I had an interesting chat today with a former FCO colleague about the slow evolution of FCO attitudes to expenses, which no doubt has echoes in much of the rest of government.

When I joined the FCO we diplomats on foreign postings had various allowances, calculated laboriously to try to take account of the extra direct costs (if any) of living overseas, plus indirect costs we incurred from that lifestyle.

Plus we were given one modest interest-free loan to buy a property in the UK, to help junior officers get started on the property ladder and by way of some puny compensation for the real loss we incurred by being overseas for years on end and so being unable to move fast to buy something suitable.

The usual overseas allowances were paid in to our bank accounts with our salaries. They might go up or down as sterling drifted against other currencies – in choppy times the cost of these uncontrollable fluctuations could be a big problem for the FCO overall Budget.

On top of that we had access to Embassy entertainment funds. Back in 1979 each diplomat had a small personal entertainment allowance, which could be spent on cultivating contacts and claimed back via receipts and a list of contacts entertained. Then, later, these personal entertainment funds were pooled for each Embassy but claimed back in much the same way.

Travel costs were refunded according to various complicated formulae – a trip to a regional capital might be claimed back at a flat rate of £70 per night for hotel + food, regardless of what one spent; a trip to a remote area might be claimed back against ‘actuals – what one had actually spent on hotel/food

Ambassadors also had a personal allowance called Frais. This was a sizeable sum of money paid in to their bank accounts to be spent on entertaining senior foreigners at their discretion. All this was shrouded in serious secrecy – how much was X getting in Paris, compared to Y in Washington or Z in Kinshasa?

These arrangements emerged in a more leisurely time when public servants were expected to come across and behave like Gentlemen. There were obvious real or likely abuses:

  • the allowances for single people contained an element for a notional sole child (a certain Horace). Why? It was just there. Enjoy!
  • people pocketing the difference between what they spent on an official trip and what they could claim back. This was a big deal for people in Ministers’ Private Offices (and indeed Ministers) who travelled a lot but who had accommodation and food paid for along the way separately. Not to mention all that Duty Free booze which had to be left by the Embassy on the departing Ministerial plane.
  • Embassy and locally employed staff too enjoyed travel subsistence – money claimed back on a trip up-country beyond what was spent was a nice little tax-free salary bonus
  • Ambassadors basically stealing from the taxpayer by not spending their Frais on entertainment or not accounting for this spending honestly. I have good reason to know that in one case this happened on a non-trivial scale (ie several thousand pounds and probably a lot more). What did I do about it? Nothing. Because that was how the system worked, and it would have been next to impossible to prove in practice as no receipts had been left behind when the Ambassador concerned left post.

Not only abuses. Insane anomalies. Long after the distinction between direct and indirect allowances had withered away, traces of it remained. No-one knew why. But no-one wanted to ‘risk’ abolishing them.

Thus as HM Ambassador Warsaw I could use my local allowances discretion to buy stationery supplies to record Residence spending, but not a new computer programme to do the same job far better. I asked why it was OK to buy products made from trees/paper but not products made from sand/silicon. No-one would answer.

Under pressure from internal unease, some questions in Parliament(!) and the Inland Revenue, the FCO over the years moved to making almost everything accountable and claimable as ‘actuals’. No more little profits here and there. But it took a very long time – almost thirty years.

Ambassadors’ Frais was an especialy tough one to crack, as even to question it was presented as an aspersion on their Excellencies’ lofty honour.

First it became fully accountable: you had to spend the money you were given on reasonable entertaining, and, if it was not spent, send the remainder back. In Belgrade and Warsaw Mrs C laboriously entered all our official spending into a clunky computer programme and sent the data to London. But not once in seven years did anyone ever check the entries against our actual spend.

Only in 2007/08 did Frais stop being paid directly into Ambassadors’ private bank accounts and become part of a transparent Embassy budget open to easy, reasonable internal and external scrutiny.

So this is how things work in any organisation, with state/government bodies especially prone to be less concerned about the financial bottom line and instead working to laborious ‘evolution’ and precedent. Transparency is seen as an annoying intrusion, not an opportunity 

Parliament’s allowances structure likewise has evolved over decades and is now utterly rotten.

Within that structure there will be MPs who have restrained themselves from a sense of personal and professional responsibility and claimed a reasonable number of items back, knowing that they might have claimed far more.

There will be MPs who have gone for broke, filling their boots with taxpayers’ money on all fronts while they could, especially if they might be Out at the next general elections.

And there must be plenty in the middle, who one way or the other were tempted to put in a cheeky/greedy claim or ten, knowing that that was the System and arguing that if lots of others were taking full advantage of it why should not they have a small slice too? 

Especially if it was ‘within the rules’. Which they helped set.

The allowances binge-drinking party hosted by taxpayers is finally ending in the UK.

Next stop: the European Parliament. See how they run…