The House has recently expressed interest in the financing of the Foreign and Commonwealth Office. The FCO is working to manage the impact on the purchasing power of its budget next year caused by changes in the value of sterling. That impact is over £100 million in the current financial year and an estimated £110 million in the year ahead.
The FCO has now agreed with Her Majesty’s Treasury a range of measures to help manage these pressures in the next financial year:
an additional £25 million from asset sales will be recycled into the FCO’s budget;
a further £35 million to the FCO will be made available from the reserve, of which £20 million would form a foreign exchange adjustment account to manage the impact of currency movement to be drawn on in agreement with Her Majesty’s Treasury;
a further £15 million in end year flexibility will be made available, focused on restructuring and modernisation costs subject to a business case being made.
In addition, I have agreed with other parts of the FCO family, including the British Council, BBC World Service and FCO Services Trading Fund, that they will make a contribution to help manage these pressures. A broad programme of streamlining and cost-savings will also be implemented within the FCO’s own operating spending to reduce further back-office costs, implement more innovative working practices, and review staff allowances. This package of measures will substantially offset the foreign exchange pressures on the FCO budget.
In common with other Government Departments, the FCO is committed to delivering increased efficiency which will require further cost reductions and rigorous prioritisation, including in areas of programme spending. Good progress is being made. On this basis, I am confident that the FCO will continue to deliver a world-class and comprehensive diplomatic service for the UK, and that the Government’s highest foreign policy priorities, including our counter-terrorism programme, will continue to be funded effectively.