Foreign Office expands its £2bn global property empire despite the cuts

It may be facing the loss of hundreds of jobs, but William Hague's department has been busy in the property market

The British flag is fluttering above more buildings around the world than ever before, despite the Foreign Office's struggle with a multimillion-pound cut in its annual budget and plans to shed hundreds of jobs from its workforce.

While the Government's spending cuts are stifling departments across Whitehall, figures seen by The Independent on Sunday reveal that the FCO is sitting on an expanding worldwide property empire that is worth more than £2bn.

The Foreign Secretary, William Hague, claimed last week that the case for a stronger diplomatic network across the world was "utterly compelling", as he signalled an increased British presence in places such as Brazil, Turkey, Mexico and Indonesia. The shake-up, confirmed after MPs complained that the department's performance had suffered due to a lack of resources, will be funded by £100m of "administrative savings" every year.

But Mr Hague did not disclose that the number of properties owned by the FCO across the globe has risen to more than 2,300 – at a time when all government departments have been under severe pressure to cut costs.

Two years ago, Foreign Office mandarins threatened widespread sales of British embassies and official residences, as part of a crackdown on the costs of maintenance, staffing and expensive duties including official entertaining. In 2008-09 alone, the FCO sold over £60m-worth of property in 11 countries.

In spite of further warnings about large-scale sell-offs when the coalition came to power last May, the number of UK-owned properties has risen from 2,180 to 2,318 in the three years up to last September.

The value of FCO property in 126 countries around the world rose from £1.7bn to more than£2bn in the same period. The Foreign Office opened a new £17m embassy in Tbilisi, Georgia, in November. However, the most valuable holdings are in Thailand, where the 44 offices, compounds and residential properties are valued at almost £160m. It is believed that expanding trade and tourism links have sparked the expansion of the presence in Thailand, where the UK recently opened a consulate in Pattaya. The FCO's portfolio in the United States – which houses the UK's delegations to Washington and the United Nations in New York – is worth £132m.

A watchdog report last year condemned the department's management of the global estate – and highlighted "poorly used space" in locations including Thailand and the US. The National Audit Office found one area of the Bangkok headquarters had 11 empty rooms, while the consulate general offices in New York are spread over two floors leased for £1.4m a year, with surplus office space on both floors.

Improbably, the second-largest outpost in the FCO's property empire is in Ethiopia, where the department owns 70 buildings, including a century-old residence in a 90-acre compound outside Addis Ababa. A further 67 are listed in Nigeria, 62 in the Russian Federation and 48 in Kenya.

The values of the holdings vary widely. The 11 buildings in Hong Kong are worth more than £115m, an office and two homes in Greece are valued at £30m, while 20 buildings in Nepal are worth a total of £220,000. Two residential properties on the Falklands are worth £360,000, and the six holdings on Barbados are valued at £4.6m.

Even though the FCO is grappling with a 24 per cent cut in its £1.6bn budget, imposed under George Osborne's spending review, the department is resisting a large-scale sell-off of its overseas assets. Mr Hague last week announced "a substantial reinvigoration of the diplomatic network to make it ready for the 21st century". He added: "The only way to increase our national prosperity and secure the growth of our economy is through trade, and our embassies play a vital role in supporting British business."

The FCO's top civil servant, Simon Fraser, told the Foreign Affairs Select Committee that diplomats would make savings by spending less on upgrading embassies and by selling off some of its properties abroad.

Last week the committee's report on the FCO's role warned that budget cuts were "one of the major threats to the FCO's continued effectiveness".

The committee's chairman, Richard Ottaway, said: "We regard the FCO's network of overseas posts as integral to the department's ability to discharge its functions, and recommend the FCO seek to maintain a global UK presence."

Charlotte Linacre, of the TaxPayers' Alliance, said yesterday: "The Foreign Office shouldn't be expanding their property portfolio or tying themselves into contracts with little room for manoeuvre. They need to be looking to save money by sharing office functions in foreign posts where possible.

"It's crucial that operations are streamlined and savings are found, but these figures don't suggest they've been scaling back. The Foreign Office must work harder to ensure they are doing all they can to control costs and deliver better value for money for taxpayers."

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