This is the second in a series of blogs on the upcoming Spending Review, and how Britain maximises its influence and soft power across the world at a time of declining budgets. This focuses on the British Council, the UK’s international organisation for cultural relations and educational opportunities. Find the first, on the FCO here.
FCO financing, under the spotlight in the forthcoming Spending Review, has significant influence on key soft power assets, of which the UK has many, built up and consolidated over many centuries. Founded in 1934 to create ‘a friendly knowledge and understanding’ between the people of the UK and wider world, the British Council (interacting with nearly 550 million people in over 100 countries each year) receives grant-in-aid funding from the FCO allowing it to “represent the UK’s long term interest in countries where we cannot rely on earned income alone”. Government funding was cut by 25% from 2010/2011 – 2013/2014, and in 2013 it received £172 million in government aid, on par with 1998-1999 levels. However, the organisation has been developing alternative funding streams, resulting in the perception that the organisation is adopting a more commercial approach, which, according to John Baron MP (member of the Foreign Affairs Select Committee), “risks damaging a unique brand”. With over 75 per cent of turnover earned through teaching and exams, tendered contracts and partnerships, FCO funding is less than 20% of the organisation’s income. Last’s year’s Triennial Review of the British Council reported that self-generated income (English Language Teaching & exams) increased by over £100 million since 2010 and predicted it would increase by a further £100 million by 2015 – “well beyond levels needed” to compensate funding cuts. Nevertheless, as Colm McGivern, Director of the British Council in South Africa explains, “like every organization in receipt of public funds we have to be increasingly efficient and constantly innovative in the ways we connect the UK to other countries using education and culture.” This is in the face of increasing competition, with China’s Confucius Institute and Institut Français surpassing the British Council in number of offices globally.
Most recently, the Foreign Affairs Select Committee called for protection of the British Council’s budget in the Spending Review: “Any attempt to make a parallel cut to the British Council budget in the 2015 Spending Review would inevitably weaken the UK’s capacity to project soft power and culture in target countries with growing economies or regions with high priority political and human rights concerns, such as Russia and the Gulf.”
This is the first in a series of blogs on the upcoming Spending Review, and how Britain maximises its influence and soft power across the world at a time of declining budgets. This focuses on the Spending Review, and the Foreign & Commonwealth Office (FCO).
Civil servants across Whitehall returned from their summer holidays with a thump. Now in the thick of negotiations, the Chancellor’s Autumn spending review looms with huge departmental cuts on the horizon. Seeking to bring the UK into surplus by 2019 / 2020, the review seeks £20bn of departmental savings. May’s Budget saw Chancellor George Osborne protecting over half of all public spending while simultaneously committing to increases in health and defence spending, ring-fencing schools funding on a per-pupil basis and renewing the pledge to spend 0.7% of GNI on overseas aid. Unprotected departments will therefore bear the shoulder the heaviest burden, and have been asked to formulate ideas for savings of between 25% and 40%. These scenarios are not far-fetched. Analysis by the Institute for Fiscal Studies reports that during the last Parliament, overall departmental spending was reduced by 9.5%, with unprotected departments facing cuts averaging 20.6%.
The UK’s Diplomatic Service under pressure
With defence and aid budgets largely protected, the FCO is the major remaining government department (working on the UK’s role overseas) which will be affected. With a budget that is 25% lower than its French equivalent (despite comparable network sizes), FCO funding (£1.7bn) amounts to less than 3% of the total of the three budgets combined, and as the only unprotected department in this group, the FCO is exposed to the full force of Sending Review cuts.
And there is limited scope for savings. With the devaluation of sterling, FCO spending power has reduced by between a fifth and a quarter since 2009, requiring increased prioritisation and efficiencies. The 2010 review saw the FCO making a 10% cut (real-terms), followed by a further 6.3% reduction in 2013. Simon Fraser, former FCO Permanent Secretary, admitted in his farewell interview that “like other departments, we’ve faced a pretty tight resource situation since 2010”. Diplomatic capabilities remain underfunded, especially in the areas of compensation levels, technology infrastructure and staff numbers. A February report by the Westminster Foreign Affairs Committee described an FCO desperately in need of funding and a diplomatic service lacking the right skills. There is also evidence that human rights is no longer one of the FCO’s top priorities – believed to be a consequence of the savings imposed so far.
Foreign policy challenges in the aftermath of the 2008 financial crisis have not abated, and there has been significant turbulence across the globe affecting UK interests. Shifts in world order (e.g. reduced power of Bretton Woods institutions) are also coinciding with this relative decline in the UK’s material capacities and its ability to apply international leverage. So what to do in an era of declining budgets and increasing challenges? Prioritisation is key, according to Fraser “…you cannot carry on doing more and more if you’re under continuing resource pressure – and I think we have to face that. The government has to think about that and we have to think about the priorities – what really matters and how we can focus our effort on the things that we can make the most difference on.” There are already some indicators of focus – in June, Foreign Secretary Philip Hammond told the Foreign Affairs Committee that that the FCO would aim to protect its network of overseas embassies, “I am clear that the crown jewel of the Foreign Office’s capability is the network of international platforms, embassies, and missions around the world… …We must seek to protect that sharp end presence while addressing the need for further efficiencies.” Were there to be cuts, they would likely be made to support functions, subordinate posts in developed countries, and UK operations. The Permanent Under-Secretary, Simon McDonald stated in a recent inquiry; “the logical conclusion of protecting the network and having to reduce is that such reductions that have to take place will be at home”.
Early indicators for 2015 are not promising – the Chancellor unveiled a £4.5bn savings “down payment” in June, with the FCO taking a £20m hit of in-year spending reductions, and more cuts expected. With no constituency in the UK to speak up for it and already stretched, the organisation has largely been left to fight for itself. Echoing an assessment made by the predecessor Committee in the last Parliament, last week’s report by the Foreign Affairs Committee called on the Treasury to protect and increase the FCO budget, “We recommend that the Treasury protect the FCO budget for the period covered by the 2015 Spending Review, with a view to increasing rather than cutting the funds available to support the diplomatic work on which the country’s security and prosperity depend.”