Select Committee on Public Accounts Minutes of Evidence

Examination of witnesses (Questions 60 - 79)



  60. The other way to look at it, though, is instead of waiting for them to produce their programme which you then look at—because it is a significant amount of public money which is going into it—why are you not in at the beginning?
  (Mr Young) In a sense we are. It is a five-year rolling programme and each year we up-date it. We do not get it once every five years and wait.

  61. I am still left with the impression that they come to you and tell you what work needs to be done and in a sense you give them the nod and tell them they can get on with it.
  (Mr Young) That is correct and we get to our decision on the grant-in-aid amount. We have got a five-year programme annually updated and we have been in there for the last four years before the fifth year in which they do their job. It is a five-year rolling programme annually updated. We are working very closely with them on this and we think it is important to have independent professional advice so we can run a cross-check over the Household's proposals.

  62. I want to go back over the points that Mr Williams was dealing with and give you an opportunity to say something on this. If we take Windsor Castle, it seems to me that the taxpayers come in in two ways. First of all, they provide some of the grant-in-aid for the work to be done but they also pay their entrance fees. Yet it seems to me that only a small proportion of entrance receipts actually goes to maintaining the Palaces. I think the figure for 1998-99 is out of £3 million somewhere in the region of just over a quarter of a million goes into the maintenance programme. Is that balance right in your view? It does not seem a very large proportion to me.
  (Mr Young) The proportion will vary over time, as Sir Michael's answer has implied. The key point for me is the one set out in paragraph 3.5 of the Report, that it is absolutely essential from the Department's point of view that the net surplus from charges for entry into the Castle precincts continues to be used for property services—thus meeting costs which would otherwise be met from the grant-in-aid. Whatever the surplus is, it has to come into the amount which otherwise would be covered by grant-in-aid. So it reduces my grant-in-aid liability the greater the net surplus.

  63. I just wonder by how much it reduces the grant-in-aid. I understand the point about the formula, but from a very simple perspective it seems that the less which comes into property matters from receipts the more has to be paid out of the public purse. Is that not right?
  (Mr Young) Unless we just reduce the grant-in-aid. Lower receipts could increase the call on the public purse but the cash amount is the Government's decision. I would remind you that we have pegged the grant-in-aid to £15 million for the years 2000-01 and 2001-02 whatever comes in from Castle precincts income, or any other area. I think the figure is between £1 and £2 million—Michael will have the figures—and that is what the current surplus has been.
  (Sir Michael Peat) The grant-in-aid gets about half the income from the precincts. Just looking at the figures, in 1999-00 it was £4.4 million and the grant-in-aid got £2.2 million of that, and so it gets about half. It comes in to offset the cost of the maintenance of the buildings. It does need to be borne in mind that the contents, which are also national property, have to be maintained as well and the other half goes towards maintaining the contents. If those contents were not maintained by the income from the Royal Collection Trust I am sure the country would not want them to fall to pieces, so the taxpayer would have to pay for their maintenance as the taxpayer pays for the V&A and the National Gallery and the National Portrait Gallery. So the money going to the Royal Collection offsets costs to the taxpayer as well

  64. You have answered my next question which is there is no difference between the taxpayers' money going into upkeep for Palaces, which are in a sense state assets, and the Royal Collection which you are telling me is also a state asset?
  (Sir Michael Peat) Yes, the Palaces and the Royal Collection are held by the Queen as Sovereign in trust for the nation. She cannot give them away or leave them to anyone or sell them. She holds them in trust for the nation. The taxpayer funds the maintenance of the Palaces. To relieve the taxpayer of the burden of maintaining the contents as well we raise that money ourselves. That is how it works.

  65. I want to move on to a question which I think follows on from what Mr Leigh said. He asked you about the size of the Royal Household property section and in terms of the amount of grant-in-aid which is forthcoming from the taxpayer I think the figure in 1991 was just under £30 million and that has fallen to somewhere in the region of £7.2 million. That is a considerable fall in the amount of taxpayers' money which is going in there and you said, as I understand it, that the number of staff employed has gone down from 250 to 160. Why has it not fallen further? You said that it had reduced by five per cent in recent years and yet the amount of money from grant-in-aid has reduced much faster, has it not?
  (Sir Michael Peat) Because the grant-in-aid is spent in two principal areas. It is spent on maintenance work to the buildings—mending the roof, relaying roads, repainting, etcetera. The other areas where it is spent is utilities: gas, electricity, telephones, fire precautions, making sure the Palaces do not burn down, we have 24 firemen. There is also routine maintenance, which is unblocking lavatories, fixing sticking windows, dealing with dripping taps, changing light bulbs. Where the major savings have been made is on the property maintenance side, fixing roofs, rebuilding things, etcetera, and most of that work has always been sub-contracted and is done by external workmen. Therefore you do not see the decline in that work reflected in a decline in our internally employed numbers. The numbers of firemen that we employ, of telephone operators that we employ, of industrial cleaners that we employ have remained just about constant. They have come down a little but it is much more difficult to reduce numbers there. We get 750,000 incoming telephone calls a year and they go up so you cannot really reduce telephone operators. We do not really want to reduce the number of fire surveillance officers we have, because they are such important parts of the national heritage that they look after. Those are not the areas where there are savings. The areas where we employ people in-house are not the main areas where savings have been made.

  66. Nevertheless, the backlog has been cleared. Even in a situation where you are talking about a significant amount of money and staff required for care and maintenance the backlog of bigger projects has been completed. I simply wonder why it is that you need so many people to administer what could be potentially the same number of properties but fewer projects?
  (Sir Michael Peat) The people who cleared the backlog were external workers, they were never internal workers to begin with. To clear the backlog we employ architects, quantity surveyors and building contractors on a contract basis. They were never our employees. These were never included in the 250, the 172 and the 163. There is a full list of employees in the annual report. You can see—I sent you a copy—the workforce is now 163, they are not just employed in the areas dealing with the backlog.

  67. I understand that. I am left with the impression that the major projects having been completed, I still, nevertheless, wonder why there are grant-in-aid places for 160 staff, but 52 of those are not employed in the property section. What do they do?
  (Sir Michael Peat) That is irrelevant so far as grant-in-aid is concerned. They are still fully subject to my control, supervision and monitoring. They go into the departments where they will be managed most effectively and cost efficiently.

  68. They still do jobs related to property services.
  (Sir Michael Peat) They are industrial cleaners and, for example, the people who mend furniture. They are put in departments where the management expertise is there to control them. As far as the auditors are concerned, the Department is concerned and I am concerned, it is all my responsibility and I have to check value-for-money, and that sort of stuff, with them, just as much as for the property section.

  69. Mr Leigh said that he was happy with gentlemen's agreements, I am not sure whether local authorities would be happy with that or we would be happy with them having gentlemen's agreements. How do you ensure best value in the work that you do?
  (Sir Michael Peat) We have a culture of achieving value-for-money, it is deeply imbedded in our training systems, getting things right and getting the most creative solutions. We have very detailed desk instructions. We have rules to do with competitive tendering and controls over overruns and how contracts can be let. We are audited by external auditors. We have special auditors who come in and look at technical issues; we have the Department's auditors; we have our own internal auditors and we have the National Audit Office. We are the most heavily audited organisation probably in the world.

  70. What about 30 per cent of the work that you do, where the contracts are less than 25,000 in value, they are not competed for, are they?
  (Sir Michael Peat) Yes, absolutely. They are all covered by all of the procedures I have just mentioned.

  71. How do you ensure in the projects that you oversee quality, because I think there is a very big difference between value-for-money and cost? Presumably you are interested in what I would call true value-for-money, which implies quality, how do you ensure quality?
  (Sir Michael Peat) In a number of ways. The users of the Palaces, from the Queen down, will soon pick up on it if the quality is not up to it. Secondly, all our projects are reviewed by English Heritage. Thirdly, they are reviewed as part of the Quinquennial Surveys, by our independent surveyors, and fourthly they are reviewed by everyone in the property section. Quality is top of their list, it has to be with such important parts of the national heritage.

Mr Steinberg

  72. Can you look at page 15, Figure 5. The net income from visitors to Windsor Castle was £3.416 million and, as Mr Campbell pointed out, the contributions to the 1998/1999 fire restoration costs and general maintenance was £246,000. When Mr Campbell pointed that out you were nodding your head, you did not come in. Why were you doing that?
  (Sir Michael Peat) The total that comes in, as you can see here, is £3.4 million this particular year. There was a suggestion that the contribution to general maintenance was low, I think the figure £309,000 was mentioned for the next year and this figure is £246,000. The suggestion is that it is a low amount. The only reason that it is a low amount is because the money was going to fund the fire restoration. When the fire restoration has been paid for, as it has been now, the amount available to pay for general maintenance will jump right back up to £2 million or so. First of all, it went to the fire restoration and now that is finished it will go to general maintenance. The low figure of £246,000 was because most of it was still going to pay for the fire restoration.

  73. Basically the income from visitors was £3.4 million. You are saying that in effect the whole of that £3.4 million was either spent on maintenance or fire restoration?
  (Sir Michael Peat) The number varies from year to year.

  74. I am talking about this year.
  (Sir Michael Peat) Whatever the amount is, it is going to be several million.

  75. How much will be used in future years from visitor fees for the grant-in-aid programme?
  (Sir Michael Peat) Visitor numbers have come down. This year it will be about £2 million. As I said earlier, we hope it will get up to about £2.5 million.

  76. That is why I asked the question. Where will that money go, the 2.5 million, will it go into the grant-in-aid fund?
  (Sir Michael Peat) It will go to off-set expenditure which otherwise will be met by the grant-in-aid.

  77. If there were no visitor fees during the time of the fire or since the fire, who would have paid?
  (Sir Michael Peat) The grant-in-aid would have had to pay, that is a statutory responsibility.

  78. Paragraph 3.5. The first sentence in that particular paragraph says, "The Department are considering the status of the income from charges to Windsor Castle precincts", and then it goes on. Can you explain what that actually means? I read it a few times and it is not really clear what that meant.
  (Mr Young) It is a subject for the experts, which up until recently did not include me.

  79. It certainly did not include me.
  (Mr Young) The key point is that the Department wanted to ensure that the net surplus, the charges for entry into the castle precincts, would be used for things otherwise met by the grant. I want the amount of grant to be reduced by the net income from the charges. To do that we have to get the necessary agreement with the Household, which we always had, we have to sort out the legal definition of what the status of this income from these charges is. At the time of writing this report it had not been sorted. It has now been sorted. This income is classified as non-hereditary income. The important point is that there is an agreement between the Household and the Department that income will be used to reduce the grant-in-aid. That is the key point.

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