The Foreign Affairs Committee publishes a wide-ranging report on the work of the Foreign and Commonwealth Office (FCO) and two of its sponsored bodies, the BBC World Service and the British Council. It makes key recommendations on language skills for top diplomats, BBC World service funding and priorities, and funding for the British Council. For the FCO, the exclusion of foreign language skills and reliance purely on general management competencies creates the risk of credibility in respect of key diplomatic postings. The Committee finds it unacceptable that the World Service will not know its budget, priorities or objectives before the transition to licence fee funding and the new arrangements for oversight by the BBC Trust from April 2014. The British Council will struggle to deliver the UK's foreign policy objectives if cuts to grant funding from the FCO continue at a similar rate. The Committee recommends that the FCO should shield the British Council from the effect of any further cuts to the FCO budget in 2015-16.

The cuts imposed on the FCO since 2010 have been severe and have gone beyond just trimming fat: capacity now appears to be being damaged. If further cuts are imposed, the UK's diplomatic imprint and influence would probably reduce, and the Government would need to roll back some of its foreign policy objectives. The FCO's budget is a tiny element of Government expenditure, but the FCO makes disproportionate contribution to policy making at the highest level, including decisions on whether to commit to military action. The next Government needs to protect future FCO budgets under the next Spending Review.

This report focusses on the FCO's financial situation and the implications of the Spending Review 2010 for its work and performance, and that of its associated body, the British Council. The FCO is one of the major departmental 'losers' in the Spending Review. Reductions in spending on the FCO, if they result in shortfalls in skilled personnel and technical support in key countries and regions, can have a serious effect in terms of the UK's relations with foreign countries, out of all proportion to the amounts of money involved, especially in relation to the UK's security and that of its Overseas Territories. Cuts to the core FCO budget of even 10% may have a damaging effect on the Department's ability to promote UK interests overseas. The FCO will also face cuts of 55% to its capital budget. The target of raising £50 million per year through selling existing buildings may be difficult to achieve, and may not secure savings in the long-term. A further reduction in the opportunities for more junior UK-based staff to serve in overseas posts, and a consequent diminishing of experience and morale among FCO employees, could over time have a damaging effect on the quality of British diplomacy and the effectiveness of the FCO. The British Council, facing a 25% cut in spending, should give detailed information on its strategy for implementing the cut, which may well trigger fundamental rethinking of the role and work of the Council.

In this report, published on the last day that the Foreign and Commonwealth Office has funding responsibility for the World Service, the Foreign Affairs Committee says that it has "clear differences" with the BBC on new arrangements for governance of the World Service. It specifically has reservations about the move to licence fee funding for the World Service and what that would mean for the World Service's budget, and its ability to be heard amongst all the other competing voices within the BBC. The Committee regrets that the World Service now has no direct voice on either the BBC Executive Board or the Management Board, and it says that it "remains to be seen" whether representation of the World Service's interests at Board level by the Director of News and Current Affairs will indeed safeguard the distinct nature of the World Service. The Committee welcomes the assurance given in evidence by James Harding, the BBC's Director of News and Current Affairs, that the £245 million budget for the World Service in 2014-15 will be used as a baseline for the following two years. But what is really needed is longer-term protection at institutional level, and we continue to be concerned about the absence of a direct voice for the World Service on either the BBC's Executive Board or the Management Board

Despite the impressive performance of the Foreign and Commonwealth Office in representing the UK's interests across the globe with what is, in Governmental terms, a particularly small budget, the Foreign Affairs Committee believes that the FCO is under-funded. This situation has been exacerbated by the Spending Review 2010 and the lack of detail provided by the FCO and the BBC World Service as to exactly how the spending reductions target will be met is disappointing. There are concerns about the steps taken by the FCO to adjust to its reduced budget: reductions in the deployment of UK-based staff overseas and the optimistic planned programme of property sales will have a detrimental impact on the ability of the UK to protect its interests overseas. The establishment of the European External Action Service (EEAS) will place a further strain on the FCO's resources. The Committee welcomes the appointment of Lord Williams of Baglan to the post of "International Trustee" with responsibility for the BBC World Service, but reiterates its belief that a formal concordat governing the World Service's budget and output should be drawn up setting out the World Service's independence from budgetary pressures elsewhere in the BBC. The budget cuts faced by the British Council will lead to the Council becoming a substantially different organisation by the end of the Spending Review period. The greater emphasis that the British Council will place on commercial activity risks a diminution of the UK's influence and soft power.

The Foreign Affairs Committee believes the events of the 'Arab Spring' should stand as a reminder to the Foreign and Commonwealth Office (FCO) that failing to take a stronger and more consistent stance against human rights violations by overseas regimes can carry risks for the UK. Any suggestion that the FCO downplays criticism of human rights abuses in countries with which the UK has close political and commercial links is damaging to the UK's reputation and undermines the department's overall work in promoting human rights overseas. The Committee is less confident than the FCO that there is little conflict between its simultaneous pursuit of both UK commercial interests and improved human rights standards overseas. The Committee heard concerns on this front with respect to Saudi Arabia and Bahrain in particular. There should be a more robust and significantly more consistent position on human rights violations in the Middle East and North Africa. On China, the Committee finds it difficult to support the Government's approach to human rights engagement with China in the continuing absence of any evidence that it is yielding results, and when the human rights situation in China appears to be deteriorating. The Government should engage in more explicit, hard-hitting and consistent public criticisms of human rights abuses in China. The Committee welcomes the FCO's continued production of an annual human rights report and the Government's recognition that the UK's own human rights practices affect its international reputation and ability to pursue improvements in human rights standards overseas.

The FCO designated 28 countries of concern in its 2013 report, where it judged the gravity of the human rights abuses to be so severe that a particular focus should be applied. The Committee concentrated attention on three of these countries: Sri Lanka, Burma, and Israel and the Occupied Palestinian Territories. Favourable trade concessions to the EU market should be removed from Sri Lanka if the Government of Sri Lanka continues to deny the OHCHR investigation team access into the country. The Government should advocate re-imposition of sanctions by the EU if there is no improvement in the human rights situation in Burma. The human rights of Israeli, Palestinian and Bedouin citizens living in Israel and the Occupied Palestinian Territories continue to be of serious concern to the UK.