Recommendation 3

There has at times been a lack of trust between the British Council and the FCDO, and both sides have struggled to adapt to a shift from a sponsor relationship to one where the FCDO is also a commercial lender. Through the National Audit Office’s report and our own evidence session it is apparent that there have been tensions and a lack of trust between the two organisations. Beyond the key element of disagreement over the British Council’s status as a commercial organisation, the British 4 Council raised concerns over ministerial engagement through the loan renegotiation process and discussions about proposed country closures, and voiced frustrations with changing administrations posing barriers to progress. It is apparent that the FCDO has lacked confidence in the British Council’s leadership, having commissioned four external reviews of the British Council since August 2025 at a cost of £540,000, three of which the British Council funded. This also reflects lessons learned from the failure of the 2020 business plan where assurances by the British Council about profitability proved to be incorrect. The FCDO is now more than a sponsor of the British Council, it is also a lender. It is clear that this change has proved challenging, and this is reflected in the FCDO’s recent move to become more embedded in the British Council’s financial governance arrangements. recommendation The FCDO should set out any changes it is making to governance arrangements to ensure that they support both: a. a collaborative sponsorship arrangement that balances appropriate oversight of how the British Council uses its grant-in-aid funding and British Council autonomy; and b. the financial oversight necessary for the FCDO as a commercial lender to the British Council.