Officials at the Foreign Office are bracing themselves for a tussle over resources, following the emergency budget in which each government department will be forced to reduce spending by 25 per cent over four years.
This amounts to £550 million worth of savings from the FCO’s £2.2 billion budget, but with health and overseas development budgets being ring-fenced, the FCO may have to shoulder even more of the burden of cuts.
The Foreign Office has already announced £55 million worth of efficiency savings by cutting waste on consultancy, better procurement and asset sales of the FCO’s overseas estate.
Cutting a further £495 million will certainly mean the axing of diplomatic privileges, such as schooling allowances, business-class flights and other perks, which will claw back a further £10 million. The policy of replacing diplomats with locally employed staff is expected to save a further £12 million and the freeze on bonuses will also save the department £9 million.
The Foreign Office’s entertainment budget will be in the firing line, with one MP even suggesting that it replace its £864,000 wine cellar with cheaper plonk. London’s foreign diplomats will also have to prepare for no-frills treatment in London as FCO-subsidised privileges for the diplomatic corps may be reduced further.
Even these cuts are unlikely to make a dent in the remaining £460 million, meaning savings may inevitably have to come from the closure of posts.
In an address to FCO staff, Foreign Secretary William Hague vowed to fight for resources to match the FCO’s political clout under the new government. Mr Hague has been appointed First Secretary of State, the third most powerful politician in Britain, while former FCO Permanent Under Secretary Sir Peter Ricketts now occupies the influential position of National Security Adviser, a post that will cover defence, foreign affairs and counter-terrorism issues.
In a bid to ease the shock of the spending cuts, the Foreign Secretary has pledged to reverse the decision to transfer exchange rate risk to the Foreign Office, which will insulate the FCO from any devaluations of the pound.