Written evidence from the British Council
FINANCE
This note sets out the British Council response
to the impact of the loss of the overseas price mechanism; as
well as how we plan to contribute £5 million to the Foreign
Office Departmental Expenditure Limit (DEL) in 2010-11 following
the recent statement by the Foreign Secretary on FCO finances.
IMPACT OF
THE LOSS
OF THE
OVERSEAS PRICE
MECHANISM (OPM)
The weakening of sterling in 2008-09, combined
with the loss of the Overseas Price Mechanism, resulted in a significant
reduction in our overseas purchasing power. We estimate this to
be approximately £20 million.
In response to this, we are implementing a major
business modernisation programme which has reduced our UK headcount
by 330. The majority of the associated voluntary and early redundancy
costs have been met from our reserve. We are continuing to explore
with the FCO and HMT whether any additional modernisation monies
will be available in 2009-10 to meet the remainder of these costs.
We will seek a further reduction of staff this
year giving a total reduction in UK headcount of 500. This will
have a significant impact on finances for 2010-11.
Against the background of its tight financial
position, the British Council has decided to prioritise its programme
work overseas above all other expenditure. The staff reductions
in the UK, the increased efficiency of support functions such
as IT and Finance and a programme of significant pay restraint
globally all contribute to maintaining spending on programmes
for the UK overseas.
IMPACT OF
THE BRITISH
COUNCIL'S
CONTRIBUTING £5 MILLION
TO FCO DEL 2010-11
Nevertheless, as part of the coordinated response
to the severe financial pressure experienced by the FCO, we have
agreed to contribute £5 million to FCO DEL in 2010-11. This
figure was approved by British Council Board of Trustees in their
23 February meeting. Our ring fenced DEL remains as agreed by
HM Treasury in the settlement for the period 2008-11.
Drawing down £2.6 million less from our ring-fenced
DEL
We will draw down £2.6 million less in
2010-11 from our ring-fenced DEL allocation (£185 million).
We will achieve this by refocusing our programme
activity under the Reconnect initiative but seek to maintain impact
in Pakistan and Afghanistan. We expect this exercise to identify
£1.5 million.
In addition, we will identify further operating
budget cuts of £1.1 million in 2010-11; we will manage the
impact of these internally by prioritising programmes in order
to make cuts.
Pass on the net surplus of the sale of our Mumbai
office (£2.4 million)
We will pass on the net surplus of the sale
of our Mumbai Office, which we anticipate to be £2.4 million.
This will create an overspend in 2009-10 offset against the FCO's
capital underspend for 2009-10.
This transfer will have no impact on the British
Council's capital DEL though the capital grant draw down will
be reduced by £2.4 million.
FUTURE FINANCIAL
PLANS
The British Council's financial plans for 2010-11
are dependent on establishing a global service centre in India
and new operating subsidiaries for income growth. These are complex
issues and we are in detailed discussion with FCO and HM Treasury
to secure the necessary approvals imminently.
1 March 2010
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