Maintaining the Occupied Royal Palaces FINAL CRC...In addition, we visited Buckingham Palace,...

HC 201 Published on 2 June 2009

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House of Commons

Public Accounts Committee

Maintaining the Occupied Royal Palaces

Twenty-fourth Report of Session 2008–09

Report, together with formal minutes, oral and written evidence

Ordered by the House of Commons to be printed 27 April 2009

The Public Accounts Committee

The Committee of Public Accounts is appointed by the House of Commons to examine “the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit” (Standing Order No 148).

Current membership

Mr Edward Leigh MP (Conservative, Gainsborough) (Chairman) Mr Richard Bacon MP (Conservative, South Norfolk) Angela Browning MP (Conservative, Tiverton and Honiton) Mr Paul Burstow MP (Liberal Democrat, Sutton and Cheam) Mr Douglas Carswell MP (Conservative, Harwich) Rt Hon David Curry MP (Conservative, Skipton and Ripon) Mr Ian Davidson MP (Labour, Glasgow South West) Angela Eagle MP (Labour, Wallasey) Nigel Griffiths MP (Labour, Edinburgh South) Rt Hon Keith Hill MP (Labour, Streatham) Mr Austin Mitchell MP (Labour, Great Grimsby) Dr John Pugh MP (Liberal Democrat, Southport) Geraldine Smith MP (Labour, Morecombe and Lunesdale) Rt Hon Don Touhig MP (Labour, Islwyn) Rt Hon Alan Williams MP (Labour, Swansea West) Phil Wilson MP (Labour, Sedgefield) The following member was also a member of the committee during the inquiry: Mr Philip Dunne MP (Conservative, Ludlow)

Powers

Powers of the Committee of Public Accounts are set out in House of Commons Standing Orders, principally in SO No 148. These are available on the Internet via www.parliament.uk.

Publication

The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/pac. A list of Reports of the Committee in the present Session is at the back of this volume.

Committee staff

The current staff of the Committee is Mark Etherton (Clerk), Lorna Horton (Senior Committee Assistant), Pam Morris (Committee Assistant), Jane Lauder (Committee Assistant) and Alex Paterson (Media Officer).

Contacts

All correspondence should be addressed to the Clerk, Committee of Public Accounts, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5708; the Committee’s email address is [email protected].

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Contents

Report Page

Summary 3

Conclusions and recommendations 5

1 Managing the Estate 9

2 Generating income from visitors 12

3 Making use of accommodation on the Estate 15

Formal Minutes 17

Witnesses 18

List of written evidence 18

List of Reports from the Committee of Public Accounts 2008–09 19

3

Summary

The Occupied Royal Palaces Estate (the Estate), which includes Buckingham Palace and Windsor Castle, is held in Trust for the Nation and used to support the official duties of The Sovereign. The Department for Culture, Media and Sport (the Department) is accountable to Parliament for the upkeep of the Estate, but has delegated day to day responsibility to the Royal Household (the Household). The Department gives the Household an annual grant to maintain and run the Palaces, which has remained at around £15 million since 2000–01 (a 19% real terms reduction). An increase in running costs over the same period means there has been a 27% fall in maintenance expenditure to £11.1 million in 2007–08.

The Department has set the Household an objective which focuses on the condition of the Estate, but none of the key indicators measures performance against it, and the Household does not have a comprehensive analysis of the condition of the Estate. In addition, despite our warning in 2001, the Household has reported that a £32 million maintenance backlog has built up. As a result, important work such as the repairs to the Victoria and Albert Mausoleum has been deferred. The Department and the Household have yet to agree criteria for assessing the backlog and develop a plan for managing it. In addition, the Household does not have a strategy for managing its Estate.

The Royal Collection Trust (the Trust) is responsible for the works of art held in Trust for the Nation, but is not accountable to Parliament. The Trust manages visitor admission to the Palaces and receives the income generated, which in 2007–08 totalled £28 million. The Trust shares some of the Windsor Castle income with the Household (£1.8 million in 2007–08), and, eight years after we first recommended it, the Trust plans to share income from visitors to Buckingham Palace with the Household from April 2009. In contrast to Windsor Castle, which is open to the public virtually all year, Buckingham Palace is open for 63 days because of the number of official engagements and the costs involved. Other buildings such as the White House and Houses of Parliament manage to open for most of the year, despite similar obligations and security concerns.

The Household uses the Estate to accommodate some members of the Royal Family, 139 current and 32 former staff, and has 36 properties available to let. Since 2001, the Household has increased the rent received from £418,000 to £1 million. In the absence of a strategy the Household assesses the suitability of properties to let on a case by case basis. Despite our recommendations eight years ago, the Household has only moved one member of staff to within the secure perimeter, although there are 28 vacant properties within it.

On the basis of a report by the Comptroller and Auditor General,1 we took evidence from the Department and the Household. In addition, we visited Buckingham Palace, Clarence House, St James’s Palace and Windsor Castle to see a selection of the Household’s maintenance projects.

1 C&AG’s Report, Maintaining the Occupied Royal Palaces, HC (2008–09) 14

5

Conclusions and recommendations

1. The Household has reported that there is a £32 million backlog of maintenance work but this is not supported by rigorous analysis. In the absence of a consistent approach to assessing the condition of the Estate and calculating the backlog, and without an assessment of the practical consequences of the backlog, the Department and the Household cannot be sure how big the problem is or what to do about it. The Household should define criteria for inspecting the condition of the Estate, agree with the Department the basis for calculating the maintenance backlog and, before the end of 2009, set out a plan for managing it.

2. It is a scandal that the Victoria and Albert Mausoleum, the resting place of Queen Victoria and Prince Albert, is on English Heritage’s Buildings at Risk Register. Work required to repair the Mausoleum, a monument of national importance, has been outstanding for 14 years and its condition is getting worse. Repairing the Mausoleum would cost around £3 million but resource constraints mean the Household has no plans to do the required work. Ultimately, the condition of the estate is a matter for the Department, which should identify how the restoration of the Mausoleum can be funded without impacting on the Household’s resources for maintaining the rest of the Estate.

3. The Department for Culture, Media and Sport is accountable to Parliament for the upkeep of the Occupied Royal Palaces but does not have a firm grip on its responsibilities. The Department has set the Household an objective for the condition of the Estate, but does not measure the Household’s performance, and has allowed a maintenance backlog to build up despite our warning that this might happen. The Department should establish performance measures that keep it appraised of the condition of the Estate starting in the 2009–10 financial year.

4. In 2007–08, the Royal Collection Trust received over £27 million from visitors to the Occupied Royal Palaces, of which just £1.8 million was passed to the Royal Household to top up the resources available to maintain the Palaces. The arrangement by which money paid by visitors to the Palaces goes to fund the Royal Collection Trust dates from 1850, but times have changed. More Palaces are now open to the public and hundreds of thousands of tourists visit them each year, yet only a fraction of the income generated is used to maintain the Palaces. The amount paid over to the Household is at the discretion of the Royal Collection Trust, but some staff of the Household are also involved with the Trust and have potential conflicts of interest. The Department should:

• work with the Household and Royal Collection Trust to revise the arrangements for the collection and distribution of visitor income to reflect the fact that visitors come to see the Palaces, as well as the works of art in them, and

• assure itself that the revised arrangements are equitable for the Household.

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5. The way the Royal Collection Trust manages its resources is not subject to scrutiny by the Comptroller and Auditor General. We can see no constitutional justification for the Comptroller and Auditor General being denied access to the Trust. The Royal Collection Trust looks after a vast number of priceless works of art on behalf of the Nation, and its commercial success impacts directly on the amount of resources available to maintain the Occupied Royal Palaces, but the Trust is not accountable to Parliament. As we have recommended previously, the Comptroller and Auditor General should be the auditor of the Royal Collection Trust.

6. Buckingham Palace generated income of over £7 million from visitors in 2007–08 despite being closed to the public for over 300 days a year. It may be more difficult to open areas of Buckingham Palace to the public when there are other events taking place and when members of the Royal Family are in residence, but it does not follow that the whole Palace needs to be closed. The Household should work with the Royal Collection Trust to assess the practicality and cost effectiveness of extending the opening times, starting in 2009. The review should examine how other organisations, such as the White House and the Houses of Parliament, manage visits by members of the public alongside state business and the associated security considerations.

7. In 2001, we recommended the Royal Household move its staff to accommodation within the secure perimeter of the Palaces to allow more properties to be let commercially, but since then only one member of staff has been moved. With 18 staff and pensioners accommodated outside the secure perimeter and 28 vacant properties inside, there is scope to reduce the subsidy of over £200,000 being provided by public funds. The Royal Household should relocate staff and pensioners accommodated outside the perimeter to properties inside as soon as is practicable, while taking into account age and health considerations. The Household should also investigate whether adjustments to the secure perimeter can be made, without compromising the safety of the Royal Family, to allow more properties currently within the perimeter to be let at market rents.

8. Without a comprehensive estate management plan, the Royal Household risks managing the Estate too reactively and thereby missing opportunities to improve value for money. The Royal Household should prepare a forward looking strategy for the Estate within the next six months setting out:

• the operational needs of the Household, including which members of staff need to be accommodated;

• how the current assets, including the principal buildings such as Kensington Palace, will be used to support those needs, and

• alternative uses for properties likely to be surplus.

9. The Royal Household has not provided all of the additional information requested by the Committee. We expect witnesses to provide full responses to our requests for information. The Royal Household has not provided all the notes we asked for, and, without explanation, those received do not provide all the information we requested. We also expect the Royal Collection Trust to provide the National Audit Office with inventory data by April 2010. The Treasury should make

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clear to all potential witnesses the importance of providing detailed and thorough notes where commitments have been given during the hearing.

10. Since 1998–99, £1.7 billion in hereditary revenues of The Sovereign has been surrendered to the Exchequer in return for funding of £376 million, producing a net surplus for the Exchequer of over £1.3 billion. The hereditary revenues of The Sovereign, based on a £7 billion property portfolio, are surrendered to the Exchequer in exchange for funding to meet the cost of The Sovereign’s official duties. We conclude that the hereditary revenues of The Sovereign provide a surplus for the Exchequer which is sufficient for the Department to meet its responsibilities in funding the work of The Sovereign.

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1 Managing the Estate 1. Since 1760 it has been customary for The Sovereign to surrender hereditary revenues to the Exchequer in return for funding to meet the cost of The Sovereign’s official duties.2 In 2007–08 £211 million was surrendered and the Exchequer funding included the £15.7 million grant-in-aid to maintain and run the Occupied Royal Palaces. It also comprised the Civil List (£7.9 million), a Parliamentary annuity paid to the Duke of Edinburgh (£0.4 million), the grants-in-aid for Royal travel (£6.4 million), communications (£0.5 million) and other costs met directly by other Government Departments (£4.9 million).3 Since 1998–99, £1.7 billion in hereditary revenues has been paid over to the Exchequer in return for funding of £376 million (Figure 1), producing a net surplus for the Exchequer of over £1.3 billion.4

Figure 1: Hereditary revenues surrendered to the Exchequer and funding received from 1998–99 to 2007–08

0

50

100

150

200

250

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

£ m

illio

n

Hereditary revenue Exchequer funding 2. The annual grant-in-aid to maintain and run the Occupied Royal Palaces Estate (the Estate) is paid by the Department for Culture, Media and Sport (the Department). Since 1991 day to day responsibility for planning and managing the maintenance of the Estate has rested with the Property Section of the Royal Household (the Household). The Department, however, is ultimately accountable to Parliament for maintaining, and providing services to, the Palaces.5

2 The Hereditary revenues consist of the annual revenue from the Crown Estate, a property portfolio worth over £7bn

that was formerly the property of The Sovereign but is now managed by an independent organisation headed by the Crown Estate Commissioners and accountable to Parliament.

3 Qq 93–102; The Crown Estate Annual Report 2008; Royal Public Finances, Annual Reports 2007–08

4 Ev 24

5 C&AG’s Report, para 2

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The Occupied Royal Palaces Estate

The Estate is Buckingham Palace, Buckingham Palace Mews and Gardens, St James’s Palace (including Clarence House), Windsor Castle and Windsor Castle Royal Mews, buildings in Windsor Home Park, Hampton Court Mews and Paddocks, and residential areas of Kensington Palace. Source: Comptroller and Auditor General’s Report HC (2008–09) 14, Box 1

3. In setting the level of grant-in-aid, which has been around £15 million since 2000–01 (a 19% reduction in real terms over the period), the Department considers other demands on its resources as well as opportunities for the Household to generate income from other sources—£2.8 million in 2007–08.6 In 2007–08, the Household spent £11.1 million on maintaining the Estate, after meeting running costs (such as utilities, security, fire prevention and health and safety) of £7.4 million. The effect of the real terms reduction in grant-in-aid, coupled with rising utility and security costs, has been a 27% real terms fall in maintenance expenditure since 2000-01 (Figure 2).7

Figure 2: Maintenance expenditure (in real terms) from 2000–01 to 2007–08

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

2007-082006-072005-062004-052003-042002-032001-022000-01

Year

(£m

)

Source: Analysis of the grant-in-aid for the maintenance of the Occupied Royal Palaces in England Annual Report and Accounts

4. The Department has set the Household the objective of maintaining the Estate to a standard consistent with the Household’s operational requirements, and with the royal, architectural and historic status of the buildings.8 While the Department considers it has a good understanding of the condition of the Estate and commissions consultants to advise it, none of the key performance indicators reported by the Household to the Department measures performance against this objective. In addition, although the Household inspects the condition of around 70% of the Estate annually, its assessment criteria are not clear and are open to interpretation, and the inspections do not result in a comprehensive analysis of

6 Qq 14–15, 20; C&AG’s Report, paras 6–7, Figures 1–2

7 Qq 20–21, 60–63; C&AG’s Report, paras 12–13, Figures 4–5

8 Q 8; C&AG’s Report, para 2

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the condition of the Estate. The Household is now reviewing how other organisations responsible for maintaining heritage assets measure and report on condition.9

5. In 2001, we highlighted the risk of a backlog building up if maintenance expenditure was reduced. The Department assured us at the time that it would ask its consultants to check whether a backlog was developing, but only did so in July 2008 after the Household stated in its annual report and accounts that it had a £32 million maintenance backlog.10 The Household attributes the backlog to its grant-in-aid and visitor income not increasing as expected, and its running costs increasing by more than anticipated. In addition, some maintenance projects, such as the repairs to the Buckingham Palace façade, have been brought forward for health and safety reasons, resulting in other work being deferred.11

6. The Department and the Household have yet to agree criteria for assessing what should be included in backlog, assess the practical impact of deferring work and develop a plan for managing it. Meanwhile, repairs to buildings of national importance have been deferred. The need for work on the Victoria and Albert Mausoleum, which is on English Heritage’s Buildings at Risk Register, was identified 14 years ago and the Household estimates the work would cost around £3 million. When we visited the Estate we saw how much the condition of the Mausoleum had deteriorated. We also saw some of the other work which needed to be carried out, for example, in the State Rooms. Despite this, we recognise the dedicated job the Household’s front-line staff do in maintaining the Estate given the range of challenges they face and a decreasing grant-in-aid.12

7. When looking to get the best value for money from available resources, it is important that an organisation has a strategy for managing its assets. A good estate strategy matches an organisation’s operational needs with the property it manages, and without a clear strategy an organisation may miss opportunities for improving value for money. The Household, however, does not have a strategy setting out a management plan for the Estate.13

9 Qq 8, 10, 17–18, 49–51, 53, 146; C&AG’s Report, paras 27, 31, 33

10 Committee of Public Accounts, Eighth Report of Session 2000–01, Maintaining the Royal Palaces, HC 77, para 5; Treasury Minute on the Eighth Report of Session 2000–01, Maintaining the Royal Palaces, Cm 5201; C&AG’s Report, para 39

11 Qq 9, 12, 103; C&AG’s Report, para 37

12 Qq 9, 88, 102–105, 141, 146; C&AG’s Report, paras 36, 40

13 Qq 32–39, 41–44; C&AG’s Report, paras 16–17

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2 Generating income from visitors 8. Buckingham Palace and Buckingham Palace Mews, Clarence House, Windsor Castle and Frogmore House in Windsor Home Park are open to paying visitors at times during the year. The Royal Collection Trust (the Trust) manages visitor admission to the Palaces. The Trust is responsible for maintaining and conserving the collection of works of art held in trust by The Sovereign for the Nation, and a new inventory is being prepared.14 The Keeper of the Privy Purse explained that it would be inadvisable to attempt to produce a full inventory listing for the Committee from the current system given the age and fragility of the hardware, and that all information is shortly to be transferred to a new Collections Management System which has been in development for over 10 years. The Keeper of the Privy Purse expected the new system to be fully operational by April 2009.15 The continuing delay is unsatisfactory, and we expect the Trust to provide the National Audit Office with inventory data by that time.

9. Under an arrangement which began in 1850 when Windsor Castle was first opened to the public, the Trust receives the income generated from visitors to the Palaces and sales of merchandise, which in 2007–08 totalled £28 million (Figure 3).16

Figure 3: Visitor admissions to the Palaces and gross income generated in 2007–08

Visitor Numbers

Income from visitor admissions

(£000)

Income from shop sales

(£000)

Total income

(£000)

Windsor Castle and Frogmore House

1,003,000 10,004 2,325 12,329

Buckingham Palace

360,000 4,952 2,214 7,166

The Queen’s Gallery

158,000 1,133 1,636 2,769

The Royal Mews 155,000 798 765 1,563

Clarence House 25,000 172 101 273

Palace of Holyroodhouse

285,000 2,174 1,241 3,415

Total 1,986,000 19,233 8,282 27,515

Source: Analysis of The Royal Collection Trust Annual Report for the year ended 31 March

10. At the discretion of the Trust some of the income from Windsor Castle now supplements the grant-in-aid for maintaining the Estate. Under a formula negotiated with the Trust, the Household received £1.8 million in 2007–08.17

14 Qq 75–79; C&AG’s Report, paras 1, 7

15 Ev 23

16 Q 87

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11. As there was no equivalent arrangement for the Household to benefit from income generated from visitors to Buckingham Palace, in 2001 we recommended that consideration be given to using a proportion of the receipts at Buckingham Palace to meet costs that would otherwise be borne by the grant-in-aid. The Keeper of the Privy Purse told us that the Trust had proposed sharing the Buckingham Palace income with the Household when it had reduced the borrowing used to refurbish the Queen’s Galleries to £10 million.18

12. We wanted to know if the Trust’s proposed sharing of Buckingham Palace income had been assiduously pursued. On further enquiry, our understanding is that the Keeper of the Privy Purse put proposals to the Department in February 2004 and received an inconclusive response almost a year and half later in July 2005. In addition, while the Trust’s published accounts show that its borrowing had fallen to £6.7 million by March 2007, the arrangement to share the income from visitors to Buckingham Palace with the Household was deferred to April 2009—at least two years later than was originally proposed.19

13. There is a potential conflict of interest for those officials who have responsibilities for managing the grant-in-aid and also serve the Trust. The Keeper of the Privy Purse looks after the grant-in-aid and the management of property services for the Occupied Royal Palaces, but is also a trustee of the Royal Collection Trust and is therefore required to serve the interests of the Trust. Similarly, the Household’s Finance Director manages the property services grant-in-aid and is also Finance Director of the Trust.20

14. The Palaces generate income when they are open to the Public. Windsor Castle is open to visitors some 360 days a year, with occasional closures for events such as state visits. In contrast, Buckingham Palace is open to paying visitors for 63 days a year during July, August and September, generating £7 million in 2007–08 (Figure 3), although private tours of the Palace are now available during January and April.21 Tours of Buckingham Palace Garden will also be available from April 2009 and a share of the income will go towards maintaining the Estate.22

15. In the Household’s view, the ability to extend the periods when Buckingham Palace is open to visitors is constrained by members of the Royal Family being in residence and the number of official state and royal engagements, such as state visits, investitures and receptions, which are held at the Palace. The Queen was in residence at Buckingham Palace on 111 days in 2008. We note that a number of other high profile public buildings such as the White House and the Houses of Parliament are open to the public for most of the year while carrying out state business and maintaining security.23

17 C&AG’s Report, para 7

18 Qq 1–2, 25; Committee of Public Accounts, Eighth Report of Session 2000–01, Maintaining the Royal Palaces, HC77, para 5

19 Qq 3, 25, 83; Royal Collection Trust, Annual Reports 2005–2007

20 Qq 77, 80–82; C&AG’s Report, para 2

21 Qq 6, 123, 127, 129–130

22 Q 6; C&AG’s Report, para 9

23 Qq 6–7, 88, 91–92, 120–121, 127, 131–135; Ev 25

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16. The Household told us that when the Trust last considered extending the times Buckingham Palace was open to visitors, it judged that the business case did not support opening at other times of the year because of the set up costs involved. Although we asked to receive the original business case that informed this decision the Household has provided an updated business case, which assesses the costs and benefits of opening Buckingham Palace for 28 days in winter 2009 when The Queen is away at Sandringham. The revised business case assumes that around 93,000 people would visit the Palace in January compared to 150,000 during September 2008 and concludes that income from visitor admission in winter would be insufficient given the set up costs involved, resulting in a deficit of around £150,000. The business case, however, does not examine the scope for extending the current summer opening.24

17. The Royal Collection Trust is responsible for the works of art held in trust for the Nation. The commercial activities of the Trust bear directly on the resources available for maintaining the Palaces in that they generate income which is used in part for this purpose. The Trust, however, is not accountable to Parliament and, contrary to our previous recommendations, the Comptroller and Auditor General neither audits the Trust nor has the right of access to examine its books and records.25

24 Qq 5, 7, 89; Ev 17–21

25 Committee of Public Accounts, Eighth Report of Session 2000–01, Maintaining the Royal Palaces, HC 77, para 5

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3 Making use of accommodation on the Estate 18. The Estate has around 217 self-contained properties which are available for use as residential accommodation for some members of the Royal Family and current and former employees. In addition, the Household generates commercial income from letting properties on the Estate not required for official purposes.26

19. Of the 217 properties on the Estate, the Household uses six to accommodate members of the Royal Family. The Household receives rent for The Prince and Princess Michael of Kent’s apartment in Kensington Palace; the other members of the Royal Family receive rent free accommodation in return for carrying out official duties.27

20. We visited Kensington Palace in 2002 to see firsthand the type of property maintained by the grant-in-aid and how it was being used as residential accommodation. Since then some apartments have been handed over to the Historic Royal Palaces, and our understanding is that apart from those members of the Royal Family who were accommodated at the Palace at the time of our visit—The Prince and Princess Michael of Kent, The Duke and Duchess of Gloucester, and The Duke and Duchess of Kent—no further members of the Royal Family currently have apartments at Kensington Palace. We recall that the Household intended to review its use of Kensington Palace as apartments occupied by members of the Royal Family became available, but the Household had no record of such a commitment.28

21. The Household accommodates 139 staff and 32 pensioners on the Estate. The Household prefers to use accommodation to house staff and offset costs through salary abatements rather than leave it empty and open to decay. The financial arrangements for staff who occupy accommodation vary. Staff entering their contract of employment before 1991 generally pay 16.7% of their net salary, although staff employed more recently pay between 22% and 28% of their gross salary. Of the 139 staff in accommodation on the Estate, 130 have their salary abated or pay rent. Of the 32 pensioners accommodated on the Estate, 15 do not contribute to the cost of their accommodation. We asked the Household for a note setting out the rationale behind which pensioners paid rent and which did not, but have not received such a note.29

22. The Household also lets accommodation on the Estate to generate income. Although the Household aims to maximise its commercial income, it does not have a documented, long-term strategy for how it uses the Estate (Paragraph 7) and assesses alternative uses for properties on a case by case basis as they become available. One building outside the secure

26 C&AG’s Report, paras 19–20

27 Qq 137–138; C&AG’s Report, Figure 7

28 Qq 136–138

29 Qq 26, 72; C&AG’s Report, para 23, Figure 7

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perimeter of the Royal Mews at Hampton Court is occupied rent free by the Horse Rangers Association Charity.30

23. We asked the Household to provide details of all properties that generate less than the commercial rent they would attract on the open market so that we could estimate the effective subsidy to staff and charitable organisations. The note we received considers properties outside the secure cordon rather than the whole Estate, but even so the estimated subsidy amounts to over £200,000 a year.31

24. In 2001, we recommended that the Household explore the scope for moving staff to accommodation within the secure perimeter of the Estate to free up more properties for commercial lets.32 Since then the Household has relocated only one member of staff to a vacant property within the perimeter, despite having ten pensioners and five staff in properties outside the perimeter and 28 vacant properties inside the perimeter. The Household told us that some pensioners in properties cannot be moved because of age and ill health and that it was mothballing some vacant properties inside the perimeter because of the level of funding required to bring them up to standard.33

25. Since we reported in 2001, the Household has increased the number of properties available to let from 16 to 36 and the total annual rent received from letting properties from £418,000 to £1 million, representing a 96% increase in real terms. As the secure perimeter means the Household cannot let those properties located within it at commercial rates, for 12 properties inside the perimeter the Household charges a negotiated rent to organisations with the necessary security clearance. Of the remaining 24 properties which are all outside the perimeter, the Household:

• has let 12 properties through agents at market rates; • lets seven properties under negotiated terms, and • expects to let five properties, which are currently being refurbished, at market

rates.34

30 Qq 32–34, 37–41, 69; C&AG’s Report, paras 17, 22

31 Q 69; Ev 22

32 Committee of Public Accounts, Eighth Report of Session 2000–01, Maintaining the Royal Palaces, HC 77, para 5

33 Qq 11, 27, 139; Ev 31

34 Q 69; C&AG’s Report, paras 20–21

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Formal Minutes

Monday 27 April 2009

Members present:

Mr Edward Leigh, in the Chair

Mr Richard Bacon Mr Paul Burstow Mr Ian Davidson Mr Nigel Griffiths Rt Hon Keith Hill

Dr John Pugh Geraldine Smith Rt Hon Don Touhig Rt Hon Alan Williams

Draft Report (Maintaining the Occupied Royal Palaces), proposed by the Chairman, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 25 read and agreed to.

Conclusions and recommendations read and agreed to.

Summary read and agreed to.

Resolved, That the Report be the Twenty-fourth Report of the Committee to the House.

Ordered, That the Chairman make the Report to the House.

[Adjourned till Wednesday 6 May at 3.30 pm

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Witnesses

Monday 26 January 2009 Page

Sir Alan Reid KCVO, Keeper of the Privy Purse and Treasurer to The Queen, Mr Michael Stevens CVO, Deputy Treasurer to The Queen and Director of Finance, Royal Collection, Mr Graham Sharpe, Director of Property Services, Royal Household and Mr Jonathan Stephens, Permanent Secretary, Department for Culture, Media and Sports Ev 1

List of written evidence

1 The Royal Household Ev 17

2 National Audit Office Ev 25

19

List of Reports from the Committee of Public Accounts 2008–09 First Report Defence Information Infrastructure HC 100 Second Report The National Programme for IT in the NHS: Progress

since 2006 HC 153

Third Report Skills for Life: Progress in Improving Adult Literacy and Numeracy

HC 154

Fourth Report Widening participation in higher education HC 226 Fifth Report Programmes to reduce household energy

consumption HC 228

Sixth Report The procurement of goods and services by HM Prison Service

HC 71

Seventh Report Excess Votes 2007–08 HC 248 Eighth Report Ministry of Defence: Chinook Mk 3 HC 247 Ninth Report Protecting the public: the work of the Parole Board HC 251 Tenth Report New Dimension—Enhancing the Fire and Rescue

Services’ capacity to respond to terrorist and other large-scale incidents

HC 249

Eleventh Report The United Kingdom’s Future Nuclear Deterrent Capability

HC 250

Twelfth Report Selection of the new Comptroller and Auditor General

HC 256

Thirteenth Report Department for Work and Pensions: Handling Customer Complaints

HC 312

Fourteenth Report HM Revenue and Customs: Tax Credits and Income Tax

HC 311

Fifteenth Report Independent Police Complaints Commission HC 335 Sixteenth Report Department for International Development:

Operating in insecure environments HC 334

Seventeenth Report Central government’s management of service contracts

HC 152

Eighteenth Report Investing for Development: the Department for International Development’s oversight of CDC Group plc

HC 94

Nineteenth Report End of life care HC 99 Twentieth Report Ministry of Defence: Major Projects Report 2008 HC 165 Twenty-first Report The Department for Transport: Letting Rail

Franchises 2005–07 HC 191

Twenty-second Report Financial Management in the NHS: Report on the NHS Summarised Accounts 2007–08

HC 225

Twenty-third Report Mathematics performance in primary schools: getting the best results

HC 44

Twenty-fourth Report Maintaining the Occupied Royal Palaces HC 201

Processed: 22-05-2009 20:02:04 Page Layout: COENEW [SO] PPSysB Job: 425164 Unit: PAG1

Committee of Public Accounts: Evidence Ev 1

Oral evidence

Taken before the Committee of Public Accounts

on Monday 26 January 2009

Members present:

Mr Edward Leigh, in the Chair

Mr Richard Bacon Geraldine SmithMr Ian Davidson Mr Don TouhigNigel GriYths Mr Alan Williams

Mr Tim Burr CB, Comptroller and Auditor General, Ms Gabrielle Cohen, Assistant Auditor General, andMr Keith Hawkswell, Director, National Audit OYce, gave evidence.

Ms Paula Diggle, Treasury OYcer of Accounts, HM Treasury, gave evidence.

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL (HC14)

MAINTAINING THE OCCUPIED ROYAL PALACES

Witnesses: Sir Alan Reid KCVO, Keeper of the Privy Purse and Treasurer to The Queen, Mr Michael StevensCVO, Deputy Treasurer to The Queen and Director of Finance, Royal Collection, Mr Graham Sharpe,Director of Property Services, Royal Household and Mr Jonathan Stephens, Permanent Secretary,Department for Culture, Media and Sports, gave evidence.

Q1 Chairman: Good afternoon. Welcome to theCommittee of Public Accounts where today we areconsidering the Comptroller and Auditor General’sReport on Maintaining the Occupied Royal Palaces.We welcome to our Committee Mr JonathanStephens who is the Accounting OYcer andPermanent Secretary of the Department for Culture,Media and Sport, and Sir Alan Reid, Keeper of thePrivy Purse. I would like to thank Mr MichaelStevens and Mr Graham Sharpe for showing usaround Buckingham Palace and Clarence House lastweek. Unfortunately we did not get out of thebasement of Clarence House but I suppose that isappropriate for a downstairs Committee like this.We are now going to look at how you maintain theupstairs as well as the downstairs, Sir Alan. I have afew questions for you, if I may. We reported on thisin 2001 and if you look at our report at paragraphnine you can see that we have said that considerationshould be given to applying a share of the incomefrom visitors to Buckingham Palace to meet coststhat would otherwise be borne by the grant-in-aid.This has not happened in all these years since; whynot?Sir Alan Reid: This is the Royal Collection takingson Buckingham Palace where you want to transfersome to supplement the grant-in-aid.

Q2 Chairman: If people are visiting BuckinghamPalace it seems entirely appropriate that the moneyyou get from these visitors should be applied tomaintenance. I should say that on our visit it wasquite clear, even to a casual observer, that thecondition is not fantastic in many of these stateapartments—the wallpaper is somewhat faded,there are other problems—and we were shown allthis. We will go into much more detail later but thereis clearly a problem with the maintenance backlog.

You have visitors now. Would it not be entirelysensible for the money you make from visitors to beapplied to the maintenance?Sir Alan Reid: We were in discussion with theDepartment on this topic and we reached anagreement round about 2004—a letter from me tothe Department—for a basis on which to transfersome of the share of admissions surplus atBuckingham Palace to the property grant-in-aid. Inthat letter I explained that the Royal Collection wasspending a huge amount on refurbishing andrenovating The Queen’s Gallery in BuckinghamPalace and The Queen’s Gallery at Holyrood inScotland, as a result of which they had verysubstantial borrowings of about £20 million.1 Wesaid we were very happy to start paying as soon asthose borrowings reduced to the £10 million leveland the Royal Collection was in surplus itself. Ishould say those buildings form part of BuckinghamPalace and Holyrood and therefore the £23 millionof funds was going from Royal Collection intotaxpayer owned assets so eVectively there has been a£23 million transfer of funds from Royal Collectioninto the property side of the Royal Household. As ithappens, we did move into overall surplus a coupleof years ago and the borrowings reduced to below£10 million and therefore we would normally havetriggered payments at that stage.

Q3 Chairman: This is a very long answer, but let ustry to keep it simple. All we want to know is whetherincome from visitors to Buckingham Palace is goingstraight across to try to help with the maintenance.That is all we want to know. It is a simple questionand we want a simple answer.

1 Note by witness: The Royal Collection’s maximumborrowings were actually £14 million.

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Ev 2 Committee of Public Accounts: Evidence

Royal Household and Department for Culture, Media and Sport

Sir Alan Reid: A share of the surplus will go acrossnext year but in the meantime £23 million—

Q4 Chairman: Is that for Windsor Castle or is it forBuckingham Palace as well?Sir Alan Reid: Windsor Castle already goes across;Buckingham Palace will start in 2009–10.

Q5 Chairman: My other question is that if you havethis problem of maintenance why do you not openBuckingham Palace for longer?Sir Alan Reid: It is quite diYcult to actually achievedecent surpluses in opening longer.2 At the presenttime it is open through the summer. We have hugenumbers going through. A lot of those visitors quitepossibly, if the Palace were open longer, might spreadtheir visits and we may not actually see more income.

Q6 Chairman: Have you done a proper business caseon this? After all the tourist season now is quite long,from Easter right through to October. All the othergrand houses in England have long since had to openfor most of the tourist year. Is there any reason whyBuckingham Palace should not remain open forlonger?Sir Alan Reid: Yes, there is. A lot of those houses donot have all the oYcial state and royal engagementsgoing on. We have a very busy programme duringthe year. The costs of actually setting up the Palaceto make sure that people going through do not addto our maintenance burden is very significant indeedand cannot simply be set up for a weekend. We alsotrain 250 student wardens in order to do a very goodjob of wardening. There is a lot of administrationcost around it. What we have done is open up forprivate tours during the winter where it is not openaccess to the Palace but they are guided round by awarden. This year we are also opening up the gardenfrom April to June to summer private tours. We aretrying to do what we can with the rest of the yearconsistent with a very busy activity in the Palaceitself and not adding to the maintenance burden.

Q7 Chairman: This Palace, for instance, is openthroughout the year. We have the entire executive ofthe Government in it at various parts of the week.There are many, many functions going on but wemanage to keep a large part of the Palace openthroughout the year. I would have thought it mightbe possible, with a bit of ingenuity, to open thePalace for longer despite the fact that, as we know,you have functions in it throughout the year. We areonly talking about the State Apartments here.Sir Alan Reid: I understand but there are a lot offunctions which go on in the State Apartments. It isin our interests to generate more income; we are notagainst doing that but the business case does notstack up to generating the level of income that we getfrom the current opening.

2 Note by witness: Opening longer in this context means atother times of the year, rather than opening BuckinghamPalace for a longer period during the summer, which isconstrained by The Queen’s programme.

Q8 Chairman: Mr Stephens, I would like to ask youabout how you measure whether these works arebeing achieved. If you look at paragraph 27 you willsee that “none of the Key Performance Indicatorsmeasures the outcomes achieved”. If you look acrossat figure eight you will see there is the objective tomaintain the Palaces to a standard consistent withoperational requirements. That is quite a clearobjective, but if you look at the Key PerformanceIndicators across the page it is not quite clear to mehow you are meeting your first objective.Mr Stephens: The performance indicators do focuson achieving value for money in the individualprojects. In terms of assuring ourselves that theindividual projects are delivered and delivered to agood standard that is why we have our independentexpert advisors, Watts and Co. They do a sample ofprojects and audit those on a regular basis. In termsof assessing the overall condition of the Palace bothwe and the Household have a strong interest in this.The Household has taken significant strides in recentyears in improving the eVectiveness and regularity ofthe inspection process so that most of the Palace isnow inspected on an annual basis and our expertadvisors have access to the results of that. Overall wehave a good feel, with the Household, of thecondition.

Q9 Chairman: You tell us that but we warned youway back in 2000 that a maintenance backlog mightbuild up (paragraph 39). We now know that there isa maintenance backlog of £32 million. If you are sowell informed why have we got problems, forinstance, with the Victoria and Albert Mausoleumwhich apparently is on the at risk register? It seemsto me that you do not have an entirely firm enoughgrip on what is going on in this immensely importantEstate in terms of national importance. You do notactually know what is going on. If you did knowwhat was going on why have you allowed such alarge backlog to build up?Mr Stephens: In the case of the Mausoleum, theMausoleum has been outstanding in various formsas the NAO Report itself says for well over 10 years.It has been in the backlog, if you like, for some time.There is not a direct read-across, as the NAO Reportalso makes clear, between the backlog and theimpact of not doing projects in the backlog on thecondition of the Estate. The existence of the backlogfirst of all assumes that a certain amount was alreadyin the backlog from more than 10 years ago. It is alsoconstructed on the basis of what will be the backlogin 10 years’ time on certain assumptions aboutfunding. Of course there is a further distinction to bemade between whether projects actually happenand, as the NAO Report says, what impact theyhave on the overall condition.

Q10 Chairman: Did you actually see this backlogdeveloping? We read again in paragraph 39 that“The Department told the Committee that it asks itconsultants to look at whether a backlog of work isdeveloping”. Did you actually see this coming?

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Mr Stephens: As I said, we discuss regularly with thePalace what the condition of the Estate is. We haddiscussions around the time of the last spendingreview. The overall condition of the Estate, assessedby the Palace and endorsed by English Heritage, isthat it remains in good condition but there are somelong term projects which are being delayed ordeferred.

Q11 Chairman: Can I ask about the accommodationnow? If you look at figure 7, Sir Alan, this is thenumber of people who are living inside the secureperimeter and outside the secure perimeter. It makesobvious sense to try to move people inside the secureperimeter so that you can let the propertiescommercially outside. We made variousrecommendations that you should move as manypeople as possible inside the secure perimeter.Apparently since 2001 only one person has moved.If we look at this figure you will see that inside thesecure perimeter you have no less than 25 vacantproperties and you also have 18 people living outsidethe secure perimeter. There are 25 vacant propertieswithin, 18 people living outside; why do you nothave a more businesslike approach to moving yourpeople inside the secure perimeter then we could freeup properties outside and we can let them at whatwould be very high commercial rents.Sir Alan Reid: First of all we have a businesslikeapproach to this. We have more than doubled ourcommercial rent income from the whole estate sincewe last appeared before you. The 25 vacantproperties inside also include a number of propertieswhich are eVectively turning over. They have had anoccupant and there will be another occupant goingin. They also include some that we have had tomothball because we simply do not have enoughmoney to bring them back up to a decent standard.The average age of the 13 pensioners who liveoutside is significantly older than normal pensionerpopulation because they were allocated thisaccommodation many, many years ago before ourpolicies changed and we are now much morestringent in allocating pensioner accommodation.So their average age is about 80 and we do notbelieve it is fair to move them at that age into otheraccommodation as some of them are not terriblywell. They are diminishing, it is sad to say, at quite arapid rate and since this Report has been publishedtwo of the 13 have died and one has moved into anursing home. Those three properties will comevacant and we will look to commercially let them.We very much have your guidance in mind on thatbut we are doing it at the pace at which these peoplemove out of the accommodation.Chairman: Thank you very much. Alan Williams?

Q12 Mr Williams: May I apologise because I have toleave shortly to chair another meeting; it is nodiscourtesy to my colleagues or yourselves. Sir Alan,what was the backlog of maintenance when youtook over?Sir Alan Reid: It was not calculated at that time. Itook over in 2002. I am aware my predecessor saidthat there was no backlog last time he appeared

before you. The reason it has built up since then isthat when he gave you that statement four diVerentthings have happened. One is that he anticipated anincrease possibly along retail price index levels in thegrant-in-aid which has not happened. He alsoexpected a significant increase in tourism which therest of the industry expected as well. That did nothappen. If it had happened then the Windsor shareof precincts income for the property grant-in-aidwould have been about one million pounds a yearhigher. Energy costs increased by greater than hemight have expected—as we all have suVered—andalso with an increased level of security necessaryfrom about 2001 onwards it is actually moreexpensive for us to do work inside the palacesbecause of the level of clearances for contractors,et cetera.

Q13 Mr Williams: Thirty-two million seems aninordinate sum to have built up over so short aperiod when the backlog had, as your predecessorclaimed, been cleared.Sir Alan Reid: On the face of it it does but he hadbuilt into that statement the fact that the 10 yearactivity plan was going to do a lot of the things thatare now in the backlog. Due to the lack of income wehave not been able to do them. He knew those issueswere there but he thought he had the funding comingalong in order to deal with them. It is not such a greatsurprise and it is not a rapid deterioration in thebuilding that has led to that.

Q14 Mr Williams: It is still a formidable sum ofmoney. Mr Stephens, how do you justify this staticgrant-in-aid?Mr Stephens: We set the grant-in-aid taking intoaccount of course need, taking into accountpriorities across other areas of the DCMS budgetand taking into account also the opportunities forgenerating income. It is worth making the point, ofcourse, that maintenance spending only accounts forabout half of the total grant-in-aid. Ultimately theseare matters for ministerial decisions.

Q15 Mr Williams: However, 19% is a formidableloss.Mr Stephens: I think the Household have done verywell in increasing value for money and eYciency asI am sure everyone will want to see them do.

Q16 Mr Williams: You referred in an answer to theChairman to expert advice you have had. Are theseoutside consultants? I do not know what they cost ayear, but are they expensive?Mr Stephens: The company is Watts and Co whichis a professional firm with expertise in heritageassets. We pay them about £16,000 a year.

Q17 Mr Williams: What have they been advisingyou? Have they not been telling you that it is possiblyfalse savings if you are allowing this enormousbacklog to build up?Mr Stephens: The advice they have been giving us isconsistent with the assessment that has beenpublished which is that the overall condition is good,




that the Palace is watertight and all that you wouldexpect but, as I said earlier, there are some long termprojects that are now being deferred or delayed.

Q18 Mr Williams: Have your consultants suggestedto you that you should have key performanceindicators on the condition of the Estate?Mr Stephens: The consultants have been workingclosely with the Household to develop together asystem for assessing the condition. This has led tothe process of inspection that is now in place. I thinkthe NAO Report contains some useful suggestionsfor developing it still further.

Q19 Mr Williams: It is interesting that the NAO wasable to reveal all these facts after a very short inquiry,whereas with constant support from yourconsultants you seem to have been oblivious tothem.Mr Stephens: I do not accept that. I think most ofthese facts have been published.

Q20 Mr Williams: You just chose to ignore theminstead. Sir Alan, we come to you. You have had toput up with the misfortune of having a 19% real fallin income but you reduced maintenance spending by27%, that is half as much again. Why?Sir Alan Reid: It is an arithmetical calculation thatleads to that, I am afraid. A lot of the grant-in-aidgoes in just running the palaces: fire, health andsafety, energy and such like. If those costs go up thenit leads to a diVerent percentage reduction in what isleft for maintenance. I am afraid the reducedamount that is left for maintenance as a direct resultof increases in other costs and a fixed grant—

Q21 Mr Williams: So maintenance is at the end ofthe queue.Sir Alan Reid: Yes. We have no choice. We need toheat and light the palaces; we need to protect themfrom going up in flames again.

Q22 Mr Williams: You are working on information,we are told in paragraphs 46 and 47, that is out ofdate and does not reflect reality. So how can you besure 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 thatparticular point because he is best placed to answeryou?

Q24 Mr Williams: I do not mind who answers.Mr Sharpe: I think you are referring to the accuracyof the initial budget. The NAO Report takes asample of projects and you can see that some of themare under and some of them are over. On a sample ofour projects in 2007–08 let tenders were about 16%above the initial budgets so it is not the 49% that isquoted in the National Audit OYce Report.

Q25 Mr Williams: Sir Alan, as the Chairman hasalready touched on, eight years after the PACrecommendation that the Royal Collection Trust

should pay more to you from their visitor income,why is it that it has only recently been decided toincrease it?Sir Alan Reid: The formula I put to the Departmentin 2004 (which I understood they agreed with) wasthat we would start making payments across to thegrant-in-aid from the Royal Collection Trust when itwas in overall surplus and when it had reduced itsborrowings down below £10 million. Thoseborrowings have been incurred to spend a lot ofmoney on tax payer owned buildings. The tourismtrade has actually been very diYcult for a lot of thisdecade and it was only a couple of years ago that theoverall surplus was reached and the borrowingscould be reduced below £10 million. There was alsoa pension payment that came in two years ago thatdeferred further payments until next year. It hasalways been the intention of Royal Collection tomake these payments and to show good faith in thatI would draw your attention to the fact that weunilaterally approached Royal Collection trustees tomake bigger payments to the property grant-in-aidbased on the Windsor precincts income where,because it was not generating the sums that wethought it should, we revised the formula and as aresult there is about half a million pounds a yearmore going into the property grant-in-aid andsupplementing the property grant-in-aid from theRoyal Collection.

Q26 Mr Williams: Your predecessor told us that heplanned—that was, I think, his word—to reduce thenumber of private secretaries and oYcials housedfrom 39 to 11. All these years later, instead of goingdown by 28, it has gone down by six. Why?Sir Alan Reid: We changed the policy. First of all wechanged the gradings so that although we haveprivate secretaries we do not have people calledoYcials any more and we have a morestraightforward, less status oriented grading system.The fact of the matter was that these people wereliving inside the secure area and if we moved themout of the accommodation there was little that wecould do with it other than mothball it. Everyonewho has been appointed fairly recently who is inPalace accommodation has eVectively a rentalpayment on an abatement of salary which can varyfrom 22% to 28% of their gross pay. It is better, in ourview, to save the tax payer money by having thesepeople living in accommodation and the civil list orwhoever having a reduced salary cost than simply toleave the property empty and subject to decay. It wasa commercial decision to reduce the cost to the taxpayer and therefore it is a changed policy from whatmy predecessor reported to you.

Q27 Mr Williams: On the other hand, as theChairman has said, there was a recommendationthat you should take people from outside theperimeter and put them inside the perimeter. Whyhave you not done that?Sir Alan Reid: We only have five staV membersoutside left now and 13 pensioners.




Q28 Mr Williams: They are highly rentableproperties, are they not?Sir Alan Reid: Some of those outside are not thatdramatically expensive properties or high rental byany stretch of the imagination. That is whypensioners are in them. It did not make a lot of senseto move an old pensioner out of their house into theconfines of a Palace from what is, in most cases,relatively modest accommodation.

Q29 Mr Williams: I saw in the notes that the Prince’sCharities are now paying rent of a million a yearinstead of the half million they were paying before.What led to a doubling in the fees of the rent forcharities?Sir Alan Reid: I am sorry, I do not recognise thefigures you are quoting. If it is the property that weare renting to the Prince’s Charitable Foundation,the rent on that is about £66,000 a year.

Q30 Mr Williams: Since the Committee last reportedthe 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 haveincreased from under £500,000 to a million pounds.

Q31 Mr Williams: What about the charities?Sir Alan Reid: The charities are included in that. Wecharge the Prince of Wales’ Charities £66,000 a year.

Q32 Mr Touhig: In the Property Section there seemsto be no overall strategy or even a target forgenerating income. That seems to be symptomatic ofthe whole approach. Why are there no targets forgenerating income? Why are there no strategies?Sir Alan Reid: We do have strategies. We have a veryclear objective to maximise our commercial income.I think what the NAO had concerns about was thatwe had not written that down and it is not fixed.

Q33 Mr Touhig: There is no strategy in the PropertySection, at least that is what the NAO tell us.Sir Alan Reid: What I am referring to is the PropertySection. Our objective is to maximise commercialincome, but we cannot make firm decisions on that,we cannot necessarily say that in a particular monthor in a particular year something definitely willhappen. Our organisation has to be very flexible todiVerent scenarios and in that context we respond asflexibly as we can and as commercially as we can todiVerent situations. We have a housing committee sothat if a house becomes available we will look at itand made a decision as to whether it should becommercially let or whatever.

Q34 Mr Touhig: How far ahead can you plan thenwith all the restrictions you seem to imply you haveplaced upon you?Sir Alan Reid: In some cases we will plan severalyears ahead.

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

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

Q36 Mr Touhig: I understand that. I understand youare dealing with the residence of the Head of Stateand I understand all the diYculties and so on; youare right to point those out. However, there areplenty of successfully run stately homes, as theChairman pointed out, and I am sure there arelessons to be learned. I am not suggesting for oneminute that you have a safari park or a theme parkin the corner of the grounds of Buckingham Palace,but I think you are getting the message. There areways in which you could be generating more incomemuch more eVectively to help overcome the hugeproblems you have now with maintenance.Sir Alan Reid: Yes, and we are open-minded on thatand we did have the eVect of a theme park with theChildren’s Literary Garden Party a couple of yearsago for The Queen’s birthday. We are very happyto try to meet the National Audit OYce’srecommendation here and document it as far aspossible so that others can trace through what ourcommercial rationale has been and is for looking atproperty.Mr Stevens: If I may inform the Committee of someof the initiatives that we have been taking togenerate income, for instance we generate aroundabout £80,000 a year from plant sales from thegardens at Windsor. We make use of the facilitiesthere and sell them through the farm shop andthrough various wholesalers. We have been lookingto introduce tours of the Buckingham Palacegardens from this year. They are very, very popular;there is enormous demand. That is going to generatein the region of around about £30,000 for the grant-in-aid; these are very small amounts. Unfortunatelythese aspects of our income generating strategy arenot in a documented plan.

Q37 Mr Touhig: I understand that and I understandthat these are small amounts but I do appreciate thehuge task you have got. However, you are saying youdo have a strategy and you do have targets, so whyhave you accepted the NAO Report which says thatyou do not have a strategy and you do not haveany targets?Sir Alan Reid: I think their wording was notparticularly inaccurate. We have not written it downand it is not fixed so that we can say that on aparticular day we are going to sell this building.

Q38 Mr Touhig: It is not possible to write it downand fix it.Sir Alan Reid: We will attempt to write it down butit will need to be flexible.




Q39 Mr Touhig: Alternative uses for properties arelooked at on a case by case basis and this seems tosuggest that there is no strategy for managing theassets of the Estate. Colleagues have referred topeople within the secure perimeter and otherswithout and so on. Do you really have a strategy formanaging the assets of the Estate?Sir Alan Reid: Yes, we do. An example would be thatif a property becomes vacant and it is extremelyexpensive to get it back into a fit condition becauseit has probably got asbestos and re-wiring needing tobe done, we may well choose to mothball it unless wecan get a proper rate of return for the money we aregoing to spend from the grant-in-aid. That rate ofreturn would be determined either by commercialrent or by the abatement of salary in the savings tosome other tax payer funded grant from doing thatbuilding. In that situation we will mothball it. If itdoes have a payback then we will go forward on acommercial basis. When Princess Margaret died wecould not think of a sensible use of that by us so withthe Departments’ agreement we transferred that toHistoric Royal Palaces and relieved this grant ofthat.

Q40 Mr Touhig: There are parts of KensingtonPalace that have been empty for 10 years, since thePrince of Wales and his late wife lived there.Sir Alan Reid: That is now occupied.

Q41 Mr Touhig: In a previous incarnation, Sir Alan,I was a councillor and I chaired something calledGwent County Council Estates responsible for 6000acres of county farmland mainly small holdings andwe discovered the tax payers of Gwent weresubsidising it. We turned the whole operation roundby reviewing rents, increasing rents, by getting aproper management plan for the estate, reorganisingit, disposing of assets we did not need and so on. Doyou have that sort of approach, this over-archingapproach, bearing in mind the diYculties you sayyou have in planning too far ahead?Sir Alan Reid: We do have that overarchingapproach but I think, to satisfy the National AuditOYce, we would be happy to try to document itmore clearly.

Q42 Mr Touhig: When would you do that?Sir Alan Reid: In the next few months.

Q43 Mr Touhig: You could do that.Sir Alan Reid: Yes.

Q44 Mr Touhig: You think you could have anoverall plan which would give you a basicmanagement plan for developing the Estate longterm. From my experience we found that it wassensible not to wait for a property to become emptybut to indicate long term how we would want to dealwith it.Sir Alan Reid: Yes, it will have a number ofcontingencies in it.

Q45 Mr Touhig: It is not rocket science.Maintenance costs can be massive. My youngest sonworks for a company that maintains domesticproperties and other properties for the Diocese ofMonmouth and LlandaV and he often comes homeand tells me about the huge problems they have ondiscovering, when going into a rectory or something,that it is going to cost the diocese a fortune to putright and yet it seems to me that the Departmentdoes not learn the lessons of dealing with amaintenance problem, getting an estimate for it andthen cross-referencing that with the actual cost. TheReport tells us that you do not seem to do that.Sir Alan Reid: The maintenance is firmly in GrahamSharpe’s focus.Mr Sharpe: I think we do learn the lessons fromvariations. We carry out post completion reviews onthose projects that have had diYculties encounteredin them to try and learn those lessons across theboard. We have had presentations from our staVwho have carried out those projects to othermembers of the team for that very purpose, to learnthose lessons.

Q46 Mr Touhig: I appreciate you talk to your staVabout it. We are told here that a test check of projectsshowed that initial cost estimates tended to beoptimistic but the Property Section does notroutinely check the accuracy of these estimatesagainst the final costs. That is kind of basic, it seemsto me.Mr Sharpe: We do record them.

Q47 Mr Touhig: So the NAO have got this wrongthen.Mr Sharpe: No. We have a financial record whichgoes from inception to completion. We record theinitial cost which, in some cases, will have beenproduced five years before the project has evenstarted up in design. We do not choose to reviewthose initial estimates. We think it is important tomaintain that as a marker. What we do not do at themoment is record the reasons why there have beenincreases in costs. For example, has inflation beenhigher than expected over the period of the five yearplan? If you take lead roofs, the cost of lead has goneup hugely, way in excess of inflation. We would seekto revise our forecasts as a result of those sorts ofchanges. Those are lessons we perhaps ought todocument a bit more clearly.

Q48 Mr Touhig: Do you have your own workforcedoing this maintenance or do you use contractors?Mr Sharpe: For project work we tend to use outsideconsultants. We have a small core team that is thereto manage, if you like as client representative onthese projects. They also act as staV to keep theEstate maintained, reacting to repairs, placingorders and that sort of thing. They would not tendto carry out the larger projects themselves; theywould use consultants to do that.




Q49 Mr Touhig: Mr Stephens, I see the Departmentsets objectives for the Property Section, however youdo not seem to know whether or not they have keyperformance indicators. Do they have keyperformance indicators which report back to you?Mr Stephens: Yes they do. The current set of keyperformance indicators are listed in the NAOReport in table eight on page 15. We are currentlyrevising those and we will take into account the veryhelpful comments from the NAO Report.

Q50 Mr Touhig: The Property Section hasintroduced this risk based approach and inspectionof the conditions of properties in recent time but hasnot defined any criteria by which to look at thiswork, it is open to interpretation. Is that not ratherconfusing and rather loose, if you do not actuallyhave a proper measurement of what you are seekingto achieve?Mr Sharpe: There are no industry standards fordoing so. Organisations like ourselves will usespecialist consultants—surveyors, architects and thelike—who would use their judgment to assess thecondition of the buildings they are looking at. Theirassessment of good or excellent can vary but notsignificantly I would suggest across the profession.That said, we were not aware of any software thatcould do this for us until we met Defence Estatesrecently as a result of the National Audit OYcerecommendation. We were impressed with thesystem that they have been running on 60-oddthousand buildings in their Estate where they havea framework, a series of descriptions by which theyanalyse the conditions of their buildings.Mr Touhig: I should stop you there because I amrunning out of time and I was the Ministerresponsible for Defence Estates, so I will end on ahigh.

Q51 Chairman: Mr Stephens, if you do not mind mesaying so, your answer to Mr Touhig aboutperformance indicators I thought was a bitdisingenuous because you claim that you have thembut there was a question I was putting to you earlierthat they do not bear any relation to the objectives.This is brought up by the Report in paragraph 27:“None of the Key Performance Indicators measuresthe outcomes achieved”. I put this to you again: hereyou have your high level objectives (they are set outin figure eight) and the key performanceindicators—the number of staV, the supply ofpayments made within 30 days—do not actually tellus how you are meeting your objectives; they are notmuch use. That is why I put to you that you have alack of grip on this and that is why I think you haveallowed this £32 million backlog to develop.Mr Stephens: I certainly was not seeking to bedisingenuous.

Q52 Chairman: No, I am sure you were not; perhapsI am being unfair but I did not think that youranswer was as full as it might have been.Mr Stephens: The suggestion was put to us that wedid not have any performance indicators but we dohave performance indicators.

Q53 Chairman: I put it to you that they are notany use.Mr Stephens: We have three objectives listed in tableeight, all of them one way or the other—as I am surethe Committee would expect—are about value formoney and the key performance indicators give us arange of insights into how the Property Section isdelivering value for money which is very important.What I am not disagreeing with is that if we coulddevelop a performance indicator that indicatedchange in the condition of the Estate that would bea very valuable measure. Generally we are currentlyreviewing our performance indicators.

Q54 Chairman: So you are going to do it now, areyou?Mr Stephens: We have just had some discussionabout what measures might be available. Assessingthe condition of a historic estate is not a simple orstraightforward matter. We are happy to look at theopportunities.Chairman: Good; we are making progress. IanDavidson?

Q55 Mr Davidson: Could I start oV by clarifyingsomething? You have mentioned a couple of times inrelation to these buildings that they are tax payerowned assets. Is that the position as youunderstand it?Sir Alan Reid: In my view they are owned by TheQueen on behalf of the nation just like Parliament isowned by the Government.

Q56 Mr Davidson: That is slightly diVerent; that isnot tax payer owned assets, it is owned by The Queenin trust for the nation.Sir Alan Reid: It is a very similar form of stateownership.

Q57 Mr Davidson: When people raise things with usas being tax owned assets it means that they wantmoney but if they do not want us to have access tothem then they are something else and I just wantedto clarify that that is exactly the same here as well.You mentioned that the business case for increasedaccess to Buckingham Palace did not stack up. CanI just ask the National Audit OYce whether or notyou have seen that business case?Mr Hawkswell: No, we have not seen it.

Q58 Mr Davidson: Can you make that business caseavailable to the National Audit OYce so that theycan examine it and see whether or not they agree.Sir Alan Reid: We can certainly make it available,yes.3

Q59 Mr Davidson: Why was it not made availablebefore?Sir Alan Reid: The point was not raised.

Q60 Mr Davidson: And you did not volunteer it. Iunderstand. Can I just clarify the points that youmade in relation to the way in which the

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maintenance budget has gone down by more thanthe budget overall has gone down? I was astonishedby your answer because it seems to suggest thatmaintenance just gets what is left after you havespent all the other money that you want to spend onrunning costs. Like some of my colleagues I used tobe involved with a local authority; we had budgetsand we decided how much we were going to allocateto maintenance. Are you saying to me that you didnot have that and that maintenance simply got theresidual?Sir Alan Reid: I should probably clarify that thereare two diVerent types of maintenance in my view.One is the day to day maintenance that obviouslycontinues as before because we have to keep thesepalaces in an operational state. There are then otheraspects of maintenance which are perhaps muchmore substantial and more like refurbishment andthose are the ones that tend to take the brunt becausethe other costs are ones that we cannot actuallyavoid.

Q61 Mr Davidson: In paragraph three it doesmention that spending on maintenance projects hasreduced by 27% and that the budget overall wasdown by 19%. Who took that a decision?Sir Alan Reid: It was not a decision. It is a fact of lifethat if we have levels of expenditure on the runningcosts—

Q62 Mr Davidson: No, no, no. Of course it is adecision; even if it is a decision not to take a decisionit is still a decision. You obviously decided to let therunning costs run and the residual then went tomaintenance.Sir Alan Reid: We let the running costs run becausenot to do so may well have led to redundancies andreduced staV.

Q63 Mr Davidson: That is a decision.Sir Alan Reid: To that extent yes.

Q64 Mr Davidson: Was it reported to theDepartment that you were taking such a decisionand that the result was that this backlog was goingto build up?Sir Alan Reid: Yes, it is very clear from what we werestating—

Q65 Mr Davidson: Can I just clarify with MrStephens, were you aware that these decisions werebeing taken and was it referred to you as boldly asthat?Mr Stephens: We get a regular quarterly report.

Q66 Mr Davidson: That was not what I asked you.I asked you whether or not you were aware that thedecision was being made in such a formalised wayand were you happy to let it go?Mr Stephens: We discuss the annual report with thePalace on a regular basis.

Q67 Mr Davidson: Is that a “yes” then? Did youagree that?

Mr Stephens: This is rightly and properly a decisionfor the Household.

Q68 Mr Davidson: They took the decision and younoted it. Can I clarify the question of income? I amanxious about income foregone. Rather than gothrough them one by one maybe I could ask if youcould let us have a paper via the National AuditOYce about the properties mentioned in box onewhere there is anything less than the commercial rentbeing charged for accommodation or oYces in orderthat we can total it. It seems to me that eVectively theproperties are subsidising a whole number of otheroperations by either under-charging rent or notcharging rent at all. I think it would be helpful if youcould clarify the extent of that. Is that possible?4

Sir Alan Reid: I would be very happy to provide ithowever it might be helpful if I explained some of theother cost areas of the civil list.

Q69 Mr Davidson: No. Maybe you could come backto that in your time but I have a limited amount oftime right now. There is a charity mentioned here,the Horse Rangers Association Charity, and I amnot sure of the extent of the subsidy they arereceiving and whether or not, if that was a publicpolicy decision, we would agree with that. I think wewould want to have all of that clarified. Have younot done that before, itemised the properties, whatthe real rent would have been, how much of asubsidy you are providing and how much thereforethe cross-charging subsidy is?Sir Alan Reid: We are certainly aware of that wherethe properties are outside the secure zone. Inside thesecure zone it is an academic exercise because wecannot rent them commercially.

Q70 Mr Davidson: It does relate, of course, to theamount of money that you have available. Takingthe example of charities, as I understand it a numberof charities are receiving essentially subsidised rentwhich was a decision taken by yourselves to givethem money which is then not available to maintainthe buildings. If they were paying the real rent thenthe money would be available.Sir Alan Reid: The abatements on rental that we giveto staV were originally calculated by the Treasurybased on similar percentages in local government.

Q71 Mr Davidson: I am not disputing that they arefair, I just want to know how much it is.Sir Alan Reid: We follow that and we can certainlytell you how much it is. The other one is where thereis a Ministry of Defence let or the Princes’ charities;they are the best guess at as reasonable a rent as wecan get given that it is not a purely commercialsituation.

Q72 Mr Davidson: It would be very helpful if wecould have that. I am not entirely sure about therationale behind some of the decisions onpensioners, for example. Maybe you could give us anote indicating how it has been decided which

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pensioner should have no rent and which pensionershould pay. I have here, for example, a very helpfulpaper where the press secretary to Elizabeth, TheQueen Mother, has three reception rooms, fivebedrooms and does not pay rent whereas a formerphotocopy operator does pay rent. The retiredaccountant of the Privy Purse does not pay rent; aliveried porter does pay rent. A cousin of The Queen(I am not entirely clear who that is but perhaps youcan clarify that) and the Principal of the Foundationof St Katherine (I am not quite sure who that is andit would be helpful to have that clarified), neither ofthem pay rent yet the widow of a carriage cleanerdoes. On the other hand, the widow of a Royal Mewsgroom does not. Is there a system behind all that?5

Sir Alan Reid: The system is not the one that you areimplying; it is generally one to do with the timing oftheir retirement. Up until about 1991 it was thepolicy for pensioners that were accommodated notto pay rent. The Queen tended to make thosedecisions.

Q73 Mr Davidson: Again it is a question of howmuch of a subsidy that is to the individuals involvedand therefore how much money is foregone. If theywere being charged then presumably the moneywould not actually be paid by them directly, it wouldbe paid out of the civil list which would meaneVectively that there would be more money availablefor maintenance.Sir Alan Reid: Pensioners since 1991 do pay rentaland it is set at a percentage of their pension.

Q74 Mr Davidson: Can I just turn to the question ofthe Royal Collection Trust which, again using yourterm, could be considered tax payer owned assets ifyou are asking for money but not if you are not.Sir Alan Reid: The assets managed by the RoyalCollection Trust are owned by The Queen on behalfof the nation.

Q75 Mr Davidson: You are not asking for money forthem so they are not tax payer owned assets. Do youhave a catalogue of those items?Sir Alan Reid: There is an inventory and we have anew computerised inventory system going in at thepresent time.

Q76 Mr Davidson: So you will be able to provide theNational Audit OYce with a copy of that inventoryand catalogue and a list of where they are.Sir Alan Reid: It is possibly a bit early. We couldprovide the old inventory.

Q77 Mr Davidson: Could you let us have what youhave and clarification as to when we might get thewhole thing.Sir Alan Reid: Before I commit Mr Stevens is alsoFinance Director of the Royal Collection Trustwhich is part of where we have been trying to savemoney in sharing his services between two bodies.He may be able to give you a more accuratecommitment as to what we can provide.

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Mr Stevens: The Royal Collection Trust hasembarked on a five year project to replace itsinventory system. At the same time it is continuingwith the cataloguing of its inventory. There are overhalf a million items at the moment and although weexpect to be able to publish the inventory at somestage in the future—that is why we have built infunctionality into the existing database—we are notin a position to publish it at the moment. Items fromthe inventory are published on the RoyalCollection website.

Q78 Mr Davidson: For as long as I have been on theCommittee and I think longer we have been gettingtold that there was an inventory in the process ofbeing drawn up but we have never, ever seen it. If youare saying to me that it is now in a form that can bereleased to the National Audit OYce and madeavailable then that is welcome and we will come backto that.Mr Stevens: Unfortunately it is not in a form thatcan be released to the National Audit OYce at thisparticular point.

Q79 Mr Davidson: So despite all the years that wehave been asking for this and you have beenpromising it, it is still not available.Mr Stevens: As I said, we have been working with acontractor for about five years now to deliver thenew inventory system. It is a very, very complexsystem and I am pleased to say that we havecontracted on a fixed price basis so that we havemanaged the risk of that contract but unfortunatelyit has taken longer to deliver.

Q80 Mr Davidson: You can give us a partial report;you can give us what you have got. Can I just turnto the information in paragraph nine?6 This is apoint that some of my colleagues have picked upbefore which is about sharing the income fromvisitors. Emphasis has been placed to us on the factthat any proposals about income coming into themaintenance budget would have to be agreed by theRoyal Collection Trust themselves. It was not untilI asked the National Audit OYce that I discoveredexactly who the trustees were of that. Clearly it is allfigures at and around the Palace. Sir Alan, are you amember of that?Sir Alan Reid: Yes.

Q81 Mr Davidson: You will know your colleaguesbetter than I do then. You are in a diYcult positionin a sense because you are on both sides of theargument. You are part of the Royal CollectionTrust not wanting to give money to BuckinghamPalace but you are involved with BuckinghamPalace wanting to get money out of yourself.Sir Alan Reid: I do not think it is fair to say that theRoyal Collection Trust does not want to give moneyto Buckingham Palace. They know they benefitgreatly. The key point is that Royal Collection is aseparate legal entity and the trustees of that charityhave responsibilities to the Charities Commission.

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Q82 Mr Davidson: It is a diYcult position for you, isit not, having to wear two hats?Sir Alan Reid: Not necessarily. It can actually leadyou to looking at issues from a more equitable pointof view.

Q83 Mr Davidson: You are bearing up very well. Youmentioned that there had been a process ofdiscussion and negotiation about this for quite someperiod and that various things have been considered.Has all that information been made available to theNational Audit OYce?Sir Alan Reid: We have not kept them from it. Is thisthe correspondence between me and theDepartment? I would have thought they would haveasked for it if they had wanted it.Mr Davidson: Maybe I could ask the National AuditOYce to ask for all of that then and to clarify all ofthe process and tell us whether or not you aresatisfied that it is being pursued as assiduously aspossible in terms of wanting to get the money for themaintenance.7

Q84 Chairman: Providing notes to this Committee isa very serious business. There are variousconventions surrounding it. You know what notesyou have promised Mr Davidson, do you? Inparticular we want to have a note on this inventory,what have been the problems that you haveencountered, when are we going to have it becausewe have been asking it for many years now? If you donot have it, how do you know if anything is missing?Sir Alan Reid: We will certainly supply you with theinformation we have got. There was a two year delayfrom the people developing the computerprogramme. I have not been aware that you havebeen asking for this for several years because I havenever received a request in my time.Mr Williams: I have asked for it in previous hearingswith you; not with yourself but with yourpredecessor.

Q85 Chairman: Are we going to get it now? If we arenot going to get it we want to know when we aregoing to get it.Sir Alan Reid: You will get what we have.8

Q86 Mr Davidson: I have a final point on paintings.There was only one picture that I recognised when Iwent round and that was the team photo of GlasgowRangers Football Club which I was very surprised tofind pasted up in a section of the Palace. Since thatis my local team then I will go back and tell myconstituents that they are not forgotten in thePalace.Sir Alan Reid: You may look in the inventory in vainfor that one; it may have been privately owned.Mr Davidson: I am not sure I am going to get thecomplete inventory anyway.Chairman: You can have that and I will have theMillet. Richard Bacon?

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Q87 Mr Bacon: I must say that thought the picturegallery was lovely. I think the Glasgow Rangersthing looked like it was cut out of the Daily Mirrorto be honest. Sir Alan, I would just like to pick upon the last thing you said to Mr Davidson about theRoyal Collection having trustees, being a charityand having responsibilities to the CharityCommission which we understand, in fact we havehad the Charities Commission before us. Obviouslythey have to act in a fiduciary in relation to theirresponsibilities and so on. However, the very factthat they have this income that is arising from thevisits to Buckingham Palace—they then have tochoose what they do with it carefully bearing in mindtheir responsibilities as charitable trustees—is onlybecause there was an agreement that they should getit. Referring back to something the Chairman askedat the very beginning (which I still do not reallyunderstand following the visit although there was acomprehensive attempt to explain it to us), if therevenues arise as a result of the visits to BuckinghamPalace why is that the Household does not get therevenues in the first place. The answer seems to be,“Well, because the Royal Collection needed to spenda lot of money on refurbishing themselves” (youmentioned £23 million) and presumably that willincrease the number of visitors and enable the RoyalCollection to do more in terms of displays and thiskind of thing. Nonetheless, they are only exercisingthose responsibilities in light of the agreement thatwas reached.Sir Alan Reid: I will try not to make this a longanswer but there are two parts to it. The Queenowns, on behalf of the nation, buildings—being thepalaces—and she also owns on behalf of the nationart—being the pictures et cetera—managed by theRoyal Collection. One way or another funding hasto be achieved for both of those. If it goes to the artit means less money for the properties; if we divertedit all to properties there would be a need for fundingfor the arts. There is a national funding issuewhichever way you go on this. Windsor Castle wasfirst opened to the public in 1850 by Queen Victoriaand in 1902 King Edward VII started charging forgoing into Windsor Castle. So there has been ahistory of a hundred years whereby this income wasgoing into what was called the Royal PalacesPresentation Fund which is really the predecessorbody to the Royal Collection. So that had beenhappening for almost a hundred years (90 at the timeof the Windsor fire) so when the money stoppedbeing diverted into the fire restoration it was simplya case that the decision had already been made ahundred years ago that that money would continueto go back into the Royal Palaces Presentation Fundwhich by that stage had become the RoyalCollection Trust. The Treasury agreed to that at thetime but it was not a brand new decision; it was theway it had always been.

Q88 Mr Bacon: Mr Stephens said earlier that hethought that the Household was doing quite wellgiven the declining revenue in real terms that youhave available. Having listened to what Mr Sharpeand Mr Stevens said during our visit it was quite




clear that they have an enormous range of challengesand not enough income to deal with it. I think youcut straight to the quick in your last answer: you donot have enough money coming in for the things thatyou need to do. One of the reasons for that is becauseMr Stephens is so stingy and does not give youenough; the other is because you do not have enoughincome coming in from visits. I will come onto MrStephens in a minute but on the income side you saidthat it would be very diYcult to increase the numberof days of visits for Buckingham Palace because ofthe oYcial, state and royal engagements. TheChairman mentioned that we, in this Palace—whichis also a royal Palace—are open all year round andwe have a lot of visitors. We have over half a millionvisitors a year; Hampton Court has 600,000; theTower of London has two million visitors (obviouslythe Tower of London is a major tourist attractionwith the Crown Jewels and is open largely for thatpurpose). One appreciates it is diVerent inBuckingham Palace but nonetheless you made itsound in your answer that even if you were open forlonger it would be a zero sum game; the touristswould just be spread over a larger period. What isyour estimate of the extra revenue you would get bybeing open for longer?Sir Alan Reid: I do not know a precise number but itis small.

Q89 Mr Bacon: You said the business case does notstack up. If you know that the business case does notstack up you must know why it does not stack upand the extent to which it does not stack up?Mr Stevens: If I may just qualify the issue about thebusiness case, the business case was evaluated fromthe point of view of having a separate opening atother times of the year, during the Christmas periodand during Easter when The Queen is away. Thosewere obvious times to open the palaces.Unfortunately for the infrastructure that goes intoestablishing the Buckingham Palace summeropening we pay something like £200,000 fortemporary buildings and security systems. Toimplement that for a short period at those times ofthe year when visitor numbers are much lower, thebusiness case would not stand up.

Q90 Mr Bacon: Surely that is all the more reason toleave it up permanently then you spread the capitalcosts over a greater number of visitors.Mr Stevens: That would be the ideal situation.Unfortunately if we were to establish those buildingsthey would be in parts of the Palace that have otherfunctions at other times of the year. We are able toput those temporary buildings—our ticket oYce,our security searching channels—in parts of thePalace that are not used during the summer period.As Sir Alan mentioned, we recruit a lot of studentsto help us out during the summer opening—seasonalstaV—and those students all return to university inOctober.

Q91 Mr Bacon: When I was a student myself Iworked in October, November and December inLondon; I am sure you would find people who could

work throughout the year. The White House inWashington DC has visitors throughout the year.They do not actually charge, I do not think, but theyhave head of state function, they have a lot of oYcialstate engagements going on throughout the year,oYcial visitors, there is a very high security issue andyet they still manage to be open for much longer. Ijust find it diYcult to be persuaded that you havedone all that you could do.Sir Alan Reid: The White House has reigned backwith heightened security levels as well. I guess peoplecome into the House of Commons to watch theirMPs at work.

Q92 Mr Bacon: Also to do tours. Look behind you,it is not full. Most of them come in to do the line ofroute tour actually.Sir Alan Reid: We could have a state visit going onin October and we cannot have the public wanderingaround watching the President of Mexico with TheQueen in the middle of a state function.

Q93 Mr Bacon: They would probably pay quite a lotfor that actually. Let us move onto Mr Stephens andhis stinginess. Politically it is always going to bediYcult in good economic times when there are somany other priorities to justify extra expenditure ofthis kind and we are not in good economic times.Remind me, Mr Stephens, what is the total grant-in-aid?Mr Stephens: The core grant-in-aid is £15 million.

Q94 Mr Bacon: That is for the maintenance.Mr Stephens: No, £15 all in for the running costs andthe maintenance.

Q95 Mr Bacon: Have you got a rough figure for thebase cost of the total running costs if you add in thecivil list and the travel? The civil list is £12 million,the travel is £6 million; buildings grant-in-aid is £15million. Excluding the police, the army and thesecurity, what is the rough cost of the entireshooting match?Mr Stephens: I am not responsible for all those.

Q96 Mr Bacon: I did not ask you if you wereresponsible; somebody must know roughly what itis.Sir Alan Reid: It is £40 million.

Q97 Mr Bacon: My guess was that it would be under£50 million. The security, army and police element isobviously on top of that and it is significant. On theother hand you would have to factor in the numberof tourists who come to London to watch theChanging of the Guards if you were to get anaccurate picture. Am I right, Mr Stephens, that thereason the civil list and the grant-in-aid work theway they do is because an agreement was reachedbetween the Royal Household and Her Majesty TheQueen and the Treasury whereby the monies fromthe Crown Estate were paid over and then themonies to run the Royal Household and Family andEstates were paid out of public funds. Is that right?




Mr Stephens: Yes.

Q98 Mr Bacon: If you look at the Crown Estaterevenues last year it was £211 million pounds paiddirectly to the Treasury. In fact the chairman, MrGrant, said “I am delighted we have returned £211.4million to the Treasury in the form of our net revenuesurplus”. If you just add up the last five years it isnearly a billion pounds that the Treasury hasreceived. It is in this context, I think, that one has toexamine your stinginess because actually there was adeal that these monies would be handed over inreturn for the state looking after the head of statefunction. You are failing in your responsibilities, areyou not?Mr Stephens: No, I certainly do not accept that weare failing our responsibilities. The overall conditionof the Palace is good and the Household is doing avery good job under tight constraints. Priorities haveto be determined within our budget and the DCMSdoes not get the benefit of the income from theCrown Estate.

Q99 Mr Bacon: Sir Alan, it may be that you havethese numbers available easily or perhaps with theNational Audit OYce they can be assembled, but isit possible that you could send us two schedules sideby side, one showing the revenue surplus that hasbeen paid over by the Crown Estate to the Treasuryfor the last 10 years and then the various costs of theRoyal Household—be it civil list, travel and so on—over the last 10 years?Sir Alan Reid: We produce a document on thesecond, including all government departmentexpenditure on us except for security and police andwe publish it every year so I will happily send youthat.

Q100 Mr Bacon: Between you could you send us, asa Committee, both of them, including the moniesthat you, Ms Diggle, get in. I reckon that you doquite well out of this as well.Ms Diggle: We certainly try to.

Q101 Mr Bacon: Over the last 10 years the costs havebeen £400 or £500 million and the revenue has beena billion and a half or something like that. Wouldthat be fair, roughly?Ms Diggle: They make a surplus of about £200million.

Q102 Mr Bacon: The Crown Estate does, yes. SirAlan says he costs £40 million. If you add in thepolice and the army and everything else it is notgoing to be £200 million is it?Ms Diggle: I would not like to comment; I do nothave a figure for that.Mr Bacon: I think you do very well out of it.Anyway, I look forward to receiving the note,thank you.9

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Q103 Geraldine Smith: I feel quite positive aboutwhat you are doing actually because I think you aremoving in the right direction with tours aroundBuckingham Palace. I think that gives people a greatdeal of pleasure. Perhaps we can get a bit petty attimes. When we look £32 million seems a lot ofmoney but at the end of the day over a number ofyears it is not that much when you are looking atunexpected maintenance and things that mightoccur during the time. Do you find that thathappens? I know with my own home—a very smallhouse—you find things go wrong that you do notexpect.Sir Alan Reid: It is exactly like that and it is a similarreaction. You get very depressed when you suddenlyfind that you need to rewire your house. When thefacade in the back courtyard of Buckingham Palacecrumbled we knew that work needed to be doing atsome stage but it was extremely depressing to realiseit had to be done right there and then because that iswhat the crumbling was telling us.

Q104 Geraldine Smith: Also there are health andsafety issues if there are pieces of rock falling andpotentially hitting people.Sir Alan Reid: It is certainly a public liability issue.

Q105 Geraldine Smith: I think there has to be somebalance is well. It is good that you are opening up thegardens of Buckingham Palace; again I think therewill be a great deal of interest in that. I also think theRoyal Garden Parties give people a great deal ofpleasure. I know any constituents of mine who havemanaged to get a ticket have always talked about itfor years. I think the tax payer does benefit from allthese things not to mention all the receptions.Sir Alan Reid: The Garden Parties are an issue interms of opening Buckingham Palace becauseprobably we could get the most tourists possibly inin July but that is the peak season for the GardenParties. People who are invited to a Garden Party dovalue the invitation hugely. This is a decision we keepfacing: do we want to squeeze that in order to getmore paying public through or should we haveregard to the emotional and reward element thatpeople coming to the Garden Parties feel?Geraldine Smith: As you say, I think it is a questionof balance. You are in danger of almost devaluing itif you open it up too much and there is too muchaccess. Certainly I do not think we should be pettyabout the redecorating costs. I find it quite sad reallywhen some of the state rooms become a little bitfaded and the work cannot be done immediately.Certainly on this Committee I remember well oneoccasion when the Home OYce had spent £30million on an asylum centre that was never built; thegrass was not built on, nothing happened. To methat is a huge waste of money. When we visited thePalace we could see for ourselves the work on theroof that needed to be carried out just to make itsafer for people working up there if they have to beon that roof and also maintenance of the boilerroom; all that is very expensive. Do you sometimesget a bit annoyed when people seem to be pickingfault very much?




Chairman: I hope you are not referring to me.

Q106 Geraldine Smith: Obviously we do have a dutyto ensure that money is well spent.Sir Alan Reid: We understand that we have to beaccountable.Chairman: Very diplomatic, Sir Alan.

Q107 Geraldine Smith: Can I just ask a little bitabout the Royal Collection as well? What sort ofbenefits do tax payers get from that?Mr Stevens: One of the benefits for the tax payer isthat the admissions to all of the palaces comply withthe gift aid regime that was introduced foradmissions to museums, galleries, et cetera andvisitors are able to come back as many times as theylike throughout the year. Compared to the cost ofadmission to many other comparable attractionsmany of our visitors get very good value for money.The investment in The Queen’s Galleries both inLondon and in Edinburgh have greatly increased theamount of exhibition space that the RoyalCollection now has and has a much greaterprogramme of changing exhibitions which meansthat more of the Royal Collection can be seen. It canbe brought out of the palaces which, in the case ofBuckingham Palace, is only open for a couple ofmonths a year, and members of the public can seemore of the Royal Collection. There is enormousbenefit from that investment for the tax payer.Geraldine Smith: Your consultants’ fees are not thathigh. I guess they would look high to anyone outsidethis room but compared to figures I have seen I thinkthey are pretty modest and I hope you can keep themthat way.Chairman: Thank you Mrs Smith. Your lastquestioner is Nigel GriYths.

Q108 Nigel GriYths: The reasons you believe you donot have enough money to maintain the Estate to astandard you would like are two-fold. As figure oneshows there has been a flat lining of the grant andsecondly Sir Michael Peat’s anticipated increase intourist income has not come about since 2002.Sir Alan Reid: Yes.

Q109 Nigel GriYths: You told the Committeebasically that you are straining some of these tocapacity in getting people in at the moment, is thatright?Sir Alan Reid: It was capacity at Buckingham Palacethrough this summer; it has not necessarily beencapacity at Windsor.

Q110 Nigel GriYths: Is that where Sir Michael Peatthought in 2002 the anticipated income was going togo up?Sir Alan Reid: I think he was here in 2000 and thatis certainly one of the areas where he was expectingvisitors. The way the allocation is structuredeVectively the property grant-in-aid was the equityowner of the Windsor Castle receipt so any increasein tourism above a certain amount almost all went tothe grant-in-aid. So there has been one to one and

half million pounds a year less money than wasexpected and that accounted for something like £10million lost money.

Q111 Nigel GriYths: How many members of theteam have graduate qualifications in marketing?Sir Alan Reid: Can I ask you which team you mean?

Q112 Nigel GriYths: Anyone involved in makingsure that we maximise the revenues for visitornumbers.Sir Alan Reid: That would be the marketing side ofRoyal Collection.Mr Stevens: Can I just comment on that? We have ateam of about half a dozen people in the marketingdepartment responsible for the Royal Collection PRand marketing strategy. I think the key point is thatthe marketing team would never have anticipatedthe developments in the tourist sector that occurredfrom 2001 onwards.

Q113 Nigel GriYths: Like what?Mr Stevens: Like 9/11, foot and mouth.

Q114 Nigel GriYths: Hang on, in 2007 it was arecord year; volume was up to 32.8 million peoplefrom abroad visiting which was 8% up over twoyears. The increase in income was up to £16 billion,9%. So whatever happened in 2001 was certainlycancelled out and indeed allowed organisations likethe British Museum and the National Gallery tomassively boost their numbers. Why did the onesyou preside over fail to mirror those?Mr Stevens: Hopefully that is reasonably easy toexplain. One of the reasons why organisations likethe British Museum and the National Gallery wereable to boost their numbers was of course theintroduction of free admission to museums andgalleries. The second point is that if one looks at, say,the performance of the Royal Collection where wehave seen a reduction in visitor numbers—particularly at Windsor Castle which is really whatwe are referring to here—of around 300,000 perannum from 1.25 million in the 1990s to about950,000 on average post 2000, that is not sodissimilar to the performance we have seen at othervisitor attractions, for example Hampton Court andthe Tower of London, where they have seen areduction in their average visitor numbers of nearly20% over the same period. Our performance is very,very similar.

Q115 Nigel GriYths: You seem to be almostbenchmarking yourselves against the losers and notthe winners and I would like to know why.Mr Stevens: Benchmarking ourselves againstorganisations which are in the heritage sector we arevery, very similar in the oVer in our tourist market.There are areas where the Royal Collection has donewell during that period and noticeably atBuckingham Palace. One of the reasons for that isthat the Royal Collection has had to invest veryheavily in mounting special exhibitions each summerin order to compete with the many other visitorattractions that are on oVer these days.




Q116 Nigel GriYths: That is probably why, if you docompare like with like, we have seen a dramatic risein the number of visitors to the National Gallery, theBritish Museum and elsewhere. Have you consultedNeil MacGregor, Director of the British Museumabout how to boost numbers and maximise yourassets?Sir Alan Reid: The key feature there is that that isbenchmarking against places that have freeadmission.

Q117 Nigel GriYths: My question was, have youconsulted Neil MacGregor? I am just looking for ayes or a no.Mr Stevens: Our marketing department have notnecessarily consulted Neil MacGregor but theyconsult with their peers at other museums andgalleries and with VisitBritain and so we share theintelligence of what is working in particularorganisations.

Q118 Nigel GriYths: I am puzzled that somethinglike the Tate Modern which, after all, is just a pile ofbricks in an old power station, can break all recordsby getting 4.5 million visitors and yet you are gettingslumps in facilities that have been household namesfor centuries.Sir Alan Reid: Can we compare the revenue fromadmissions of both those organisations?

Q119 Nigel GriYths: You can do what you want.Sir Alan Reid: There is no charge.

Q120 Nigel GriYths: Yes, I am sure you are gettingmore. In terms of the White House which Mr Baconraised I certainly was not satisfied with the answer.The White House is open year round. The bookingprocedures have become slightly tighter and thesecurity has been put in, but the notion that ordinarymembers of the public in America would not haveaccess to the White House is anathema to theirdemocracy. We seem to take a slightly diVerentattitude to Buckingham Palace.Mr Stevens: I think the analogy of the White Houseis quite interesting because the visitor experience isvery, very diVerent. When you go to the White Housethe security means that all your bags are confiscated,you have to book a considerable time in advance. Itis not a case of just turning up for a visit and ofcourse it is free as well. It is diYcult to compare a feecharging attraction.

Q121 Nigel GriYths: I accept that and I am notgoing to press that point. The point I will press is thatyou are likely to be there at the same time as theMexican Prime Minister or President and the WhiteHouse does not have problems with that. I thinkthere are separate doors. You seem to know aboutthe White House; have you been over to the WhiteHouse to ask them to solve this problem? Have youconsulted anyone specifically to say, “How do wesolve the problem of Buckingham Palace?” (Thatsounds like a new TV quiz.)Mr Stevens: I do not think we have consulted anyonespecifically at the White House but we are aware of

the way that they operate. One of the key thingsabout any development of the opening ofBuckingham Palace is that we would have to consultvery closely with security and the Home OYcebecause they do have a considerable input into theopening of the Palace each summer and considerablecost as well.

Q122 Nigel GriYths: How do you get a private tourof Buckingham Palace?Mr Stevens: You can apply through the RoyalCollection website and you can call the ticket salesand information oYce at Buckingham Palace.

Q123 Nigel GriYths: It is as available as that, is it?Mr Stevens: Absolutely. We also have begun tomarket the private tours; they are private from thepoint of view that they are exclusive; you go roundwith a guide, that is the element of being private.

Q124 Nigel GriYths: How many of these roughly areavailable in the course of a season?Mr Stevens: As we have opened the Palace now inJanuary and April there are 50 for anything up togroups of 60 (they go round in two groups) and thenduring the summer when the Palace is open mostevenings there would be another 50 or 60 tours then,again they could be up to 60 people. Those tours aretaken round by a curator.

Q125 Nigel GriYths: The British Museum andothers have corporate sponsorship for those sorts ofevening events, have you considered that?Mr Stevens: The only sponsorship that the RoyalCollection has had in the past has been sponsorshipfor its publication programme. It has not really beendeemed appropriate to consider sponsorship forother activities.

Q126 Nigel GriYths: Do you not think that that ispossibly a massively lucrative area of income thatyou are missing out on?Mr Stevens: If you had asked me that question twoor three years ago I would have said that we may wellbe missing out. In the current economic environmentI think many sources of corporate sponsorship areprobably drying up. Again it is something to look atin the future.Chairman: There are a couple of supplementariesfrom Mr Touhig and Mr Bacon.

Q127 Mr Touhig: Mr Bacon and Mr GriYths havepressed you about the issue of the number of daysthe Palace is open to members of the public. Youhave explained that there are times when the Palaceis being used in terms of state visits et cetera. I fullyunderstand all that, but this place is flexible in thesense that we meet at diVerent times and on aWednesday and Thursday we meet in the morningsso it is not possible to go round the whole Palace.Surely that is not a problem; you could overcomethat. If you had a visit from the President of Mexicoon a Wednesday afternoon the Palace could be openin the morning. I would not want in any way to puta stop to the Royal Garden Parties because people




love to go, it is a great privilege to go, but in themornings it would be possible to have visits. Not allstate banquets et cetera are held at the Palace; othersare held at Windsor. How many days a year is theRoyal Family actually in the Palace?Sir Alan Reid: First of all, Windsor Castle is openpretty much every day of the year—about 360days—and needs to close occasionally for state visitsor whatever. Buckingham Palace is maybe a lotbusier with activities than people realise. Three orfour days a week The Queen may well be givingaudiences to a variety of people; there areinvestitures for 22 days as well as over a hundredreceptions going on.

Q128 Mr Touhig: Would it not be possible to openthe Palace and cut out certain areas that are beingused at that time?Sir Alan Reid: We have taken the view that if you arenot giving people a tour around the whole of whatthey can see in the summer you might well have tohave a reduced charge for other times. By the timeyou do have that the extra money you get from it,with extra security and protecting the Palace so thatthe maintenance bills do not go you end up with verylittle gain.

Q129 Mr Touhig: How many days a year is thePalace open to the public?Mr Stevens: Sixty-three days.

Q130 Mr Touhig: How many days is the RoyalFamily in occupation at the Palace in a year?Mr Stevens: It is 63 days and then the Palace is openfor private views during certain periods.

Q131 Mr Touhig: How many days is the RoyalFamily actually in residence?Sir Alan Reid: There could well be a member of theRoyal Family there for up to 300 days a year.

Q132 Mr Touhig: Yes but they are not.Sir Alan Reid: I meant that one or other member ofthe Royal Family may very well be there, adding upto 300 days a year.

Q133 Mr Touhig: So you do not have precise figuresto tell us how often the Royal Family is actually inresidence.Sir Alan Reid: We do not monitor when they comein and out I am afraid.

Q134 Mr Touhig: I do not mean that they arepopping down to Tesco to do a bit of shopping; Imean they are actually at Sandringham or they arein Balmoral or somewhere else.Sir Alan Reid: I know exactly when The Queen andthe Duke of Edinburgh are there because we cantrack that through diaries et cetera.

Q135 Mr Touhig: Could you perhaps give us thefigures of how often the principle members of theRoyal Family are in residence in a year?Sir Alan Reid: The Queen, Duke of Edinburgh,Duke of York? Yes.

Chairman: It may be one or other member of theRoyal Family is there for 300 days a year but youcannot close the entire Palace because the Duke ofYork is sitting in his flat upstairs. We just want areasonable answer.10 I think Mr Davidson has asupplementary.

Q136 Mr Davidson: Following on from Mrs Smith’spoint about moving in the right direction, I think wewould agree that you are moving in the rightdirection but the last time I heard that phrase used itwas describing a glacier and I think the speed ofmovement leaves a great deal to be desired. I wantedto ask about Kensington Palace and the occupationthereof. The last time we were there we were told thatthe whole question of the occupation of KensingtonPalace could not really be questioned in any waybecause Princess Alice was there. She was an elderlylady and it would be impossible to think aboutmoving her out, they would not want to do that andso on and so forth, the implication being that whenshe passed on that would all be re-examined. Wellshe did and it was not. I think we have the impressionthat you provide answers to us at a particularmeeting—like the question of the Royal Collectionand when it is being inventoried—then you go awayand do not really do a great deal about it and youonly move when pressure is applied. In relationparticularly to the question of reviewing the use ofKensington Palace, can you clarify what exactly hasbeen done to re-examine that? We were particularlyinterested in assessing whether or not much more ofthat could be used for other purposes.Sir Alan Reid: I have never heard of any implicationthat when Princess Alice died the whole thing wasopen to review.

Q137 Mr Davidson: I think we need to pursue that.I think we need to check with the National AuditOYce whether or not that was said at the time,whether or not we have records of that and, if wehave—I am pretty certain we have—why has thatnot been communicated to yourself? There is nopoint in us meeting you as an individual if there isnot an inherited memory of the organisation. I thinkthat is one of the worries that we have had aboutdealing with yourselves for a long period.Sir Alan Reid: It is such a significant point I amsurprised it has never been mentioned to me if it wasactually stated. Since you made that visit PrincessMargaret died and we handed that apartment and acouple of others over to the Historic Royal Palacesso we did not add to the Royal Occupancy at thatstage. The Duke and Duchess of Gloucester and theDuke and Duchess of Kent still live there; TheQueen has always intended that they should livethere as long as they are doing oYcial duties whichthey continue to do. I have never been aware of anyimplication that they would be leaving whenPrincess Alice died.

Q138 Mr Davidson: The discussion about wheresome of these royals should be was brought on the

10 Ev 25




basis that Princess Alice was there and therefore youwere going to have all the rest of those properties andyou had to fill them with somebody. That is why theywere there rather than anywhere else.Sir Alan Reid: What has been on my agenda hasbeen the situation of Prince Michael and PrincessMichael. I understand you expressed concern thatno rent was being paid when they were not doingoYcial duties and we dealt with that point. As far asI am concerned we have dealt, not at a glacier pace,with the points that I was aware of. There is nointention of the other members of the Royal Familyleaving Kensington.

Q139 Mr Bacon: Sir Alan, of the 25 vacantapartments within the secure perimeter that arereferred to in the Report that were vacant in 2008,how may are vacant now?Sir Alan Reid: I think we may have to send you anote on that.

Q140 Mr Bacon: You said they were rotating. Youmade it sound as if none of these were vacant forvery long.Sir Alan Reid: I think my answer covered rotationand also mothballing.

Q141 Mr Bacon: In our note perhaps you couldexplain how many of those that are mentioned in theNational Audit OYce Report as being vacant in July2008 are still vacant or have been occupied recently.Mr Sharpe: There are 27 currently vacant but theyare diVerent.11

Mr Bacon: Are they all diVerent? Perhaps you couldexplain it in a note that would be very helpful.12

Finally, Mr Stephens, the Victoria and AlbertMausoleum is a national treasure that is at riskaccording to English Heritage. Your Department isresponsible ultimately for the nation’s heritage,when is it going to be fixed? It has been waiting for14 years, when are you going to make sure it getsfixed or are you just going to let it fall into disrepair?

Q142 Chairman: We are going to see it in the nextmonth; will you fix it before then?Mr Stephens: I fear not. It is of course one of anumber of buildings on the at risk register. I thinkEnglish Heritage estimate that it would take some£400 million to put right all the things on the at riskregister. It is not, of course, in the highest categoryof risk; the category of risk it is in is slowdeterioration with no agreed solution. As a result ofthat the Household is now monitoring the conditionwith a view to assessing what scope there may be formeasures to arrest any decline. I think it is fair to saythat this is outside the normal operating costs of theRoyal Household. It is not an operational part of thePalace; it is not one to which staV or members of thepublic have routine access.

11 Note by witness: There were in fact 32 properties vacant asat that date.

12 Ev 25

Q143 Mr Bacon: But it is historically enormouslyimportant. You are basically making arguments asto why it should be funded especially by theDepartment.Mr Stephens: In the context of other buildings on theat risk register for which there are funds more widelyavailable but quite limited funds

Q144 Mr Bacon: So what is the answer to myquestion?Mr Stephens: The answer is that we are currentlyassessing the condition; the Household is currentlyassessing the condition.

Q145 Mr Bacon: The assessing has been going onnow for 14 years; how much more assessing isneeded?Mr Stephens: It has to be considered in the light ofother priorities, including other at risk buildings.Those who know the Mausoleum—I have not yethad the opportunity to visit—tell me that there havebeen problems with the building for a hundred yearsor more that are inherent to the design of thebuilding, so putting it right is not an easy matter.

Q146 Chairman: Gentlemen, thank you; thatconcludes our hearing and we will obviously nowhave to reflect on our report. My own personal viewis that clearly the front line staV do a dedicated joband I am lost in admiration for the work of TheQueen, but I am not really lost in admiration for theprofessional management of these priceless nationalassets, I have to say, Mr Jonathan Stephens. I am notsure that there is a strategy for the Estate; I am notsure there is certainty about the size of themaintenance backlog or the priorities for dealingwith it. I am not certain about the performanceindicators relating to the objectives. I am not certainabout the inspection arrangements being guided byclear criteria for the condition of these assets and Iam not certain that we have best of class Estatemanagement arrangements for what are, by anyaccount, priceless national assets. I have made mypoint, Mr Stephens, so I think it is only fair that Igive you the final say to comment.Mr Stephens: I would repeat simply that overall theRoyal Palaces are in good condition. I think theRoyal Household is delivering very good value formoney against a declining grant and decliningincome from other situations. The National AuditOYce in their Report says that they have the keyelements of a sound maintenance strategy in place.We strongly support their eVorts to seek to increaseincome from other sources and of course we attachenormous importance to the maintenance andoperation of the Palaces in their key role providingan appropriate and dignified setting for the Head ofState. I think I should just finally add, Chairman,that you failed to repeat what I will certainly put onmy CV for applications for future accountingoYcers, namely the description of me as stingywhich is one which a number of my colleagues willdoubtless think is one that should be a qualificationfor an accounting oYcer.Chairman: Thank you very much, Mr Stephens;thank you gentlemen.



Memorandum from The Royal Household

Questions 57–58 (Mr Davidson): Business case for increased access to Buckingham Palace.

PROPOSAL TO OPEN THE STATE ROOMS AT BUCKINGHAM PALACE DURINGSANDRINGHAM AND EASTER COURT (updated December 2008)

Objective

To increase public access to Buckingham Palace and the works of art in the Royal collection by openingthe Palace during The Queen’s absence in Sandringham and Windsor at Christmas and/or Easter, therebygenerating additional income from visitor admissions.

Factors to Consider

In determining the feasibility and profitability of opening the State Rooms at Buckingham Palace at atime outside the existing summer opening period a number of factors need to be considered. These includethe uninterrupted period of time available and costs involved in providing the required infrastructure, therecruitment and training of staV and the Property Section’s maintenance programme at the Palace duringThe Queen’s absence.

The proposal outlined below is based on known costs from the existing summer opening but on a reduceddaily staYng requirement, on the assumption that visitor numbers will be fewer outside the peak season (seevisitor number assumptions under Financial Summary).

Where possible the infrastructure has been reduced, eg a smaller waiting area at the Visitor Entrance, noshop (visitors will be directed to the Royal Collection shops on Buckingham Palace Road) and no specialexhibition. This slightly reduces the set up time and costs.

In certain areas, such as uniform purchase, maintenance and ticketing hardware, costs have been reducedon the basis that these would be incurred annually for the Summer Opening. However, it should be notedthat the majority of the costs involved in setting up and staYng the opening of the Palace for large numbersof visitors are fixed.

This proposal excludes existing guided private tours that are currently carried out in the evenings duringthis period.

Set-up Timetable

Temporary buildings:

The temporary structures needed to provide the required facilities for large numbers of visitors to thePalace are as follows:

— Ticket oYce.

— Covered queuing and waiting area.

— Security search area for airport style security.

— Baggage check-in.

— Audio guide distribution area (audio guides are included in the cost of admission so are given toeach visitor).

The period required for building and fitting out these structures is 17 days from starting on site tocompletion. This is three days less than the Summer Opening set-up timetable which requires additional timefor changing the buildings over from their garden party usage and the construction of a larger visitorwaiting area.

All other buildings and walkways can be built and fitted out within this time frame as follows:— Lavatories 7 days— West canopy (for audio guide returns and baggage collection) 3 days— Quadrangle walkway and viewing platform 3 days

State Rooms, Operations oYce and staV changing and locker rooms

In addition to temporary structures, certain measures are taken to make the State Rooms ready for largenumbers of visitors. These activities require ten days to carry out and include:

— installing discrete Perspex coverings on doors and staircases to protect the gilt decoration;

— installing temporary handrails to the staircases inside and on the West Terrace for health and safetyrequirements;

— the provision of a temporary platform lift to provide access for a large number of wheelchair users(the existing stair-lift is not suYcient for the number of projected visitors even on reduced dailyvisitor numbers);



— the provision of a temporary hoist to enable visitors luggage and pushchairs to be taken to the exitfor them to collect as they depart. (Visitors are not permitted to carry large bags through the StateRooms for security and safety reasons);

— laying protective runner carpets in some areas either to protect floors or to even out the flooringto prevent slips and trips;

— lifting and storing antique carpets and replacing with modern equivalents;

— the re-positioning of large pieces of antique furniture to ensure visitor flow through the rooms isnot disrupted, putting out ropes and stanchions to protect the artwork (many paintings areunglazed and the porcelain is fragile);

— putting out plants and flower arrangements to enhance the presentation of the rooms; and

— the set up of a temporary staV changing and locker room for over 100 staV, an operations controloYce and first aid facilities in areas that are normally in use by the Royal Household.

Further to the installation of the infrastructure, one day is required for the installation of IT, securityequipment etc and, at the very least, a further day’s on-site training for staV.

Number of Days Available to Open in 2008–09

January opening (Sandringham Period)—4 to 31 January

This proposal is based on The Queen’s diary and events taking place in the State Rooms for 2008–09.

The last events in the State Rooms prior to The Queen’s departure to Sandringham are as follows.17 December Chapel Royal Carol Concert in the Ballroom18 December Investiture

Work on setting out the interior of the Palace for public opening could commence from Friday19 December for a period of 10 days and complete on 30 December. This assumes that no work would takeplace on Christmas Day and Boxing Day when the entire Palace is closed.

Construction of the temporary buildings for the summer opening takes place prior to The Queen’sdeparture as it does not generally conflict with the work of the Household inside the Palace. This proposalis based on the assumption that the same approach could be adopted for a January opening. Therefore, workon the temporary buildings would commence 17 days earlier on Friday 12 December (again, excludingworking on Christmas Day and Boxing Day).

Installation of equipment would take place on 31 December and snagging would take place on 1 January.(NB No specific allowance has been made for any additional bank holiday working costs in the outlinebudget).

On-site training for staV in the temporary buildings would take place on 2 and 3 January. This proposalassumes the availability of St James’s Palace for two days in the last week of December for classroomtraining for 120 people (or a similar sized and priced venue).

On the basis of the above set up timetable, the Palace would be ready to open to the public on 4 January.

Exhibition

A key element of the Summer Opening each year is the special exhibition in the Ball Supper Room or theBall Room. This is a central feature of the marketing strategy to encourage repeat visitors, and provides PRand media opportunities to remind people that the Palace is open.

Work on setting up the special exhibition normally commences at least 3 weeks before opening and accessto the Ball Room would not be possible until 19 December and to the Ball Supper Room until 18 December.The earliest date of opening if an exhibition were to be mounted would therefore be 7 January, ie 4 fewerdays open to the public.

The cost of mounting the display is in the region of £150–200,000 depending upon the subject matter.

In view of the likely constraints over the amount of set up time available and the reduction in the numberof days available, the cost of mounting the display and the need for additional resources within the exhibitionteam, it is unlikely that the January opening would be able to mount a special display. This will have aconsequential impact on the PR and marketing strategy and as a result, visitor numbers (see FinancialSummary).

Decant timetable

In 2009 The Queen returns to Buckingham Palace on 6 February.

Using that template, the Palace could be re-instated as follows:

1 February—Equipment removed.

1–6 February: rooms re-instated for The Queen’s return.

2–11 February: temporary buildings removed.



Days Open

On the basis of the set up and decant timetable the Palace would be open for 28 days (compared with63 days in the summer).

Easter Opening

Easter has been discounted as a potential opening period based on The Queen’s current usage ofBuckingham Palace. In 2009 the last event to be held in the State Rooms is a charity dinner on 26 March.The Queen goes to Windsor on 27 March but returns for the G20 summit and the State visit of the Presidentof Mexico from 1 to 3 April. The Queen returns to Buckingham Palace on 27 April. Even without thecomplication of the G20 Summit and State Visit this year the potential time for opening would be only14 days and therefore not commercially viable.

Daily Staffing

The projected minimum daily staYng level of 87 is 19 fewer people per day than during the summer. Thisis based on the following assumptions

— there will be fewer visitors so fewer security channels will be required;

— there will be no special exhibition;

— less of the garden will be open; and

— there will be no family activity room (as in September).

This staYng level would need to increase by seven at weekends to allow for a second security arch andadditional admissions staV on the assumption that visitor numbers would be higher at weekends.

In addition there would be a requirement for 37 Ticket Sales and Information OYce (TSIO) staV to dealwith telephone, internet and on the day ticket sales

Recruitment

Based on our experience of recruiting staV for a 10-12 week contract over the past 14 years recruiting therequired number of staV for a one month fixed-term contract, outside of university holidays, would beextremely challenging. Despite a number of initiatives to recruit more non-students during the summerperiod through targeted advertising, the majority of our staV are students or recent graduates.

The proposed period of opening would cover about one to two weeks of the university holiday butthereafter students would return to university (in many cases, to mid year exams).

We would therefore need to recruit students from London Universities and Colleges who could trainduring the Christmas holidays and thereafter work part-time for the rest of January whilst they continue tostudy. It is likely, therefore, that we would need to increase the proportion of staV on part-time contracts.

To ensure the required security and pre-employment checks can be carried out in time advertising,shortlisting and interviews would have to be carried out during August and September. Additional resourceswould therefore be required as the Visitor Services and TSIO teams are fully stretched during this periodwith running the Summer Opening.

For the Summer Opening recruitment 15 half days are set aside for the recruitment of Warden staV (twosessions per half day ie 30 group interviews per year) and nine half days (18 sessions) are set aside for TSIOinterviews.

As fewer staV are required and it would be hoped that some summer staV would also work in January wewould require at least ten half days (20 sessions) in September.

In addition a further two full days would be required for interviews to recruit the 12 supervisor positions.

Training

A minimum of four days training per person would be required (on the assumption that 30% of staV arereturners with experience of the Summer Opening).

Opening Times

The Palace would open to visitors at 9:45am as in the summer.

Visitors would need to exit the State Rooms from the West Terrace via the garden. The Quadrangle is notconsidered acceptable from a security point of view. It would not be safe or secure for visitors to leavethrough the garden after dark so the last admission time would need to be 2.30pm to ensure that the majorityof visitors leave the garden prior to 4pm when it will be dark.



Ancillary Costs

Additional resources would be required in the Personnel and Security Liaison departments to deal withthe increased volume of security clearance, pre-employment checks, reference checking or bridgingreferences for returning staV

Additional resources would be required in the Visitor Services team to cover the recruitment, training,admin and set up period together with management of the opening for the month of January. As this teamare not permitted to take holiday during July, August or September holiday needs to be taken and coveredoutside this period. This period is also the time spent on planning and budgeting for the coming year andcarrying out staV performance and development reviews. These activities could not be carried out togetherwith the additional opening without increased headcount.

In addition there would be the need for an additional Duty Manager and Operations Supervisor duringJanuary to provide the required management cover.

Property Section Works Programme

Since the opening of Buckingham Palace to the public in 1993, the Property Section have had toprogramme most of the maintenance in the State Rooms into the Sandringham and Easter Court periods.The introduction of Private Evening Tours of the State Rooms and Garden Tours during the day has placedfurther constraints on the programme. This proposal may not therefore fully consider the impact on theProperty Section’s ability to achieve its objectives.

Financial Summary

VISITOR NUMBERS

January 2009 September 2008

Daily average Weekday 3,000 4,600Weekend 4,000 7,300

Total Month 93,000 150,000

By comparison the Tower of London has receives 90,000 visitors in January (average of last two years).

Pricing

Admission prices could not realistically be maintained at the summer level due to the following:

— there would be no special display;

— there would be limited access to the Garden;

— there would be no catering provision;

— the retail oVer would be from The Queen’s Gallery, the Royal Mews and Buckingham PalaceRoad shops.

It is anticipated therefore that admission prices would be discounted as follows:

January Opening Summer Opening

Adult £11.50 £15.50Senior/Student £10.50 £14.00Child £6.50 £8.75Family £30.50 £39.75

The lower pricing may have an impact on overall visitor numbers as some domestic visitors may take theopportunity to visit in January at a lower price. Furthermore, in view of the Royal Collection’s oVer ofunlimited admission, some visitors may also visit the Palace in the Summer to see the special exhibition forfree. The income projections do not include any allowance for loss of income.

Private Evening Tours could be oVered each day ie an additional three or four days per week to thoseoVered currently in January. (this has not been factored into the income projections).



Operating Surplus/(Deficit)

The detailed financial budget has been prepared on the basis of the assumptions outlined above, and isset out below.

The expected outcome of a Winter Opening of Buckingham Palace is a deficit of £154,000.

Summary

Although opening Buckingham Palace in January, on a scale similar to that in the summer, would meetthe Royal Collection Trust’s objectives of increasing access to the Royal Collection, the additional demandson staV and the financial outturn, do not justify a Winter Opening.

Recommendation

Consideration should be given to:

(a) extending the Buckingham Palace Summer Opening by opening earlier in July or opening later intoOctober (both subject to The Queen’s diary), thereby making use of the infrastructure for a longerperiod; or

(b) extending the number of Private Tours throughout the year that do not require an infrastructureon the scale of the BPSO, when The Queen is away and other members of the Royal Family arenot using the State Rooms.

WINTER OPENING OF BUCKINGHAM PALACE STATE APARTMENTS

Profit and Loss Review

2008 Summer 2009 Winter

Non Financial InformationDays Open 63 28Individual Visits 287,696 65,013Cash Groups 25,299 6,543Credit Groups 78,946 21,444Number of Visitors 391,941 93,000

2008 Summer 2009 Winter£ £

IncomeAdmissions 5,628,372 935,067Cost of Sales 336,152 68,612Gross Profit 5,252,796 866,455

StaV CostsAdmissions staV Salaries and Wages 538,633 195,548TSIO staV costs 173,197 118,132Other StaV Costs 130,459 58,985

842,289 372,665

Operating CostsContracted services—Cleaning and Security etc) 161,572 70,600Marketing costs 190,061 117,000Temporary building costs 234,949 231,134Other operating costs 532,416 135,854Insurance and other finance charges 50,918 12,458Irrecoverable VAT 135,638 80,718

1,305,554 647,764

Net surplus/(deficit) 3,104,953 (153,974)

Income per visitor £14.36 £10.05

Costs per visitor £6.34 £11.71

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PROPERTIES OUTSIDE THE SECURE CORDON NOT RENTED AT A COMMERCIAL RATE

Area % Gross internal areas (GIA) were provided. Please note for oYce purposes the area has been estimated for net internal area (NIA)Property

Est/rent per Est. Average EstAnnual Curr. AnnualCommercial Property Notes Approx sq ft mthly rent rent Rent Rec’d Variance

Location Area-sq ft £ £ £ £ £

Horse Rangers Association Possible refurbishment as oYces,(Charity) subject to planning (change of

use) and listed building consent Hampton Court Mews 4,000 15–20 18 72,000 0 72,00072,000 0 72,000

Est Weekly Est Monthly Est. Average EstAnnual Curr. AnnualResidential Property Notes Rent Rent mthly rent rent Rent Rec’d Variance

Location Area-sq ft £ £ £ £ £ £

1 Marlborough Road St James’s Palace 640 500–600 2,383 28,596 6,537 22,059

2 Marlborough Road St James’s Palace 560 500–600 2,383 28,596 7,021 21,575

9 St. Mark’s Place DCMS property—wouldnormally be sold when vacated,with income arising reverting tothe DCMS Windsor not known 1,100–1,200 1,150 13,800 3,522 10,278

1 Cumberland Lodge Mews Windsor Great Park 1,400 950–1,100 1,000 12,000 0 12,000

3 Cumberland Lodge Mews Windsor Great Park 1,650 1050–1250 1,100 13,200 1,671 11,529

4 & 5 Cumberland Lodge Mews All properties at CumberlandLodge Mews should be returnedto the Crown Estate whenvacated Windsor Great Park 2,525 1,100–1,300 1,200 14,400 0 14,400

6 Cumberland Lodge Mews Windsor Great Park 2,225 1,100–1,300 1,200 14,400 2,367 12,033

7 Cumberland Lodge Mews Windsor Great Park 1,600 950–1,100 1,000 12,000 0 12,000

8 Cumberland Lodge Mews Windsor Great Park 1,600 950–1100 1,000 12,000 0 12,000

10 Cumberland Lodge Mews Windsor Great Park 2,100 1,100–1,300 1,200 14,400 3,405 10,995

163,392 24,523 138,869

Grand total 235,392 24,523 210,869

In addition, there are two residential properties occupied by staV at Hampton Court in poor condition that could be refurbished for commercial letting, with an estimated combined annual rental of £60,000.The costs of refurbishment are likely to be £200K and £300K (excluding relocation costs), giving payback of over 10 years.



Questions 74–80 (Mr Davidson): Royal Collection Inventory.

The Royal Collection Inventory

The Royal Collection Trust and the National Trust have been working together since November 1997 onthe development of a Collections Management System which will replace the Royal Collection InventorySystem originally implemented in June 1991. The introduction of the new system has taken longer thanoriginally anticipated, but Acceptance Testing is currently in progress and is expected to be complete by theend of April 2009.

In preparation for transfer of information to the new system in early March 2009, the existing RoyalCollection Inventory System has been frozen and is now only available for searching.

The present custodial inventory is structured principally for on-screen use by trained inventory staV todocument and manage the Collection (for example, for the administration of loans made by The Queen tomuseums and galleries in the UK and around the world), to answer public enquiries and assist externalresearchers. Partial printouts are only ever produced for cyclical inventory checks. In view of the age andfragility of the hardware supporting the existing inventory system and the imminent transfer of informationto the new system, Royal Collection management consider it inadvisable to attempt to produce a fullinventory listing from the existing system as this may compromise the data transfer and jeopardise thesuccessful implementation of the new Collections Management System. It should also be noted that even ifa full listing could be produced from the existing system it would probably be of limited value to anyoneother than a trained member of the inventory team as the information that the present system contains iswithout images, limited in content and designed principally for inventory checking.

Once the new Collections Management System is in place and fully operational, Royal Collectionmanagement will continue to investigate options for providing appropriate and helpful external access tothe full Collection. In the meantime the Royal Collection will continue with its project to publish the mostsignificant works in the Collection with full descriptive information and images through the on-line gallery.

It is anticipated that the new system will have been successfully implemented and all outstanding softwaredevelopment will have been completed to the satisfaction of the National Trust and the Royal Collectionwithin 12 months of implementation. It is proposed therefore that we discuss with the NAO whatinformation they would wish to see from the new Collections Management System at that time.

Questions 93–102 (Mr Bacon): Revenue surplus paid over by the Crown Estate to the Treasury for last10 years.

Background to Civil List and Hereditary Revenues

Since the accession of George III in 1760 it has been customary for each succeeding Sovereign to surrenderhereditary revenues to the nation for the term of his or her life, in return for an annual income known as theCivil List and other financial support.

Under the terms of the Civil List Act 1952 and subsequent Civil List Acts, The Queen surrenders theincome from The Crown Estate and other hereditary revenues, in return for (a) the provision of an annualCivil List to meet her most immediate oYcial expenses, (b) the provision of Annuities for other Membersof the Royal Family and (c) Government Departments, by convention, meeting other expenditure incurredin support of the Monarchy directly from their annual voted supply.

The statutory authorities that govern the Civil List are the Civil List Acts of 1952, 1972, 1975 and the CivilList Audit Act 1816.

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CROWN ESTATE SURPLUSES AND HEAD OF STATE EXPENDITURE 1998–2008

2007–08 2006–07 2005–06 2004–05 2003–04 2002–03 2001–02 2000–01 1999–2000 1998–99 Total£m £m £m £m £m £m £m £m £m £m £m

Head of State Expenditure 40.0 38.0 37.4 36.7 36.8 36.2 35.3 34.9 37.8 42.4 375.5The Crown Estate Surplus Revenue 211.0 200.0 188.0 185.7 173.0 171.0 164.0 148.0 133.0 126.0 1,699.7

Net Surplus to HM Treasury 171.0 162.0 150.6 149.0 136.2 134.8 128.7 113.1 95.2 83.6 1,324.20

Head of State Expenditure as % of Crown Estate surplus 19.0% 19.0% 19.9% 19.8% 21.3% 21.2% 21.5% 23.6% 28.4% 33.7% 22.1%



Questions 130–135 (Mr Touhig): How many days is the Royal Family in occupation in a year?

NUMBER OF DAYS THE QUEEN IS IN RESIDENCE AT BUCKINGHAM PALACE—2008

February 13March 11April 2May 13June 16July 12October 14November 19December 11

Total 111

Questions 139–141 (Mr Bacon): Vacant apartments within the secure perimeter.

Vacant Self Contained Residential Properties

At the time of the PAC Hearing, there were 32 vacant self-contained residential properties, compared with27 at the time of the NAO Audit at the end of July 2008. Of these 32 properties, 28 are within the securecordon (25 at the end of July 2008).

Three of the properties outside the secure cordon are being refurbished for commercial letting while theother is being returned to the Crown Estate.

Four of these properties have been mothballed because the costs of refurbishment are too high.

17 of the 28 vacant properties within the secure cordon were yet to be allocated at the time of the hearing.10 of these were also unallocated at the end of July 2008, but three of these have now been allocated to staV.

Six properties (three inside, three outside the secure cordon) have been vacated by pensioners since theend of July 2008, all of which were previously occupied rent-free.

18 February 2009

Memorandum from the National Audit OYce

Mr Davidson asked about the role of the Military Knights and the former occupations of pensionersprovided with accommodation on the Royal Estate.

Military Knights

Background

The Military Knights of Windsor were formed by King Edward III. Known as the Alms Knights, theyformed part of the College of St George which was created to support the establishment of the MostHonourable and Noble Order of the Garter. 26 “Poor Knights”, mirroring the 26 Garter Knights, were givenaccommodation in the Lower Ward of Windsor Castle in exchange for daily prayer in St George’s Chapelon behalf of the Sovereign and the Garter Knights. King Henry VIII reduced the number of Knights to 13,and in accordance with his will, Queen Elizabeth I improved the accommodation of the Knights so that theywere housed individually in the Lower Ward, with one of their number appointed as Governor.

The Knights are all retired Army OYcers and preference is given to applicants who are in needycircumstances and are married. Military Knights must be appointed before the age of 65. Apart from a smallstipend, Military Knights are not paid for their duties. Military Knights are accommodated free of chargein the Lower Ward of Windsor Castle in exchange for duties carried out.

Role

The duties of the 13 Military Knights include being on parade nearly every Sunday and during state visitsat Windsor Castle. The main event in the calendar is the Garter Ceremony when the Military Knights headthe procession through the Castle precincts and into St George’s Chapel, the spiritual home of the Order ofthe Garter. Additionally, there are four “obits” (Remembrances of College Benefactors) in the year, plus theoccasional military funeral and the laying up of a deceased Garter Knight’s Banner. Most of these dutiesare linked to St George’s Chapel and only very occasionally are the Knights on parade away from Windsor.



Positions Formerly Held by Pensioners Accommodated on the Estate, Details of Accommodationand Whether or Not Rent is Paid as at July 2008

July 2008Reception Rent Paid

Position when employed Rooms Bedrooms Y/N

Photocopy Operator (was Deputy ChauVeur)* 2 3 YLiveried Porter 1 2 YInformation OYcer (was Head Warden)* 1 2 YTravelling Yeoman (was Senior Footman)* 1 2 YChief Upholsterer 1 2 YQueen’s Page 1 3 NWidow of Carriage Cleaner 1 2 YCourier 1 2 YWidow of Royal Mews Groom 1 2 NRoyal Mews Groom 1 2 NSecurity OYcer, Royal Mews 2 1 YGirl Groom 1 2 NHorse Box Driver 1 2 YNannyL 1 2 NGardener 1 1 YPolisher/Gilder 2 3 YGamekeeper 2 3 NWidow of Gatekeeper 2 2 NStud Groom 2 2 NPrincipal, Foundation of St CatherineL 2 3 NSecretary to the Private Secretary 1 3 YCousin of The QueenL 3 3 NAdministrative OYcer 1 3 YPersonnel OYcer 1 3 YPalace Attendant 1 1 YHead Coachman 1 2 NWidow of Stud Groom 1 2 NWidow of Caretaker 1 2 NAccountant, Privy Purse 1 2 NComptroller of Stores 3 4 YPress Secretary to Queen Elizabeth The Queen Mother 3 5 NAssistant to the Master of the Household Branch 2 3 YL Not previously an oYcial employee (ie provided with grace and favour accommodation)* Text in brackets indicates other positions held during the course of employmentTotal paying rent 17Total rent free 15Total pensioners in accommodation 32

23 January 2009

Supplementary memorandum from National Audit OYce

Questions 57–58 (Mr Davidson): Analysis of the business case for opening Buckingham Palace at other timesof the year

Mr Davidson asked us to examine the business case which informed the decision not to extend the timesBuckingham Palace is open to the public and see whether or not we agree with the Keeper of the Privy Pursethat “the business case does not stack up”.

The updated business case provided by the Keeper of the Privy Purse in February 2009 evaluatesproposals to open Buckingham Palace at other times during the year when The Queen is away atSandringham and Windsor.

The business case does not, however, assess the costs and benefits of opening the Palace earlier in July orextending the summer opening into October. The business case discounts the possibility of opening thePalace when The Queen goes to Windsor at Easter because the Palace could only open for a maximum of14 days. The business case concludes it would not be commercially viable to open during Easter, althoughit does not include any detailed analysis to support this assertion.



The evaluation focuses on the costs and benefits of opening the Palace for 28 days in January 2009 andincludes a description of the factors considered and a high level analysis of potential income andexpenditure. The business case concludes that additional demands on staV and the expected financial deficitof £154,000 do not justify opening the Palace in January. Without the detail underlying the analysis of costsand income it is hard to come to a conclusion on whether the business case is robust. The key assumptionsin the business case are listed below:

Days open

— The Palace would open for 28 days (4–31 January) when The Queen is at Sandringham, allowingtime to set up and take down temporary buildings such as ticket oYces as well as make StateRooms ready for visitors.

Income

— Visitor numbers would be similar to those visiting the Tower of London in January at 93,000people compared to 150,000 in September during summer opening. Visitor numbers would belower because the January opening would not include special exhibitions.

— Admission prices would be around 25% lower than during summer opening as there would be nospecial exhibition, catering or retail oVer in the Palace and access to the garden would be limited.

Costs

— The majority of costs for setting up temporary buildings and staV are fixed.

— Between 12 and 19 fewer staV would be required per day compared to the summer opening.

— Although 30% of staV should have experience of summer opening, staV would need a minimumof 4 days training.

— Additional resources would be needed in August and September to deal with the securityclearance, employment checks and to cover recruitment of staV in preparation for the Januaryopening.

Questions 80–83 (Mr Davidson): Proposal to share receipts from visitor admission to Buckingham Palace withthe Royal Household’s Property Section

Mr Davidson asked us to look at information relating to the process of discussion and negotiation aroundsharing income from visitors to Buckingham Palace with the Royal Household and say whether thearrangement was being “pursued as assiduously as possible”. The correspondence we have reviewedindicates there was an 18 month delay between the Keeper of the Privy Purse writing to the Department onthis subject and the Department’s response.

In February 2004, the Keeper of the Privy Purse wrote to the Permanent Secretary for the Departmentsetting out in detail his understanding of the agreement reached with the Department over how any netsurplus from admissions income from the Buckingham Palace summer opening would be shared betweenthe Royal Household and the Royal Collection Trust.

The letter set out that 20% of the annual net surplus would be transferred directly to the RoyalHousehold’s Property Section. The letter, however, also referred to concerns raised by the Trustees of theRoyal Collection Trust about the timing of the arrangement and therefore asked the Department if it wouldbe prepared to delay the start of the arrangement until the Trust’s overdraft and loan obligation fell to£10 million.

The Department responded around 18 months later in July 2005 to ask if there was anything the Keeperof the Privy Purse wanted to change or update from his earlier letter. The Department’s letter refers todiscussions held with the Keeper of the Privy Purse but stops short of agreeing to the proposals set out in theFebruary 2004 letter. We have requested all correspondence and are not aware of any further communicationbetween the Department and the Keeper of the Privy Purse on this subject.

According to the Royal Collection Trust’s published accounts the Trust’s borrowing had fallen below £10million by March 2007. The Keeper of the Privy Purse confirmed to the Committee that the arrangementto share receipts from visitors to Buckingham Palace will begin in April 2009.

11 March 2009

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