The Foreign Office has been criticised by MPs for wasting millions of pounds of taxpayers' money in botched property deals.

A report from the Commons foreign affairs committee released on Thursday found that the government missed out on £6 million by delaying on selling its New York residence, while a a further £4 million was lost through re-acquiring a Dublin house.

The senior committee also criticised the Treasury for forcing the diplomatic service make short-term efficiency savings and for failing to fund the additional Foreign and Commonwealth Office (FCO) costs that will be accrued by hosting major international events next year.

The assessment of the FCO's annual report found that a Treasury inspired drive for savings begun in 1998 had led to the department reviewing its overseas embassies.

The consul-general's residence in New York was identified as being too large in 2001 and a smaller estate was bought for £6.48 million.

But the collapse of the Manhattan property market following the September 11 attacks saw the original residence drop in value from £12.23 million to £6.32 million when it was eventually sold.

While the MPs said the department could not have been expected to foresee the attacks, they claimed it was "reprehensible" and "utterly bizarre" to have gone ahead with the deal nonetheless.

"This transaction was undertaken for the purpose of realising a gain of approximately £6 million and has instead resulted in the loss of £380,000 and the replacement of a highly prestigious property by an inferior one," the report said.

Dispute

The committee also disputed a claim from permanent secretary Sir Michael Jay that the FCO "made" £13 million by selling and then buying back its Glencairn residence in Dublin without the grounds.

The MPs said this should be better be understood as a loss of a potential £4 million given the loss of the grounds during the process.

They also argued that the committee was right to insist on its right to investigate the deals, despite resistance from the department.

"The FCO's claimed 'net gain' of £13 million from its Dublin property transactions should more accurately have been described as a net gain of at least £17 million being reduced by £4 million as a result of the department's mistaken decision to sell, only to reacquire, the Glencairn residence and to purchase, only to sell, Marlay Grange," said the report.

"We conclude that serious mistakes were made during the sale and purchase of residences in Dublin and New York and should not have occurred.

"Such incidents serve to underline the importance of effective scrutiny of the Foreign Office's property transactions by parliament."