8 The British Council |
The 2010 Spending Review and
the British Council
84. The British Council, the UK's principal public
body for cultural and educational relations with the rest of the
world, is one of the largest organisations of its kind worldwide.
The Council is a charity established by Royal Charter, and is
overseen by a Board of Trustees, but has a reporting relationship
with the Foreign Office
and receives substantial funding from it. The Council's work includes
helping deliver the UK Government's foreign policy objectives
(provided this is consistent with its charitable purposes and
Charter aims). By any criteria, the British Council is a major
instrument of UK public diplomacy and "soft power".
85. The UK is recognised as one of the leading
global exponents of soft power.
As we have reported in the recent past,
there is increasing global recognition of the importance of cultural
relations as a means of enhancing a country's reputation and status,
of generating goodwill from other nations and peoples, and therefore,
indirectly, of advancing the national interest. With this increased
recognition also comes increased competition: in its own evidence,
the Council acknowledged the significant investment that China
and Turkey, amongst others, have been making in their public diplomacy.
86. The Diamond Jubilee and, in particular, the
London Olympics and Paralympics ensured that 2012 was a very good
year for the UKMartin Davidson, Chief Executive of the
British Council, described it to us as "exceptional"but
precedent indicates that this "2012 effect" may not
last long. Mr Davidson went on in his evidence to caution that
the boost that 2012 had provided to the UK's image abroad would
"fade extraordinarily quickly"
if there were a lack of future investment in the promotion of
the UK's image and significance abroad.
87. These comments were made in the context of
an increasingly challenging economic climate for the British Council,
whose turnover comprises a mixture of direct grant from the FCO
and commercial income from English teaching and contracts. In
2010, the grant was £180 million, comprising 30% of income.
Since then, it has been shrinking. By 2015, when the Review period
ends, grant income will have reduced to some £150 million,
a cut of some 26% in inflation-adjusted terms.
88. Not only is the FCO grant being reduced:
it is also being increasingly ring-fenced, for spending in the
developing world. By the end of the Spending Review period, around
two thirds will be ring-fenced. According to the Council, this
will have the effect of requiring their offices in the developed
worldin places such as France, Germany, Japan or South
Koreato become increasingly self-financing.
THE BRITISH COUNCIL'S RESPONSE TO
THE SPENDING REVIEW
89. The Council has responded to this financial
challenge in two main ways. First, it has made cuts: it has cut
staff in the UK (partly through compulsory redundancies) and shrunk
its UK office footprint, transferring most back office work to
India; it has ended some loss-making programmes; and it has closed
a small number of overseas offices (many of them small offices
in the developed world-those places hardest hit by the combined
effect of the drop in grant and its increased ring-fencing for
development aid). 
The first phase of this programme of savings has been the focus
of much of our scrutiny over the past two years.
90. Secondly, the Council has significantly expanded
its commercial operations. Its overall aim is, despite the cut
in grant, to expand its turnover and activity over the
Spending Review period, through becoming a more commercial and
Its target is to achieve turnover of £969 million by 2014-15
(as opposed to £707 million in 2009-10), of which just 16%
will be FCO grant income.
91. Over the past three years, the main theme
of the British Council's evidence to the Committee has been that
the Spending Review has been extremely challenging, and has required
some difficult choices, but that the Council is coping. It has
not significantly drawn in its international activities, nor has
it compromised its charitable purposes or its reputation, in its
efforts to become more commercial.
THE BRITISH COUNCIL AFTER 2015
92. However, this year, we detected a new note
of concern in the Council's evidence, relating to the period after
2015, when the Spending Review ends and the Council will face
a new funding settlement. Martin Davidson told us that current
indications were that funding from the FCO would, for at least
for the first year after the end of the Review period, follow
the same downward trend. This would mean another £8 million
being cut from the grant that year, with the possibility of more
cuts to follow.
Mr Davidson warned of the danger of under-estimating the importance
of soft power and the Council's role in relation to it. Referring
to the "vitally important"
connection between the Council and the UK's foreign policy agenda,
he said there was a risk of it being broken if significant cuts
continued after 2015:
We must maintain that connection; otherwise we are
simply another commercial organisation and not delivering the
soft power of this country. That would be a tragedy not just for
us as an organisation but for the UK.
93. Mr Davidson also appeared to see it as inevitable
that cuts of this nature would lead to further office closures
There is no question - particularly if what we fear
is likely to come from a further reduction into 2015-16 - but
that our ability to maintain the scale of operation we have, for
example in western Europe, is going to come under real challenge.
While I think we have some very fine small offices, there comes
a point when the cost of being there is simply excessive compared
with what you are actually able to achieve.
94. Grant losses would of course be mitigated
if targets for commercial income were met or exceeded. Council
witnesses acknowledged, however, that the commercial targets they
had set themselves for 2015 were tough and that there was a risk
of their not being fully achieved. Some interim targets (for instance,
increasing turnover by 9% during the reporting year) had not been
met, which the Council had blamed in part on instability in the
Middle East and North Africa. The relative weakness of the euro
during the reporting period had also been problematic.
THE BRITISH COUNCIL'S PROFILE AND
95. In our reports of the last two years, we
took the view that the Spending Review "may well trigger
some fundamental rethinking of the role and work of the Council"
and lead to it "becoming a substantially different organisation".
96. If the Review has led the Council to become
a more business-savvy body and a more diligent custodian and investor
of public money, this is, of course, a good thing. However, we
have been concerned that the Council's changed financial situation,
and its focus on generating more commercial income, might lead
it into making decisions inconsistent with its long-term interests,
or with those of the UK. For instance, it might feel compelled
to abandon schemes and programmes that produced no direct financial
return but generated more intangible benefitsnot least
a very positive image of the UK. It might employ fewer staff overseas
who have a strong connection with the UK. Or it might focus too
much on income-generation, for instance by charging for previously
complimentary events or services, and in so doing putting at risk
the goodwill of the foreign investors or opinion-formers that
it was seeking to reach. We summed this up last year in the view
that the Council should not end up as "predominantly an English
language school rather than a promoter of the UK's reputation,
culture and influence."
97. We explored this issue further with the British
Council this year. Council witnesses clarified that it does, from
time to time, take advice as to whether particular activity is
consistent with its charitable status and core aims, including
from the Charity Commission.
In relation to English teaching, the Council makes no secret of
the Council's desire to markedly increase income, and to pursue
new markets in areas where it is currently weak, for instance,
in Latin America.
Tied in with this is an increased emphasis on pursuing major contracts
for teacher training and on becoming more of a presence in online
98. Council witnesses argued that there was no
inconsistency between any of this activity and its charitable
and Charter purposes.
Professor Pamela Gillies, a member of the Council's Board of Trustees,
stressed that, even if account were taken only of the Council's
English teaching work, that in itself helps advance the Council's
cultural agenda as the curriculum it uses "is absolutely
steeped in British culture".
Martin Davidson referred to an "income dividend"
from more commercial activity that could be recycled as spending
on arts, culture, and broader education. This, he argued, was
particularly needed in the developed world (he singled out France),
where it had now become a "challenge"
for the Council to remain a body focussed on the advancement of
British culture, rather than simply a money-making organisation.
99. Other risks may arise when a cultural and
charitable organisation such as the Council starts to orient itself
as a more commercial body. One is that it engages in work that
compromises, or is seen as compromising, its independence and
integrity. This criticism has been made of the Council in relation
to the 2012 London Book Fair. The Council has an established role
promoting each year's "market focus" for the fair, which
last year was China. Some critics allege that the Council had
let the Chinese Government have too much influence on the programme,
including allowing it to dictate which writers should and should
not be invited.
We put these criticisms to Mr Davidson, who responded
that getting the right balance in dialogue with China was "an
extraordinarily sensitive area". He acknowledged that the
Council had refrained from inviting some dissident writers but
said it was "critical ... that we do not look at a single
event like the London Book Fair, but at a broader sweep."
Mr Davidson added that, in other contexts, the Council had played
its role in exposing people in China to diverse and dissenting
views that might otherwise have remained unheard.
100. Another risk is that the organisation might
increasingly seek to "monetise" its good name and its
relatively privileged access to power, to the detriment of its
competitors. We are aware of some criticism reported in the media
that the British Council has increasingly become a commercial
rival to private businesses (particularly in English teaching)
and does not compete with them on a level playing field. We put
these observations to Mr Davidson, who responded
that he had heard "a generalised air of concern" but
that the specifics of any criticism were often lacking. He clarified
that the Council had "a very clear policy" of not using
the FCO grant to subsidise its English teaching, which in any
case tended to be more expensive than that offered by other providers.
101. Overall, it is to the British Council's
credit that it has responded positively to the considerable challenge
posed by the 2010 Spending Review and has, so far, managed to
take on a more entrepreneurial character without significant detriment
to the quality of its work or its global reach. We
urge the Council, and its trustees, to be continually vigilant
in ensuring that it retains its good name and integrity as it
becomes more financially dependent on earned income.
102. In addition, we urge the
FCO to pay heed to the British Council's concerns about its future
funding, after the current Spending Review period ends. The Council's
main role is to promote British culture and education, which is
an end in itself. In so doing, however, it both generates trust
and deploys influence, from which the UK as a whole benefits.
The UK currently performs well in the global contest for soft
power, but that contest takes place in an increasingly crowded
field, and against increasingly well-resourced competitors. Trading
off the advantage the UK currently enjoys in that field- and all
the benefits, tangible and intangible, that come with it- in exchange
for relatively minor savings on the FCO balance sheet would be
the worst sort of false economy. Accordingly, the Committee believes
that the FCO should shield the British Council from the effect
of any further cuts to the Department's budget in 2015-16.
The Council's role in relation
to higher and further education
103. The British Council describes the UK's further
and higher education sector as one of the UK's "most attractive
describes its own role in promoting the sector overseas as "one
of our absolute core areas of work".
The Far East and South Asia (especially India) are recognised
as two particularly strong growth areasregions with the
potential to send large numbers of students to these shores, including
postgraduates who may have commercially useful skills in research
GOVERNMENT POLICY ON STUDENT VISAS
104. Since coming into office, the Coalition
Government has been seeking to reduce migration into the UK. The
Government is constrained about what it can do about migration
from within the EU so has focussed on other areas. This has included
tackling perceived abuses of the student visa system. In response
to concerns that
the policy is hindering the growth of the UK tertiary education
sector, and the recruitment of talented postgraduates to university
research departments, the Government has sought to stress that
there is no formal cap on overseas students and postgraduates,
and indeed that it would be happy to see the number continue to
rise. It has also emphasised that its policy is as much about
addressing loose practices by universities and colleges in this
country (or bogus organisations posing as colleges) as it is about
preventing bogus students coming in to the UK under false pretences.
105. Recent official figures, published after
our evidence session with the British Council, indicate that the
number of overseas university students in the UK has continued
to rise, but at a lower rate. Within that, there has been a small
decrease in overseas postgraduate students. The number of individuals
coming to learn English or attend further education colleges has
THE BRITISH COUNCIL'S VIEW
106. Visa policy is not within the remit of the
FCO and it is not our role to examine the overall merits of the
policy in this report.
However, the issue did arise in our scrutiny of the British Council's
effectiveness as a champion of the British tertiary education
system abroad. The Council's evidence was blunt. Professor Gillies
said that the policy contributed to a general sense overseas that
Britain was an "unfriendly" country, and was:
seriously damaging our ability to work with countries,
and not just in higher education - it is poisoning a wide range
of activities that we are engaged in. We need to work hard to
turn around those negative perceptions.
107. Mr Davidson said
that it was "purely" because of the Government's student
visa policy that much of the foreign media was running negative
stories about Britain's attitude to overseas students. This helped
create "a sense that foreign students are not welcome".
He added that:
Many countries believe there is a cap on visas, and
many people believe that the systems are designed to make it difficult
to come here. Much of my colleagues' time is taken up trying to
convince local authorities, agents and other organisations that
that is not the case.
108. The British Council's important
work promoting tertiary education, and promoting the UK as a place
to study in and to carry out research, gives it insight into the
impact of the Government's student visa policy. It is therefore
worrying to hear the Council warn that the policy is being interpreted
in some parts of the world as a message that the UK does not welcome
foreign students. The Government should consider this warning
carefully. Whatever the merits of the policy, a revision of how
it is being communicated is called for.
167 The Council's annual corporate plan must be approved
at FCO Ministerial level; the Council must advise the FCO if it
intends to open or close offices overseas; and the Permanent Under-Secretary
of the FCO is ex officio a trustee of the Council. Back
For instance, since 2010, three successive surveys carried out
by the Institute for Government, in collaboration with Monocle
magazine, using a mixture of objective and subjective criteria,
have ranked the UK in the top echelons of global soft power. In
the most recent survey, in November 2012, the UK came top. The
British Council cited in its written evidence survey data showing
that respondents in 10 strategically important countries rated
the UK very favourably for levels of trust compared to other countries.
In our report, FCO Public Diplomacy: The Olympic and Paralympic
Games 2012, Second Report of Session 2010-12, HC 581 Back
Ev 46 Back
Q 169 Back
Q 177 Back
Departmental Annual Report 2010-11, Eleventh Report of
Session 2010-12, HC 1618, Q 175 & Q 180 Back
British Council, Annual Report 2011-12, page 68 Back
British Council Corporate Plan 2011-15and Annual Report
2011-12, page 8 Back
According to the Council's 2011-12 Annual Report, 25% of its £739m
turnover for the year came from grant, 59% from fees and income,
and 15% from contracts. Back
Departmental Annual Report 2010-11, Eleventh Report of
Session 2010-12, HC 1618, Q 169 & Q 194 Back
Q 170 Back
Q 170 Back
Q 177 Back
Q 190 Back
Q 172; The British Council, Annual Report 2011-12, page 11 Back
FCO Performance and Finances, Third Report of Session 2010-11,
HC 572, paragraph 85 Back
Departmental Annual Report 2010-11, Eleventh Report of
Session 2010-12, HC 1618, paragraph 62 Back
Departmental Annual Report, Eleventh Report of Session
2010-12, HC 1618, paragraph 63 Back
Q 179 Back
Q 202; British Council Annual Report 2011-12, page 60 Back
Q 186; British Council Annual Report, pages 16 and 17 Back
The Council's Charter aims include promoting "a wider knowledge
of the English language" and "the advancement of education".
These are subject to the over-arching condition that the Council
shall advance "any purpose which is exclusively charitable". Back
For instance, in an article in The Guardian, 13 April 2012 Back
Q 199 Back
For instance, in an article in The Guardian, 8 October
Q 183 & Q 185 Back
British Council Annual Report 2011-12, page 21 Back
Departmental Annual Report 2010-11, Eleventh Report of
Session 2010-12, HC 1618, Q 188 Back
British Council and Oxford University: The Shape of Things
to Come: Higher Education Global Trends and Emerging Opportunities
to 2020 (2012) Back
As reported, for instance, in The Economist on 20 October
As reported, for instance by The Telegraph on 18 February
2013, referring to comments made by the Prime Minister in relation
to his visit to India that month. Back
As set out, for instance, in the Home Secretary's 12 December
2012 speech, An Immigration System that Works in the National
Interest, available on the Home Office website. Back
Higher Education Statistics Agency, Statistical First Release
183 (January 2013); Office for National Statistics, Quarterly
Report, February 2013. Back
Two House of Commons committees with more direct locus to comment
have reported on aspects of the Government's policy. In March
2011, the Home Affairs Committee, whilst welcoming the Government's
aim of preventing abuse of the system, concluded that the Government's
policy risked damaging the UK's thriving educational export sector.
The Committee expressed doubt whether overseas students should
be counted as "migrants" for immigration purposes at
all. This latter point was the main conclusion of the Business,
Information and Skills Select Committee in their September 2012
report, Overseas Students and Net Migration, which argued
that the way the Government's policy was being implemented was
economically damaging to the UK. Back
Q 208 Back
Q 208-209 Back
Q 209 Back