The Firm: The Troubled Life of the House of Windsor (6 page)

By the time Michael Peat was due to return to Peat Marwick McLintock (by now renamed KPMG), in 1993, there was a great deal going on in which he was heavily involved. Fire had devastated Windsor Castle; another new department – Royal Enterprises, the trading arm of the Royal Collection – was just coming on-stream; there were plans for Royal Travel, Communications and the Historic Royal Palaces – all changes that he had recommended in his report – and he was far too busy to leave. KPMG, who had been paying him a very generous partnership share all the while, began to get restless and Peat had to make a choice: to stay at the Palace and see through what he had begun, or go back to a very lucrative number in the City and amass a fortune for his declining years. To his family’s chagrin he opted to stay, becoming Keeper of the Privy Purse, and has so far resisted all enticements to return. Indeed, in 2003 he took on the ultimate challenge and became
Private Secretary to the Prince of Wales, just in time to field the fallout from the Burrell trial.

Peat is not universally liked; he is frequently described as lacking charisma, being a faceless accountant, a cold fish; but new brooms are seldom liked and it’s too easy to attach damning labels. He was effecting radical change in a cosy, hierarchical environment and interfering with working practices that no one has questioned for decades. He disturbed some well-feathered nests. No wonder he upset a few people along the way. As he has been heard to say, ‘We changed a huge amount in terms of the head; whether we changed the heart I don’t know.’ The heart was easier to change in those areas where staff were better educated, among those who come into the Palace in administrative posts – finance, press, property, private secretaries – but it was more difficult to change the heart in the domestic areas, the Mews, the Master of the Household’s department, areas where there was a very strong military background.

Educated at Eton and Oxford, Peat is tall and slim, a year younger than the Prince of Wales and two years younger than Robin Janvrin. I first met him in April 2003, shortly after his move to St James’s Palace. He was impeccably mannered, charm itself and as cool as a glacier; I was happy then to believe what people said about him. But I have changed my view; I had known and liked Mark Bolland – and Peat was making a break with the past and the methods of the past. I was probably seen as part of that and I think he was expecting hostility. He was in a new job, he had the reputation of being a ruthless accountant, and the Prince’s staff, members of which had always enjoyed a more luxurious life than their counterparts across the Mall, were extremely wary. First impressions were misleading. Peat is far from glacial and far from grand; he makes his own calls and answers his own telephone (as
opposed to routing calls through his secretary, as many at his level do); he gets around London on a bicycle; and he has a real life outside the Palace with a wife, three children and a farm in Berkshire. Given what he has achieved over nearly twenty years, he is remarkably self-effacing.

During the period of his secondment, in 1991, Peat began working on new tax arrangements for the Queen. He had decided not to mention tax in his report, but, having looked at her finances from top to bottom during its preparation, he felt strongly that the Queen could and should be paying income tax. He knew it was a matter that needed careful handling; the Queen had never paid tax, but that was not a tradition that went back generations. Queen Victoria and Edward VII had both paid tax, George V and George VI had paid tax on investment revenue, and complete exemption only began at the start of the present Queen’s reign in 1952. However, the feeling in the household had always been that the Queen could not afford to pay tax and maintain her current lifestyle, given her outgoings: she was paying for her children and other members of the Royal Family, paying for the upkeep of Balmoral and there was the small matter of horseracing. There was also a fear that any change would involve time-consuming legislation.

But the tax issue was inflicting grave damage and David Airlie was in full agreement with Peat. The monarchy was coming under heavy fire from the media on a number of counts, but the underlying malaise was its expense. The Waleses were at war with one another, Prince Andrew had married Sarah Ferguson, who was proving to be too much the girl next door and had an appetite for parties and holidays, and Prince Edward had shown himself to be arrogant and petulant. People were beginning to question why the taxpayer should be paying for the Royal Family to live the life of Reilly
when they were patently no better than anyone else. The Palace had always been very coy about how much the Queen was worth, and in the absence of hard information journalists speculated. She was consistently reported to be worth billions; in 1989 the American business magazine
Fortune
placed it at £7 billion, making her the world’s richest woman and the world’s fourth richest individual. It was wildly inaccurate, but in PR terms it didn’t matter. While the rest of the country paid tax on their comparatively meagre incomes, she was exempt; and the Prime Minister’s announcement in 1990 that her income from the Civil List was to be increased by more than 50 per cent as part of the ten-year deal simply added insult to injury.

Peat’s first challenge was to convince the household that the Queen could in fact afford to pay tax and still maintain a lifestyle commensurate with her position as sovereign, and then to convince the Treasury and the Inland Revenue that this could be done without a change in the law. Once he had Airlie’s support, neither challenge proved insurmountable; and in February 1992 he set up a small working group with representatives from both the Treasury and the Inland Revenue to work out the detail. The plan was to announce the scheme in April 1993.

On 20 November 1992, however, five months before the proposed announcement, catastrophe struck. Fire broke out at Windsor Castle, the oldest of all the royal residences and the only one that has been in continuous use since William the Conqueror selected the site for a fortress after his conquest of England in 1066. The fire began in the Private Chapel when a curtain that had accidentally been touching a spotlight for a prolonged period burst into flames. By the time the alarm was raised fire had taken a firm hold of the north-east wing and smoke was billowing from the roof. It took fifteen hours and
a million and a half gallons of water to put out the blaze. Mercifully no one was injured, and thanks to the Duke of York, who hastily organized a rescue operation, most of the artwork was moved to safety, but the fire caused millions of pounds’ worth of damage to a glorious and historic building that was uninsured. Nine principal rooms and more than a hundred others over an area of nine thousand square metres were damaged or destroyed by the fire – approximately one-fifth of the castle area.

The Duke of Edinburgh was in Argentina at the time and spent hours on the telephone trying to console the Queen. She had stood watching her childhood home burn, a small, sad figure in a mackintosh with the hood pulled over her head. She was clearly distraught and the nation felt huge sympathy. But that sympathy quickly evaporated when the Heritage Secretary, Peter Brooke, announced that since the castle had been uninsured the government would foot the bill for the repairs, estimated at between £20 and £40 million. ‘When the castle stands, it is theirs,’ wrote Janet Daley in
The Times.
‘But when it burns down, it is ours.’

And so, when John Major rose in the House of Commons six days after the fire and announced that from 1993 the Queen and the Prince of Wales would pay tax on their private income and that Civil List payments of £900,000 to five other members of the Royal Family would cease, it looked as though the Palace had been bounced into paying tax as a placatory measure. How the tabloids crowed.

It was very bad luck, because all they had actually been bounced into was making the announcement earlier than they had intended – and instead of gaining brownie points for having volunteered the idea, the Palace was once again caught on the back foot apparently reacting to bad publicity. In fact Airlie and Peat had not yet talked to the Queen about the
detail of their proposals. She knew that they had undertaken a study into the feasibility of her paying tax but the whole business had been enormously complex and, although they had almost completed it, it was not yet entirely ready when the flames took hold.

In the end the restoration work at Windsor Castle was completed at no extra cost to the taxpayer – and in a round-about way at considerable pleasure to visiting tourists. The irony was that, having worked so hard to become masters of their own destiny, the newly formed Property Services department was landed with the awesome task of repairing the damage. It took five years to complete and turned out to be the biggest and most ambitious historic-building project to have been undertaken in this country in the twentieth century. Privately it was a nightmare. First, all the debris had to be cleared and the salvaged pieces sorted, dried out and numbered. Next the building had to be stabilized, then re-roofed. Some of the rooms were restored and reinstated as they had been before the fire to accommodate the original furnishings and works of art that had been rescued. Other areas, such as the Private Chapel where the fire had started, were so badly damaged they had to be built from scratch. Miraculously, it was completed six months ahead of schedule and came in £3 million below budget. The final cost was £37 million. To help pay for it, Michael Peat suggested opening the state rooms at Buckingham Palace to the public. This could only be done for eight weeks of the year, during the summer when the Queen was in Scotland, but it proved so popular that it paid for 70 per cent of the total cost of the work. The shortfall was met by the annual Grant-in-Aid funding by Parliament for the maintenance and upkeep of the occupied palaces. But it was a very difficult period and one on which everyone looks back in horror.

Another major fault highlighted in Peat’s report was communication; and it was certainly my experience over the years that the right hand never knew what the left was doing. Press officers seldom appeared to know what the private secretaries were briefing and vice versa, and there was no sense that the various members of the family were all working either for the same outfit or towards the same goal. Peat didn’t criticize the private secretaries in other respects, but he found the idea of forward planning or discussing arrangements for their principal with other households within The Firm anathema. It was perfectly possible, and certainly not unknown, for two members of the family to have been visiting the same town on the same morning and know nothing about each other’s visit until they met in the high street.

There was another problem. They were constantly being caught on the wrong foot, always reacting to problems and situations, waiting for criticism rather than pre-empting it. The solution, devised by David Airlie, Michael Peat, Robin Janvrin, then the Queen’s Deputy Private Secretary, and Charles Anson, her Press Secretary from 1990, was The Way Ahead Group, which first met in September 1994. Hard to believe that so simple an idea had to wait until 1994. It was an informal
meeting which took place every six months between the Queen, the Duke of Edinburgh, the Prince of Wales, the Princess Royal, the Duke of York and the Earl of Wessex plus their private secretaries and other senior courtiers to map out the coming half-year and discuss anything of importance. According to a leaked agenda from a meeting in 1996 that could mean a discussion about the possibility of abandoning primogeniture – and allowing the firstborn, whether male or female, to inherit the throne – abolishing the ban on heirs to the throne marrying Roman Catholics, ending the monarch’s position as Supreme Governor of the Church of England and reducing those working for the Family Firm to include only the consort, children and grandchildren directly in line. The constant surprise is that the Royal Family doesn’t discuss any of these sorts of topics with one another on their own; it takes prompting from their courtiers and the structure of a formal group. Privately their talk tends to revolve around the domestic scene: dogs, horses, sporting pursuits and Estate matters, interspersed with dirty jokes and nudges in the ribs. This is not a family that enjoys debate or intellectual conversation. ‘Some people regard “bugger” as a term of abuse,’ says a former courtier. ‘The Royal Family uses the word “intellectual” in much the same way.’

‘They do communicate in the oddest way,’ agrees another, echoing everyone I have known who has ever worked for the Royal Family. ‘It’s a very close family, but they don’t communicate directly. They let other people take soundings; they never say “I’ll talk about it with whomever” over the weekend. They do it through private secretaries or press secretaries. It’s very cumbersome.’

‘They used to write each other memos all the time, but that’s changed a bit,’ says one lady-in-waiting. ‘They no longer commit anything to paper that they wouldn’t want
to see on the front page of the
Daily Mail
.’ Unfortunately for the Prince of Wales, an inveterate memo writer, old habits die hard. An internal memo sent to Mark Bolland, his Deputy Private Secretary at the time, about a secretary he thought ‘so PC it frightens me’ turned up in an industrial tribunal and was on the front page of every newspaper as recently as November 2004 and sparked off a massive row about education. The then Secretary of State for Education, Charles Clarke, weighed in and openly criticized the Prince of Wales for meddling in something he knew nothing about, thus breaking the convention that members of the government never criticize members of the Royal Family in public. In fact the Prince of Wales knows a damn sight more about education than most politicians, but it would be a shame to let the facts get in the way of giving the Prince a good kicking.

It has to be said that safe methods of communication are diminishing. The Duke of Edinburgh has seen his private letters to the Princess of Wales published for public consumption courtesy of Paul Burrell and his book, and the Prince of Wales knows all too well about the dangers of mobile phones, after finding his amorous late-night ramblings intercepted and dished up for the world’s entertainment. No wonder he doesn’t use email.

The Prince, in fact, still writes everything in longhand, pages and pages with plenty of underlining for emphasis. He fires off memos to his staff and to his charities – Julia Cleverdon at Business in the Community calls them ‘black spider memos’ because of the colour of his ink and the frantic scribbling as his pen tries to keep up with his thoughts. And he writes letters, a habit he acquired long ago, with no apparent thought about them falling into the wrong hands.

Says a former courtier:

He’s one of the great letter writers, except he needs an editor; his letters are far too long. But most people find letters of condolence the most difficult things to do. He would just sit down, pick up his pen and do four pages, or whatever, and it was always absolutely brilliant. He’s a very emotional man and his emotions, unlike ‘British’ emotions, are right there, available and articulated. That’s why he likes the descendants of Winston Churchill so much; they’re very given to tears. He likes the idea of people breaking into tears.

Charles finds he can express himself with a fountain pen. He has never used a computer and has no plans to start now, but his Luddite tendencies are not reflected elsewhere in The Firm. His father, now in his eighties – nearly thirty years older than Charles – was probably one of the first people in the land to own a laptop and has been writing letters on it and using email for as long as email has existed. Even the Queen is ahead of her eldest son. During a trip to Brunei in 1998 she remarked to the Sultan’s family, ‘I can’t write any more. I can only write on computers. You can rub things out. It’s so simple.’ The Duke of York is another devotee and has all the very latest hand-held wizardry, like his younger brother. Having worked in the film business, Edward is entirely familiar with computers and better than most at knowing how they work. Wandering into the Press Office at Buckingham Palace one day he found Ailsa Anderson, Assistant Press Secretary to the Queen, staring forlornly at a dead screen and immediately fixed it for her. The surprising thing about Edward is that for all that exposure to the real world, and all the nice touches that people report time and again, he is the most regal of all his siblings and in some respects the least relaxed about royal protocol.

The brainstorming that produced The Way Ahead Group
threw up another good idea: the creation of a department that has no ties with the past and is staffed by no one with a military career behind them. The Coordination and Research Unit (CRU), which was set up in 1995, is currently run by Paul Havill, a civil servant who came from the Office of Fair Trading and is on secondment for three years, which has since been extended. He is the third incumbent. His two assistants are always from the private sector – usually from companies like Price Waterhouse or Arthur Anderson – and stay for a year, perhaps two. ‘The idea is to keep the fresh thinking and dynamism from the private sector coming into the heart of the private secretaries’ office.’ He works directly for Robin Janvrin, his assistants for Janvrin’s deputies.

With the best will in the world they need that fresh thinking and dynamism. It is very easy to lose touch with reality if your life is spent at Buckingham Palace. It may be more efficiently run than it ever was, but how many other offices in London have Old Masters on the walls, Georgian tables doubling up as desks and priceless works of art decorating every corridor? It’s only when you catch sight of computers, fax machines and filing cabinets that you realize this is neither a museum nor an art gallery. If you are travelling with the Queen you may visit schools and hospitals and meet a wide cross-section of society but you still travel with outriders, still walk on red carpet, and still, in the main, meet people who are pleased to see you. It is an unreal existence and it’s seductive, particularly when you stay for ten, fifteen or twenty years, as most of the Queen’s private secretaries do. Staff at lower levels are very often in royal service for life.

Michael Peat tried to put an end to that, suggesting short-term contracts of five years or so and retiring most jobs at sixty, although government policy on retirement will up that in future. It was a revolutionary idea and one that has upset
some of the old guard. ‘In the old days people went there for life,’ says one. ‘It wasn’t for the money – there never was any – but they were proud to work for the Royal Family, it was a privilege. Today they just go there to get something on their CV; there’s no loyalty any more.’ However, having a constant flow of new blood coming into the Palace, bringing experience of the outside world with them, looking at the business with fresh eyes, not indoctrinated by the protocol or intimidated by the hierarchy, is undoubtedly good. And the fact that they are no longer coming exclusively from the Armed Forces is another giant plus. Loyalty is another issue. In the wake of the
Daily Mirror
reporter Ryan Parry taking a job inside the Palace – the final straw after a spate of revelatory books from former servants like Patrick Jephson, Ken Wharf and Paul Burrell – the confidentiality clauses in all royal employment contracts have been considerably tightened.

The man in charge of personnel and all matters financial is Alan Reid, the Keeper of the Privy Purse – old title, new man. He arrived in 2002 aged fifty-five, having been Chief Operating Officer at KPMG. A Scot, educated at Fettes and St Andrews, he was one of 234 applicants for the job. As with all senior appointments at the Palace these days a headhunter was used, but the job was also advertised on the open market. One of the applicants, from Australia, either a wag or understandably confused by the job title, said he ‘would be happy to carry Her Majesty’s handbag’.

‘People used to think we couldn’t take action, but we took an injunction out against the
Mirror
and Ryan Parry, and all staff in the Palace have signed new, tighter undertakings of confidentiality.’ Most of the challenges Alan Reid has faced since he began the job, he admits, have been to do with personnel and security. ‘They could publish in the United States and over the internet here, so it’s not foolproof, but we can and
will take action in terms of anyone making money in this country; all money will go to charity. It used to be that if your principal had died, the undertaking of confidentiality died with him or her.’ This is how those people who worked for the Princess of Wales were able to publish with impunity after her death. ‘Now contracts are in the sovereign’s name and the sovereign never dies.’

The point of the Coordination and Research Unit is two-fold, and, unusually for job titles within the royal household, implicit in the title. It coordinates the family’s activities ‘because we want to have a joined-up, working-together sort of family’, as Paul Havill puts it. ‘There was a feeling that the different households didn’t know what the others were doing; each member has their own office and their own patronages and interests and there was a need to bring them together, to be more coordinated.’ Paul goes to all the six-monthly planning meetings when each member of the family sits down with their own staff to map out their diaries for the following six months. He advises everyone of the Queen’s movements. There is a pecking order in The Firm and she is at the top, then the Prince of Wales and so on down the line of succession (excluding, for these purposes, Prince William and Prince Harry who don’t yet carry out official engagements), and their planning meetings are held in order of precedence. Each member needs to work around those higher up the food chain, and if someone is needed to cover for the Queen, a date that she can’t make but an engagement which needs some sort of royal presence, Paul puts in his bid for another member of the Royal Family to take it on. And because he has an overview of what everyone is doing, if there is a disaster somewhere, such as the Madrid bombings, he can find a member of the family to drop everything and go.

And, as the name suggests, the CRU researches. ‘It provides
an executive resource for the Queen’s private secretaries’, in civil service-speak; effectively it is a Palace think tank, picking up on what’s going wrong in the Family Firm and coming up with ideas for doing things better. And in the aftermath of Diana’s famous
Panorama
interview in 1995 – which happened at much the same time as the CRU was being set up – there was a strong feeling among the Queen’s staff that quite a lot was going wrong and the Princess of Wales was stealing a march on them all.