A choice between decline and growth – UK global influence and the Spending Review

This is the first in a series of blogs on the upcoming Spending Review, and how Britain maximises its influence and soft power across the world at a time of declining budgets. This focuses on the Spending Review, and the Foreign & Commonwealth Office (FCO).

Civil servants across Whitehall returned from their summer holidays with a thump. Now in the thick of negotiations, the Chancellor’s Autumn spending review looms with huge departmental cuts on the horizon. Seeking to bring the money-and-maginifying-glassUK into surplus by 2019 / 2020, the review seeks £20bn of departmental savings. May’s Budget saw Chancellor George Osborne protecting over half of all public spending while simultaneously committing to increases in health and defence spending, ring-fencing schools funding on a per-pupil basis and renewing the pledge to spend 0.7% of GNI on overseas aid. Unprotected departments will therefore bear the shoulder the heaviest burden, and have been asked to formulate ideas for savings of between 25% and 40%. These scenarios are not far-fetched. Analysis by the Institute for Fiscal Studies reports that during the last Parliament, overall departmental spending was reduced by 9.5%, with unprotected departments facing cuts averaging 20.6%.

The UK’s Diplomatic Service under pressure

With defence and aid budgets largely protected, the FCO is the major remaining government department (working on the UK’s role overseas) which will be affected. With a budget that is 25% lower than its French equivalent (despite comparable network sizes), FCO funding (£1.7bn) amounts to less than 3% of the total of the three budgets combined, and as the only unprotected department in this group, the FCO is exposed to the full force of Sending Review cuts.

And there is limited scope for savings. With the devaluation of sterling, FCO spending power has reduced by between a fifth and a quFCO_1823237barter since 2009, requiring increased prioritisation and efficiencies. The 2010 review saw the FCO making a 10% cut (real-terms), followed by a further 6.3% reduction in 2013. Simon Fraser, former FCO Permanent Secretary, admitted in his farewell interview that “like other departments, we’ve faced a pretty tight resource situation since 2010”. Diplomatic capabilities remain underfunded, especially in the areas of compensation levels, technology infrastructure and staff numbers. A February report by the Westminster Foreign Affairs Committee described an FCO desperately in need of funding and a diplomatic service lacking the right skills. There is also evidence that human rights is no longer one of the FCO’s top priorities – believed to be a consequence of the savings imposed so far.

Foreign policy challenges in the aftermath of the 2008 financial crisis have not abated, and there has been significant turbulence across the globe affecting UK interests. Shifts in world order (e.g. reduced power of Bretton Woods institutions) are also coinciding with this relative decline in the UK’s material capacities and its ability to apply international leverage. So what to do in an era of declining budgets and increasing challenges? Prioritisation is key, according to Fraser “…you cannot carry on doing more and more if you’re under continuing resource pressure – and I think we have to face that. The government has to think about that and we have to think about the priorities – what really matters and how we can focus our effort on the things that we can make the most difference on.” There are already some indicators of focus – in June, Foreign Secretary Philip Hammond told the Foreign Affairs Committee that that the FCO would aim to protect its network of overseas embassies, “I am clear that the crown jewel of the Foreign Office’s capability is the network of international platforms, embassies, and missions around the world…   …We must seek to protect that sharp end presence while addressing the need for further efficiencies.” Were there to be cuts, they would likely be made to support functions, subordinate posts in developed countries, and UK operations. The Permanent Under-Secretary, Simon McDonald stated in a recent inquiry; “the logical conclusion of protecting the network and having to reduce is that such reductions that have to take place will be at home”.

Early indicators for 2015 are not promising – the Chancellor unveiled a £4.5bn savings “down payment” in June, with the FCO taking a £20m hit of in-year spending reductions, and more cuts expected. With no constituency in the UK to speak up for it and already stretched, the organisation has largely been left to fight for itself. Echoing an assessment made by the predecessor Committee in the last Parliament, last week’s report by the Foreign Affairs Committee called on the Treasury to protect and increase the FCO budget, “We recommend that the Treasury protect the FCO budget for the period covered by the 2015 Spending Review, with a view to increasing rather than cutting the funds available to support the diplomatic work on which the country’s security and prosperity depend.”

A bold Beeb – ambitious plans for the BBC World Service

The BBC World Service is often seen as one of the UK’s great soft power assets. Former UN Secretary-General Kofi Annan agrees, describing the world’s largest international broadcaster as “perhaps Britain’s greatest gift to the world”.

BBC satellite dishes

Tomorrow will see Tony Hall, BBC Director-General, set out the first of a series of responses to the government’s green paper on the future of the broadcaster – a “passionate defence of the important role the BBC plays at home and abroad”. The green paper opened up plenty of issues for discussion (aims, funding, license fee, digital approach etc.), but tomorrow’s response is expected to focus on some rather bold expansion proposals for the World Service. Bold because the BBC has already been asked to make cuts and shoulder the £750m burden of paying free licence fees for the over-75s. And also bold because they are explicit in seeking to counter the challenge of state-sponsored rivals, such as Qatar’s Al-Jazeera, Russia’s RT and China’s CCTV.

“This is about Britain’s place in the world…   …It is above the politics of the debates about the BBC’s future. It has to be a national priority. Other news outlets are growing globally and many do not share our traditions and values. We have a strong commitment to uphold global democracy through accurate, impartial and independent news.”

A cursory glance at the expansion plans give a good indication of priorities / challenges:

  • satellite TV service or YouTube channel for Russian speakers
  • daily news programme for North Korea
  • expansion of the BBC Arabic Service (with increased MENA coverage)
  • increased digital and mobile offerings in India and Nigeria

But how real are these challenges? Very, actually, especially if you, like 68% of opinion formers, consider the  World Service to be one of the UK’s most important foreign policy assets, or are concerned about the strategic decline of the UK’s soft power.

Firstly, the World Service faces a legacy of underinvestment. With a budget less than half that of BBC2, FCO funding was cut by 16% in 2010, leading to the departure of about a fifth of its staff. This has had an impact – in 2005 the organisation provided services in 43 languages, now down to 28. Some services have been ceased, and at one stage, audiences of 10 million in India were under threat for the sake of £900,000.

Dmitry_Medvedev_took_part_in_the_launch_of_Russia_Today_Documentary

Secondly, and more importantly, the organisation faces increased competition with the news / information arena seeing increased investment by state-sponsored broadcasters – a “soft power battle”. The BBC sounded the alarm bell in January with its Future of News report highlighting the disparity in investment seen elsewhere – “China, Russia and Qatar are investing in their international channels in ways that we cannot match, but none has our values and our ability to investigate any story no matter how difficult.” Compared to the World Service’s £245m budget (2014), both competitor investment and aspiration levels are high. China’s CCTC received nearly $7bn to expand global operations and both RT (previously named Russia Today, the Kremlin-backed news service, $300m budget), and Qatar’s Al Jazeera ($100m budget) recently launched channels targeting UK / English-language audiences. Before being named UK Culture Secretary, John Whittingdale said it was “frightening” that the World Service was being “outgunned massively by the Russians and the Chinese”. 1

The report also warned of ‘dangerous and disparate’ threats to independent and reliable world news from other well-funded state broadcasters, arguing that cuts would reduce the UK’s influence, “The World Service faces a choice between decline and growth…   …If the UK wants the BBC to remain valued and respected, an ambassador of Britain’s values and an agent of soft power in the world, then the BBC is going to have to commit to growing the World Service and the government will have to recognise this.”

With ministerial discussions on the Autumn spending review already well underway, we can expect further lobbying and positioning in advance of the November announcement on departmental settlements. More on this in my forthcoming Chatham House article on how Britain maximises its influence across the world at a time of declining resources.

Are we neglecting our soft power assets?

If foreign policy doesn’t feature in this election a global powerhouse risks losing its voice

In a piece for Real Clear World I argue that

The chances of Britain making it through to May 7 without facing at least one unexpected international event with serious implications for our national interests are slim indeed. Both David Cameron and Ed Miliband should be planning to give over at least a day between now and polling to lay out how they intend to shape world events and not just react to them. Even if they remain unpersuaded that the electorate is hungry for answers now, it is difficult to see how they could claim a later mandate for tough decisions if they don’t hint at their direction of travel on ISIS, Russia, China, the Transatlantic relationship, Syria, reform of the European Union, and prospects for this year’s critical summits on sustainable development and climate change.

You can read the whole piece here and see all the other world election coverage they are gathering together here.

The paranoids versus the Pollyannas: what is driving Labour’s foreign policy?

The Fabian Society has a new pamphlet out this week which lays bare some of the big strategic fights underlying Labour’s emerging foreign policy. I’ve attempted to summarise them here.

Labour politics has taken an inwards-looking turn since 2010 but a new pamphlet, published by the Fabian Society this week, sees the party’s internationalists limbering up for a ruck with the opposition, the leadership and each other all at once. If the IPPR’s Influencing Tomorrow was a genteel debate in the officers’ mess, the Fabians’ collection is a squaddies’ bar room brawl between, in Mark Leonard’s words, “the New Labour tribes of globalisers, liberal interventionists and pro-Europeans and the Blue Labour apostles of localism and disengagement”.

What is a progressive foreign policy anyway?

Labour left office three years ago this month and may return to it just two years from now. That’s not a very long time in which to formulate a distinctive foreign policy for government, nor to game out responses to the massive shifts in the global strategic context in which the next Prime Minister will be operating.

To lend a hand, Labour think tank/ pressure group Progress have commissioned a series on progressive dilemmas in foreign policy, addressing the 12 big questions where the tensions between different left-of-centre first principles are most acute. Whatever your politics, we hope seeing how that debate plays out inside what could be the next governing party of Britain will be of interest.