"The Foreign and Commonwealth Office did well in 2009-10
in quickly bringing its expenditure down to within its budget, and
we recognise the significant effort and teamwork involved. However,
measurement and evaluation were limited. The FCO's approach to cost
reduction must now be fully strategic and sustainable. It will be
vital to avoid damaging value for money through over-simplistic
cuts."
Amyas Morse, head of the National Audit Office, 29 March
2011
The spending cuts made by the Foreign and Commonwealth Office in
2009-10, mainly in response to exchange rate pressures, provided an
early experience of the challenges the Department will face in
cutting its core expenditure by 10 per cent as a result of the 2010
Spending Review.
The Department rose to the challenge of making the 2009-10 cuts.
However, they were a short-term response to the immediate problem
of a forecast budget shortfall of £72 million. They were designed
to reduce in-year spending quickly, rather than aimed at achieving
long-term efficiencies. In contrast, cuts to core expenditure as
required by the spending review, if they are not to result in an
erosion of service quality, will demand a more strategic
approach.
The 2009-10 spending cuts were made with some attention to
prioritization. There is evidence of the Department's seeking to
protect its front-line activities and intending to make reductions
in spending permanent. In addition, it was also making efficiency
savings in response to the 2007 spending review. However, it did
not establish any process to ensure that the spending that was cut
was not resumed subsequently. The Department could not be sure that
all the cuts were implemented as intended or had the least possible
impact on its business.
Most of the FCO's spending reduction resulted from its doing
less - either slimming down budgets or stopping activities
altogether. The NAO also estimates that about 10 per cent of cuts
were achieved through simple deferral: postponing activities such
as non-essential maintenance to a later year. In addition, although
the Department had assessed the risks of making spending cuts, at
the time the cuts were made it did not have measures in place to
assess the impact of the cuts on the achievement of its
objectives.
In February 2010 the Department had started to develop
contingency plans in case further cuts were required in 2010-11.
However, it did not conduct a formal evaluation of its spending
reduction activities in 2009-10 and therefore missed a valuable
opportunity to learn.
Publication details:
HC: 826, 2010-2011
ISBN: 9780102969641