It is one of the finest art collections in the country, and belongs to you — not that you will ever have seen it before.

The full breadth of the British Council's hoard of 20th-century British art, toured and exhibited abroad to promote Britain and its artists and designers, is to go on show in this country for the first time next year. The collection, including works by Walter Sickert, Henry Moore, David Hockney and Lucian Freud, will form part of the inaugural programme at the revamped Whitechapel Gallery in East London.

Iwona Blazwick, director of the gallery, said that the British Council had made the most of the relatively low prices for home-grown art yet had shown prescience in its choices. “Up until the late 1980s the art market in Britain was not tremendously dynamic. The British Council were damned lucky, but they were also consistent in getting in early [in artists' careers] and buying work of tremendous quality.”

One of the country's most important galleries, the Whitechapel has in effect been shut since February 2006 for a £13.5million refit and extension into the equally historic library next door, almost doubling its space. It will reopen in April with plans to establish itself as the cultural centre of the busiest artists' quarter in Europe: the East End.

Victorian philanthropists founded the gallery in 1901 to enlighten the poor of East London. In 1939 Picasso's anti-war masterpiece, Guernica, was exhibited there, the first and only time that it has visited Britain. The painting was the star of a show put on by Stepney trade unionists to raise consciousness about the Spanish Civil War. Clement Attlee, leader of the Labour Party, gave a stirring speech and Picasso asked visitors to donate shoes to the Spanish Republican fighters.

Other achievements include the first major British shows of Jackson Pollock, Mark Rothko and David Hockney, as well as the first London appearance, in 1982, of work by the Mexican painter Frida Kahlo.

The Passmore Edwards Library, next door, is nine years older. It was known as the “University of the Ghetto” because of its role as intellectual heart of what was for much of the 20th century a vibrant Jewish immigrant community.

The library closed in 2005, to be replaced by David Adjaye's Idea Store, also in Whitechapel Road. Its graciously proportioned rooms include a spectacular glass-ceilinged gallery that was rediscovered during building works and will now house rarely seen public and private collections, such as the British Council artworks.

“It's an extraordinary jewel of a space,” Ms Blazwick said. “We don't have a collection, so we thought here's an opportunity to borrow other people's. At least three public collections have no home — the Government Art Collection, the Arts Council Collection and the British Council's — and have played a tremendously important part in nurturing 20th-century art.”

The British Council's 8,000 works will form the basis of five shows at Whitechapel in the first year. The last will be the subject of an international competition, inviting curators to pitch for what they would do with the collection. The works “are actively lent around the world, but we don't often get a chance to see them in one place”, Ms Blazwick added.

Since 1938 the British Council has been collecting art that it uses to promote the status of British art. Works not included in the touring exhibition programme are displayed in the council's cultural centres in 109 countries, in its UK offices or in museums and galleries overseas. The collection, valued at £60 million, spans the development of contemporary British art, from Wyndham Lewis and Sickert to Barbara Hepworth and Frank Auerbach. Richard Riley, of the British Council, said it was apt that next year was the 75th anniversary of the founding of the British Council.

Elsewhere in the expanded Whitechapel Gallery are a room for the gallery's archive and an education and research tower. A retrospective of the German sculptor Isa Genzken will be another highlight of the reopening.

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