Peers criticise ‘unconscionable’ British Council Covid loan repayments

Members of the House of Lords have called on government to forgive a £200m loan made to the British Council during the pandemic, calling the interest payments amounting to £14m a year “unconscionable” and warning that if the soft power organisation is forced to close down foreign outposts to save money, “Russia or China are poised to move in”.

Speaking to the House of Lords on 13 February, cross-bench peer Lord Clancarty
said the British Council is having to consider closing up to 40 country operations to deal with the debt.

“The government should take careful note that wherever we move out from, Russia or China are poised to move in,” warned Clancarty before asking Parliamentary Under-Secretary Baroness Chapman: “Will the government forgive the Covid loan, with interest accruing at the commercial rate of £1 million a month?”

Echoing Clancarty’s concern about the Council’s fragility at a time of increasingly strained international tensions, Labour peer Baroness Kennedy said: “We are watching the United States retreat from the world and from obligations to the world, and from the soft power that it exercised through USAID. Is this not the very moment when we should be stepping forward and making sure that we are the people who can do soft power better than anyone?”

In response, Chapman said Labour would not forgive the loan, noting it was made under the previous government and adding: ”I cannot explain why it was done in the way that it was, and it is unfortunate that a payment schedule was not agreed as part of that process. However, we are where we are.”

The government currently provides 16% of the British Council’s funding. The organisation, which promotes cultural relations and educational opportunities between the UK and other countries, has annual revenue of close to £1bn, primarily generated through commercial activities, including language classes, professional communication courses and networking opportunities.

‘We are where we are’

News of the Council’s financial difficulties first emerged last month, just a week after the Foreign Office and Department of Culture Media and Sport launched the UK Soft Power Council to drive UK growth and security.

Former Culture Minister and Conservative peer Lord Vaizey called the interest rates on the Council’s loan “unconscionable” and was one of several peers to question why the government had launched a new Soft Power Council when the British Council needed support.

“The British Council, alongside the BBC World Service, is the most important arm’s-length body in projecting British soft power,” said Vaizey, “We cannot simply say we are where we are and leave it at that.”

“Nobody is saying ‘we are where we are and let us leave it at that’, but we are where we are,” responded Chapman.

Cross-bencher Baroness Boycott also said she did not understand why the UK needed both the British Council and the Soft Power Council, with Chapman replying, “It is not an either/or.”

“The British Council is central to the Soft Power Council. However, the Soft Power Council includes business, the Premier League, museums and science and technology. It will be much bigger, but the British Council will be at the centre of it.”

‘Does Rachel Reeves want to be paid in art?’

Last month, it was revealed that the British Council had offered its collection of art valued at £200m to the government in exchange for writing off its loan, but the offer was refused.

Shadow DCMS minister Lord Parkinson asked if the government might consider an acceptance in lieu scheme to allow the Council’s debts to be offset while enabling the artworks to be kept and shared with the public.

Chapman said that around half of the Council’s collection is covenanted and could not be sold, but she supported the Council looking at “other assets”, adding: “Does Rachel Reeves want to be paid in art? I very much doubt it.”

“The issue of the loan needs to be dealt with, but no one should think that that is the only thing that the British Council needs to concern itself with in making sure that it is as strong as it can be in the future. It needs to look at changes in the way language tuition takes place and at different parts of the world where it may not operate currently but might wish to in the future,” said Chapman.

“All of these questions need to be discussed and thought through thoroughly so that we get a strong, sustainable business plan and are able to see the British Council thrive in the next few years.”