To ask the Chancellor of the Exchequer what the reasons were for his Department’s decision to withdraw support for the Foreign and Commonwealth Office’s overseas pricing mechanism; and when the decision was made. (262094)

The decision to abolish the Overseas Price Mechanism was taken in the autumn of 2007 as part of the broader agreement for the Foreign and Commonwealth Office in the 2007 comprehensive spending review. The OPM protected the FCO from currency fluctuations but it did not provide the Department with the incentive to factor in medium-term changes in currency costs when it allocated its resources. As part of the CSR07 agreement, the Treasury allowed the FCO to engage in forward currency markets to better manage short-term currency risk. This change brought the FCO into line with practice in other Government Departments.