The Foreign Office will aim to prioritise its overseas embassies as it seeks to make further cuts to its spending, Philip Hammond has said.
On Tuesday, the Treasury wrote to government departments asking them to model cuts to their resource spending of 25% and 40%. Chancellor George Osborne wants departments to find a total £20bn of savings by 2019-20, and has announced that the spending review outlining those cuts will take place in November.
The foreign secretary told MPs yesterday that he believed the models called for by the Treasury were more likely to be "aspirational and a ranging shot" than the final settlements that would be agreed by Cabinet.
But he acknowledged that the Foreign Office would have to make "strategic" savings, and stressed the importance of protecting the "sharp end" of the UK's diplomatic network.
"I am clear that the Foreign office will be able to achieve further efficiencies," Hammond told the Foreign Affairs Committee.
"But I do not think that savings on the scale that are indicated by the fiscal trajectory can be delivered simply by cheeseparing across the piece. I think we need to make some strategic decisions about where we need to focus resource and where we need to downgrade.
"I am clear that the crown jewel of the Foreign Office's capability is the network of international platforms, embassies, and missions around the world. We must seek to protect that sharp end presence while addressing the need for further efficiencies."
At the 2010 spending review, the Foreign Office was asked to make a 10% real terms cut to its resource budget, followed by a further 6.3% reduction at the 2013 round. The FCO's outgoing permanent secretary Sir Simon Fraser recently warned that much of the "low hanging fruit" of efficiency savings had already been removed.
“We, like other departments, genuinely did more with less and we are proud of that – and I am sure there is more we can do to streamline administration, to work smarter, to innovate and to increase flexibility – but I am not sure how much more we can do," he told the Institute for Government.