The Russian authorities have evidently reopened the case concerning the British Council’s operations in St Petersburg, see here (The Times) and here (FT), and there will no doubt be further pressure applied on Britain through this channel. There is much speculation that the reopened investigation is (politically) linked to reports that the Russians say that our man Q has created an electronic "rock" to be used as a data storage device for cunning British spies to upload and download data while apparently innocently walking along the street in Moscow. There are plenty of reasons for thinking that it is all a bit improbable, not least because Q would know that such a rock lying beside the road might constitute an invitation for someone to use it for nefarious purposes - to break open a car for example - which wouldn’t do it much good. And after all, if gigabytes of information can be stored in something the size of a credit card, and if local transmitters can be the size of an ant, why plonk a rock that to judge from the CCTV pictures needs regular servicing in a public place? It all sounds a bit daft. So it probably is cooked up.
Where does the British Council come into this? Nowhere. But the British Council has given the Russians a licence to have a crack at them when it suits them, because the silly Billys didn’t pay their tax. We are told that this has all been settled, and the Council has paid up the £1.4 million that was evidently owing. But hang on a minute - £1.4 million? How many language schools can develop a tax liability of that order? It’s virtually impossible to think of any. To then allow things to deteriorate so massively as to let the non-payment of this tax reach the national newspapers of both countries, and the ears of Putin and Blair, and so provide the Russians with leverage in a spying scandal, surely requires incompetence on an epic scale. Not many language schools could do that either.
Will this incident prevent the British Council from getting on with their work in Russia? We have no idea what they do there, but do they need a language school? The idea that anybody needs a British Council language school nowadays is just plain silly. The British Council would argue that they earn money that way, and that the surplus revenues from these “enterprises” are used to support other initiatives. But has anybody done the sums? The true sums? Their teachers in St Petersburg, and in plenty of other places, have diplomatic status, and so are exempt from local taxation. This is anti-competitive. It means that a competitor, including therefore a British competitor working in the same market, would have to pay teachers much more just to match the “take-home” British Council salaries the “diplomatic” teachers enjoy. The British Council were evidently able to find £1.4 million on this occasion to (however temporarily) satisfy the Russian authorities, and so prior to this rude shock they presumably thought they were profiting – as they do elsewhere – from their diplomatic tax-exempt status. Put that “diplomatic status” alongside the £186.25 million of public money that supports them, and their claim to be independent of government (a necessary condition for them in order to be registered as a charity) looks pretty thin. Ridiculous even.
The underlying problem is this. The British Council is essentially a parasitical organisation, unable to exist without a giant fix – the equivalent of £25,000 per employee per year, and there are over 7000 of them – from the British taxpayer. Using this giant subsidy as a base, they then manage to avoid tax on other income through the wheeze of having both diplomatic status abroad and charitable status at home, thereby creating problems, market distortions and aggravation all over the place. To cap it all, after comfortable careers enjoying an absurdly privileged existence, their employees retire at 60 on civil service pensions, paid for by the taxpayer. The true cost of the British Council, to enterprises and taxpayers worldwide, but most especially to the British taxpayers who unwittingly underwrite this awful arrangement, must be monumental.