The Government has come under fire after a minister admitted it had been forced to cut back on counter-terrorism programmes in Pakistan due to the fall in the value of the pound.
Foreign Office Minister Baroness Kinnock of Holyhead said programmes in counter-terrorism and radicalisation in Pakistan had been cut as the Foreign Office tried to deal with a shortfall of £110 million this year.
Her revelation in the House of Lords came hours after the Prime Minister made a statement in the Commons saying that the "crucible of terrorism" on the Afghan-Pakistan border remained the "number one security threat to the West".
Shadow foreign secretary William Hague seized on the minister's remarks, saying: "Pakistan has been identified as one of the major sources of the terrorist threat to this country.
"Cutting FCO expenditure on counter-terrorism programmes in Pakistan because of the movement of exchange rates is clearly not the way to run an effective foreign policy."
At Lords question time, Lady Kinnock outlined a string of areas that have faced cuts due to the shortfall.
She told peers: "As a result of exchange rate movements, the FCO faces a shortfall in 2009-10 of an estimated £110 million; we estimate this shortfall will increase slightly in 2010-11."
She added: "We have had staff redundancies in Argentina, Japan and across the United States. Programmes in Afghanistan in counter narcotics have been cut, capacity building to prevent conflicts in Africa, counter-terrorism and radicalisation in Pakistan, the list goes on."
Mr Hague said the cuts were the "direct consequence of Labour's decision to remove the FCO's protection against exchange rate movements".
He said: "This momentous decision happened on David Miliband's watch and the buck rests with him. There has never been a full explanation of how this happened and whether Foreign Office ministers took their eye off the ball. It is time that the truth is known and the full extent of the damage done to British diplomacy overseas laid bare."
