13.1 | Resources

550. Treasury officials commented that it was the third year in a row that the FCO had

made claims on the Reserve for “apparent shocks”.

551. Mr Boateng replied to Mr Straw on 9 September, in line with the advice provided

by officials.334

552. Mr Simon Gass, FCO Director Finance, called on Mr Jonathan Stephens, the

senior Treasury official dealing with the FCO, the following day.335

553. Mr Gass reported to Sir Michael Jay that he had rehearsed the FCO’s arguments

for additional funding and challenged Mr Stephens on whether the MOD and DFID

were being asked to absorb costs arising from Iraq to the same extent as the FCO.

He reported that:

“He [Mr Stephens] was evasive and uncomfortable … He argued weakly that the

decision was taken on the basis of capacity and ability to absorb … I pointed out that

DFID and MOD both had much greater capacity to absorb not only because of the

size of their budgets but also because of the strain on FCO expenditure …

“They [the Treasury] are certainly stung by accusations that the FCO is being singled

out for harsher treatment than other Government departments and this should be

part of the Foreign Secretary’s line with the Chief Secretary.”

554. Security in Iraq deteriorated in August 2003. Concerns about progress on

reconstruction in the South and the implications for the level of consent enjoyed by UK

forces led the Government to seek rapid and visible improvements in essential services.

555. Section 10.1 describes the subsequent development of the US$127m Essential

Services Plan, to improve delivery of essential services in the South.

556. Mr Hilary Benn, Minister for International Development, told the 4 September

meeting of the AHMGIR that DFID would contribute £20m (US$30m) to the Essential

Services Plan, to improve delivery of essential services in the South.336 The UK should

continue to seek the balance of the funding from the CPA, but must be prepared to act

fast on its own if necessary.

557. Mr Benn wrote to Mr Blair later that day to confirm DFID’s commitment.337

Mr Benn advised that:

“We [DFID] have held back from committing to meet the full cost [of the Essential

Services Plan], to avoid giving the impression to the CPA that HMG wants to take

334 Letter Boateng to Straw, 9 September 2003, ‘Iraq Reserve Claim’.

335 Minute Gass to PS/PUS [FCO], 10 September 2003, ‘Iraq: Discussion with the Treasury’.

336 Minutes, 4 September 2003, Ad Hoc Group on Iraq Rehabilitation meeting.

337 Letter Benn to Blair, 4 September 2003, ‘Iraq: Restoring Essential Services in the South’.

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