This is the fourth 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 GREAT Britain campaign, which has been a focal point for the UK’s prosperity agenda. Find the others with the following links: FCO, British Council, BBC World Service.
Another ambitious initiative has established itself as one of the UK’s more innovative soft power tools – the GREAT Britain campaign. Active in 144 countries, the £113.5 million campaign (2012 – 2015), is the government’s major branding campaign to promote the UK as a destination for tourists, trade and investment, and students, in order to secure economic growth. As Director, Conrad Bird highlights, the award-winning campaign has focussed unashamedly in driving the prosperity / economic growth agenda with clear objectives aiming to stimulate foreign direct investment, tourism and strengthen the UK’s economy – “…it is about jobs and growth for Britain; it is designed to make money for Britain”. Conceived and coordinated from the Prime Minister’s Office in Downing Street (but working with UKTI, the FCO, British Council, VisitBritain and VisitEngland), the campaign was recently commended by the National Audit Office, reporting a return on investment (so far) of £1.2 billion.
The campaign has not been without resource challenges, as James Pamment from the USC Center on Public Diplomacy explains, “Despite the potentially demotivating effects of cutbacks and the marketing freeze, GREAT has provided a focal point for the prosperity agenda. Backed by hard cash, positivity dividends from the Jubilee and Olympics, support at the highest political levels, and metrics which demonstrate value in a manner easy to understand, GREAT has opened the door to opportunities for organisations and staff at a time when resources have been stretched.”
With over 400 businesses and high-profile individuals backing the brand with joint funding and sponsorship (contributing over £69m in cash and in kind support), the campaign is in an increasingly strong position to seek further support from the private sector given the increasing value of the GREAT brand itself, and track record in delivering results for business. With further campaign plans for the next 12 – 18 months (e.g. using the Bond movie to promote the UK, Exporting is GREAT campaign targeted at SMEs, tourism campaigns on Culture & Countryside, activity marking Shakespeare’s 400th anniversary, supporting Liverpool’s 2016 International Festival of Business), it is clear that the campaign is seeking to build on the momentum generated and will no doubt will be hoping for adequate resourcing for its ambitious plans. The 2015 Conservative manifesto hints at future support – “We will boost our support for first-time exporters and back the GREAT campaign, so we can achieve our goal of having 100,000 more UK companies exporting in 2020.
This is the third 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 BBC World Service, “Britain’s gift to the world”. Find the others with the following links: FCO, British Council.
Other UK soft power assets fall into the “unprotected” category and are at risk of cuts. Since the Chatham House / YouGov Survey began polling in 2010, BBC World Service radio and TV broadcasting has been seen by UK opinion-formers as the UK’s top foreign policy tool, consistently ranking higher than all other foreign policy “assets”.
Broadcasting to 210m people every week and with a budget less than half that of BBC2, the World Service faces increasing challenges in the form of domestic and international competition, technical change, and a legacy of underinvestment. FCO funding was cut by 16% in 2010, leading to the departure of about a fifth of its staff. This has had an impact – in 2005 the organisation provided services in 43 languages, now down to 28. In contrast, there is increased competition – following a 2007 directive from Premier Hu Jintao, China has been investing heavily in soft power assets with state journalists now pumping out content in more than 60 languages. Lacking first mover advantage, it is clear that competitors have strategic ambitions. Yu-Shan Wu of the South African Institute for International Affairs comments, “Since the Beijing Olympics, we have seen increased efforts to provide China’s perspective on global affairs, signalling relations with Africa have moved beyond infrastructure development to include a broadcasting and a people-to-people element. There are now regular exchanges between Chinese and African journalists, and it is clear that China is stepping up and laying the foundations for a more concerted public diplomacy effort in the region.”
From April last year, the World Service ceased to be funded by the FCO, and is now resourced by a share of the BBC licence fee. Although its budget was increased by the BBC in 2014 (up by £6.5m to £245m), the BBC itself faces many of its own funding challenges. In July, the Chancellor called on the organisation to make savings and make ‘a contribution’ to the budget cuts Britain is facing. Ministers asked the BBC to shoulder the £750m burden of paying free licence fees for the over-75s, and later that month unveiled a green paper on the future of the broadcaster which questioned if it should continue to be “all things to all people”. In the same month, the organisation announced that 1,000 jobs would go to cover a £150m shortfall in frozen licence fee income.
The World Service is somewhat insulated from wider BBC cuts, as the BBC has to seek the Foreign Secretary’s approval to close an existing language service (or launch a new one). Nevertheless, in early September, Director-General Tony Hall made the first of a series of responses to the green paper. Making a “passionate defence of the important role the BBC plays at home and abroad”, he unveiled proposals for a significant expansion of the World Service, including; a satellite TV service or YouTube channel for Russian speakers, a daily news programme on shortwave for North Korea, expansion of the BBC Arabic Service (with increased MENA coverage), and increased digital and mobile offerings for Indian and Nigerian markets. Interestingly, the proposals sought financial support from the government, suggesting matched funding, conditional upon increased commercialisation of the BBC’s Global News operation outside the UK.
More on the expansion plans here.
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.”
I know Treasury mandarins don’t laugh much, but I suspect a few of them will be smirking on their way home tonight. If I read the spending review right, they’ve pulled a fast one on their bitter, and less numerate, rivals at the Foreign Office – something that is sure to cause an immense feeling of satisfaction.
The crux of the matter is in who bears the risk of currency fluctuations. The FCO spends most of its money overseas, so its costs rise when the pound is weak, fall when it is strong.
Historically, the Treasury has evened this out through the Overseas Price Mechanism. The FCO was given money in sterling and, if it found that this was worth more than expected overseas, it gave money back to the Chancellor. If the settlement was worth less than expected, it was given sufficient extra funds to enable planned activity.
In the mid 2000s, the tide was in the Treasury’s favour, with £5-14 million a year being returned by the FCO, but in 2007/08, the pound began to weaken and HMT had to pay the FCO £1.5 million or so.
The Treasury didn’t like this, so it abolished the price mechanism and left the FCO to deal with an increasingly feeble pound. The result was carnage. The FCO lost £100m in 2008/09 and the same again in 2009/10.
According to the Foreign Affairs Select Committee:
The FCO has lost around 13% of the purchasing power of its core 2009–10 budget as a consequence of the fall of Sterling. We concur with the National Audit Office, that the withdrawal of the Overseas Price Mechanism and the subsequent fall of Sterling have had “a major impact on the FCO’s business worldwide”.
We note that the budgetary transfers which the FCO has made to try to help cope with the hit have absorbed all of the Department’s contingency reserve at the Treasury in both 2008–09 and 2009–10, and we conclude that this represents an unacceptable risk to the FCO’s ability to perform its functions.
So today’s announcement that currency risk is being passed back to the Treasury is a big coup, no? Certainly, the new ‘Foreign Currency Mechanism’ will give greater certainty to FCO staff, but the re-introduction comes at a time that is highly disadvantageous to our diplomats.
Look at this graph showing the pound’s value against a basket of currencies. Currency risk was dumped on the FCO just as the pound was about to begin a long, hard fall. It’s now been taken back by HMT at what looks like the currency’s trough.
Worst case for HMT, the pound’ll bump along the bottom. Best case, it’ll strengthen and they can demand a big fat cheque from William Hague. It’s the first rule of markets – sell high, buy low – especially when you want to turn the screw on your next-door neighbours.