Maintaining the Occupied Royal Palaces - Public Accounts Committee Contents


Examination of Witnesses (Questions 20-39)

ROYAL HOUSEHOLD AND DEPARTMENT FOR CULTURE, MEDIA AND SPORT

26 JANUARY 2009

  Q20  Mr Williams: You just chose to ignore them instead. Sir Alan, we come to you. You have had to put up with the misfortune of having a 19% real fall in income but you reduced maintenance spending by 27%, that is half as much again. Why?

  Sir Alan Reid: It is an arithmetical calculation that leads to that, I am afraid. A lot of the grant-in-aid goes in just running the palaces: fire, health and safety, energy and such like. If those costs go up then it leads to a different percentage reduction in what is left for maintenance. I am afraid the reduced amount that is left for maintenance as a direct result of increases in other costs and a fixed grant—

  Q21  Mr Williams: So maintenance is at the end of the queue.

  Sir Alan Reid: Yes. We have no choice. We need to heat and light the palaces; we need to protect them from going up in flames again.

  Q22  Mr Williams: You are working on information, we are told in paragraphs 46 and 47, that is out of date and does not reflect reality. So how can you be sure that you are making the right decision?

  Sir Alan Reid: Are you quoting from the paragraph?

  Q23  Mr Williams: That is an interpretation.

  Sir Alan Reid: Can I ask Mr Sharpe to deal with that particular point because he is best placed to answer you?

  Q24  Mr Williams: I do not mind who answers.

  Mr Sharpe: I think you are referring to the accuracy of the initial budget. The NAO Report takes a sample of projects and you can see that some of them are under and some of them are over. On a sample of our projects in 2007-08 let tenders were about 16% above the initial budgets so it is not the 49% that is quoted in the National Audit Office Report.

  Q25  Mr Williams: Sir Alan, as the Chairman has already touched on, eight years after the PAC recommendation that the Royal Collection Trust should pay more to you from their visitor income, why is it that it has only recently been decided to increase it?

  Sir Alan Reid: The formula I put to the Department in 2004 (which I understood they agreed with) was that we would start making payments across to the grant-in-aid from the Royal Collection Trust when it was in overall surplus and when it had reduced its borrowings down below £10 million. Those borrowings have been incurred to spend a lot of money on tax payer owned buildings. The tourism trade has actually been very difficult for a lot of this decade and it was only a couple of years ago that the overall surplus was reached and the borrowings could be reduced below £10 million. There was also a pension payment that came in two years ago that deferred further payments until next year. It has always been the intention of Royal Collection to make these payments and to show good faith in that I would draw your attention to the fact that we unilaterally approached Royal Collection trustees to make bigger payments to the property grant-in-aid based on the Windsor precincts income where, because it was not generating the sums that we thought it should, we revised the formula and as a result there is about half a million pounds a year more going into the property grant-in-aid and supplementing the property grant-in-aid from the Royal Collection.

  Q26  Mr Williams: Your predecessor told us that he planned—that was, I think, his word—to reduce the number of private secretaries and officials housed from 39 to 11. All these years later, instead of going down by 28, it has gone down by six. Why?

  Sir Alan Reid: We changed the policy. First of all we changed the gradings so that although we have private secretaries we do not have people called officials any more and we have a more straightforward, less status oriented grading system. The fact of the matter was that these people were living inside the secure area and if we moved them out of the accommodation there was little that we could do with it other than mothball it. Everyone who has been appointed fairly recently who is in Palace accommodation has effectively a rental payment on an abatement of salary which can vary from 22% to 28% of their gross pay. It is better, in our view, to save the tax payer money by having these people living in accommodation and the civil list or whoever having a reduced salary cost than simply to leave the property empty and subject to decay. It was a commercial decision to reduce the cost to the tax payer and therefore it is a changed policy from what my predecessor reported to you.

  Q27  Mr Williams: On the other hand, as the Chairman has said, there was a recommendation that you should take people from outside the perimeter and put them inside the perimeter. Why have you not done that?

  Sir Alan Reid: We only have five staff members outside left now and 13 pensioners.

  Q28  Mr Williams: They are highly rentable properties, are they not?

  Sir Alan Reid: Some of those outside are not that dramatically expensive properties or high rental by any stretch of the imagination. That is why pensioners are in them. It did not make a lot of sense to move an old pensioner out of their house into the confines of a Palace from what is, in most cases, relatively modest accommodation.

  Q29  Mr Williams: I saw in the notes that the Prince's Charities are now paying rent of a million a year instead of the half million they were paying before. What led to a doubling in the fees of the rent for charities?

  Sir Alan Reid: I am sorry, I do not recognise the figures you are quoting. If it is the property that we are renting to the Prince's Charitable Foundation, the rent on that is about £66,000 a year.

  Q30  Mr Williams: Since the Committee last reported the rent from letting properties on the Estate, including that rented by the Prince of Wales' Charities, has increased.

  Sir Alan Reid: Yes, our commercial rents have increased from under £500,000 to a million pounds.

  Q31  Mr Williams: What about the charities?

  Sir Alan Reid: The charities are included in that. We charge the Prince of Wales' Charities £66,000 a year.

  Q32  Mr Touhig: In the Property Section there seems to be no overall strategy or even a target for generating income. That seems to be symptomatic of the whole approach. Why are there no targets for generating income? Why are there no strategies?

  Sir Alan Reid: We do have strategies. We have a very clear objective to maximise our commercial income. I think what the NAO had concerns about was that we had not written that down and it is not fixed.

  Q33  Mr Touhig: There is no strategy in the Property Section, at least that is what the NAO tell us.

  Sir Alan Reid: What I am referring to is the Property Section. Our objective is to maximise commercial income, but we cannot make firm decisions on that, we cannot necessarily say that in a particular month or in a particular year something definitely will happen. Our organisation has to be very flexible to different scenarios and in that context we respond as flexibly as we can and as commercially as we can to different situations. We have a housing committee so that if a house becomes available we will look at it and made a decision as to whether it should be commercially let or whatever.

  Q34  Mr Touhig: How far ahead can you plan then with all the restrictions you seem to imply you have placed upon you?

  Sir Alan Reid: In some cases we will plan several years ahead.

  Q35  Mr Touhig: You have said there are difficulties in planning too far ahead.

  Sir Alan Reid: There tend to be, yes. For example, the change of reign would bring about dramatic circumstances in the property situation; I cannot possibly plan for that. We do not know when that will happen; hopefully it will not happen in my time. There are a lot of other issues around uncertainties of when certain events are going to happen. It is not quite like the commercial world from that point of view.

  Q36  Mr Touhig: I understand that. I understand you are dealing with the residence of the Head of State and I understand all the difficulties and so on; you are right to point those out. However, there are plenty of successfully run stately homes, as the Chairman pointed out, and I am sure there are lessons to be learned. I am not suggesting for one minute that you have a safari park or a theme park in the corner of the grounds of Buckingham Palace, but I think you are getting the message. There are ways in which you could be generating more income much more effectively to help overcome the huge problems you have now with maintenance.

  Sir Alan Reid: Yes, and we are open-minded on that and we did have the effect of a theme park with the Children's Literary Garden Party a couple of years ago for The Queen's birthday. We are very happy to try to meet the National Audit Office's recommendation here and document it as far as possible so that others can trace through what our commercial rationale has been and is for looking at property.

  Mr Stevens: If I may inform the Committee of some of the initiatives that we have been taking to generate income, for instance we generate around about £80,000 a year from plant sales from the gardens at Windsor. We make use of the facilities there and sell them through the farm shop and through various wholesalers. We have been looking to introduce tours of the Buckingham Palace gardens from this year. They are very, very popular; there is enormous demand. That is going to generate in the region of around about £30,000 for the grant-in-aid; these are very small amounts. Unfortunately these aspects of our income generating strategy are not in a documented plan.

  Q37  Mr Touhig: I understand that and I understand that these are small amounts but I do appreciate the huge task you have got. However, you are saying you do have a strategy and you do have targets, so why have you accepted the NAO Report which says that you do not have a strategy and you do not have any targets?

  Sir Alan Reid: I think their wording was not particularly inaccurate. We have not written it down and it is not fixed so that we can say that on a particular day we are going to sell this building.

  Q38  Mr Touhig: It is not possible to write it down and fix it.

  Sir Alan Reid: We will attempt to write it down but it will need to be flexible.

  Q39  Mr Touhig: Alternative uses for properties are looked at on a case by case basis and this seems to suggest that there is no strategy for managing the assets of the Estate. Colleagues have referred to people within the secure perimeter and others without and so on. Do you really have a strategy for managing the assets of the Estate?

  Sir Alan Reid: Yes, we do. An example would be that if a property becomes vacant and it is extremely expensive to get it back into a fit condition because it has probably got asbestos and re-wiring needing to be done, we may well choose to mothball it unless we can get a proper rate of return for the money we are going to spend from the grant-in-aid. That rate of return would be determined either by commercial rent or by the abatement of salary in the savings to some other tax payer funded grant from doing that building. In that situation we will mothball it. If it does have a payback then we will go forward on a commercial basis. When Princess Margaret died we could not think of a sensible use of that by us so with the Departments' agreement we transferred that to Historic Royal Palaces and relieved this grant of that.


 
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