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Baroness Blackstone: My Lords, perhaps the noble Lord will clarify one point. Is it not the case that the substantial cuts in the bilateral aid programme will affect the contract income that the council has received over the past few years? Will it not be cut in future just as a result of the other cuts that have been made to the aid programme?

Lord Chesham: My Lords, while there may be cuts, our bilateral aid is specifically targeted. Those are the areas in which the British Council is of the greatest help in supporting or administering bilateral aid.

Within the bilateral programme, our country programmes are recognised for their excellence and poverty focus. They are at the heart of our aid effort, and therefore we continue to focus expenditure through them. We also seek to maintain our support for volunteers and non-governmental organisations. The funding of NGOs has risen sharply over the past five years from £65 million in 1989-90 to £185 million in 1994-95. The joint funding scheme, which is ODA's principal channel of support of the development activities of NGOs, rose from £16 million to £33 million in the same period, and a further increase in 1996-97 will take it to over £36 million. Similarly, our support to the volunteer agencies, like VSO, will be increased by over £1 million to £23.7 million in 1996-97. This means that expenditure on other aspects of bilateral aid, including grants to the British Council, will decrease.

I am pleased that some noble Lords have stressed the importance of the arts. The council plays a pivotal role in taking the best of our visual and performing arts

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overseas as well as promoting British literature and films. The council has also been highly successful in stretching its grant funding through sponsorship. Typically, the council now puts in only modest seed-core funding, plus its extensive expertise, to bring about major cultural events which bring us enormous good will, publicity and business opportunities. Many firms that have been involved in sponsorship have found this to be a sound investment, and I hope that others will follow suit.

The noble Lord, Lord Mayhew, referred to competition. It is the Government's policy to seek competition where it is cost-effective to do so. Competition enables us to secure and demonstrate value for money. Since 1991 it has been the policy of the ODA that new education projects will normally be subject to competition. Competition is not always appropriate; for example, where the contract is too small to make tendering worthwhile, or where a consultant already has an established track record in a particular country and will be virtually certain to win at competition. Therefore, in circumstances where the council's knowledge makes it the obvious front runner it may be appointed under a waiver of competition.

Within the FCO and ODA we keep up pressure on the British Council to address any criticisms and bring greater transparency into its operations.

The noble Baroness, Lady Blackstone, mentioned technical co-operation training. The present contract expires in March 1997. It is premature to suggest that it will not be renewed. Consultation is under way on the shape of arrangements thereafter, and the British Council will be kept closely informed as ODA thinking develops. As to the noble Baroness's question about savings in relation to the FCO and ODA, I do not have the figures with me as I did not expect the question. However, I will write to her.

Noble Lords have spoken most eloquently this evening about the high regard in which the council is rightly held both in this country and overseas. I am delighted to have had the opportunity this evening to join your Lordships in paying tribute to the work of the British Council and to make clear that the British Government remain fully committed to supporting it as an integral and essential part of the United Kingdom's overall diplomatic and aid effort. We recognise that the council faces a difficult time in adjusting to a lower level of government support. But the council has done exceptionally well in recent years in reducing its dependence on government grants by increasing its revenue-earning activities, expanding sponsorship and finding more cost-effective ways of doing things. We are therefore confident that the council will respond positively to the latest challenges that it faces as a result of the budget reductions.

Lord Redesdale: My Lords, I am grateful to the noble Lord for giving way. It appears from what he has said that the Government will go through with these

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cuts. Can he give an indication as to a question that has been raised by many noble Lords in this debate; namely, who will pay for these redundancy packages?

Lord Chesham: My Lords, the council is still considering how best to deal with the reduction in the grant-in-aid. We will discuss those proposals carefully with the council when they are received.

Baroness Blackstone: My Lords, I believe that the noble Lord asks a specific question about restructuring costs. I also put that question to the noble Lord. Before the noble Lord sits down, can he give an indication to

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the House as to whether the council may be awarded those restructuring costs and treated for this purpose in the same way as a Whitehall department, as surely it should be?

Lord Chesham: My Lords, I cannot give that assurance tonight.

We for our part will continue to work closely with the council both at home and abroad so as to maximise our assets in the common effort to further British influence and interests overseas.

        House adjourned at two minutes before nine o'clock.

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