delivery. He will have a Director working with him, recruited from the Civil Service, who has a lot of experience in managing change projects, and he will have a unit with more capacity. A committee of the Board will oversee the change programme.

    We found the capability review very useful from that point of view; it galvanised us to make sure that we had the resources needed to pull together all the various changes and to ensure that they are coherent.

  Q93  Andrew Mackinlay: You will recall the fear of your staff when involved in grievance procedures. The matter eventually came before the National Audit Office. The NAO produced a report, and you wrote to the Committee indicating that you accepted the NAO recommendations. You acknowledged the deficiencies found in the grievance procedures. However, you rejected one of the recommendations. It was in respect of the three people who had initiated the NAO review, and it said that independent arbitration should be set up to deal with those three aggrieved people.

    You rejected that recommendation, which caused some dismay. It seemed that the NAO had found deficiencies in the stewardship of the grievance procedures, and it had found them through the initiative of the three aggrieved people. The NAO was not adjudicating on those three cases, but it did suggest that there should be an independent system of mediation, and you rejected that. That seems demonstrably unfair. It also seems that you were acting as judge and jury. What say you to that?

  Sir Peter Ricketts: First, the NAO report showed that our grievance procedures, as they existed before September 2004, had flaws. The NAO picked them up, and we recognised that. The NAO also found that the new arrangements that we introduced from 2004 onwards were an improvement. It came up with some additional ways to improve them further, and we accepted 15 of the 16 proposals.

    As you say, the 16th was for further mediation with the three members of staff to whom you refer. We thought long and hard about that, and we concluded that in those three cases we had been through all the steps that any good employer could reasonably be expected to have gone through—that we had done everything that could be expected of us. In those circumstances, it was not right to accept mediation. We concluded honestly that it would not add to what we had already been through over a number of years. We thought seriously about that, and we would never have decided not to accept a recommendation of the NAO without serious thought. These were advisory recommendations and in the end, as the management of the organisation, we had to take a view on whether mediation would add to what we had already been through with these particular members of staff. That is the conclusion that we reached.

  Q94  Andrew Mackinlay: I invite you to pause for a minute, step back and look at this. You have reiterated your view and are quite firm in it. Indeed, I would almost expect you to be firm in your view, but the NAO has taken a different one. An independent assessment has been made, there is no finding in favour of the aggrieved people and it just says that, as good employers, you should allow this to happen, so it is breathtaking that you, as a Government Department, or any employer, should be saying, "We are good employers, we have looked at it and we don't think anything should change." I return to it: you are being judge and jury. Is there not a case, even now, for you to reflect on this and follow the recommendations of the NAO? It looks, on the face of it, extraordinarily arrogant to ignore this.

  Sir Peter Ricketts: I certainly do not seek to be arrogant, Mr. Mackinlay—quite the reverse. I am always ready to reflect further on everything, but we have thought quite carefully about this. I wonder if I can ask Mr. Warren, who has been even more closely involved in this to—

  Q95  Andrew Mackinlay: No disrespect to Mr. Warren, but he is the judge and jury that I am referring to. He is the man who had stewardship over this matter. He dealt with it diligently and to the best of his ability, but he is also the man who is saying to you, "I am not going to agree to this independent review because I have decided on the matter."

  Sir Peter Ricketts: I wonder if I could ask him just to respond.

    David Warren: Thank you. I understand the point that Mr. Mackinlay is making. This was an exceptionally difficult issue for us. The NAO made it clear in its report that it did not have the legislative power to examine specific grievances. The report was on our grievance procedures and the value for money of our procedures, and individual cases were outside its terms of reference.

    As Sir Peter has said, we found the report extremely valuable. It is worth pointing out that it found good things and bad things in our old procedures. It found more good things in our new procedures, but it quite rightly invited us to address ways in which we could strengthen things, and we are doing that.

    The only issue of contention between us and the NAO was this specific recommendation, and we make no secret of that. It was reflected in the discussions that we had with the NAO, which we found valuable. The NAO invited us to consider—and made it clear that we were at liberty to reject—the suggestion that we should reopen old cases that we considered to be closed and should invite independent mediation to resolve issues that we no longer considered to be disputes.

    It is an important point of principle for us that, having gone through what we believe are exhaustive and very careful processes, and having done all that any responsible employer could reasonably be expected to do to resolve these disputes, we believe that we have done all we can. I offer that humbly to the Committee as a genuine statement of what we believe we have done as an employer.

    We believe, in those circumstances, that it would not be correct to reopen these cases, which we believe to be closed. We said that to the NAO. I recognise that that leaves an issue of disagreement, as it were, between us and the NAO. However, the NAO was content for us to respond in that way, as this was a report to FCO management.

  Q96  Andrew Mackinlay: Is that the final word on the matter or will you review it?

  David Warren: That is the final word on the matter. We believe that these issues are closed.

  Q97  Chairman: I think that we need to move on, Mr. Mackinlay.

    In the five minutes left to us, can I just ask you about public diplomacy? We are taking evidence tomorrow from the BBC World Service and the British Council. Are you satisfied with the operation of your new Public Diplomacy Board, which was established quite recently? What were the reasons for the choice of three particular strategic priorities as the focus of the pilots on public diplomacy that you have established?

  Sir Peter Ricketts: Yes, we are satisfied. We think that the Public Diplomacy Board has developed very well as a forum where we meet at ministerial level. The BBC and the British Council can come together, with others involved, to ensure that the activities of the BBC and British Council in particular are well lined up with the strategic priorities that we in the FCO are pursuing. We do that without cutting across the World Service's editorial independence or anything like that, but while ensuring overall strategic coherence. We think that that is working well.

    We chose the three particular pilots because we wanted separate, quite different sorts of area to test whether a more targeted approach could achieve something. The ones we chose: climate, democratic development and governance, and the economic and business link to UK Trade and Investment, seemed to us to be quite different areas, where public diplomacy could work in different ways, but each of them were important tests to see whether the money that the Government were spending could actually achieve something useful. So they were chosen for their variety as test cases, really.

  Chairman: Thank you. Mr. Mackinlay, do you want to take the last question?

  Q98  Andrew Mackinlay: On parliamentary relations? Yes.

    Your predecessor, Sir Peter, volunteered to give us some management information—I have the quote here; brevity will not allow me to deal with that, but I think that you are well rehearsed in this—and yet you snatched it back. Why would you do that?

    I understand that it now has the imprimatur, as it were, of Margaret Beckett. Is that personal to her? If we asked you again on Friday, would you revisit it with a new Minister? I am not being sarcastic, I assume that there will be a new Minister. What is your personal view? Your predecessor gave us an undertaking that he would make these things available. He went to great lengths—I have a whole screed here of how he was poring over the Committee saying, "You can have this information, delighted to let you have it," and then, under your stewardship, the Committee is refused the management information.

  Chairman: You are talking about the quarterly reports?

  Sir Peter Ricketts: Particularly the quarterly reports? I think, to be fair, Mr. Mackinlay, your Committee gets an enormous amount of management information about the FCO—

  Q99  Andrew Mackinlay: That was not my point though, was it? Your predecessor came to us and said, "You can have this, I am going to give it to you". He was almost forcing it through the letterbox—

  Sir Peter Ricketts: I do not believe that the Committee is under-resourced in terms of management information. In fact, I think probably that what we offer the Committee compares favourably with what any other Department engages their Select Committee on, and quite rightly. I am very committed to working in an open and transparent way with the Committee. If I may say so, we very much value the Committee's interest and oversight, and the fact that, when you travel, you engage so well with our staff. I looked at the amount and volume of information that we have supplied for the Committee over the years, and it is very, very substantial.