Government loses millions in diplomat homes deals

Senior diplomats have wasted millions of pounds of taxpayers' money by playing the property market with Britain's official residences abroad.

A committee of MPs discovered that the Foreign Office lost a fortune when it tried to cash in on the sale of its official residence in New York to allow the consul general, Sir Thomas Harris, to move to a smaller, cheaper building.

The Foreign Office had a prestigious apartment on the east side of Central Park valued at £12.23m, when Sir Thomas found another residence property elsewhere in the Big Apple, worth £6.3m, giving the government department a handsome profit, on paper, of about £6m.

The department paid £6.48m for its new residence in August 2002. But after a downturn in the market, only £6.7m was raised on the Central Park apartment, wiping out the net profit. The weakness of the dollar also cut the sum raised in sterling to £6.32m, resulting in a £380,000 loss on the transaction.

In another relocation disaster, the Foreign Office decided to sell the ambassador's official residence in Dublin, a stately home on 34 acres called Glencairn, because of the difficulty of securing it against the IRA terrorist threat.

The Foreign Office sold the estate in 1999 for £24.3m and planned to buy the smaller Marlay Grange in Dublin for £6.2m, netting a profit of £18.1m.

However, while the deal was going through, Tony Blair and the Irish premier Bertie Ahern brokered the Good Friday Agreement, reducing the security threat. The Foreign Office decided to buy back Glencairn three years after it had been sold, but without the 34 acres, for £7m. The MPs estimate that, with land prices soaring in Dublin, the Government lost at least £4m on the estate.

The Foreign Office is selling Marlay Grange, but estate agents now value the property at £4.3m - a reduction of £1.9m.

The Commons Select Committee on Foreign Affairs, chaired by the Labour MP Donald Anderson, said yesterday that it had "grave concerns'' about the department's sale of official residences to raise money for running costs. One MP said it was like "selling the family silver".

"Serious mistakes were made during the sale and purchase of the residences in Dublin and New York," said the committee.

The MPs fear a "significant number" of official residences around the world, particularly in central America and west Africa, will be sold because Gordon Brown, the Chancellor, has ordered cuts of £120m in the Foreign Office budget over the next three years.

"Gordon is a Presbyterian," said one committee member. "He doesn't like the thought of fancy houses for our diplomats but it is a false economy."

The MPs persuaded the Foreign Office to shelve plans to sell its prestigious embassy building in Prague's historic 15th-century Thun Palace, arguing that the centrally-located embassy was irreplaceable.

They have also persuaded Jack Straw, the Foreign Secretary, to review plans to sell the High Commissioner's official residence in Cape Town, overlooking the famous bay.

RELOCATION DISASTERS

Consul General's official residence, East Side, Central Park, New York

Valued at £12.23m but raised only £6.23m.

Lost £380,000 on fall in the dollar.

Ambassador's residence, Glencairn, Dublin

Selling the estate and moving somewhere cheaper was meant to bank an £18m profit but rising house prices put paid to much of that.