Page last updated at 16:02 GMT, Thursday, 21 January 2010

In full: Leaked Foreign Office memo

Here is the full text of what the Conservatives claim is a leaked Foreign Office memorandum on possible budget cuts:

NEXT YEAR'S BUDGET: THE LATEST

Our monthly meeting on 18 December was almost entirely devoted to the next step in setting budgets for every Directorate and Post for the next financial year starting on 1 April.

We know that next year will be a lot tougher than this year. This is partly because we just have less money (like all Departments we have to make further efficiency savings next year). But it's mostly because the value of our budget is continuing to decline as sterling has dropped against other major currencies. Since we spend most of our money abroad in foreign currency, that means the pounds we have to allocate will buy less.

We have a twin-track strategy for dealing with this: making contingency plans on the assumption that we will get no extra help with the severe pressures on our budget, while on the other hand continuing to fight hard for a better deal.

We have agreed a core principle to guide us in allocating the money we do have: put our network and people first. We want to sustain an effective global presence, keep our staff safe and secure, and continue to invest in them through the training and other development activities we provide. We also want to give posts greater certainty about the value in local currency of their budget next Financial Year, so they can plan properly.

On that basis, the Board made provisional allocations for our major budgets for next FY: administration (that is people, rents and running costs), programme (which funds much of our work on issues like counter-terrorism and climate change) and capital (which pays for buildings, security works and other infrastructure). All these budgets will go down next year but the admin budget is the one under greatest pressure.

We therefore agreed to make some cuts in programme spending to ease the pressure a bit on our network and our staff (admin) and to create a central fund to manage in-year currency fluctuations. We also agreed to allocate some additional money to sustain training and development next year, and for essential physical security works.

Even with cuts to programme to subsidise admin, next year's admin budgets will still be substantially less than this year. We were clear that further cuts could and should not be achieved by salami slicing: it would require us to stop activity, close posts and reduce staff numbers.

That is not where any of us, including the Foreign Secretary and his Ministerial team with whom we discussed this on 21 December, want to end up. And any strategic decisions about the future size and shape of the FCO will be for whatever government comes to power after the UK elections.

So once we have finalised the budget allocations in January, we will ask Directors and Heads of Mission to do two things as they plan for the coming year. First, seek to avoid irreversible decisions between now and the election. Second, work up contingency plans for substantial cuts which could be implemented soon after the election if the new Government decides not to allocate additional funds to the FCO.

We will be asking Directors and Heads of Mission to look at a whole range of options. I realise that this will be unsettling for all of you, and I am sure the rumour mill will be working overtime. But I can assure you of three things:

• We have made no decisions on the size and shape of the FCO and the overseas network, and won't until after the election.

• We will keep you fully informed. As soon as decisions are made, we will tell you and explain the reasons.

• We will continue to make the case, now and after the election, for a properly-funded FCO to protect and advance the UK national interest. I can't promise you we will succeed. I can promise you we will campaign vigorously and confidently on behalf of the whole organisation.




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