MPs attack 'ludicrous' Foreign Office currency move

The "ludicrous" decision to stop protecting the Foreign Office budget from fluctuations in exchange rates has caused an "unacceptable risk" to its ability to function properly, MPs said today.

A sharp fall in the value of sterling had caused a 13% drop in the FCO's core purchasing power since the system was axed in 2007, the Commons Foreign Affairs Committee found, sparking cuts in embassies and postings around the world,

The cuts caused a political row earlier this year when the Tories accused the Government of undermining Britain's global interests by scrapping the special fund that provided insulation from movements in the pound.

And the influential cross-party committee said the financial constraints under which the FCO was now operating were "unacceptably disrupting and curtailing" its work.

"We cannot see that it remains credible to regard the costs of currency fluctuations as predictable ones which the FCO might reasonably be expected to absorb," the committee said in its report.

"The cuts that the FCO is making at its overseas posts represent a serious reputational risk to the department and the UK, and thus a threat to the FCO's effectiveness," it said.

"Given the dispersal around the world of potential threats and areas of concern to the UK, and the large numbers of British citizens who travel widely overseas, closures of FCO overseas posts risk leaving potentially damaging gaps in UK information-gathering, provision of assistance and exercise of influence."

The committee chairman Mike Gapes said it was essential that the FCO had the resources it needed to carry out its traditional policy-making functions.

"For reasons largely beyond its control, the FCO's financial situation has come to represent an unacceptable risk to the department's ability to perform its functions," he said.

"Exchange rates should not drive UK foreign policy. At a time when globalisation is acknowledged as the key phenomenon of our times, it is incongruous that the position of the only government department with a global reach is threatened with erosion."

Mr Miliband told MPs last month he had negotiated a package with Chancellor Alistair Darling which would "substantially offset the foreign exchange pressures on the FCO budget".

The agreement included an additional £25 million from asset sales to be recycled into the FCO budget, £35 million from Treasury reserves and £15 million in "end-of-year flexibility".

Earlier this month the Foreign Office asked the Treasury for an "urgent" cash injection to help fill a nearly £135 million budget shortfall but insisted that was a "routine" procedure and unrelated to currency fluctuations.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk