I would like to start this one-off session of the International Development Committee on the FCDO’s 2024-25 annual report and accounts. We are very lucky to have not one but two permanent under-secretaries in front of us, and the finance director. I will start by asking you all to introduce yourselves in a sentence, setting out your role, starting with Sir Oliver.

I am Olly Robbins, the permanent under-secretary and therefore principal accounting officer for the Department. I have been in role since mid-January.

I am Nick Dyer, the second permanent under-secretary.

I am Tim Jones and I am the finance director.

I will go straight in, if I may. With a few exceptions, the report and accounts show steady support for middle-income countries. Can you explain the rationale behind that decision and say which of the priorities that decision reflects? All of you might want to answer, but I will come to Olly first.

Do you mind if I ask Nick to answer on the middle-income countries? There are some very specific ones where we still provide ongoing support—for example, Turkey, for obvious reasons related to Syrian refugees. However, if it is a broader question, Nick might be better equipped to answer it.

The answer to that question is embedded in the refugee problem. The bulk of our support for middle-income countries, whether that is Jordan, Lebanon or Turkey, is all about supporting refugees who have fled their home and moved to neighbouring countries. I was in Jordan and Turkey about a year ago, having a look at the support that we were providing to refugees. Of course, in aggregate the region that receives the largest share of our bilateral budget remains Africa, which is where the bulk of extreme poverty still lies.

I would like to push you a bit on that answer. Some of us had a briefing this morning around the horror in Sudan and the impact that it is having on civilians, both internally displaced people and people displaced to other countries. How are you co-ordinating the support that you give to host countries and to displaced people on a regional basis? I ask that because, to continue with Sudan, the situation there is having a knock-on effect in all the surrounding countries. Also, how do you co-ordinate that response with the ever-reducing ODA budget and the impact that that will have on global climate migration?

If we take Sudan as a good example, the country that is receiving the bulk of the refugees—and can actually absorb that the least—is Chad. David Lammy, when he was Foreign Secretary, and Baroness Chapman have both been to the Adré crossing where most of the refugees are coming across. We are choosing to spend some of the support that we have allocated towards Sudan—or the Sudan crisis—in Chad, because that is where the bulk of the immediate support is required. We are also talking to others, such as the World Bank, about what they can do, and do more of, in Chad in the light of their fragile and conflict-affected states policies; we were talking to the President of the World Bank about that about a week ago. It is about what we can do, but also what we can get others to do, in that region. As you are aware, the Prime Minister committed, when he made the first announcement in Parliament, to retain our commitment to Sudan, Ukraine and Gaza. So going forward, regardless of what else is happening in our aid budget, we will be protecting the overall funding for our Sudan response.

Rather than looking country-specifically, will you be protecting early intervention and prevention? Obviously it is infinitely cheaper—not to mention that it reduces the horrific impact on lives—to prevent crises rather than deal with the consequences, which seems to be the position we are in now.

We are looking quite hard at how we do our humanitarian response, and we are choosing to take a new posture towards it: rather than just focusing on lifesaving, we should also use our humanitarian response for building resilience. A good example of that was the work that we did in Somalia two or three years ago on helping people to protect their assets, giving cash transfers, and helping with water points for people and cattle during the repeated drought—I think there were six short rains in a row. Somalia did not experience the famine that it had experienced about 10 years before that because of the resilience activities that we put in place. We are really focusing more around that interface between lifesaving and resilience; we want to do more of that and to encourage our partners to do more of that as well.

Was the early intervention in Sudan good enough?

That was in Somalia.

No, I am talking about Sudan; was our early intervention in Sudan good enough?

In Sudan, the reality is that the war has driven the conflict, and—

But this Committee was raising the conflict before the war broke out.

And we were doing conflict-mitigation activities in Sudan. I was there about five years ago—in fact, I went to El Fasher and sat down with a community group who were engaging in local community activities to try to reduce pressures and conflict. The reality was that it was not enough; the conflict was driven by the two warring parties, and those community engagements did not actually achieve what we were hoping they could and should have achieved.

Olly, could I ask you something specific: what is the role of the Sahel and security department, and what is the rationale behind cutting £13.8 million of its funding—hearing what your permanent under-secretary with a focus on development is saying?

That is a part of our geographical Africa directorate. As the name suggests, it looks after our interests in the Sahel region of Africa. Therefore, like all our geographical teams, it will have responsibility for the management of our network of posts in that part of the world—and obviously some of those have been severely stressed posts over the last year. Yes, it will have some programme responsibility, but excuse me because I am not sure exactly what programme funds they disperse compared with other bits of the organisation.

Are you saying that the cuts are going to the staffing rather than to the resources? My concern is that the whole of that region is fragile, one could argue, so us stepping back from that is quite concerning.

I’m sorry; I am not sure what cut you mean, Chair.

The Sahel and security department has had a £13.8 million funding cut.

It is in the report and accounts that you have identified that.

Oh right; sorry.

Can I say two things on that? Comparing these accounts is quite hard. It is unusual because the ’24-25 are actuals and the ’25-26 are budget. What has happened in many of the big shifts you see between those years in some of the countries identified here is that during the year we uplifted the funding and gave additional funding compared with the original allocation. In many cases, the original allocation has actually remained the same but it looks like there has been a big drop off because, for various reasons, we increased the funding. On the Sahel, I think there is a wider problem—not the £13 million we have cut in our funding.

It is a drop in the ocean compared with what we need.

The hard reality is that if you talk to the French, they put billions into the Sahel compared with the UK and our overall response in the Sahel—globally, collectively—has failed. The question is why and what you can do now to respond effectively in that context. I am not sure that any of us really have the right answer to what we do in the Sahel. If I am honest, I think resourcing can go some way but, given the scale of the challenge, I think the wider question for us is: do we have sufficient resources to do what we think would need to be done in the Sahel? Or should we rely on others like the African Development Bank, the replenishment of which we are hosting next month, and encourage them to do more, bigger and differently in the Sahel rather than rely on our resources?

Olly, do you see a role for the FCDO, for this Government, to help with the co-ordination of international partners, particularly the leaders and civil society of the countries affected, to try to come up with that master plan?

Yes—but I am hesitating because I think we have to be focused and humble about where we can do that. Nick has described some of the extraordinary effort the Department is going to and has gone to on Sudan. That is a very sensible strategic prioritisation of our time, money and political effort, and Ministers have been very clear that is a top priority for them. Dealing with and trying to avoid conflict is, I am finding, quite deeply engrained in the DNA of the Department. It is something a lot of my senior colleagues have made their careers on. But we do also need to be humble about, first, the fact that despite years and years of effort around Somalia—I was heavily engaged myself for four years—when I came back to Government and joined the Foreign Office in January, I found the situation not much improved; honestly, it was rather less good than the way I remember it. Secondly, as your question implies, Chair, very often what we can most bring is a convening and co-ordinating plan and authority rather than necessarily applying dozens of our own people or millions of pounds of our own money. It is just making sure we do not pretend we can be that voice and that co-ordinating mind everywhere.

But surely a retreat by the British in places like the Sahel and other places in that region invites other actors to step in, such as Russia and China, which may not have our best interests at heart?

You may have more to say on this, Nick, but first of all I find it hard to marry “retreat” with what I see of what our teams are doing in this part of the world. I have been very closely in touch, as I am sure members of the Committee would expect, with understanding what is happening with our team in Mali over the last few months, where the embassy has been facing the fuel shortage that has plagued the capital. These are teams still doing extraordinary jobs and vital work, and Ministers—and of course Nick and I—want to support them as hard as we can. I think they would be surprised to hear that they were retreating from the Sahel. The thing we need to be careful about, as Nick was saying in his earlier answer, is that relatively small amounts of British direct funding have not proven to make a huge difference to peace and security in the Sahel. Does that mean that British Ministers don’t care? Absolutely not; we will be continuing to think about raising issues, talking to our colleagues and making sure there is a broader international response, but we just have to be careful about assuming that the right answer is a new British programme.

But there will be less funding, essentially?

As we will probably come on to, Ministers are now in the middle of looking at our ODA allocations for the next three years beyond April, following the spending review outcome. That is work that Nick and other senior colleagues have led most directly. Nick can speak to this in detail, but that does probably involve us coming out in a position whereby we can do less on the bilateral programming front than we used to. Ministers have guided us into a pretty strict prioritisation of how we still achieve strategic impact with our ODA, but no clear firm decision has been taken about any one country programme yet—if I am right, Nick?

That is correct. That then means that we need to do two things—first, operate in a different way; and, secondly, really make sure that we are joined up with our partners. I think some of the Committee were in Nigeria recently. In terms of operation, what we are doing in northern Nigeria is really quite interesting. That is combining how we are doing our humanitarian funding using local responders and local partners with our growth agricultural funding to try and build resilience and livelihoods, and linking that to our CT funding on the security side and the MOD’s engagement with the Nigerian military, as a package of how we have that comprehensive support across the whole continuum of humanitarian and stabilisation in conflict. That is an example of working in a different way, which is quite interesting. How do you work in the middle of that Venn diagram between security, humanitarian and stabilisation, and development? Then there is the question of how you join up with your partners. I will keep going back to this—we are not operating at scale, but there are people who operate at real scale in Africa. I am not talking about the Chinese or the Russians here; I am talking about the World Bank and the African Development Bank. They are bringing billions to the continent. The IMF is bringing billions to the continent. I think last year, in Africa, MDBs spent £22 billion—or they committed £22 billion to Africa. The question is how you get those institutions to work in a more conflict-sensitive way and to work more effectively and better in fragile and conflict-affected states. They need to do better on that; we are putting them under a lot of pressure to make sure that they do.

I will touch on this now because I don’t think it will come up later in the session: the elephant in the room is that shift from bilateral to multilateral programmes that keeps re-occurring. I find it a bit strange to use the northern Nigeria example and in the same breath make an argument for scaled multilateral programmes when you actually have some examples of bilateral direct programmes there that the FCDO is running, which it seems to have a great handle on and where, if anything, it is playing a leadership role in the region. That multilateral shift keeps coming up time and again. Do you really feel comfortable with that?

This is partly about leverage as well. As Nick reminded me this morning, for every £1 we commit through the multilaterals, they can leverage a further £5.[1] That makes an extraordinary difference—the sorts of numbers that Nick was just talking about for Africa are possible only because of that leverage. We are also not saying that our recommendations to Ministers would be that we get out of the bilateral business altogether—I am sure even if they were, Ministers would not accept them. We are just saying that in a world in which ODA is a bit scarcer than it was, we have to be even more rigorous about making sure, against that backdrop of multilaterals providing us with so much bang for our buck, and with us having a really respected voice in those multilateral institutions on how they direct their support, that that means we are being tougher with ourselves on where our bilateral programmes add the most value.

Could I just push back on that a little bit? Yes, it is a multiplier in terms of cash, but how much does it actually get us influence on the ground? In reality, there will be a World Food Programme logo or a World Bank logo. By putting the money in, do we actually have the soft power influence? Or is it just a hope that they are spending the money well in our name?

There are a couple of different levels to this. First, I should start by saying that the culture of the organisation, which I admire, is that we ought to think about the real-world impact first, and therefore, in a sense, be a bit agnostic as to whether the logo on the project is ours or a multilateral logo. Secondly, I think that many of our in-country partners are pretty sophisticated at understanding the role that the UK plays in helping to direct multilateral lending and support. Thirdly, the sheer comparison of the resources that we are able to deploy through the multilateral, versus through an equivalent programme that is trying to do something bilaterally, and with “UK aid” stamped on the side, means that the value for money of the multilateral commitment is significant.

We work on that principle, but actually 2016 was the last time that the FCDO did a review into value for money of multilaterals. We are looking at a very changed world with a different set of needs, but we are still relying on something that was built 80 years ago, and that we are hoping is still as effective as it was 10 years ago.

We are doing a lot more than hope. Obviously, we have board seats on a number of these institutions, and we have fiduciary duties to understand what they are doing, and the value for money of doing it. We take those responsibilities very seriously. You are absolutely right that the overall architecture of aid and multilaterals is showing its age. As I have learned from Nick, it is a fact that we were having to think about that long before cuts to ODA as a proportion of GNI were mooted. Nick will speak about this, but the fact that we have chosen to recommend to Ministers that we carry on investing heavily through the multilateral system is not because it is what we have always done; it is because we are taking a positive decision that it is the best way of having the highest impact with a slightly reduced ODA budget.

I think we get higher impacts, and I think that leverage is really important. In a world of declining resources, it is about how you leverage other people’s balance sheets and get additional resources on to the agenda, and into poverty reduction. How else are we are going to do it? It is a really important part of our toolkit. On influencing the multilaterals, I will take the World Bank as an example. There are three moments when you influence it, one of which is when you replenish, because you have a formal process of agreeing what the policy agenda and priorities are going to be for the period of that replenishment. There is also a moment when you are sitting on the board and approving projects, but that is far too late. The real influence comes on the ground by engaging with the teams, building those relationships, influencing their project design, talking to the relevant directors or VPs in Washington and shaping their programmes as they design them. That is where I think we can add real value, because we have people on the ground who understand the development process and have good relationships. As a result, in a world where we are not spending as much money ourselves, we can deploy our time better to shape the design and implementation of the programmes and the strategies of our major partners.

And all that requires our fantastically skilled and experienced staff, and we want to come on to staffing in a moment.

Indeed. Can I just say one other thing? When we are looking at the really difficult question of how to deploy our declining resources, it is all about trade-offs. Because of the way that our budget is structured, I do not think that the trade-off is between the multilateral banks and the bilateral programme. The trade-off is the health funds in the bilateral programme. The multilaterals are all CDEL, or they are all capital, and it is really hard to spend capital well, particularly in a fragile context. You have to spend resource money, or RDEL. All the MDBs are capital, so the RDEL is very precious. If you want to protect the Global Fund to Fight AIDS, TB and Malaria, and Gavi, as we have done, and as a lot of Committee members and Members of Parliament wanted us to, I am afraid the trade-off is the bilateral programme.

It is interesting to think about, if that direct trade-off was put to Members, what choices they would make; I am sure Ministers have to make that difficult decision. Will you be doing a review of the value for money of both types of multilateral funding?

We have got nothing planned at the moment because we are focusing on the allocation.

You have got quite a lot on, haven’t you?

Yes, we have got quite a lot on.

On the fiscal reforms that have taken place in Nigeria, it was the FCDO and the UK that had been leading the World Bank, and the World Bank acknowledged that it was UK leadership that had really driven forward those reforms. I guess there is a risk if you put too much trust in the multilaterals—you trust that they are leading day to day in a way that actually we were being told the UK and our staff had been leading, in the case of Nigeria. At our private finance roundtable, it was made very clear that there was a desire to see the FCDO put pressure on the World Bank and others to release funds from different sectors. It was very interesting to hear about the role that the UK is playing in the Nigerian context. I think it is more sophisticated and strategic than simply trusting the multilaterals to do the right thing.

Yes, and it is a partnership. These are the kinds of roles that we can and should continue to play. I remember talking to Nigeria’s Minister of Finance when he had just been appointed—he was literally four days in post; they wanted to do these reforms, and these reforms do not happen unless there is real commitment and desire to do them, no matter what outsiders want to do and say.

The Nigerians told us that the UK was there with them in a way that the World Bank initially was not, and actually it was through the UK’s leadership that additional support came.

Because you brought up the issue of leveraging extra finance, I wondered what discussions you have had with the Treasury, since the decision to cut the aid budget was made, about looking at alternative forms of development finance. I hear what you are saying about putting money into the World Bank because of the money that can potentially be leveraged out, including UN special drawing rights, on which Japan has committed to a 40% rate, as well as replicating the International Finance Facility for Immunisation across different issues, as we have done on education. As a follow-up question, is there anyone in the Treasury who is specifically focused on this and actually acting as an ally to look at other forms of development finance? My fear is that there is not.

My answer would be that there is. We have a very active conversation with the international finance team at the Treasury, and that is now starting to play out as we are all starting to think about what our G20 is going to look like for 2027 and what the development finance part, if there is to be one, of that G20 might look like. We are having those conversations. We have conversations with the Treasury about debt. We have had conversations with the Treasury about SDRs. We have ongoing conversations with the Treasury about guarantees. All these conversations are—

Did it say yes to any of those?

Not immediately, but this is a conversation that we will continue to have. The Treasury is prepared to continue to have that conversation with us.

On guarantees, they have expanded as a tool over the last couple of years, in close consolidation with the Treasury.

In that context, do you have clarity on what is happening in the US? This Committee was in the US. We met the congressional committee at a point when the negotiation on the US budget was still ongoing between the House of Representatives, the Senate and the White House. There was then the lockdown. There was then, as I understand it, a temporary settlement in the US. Do you have clarity on the likely current US funding situation? My second question is on the ability to spend it, because the second thing that came out of our discussions with congressional leaders was that, although budgets may have subsequently been protected or pushed back on, because of other earlier changes, there was a huge loss in capacity.

The obvious starting point—which I should say—is that the decisions the US Government make are for the US Government to make. It is for them to make those decisions.

They do impact significantly on multilateral organisations in which we are heavily involved.

It is clear that the future of development is changing, because the whole context in which we are operating is changing fast. That would have happened without our cuts and the US Government cuts, but I think that the US Government cuts have just accelerated a reality that was happening anyway, and we need to respond to that. The truth is that the US Government’s approach is evolving, and we are understanding what that is looking like as it evolves. For example, the US Government made a $4.6 billion commitment to the Global Fund. Some people were surprised by that, because the conversation had been kept very confidential. It was eventually revealed, and we were very pleased to see that contribution. What the US Government have just agreed with Kenya—the $1.6 billion health compact—is interesting in two respects: one is the sectoral focus that they are putting on health; and the other is actually quite a fundamental shift for the US Government, which is away from using NGOs and delivery partners to putting the money through the Kenyan Government. That is a major shift. In effect, that is going back to what we were doing 20 years ago with budget support, which they have never done before. For implementation, they are using mechanisms and models that do not require the USAID approach of multiple third-party implementers that need close monitoring and contracting, because they are going down a completely different route, so in some respects it is easier to deliver.

Talking of going down a completely different route, Sam.

We will change the subject, if that is okay, to talk about the FCDO restructure. Sir Oliver, can you tell us about the timetable for the restructure?

Certainly. This is a process that has been proceeding in stages so far. We launched a restructuring exercise at what is called SCS3, which is the Department rank called colloquially “director general”, the board-level colleagues for Nick and me. Not long after I started, we conducted that exercise in late spring. We have just finished the second phase of the programme, which was to do a similar exercise at SCS2, which is the director level of the organisation. Both those exercises were about staffing at headquarters, but—in a rotational model, to be fair to people, and to manage talent intelligently—we also expanded the scope of both exercises to include people shortly to return from postings abroad. As I say, the SCS2 phase of that is now over. That means that newly appointed directors—some of them, of course, are continuing—will take up their post at the beginning of January and then work with us through the right size and shape of their directorates for the future. The next phase of our headquarters reshaping and restructuring exercise will therefore be after they have started those posts in early January. Does that answer you?

May I ask what the rationale behind those changes is?

Certainly. You will have to speed me up if I speak for too long, Chair, but this is a really important question. First, I will say that I have taken over as PUS of this organisation only 11 months ago. It is a fantastic institution, and Nick and I have 17,000 colleagues doing amazing things around the world. I know that sounds trite, but it is important to say, partly because, of course, one of the things we have to talk about internally is why, if this organisation is so successful, with such brilliant people doing amazing things, does it need to change and, bluntly, to shrink? That is not because we are doing the wrong things. We have seen on Palestine, on the humanitarian crisis in Sudan and, as we have already touched on, even on the response to Hurricane Melissa in the past few weeks, that the organisation is capable of extraordinary things. But the world is changing dramatically around us, and it is our duty—now that of the executive group of the Department, after the reshaping of the board through the first of those restructuring exercises I was talking about—to ensure that we are delivering a capability to Ministers that is at least as good as, and can hold its head up high around the world in three or four years’ time, as it is today. We do not do that by pickling the organisation we have. The frank reality is that, for reasons that are obvious and understandable but cumulatively quite hard to explain, the organisation is 28.5% bigger in terms of UK-based staff than it was when the FCO and DFID were separate Departments 10 years ago. Almost all that increase has been in the United Kingdom. Our overseas UK-based colleagues were around 2,000 across the FCO and DFID in 2015; they are around 2,000 today. The expansion in UK-based staff is in the UK. The number of very senior officers in the Department over the same period has gone up by 100.

What period is that?

Ten years: 2015 to 2025. I am comparing apples with two mini apples, in that that is two Departments, 10 years ago, versus one Department today. There were lots of good reasons for that expansion at the time, and good things that I am sure have been achieved as a result, but it does mean that we have become an organisation that is less abroad, proportionately, and spending an increased proportion of its working time talking to itself. If I am going to deliver the kind of capability against the context that I was describing to you, Mr Rushworth, we serve Ministers best by tackling those issues head-on, rather than saying, “Everything is brilliant today, so let’s hope it continues that way.”

What I think I am hearing is that you came in with a fresh set of eyes, looked at the organisation that you inherited and said, “Actually, for the world we find ourselves in, I am not confident that this delivers as effectively as it could.” Is that what you’re saying?

This may sound a bit prissy, but I came in as a result of being appointed by a Foreign Secretary who had decided those things. David Lammy had looked very hard at the Department; he had thought a lot about it in opposition, as you will know—

So that was your brief when you came in.

He presented me with his mandate, but also his observations of the Department after six or seven months in the post by that point. Then, with Nick and other senior colleagues, we have worked up a plan to respond to those observations.

So the direction came from the former Foreign Secretary to make these changes.

The former Foreign Secretary said, “This is a Department that does not feel sufficiently strategic. It feels like it has a workforce and we cannot explain exactly whether it is in the right places, doing the right things, at the right time. We are trying, probably, to do a little bit too much of everything, everywhere in the world, all at once.” He made a series of observations—some of which we have tested and found that we agree with; some we agree with a bit less—and they gave us the mandate to develop a plan to respond.

If you talk to our staff, which we have done over the last six months, a consistent story comes through. They will say that we are too top-heavy, too hierarchical, we are not giving people enough responsibility, we do not invest enough in new technology, and we look and feel—and are—quite dated. We are too process-orientated and too slow—that is what our people are telling us. It is coming from within the organisation. I agree with all that. Given the external shocks and changes that are happening in the world, we want to try to address both of those at the same time.

To push you a little, you are linking the two with the expansion of staff. At the time of the merger, we saw a lot of development expertise leaving. In his session of 9 July, the then Foreign Secretary David Lammy said that he was actively recruiting 200 more development staff. Is it your assumption that it is the Foreign Office bit that has got top-heavy, and therefore are you protecting the development bit?

Neither part is quite right, if I may say so. At very senior levels—SCS3, DG level—a very important factor in our feeling more top-heavy, as Nick said, and he is absolutely right that is what our staff tell us, is the fact that we have upgraded quite a few of our head of mission roles, particularly around Europe but not just around Europe. It is invidious to pick any out in this session, if you don’t mind, Chair. There are quite a few roles which, when I was new in the civil service, were much more junior. You can understand relative priority changing. The observed reality is that everything has become a higher priority. That is not prioritisation. I now have 22 directors general serving abroad. A director general in the Home civil service runs the Prison Service. We need to be clear with ourselves that these really are very heavily weighted jobs. They are different jobs from the Prison Service. The right of access to Field Marshal Munir in Islamabad is a really important role that having deep experience and political judgment probably gets you, whereas that might not apply to a more junior official, to give an example. But it is at least a good test for us on whether we are allowing a one-way ratchet when we ought to be a little tougher with ourselves. We have continued with much of the uplift that David Lammy spoke to you about back in the summer; I think about 160 of those 200 posts have now been filled through external recruitment. As Nick and I said at the point the Prime Minister made the announcement about moving to 0.3%, there is not a linear relationship between ODA resourcing for the Department and the amount of development expertise and capability that we need at the Department. You have made that point powerfully yourself, Chair, and we agree: there is no direct relationship. But on the other hand, we have to face the reality that the Department will be spending quite a lot less money in three years’ time than it is today. We have to make sure that how we are set up to do that feels proportionate to the budget management that we have to do.

On a point of clarification, I was not sure whether you were saying that the 28% increase was pre or post-merger. I think you were saying that it was even pre-merger, so that there are 28% more staff now than even before the two organisations merged.

Excuse me for not being clear. I am taking point to point 2015 to 2025, so you are right: that means that in the two Departments, from long pre the merger—from 2015 to today—UK-based staff have grown by 28% and a bit.

You mentioned two shifts. One is that we were too UK-heavy, so there was a shift more towards the field; secondly, we were too top-heavy—so there was a shift towards more doers. But obviously about a quarter of the workforce are being cut under these plans, so are we also going to see an increase in overseas staff or is it more that we are cutting out that top slice of UK-based staff?

That is a very reasonable question. Before I give a full answer, I should say that the 25% cut has been a bit overstated here. We have been open with the organisation and, with Mr Lammy, I was open with your sister Committee, the Foreign Affairs Committee, before the summer: we are looking at a range of potential workforce scenarios of 15% to 25% reductions. With an abundance of caution, we then answered a direct question about what 25% would mean, which led to a statistic of 1,885 job losses. That is one scenario among many.

Why was that number given to the—I can’t remember what they are called?

The Insolvency Service?

Thank you very much.

We thought we needed to be open with them about the maximum possible extent of job losses.

Okay, so that is the worst scenario.

That is the worst-case scenario.

Imagine how that must feel to the staff, though.

I do not have to imagine, Chair—I know very well and I make sure to find out. One of the things that Nick and I have done religiously, if that is the right word, over the last few months is engage with staff at all-staff meetings and in smaller groups, to understand both how that feels and how we can mitigate some of how that feels but also to get the very direct feedback that Nick was feeding off earlier about what they want to change. I am not doing a silly kitchen-sinking exercise: this Department is in a fine state doing important work really well. But our staff are really ambitious for it and they want it to change. That has been an important part of the two-way communication. Sorry—back to your point. What we are trying to do is make sure that we try to plan the headquarters workforce over the next few weeks with the new directors who take up position, as I said, at the beginning of January, but in parallel thinking about the size and shape of our overseas network. We have begun a piece of work looking at our 280 posts around the world—who they have on platform, including from other Departments—and what the likely requirement of them for Ministers is going to be in future, so that this exercise does not become too UK-centric. That is not least because, of course, for our UK-based workforce the 2,000 people we have working overseas are tomorrow’s headquarters workforce. We need to make sure that we carry on seeing that as a two-way street.

If I am right, there have been three reviews in progress: there was the review of the overseas network; there has been a review of the Department’s directorate structures; and then there has been an assessment of what the cuts mean for the ODA budget.

I recognise all those. We can discuss the terminology about what they are reviews of, but that is roughly right.

So it is effectively those three things. You described one or two of them earlier that had finished. Have all those things finished?

No. The work that we touched on earlier—we can talk more about it—around ODA allocations is still ongoing. We are still discussing with the Minister the very trade-offs that Nick was describing earlier and making sure that we have them right. We also need to make sure that we are undertaking the important role that the Treasury gave the Department in overseeing the ODA programme across Government. We need to make sure that that is all tying together, and that we are presenting back to the Treasury and the Prime Minister a portfolio that makes sense. We have only just started the overseas network review. We obviously had to settle the work to set our new directorate structure before we recruited to those directorates. The next piece of work is those new directors looking at the pieces of the jigsaw that they have inherited, and working out—but through, I hope, a more strategic lens—what the Department really needs in terms of capability in three or four years’ time.

We on the Committee have been struggling to wrap our heads around how things such as the directorates have been determined when, as you have described, there is a series of moving parts and those parts have not landed, including arguably the biggest one, which is ODA and where that is being spent. How are decisions being made on the directorates in a fair and honest way if we do not have a full understanding of the end point? Normally, if you do a target operating model, you know what you are designing towards. It sounds like decisions have been made on structures and staffing without being clear about where the end goal is.

I hope that is not quite fair.

I do too.

Thank you. We have not been operating in a strategy-free zone. We have—at the very highest level, of course, but it is important to say—the six priorities that the former Foreign Secretary gave to the Department. Yvette Cooper, as Foreign Secretary, has endorsed those and wants us to continue to work to them. We have a lot of work underpinning each of those priorities as to what we are trying to achieve over the next couple of years as a Department. One of the thrusts of our reform work—this is very close to Nick’s heart and mine—is to make sure that we are attaching rather more measurable objectives and impact measures to each of those priorities. Then we have worked with Ministers and with the senior managers that we have been recruiting to make sure that we understand the target operating model—exactly your terminology—for the Department going forward. To take an obvious example, if we are anxious about a particular development in an ally such as Turkey, is that the responsibility of a geographical team in London, of a thematic team that worries about that particular aspect of policy in relation to Turkey, or of our ambassador in Ankara, who is an extremely experienced SCS3-level officer with a big team? We hear from colleagues that it is not entirely clear to them what the answer to that trilateral question is. Through the target operating model work, we want to give clarity on those important design questions about the Department. We think we are almost there; we will be there in time for those principles to be used by directors as they design the directorates that flow.

Are you saying that there is no risk in the approach to making decisions about directorates and senior staffing numbers and individuals without having a clear understanding of the overall end picture, or would you accept that there is heightened risk?

I would say that this is the thing that makes me more worried than anything else I have ever done. I have been entrusted with an important national institution and already, after 10 months, I love it and want to leave it in a better state than I found it. Many of you will have done hard things, and the hard thing here is getting the ordering of your intellectual priorities, coupled with the political message that the Government are trying to deliver—the priorities they are to achieve—and making sure you do all that at the same time as communicating clearly and honestly with your staff and looking after them, when they do important but sometimes dangerous things for you. I am not complacent about that at all. This is the hardest thing I have ever done, and I am grateful that I have such a good team around me helping me do it.

Do you think the cart is going before the horse a bit on this issue?

No. At risk of destroying the metaphor, I think there are several different carts moving along the road at once. We have not got on to estates—you may well want to touch on that—but we have 6,500 properties around the world with a significant maintenance backlog, which has health and safety implications for our workforce. We are anxious about our workforce security in many different parts of the world. We are trying to tie that up with the programme funding decisions we have to take as a Department—some of those are ODA; some of those are non-ODA. We then have to make sure that as the Department for Business and Trade decides that it needs to be less overseas than it used to be, we are factoring that into the way that we run our overseas network. This is complicated. In an ideal world, I could design a process that would do all of those things over about three years in a more logical order than probably we have time to get on with. Part of that, honestly, is that I want—and it is not just me; we all need—to give the Department as much clarity as possible before we begin the new financial year, because we are desperate to use the fact that we have a three-year stable budget to actually do some proper multi-annual planning on the ODA side and on the programme side more generally, and to make sure that people can plan their careers.

I was talking to one of our trade envoys. I had not realised that the overseas DBT were making similar cuts to staffing. How is oversight across Government happening to make sure that we do not end up with two people in Bogotá or wherever it might be?

I wish I had a better answer for you, honestly, Chair. The reality is that in a highly federated structure like the one we run, it is often a bit easier to run Government at Bogotá than it is at London. You have all your resources in sight; you know all the people; you can make plans; you get the gossip and the intelligence on what the Department is thinking. We have of course tried to systematise this a bit in London. That is part of what our overseas network review is all about—making sure that we are consolidating what other Departments are thinking, some of which is still in quite early draft, about their plans. Our consulate general in Istanbul will depend very heavily on what the National Crime Agency thinks it is doing in Istanbul over the next few years, for example. We are gathering that intelligence as an input into our overseas network review. Then, of course—back to the question earlier—what we are going to have to do is to make slightly 80/20 judgments. We are not going to have perfect information, but as it sounds like you are well aware of, the unit cost of having FCDO people in some places, particularly the smaller posts with extensive cross-Government presences, is going to go up if those presences reduce sharply and we don’t know about it.

Is there a ministerial taskforce that is overseeing all of that?

We report to Ministers inside the Foreign Office on that, but the governance mechanism is something called the network board, I think. This is where senior officials in London come together and share their plans for their overseas workforces. One of the reasons for the way we restructured the director general level of the organisation was to consolidate that in one person in the Foreign Office at board level. Previously, for other good reasons, we had split that geographically among several directors general.

Sorry to push this, but I am still not clear. I would imagine that the Cabinet Office, for example, has oversight of this, or No. 10. Who ultimately has the bigger picture that all of you are feeding into to avoid gaps and duplications? I am assuming that different Departments are all doing a similar thing at different speeds.

They are. That is fair. But the answer is, I think, on this, that the buck stops with the Foreign Office. It is our network. We have to run it—

Could you push back—for example, if DEFRA was cutting all its staff in Jamaica, and you knew that you were making substantial cuts there as well and you needed some of their skills and expertise because you were withdrawing them from your team?

That is exactly the kind of thing we want to flush out through this network review and in empowering the DG network as the person who can hold that conversation and hold the ring in Whitehall. I would say this, wouldn’t I, on behalf of the Foreign Office, but I am very conscious that our colleagues will end up being the agriculture adviser of last resort if there is not a DEFRA person at post, so we need to make sure that we are getting those people the support and skills they need if those Departments are going to retract from some of those jurisdictions or markets.

No wonder you don’t sleep at night—not just the worry, but I don’t think there are enough hours in the day for effectively just one person to have oversight of all that.

This is not just about me. There is a good team.

Yes, but someone has to say yes or no when it ultimately comes to it.

We engage very often indeed with the departmental trade union side. It is something that I have been very proud of since I arrived in the Department, but it is a longer tradition. I met the unions myself in my first few weeks in the job. I think my HR colleagues have met them twice in the last week, and they have met them at least fortnightly—or even weekly—throughout the processes that we have run, in answer to Mr Rushworth’s question about the senior officers in the Department. We have tried to share and communicate as much as we can about our plans. Obviously, with these very small restructurings, that can get very invidious about particular people if you are not careful with the information. None the less, we have tried to share as much as we can about what we are doing, what the timetable for it is going to be, and how we are trying to ensure fairness and transparency through those processes. We are still talking to the unions, including the PCS, and we will carry on being as open as we can about our plans for the rest of the headquarters restructuring that I was outlining earlier. Obviously, I have seen and heard that the PCS is dissatisfied, which I regret, but I honestly think that we are working very hard to bring it and our other departmental trade union colleagues as close into our counsels as we can. If I may say so, it goes way beyond that. Nick and I took a conscious decision back in late January or early February that we did not quite know where all these processes were going to end up. We felt that it was important to treat the Department as grown-ups and tell them that these were the things that we thought we had to tackle, and these were some of the potential consequences or ranges of outcomes. We wanted to treat them as grown-ups; we are still happy that we have done that, and we are still carrying on doing that. It means that we have been open with 17,000 colleagues about where we are trying to take things.

The next step in what we have to do is take the work that directors are doing now and in early January, and turn that into a precise, transparent, clear and rigorous HR restructuring exercise for the next levels down the organisation. We will absolutely work with the trade unions in that process and share with them all our thinking as we go along.

Can I just come in? Nick, one of the many things that I am struggling with is this: are the changes to the ODA spend being done hand-in-glove with the staff restructuring, or are the two running on parallel lines?

The reason why we want to complete the allocations process, both for ODA and non-ODA—we have a non-ODA process going on as well—is to ensure that there is full understanding and expectation of what needs to be done to take into that restructuring process. We set out indicative allocations in the summer to be able to get the feedback from the organisation about how it would respond to that, what the challenges would be and what the quality impacts would be. We are now using that to work with Ministers to make final decisions. The organisation has a sense of direction, but it does not know the full answers. You are right that, in the restructuring, you want the directors, when they are thinking through what skills they need to deliver the objectives that they have been set, to know both the top-down priorities of Ministers and what Ministers have decided for the allocations. It may not be perfect, but the ambition is to bring those together in the first quarter of next year, which is when that restructuring work will be done.

This is where we are in danger of putting the cart before the horse. We are designing the process for the restructuring over the next few weeks, and that is the design process on which I gave you my commitment that we will continue to engage the unions as closely as we possibly can. We cannot say precisely how that is going to work until we have finished designing it with HR colleagues, and until we understand, thanks to the directorate restructuring work, what the requirement is going to be for future skills and numbers of posts.

That is a very fair question. We are trying to land together both a top-down exercise and a bottom-up exercise. Directors are looking at the jobs that we have given them to deliver for Ministers in particular areas of the Department, as well as what balance of skills there is at head office in the network, and what kind of programme budget money they would need to deliver that set of objectives. At the same time, we are also asking ourselves some higher level questions about what skills and capabilities the Department might, in principle, need in five years’ time, particularly where those might look different from what we have today. To take an obvious example—possibly even a slightly hackneyed one—the FCDO has one of the lowest percentages across Government of civil servants who are experienced in, or qualified in, digital and data manipulation techniques. That worries me. I think a huge part of our development and diplomacy work over the next few years will be the use of advanced data and computational techniques to try to give Ministers sharper insight and more advanced notice of things, and to craft our responses intelligently. It seems obvious to me that we are going to have to get that skill level up, but that does not necessarily mean that we need to bring those skills in entirely from outside. One thing I have not yet had the chance to talk about—if you are interested, we can pursue it—is that we are, in parallel, developing a new college for the Department that is working really hard on both setting that capability framework—again, we will work with the unions to make sure that they feel properly informed about where we are going with that—and making sure that we are training and developing our own people to do as many of those jobs as possible. It is one of the reasons why we have been very tight, for at least a year now, on reducing the numbers of people that we import from other Government Departments and recruit externally. We have been very conscious of our employer’s duty to the people whom we already employ to make sure that we offer them redeployment or reskilling opportunities.

As Nick mentioned earlier, if we needed it, which I hope we did not, Yvette Cooper’s arrival as Foreign Secretary has pushed our work on women and girls right back up to the top of the Department’s priority list, particularly violence against women and girls, which is topical at the moment. I am sorry that I cannot give you a terribly good, measured answer to that, but it should be obvious as we complete the restructuring that, far from de-emphasising that area of work, we are going to have to make sure that we carry on being able to deliver for Ministers across the board.

It is. I am possibly in danger of straying into an area that I know less about, but Nick can just kick me above the table if I get this wrong. Part of what we are trying to do here is make sure that we are investing in and creating a workforce that is able to do that across several different themes, so that we get a little bit away from having silos of very particular expertise, with people who have been in a particular area for a long time and are very expert in it, but who are not then terribly flexible across emerging priorities. To come back to some of your opening questions about conflict mitigation and prevention, we want people we can deploy—either at headquarters or from headquarters out to post—who are able to see a complicated situation in a country and apply what they know about priorities in not only women and girls but other things, so that they can then make sure that it is—to use your word—mainstreamed into the way that they then operate in those countries.

The real prize here is not keeping this within the development space but breaking it out across the rest of the organisation. You will need people who have deep knowledge, understanding, experience and background in gender equality and women and girls in our central development teams. They then may be involved in negotiations multilaterally or helping to design programmes and support for the rest of the organisation. We just then need foundational knowledge for our core diplomats across the whole organisation so that they understand what this whole thing means, or what supporting and mainstreaming women and girls means. That is the prize here, in how we break it out.

Excuse me if I missed it, but of what, precisely?

All I can say at this stage—but it is heartfelt—is that, as we design this restructuring process, leaving the Department at least as well equipped in terms of capabilities and skills, in their breadth and their depth, is incredibly important to us. That is one of the design principles of the exercise. It is a bit like the voluntary exit scheme that was instituted under my predecessor and that has been running through this financial year. We want to make sure that we have a strong, but not inflexible sense of what skills and capabilities we need for the future, so that we can make sure that we are not accidentally losing the skills we most need.

The parameters of our restructuring exercise will be as open as they possibly can be, providing for looking after people’s personal data and anonymity through the process. We are very keen to make sure that—this is one of the five pillars of our reform programme—the FCDO at the end of this exercise feels a more open and diverse place than it did a year ago. We start from reasonable foundations there, but we have more to do.

Olly, may I push on that a little? When my colleague asked the question about the equalities impact assessment, you focused on the fact that you want to retain broad capabilities and skills. The FCO particularly was scoring poorly when it came to representing the make-up of our country—I am thinking gender, and diversity of race, religion, disabilities. What I am interested in is that, at the moment, we have a Department that over the past five years has had mergers, cuts and reshaping, with a workforce who are—from those I speak to and thinking about how that must feel—quite traumatised by all that, so how are you managing to keep that broader diversity of personal skills, so that the FCDO is reflective of this country and future-proofed to have all the skills and experience that we might need in the future, when we do not know in such an unstable world what that future is? My hunch is that the people who are most marketable or most loyal are just throwing their hands up and walking now. You might well end up with a particular department where 90% of the staff have left, or a particular cohort—say, women over 50—thinking, “Right, I’m done with this, I’m gone.” How are you mitigating that?

We have a very low attrition rate, as a Department—if not at the very bottom of the league table across civil service Departments, we are very close to it. In many ways, I am pleased to hear—

That is because your staff really care about this—

Exactly.

But this feels like breaking their confidence and trust. Relying on them doing the right thing and being good people is great, but how are you mitigating the loss of skills, experience and diversity in FCDO?

Again, we do not start from a bad position. We have a senior civil service across the FCDO which, compared with five years ago—I have the statistics, if you are interested—on each of the protected characteristics that we monitor most closely as a board, the situation has got better—

It has got better, but it is not yet representative, is it?

It is not precisely representative. For example, 47% of our most senior officers are women; our aspiration is 50%. We have an aspiration to have 13% of our senior officers registering a disability; it is at 12.6%. On lesbian, gay and bisexual officers, the aspiration is 6%; we have 8%. The area where I am troubled, and where we have lagged more than others, is ethnic minority colleagues. At senior level, our aspiration is 14%, which is roughly representative of the population; we are currently at 11.7%. The Department has done a lot of work, including with staff networks and others, to try to understand where the barriers to advancement are—particularly for black colleagues, but for ethnic minority colleagues more generally.

How are you embedding that into the restructure? You have said that on a normal day of the week, that is what you are doing, because you know that you are lagging in some areas and you are trying to encourage more to join. But in this particular situation, with quite a strong restructure going on, how are you mitigating the unintended consequences?

Partly it is about making sure that the processes that Ms Gilbert was probing me about, in terms of understanding the capability framework and the skills that we need, are rigorously fair and transparent. We want colleagues to have complete confidence in these as objective exercises, rather than subjective ones. We will also make sure that as colleagues are placed into new roles, we will monitor very carefully whether there are inexplicable concentrations of particular characteristics—if I can put it that way—among those who are not immediately placed into new roles. That is something that, as a board, we will be monitoring very closely indeed. But I think your broader point is about the breadth of expertise in the Department. There have been some really hard decisions here. It is honestly counterintuitive for me that, at the moment, we are having to say to quite a lot of civil servants on loan to the FCDO that we cannot guarantee them their job, and that it is for them to organise that with their home Department. That is not the open magnet for talent that I want the FCDO to be, and I know you agree, Nick. But it is also about trying to triangulate that against the strength of our duty to our employed colleagues that we must always first look for ways of making sure that we are not bringing people into the Department to do jobs that people already here could do instead. That is really hard baked into how we are approaching this exercise.

So you will be doing a skills audit alongside that?

I am sorry if that was not clear. Yes, we will be looking at the capabilities we have now, those we need for the future and how we get from A to B.

And presumably you are going to be asking for voluntary redundancy first.

We will need several different exit routes from the Department, but voluntary redundancy is always before compulsory.

That is a great question. I sometimes say internally that even if the Treasury had given us a 10%-plus settlement over the next few years, it was our duty as good public servants to think about some of the hard questions that we are now thinking about. If our budget was a bit easier, I am not sure whether we would be as fast and rigorous as we feel we have to be over the next few months. We might take a little bit longer about it, but the kind of thought process that we are putting ourselves through and discussing with our colleagues is one that we really ought to go through, almost regardless of the settlement.

This is so hard, because I have not yet met anybody in the FCDO who I do not think is doing a decent job and doing it for very good reasons. It is not that Nick and I are sat in my office and thinking, “If only we could just do this.” There is no part of the Department that I cannot see the relevance of. I do think that over time—Tim, you have seen a lot of this, which is not unique to the FCDO—we have a tendency, when we encounter a problem, to invent a new process to give ourselves some assurance. Sometimes it is a rather false assurance that the problem will not reappear. We bolt that process on top of all the existing processes. We create a new team to run it, and we create a new computer system to monitor it. Then, five years later, we will realise that, like barnacles on the ship, we are slightly slowing down, as each of these new processes has its own reporting structure and its own risk management structure. One of the important things that is happening in the corporate area—led by Tim and some of his colleagues, such as our new chief operating officer—is making sure that we do not end up just giving the Department a faster horse by digitising all these processes that we have developed over five to 10 years, when we need to look really hard at which of them are strictly necessary.

Out of curiosity, why are you giving us the 10-year time period to look at the 28%? I would say that 2015 was when the Conservative Government really started focusing on development, so of course, the Department was going to grow. The last five years have been the merger period, so would that not be the more useful period to look at? The implication is that it has grown 28% and that is bad, rather than it has grown 28% because the UK was stepping up on the international stage.

I hope I didn’t say that was bad.

The implication was that it is 28% bloated.

What I meant, Chair, was that when a Department has expanded in that way, for possibly very good reasons, it is incumbent on us as decent accounters for public money to think about whether that is completely justified, and to make sure that we are rigorous about the way we approach it. That is all I want to say. As for the choice of a decade, it felt like a natural period to choose, rather than choosing 2015 as a particular moment in time.

I love statistics, but I know how easy they are to manipulate.

It is a bit difficult to answer in abstract, but in principle, there is nothing stopping Nick, me and the senior management of the organisation from giving Ministers that advice. I think it would be quite irresponsible of us to do that right now, if I am honest, because we are only five months away from the beginning of a new financial year, in which we—despite what I said earlier about what we might want to think about, if our budget were higher—have to start to adjust to a world in which our operating expenses as a Department need to be held flat over the years ahead. We want to be able to pay pay rises. We need to be able to pay country-based colleagues, in what are often quite high-inflation environments, decent pay rises. That means that we have to get a grip on staffing numbers for those two to three years ahead, even if we were not also being driven to do so for reformist reasons.

Apologies for having to leave to go out and vote on whether there should be a customs union with the EU. [Interruption.] Yes, I felt exactly the same. I want to ask about Abercrombie House and its future. As Nick will know, we previously had a discussion at this Committee about Abercrombie House, only for it—not deliberately—to be announced a few days later that the FCDO was leaving Abercrombie House to move to a campus in Glasgow. It was then announced that the campus in Glasgow was not going ahead. In the interim, we had heard evidence about operational issues at Abercrombie House—that it was not fully equipped to operate as the second FCDO headquarters, and would need work done to allow that to happen, which was one of the justifications given for moving to the Glasgow campus. Not only has this been—I think we would all acknowledge—an entirely unsatisfactory experience for all the staff based at Abercrombie House, but it is not clear whether you plan to invest in Abercrombie House now in a way that would allow it to be equivalent headquarters to King Charles Street.

That is a really important question, Mr Mundell. We have 936 colleagues at Abercrombie House. The former Foreign Secretary and this Foreign Secretary have been very clear that our presence in Scotland and the joint headquarters there is an important part of the Department’s character and the way it behaves and operates in the United Kingdom. Nick and I have been up often to Abercrombie House to meet staff. The only thing in your question that I want to take issue with is that I think what staff there were crying out for, actually, was honesty, clarity, certainty and speed of decision on Glasgow. As your question rightly implied, this is a project and a decision that had been hanging over them for some time. I think for some colleagues it was a bitter disappointment to find that we were not able, in the end, to move the operation to Glasgow. For some, it was a relief. They had deep roots around East Kilbride and were content with that, and wanted to keep it that way. On the forward-looking part of your question—thank you for asking it; it is really important—we are now devoting real resource to trying to match with money our words about Abercrombie House being, for the foreseeable future, our joint headquarters in Scotland. Some of this gets a bit micro—forgive me—but one of the things that our staff have been crying out for for years, and which has been put on hold because we were not sure about the future, was for us to re-tarmac the car park and make it a far more pleasant environment for colleagues. We have done work on the canteen. We are also looking at secure capabilities at Abercrombie House to make sure that a wider spectrum of FCDO policy and headquarters functions can be done as easily from Abercrombie House as from King Charles Street. Behind that answer, there are still some difficult decisions for us to take, in a workforce that is almost certainly reducing over the next few years. We have to make sure that we do not accidentally take decisions about the capabilities and the profile of the workforce at Abercrombie House. It is a version of Ms Gilbert’s question about being clear and forward-looking about who we have and where we have them, as well as what they can do for us. There are also some opportunities with the teams at Abercrombie House to think about whether we want to try to make some concentrations of colleagues with particular expertise in particular roles, where we might actually get some benefit from those teams being co-located. Our approach to staffing at Abercrombie House has perhaps occasionally looked a bit scattergun; as people have volunteered to move to Scotland, suddenly someone has popped up there who is with our Department X team. We could be a little more deliberate about creating momentum in some specialisms in that part of the civil service in Scotland.

Just to clarify, you said that you are looking to upgrade the secure functions to allow senior staff to operate. Was that a commitment to do that? What would determine whether you did it? Might it be something structural—the building could not be adapted to do it, for example—or that you did not want to put those particular people there? What would be the consideration that determined whether or not you did it?

Forgive me—I should have said that we already have a capability there. We probably do not use it quite as much as we should. I joined a meeting with David Lammy on national security from Abercrombie House by video link from our secure area. My colleague on the board who looks after defence security is there and regularly holds meetings from there with partners across Government, as well as with teams in the headquarters in London. There is a capability and we use it. The question is whether we should expand that capability. We just need to trade that off in our capital plans. As you probably know, creating this sort of capability is extremely expensive. We need to make sure the business case for that is right, and that depends slightly on these questions about whether we want to move particular teams of people to Abercrombie House and have those concentrations based out of there.

I am one of the permanent secretary champions for Scotland, so I am absolutely committed to looking across the whole of the UK Government’s footprint in Scotland at how it makes sense and how it can complement itself. There are quite good questions around what the opportunities are for hosting other Government Departments in Abercrombie House. That might be an option, because if you look at the other hubs that are currently in Edinburgh and Glasgow—Atlantic Square and Queen Elizabeth House—they are now full. They just do not have any more capacity. There is very limited high-side capability in Scotland all round, and other Government Departments want and need it. Another question for us, as we look at the business case for that, is what the demand is from other Government Departments, and whether we could create a capability that is also made available, on a financial basis, to other Departments. This is a building that is 45 years old, and some parts of it—some of the mechanics and mechanicals—are coming to the end of their life. We are now starting to look at the work and consider what we would need to do and how much it would cost to give Abercrombie House another lease of life for the next 25 years. That is where we are, because we have an enduring commitment to Scotland and Abercrombie.

Nobody is a greater champion than my good self of the UK Government in Scotland, having driven through the proposals for Queen Elizabeth House, but it seems to me that it would have been better for some of that thinking to be done earlier in the process, when the decisions were being made about a hub in west central Scotland. It is just about reinforcing how important it is that the FCDO remains in Scotland and, as you have indicated, Olly, at the appropriate level. It is not simply a back office; it is a genuine headquarters building.

I think you said that we have 280 locations overseas.

That’s right—280 posts.

The Committee has been getting quite mixed messages about whether staff in those locations are part of this restructure. We are hearing that most areas are doing an analysis of their staffing and looking to see, if cuts were needed, where those cuts could be. We are hearing that some local staff are losing their jobs. Could you give us some clarity on the future? Presumably, if you have a reduced budget and reduced staffing here, you may well be reducing our footprint in countries overseas.

Of course. Forgive me; there are several layers to this.

I know, but we are getting several layers of information, so we are trying to find our way through, not least to reassure staff.

Yes. I am apologising in advance for what might sound like a long, complicated answer. We are running our overseas network process of trying to work out whether those 280 posts are, at one extreme, all required into the future—that includes lots of subsidiary posts and quite a lot of smaller posts. Are those all justified, from a value-for-money point of view? As I have tried to answer earlier, we are then looking at the right mix of skills and people in those posts. That will, over time—but not in January—produce individual workforce budgets for those posts that will then require adjustment. For UK-based staff, that will be part of wider restructuring, either at headquarters or across whole chunks of the office. For country-based colleagues, we will of course seek to mitigate that in any way that we can, but it will not be mitigatable by moving them to a different post in a different country. At the strategic level, we are thinking about the size and shape of the workforce at post, but as I said much earlier in this session, we come at this with the starting point, which we are testing, that the FCDO ought to be proportionately a Department that is more abroad at the end of this exercise, rather than less. That does not mean that we have all the right people in exactly the right places—some of these posts are the size and shape they are for historic reasons that we need to at least feel are still relevant in five years’ time—but we start from the point of view that we are probably reducing workforce at headquarters more sharply than overseas. The second point, which I think is where you are getting some of the information from, is that some heads of mission and team leaders, in particular in big posts, are thinking ahead, and thinking, “We know that this country is unlikely to be as significant a priority in this way in the future.” They are getting guidance from teams in London, and when contracts come to an end, they are making sensible dispositions about their workforce, looking forward and giving themselves a bit of flexibility. On the upside of that, I should say that, where other Departments have let, in particular, country-based colleagues go in posts with a big network, sometimes the FCDO has taken some of those people on, because they are very experienced and senior colleagues who have real insight to offer more generally to the post. We are allowing for that local flexibility and licence within people’s existing parameters and budgets. That is particularly true for big networks like India, China and the US. Thirdly, we have run for over a year now a voluntary exit process whereby some UK-based staff will be leaving the Department. Some 350 have already in this financial year. Some of those will be in the network. At the heart of managing all of this is making sure that we do not so artificially separate our staff in the network from our staff at home that we forget that these careers are intertwined.

Absolutely. On those 350 who have left voluntarily, is that just because of retirement, or were they voluntary redundancy calls?

It is what we have called a voluntary exit scheme. That is not on voluntary redundancy terms; it is where colleagues have asked to be considered for an exit payment, but not on a voluntary redundancy basis. It is a specific scheme that we ran—it was launched before my arrival, but with the agreement of our Ministers, Treasury Ministers and the Cabinet Office—partly because we were conscious that the workforce budget pressures on the Department were so strong.

May I re-emphasise the analysis of skills and diversity overseas? Can you envisage a situation when, for example, you might have your WASH expertise all based in Nigeria, or will they always be based across the road? I am very critical of the multilaterals having offices in Manhattan, Geneva and Singapore, or wherever it might be. Might we be looking to do something like that?

There is a specific strand of the work that has just started on the overseas network about whether we ought to be thinking about some much more deliberate regional hubbing of policy and thematic expertise. Full disclosure, Chair—this may frustrate you—but we have not reached a conclusion on that yet, but it is definitely one of the questions that we are asking. That is a model that has sometimes shown its worth, occasionally on the trade side, and in terms of policy and thematic activity it can be—albeit not always—useful to us to have that expertise a bit closer to the host Governments. Organising that regionally, however, may provide us with a sensible compromise between the cost-investment of putting it in one place versus trying to organise it on a regional basis. We just have to bear in mind that for every UK-based colleague we post overseas, the cost of that individual to the Exchequer is three or more times having someone at headquarters, so the value-for-money justification of putting a UK-based colleague—

The estate costs do not necessarily—yes, got it.

First, I should apologise for nipping off for the UK-EU customs union vote. It was won by one vote, which was the casting vote—rather exciting, so just as well I went. We could have stayed behind, though. Why have you fully funded support for Ukraine, but left the commitment to Sudan and the Occupied Palestinian Territories reliant on the crisis fund, despite the Minister confirming that FCDO would allocate the same spending this year as last year to those regions, and especially when, according to a briefing that some of us attended this morning, the towns of El Obeid, Kadugli and Zalingei are in peril.

Some of this comes back to the answer Nick gave earlier—apologies for this being a bit frustrating—that we are dealing slightly with apples and pears when we look at the 2024 column and the 2025 column in the annual report, because the one is out-turn and the second is budgets for 2025-26. Through the course of the year, those budgets will have changed, and the out-turn that we will report in the new set of accounts will be different from the column for 2025-26 in the 2024-25 report. But the Prime Minister gave the commitment that he did in the House of Commons at the point at which he made the announcement, reluctantly, about the aid budget. We stick absolutely firmly to that. We have given ourselves some flexibility at the margins through using the crisis fund, but our intention is to meet that commitment in full.

Let me give an example. For Palestine—the Occupied Palestinian Territories, as the report has it—the figure for ’25-26, which is £101 million, is actually the same budget that was set in ’24-25, but in the accounts here, ’24-25 is reported as £127 million, because we added additional funding through the year to top up that budget. We are also adding additional funding this year to Palestine to top up the budget, and my expectation is that we will be broadly in similar territory. As we are looking at our allocations going forward for the next three years, we are looking at these baselines and asking ourselves which one we should be using for the aspiration to retain the level of commitment across the three years for those three countries.

I rather suspect your answer will have covered my second question: why is the remaining 18% for Sudan to match last year’s funding dependent on the crisis fund, and not allocated at the time of preparing the annual report and accounts?

Because both years—last year and this year—it was reliant on crisis funding. As I said, the base allocation of £101 million was the same for both years. We are looking to put it on to a sustainable level for the next three years as part of this multi-annual funding. The basic problem we have had ever since the merger—in fact, when we do the three-year allocations for this SR, I think that it will be the first time since 2015 that we will have done a three-year allocation. We have been working year on year because of cuts, in-year changes, SRs, new SRs, and changes in Government. None of this has been consistent and predictable; it has always been reliant on in-year uplifts, and then the next year having a new approach to how we set allocations. The three-year process that we are going through now is a really good opportunity for us to get some predictability and stability into our budgets.

Finally, amid rising humanitarian needs, which were alluded to at the beginning, and worsening global crises and conflicts, is the remaining £33 million of the crisis fund, after commitments to Sudan and the OPTs are met, enough to cover the rest of the world?

If you look historically, the crisis fund was set up to respond to sudden-onset crises, whether that is a flood, a hurricane or an earthquake. If you look at how much we have spent on sudden-onset crises, it is about £30 million a year, which is actually the baseline for the crisis reserve. For this year, our crisis reserve is £100 million. We have quite often topped up protracted crises from the crisis reserve. The crisis reserve has just been a pot of money that we have added to for existing crises. It has become more than a sudden-onset crisis reserve. Personally, I would like to get it back to a sudden-onset crisis reserve, and use the allocations to lay out our expected crisis funding going forward based on what we are basing it on, which is need and severity—where the most need is and where the highest severity is. That is how we are going to allocate our humanitarian funding going forward.

The Rwanda-like situation in Sudan is something that we should all take cognisance of. It is pressing, and we should all be thinking about it.

We are deeply worried about what is going on in Sudan. The atrocities that are being alleged, and that we seem to be seeing on our TV screens, are absolutely horrendous and horrific. That is why we have maintained our funding, and why the Foreign Secretary is putting so much time and effort into talking to the members of the Quad who are looking at Sudan. That is why we have seen an increase in funding for Sudan, and why we have done things like the UK agreeing a resolution at the Human Rights Council to mandate a fact-finding mission on the atrocities that we have seen in El Fasher. The UK is deploying its wider diplomatic, political and convening relationships to this crisis, beyond just the humanitarian response.

Can I push you on where the money is coming from? Is there a commitment to retain the funding levels for Sudan, the OPTs and Ukraine on the lower baseline allocations, or to an increased post-crisis reserve spend?

We are right now going through those figures with Ministers. Ministers are very aware of what the baseline is for each of those countries, and very aware of the commitment to retain the funding at baseline levels. We are looking hard at what the options are to enable us to do that.

Can I put my speculation in front of you? Looking at the messages that are coming out, I have a hunch that the majority of our ODA will be going to multilaterals—that we will be prioritising humanitarian, and that you might be giving a little bit of money to each of the posts to do what they think most appropriate with. That would mean that our bilateral and particularly our centrally managed funds either will not be there or will be much reduced. That would also mean that you would not need all the staffing around that. Is that assumption roughly there or thereabouts where you think we will be?

I think it is only fair to give Ministers—particularly the new Foreign Secretary—the time to go through and understand the allocations and make decisions on them. That is the process we are going through, and I do not want either to prejudice it or pre-empt it by saying what I think will be the outcome. On staffing, the reality is twofold. One is that, as we said earlier, the world of development is fundamentally changing, and we need to change with it. The other is that, as we move to 0.3%, the portfolio is also fundamentally changing. At the moment, we have 540 projects or thereabouts, with a portfolio value of £57 billion. That is the portfolio we have. That will look very different in three years’ time. It will shrink and, as that portfolio shrinks, it means that we will need fewer people running those projects and programmes. Actually, I think that is a good thing, because for a long time, I have wanted our people to do less on delivering programmes and more on engaging with Governments about what are the right policy and regulatory changes needed to improve the environment in which they are working. We need to put our people into doing things such as running the Foreign Secretary’s violence against women campaign, or running the illicit finance conference that we will be holding next year. We need to help our people to engage with the World Bank to shape their thinking on fragile conflict-affected states. That is how we should be using our staff. Overall, our staffing will reduce, and we will have to think hard about the priority areas we want to focus on and the skills that we need. We will need more private sector advisers than we have had in the past, because we will be doing much more with the private sector, including running the private sector taskforce that we have set up to give us advice and help us to promote private investment in the most fragile contexts and places. All these things are happening at the same time. I would think that the skillsets, deployment and numbers of our people will look different in three years’ time, compared with where we were two years ago. We are right in the middle of that evolution.

That is what concerns me. With, as you say, all these things happening at the same time, the likelihood of unintended consequences is massive. Also, let me declare an interest—I was at the Doha Forum over the weekend, and I am very grateful that the state of Qatar funded me to go out there to look at the work they are doing on peace, fundamentally. It does not require an awful lot of money; it does require the expertise and commitment to make a change. I absolutely agree that the UK could and should be doing more on the convening stage, but that requires our specialist staff and our credibility in the sectors. I am also very concerned to be hearing that things such as the amazing work we have done internationally on female genital mutilation and how to prevent it and embed that prevention into societies are likely to be cut. There are areas that the UK has led on, or that no other country would go into, that I become very concerned about if we do not have some centrally managed funds with international oversight and leverage of the skills behind. If we lose them, what is it that we are bringing? More and more we seem to be focusing on outcomes rather than prevention, and prevention is infinitely cheaper and involves a lot less harm. Can you give us any reassurance that you will be retaining that early intervention, prevention and thought leadership within the Department?

I will declare a similar interest. I have worked in this world for the last 30 years and genuinely believe that the quality of our people and our staff has been the thing that has really set the UK apart compared with others. I will also declare an interest, though: we are facing a reset and a change in our affordability and our staffing that will force us to make some really tough choices about what we are going to prioritise, and how we are going to prioritise our people going forward. The reality is that over the 30 years of my career in ODA, DFID and the FCDO, we have accreted, kept and squirrelled away multiple new proposals, ideas and ministerial commitments, none of which we drop. We have reached a point where we do need to stop doing some of them and pivot some of our resources to those areas that we really care about, like violence against women and girls. I have read your letters on your concerns about the FGM programme, disability funding and so on. All I can say about that is that these will be picked up in the equality impact assessments that we are doing in the allocation process that we are running. No decisions have been made on programmes such as that at this point in the allocations process.

Footballers in the premier league are paid eye-watering amounts of money, but one assumes that the benefit they give to the club and the economic draw that they have outweigh the up-front cost. My concern is about the restructure that you are doing. Olly, you started by saying that we have all these very expensive, very skilled, very experienced people at the top. Maybe they are the jewels in the crown. Maybe they are the people who, if they pick up the phone to dictators and say, “We need you to stop this, or get round the table,” are the ones who understand the problem and are listened to as a consequence. I am just worried about cart and horse. It goes back to Tracy’s question. I am still not clear on whether this change is driven by trying to manage a budget, or whether it is completely independent and just about future-proofing the organisation. I heard what you said about how the two are dovetailing beautifully. I am not buying into that. Why is the restructure happening in the way that it is happening right now? We know that you have got rid of some of those really skilled, experienced staff, and I think the next level is going through right now.

I am not sure there is a lot more that I can say, Chair. It is not a glib line; we are working incredibly hard to try to make sure that we hang on to as much of what I agree is the extremely experienced talent that we need, at various degrees of seniority. Obviously, some of that deep experience is at more junior grade levels.

Absolutely. That is the other thing about the skills audit: there might be someone at a very junior level who is the world expert on some neglected tropical disease, for example.

Absolutely, and we are trying to capture as much of that information as we can as we make these plans. What I have tried to explain to the Committee is that we are not embarking on this in some reckless rush. We have thought very hard about it. We have made appointments to a senior team that is now very motivated to make this restructuring happen in as strategic, rigorous and kind way as possible. They have every incentive to want to preserve all the most experienced and important talent that we need for the future—thank goodness. Nick and I cannot know a fraction of the people in the Department that we need to know in order to have that overview, so we need good, experienced leaders to help us through that process. It is always going to be tempting to say, “If we took another month, would we get it better still?”. Maybe, but I am also very conscious, as several members of your Committee have rightly asked me, of how this feels to staff. If I did some awful word cloud of the words that are used with me, “pace” would probably be at the heart of it.

As a good thing or a bad thing?

As something that people want and need—pace and clarity. People who work for us are sophisticated and very international people; they see the Auswärtiges Amt announcing a 15% reduction, and they see Global Affairs Canada announcing an 8% budget reduction. They have heard what Nick and I have been saying to them for six months, and they are saying, “Okay, we understand. Now can you get on with it, please?”.

Going back to BII—I refer members of the Committee to my entry in the Register of Members’ Financial Interests—we heard that the strategy will be forthcoming quite soon. When exactly can BII expect to know how much funding it will receive?

We have brought the strategy forward by about nine months, and we aim to get it agreed by April next year. We have done that because we wanted to align the next five-year strategy with the new SR, and because we have a new Government, and a new set of Ministers, so we want to give them as early an opportunity as possible to shape the strategy of BII. That is the timing. The reality we are facing is that, in our SR settlement, the amount of financial transaction capital that we received—in other words, the kind of money that we give to BII—has fallen by 50%. We have a lot less available, so it knows that this strategy will not be similar to the last two strategies that we did, where we gave quite significant uplifts in its capitalisation. Last time, we committed £3.5 billion to BII. In practice, we will end up giving it half of that, because of the cuts that we have seen. We are going through the process now of doing two things: one is talking to it about what the elements of the new strategy should look like, and the other is what the funding would be to support that strategy process.

That is still quite a lot in a fund that is supposed to be recycling capital and making exits.

There are four broad elements to the strategy that we are discussing with BII: geography, theme, product and sustainability. How will BII sustain itself in a world where we are not capitalising it? Because that is going to be the reality. We will give it some resources to complete the commitments that both of us have made on Ukraine, so we will give it additional funding for Ukraine. We are talking to it about whether to capitalise a new mobilisation facility for climate, which we are in consultation with it about. The main question will be, without that capital, how it stops itself from shrinking. Exactly as you say, that is a combination of how you exit and rotate your resources, and a question of what expected return you are requiring of BII for it to fund itself and do its own capital investments.

Is there any strong indication on the direction of returns for the forward-looking period?

For the last seven years, I think I am right in saying—I wrote it down somewhere—that its seven-year annual average financial return is 5.1%. We set it a hurdle rate of 2%, so it is operating at higher than its returns. We need to have a conversation with it about what that hurdle is going to be for the future. Sorry to add a complication to this, but it is slightly complicated in the way that the Treasury is setting its expectations of returns, and the use of this type of capital. It is now expecting a return that is similar to the gilt rate, so we also need to have a parallel conversation with the Treasury about this.

I forget the abbreviation, but is that required for it to be the type of capital used?

Yes, that is right.

So essentially exceptional capital.

It is capital that creates a return on investment that we get back.

I apologise; I probably sound like a broken record on this point every time we have you but, given the inherit bias towards capital spend across Departments—you can argue the toss whether that filters through to FCDO, because of the nature of the ODA cuts—why is that bias towards capital investment not feeding through to bigger allocations for BII? Is it an accounting misfortune? What is the real reason?

Well, I would say that in the past, it has. We have had uplifts from the Treasury on the financial transactions capital—it has a different technical term, but let’s call it that. Consequently, we have used the bulk of that—not all of it, but the bulk—to capitalise BII. Actually, we have, over the last two strategy periods, significantly uplifted the amount of capital we have put into BII.

Okay. It is just strange, at a time when the fiscal rules have changed and all this capital has been released, that that has not filtered through. What are the reasons for that?

That is a decision of the Treasury. With the changes in the fiscal rules and the amount of financial transactions capital being released by that, the Treasury is choosing to invest that in the UK economy. That is a choice of the Treasury. We can only deal with the SR outcome that we have been given.

Coming back to the return, it reflects a reasonably cautious approach in the past from BII, or at least one that is designed, even with different strategies, to yield a positive return overall. What assessment have you made of the impact of that approach on BII being able to get investment into some of the poorest countries? You said earlier how difficult that is, but need that be the case?

The return rate we have set is not to encourage BII to be cautious, but to encourage BII to take risk. The lower the return rate you set, the higher the failure you are prepared to accept. If we set a 10% return rate, it would just chase easy deals in middle-income countries. We are asking BII to operate in the most difficult, fragile contexts—60% of its portfolio is in Africa. It is the European DFI with the highest share of its investments in fragile conflict-affected states. It makes fewer bad investments than we originally expected, because of the way it carefully makes its investments. Its return of 5.1% is a reflection, in part, of the changing economic environment, but also of the difficult markets we expect it to operate in. It could make much bigger returns if it just invested in south-east Asia and/or Latin America.

Do you think it is taking enough risk?

We have created, with BII, a couple of new product lines that have allowed it to take normal capital investment—not the financial transactions—to enable it to use first-loss blended finance in very high-risk investments where, in some cases, we would expect some of them to fail. That is a reflection of the fact that we would like it to take even more risk in some areas, in carefully managed ways.

Should BII raise debt? If so, would that affect FCDO’s relationship with the organisation?

We have had this conversation with the Treasury about BII being allowed to take on debt, but the current situation—where it cannot—is a reflection of where that conversation has gone.

Turning to the integrated security fund, the allocations are on the downward trend. I want to understand the rationale for that decision.

Between ’25 and ’26, the overall ISF was cut by 13%, and then from ’25-’26 into the SR, it has been cut by another 15%. Those were choices by the Treasury on how to allocate resources across Government Departments.

My question is really getting at what the mitigation for that is. What alternative options are you looking at, so that we do not lose the fund’s original intention?

An important ingredient here is that the Treasury agreed with us during the spending review that it would allocate to us a non-ODA programme budget of £200 million a year, which is more of a discretionary programme budget for the Foreign Secretary to spend on non-ODA priorities. Obviously, many of those priorities—not all necessarily—will be to do with her priority theme around security. It gives us the opportunity, as a Department, to offset some of the reduction in the overall ISF.

That is helpful. You may have already answered this, but when we last saw you in February, Nick, you said you were going to be doing a review of the ISF. Is that old news now? Has what you have just said taken over from that?

I think both the honest and the simplest way to see this is that the review effectively ended up being the spending review. One of the things we thought through with our Ministers, Cabinet Office Ministers and Treasury Ministers was whether—to be pompous about it—the architecture of a cross-departmental fund was adding value to the programmatic activities of ourselves and other Departments, or whether we would be better passing it up and putting it directly in the Department’s budget. In the end, the Treasury felt there was still value, in the round, in that interdepartmental structure, so we have maintained it but at a smaller level with more discretionary funds available to the FCDO.

Even though the money is not allocated out of ODA spending, does it still have a development impact and focus within it? In some ways, if it does, that is great, because it is additional money that is not coming out of the aid budget. If it does not, the whole point of this is to have some integration between foreign policy, defence and development for all the obvious reasons. Is that still happening?

I may be answering your question in a slightly different way, but I hope this helps. I think it gives us the opportunity to be less theological about the ODA/non-ODA boundary. For instance, within the Department, of the two of us, Nick is the Permanent Secretary chasing hardest the Foreign Secretary’s priority on migration. Some of what we will do upstream on migration has a legitimate development purpose and should be a call on our ODA programme, and some will not be. In the past, we would have had to go through to a completely different process to plead for funds to do the non-ODA bit. I am hoping that some of that tension will be managed in a different and better way by this set-up.

As we have discussed, the FCDO’s ODA share has been reducing in recent years with the swing towards multilateral spending. Given that, do you think the Department still has enough control over how the budget is spent?

Maybe I will put some basic facts on the table, and I am sure Nick will want to deal with the way in which we take decisions. First, the overall official development assistance budget will fall over the next couple of years. The proportion of that being spent by the FCDO will rise. That is a function, of course, of what other Departments will spend within an overall ODA number, and is particularly, but not only, a function of in-donor refugee costs managed by the Home Office. Something I know—not from direct experience, but from reading up before this session, and as your Committee has focused on in the past—is that the amount of any given ODA budget that is deployed on development overseas by the Foreign Office is rising over this period.

Do you know what the percentage will be? I think it was at around 76%.

It is 68% to 74%.

Okay, so it is back to where it was.

Yes, and one hopes that is a trend one could see drawn further on because of the Government’s commitments on bringing down in-donor refugee costs, which I am sure will extend beyond the end of this particular spending review period. To come back to your question, Mr Law: sorry to be pompous about it, but within any FCDO ODA allocation, what Nick was describing earlier was our view—subject to the overall allocation discussion we are still having with Ministers—that it was good value for money for the marginal pound to be spent through multilateral delivery mechanisms. You are right that that means we do not have direct control of it in the sense that you might traditionally have control of a bilateral aid programme. But as we tried to explain in response to some of the earlier questions, we think that at the strategic level it still gives us a good degree of control. In some countries—as your colleague’s question brought out earlier—a highly experienced, development-focused high commissioner, as we have in Abuja, is able to think really cleverly about how to exercise influence to make sure that we get the leverage of that multilateral investment.

Okay, that is clear. With regard to spending by other Departments, Nick, have you made representations to those other Departments on making sure that unspent money comes back to the FCDO?

Two things happened in this spending review. One is that, unusually for the Treasury, the FCDO was given responsibility for making proposals on how to allocate the funding across Government. Ultimately, the Treasury had to sign that off, but we ran a process where we saw evidence papers from other Government Departments and made a proposition to them and to the Treasury about what those allocations should look like. We focused particularly on climate change and nature and on R&D, because those are the two big spends from other Government Departments. We were very much part of that process. The other big change in the spending review is that we are no longer the saver and spender of last resort. That cuts both ways. If the Home Office overspends their allocated ODA budgets for in-donor refugee costs, they will no longer come knocking on the FCDO’s door for us to cut our budget, so we will no longer have to make the in-year budget cuts that we experienced in the last two or three years, which have been incredibly damaging.

That is a very welcome step forward, but regarding some of those excess profits, particularly in asylum hotels, are there any attempts to claw back any of that and use the proceeds to increase spending abroad? What more can be done, beyond that move from your being saver and spender of last resort?

There are two big drivers of first-year in-donor refugee costs. The first is the pace at which the determination is made about whether they get asylum, because they can work once they get asylum, and generally they reduce the burden on the UK state. The other is to get people out of hotels, because the cost of a hotel compared with dispersed accommodation is seven times higher. The Home Office is under a lot of pressure to improve both of those, so getting people out of hotels but also speeding up the rate of asylum decisions. That is not necessarily to do with reducing the burden on the ODA budget, but that is very much a political expectation and objective of this Government.

Very briefly, have you noticed the difference in incentives since the change in the FCDO’s status as saver and spender of last resort?

I think the Home Office is under incredibly high pressure to get asylum seekers out of hotels in the UK.

I just want to make sure that we do not leave the Committee with the wrong impression—it is reciprocal. While we will no longer feel the pain from Home Office estimates rising in-year, so too do we have no expectation that, if they underspend their forecast, it will flow to some notional ODA budget that is then devoted to the FCDO.

Do you still have the ministerial oversight board for ODA?

We do.

When does it meet? When did it last meet?

It met in September. The first reconstituted board post the SR, with Baroness Chapman and the then CST, was held in September.[2] We are expecting the second to be in January.

Forgive me if this is a stupid question based on what you have just said, but are you saying therefore that any money saved from the reduction in hotel use by the Home Office will not, as things stand, automatically flow back into aid overseas?

What I am saying is that, during the spending review, the Home Office agreed a forecast for in-donor refugee costs on a sharply declining path. They have to meet that forecast budget. If they exceed it, that is for them to consume. If they manage to beat that forecast and cut those costs faster, we have no expectation that it will flow to us.

So if it does, happy days, but it is not your expectation?

That is right. All I am being very precise about, Mr Taylor, is that it is not a flat forecast; it is sharply declining.

I am not laying it at your door. I think it is something we might want to pick up with the Treasury.

Yes.

Moving on to displaced people. Chair, I thought we had a hard stop.

We have a hard stop in 16 minutes, so if we can do quick-fire questions.

We did a report on displaced people, which I will assume you have seen—or certainly your teams have—at some point. The Minister twice told us that there had been no equality impact assessment, but the response that we received suggested that there had been. Could you clarify whether an equality impact assessment had been done?

Sorry, on what exactly?

The response we received to our displaced people report pointed to equality impact assessments that had been undertaken; I think they were published online, but they were quite vague. I am seeking clarity on what equality impact assessments have been done in and around policy towards displaced people.

We do equality impact assessments, and we are doing them for the allocations—whether and how those allocations change and what the equality impacts are. When we design new policies, we will look at equality impact assessments. We are doing a lot of activity on displaced people regarding prevention, protection and working with host communities in neighbouring countries, in terms of source countries where people are being displaced both internally and externally. But I am not aware that we have an overall policy that has required an equality impact assessment.

Which I think is what the Minister had alluded to, but the response we got from the Department suggested that these things were taking place. Perhaps that is one for a follow-up, for clarity.

It sounds like the wires are slightly crossed. I think what Nick is saying is that lots of individual elements that we consider to deliver our objectives on displaced people will have been subject to equality impact assessments at the moment of change—whether that is a new budget, a new policy or a new programme. We do not have a displaced-people thing that we have done an equality impact assessment on. Is that fair, Nick?

Yes, I think that is fair.

Okay. I guess what we are trying to understand is the direction of travel for the Department. The response we received to that report said that “less money does not necessarily mean less action” on women and girls programming. Can you expand on how those things can be true? Presumably you are saying “We’re just going to be doing things more efficiently than we were before, but less money does not necessarily mean less action when it comes to women and girls programming.”

Well, it depends on what you mean by “action”—

We don’t know. This is what you’ve told us.

I would say that action has a number of aspects. What I want the Department to get away from is the sort of trap we have fallen into over the years, particularly as we got to 0.7%, of associating action with spend. We know—and I have said this to the Committee in the past—that the biggest wins in development do not come from spending money; they come from changing policies, changing regulations, changing environments and changing the norms and behaviours of communities towards women and girls in terms of violence and/or FGM. That is how you change behaviour. It is also in terms of working at international level and/or working with partners who are spending our money, whether that is the Global Fund to Fight AIDS, Tuberculosis and Malaria, BII or the World Bank, which all have women and girls activities. It is about getting the whole framework and the whole sector working in different ways and using our convening power and relationships to get others to take action, not just ourselves. I want us to avoid concluding, as we move from 0.5% to 0.3%, that it means we will necessarily diminish our impact in all cases, because we just need to work in a different way to ensure that we sustain and promote both UK interests and development interests in all the various areas we are talking about.

Nick, I hear what you are saying, and just do not buy it, because it does not work on the ground. BII is a classic example: when we push them on gender equality in their programming, they point to what I think is called the 2X programme and how they are getting women into businesses. That is great, but if a girl child cannot go to school, or is married off, there is no way that she is going to be trained with the qualifications that she needs to get a job in a BII-funded project. Nowhere have I seen that without positive action you get people in a position to be counted, let alone to contribute and benefit. Is your intention that, within the programming, expertise and funding, there will be specific projects to try to challenge the deep prejudice that women and girls face, so that they can enter into mainstream programming?

That would be the intention. Take education: we have gone well past the world where we are buying results at scale. We just cannot do it. We do not have the resources, and it is no longer the right thing to do anyway: many of the countries have their own resources to put into education. So, what do you do in education? In fact, the biggest sums of money going into education in many developing countries are from their Governments, not from external parties, so we need to move. We have said—Minister Chapman has said to the Committee—that we want to move from delivering services to shaping systems. So, what do you need to do? You need to work with the Government of Nigeria. That is one of the programmes that they are doing in Nigeria—how to bring knowledge and understanding of what works in education, and how to bring the right curriculum and development. That includes work with the World Bank, which has a relationship with the Ministry of Education in Nigeria, to bring those best lessons into that new programme, and into the Nigerian Ministry of Education. That is the world that we have to operate in.

So you are saying that you will advocate in a positive way, rather than just mainstreaming? Rather than saying, “Everybody needs education,” you will say, “There are particular reasons why girl children need education; these are examples of projects where it really works and, in the long term, these are the economic and societal benefits”?

With the Gates Foundation, the World Bank and UNICEF we have invested in what I think is a world-class, world-leading What Works programme for education.

I agree. And we will be continuing that?

We will be looking hard at how to continue our What Works work in education. We are doing the same for preventing violence against women and girls—the Foreign Secretary mentioned that when she launched the “All In” campaign last week.

I would also say that FGM is part of that whole picture.

You could be right—well, you are right, but we need to think about how best to do that. The question with all the What Works analysis, which is all contextual, is how you bring it into use. That is the key.

Going back to that quote that “less money does not necessarily mean less action”, the problem is that you say that for education, for women and girls, and for disability, but that cannot be true for everything. Effectively, it comes across as saying, “We are just going to mainstream the things that we are no longer fully committed to as discrete programmes and hope that we can continue a level of commitment to them.” That is not a genuine position to take. You cannot mainstream absolutely everything, otherwise you end up with a huge blob that you are trying to deliver in every single location, which is not a good use of public resources. I do not know that we are being honest, in some of these areas, in suggesting that mainstreaming remains a realistic option.

I think the question is what the UK can do versus what needs to be done collectively. In education, some countries no longer need the external support that they needed when I started 30 years ago because they have grown, increased their revenues and funded their own education systems. That does not mean that those education systems are working most effectively and efficiently. We can help by providing advice and support on how to do that better. There are still some places in the world that need external support—mainly fragile, conflict-affected places, principally but not only in Africa; we know that 80% of the world’s most extreme poor will be in 25 African countries by 2030. Given where we are with our budget, we cannot realistically provide that external support at scale. Other people can: the African Development Bank and the World Bank can. Many more philanthropic organisations are looking at education. New donors, particularly in the Gulf/Turkey, may be working in this space.

Can I pause you there? You are focusing on the money. I think we have been absolutely brilliant on PSVI, for example. That was not about putting money in, but about convening and giving examples of what works. That brings me right back to the start: caring that we protect the expertise that we have and that we future-proof the Department so that we are useful, rather than fighting over particular projects.

I hope that we have both demonstrated that we care deeply that the FCDO of the future will require deep expertise in quite a lot of areas—development, but also on the foreign policy side, defence and intelligence, and geographic language skills: the whole lot. But what I cannot say to you is that we will protect every single area that we have ever worked on in the last 25 to 30 years. We have to make some trade-offs and tough choices about the areas that we want to prioritise while still doing that careful understanding of the evidence and the lessons and trying to bring that to bear, using our convening power in the best way possible across a whole range of countries. We have to make those choices because we cannot afford to do anything else.

When she was last here—or the time before that, maybe—the Minister said that there would be no disability, inclusion and rights strategy refresh. How does that sit alongside the amount of change that we have talked about today? How can we be confident that we do not need a refresh in the context of what has been described?

To be fair to the Minister, I read her letter in response to the Committee. I think it says that when we get to the mid-year review of the strategy in 2026, we will take stock then of whether we should refresh and have a look at a new strategy.

That does not really give confidence though, does it? You are saying that you are going to review whether the existing strategy is fit for purpose and whether we need another.

When we get to the mid-year point next year, we will take another look at that, yes.

I find it slightly concerning that we are making all these changes and funding decisions now, based on an old strategy. I would argue that people with disabilities are probably the most marginalised and hard to reach. They are probably the people we should be focusing our attention on. No one else seems to be.

But the old strategy itself did not have huge sums of money attached to it.

So you are still working to the old strategy.

Until such time as we review the existing strategy, we have an existing strategy that is still current.

Good; that is reassuring. Gentlemen, thank you very much for your time. You have given us loads of information that you know we will pore over and pick through; we may come back to you if we need further clarification. If there is stuff you want to come back to us on in writing, please do. We really appreciate your time and leadership. It is reassuring that you are very aware of what a precious Department you have and how vital it is for not just our security but international security and development. Thank you for all you do. Your team are fantastic and always very generous to us.     [1] Witness correction: this is a 1:4 ratio   [2] Witness correction: The CST did not attend the September meeting.