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on information, we are told in paragraphs 46 and 47, that is out
of date and does not reflect reality.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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