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| INTRODUCTION AND SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
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C&AG's Memorandum Evidence, pp. 1-8, para 5
Evidence, p. 2, para 6
| 1. Since 1831, in consideration of a reduction in the Civil List, responsibility for repairs and maintenance of the Royal Palaces and Gardens, including the salaries and wages of staff employed thereon, has passed to successive government departments, including from April 1992 the Department of National Heritage (the Department). From 1 April 1991, day to day responsibility for the upkeep of, and some other services in, the English Occupied Royal Palaces has been delegated to the Royal Household and funded by a grant-in-aid. This was set at £20.6 million for 1994-95, including £2.2 million towards the restoration of Windsor Castle, following the fire in November 1992.
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| C&AG's Report, (HC 132, Session 1993-94), para 5 PAC 40th Report, Session 1993-94 (HC 316), para 2
| 2. On 23 March 1994, our predecessors took evidence on a report from the Comptroller and Auditor General which examined the Department's arrangements for funding property services in the English Occupied Royal Palaces and securing propriety and value for money. In their subsequent report on this subject, our predecessors stated that the evidence taken at their hearing and given to them in subsequent notes raised issues beyond property services and that they intended to return to these matters subsequently.
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| Treasury Minute dated 24.11.94 (Cm 2732), Evidence, pp. 1-8
| 3. Our predecessors further examined the Department on matters arising from the Treasury Minute on their report. On the basis of a Memorandum from the Comptroller and Auditor General, they have also examined the Department on the size and salaries of the Royal Household, the allocation of, and charges for, accommodation, and the costs of maintaining accommodation.
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| 4. Our main conclusions and recommendations are as follows:
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| On matters arising from the Treasury Minute
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| (i) We note that the Royal Household willingly entered into a Memorandum of Understanding and Financial Memorandum which provide for very close Departmental monitoring of the grant-in-aid. We note that a revised Financial Memorandum has been prepared, which gives the Department full access to the Royal Household's accounts and records, and that the arrangements in the revised Memorandum are already in place. We welcome this development and the recognition that the National Audit Office have an automatic right to see all documents that the Department see (paragraph 22).
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| (ii) We note the Department's view that the arrangements for access must fall within the confines of Government policy on what is the constitutional relationship between the National Audit Office, the Department and the Royal Household. We recognise that, with the exception of some information requested on behalf of a Member of the Committee, information requested by the Comptroller and Auditor General has been readily supplied by the Department and Royal Household (paragraph 23).
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| (iii) We consider that it is always preferable for auditors to have direct access to the source of information to ensure that matters of importance have not been overlooked and so that they can test how systems of control operate on the ground and see the context in which they operate. We are disappointed to note that the Government have decided not to grant such access to the Comptroller and Auditor General in this case, since they consider that such access would be incompatible with the Royal Household's unique constitutional position. We do not agree with this view since we believe that it would be in the interests of Her Majesty the Queen, as well as Parliament, that the usual principles of direct access by the Comptroller and Auditor General to papers relating to the expenditure of money voted by Parliament should apply. We propose to return to this issue in the future (paragraph 24).
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| (iv) We note that the Government propose to invite Parliament to approve a single grant-in-aid from the Department of Transport to the Royal Household for Royal Travel, using the grant-in-aid for property services as a model. We recommend that the Comptroller and Auditor General should be given access to the papers relating to the new grant-in-aid which is at least as extensive as that which he has to the grant-in-aid for property services (paragraph 25).
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| (v) We note that, of the 17 recommendations in the Bailey Report on `Fire Protection Measures for the Royal Palaces', 15 had been implemented, and that automatic fire detection would be completed in 1996 (paragraph 26).
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| (vi) We recognise that it may be more cost-effective to delay some work on fire compartmentation to combine it with other projects and that decisions of this nature are based on risk assessment. We urge the Royal Household not to delay compartmentation work where there is a material risk (paragraph 26).
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| (vii) We note the Department's assurance that the Royal Household are fully aware of how to manage risk in historic buildings, that current arrangements in their view provide adequate substitutes for commercial insurance disciplines, and that insurance companies have commented favourably on fire protection arrangements. We stress again the importance of such matters in protecting valuable national assets (paragraph 27).
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| On the size and salaries of the Royal Household
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| (viii) We note that the Royal Household in 1991 assumed delegated responsibility for remuneration for publicly funded employees in the Royal Household. We recognise that, in introducing a new system for the remuneration and grading of their staff below Civil Service Grade 5, the Royal Household have sought to streamline their arrangements and make them consistent. We note that the Royal Household have taken care in establishing a performance-related pay scheme and that the additional costs arising from this have been met by savings elsewhere in running costs (paragraph 36).
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| (xi) We note that the Department receive details of employees' salary levels and we recommend that the Department should monitor the Royal Household's progress in applying the new contracts to all staff (paragraph 37).
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| On the allocation of, and charges for, accommodation
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| (x) We note that the Royal Household have recently completed a review of accommodation and have told the Department that they plan to make a net reduction of 60 in the apartments allocated to employees. As they become vacant, apartments outside the police security cordons will be rented out, or in the case of seven apartments owned by the Department, sold. We note that the Royal Household have been working on this review for some time and that the substantial scope for releasing accommodation was not brought to the Committee's attention when our predecessors previously made enquiries (paragraph 61).
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| (xi) We are surprised that the Royal Household have been able to identify such a substantial reduction in the apartments needed by their staff. We note in particular that between May 1994 and March 1995 the number of private secretaries and officials in the Royal Household or other Households that needed to be provided with residential accommodation reduced from 56 to 11 (paragraph 62).
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| (xii) We recognise that the allocation of accommodation is not within the Department's responsibility but they are responsible for ensuring that value for money is obtained for the grant-in-aid. We note the assurance that the possibility of rationalising the use of the Occupied Royal Palaces will be reviewed periodically. We would expect new rental arrangements to be of a form which would not prejudice future rationalisation. We recommend that the Financial Memorandum should be revised to introduce formal arrangements to provide the Department with assurance that the use made of the Occupied Royal Palaces and the official apartments within them is regularly reviewed (paragraph 62).
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| (xiii) We note that salary abatements in respect of staff accommodation amount to £327,000 annually, representing an average payment of £45 a week, but that this is expected to rise to £700,000 (£83 a week on average) as new contracts are introduced. We note that the revised abatements will still represent payments substantially below commercial rents. But we recognise that the staff allocated accommodation would not be able to occupy apartments at market rents, and that properties within the security cordons would therefore be unoccupied if commercial rents were charged (paragraph 63).
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| (xiv) Whilst the new arrangements will bring abatements onto a consistent basis, we are concerned that for staff not on new contracts the percentage abatement of salary varies substantially, with 16 staff having no abatement, and that there will be a long delay before the full benefits are achieved. We look to the Department to monitor closely the achievement of these benefits (paragraph 64).
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| (xv) We note that the Department intended to seek Parliamentary authority for the income from sales and commercial letting to be used to reduce the grant-in-aid, and that the letting income could total £0.5 million a year, less £0.2 million a year of salary abatements foregone. We look to the Department to ensure that savings from letting and selling apartments are maximised and that, subject to Parliamentary authority, they accrue to the grant-in-aid as soon as possible (paragraph 65).
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| (xvi) We recognise that how properties are best used in fulfilling the requirements and functions of the Head of State is a matter for Her Majesty the Queen. We note that the Department consider that the provision of accommodation is a matter of remuneration which is not a matter for the Department, whilst the work of maintaining the fabric is not part of the remuneration package. We note that the Department consider that the level of salary abatement is set as part of remuneration policy and is not intended as a payment for accommodation, so the abatements benefit the funding source from which the salaries are paid (paragraph 66).
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| (xvii) It appears to us anomalous, however, that whilst the Department can plan to offset the receipts from the sale and commercial letting of apartments which are no longer needed against the substantial costs of maintaining apartments borne on the grant-in-aid, they cannot offset much of the revenue from those apartments which are still required, and they have no role in determining how many should fall into each category (paragraph 66).
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| On the costs of maintaining accommodation
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| (xviii) We observe that it has cost the grant-in-aid £0.94 million to repair and refurbish the apartment previously occupied by Princess Alice Countess of Athlone. We note that this high cost was attributable to the fact that the apartment had not been refurbished since 1923 and had been uninhabited and uninhabitable since 1981. We are concerned that part of the Estate was neglected in this way. We note the Royal Household's assurance that there are no other apartments which have been similarly neglected (paragraph 79).
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| (xix) We are not convinced by the argument put forward that the costs of repairing and refurbishing this part of the estate will be recovered in 20 years. Some £900,000 has been spent, whereas rents, currently totalling £30,452 a year, plus in one case six per cent of net salary, will be recovered gradually over the next 20 years. Even without allowing for interest on capital, recovery of £900,000 over 20 years would equate to £45,000 each year (paragraph 80).
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| (xx) We recognise that the apartments in the Occupied Royal Palaces are in historic buildings and, as such, are difficult to maintain. We accept the Royal Household's assurance that they have maintained them to a reasonably modern standard, that they now have better-maintained properties and have achieved savings on the annual maintenance programme since 1991 which will allow the grant-in-aid to be reduced to £15 million by 1999-2000 (paragraph 81).
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| (xxi) We note that the apartments of six Heads of Department in the Royal Household have been fully furnished at public expense since 1982, and that, between April 1991 and March 1995, a cost of £310,000 was incurred, for four apartments. We also note that furnishings were provided through an agreement with the Department of the Environment dating back to 1982, and that no further costs will be charged to the grant-in-aid. We recognise that the main justification was that furnishings were expected to last 15-20 years, whereas the average tenure of any post- holder is about nine years (paragraph 82).
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Evidence, p. 1, para 2
Evidence, pp. 1-2, para 4
| 5. The two principal ways in which Parliament provides funds to the Royal Household are the Civil List and the grant-in-aid. The Civil List covers the salaries of the main departments of the Royal Household and such expenses as those for catering, furnishings, the Royal Mews, garden parties, computers, stationery, contract cleaning, and liveries and uniforms. Under the Civil List Act 1972, the Treasury have oversight of the Civil List and expenditure from it is subject to audit by the Permanent Secretary of the Treasury. Although the audited accounts are not published, the information is summarised by the Royal Trustees appointed under the Civil List Act in their periodic reports to Parliament which must be made at intervals of no more than every ten years. They last reported in 1990. The Comptroller and Auditor General ensures that payments from the Consolidated Fund to the Royal Household comply with relevant legislation, but otherwise has no locus in, or access to, the accounts.
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Evidence, p. 2, para 6, Statutory Instrument 2018/1990
Q 80
| 6. Since 1 January 1991 the Civil List has been fixed for ten years by Statutory Instrument at £7.9 million a year. This made allowance for inflation of 7.5 per cent per annum over the ten years, adjusted by an assumed allowance for efficiency savings. The Royal Household told our predecessors that they had been set targets so that their expenditure had to come in below the actual rate of inflation.
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Q 16
Evidence, Appendix 5, pp. 40-41
Evidence, Appendix 4, p. 39
| 7. The Royal Household also stated that they had a plan covering the period that set out their future levels of expenditure. Within that plan they prepared every year a budget for the Civil List for approval by the Treasury. They only drew down from the £7.9 million the amount needed to meet the budget. During the first five years, their Civil List expenditure had increased by about 5 per cent compared with retail price inflation of around 18 per cent and weighted inflation as it applied to the Civil List of about 27 per cent. The Department subsequently told our predecessors that weighted inflation was calculated by applying earnings inflation to the payroll costs and the retail price index (excluding mortgage interest) to other costs. We are cautious about this because comparison with the rate of increase in Civil Service pay over the period would have been more relevant. The Department have stated that such information was not available.
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| Q 17
| 8. The Royal Household told our predecessors that so far they had achieved substantial savings by tight control, attention to detail, giving people clear guidance as to what was expected of them, giving people clear responsibility and setting performance indicators. They had looked at every small thing in detail and found a large number of savings that had built up to quite a decent amount.
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| Qs 221-222
| 9. Our predecessors asked the Department and Royal Household what was the exact cost to the tax-payer of the Royal Household. They said that the last explanation of the total funds provided to the Royal Household was in 1990 in the report of the Royal Trustees. The total figure, which included other things funded neither by the Civil List nor by the grant-in-aid, like the Royal Train and the Queen's Flight and the costs borne on other Government Votes, was £42.3 million.
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