TUESDAY 23 FEBRUARY 1999

BARONESS KENNEDY OF THE SHAWS, QC, MR TOM BUCHANAN, CBE and MR EDMUND MARSDEN

  101.  Lady Kennedy, may I welcome you and your two colleagues. Perhaps you would introduce your colleagues before we start.
  (Baroness Kennedy of the Shaws)  To my right is Tom Buchanan who is the Acting Director-General of the British Council and to my left Edmund Marsden who is the Assistant Director-General.

  102.  You yourself have been chairing for how long?
  (Baroness Kennedy of the Shaws)  For six months now. I came in to follow in the footsteps of Sir Martin Jacomb and I took over at the end of August.

  103.  You have had a certain baptism of fire because we know about the turbulence at senior level. Can you tell us about that. Has that impacted adversely on the work of the Council?
  (Baroness Kennedy of the Shaws)  Strangely for me certainly it has had the beneficial effect that I have had to get to grips with the Council probably much more in depth than might have happened at such an early stage and I found that very fruitful. It has meant that I have had very intensive contact and made firm relationships not only with our partners in the Foreign Office but also with my own board. I have spent a lot of time inside the organisation and so for me it has worked to my benefit and I think that in fact the moment of change was quite invigorating for the Council because it meant that there was a re-assessment of what the Council's needs were. There was a very exciting conference of directors in Gatwick in November and it brought the whole of the Council together and I think, in fact, it has had the opposite effect from what one might have imagined.

  104.  So it is welcomed, it has been good for you personally, it has been good for the Council?
  (Baroness Kennedy of the Shaws)  I think so.

  105.  Marvellous. So we should be in a state of perpetual crisis to improve things?
  (Baroness Kennedy of the Shaws)  We should certainly be in a state of perpetual reconsidering our position, obviously honing the skills of the British Council and also doing what we are seeking to do today which is arguing the case for the Council and saying that it is not properly resourced.

  106.  And is the end of turbulence in sight?
  (Baroness Kennedy of the Shaws)  At the moment we have advertised for a replacement Director-General and the interviewing is taking place over the next two weeks so we are hoping there will be an appointment made thereafter, but I can honestly say that Mr Buchanan has taken the role with great aplomb and has been fulfilling that function admirably.

  107.  You will be writing him a good reference.
  (Baroness Kennedy of the Shaws)  We will be continuing with him for as long as we need to.

  108.  When we had colleagues from the World Service last time we were criticising them for being rather complacent about the financial regime that was facing them. By contrast with you the charge may well be that you have been possibly over-gloomy. We see that as a result of the Comprehensive Spending Review the grant-in-aid fell from 1995-96 to 1996-97 from £146.5 million to £136.8 million, and that the funds available to you for the grant-in-aid fell again in 1997-98 to £129.4 million. Now at least that decline has been arrested and stabilised over a three year period. We cannot blame you because you are new but what were your predecessors doing during that period of substantial reduction?
  (Baroness Kennedy of the Shaws)  You would obviously have to address that question to them and I am sure this Committee did at the time but the thing that strikes me, as someone coming new into the Council and having now quite intensively spent time in the Council, I feel very strongly that in fact although there has been this slight increase, it really in no way redresses what has been happening before. Indeed, there was a 13 per cent reduction from 1995-96 until the present and this two per cent uplift in real terms is only reducing that to 11 per cent. We are still considerably down at a time when we should look optimistically at the role of the British Council in a changing world; and the role is one that is, I think, full of potential for the Council. It is rather regrettable that at such a time money is not available at the sort of levels that it needs for the Council to fulfil its function well.

  109.  Sir John and Mr Rowlands, who were on the Committee in the last Parliament, will no doubt be saying what they did at that time. One final question from me. We note that there has been one key change in respect of Government in that the DFID element has been taken out of your own funding and you are now effectively wholly funded by the Foreign and Commonwealth Office. Is that reflected in any way in the priorities of the Council? Clearly the Department for International Development would prioritise aid work in the poorest countries and so on and they are out of the equation and the Foreign Office is there with perhaps rather different priorities. Has that been reflected in the areas in which you have been specialising?
  (Baroness Kennedy of the Shaws)  Quite clearly there is a reduction in the amount of contract work coming out of DFID now and we met with the Secretary of State recently and had a very fruitful exchange about the philosophy that is now guiding the Department and the ways in which the Council can seek to create in our work an environment in which contractual work can continue. I have just been to South Africa where a very considerable amount of work is still being done for DFID around the areas of education, literacy and the like and the Secretary of State is very interested in training——

  110.  The Secretary of State for——?
  (Baroness Kennedy of the Shaws)  For DFID, is very interested in training in situ in poorer countries particularly around further education and adult education and creating a trained cohort of technicians which those countries desperately need and that is an area where we see ourselves redirecting some of our work and being able to fulfil some of the contracts that will follow from that.

Chairman:  I am sure colleagues will take that further. Mr Woodward?

  111.  There seem to be two views about the British Council's current funding position. One, celebrated by some, is that there has been a two per cent increase in real terms——
  (Baroness Kennedy of the Shaws)  It may make some people happy.

  112.  The other view is that you are shamefully underfunded. What is your view?
  (Baroness Kennedy of the Shaws)  I think we are shamefully underfunded. Finances are really in a parlous state and anyone who has been closely connected with the Council—and it was interesting in the debate in the House of Lords only a few weeks ago the many people who spoke who had close connections with the Council and who know on all sides of the House that finances are such that it desperately needs more money particularly at this time if we are going to fulfil the kind of challenges that there are for the Council. Public diplomacy has risen as a prospect for us as a nation and it is something that the British Council does incredibly well and with great subtlety and I do not think anyone matches us on that. Having seen that in the front line, having seen it in China and South Africa and Europe, I have felt this is where we have enormous strength which we should capitalise on and yet in some ways, as we so often do, we do not recognise the things that we are good at in Britain. My argument is that we really have to inject more funds into it and have a leap of imagination if we want to fulfil our function well.

  113.  It has been until now the policy of the British Government to discourage the Council from withdrawing from any country. Following the Labour Government's Comprehensive Spending Review that condition has been "slightly relaxed". Could you just expand a little bit on the idea of it having been a little relaxed, set out what they might mean and, if you could, also indicate to us who has given you an indication that it should be slightly relaxed?
  (Baroness Kennedy of the Shaws)  In the relationship we have with the Foreign Office we keep ourselves at arm's length and we maintain our autonomy which I think is a very important thing for the British Council to be doing because it gives us credibility in certain countries where the embassies cannot exist. However, it also means that we keep on very good relationships with the Foreign Office and we try to set ourselves the same sort of priorities in terms of the countries that are of concern to Britain, where we do want to have a significant presence, where we can make a lot of difference and benefit accordingly. So what we have sought to do in our strategic plan for the coming years is to prioritise certain countries and it does mean that those countries that are, if you like, on the lesser end of that prioritisation will have a much less intensive set of activities. So, although we will be covering key areas, some of the areas of activities will be reduced.

  114.  But would you still be searching out priorities, meaning withdrawing from some countries, if you had not be been so chronically underfunded?
  (Baroness Kennedy of the Shaws)  What has happened in the past is there has been a serious resistance. The last time that there were going to be reductions we managed to persuade government to reduce by half the amount of money that was going to be taken out of the Council. It was pointed out that it would mean coming out of countries. It was Malcolm Rifkind then and when he saw upfront what it would mean he was seriously alarmed by that. What we did as a result was to drastically reduce staff in Britain which had very serious consequences down the line. However, what we are saying now is that if we do not have a serious uplift in money—that is why coming to you just now saying we are happy and everything is hunky-dory would be a total denial of reality—the group of countries in our bottom list would certainly have to come off and we might have to think about closing down.

  115.  You would be unhappy about doing that?
  (Baroness Kennedy of the Shaws)  Most certainly. It also may mean because the money is so insignificant that actually we would be moving into what is our third list—there are four lists—and the third list would have to be eaten into significantly for there to be enough reduction for it to count.

  116.  When you explained this to the Foreign Secretary and the Foreign Office what was their response?
  (Baroness Kennedy of the Shaws)  There is a real reluctance to see a reduction in activities in any of the countries.

  117.  But unless they give you more money you are going to have to make them?
  (Baroness Kennedy of the Shaws)  One of the difficulties, and it is an argument I want to place before you with some emphasis, is that the cake is always seen as being a finite cake and the money goes to the Foreign Office and if there is an increase to the British Council it has to mean a reduction to the Foreign Office. I have faced this already in a very different context but I would like to just mention it. This was around the argument I had recently about the need for funding for further education where immediately the universities got very alarmed because they thought this was going to reduce their funding too. What we argued for was that there should be a greater amount of money and that the cake should be made bigger and there should be a serious commitment that the extra money went to further education and this happened because the Education Select Committee on further and higher education came in behind that and behind the report that I was involved in publishing which had argued that there has to be a serious uplift in the money to further education. I would like this Committee to come in behind the British Council in advocating that we are not arguing here for less to the Foreign Office and more to us, which immediately creates tensions between us and the Foreign Office. What we really are asking for is more money for the British Council because of the benefits it makes to Britain and that should not mean a reduction to the Foreign Office.

  118.  The cake is already bigger as a result of the Comprehensive Spending Review.
  (Baroness Kennedy of the Shaws)  It certainly is for the next three years and of course we work within that. It is going to be incredibly tight for us to do so. In some places it means we will not be able to have the kind of ambitions we would want to have for the activities of the British Council. It is rather narrow to see that as being the horizon three years hence because we really are talking about something that needs to have a much more comprehensive and longer term view if it is going to be successful.

  119.  That really leads me to my final question which is that on the movement from you receiving some of your grant-in-aid from the Department of International Development and the Foreign Office to solely the Foreign Office is that a good thing or a bad thing for the British Council?
  (Baroness Kennedy of the Shaws)  In some ways it is actually quite a good thing. It simplifies the nature of the relationships, it means that we have one funding body with whom we have direct contact, with whom we have auditing relationships and so on. In some ways it makes for a simpler relationship. You have got to remember that we also have relationships with many Departments, the Department of Education, the Department of Trade and Industry, and so on, and that we maintain very clear and strong links with those other Departments too, but having one funding relationship is actually no bad thing in my view.