Conclusion 7

The FCDO explained that its position is that the British Council is a commercial organisation and therefore it should receive financial support on commercial grounds, and the FCDO told us that it had taken legal advice on this position.10 However, the British Council told us that it does not agree with this position and that it believes that it has never acted as a commercial organisation, although it accepts the FCDO’s judgement with regard to the treatment of its loan. The British Council outlined limitations 6 C&AG’s Report, paras 2 and 2.11 and Figure 10 7 C&AG’s Report, para 3 8 Committee of Public Accounts, Financial sustainability of the British Council written evidence 9 C&AG’s Report, paras 1, 1.4, Figure 2 10 C&AG’s Report, para 2.6 and Q31 9 on its activities, such as not being able to teach English in the UK, for example, or teach other languages around the world as its competitors do.11 The British Council views itself as a cultural relations organisation which is able to leverage its ability to generate other income to increase its soft power effect for the UK.12 This is in spite of its relatively lower proportion of government funding in comparison with similar organisations in other countries. Whereas the British Council received state funding of £184 million in 2021, comparable organisations in France and Germany received a total of £744m and £570m respectively.13 As we heard in evidence, the grant for the British Council was £200 million in 2010, which would stand at about £320 million today after inflation.14 The British Council told us that, for its entire history, it had used its commercial income to subsidise its soft power operations.15 Over the period 2015–16 to 2020–21 the British Council used £128 million of its operating surplus from commercial operations to support its grant-in-aid activities.16 It told us that because the grant-in-aid amount has not kept pace with inflation in recent years this has only increased its reliance on growing its commercial incomes.17