I am at Sky News for on a panel of experts (find some of them on Twitter here), covering the international beat (diplomacy, development, any fallout from yesterday’s defence review etc).
Not expecting many of the headline issues to be on my patch – ironic given that the UK is in a mess because of risks that hit it from overseas: 9/11 and all the dumb things we did as a result of Bin Laden’s provocation; the food and fuel price spike; and the global economic crisis.
Anyway – Osborne is speaking now: it’s time to pull Britain back from the brink. Updates whenever global makes a showing…
Update: In 2014/2015, George Osborne tells the House, the UK will be paying £63bn in debt. I’d expect the UK to be spending considerably less than £60bn on its entire international programme (defense included).
Update II: George Osborne says that 490,000 jobs will be lost over four years. (Next to me, Chris Dobson from PWC says that another 500,000 jobs will go in the private sector as a result of government cuts)
The Chancellor promises to sack as few people as possible – which means, I expect, a near-total recruitment freeze. But, at the same time, he wants root-and-branch public sector reform. That means departments will have to take on new responsibilities, without being able to hire in new skills.
Sclerotic government anyone?
Update III: We’re onto defense. MOD gets £33.5bn in 2013/14 an 8% cut – plus whatever Afghanistan needs. 24% cuts for the FCO by taking a hatchet to HQ staff (because strategic synthesis on global issues doesn’t matter as much as ‘commercial diplomacy’).
DFID has been told its admin costs down to half of what other donors spend (which means not enough staff to work in fragile states). Programmes in China and Russia are to be abolished.
Update IV: The FCO loses around £530m (about half the cost of a new Type 45 destroyer) – but £240m of that is accounted for by the World Service, which will now be paid for by the BBC license fee payer. So the big question is, how much of the other £287m is real money? See update VII for more.
Things to look for – how much development assistance will the FCO get to spend? Will parts of the Council budget be paid for by DFID?
Update IV: All British Council grant-in-aid will continue to be funnelled through the FCO. The Council sees a cut of around £30m over four years – around 18% of its current budget. BC head, Martin Davidson says its a ‘reasonable settlement.’
Update V: Looking at the full spending review report, now. FCO gets protection from exchange rate fluctuations. It will also get a chunk of the increase in development spending. Probably the big surprise is that is cuts are heavily backloaded. It doesn’t lose anything at all until 2013/14…
Update VI: Talked to DFID press office. They’re aiming to half adminstration costs – taking them 4% of total spending (which is about average for donors) to 2%. That measn £15m of cuts – £8m on ‘back office’; £2m off the wage bill; £4m by leasing three floors of their building out; and £3m by making their staff travel economy.
Update VII: The FCO loses £200m in cash terms over four years but the cut happens in the last year – there’s a small cash increase before that. I now think the cut is almost wholly accounted for by the transfer of the World Service to the BBC which does not happen until 2013/14. The ‘real’ cut is 24% – but that, of course, depends on the rate of inflation. I was told before the announcement that the FCO would be pretty happy with flat cash. Still not 100% sure what’s and out of the figures though, and am waiting for the FCO press office to clarify.
Update VIII: This is it for me – unless more news unexpectedly emerges. But one final reflection on the FCO… When we wrote our Chatham House paper, the most contentious issue was what to do with the FCO’s central operation – expand or gut it.
Looking to the future, we see two options for the department:
- A back-to-basics reform of the FCO, paring the department back to focus on its traditional core business of (i) running a network of embassies, (ii) providing a geographical perspective on policy to the rest of government, and (iii) offering consular services to UK citizens.
- Radical reform that would rebuild the FCO’s London headquarters around the primary role of strategic synthesis on the UK’s global issues objectives – a role that would enlarge its responsibilities and bring it much closer to the centre of government, but require far-reaching operational changes – while still firmly maintaining the FCO’s in-country expertise.
Many will see reasons to support the first option. The FCO excels at this work, and would probably prefer to stay in the comfort zone of its overseas network and bilateral relationships. Recent years have shown that global issues are far from being a core concern for the department (with climate change as a notable exception)…
However, we fear that this route would lead to an ongoing downgrade and marginalization of the existing FCO – and would still require the same strategic synthesis and campaigning capacity to be created elsewhere in government.
We therefore believe that William Hague should explain to his new department that it must be prepared to consider far-reaching steps to secure its future, developing a strategic role at the heart of the government’s response to globalization’s long crisis. This means that at least 50% of the mid-level and senior staff working on policy issues at its London headquarters should be seconded from other government departments – making the FCO less like other Whitehall line departments and more like the Cabinet Office.
This shift would both ensure an effective mix of issue and geographic expertise, and begin the process of transforming the FCO into a department able to use its geographic network to respond effectively to global issues.
Clearly, we now have an FCO burrowing deep back into its comfort zone – but I expect we’ll be back asking the same questions about strategic synthesis on global issues the next time a big crisis hits.
Update IX: On aid, the big year is 2013, when expenditure is expected to suddenly leap from 0.56% of GNI to 0.7%. If the 0.7% commitment is ever to be dropped, it’ll be then.