Foreign Office faces property sale deficit

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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 £240m between April 2011 and March 2015 was “poorly founded” and the target had now been cut to £140m.

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 £100m a year of receipts from property sales back into its diplomatic network.

In June last year, the FCO maintained its £240m target was “challenging but realistic” but, by November last year, just £36m had been raised from sales.

The target was later revised down to £140m, 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 about £60m.

The committee said: “The FCO initially aimed to generate £240m from sales of property assets between April 2011 and March 2015 for reinvestment in the estates capital budget.

“Eighteen months into that period, the target has been reduced to £140m.”

The original estimate was “clearly poorly founded” and there were “forecasting failures within the FCO”, the report said.

The MPs called on the FCO to take steps to improve its procedures for assessing future needs across the estate.