6 The British Council |
54. The British Council received what it calls
a "challenging" settlement in the Spending Review 2010.
By the end of the Spending Review period, the amount of funding
provided by the FCO in the form of direct grant-in aid will reduce
from £185 million to £154 million, a 26% real-terms
reduction by 2014-15. As well as a reduction in the absolute amount,
an increasingly greater proportion of the FCO grant must be allocated
towards Official Development Assistance (ODA)-eligible activity.
By 2014-15, ODA-eligible activity will account for two-thirds
of the FCO grant-in-aid. Martin Davidson, the British Council's
Chief Executive, told us that the cumulative effect of these changes
would leave the British Council a substantially different organisation:
In 2010-11 the FCO grant accounted for 27% of our
income and 73% was earned income - in other words we earned £3
for every £1 provided by Government. By 2014-15 this will
have changed to 16% FCO grant and 84% earned income, so that for
every £1 the taxpayer invests in us we will be earning £5.
Three years ago, the FCO's grant constituted around
one-third of the British Council's income.
55. Before the Spending Review 2010, the British
Council was already implementing measures to reduce its costs.
This spending reduction programme was necessitated by a reduction
in FCO grant-in-aid of approximately 10% or £20.8 million
between 2007 and 2011. As a result of this spending cut, the British
Council reduced its physical overseas network, emphasised commercial
activities in some areas and initiated an efficiency programme
based around the transfer of some back-office functions to the
new Shared Services Centre in Noida, India with a consequent reduction
in staffing levels in the UK. In order to adapt to the spending
settlement in the SR2010, the British Council anticipates further
effort in these areas through to the end of the Spending Review
The efficiency programme and the Noida centre
56. The British Council intends that 35% of the
required savings will be via increased efficiency and the savings
generated by the transfer of back office functions to Noida, India.
This process has so far seen the loss of 165 finance and administrative
jobs throughout the British Council's network (not just the UK).
These job losses are part of a wider reduction in staff numbers;
according to its Annual Report, the British Council has lost 290
UK-based staff over the past financial year. These reductions
have been concentrated among lower-grade employees. During this
period the proportion of UK-based British Council staff classed
as "senior management" has increased from 13 to 16%
over this period.
The PCS Union notes that the previous efficiency programme saw
UK staff numbers fall by 35%. It further notes that temporary
workers now represent 20% of the British Council's UK-based staff.
57. Correspondence with the Council suggested
that in 2010-11, £5.6 million was saved from the transfer
of back-office functions to India. Improvements in the performance
of the Noida centre are expected to result in annual savings of
£7.4 million by 2012-13 and by 2015, be a part of a 20% reduction
in running costs.
However, while the British Council plans for this efficiency
programme to account for over one-third of the savings demanded
under SR2010, the Council admitted to ongoing concerns about this
move and the performance of the Noida centre.
Mr Davidson said that a failure to improve the performance of
the Noida centre would have implications for the rest of the British
Council's savings programme.
A new emphasis on commercial activity
58. During last year's inquiry, Simon Fraser,
Permanent Under-Secretary at the FCO, told us that part of the
reason why the British Council was facing larger reductions to
its budget than those faced by the FCO and BBC World Service was
the ability of the British Council to generate income via commercial
activity. In 2010-11,
the British Council earned £492 million, mainly from English
teaching and examinations and commercial partnerships. This currently
represents around 70% of the British Council's total income. The
British Council aims to increase its revenue from earned income
by between 9 and 15% annually, or 55% over four years to £748
million by 2014-15.
The Council's commercially generated income in 2010-11 increased
only marginally from 2009-10.
59. Martin Davidson told us that, given the overall
reduction in FCO grant-in-aid and the demand that a greater proportion
of this grant be allocated to ODA-eligible activity, "virtually
the full weight of the loss of FCO grant will fall on the developed
world", mainly on British Council operations in western Europe
and East Asia. Sir Vernon Ellis, Chairman of the British Council
agreed, warning of a "strain" on Council activities
in East Asia. To compensate for the reduction in FCO grant to
these areas, the British Council will place a greater emphasis
on commercial activities-examinations and commercial partnerships-in
the developed world. The British Council hopes that the increased
commercial revenue can be directed towards cultural activities
that were previously funded from the FCO grant-in-aid. In 2010-11,
the British Council used £11 million of its commercially
generated income to supplement cultural activities throughout
its network; in this year it is planned that £7-8 million
will be redistributed in this way.
Reduced geographic coverage.
60. During last year's inquiry, Sir Vernon Ellis
spoke of the "rationalisation" of British Council operations
in some countries and a move to a "hub-and-spoke" model.
The British Council's corporate plan states that the Council will
also "continue to bring in 'lighter' models of operation"
and "office and even country closures will almost certainly
be necessary". Changes to its overseas network are expected
to reduce the British Council's costs by £41 million.
Despite the statement that country closures will almost certainly
be necessary, there has been no net decrease in British Council
offices over the past financial year.
61. In our evidence session this year, Mr Davidson
clarified what was meant by "rationalisation":
We are, however, looking very carefully at the nature
of our network, and our expectation is that for a number of our
smaller operations we will become a very much smaller organisationprobably
down to one or maybe only two people in some of the smaller countries.
The PCS Union has been critical of this plan. In
evidence to us it claims that:
These "new models of working overseas"
translate into the classification of the countries in which the
British Council operates as "low", "medium"
or "high" priority. Over half are "low priority".
Many of these will be reduced to a staff of just two or three,
with no UK-appointed staff in country. The assumption is that
an online, digital presence will in many cases replace the very
real, long-term cross-cultural human engagement that the British
Council has been facilitating and nurturing for over 75 years.
Sir Vernon Ellis told us that the areas which would
be "rationalised" and where operations would be reduced
in size would be those parts of the world receiving less in the
way of FCO grant-in-aid, namely East Asia and western Europe.
62. In last year's Report we
concluded that the SR2010 financial settlement would put the British
Council's budget under "great strain" and "may
well trigger some fundamental rethinking of the role and work
of the Council". One year later, we conclude that this is
indeed the case. The planned reductions in the Council's presence
in the developed world have been directly attributed to a reduction
in the FCO's grant-in-aid and the wider changes announced by the
British Council in response to the sharply reduced grant-in particular
the much greater emphasis on commercial activity-will lead to
the British Council becoming a substantially different organisation
by the end of the Spending Review period.
63. We stated last year that
SR2010 posed a significant challenge to the British Council and
we are pleased to see this challenge tackled and a plan put in
place to adapt to a change in financial circumstances. However,
we remain concerned that such an emphasis on commercial activity
will detract from the British Council's primary purpose to "build
engagement and trust for the UK through the exchange of knowledge
and ideas between people worldwide". We accept that in many
ways commercialisation of the British Council is unavoidable and
driven by decisions made by central Government, but nevertheless
we remind the British Council that it must place its primary purpose
at the core of all its activity, commercial or otherwise, and
must not become predominantly an international English language
school rather than a promoter of the UK's reputation, culture
62 Ev 81 Back
Q 168 Back
Ev 82 Back
British Council Annual Report 2010-11, March 2011, page 108. Available
the British Council's website. Back
Ev 83, para 11 Back
Ev 82 and Ev 78, para 2.3 Back
Qq 180-182 Back
Q 182 Back
Foreign Affairs Committee, Third Report of Session 2010-11, FCO
Performance and Finances, HC 572, Ev 36 Back
Ev 78-79, paras 1.3, 2.4 and 3.1 Back
Qq 172-175 and Qq 196-197 Back
Oral evidence taken before the Foreign Affairs Committee on 3
November 2011, HC 572-i, Q5 Back
"British Council Corporate Plan 2011-15", page 22 Back
Q 165 [Sir Vernon Ellis] Back
Q165 [Martin Davidson] Back
Ev 82, para 8 Back
Qs 173-174 Back