| THE ALLOCATION OF, AND CHARGES FOR, ACCOMMODATION
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| Allocation of accommodation
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| Evidence, p. 3, paras 12, 14
| 38. There are 285 self-contained flats and houses located across the English Occupied Royal Palaces Estate. The Royal Household's policy is currently to allocate these properties to members of the Royal Family who undertake official duties on behalf of the Queen, employees of the Royal Household as part of their terms of service, and pensioners who have served the Royal Household for at least 20 years and who, for financial or other reasons, would find it difficult to provide their own accommodation in retirement.
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Evidence, p. 4, para 18
Q 155
| 39. The Royal Household told the National Audit Office that their policy now was that, except for accommodation allocated to retired employees, all apartments are employment or post related and occupants are required to vacate them if they cease to be employed by the Royal Household. They told our predecessors that by renting accommodation to staff they were really achieving two objectives at the same time. In order to do a number of the jobs, such as fire patrolman, maintenance person, security person or someone who worked in the stables, staff needed to live near the job and that was a primary benefit and driving force. There was a secondary benefit in terms of finance to the tax- payer in that they used the property to secure a return.
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| Evidence, p. 3, para 18 PAC 40th Report (93-94) HC 316, Appendix 4, pp. 47-48, para 2 Evidence, Annex, p. 8 and Q 96
| 40. The Royal Household have recently completed a review of the self- contained accommodation and in March 1995 told the Department that they planned to make a net reduction of 60 (from 265 to 205) in the apartments allocated to employees. This included a reduction from 56 to 11 in the number of accommodated private secretaries and officials within the Queen's Household and other Royal Households, between the list supplied to our predecessors in May 1994 and the revised list provided by the Royal Household to the Department in March 1995.
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Evidence, Appendix 1, pp. 30-36
Q 15
Evidence, Appendix 1, pp. 30-36
Q 2
| 41. Our predecessors asked the Department what changes had taken place in the duties of the 45 staff no longer required to live in and when the 45 units of accommodation to be released would become available for alternative use. They said that the duties had not changed. The fact that the staff were no longer to be accommodated might cause some inconvenience but the reductions to the housing list were for the posts where there would be the least effect. They stated that this should be compensated for by the improved financial return expected from letting out properties on a commercial basis. Twelve of the properties were outside the security cordons and were expected to become available for commercial letting. Although the other 33 units were within the security cordons, employees might be moved from properties outside to properties within the security cordons, if feasible and economic, thus releasing the former for commercial renting. But future use would be determined when the present postholders left or retired.
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Evidence, Appendix 1, pp. 30-36
Q 3
| 42. Our predecessors also asked what study had been made of the possibility of rationalising the use of the diminishing residential requirement to see if and when the number of Occupied Royal Palaces could be reduced. The Department stated that this matter had been considered and would be reviewed again periodically.
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| Qs 47 and 49
| 43. The Royal Household told our predecessors that, of the 285 flats, houses and apartments, which were used or were available to be used as self-contained residential accommodation, 63 fell outside the security cordons and, in essence, outside the curtilage of the Palaces themselves, and 222 were inside. Within the security cordons, they acted on the advice of the Police, which had been that it would cause them substantial difficulties if apartments were rented out.
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Q 48
Qs 203-206
Q 209-211 and Evidence, Appendix 3, pp. 38-39
Q 48
Qs 199-200
| 44. Our predecessors questioned the Royal Household on the scope for selling the properties that fell outside the security cordon. They said that of those 63 properties, seven were owned by the Secretary of State for National Heritage. They would be sold when they became vacant. The Department were looking to sell one of them in Windsor for around £100,000 and would sell the others, which were probably comparable, as they became vacant, for around £0.75 million. At 31 January 1995 the salary abatements and rent receivable for the six occupied properties totalled £9,048 a year. The Royal Household stated that a further ten properties were owned by the Crown Estate and the balance were owned by the Queen in right of Sovereign. The Crown Lands Act 1702 prevented the Monarch from selling property. Because they were not being sold, these properties had not been valued.
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Qs 5-6
Evidence, Appendix 5, pp. 40-41
| 45. The Department told our predecessors that several of the properties which fell outside the security cordons would be rented out progressively as the period of service of the staff in them finished. That rent income was known as hereditary revenue of the Crown and would flow to the Consolidated Fund. The Department expected that, subject to Ministerial agreement, they would recommend that Parliament voted the income as an appropriation in aid to reduce the level of the grant- in-aid. They would consult with the Royal Household to ensure that a proper rental was obtained and that the grant-in-aid did indeed benefit. The Department have since told our predecessors that two properties were let commercially in 1995-96 and that it was hoped that a further three would be let and one sold in 1996-97 or shortly thereafter.
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| Q 73
| 46. Our predecessors asked the Department why it had suddenly become possible to make such a large reduction in the self-contained accommodation which was to be let to members of staff. They said that three sets of arrangements were coming together. The transfer of responsibilities to the Royal Household in 1991 and the review conducted by the Royal Household and the Treasury of remuneration, pay and grading had provided a platform for the Royal Household to review their overall need and look positively at the opportunity that would arise from being able commercially to rent properties which fell outside the security cordon.
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Q 73
PAC 40th Report (93-94) HC 316, Appendix 4, para 4
PAC 40th Report (93-94) HC 316
Q 316
| 47. The Royal Household emphasised that there was no question that it had suddenly become possible. The revised housing list was something which they had been working on for some considerable time. When they assumed responsibility in 1991 for these matters they had put in train a root-and-branch review of pay, grading and accommodation and these developments had accrued from that. In May 1994 the Department and the Treasury had told our predecessors that the list of postholders to whom accommodation was provided had been considered during the grading and salary review and some amendments were being made. However, in March 1994 the Royal Household had stated that the properties could not be let out for security and legal reasons.
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Q 75
Q 76
Q 75
| 48. Our predecessors asked whether the reduction of 60 accommodated posts arising from their review equated precisely with the number of properties outside the security cordon. The Royal Household said that it did not precisely, but that one of the reasons why the accommodation on the Estate had been used to house staff, had been to secure a return for the tax-payer. If the accommodation had been left empty it would not have been very good for listed buildings and the abatements from salaries would not have been available. When the Royal Household took over responsibility they made the decision that this policy, in future, might only be applied to those properties which were actually within the security cordons.
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| Q 103
| 49. The Royal Household also told our predecessors that there was no doubt that, if it was thought appropriate to rent out apartments within the security cordons, in other words within the main palaces themselves, substantial sums of money could be raised. The implicit advice from successive governments was that apartments within the Head of State's palaces should not be rented out. The Royal Household were not aware of any other country that rented out part of the Head of State's residences.
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| Revenue from lettings
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Evidence, p. 5, paras 19, 22
Evidence, Appendix 5, pp. 40-41
| 50. The salaries of many employees of the Royal Household are abated to take into account the fact that accommodation is provided. Until 1 April 1994 this was not done on a consistent or uniform basis for all employees, and the percentage of salary abated varied from nil to over 17 per cent. The Royal Household's review of remuneration for staff below Civil Service Grade 5 examined this with the result that contracts for all staff from 1 April 1994 require a uniform abatement, irrespective of the size or standard of accommodation provided, of 16.7 per cent of gross salary paid out of net salary. This applies only to new staff engaged from that date and those staff who have chosen to transfer to new contracts. At 31 January 1995, 58 (38 per cent) of the staff with self-contained accommodation paid from the Civil List or grant-in-aid were employed on the new contracts (63 staff (45 per cent) in May 1996).
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Evidence (24.4.95), p. 5, para 23
Q 135
Qs 22-24
Evidence, Appendix 5, pp. 40-41
| 51. The Royal Household estimated that, at 31 January 1995, abatements totalling £315,000 a year were applied to salaries of the 151 staff accommodated in self-contained apartments and paid for from the Civil List and grant-in-aid. This was equivalent to an average of £40 a week, although the actual amounts varied between nil and £355 according to the abatement percentage levied and salary paid. The Royal Household stated that 16 staff were presently still on nil abatement. They said that the average abatement was £73 a week for someone on the new system with an abatement of 16.7 per cent and that it would probably take around ten years until the large majority of occupiers were on a 16.7 per cent abatement. This was a rough estimate depending on when people retired. The Department have since told our predecessors that at March 1996 the annual abatements totalled £327,000 with an average weekly abatement of £45.
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Q 3
Q 10
| 52. The Department said that the review of remuneration, both for staff below Grade 5 level, and for staff at higher levels, a review of which was going on now, tried to ensure that the relationship between remuneration and what was contributed through abatement of salary in relation to accommodation provided, was consistently and fairly applied across all Royal Household staff. That was both those who had accommodation inside the Estate and those who lived outside. The Department expected that the total revenue from salary abatements would, over time, rise to around £700,000 (an average of £83 a week). They did not know whether the Royal Household could indicate how that figure would break down between the Civil List and grant-in-aid, taking account of the possibility of commercial lettings.
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Q 201
Q 102
Q 212
Evidence, Appendix 5, pp. 40-41
| 53. Our predecessors asked the Royal Household for an estimate of the rental income from the 60 properties no longer to be occupied by Royal Household employees. They said that seven of these were to be sold not let (paragraph 43 above refers). For some of the properties in central London they would hope to receive rent of £850 a week. For some of the smaller properties in Windsor and Hampton Court they had been advised to look for something in the region of £150 a week, and that was with basic furnishings, carpets, curtains and kitchen equipment. They hoped that, in due course, as properties became vacant, they could raise about £0.5 million a year. This was quite a speculative figure as they were talking about quite a long way into the future. Some of the rental income, for about ten properties at Windsor, would go to the Crown Estate rather than to the Royal Household. The Department have since told our predecessors that gross income from letting two properties commercially (paragraph 45 above), for periods of nearly four months and two weeks in 1995-96, was £7,962. The cost of furnishings, minor maintenance and legal and estate agents fees were deducted from this.
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Q 213
Qs 217-218
| 54. The Royal Household told our predecessors that such possible rental income compared with staff abatements from these properties at the 16.7 per cent rate of around £200,000, so that they would enhance income, in very general figures, by about £300,000 a year. Part of the difference was because the properties would be provided furnished, part because of the sort of people who might wish to rent them. If they put up the rent too high for the staff who were required to occupy them, they would not have any staff, nor therefore a return for the tax-payer because they would be empty. It was a compromise and the Royal Household thought that the 16.7 per cent figure which the Treasury had come up with was a fair and reasonable figure. It was not intended to be a commercial figure.
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| Evidence, p. 4, para 17
| 55. The Royal Household have in the past nominated the occupants of some apartments in the Estate managed by the Historic Royal Palaces Agency (the Agency). In March 1995 there were 16 such apartments and all but one were provided free of charge. These allocations pre-date the current arrangements for managing properties in the Occupied and other Royal Palaces.
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| Q 122
| 56. The Department emphasised that it was right that they should honour the commitments they had made to people who were there. However, when those persons no longer needed those apartments, they would revert to the management of the Agency and it would be their policy to rent commercially. The Department thought that the figures for rental income would be similar to those for the outlying parts of the Occupied Royal Palaces Estate.
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| Departmental responsibilities for the allocation of, and revenue from, accommodation
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| Evidence, p. 4, para 13
| 57. The Occupied Royal Palaces are vested in the Monarch in the right of the Crown. How the properties should best be used in fulfilling the requirements and functions of the Head of State is a matter for Her Majesty the Queen. The list of occupants is provided to the Department for information.
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| Qs 84-86
| 58. Our predecessors pointed out to the Department that, where accommodation was provided because it was needed for staff to carry out their job and was part of the payment for the job, it could be argued that it was the responsibility of the Department because they were paying for such accommodation through the grant-in-aid, at a cost over the last four years of £1.25 million a year. The Department said that this money was properly spent on maintaining these historic buildings, on having work done for conversions that were necessary, for fire protection, damp proofing and other reasons and was not designed to be part of the remuneration package. The provision of accommodation was treated as a matter of overall remuneration which was not a matter for the Department.
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| Evidence, p. 6, para 27
| 59. With the exception of certain specific payments to the grant-in-aid, salary deductions and abatements in respect of accommodation provided to staff are accounted for by the funding source within the Royal Household responsible for paying their salaries. Therefore at 31 January 1995, £251,000 of the £397,000 annual income and salary abatements was allocated to the Civil List rather than the grant-in-aid.
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| Q 11
| 60. The Department told our predecessors that the reason for this was that the level of abatement was set as a matter of overall remuneration policy rather than as something that was designed to pay for the maintenance costs of accommodation. Salary abatements therefore flowed to the funding source of the salary rather than the grant-in-aid which dealt with the maintenance and utilities costs of the actual fabric of the buildings.
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| Conclusions |
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| 61. We note that the Royal Household have recently completed a review of accommodation and have told the Department that they plan to make a net reduction of 60 in the apartments allocated to employees. As they become vacant, apartments outside the police security cordons will be rented out, or in the case of seven apartments owned by the Department, sold. We note that the Royal Household have been working on this review for some time and we are therefore concerned that the substantial scope for releasing accommodation was not brought to the Committee's attention when our predecessors previously made enquiries.
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| 62. We are surprised that the Royal Household have been able to identify such a susbstantial reduction in the apartments needed by their staff. We note in particular that between May 1994 and March 1995 the number of private secretaries and officials in the Royal Household or other Households that needed to be provided with residential accommodation reduced from 56 to 11. We recognise that the allocation of accommodation is not within the Department's responsibility but they are responsible for ensuring that value for money is obtained for the grant-in-aid. We note the assurance that the possibility of rationalising the use of the Occupied Royal Palaces will be reviewed periodically. We would expect new rental arrangements to be of a form which would not prejudice future rationalisation. We recommend that the Financial Memorandum should be revised to introduce formal arrangements to provide the Department with assurance that the use made of the Occupied Royal Palaces and the official apartments within them is regularly reviewed.
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| 63. We note that salary abatements in respect of staff accommodation amount to £327,000 annually, representing an average payment of £45 a week, but that this is expected to rise to £700,000 (£83 a week on average) as new contracts are introduced. Therefore the abatement of income is currently about £370,000 lower than it would be if the new contracts applied to all staff. The Royal Household estimated that it could take ten years until the large majority of employees are on the new contracts. We note that the revised abatements will still represent payments substantially below commercial rents. But we recognise that the staff allocated accommodation would not be able to occupy apartments at market rents, and that properties within the security cordons would therefore be unoccupied if commercial rents were charged.
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| 64. Whilst the new arrangements will bring abatements onto a consistent basis, we are concerned that, for staff not on new contracts, the percentage abatement of salary varies substantially, with 16 staff having no abatement, and that there will be a long delay before the full benefits are achieved. The Department's monitoring role is obviously of importance to us and we are concerned that the Department did not know whether the Royal Household could forecast the extent to which increased salary abatements would accrue to the grant-in-aid. We look to the Department to monitor closely the achievement of these benefits.
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| 65. We note that the Department intended to seek Parliamentary authority for the income from sales and commercial letting to be used to reduce the grant-in-aid, and that the letting income could total £0.5 million a year, less £0.2 million a year of salary abatements foregone. We note therefore that income from these properties currently is 40 per cent of the anticipated rental income. We note that further income is accruing to the tax-payer as properties occupied by Royal Household nominees in the estate managed by the Historic Royal Palaces Agency become vacant and let commercially. We look to the Department to ensure that savings from letting and selling apartments are maximised and that, subject to Parliamentary authority, they accrue to the grant-in-aid as soon as possible. We note that because most of the properties could not be sold, they had not been valued. We consider that this should not prevent market rental valuations being obtained to facilitate assessment of the value of the property element of staff remuneration.
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| 66. We recognise that how properties are best used in fulfilling the requirements and functions of the Head of State is a matter for Her Majesty the Queen. We note that the Department consider that the provision of accommodation is a matter of remuneration which is not a matter for the Department, whilst the work of maintaining the fabric is not part of the remuneration package. We note that the Department consider that the level of salary abatement is set as part of remuneration policy and is not intended as a payment for accommodation, so the abatements benefit the funding source from which the salaries are paid. It appears to us anomalous, however, that whilst the Department can plan to offset the receipts from the sale and commercial letting of apartments which are no longer needed against the substantial costs of maintaining apartments borne on the grant-in-aid, they cannot offset much of the revenue from those apartments which are still required, and they have no role in determining how many should fall into each category.
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