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Contracting Out (Functions in relation to the Management of Crown Lands) Order 1998

10.27 p.m.

Lord McIntosh of Haringey rose to move, That the draft order laid before the House on 15th January be approved [19th Report from the Joint Committee].

The noble Lord said: My Lords, the order which, I suspect, a few of us will be debating is made under Section 69 of the Deregulation and Contracting Out Act 1994. Section 69 allows a Minister to authorise another person or persons to exercise the Minister's statutory responsibilities. The order would allow the Secretary of State for Culture, Media and Sport to enter into a contract with a new body to carry out his day-to-day responsibilities for the management of the historic royal palaces.

The Secretary of State, announced in another place on 15th January his intention to apply to Her Majesty the Queen for the granting of a charter to establish the

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historic royal palaces trust with whom, subject to the agreement of Parliament, he would contract to carry out his responsibilities under the Crown Lands Act 1851.

The Crown Lands Act 1851 places statutory responsibility on the Secretary of State for the management of the historic royal palaces. These palaces are currently managed by the Historic Royal Palaces Agency, an executive agency of the Department for Culture, Media and Sport, and comprise the Tower of London, Hampton Court Palace, Kensington Palace state apartments, with the court dress collection and orangery, the Banqueting House in Whitehall and Kew Palace, with Queen Charlotte's Cottage.

The Government value the historic royal palaces highly. They are woven into our history and are an important part of our heritage. Historic Royal Palaces was one of the first executive agencies. It has been a particular success in its conservation and presentation of the palaces to the public, while at the same time reducing its call on the taxpayer for financial support. Care for the buildings has gone hand-in-hand with care for visitors and both have benefited.

It is due to the expertise and commitment of the agency's management and staff that agency status has seen investment of around £60 million in the conservation and improvement of the historic palaces while increasing gross annual turnover from £15 million to £50 million. At the same time the need for support by the taxpayer has reduced from, in real terms, some £12 million in 1989 to £7.5 million this year and, subject to the changes we are proposing, about £4 million in 1998-99. Yet the status and dignity of these great buildings have in no way been compromised. Over 20 major improvements in the past eight years have transformed the quality of the visitor's experience: these range from the re-presentation of the Crown Jewels at the Tower of London to the immaculate restoration of the King's Privy Garden at Hampton Court Palace.

The Government want to build on that success and have considered carefully how that could be done without compromising the unique royal and historic status of the palaces and the Government's ultimate responsibility and accountability for them. The Government have concluded that establishment of the agency as a non-departmental public body, with charitable status, will be beneficial for several reasons.

The first is the establishment of a body of trustees which will guide and oversee the work of the trust. We have seen already the benefits under agency status of having senior managers with clear remits on which to focus. A body of expert trustees, with a wide range of experience, will be able to focus at a more strategic level on the specific needs and development of the historic palaces. We hope to announce shortly the names of the chairman and the other trustees. They will all be of a suitable calibre, with relevant experience and expertise in the management and conservation of historic buildings, finance, business, fine art and tourism. The appointment of the chairman will be made by Her Majesty the Queen on the advice of the Secretary of State. The appointment of three trustees by the Queen will bring to the board of trustees the Royal Household's

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expertise in the care of the Royal Collection (much of which is housed in the historic royal palaces) and in the maintenance of the occupied royal palaces.

As a charity, the new body will have a greater degree of independence and should be more attractive to sponsors and grant-giving bodies. Sponsorship will be approached cautiously and handled sensitively to ensure that the quality and status of the palaces are not compromised. The trust will also be freed from some of the restrictions of the government accounting framework. However, the key requirements of regularity and propriety will continue to apply, including audit by, and access for, the National Audit Office; and the chief executive will continue to be liable to be called before the Public Accounts Committee. But the trust will be able to plan expenditure more flexibly across the annual boundary, which is a particular benefit in the planning of long-term capital and conservation programmes. It will be able to adopt accounting procedures more suitable to its needs and, finally, be able to reinvest any surpluses in the improvement of the palaces. A combination of these changes will, we believe, allow support from the Exchequer to be brought quickly to an end.

I can assure your Lordships that change in status will not lead in any way to over-commercialisation of the historic palaces. Their status, the care with which they are maintained and improved and the quality of the visitor experience are what make the historic royal palaces such popular attractions. To compromise that in any way would be entirely wrong and, indeed, would detract from what makes them so particularly attractive to visitors. But as I have explained, we see some financial benefits accruing.

The agency's success to date could not have been achieved without the expertise and commitment of its management and staff. They are crucial to its progress. Staff should transfer to the new body on their existing terms and conditions of employment. However, one change will be necessary. Because we expect the new trust rapidly to end its call on voted funds, it will not be possible for staff to remain members of the Principal Civil Service Pension Scheme. We are therefore establishing new pension arrangements, with the advice of the Government Actuary's Department, which will provide broadly comparable benefits. The Secretary of State will ensure that public funds are made available to the trust to establish the pension arrangements on a firm long-term basis. Discussions have begun with staff on the details of the change in status and especially on the new pension arrangements, and these discussions will continue.

The historic royal palaces are owned by the sovereign in trust for the nation. That will not change under these proposals: we are not talking of sale or privatisation. Statutory responsibility will remain with the Secretary of State, who will continue to be responsible and accountable to Parliament for the care and presentation of the palaces.

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We are instead talking about a new structure for the day-to-day management of the historic palaces which the Government believe will allow the organisation to develop in the best interests both of the palaces and their visitors from home and overseas.

The allocation of funding of up to £4 million in 1998-99, the first year of the trust's existence, will allow it to start out on a firm footing by helping to meet the cost of some outstanding commitments such as fire protection work throughout the palaces. The order has been the subject of debate and approval in another place. If it is approved by your Lordships' House the Secretary of State for Culture, Media and Sport will then sign the order which will pave the way for him to enter into a contract for the care and maintenance of the historic royal palaces once the new body has been established by the granting by the Queen of a royal charter. I commend the order to your Lordships.

Moved, That the draft order laid before the House on 15th January be approved [19th Report from the Joint Committee].--(Lord McIntosh of Haringey.)

10.36 p.m.

Baroness Rawlings: My Lords, I thank the noble Lord for comprehensively explaining the draft order. The measure is entirely in line with our policies when we were in government. The Historic Royal Palaces Agency was one of the first bodies of the Next Steps programme. Furthermore, the setting up of the royal palaces as a non-departmental public body (NDPB) is also in line with the then Conservative Government policy.

The National Heritage Act 1993 set up as an NDPB some of our greatest national institutions like the Victoria & Albert Museum and Kew Gardens. We are happy to see the Government loyally pursuing our policies. However, any matter concerning the royal palaces, which are currently managed by the agency, not the palaces that remain in use, directly or indirectly impinging on the royal household, should be approached with sensitivity. Understandably, the general public make little distinction between the management and ownership of these royal properties. Great buildings such as the Tower of London and Hampton Court Palace which are known to, and cherished by, the public must continue to be run to the highest standard.

We support in principle the changes outlined by the noble Lord. However, we have some questions. First, given the importance of these buildings it is essential that those who serve as trustees are of the highest possible quality, especially as the chairman will be chosen by the Queen on the advice of the Secretary of State. Can the Minister tell us how the post was advertised, and similarly for the other trustees? Will a financial element be involved? Will representatives of the business community sit on the board? Public relations experts on the board will no doubt enable it to build on the commercial improvements that have been made, attracting more visitors to the palaces.

Secondly, is it not crucial that students should be able to continue to gain wide knowledge of our British heritage? It is essential that they continue to have similar

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or better access to these buildings and gardens. I hope that the noble Lord can give an assurance that as part of their remit the trustees will ensure that young people continue to have access to these buildings and that appropriate guidelines are drawn up.

Thirdly, we are pleased that there will be no material change in the pension arrangements for those employed by the new agency. But what sum will be involved? The Secretary of State said that money from public funds would start off the pension scheme and bring any benefit to the level of the Civil Service pension scheme.

Those who work in the royal palaces and households in whatever capacity have great pride in so doing, which we respect. We must ensure that the individuals whose pension arrangements will be affected are treated appropriately. They are right to seek and have a right to be given some reassurance about their pensions. If there are to be any material changes in the pension provisions of the current staff of the agency that should be stated publicly. What discussion has there been with staff representatives about the pension arrangements since the announcement a fortnight ago?

Finally, I touch on a few financial aspects. The proposed change is to make the establishment self-financing and relieve the Exchequer of responsibility for next year's sum of £4 million. Will the Minister give details of projected increases in revenue? Are they based on increased visitor numbers and increased entry charges? Will the Government give assurances that for 1998-99 they will guarantee a smooth financial transition?

The Minister said today:

    "The trust will be able to plan expenditure more flexibly across the annual boundary which is a particular benefit in planning long term capital and conservation programmes."
That is not much good if government expenditure plans do not revert to the three-year cycle. Will the Minister give assurances that that practice is going to be resumed? I accept that the grant-in-aid of the royal palaces is only about 18 per cent. of their income--a much lower proportion than that of the national museums. It is very difficult, however, to plan ahead, when the institution ignores the entity of the grant-in-aid over the medium term, especially when working on large capital programmes such as the Tower of London at a total cost of £30 million.

Is the virtuosity of the Government in respect of the status of the royal palaces just a tacit admission that there will be no additional funding for the clients of the Department for Culture, Media and Sport in the medium term. Furthermore, the Government have allowed the Millennium Dome to absorb up to £400 million of lottery money and are diverting lottery money away from capital projects. Therefore they cannot tell the royal palaces to rely on the lottery.

As a consequence, the royal palaces must raise funds through sponsors and the private sector. Hence they have to be enabled to do so through this change of status. We have no quarrel with, and indeed had an excellent record in promoting, sponsorship and voluntary giving. We are, however, concerned about the type of fundraising activities that may appear opportune

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to the trustees. We certainly do not want controversy over this order of the kind that arose concerning the royal yacht. It is important, given that there will be a shortfall under the proposed new arrangements, that no vulgar commercialisation should take place. That would be completely unacceptable. We do not want to see an Anne Boleyn scratch card competing with a Diana scratch card to fund the reflooding of the moat of the Tower. Will the Minister give assurances that, notwithstanding the independence of the trustees,

    "the change in status will not lead to commercialisation of the historic palaces, nor take them downmarket"
and that that will apply to their fundraising approach? I should be most grateful for a response to those points.

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