Select Committee on Public Accounts Minutes of Evidence

Examination of witnesses (Questions 220 - 247)



  220. And who makes the decisions about where that money goes?
  (Mr Young) It is netted off the grant-in-aid in the same way. So Historic Royal Palaces is not grant-in-aid funded now because of their income and English Heritage ditto[8], as you have heard in previous sessions here. In setting the level of grant-in-aid for English Heritage we take account of the amount of income they get in from various sources.

  221. That, in effect, is a parliamentary or ministerial decision? The money that is taken in from visitors paying to visit a national property of that sort is used to pay for that upkeep rather than out of the taxpayers' other funds for that upkeep?
  (Mr Young) Yes, indeed.

  222. These properties that we are talking about here, which have been said on various occasions to be in effect state property, the decision on visitors' charges for those properties is not taken by the Secretary of State?
  (Mr Young) The use to which the charges are put is taken in consultation with the Secretary of State because it is very important that we, in our financial memorandum and the Memorandum of Understanding with the Household, have incorporated words to the effect that the net surplus of charges for entry into the castle precincts will continue to be used for property services, thereby meeting costs which would otherwise be met from the grant-in-aid. So our grant to Sir Michael's Royal Household is conditional on that use being made of those funds, or at least that is in the Memorandum of Understanding between us.

  223. The funds that are coming in from Buckingham Palace, the extra funds which were to begin with given for the work at Windsor Castle after the fire, they are now being taken by the Royal Collection Trust for their various purposes?
  (Mr Young) Yes.

  224. Has that been agreed with the Secretary of State in the same way as the Memorandum you are talking about?
  (Mr Young) No, it did not have to be because we do not pay to the trust, the trust is a charity set up for that purpose and the Queen effectively gives it money and they use it for that purpose.

  225. There is a clear difference between the amount of governmental/ministerial responsibility for how money is used when it comes in through visitors to what you call a Government owned property, a state owned property, as compared with the decision making process when money comes in to one of these properties, in particular Buckingham Palace?
  (Mr Young) I think that is true, there are differences.

  226. Should there be? It seems rather odd if they are both state owned and they are both really state assets because in one case there is a governmental responsibility on how that money is used and in other cases there is not.
  (Mr Young) It arises from the historical position of the Royal Household which Sir Michael has outlined.

  227. Is the Royal Collection Trust, like the sub-body Royal Collection Enterprise Committee, audited by KPMG, both by the same people?
  (Sir Michael Peat) Yes.

  228. Sir Michael, would you be happy were Parliament to decide that like any other NDPB, and from the way you describe it the Royal Collection Trust is in effect an NDPB, if that particular NDPB like others were to be audited in future by the National Audit Office?
  (Sir Michael Peat) No, I do not think it is an NDPB and I think there are differences. I do not want to go into it in detail but I think from your previous point, that there are differences between properties owned by the Head of State and not owned by the Head of State, although they may not be material. I think the National Audit Office are excellent auditors and we would be delighted, we want the best audit we can get. I am sure the National Audit Office would do a tremendous job.

  229. From your point of view there is nothing against Parliament deciding that in future, if they set it up by statute, the National Audit Office should be the auditors?
  (Sir Michael Peat) Yes. My only comment would be, if they do this, that I think all charities who operate in that way should be audited by the National Audit Office. I am not quite sure why the Royal Collection Trust should be picked out. From our own perspective I am sure Sir John's auditors would do an excellent job.

  230. Whose decision is it how the rooms and flats in the various Palaces are used?
  (Sir Michael Peat) Well, it is the Household's decision, reporting to the Queen, on how they are best used to support the Queen in undertaking her duties as Head of State and how that is done most effectively and efficiently.

  231. Is there any thought given to maximising the visitor attractiveness of the use of the rooms?
  (Sir Michael Peat) Yes, a huge amount of thought. It is a very competitive business opening heritage locations.

  232. For example, has any thought been given to—I do not know—allowing them to be used by perhaps private parties or weddings or dances?
  (Sir Michael Peat) Yes, a lot of thought and that is suggested the whole time. The decision has been taken that it would not be commensurate with the status and dignity of the Head of State if the rooms are let out to the public like a hotel.

  233. Has any thought been given to what the value of that would be?
  (Sir Michael Peat) I am sure that a lot of money could be made from it to begin with, until the goose which laid the golden egg was killed. However, no detailed thought has been given to it because, as a matter of principle, it has been decided not to do it. It is just like renting out anything, I am sure a lot of money could be made initially if that is done, if Buckingham Palace is just turned into a corporate entertainment centre.

  234. This is because they are being used as residencies part of the time by the Monarch?
  (Sir Michael Peat) Why? They are not.

  235. Yes, the decision you said was not commensurate with the dignity of the Monarch.
  (Sir Michael Peat) There were two questions, were there not: whether the State rooms at Buckingham Palace could be let out for corporate entertainment and the other question was whether individual apartments could be rented out commercially? The reason for individual apartments is security, primarily because if individuals live there they come in and out. If you let out the Palace for corporate entertainment, as the Queen has 80,000 guests coming into the Palace every year anyhow the police are well versed at security in dealing with them. But it more difficult when it is a free flow at all times of the night with people coming in in cars and vans and residential issues. They are two different issues.

  236. You are saying there would not be any particular security reasons for not renting out some of the rooms for parties?
  (Sir Michael Peat) For corporate entertainment I suppose there would not be because for a diplomatic reception the Queen invites 1,500 people and the police take this very seriously.

  237. The decision has been taken because, as you put it, it would not be commensurate with the dignity of the Monarch?
  (Sir Michael Peat) Yes, status and dignity of the Head of State.

  238. That is because it is a residence?
  (Sir Michael Peat) Because it is the official home of the Head of State of a great nation. If the rooms are rented out for commercial corporate entertainment, you could go along there and have your dinner and pay £50, but when you were invited by the Queen fulfilling her duties as Head of State because you have done something marvellous, received a medal for gallantry, or you are someone who should be recognised - just like the reception she gave for the British Olympic Team, which was the last one, two or three weeks ago—it would not be quite so exciting coming into the rooms because in fact you could have dinner there or a drink there through corporate entertainment; in other words, it might not be quite so nice when official guests are asked. As far as I am aware no other country rents out for corporate entertaining the main rooms of a great nation. I hope it does not happen in my time, perhaps it will one of these days.

  239. Indeed. You said also, to go on to a completely different point, you have to be a bit flexible, that you sometimes get a shock when you lift the floorboards when you are doing maintenance on one of those properties and I can well understand that.
  (Sir Michael Peat) Yes.

  240. Presumably you know now that you are going to get a shock more or less every time when you lift the floorboards because some of these places are old and probably the floorboards have not been lifted for some time. What sort of allowance do you make in terms of time and cost when you are setting up a project because you are almost bound to find something historical that maybe English Heritage want to have a look at and that holds you up?
  (Sir Michael Peat) None.

  241. You assume you are not going to have any of these things?
  (Sir Michael Peat) No, we do not believe in contingencies. The minute you have contingencies and contingency allowances, experience shows they always get used up. Mice get at them. So you run it on the basis that they are meant to do the best they can. Obviously with historic buildings it is difficult. The minute you start having contingencies and allowances, then the people who do the job will operate to that standard.

  242. I am quite surprised you say that because my understanding is quite a number of the projects which you run actually came in under budget anyway.
  (Sir Michael Peat) Yes, they do, a number of them.

  243. So the budget is not always used up if it is there?
  (Sir Michael Peat) No, but sometimes when you look at it you think you have your best estimate. A good example was when we were doing some work on the roof of Windsor Castle. We thought the whole roof needed replacing but when we looked at the joists underneath and we looked at the lead work, it was not quite as bad as we thought and so we saved money by just doing repairs in specific areas.

  244. Having a bit of extra money in the budget does not necessarily mean you use it all up?
  (Sir Michael Peat) My belief is that for all projects people should proceed on their best estimate of what needs to be done. Once you start muddying the waters with allowances and contingencies, you are not quite so clear in what direction you are going.

  245. It is not usual, is it, in most commercial organisations to run major projects without some sort of contingency?
  (Sir Michael Peat) No, it is not, I agree, but it is one of the reasons why I think we probably do better than most.

  246. In paragraph 3.18 there are two reasons given why things go over budget and over time. One is "...structural work identified once the project started and areas were opened up..." which we have been talking about. The second is "... decisions to add minor maintenance work to projects which would otherwise have been carried out separately...". That should have been known about in advance surely, should it not? Why is there not a significant reason why you should have delays?
  (Sir Michael Peat) Sometimes things break down, plant breaks down, you have problems with automatic fire detection wiring, some computer wiring. It is the hole in the road syndrome, that if you have dug the hole in the road you really do need to get as much work done in that hole before it is filled in rather than digging it and filling it in and then digging it up again.

  247. You would surely normally know in advance how much you are going to do, you do not discover that when you dig the hole. If you have got minor maintenance work that you know has to be done on that road you take the decision to do it at the same time as you are doing other work.
  (Sir Michael Peat) Minor maintenance work is not predictable, a piece of plant can break at any time and issues can come to light at any time. Obviously people like to look forward but it would be totally unrealistic with buildings to say that everything is known about in advance, it is not.

  Mr Rendel: Thank you.

  Chairman: We have a number of interesting issues, the biggest one of which is whether the money raised, or the income from, or benefits in kind arising from public assets amount to public money. It is an issue that we will have to resolve in this particular report. We will have a number of written questions to follow on because I had to cut a number of people short today[9], so just be aware that we will be providing them to you as your Christmas present from this Committee. It just remains for me to say thank you for coming and to wish you both a very Merry Christmas and a Happy New Year and we look forward to a lively report. Thank you very much.

8   Note by Witness: English Heritage's income is also taken into account. Back

9   Note: See Appendices 1-5, p.27-46. Back

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