Examination of witnesses (Questions 40
MONDAY 18 DECEMBER 2000
BOURN, KCB, MR
YOUNG and SIR
40. That rent is at most £7,000 a year,
which works out at £140 a week on average. That is not bad
for a pad in one of the top properties in the United Kingdom,
multi-bedroom, multi-sitting room, and so on, with a security
system built in as well, it is a fraction of what it would cost
if they were at market value. What is the valuation of these properties,
there were none when we first asked you? In rental terms how do
you value them?
(Sir Michael Peat) Valuations are not done. It is
difficult to value a Royal Palace, because it is a unique building
and there would not be a lot of point in doing so. The rents are
set according to people's ability to pay according to a formula
set by the Treasury. I think, as this Committee said last time,
it is understood that people who work for the Queen who are on
Civil Service pay rates would not be able to afford to pay the
full value for some of the apartments, but that it is better they
should pay something and the apartments should be used, rather
than be left empty. The rents that we charge now more than cover
the costs of maintaining the apartments, which is something that
we achieved during the past few years, and is a considerable improvement
on the previous situation.
41. I think most people would consider that
the socialist republic of Buckingham Palace, which you are conveying
to us, is a rather artificial concept, and having accommodation
of that type and that scale for £140 a week is actually a
gift by anyone's standards. The final question is this, since
you do not value them and since the previous Chancellor, Kenneth
Clarke, in a Parliamentary Answer told me that people in grace-and-favour
accommodation would be eligible to pay tax on the beneficial difference
between the rent they pay and the beneficial value of the property
they are in, how on earth can the Inland Revenue be taxing them?
Do you pay tax on the beneficial value of the house you are living
(Sir Michael Peat) I can tell you personally about
my own affairs. I do pay tax. I personally pay tax but the Inland
Revenue, quite rightly, takes confidentiality very seriously.
I do not think the Inland Revenue would necessarily tell you about
anyone else. I do not know about other people's tax affairs. I
pay tax, if that is helpful.
42. If you have properties which are clearly
so valuable, as you said yourself, people could not afford to
pay the rent.
(Sir Michael Peat) There are some very nice properties,
although a lot of them are just flats above stables. The great
majority are not grand properties.
43. I have a list of the accommodation.
(Sir Michael Peat) I think you are slightly giving
the impression they are all grand, the minority are grand properties,
44. Answer this question, it is a very important
one, if you do not value those properties and, as the previous
Chancellor of the Exchequer said, the people living in them are
due to be taxed on the difference between the beneficial value
and the actual rent paid, how can they be taxed when there is
(Sir Michael Peat) That is a question to put to the
Inland Revenue. The Inland Revenue do value things, as I know
from my experience, and they place valuations on many things.
It may well be the case that the Inland Revenue value it. I cannot
comment on Inland Revenue taxation policy, it is not my area.
Mr Williams: We will take it up with the Inland
45. Since the Royal Household took over the
management of Property Services in 1991 the amount of annual expenditure
is £29 million, plus £15.8 million, and the expenditure
on major maintenance projects has fallen from £90 million
to £7.2 million in 1998/1999. The report shows that the expenditure
on property maintenance has reduced by over a half since 1991.
Can you tell us you bit more about the reduction you have been
able to make and the size of the cost to the Property Service
(Sir Michael Peat) Yes. We have completed quite a
number of large projects. We began with the large rewiring project
in Windsor Castle. We devoted quite a bit of money to the fire
restoration. We have also spent substantial amounts of money on
fire precautions, automatic fire detection and fire compartmentation.
As these large projects are completed we are reducing the amount
of the grant-in-aid. Obviously for large, old historic buildings
there is always going to be a level of maintenance required, and
the odd improvement project requirement. Hopefully major projects
are coming to an end.
46. Could you, please, now answer the question
I asked you, has there been a corresponding reduction in the size
and the cost of the Property Service Department?
(Sir Michael Peat) Staff numbers have come down by
about 5 per cent. The majority of staff are not actually devoted
to construction work, and their tasks continue. A large number
of staff are fire precautions officers, who are there to work
the automatic fire detection equipment, and to make sure there
are no fires. There are telephone operators, there are industrial
cleaners and basic maintenance people whose numbers are not affected
by the general reduction in building work, the majority of which
is undertaken by external contractors, external architects, quantity
surveyors, structural engineers, et cetera.
47. Can you help us about the maintenance backlog?
Is there any job which should be done which has not been or which
could not be done within the constraints budget?
(Sir Michael Peat) We think the maintenance backlog
is cleared. We have a works programme stretching ahead for the
next five years and all issues that need to be addressed are already
included in it.
48. Is it right that there are 160 Royal Household
staff? Do we need these people to be paid directly? Is there any
further scope for contracting out?
(Sir Michael Peat) We have contracted out. When we
took over, as the previous National Audit Office Report said,
I think from memory in 1991 there were over 250 staff, so we have
brought numbers down. As I have just said, we do contract out
substantially. A large majority of the work is contracted out.
We only have a smallish core team supervising.
49. I hesitate to get involved in your spat
with Mr Williams over the Royal Collection Trust, but maybe I
can force myself! Unlike Mr Williams, I am new to this, but it
seems to me that as grant-in-aid reduces (as indeed it should)
that the public surely has a right to expect that the Royal Collection
Trust could make increased contributions?
(Sir Michael Peat) It will. The Royal Collection Trust
is working very hard to increase contributions. The Royal Collection
Trust this year will be contributing £1.9 million to offset
the amount of the grant-in-aid. Depending on visitor numbers,
if things go welland it is difficult to forecast with confidencewe
are hoping that this will increase to £2.5 million during
the next three to four years.
50. I am sure you would agree that the National
Audit Office would do its job all the more effectively if you
were able on a voluntary basis to provide them with more information
about the Royal Collection Trust.
(Sir Michael Peat) All the information about the Royal
Collection Trust is set out in a very, very detailed Annual Report.
Any information requested is provided.
51. The National Audit Office has full access
to the records, does it?
(Sir Michael Peat) Any information the National Audit
Office would like to see about the Royal Collection Trust they
can have. We have never refused them any information.
52. It has access to all the records, does it?
(Sir Michael Peat) Absolutely, it can see anything
53. Could I ask the Comptroller and Auditor
General to comment on that?
(Sir John Bourn) It is certainly true that the Royal
Household have always responded to requests we have made for information
but, of course, we are not the external auditor of the Trust and
in that sense, of course, we work on a grace and favour basis
rather than by right.
54. This is all frightfully gentlemanly and
I am all in favour of gentlemen's agreements, but does this grace
and favour arrangement work adequately in the public interest?
Do you feel that you have full access?
(Sir John Bourn) I do feel I have full access but
I am not satisfied, as I put it, with the grace and favour arrangement.
As I say, everything I have asked for I have been given, but I
have to ask it because I am not the external auditor. I think
there is a case that I should be the external auditor. It is part
of a general thrust that the NAO has made over the last few years
for the right to audit public money in whatever form it is presented.
So in that sense I am not satisfied with things as they are, but
I do acknowledge that what Sir Michael says is correct.
55. If one is not given the records, does one
always know necessarily what to ask for?
(Sir John Bourn) Indeed not.
56. Satisfaction levels; is it true there are
generally low satisfaction levels or do you reject that charge?
(Sir Michael Peat) Satisfaction about what?
57. Satisfaction among the public about the
(Sir Michael Peat) I absolutely reject it. We do detailed
market research and satisfaction levels are extremely high, well
over 90 per cent, so they are exceptionally high.
58. If satisfaction levels are as high as you
make out and, as you know, they are such important tourist attractions,
do you believe that there is any prospect of making these Palaces
fully self-financing in the future?
(Sir Michael Peat) It is quite a big hurdle to climb.
The Royal Collection has a collection which is bigger than the
Tate Gallery, National Gallery and National Portrait Gallery all
put together. After we pay the £2 million across to the Property
Services grant-in-aid, the Royal Collection is left with about
£6 million to preserve the collection. It is an old collection
and a lot of it is in buildings with central heating and it costs
a lot of money to conserve and to present it. We send it all around
the country and the world, to 200 plus different locations at
the moment, in addition to the Palaces where it is based permanently.
We are building a new gallery at Buckingham Palace and a new gallery
in Edinburgh. We do all this from our own resources. We obviously
look with some envy at the V&A with £30 million from
the taxpayer and the National Gallery with £20 million from
the taxpayer. We do not spend nearly so much money and do not
have nearly as much money as the other collections to spend. We
would like to improve presentation and we would like to increase
our education programme. Whether as we (hopefully) increase the
return from Palaces we spend more on presenting and conserving
the Royal Collection or are able to give a bit more across to
offset the amount of the Property Services grant-in-aid remains
to be seen, but I would not like anyone to be left with the impression
that the Royal Collection is generously funded compared with other
collections at the moment. We raise it all ourselves.
Mr Leigh: Thank you. No further questions.
59. Mr Young, I would like to start with you
if I may. You have had a bit of a quiet afternoon so far and I
am going to ruin that for you. As a point of clarification, the
Royal Household, as I understand it, carries out a detailed survey
every five years done by outside consultants to see the work that
needs to be done, and then the Department employs outside consultants
to consider the Royal Household plan, and an attempt is made to
try and match, presumably, needs with resources. Is that not a
rather expensive and bureaucratic way to go about it?
(Mr Young) We hope not. We think that the idea of
a five-year rolling programmes annually updated is an efficient
and effective way of running this programme. We in the Department,
of course, are anxious to be in some position to cross-check the
Household's projections. If we did not have our own professional
advice we would risk just having to believe their programme which
could be gold-plated or under done in some way or another, so
therefore we think it is worth having our own consultant to advise
us. Otherwise if they came in with a programme we would then have
to decide whether to pay or not. We wanted to have and we are
getting independent professional advice.
3 Note: See Evidence, Appendix 1, p.27. Back