House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Third Report

3 British Council

Work in 2004-2005

66. As part of our inquiry into Foreign and Commonwealth Office Annual Report 2004-2005, we held our first oral evidence session of the new Parliament with the British Council, meeting for the first time the Rt Hon. Lord Kinnock of Bedwellty in his role as chairman of the British Council. He was accompanied by Sir David Green KCMG, director-general and Mr Martin Davidson, the then newly appointed deputy director-general.[122] In preparation for this session, the Council sent us a memorandum which catalogued and described its activities in the last year.[123] Programmes and initiatives were listed under the FCO priority to which they related. Areas of its work highlighted included:

the Council's developing work in Afghanistan and Iraq and the wider Islamic world;
the Global Gateway, which has established 2,000 school link projects between the United Kingdom and 35 other countries;
expanding the 'Connecting Futures' programme to 42 countries;
the 'Crossroads for Ideas' campaign, which is building networks and partnerships with new EU accession states;
the launching of the United Kingdom and South-East Europe forum;
in partnership with the Open Society Institute, launching the Independent Commission on Turkey;
an increase in priority for India and China;
the launching of the Zero Carbon City initiative, which aims to increase awareness of global warming and, through a rolling exhibition, reach 8 million people over two years;
the 'Dreams and Teams' programme, run in partnership with the Youth Sports Trust and the DfES, which will have trained 40,000 young sports leaders internationally by the end of 2006; and
its work in a broad range of human rights, education and governance projects.

Annual Report for 2004-05

67. The British Council published its annual report and accounts for 2004-05 in December 2005 which was somewhat later than most government departments.[124] The style and design of the 2004-05 report is very impressive and conveys an innovative, artistic image suitable to such an organisation as the British Council. Pictures and graphics are juxtaposed creatively with brief narratives of the Council's work and achievements. Nonetheless, we believe it would be valuable if next year the Council were to provide more information on areas where it believes it can make improvements or on where it sees its challenges lying ahead, similar to the 'Lessons Learned' sections adopted by the Foreign Office for its departmental reports. We found the Council's 2005 three-year corporate plan more helpful in this respect.[125] We regret that the British Council was late in publishing its annual report for 2004-05 and recommend that in future it publish its annual report more speedily so that Parliament may carry out effective and timely scrutiny of its performance.

68. The annual report gives the British Council's performance against its objectives.[126] In 2003, the Council developed a 'scorecard' for measuring its performance against five main objectives from the five-year strategy. The scorecard is calculated on the results of surveys of the British Council's customers, clients and staff. Additionally, some factual statistical data are collected. However, this year, the annual report's failure to provide performance targets means that it is impossible to work out from this document alone the degree of the British Council's success or failure against its objectives. A further criticism is that the results for 2003-04 and those for 2004-05 are not easily comparable as they have been presented using different indices, with no effort made to calibrate the two. We wrote to the Council about this and in a supplementary note it provided clarity.[127] We recommend that for the 2005-06 annual report the British Council present its performance results against targets in a format that demonstrates clearly successes or failures.

British Council's raison d'être

69. The Foreign Office describes the British Council's purpose as one of building long-term influence for the UK by developing relationships with other countries and by increasing appreciation of the UK's creative ideas, values and achievements.[128] The rationale for the Council's work has remained fundamentally the same ever since its advent in 1934 as our predecessor Committee noted:

When it was founded in the 1930s, the purpose of the British Council was: "to make the life and thought of the British peoples more widely known; and to promote a mutual interchange of knowledge and ideas". In 2004, the purpose is expressed differently, but remains essentially unchanged: to build mutually beneficial relationships between people in the UK and other countries and to increase appreciation of the UK's creative ideas and achievements.[129]

70. The British Council recently published "Making a world of difference" a pamphlet which follows up its By 2010 strategy document.[130] The Council says it will continue to focus on education and training, sport, English language teaching and learning, the arts, science, governance and human rights.[131] The Council's goals for 2010 are that:

50 million people a year will be experiencing creative ideas from the UK with its support—up from 24 million a year in 2006;
10,000 influential young people in the UK and a range of other countries will have the skills and relationships to take the world community into a new era of intercultural exchange and understanding;
20 million young professionals worldwide will have chosen the UK for their self-development with lasting benefits for relationships between their countries;
Every teacher and learner of English in the world will have access to the skills, ideas and materials they need from the UK; and
The UK will deliver—for the first time in the history of the Olympic games—a legacy of intercultural understandings and relationships for millions of young people in the UK and worldwide.

71. When we met Lord Carter we asked him what he considered was the British Council's raison d'être.[132] He highlighted three things. First, he told us that he believed that the Council's greatest contribution was its role in attracting foreign students to come to study at British universities and other higher education institutions in the United Kingdom. He considered that if the British Council was not performing its educational role then some other organisation would have to instead.[133] Second, he believed English language teaching was a "big value-added" service.[134] Third, in terms of culture, he pointed to an annual spend of £25 million on the arts which he believed was very useful in "positioning" the United Kingdom overseas.[135] He went on to say that a marked cultural positioning helps drive industries like tourism.[136]

72. In the course of our consideration of the Carter review we became convinced that the purpose of the British Council needs to be reassessed. We recognise that the British Council currently draws into a relationship with the United Kingdom very large numbers of people around the world, especially through its English-language teaching and administration of examinations. Nevertheless, we believe that a re-appraisal of the British Council's core purpose is overdue in the light of the changed world in which it now operates. We recommend that the Foreign Office, as part of the 2007 comprehensive spending review, commission an independent review of the British Council's work which examines what the British Council does, why it is doing it, what it should be doing, and whether any of its activity would be better conducted in other ways or by different organisations.

Working with government departments

73. The Carter review called on the British Council to "continue to look for ways in which it can work with other government departments to ensure a complementary approach to international responsibilities and challenges."[137] In its memorandum, the Council stated its aim is "to provide access and open doors internationally to [its] UK partners."[138] The Council told us how it extended its reach through partnerships with the Department for Culture, Media and Sport (DCMS), the Department for Education and Skills (DfES), Sport England, Universities UK and the Arts Council for England.[139] We were impressed to learn that in a survey over 87 per cent of the British Council's stakeholders indicated that the Council opened doors for them overseas that no other institution could.[140]

74. The British Council's annual report for 2004-05 describes a substantial amount of joint activity with other government departments. In respect of the DfES, the Council manages two major projects associated with the Department's international strategy for education and children's services.[141] Last year, the Prime Minister's target for the number of overseas students coming to study in the United Kingdom was met; we commend the Council for its part in this achievement. We also note that the Council managed on behalf of DFID its 'political participation fund' in Iraq.[142] We conclude that over the past year the British Council has demonstrated an enthusiasm for working in association with other government departments and public bodies.

Staffing and efficiency savings

75. We asked the British Council to provide us with details of its staff showing the balance between those based in the United Kingdom and those overseas. They provided us with the following information:[143]

British Council staff including overseas locally-engaged staff

(average monthly figures for 2004-05)

Number

United Kingdom 1,159

Overseas 4,754

Teachers 1,700

Total 7,613

Note:
Figures are for the entirety of British Council work and activity and not solely for grant-funded activity.

Of the total UK-based staff half are serving grant-funded work, with the other half serving client-funded services.[144] The Council was keen to explain that the UK staff were not "purely composed of grant-funded staff undertaking administrative duties."[145]

76. We note that the British Council's work in English teaching and examinations is self-financing.[146] All the fees paid by the Council's teaching centre and examination clients cover all their associated costs, both at a local level (for example, teachers' salaries and a proportion of premises costs) and at a corporate level (for headquarter support services, teaching material and premises).[147]

77. Sir David Green told us that in the 2002 spending review, in the period up to 2004, the Council had been committed to reducing its staff headcount within the United Kingdom by 5 per cent.[148] It had set itself a target of reducing its UK headquarters' headcount by 8 per cent, a target it achieved.[149] We asked the Council whether it considered a 5 per cent reduction in its staff was an ambitious target. Lord Kinnock remarked that a policy of reducing staff by five per cent over a three-year period should be seen in the context of growth of demand for the Council's services.[150] He considered that over a three-year period it was not unreasonable to assume growth of between 10 to 12 per cent in services like English language teaching and administration of examinations.

78. Over the past five years, the overall number of the Council's UK-based staff has remained fairly static, with the percentage of vacant positions increasing slightly. In the 2004 spending review round, the Council was not set a specific headcount reduction but instead agreed to make efficiency savings of 2.5 per cent per annum up to 2007-08. We were told that 62 per cent of the Council's £13 million projected savings for the triennium to 2008 are reliant on the introduction of new IT systems.[151] Of the total projected savings, 51 per cent is estimated to derive from staff reductions and 41 per cent from savings in procurement and other non-staff areas.[152] We intend to monitor closely the Council's progress during the triennium period towards meeting its annual efficiency targets.

Value for money?

79. The last value for money investigation by the National Audit Office into the British Council was completed in 1991.[153] At that time the then Public Accounts Committee concluded that it considered "that the English language is one of Britain's major assets" and said it was "glad to see that the Council seeks to exploit it by promoting and improving the teaching of English abroad."[154] In 2004-05 the £172 million of grant-in-aid funding the British Council received represented approximately one-third of its overall turnover of £473 million.[155] As Lord Kinnock told us, roughly 60 per cent of the Council's total income is self-generated.[156] In 2004-05, the British Council generated £1.76 for every £1 it received in grant-in-aid.[157] Lord Kinnock went on to say "where there are feasible possibilities of securing revenue returns [the Council] exploit[s] those opportunities."[158]

80. The British Council uses the surpluses it raises from its revenue-earning operations to fund the teaching of English in countries with more difficult environments. The Council acknowledges that it has been argued that the private sector might undertake English teaching and administration of exams overseas.[159] It points out that few private sector schools could undertake teaching in more difficult operating environments where there are "severely limited business prospects and serious security risks."[160] We conclude that it is the British Council's international network that allows it to run English language teaching centres where conditions are challenging and where there are limited business opportunities. We further conclude that it is the British Council's independence from Government that helps to broaden the range of organisations in these difficult environments with which it is able to engage.

81. We asked Lord Carter whether he considered the British Council represented good value for money. He believed "generally" it did and said that he had found other countries to be "envious" of both the British Council and the BBC World Service.[161] Lord Carter told us that measurement of good value in the case of the British Council and the World Service "is the thing that I was exercised by.[162] He pointed to two ways of measuring value in the case of the Council: by surveying people's opinions, along the lines suggested in his review, to discover if, over time, interventions by the British Council had a positive effect; and by the collection of quantitative data. For example, in relation to education it is possible to record the number of foreign students seeking advice from the British Council offices and number of 'hits' to its website.

82. We also asked the British Council to provide us with international comparisons of the Council with its closest analogues in Germany and France in terms of spend per head of population. The Council told us that the Goethe Institut[163] and Alliance Française[164] were its nearest comparable organisations but that direct comparisons were not possible as their precise functions differ from that of the Council, as do their methods of funding.[165] In the case of France, the cultural section of the Foreign Ministry, the Institutes Francaises[166] and parts of the Department for International co-operation and Development, carried out some of the functions performed by the British Council. And, in the case of Germany, Deutscher Akademischer Austauschdienst (DAAD) had some similar responsibilities to the British Council as Germany's educational exchange agency. The British Council also emphasised that it would be necessary to examine the varying scope, reach and impact of the institutions concerned. In 2004-05, the British Council's grant-in-aid funding per head of the UK population amounted to £2.96. The Goethe Institut had a total income of €204 million, which represented £1.80 per head. Of this, €163 million was government grant which was £1.40 per head.[167] The Alliance Française does not exist as a single financial entity but in total its institutes collectively receive a government grant of €41 million, equivalent to 47 pence per head.[168]

83. While Lord Carter's review examined the effectiveness of the mechanisms in place which hold the British Council and Foreign Office to account, ultimately to Parliament, for its expenditure of grant-in-aid his review did not as part of its remit have a value-for-money focus. Lord Carter agreed that a value for money review of the British Council was "something that needs looking at".[169] As the National Audit Office has the power and resources to conduct a thorough examination of the British Council in terms of effectiveness, efficiency and economy, we believe that it would prudent for it to complete another investigation. We recommend that the National Audit Office urgently consider conducting a further value for money report on the British Council.

Middle East, Afghanistan and North Africa

84. In its memorandum, the Council told us that in the Middle East and North Africa it sees its role as "to build trust and mutual respect" with a range of partners and relevant audience groups.[170] For the Near East and North Africa and the Middle East the Council has increased the priority of these regions in line with its Strategy 2010 by expanding grant-in-aid funding from £7.9 million in 2003-04 to £14.2 million in 2006-07.[171]

85. The British Council is involved in an impressive range of work in Iraq, where its activity is increasing. Lord Kinnock told us:

In Iraq we have been making a significant contribution to rebuild the country's capacity in education and in fostering free reporting media, where obviously we have collaborated closely with the BBC World Service. We have provided training for hundreds of senior university managers, education ministry staff, teachers, media technicians and journalists. We have delivered more than 50 tonnes of books to universities and set up educational resource centres in universities in Baghdad and Basra. We have worked with women's groups and excluded minorities in projects that are particularly geared to increasing electoral participation. Obviously, all of these activities continue to flourish.[172]

We commend the British Council's staff in Iraq who are patently working in an extremely difficult operating environment.

86. We were pleased to discover that the operating situation in Afghanistan had improved slightly this year and to hear that that there is great demand on the ground for the Council's services. Sir David Green told us, "I have to say that the thirst for English language in Afghanistan is extraordinary and these English language resource centres are just packed and it is impossible for people to move."[173]

87. Security of the British Council offices overseas is an issue our predecessor Committee covered extensively in its last Report.[174] In addition to increases in its baseline funding, the Council was granted in full a reserve claim for security improvements of £4 million in 2004-05 and £6 million in 2005-06. Sir David Green told us that the extra money secured had enabled security improvements to take place at 75 of its premises so far and that all the money for 2004-05 had been spent. Work was still in progress on 2005-06 programme of improvements.[175]

88. Following an unstable period in Pakistan, in the wake of bombings in Afghanistan, and the spate of terrorist attacks in Saudi Arabia, the British Council closed its offices throughout those countries. We asked the Council what effect the existing security situations were having on public access to its premises in these volatile counties and on its ability to generate income. Sir David told us:

What we have done is a very careful and thorough review of all our premises cross the world. In some places, sadly, we have had to close our centres to public access. If you take a country such as Pakistan, there is no public access in any of the five centres that we have across Pakistan. That is not to say that we are not able to operate in Pakistan, we have a very thriving operation and we administer 200,000 examinations each year, for instance. This does not require people to come to our offices, we have made an arrangement through Standard Chartered Bank and they can go to any branch of Standard Chartered Bank and register for examination…[176]

89. We were disappointed to hear that there is no near-term prospect of the British Council re-opening its offices in Pakistan. We were however pleased that over the last year in Saudi Arabia four of its six offices have moved into new secure premises and that all six are now open to the public.[177]

90. As a Committee we value the opportunities we have when we are overseas to visit the British Council's offices and to meet its staff to learn more about their work. In November 2005, some of us visited the British Council's office in Ramallah in the Palestinian Territories and we were impressed there by the range of work in which it was involved. We were therefore very concerned to learn of the attacks on 14 March on two of the British Council offices in the Palestinian Territories, those in Gaza and in Ramallah. Both offices were set alight by demonstrators. During our visit, we met the British Council staff in Gaza and gained a direct impression of the dangers in carrying out their duties. We recognise the great value of the work being carrying out by the British Council in the Palestinian Territories and we hope that its offices there may re-open as soon as it is practical and safe to do. We commend the British Council's determination to stay open for business in countries where it faces extremely challenging security conditions and for the progress it has made in improving security at its premises for staff and customers alike and recommend the Council continues these policies where appropriate and necessary.

British Council's tax status in Russia

91. In the last Parliament, our predecessor Committee raised its concern over the British Council's tax status in Russia. In May 2004, the Russian Interior Ministry raided several British Council offices over claims of non-payment of tax. At that time the Committee asked the Foreign Office to set out what progress it and the Council had made in resolving the situation.[178] In response, the Foreign Office said that it had frequently lobbied the Russian authorities at all levels about their treatment of the Council.[179]

92. In a note to the Committee, the Council outlined the background to the Council's tax position in Russia.[180] In 1994, when the Council first went to Russia, the Russian and British foreign ministries signed a cultural agreement which encouraged both countries to open information centres and language teaching operations in each other's countries. The Russian Ministry of Foreign Affairs (MFA) told the British Council that it would be able begin negotiations over its tax status with tax authorities as soon as a new cultural centres agreement was signed. The Council told us that in 2001, the United Kingdom signalled approval to the draft agreement. However no approval was given by the Russian side. Despite their repeated assurances that an agreement was forthcoming, the last assurance being in May 2004, the Russian authorities carried out unannounced raids on the Council's premises.

93. In October 2005, on the eve of a EU-Russian summit, a new criminal investigation by Russian authorities was opened against the British Council office in St Petersburg.[181] We were concerned that this matter was still live and we raised our concerns with the British Council during oral evidence. Lord Kinnock explained:

We are given to understand that we have had tax obligations in respect of our operations in Moscow, St Petersburg and the other centres in which we operate in Russia. The tax liabilities stipulated by the Russian authorities were paid in full in respect of Moscow in September. They were paid in full in respect of St Petersburg last week. We are led to believe that we can reasonably anticipate that by the end of this month the remaining tax issues will be cleared…. So far as the status is concerned, we have heard of an explicit assurance that immediately after these tax obligations are resolved… there will be rapid movement towards the conclusion of the agreement.[182]

94. In a supplementary note to us, the British Council told us that the Russian MFA's position was that the signing of a new cultural centres agreement could now only take place once all due tax has been paid.[183] In October 2005, the Council reported to us that it had about £100,000 of tax outstanding in St Petersburg, an amount that was "being processed".[184] The total amount of tax paid, including both 'back' tax and tax due for the current year, was £1.4 million.[185] On 27 January 2006 the Council reported that the Russian Federal Tax Service had given the Ministry of Foreign Affairs written confirmation that the British Council had met its obligations to pay back-taxes.[186]

95. Lord Carter's review picked up on the British Council's tax problems overseas. It called for the Council to be "more proactive in resolving the growing number of tax issues" arising, and went on to suggest that disputes could "present reputation risks to the UK, and consequently to its public diplomacy efforts, if not appropriately addressed."[187]

96. The dispute between Russian tax authorities and the British Council is set in a context of the Council's services being used by over half a million Russians last year.[188] We asked Lord Kinnock if he thought the ongoing dispute was politically motivated and whether in fact the British Council was being used as a "political pawn."[189] The Council did not feel that it was in an "authoritative" position to comment; we respect its position.

97. It was with great concern, following the recent allegation that British diplomats were involved in a spying operation in Moscow, that we read once again reports in the press that prosecutors in St Petersburg had reopened an investigation into the British Council owing to their suspicion that the Council was undertaking "illegal commercial activity."[190] It seems quite evident that the Russian authorities are targeting the British Council deliberately in line with the Russian government's hostility to the presence of foreign Non-Governmental Organisations in Russia. We recommend that in its response to this Report the Foreign Office update us on the latest position of the British Council in Russia regarding outstanding tax issues and detail what actions it is taking to prevent further interference with the Council's operations by the Russian authorities. We further recommend that the Foreign Office inform us of any tax problems in other countries which relate to the British Council and what it is doing to resolve them.

Chevening scholarships and fellowships

98. Chevening scholarships and fellowships schemes are administered by the British Council on behalf of the Foreign Office. In 2004-05, there were 2,124 Chevening scholars studying in the United Kingdom from over 150 different countries.[191]

Regional background of Chevening scholars and fellows—2000 to 2005

99. In 2002, a review of the Chevening scheme found that, while the Chevening scholarships were highly regarded, there was no significant effort made to link expenditure on scholarships to the FCO's strategic priorities or show their impact in the short to medium term.[192] The review recommended the introduction of fellowships, in addition to scholarships, which would offer professional awards aimed at "mid-career and senior professionals." As the fellowship placements would be shorter, and consequently cheaper to run, the review envisaged that they would have a more immediate impact on specific FCO policy objectives at Posts. We learn from the Carter review that ministers have agreed, following a pilot exercise, funding for fellowships of £5 million a year from 2006-07 and beyond as part of the overall Chevening programme.[193]

100. Our predecessor Committee welcomed the "revitalisation" of the Chevening scholarships and believed that the proposals given in the River Path Review[194] should allow the scheme to be more "responsive to the United Kingdom's wider diplomatic needs."[195] The Carter review considered the Chevening scheme and its association with the FCO's public diplomacy aims in some detail. It found that generally there was insufficient effort made to track and maintain ongoing relationships with alumni and recommended that tracking and engaging alumni should be incorporated into the next service level agreement between the FCO and the Council for the administration of scholarships.[196]

101. When the provenance of Chevening scholarships awards distributed for 2004-05 is examined, there appears to be no clear relationship between the FCO's geographic priorities and the beneficiaries of scholarships. Several nations with a relatively high allocation of scholarships were not identifiable as FCO strategic or public diplomacy priority countries.[197] It is noted by Lord Carter that this is likely to be due to the fact that up to last year geographical directorates were responsible for allocating scholarships. They were therefore accordingly apportioned on a regional basis and so were often in line with regional rather than global priorities. Scholarship budgets will transfer to the Public Diplomacy Group in the FCO for future rounds of distribution.

102. This year in its annual report a lesson learned by the FCO was that it underestimated the combined effect of focusing scholarships on priority countries and of developing the Chevening fellowship programme.[198] The FCO decided that it should have communicated the reasons for the changes of the Chevening scheme more carefully to the FCO as whole.

103. We recommend that in its response to this Report the Foreign Office set out how it proposes to appraise expenditure on the Chevening scholarships and fellowships in terms of their impact in the medium and long terms. We further recommend that the Foreign Office explain what selection process and criteria it uses to identify those scholars and fellows most likely to bring benefit to the United Kingdom in the short, medium and long term.

122 Ev 10-22 Back

123 Ev 1-5 Back

124 British Council, Making a world of difference, Annual report and accounts 2005-05, December 2005, available at www.britishcouncil.org Back

125 British Council, Corporate Plan 2005-06, available at www.britishcouncil.org Back

126 British Council, Making a world of difference, Annual report and accounts 2004-05, December 2005, pp 42-43 Back

127 Ev 33 Back

128 Foreign and Commonwealth Office, Departmental Report 1 April 2004-31 March 2005, June 2005, Cm 6533, p154-55 Back

129 Foreign Affairs Committee, Foreign and Commonwealth Office Annual Report 2003-2004, para 204 Back

130 British Council, Making a world of Difference: Cultural relations in 2010, March 2006 Back

131 Ibid, p 9 Back

132 Q 197 Back

133 Q 197 Back