Pity the Foreign Office. About two years ago, Britain’s supposedly canny diplomats were comprehensively outmanoeuvred by the Treasury. In return for a modest increase in capital funding, the Treasury asked the FCO take on the risk of currency fluctuations. The result? As the pound crashed, the FCO lost almost a sixth of its core budget.
The consequences were laid bare by Baroness Kinnock yesterday, who acknowledged that counter-terrorism programmes in Pakistan were being cut on the very day Gordon Brown called it the “crucible of terrorism”.
But it does not stop there. All discretionary spending is being cut back, hitting projects ranging from peacekeeping and conflict prevention to climate change. Local staff (who are mostly foreigners) are being fired, told to work four day weeks and receiving smaller pension contributions (imagine the outcry in Whitehall). Diplomats are banned from entertaining contacts or travelling. It is pretty bleak.
You can read more about the FCO budget crisis in these articles we published before Christmas. Beyond the fuss over Pakistan funding, there are two important points to make.
1) This crisis will be worse next year. The shortfall in the core budget is set to rise from 12 to 15 per cent. Most of the fat has already been cut away.
2) This was never planned. The cuts are a taste of the austerity to come across Whitehall. But the manner in which they have been imposed is a textbook example of bad policymaking. No decision was taken to slash diplomatic funding by a sixth. The FCO did not suddenly become a sixth less important relative to other departments. It just emerged with a debilitating injury from the usual wrestling match over budgets with the Treasury. The FCO lost 15 per cent a year — the sort of budget cut other departments are fearing in the next three year spending round.
This is a terrible self-inflicted wound that the FCO should have been smart enough to avoid. But the Treasury is as much to blame. Cunning, guile and sneaky budget negotiating moves are no way to put a price on the value of Britain’s diplomacy.
Jim Pickard
Kiran Stacey