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The British Council is in “real financial peril” and “selling everything” it can to survive, its chief executive warned on Tuesday, as he called on ministers to resume talks over funding for the international cultural body.
Scott McDonald said he was overseeing a second restructuring since the pandemic to cut costs but that the Foreign, Commonwealth and Development Office urgently needed to resolve the issue of a Covid-era loan to the organisation worth £197mn.
“We’ve made close to no progress [with the government] and everything has now stalled,” McDonald told MPs on Tuesday, warning that the body was “still in real financial peril” despite 16 months of discussions.
“We are now selling everything the British Council has that we are able to sell. We don’t have anything else,” he added. “If it [soft power] is worth it, the UK needs to fund it. If it’s not worth it, then we can get to work shrinking further.”
While pushing for an increase in government funding, McDonald said the cultural body planned to cut more jobs, sell assets including buildings worth about £90mn and close operations in 35 countries as part of the restructuring.
But the plan could proceed only with FCDO approval and if the British Council — which was founded in 1934 and is an arm’s-length body of the Whitehall department — could access cash from the asset sales, he added.
Scott McDonald says the loan, issued during the pandemic to keep the organisation afloat, could be written off ‘with the right political will’ © Aaron Chown/PA
“We have partners around the world who rely on us being financially sustainable . . . Without being able to say to the world ‘we’re actually a viable organisation’, it’s very hard for us to operate,” McDonald told the House of Commons foreign affairs committee.
Forced repayment of the £197mn commercial loan, which was issued by the previous Conservative government during the pandemic to keep the organisation afloat and is due in September 2026, would result in its “complete withdrawal”, he warned.
A transfer to the government of the British Council’s art collection, which comprises some 9,000 pieces and is worth roughly £200mn, was “a good solution [to the loan] for everyone, but we haven’t got traction [from ministers] on it”, McDonald noted.
The loan could also be written off “with the right political will”, he added, calling the body’s annual interest payments of between £12mn and £15mn “not wise”.
The FCDO said its “record of support to the British Council is clear . . . No decisions have been made on future grant funding, however we continue to work with the British Council and HM Treasury on a resolution for the outstanding loan”.
The UK’s international organisation for cultural relations and educational opportunities operates in about 100 countries and reached 650mn people in 2021-22. But its principal sources of income — teaching, exams and development contracts — have come under pressure since the pandemic, while moves in exchange rates have hit the value of some of its currency holdings.
In January, then foreign secretary David Lammy launched the Soft Power Council, saying the government advisory board would help “enhance our security and drive economic growth”. The late Harvard professor Joseph Nye coined the term “soft power” to describe a nation’s ability to obtain what it wanted “through attraction, rather than coercion or payment”.
Lammy had been “excited” about soft power in office, said McDonald, a member of the council, noting that the British Council was involved in “most of the work” of the new group.
“We’ll have to see if the new foreign secretary [Yvette Cooper] has the same desire to keep [it] going,” he added.
