Examination of Witnesses (Questions 1-19)
MARTIN DAVIDSON,
GERARD LEMOS
AND SUE
BEAUMONT
4 NOVEMBER 2009
Q1 Chairman: Apologies to
our witnesses for keeping you waiting for a few minutes, but we
had a lot of business to get through. This session is part of
our annual investigation into the departmental annual report of
the Foreign and Commonwealth Office. Because the British Council
and the BBC World Service receive funding through the Foreign
and Commonwealth Office, we have the opportunity every year to
question both organisations. We'll start today with the British
Council and then move on later in the session to the BBC World
Service. Mr Davidson, welcome. Can you introduce your colleagues?
I think we haven't met the acting chairman before; you are very
welcome. Ms Beaumont, we saw you in Pakistan when you were working
there for the British Council, so you are known to us, but perhaps
you could all introduce yourselves before we begin.
Martin Davidson: Shall I introduce
Gerard Lemos? As you say, Chairman, he is acting chairman of the
British Council, but also has been on the board of the British
Council for a very long time. Sue Beaumont, as you say, was previously
our director in Pakistan, but is now our regional director for
the near east and north Africa, based in Amman in Jordan.
Q2 Chairman: Thank you very
much. Let me begin by taking you back to the National Audit Office's
examination of your organisation last year. What progress have
you made in implementing its recommendations on value for money?
Also, we understood that there was due to be a progress report
on that. When is that likely to appear?
Martin Davidson: We have obviously
made quite a lot of effort to build on the NAO report. In particular,
one of the key issues that came up in the report was the issue
of the English language trading side and making sure that that
was done fairly. We will be publishing, by the end of this month,
a new position on our trading activities, with a complaints and
appeals process which enables those who feel that we are not operating
in a fair and open way to appeal against that. The other aspect
that the NAO report picked up on was customer relationships management.
As we said at the meeting, we are cautious about going in for
large-scale, technical solutions to CRM activity, but we have
piloted a new system in China—across our four offices in
China—and that is looking very positive. We expect to be
able to move forward with that more widely across the organisation.
The final area was looking at the whole question of measurement
of effectiveness. As you will have seen from our annual report,
we have made a number of changes to the way in which we evaluate
the effectiveness of the organisation, and we will continue to
develop those programmes.
Q3 Chairman: What about the
progress report from the FCO? It was indicated to us that there
would be some kind of published progress report. What is happening
on that?
Martin Davidson: To be honest,
we have not focused ourselves on publishing that. We certainly
can do so, and we could undertake to produce a progress report
by the end of this calendar year.
Q4 Chairman: Thank you. We
also understand that there is supposed to be some reduction in
your capital works. Clearly, you have your headquarters in Spring
Gardens. When does the lease expire on that?
Martin Davidson: The lease expires
on our Spring Gardens headquarters in 2020, and I would make the
point that it is a very favourable financial arrangement for that
particular building. We are constantly looking at our global estate,
and we have, over the last year, reduced the global estate by
3%. We have a wider commitment to reduce it further and we expect
to be on target for doing so.
Q5 Chairman: Do you intend
to try to stay in central London?
Martin Davidson: Our intention
is to reduce the total number of staff in central London. As we
announced earlier this year, we will be reducing the total number
of staff—British Council employees—in the UK by 500,
and I expect a significant proportion of those to come out of
London in particular. We will be reducing most of our back-office
staff in London, so we will no longer be writing cheques with
staff sitting in Trafalgar Square. I would anticipate that we
will require a presence in central London, but I do not at the
moment know exactly what size that will be.
Chairman: I will bring Eric Illsley in
on these related issues.
Q6 Mr Illsley: As part of
the transformation investment programme, how many British Council
staff have lost their jobs so far, and how many further voluntary
or involuntary redundancies do you anticipate as part of that
programme?
Martin Davidson: The programme
was launched earlier this year. No staff have yet left the organisation,
and we are running a voluntary early-retirement programme. That
closed on Monday and we have had 380 applications for that programme.
As I say, we expect to lose a total of 500 posts across the UK,
but not all of those will be permanent staff; we expect some 280
to be permanent employees and the balance of 220 to be temporary
and contractor staff. There will be a further loss of posts in
our overseas operation, which at the moment I expect to be between
200 and 300. We are looking at a significant shift in staffing
over the coming year. I expect that most of those staff will leave
our employment between April and July next year.
Q7 Mr Illsley: So there will
be 380 people applying for voluntary redundancy. That leaves you
short of the 500 target. Do you expect to meet that by releasing
temporary and contractor jobs?
Martin Davidson: Yes, we have
made a clear statement to staff that, first and foremost, temporary
staff will be released before we release permanent staff. I expect
and hope that we will be able to meet the requirements of our
redundancy programmes through the staff who have already applied
for voluntary redundancy.
Q8 Mr Illsley: You will be
aware of the recent report in The Times that said that
there were plans for a further 240 job losses over a five-year
period. You have disputed that.
Martin Davidson: Yes. We do not
recognise the numbers quoted in The Times as being any
part of our plans. We cannot possibly promise that there will
be no further job losses, but they are not part of our planning
at the moment.
Q9 Mr Illsley: Given the scale
of the job losses and restructuring, presumably you have made
a detailed assessment of the impact of those losses. Are you convinced
that you have the capacity to continue the British Council's role
in the future?
Martin Davidson: The job losses
break down into two key categories. One is our support services,
and we intend to reduce the numbers of staff in our support services
on the back of our substantial investment in new financial systems,
which the Committee will be aware of from previous sittings. We
are also consolidating our five global finance and IT hubs into
one. The second, and in some senses the more significant shift,
is in our contracts and projects work, which essentially is the
capacity in the UK to manage programmes and activities. We believe
that we can no longer continue to do that wholly ourselves, and
in order to meet the demands and expectations of our growing programmes
overseas, we must be able to work with other organisations. We
are looking to partner and other organisations to handle some
of the work that previously would have been done wholly by our
own staff.
Q10 Chairman: Thank you. Perhaps
you can help me on this, Mr Lemos, or perhaps Mr Davidson can.
The Chairman of the British Council, Lord Kinnock, who we got
to know well when he came before us in previous years, resigned
in July. Could you give us some indication about what the timetable
is for the appointment of his successor?
Gerard Lemos: Yes. The process
is on schedule to end, at the end of March. As you know, this
appointment is governed by the public appointments process, and
we are going through that in a fully compliant way. It takes a
long time, but it is important to have that level of transparency
and so on. Nevertheless, the intention is not to delay any longer
than is necessary.
Q11 Chairman: So, you are
the acting chairman until March?
Gerard Lemos: That's the assumption
that I am working on. I am ready to depart when told to do so.
Chairman: I am not trying to push you
out the door. I will bring in Mr Mackinlay.
Q12 Andrew Mackinlay: The
way I understand it, you're a creature of statute at the British
Council, and a charity, but you are subject to this public appointments
regime. Potentially, is there not a slight problem? You have to
make the decision to appoint this recommendation to your board,
or your trustees select—
Gerard Lemos: It is slightly complicated.
Andrew Mackinlay: May I stop you there?
I invite you to say—you might not want to do this—that
it is complicated and unsatisfactory. It is neither one thing
nor the other. Also, the discretion that you could have exercised
in the past for having some remuneration or compensatory payment
to chairpersons, is more aggravated. It is more difficult. I would
like you to comment first on the statutory point and secondly
on whether it could exclude persons of limited income from aspiring
to the top job.
Gerard Lemos: On the statutory
point, the governing edict is set out in our royal charter and
that comes above everything else. We are bound by the Charity
Commission's rules and we are also an NDPB. We exist under all
sorts of regimes. From day to day, this is not a problem. It does
have the effect, as you rightly say, that none of the trustees
or the chair can be remunerated. I do not feel particularly qualified
to comment on whether that excludes people or not, but that is
the requirement of the Charity Commission. The staff went through
it with the Charity Commission when this process was initiated
and it was very clear and insistent that our charitable status
required the chair to remain unpaid. The only circumstances in
which it would even consider agreeing to it being paid would be
if we had run at least two unsuccessful competitions. I am afraid
that is the order of the day with which we will have to comply.
Q13 Andrew Mackinlay: The
paradox is, you could get paid as a chairman of the Charity Commission,
so you could be working class and poor, but you could not be working
class and poor and be the chair of the British Council. That is
not your fault, but I make that observation. That is a matter
of logic.
Chairman: Mr Mackinlay, I suggest you
put down an early-day motion on that.
Andrew Mackinlay: I will do that and
make the point when we come to our recommendations. In any event,
there is also this perversity where you have to go through this
public appointments outfit and you are presented with one name.
You as trustees have got to choose them.
Gerard Lemos: No. Perhaps I can
set the record straight on that. The process is being led jointly
by the FCO and the deputy chair. I am obviously not involved,
as that would be inappropriate. I led the process when I was deputy
chair and Lord Kinnock was appointed, although it was not Lord
Kinnock in those days. There are two other trustees who are also
on the selection panel along with the Permanent Under-Secretary
of State, Foreign and Commonwealth Office. Once they have made
their selection, they will submit, in line with the public appointments
rules, two names to the Foreign Secretary with a preference for
one, which I would confidently expect the Foreign Secretary to
accept. The trustees have been fully involved in describing the
job and what they are looking for. I know the deputy chair has
spoken to them all individually. I would say—partly because
I have been involved with the selection of virtually all the trustees
over the years—it is an extremely strong and robust group
of people who will not be pushed around easily.
Q14 Chairman: No doubt we
shall return to this at some point. Can I turn to your annual
report and performance? You have given us some useful information
about audience; how you engage with people; how wide you reach.
It appears that there has been a decrease in direct engagements
from the previous year. It is not clear to me why there is a decrease.
Is it as a result of financial pressures that you are under, is
it the way that you assess direct engagements or is it a deliberate
focus that you have made in the way you work?
Martin Davidson: It is a combination
of all three. First, as we say in our report, we have tried to
apply a rather more robust analysis of engagement. We no longer
include some areas we would previously have counted as engagement.
For example, attendance at an education fair would previously
have been regarded as engagement for the purposes of this but
no longer. We transfer that into the reach figures because we
do not feel that provides a robust enough exchange of ideas with
the UK. So the engagement figures are being focused very definitely
into a robust exchange between the overseas audience and people
from the UK. The second thing is that, as part of the last expenditure
settlement, the overseas price mechanism that the Treasury used
to protect us against exchange rate fluctuations was removed.
Chairman: We are aware of that. It is
causing problems all over the place.
Martin Davidson: That effectively
means we have had to manage a 16% reduction in the purchasing
power of our overseas grant. On a pure like-for-like basis, we
calculate that although we have lost 16% of our operational money
in effective terms, the reduction in the actual engagement has
been only 4%. We feel that by focusing ourselves rather more strongly,
we are reaching the individuals we want to in a more effective
way and doing so at a higher level than we might have done previously.
Q15 Chairman: In which case,
why does it appear that there is a 31% decline in the number of
high-level decision makers and leaders engaged with the British
Council?
Martin Davidson: The reduction
in high-level leaders has caused us concern and we are looking
at that in particular. In part, there has been a refocusing of
our programmes, most particularly the removal of the funds from
western Europe and applying those in new parts of the world, particularly
in central and south Asia and the near and Middle East. It has
taken us longer than we originally anticipated to engage with
that level of individual in those new regions. Of course, by taking
the money out of Europe, we lost such people there in the first
place.
Q16 Chairman: In 2006-07,
your score for engagement with FCO heads of mission was 87%. It
went down to 76% and is now at 79%. Is that change significant?
If so, what will you do to remedy it?
Martin Davidson: I think the drop
between 2006-07 and 2007-08 was largely caused by our decision
to move towards regional working. That meant that we no longer
focused directly on the individual country. The country was focused
on within the context of the wider region. It took us some time
to convince our FCO colleagues that that move was to be welcomed.
I have taken a lot of encouragement from the fact that the numbers
moved back up last year and I anticipate that they will move up
further this year. In part, that is because we have been able
to demonstrate the power of working regionally with a smaller
number of larger programmes. Also, the Foreign Office is moving
to this style of work and perhaps it understands it rather better
than it did when we started.
Q17 Chairman: You referred
to changes in where and how you work in Europe. One figure that
has come out is a perception of a reduction in quality of service
in northern Europe. Is that just an inevitable consequence of
your shift of focus or can we do something about it?
Martin Davidson: I think a strong
aspect is that we quite deliberately are no longer present in
some of the places where we were present previously. Indeed, we
now charge for some of the services that we provided free in the
past. Many of those services are now being delivered online rather
through face-to-face meets. There is an inevitability of some
reduction. We are certainly not complacent about that and believe
that we must focus on ensuring that the services we provide in
the new ways meet the needs and expectations of the people with
whom we are working.
Q18 Chairman: I would be grateful
if you could try to explain another statistic that I found surprising.
The level of satisfaction with engagement with you is apparently
81%, and 82% perceive the British Council as a leader in its field.
However, only 47% recommend working with you. Can you explain
that?
Martin Davidson: I am not sure
that we have sufficiently got inside that. The recommendation
figure is a new measure that we brought in for the first time
last year. We are looking at it because it is an industry-standard
way of thinking about how effective an organisation is. We understand
that the top performers would normally expect to register somewhere
between 50% and 80%. There is clearly a distance for us to go.
In some senses, we are asking different people a different set
of questions. Although people appear to be satisfied with the
services they get, there is not a sufficient number of people
who would necessarily recommend us to others. That is a figure
that we will focus on and try to raise.
Q19 Chairman: Do you have
a regional breakdown for that figure? Is it better in some regions
than others?
Martin Davidson: I do not have
the figures in front of me, but I could certainly supply them
if you would be interested.[1]
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