Examination of Witnesses (134-159)
WEDNESDAY 14 FEBRUARY 2001
MS PAM ALEXANDER AND MR BRIAN GLICKSMAN
134. The first session of today's meeting is to take supplementary evidence on the Access to Properties Grant-Aided by English Heritage to take up some issues that did not come up or were not properly answered at the time of the previous Report. Our witness today is Pam Alexander, Chief Executive of English Heritage. We may have to break in about five minutes to vote so you will forgive us if we have to break to do that. Can I go straight into questions. I want to address the memorandum you sent to the Committee in response to our written request, and in particular paragraph 15 saying that you wrote to Party Planners on 8 June about the outstanding donation for the wedding reception at Kenwood House pointing out that the then forthcoming Committee of Public Accounts hearing might draw attention to this matter. Given that the event took place in July 1999, why did you wait until 11 days before the hearing of the Committee to pursue the outstanding donation?
(Ms Alexander) We had already pursued the donation, Chairman, during the course of the previous 12 months. The reason I took the opportunity to write on 8 June was two-fold. Firstly, as I said in my letter to Lady Anson, we had recently been putting together our annual report and accounts which I thought would show there was no donation. There had been considerable publicity for the National Audit Office's Report when it came out in May which had been taken up in the national broad-sheets on the report on access to grant-aided properties and I thought that might make the local press link it to access to Kenwood which had been an issue at the time of the Royal wedding, and I thought this was something that I should draw to Lady Anson's attention as it would perhaps be something that she considered was relevant to the donation.
135. Others may come back on that, I want to press on given our time. That letter elicited a donation of £5,000 that was received only four days before you appeared before us, yet when asked when the donation was received (that is Question 32 of the minutes of the evidence) you replied "very recently". Given I imagine this was quite high in your mind why were you unable to be more precise in answer to that direct question?
(Ms Alexander) What I meant by "very recently" was in the last few days. I had been out of the office nearly all of the previous week on the Commission's annual tour and I was not aware which precise date it arrived, but I thought "very recently" addressed the point which I thought the Committee was probably interested in, which was whether the donation had been paid at the time of the wedding or very recently, which indeed was the case.
136. One other aspect, paragraph 15 of your memorandum also reveals that the donation was paid by Sir Jocelyn Stevens, your previous Chairman, on behalf of the ex-King of Greece. Given our clear interest in the circumstances surrounding the donation and when it was paid, why did you not share that information with the Committee at the time?
(Ms Alexander) I am sorry, I was trying to be as helpful as possible on a matter which was not directly connected to the Report which I was giving evidence on and on which I did not have specific briefing. Because I had had some knowledge of some of the issues that were asked about the Kenwood wedding, I felt I should try to be helpful. With hindsight and looking at the number of footnotes which I had to give to my evidence perhaps it would have been wiser to have written, but I was trying to be helpful on the basis of my own knowledge. It did not occur to me that that was particularly the point that was being asked for. The donation had been pursued throughout by Sir Jocelyn and I was not expecting a cheque from the former King of Greece himself.
137. I would have thought that it would be fairly obvious that when a cheque is made payable to an organisation by a previous Chairman, that would be relevant to the Committee.
(Ms Alexander) That is why we made sure we covered it very comprehensively in the memorandum which I submitted.
138. Can you cast any light on why your previous Chairman paid the donation himself?
(Ms Alexander) I was told by him and by Lady Anson that he was paying it on behalf of the former King of Greece who was not in the country at the time.
139. I see, okay. Before we go to vote which we will have to do in one minute or two, can you tell us why did you agree to the hire of Kenwood House on the basis of costs plus a voluntary donation at the hirer's discretion? Why was the arrangement not put on a proper footing and in particular on a full costs footing?
(Ms Alexander) I felt that the arrangement was on a proper footing, Chairman. The basis was that we would charge attributable costs and that is what we did. The main benefits to English Heritage were the publicity nationally and internationally and the profile we got out of it. The question of whether there would be a donation in addition was supplementary to that and, by definition, voluntary. We took it on on the basis of the international publicity that we would get which would bring substantial benefits to us as a organisation and to Kenwood.
140. I have to say I found the section on evaluation of publicity wholly unpersuasive. You have made clear in paragraph 11 that you did not charge a management overhead for central staff, senior officers' time, any of those sorts of matters. That is a pretty important decision on the use of public money, is it not, when you are providing a social event for somebody who is hardly amongst the poorest in our society on a subsidised basis?
(Ms Alexander) We did not subsidise the event, Chairman. We attributed all of the costs that we felt could properly be attributed to managing the event itself. We have a policy in relation to our third party events generally and our hospitality business that the overheads of running that business are charged to the profits of the business overall and not to specific events, and most of the management who were there that day were there not for the benefit of the organisers and hirer of Kenwood that day, but to make sure that English Heritage's reputation was absolutely maintained; to manage the press on behalf of English Heritage; to make sure that we learned lessons out of it which we later shared with other organisations, by holding seminars on the management of events like this. There are a number of benefits which we gleaned by having staff there and it would not have been proper, in my view, to try and charge those to the hirer. I do not think we would have necessarily succeeded had we tried.
Chairman: We will return shortly. I apologise for the short break.
The Committee was adjourned from 16.44 to 16.50 for a division in the House
141. I will press on Ms Alexander, if I may. Before we went out I was asking about the charges that you made and the level of costs and your memorandum made clear that it was on what might be called a marginal incremental cost basis. Long-standing Treasury guidance says that charges and fees should be set at a level which recovers full costs and generates an appropriate return on capital. That clearly was not the case with this charging arrangement.
(Ms Alexander) It is the case that we apply that rule to our overall business of third party events. Individual events are charged at market rates which relate to what they can bear and one-off events have to be looked at in terms of the overall benefits they bring, which may be financial, may be direct or indirect. This one brought us enormous benefits in terms of publicity and profile with about 100 international press there and massive coverage which we felt would bring us indirect financial benefits into the future and would certainly help with the business we were going to be starting at Kenwood within the following 12 months and the general profile of our business. For many years we have hired our many properties out to local community groups, to charities, to all sorts of different groups on bases which are justifiable event by event and are considered event by event. We must overall make sure that what we are doing is producing a proper return on the investment in our hospitality business.
142. Treasury guidance does not elucidate on whether this is individual or overall, I would judge that to be individual. I also would say to you that the outline of events in your memorandum does not smack to me of considering the highest market return you could make or the highest market rate. It looks extremely loose and woolly and undefined throughout the major part of the organisation of the event.
(Ms Alexander) Chairman, we were invited to consider at Kenwood an event which I think most venues in the hospitality business in London, and certainly most galleries or historic houses, would have been very pleased to host and the basis on which we would achieve that was what we were considering. There were other venues to which the hirer could have gone whom I am sure would also be very happy to do it on the basis of full costs, which is the basis on which I believe we did it, given the prestige and other benefits that have come out of it. We believe that was what the market was likely to bear and, indeed, we felt we had been fairly tough in negotiating those terms. £34,000 was quite a lot to pay just for the hire of the venue.
Chairman: That is not my impression from the Report but let us widen it out. Mr David Rendel?
143. Can you tell us Ms Alexander, following the publicity that you got after this event how many other events were held at Kenwood House as a result of that publicity?
(Ms Alexander) We did not start the hospitality at Kenwood House until the following May but in the three months that followed the wedding income from our catering concession at the old kitchens went up by 44 per cent over the previous year and we take an 18 per cent commission on that.
144. In financial terms how much is that?
(Ms Alexander) In financial terms I do not have the figure in front of me, I am afraid, but I could certainly let you have it.
145. In the low thousands?
(Ms Alexander) The concession makes well over a £1 million a year in total and we take an 18 per cent commission on that.
146. So the extra that you made as a result of this?
(Ms Alexander) I am sorry, I have not worked it outbut I now have it in front of me. The income from the concession in those three months went up from £41,000 in 1998-99 to £59,000 in 1999-2000
147. An extra £18,000?
(Ms Alexander) An extra £18,000, 44 per cent, quite a significant increase.
148. For which you paid, according to yourself, £790,000 worth of publicity.
(Ms Alexander) We did not pay for any of that.
149. No, but that was the value you claim for the publicity you got. For £790,000 worth of publicity you got an extra £18,000 return.
(Ms Alexander) I am sorry, I was giving you one example of the benefits. Firstly, the evaluation of publicity was something which was done on the basis of industry standards by an independent agency. I would not want to claim particularly that three quarters of a million pounds was what we got out of it.
150. I am glad to hear it.
(Ms Alexander) Even if it was only a tenth of that it would be very much more than we could possibly spend on the business of hospitality at our properties
151. It would be worth spending given the return you got from it.
(Ms Alexander) Absolutely. The return we were looking for was about our overall profile having a prestigious event and developing a new business which was getting a very good kick-start.
152. Which managed to increase your visitor numbers by four per cent, is that right?
(Ms Alexander) Yes, which was three times the increase in London generally, at an established house.
153. About another 5,000 or 6,000 visitors.
(Ms Alexander) The figure for visitors was that it went up from 144,700 in 1998-99 to 150,600 so it was another 6,000 visitors.
154. An extra 6,000 visitors on which you claim you got the value of nearly £800,000.
(Ms Alexander) We do not charge our visitors to Kenwood, as you know, we are very pleased to have them.
155. I am just making the point in the same way as I think the Chairman was that the evaluation that you put on the publicity seems to me to be wildly excessive. The evaluation as I understand it is on the basis of what it would have cost you to advertise in that amount of paper space. What you actually got was an article about the wedding, not specifically about Kenwood House, and you have valued that at the equivalent value of the advertising space, which seems to me totally absurd.
(Ms Alexander) We would not have valued the advertising in financial terms. We did not think it was an enormously useful exercise but since the Committee had particularly asked what the value was we asked for it to be valued on the basis that the industry normally values advertising space. Our view was that it went without saying that the coverage we got for Kenwood, not just for the wedding, out of this event was very well worth having for the organisation as a whole and Kenwood in particular, and certainly we got an enormous amount of mail from people (not just locally but nationally and internationally) who felt it had been something we could take great pride in.
156. You have many staff who have to handle cash and accounts on behalf of English Heritage. What guidance do you give them about mixing up their private finances with the finances of the organisation?
(Ms Alexander) They would not do it, Mr Rendel.
157. Do you have written guidance that they should not do it?
(Ms Alexander) I am not quite sure in what way you are suggesting they might do it.
158. I am assuming you have rules and regulations about how they should handle the finances of the organisation?
(Ms Alexander) Absolutely. Members of staff and particularly custodians who are handling money daily have very clear guidance on how they should do that.
159. For example, if they were to borrow some money one day out of the till and then replace it three days later that would be against the regulations you laid down?
(Ms Alexander) It would indeed.
2 Evidence, Appendices 1-3 pp 14-20; Appendix 3, p 18. Back