The Foreign Office will raise £100 million less than planned through the sale of British diplomatic outposts and other overseas properties, according to a cross-party group of MPs.
The Foreign Affairs Committee said the original estimate that property sales would generate £240 million between April 2011 and March 2015 was “poorly founded” and the target had now been cut to £140 million.
The MPs also warned of “unacceptable” uncertainty over future arrangements for the BBC World Service and urged the Foreign Office (FCO) to spare the British Council further cuts in the next spending round.
Under a deal with the Treasury, the FCO is allowed to invest up to £100 million a year of receipts from property sales back into its diplomatic network.
In June last year the FCO maintained its £240 million target was “challenging but realistic” but by November last year just £36 million had been raised from sales. The target was later revised down to £140 million, partly due to the committee’s warning in an earlier report about the danger of going “too far, too fast” in selling off “heritage” buildings.
But the FCO’s chief operating officer, Matthew Rycroft, told the committee that “spiralling property prices” in some parts of the world would enable the FCO to generate higher revenue than expected, with the sale in December last year of the High Commission in Kuala Lumpur, Malaysia, raising approximately £60 million.
The committee said: “The FCO initially aimed to generate £240 million from sales of property assets between April 2011 and March 2015 for reinvestment in the estates capital budget. Eighteen months into that period, only about £36 million had been raised from sales, and the target has now been reduced to £140 million.” The MPs called on the FCO to take steps to improve its procedures for assessing future needs across the estate and its forecasting of local property markets.
In the wide-ranging report on the FCO’s performance and finances in 2011/12, the committee expressed concern about plans for the World Service, which will be funded from the TV licence fee from 2014.
“We do not see how the BBC World Service can plan properly how to reflect its priorities from April 2014 according to the new operating licence, or pursue its new objectives or shape its output, given that the licence is likely to be published only a few months before it comes into force,” the MPs said. The committee called for the BBC Trust to announce “as soon as possible” what the funding for the World Service will be from April 2014.
On the future funding of the British Council, the MPs warned against cuts in its FCO grant continuing beyond 2015. The report said: “Trading off the competitive advantage the UK currently enjoys in public diplomacy in exchange for savings that are, in the wider scheme of things, relatively minor would be the worst sort of false economy. We believe that the FCO should shield the Council from the effect of any further cuts to the Department’s budget in 2015/16.”