House of Commons - Public Accounts

Select Committee on Public Accounts Sixtieth Report

SIXTIETH REPORT

The Committee of Public Accounts has agreed to the following Report:

ROYAL TRAVEL BY AIR AND RAIL

INTRODUCTION AND LIST OF CONCLUSIONS AND RECOMMENDATIONS

1. Since April 1997, the cost of air and rail travel for official purposes by the Royal Family and the Royal Household (the Household) has been met by a grant-in-aid from the Department for Transport, Local Government and the Regions (the Department) and its predecessors. Expenditure met by the grant-in-aid totalled £5.4 million in 2000-01.[1]

2. The Household operates its own helicopter service and uses around eight per cent of the flying time of aircraft from the Royal Air Force's 32 (The Royal) Squadron (32 Squadron). Other travel is undertaken using chartered or scheduled air and rail services, and the royal train. The grant-in-aid excludes the cost of royal travel by car, which is met from the Civil List, Parliamentary Annuities or from the Royal Family's own resources. Since the decommissioning of the royal yacht Britannia in December 1997, there has been no royal travel by sea. The cost of royal travel by sea in the past has not been met by the grant-in-aid.[2]

3. The Department oversees the payment of the grant-in-aid and scrutinises the expenditure charged to it. The Household has day to day responsibility for administering the grant-in-aid and managing the royal travel arrangements. Within the Household, the Queen's Private Secretary has responsibility for the policy for royal travel, and the Keeper of the Privy Purse has responsibility for financial matters, including stewardship of the grant-in-aid. A Financial Memorandum between the Department and the Household sets out the terms of the grant-in-aid. Since 1997, with the agreement of the Department, the Household has produced its own more detailed guidance on the travel to be covered by the grant-in-aid.[3]

4. On the basis of a Report by the Comptroller and Auditor General,[4] we took evidence from the Keeper of the Privy Purse, the Department and the Ministry of Defence (the Ministry) about the administration and control of the grant-in-aid. The following conclusions and recommendations emerge:

Expenditure on royal travel by air and rail was £5.4 million in 2000-01, compared with £17.3 million in 1997-98. The Household has made major savings in the cost of air travel and in the cost of operating the royal train. Credit should be given to Sir Michael Peat for what he has achieved. Expenditure has also been reduced by a change in the method used to calculate the charges made by the Ministry for the use of aircraft from 32 Squadron which has resulted in some costs previously borne by the Household now being borne by the Ministry.

The Ministry should take close account of market rates in setting charges for the use of 32 Squadron for private use. Three members of the Royal Family—The Queen, the Duke of Edinburgh, and the Prince of Wales—may use 32 Squadron aircraft for private travel. At present, the Ministry charges the Household for private use of 32 Squadron on the same basis as official use, that is, on the basis of variable costs only, which may be lower than the market rate. The Household then recovers this charge from the relevant member of the Royal Family. Revenue would be increased by setting a market rate for private use of 32 Squadron. A similar policy should be adopted elsewhere in government for journalists accompanying ministers on special flights, on which current practice varies.

In one instance the Household and the Ministry used the movement of 32 Squadron aircraft in preparation for royal use as a training exercise. The Ministry and the Household should explore all opportunities for combining such positioning flights with genuine training opportunities, thereby releasing more flying hours for operational use and making more effective use of 32 Squadron's aircraft.

The size of official parties may not significantly affect the travel costs borne by the grant-in-aid, particularly where there are already spare seats on the aircraft. In other cases, however, the size of the party can affect costs, for example if it affects the size of aircraft required for the journey. The Department and the Household should therefore consider clarifying their guidance to include the principles to be applied when party size materially affects the cost of official travel.

The Household is considering alternatives to the current expensive and under-used royal train. The cost of the royal train has reduced under the Household's stewardship of the grant-in-aid but the cost per mile of rail travel, mostly costs of the royal train, is twice that of air travel. The Household is making more use of the royal train during the celebrations of the Queen's Golden Jubilee but thereafter its use is likely to remain limited. The Household plans to review the future of the train after Her Majesty's Jubilee celebrations, and the Household should share the review Report with the Comptroller and Auditor General so that he can advise this Committee on the outcome. If the review identifies a continuing need to operate a royal train, it should consider all options for its provision, including leasing from a commercial operator. However, we accept that it is often much less stressful for the Queen to be able to use the Royal Train as an overnight base. Given the Queen's age and commitments, cost should not be the only consideration.

THE HOUSEHOLD'S RECORD AND OTHER FACTORS IN REDUCING EXPENDITURE ON ROYAL TRAVEL

Figure 1: Grant-aided expenditure on royal travel by air and rail since April 1997

	1997-98	1998-99	1999-2000	2000-01
	£m	£m	£m	£m
Air travel
32 Squadron fixed wing aircraft	10.3	9.0	4.2	1.8
Helicopters	4.2	1.3	1.8	2.0
Scheduled flights and charters	1.4	1.4	1.5	0.7

Rail travel	1.9	0.8	0.8	0.6

Administration and other costs	0.2	0.3	0.3	0.3

Total expenditure charged to the grant-in-aid	17.3	12.8	8.6	5.4

Source: C&AG's Report, Figure 5: Ev 1

5. Expenditure on royal travel by air and rail has been reduced from £17.3 million in 1997-98 to £5.4 million in 2000-01, a reduction of 69 per cent (Figure 1). The largest reduction has been in the cost of using 32 Squadron's fixed-wing aircraft. This reflects both a reduction in royal use and significant reductions in the unit charges to the Household for that use. The Household now pay only the variable costs of the aircraft. In line with other official users, they no longer pay the larger fixed costs, as shown in Figure 2, below. But there have been reductions in the cost of all types of travel.[5]

Figure 2: Fixed and variable charges to the Household for use of 32 Squadron fixed-wing aircraft

Total charges to the Household for using 32 Squadron have reduced significantly since April 1997.
Total Charges	1997-98 budget £m	1997-98 actual £m	1998-99 actual £m	1999-2000 actual £m	Reduction¹

Fixed charges²	9.2	9.4³	8.5	3.8	59%

Variable charges⁴	2.6	0.9	0.5	0.4	85%

Total	11.8	10.3	9.0	4.2	64%

Unit Charges
Fixed
Per planned hour BAe 146	n/a	£10.763	£12,868	£10,428	3%
Per planned hour Bae 125	n/a	£5,131³	£6,760	£4,662	9%

Variable
Per actual hour BAe 146	n/a	£1,706	£1,952	£1,213	29%
Per actual hour BAe 125	n/a	£800	£653	£622	22%

Notes ¹The reductions in the final column for total fixed charges and total variable charges are calculated by comparing the 1999-2000 outturn with the 1997-98 budget, which represents the best estimate of charges before the Household assumed full responsibility for royal travel arrangements. Reductions in the charges per planned and actual hour are calculated by comparing the 1999-2000 outturn with 1997-98 actual expenditure. ²Fixed charges have been apportioned by the Ministry of Defence on the basis of planned flying hours. ³1997-98 fixed charges included an additional one-off VAT charge of £200,000 which has been excluded from the calculation of hourly rates, for the purposes of comparison. ⁴The variable charges total for each year also includes handling, landing and subsistence charges which are excluded from the hourly rates shown in the Figure.
Source: The Royal Household

6. Until March 1998, the Household used Wessex helicopters from 32 Squadron for its helicopter travel. Due to concerns about the cost and reliability of these aircraft, the Household established its own helicopter service, based on a modern civil helicopter, operated from a civilian base and flown and supported by Household staff. Although the Household increased its use of helicopter travel from 258 hours in 1997-98 to 475 in 2000-01, the new helicopter service saved the grant-in-aid some £2.8 million a year compared to the old arrangements. Savings were also made in the cost of operating the royal train following a detailed review by the Household and its rail contractors. Maintenance was rationalised to reflect coach usage more accurately and planning and co-ordinating charges were renegotiated with the Household's supplier.[6]

7. The Household attributed the reduction in expenditure to its stewardship of the grant-in-aid, in particular to the bringing together of user and financial responsibility for royal travel by air and rail. This had been the purpose of introducing the grant-in-aid and had given cost control greater focus. The change had also brought greater transparency and accountability, with more information being available about royal travel than had previously been the case.[7]

USE AND CHARGES FOR 32 SQUADRON

8. In 2000-01 the Household spent £1.8 million (Figure 1) on using aircraft from 32 Squadron of the Royal Air Force. 32 Squadron aircraft were also used by Ministers, and to transport military personnel and equipment. In 2000-01, royal use represented around 8 per cent of the Squadron's total flying hours, ministerial use accounted for some 16 per cent, training for about 19 per cent and military use some 56 per cent.[8]

9. The cost of using 32 Squadron fixed wing aircraft in 2000-01 was less than one fifth of the cost in 1997-98 (Figure 1). This partly reflects reduced use of these aircraft. Actual flying hours in BAe 146s, the larger of the two types of aircraft used, went down from 335 hours in 1997-98 to 142 hours in 2000-01, and flying hours in BAe 125s fell from 191 to 149. Planned flying hours, which determined the level of fixed charges, were also reduced. A new form of maintenance contract and a reduction in the number of aircraft operated by the Squadron also reduced the Squadron's overall costs.[9]

10. The basis for charging for the use of 32 Squadron aircraft was also changed. When the Household took over responsibility for royal travel in 1997, the Ministry did not have sufficient information on the composition of the charges for 32 Squadron to demonstrate that its charges were fair and reasonable. Subsequently, the Household and the Ministry achieved greater accuracy in the calculation of variable costs and better apportionment of overheads between users. These changes resulted in some costs previously borne by the Household being borne instead by the Ministry. In addition, in 2000-01 the Ministry changed the basis of its charging from separate charges for fixed and variable costs to a combined charge covering both.[10]

11. When grant-in-aid started in April 1997, the number of aircraft operated by 32 Squadron was in part determined by the official travel requirements of the Royal Family. The Household, the Department, the Treasury and the Ministry therefore agreed that the Household would be charged both fixed and variable costs for use of the Squadron's aircraft, to give greater transparency and to allow the full financial impact of decisions determining the size of the Squadron to be considered. Apart from some NATO users, the Household was the only user of 32 Squadron to be charged for fixed and variable costs. Military and Ministry users were not charged at all for use of 32 Squadron. Other non-military users were charged only variable costs.[11]

12. A study by the Ministry in 1999, following the Strategic Defence Review, concluded that the principal function of the Squadron was to support military operations and that the Squadron's capacity - two BAe 146 and five BAe 125 aircraft - was being determined by military needs alone. The study concluded that royal and other non-military use was secondary to the Squadron's military role and was being carried out only using spare capacity when aircraft were not needed for their military role. The purpose of the Squadron was to meet the operational needs of a crisis, when all aircraft would be needed, but in peacetime the Squadron had surplus capacity.[12]

13. Treasury guidance on fees and charges provides for charges to be levied on the basis of variable costs in instances where there is surplus capacity. Charging on the basis of variable costs would still cover the actual costs of travel using 32 Squadron aircraft, but would encourage non-military users to use spare capacity in the publicly owned assets of 32 Squadron, rather than hire more expensive charter flights. Accordingly, following a recommendation from the National Audit Office, during 2001-02 the Ministry changed to variable costs as the basis for charging for royal use of 32 Squadron aircraft.[13]

14. Changing the basis of charging to variable cost recovery had increased royal use of the Squadron's aircraft. In the year 2000-2001 the Household used 291 hours of 32 Squadron flying time. Before the change was made, the Household was planning to reduce to 105 flying hours for 2001-2002, as other modes of travel were cheaper than the combined fixed and variable charge levied by the Ministry. As a result of the lower charge resulting from the change to variable cost charging, the Household expected to use some 380 hours of 32 Squadron flying time in 2001-02, with consequential savings for the taxpayer by reducing the sums paid to charter firms.[14]

15. When 32 Squadron aircraft have needed to fly to reach the start of a royal journey, or to return from its end, the Ministry's charge to the Household has usually included the cost of getting the 32 Squadron aircraft to the start of the journey and back to base afterwards. However, if the movement of the aircraft had training value and fell within the training hours allocated to the Squadron, the cost of the movement might not have been charged to the Household. For example, on the Duke of York's visit to the United States of America and the West Indies in March 2000 the Household was not charged for part of 32 Squadron's costs, as the Ministry used the movement of 32 Squadron aircraft in preparation for royal use as a training exercise.[15]

16. The Queen, the Duke of Edinburgh and the Prince of Wales may use 32 Squadron aircraft for private travel. In some cases, private journeys have to be undertaken using 32 Squadron aircraft for security reasons. The Household said that the Royal Family had used 32 Squadron aircraft for private travel once in 2000-01 and three times in the first ten months of 2001-02.[16]

17. The Ministry had charged the Household for private use of 32 Squadron on the same basis as official use, and thus recently on the basis of variable costs only. The Household had then recovered this charge from the relevant member of the Royal Family. Charging closer to a market rate for private travel would contribute to meeting the fixed costs of 32 Squadron, and save money for the taxpayer. The Household was content for the Ministry to charge a market rate for private travel in future as it would then consider whether to use 32 Squadron aircraft for such journeys on a case by case basis.[17] On the question of charging journalists accompanying ministers on non-scheduled special flights, the Department did not know what practice other departments adopted. The Cabinet Office has since told us that some departments charge the equivalent to the standard scheduled fare, while others do not charge or have no specific charging policy in place. The Cabinet Office told us that it intends to issue guidance to departments regarding charges for members of the press accompanying ministers on official travel.

THE ROYAL TRAIN

18. Under the Household's stewardship of the grant-in-aid, the cost of royal travel by train was reduced from £1.9 million in 1997-98 to £0.6 million in 2000-01 (Figure 1). Ninety six per cent of expenditure on royal travel by rail in 2000-01 related to the cost of the royal train. The number of journeys by scheduled rail had increased significantly since 1997-98, but these journeys were of shorter duration and were cheaper than using the royal train (Figure 3).[18]

Figure 3: Use of the royal train and other rail services

	Number of rail journeys				Average miles per journey
	1997-98	1998-99	1999-2000	2000-01
Royal train	19	16	24	17	581
Other rail services	24	60	58	60	156

Source: C&AG's Report, Figure 11; Ev 3

19. The cost per mile of rail travel was twice that of air travel. The Household acknowledged that the royal train was an expensive form of travel but said that it offered unique advantages. These included overnight accommodation and dining facilities, and facilities for meetings and briefings prior to engagements. Members of the Royal Family could arrive right at the centre of a city and start their day of engagements early. The royal train was also less vulnerable than a helicopter to disruption from poor weather. The royal train was, however, slower than many modern mainline trains and often could not be used on busy railway lines during the day, nor could it pass through the Channel Tunnel. The type of accommodation it offered was also limited, and its relatively high operating cost discouraged its use. The royal train had therefore been used infrequently, only 17 times in 2000-01.[19]

20. The Household and the Department had sought private lettings to reduce the overall cost of the royal train but there had been no expressions of interest to use the royal train in 1999-2000 or 2000-01. The Household attributed this to the lack of extensive conference and dining facilities, and the configuration of the train for overnight travel.[20]

21. Use of the royal train would increase during the celebrations of the Queen's Golden Jubilee. But after Her Majesty's Jubilee celebrations, its use was likely to remain limited unless patterns of travel changed. The Household was reluctant to dispense with the royal train in view of its operational advantages, but recognised the need to provide the service as economically as possible. The Household therefore intended to review the future need for the train, basing its decision on the use and experience of the royal train during Her Majesty's Golden Jubilee year celebrations.[21]

THE SIZE AND COMPOSITION OF OFFICIAL PARTIES

22. The size of the party carried on official journeys has varied considerably, from as few as two people on some official engagements to over 50 on some State visits. The Household said that State visits could require large parties because, for example, of the need to take a doctor, domestic staff and private and press secretaries. And as Her Majesty provided a return banquet for her host, the royal party would include catering staff. Ministers and officials from the Foreign and Commonwealth Office had sometimes also travelled as part of the party. Figure 4 shows the membership of the party of 38 for the State visit to Korea in April 1999.[22]

Figure 4: Members of the Royal party for the State visit to Korea in April 1999

Members of the Royal Family The Queen The Duke of Edinburgh
Staff of the Household
The Queen's Lady in Waiting The Queen's Private Secretary The Duke of Edinburgh's Private Secretary Master of the Queen's Household, responsible for State entertainment hosted by Her Majesty The Queen's Assistant Private Secretary, responsible for planning and administering the State visit The Queen's Doctor The Queen's Equerry The Queen's Press Secretary, responsible for all media arrangements	The Director of Royal Travel, responsible for all air movements Five Assistants, Clerks and Support staff Two staff with responsibility for The Queen's wardrobe One member of staff responsible for the Duke of Edinburgh's wardrobe The Queen's hairdresser Eight logistics and support staff, responsible for the movement of luggage, office support, transport, and immigration and customs
Other members of the party
The Minister of State for Foreign and Commonwealth Affairs The Minister's Private Secretary and his Press Officer Four Metropolitan Police Officers	For the Seoul/Yechon/Seoul legs of the tour: The British Ambassador in Seoul and his wife A member of staff from the British Embassy in Seoul

Source: Ev 23-24

23. The Financial Memorandum between the Department and the Household provided no guidance on party size. Since 1997, with the agreement of the Department, the Household had produced detailed guidance to supplement the financial Memorandum. This guidance covered the purposes and modes of travel but said less on party size. Party size might not significantly affect travel costs borne by the grant-in-aid, particularly where there were spare seats on the aircraft. But costs would be increased if party size increased the size of aircraft required for the journey.[23]

24. Sometimes, when there had been spare capacity on chartered aircraft being used for overseas journeys, members of the Press and other media had accompanied the royal party. The Household had charged the media the equivalent fare for the regular scheduled service plus a share, on a pro-rata basis, of any additional cost incurred by the Household.[24]

1 C&AG's Report, para 1.1; Ev 1 Back

2 C&AG's Report, paras 1.3, 1.5 Back

3 ibid, paras 1.6-1.7, 3.2 Back

4 C&AG's Report, Royal Travel by Air and Rail (HC 25, Session 2000-01) Back

5 Ev 1-4; C&AG's Report, para 2.12 Back

6 C&AG's Report, paras 2.8-2.11, 2.30-2.31; Q57; Ev 1, 3-4 Back

7 Qs 32, 40, 99, 153, 173 Back

8 Q28 Back

9 C&AG's Report, paras 2.13-2.14 and Figure 7; Ev 2 Back

10 C&AG's Report, paras 2.12-2.15 Back

11 C&AG's Report, paras 2.17-2.18; Q41 Back

12 C&AG's Report, para 2.18; Qs 28, 41, 211 Back