Examination of Witnesses (Questions 40-59)
RT HON
LORD KINNOCK
OF BEDWELLTY,
SIR DAVID
GREEN KCMG AND
MR MARTIN
DAVIDSON
12 OCTOBER 2005
Q40 Mr Hamilton: Lord Kinnock, may I
come back to the point about efficiency savings with regard to
information technology? I understand you have this wonderful,
global integrated, Finance and Business System, or FABS for short
(some people call me Fabs for short). Ninety-six million pounds
over 10 years is what you are expected to spend. I wondered what
sort of savings in back-office operations and staffing you were
likely to make during that period.
Lord Kinnock of Bedwellty: For
a blow-by-blow account with all the decimal points, Sir David.
Sir David Green: First of all,
the reason why we have embarked on this massive programme is that
we had some 20 different independent IT systems which in the modern
age had to be brought together. So what we will have with the
Finance and Business Systems is an integrated system. We went
live in the United Kingdom in January, very successfully, and
we have just gone live, a week ago, in India and our next wave
is in China, followed by South Africa. It will result in savings
of around 300 staff by the end of the 10-year period. It will
also result in savings of around the figure of £96 million
that you quoted. We have already made £3.4 million in savings
this financial year, even though it has only been going a relatively
short period of time, which if you extrapolate through to the
end of the period is around 30% of that £96 million. So,
so far so good. I am not so optimistic or unrealistic as to not
appreciate that there will be a number of problems along the way;
it is a very complex system and even though it went well in the
United Kingdom it has taken sometime to bed down and it did mean
that we were later in presenting our annual accounts than I had
hoped because of some technical difficulties. However, we have
now resolved those and the National Audit Office gave us a clean
bill of health and thought that, actually, the introduction of
the Finance and Business System was one of the best introductions
they had seen. The fact that it was to time and to budget was
something which is not the norm within the public sector. So,
so far so good.
Q41 Mr Hamilton: It is very rare, is
it not, that it is to time and to budget? So, obviously, from
what you say, you are pretty satisfied with the new system and
it is delivering what you expected. Have there been any major
glitches or problems, apart from making you late with your accounts?
Sir David Green: No, we did learn,
though, from our initial experience of going live in the United
Kingdom that investment in prior training is the key to it. I
think it is fair to say that the introduction in India has gone
more smoothly than it went at this comparative point with the
United Kingdom introduction. That is because we learnt the lessons
and we have a team of people who have been working on the FABS
project who are now in centres in India supporting staff. I think
we will get better as we go through. The other thing, of course,
is that it is very dependent on high-quality connectivity, and
we have signed a large contract with Global Crossing (?) to provide
connectivity for us across the world, and it is entirely dependent
on that.
Q42 Mr Hamilton: Finally, may I ask what
proportion of your total savings is dependent on the IT systems,
in terms of efficiencies?
Sir David Green: The efficiency
savings that we are committed to are very much in line with Gershon
targets, and that is 2.5% per annum between 2005-06 and 2007-08,
and what that commitment will mean is us finding £30 million
and moving that from savings into frontline services. So the actual
proportion that is reliant on FABS I am not entirely sure. Can
you give us a figure, Martin? Can we come back to you on that?
Q43 Mr Hamilton: Do come back.
Sir David Green: I think we would
need to come back to tell you what proportion it is, but it is
significant.
Lord Kinnock of Bedwellty: There
is a further, additional point that gives the Committee some figures
that Martin has got.
Mr Davidson: We are committed
this year to £5 million of efficiency savings. Of that we
expect to find slightly over the full amount—about 102%.We
are committed to a further nearly £9 million next year and
we have identified about 50% of those figures already, and we
are committed to a further £13 million in the year out from
that, of which we have identified about 30% to date.
Q44 Mr Hamilton: When you say "identified",
are these identified within the new IT system?
Mr Davidson: The year-out figures
will be largely identified through the IT system, yes.
Q45 Mr Hamilton: Finally, Lord Kinnock,
or your colleagues, can I ask you about your estate abroad? Last
year the British Council told this Committee that it was developing
a fresh strategy for reducing the Council's footprint (terrible
word) in estates by about 15% by 2007-08. I wondered what proportion
is likely to be as a result of sales of property owned by the
British Council.
Mr Davidson: We do have a sales
programme for the British Council. We are looking this year for
sales of about half a million pounds within our budget, but we
have already identified and have already made at least one sale
and there are two more in the pipeline which will substantially
exceed that. We would expect to see a continuing sales programme
of around the £1 million mark for the next couple of years,
which is against a total fixed asset estate of about £65
million.
Q46 Chairman: Can I ask you a few questions
about security? Last year you claimed £10 million from the
contingency fund to upgrade the security of your estate. Has all
that money now been allocated and do you foresee you will require
any further money for security from the contingency fund?
Sir David Green: It was awarded
to us in two tranches: £4 million in the previous financial
year and £6 million in this financial year that we are in.
We spent the £4 million last year on upgrading our security
in the high priority areas and we have committed to spending more
than £6 million this year, so the rest we will find from
within our own resources. There is no question that we will need
all of that.
Q47 Chairman: The last spending review
allowed you to retain all your efficiency savings that were anticipated
for reinvestment in security. What is going to happen to your
planned savings which you have referred to already? Is that all
going to be reinvested in security or not?
Sir David Green: Some of it will
have to be. What I have just explained covers some 75 locations
around the world but, given the increasing security problems that
we face as an organisation, I am quite certain that we will have
to invest more in security. The commitment we made to Treasury
was that we would not go back to ask them for more if we were
allowed to keep the efficiency savings and could spend at least
part of those on upgrading security and the balance of that would
be put into reinvesting and investing in products and services
for the future.
Q48 Chairman: You said there were 75
locations, presumably a large number of those will be locations
where there is public access. Does the need to improve security
actually reduce public access and does that have a knock-on consequence
on your ability to generate income from the use of your facilities
and your services?
Sir David Green: Yes. As both
American embassies and UK embassies and High Commissions have
become more fortified, we have become a possible displacement
target and we have to take very carefully and very seriously the
issue of security and safety of our staff and people who use our
buildings. What we have done is a very careful and thorough review
of all our premises across the world. In some places, sadly, we
have had to close our centres to public access. If you take a
country such as Pakistan, there is no public access in any of
the five centres that we have across Pakistan. That is not to
say that we are not able to operate in Pakistan, we have a very
thriving operation and we administer 200,000 examinations each
year, for instance. This does not require people to come to our
offices, we have made an arrangement through Standard Chartered
Bank and they can go to any branch of Standard Chartered Bank
and register for examination, we tell them where to turn up and
then notify them by post or by email. It is forcing us to think
of new ways of working. That is an extreme case. There are other
countries where we have more limited public access and in some
countries, such as Cairo, where the Chairman and I were earlier
this year, we have increased security and people coming into the
building have to go through an x-ray machine which would not have
been the case five years ago.
Lord Kinnock of Bedwelty: There
is still a huge use of the Cairo building—huge.
Sir David Green: Yes. In terms
of numbers that we are reaching both face-to-face and virtually,
the numbers are growing very substantially each year.
Q49 Chairman: You mentioned Pakistan,
is there any near term prospect of the reopening of your public
offices there?
Sir David Green: Not near term,
no.
Q50 Chairman: What about Saudi Arabia,
which I also understand has been closed?
Mr Davidson: Over the last year
we have moved two-thirds of our six offices into new premises
in Saudi Arabia but all of them do have public access. In one
centre in Dammam in eastern Saudi Arabia we have closed the teaching
centre because it was becoming impossible to maintain an effective
teaching operation in the environment. In Riyadh and in Jeddah,
we have both men's and women's teaching centres which are open
to the public and which are beginning to increase the throughput
of people as well, I am glad to say.
Q51 Chairman: This Committee visited
Algiers and found that there was disappointment in the fact that
the British Council had closed its presence there over 10 years
ago and some other European countries do have facilities there.
Is there any possibility of a return to Algeria in the near future?
Sir David Green: That is something
we are looking at at the moment. I think there is a possibility.
I do not want to be more positive than that but certainly it is
something that we are exploring.
Lord Kinnock of Bedwelty: Just
to emphasise, I am sure the Committee will understand that our
approach to security is substantially based on the analysis provided
to us by the Foreign and Commonwealth Office and also substantially
determined by our determination to provide the maximum degree
of security and protection to the people who use us as well as
the people who work for us.
Chairman: Thank you. I think Fabian Hamilton
has a question to do with the Middle East.
Q52 Mr Hamilton: I just wanted to ask
you about Iraq and Pakistan. I know that you have been pretty
successful in re-establishing the British Council in Iraq. For
example, I understand that you have got five resource centres
now in Basra and you are opening two more during the course of
this year; I do not know if they are already opened. You have
brought 200 university and ministry staff to the UK for training
and networking. You have trained 50 managers and teachers from
technical colleges. I understand you have trained 140 media workers
and 120 media technicians as well in partnerships with the BBC
World Service Trust. I wanted to ask you what the problems are,
apart from the obvious ones, of operating in Baghdad, Basra and
other parts of Iraq and whether your staff are facing undue security
problems and are uncomfortable, or whether the situation is relatively
normal apart from the dreadful suicide bombings that we know about
from the news?
Lord Kinnock of Bedwelty: I will
let my colleagues go into the detail in relation to the locations.
I met a substantial part of our Iraqi staff during the course
of one of their orientation visits to London. They are conscious
and grateful for the fact that we are acutely aware of realistic
concerns about their security. It has to be said, however, that
they are absolutely determined to sustain and, if possible, advance
the service that they are providing in a variety of forms. That
will never make us careless about their safety but that is a factor
to insert. These are people who have got experience of what existed
before, in several cases are victims of what existed before.
Q53 Mr Hamilton: So there is quite a
number of local engaged staff then in Iraq?
Lord Kinnock of Bedwelty: Absolutely.
Q54 Mr Hamilton: In Afghanistan as well?
Lord Kinnock of Bedwelty: We will
go into detail on Afghanistan where the picture in the last 12
months substantially and happily has shown considerable improvement.
The point I am making is our watchword is the security of the
people who work for us and who use us. Several of the people who
work for us in areas of pressure, like Iraq, are not unconscious
of their own safety but, nevertheless, are so utterly committed
they just want to get on with the job. They are very impressive
people.
Sir David Green: We had a member
of our staff from Iraq here earlier this week accompanying the
Minister of Education for Iraq who is here on a visit with his
senior staff to look at how the UK can support him in rebuilding
his education system. One of the things that he is most interested
in is English language teaching and how we can support the development
of English language teaching through teacher training and through
the provision of textbooks. I asked our UK-based member of staff
how she was finding the security situation and it is very tough.
It is a requirement that she has to travel in an armoured vehicle
and is accompanied by a security officer. It is very difficult
to get out or beyond Baghdad. The operating situation is not easy.
Having said that, you gave a catalogue of some of the things that
we have been involved in and I think we have managed to work very
successfully in bringing Iraqis out, often to Jordan, sometimes
to the UK, to work with them on teacher training and curriculum
development. We brought a number of vice-chancellors here to the
UK to look at what their needs were and to explore that with them
through a management development programme organised with Birmingham
and Nottingham Universities. We also distributed 50 tonnes of
books to universities very soon after the war ended. There is
a number of things we are able to do but it is constrained on
the ground in terms of our UK staff in terms of their movement,
so we have to be imaginative in terms of how we can provide a
service. As the Chairman was saying, in Afghanistan the picture
is brighter. We have now got English resource centres both in
Kabul University and in Balkh University, Mazar e Sharif. We have
also appointed an ELT consultant to develop the English language
curriculum of Kabul University. I have to say that the thirst
for English language in Afghanistan is extraordinary and these
English language resource centres are just packed and it is impossible
for people to move. Working with the BBC we have also produced
self-study English language textbooks in Dari Pashto, which have
now been distributed, and we have provided English language training
for 70 members of the new parliament in English language using
our British Council resource centres. It is easier to operate
now in Afghanistan than it was, and certainly in Iraq, but it
is not that easy.
Mr Purchase: On the question of Iraq
and safety, is it reasonable for management to actually allow
work to go on in these circumstances of extreme danger, notwithstanding
the staff's willingness, courage and so on and so forth? Is it
reasonable for management to continue to put staff in this position?
Q55 Andrew Mackinlay: You withdrew them
from Minsk on safety grounds, I remember.
Sir David Green: No, that was
not the case. We withdrew them from Minsk because we could not
operate in that country; it just was not possible to operate there.
Obviously we think about this very hard and if anything keeps
me awake at night it is the security of our staff and the people
who use our services. The other thing I did not mention about
Iraq was we administer and manage two very large DFID funded programmes,
one on political participation and one on civil society engagement
and capacity building within civil society. In discussions with
DFID and obviously with the Foreign and Commonwealth Office, taking
advice, we think we are being responsible and if I ever felt that
we were placing our staff in an impossible position then I would
withdraw them.
Chairman: Sir John Stanley has been very
patient; he has been waiting to ask about Russia. It is now your
turn.
Q56 Sir John Stanley: Thank you, Chairman.
Lord Kinnock, when the Members of this Committee in the last Parliament
visited Moscow in June 2004 we had a very detailed briefing discussion
with your senior management there about the imploding tax dispute
between the British Council and the Russian tax authorities. It
appears since our visit the situation, if anything, has got worse
and we understand that a criminal investigation, as described
by the Russian authorities, has now commenced against the British
Council in the St Petersburg area. The Independent on 4
October reported: "St Petersburg's main investigation directorate
told the Interfax news agency `A criminal case regarding illegal
entrepreneurship is being pursued in connection with the offering
of commercial English language courses.' Also over the past four
years the British Council has not paid a single kopeck in tax
from its commercial activities." Lord Kinnock, I will of
course give you every opportunity to respond to the wider issues
here but I would be grateful if we could have one or two facts
on the table. Could I ask you, first of all, members of the British
Council, both the expatriate members and locally engaged members,
do they or do they not have immunity from criminal prosecution
under diplomatic immunity in Russia?
Lord Kinnock of Bedwelty: I think
it is best for the case of the oral record for the response to
come from the Chief Executive.
Sir David Green: I am going to
ask Martin. I want to give you absolutely the right answer and
I think Martin knows.
Lord Kinnock of Bedwelty: That
is perfectly correct.
Mr Davidson: All our UK based
members of staff working in Russia are there with diplomatic immunity
and, therefore, have immunity from prosecution; our local staff
do not. Local staff are normal members of the Russian public who
are employed under normal circumstances as are our local staff
elsewhere in the world and are subject to the laws of the country,
of course.
Q57 Sir John Stanley: Thank you. The
next question I would like to ask you is did the British Council
before engaging in the commercial provision of English language
courses take tax advice not only from UK based tax advisers but
also from the Russian tax authority?
Mr Davidson: I think the point
I would like to make is that English language teaching has never
been a hidden area of work, it has always been completely open
and—
Q58 Sir John Stanley: I would be grateful
if you could answer my question. I asked a specific question.
If you have not got the answer here we will completely understand
if you give it to us in writing.
Mr Davidson: We have taken tax
advice from an international accountancy firm. From time to time
we have also sought to engage with the Russian tax authorities
but because the status of the British Council was not settled
under Russian law it was not possible for us to engage with them.
Q59 Sir John Stanley: It would be helpful
if you could just fill that out a little bit and let us have a
note of the attempts the British Council made to get clarification
of its tax position in relation to its commercial English language
courses and what response you had from the Russian tax authorities.
Mr Davidson: Certainly.
Lord Kinnock of Bedwelty: The
note will show over long years, maybe as many as a dozen years,
efforts by the British Council to conclusively resolve its status
with regard to Russian law. For reasons that I think everyone
will understand it can reasonably be said that in parts of the
regulatory regime in Russia there is a continuing state of evolution.
| 
