Following the 1995 Public Expenditure Survey, the British Council was faced with a 16 per cent cut in its grants-in-aid. The then government reduced the cut to 9 per cent on condition that the Council agreed not to close any of its offices overseas. In real terms the grants-in-aid were cut by £17 million, or 12 per cent, between 1995-96 and 1997-98. The Council responded by reducing its staff in the UK, reducing the size of its premises throughout the UK, and cutting back centrally controlled investment expenditure.

  This paper:

describes how the cuts were managed;

highlights areas where additional resources are needed now; and

identifies where investment must be restored if the Council is to have a credible future.

MANAGING THE CUTS

  In 1996-97 UK posts were cut by 26 per cent, and 285 staff in the UK took early retirement or left on redundancy terms. This reduction followed a period of three years when the Council had already met its targets for efficiency savings with a loss of some 300 staff in the UK. By altering its working methods the Council managed to increase its efficiency still further.

  The number of staff employed in facilities management and looking after students and official visitors to Britain was substantially reduced. The Council opted for defining and monitoring precisely which services it needed, and then buying those services, where appropriate, from outside providers. This process has helped the Council to become more aware of the services that are valued by its customers, and more self critical about the way in which they are provided. As a result working methods have been improved, and the Council now provides a more appropriate service, to a defined quality, for less money.

  The number of staff in corporate personnel and finance was also substantially reduced. This was part of a policy to devolve day to day control of financial and staffing resources to line managers. Corporate staff retain responsibility for determining and controlling policies. There is a general perception that management of resources is now better, but there has been a significant increase in the burden placed on managers.

ADDITIONAL RESOURCES NEEDED NOW

  Four years after the cuts, and with a new Government, cultural diplomacy has an unprecedented significance to the UK. With its network overseas, its contacts and its reputation at home and abroad the Council should be the obvious vehicle for this work. Yet without additional resources opportunities may be missed, and there may be unacceptable risks in even trying to maintain our current activities.

Managing the Council's offices abroad

  The number of Council offices overseas has increased, but the number of staff in London responsible for managing operations overseas has reduced. At the same time, with devolution of responsibility for finance and personnel issues there has been a significant increase in the work they have to do directly and in the support and briefing needed by directors overseas. A regional team of one senior manager, one middle manager and an assistant is typically responsible for overseeing the Council's work in 18 countries, with 40 UK appointed staff, and some 600 local staff. In a third of countries there is only one UK based member of staff. The team is responsible for setting regional policy and objectives, for allocating and monitoring budgets within the region, and for selecting, appointing and briefing the UK appointed staff. The team also co-ordinates the Council's activities with the FCO and other government departments, provides briefing for UK ministers, MPs and officials making visits to the region, and hosts all senior visitors from the region. By working long hours, and by minimising travel, staff cope with this basic work load. Essential work has to be pushed aside to cope with the additional demands that result from political instability or other emergencies in a country, or from sickness, particularly in one person posts. Day to day issues leave managers with little time to invest in planning for the future. The Council would like to do more to be open to those in the UK with an interest in its work, for example, to brief partner organisations, and develop contacts with potential partners.

  More staff are needed to provide flexible cover for posts abroad, to cover additional work in the UK in times of crisis, for strategic thinking to direct future policy and for maintaining our relationships with partner organisations. Adding one more middle manager to each regional team, and providing three flexible posts to cover emergencies, and help develop new policies, would cost some £435,000 a year.

An authoritative presence in governance, social inclusion and human rights

  The Council is looked on at home and overseas as an authority in many fields, including the arts, education and English language teaching. It maintains a core of professional staff in the UK, who work with trained and experienced staff based overseas. In the past resources were shifted from sector to sector as priorities changed. In 1996 we cut resources in lower priority areas, such as health, but we were not able to redeploy them into areas of growing importance.

  The Council has an objective "to position the UK overseas as a committed partner in tackling key reform agendas and promoting sustainable development." We already have the network of offices overseas, and the contacts in the UK, however, a team of six staff in the UK is responsible for all work in governance, human rights, gender and social reform, management, economic reform and sustainable development. Because this is a relatively new area of activity there are few staff overseas with any relevant experience. We need to build up the professional team in the UK to design and to manage new programmes in these areas. We need to provide basic training to staff overseas, so that they are aware of the issues involved and of the opportunities. Operational funds are also needed, initially in the form of a centrally held challenge fund to be bid for by country directors.

  The Council has prepared a separate paper for the Committee giving detailed proposals for work in this area. Appointing the additional professional staff needed, providing training for existing staff is costed at £4 million over three years. An additional programme budget of £6 million is proposed.

Attracting students to Britain

  The Council has a well developed programme providing advice to potential students on educational opportunities in Britain. By persuading schools and colleges to share the costs we have been able to extend our work in this area in spite of the cuts. Staff in the UK work with educational institutions to identify priority countries, and to design and produce reference material. This is promoted abroad through specially trained staff in the Council's offices overseas, and through missions and education fairs co-ordinated by the Council. The international demand for education is increasing rapidly, but so is the competition from other countries. International students coming to Britain help to promote abroad the best of Britain. They are also valuable to our domestic economy, and more than repay the money spent in attracting them. Recognising this the Prime Minister has asked for advice on how to bring more students to Britain.

  Paying for professional staff in the UK and training existing staff overseas to support the programme proposed to the Prime Minster would cost the Council about £400,000 a year. The full recurrent costs of the programme would be in the region of £5 million a year.

INVESTING IN THE FUTURE

  Many of the effects of the 1995 cuts are only just beginning to be felt as the assets that enable the Council to do its work are being eroded. If the Council is to continue to play its role as the UK's principal agency for cultural relations abroad it needs to recognise the effects of the 1995-96 cuts, and to invest in its future.

Investing in staff

  A vital factor in the effectiveness of the Council is the commitment, skill and experience of its staff. This has been developed over decades through a combination of recruitment of those with potential, through professional and language training, and through successive postings in professional advisory posts in the UK and in junior management posts overseas. Over the past 10 years, and particularly since 1995, the number of junior management posts in the UK has been cut. Overseas such posts are now filled by well-qualified local staff. UK based staff working overseas are almost all over 35, and in senior grades. As jobs have gone there has been no opportunity to recruit younger staff to succeed them, and there are very few posts left which can provide a training ground to develop future senior managers.

  As part of the cuts the Council controlled overheads by transferring all staff and training budgets to line managers. Staff could only be released for training if their current unit was able and willing to fund both the training and their salary in their absence. For short term training, for example in customer care, this approach made sense. Individual managers could not however justify or afford investing in long-term training. Without the ability to train its own staff the Council had to rely on buying in expertise—generally at higher costs, and with less experience of our activities, or proven commitment to the organisation. Independent surveys show that this has been demoralising for existing staff who joined the Council for relatively low salaries, but with the expectation that training would be available.

  If the Council is to make best use of its staff it needs the resources to fund staff costs during induction, pre-posting or professional training, for example to acquire financial skills. Resources are also needed to establish secondments, which can be a valuable way of building both staff skills and relations with partner organisations in the UK. Funding eight junior and middle management training posts for a year would cost an additional £300,000 a year.

  As long serving staff leave, the Council's language skills diminish. No member of staff has been on language training for more than three months in the past three years. The recent Quinquennial Review commented that representatives of an organisation committed to cultural exchange cannot afford to be seen to be ignorant of their hosts' language. Such ignorance is at variance with the Council's objective to "enhance the UK's reputation as a valued partner in the world". We need to re-establish a programme for training staff in core languages that offer mobility of posting, and are not readily available. The cost of 20 staff receiving an average of six months language training would be some £900,000 in post costs and training costs.

Investing in buildings and equipment

  No organisation can operate effectively unless it maintains its buildings and equipment adequately. An organisation which aims to challenge outmoded stereotypes of the UK abroad cannot do so from dilapidated buildings filled with out of date equipment. In its submission as part of the Comprehensive Spending Review the Council asked for an additional £8 million per annum to enable it to maintain its estate and equipment. No additional capital funding was found.

  As part of the cuts the Council gave up 46 per cent of its headquarters floorspace, moving to smaller premises in Manchester, closing down an office in London, and giving up the lease on half of the main headquarters building. UK offices are generally well maintained, but packed to bursting point—this year we have resorted to renting serviced offices in Central London. Ten per cent of UK staff are housed in a building on which the Council does not pay a commercial rent, but the lease is due to expire in 2002. As the focus of work changes a number of staff currently located in Manchester would be more appropriately located in London. The CSR settlement included a modest element for inflation, but it did not allow for the £1 million increase, 70 per cent, in the rental on our main headquarters building this year. The Council is currently reviewing future options for accommodating staff in the UK, but it is clear that the savings of £4.5 million per annum made at the time of the cuts will not be sustainable.

  The Council has a programme of maintenance of its premises overseas which ensures that buildings do not become dilapidated or unsafe to work in. However at the current level of investment only two or three premises can be given a major refurbishment each year. An individual office would be refurbished on this basis only once in 30 years. Substantial additional investment will be needed if the Council's premises are to be a showcase for the UK's creative industries.

Information Technology

  The Council is increasingly dependent on information technology for communication between staff, and the electronic transfer of information is a fundamental part of our financial management systems. Current investment plans, totalling £17.5 million, should allow sufficient modifications to cope with the millennium bug, but they will leave the Council with a mixture of software and hardware in the UK and overseas which is not compatible and which will be increasingly expensive to maintain. We will certainly not be able to equip our offices overseas with state of the art systems to provide information about Britain. A full upgrade of the Council's IT infrastructure, similar to that being implemented by the FCO, would cost in the region of £50 million.

THE FUTURE

  This paper has described the impact of the reduction to the Council's grants-in-aid in 1995-97. It has also outlined the sums needed to ensure that reductions in the Council's UK operations do not seriously prejudice the quality and range of the Council's work overseas. The British Council is grateful for the opportunity to present additional evidence and welcomes the Committee's interest in its work.

22 March 1999