The British Council was founded in 1934 as fascism was rising across Europe. It opened its first four offices in 1938, as Britain prepared for war, in Bucharest, Cairo, Lisbon and Warsaw. Today it operates in more than 100 countries, but as fascism rises in Europe again, the British Council (BC) is in retreat. It is in effect bankrupt, and the Labour government can choose either to save or condemn it. “We are facing an existential crisis,” Scott McDonald, the CEO since September 2021, told me when we met before Christmas. When I saw him again recently, the Council’s position had become even more perilous because of proposed cuts to the overseas aid budget.
Before the pandemic the BC was profitable and generating revenues of more than £1bn. In addition, it received an annual government grant of £165m. “Covid smashed our revenues,” McDonald said, adding that English teaching and the institution’s exams business had become less profitable since the pandemic because of advances in language-learning technology and AI.
The BC is losing £50m a year, and McDonald is preparing to sell its assets, which include 40 buildings it owns overseas and, sadly and most controversially, an art collection of 9,000 works (valued at £200m). Artists in the collection include Lucian Freud, Barbara Hepworth, David Hockney and Tracey Emin. Thousands of jobs will be cut and offices closed around the world. Before the pandemic, the Council employed 12,000 people, many of them teachers and examiners; the workforce is now 9,000 and will be cut again by 20 per cent. “It’s desperate stuff,” McDonald said. “The worst-case scenario is that we cut the British Council to 30 offices. [But] we would disappear then. The board, which is personally liable if the British Council goes insolvent, wants us to shrink as fast as possible. It’s not over yet. There’s real support for us in parliament.”
David Lammy set up the Soft Power Council in January and McDonald describes him as being “rhetorically supportive”. The Foreign Secretary “understands the value of soft power and culture – his wife is an artist – and wants us out there celebrating Britain and our values”. Lammy has spoken to me about his approach to foreign affairs, what he described as his style of formal and informal diplomacy, and this is something the British Council understands: it works through formal and informal networks and partnerships.
McDonald was for a decade CEO of Oliver Wyman, a consulting firm. During his 26 years there the workforce grew from 50 people to 7,000. He is a Canadian, formal in speech and manner, and no bohemian liberal, but has lived in England for several decades, and uses the first-person plural when speaking of Britain. His wife, Julia, is a novelist, and he calls her a “British Council baby”: her parents met at a BC literary event in Germany in the 1960s.
“I am hard-nosed and recognise the times we live in and the financial hardship we face because of the need for rearmament,” he told me as we travelled by train from Lodz to Warsaw. I was with him in Poland to observe some of the Council’s work and attend the opening of the 2025 UK/Poland cultural season, a smartly curated exhibition of modern abstract landscapes. Poland has absorbed more than one million Ukrainian and Belarusian refugees since the full-scale Russian invasion in 2022. I visited a school in the northern suburbs of Warsaw where at one time a third of the nearly 950 students there were migrants or refugees. English is what the headteacher called the “bridge language” connecting the children.
McDonald believes the British Council “gets a bad rap as a soft institution because we’re involved in culture. What we want to demonstrate to the taxpayer is that we are useful. We also want to show the way we think about soft power can lead to growth for the UK and greater security because of our work on disinformation, on media literacy and community building.” What the BC offers to Britain, he thinks, is greater “reputational security”.
During the pandemic it was bailed out not with a government grant but a loan of £250m approved by Dominic Raab, then foreign secretary. McDonald sold the BC’s exams business in India and repaid £50m, but £197m is outstanding and the Treasury is demanding repayment. The interest rate on the loan was fixed at the sterling overnight rate, plus 2 per cent; the annual interest payment is £13m. Working with Raab “was bruising”, McDonald said.
“What killed us, and kills us still, is that Raab bailed us out but with a commercial loan. He deemed us a commercial enterprise because we were out there teaching English and charging for it. But we don’t have shareholders, we don’t pay bonuses. We’re incredibly stretched everywhere. We can’t fix our buildings, we can’t pay our people properly, which is why we’ll have to make these cuts. We want to be a valued partner to the government. If you did a poll of leaders of the university sector, education, the cultural sector – we’d get overwhelming support.”
McDonald believes the loan should be cancelled or at least extended to a 25-year term at a lower interest rate more appropriate to a charity. “What makes me angry is that for years the UK has had this great deal: we take a small amount of money and amplify it enormously using the private sector and other means.”
After ten years as CEO of Oliver Wyman, McDonald had a choice: “To find an even bigger corporate job or do something completely different.” He chose the latter, but the role he has is “ten times harder than I imagined”.
Does the British Council still have a place in the world? Its name is redolent of a distant, more paternalistic era. There is as well a kind of incoherence: the name is familiar, but who outside the organisation could say exactly what it is and what it does? It is not an NGO. It is not a commercial enterprise, but its disparagers would dismiss it as a quango. Far better, I think, to see it as a valuable intermediate institution, operating between the market and the state: independent of but part-funded by government, with an explicit soft-power mission to promote British culture, education and values, as well as our greatest asset of all, the English language. If the United States had given the world its dominant language and the lingua franca of business, Donald Trump would be ceaselessly boasting about it. The modern British are more bashful and self-interrogative than the king of Maga, or the old imperial overlords who believed in manifest destiny and their innate superiority.
“We’ve gone way over the top in the UK with our constant self-criticism,” McDonald said. “There’s a bit of it I like, but overall, the result is negative. If you get out into the world – I’ve visited 50 countries in three years – if you meet government ministers, the cultural sector, university leaders – overwhelmingly there’s real interest in the UK, and love for our education, our art forms, the English system of regulation.”
The equivalent institutions to the British Council in Germany and France, the Goethe Institute and Institut Français, are much more generously funded by government. China, which understands the value of soft power, uses Confucius Institutes ruthlessly to advance its interests overseas. Scott McDonald is prepared to “reshape the network” in response to the government’s growth and security imperatives but believes further punitive cuts, or even closure, after 90 years of continuous service would be a historic mistake. “Is the UK so poor that it cannot afford the British Council?” he asked as we parted.
[See also: Labour has learned that austerity is hard to avoid]
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This article appears in the 12 Mar 2025 issue of the New Statesman, Why Britain isn’t working