Select Committee on Public Accounts Minutes of Evidence

Examination of witnesses (Questions 40 - 59)



  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 in?
  (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, not all.

  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 no valuation?
  (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 Revenue[3]

Mr Leigh

  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 Department?
  (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 well—and it is difficult to forecast with confidence—we 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 it likes.

  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 Royal Palaces?
  (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.

Mr Campbell

  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

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