Pound's slide hits Foreign Office

Mike Gapes is chairman of the Commons Foreign Affairs Committee

MPs have called on the Treasury to provide the Foreign Office (FCO) with additional funding to cover shortfalls caused by the pound's declining value.

At a time when all Britons are finding the pound does not go as far as it once did, the FCO's work abroad means it is feeling the pinch more than most.

The Foreign Affairs Committee says the removal of Treasury protection against currency fluctuations is another blow.

The pound's value against the euro and dollar has slid in recent months.

It is now trading at around 1.10 euros, compared with 1.50 in 2007, and has crashed to around $1.45 in trading against the American dollar.

The bulk of what Britain's diplomats do abroad is paid in foreign currency - so the plunging pound has hit Foreign Office budgets much harder than any other government department.

The FCO uses "hedging" arrangements to limit its exposure by securing foreign currency in advance at a fixed rate, but told the committee it acknowledged that it will face "a tougher challenge" to fund its activities in the next financial year.

Meanwhile, the FCO warned that anticipated increases of more than