Select Committee on Public Accounts Minutes of Evidence

Examination of witnesses (Questions 80 - 99)



  80. It just seems sensible to me that if you take in money from visitors' fees and the taxpayer is paying X million a year in a grant then you reduce your grant, by including all of the visitors' fees. That seems logical to me. Is that what you are saying?
  (Mr Young) It is also what is said in the financial memorandum between the Household and the Department.

  81. It could not be realistically used for anything else unless the Queen was going to use it for her own purposes.
  (Sir Michael Peat) The Queen could use it for something else but the Queen has said that she would like to use it to offset grant-in-aid.

  82. How could she legally use it for something else?
  (Sir Michael Peat) Because it is not part of the hereditary revenue. How it works is that the Queen as Sovereign is entitled to the income from the Crown Estate, which is called hereditary revenue, and which she surrenders at the beginning of her reign in return for the Government paying the Civil List and meeting other costs in support of the Monarchy, one of which is this grant-in-aid. The Queen gives a certain amount of money to the Exchequer, £130 million last year, in return for which the Government pays out certain money to fund costs in support of the Monarchy. For technical reasons the revenue from the charges at Windsor Castle is not included in that money surrendered by the Queen, that is the law, and it never was surrendered. The Queen has said that it does not matter that it was not included in it legally, I shall assume I have surrendered it and I will use it to offset the grant-in-aid. I am afraid it is a legal nicety.

  Mr Steinberg: I bet you are delighted Mr Williams cannot come back on that one. I am not going to be tempted to because I might end up in the Tower.

  Mr Gardiner: You should have been there years ago, Gerry.

Mr Steinberg

  83. I read paragraph 3.6 and it was a bit confusing. It appears to be saying you did not have to keep a record of the visitor receipts to Windsor Castle. Is that right?
  (Sir Michael Peat) No. We keep a very close record of visitor receipts. I think the point here is that we do not know precisely what they are until the end of the financial year, and the Department have to determine our grant before the end of the financial year, so there is a timing difference, that is all the issue was.

  84. There is nothing there to get my teeth into. I read this report and I was delighted I could not find anything to have a really good go at. I read the report and it seemed that since the Royal Household has taken over running the Palaces the taxpayer was getting better value-for-money. Perhaps I do not know enough about it to be able to go down any other track. If it had been the privatisation of Railtrack it would be a different matter, we are not doing that, unfortunately. In Figure 7 we see the grant-in-aid has fallen from 29 million in 1992 down to 15 million in 1999. The obvious question that I wanted to ask here is the same question you would ask local government, if you have reduced the grant-in-aid quite considerably from 29 to 15 does that mean the same amount of work is being done for less money or is less work being done for less money?
  (Sir Michael Peat) It is a mixture of the two. I would like to think we have made our pounds work harder and we are more efficient and now get better value-for-money. I think that is the case. I am pretty confident that is the case. Part of the answer is that the same amount of money is working harder. Part of the answer is that there are a number of large projects that needed to be undertaken, have been completed and we have caught up with the maintenance backlog.

  85. So that means presumably that if you have caught up with the maintenance backlog and the programme is not as big then you do not need as many staff?
  (Sir Michael Peat) We have been through this one. We do not need as many staff on the architectural and the building side but we need as many fire surveillance officers and telephone operators.

  86. Being an ex-member of local government I can always remember senior officers always arguing for the retention of staff. I can remember, for example, getting rid of a whole department, a whole responsibility, but nobody lost their jobs, they were put into other departments.
  (Sir Michael Peat) We have reduced staff substantially and we would be delighted to reduce staff a lot more. We want to make the grant-in- aid as low as possible. However, you do have to have telephone operators and you do have to have people to change light bulbs and things and it is difficult. There are a thousand people working in the Palaces and, just like here, there are routine tasks that need doing.

  87. Again, in figure eight, if I actually read it properly, the expenditure on maintenance projects since 1991-92 has reduced dramatically from nearly 19 million down to just over £7 million. So, again, what does that actually mean in terms of the amount of work that is being done? Does that mean that there is less maintenance being done, less need for maintenance?
  (Sir Michael Peat) Yes. It is the same answer as before, it is a mixture of the two. There is less work to be done because we have caught up with a lot of the backlog and the work that is done is done more efficiently with better value for money.

  88. If there is less work to be done because most of the major projects have been done and gradually the cost of maintenance has come down quite considerably, the grant aid appears to be coming down quite considerably as well. The thing that strikes me is that the number of visitors to the Palaces may well increase considerably. You said they are slightly down but they could increase.
  (Sir Michael Peat) They are, yes.

  89. What happens when we get a situation where the amount of visitors' fees being paid eventually becomes bigger than the grant aid that is needed?
  (Sir Michael Peat) I am very much looking forward to that day. Whether I will live to see it is another matter. It would be marvellous, we would not need the grant-in-aid. The Queen has always said that she wants to take as little financial support from the taxpayer as possible. This was said in this July's Royal Trustees' Report. The cost of the monarchy to the taxpayer has come down by 55 per cent in real terms during the last ten years. It is my job to do my best to make sure it comes down further, while at the same time ensuring that the Queen receives the support she must have to do her job and that valuable parts of the national heritage do not fall to pieces.

  90. In terms of the 1998-99 figures that we have, and the only ones I can look at and compare, we are talking about something like £3.5 million worth of visitors paying fees. In the same year the actual maintenance is down to something like £7.2 million.
  (Sir Michael Peat) That is only the maintenance bit of the grant-in-aid. The whole grant-in-aid is £15 million, including telephones and electricity, etc.

  91. So there could at some time in the distant future be a surplus?
  (Sir Michael Peat) Yes, in theory. However, you could not fit that many visitors into Windsor Castle, it does have capacity limitations. We do operate at capacity on certain days already. The quality for the visitors is also very important and we work on it extremely hard. Unfortunately, I think it is not a totally realistic proposition but that does not mean that we will not be trying hard to achieve it.

  92. Do you ever envisage a time when all the work could be done on visitors' fees, all the maintenance work?
  (Sir Michael Peat) Not realistically, no. We could not fit the number of visitors into the building to pay that amount of money.

  Mr Steinberg: Thank you.

Mr Davies

  93. Just looking at the rudimentary issues here. In general terms, the reduction in grant aid has been quite tremendous from £29 million to £15 million in 1992-2000, something like a £14 million reduction. If you compare that with the reduction in maintenance projects that has gone down to £12 million, so there is a saving there of £2 million and that £2 million is to be seen alongside the extra income you keep from Windsor Castle. Where has the £2 million gone?
  (Sir Michael Peat) Some things have gone up. We have to pay business rates, they have gone up quite a lot. We have invested substantial amounts of money in our health and safety and fire precautions. Our fire surveillance teams now cost £1 million a year. Our minor maintenance has gone up. Minor maintenance is problematic. We got it down from about £2.9 million when we took over to about £1.9 million. Minor maintenance, jobs costing less than £2,500, has now increased back up to about £2.3 million. While we have achieved significant savings in overall terms, we have not reduced every single item, you cannot do it. In some areas, like fire and health and safety, we have made deliberate decisions to increase the resources to both of those areas. In other areas, like business rates, we pay what we are required to pay and they have gone up at a considerably faster rate than inflation.

  94. So there is a sense in which you have taken money out of maintenance to pay for the fire prevention and business rates and small projects, is that right?
  (Sir Michael Peat) I would phrase it slightly differently. Because we have saved so much money on maintenance, we have not had to ask for an increase in our grant-in-aid to fund increased expenditure in some other areas but have nevertheless managed to maintain a downward trend in the overall grant-in-aid.

  95. Do you feel, following the awful fire at Windsor, that there is any sense of over-reaction? Obviously we are spending much, much more now on fire prevention than we were. Is that a case of closing the door after the horse has bolted? Are we spending much more on that sort of area than other comparable buildings?
  (Sir Michael Peat) It is a good question. We have spent in today's terms, over the last ten years, about £19 million on fixed fire precautions, which is fire compartmentation and automatic fire detection systems. We spend about £1 million a year on fire surveillance officers and maintaining the automatic fire detection equipment, renewing fire extinguishers, etc. The real question you are asking is is £1 million a year too much to spend on running costs in terms of fire precautions in such important buildings? Obviously my view is that it is not but, on the other hand, our standards of fire precautions are extremely high.

  96. Fires are often caused by bad electrics and that sort of thing, do you include electrical installation as part of maintenance or part of fire prevention?
  (Sir Michael Peat) You are right, rewiring is often undertaken as a result of the fire risk. The major rewiring at Windsor was shown separately. Minor rewiring is included under fire precautions if it is essentially done for fire precaution reasons, if it comes out of the fire side telling us that they are worried about it.

  97. Can I ask you, I am right in saying that you are the Peat in Peat Marwick, that is correct, is it not?
  (Sir Michael Peat) I used to be the Peat in what used to Peat Marwick, yes.

  98. So when people say KPMG, you were the Peat, were you not?
  (Sir Michael Peat) Yes.

  99. And you are the Peat, as it were, in KPMG who are the external auditors of your accounts?
  (Sir Michael Peat) Not any longer. It stopped being a family firm in 1965 before I joined. My grandfather was, yes.

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