This report marks my first year as Chief Executive but more importantly it marks, as Neil Kinnock has mentioned, a year during which our programmes have reached 128 million people, the highest number in the British Council’s history and 25 million more than last year. In doing so we have been able to enrich lives in the UK and around the world. At the heart of our work is the principle of mutuality so, while our overall aim is to bring benefit to the UK, the way we work also ensures that the countries where we operate gain from our programmes.

The last year has been one of our best, yet most challenging, to date. We have continued to respond to the needs of our many varied customers and partners – delivering life-changing projects across the world, but we also had to deal with the Russian authorities’ increasing attacks on our work as political tension grew between the UK and Russia.

We are reaping the rewards of the regional approach to managing our overseas network that we established three years ago. At the same time we have begun to move resources out of Western Europe to other regions, leading to the closure of a number of public access offices. However, our new ways of working are leading to greater impact and we have increased our reach across the whole of Europe.

Our work in international cultural relations matters more today than ever. A long-term response to difficult and seemingly intractable global issues will require more than government-to-government action and must include bringing people together to share ideas, skills and knowledge and to experience one another’s culture. The resulting connections and relationships challenge misperceptions and foster co-operation as well as build trust in the UK. And we have set ourselves the challenge of doing so at a greater level than before.

Achieving greater impactOver the last year we have moved resources from small-scale local projects into larger-scale regional and global activities. In 2007–08, 41 per cent of programme resources focused on larger-scale products, compared with 11 per cent the year before. The lower development and management costs of these activities allows us to reach more people and achieve greater impact for the same investment, while still being tailored to suit local needs. In our Corporate plan for 2008–11 we have set ourselves the target of moving 80 per cent of our programme spend into larger-scale products and we are confident that this will significantly improve our impact.

Another way of increasing our impact is to run more programmes in partnership with others. For example UKIERI is a unique programme involving 11 funding partners including the Department for Innovation, Universities and Skills, the Department of Science and Technology, the Foreign and Commonwealth Office, the Department for Employment and Learning, the Scottish Executive and the Welsh Assembly Government, and corporate partners BAE Systems, BP, GlaxoSmithKline and Shell. If we are to achieve our growth objectives, we recognise that we need to increase our ability to develop successful partnerships such as UKIERI.

We met our government-set Gershon efficiency targets, making in-year savings of £4.5 million to achieve our target of £13 million over the three-year spending period. We have reduced the proportion of our funding that we spend on overheads and, in 2007–08, we reduced corporate overheads by five per cent of total corporate costs. We will continue to find efficiency savings during the next three years, in order to live within our flat cash Comprehensive Spending Review settlement.

In 2007–08 we also earned £16.3 million from contracts delivered on behalf of organisations such as the EU or DFID. We bid for these on a competitive basis where they align with our long-term cultural relations objectives. To remain competitive and relevant we are focusing on expanding our commercial expertise by developing new models of English language provision and by winning new contracts.

This year we focused our work on a combination of programme and geographical priorities that are both important to the UK and deliver projects of real value to the countries in which they operate. These priorities are set out later in this introduction, with examples of the type of work that we undertake.

Over the last year we have been looking at our approach to arts and creativity. Recognising that we had not consulted as effectively as we should, we undertook a major discussion with over 600 individuals and institutions between January and April 2008, which allowed us to understand better what they want from us. Our plans, which emphasise operating on an ambitious and global scale with real arts expertise, have been shaped by their energy and knowledge. The arts will remain as central to our cultural relations work as they have always been.

Benefit for the UKAll our work has a connection with the UK and many projects make a difference to thousands of lives across Scotland, Wales, Northern Ireland and England.

In Northern Ireland for example, Global Xchange is getting under way. The first exchange between the cities of Newry and Mombasa was launched in March 2008, giving 18 volunteers the opportunity to work together in each other’s countries. Global Xchange is a worldwide partnership with VSO, which gives the volunteers from the UK a strong appreciation of the country and culture they have visited. But the programme also gives those from developing countries the opportunity to recognise that they have skills and experience of real value to a developed country like ours.

Reporting the Elections brought young journalists from around the world to Wales and Scotland to see and report on the elections to the National Assembly for Wales and Scottish Parliament in May 2007. The project gave the media professionals a first-hand insight into the democratic processes of the UK, Wales and Scotland in particular, and showed how devolution actually works here. The journalists shadowed prominent candidates during their election campaigns and gained a good understanding of the local political landscape and the concerns of the voters. The young international journalists shared their impressions of the elections with counterparts from the BBC and other media and sent reports to newspapers in their home countries.

Young people from Wales and the north-west and south-east of England joined 36 other climate change champions travelling to Japan as part of the British Council’s International Climate Champions (ICC) project. Selected for their enthusiasm and active role in addressing climate change they will present their climate change challenge to the G8 Environment Ministers’ meeting in Kobe. Through their involvement in ICC, they will continue to encourage other young people and community leaders to engage directly in climate change issues.

I am particularly proud of our school linking activity, which will be expanded through the global roll-out of our Connecting Classrooms programme. The programme enabled over one million young people in 900 schools in the UK and around the world to learn together in joint curriculum projects, online discussions and lessons linked by webcams. By working together the schools are broadening their horizons, breaking down stereotypes and building understanding between cultures, as well as giving young people opportunities to develop the skills they need for life and employment in our global society. We have set ourselves the challenge of increasing the number of schools involved to 6,000 worldwide by the end of 2011–12.

International education marketWe work hard to ensure that the UK is positioned as a leader in the international education market, and is able to maintain its share of that market. Attracting international students to study in the UK is an important part of this work, and worth, according to our research, £8.5 billion to the UK. Moreover, the experience of studying in another country is invaluable in enabling young people to develop the level of cultural insight and understanding they will need to prosper in a world that requires a more global skill set.

However, the dynamics of the international education market are changing and we must broaden our approach. Our ability to continue to attract students increasingly depends on our reputation and standing in the international arena. Not only is this about the quality and value of our education, it is also about the contribution we make globally. We must think in terms of developing long-term relationships that lead to mutually beneficial outcomes.

The operating environment in particular countries sometimes becomes very difficult at short notice. In Russia the British Council was drawn into the deteriorating bilateral relationship between the UK and Russia. The circumstances are covered in more detail in the Russia and Northern Europe section, but I was deeply disappointed that the Russian authorities chose to attack cultural and education links at a time of political tension. In spite of demand for our services, I reluctantly decided to suspend our work in St Petersburg and Ekaterinburg in January 2008 to protect our staff from intimidation. Our staff worked exceptionally hard to keep our services running in the face of state pressure but, ultimately, to remain open would have exposed colleagues to unjustifiable risk. We continue to operate from our Moscow office and we look forward to working with the Russian authorities to restart our work in St Petersburg and Ekaterinburg.

Income trendsIn 2007–08, we received grant-in-aid of £189 million from the Foreign and Commonwealth Office. We increased significantly the scale, scope and reach of our operations by providing English language teaching and access to UK examinations and qualifications to customers around the world, generating £202 million. Last year the number of examinations was increased to 1.7 million, provided for 1.3 million customers. We intend, over the new spending plan period to 2011, to increase the relationship between earned income and government grant from £2 per £1 of grant to £2.50 to £1 of grant.

Income trends Measured in £ millions Income trends in £ millions

Our peopleOf course, most of our success is due to the people we employ and I am immensely proud of and grateful for their energy and commitment. There are 5,000 foreign nationals in our network of over 200 offices in 110 countries and territories. Their expertise makes us unique and enables us to really understand the countries in which we work. Our pre-eminence in high-quality English language teaching around the world is based on a core of experts in English teaching techniques and a team of over 1,800 experienced teachers.

Our staff survey shows again that our staff are strongly committed to the overall purpose of the organisation. However, our staff have told us that we are not as good at engaging them in the process of change as we should be. The pace of change in some parts of the British Council, including our arts group, meant we did not always consult fully enough and we are responding to this and other feedback with a range of actions to improve engagement across the organisation.

The Board of Trustees agreed that we should recruit a team of four executive directors to work with me to manage the organisation and develop our strategy for the future. We recruited one member of the team internally and have brought into the British Council three directors from outside the organisation with the perspectives and skills that we need for the future. The new executive board has established a closer working relationship with the Board of Trustees. I would like to take this opportunity to thank the Board of Trustees, who give freely of their time, for their support and commitment over the last year.

The benefits of cultural relationsSometimes, from a distance, the public benefits of cultural relations work can seem unclear. But seen close up, through the enthusiasm of staff, customers, partners and beneficiaries, it is obvious that our work does make a positive difference to millions of people’s lives and directly benefits the UK. Just one example of this is the InterAction leadership programme that I attended in Malawi, where members of the Malawi Cabinet were joined by a cross-party delegation from the UK: Baroness Valerie Amos, former Secretary of State for International Development and former Leader of the House of Lords; Sally Keeble MP, former minister at DFID; and Mark Lancaster MP, current Shadow Minister for International Development. This has strengthened the relationship between the UK and Malawi at a senior level and was an effective response to a direct request from the President of Malawi to strengthen links with and the skills of his cabinet.

Looking aheadThere is much to do over the coming years, but I feel we have achieved plenty to be proud of. I want even more people in the UK and overseas to benefit from our work and I am confident that we are on track to do this. In the UK I would like a wider public to be touched by our programmes and to be proud that the British Council is working on behalf of the UK around the world. As the Board of Trustees recently articulated: ‘The future for the UK in this crowded, dangerous, beautiful world depends on people of all cultures living and working together on the foundations of education, mutual understanding, respect and trust.’ I believe that the British Council and its staff and partners, through our work in cultural relations, can make a significant and growing contribution to building those foundations for a more successful future.

• Programme priorities
• Geographical priorities