This morning, the Foreign Affairs Committee is holding the first of two sessions today on the work of the Foreign, Commonwealth and Development Office. In this session, we are joined by officials including the new permanent under-secretary. Would you please introduce yourself for the record?

Of course. I am Olly Robbins, permanent under-secretary at the Foreign, Commonwealth and Development Office.

And who have you brought with you?

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

And I am Tim Jones, finance director.

I think we have met before. Congratulations to your other officers. I will start with a general question to get us going. What are your priorities in your five-year tenure as permanent secretary? What is your vision for the reshaping and restructuring of the Foreign Office?

Thank you, Chair. I have three personal priorities, which are probably pretty obvious. The first is to make sure that we run the Foreign Office, which is a big and complicated institution, in a way that delivers for the Government of the day. That might sound like a statement of the obvious, but this is a network of 280-odd posts and 17,000 colleagues delivering across a series of ministerial priorities. We cannot take our eyes off that ball; the team and I need to keep focused on that. The second priority is to make sure that we are ready for the challenges of the future. As you know, Chair, we have been thinking a lot as a leadership team about what that means in practice. We have a tough few years ahead from a budgeting point of view. We need to ensure that the Department is focused on what it is trying to deliver strategically; that it then prioritises rigorously, can follow through on its delivery plans, invests in the capability of the workforce, keeps open and takes in the best of the world around us, and manages our administration to be more efficient and to release more resource to the frontline of what we do. There is a big change programme ahead of us, which, as you know, we are calling internally “FCDO2030”. My third priority is to make sure that the Foreign Office delivers the best advice to Ministers, drawing on the insight of our network, and that part of my personal role, alongside Nick and other senior leaders, is to invest some of ourselves in ensuring that advice is the best that Ministers can get, and allows them to make a massive contribution to the success of the Government as a whole. Those are my three broad priorities as permanent under-secretary. I hope in answering your question, I have given you a flavour of what our change programme looks like, though I am happy to dive into it in more detail.

The Chief Secretary to the Treasury spoke to the Commons Treasury Committee about the administrative budget cuts. His view was that the permanent secretary and the Department “need to reshape the overall headcount and structure in the Foreign Office.” I suppose if you have 17% cuts to the administration budget, the big cost is not the photocopying; it is the people. Could you help us with what that means? What kind of headcount are we talking about? How many people are you going to lose? Could you share that with us, please?

If I may step back for a second, Chair; I will get to your question quickly. Because it is a complicated Department, the spending review outcome is sometimes tricky to explain. The overall size of the Foreign Office budget declines rapidly over the next few years, but as you know well, that is mainly a function of the Government’s decision about the overall level of overseas official development assistance programme. Within that departmental expenditure limit, as it is called, the budget for the Foreign Office’s operating expenses—what we spend on ourselves to keep the network going and our headquarters functions running—is flat. We will spend in resource DEL this year about £1.5 billion, and in the final year of the spending review, we will spend about £1.5 billion in resource DEL. That is what is known in the jargon as a flat-cash settlement. As you know, that means that we have to take account of inflation, so in real terms that is a cut. Then, within that, the settlement we have reached with the Treasury allows us to do some important things. We have a £290 million transformation fund allocated to us, mainly over the middle two years of the spending review—so not this financial year, but the next one and the one after. You just referred to what the Chief Secretary was saying. That allows us to invest in and reshape our workforce, as well as to invest in our digital capabilities. We also have a £100 million capital departmental expenditure limit uplift to our baseline. Excuse the jargon, but that means our budget in next year and the years thereafter will be £100 million of capital higher. That is mainly, not exclusively—

We will come on to capital in a minute. I just want to talk about the people.

Of course. Within that overall settlement, we have to achieve the operating budget of £1.5 billion by the end of the period. What I have said to the Department is that that is achievable only if we get significantly smaller over the course of the next three to four years. We don’t know exactly what level of staffing that is going to require yet. That is why I have to give you a frustratingly vague answer at the moment. We think it is cuts of between 15% and 25% to overall headcount.

A 15% to 25% cut in the number of staff at the Foreign Office?

Yes. In the total numbers of staff.

Over what period will that happen?

Between now and 2029.

Okay. Can I just pause there? How are you going to do that? Every Department—every organisation—has people who are not as strong as the others. If we could just cast off the weakest people—if you had 40% who were weaker, and they wanted to go, that would be great, because you could just employ some other good people and carry on having all of them being great. But that isn’t how it works. If you are losing between 15% and 25% of the Foreign Office, how do you ensure that you don’t lose the best people, who find it easier to get jobs elsewhere?

We have started this process. In this financial year, we are running a voluntary exit scheme, which is looking to lose around 500 colleagues. Of course, people have to apply for the voluntary exit scheme, but then we run a process internally at different levels of the organisation to vet those applications to make sure that we are not losing people with the skills we need for the future of the organisation.

You are not letting good people go. So if you are too good, you are not going to be allowed to have voluntary exit?

That is roughly right, yes. I am avoiding using the word “good” because it is more about the skills that we need for the future. We will lose some very good people, but they may not have the skills we need for the future.

Okay. So you will have to do an audit of the skills you need. Is that what you are going to do first?

The 2025-26 voluntary exit scheme, which we are in the middle of, was devised with a pretty basic set of assumptions around what kind of skills we needed for the future, and people were then invited to apply. The process of deciding who should be granted voluntary exit has reached a conclusion, so now we are just waiting for those people to get their quotes and to decide whether to take up the voluntary exit that they applied for.

How do you know who you need to lose if you don’t know what the future structure is going to look like?

It is difficult, Chair, you’re right. The reality of the situation that we are in is that there are a lot of people who we thought would almost certainly not see a future with the organisation over the next three to four years, so as we have allowed them to apply, we have been able to come quite quickly to a mutual sense that they are probably not the right fit for the future.

Because they want to go. The people you are losing at the moment are the people who want to go and they will take advantage of a cash sum and get out.

By definition, because they have applied, they are people who want to go, but there has been a constructive conversation with and about the people who have been feeling for a while that they may want to leave and may not have a long-term future with us.

Of the 15% to 25% of staff you are losing, are you losing them at all levels? Will there be more? If you have to make savings of 17%, presumably you could save more money by losing more people at the top.

Yes.

Presumably you have started work on this; have you started by thinking about people at the top or at the bottom?

We have started from the top. At the moment, we are engaged in restructuring our director general level in the Foreign Office.

How many directors general do you have?

The board I arrived with had nine directors general in London, and we will have seven in September. We then look at the next level down from that.

You are stopping at seven in the director general level. Will that be it?

In London, yes. The complementary exercise we need to run over the next year or so is on whether we have the right levels of grading and seniority in our overseas network.

How many directors general do you have overseas?

We have over 20.

Do you know many of those you will lose yet?

I do not.

Are you going down to the next level now?

We are looking at the director level, which allows us at the same time to plan the headquarters structure in more detail. In early autumn, we will come to what I hope will be a stable headquarters structure for the rest of the Parliament, which allows for fewer jobs at the director level, but they will be bigger and more empowered.

How many are we talking about?

We do not know yet; we are in the middle of consulting on that exercise.

What will the proportion of cuts be for overseas versus London?

Again, I’m afraid we do not know that yet.

When will you know it?

We will have to have a good answer to that by Christmas. The exercise we are engaged in at the moment is focused on what the right structure is for the headquarters organisation. We will look at the overseas network early in the new year, but to do that properly we will have to have a sense of that balance by Christmas. We are trying to run this so that we have, on the whole, a bias towards having a larger proportion of our workforce overseas by the end of the Parliament than we have today.

I suppose there is another problem, isn’t there? If people are going to an overseas posting, that takes a bit of time by itself, because you have to learn the language, which takes about a year—or two years if you are learning Chinese.

indicated assent.

Starting off by thinking about London and then thinking about overseas might not necessarily be the most efficient way if the lead-in time for people going overseas is much longer than staying in post in London.

I accept that. The difficulty here is we have to come up as quickly as we can with a headquarters structure that works, because we need a well-functioning, streamlined headquarters to plan the overseas network. I take your point entirely about the rotational model, and at the moment we are trying to work through with directors how to sensibly take account of the fact that people will be coming back from overseas during this process, and the fact that some of our current directors in London plan to go overseas in the next couple of years. It is complicated, and we are trying to work through that, but the risk on the other side is that were we to throw the whole structure of the organisation up in the air all in one go, it would create so much uncertainty and dislocation that we would lose focus on delivery.

You say you will try to get back with the structure or the idea of what the structure will be in London by Christmas, but that it is quite a long time by itself, isn’t it? If it takes you to Christmas to work out the London structure, how long will it take you to sort out the overseas structure?

We can begin some of that preparatory work in parallel, and we have done. We have started talking to people about how to do that sensibly. As you can imagine, Chair, I am conscious of the need to do this in a way that is rigorous and fair to people. The exercise Nick and I have just run at director general level has taken us a couple of months, but that is because we needed to show—with the help of the Civil Service Commission—that we are doing this in a clear, evidence-focused and decent way. It takes a little bit of time, but we are being as open as we can be with people internally about our timelines and objectives as we go along, so at least people do not feel like this is a secret process.

I think the other question that people would want us to ask is: given the state of the world—the chaos in the Middle East, the war in Ukraine, Donald Trump, climate change and everything—and given that, in the middle of all of that, we are trying to be a stable force for good, why is it that the Foreign Office, of all the Departments, has the biggest cuts?

The level of the cuts is exaggerated in the public numbers, Chair—

That 17% is not an exaggeration; 17% is what the number is. You say that you want to have a Foreign Office that can give the best possible advice to Ministers, yet you are going to lose all these people.

I do think that over the next three or four years we can get to a position in which the Foreign Office is at least as effective as it is today. I am very conscious of the complexity of the world and the difficulties that my colleagues face. One of the things that we talk and think about a lot is how to preserve experience and knowledge, including at senior levels. While we want to push as much responsibility and accountability down the organisation as it is sensible to do, we do need experience and judgment in some of our senior roles. The Foreign, Commonwealth and Development Office is a lot bigger than it was at the time of the merger, and some of that increase is hard to explain, so there is something to be said for doing this. Talking to our senior colleagues reveals an appetite for streamlining and for making sure that responsibility is pushed down to people—very bright and capable people—coming up through the organisation. There is an appetite internally for some of this change, and we are alive to the need to do it without reducing the effectiveness of the Department and without losing valuable experience and skills.

We will move on to the estate, but I want to understand how all of this fits in with the China strategy. We hear from the Foreign Secretary that there will be 1,000 mandarins speaking Mandarin. Is that going to be your staff? If so, at a time when you have 17% cuts and you are losing 15% to 25% of your staff, will the ones who are left all be learning Mandarin? I mean, how does this work?

We are investing in Mandarin, but it will not just be the FCDO that will be learning about China and learning Chinese. The programme—

What proportion will it be? Of the 1,000 mandarins, how many will be in the Foreign Office and how many in other Departments, and which other Departments will they be?

I do not know the answer to that today, Chair, but I can find it out for you.

Give us a general idea. How many people in the Foreign Office do you think will be speaking Mandarin in two years’ time?

May I write to you on that? It depends slightly on the level of qualification we are talking about. I know the number for the most advanced level of Mandarin, but that is a small number because it is for total business fluency. I think we have about 70 at that level today, and the plan is to increase that, but the overall number that the Foreign Secretary has quoted will include other operating levels of Mandarin.

Okay. We have other questions. In order for advice to be able to be given, given such part of the China strategy or the China audit that we have been able to see, we understand that there is going to be advice given across Government, that there is going to be an agreement, and that we are going to have a comprehensive strategy that is consistent. Will the advice on that be coming from the Foreign Office? Will the Foreign Office be running that?

Yes. We have run the audit for the Foreign Secretary, and the ministerial group on China, which he chairs, will continue to oversee the strategy.

So if I were running a local authority and some Chinese businesspeople approached me, would I be coming to the Foreign Office and asking for advice on whether it would be appropriate for me to get involved in a deal with that Chinese company?

Not in the first instance, no. Co-ordinating the delivery of the strategy is absolutely for us—working with other Departments, of course—but I suspect that, in the example you give, you would still go first to the Department for Business and Trade, and only if there were particular issues regarding the type of deal that you were inquiring about would they necessarily come to us.

Would the Department for Business and Trade be relying on you to give advice to them?

Ultimately, but they would not necessarily need it in every case.

Because they would have some of the 1,000 mandarins?

Well, that and we have on gov.uk new guidance for businesses on dealing with China, which the Department for Business and Trade oversees and we fed into. The model here is that Departments take ownership of their chunks of the strategy, with us maintaining the central expertise and oversight.

But you cannot tell me at the moment how many people will have that central expertise and oversight.

Not across Government, no.

No, but I mean also within the Foreign Office, which you are currently restructuring. Even though the Foreign Secretary has made an announcement like this and you are currently making 15% to 25% cuts to staff, you cannot say how many of the staff who are left will be involved in this new China strategy.

I cannot at the moment, no. The overall numbers are a bit too uncertain for that, I am afraid.

The cuts are enormous: up to a quarter of staff, on top of a 40% cut to the ODA budget, which is even more represented among what the FCDO spends on ODA. Could we get your reflections on how that will impact the UK’s role on the world stage? If you are going to continue to be effective, which bits will we be deprioritising with these very large cuts? Which bits will we have to do a bit less of than we used to?

One of the things we will be looking at very hard over the next couple of months is how we make sure that the activity of the Foreign Office is closely targeted on what Ministers have set out as our six priorities as a Department. That does not mean that if something is not included in those six priorities, we will not do it, but there is a need to check that activity across the Foreign Office is properly targeted on those priorities. There are things that the office is still doing and monitoring that are good and important.

Could you confirm for the public what those six priorities are?

Of course. The Foreign Secretary has set out six priorities as a whole for the Foreign Office. The first is around growth and jobs. The second is around migration and making sure that the Foreign Office is playing its part in controlling illegal migration. The third is around Europe and the European reset. The fourth is around climate and nature, and reasserting British leadership on those issues. The fifth is around development and making sure that we have a modernised but globally impactful role on development; I am sure we will come back to that. The final priority is on security and making sure that the Foreign Office plays a leading part in the UK’s national security architecture, dealing with crises in the world and the long-term challenges that affect our security at home. Those are our six priorities. That has been a stable framework for me since I arrived in the job. What we are trying to do with the exercise that we are running internally is make sure that we can map the Foreign Office’s activity to those six priorities and then challenge ourselves where there are things that the office is doing, particularly at the moment in headquarters, that do not easily map on to those six priorities. Are they none the less a standing task that the Foreign Office ought to be doing? For instance, it is obviously extremely important that we continue to have a strong consular and crisis team, but that is not explicitly listed among the six priorities. Or are they priorities that the office has moved on from and that we should be scaling back? That is the exercise we are currently engaged in. My hope is that we will get to a framework for the office where we are able to push more resource from headquarters, relatively speaking, out into the field and the network and that therefore, although the overall staffing numbers will be falling, the UK’s presence and impact in the world will not be seriously affected.

On security, which is the sixth priority you mentioned, the world is becoming much more unstable. The Prime Minister has particularly prioritised our development work in conflict hotspots such as Ukraine and Sudan. I have noticed that the integrated security fund has a particularly large reduction in its support, of 45% from last year’s spending. Do you think that that is consistent with the UK playing a global role on maintaining security and working in conflict resolution?

That is a very good question. Tim, are you able to help a bit on the integrated security fund? It is included in our baseline, but the way it is budgeted for is a little bit odd.

A big portion of the ISF is ODA. Nick may want to talk about how ODA has been reset across Government, but substantially more has been pulled into the FCDO, as the lead Department for ODA. Some of what you see in the ISF numbers is playing that story out. In terms of the wider fund, since the merger of DfID and the FCO, a significant block of it is now within the FCDO. We receive the money from the Treasury on a baseline, and the decisions are currently taken in the Cabinet Office as to where the money is distributed. A lot of it is then effectively spent by the FCDO, so it comes back to us to spend, and you can see that moving through the main estimate. It is sometimes quite a hard story to tell really succinctly, but we are the main spender of ISF.

Also, as part of the spending review settlement, the Treasury agreed an extra discretionary fund for the FCDO of £200 million a year for non-ODA priority programmes. Half of that has to be scored as part of our contribution to NATO measures of defence spending. We are therefore expecting that at least half of it will be security-related.

Finally, with that reduction in ODA to the ISF from £350 million to £194 million—I think that was the figure I saw—will we still be able to support the mine-clearing operations and peacebuilding work that the NGOs are doing, as we did in the past? There is going to be a £200 million uplift in addition to ODA. Is that what you are saying?

In total, we will be able to sustain our funding for security-related activity. I need to be careful, if you do not mind, as we have not yet made the allocations within that. I cannot give you a clear answer today on mine clearing, for instance, but those are the sorts of issues that we will talk through with Ministers this autumn.

May I add to that? We have actually brought some of the activities that are currently funded under the ISF to our own baseline. Actually, we are releasing the ISF funding to be spent elsewhere, and some of those activities are just part of our normal baseline of expenditure. We are currently going through the resource allocation process for the next three years, which will conclude in about the autumn. It is too early to tell what the final outcome will be for future funding in those areas.

Fair enough.

As we have been discussing, ODA spending has been the subject of significant cuts. Approximately 20% of UK aid in 2024 was spent by the Home Office on asylum seekers here in the UK. Have you made any assessment of what proportion of the remaining, significantly smaller ODA budget will be spent in the UK, rather than overseas?

Do you want to take that, Nick?

You are right. Let me start from the basics. It has always been a valid expenditure to pay for the first-year costs of migrants coming to the UK—we have always done that, for the last 15 years. It is just that it has grown substantially, particularly with the Ukraine and Afghan schemes that came into effect. The costs have actually come down dramatically, from £4.3 billion in 2023 to £2.8 billion in 2024. In the SR, the Home Office is projecting that its funding will come down even further, to about £2.3 billion this year. The Chancellor has said in the SR that she expects the costs of accommodation for migrants in the UK to come down by about £1 billion over the course of the SR. The Government are also addressing the asylum backlog, which should help to reduce the costs. We expect those costs to continue to come down. At this stage, it is very difficult to tell what the actual number will be.

I am just trying to get an idea of the proportion that you are expecting. We obviously have significantly less, and there are some very important projects to spend it on. Have you thought not just about the costs coming down, which is excellent, but about the proportion?

It was a third in 2023, and it certainly will not be as big as that. It has come down to less than a quarter in 2024, and even with the reduced aid budget, I expect that proportion to come down. It is very difficult to put a number on it, because the Home Office forecasts are all subject to investments, hotel costs and the number of people coming into the UK. I would expect that number to be below 20%.

The difficulty is that it is a structural problem, isn’t it? It is Foreign Office money, and the Home Office can spend it.

It is exactly that point that I want to come in on. In the spending review, that link has been broken. To come back to the original question, the reality is that, while we still care about what the overall level of ODA is as a proportion of GNI, because the Foreign Office takes an overall interest in that level, the budgetary link between the available ODA to spend for the Foreign Office and the Home Office’s projections of asylum costs in-year is broken. Our ODA budget, as laid out in the spending review, is now protected from any rises in the forecast that the Treasury is making of in-donor country refugee costs.

You set out the six priorities that you are using as a basis for what you would want to use ODA spending for. How does the FCDO evaluate and demonstrate value for money against those criteria?

With the reduction from 0.5 to 0.3, it is clear that we need a reset in how we do development. That is quite clear. We have currently got 600 projects and a portfolio of £60 billion that we are holding. That is just not affordable, so we have to completely reset it. It is also true that there has been a fundamental foundational shift over the last five years in how we think about and do development. I would say that three things have shifted. One is the geopolitics; the Committee has talked about that a lot, in terms of small, contested and volatile. The challenges have changed; they are a lot more cross-border, and whether it is climate, conflict or movement of people, it affects the UK. Also, countries are telling us that they want something different: they want to focus mainly on growth and jobs. We are in the process of completely resetting the way we allocate and focus our ODA priorities. Ministers are quite clear that they want us to sharpen our focus on four areas: humanitarian, climate, global health and economic development and jobs. They also want us to prioritise those parts of the multilateral system that we think are fundamental to addressing those challenges and that benefit the UK—particularly the climate, the humanitarian and the global health systems. You will have seen our recent commitment to Gavi in the last couple of weeks, which is part of that. The Foreign Secretary has also been very clear that he wants us to work in a different partnership model, so that we are less a donor and more an investor, and so that we are doing less grant allocation and more technical assistance and support, unlocking the advice that is available in the UK. He is also clear that we cannot afford to do service delivery any more; we have to help Governments provide their own services. There is a foundational shift in how we are going to do our allocations. That is the context. We are going through the allocations right now. We have a well-trodden mechanism within the FCDO for how we do our programme design, business cases and allocations, and for how we actually monitor and evaluate programmes when they have been operational. Part of that is being very clear about what the value for money is, and part of my role, as the accounting officer for programming, is to be very clear about the value-for-money impact of our support. That is very much embedded in the programming guidance that all our teams use when they are designing their projects and programmes.

Broadening that out beyond development to the rest of the priorities that we have as a Department, the Foreign Secretary set up, before my arrival, a system of delivery boards that he uses to chase the delivery plans for each of those six priorities. He then has a delivery unit: civil servants within the Department whose job it is to vet and challenge those plans and ensure that we are evaluating progress against them.

Uma has some questions. We are not going to go too far down a rabbit hole on this, because it is not strictly our part of the Department, but it is important.

I will wrap up all my questions into one. There is a view that development and defence should be seen as two sides of the same coin, and that talking about it in isolation is partly why we have got into the situation that we are in. When we spoke to the previous permanent under-secretary in November, he told us about the last Conservative Government’s cut to ODA from 0.7% to 0.5% and the impact that that had on the soft power of the United Kingdom. He told us that the ODA cut under the previous Conservative Government had given the impression that we were an unreliable partner. Does the same risk exist now, because it has been cut further and we have reduced it to 0.3%? What approach is being taken by the FCDO to mitigate that? What are the implications for our soft power?

I will answer first, if I may. This is not all about the UK, if I may say so. The reality, as Nick was just touching on, is that the global international development system has changed and is more challenged. It is unrecognisable from 10 years ago, let alone 15 years ago. As we can talk about more if you are interested, it is about the way the multilateral system works. It is about the actions of other big donors. We will still be in the top five over the next few years; we are not retreating entirely from that sort of work, but the reality, as Nick was just hinting at, is that the demand from our partners has changed as well. They are interested in UK expertise and interested in UK partnership, but the demand for bilateral aid programmes has changed. We are partly responding to changes in the rest of the world, as well as to UK budgetary choices and pressures.

The National Audit Office did a review on the last set of cuts from 0.7% to 0.5% and identified three core lessons from that review. One was that the speed of change worked against value for money. The second was that we did not do enough consultation in-country. The third was that, cross-Government, we were not being as joined up as we could have been. I would say that one lesson internally from the cut from 0.7% to 0.5%, and the thing that our teams tell me all the time is absolutely killing them, is lack of predictability. They want predictability. They say, “I don’t care what the budget is—just keep it consistent over the course of a couple of years and I can work with it.”

How can they do that, post Trump? The American aid impacts the way in which we spend our aid, surely.

Clearly, given what is going on within the context in which they are operating, they are best placed to make the judgments on how to spend and allocate their resources. Baroness Chapman is very clear that she wants to give the teams in-country authority to decide how to spend the money, and not just to micromanage it from the top, so that they can respond and be clear about how to respond to other decisions. But the main thing for me on this cut to 0.3% is that whereas all the other cuts were either in-year or with four months’ notice, this is a cut that will come into effect in two years’ time, so there is a glide path to 2027-28. This year, 2025-26, is a transitional year. We are basically continuing with our existing portfolio, but with a few tweaks around it—I can explain that if you wish—but getting ready for reducing our budgets in future years. This has been less of a sudden shift; it has been more planned and more predictable, and it gives us time to talk to our partners in-country. It has also given us time to discuss with the rest of Government how best to deploy the entire aid budget, not just our element of it, across the whole of these priorities that are laid out by Ministers, and we have done that as part of the spending review.

Thank you. The consistency point rings true with what we were told by staff on the ground when we were in Jordan; they were telling us the same thing. On the soft power point, do you think that this cut to 0.3% is having an impact on our place in the world and our soft power? Your budget is shrinking, and you are rightly prioritising different things, but soft power can also be so important.

It can, and I am sure we will come on to this. We are thinking about soft power in quite a broad way. Our development work, not just our development budget, is an important part of that, as are our NGOs and a lot of what the UK does in partner countries, but so are the contributions of our sporting sector, our creative sector, the British Council, the World Service and so on. There are a lot of different things in the portfolio of British soft power, and we are delighted that, independently, we are still rated in the top three globally. I think that that will continue.

I think that if we had continued with the development programmes that we had 10 years ago, even at 0.5%, we would have eroded our impact and influence anyway. Because of that shift that is happening, we have to reset. It was happening anyway; it is just accelerating.

Good morning, Sir Oliver. I serve as a Government trade envoy, and have had some experience of working with ambassadors and embassies. I want to ask a couple of specific questions on the overseas network of our embassies, because it is not just FCDO staff there; they are working alongside sometimes a bigger team of Department for Business and Trade staff, and Defence staff. How are you working across Government to look at the physical impact of reductions across the board?

It is a very good question. We are having to co-ordinate tightly. You are right: that is particularly an issue at the moment with DBT, because DBT have decided to make changes to their own global footprint, which does impact us because we provide the platform, as you say, off which they work. There are over 4,000—

Could you help us with what changes they have decided? You are making 15% to 25% cuts. We do not yet know how many staff are being lost overseas, but do you know how many staff are being lost overseas by the Department for Business and Trade?

I don’t yet, but we are in consultations with them. We had a joint executive team meeting with them a few weeks ago, and they are working through at the moment what their assumptions would mean for our estate. We are very conscious that we want, as a Foreign Office, to continue to provide at least a good basic level of service to British businesses everywhere in the world, so we need to be able to plan and compensate for changes that DBT might make when they are, understandably, going to be focused on the most important markets.

If we look at our embassies almost in competition with other world powers, such as China and Russia, I know of one example where Russia has six defence attachés and the UK has just gone from two to zero. DBT staff are being cut. FCDO staff now look like they are going to be cut. This is a risk about our influence in the world with emerging middle-income powers, isn’t it? We are going to lose influence.

If I may say so, we start from a very, very strong base. We have 283 posts abroad. We have an organisation of over 17,000 people. This is a strong Foreign Office, present in as many countries as any other global power, with one or two exceptions that are considerably larger than us. We have a good, strong, big network.

How are you monitoring, or how do you intend to monitor, the potential impact, or the loss of manpower, as this goes forward?

It comes back to the question that we were asked about evaluation. We need to make sure that we are monitoring the impact on what we are supposed to deliver for Ministers. I am confident that, person for person, a British defence attaché makes a very considerable contribution, and probably more so than their Russian opposite numbers, but the way we will know that is by the depth of their relationships. I was in Delhi the other day with the Indian Defence Ministry and the armed services. Our defence attaché in New Delhi is doing an amazing job of taking that relationship to a different level. What I want us to be doing as a Government is evaluating the success of that priority and that programme of work, and making sure that the people leading it are then properly resourced to do it. India is an important priority for us, and that is where we should be focused. What we need to do, in response to your first question, is make sure that the overall HMG effort in countries is commensurate with their priority. That means that we in the Foreign Office need to keep an overview of staff at post, even when they are not ours. Over 4,000 civil servants abroad are partners from other Government Departments rather than from the Foreign Office, so that takes a bit of co-ordination, in country and at home in London.

I hear what you say about needing to have an overview and needing to try to co-ordinate, but if everybody is under pressure, the Ministry of Defence may decide that we do not need to have defence attachés in country X—I was thinking of naming one, but I probably shouldn’t. If they withdraw those attachés, and Trade decide that really we have better uses of our time, a British outpost run by the Foreign Office that used to have nine London-based staff will suddenly have two, and they are Foreign Office, and they are all by themselves. Would you consider closing the post? Would you conclude in any circumstances that we should close the post?

If I may say so, Chair, we are not a passive agent in this. We are responsible to the Foreign Secretary for our international strategy, and if the hypothetical country you are talking about is one where the British Government thinks it has strong interests, it is my job to be making representations to the Ministry of Defence and the Business Department about maintaining a serious presence there, or to talk to the Foreign Secretary about how we compensate for those departments withdrawing.

You talked about a country where we believe we have serious interests. Let us say it is a country where we do not currently have serious interests, but where we think it might be a good idea to have a presence because you never know what might happen in the world. If you want to continue to have a presence, but you have gone down from nine to two, what would you do?

We have run some analysis and we do not think we save a lot of money by closing sovereign posts. While it is not my place to make commitments about that—you will see me with the Foreign Secretary this afternoon—we do not at the moment have plans to close sovereign posts overseas. We think it is important, in the uncertain times that Nick was talking about earlier, to be able to marshal our network to deliver, for instance, votes at the UN General Assembly, and all sorts of other international influence that means it is important to maintain at least a basic level of coverage in most of the places we are now.

So even if you are left with a post that has only two people, so they cannot both go out to lunch at the same time because you have to have somebody from London based in the embassy all the time, you still keep it open.

We do have some posts now that are that small, and they are very effective, Chair.

Very good.

I have some questions about the overseas estate, but before I get to them I have a specific question about the overseas employment framework. The autumn Budget requires the FCDO to deliver efficiency gains of £76 million a year by 2029. The FCDO has identified areas where it can achieve those efficiency gains, one of which is by modernising and simplifying the overseas employment framework. Included in that framework is so-called danger money—additional payments to staff overseas in a hostile environment. It has been suggested that some staff are worried that cuts to that will result in their having to fund additional expenses out of their own salary. I wanted to give you an opportunity to address those staff concerns. Are you happy to say that there will not be cuts to danger money, or that there is a commitment that staff will not be forced to fund additional expenses out of their own salary?

I will get to your question in 30 seconds, I promise, but we should remember why we are doing this. The merger happened over four years ago, and we still have staff at posts overseas on two completely different sets of terms and conditions. We have former DfID members of staff who are on a very different system of allowances from former FCO members of staff. That is a morale issue as well as an effectiveness and efficiency issue. It is something that Nick and I have been working hard at since January, with the rest of the leadership team. The reality is that we have to end up with an overall allowance system that is, per head, cheaper than the one we have now. We think we can justify that, because there are things in some of the legacy allowance policies that we think are out of date. The portion of our allowance system that is targeted on making sure that people are compensated for the very real difficulties that they face working in very hostile environments is not in our sights. The policy justification for that feels sound to us and, if anything, is growing.

Thank you. I want to talk about the maintenance of the overseas estate. The National Audit Office has said that 933 of the 6,500 overseas properties did not meet its target condition score, and that the maintenance backlog had reached £450 million by November 2024. Given that that was 2024, could you update us on how the FCDO is doing on reducing that maintenance backlog?

That was a bit of a static assessment. We ran a survey over a year, through our estates directorate, to establish much more rigorously the true state of the maintenance backlog. They surveyed over 2,000 properties—not the whole 6,500—in order to come up with a good assessment and estimate of that backlog, which as a result went up from £150 million to £450 million. I suspect the reality is—I do not know for sure; Tim may be able to help me here—that although we are spending considerable amounts on trying to maintain the estate, the maintenance backlog has probably kept pace with that spending over the last year, because the reality is that the estate is very large and very complex. We need to think seriously about how we consolidate it and then prioritise investments that reduce that maintenance spend on an ongoing basis. We have a new global asset management programme and a new maintenance strategy, which the estates directorate are working through at the moment. As I mentioned earlier to the Chair, we were given at the spending review some significant capital funding to allow us, at last, to have a chance to get ahead of the maintenance backlog. However, I suspect—although this is guesswork—that the honest answer today is: I doubt it has improved much since that estimate from a year ago.

The spending review confirms that the settlement seeks sustained investment in the overseas estate, moving away from the reliance on one-off asset sales. However, the investment spending—the capital departmental spending limit—is cut by an average of 4.2% per year from 2024 to 2029-30. My question is: in reality, do you have enough money? Mr Jones, we had a conversation last time—and we may have disagreed on the final number—about a run cost of about £250 million a year on maintaining the estate. That is not dealing with the backlog; that is just on annual maintenance. Given the cut in capital spending, the backlog and the run cost, in reality, don’t you need to continue to sell assets?

Let me make three quick points. First, that overall capital departmental expenditure limit is mainly a function of our overseas official development assistance programme. So that 5% decline is a function of the conversation we were having with your colleagues about the size of the ODA programme over the next few years. The operating expenses for the Department—that is, what we can invest in our own estate—will jump by somewhere between a fifth and a quarter over the period, so we will be able to spend a lot more than we were spending in our baseline year, which is this year. Secondly, in response to the question you rightly asked about maintenance, a lot of maintenance spending is resource, as well as capital. If we get ahead of it, capital is the way we can build in order to reduce ongoing maintenance costs. But servicing a boiler, to give an obvious example, means paying a workman to come out and service it, which costs to the resource budget, rather than the capital budget. Our overall spending on the estate is more than a function of our capital spending—important though that is as an improvement for the future. Thirdly, we are trying to make sure that we get the investments right so that we can reduce the running cost in the future. That means thinking about where we can build to save, but also how we try to consolidate from 6,500 buildings down to a smaller number, without necessarily getting into the Chair’s territory of closing missions.

But you do envisage that there will have to be some asset sales, do you? Are those being driven by the maintenance of the estate, the budget available or the political priorities of where we need to be?

The strict budgeting link between selling off buildings in order to fund capital investment has been broken by the spending review, so we are no longer under, as it were, a Treasury obligation to sell assets in order to fund capital. The uplift we received in our capital budget is now a proper baseline capital budget. We have £0.5 billion a year to spend on maintaining and improving our estate, and that is not dependent on any particular sales. If we sell, because we think it is the right thing to do to reduce the overall cost of running the estate into the future, we will do it because we think it is the right thing to do, rather than to fund something else. Have I got that right, Tim?

Yes.

The Foreign Secretary told Parliament that the majority of documents that form the China audit were classified as secret or higher. On that basis, what proportion of your team within the Foreign Office will be able to see the China audit?

The whole of the China audit team are vetted to the highest level, so they were able to read them all.

Sure, but my question was in terms of the whole of the FCDO staff. What proportion of them will be able to see the China audit, given its classification?

Excuse me. We have not circulated those documents to the whole Department, but if people had a particular reason—for instance, they were working on an aspect of business investment and growth, as the Chair’s earlier question suggested—then they probably fed into the audit to begin with, but we would enable them to see the bits of the audit that they needed to see.

I guess the difficulty with a secret audit and Government strategy is how do you know what you do not know? As a civil servant, how do you know that you are supposed to have information that is within the document? How do you operationalise something that is secret?

That is a very good question, and it comes back to the conversation I was having with the Chair. We have now a clear set of co-ordinated governance, at both official and ministerial level, which means that not only officials across the FCDO, the network and headquarters, but other Government Departments know how to feed in questions and ensure that they are properly locked in to the thought process that led to the audit and to the statement that the Foreign Secretary made to Parliament. The audit was partly, of course, a backward-looking exercise, and his statement to Parliament talked about the fact that we have now turned that exercise into a forward-looking strategy. People who need to know where that strategy is can come and talk to us and, more importantly, it is fed in to the way that other Departments deal with the issues day to day.

Just to be clear, the audit was secret; is the strategy you are talking about classified as well?

It is also classified, yes.

The concern, which the Chair referred to earlier on, is that this is supposed to be something that co-ordinates across Government. Your Department has, I am guessing, the highest or second-highest level of staff who do have clearance to see both the audit and the strategy, but most of Government will not. Given that this was supposed to be something that was co-ordinating China work across Government, how is that going to work with a secret strategy?

It is about making sure that people know where to go for that extra, deeper, expert advice that they might—

How will they know? What will be given to people so that they know what they are supposed to ask for?

Just because you are speaking to somebody who is Chinese, does that mean you need to go and get advice?

Ordinarily I would not have thought so, Chair, no. If you are dealing with a specific new policy problem or issue, it is important that you know that the team in the Foreign Office who have run the audit and supported Ministers in setting the strategy are available to you if there is something new and contentious that you need to get advice on. As I was trying to explain earlier, Chair, the Department for Business and Trade, in dealing with a new investment partnership proposal that involves China, already has all that it needs from the process, which it has been deeply engaged in, to be able to deal with that issue.

Is guidance going out across Government to say, “Here are the sort of things you should be coming to the China audit team to ask advice on.”?

There is guidance all the time on dealing with a variety of sensitive countries and issues. There is guidance going out—

My question was whether there is specific guidance on the China audit going out across Government to say, “Here is what the advice should be.”

New guidance has been issued to businesses on dealing with China, which is on gov.uk, and there are issue-specific bits of guidance that the Foreign Office has fed into or led. There is no one single new piece of guidance out to Departments, because that would get to the heart of your question about how we maintain a sensitive collection of issues at the centre.

You see our frustration about how we can play any sort of effective role in talking about this when not only is the audit secret, but the guidance coming out of the audit is secret as well.

I understand your frustrations. The difficulty here, which honestly has been a difficulty for the team, is making sure that we support Ministers properly on a commitment they have made to look seriously at the full range of the UK’s interests and equities with China, but doing so in a way that does not ultimately compromise exactly those equities. The Foreign Secretary’s commitment to giving his statement in Parliament and to being as open as he can be—frustrating though that may be for you—was an attempt to ensure that we balanced those issues.

If we as a nation need to look again at our attitude to China—on the one hand we want to be able to work with them as much as we can, but we need to protect ourselves—how on earth do we do that if there is a secret audit with a secret strategy that we are not allowed to know about?

I think the only way you can judge the Department and the Government on these issues is by our actions, then, Chair. If you—

But it should be our actions too. For example, if I was in charge of a department at a university and one of my PhD students was not allowed to publish her PhD because there was a SLAPP that had been put on her—they had gone to court and said, “She’s not allowed to publish because it’s libellous,” or whatever—what does she do? What does the person in charge of that department do? Are you going to help? Is this part of the China audit? Where do we go? How do we know what the strategy is? What do we know is acceptable and what do we know we should be standing up against, if your strategy is secret?

In the instance you give—I hope this is helpful—normal governance and policy has not been suspended. In the end, the way that university dealt with that issue would be accountable in the way that it normally would be. There has not been new, secret guidance to universities on how they handle students. What the Government were trying to do was make sure that the way we saw our entire relationship with China, a massively important country and trading partner, was seen in the round, and that we were not taking decisions in one part of the forest that then ended up prejudicing those relationships across the board. It is not that there is some new, secret edict about how you deal with China; it is about the way we make sure that Ministers collectively are informed about this massively important relationship and are able to make strategic decisions on it.

I do not think that we are suggesting that there has been a secret edict; I think we are saying exactly the opposite. A small number of people had a secret policy, but they are keeping it to themselves. That does not seem to us to be the best way of proceeding and changing our relationship with China for the better.

The Department has been very engaged with the rest of Whitehall. In working through this process, we have taken hundreds of representations from outside Government, as well as in Government, in coming up with the work. We have then chaired meetings and talked to the rest of Government about how to implement the way we approach China. In most areas, this has been an evolution of the policy that Ministers have set since they arrived in office last July, rather than seismic change.

Our problem as the Select Committee is that all we can do is take your word for that. We cannot look into the details, because it is all secret.

As I say, I hope that, as we work through the issues on China over the next months and years, you will have plenty of opportunities. We are certainly very committed to coming and explaining how we have tried to operationalise these issues in practice.

Okay.

On China, permanent secretary, I want to read back some of your remarks on the work that the Foreign Office is going to do on that forward-looking strategy. At the start of this session, you mentioned that the FCDO will be able to offer “central expertise and oversight”, working with other Government Departments. You also said that, if people have concerns, they can come and talk to you, and they can look at gov.uk. I am a little bit confused about the extent to which the Foreign Office is proactively marshalling other Government Departments to come and get expertise on China. Could you speak to that? Also, how frequently is the FCDO going to be sitting with other Departments and stakeholders across Government to make sure that this strategy is working, and to share that expertise?

As I hope you would expect, we have an ongoing programme of engaging with the rest of Government, led by our China department in the Foreign Office and our director of China. He is talking to his colleagues across Government to make sure that the central expertise that the Department holds is properly shared and used by the rest of Government. We have made sure that the work we do internally to improve British civil service capability on China is not just about the Foreign Office. Coming back to the question I was asked earlier, we have the Great Britain China Centre as an arm’s length body, which is focused on China expertise and skills. I really welcome your question, because it is something that I have been thinking a lot about. I am interested in making sure that we do not just have a cadre of deep China experts, but that—given what the Government have said about the importance and centrality of China for the next 10 years of British policymaking—the wider range of British foreign policy experts, and other policy experts have at least a good understanding of China and Chinese issues, and I think there is quite a long way to go.

On the topic of expertise, the Foreign Secretary has spoken about 1,000 civil servants speaking Mandarin. What work is the FCDO also doing across Government to raise awareness of other strategic risks associated with China, such as countering disinformation or cyber-security?

We have a new programme of work in the Department about countering misinformation and disinformation, where we are working with partners from other Government Departments to make sure that we are sensibly and operationally countering narratives that are being promulgated by states with different values, or hostile values from time to time, where those affect British interests. You would not expect me to speak directly about China or any other country in that context, but we are very alive to those risks. The defence and intelligence directorate-general at the Foreign Office has that work in place to make sure that we are working with other Government experts in these matters to counter those narratives.

Taking all in the round, along with the comments we have heard about the China audit and the strategy being highly classified, how should the Committee hold you and the Foreign Secretary to account on whether the policy has been successful? What are the key metrics that we should be judging success by?

The Foreign Secretary has engaged with his Chinese opposite number several times since the election. It is an important and constructive relationship; he is able to talk to Wang Yi about a huge range of global issues. As the Government have said, and as you know, the importance of being able to co-operate with China, as well as to compete and where necessary challenge, is what is animating the Foreign Secretary in doing that. Whether on shared international crises and problems or global challenges such as climate change and nature, it is important that we are able to hold those dialogues. Trying to evaluate the impact of the Foreign Office and Government's work on China is, I am afraid, disparate. There is the work that we are doing across Government to ensure that we can safely take investment from China and the work that Nick referred to earlier about modernising our approach to development and trying to make sure we are talking to the Chinese about how they change their approach so that we are genuinely benefiting partners. That is a big range of work, some of which directly involves China and some in which China is just part of the multilateral environment that we need to influence. Judge us on those six priority themes and outcomes—and China will be present in almost all of them.

In conversations we have had about China we have heard that Whitehall needs people who are fluent in technology, in AI and things like that. But we need to have people who are experts in that as well as being experts in Chinese culture, thinking and language. As part of your China strategy and your thousand mandarins, are you going to be recruiting tech experts and teaching them Mandarin, or recruiting Mandarin speakers and teaching them about technology?

The way we are thinking about technology at the moment is that we have three quite distinct challenges, all of which we need to do better at. The first, as I said in my answer to your opening question, is that we need to be better at using technology to increase our own efficiency. Those are recognisable challenges for any large organisation, but we have them in spades given the disparate nature of our network and some of the complexities of running a global organisation. The next level up is that we need to think creatively about how we do our frontline job better with 21st century technology. That is probably where concepts such as artificial intelligence and other cutting-edge new technologies come in. Thirdly, going directly to your question about China, we need to think about the way in which technology is going to be changing the world over the next 10 years. Our business is the world and British impact and interests in the world. For that, we need to understand what the Chinese state’s objectives are on technology: how it plans to regulate, where it is choosing to invest and who it is choosing to partner with. Having people in the Foreign Office who understand those technological developments and are alive to the role that China is playing in the world is an important intersection. I do not have a strong view at the moment about whether they need to speak Chinese or not, but I am sure that, as we think about the development of our post in China and our China team in the UK, technological expertise is going to be important.

We also need technological expertise to defend ourselves against any potential threats or attempts by the Chinese to hoover up ideas and developments that we have in the UK and where one works in partnership or where one simply opens a door and finds that data and all sorts of other things are being nicked.

All I can say is that I could not agree more.

Good. I just want to know how you are going to deal with it. To have somebody who has expertise in both Chinese and technology is a rare thing; that is why I am wondering whether they are at the forefront of your mind when you are thinking about your secret strategy and how you are going to ensure that we defend our country.

It is certainly at the forefront of our minds, but we also are working with partners across Government on this. So we are thinking about how we make sure that the Foreign Office delivers what only the Foreign Office can do here: making sure that we are thinking about the direction of policy, investment and partnerships from China, and that we are recruiting and developing in-house the kind of expertise that can help Ministers have real impact on those issues and the threats that potentially come with them.

Perhaps I can start with the last part of your question, because it is very important. We are very alive to that risk. In the voluntary exit process I described to the Chair at the outset of this session, we have made sure all along, with help from HR colleagues, that we are not revealing any biases in the way we are approaching applications for voluntary exit from colleagues, and that we are not ending up in a situation where, unintentionally, we are having an undue impact on people with any particular protected characteristics. I can reassure the Committee that that has been a strong focus of the process. It has been well handled and we will be keen to replicate that with any future reductions in the workforce as we go forward over the next few years. I am not satisfied with the way the Foreign Office UK-based workforce reflects the population at large, but it is important to reflect on the progress that has been made. We are now in a position where I think just under half of our heads of mission around the world are women. Over half of our personnel at the most senior grade under me, director general grade SCS3, are women. We have come eight places up the Whitehall league table to fifth in terms of senior civil servants from a black and minority ethnic background. At 11%, that is not yet reflecting the population at large, but it is a positive direction and one that we are determined to maintain. We have just been doing some thinking with the Foreign Secretary about how to do that. We will be talking to the organisation a bit more in the autumn about the specific and tailored programmes and support we think we need to put in place to make sure that we are mentoring and developing colleagues from a range of backgrounds, so that all the most senior jobs in the Foreign, Commonwealth and Development Office, whether at home or abroad, are open to anyone from any background.

I take your point. This sounds a little defensive, but as the Chair kindly mentioned earlier, we do operate a rotational model; as I say, more than half of my colleagues at that most senior level are women. But we have gone rather suddenly from a position in which an overwhelming majority of our posts in G7 countries were women to a minority. That is partly because it is such a small number of posts that, as people turn over, those percentages are affected very quickly. We will be making further announcements over the course of the coming months, and you will see some new faces in some of these jobs, which I hope will reassure you that there has been no retrograde step in the way in which we see our senior women colleagues.

Perhaps I can step back for a second. First, I completely acknowledge that the issues around Gaza and the Middle East are extremely difficult. Ministers have said that the situation in Gaza is intolerable, so the fact that our colleagues feel strongly about it, including a number working day and night on these issues, is no surprise to me, and they have my support and sympathy. Nick and I, however, are responsible for ensuring that the organisation as a whole remembers that, although we of course want a system in which open debate and a diversity of views are allowed to flourish, because Ministers get better policy advice as a result, ultimately we are British civil servants. British civil servants are there to support the policies of the Government of the day, within the law and within the civil service code. That is an extremely important principle to me. Not that I would comment on a leaked letter, but we did not say to people they should leave the organisation. We presented a whole set of forums and support available to people, because we are conscious that these are difficult issues. I have to say, with pride, that the Foreign Office has put in place more of those sorts of measures than I have seen in any other Government Department on any other issue, in a career of 23 and a bit years in the civil service. We did think it was important to say, in the end, that serving the British Government as a civil servant is a privilege. The privilege is that you get to give your advice to Ministers without fear or favour on the issues of the day—and some of the most fascinating and important issues in the world are in the Foreign Office. That comes with a responsibility: once Ministers have taken a decision, and you are confident that that decision has been taken with the full range of evidence and advice, your job is to implement it. We wanted to remind people of that duty.

No.

No. Nick and I did an all-staff meeting two weeks ago, in which I would say a third or more of the questions we answered were around these issues. I welcome that and am very happy to talk, as you can tell. I enjoy talking about this; I think it is extremely important. It is also important to the morale and wellbeing of my staff, and I care about that. What I do not want to see is a situation in which people feel there is a special rule for issues that they feel personally politically about, which exempts them from their duties as a civil servant. It is important to reassert that.

They may feel that. Of course, that is why we held listening sessions in which they were able to come along and challenge the people leading and working on these issues. I have to say that the work of my colleagues in the legal directorate of the Foreign Office, the sanctions directorate and the Middle East department has been first rate. They have thought through these issues. The international humanitarian law cell in the Foreign Office has thought them through very hard. They have taken legal advice and put that advice to Ministers. We have thrashed it through, and it has recently been tested in the courts, as you will be aware.

Because the issues on which it advises are often subject to ministerial decisions before court cases, I do not want to get into the weeds of how often it advises, if you do not mind. It advises on particular issues arising from export licences. It looks at material changes to what it believes is going on in the occupied territories and gives Ministers clear advice on the evidence with legal support. The decisions that Ministers have taken as a result have recently been tested in the High Court.

It depends on the circumstances.

Not necessarily every reported incident would be the occasion for a new submission. You need a body of evidence that you have taken and been able to probe, and you need to have taken serious legal advice. The committee keeps in very regular dialogue with Ministers about all these issues.

It depends on the nature of the incident.

I am afraid that is policy advice to Ministers. As I said when I explained the role of the civil service, it is for Ministers to make the decisions, and to be properly held accountable by this Committee, and ultimately the courts, for those decisions.

I turn to the activities of the Foreign Office that fall within the general description of UK soft power. The Foreign Secretary has recognised the importance of the establishment of the Soft Power Council, but I understand that, in budgeting terms, these activities—I am talking about things such as the British Council, the World Service, the Westminster Foundation for Democracy and one or two others—come roughly within the same sort of budgetary envelope. Will they be subject to the same requirement to find savings as other elements in the Foreign Office budget, particularly since quite a large proportion of their funding is ODA?

If I may, I will spend two minutes on the overall financing of particularly the two large and important institutions you referenced: the World Service and the British Council. The British Council receives a grant in aid from the FCDO. You are right—that comes out of the overall budgetary settlement. This year, that is responsible for between 16% and 17% of its overall revenue. Put another way, the British Council is 83% financed by the commercial revenues it receives through the provision of examinations and the teaching of English. We can come back to that in further questions if you like, but the most important work for my team with the British Council is making sure that that revenue is sustainable, and ultimately, that we are able to find a sustainable financial footing for the council and grow its commercial revenues rather than have it become more dependent on the taxpayer. The World Service is slightly different, as you will know. About a third of its finance comes from a grant in aid from the FCDO. The rest is ultimately funded by the BBC through its sources of revenue, chiefly the licence fee. The FCDO plays an important role in funding both those institutions, but not the dominant role. You are absolutely right that those two contributions are subject to the overall pressures on the FCDO budget, which Nick and I and the leadership team have to try to manage and advise Ministers on. Because we are in the transitional year until the next spending review, we will not get to providing advice on those allocations until this autumn. This autumn, Ministers will start to take decisions in the round about some of the Chair’s initial questions on the future structure of the Foreign Office and some of the other institutions that we fund, and then we will give co-ordinated advice on the right laydown overall.

Okay. I will take each of those areas of expenditure in turn. You will be aware that the British Council has made it clear that even if the grant in aid is maintained at roughly the present level, it may be required to close 36 offices. Is that something that the Foreign Office would consider acceptable at a time when soft power has been recognised as one of the most important attributes for projecting British influence?

The way we are working with the British Council is that we don’t want to accept its retreat from the world. For all the reasons that this Committee hearing has brought out, it is important that we are stepping into the world and projecting as much as possible. You will be aware that the British Council’s commercial revenues were badly hit in the aftermath of covid. The then Government provided the British Council with a commercial loan to tide it over. We have extended the terms of that loan recently, and as part of the conditions for that loan, the British Council has appointed a chief transformation officer who has been working with the chief executive and my team to try to work out what the right balance of revenues and costs is for the Council over the whole of the spending review period. I have seen reports of 36 offices. We have no plans to close 36 offices, but it is for the Foreign Secretary to advise the Council on what he thinks ultimately is the right way to set out the British Council’s presence overseas; but the Council is operationally independent, so our role as a team of officials is to be as supportive, but also as challenging, as we can be in making sure that it comes up with a sustainable plan for the next few years.

Perhaps I might separate those two elements of funding and first ask you about the loan. The loan, you say, has been extended, but it has only been extended for a short time, and in the meantime, it is costing the British Council £15 million a year in interest payments, and it has no guarantee. I think the British Council would find it much easier to plan if that loan were written off or, if the Treasury is not willing to consider that, at least if there to be a long-term repayment plan over not a year or two years, but maybe 10 or 15 years. That would give the British Council much more security. Is that something you are trying to persuade the Treasury of?

To be fair to Treasury colleagues, I think the terms of the loan are much more to do, honestly, with the Government’s assessment of the legal risk around supporting an institution that is selling services on to the open market, and their giving it a soft loan or a subsidy that allows it to compete unfairly in that market. We agreed the terms of the loan with the Treasury, but the Treasury are not, as it were, holding us to be unpleasant to the Council. We tried within the limits of the legal advice to give the Council the best possible urgent support at the time of its particular strain. As I say, we have recently extended that term a bit longer. I agree that it still requires the Council to come up with a more sustainable plan quickly, rather than giving it years and years to think about it, but I think that is sensible when the FCDO as a whole has to make a plan for the next few years and we cannot allow one bit of that plan to drift out too far to the right. If we could find a way of alleviating the interest pressure on the British Council as part of that sustainable plan, of course we would consider it, but I would also say—

May I suggest something?

Of course.

It owns all these paintings that are worth millions and millions and millions of pounds, and all these paintings are just in storage as far as I can see, or at least the majority of them are. You have a financial background—there must be a way whereby, instead of them being owned by the British Council on behalf of the country, they could be owned by the British Government on behalf of the country. By transferring the ownership from one column to another, the loan goes—why not do that? Why not just simply allow it to do that? Frankly, hopefully with the new ownership, the public might even be able to see their paintings.

You will not be surprised to hear that the issue of its art collection is firmly on the table in the discussions we are having with the Council, but the issues around how it is used, its ownership in the future and the extent to which it can be used as part of the restructuring plan are still being discussed.

That is hopeful.

I recognise that some of these questions are perhaps for the Foreign Secretary later this afternoon, but alongside the loan, which is sort of hanging over it and incurring costs as long as it continues to exist, you then have the grant in aid, which of course does not represent the majority of its income but nevertheless is very important, particularly in funding those programmes that are of real benefit, such as in the Baltic states, who are very anxious about the suggestions that that might be lost. The cost of maintaining those offices, which look as though they may have to close if the existing budget is maintained, is actually relatively small. Surely it is worth the investment to maintain British influence in some of the most important strategic areas in the world.

I mentioned my trip to India earlier, Sir John, and I will take a brief example from that. The work I saw that the British Council was doing in Delhi was amazing. In terms of the projection of Britain and of our interests and values in India, it felt to me like very good value for money. The way it was doing it was by taking the 20th-century, extraordinary reputation of British Council libraries in India and updating that for the 21st century. New university students in Indian universities were getting a free subscription to an online British Council library that was giving them free access to the best English language literature. They associate that with the British Council brand. That kind of creative thinking is how we will manage to sustain, or even increase, British soft power over the next few years. I am not saying that the physical presence of British Council officers is not still going to be important, but in our joint work with the council, we are trying to encourage it to see all the opportunities ahead and to exploit them for British soft power in the round.

Perhaps we can pursue elements of that later. I will ask you about the other major area of expenditure within the soft power umbrella, which is the BBC World Service. Again, you are right, two thirds of the money comes from the licence fee payer, but we know that already the BBC has had to make reductions because of the pressure on licence fee income. That was topped up by the Government in the last spending settlement, I think, last October, but the indications that we have had are that negotiations are now taking place between the Foreign Office and the World Service that might lead to a reduction in the amount of money supplied by grant in aid from the Government. Can you tell us whether that is the case?

The only decision taken, as you rightly say, Sir John, was that the Government dramatically increased the grant in aid in 2025-26, by 30%, which is an extra £30-odd million to the BBC World Service, from memory. As a result, the World Service continues to deliver an absolutely fantastic service and reaches 320 million people, over 70% of them in countries with low or no media freedom. That is absolutely central to the Foreign Secretary’s conception of soft power. To save the Committee’s time, we are in exactly the same position with the World Service as we are with the British Council, that is, supportive of what it does in the world—we think it is important, and we want it, and the Foreign Secretary wants it, to continue to play a major role—but we have to think about our funding decisions in the round this autumn. That will mean that we have to look at the best way of sustaining the impact that the BBC World Service has for us with a variety of tools at our disposal, not necessarily accepting that it has to be exactly the way it is now.

That is still open for negotiation and will not be determined until the autumn—as to whether or not the BBC World Service can even maintain the existing level of funding from the Foreign Office.

The new financial year—next spring—is the first year of the spending review settlement we have just received, so yes, we will spend the next few months working through the spending review settlement that we received three weeks ago and translating it into budgets for next spring. I imagine that most of that work will happen this autumn.

May I just express some frustration? I am a strong supporter, as I think almost everyone will be, of the decision to increase the proportion spent on defence, but soft power represents a kind of defence. It is the same taking on of authoritarian states that are active in this space through things like disinformation from Russia and China. We know about Chinese activities through its cultural institutions. Britain stands up against those. Surely that should be included in our defence contribution, but because it happens to be siloed into the Foreign Office and not MOD, not only are you not able to benefit from that increase, but you actually suffer from the increase in defence, because ODA is paying the price of it.

It is quite hard to disagree with that, Sir John, as the accounting officer for the Foreign Office. All I would say is that we met Mr Davie the other day, and we are very conscious of the important role that the World Service plays in countering exactly those narratives that you talked about. Also, if I may, let me take advantage of my presence here to pay tribute to the work of my colleagues out in the network. Every day, Foreign Office diplomats are taking on some of these narratives and displaying real energy, agility and courage in doing so.

To supplement what Sir John said, it is not just us—it is the BBC. There is not a better label internationally for people to believe in than the BBC. We have this extraordinary, unique asset. The Chinese are spending £8 billion a year on their overseas media to try to counter the BBC, which we pay for out of tuppence ha’penny and a button. We are losing such an opportunity. As a Committee, we are collectively behind Sir John on this.

We are united.

Yes, we are united on this. We think that if there is consideration on funding, then the World Service needs every penny that the Foreign Office can give it, because it is such an important way of projecting us as a nation internationally and countering the lies that go around the world.

The BBC brand is fantastic. Since I arrived at the Department, one of the most important and fascinating statistics I have heard is that it is still the most trusted brand in the world for news and information. The last thing the Department wants is to give that up. All I would say—and I hope you have some sympathy for what we are trying to do here, and what we are working with the Foreign Secretary on—is that this will be a few years of difficult decisions. We are very clear-sighted on what the UK needs to be able to project in the world, and the importance of the World Service in that, but we need to weigh it up against all the other pressures.

We understand that; we are just putting our weight behind the BBC.

I want to go back a step on Sir John’s excellent questions about the British Council. I declare that it is headquartered in my constituency of Stratford and Bow; none the less, I would still be asking this. It brings in £5 for every £1 it receives from the Government. It is clearly a huge source of soft power and our place in the world. I have visited the British Council a number of times and seen the great work it does. It is very cost-effective, given the £5:1 ratio, and it is a revenue-driving area in the FCDO, but it is facing significant cuts, as we have discussed. As a result of the spending review settlement, will the FCDO act to invest further in the British Council? Or what will you be doing to prevent further closures and make sure that it can keep doing that, and keep revenue raising?

To be the dull bureaucrat I am, let me say that that £5 for £1 is that 80% to 20%, or 84% to 16%, that I was talking about earlier. The sad reality is—the chief executive of the Council would say the same if he were here—the Council is making a loss and has been for a while. That loss considerably outweighs the interest cost payable on the loan that Sir John was asking me about. The reality is that the sustainable future for the Council has not been gripped for a while. The chief executive, I think, has that clearly in his sights; he is working with the trustees and us. We want the British Council to have a strong and sustainable future, but I am afraid it is not as simple as just saying that we need to up the British Government’s contribution and the revenue will flow. The revenue has been challenged now for five years, and that is a function of changes in the world. The strains of covid meant that the previous business model for the British Council has suffered. We are alive to that, and we want it to have a sustainable future, but just putting more grant in aid into the existing business model may not be the right answer, with respect.

Is there a plan of action that perhaps it or the FCDO has to report back on so we can see the progress of this? We do not want it to go into further debt or decline.

We certainly do not want to see the British Council in decline. It is working through. It is independent and it has its trustees. The chief transformation officer is working with the executives of the Council to convince the trustees that they have a sustainable business plan for the future, and he is being open with us about that as he goes along, but that is a matter for them. The Foreign Secretary will then have a role in signing it off, alongside the wider allocation decisions I was talking about earlier.

You are not the chief executive’s line manager?

No. The chief executive works for the British Council. It is independent and he works for the trustees.

Right.

Permanent secretary, going back to remarks you made earlier, there seemed to be an apparent contradiction about the British Council. It is an arm’s length body of the Foreign Office that is there to promote British interests and British soft power abroad. But you made a comment on the circa £200 million loan and said that there were concerns around whether or not the terms of that loan would be comparable with commercial operators offering English-language services abroad. I don’t understand that. Can you explain it, please?

There are many other people who offer English as a foreign language training and support examinations, and so if the Government had offered a subsidised loan or just a straight subsidy, we would have risked being in—we wouldn’t have had vires to do that, because it would have been against the law as state aid to a commercial organisation.

Is that the same, for instance, for the French and German equivalents of the British Council? They don’t receive favourable loan treatment from their ministries of foreign affairs.

I am afraid I don’t know the precise funding arrangements for those bodies. The British Council is deliberately funded in a diverse set of ways, including our grant in aid, because it does some things that are a public service and we pay for as a public service. Its wider cultural offering or the support it gives to universities in founding new campuses in some of our international partner countries is stuff that we are very happy to fund from the taxpayer. Its commercial work is seen separately.

Thank you.

I think that’s it. I think we have ground to a halt. We are very grateful to you for your time. Thank you to all three of you for coming in before us. You were talking about decisions being made in the autumn or at the end of the year. Might you be in a position to come back and tell us about that at the end of the year?

It has been a very good session. Thank you so much for the questions. I would be delighted to come back. You just say when you need me.

Okay. You may regret that.

About 1 o’clock, I think. [Laughter.]

Thank you very much. That concludes the session.