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Identifier
Created
Classification
Origin
09LONDON266
2009-01-29 15:13:00
CONFIDENTIAL//NOFORN
Embassy London
Cable title:  

HMG BUDGET CRUNCH THREATENS TO LIMIT UK'S GLOBAL

Tags:   PREL  EAID  MASS  UNSC  KPKO  UK 
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VZCZCXRO8155
OO RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHLO #0266/01 0291513
ZNY CCCCC ZZH
O 291513Z JAN 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1236
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 1354
						C O N F I D E N T I A L SECTION 01 OF 02 LONDON 000266 

SIPDIS
NOFORN

DEPART FOR AF/RSA, SCA/RA, AND IO/PSC

E.O. 12958: DECL: 01/28/2019
TAGS: PREL EAID MASS UNSC KPKO UK
SUBJECT: HMG BUDGET CRUNCH THREATENS TO LIMIT UK'S GLOBAL
REACH IN CONFLICT PREVENTION

Classified By: Political Minister Counselor Greg Berry, reasons 1.4 (b/
d).

C O N F I D E N T I A L SECTION 01 OF 02 LONDON 000266

SIPDIS
NOFORN

DEPART FOR AF/RSA, SCA/RA, AND IO/PSC

E.O. 12958: DECL: 01/28/2019
TAGS: PREL EAID MASS UNSC KPKO UK
SUBJECT: HMG BUDGET CRUNCH THREATENS TO LIMIT UK'S GLOBAL
REACH IN CONFLICT PREVENTION

Classified By: Political Minister Counselor Greg Berry, reasons 1.4 (b/
d).


1. (C/NF) Summary. Ballooning UN assessed costs, an HMG
budget crunch, and the falling Pound have all contributed to
an internal budgeting crisis for HMG's tri-departmental
conflict prevention spending, which includes UN assessed
costs, discretionary spending on peacekeeping operations,
elections monitoring, country-specific programs in key
countries like Iraq and Afghanistan, and support to regional
organizations like the African Union. Foreign Secretary
Miliband, Development Secretary Alexander, and Defense
Secretary Hutton were made aware of the dire budget situation
at a January 22 sub-Cabinet meeting, which one contact termed
"an outright disaster" where all civil service officials were
asked to leave the room and no decisions were made. Requests
for HM Treasury to raise the current ceiling for HMG spending
on UN-related activities, or at least to peg HM Treasury
contributions to UN assessed costs, have received negative
responses, though Miliband has reportedly written to Prime
Minister Brown requesting that HMT's decision be reversed.
HMG is now being forced to look at making up the short-falls
from other budget items. First on the chopping block is
HMG's conflict prevention spending. The Cabinet Office has
thus started a rigorous prioritization exercise, exclusively
based on the UK's National Security Strategy, for all
countries where the UK provides non-development assistance.
While no final solution has been found, the crisis has caused
many in HMG to call for more rigorous analysis of the cost of
UN commitments before the Security Council mandates
activities that result in increased assessed costs. Such a
shift in HMG's strategy for mandating UN activities could
make our discussions in New York more difficult, and the UK's
reduced budget could significantly limit the UK's global

reach on conflict prevention. End summary.

The Scope of the Problem
--------------


2. (C/NF) Contacts in the FCO's International Organizations
Department and in the Conflict Group's Peacekeeping Team and
Strategy Unit report that ballooning assessed costs in the
UN, the current HMG budget crunch, and the Pound's
depreciation against the USD have all caused an internal
budgeting crisis for the UK's conflict prevention spending.
At present, HMT has put a ceiling of GBP 374 million
(approximately USD 425 million) on the amount HMG will pay
for UN-related costs, which is a direct call on the
Treasury's reserve. Initial estimates of UN assessed costs
over the next two financial years are between GBP 424 - 470
million, which will have to be made up from other budget line
items.


3. (C/NF) The current plan is to cut MOD-FCO-DFID
tri-departmental spending on conflict prevention, which has
two pools of funding. The first is the Conflict Prevention
Pool (CPP) for general conflict prevention programs ranging
from Sudan to the Americas and is designed to work on
long-term conflict issues. The second is the Stabilization
Aid Fund (SAF), which is dedicated specifically to Iraq and
Afghanistan. These two pools are budgeted on a three-year
cycle and are funded at approximately the following levels in
millions of GBP:

FY08/09 FY09/10 FY10/11

1. Conflict Pool 110m 110m 106m

2. Stabilization 73m 73m 123m

Total 182m 182m 229m



4. (C/NF) To make up the possible GBP 100 million shortfall
between the anticipated GBP 424 - 470 million in UN assessed
costs and the GBP 374 million HMT has budgeted, HMG is
looking at cutting all discretionary spending toward UK
peacekeeping operations and taking roughly GBP 50 million
from both the Conflict Prevention Pool and Stabilization Aid
Fund. There have also been discussions about requiring MOD,
DFID, and FCO each to pay between GBP 5 - 21 million from
their departmental budgets to ensure that essential conflict
spending is maintained. Additionally, any future increase in
UN assessed costs would mean further reductions in conflict
spending and/or greater calls on departmental budgets.

The Conclusions
--------------


LONDON 00000266 002 OF 002



5. (C/NF) Foreign Secretary Miliband, Development Secretary
Alexander, and Defense Secretary Hutton were made aware of
the dire budgeting situation at a January 22 sub-Cabinet
meeting, which one well-placed contact termed "an outright
disaster" where all officials were asked to leave the room
and no decisions were made. Miliband and Alexander are
reportedly particularly concerned because the budget cuts
would mean eliminating projects that they have personally
promised to foreign countries, such as elections observers,
UK personnel secondments to UN missions, and other
discretionary items. It may also mean HMG closing conflict
prevention activities in entire countries. In preparation
for such actions, the Cabinet Office has started a rigorous
prioritization exercise, exclusively based on the UK's
National Security Strategy, for all countries where the UK
provides non-development assistance. If the prioritization
scheme is adopted, HMG could cut entirely its conflict
prevention budgets in the Americas, most of West Africa, and
other countries like Rwanda and Ethiopia. It is also
anticipated that the prioritization model would be adopted as
an overarching mechanism for determining non-development
spending on foreign countries.


6. (C/NF) HMG officials have suggested that the UK could
simply stop paying its entire assessed costs bill, as other
nations sometimes do. However, Ministers felt it would send
the wrong message about HMG's commitment to international
institution reform and increasing UN capacity. So, officials
have been asked to find ways to reduce the volatility of
assessed costs, some of whom have said that this may result
in HMG being forced to scrutinize UN mandates more carefully
when costs are involved.

Comment
--------------


7. (C/NF) HMG's global reach benefits the USG because of our
shared interests and goals. And HMG's consistent spending
around the globe has made it a valuable partner in most
regions. If a budget crunches mean a serious reduction in
what the UK has to spend on third countries, we may see
diminishing HMG influence in some regions. In addition, a
cost-based approach to UN-mandated activity, especially
peacekeeping operations, may make it more difficult for the
USG to rely on UK support for more ambitious projects in the
UN.


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