FCO Performance and Finances - Foreign Affairs Committee Contents

Examination of Witnesses (Quesitons 1-42)

Witnesses: Vernon Ellis, Chair, British Council and Martin Davidson CMG, Chief Executive, British Council, gave evidence.

3 November 2010

  Q1 Chair: I welcome Mr Vernon Ellis, the Chairman of the British Council, and Martin Davidson, the Chief Executive—a very warm welcome to you both. Mr Ellis, I think you would like to make a short opening statement before we get into questions.

  Vernon Ellis: I will keep it very brief if I may, Chairman. I thought it might be worth setting in context, first of all, who I am. I have been Chair since 25 March this year. My background was 41 years at Accenture, where I led its operations in Europe, the Middle East, Africa and India, and then I became international chairman. Over the past decade, I have also had an increasing involvement in the arts. Since the end of 2005, I have been chair of English National Opera.

  When I was approached in January to see if I was interested in being appointed, there was, of course, a competitive process and I dug around to find out a bit about the British Council. I had three impressions. One was that I was very impressed by the wide range of activities, the impact they seem to have and their importance to the UK. Secondly, perhaps because of that wide range and because it had developed into quite a complicated organisation, it was hard to get to the essence of what the British Council was about. Thirdly, I thought that my experience was relevant to the skills listed as requirements in the brief, and that I would bring something to it.

  Since joining, I have spent a lot of time on it—the six days a month was an expected underestimate—and I have travelled a great deal. I was with the Prime Minister's trip to India and I am going to China and other countries. The impressions I have got over those six months have confirmed all those three impressions; but, even more so, have confirmed that it is an important organisation, which can and does make a big impact. But it is also a little fuzzy and a little complex. I recognised from my experience at Accenture that it was on a journey of getting its arms around a very disparate set of countries around the world. Two things seemed to be important. One was to clarify the purpose; the other was to simplify the organisation.

  Its purpose is not very different from what we have said. It is about creating international opportunities for and trust between the people of the UK and other countries. We do it by using our great assets: the English language, higher education and the arts. In terms of organisation, perhaps that is the key, because if we focused very precisely on geography and three sectors—English and exams, education and society, and the arts and culture—it would perhaps be a simpler organisation than the one we have at the moment.

  I will close by saying that I have been absolutely delighted by the rapport I have had with the executive. At the end of the day, they have to manage—not me—the degree to which they experience things that have been useful. Lastly, on the rapport and engagement of the trustees, it is really important that we have trustees who are involved and committed. We have made a lot of progress, but I am hugely optimistic about the future.

  Q2 Chair: Thank you very much. Some of us were in Afghanistan last week, we visited the British Council there and we were quite impressed by what they were doing—it was a good visit.

  Vernon Ellis: Good.

  Q3 Chair: Can I take you back to the events of the last couple of months and the fairly significant spending review that was announced a couple of weeks ago? How did the dialogue go with the Foreign Office and the Treasury and was there any point when your future as an NGO was threatened?

  Vernon Ellis: Not explicitly, at all. There was no dialogue with the Foreign Office about an agenda to cut us. Right from the beginning the Foreign Secretary has indicated—publicly in speeches—that he regards the British Council as an important arm. It is a subtle thing, because the benefits are oblique, rather than direct, but it brings benefit and it is an important part of our integrated approach overseas. Of course, one only has to read to know that there must have been questions from some quarters, but it has never been part of the agenda with us. Martin, you have been more deeply involved in the actual dialogue than I have, although I have interacted with the Foreign Secretary on one or two occasions and it did not come up then.

  Martin Davidson: Obviously the question was asked, along with other NDPBs, but I do not think that we felt at any particular time that there was an agenda for the British Council to be abolished.

  Q4 Chair: How did the conversations with the Treasury go? Did you have the conversations with the Treasury, or was it directly with the Foreign Office?

  Martin Davidson: Obviously, as an NDPB under the Foreign Office, we have to direct much of the conversation through the Foreign Office, but we also have a separate conversation with the Treasury. The conversation was very much as one would expect. What is the value to the UK of the work of the British Council? How do you demonstrate value for money for the expenditure that the British Council undertakes? Are there ways in which the British Council can do the work that we do at the moment in a cheaper and more efficient way? That was the nature of the conversation that we were having.

  Q5 Ann Clwyd: Can you tell me what activities the British Council will need to stop or curtail to meet the 25% cut in spending? Can you give us an overview?

  Vernon Ellis: There are perhaps three areas that I would pick on. First, as I have said, the journey we have been on is to try to get more integration and more synergy. That has meant building some programmes and functions at the centre in order to do that. I think that we have reached a point where a lot of that could be done more naturally with a simpler organisation. There is a cost to be saved at the UK end in the headquarters. Quite a lot has been done already, by the way. A lot of the cost was taken out last year by moving some functions to India, offshoring them, and by rationalising some other functions, but I think that we all agree that more can be done in London.

  Secondly, in terms of activities, the area that is perhaps hardest to get your arms around is what we call "society". We are seeing education as a society. There is a seamless run from education, higher education, schools, schools linkage, inter-cultural dialogues and so on. At one end of that you might say, "Are we really making a sustainable impact, or is it just making a nice dialogue and making an individual impact on individuals?" I think that there are some programmes that we can cut out.

  Thirdly, we will have to look at our geographic coverage. We very much do not want to pull back. We see our local coverage as being essential to our role, but maybe there are some cleverer things that we can do on cutting costs, on doing things in new ways, on perhaps having hub and spoke, but in some way rationalising some of the operations, particularly in smaller countries.

  Q6 Ann Clwyd: In addition to the Grant in Aid from the FCO, you receive over £10.5 million in education grants from other Departments—from the Department for Education, from the Department for Business, Innovation and Skills and from the three devolved Governments. Following the spending review, will you continue to receive that funding and will you continue the activities that funding supported?

  Vernon Ellis: I will turn to the chief executive for a more detailed answer, but the general answer on that and other things that are funded under grants—usually for full cost recovery work or other grant work—is that it would depend on their detailed review following the spending round. We won't yet know the answer to all that. Martin, you might want to expand on that.

  Martin Davidson: For example, the grant from the Department for Education, about £7 million last year, was very much about links between schools in England and other countries, and support to teachers to gain international experience. From the Department for Business, Innovation and Skills, it was to support the promotion of higher education and the recruitment of students into the UK through the Prime Minister's initiative and specific work on developing a stronger education link with India. We are having discussions with those Departments at the moment on what they feel they will be able to continue, but on our side we believe that the opportunities to build stronger links between schools and to give young people who are here in this country an opportunity to gain international experience—albeit largely through internet or IT-based exchanges—are all very important initiatives. The money from the three devolved Administrations was very much in support of those same programmes. In addition to that, Scotland, for example, supported staging the Black Watch play by the National Theatre of Scotland in Washington and New York, where it had the most extraordinary reaction from the audience. The play is about the reaction of ordinary British troops to serving in Iraq.

  Sir Menzies Campbell: I saw it in Brooklyn.

  Martin Davidson: The reaction from the audience was truly extraordinary. Those grants from the other Administrations and the other Departments are important for us, but we have to recognise that in the present circumstances it is likely that they will be reduced.

  Q7 Ann Clwyd: You also raised, I understand, about 70% of your money through commercial activities. Can you explain what those are?

  Vernon Ellis: The bulk of those are English and exams. As I have been around, I have seen the value of that, not just in the commercial raising of income, but the linkage to our other activities. There is a huge demand for English around the world and it is growing hugely in countries like China, but there is still very strong demand in places like Spain and Italy where we have very active teaching centres. I was in Rome last week for the opening of a new Rome office, which is very profitable. English also extends into other parts of our work. What we are doing in India is funded partly by state Governments there. That is not through language teaching centres; it is training master trainers, who train teachers who then reach out to 14 million children. So we see English as being very synergistic with our overall mission.

  Similarly, exams are quite profitable. A lot of them relate to English—they are English exams, IELTS with the Cambridge exam. What we are selling is decent premises and decent supervision, but above all trust. That is why I think it has something to do with our mission. Our brand is associated with trust because they know they are not going to have a corrupt overseer. They know that they will be decently housed, that they will be able to take their exam in private and that their results won't be tampered with.

  Q8 Mr Baron: May I press you on that just a little? There seems to be an assumption about the ongoing negotiations, as regards the settlement as I understand it, that you will have to become more entrepreneurial. Now, you did well last year. There was a 9% increase in your income. Can you tell us a little more about how you are going to become more entrepreneurial, if that is the case? Perhaps that is one reason why you were approached, Mr Ellis. Can you also enlighten us or assure us that, if you are going to become more entrepreneurial, it will not affect or diminish the brand of the British Council?

  Vernon Ellis: If I may say so, that is a very good question. I had the same sorts of questions when I first started talking to the Council, because it seemed to me that you had to be aware that there could be a dichotomy or a strain—that the more you become commercial, the more you put in the type of commercialism that would maximise that, the more you concentrate on, for example, places in Europe, where it is nice and easy and profitable, the more you might diminish your capability overall. I think that I have reconciled my mind in the following way. I am not saying it is easy, because you do touch on a thing, but I think we can manage the growing commercial aspects while, at the same time, having an English language programme that embraces not only those commercial activities, but the wider aspects of the use of the English language. There is no doubt that our brand, and the reason we are a premium supplier in most countries, derives from the fact that it is the British Council. They actually like the cultural associations. They like the high-quality teaching that they get. But I firmly believe that, if you were, for example, to say, "Well, why don't you just sell them off to somewhere else?" it wouldn't be worth as much as it is now, because it would lose something of that distinct brand. If that is so, we have to be very careful to maintain that. You're absolutely right. I think it is something that we have discussed a lot. It is of such importance that I don't know whether you want to add to that, Martin.

  Martin Davidson: The area that I would also like to add is that an important aspect of our income is support from commercial organisations through their CSR works. In the report period, something like £50 million was raised through partnership with commercial organisations. I think that part of the future for us will be to develop stronger links with other organisations that are prepared to support and work with us.

  One example is that I will be talking later this afternoon to the head of the Microsoft learning network, which is particularly interested in working with us on school-linking in sub-Saharan Africa and will, we hope, be wanting to partner with us, including financially, to develop those school links. If we aren't able to maintain the level of school links that we have at the moment, we are looking for other partners that are able to work with us to do that, and they want to work with us, because of the brand and the sense of an organisation that is, yes, delivering something of value to the UK, but also delivering something of value to the places where we are working.

  Q9 Mr Baron: That is very good to hear, but do we have your assurance, or a certain assertion, that the brand will be protected? One can think of other examples where commercialism has represented a sacrifice and is not to the long-term well-being of the organisation in question.

  Vernon Ellis: I have thought about this a lot, and I think it is really important. We can be more entrepreneurial without destroying it. If I thought that it was an impossible dichotomy, and you really can't do it, there would be a case for selling-off, but I think there is weak case for selling-off as it stands now.

  Martin Davidson: The one thing we do say to all our staff when we start thinking about this is that we have a double-bottom line. We need both the commercial gain, but we also need the impact, the sense of a partnership and the building of trust through the commercial activities. Both of those things have got to be part of the agenda for the future.

  Q10 Mike Gapes: May I switch the focus a bit? Last week, the Foreign Secretary wrote to our Chairman, and included with his letter was an interesting paragraph about what he expects the British Council to do to help reduce the deficit. The phrase that I would like to quote to you is to do with overseas development assistance, because I am not clear what it means and perhaps you will be able to explain it to me: "I am also asking the Council to meet an ambitious ODA target, and I expect to start a strategic dialogue with the Council quickly to agree how best to maintain the Council's significant global impact, and target it to greatest effect in these new circumstances." Can I take it from that, that somehow or other, you are going to be used to pay towards some of our overseas development spend, rather than it coming out of either the FCO's budget or the DFID budget?

  Vernon Ellis: Already, I think £40 million of our grant is classified as ODA. There is a very precise definition of ODA, which is laid down by the OECD.

  Mike Gapes: Yes, I am aware of that.

  Vernon Ellis: A lot of what we do naturally falls into that. Indeed, when you look hard at it, you can increase that still further. If you increased it more and more every year, it would inevitably mean that you would, indeed, take away some of our work. There would also be some interesting discussions, which will no doubt follow, about what ODA is and what work we do and how that aligns with Britain's objectives in that area. For example, I believe that there is a very valid argument for arts for development. Establishing artistic institutions that give freedom of expression, that enable difficult topics to be discussed and provide outlets for local art on an international scale, is part of development. They can link on to cultural activities.

  Certainly, as DFID was—I am not saying as it is now—that probably wouldn't have been high on its agenda, because it had a higher priority of immediate poverty relief. With the way it is looking now—much broader—and the way that the Foreign Secretary, I think, sees development as a broader institution, I can see that falling more naturally. It is those kinds of discussions in detail that will come in due course, no doubt, but I don't see a big threat to us, implicitly, in what the Foreign Secretary has written there. In fact, I think we'd welcome it.

  Martin Davidson: Yes, we would see our work in English—English for development, the development of higher education and education more generally, and the work of arts within development—as falling within the OECD definition of ODA. That is where we see ourselves focusing.

  Q11 Mike Gapes: Can I be clear? Are you saying that, at present, the British Council is spending in particular in areas related to art and culture, which could be included within the ODA definition, but are not? The implicit consequence of that, therefore, is that by counting what you are spending as part of the ODA, the Government could reduce their spend on poverty reduction in the DFID budget but still stay within the 0.7% target, because they don't count what you do as being part of that 0.7%.

  Vernon Ellis: I do not think that we can speculate on what the Government might do.

  Q12 Mike Gapes: No, but am I correct in saying that you do things at present that are not counted within the ODA definition of the UK Government, but are counted within the ODA definition of the OECD?

  Martin Davidson: At the moment, we calculate that something like £40 million of our grant has traditionally always fallen within the ODA definition, because that part of the grant was given to us from DFID about 10 years ago. Looking at the work that we do at the moment, we estimate that double that figure could possibly be submitted.

  Mike Gapes: So if I am right, the definition could be changed to the OECD definition, and, by implication, a reduction could take place elsewhere and we would still meet the 0.7%.

  Q13 Mr Ainsworth: We are not distorting the work that you do. We are effectively re-badging it so that it is ODA accountable.

  Martin Davidson: That is probably correct, yes.

  Q14 Mike Gapes: You referred to art and culture, and when we were in Pakistan last week we had a very interesting discussion with some British young people, who were taking part in an exchange programme, which I think you had something to do with. That was very interesting and very good.

  We also had discussions in Afghanistan about the Chevening scholarships. If I have remembered correctly, and I may be wrong, I was told that there were some 800 applicants, but only eight people from Afghanistan go through the Chevening programme, which is obviously a very small number of people. Do you have any say in the prioritisation of countries? I know that you administer the Chevening programme for the FCO, but do you actually have any say in which countries and how many people there will be from each country?

  Martin Davidson: On the whole, no we don't. We act very much as an agent for the Foreign Office in administering the scholarships, but the decisions on the prioritisation of countries is made by the Foreign Office.

  Q15 Mike Gapes: So they give you a number?

  Martin Davidson: They essentially give us a number for individual countries, and we administer that within the countries.

  Q16 Mike Gapes: Then you have to be sure that the people who make the application and qualify for the scholarships are those who are really able to come through the system, and have not been put in by some corrupt Minister somewhere because they are his nephew.

  Martin Davidson: That is absolutely correct. It varies from country to country, but in essence our job is to ensure that the right people are selected, that they have the qualifications and that they will benefit.

  Vernon Ellis: You probably know, but the number has been reduced. The grant has been halved.

  Q17 Mike Gapes: Because of the CSR?

  Vernon Ellis: The decision to halve the grant for that area was actually made in May this year.

  Q18 Mike Gapes: What does that mean for you in the long term? Does that mean that there will be half the number of places available, or, given the admin costs, is the impact bigger than that?

  Vernon Ellis: The precise number according to our estimates is that we were administering 1,000 awards and we are now at 580.

  Q19 Mike Gapes: Do you have any view on what the CSR will mean in the long term?

  Martin Davidson: I do not think that we are aware yet of what the outcome will be. The one thing that I would say is that, from our perspective, the Chevening scholarships are an extremely valuable contribution. Some outstanding people from across the world have taken them and are now in positions of real importance. We would very much want to see the scholarships remain as an element of the UK's wider projection.

  Q20 Mr Watts: On the subject of value for money and efficiency, you have been very successful in reaching the targets set by the previous spending review. What are the implications for the organisation in doing the same through this spending review? Are there any risks or problems associated with your decision to locate the financial processing centre in Delhi? Could you just outline how you view that decision?

  Martin Davidson: We have been effective in meeting the efficiency savings, and it has been with real pain within the organisation. With the fall in the value of the pound two years ago and the loss of the overseas price mechanism, which compensated for that, we made a decision that we had to radically change the way in which we worked if we were not going to become an organisation that spent purely on being there and not doing anything. We made a decision to establish two principal changes. First, we decided to establish a support services hub in Delhi to bring together all our global finance, IT and increasingly HR work into that one location. Secondly, we radically changed the way in which we do our support for the operations here in the UK.

  The Delhi hub opened in May. It has gone relatively smoothly; there have been some problems along the way, but they have not been significant. We have been very conscious of the potential dangers of having all our eggs in one basket, and as part of the development of the hub we also have a secondary facility based in India where we could transfer activity if that hub became unusable for technical reasons. We are also maintaining a skeleton staff in Warsaw and here in London. If India as a whole became unusable, we would be able to pick up and manage our activity from those two locations. So we have multiple layers of contingency planning to ensure resilience of the system.

  Q21 Mr Watts: The general thing about this spending review is that you have already made substantial savings in efficiency. You would think either it was a very inefficient organisation to start off with, or you were now getting to a stage where they are not really efficiency savings but cuts.

  Martin Davidson: Indeed. It is an area of real concern to us. We reduced our staffing over the past three years from something like 1,250 in the UK down to 800. I anticipate that we will want to reduce our headquarters yet further. The truth of the matter is, like many other organisations, we have been largely bureaucratic. We are wanting to move ourselves to being much less bureaucratic. That will probably mean reducing our headquarters staff quite significantly over the coming period. That does not necessarily mean having a lot fewer people in the UK, because we also have the UK operation as well as the headquarters, but I would see us becoming a much smaller headquartered organisation in the UK.

  In order to manage a 25 or 26% reduction, we will have to do business in a different way. In particular, as the Chairman said a little earlier, that means stopping doing some of the work that we do at the moment and thinking about our physical presence overseas in very different ways. A physical presence is extremely expensive—the buildings and the necessary wraparound for that—and I think there will be a number of places where we will probably have a virtual wraparound for that. I think there will probably be a number of places where we will have a virtual rather than a physical presence in the future.

  Q22 Mr Watts: Do you have any feel for how that 25% cut will be split between what you stop doing, and greater efficiency through less bureaucracy?

  Martin Davidson: The model that we are looking at, at the moment—obviously we are still working a lot of this through—would be for something like 35% of the total cut to be met through reducing our overhead. The balance will have to be found by changing the way we do our work overseas.

  Q23 Mr Frank Roy: On this point in relation to a business transformation programme, I am interested to hear you speak about a 25 or 26% reduction when the numbers are telling us that you are going to cut the number of staff by a third. Isn't that a top heavy slicing of your staff?

  Martin Davidson: The reduction of a third is what we have already done through managing the reduction in value of the pound. We haven't yet worked out what a further reduction in staff might be, but there will be some reduction; I think it's inevitable.

  Q24 Mr Roy: The ballpark figure that you are talking about, that you have already identified, is 500 jobs?

  Martin Davidson: That is correct.

  Q25 Mr Roy: Your report last year highlighted that you have got to 300?

  Martin Davidson: That is correct.

  Q26 Mr Roy: So I presume that you therefore still have the balance of nearly 200?

  Martin Davidson: In the UK, yes.

  Q27 Mr Roy: And that you are going to have more on top of that?

  Martin Davidson: The balance of that 500 are already largely gone, but the balance will be gone by the end of the financial year. We would still expect to see a further reduction in headquarter staff and headquarter functions here in the UK.

  Q28 Mr Roy: Presumably all those staff were doing really important jobs before you made them redundant. That suggests to me that if you are making such enormous cuts to your staff there will be massive cuts to the services that they provide. Surely you will not be able to deliver the same level of service as you did previously with 500 more people?

  Martin Davidson: We will have to change the way we do our work. There is a lot of bureaucracy and administrative overhead in the organisation which we will need to strip out. But also there will be a reduction in services, absolutely. Part of that we will look to replace through our income-generating activity, but it certainly won't be possible to replace all of it.

  Vernon Ellis: May I just add a word about the bureaucracy? I do not want to label this organisation, or for you to label the organisation, as being inherently bureaucratic, but in any complex people-organisations there are things that could be called bureaucratic.

  I mentioned this journey. The journey was 110 countries around the world, five or six years ago, each to an extent doing their own thing, often very good things, but there was a lot of reinventing the wheel, not much commonality and not much synergy in terms of bringing people across. What Martin and his team did, as I understand it, was to put in on top of our normal sectors of English some vigorous centrally led programmes that devised things of global impact in certain areas, such as inter-cultural understanding, the use of the creative industries and so on. They were driven out of London, and that did change the nature of the organisation. But it had a cost, because you then had some sectoral people, you had some programme people and you had some geographic people. And then you have a lot of other people trying to tie things together and monitor how this interfaced with that, and how we could plan for it and then monitor it more aggressively.

  I think it has reached the stage of maturity when we can pull some of that back. We can be simpler. We can focus on where it matters on the ground in these three areas, these three sectors.

  Q29 Mr Roy: How can you pull that back if you are now proposing even more job cuts?

  Vernon Ellis: We haven't done that yet. At the moment we have an organisation designed to support that rather complicated way of doing things. It isn't going to be all our savings, but it will certainly be some of it. And I don't think that that will reduce service at all, I really don't.

  Q30 Mr Roy: But you actually think that you can lose many of these jobs? Surely you cannot lose all those jobs and not reduce the service?

  Vernon Ellis: We are talking about the UK?

  Mr Roy: Yes.

  Vernon Ellis: What I would be worried about in the UK—and this we will have to look at from a service point of view—is that part of the UK which is the UK end of bilateral and multilateral partnerships with universities, schools, whatever. I think we have to be careful of that.

  Part of it also, as we journey, is that we've perhaps merged together two different things in the UK. There is a head office function, a headquarters, which supervises and does innovation and programmes; and then there is a UK service element. One of the things that we want to do is to make a more distinct difference between the two, and I would want to preserve the UK because it is a very important part of our service, but reduce some of the overhead.

  Q31 Mr Roy: May I ask a further question? How many staff do you have now, and how many staff do you expect to have in two years' time?

  Martin Davidson: Here in the UK we have 825 full-time equivalent staff on the books. I don't know at the moment exactly how many we will have in two or three years' time, but it will be a smaller number than that; it is almost inevitable.

  Q32 Mr Roy: What is a smaller number? Surely you have a projection of where you want your funding to be in two years' time, and therefore your staffing costs and keeping people in a job, which is obviously very important for your employees.

  Martin Davidson: Of course. This is exactly the conversation we are having with our staff at the moment. The spending review was only a couple of weeks ago. We will be working with staff, the trade union side and indeed with our managers, to see how we can actually—

  Q33 Mr Roy: When do you estimate that you will know when you come to that?

  Martin Davidson: I would expect us to come to a view by the end of this financial year. Given that the reduction in income for the organisation is a fairly straight line in terms of trajectory, I wouldn't expect a huge change in a very short period of time. I would expect the change to take place over the next two years, but we will have the plans in place by the end of the financial year.

  Q34 Mr Roy: Still on those 825 employees, do you have a reasonable breakdown, in relation to the United Kingdom, of where they all come from?

  Martin Davidson: I do not have it off the top of my head. I can write and let you have it. We expect to maintain our offices in Belfast, Edinburgh and Cardiff, as well as Manchester and London. We think it is very important for our organisation to have a genuine distributed headquarters across the UK.

  Q35 Mr Roy: On that point, in relation to London and Manchester, the lease of the Manchester premises is up pretty soon as I understand it—2012. For Spring Gardens that is 2020.

  Martin Davidson: That is correct.

  Mr Roy: What are the Council's plans for renewing those leases?

  Martin Davidson: At the moment, we need to work out the exact numbers that we will have in place. I would expect, if there is a reduction in numbers in the UK, that that will largely come from London, and perhaps secondly from Manchester, rather than from the other centres. We have a very good lease, particularly for our Spring Gardens premises here. It is about two thirds of market value, or market price, through to 2020. It will be too large for us within the next year or so, but we will look to sub-let part of the premises to keep the lease. We haven't yet made up our minds exactly what our premises requirements will be from 2020 onwards.

  Q36 Mr Roy: What about 2012 for Manchester?

  Martin Davidson: The premises are significantly too large for us now in Manchester. We are negotiating with our existing landlords, but also looking elsewhere in Manchester to see whether we should move.

  Q37 Chair: May I turn to the scale and scope of what you are doing? I gather that you measure the scale of your work in terms of engagement, the people you see face to face, and in reach—the people with whom you interact online. I understand that you will be doing some tracking of how many people you are getting through to. What is your thinking behind that?

  Martin Davidson: As you say, we measure through those two lenses. We believe that the engagement figure, which is those individuals who come into a positive transaction with the organisation, is the most important measure. It is also important to ask the question, "What is the impact that that engagement has on them?".

  Q38 Chair: And does it justify the resources?

  Martin Davidson: And does it justify the resources? We have a certain amount of measure at the moment through our evaluation of long-term outcomes survey. We have also undertaken some work over the past year in five particular countries, including Saudi Arabia, China, Poland and India, to ask the question, "Does this engagement actually change the level of trust that individuals have in the UK and in the British Government?". Like all these things, it is always difficult to be able to draw a direct link between the work that we have done and the particular outcomes. But we believe that it is important constantly to ask the question, "Has this work actually resulted in a change in people's attitude?". That particular piece of work, done for us by YouGov, indicated a very significant shift in people's attitudes, particularly in those countries where the trust was perhaps least well developed. For example, the greatest shift has been in Saudi Arabia and China. People coming into contact either with the English language or with British education has changed radically their people's trust in the UK.

  Q39 Sir John Stanley: The British Council has had a pretty rough time in Russia in recent years. As you know from our reports in the previous Parliament, there is a lot of concern about that in this Committee. Where do you regard the British Council as standing vis-à-vis the Russian authorities? Are we still in, basically, a stalemate or do you see any chink of light that will enable you to do what you want to do in Russia?

  Martin Davidson: As the Committee knows, we took court action against the Russian tax authorities and their demands for tax from the British Council. Those cases have been concluded in our favour, fortunately, and we believe, rightly. The tax bill was reduced for St Petersburg by 99% and for Moscow by 95%. That has been very important. The indication from the Russian authorities is that they desire a stronger cultural relationship between Russia and the UK. The Turner exhibition, which took place in the Moscow Academy a couple of years ago, was extremely successful. It was awarded "exhibition of the year" by Russian critics. We expect a very major exhibition to take place in Moscow in 2012 and are in discussion with the Russian authorities to recognise the 50th anniversary of the first manned space flight next year, with an exhibition of Russian space exploration and, we hope, a statue of Yuri Gagarin, which the Russians wish to bring to London.

  The mood music is very different. It hasn't yet translated into the opportunity for us to sign our Cultural Centres Agreement, on which we are still very keen, or to return to St Petersburg, which we believe to be critical. We don't believe that we, as a cultural relations organisation, can be effectively present in Russia unless we're present in both Moscow and St Petersburg. Work remains to be done, but there is no question but that the Russians continue to link the position of the British Council and a warming of our work with the broader political relationship between Russia and the UK.

  Vernon Ellis: I was at a meeting the other day with the Britten-Pears Foundation, and there is a lot of talk about having a considerable presence on the 100th anniversary of Benjamin Britten's birth in 2013. They have an intense interest in him and I think that a lot of activity will happen, of which we will be part.

  Q40 Sir John Stanley: Do you feel that FCO Ministers can give you any additional support and help with the Russian authorities?

  Martin Davidson: Certainly the position of the British Council remains an item on the agenda with the Russian authorities. We had the conversation several years ago in this Committee in the previous Parliament about that linkage between the political relationship and the cultural relationship, which we deeply regretted. One of the aspects of the problem with Russia was that the Russians, pretty uniquely, had linked the education and cultural relationship with the wider political relationship. Most other countries seek to keep that separate. We believe that the role of the British Council in building that wider trust relationship using culture and education is best done at one remove from the direct political relationship.

  Q41 Sir John Stanley: Equally difficult, if not more difficult is Iran, where the British Council has been given a wonderful opportunity to let people know something of the world that is, to some extent, removed from them. Do you see any way of breaking out of the stalemate that you have with the Iranian Government?

  Martin Davidson: In the immediate term, I don't see any likelihood of the British Council returning with a physical presence in Iran, but we are looking to see how we can develop work with other organisations to support a wider involvement with Iran. For example, we now have a programme with the BBC World Persian Service on English teaching. That will be broadcast in the new year. Given the nature of the language, we will also, with the service, transmit that into Afghanistan and Tajikistan. We are working with a number of British universities to support university-to-university links and we are also supporting British arts organisations to try to become involved in Iran. But at the moment, given the Iranian attitudes towards us as an organisation, I don't see a short-term likelihood of our being able to return to Tehran.

  Q42 Sir John Stanley: Is the British Council in Iran being treated in the same way as the French and German equivalents, or have they somehow found a way of maintaining a presence that we haven't been able to do?

  Martin Davidson: I am not absolutely clear at the moment on exactly what the position is. Certainly I have had conversations with my French and German counterparts, who have had significant difficulties in that place. It is, however, true, I think, that the Iranian authorities treat British institutions like the BBC and ourselves with considerably more suspicion than perhaps they do those from other countries.

  Chair: Time is up. This has been a really valuable contribution and it will be very helpful to us in preparing our report on the finances and performance of the Foreign Office, of which you are a component part indirectly. Thank you both very much indeed.

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