Foreign Affairs Committee

Oral evidence: Work of the Foreign, Commonwealth and Development Office, HC 385

Monday 18 November 2024

Ordered by the House of Commons to be published on 18 November 2024.

Watch the meeting

Members present: Emily Thornberry (Chair); Aphra Brandreth; Dan Carden; Richard Foord; Claire Hazelgrove; Uma Kumaran; Blair McDougall; Abtisam Mohamed; Edward Morello; Matthew Patrick; Sir John Whittingdale.

Questions 1 - 71

Witnesses

I: Sir Philip Barton KCMG OBE, Permanent Under-Secretary, FCDO; Tim Jones, Finance Director, FCDO; and Corin Robertson, Director General, Finance and Corporate, FCDO.

Examination of witnesses

Witnesses: Sir Philip Barton, Tim Jones and Corin Robertson.

Q1                Chair: Good afternoon, everybody. This is the first sitting of the new Foreign Affairs Committee. We begin with the permanent secretary and a couple of his senior staff. Welcome to Sir Philip Barton, Corin Robertson and Tim Jones. Thank you very much for coming and answering questions—at least, I hope you are going to answer our questions. I will begin with a general one. Sir Philip, it has been reported that you are going to be stepping down in January. Could you tell us why you have decided to leave before completing your five-year term?

Sir Philip Barton: First, Chair, congratulations to you on your election and to the Committee. This is the first time I have appeared before the Committee since the general election. I know that I speak for myself, with the amount of the time I have left in the role, and the whole Department in saying that we look forward to working with you and your colleagues on the Committee.

In response to your question, I am well into my fifth year and the Foreign Secretary and I discussed—in the light of the successful transition to a new ministerial team at the time—what made sense for a transition to a new permanent secretary. As you know, he has launched three reviews into the work of the Department. I expect alongside taking forward the transformation of the Department in the light of the outcome of the second phase of the spending review that there will be a big programme of work over the years ahead, and it makes sense for a new permanent secretary to take that forward with the Foreign Secretary.

Q2                Chair: What is the expected timeline for the appointment of your replacement?

Sir Philip Barton: The Civil Service Commission and the Civil Service Commissioners in the usual way have launched a competition, together with the Cabinet Secretary, who is the line manager of the role. I think the deadline for applications is the end of this week, with interviews likely to be in the first week of December. An appointment will follow shortly thereafter. Once we know who my replacement is, I will agree with them to have a handover early next year.

Chair: Early next year, okay—but you are leaving in January?

Sir Philip Barton: I mean, January is the aspiration, but in the end, I will make sure that there is a smooth transition. I will not leave the Department in the lurch without a permanent secretary.

Chair: So there won’t be a gap.

Sir Philip Barton: There won’t be a gap, no. I will be flexible.

Q3                Chair: Looking back on the time you have spent in charge of the Foreign Office, what have you learned? I suppose the real question is, if you knew then what you know now, what would you have done differently?

Sir Philip Barton: That is a very good question, Chair. As I come towards the end of my time in the diplomatic service—I have been a diplomat for 38 years now, so it has been a long career in that profession—I have reflected both on how my profession has changed and, in response to your question, on my time in the Department. I started on day one of the newly merged Department on 2 September 2020 as the first permanent under-secretary of the new Department, bringing together diplomacy and development. I think we have achieved a lot, and we are now settled as a single Department. The task ahead is to build from where we are and build the capability of the Department, and the Foreign Secretary’s three reviews will help to guide all of that.

We started between the first and second waves of covid in the UK, and it was still a very serious challenge across the whole globe. I do not think that in the autumn of 2020 people quite understood—and the Department didn’t understand either—how long it was going to continue and how deep the impact was going to be, both on our own finances and on our ability to operate as a global organisation that depends, to a high degree, on being able to have people overseas, to travel and to meet people.

One lesson that I learned—and if I had my time again, I would think about this differently—is that we were over-ambitious in what we tried to achieve in the first phase of the merger. The NAO published a study in March this year into how the merger had gone and how we went about it, and that brought this out. After about a year, we realised that that ambition could not be met, and we therefore pared back the transformation to absolutely making sure that we prioritised the basic, fundamental foundations of a single Department: making sure that we had single accounts and a single system for our finances in HR, and that we had a single IT system and the backbone of a single Department, alongside the merged teams and merged leadership, which we put in place in the first six months. We had hoped to be more ambitious in that first phase, but particularly covid and also the reduction in overall resources made it more challenging than I think any of us realised at the start. That is my one big lesson.

Q4                Chair: Dan is going to ask you some questions about the merger in a minute, but I want to ask a question on behalf of the public who are watching. They can see that we have the permanent secretary in front of us and he has been asked what he would change—what he would have done differently. You would say that it would be the way in which the merger happened. Is there not anything else that the Foreign Office ought to have done differently over the last four or five years?

Sir Philip Barton: The other thing that we have definitely got better at is this. Our big challenge is that the world has become more volatile, more contested and less predictable, and we have a business of which a large amount is business as usual, whether that is delivering bilateral relations or engagements multilaterally, or big development programmes. There is a resource, and a people resource, required for that, but we also need to be able to flex into changing circumstances, whether that is an acute crisis like the one we saw in Afghanistan or Sudan, or a long-term shift like we have had to do in consequence of Russia’s invasion of Ukraine. We have had a big programme of work over the last three years to make the Department more agile in the way in which we can deploy our people, and I am proud that we have managed to do that.

We have managed to make ourselves more agile. When we need to find additional people—for example, to step in to do more work on the Middle East—we have better mechanisms for doing that. When we suddenly have an acute crisis, as we had in Bangladesh, we were also able to find additional people through the acute period of the crisis and the change of Government there; we were able to step into that. When we have had long-term shifts, we have, as I have said, been able to increase the resource and find ways of doing that within an overall envelope.

It remains very challenging and resources remain tight. We have to carry on being very mindful of our duty to carry on doing business as usual, whether that is consular assistance or making sure our development money and other moneys are spent properly and that sort of thing. But as I say, we have had a big programme to make ourselves more agile in response to a more challenging world and, although we cannot predict the future, to ensure that we can do a better, more organised job, thinking forward to the big things that could hit us and ensuring that we have proportionate contingency plans for some of the biggest eventualities that might or might not come about.

Q5                Dan Carden: Good afternoon, Sir Philip. Could I take you back to the difficult period of the handling of the withdrawal from Afghanistan? The predecessor Committee to this one published a damning report, which said that Afghan allies and British soldiers “were utterly let down by deep failures of leadership”. It accused your Department of giving answers to MPs that were “at best intentionally evasive, and often deliberately misleading.” It said the Department’s leadership “should be ashamed that civil servants” had to “risk their careers” by whistleblowing to unearth “the appalling mismanagement of the crisis”. It also took the extraordinary step of calling for your resignation. How do you reflect on that period now? Do you have any regrets for not taking the opportunity to resign back then?

Sir Philip Barton: The one thing I have reflected on—I am happy to repeat this; I said it at the time—is that I regret not returning from my leave during August 2021. I said that at the time and I stand by it. It is the biggest regret of my time in the role.

I would say a few things in response to the description of events that you have just given. First, we did successfully enable a large number of Afghans to leave through Operation Pitting. We had made some plans—we were the only country that had an evacuation handling centre in the environs of Kabul airport and we were the only country that had made a prior plan for a staging post in the Gulf—but I also accept that the overall response was not sufficient.

As a Department, we were overwhelmed in particular by the number of inquiries that we received and our ability to respond to them, but we did have a very large number. I cannot remember the exact statistic, but it was something like 200,000 in the space of a couple of weeks, so there was big pressure. Alongside brave military colleagues and colleagues from the Border Force, we did help a very large number of Afghans out of Kabul in those days through those operations.

It was clear that there were lessons for us to learn. As soon as the immediate crisis response had finished, I launched a detailed look at what those lessons were and appointed somebody senior within the Department—somebody who knew the Department but had not been directly involved with the team—to go through in a systematic way and work out what the lessons were. I wrote to the previous Committee in detail with the conclusions of that exercise; I think it was a six-page letter. Then I put in a place a system within the Department to make sure that it was followed up.

I used the Audit and Risk Assurance Committee, which is chaired by non-executives—so, obviously, someone external to the Department—to hold us to account a year later for how we were doing with implementation, and wrote a follow-up letter to the Committee setting out how we learnt the lessons and where we had got to in that programme of work. If you look at our ability to get people out of Sudan and our ability to assist people out of Lebanon over the summer, I think it demonstrates—although the evacuations in those cases were not of the same scale—that we have put in place better systems to respond to those sorts of crises.

Q6                Dan Carden: Thank you for that. I wondered whether you felt that episode damaged your ability to lead as permanent secretary, and I want to link that to the last four years and the FCDO merger. I know that previous permanent secretaries have driven through change with programmes: Sir Simon Fraser had his diplomatic excellence programme, and Simon McDonald, now Baron McDonald, had diplomacy 2020. I do not think you have had a flagship programme of your own, but you have overseen the merger. Do you regret not being more proactive in setting a vision from the top for the FCDO during your time?

Sir Philip Barton: I have set a vision, including how I have gone about my own leadership. I was humbled by the wave of support I had from people in the Department who wanted me to carry on as their leader through 2021 and 2022. It was really clear to me that people wanted me to lead them. We had a vision for the merger and for what we were going to do by bringing diplomacy and development together. I think the world turned out to be more challenging than people expected at the time.

In addition to covid, as I have mentioned, we had the unexpected, very significant reduction in our development assistance budget from 0.7% to 0.5% from one day to the next, which led to us having to take about £3.5 billion out of our budget inside a financial year. The following year, we again had a further very significant financial hit on our development budget through the dramatic increase in in-donor refugee costs. We had Russia’s invasion of Ukraine—a massive shock to international work overall. There were a set of things that made it harder to achieve everything we wanted to, as I said at the beginning, in terms of our vision for a merged Department.

Q7                Dan Carden: I know that colleagues are going to pick up on ODA and some of those points, but specifically, with overseas development coming into the Foreign Office and all the pressures now on that—including spending a lot of that money here in the UK—I am still missing a vision that brings those two things together.

Sir Philip Barton: The vision, which was set out at the time by the then Prime Minister, was to achieve more internationally by doing diplomacy and development together. I could give you a couple of immediate examples where I think you can see that we have done that. For example, when we hosted the Ukraine recovery conference in the UK—a conference that raised more funding for reconstruction than any similar conference since the second world war—we used both our diplomatic convening power and our deep expertise on the development side about finance, how you bring in the public sector, how you can leverage insurance and that sort of thing, and I do not think we would have achieved that without the merger.

If you look at our response to Sudan, again we can use both our development expertise and our deep expertise on how you do humanitarian programmes, together with our political influence around things like access. Both of those are examples of where we are achieving more—

Dan Carden: I am not sure that I would agree with the view that things are working better now than perhaps they did before the merger, but I know that the Chair wants to move on.

Chair: I am sorry, guys, but we ought to move on. Edward has some questions about the overseas estate.

Q8                Edward Morello: I do. Obviously, there have been some sales recently—the Tokyo embassy and the Bangkok embassy, which between them raised about £1 billion. The autumn Budget refers to investing funds from asset sales. What is that being invested in? Is that money being used to fund day-to-day operations, and, of that pot of money, how much is left to draw down on?

Sir Philip Barton: The first thing to note is that we only have capital from our estate through sale of assets. I think that has been the model since 2010. The money is almost entirely used either for other estates’ capital projects, where we need to refurbish or move to new premises, or for maintenance. I think that some of it, because it is capital, has been transferred into funding for some of our digital and data investments, but it is essentially used for the estate.

On current projections—Tim, you should have this—we think that the current asset recycling we have done will, by the end of 2026-27, have come to an end. One of the arguments that we are making to the Treasury is that we think we are near the end of a funding model, because we do not think that there are very significant assets, as there were in Tokyo and Bangkok, that we could realise to fund future capital investment. We think that we need, in the second phase of the SR, a more consistent capital funding stream from the Treasury.

Edward Morello: Equivalent to what? Roughly, what would the budget look like?

Sir Philip Barton: I do not know whether we have got that far in our planning for the second phase of the SR—in terms of being able to put a figure on it. Tim, do you want to talk about the figures going forwards?

Tim Jones: We have a forward-looking global asset plan that runs way out into multiple years, so we know that over time we will have cumulatively in the order of £1 billion-worth of estates work that will go through the system.

Edward Morello: Over what period?

Tim Jones: We are currently spending in the values of the relatively low hundreds of millions of pounds a year, through drawing down our banked receipts. We will have a conversation with Treasury in the usual way in the next phase of the spending review as to what the funding solution will be over that spending review period. We do not anticipate settlement with Treasury beyond a spending review period, as the negotiations are always bound.

We have in our own minds the very long term; we negotiate with Treasury over the medium term; and then we have a kind of short-term handling, where we work out how much we draw down, how we spend and how we sequence the estates. With all big programmes, there is sometimes a trade-off between time, quality and cost, so we might slow things down or speed them up where there is the optionality around that.

The budget is not static—annual to annual to annual. At the moment, it is financed by pulling down from banked receipts, but once we have exhausted the receipts, we will probably be in a world of more annualised budget plans. We have yet to see from the Treasury what the overall approach is to capital infrastructure over the second phase of the spending review, because it has not yet launched.

Q9                Edward Morello: But you know what your needs are, because the National Audit Office reckons that your annual maintenance budget is £250 million a year and presumably it is only going up with ageing assets. If you have got a run cost of £250 million increasing every year and you are nearly out of the drawdown that you can make from sales that you have got so far, my question is this: how much do you need from the Treasury going forward, or are there any other assets that you envisage having to sell because the Treasury will not make up that money?

Sir Philip Barton: On sales, as I have said already, I do not think there are significant assets that we would ever contemplate selling. I think we are coming towards the end of that as a way of funding our capital requirements overseas. Obviously, in the end it is for Ministers to decide, but I cannot personally see a world where that works going forwards.

On the figures, I am not sure I recognise the £250 million. Over the past year, we have done a very big review to get to the bottom of our global maintenance requirements and the backlog. That will then tell us what sort of funding stream we need going forwards. I think, Tim, £250 million is a bit high for the annual ongoing costs on maintenance, and maintenance alone. But, yes, hundreds of millions is the order of magnitude. I do not want to sit here today and give you a figure for what is and is not the right amount. We have a bit more work to do, and we do need to discuss it with the Treasury.

Q10            Edward Morello: I guess where I am trying to go with this is that, if we accept the National Audit Office number or several hundred million—whatever you want it to be—and we run out of receipts from drawdown and there is nothing left to sell and the Treasury is not making up the shortfall, you hit a cliff edge, at which point you have to reduce the service provision that we are making.

Sir Philip Barton: There are some tough choices ahead for our funding envelope. I worry that we have, for many years now, stretched the elastic very tight. I imagine that a lot of my predecessors felt the same, so I would be cautious about saying exactly when it will snap, but there are limits to how much further we can go without making some more significant choices about our global network and our global footprint.

Q11            Chair: If you do run out of money, given that this is your last appearance before the Committee, what is your parting shot? What should the Foreign Office cut?

Sir Philip Barton: It is not for me to decide what we should or should not do in the future. My parting shot is that I do not think the current funding model will work for very much longer, so we need a new model, and then we need a proper departmental conversation with the Treasury, recognising completely the fiscal situation and the pressures. We are not alone in the wider public sector in having a challenge around an estate with maintenance requirements; ours just happens to be overseas and therefore maintenance is a little more complicated. We need a proper, grown-up conversation about what is required going forward to maintain the sort of presence that Ministers choose to have for the UK’s international platform.

It is worth remembering that we provide the platform for the whole UK Government—30 different Departments, 170-odd countries, 280-plus cities. Although it is not by any means the biggest when compared with the wider UK public sector, it is a very complex network. A big part of what the FCDO provides for the whole of Government is an international platform.

Q12            Sir John Whittingdale: Very quickly—the Foreign Office has embassies, often for historical reasons, in very iconic buildings in prime locations in cities. I am sure the Treasury would say that we could sell those, raise huge amounts of money and move to nice concrete buildings in the suburbs. Do you recognise that the UK’s reputation and presence is, to some extent, a result of maintaining those buildings? Are you confident that we have not already damaged that through some of these sales?

Sir Philip Barton: I do not think we have done significant damage, for example, to our relations with Japan through selling one third of our compound there. We have kept two thirds, and we are reprovisioning that with some of the proceeds. We managed to do that in a way that did not cause a problem. That was an example where there was a very big discrepancy between the real estate value of a piece of property and what we got out of it—in that case, there was staff housing and things we did not really need any more—and we realised that in selling it.

When I look across our global estate—from time to time, we get this looked at by external experts and valuers—I do not see somewhere where there is a big discrepancy between the actual realisable cash value and the value we get as the United Kingdom through having, for example, a very nice residence in central Paris or the residence we have just refurbished in Washington. That is the other reason why I say that we are at the end of our funding model: I do not see a gap, as it were. I think the honest answer to your actual question is: I do not think we have done significant damage to bilateral relationships through what we have done so far.

Q13            Sir John Whittingdale: Obviously, the world changes constantly; new countries emerge, and others become more important. Is there any possibility of the Foreign Office wishing to open new embassies?

Sir Philip Barton: Over the past 10 years, say, we have had a modest but not insignificant expansion—in parts of Africa, or some of the places in the Pacific where we had closed, we have reopened, which is important, including for geopolitical reasons. At the moment, we have no current plans—I think that would be the phrase—for further expansion. I am not sure we will be getting any larger going forwards, not least given the pressure on our resources, but we have expanded and added probably between 10 and 20 new posts in the past five to 10 years.

Q14            Sir John Whittingdale: The constraint on opening new embassies or consulates is financial, rather than necessarily what would be good for the UK.

Sir Philip Barton: In the end, if you look at the few remaining countries where we do not have a presence, they are inevitably the ones where the relationship is one of the less important ones. As long as we have diplomatic relations, we will always have an ambassador or high commissioner, but they will be non-resident—we maintain the relationship through people visiting rather than being there permanently.

Chair: May I go to Blair?

Blair McDougall: Sir John asked the question I was going to ask, so we can press on.

Chair: Okay—that is very well behaved. Claire, I think you have some questions on ODA.

Q15            Claire Hazelgrove: Thank you, Chair, and Sir Philip. I thought a good place to start might be to follow on from where my colleague left off, with your reflections on the merger, but thinking about ODA. You set out the very different world we find ourselves in from the one we thought we might be in, in terms of the politics of it as well. We talked a bit before about the process of the merger, but based on your reflections, I wondered whether you felt that the strategic case for the merger, in the world we now live in, is still sound, or is there a case for the two not remaining within one Department? Might aid thrive if based elsewhere?

Sir Philip Barton: I think that the strategic case remains. If you look at it from the development end of the periscope, rather than the geopolitical one, what are we trying to do? We are trying to help the absolutely least fortunate and poorest. That could be emergency humanitarian relief, akin to the announcement we made in the past day on Sudan, or it could be long-term support—for example, in health or education. But if we want change to be sustainable, we require political change as well, and that influence requires growth, economic development and opportunity. That is where I think our diplomatic influence, sets of relationships and the way in which we can engage by doing things together mean we can achieve more on the pure development side as well. I think that there is an external impact case for the merger, in addition to the process points I was making earlier.

Q16            Claire Hazelgrove: Okay, thank you. I want to turn briefly to the FCDO’s priority outcomes, and in particular priority outcome 3. For the benefit of those watching at home, that is: “Reinvigorate the UK’s leadership role in international development to tackle shared global challenges, respond to humanitarian crises, and support the Sustainable Development Goals”. I am sure you appreciate that that is a lot to pack into one objective, or one outcome. I wondered about your reflections on that. A lot of that is meant to focus on the long term—for example, the sustainable development goals—but what about the negative consequences for those of focusing on so many humanitarian crises when ODA has had to be stretched so much? Do you feel there is a strong case to be made for ringfencing some ODA funds, so that there can be that focus on the long term, while additional funds from other sources focus primarily on the humanitarian crises?

Sir Philip Barton: I will answer your question, but I will just note that that is the outcome delivery plan agreed before the general election, so it has been inherited by the current Government. One of the Foreign Secretary’s three reviews is on development and how we achieve more in rebuilding our capability, where that has gone down. Actually, if you look at how we allocate our money on ODA, it is bilateral programmes, some of which are long term and multilateral. Some of it is immediate humanitarian response, but a lot of it is very long-term work on things like climate finance or money going to the World Bank. I think that we are still spending the bulk of our development assistance on long-term projects and programming, so I am not sure that there is a need to ringfence it. There are some areas—Ukraine, for example—where there has been some reprogramming, but the vast majority is long-term programming work.

Q17            Claire Hazelgrove: There is the challenge, which you touched on earlier, of the ODA decrease from 0.7% to 0.5% that the last Conservative Government brought in, so you are trying to stretch less over more. Your reflections on that would be interesting, because we are keen to make sure that the funds are going where they are meant to go. That long-termism for development is vital, and there are humanitarian crises as well. I am wondering whether we are trying to do too much with one fund.

Sir Philip Barton: I am remembering back to the autumn of 2020. In that financial year, on top of the reduction that had already happened because of the fall in GNI, taking that much money out of the budget at that speed was really, really hard. It meant shutting programmes and disappointing partners. It meant that when people said to me, “Philip, you’ve become an unreliable partner,” I did not feel I had a strong argument to rebut that to be totally honest with you, because we had had to disappoint people. It was really tough.

We also reprogrammed some big multilateral expenditure to the right, because it was a long-term portfolio approach, which meant for future years that we had pressures. Looking ahead, I think that, through the review and the Foreign Secretary’s and Development Minister’s consideration, there will be choices about what themes the Government and we as a Department will prioritise in the long-term in terms of what we want to do more or less of, recognising that at 0.5%, less what goes to other Government Departments, including on in-donor refugee costs, the budget is significantly lower than what it was a few years ago. That said, we are still among the largest ODA spenders in the G7 countries.

Q18            Claire Hazelgrove: Thank you for your honesty there. Do you think that that cut has had an impact on UK soft power?

Sir Philip Barton: Yes. I think we were seen in some quarters as slightly having withdrawn from that area, where we were very clear global leaders in that space. We are now stepping back into that. We lost a bit of capability, and we are rebuilding that and working out exactly what that looks like in practice. I think we are regaining some lost ground.

Q19            Claire Hazelgrove: This is the last one from me, and then I will hand over to colleagues. The OBR has said that it does not expect fiscal circumstances to allow an increase in ODA from 0.5% to 0.7% within this Parliament. What do you expect the timeline to look like in reality?

Sir Philip Barton: I would not second-guess the OBR, to be totally honest with you. They are the ones with the expertise.

Q20            Aphra Brandreth: I have a couple of follow-up questions on ODA, and specifically what it is spent on. The National Audit Office’s 2023-24 report found that 7.7% of the ODA budget was being spent on projects or in countries that did not meet the criteria for ODA spending. Can you elaborate on these cases? Given that those projects fall outside the broad definition of ODA spending, is there a reason why the money was spent on them?

Sir Philip Barton: I would be guessing. We might have to write to you on that. I do not know, unless it was some sort of partnership arrangement for a programme with an effect somewhere else. I would have to look into that.

Corin Robertson: We would have to look into that. It may be the international climate finance fund.

Aphra Brandreth: When you look into it, it is on page 10 of the report. It would be great to hear more about that.

Q21            Chair: That was a question about payment, based on page 10 of that report. If people can look at that and write us a note, it might be helpful. Can you do that? I think it is important to get an answer on that.

Corin Robertson indicated assent.

Q22            Aphra Brandreth: I have another question around themes of spending. Between 2019 and 2023, ODA spending on support for asylum seekers and refugees looked to rise by about 24.8% to a total of £4.3 billion. I wanted to get your thoughts on whether that is a good use of ODA finances.

Sir Philip Barton: Successive Governments have taken the approach that things that can be scored as ODA under the OECD Development Assistance Committee’s rules are generally scored as ODA against the GNI target for overall Government expenditure, which is now temporarily 0.5%. It is legitimate for Governments of the day to choose to do that.

Q23            Aphra Brandreth: Given that that is the way things have gone—obviously, it has increased substantially—I just wonder what your thoughts are about the impact on projects promoting British soft power abroad if we are focusing on spending on asylum and refugee support.

Sir Philip Barton: Obviously, there is a cost pressure to the UK—to the Home Office and, ultimately, the Exchequer—and that money has to be found somewhere. The approach that the Home Secretary has taken is incredibly welcome: she made it clear at the time of the Budget that she would drive down those costs over time, because that will have a direct impact on the amount of money available to the FCDO to spend on development assistance overseas. Clearly, sat where I am in my role, I would much rather the money came to the FCDO so we can spend it on programmes overseas, but I recognise, first, that it is within the DAC rules and, secondly, that there are wider pressures on Government finances.

Tim Jones: To come back to your earlier question, page 10 in the pack is about the totality of the FCDO’s overseas programmatic spend. The vast majority of that is ODA, but because of the merger, we have a whole bunch of non-ODA things like international subscriptions, the BBC World Service, the British Council and international programmes that the Foreign Office legacy Department runs. That is quite a sizeable amount of money in the overall programmatic spend, and it is all disclosed in the accounts.

Sir Philip Barton: So the 7.7% is a reference to non-ODA.

Tim Jones: Yes.

Q24            Uma Kumaran: My weekend reading included Civil Service World, which had an interesting article with a quote from you. In response to questions about aid budget cuts, you said that they “have damaged the FCDO’s reputation as a reliable donor”. The article was from April 2024, and obviously it was in response to decisions made by the previous Government. Linking this to priority outcome 3, on the UK’s leadership role and responding to humanitarian crises, I want to draw your attention to three things and ask you a question.

There was a 41% cut to the FCDO’s basic services programme in Afghanistan, including to the World Food Programme’s rations programme. In Sudan, where there is a significant humanitarian crisis, the humanitarian programme was slashed by 49%, and there was a further 45% cut to the FCDO’s governance programme, which hindered support to improve political representation, in particular participation for women and young people. Finally, in Ethiopia, there have been cuts to the health programme of 87%.

In the light of what I have just set out, I would like to know what representations were made to Ministers in the previous Government ahead of those decisions. I am reflecting on a question that the Chair asked you: if you knew what you know now, what would you do differently?

Sir Philip Barton: Sorry, are you referring to the decision to step down from 0.7% to 0.5%?

Uma Kumaran: The decisions I just set out. This is about the impact of the cuts to the FCDO programmes I just set out and your analysis that there was damage to our reputation as a reliable donor. What would you do differently?

Sir Philip Barton: The Government took a decision, and it was announced in the Budget. As is always the case with the Budget, that is not widely revealed. Once we knew that the decision had been taken to step down from 0.7% to 0.5%, we looked at the overall commitments that we had. We looked first at where we had legal obligations, as we often do with multilateral commitments. With the World Bank, there is a legal requirement to pay money within a certain timeframe, so that was, in a sense, non-negotiable.

We then looked at where the money was and went through a process of looking at the overall priorities. The then Foreign Secretary said in Parliament what the overall priorities were, and we looked through and asked our teams whether they were multilateral programmes, programmes in countries but run from headquarters, or programmes run from our network of overseas posts. We asked them to go through all their programmes against the priorities, and also against a value-for-money decision. Sometimes, if a programme is nearly finished, the most value-for-money thing that you can do is finish it off. If it has only just started, it might be slightly easier to close. We asked them to make a quick value-for-money assessment, and then we took overall decisions, which were incredibly tough for all the reasons you illustrate, about which programmes to close, postpone or reduce and which to continue against the overall envelope that we were given.

Uma Kumaran: Were any representations made ahead of those decisions? Did Ministers ask you about an analysis of what their proposed cuts at the time would do to some of those things?

Sir Philip Barton: Before the decisions to step down from 0.7% to 0.5%?

Uma Kumaran: Yes.

Sir Philip Barton: There was no opportunity to make representations.

Chair: Can I cut in here? The hon. Member has asked questions about particular programmes in Afghanistan, Sudan and Ethiopia, and the proportion and scale of the cuts are truly shocking. I appreciate that you had to make hard decisions and that the overall decision about cutting back on the amount of overseas development money was not in your hands, but in the hands of Ministers. Nevertheless, it is right for Uma to home in on those programmes and to ask specifically about who on earth made the decisions to cut those budgets by that amount.

Sir Philip Barton: Tim should jump in, but I have the figure from memory: halfway through the financial year, we were asked to take £3.5 billion out of the budget. That involved some really challenging choices. In the end, the decisions were taken by Ministers.

Q25            Chair: Can I ask you some questions about the Budget, because it is a little big foggy? First, it seems that there will be a slight increase over this year and next by an average of 1.8% in real terms. Is that right?

Sir Philip Barton: Tim, is that the right figure?

Tim Jones: Yes, if we take total DEL.

Q26            Chair: Okay. So the Budget confirms that the increases are driven by ODA spending. How will the latest spending announcements affect the other areas of FCDO spending?

Sir Philip Barton: Overall, like most Government Departments that are not protected, we have been asked to absorb inflationary pressures on our running costs budget. The things we have a bit of additional money for are, on the one hand, a voluntary—I emphasise the word voluntary—exit scheme to allow us to reshape and refresh our overall workforce, and some money, which we are working through exactly what that looks like in practice, to allow the BBC World Service to continue broadcasting where they are broadcasting now. Do you want to add anything else, Tim, on the overall shape of the non-ODA parts of the first phase of the SR?

Tim Jones: I don’t think so; I think that captures it.

Q27            Chair: Can I ask about something else that I don’t get? The FCDO’s main estimate for this year shows that, compared with last year’s final budget, you plan to spend £73.5 million less on day-to-day spending—resource—and £65.3 million less on capital. I don’t understand that. If there is supposed to be an increase in your budget, why do you have an estimate that you are going to be spending so much less?

There is something else that I do not understand. You are also committed to making efficiency savings of £79.5 million in this financial year. So you are committed to making efficiency savings of £79.5 million, and you are going to be spending all that money less—£73 million plus £65 million—and your budget is going up, so you will appreciate why I am confused. And, last year, in your ’23-24, the FCDO underspent by £174 million. So you are getting more money, you are underspending, you are volunteering to do efficiency cuts and you are spending less anyway. Honestly, for the public watching this and trying to understand the Foreign Office’s budget—well, I might not be the only one who is confused.

Tim Jones: We have a planning budget that is set for us by the Treasury through negotiation and the spending review. We set plans at the start of every year and lay the main estimate to Parliament. We then adapt as we go through the year and lay supplementary estimates. Quite a lot can change in the course of a year, particularly with a Department that largely delivers programmes. On the ODA side of the house, we have 571 programmes, with a total whole-of-life cost of £60 billion. As we were discussing earlier, we move things forwards and backwards, slow things down and speed things up, so the budgets can move around.

On the operating costs, the numbers in the estimates reflect that, in the previous spending review in 2021, like the rest of the Government we were tasked with finding efficiencies. So the numbers you can see are both largely the same set of numbers, with around £70 million of efficiencies that we signed up to. I think that what you are seeing in the numbers is effectively that, working its way through. We are making our efficiency savings as planned, allowing for slight variation.

Q28            Chair: So are your efficiency savings the same as the main estimates that say that you are going to spend less?

Tim Jones: They are broadly comparable, in that the efficiency savings profile we agreed with the Treasury was to save progressively more as we went through the spending review period. I do not think the numbers are necessarily exactly comparable, because they will be netting off other increases against the efficiency savings. Although the two numbers are quite similar, they are not quite describing the same thing.

Q29            Chair: Would you mind writing and explaining how this all works? I am listening hard, but it would be helpful if you could write and explain how this works out.

Sir Philip Barton: Yes, I am happy to do that.

Q30            Chair: Can I go back to the underspend? According to the ’23-24 annual report, the FCDO underspent £174 million of resource DEL and £139 million of capital DEL last year. The budget allocations for ’23-24 were updated at the supplementary estimates on 27 February ’24, just a month before the end of the financial year. So why were your forecasts so different?

Tim Jones: We have a number of smaller ringfenced budgets that are provided to us by the Treasury to cover things like depreciation and impairment charge and foreign exchange movements—

Chair: But that is not all foreign exchange movements, is it?

Tim Jones: It is operating income as well. Cumulatively, each of those things are roughly tens of millions. The agreement we have with the Treasury is that we do not try and be overly precise on the forecasting for those quite volatile elements. We cannot recycle the money. The terms and conditions of our spending review settlement are that we do not channel FX gains back into running the pay bill. We hold all those small budgets separately. In any given year, they can run up relatively sizeable underspends against each one. Cumulatively, you add them all up and it looks like quite a big figure, but individually they are not that big a set of differences.

Sir Philip Barton: They are not things we could have spent on departmental activity, because if we had needed them, they would have gone on things like foreign exchange movements. We did not need the money, obviously; this was savings to the Exchequer. It is not a missed opportunity by having those underspends in general.

Chair: But it is £174 million of resource and £139 million of capital.

Sir Philip Barton: Because in the end—we agree with this—the Treasury wants to make sure we have enough money. So you go through the supplementary estimates, making sure you have enough money. These are volatile budgets, and they have got more volatile in recent years. There is a premium on underspending a bit rather than overspending and breaking your parliamentary control totals.

Q31            Chair: Do you mind writing to us about the underspends as well and explaining that?

Sir Philip Barton: Okay.

Q32            Chair: Before we move on, what reassurance can you give the Committee that we are not going to end up with that scale of underspend this year?

Tim Jones: What we were explaining is that this is what happens every year, because of the way the Treasury gives us the money for things like accounting adjustments and foreign exchange risks. Given the way we are set up in terms of our budgets and how they work, we have had similar underspends every year for the last few years. We cannot recycle the money in. The Treasury does not want us to breach our budgets by making heroic forecasts and being overly precise. So as we come into the financial year, we hold these buffers on these small budgets so that we do not go over. We will underspend by these amounts—

Chair: Every year.

Q33            Edward Morello: Can I just ask whether there is any indication that if you are accurately forecasting that over a sustained period, the Treasury would reduce your headroom?

Tim Jones: Potentially. Over the last—

Chair: But if it is happening every year, why doesn’t the Treasury just go, “Well, you’re always going to have that. Why should we even give you that money when you’re always going to underspend by this amount?”?

Tim Jones: I think the fact that the Treasury has not pre-emptively cut the budgets demonstrates that they are quite volatile, and that the Treasury does not feel confident to pare back our budgets.

Chair: You say on the one hand that they are volatile, but on the other hand you tell us that it is always the same every year.

Sir Philip Barton: It is not exactly the same.

Chair: Okay. Well, I would really appreciate it if you could write to us, because I clearly don’t get this. Matt, I think you were going to ask some questions.

Q34            Matthew Patrick: Thank you. I think a few colleagues have mentioned your priority outcomes for 2023-24. They are obviously important for accountability and for staff. I am a great believer in defining success as well as defining failure; it is a good opportunity to learn from things. When I read through them, I see that priority outcome 1 is “shape an open and stable international order through strong alliances and future partnerships.” It feels slightly woolly to me. Do you think it has enough detail for us to be able to truly measure it?

Sir Philip Barton: To go back to what I said earlier, those outcomes were agreed during the previous Government before the election. They are challenging measures, although we did have metrics that the last Government chose not to publish. We were doing our best to measure, however woolly, what the outcome described.

The Foreign Secretary has been really clear since coming in that he sees us as the delivery arm of the Government overall, particularly around the missions and the foundations. He set us five policy priorities, within days of taking office, around putting growth and jobs at the heart of our foreign policy, playing our part in enhancing UK security, rebuilding our relationship with Europe, restoring our leadership on climate and nature, and modernising our approach to development. We are setting up a delivery unit, and we are working through the metrics underneath each of those priorities so that he can hold us accountable for delivering them as a Department, and we can hold ourselves accountable.

We are absolutely aiming to avoid woolliness and get to specificity so that we can say, “This is what we are going to achieve in the period ahead,” and we can then check how we are getting on from time to time, in a classic delivery kind of way. I agree with what lies behind your question. It is really important for us to be clear and precise about what we can achieve, but we need to be held to account for that. I am not sure I would start with the outcome delivery plan. I think we will try to move beyond that and focus on the Foreign Secretary’s priorities.

Chair: Sorry, Matt. Given that Richard has to get to Defence questions, I think he needs to ask a quick question first.

Richard Foord: I am probably all right until about 10 to, Chair.

Chair: Okay. Well, then I will come back to you in a minute. Sorry, Matt.

Q35            Matthew Patrick: That is very gracious of you, Richard—thank you.

You said that the last Government chose not to publish metrics. Why?

Sir Philip Barton: I don’t think they published the outcome delivery plan, from memory. I don’t know. It is all decided in the centre, but I don’t think that there were published metrics, unless I am—

Matthew Patrick: Is that common?

Sir Philip Barton: I don’t think any Department had its metrics published, although I am looking at my colleagues to check I haven’t misremembered. Different Governments have taken different approaches to publications of these things.

Q36            Matthew Patrick: On that point, I am pleased to hear that growth will be in the new priorities that we develop. I do think acknowledging failure up front is an important opportunity to learn lessons. Against those four priority outcomes, I appreciate that so much has happened in the world that you could not have anticipated, but where do you think we have succeeded and where do you think we have failed?

Sir Philip Barton: Clearly, we have failed to deter Putin and Russia from invading Ukraine. We did try very hard, but in response, the UK has really stepped up and led international support to Ukraine across the waterfront. We mentioned the recovery conference earlier, but we have absolutely given military and wider assistance to Ukraine, including playing a leading role in co-ordinating sanctions, for example. In that one horrific and terrible invasion, I see failure to deter, but also the UK—and us as a Department—playing a very successful leadership role in the response and support to Ukraine. I am just citing one example, based on probably the biggest recent international event.

Q37            Matthew Patrick: Against the three, where have we failed? I do not think anyone would have said, “Stopping Putin is at the top of your list—you can definitely achieve that.” Is it something we probably should have made some progress on and have not, or does it come back to the outcomes being slightly too woolly?

Sir Philip Barton: On the outcome you have just mentioned?

Matthew Patrick: On all four outcomes that are listed.

Sir Philip Barton: I will have to refer to them, I am afraid; I no longer have them at my fingertips.

Matthew Patrick: My colleague has just suggested that I read them out while you are looking at them in case anyone is watching. I have read out priority outcome 1 before.

Priority outcome 2 is: “Protect our national and international security and mitigate the threats of strategic competition through building partnerships, strengthening deterrence, and effective constraint.”

Priority outcome 3 is: “Reinvigorate the UK’s leadership role in international development and tackle shared global challenges, respond to humanitarian crises and support the Sustainable Development Goals.”

Priority outcome 4 is: ”Support British nationals around the world by providing resilient 24/7 Consular services and agile crisis response.” I must say, I think priority outcome 4 is probably the clearest.

Sir Philip Barton: Yes, and I think we do a good job on that. There is always room for improvement. We have good ways of measuring how we do that, including people’s views of the services we provide and how we work through when things go wrong.

International development is work in progress. We have a review going on led by Baroness Minouche Shafik to look at both how we get more out of doing diplomacy and development together and how we rebuild our capability and carry on restoring our international reputation. That is work in progress.

On response to humanitarian crises and sustainable development goals, resources are a challenge. We have seen a growth in humanitarian crises and need, and our resources have been constrained. That is to say, we are doing what we can, but that part is challenging for resource reasons.

On security, that is a partnership with the Ministry of Defence, agencies and others. The Home Office is charged with the security of the UK. Overall, particularly in response to Russia’s invasion of Ukraine and a more hostile world generally, the FCDO has done effective work.

On priority outcome 1, “Shape an open and stable international order”, it would be hard to claim that that is the way the world has been headed over the last few years. So that probably was an over-ambitious objective, given the trajectory of the world getting more volatile, contested and challenging.

Matthew Patrick: That ties nicely into your lessons learned at the start about overambition. If I may, Chair—

Chair: This is your last question.

Q38            Matthew Patrick: Thank you. On lessons learned and priority outcome 3, which is about responding to humanitarian crises, there are huge issues with what is happening in the middle east. What frank lessons do we and your successor need to learn about our failure to get aid into Gaza and our failure to retrieve a British hostage held in Gaza?

Sir Philip Barton: I visited Tel Aviv and Jerusalem last week, partly to show solidarity with our own people there, including our Palestinian and Israeli colleagues and our UK staff, who have been working under relentless pressure for well over a year now since 7 October 2023. I met the mother of the British hostage Emily Damari in Hostages Square in Tel Aviv, and wanted to show understanding for her anguish and the desperate situation that she and the other British-related hostages—and all the hostages—are in. We will carry on doing everything we can to influence those trying to secure their release. So far, that has not been successful. We will carry on supporting the families and supporting those efforts. We have been calling for a long time now for a ceasefire and for the hostages to be released. We will carry on using all of our diplomatic influence to try to secure that.

On the humanitarian situation and the horrendous situation in Gaza, I talked to some of the humanitarian agencies involved, not only, but particularly, on the UN side when I was in Jerusalem. I also talked to our staff. It is incredibly challenging, and we will carry on doing what we can to persuade the Government of Israel to let more aid in and to remove some of their constraints on the ability of the UN agencies and others to operate. You will have seen the Prime Minister’s very clear statement around our support for UNRWA , for example, which is fundamental to the delivery of assistance. We will carry on using our influence to the extent that we can.

Q39            Richard Foord: Sir Philip, I would like to ask about the way the Government have decided to take EU relations out of the purview of the FCDO and move them into the Cabinet Office. How does that sit, given that the FCDO is to retain responsibility for Europe strategy, business as usual and bilateral relations, but the Cabinet Office is now expected to take on responsibility for the UK’s relations with the EU? Does that not separate two functions that ought to sit together?

Sir Philip Barton: You can cut things up in different ways. It is not that different from how Europe was divided up when we were a member state, when you had a central team and a central EU adviser to Prime Ministers, but you also had the then FCO charged with the bilateral relationships with European countries, whether they were member states or not. Obviously, we are no longer a member state, so it is a bit different, but I actually think it is perfectly possible.

For me, it is all about collaboration. Are we and the Cabinet Office going to work in a collaborative way? We are absolutely set up to do that and determined to do that. The Foreign Secretary, the Minister for Europe, the Minister for the Cabinet Office and, ultimately, the Prime Minister chairing the Europe committee that looks at the Government’s all-over approach are all determined to take a unified approach under the new arrangements. If you look at the kind of individuals who have gone over to the Cabinet Office, they have been working together in one team, so there is very effective and close collaboration between the individuals involved.

Q40            Richard Foord: How many individuals have moved?

Sir Philip Barton: About 50 have moved over.

Q41            Richard Foord: Is that really enough FCDO expertise to move, given that you have the strength around negotiation and diplomacy?

Sir Philip Barton: I think it is, because if you look at the substance of what the Government want to talk to the European Union about, some of it is obviously about negotiation, but some of it is about really understanding, for example, phytosanitary arrangements. If the Government end up in a discussion around phytosanitary arrangements, you need the people who understand the phytosanitary arrangements in the UK and where we might want to make agreements. You need not only your diplomatic and negotiating expertise, and your understanding of European Union countries and where the European Union is coming from, but also your deep sectoral expertise in different areas, depending on the policies you are discussing.

Q42            Richard Foord: This is the last one from me on this subject. Last week we heard the Governor of the Bank of England talking about how the UK’s exit from the European Union had weighed upon the economy, and he said we should be alert to welcome new opportunities. What role might the FCDO have in that?

Sir Philip Barton: On the economic side?

Richard Foord: When we are talking with the European Union, if all this is now the responsibility of the Cabinet Office, what residual responsibility will the FCDO have?

Sir Philip Barton: I would point to two things. One is that there are clearly some things about our relationship with the European Union that are absolutely the Department’s responsibility. The Foreign Secretary was invited to go to the EU Committee on Foreign Affairs, and he visited and agreed with High Rep Borrell that we would thicken up our collaboration on foreign policy and security policy issues. We will take that forward.

There is then a set of bilateral relationships that we are in the process of improving, the most notable of which is the one with Germany, where we are three quarters of the way through agreeing a new treaty. We will pick that up again when German politics allows that. We are going systematically through all our bilateral relationships and looking at where and how we want to thicken those up in the light of the Government’s reset with Europe.

Q43            Chair: To follow on from what Richard asked, we have also heard, in terms of new priorities, that one of the Foreign Office’s top priorities is supporting growth generally. Would you mind giving us a short—short—overview as to what role the Foreign Office can play when it comes to growth?

Sir Philip Barton: I will be incredibly short, because the Foreign Secretary has asked Sir Martin Donnelly to do a review on what more and better looks like in terms of our economic diplomacy. That is around where and what we should be doing, in terms of where we can help secure the most growth for the UK, and what capabilities we have already and what we need to build up to do that in the best way. It is about everything from securing individual contracts and investments and taking it up with countries where British companies have been unfairly treated, to the political advice and influence we can give to DBT as it looks to negotiate free trade agreements, and everything in between, including aspects of regulatory diplomacy. Martin’s review, which will report later this month, will have a much more sophisticated answer.

Chair: Aphra, I think you had some questions on the EU.

Aphra Brandreth: Both you and Richard have covered them now.

Q44            Uma Kumaran: Sir Philip, what impact has responding to international crises, such as the ongoing conflict in Ukraine, for which tomorrow sadly marks the 1,000th day, the Middle East and the worsening situation in Gaza, had on the FCDO’s ability to deliver its core priorities? I am especially thinking about priority outcome one, which is to, “Shape an open and stable international order through strong alliances and future partnerships”, and priority outcome two to, “Protect our national and international security”.

Sir Philip Barton: I think it remains the case, if you look at what the Prime Minister said on the way to Brazil for the G20, that supporting Ukraine in response to Russia’s invasion is this and the previous Government’s top international priority, so in a sense, woven through the two headline objectives you just mentioned is our response to the invasion. We have significantly stepped up our effort, with both people—including a lot more working on sanctions, for example—and resourcing to Ukraine. We have also had to do work around the world on the secondary effects, for example, on food security and the humanitarian situation through the spike in prices with increased energy costs. There were food supply problems when there was a period when Ukrainian grain was not getting out. Both in its direct effects and more broadly, the invasion has an impact on, not all, but a vast range of departmental work.

Q45            Uma Kumaran: I have a short follow up. In your opinion, does the FCDO have the resource it needs to progress some of these pressing matters, especially since the situation in the Middle East is worsening? We have heard about the UK’s role in the ceasefire, securing the release of the hostages, and working towards a two-state solution.

Sir Philip Barton: In people terms, we absolutely have the people we need to deal with the highest priorities that you have listed. People are not a constraint. On financial resource and development assistance, all permanent secretaries are going to say that they want more money, and I would say the same. But I recognise, as I said earlier, the fiscal constraints that the Government and the Chancellor are operating under, so I understand why in the end some tough choices have been made and will continue to have to be made. Our job is to make the best use of the resources we have and to achieve maximum effect against the priorities of the Government.

Chair: Let us move back to staffing.

Q46            Abtisam Mohamed: Sir Philip, I have a question in relation to the diversity of the organisation. There is a significant percentage gap between the number of people from an ethnic minority at the bottom of the scale compared with the top—a 20% difference. That is compared with a 12% difference in gender. My first question is, what specific action is being taken in relation to the lack of diversity at the top? To follow up on that, 37% of UK-based directors are women; what is the breakdown in terms of ethnic minorities at director level? My understanding is that it is significantly lower than the 11% of people at the senior level, so what specific work is being done to address the under-representation?

Sir Philip Barton: I will ask Corin to add to that as well, but in headline terms, you are right. Our aim is to reflect the UK and all its diversity in us as an organisation. If you look at the headline figures, we do, but not when you go to more senior levels. We have improved at more senior levels since the Department was created—the percentage of ethnic minorities has gone from 7% in the senior civil service to 11.6%, but that is still not in the right place. We have also improved in what I would describe as the middle level of grades 6 and 7, which now reflect the UK population. However, we have more to do. We have tried to both understand the data better and support people through things like sponsorship, mentoring and schemes to help them get promoted and progress. I am afraid I do not know the answer to your question on directors, so I will have to come back to you. Corin, would you like to add what else we are doing on the race side?

Corin Robertson: As an organisation, we have a race action plan that is targeting interventions across different grades. As you noticed, the real challenge for us is getting people up into the senior civil service level. We are focusing interventions by DG area; for each of our directors general, we have an action plan around sponsorship and talent management. We want to ensure that we have interventions in local parts of the business to help support our diverse talent not only to encourage them to think about opportunities at the next level but to make sure that we are monitoring and keeping track of how we are doing. For instance, we are keeping track of the diversity data on appointments and promotions as we are going through.

On ethnic diversity, we are also looking at the breakdown within the wider category of ethnic diversity, but we are not doing as well as we want to, in particular around our black staff. For instance, we have the new Black Employee Association that we work very closely with to try to work out how we can better support our staff to do well in the organisation—to thrive and be promoted. We are also doing a race culture inquiry, which we are just scoping at the moment, to try to help us on that path.

Q47            Abtisam Mohamed: I want to ask about directorships, because the directors is where it is concerning for me. My understanding is that there are not any. Is work being done to ensure that the directors reflect the diversity of the population as well?

Sir Philip Barton: It is not quite true that there are none, but you are right that we are way under.

Abtisam Mohamed: It is lower than the 11%, so I think you could break it down further.

Sir Philip Barton: You are right. All the things we are talking about to help people promote and progress are designed to help people fill director-level positions going forward. I would hope that, over time, that number improves.

Q48            Abtisam Mohamed: Could you please send us the information on the number of directors?

Sir Philip Barton: Yes, of course.

Q49            Abtisam Mohamed: My final question is on ethnicity pay gap reporting. Is that taking place, and could we have those figures if they are there?

Sir Philip Barton: I am not aware of figures on the ethnicity pay gap. Do we do that?

Corin Robertson: I do not think we have official reporting on that, but we can take that away and look at what we know around ethnicity and the pay gap.

Chair: Edward, I know you have a question, but can you keep it short? We want to get on to the other topics.

Q50            Edward Morello: Sir Philip, you started off in your opening statement talking about the fact that the world has become more volatile and less predictable, and the need to be more agile in the FCDO response and think ahead to future risks. With that in mind, there was a 7% increase in the number of individuals who received the help of consular services last year on the year before. What is the predicted forecast of how many more people you expect to have to help? Is the FCDO staffed to support an increasing number of people who need it, and if it is not, is that purely down to budgetary constraints?

Sir Philip Barton: I would have to come back to you on what our actual prediction is for the year ahead. If you look through the last few years, we had a phase through covid where people stopped travelling almost completely for things like holidays. A lot of our demand fell away, but we have now seen it mostly rebuild to pre-covid levels. The reason I am hesitating is because I do not know to whether it will carry on growing, or whether last year’s growth was still catching up from covid. Let me come back to you on our predictions for the year ahead.

On your resourcing point, we are not constrained in the same way as other parts. Basically, our consular work is funded through a levy on the passport fee, and that is something that we keep under review as overall passport fees are looked at by the Home Office. We try to make sure then that the way in which that resource is deployed meets the demand against the changing requirements.

We are looking at how we can make ourselves more efficient. For example, we have a global contact centre, some of which is in Scotland and some in Malaga, and I visited a couple of weeks ago. That was an efficiency we made, so all calls go to people there and can be handled from there—we have a very good IT system behind it—and can then be basically triaged out as required. We are increasingly using technology, for example to deal with standard inquiries, to carry on freeing up staff time—

Q51            Edward Morello: If you are talking about consular services being self-funded through passport levies, those are low intervention cases. If 8,000 out of the 22,000 people who were helped were vulnerable people, they would be complex interventions that do require more money. If we are talking about a more volatile world, we are talking about an increase in the number of complex cases that the Foreign Office has to handle, so I go back to my earlier question: to what extent is the Foreign Office able to handle those and are the constraints purely budgetary?

Sir Philip Barton: We are able to handle the complex cases: we are able to support people in person in countries where they need our support. We prioritise by need and vulnerability, so where there are much more complex cases or a higher need, that is where we will ensure in-person intervention as required, and continue work on the most complicated and difficult cases, both as necessary by people in country and obviously by teams in the UK, up to Ministers as required.

Chair: We need to move on, as we have three rather weighty subjects to cover.

Q52            Matthew Patrick: I read your last published gender pay gap report. Why are men more likely to receive a bonus payment?

Sir Philip Barton: In the end, it is probably some unconscious bias in the system. The one thing I would point to on the gender pay gap is that it has fallen significantly. I cannot remember the exact figure, but I think it is down to about 2%, which is ahead of the civil service and the wider economy.

Corin Robertson: It is 2.7%.

Sir Philip Barton: There is more to do. It should be zero, but it is improving.

Q53            Matthew Patrick: On the pay gap, when can it be eradicated? What is the plan? When will your successor be able to come here and tell us, “There is no gender pay gap”?

Sir Philip Barton: I would hope as soon as possible. If you look at the trajectory, it is significantly downwards.

Q54            Matthew Patrick: I would really appreciate it if a note could be written to us with an actual aim, because we need some ambition to stretch yourselves to achieve that.

Sir Philip Barton: I am happy to do that.

Q55            Chair: If we are doing that, it would also be worth having a note about when it is hoped that the 11% will be reflected at director level. If we had both of those, we would be a happy Committee. We would be even happier if you met the targets.

Sir Philip Barton: I am happy to write so that you have it in writing, but the target for representation is 2026. I will write properly to you on that.

Q56            Sir John Whittingdale: I want to ask you about one or two specific areas of Foreign Office expenditure. You have mentioned the fact that in the Budget, the Chancellor announced that there will be an increase in the amount of money the Foreign Office provides to the World Service. Can you tell me how much that is going to be and is there any agreement as to specifically where it should be spent?

Sir Philip Barton: I cannot quite yet. We are still working out the exact details with the BBC and the BBC World Service management, and then it has to go to their board. I am sorry not to be able to put a figure on the table today—

Chair: When will that be, roughly?

Sir Philip Barton: We will let you know as soon as we can.

Q57            Sir John Whittingdale: Why does it have to go to the BBC board?

Sir Philip Barton: Because in the end we agree with them the funding arrangements—the additional money against them keeping services open—and we need to complete the discussions about exactly what that looks like.

Q58            Chair: When will it be?

Sir Philip Barton: Where are we with the BBC, Corin?

Corin Robertson: We hope very soon. I do not think we can put a specific date on it, but hopefully in the next few weeks.

Q59            Sir John Whittingdale: Will it have strings attached?

Sir Philip Barton: The strings are around keeping open the number of services they have open at the moment.

Q60            Sir John Whittingdale: The Foreign Office used to fund the BBC and the World Service in its entirety. It was then fully funded by the licence fee, and it is now partly funded by you and partly by the licence fee. The director general has made it clear that he does not think that is a satisfactory arrangement, and he thinks the Foreign Office should take back responsibility. What is your view of that?

Sir Philip Barton: It should be properly funded. It does really valuable work around the world. The BBC is the most trusted news brand of any news organisation. I think it reaches well over 300 million people. It has also done some fantastic emergency work—for example, the services into Gaza, Sudan and Ukraine were all set up on an emergency basis in the face of humanitarian crises in those places. So it is really valuable.

In terms of funding, you are right. Some years ago, a decision was taken that it should be funded out of the licence fee, but over time, that funding has come under pressure, and the FCO—now FCDO—put its own resources into that as well. As this Government—it is led by the Department for Culture, Media and Sport—looks at the overall funding of the BBC and how it should be done, obviously one of the things that will need to be looked at is future funding arrangements for the BBC World Service.

Sir John Whittingdale: So the Foreign Office does not have a view as to whether or not they should pay for it.

Sir Philip Barton: My view is that it should be funded properly. If there is any change involving more funding from the FCDO, that should be additional funds—otherwise, we are cutting other activity and having to make very hard choices about cutting other activity to fund the World Service. It should be funded properly, and if it is to be done by the Department, that should come from additional funds to what we have now.

Q61            Sir John Whittingdale: Can I ask you about another piece of unquantified funding—that is, the agreement with Mauritius over Diego Garcia? The Government have announced that you are going to make an annual payment. Is that coming out of your budget, and how much is it?

Sir Philip Barton: At the moment, I do not think we are in a position to make public the funding arrangements. In terms of the funding arrangements around the base, we do not ever make public the funding arrangements for our military operations and bases overseas.

Q62            Sir John Whittingdale: The MoD made public its arrangements over Cyprus. If the MoD can do it over Cyprus, why can’t you?

Sir Philip Barton: Cyprus is not a case where it makes payments to other countries. I am talking about where we make payments around basing rights.

Q63            Sir John Whittingdale: We are proposing to make a payment to another country—in this case, Mauritius. Why can you not say how much we are going to give Mauritius?

Sir Philip Barton: It is not normal practice for us to reveal the value of our payments for military bases anywhere around the world. That is the position on where we make payments around bases.

Sir John Whittingdale: Well, I don’t think that is the case with regards to Cyprus—

Sir Philip Barton: Cyprus is different, because it is not a base. It is a sovereign territory, and in this case, we are changing the arrangements—sorry to interrupt you. 

Q64            Sir John Whittingdale: Perhaps we should pursue this with the Foreign Secretary. Baroness Chapman said that if it was made public, the price could go up. Do you know why that should be the case?

Sir Philip Barton: These things are always going to be a matter of political debate in the recipient country, so in the end, you want to keep some of the things private for those reasons.

Q65            Sir John Whittingdale: Lastly, can I ask you about the British Council. The British Council has been sustained by loans from the Foreign Office, particularly post covid. Do you believe that there is any chance of the British Council becoming self-sustaining, and what would the consequence be if it ceased to be able to receive that funding from the Foreign Office?

Sir Philip Barton: You are right. In the light of the impact on their business from covid, the last Government made a loan of £200 million available to support a short-term cash flow problem and to allow them to restructure and begin to rebuild their commercial income. This Government, the FCDO and ultimately the Treasury stood behind that and carried on supporting that loan. We are in the process of discussing with the British Council when it can begin to repay the loan and what that looks like in terms of its future funding arrangements. I think this issue will probably be looked at in the next phase of the spending review as we look at the medium term, including for the British Council.

Sir John Whittingdale: But is it your intention that the British Council should become self-sustaining?

Sir Philip Barton: Yes.

Chair: Does it provide value for money?

Sir Philip Barton: I think it does, if you look at the impact it has around the world. By way of example, 25% of all new international students in the UK say that they first learned about the UK as somewhere to study through the British Council. That is an immediate and obvious value, and I could cite other things. So yes, I think it produces very good value for money.

Q66            Uma Kumaran: Sir Philip, I just want to step back to ask a question about the BBC World Service. I have had the joy of being interviewed by BBC Tamil, but recently, I have heard from Middle East experts who described the closure of BBC Arabic as a disaster for the region. They said it was a trusted source and now there is no longer any impartial news at all, and it is all state coverage. In fact, shockingly, Russia Today now uses the radio frequency that BBC World Service used to be on.

Do you think that future assessments of funding for the World Service should consider the impact on international and national security, and the impact on fair and impartial information?

Sir Philip Barton: Absolutely, and one of the values of the BBC, as I said, is that it is trusted. We are seeing countries like Russia investing more in this area. But on BBC Arabic, it is true that the radio service has closed, but television and digital remain. And one of the things that the BBC World Service has looked at is how people consume the news, with, over time, a shift more to digital and away from radio, particularly with younger people. So there is an Arabic service—you are right about radio, but there is still an Arabic service. 

Chair: Let’s move on to British Investment International, because that is an important topic. 

Q67            Abtisam Mohamed: Sir Philip, I have a brief question and then I will let my colleague, Edward, go on to further questions. Last year, the International Development Committee did some work on British Investment International, and it found a number of concerns about the types of companies that we were investing in. There were lots of high net worth corporate organisations, private schools and corporate hospitals, and I think this year there was an investment of £500 million in relation to a fraud suspect.

The Committee recommended a number of things. It called for greater oversight; a non-voting Minister to perhaps sit on the board; and for the entire portfolio to be aligned alongside the BII’s missions, which are to create a more productive, sustainable and inclusive economy across the world, and which, according to the Committee, it did not meet. What from those recommendations has been addressed?

Sir Philip Barton: The overall objective of the BII is basically to invest in capital that drives private sector growth in developing countries to create opportunity and jobs. This is the way it works: the BII agrees with the Government a five-year strategy, and under that strategy, it has a target around climate finance of 30%, a target around 25% of their investments enabling women’s economic empowerment, and a target that, by 2030, half of its investments will be in the poorest and most fragile countries, which relates to your point about where the money ends up.

In terms of governance, which has come up a number of times, the arrangements meet the standards set by the Treasury and the Cabinet Office for overall governance of these types of organisations—the NAO described them as thorough. The FCDO—the Foreign Secretary—is the sole shareholder. Its interests are represented by appointment of the chair and two non-executive directors of the BII, but it is deliberately at arm's length to individual investment decisions. The Government, officials in the Department and Ministers are not best placed to direct individual investment decisions, which is best done by the professionals employed by BII, under the overall direction of the chair and the BII board.

Q68            Abtisam Mohamed: How do we ensure that the things that the Committee said were not working will be addressed, in terms of the number of post-conflict countries—fragile countries—that are just not being supported? There is an emphasis on where the investment is going, and it is not directed at the countries that need it the most.

Sir Philip Barton: As I said, a strategy is agreed with the Government, which sets out the overall approach that Government asks the BII to take in its investments. I have cited some of the headlines of what that strategy says.

In addition to the formal governance that I have talked about, there are very regular meetings between Nick Dyer, who is the other permanent secretary at the Department in charge of development and our ODA expenditure, and the team within the Department. There are near-daily meetings with BII about how and what it is doing. However, the overall formal governance is at arm’s length, with the Foreign Secretary ultimately appointing the chair and two of the non-executive directors.

Q69            Edward Morello: I will come back to portfolio return in a second.  Before we talk about that, you mentioned the strategy, but what metrics are we actually measuring BII against and how are they being reported? When I look at the NAO report, all I see is portfolio return numbers.

Sir Philip Barton: I mentioned, for example, 25% on gender and women’s economic empowerment, and they brought in—I cannot remember the job title—somebody to look at and measure the impact of that. That is then reported back to us. They have really refined how they look at development impact.

Edward Morello: As in outcomes? You have just outlined what the distribution metric is.

Sir Philip Barton: Yes, as in outcomes. I also mentioned the target of 30% for investment in climate finance. Again, you may see that as an input rather than an outcome. I would have to write to you to give you the details, but they are measuring the impact. As you rightly say, there is also a target around the financial side.

Q70            Edward Morello: If we accept that the BII is achieving outcomes along the lines of the strategy in terms of development, is the other side of that that we accept that it is loss making?

Sir Philip Barton: In the end, not over time. If your overall approach is not to seek to make the most money possible, but to do good in the world and to achieve positive development outcomes—and you are seeking to crowd in private sector investment and then, through partnership, achieve even more—then as long as, over time, you can basically do a bit more than break even and reinvest the money you make, a single year in which you make a small loss, which is what we had last year, is fine. In the seven-year weighted portfolio, returns are still well over 5%.

Q71            Edward Morello: Given that it is designed to achieve a minimum of 2%, the seven-year weighted average shows that it was loss making in every single year apart from 2021, when it was up 11.2%. So it is only up now because of that one year. In fact, something happened in 2020-2021 that meant that you went from -3.7% to +11.2%. Outside of that year, every single other year is loss making, so that single year is carrying you at the moment. If the forecast carries on being negative, as it has been for the past two years, at a certain point it will be negative again. My question is, does that matter? Are we just accepting that a third of the £400 million that we put in is just going to be lost immediately in loss-making portfolios, and/or have we looked at what happened in 2021 and said that that might be a good investment strategy?

Sir Philip Barton: We do not accept that we just lose a third as it goes in—absolutely not. The purpose is not to lose money. It is quite the opposite: it is to make a little bit and reinvest it, but again, that is against the criteria of development outcomes.

I will have to take away your point around whether there is something in 2021 to learn from. Some of the changes we have had are a result of exchange rate movements and dollar-sterling changes, because although the money the UK Government put in is in sterling, quite a lot of their investments are in the dollar. In some years, the change in the exchange rate has changed the value of their investments, rather than the underlying value of the investments changing.

Chair: Thank you. We wanted to ask a series of other questions—Blair wanted to ask about Abercrombie House and Scotland—but I think we have had a good session with you, and we are very grateful for your time. If it is all right, I will sit down with Blair, work out the best series of questions and send them on behalf of the Committee.

Sir Philip Barton: I am very happy with that, and I am also very happy to provide an in-person briefing on it, if that is useful.

Chair: I think he will definitely take you up on that; that would be great—thank you. There are a few points that we picked up on that you are going to write to us about as well.

Sir Philip, we are very grateful to you, Corin Robertson and Tim Jones for giving us so much time today—thank you very much. It has been really important for our Committee to begin our investigations by being able to speak to you and to race through all the points that we have. I know that all my Committee members have a number of other points that they would have liked to have asked, and I am grateful to them for being as disciplined as they have been, so that we have been able to get through this session in the right amount of time.

We are looking forward to seeing the Foreign Secretary in a couple of weeks, and perhaps we can draw on some of your answers when it comes to asking him questions. Thank you very much.