Here is what is said to be (and looks like) extracts from an FCO memo warning of hard times ahead as Cuts come along:

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.

And here is the Guardian suggesting that a number of Embassies will be abolished:

The government is said to be drawing up a secret hit list of embassies to be closed as the effects of the sharp fall in the pound on Britain’s spending plans abroad are felt.

David Lidington, the shadow junior foreign minister, said that an internal Foreign Office memorandum claimed that officials had been ordered to work up plans for substantial cuts "which could be implemented soon after the election".

More wretched Labour/Brown decisions starting to have Consequences. In this case a change of the way the FCO is funded.

The FCO incurs two sorts of costs. Those which it pays in sterling (all UK staff costs, and a lot of ‘UK-based’ Admin overheads), and those which it pays in foreign currencies. The latter costs as calculated in sterling of course vary all the time, as currencies move to and fro.

So insofar as the idea of Government Targets makes any sense at all, it makes sense to say that the job the FCO does is worth £x billion each year, with an arcane formula being found for the Treasury to cover any excessive overseas costs brought about by a decline in sterling, but also to claw back any windfall gains the FCO might have if sterling appreciates.

A couple of years back Labour/Brown/Miliband moved away from this sensible arrangement to one in which the FCO has to carry the cost of any sterling depreciation:

The Conservatives criticised David Miliband, the foreign secretary, for the removal two years ago of the Overseas Price Mechanism, the system that, under a deal with the Treasury, made up for shortfalls in the Foreign Office budget that were the result of exchange rate changes.

Lidington said it was "appalling" to see Gordon Brown talking about the fight against terrorism while Kinnock was outlining the impact of exchange rate problems on the counterterrorism programme.

Urging ministers to "come clean" about the issue, he demanded a "full list" of the cuts being made due to the exchange rate "debacle".

This Labour stupidity has to be part of a wider ideological aim of delayering British foreign policy in the classic sense completely in favour of some sort of post-modern ‘European’ collective approach. It makes sensible planning far more difficult, since the ‘manoeuvrable’ part of the FCO budget is small.

Which means that if it costs £x billion to do what the Government expects the FCO to do, but the extra cost of doing it in sterling terms rises to (say) £x billion + £100million simply because sterling goes down against a number of other key currencies as a result of Labour recklessness, serious cuts will have to be brought in.

And since the FCO is mainly its people and buildings (UK and overseas), they have to be cut.

Hence the latest agonising.

I once sent a telegram to London saying that Milosevic was like an anti-King Midas – everything he attempted turned to dust.

That description now fits Gordon Brown, ably abetted by David Miliband. Two of the people in the Labour elite most feted by their dwindling supporters for their sheer intellect, yet incapable of running anything.

In this case the answer is simple.

The Conservatives should abandon (or at least heavily qualify their idea) of keeping up DFID spending and indeed keeping DFID at all, and look at the UK political and overseas effort in the round, thereby making sure that the FCO does not have to impale itself on the Brown/Miliband blunders.

This policy makes sense in its own terms, and can be explained as necessary by saying that the Brown/Miliband policies have been so startlingly incompetent that whole new ways have to be tried to keep some sort of show on the road.