5th March 2007 Dear Mr Henshaw, Thank you for your letters of ...

CLARENCE HOUSELONDON SW1A 1BAFrom: The Principal Private Secretary to TRH The Prince of Wales and The Duchess of CornwallDear Mr Henshaw,5th March 2007Thank you for your letters of 22nd and 28th February. The points that youhave raised, noted in bold, and my responses are given below.22nd FEBRUARY1. Political interference(i)The Prince of Wales makes his views known on political issues andmatters of public policyYou have not provided any examples of The Prince of Wales expressingpublicly views on political issues and failing to be politically neutral and Ido not believe that there are any. Most people, including most politicians,do not regard the views expressed by The Prince of Wales as political or asan attack on government policy. The National Gallery extension andmodern farming methods would not be regarded by most people as“political” issues.The misunderstanding may derive, in part, from your use of the phrase“matters of public policy”, which is not synonymous with “politicalissues”. It is generally accepted that Members of the Royal Family shouldbe politically neutral. There is also a strong convention that Members ofthe Royal Family may be involved with charitable activities. Many if notmost charitable activities are addressing “matters of public policy”;however, this involvement by Members of the Royal Family has neverbeen a concern, and indeed has been welcomed, provided, of course, thatthe charities are not political and that the Members of the Royal Familyinvolved remain politically neutral.

It may be helpful in this respect if I explain The Prince of Wales’sapproach, which is that of someone who cares deeply about the well-beingof the United Kingdom and everyone in it, and who wants to add value tohis position by helping people and making a difference for the better.Part of this is helping charities (he raised directly or indirectly over £100million for charity last year) and ensuring that views held by many peoplewhich otherwise might not be heard receive some exposure; however, HisRoyal Highness is always very careful to ensure that he is not politicallycontentious or party political, and as far as I am aware even his most ardentcritic has never suggested that he is. For example, a previous DeputyPrivate Secretary in this Office in his evidence as a witness for AssociatedNewspapers against The Prince of Wales said that The Prince “was neverparty-political”. If an issue becomes party political or politicallycontentious after His Royal Highness has raised it, for example GM crops,he will not do so in public again.When His Royal Highness’ Office is in any doubt as to whether commentsto be made by The Prince might be regarded as “political” we are alwayscareful to show a draft to the relevant Government Department.Our extensive correspondence from members of the public suggests thatthe vast majority of people are grateful that The Prince of Wales raisesmatters in this way and works so hard for charity.I should add, in case the matter arises, that The Prince of Wales never saidthat McDonalds should be banned, as confirmed by the lady to whom hehad been speaking.(ii)The Prince uses his position to “meddle” in public life and to lobbybehind the scenes to try to influence Government policyWith respect to views expressed privately to Ministers and others, ratherthan being “abuse” it is generally accepted that the Heir to the Throneshould be aware of the business of Government and that correspondencebetween Government Ministers should be treated as private andconfidential on all sides. It is also The Prince of Wales’s right as a PrivyCouncillor to consult and advise his Privy Council colleagues on a privateand confidential basis. Furthermore, Parliament confirmed in Section 37 ofthe Freedom of Information Act that communications between Members ofthe Royal Family and Ministers should generally remain confidential.In other words, neither constitutional convention nor recent legislationsupports the contention “that because the Prince’s interference is secret andbeyond scrutiny, The Prince is abusing his unique position as The Prince ofWales”.The Prime Minister summed it up well in an answer at a press briefing on23rd February last year.

“I find that what Prince Charles certainly has talked to me about andwritten about is exactly what you would expect. I think that it is completelyunreasonable not to expect that he has views or that he transmits them toGovernment Ministers; but they are not views that I have ever, everregarded, I have to say, as party-political in that sense at all. You know, forexample, he will raise issues sometimes to do with the rural community, orissues to do with, say, voluntary organizations in the UK, which I actuallyfind perfectly helpful and I think you know you can get a very exaggeratedview of how much this happens. I personally don’t think it has ever causeddifficulties for Ministers.”Similarly Lord Falconer said on the Today programme on the same day:“I think that it is perfectly appropriate for somebody in The Prince ofWales’ position to have views about the countryside, about climate change,about big environmental issues, about the Armed Forces………You cannothave views without some people disagreeing with them. That does notseem to me necessarily to involve straying into politics.”The examples you give of The Prince interceding in political issues, thedesign of the National Gallery, modern farming methods, Atlantic salmon,foot and mouth disease, badgers and alternative health, are not, I believe,regarded as “political” by the vast majority of people and my strongexperience is that his comments in these areas have generally beenwelcomed; having said this, His Royal Highness has never spoken in publicabout badgers or the policy of managing foot and mouth disease.It would also, in my view, be more damaging to the Monarchy if ThePrince of Wales did not take advantage of his position to help with issueswhich matter to ordinary people, but which have not found their way ontopolitical agendas. For example, The Prince’s Trust, which has helped wellover half a million young people, would not have been possible if youthdisadvantage were deemed to be a “matter of public policy” and a politicalissue.As His Royal Highness put it when interviewed by Sir Trevor McDonald tomark the 30th anniversary of The Prince’s Trust:“ I think it would be criminally negligent of me to go round this country andelsewhere in the world, and not to want to try and do something about what Ifind there; and if I can bring people together in order to try and tackle the gapsthat exist, and perhaps to remind people of areas that need attention ……..then I think that it is my duty to do so.”

(iii)The Prince’s views are emotional and unscientific, and involve weirdreactionary causes which he has not understood very well and have attimes been driven by self-interestWith respect to His Royal Highness’ views being emotional rather thanscientific, in most areas he has been proved right, very much includingfarming, young people, climate change and the built environment. Mostpeople would, in addition, not describe these as weird reactionary causes,and the results which he has achieved and the support he has received donot suggest that he has failed to understand the issues.His Royal Highness always consults widely before expressing a view on anissue and uses a wide range of expert advisers.Furthermore, the purpose of The Prince’s Foundation for Integrated Healthis not to promote the use of alternative treatments but to explain andencourage an “integrated” approach to healthcare. A brochure explainingthe charity’s approach and activities is enclosed. The Foundation hasreceived funding from the Department of Health to support its work andhas independent trustees.It is a grossly misleading to suggest that The Prince’s actions have beendriven by self-interest. His whole working life is devoted to charitableactivities and to supporting others, and the one example that you give - thathe advocated ways to prevent the spread of Bovine TB just to protect hisown small herd at Highgrove – is entirely incorrect.(iv)The Prince has a secretary specifically to deal with letters to influentialpeopleHis Royal Highness does not have a secretary to deal with letters toinfluential people (his Office is organised on a portfolio basis, please seethe enclosed copy of our Annual Review in which details of staff areprovided) and he does not write letters to influential people “on a dailybasis”.(v)The Prince’s interference in policy matters could lead to aconstitutional crisis when he becomes KingIt hardly needs saying that The Prince of Wales, of all people, knows thatthe role and duties of the Heir to the Throne are different to those of theSovereign and that his role and the way he contributes to national life willchange when he becomes King. In other words it is misconceived andentirely hypothetical to suggest that problems will result if The Prince ofWales fulfils his role in the same way when King. He will not.This misconception may underlie a number of the points raised in this firstpart of your letter. The roles of the Sovereign and the Heir to the Throneare different, and while The Queen as Head of State has a clearly defined

ole The Prince of Wales as Heir to the Throne does not. Some people towhom you have spoken seem to suggest that His Royal Highness shouldnot seek to participate in and make an active contribution to national life,but just wait to become King; however, most people feel that in a valueadded age this would represent a failure to take advantage of His RoyalHighness’ position to help people and make a difference for the better. Allagree that The Prince of Wales should be politically neutral and it has beena remarkable achievement by The Prince during the past thirty-five years orso to contribute so much in so many areas, particularly through hischaritable activities, without any suggestion at any time that he has beenanything other than politically neutral.2. The Prince’s Foundation for Integrated Health(i)The Prince’s Foundation for Integrated Health encourages the NHS tospend money on alternative medicineWith respect to the assertions about The Prince of Wales’s interests inhealth, he devotes a great deal of time and effort to trying to help those whoare suffering through illness or disease, from his patronage of some of themajor cancer charities and a number of hospice organisations for theterminally ill, to numerous hospital visits across the country. Heestablished The Prince of Wales’s Foundation for Integrated Medicine,which later became The Prince’s Foundation for Integrated Health, toexplain and support an integrated approach to healthcare, i.e. one which:• emphasises prevention and self-care,• looks at the person in the round, taking into account the effects onhealth of lifestyle, environment and emotional wellbeing, and• brings together the safest and most effective aspects of mainstreammedical science and complementary healthcare.As explained in the enclosed booklet, the Foundation seeks to inspire,engage and support health practitioners to work together to provide thewidest possible patient choice. It also works with health policy makers tohelp create a health service where the best of all healthcare is the norm.There was some correspondence between The Prince and the thenSecretary of State for Health, Frank Dobson, between 1997-98 on theprovision of integrated healthcare, but we are unable to find any mention ofa request for £10 million funding from NHS (or any other) funds forresearch into alternative health treatments. We should be grateful if youwould provide us with your evidence for this.You say that “…the Foundation has an agenda to encourage the NationalHealth Service to spend more money on alternative medicine, which isimproper for a charity established and so publicly supported by ThePrince”.

As is clear from the enclosed booklet the Foundation has no such agendaand it does not support or promote ‘alternative’ medicine. ‘Integratedhealth’ is the use of the best of all healthcare for the whole person. TheFoundation for Integrated Health does not encourage anyone, directly orindirectly, to refuse conventional treatment in favour of ‘alternative’methods. The Foundation believes that safe and effective complementarytherapies can play a useful part in promoting health and wellbeing, but itspecifically encourages anybody considering the use of complementarytherapies to consult his or her GP before doing so.(ii)The NHS paid for a publication which runs contrary to the officialNHS viewFollowing the Foundation's application for a £20,000 grant to produce ThePatients’ Guide on Complementary Medicine (sic), the Department ofHealth remained involved throughout the process and at no time expressedany concern about the contents of the Guide. In the Foundation’s view, theDepartment’s officials were entirely satisfied that the Guide had deliveredproperly on the basis of the original proposal. Please may we see yourevidence that this was not the case?Also, you say that “…when it was published, all evidence on safety andeffectiveness was omitted”; however, under the heading “What informationis there?” (pages 9-12), the Guide points readers to many sources ofinformation describing research and evidence about safety andeffectiveness of therapies. This allows the reader to check the latestinformation online, as well as to seek information from more than onesource.Furthermore, you say that “…critics believe the Guide is dangerous in thatthe advice it gives may encourage patients reading it to discontinueconventional treatment in favour of alternative therapies”; however, theGuide goes to great lengths to encourage patients to discuss treatment withtheir GPs before starting or ceasing any treatment:o under “Important points to be aware of before having treatment”there is a section called “Have you seen your doctor first?” (p8); itsays, among other things, “It is important that your doctor has thechance to rule out any dangerous or life-threatening illness and todiscuss treatment options with you”; ando another section (on the same page), “Keep everyone informed”,states “This is very important for your safety and includes tellingyour doctor what complementary treatments you are taking andletting your complementary practitioner know about any medicinesyour doctor has prescribed for you and any other complementarytreatments you are having…Different treatments can sometimeshave an effect on each other, which could make them work less

well, cause unpleasant side effects or be dangerous foryou…Always try to discuss your decisions about usingcomplementary medicine with your GP, practice nurse or hospitaldoctor (including your midwife or obstetrician, if you arepregnant)…Ideally, you should keep all healthcare professionalsinvolved in what you are doing so they can work together to helpyou get the best healthcare.”Five strong endorsements of the Patients’ Guide, from the GMC, BMA, theBritish Pharmacological Society, the Royal Pharmaceutical Society ofGreat Britain and the Wellcome Trust are referred to in the separate letteron this subject which has been sent to you by the Chief Executive of ThePrince’s Foundation for Integrated Health.(iii)The Prince and his Foundation for Integrated Health tried to influencethe MHRA behind the scenes in relation to homeopathic treatmentsContrary to your assertion, we have no record of The Prince of Waleswriting to the Medicines and Healthcare Products Regulatory Agency inrelation to homeopathic treatments, nor has he met the Agency’s Chairman,Professor Sir Alasdair Breckenridge “clandestinely” as you allege. HisRoyal Highness has met Sir Alasdair on two occasions. Once at a meetingin 2003 at St James’s Palace also attended by several others, an officialengagement which appeared in the Court Circular, and once when heconferred Sir Alasdair’s knighthood at an Investiture ceremony withseveral hundred people present.More recently, there was a meeting which took place in July 2005 atHighgrove, chaired by The Prince and attended by MHRA representatives(but not including Sir Alasdair), but it was to discuss herbal medicinesrather than homeopathy. This meeting was also recorded in the CourtCircular.Given that your two central suggestions are incorrect, there was noclandestine meeting and The Prince of Wales did not correspond with theMHRA on homeopathy, your conclusion that he may have influenced thepolicy and announcement by the MHRA on 1st September 2006 of “a newscheme to improve and strengthen the regulation of homeopathic medicinesin the UK” (MHRA press release 01/09/2006) is clearly erroneous.Furthermore, the new scheme announced by the MHRA in September 2006had its origins in the Directive on Homeopathic Medicinal Products,92/73/EC (later incorporated into Directive 20011/83/EC, the main EUDirective governing medicinal products) ratified by the European Union in1992.The Directive brought into European law a mechanism for registeringhomeopathic medicines. Clause 14 of the Directive allowed for what isreferred to as “Simplified Homeopathic Registration” whereby

homeopathic medicines without indications for use could be freely sold onthe European market. All EU Member States were required to implementthis Clause within a specified time period. Clause 16 permitted, but did notmake mandatory, the drawing up of “national rules” to allow homeopathicmedicines with limited indications for use to be sold within individualMember States. Several Member States implemented this latter clause quitequickly – last year it was implemented into UK law, 14 years after theoriginal Directive was ratified.The Prince did not influence this process, nor the MHRA’s announcementlast year.(iv)The Smallwood report was a political document and an attempt byThe Prince to shape public health policyPlease find at A a detailed response to the various points you make aboutthe Smallwood Report written by Christopher Smallwood himself. Inaddition, I provide some comments below.You say that “…this document, which was aimed at Ministers, was apolitical document…” There was never any suggestion that this report was“aimed at Ministers” and this was not the case.You state that : “…it was overseen by an accountant with no medicalbackground.” The report did not purport to be a medical document. It wasspecifically aimed at examining the costs and benefits of complementarymedicine, i.e. it was an economic analysis written by an economist (not anaccountant).(v)The Prince, through his Principal Private Secretary, wrote to ExeterUniversity to put Professor Edzard Ernst’s career in jeopardyYou say that “…as a result of Professor Ernst expressing his reservationsabout the Report to the media, the Prince, through his Principal PrivateSecretary, wrote a letter of complaint about the Professor to the ViceChancellor of Exeter University, alleging a breach of confidence.” Thisletter was not prompted by His Royal Highness and he was not even awarethat it had been written. The letter was sent at the express request of theTrustees of the Foundation for Integrated Health and it was made clear inthe letter that I was writing as the Foundation’s Chairman, as well as ThePrince’s Principal Private Secretary. A copy is attached at B. The Trusteeswere extremely concerned – two Professors in particular – at the apparentbreach of confidence by Edzard Ernst who had commented in detail to anewspaper about early drafts he had been shown, in confidence, by thereport’s author, Christopher Smallwood. The view was expressed byeminent practitioners and academics at a meeting of the Foundation’sBoard that it was highly unethical to comment publicly on draft reports inthis way. The Foundation’s trustees would be pleased to confirm this. Inother words it is entirely incorrect to suggest that the letter was “an attempt

y The Prince to silence the Professor and potentially put the Professor’scareer in jeopardy.” The fact that The Prince’s Foundation for IntegratedHealth has a number of eminent medical practitioners and academics astrustees, who are responsible for the charity’s operations and policy, is apoint which I am sure you will make in your programme.You may also want to take note of the enclosed (at A) copy of a letter fromthe editor of The Lancet to The Times newspaper in which he says:“……Professor Ernst seems to have broken every professional code ofscientific behaviour by disclosing correspondence referring to a documentthat is in the process of being reviewed and revised prior to publication.This breach of confidence is to be deplored.”3. Financial arrangements(i)The Duchy paid no Capital Gains and Corporation TaxAn organisation cannot pay corporation tax and income tax. Companiesalone pay corporation tax, while partnerships, sole traders and individualspay income tax. Most large estates, and indeed large legal, accountancy andother professional partnerships, are not companies and pay income taxrather than corporation tax. The Duchy of Cornwall falls into this categorywith income tax paid in full on its revenue profits. Details are given in theenclosed copy of our Annual Review.The Prince of Wales pays capital gains tax on all capital gains which hereceives. Like everyone else he does not pay capital gains tax on capitalgains which he does not receive and which do not belong to him. He has noright to the capital gains made by the Duchy of Cornwall, or indeed to theDuchy’s capital in any way, and therefore does not pay tax on them.Capital gains tax is not paid on the capital gains made by the Duchy ofCornwall because they are not distributed, indeed the gains can only bereinvested within the business and cannot be withdrawn. As the Treasurypointed out in its reply to the Public Accounts Committee, this does not putthe Duchy at an advantage compared with other property organisationsbecause “other very significant organisations operating in the investmentproperty market face similar tax treatment to that of the Duchies”.Furthermore, when capital profits are not distributed the gains can often beoff-set for tax purposes by means of roll-over or hold-over relief. In otherwords £11 million is far from the mark and while no calculations have beenmade little capital gains tax may have been foregone.

(ii)The Prince of Wales paid rent of £336,000 to himself for HighgroveThe Prince of Wales is paying himself rent of £336,000 a year forHighgrove because, if he did not, he would be avoiding tax of £134,400(i.e. 40% of £336,000). If the management of the Duchy said “don’t botherto pay the rent as we will only pay it back to you as part of the revenuesurplus” it would mean that the Duchy’s surplus, which is subject toincome tax as mentioned above, would be understated for tax purposes. Inaddition, the Duchy is required to charge all its tenants rent.(iii)The Public Accounts Committee conducted the first ever investigationinto the Duchy of Cornwall’s accounting practicesI hope that in addition to recording the Committee’s conclusions (ratherthan personal comments made by one or two members) the programmealso refers to the Treasury’s and the Duchy’s responses to thoseconclusions. The points put by the Committee to the Treasury were notaccepted. A copy of the Treasury’s and the Duchy’s responses are attachedat C.Answers to the specific points you raise are as follows.• The possible conflict as a result of The Prince of Wales being chairman ofthe Duchy’s Board and being entitled to the Duchy’s revenue but not to itscapital and capital profits was identified in the 19th century. The 1838Management Act was introduced as a result. This requires the Treasury toact, in effect, as the Duchy’s independent trustee to safeguard futurebeneficiaries’ interests. The Treasury does this, in particular, by beingrequired to approve all property transactions with a value of £200,000 ormore.• The Duchy of Cornwall’s accounts are as transparent as those for a largepublic company which employs thousands of staff and in which people’spensions may be invested. Having said this the Duchy is always keen tomake its accounts clearer and improvements are made every year. TheTreasury reviews the accounting format which it requires the Duchy toadopt for its accounts periodically, although it did not accept the PAC’sspecific suggestions.• The Committee was not “fobbed off with evasive and meaninglessanswers” and it has only asked a further two questions since the hearingwhich were replied to by the Duchy in full (they concerned the role of theNAO and the appointment of members of The Prince’s Council). Whilethere has been some disagreement of principle between, on the one hand,the PAC and, on the other, the Treasury and the Duchy (e.g. should theNAO audit the Duchy’s accounts?), the PAC’s report made no mention ofany incomplete or misleading information or of any failure to answerquestions.

• Questions were asked about the trees during the PAC hearing but wereanswered fully and clearly and there was no reference to the “trees” in thePAC’s report (i.e. the Committee did not express concern on this point).The position was as follows. The trees were purchased and planted withmoney taken from the revenue account (which belongs to The Prince ofWales) rather than from the capital account (which does not). The treestherefore belonged to His Royal Highness personally. He decided to sellthem. They could have been sold to a third party, but the Duchy’smanagement decided to buy them on behalf of the capital account. Thevaluation of the timber was undertaken by an independent valuer and theapproval of the Treasury and the external auditor were obtained for thetransaction. In other words it was a closely checked and scrutinisedcommercial transaction.(iv)A list of the Duchy’s properties was not provided to the PACThe list of the Duchy’s properties was requested by one member of theCommittee, but the request was not repeated in the Committee’s report onthe hearing. As already mentioned, the Duchy of Cornwall complies withdisclosure requirements which apply to much larger publicly ownedproperty companies in which people’s pensions may be invested and it isnot at all clear why the Duchy alone should be required to provide thiscommercially sensitive detailed information when other organisations arenot required to do so.The Duchy did not accept the PAC’s recommendation that the NAO shouldaudit its accounts. As it said in its reply to the PAC, the primary roles of theNAO are to audit the financial statements of government departments andto report on the economy, efficiency and effectiveness with which theyhave used public money. The Duchy is a private estate and is not funded bypublic money. In addition the audit regime which applies to the Duchy,with scrutiny by the Treasury and an external audit byPricewaterhouseCoopers, is already more extensive than that applied tolarge companies with outside shareholders requiring protection.The PAC’s suggestion that the NAO should audit the Duchy’s accountsseems to be based on a fundamental misunderstanding: because the Duchyis subject to review by the Treasury and because its accounts are laidbefore Parliament the assumption has been made by the PAC that theDuchy is in some way a public or semi-public asset rather than a privateestate; however, the Treasury is only involved because of the importance ofthe Duchy’s beneficiaries, present and future, and of the need (asmentioned above) to ensure that no one beneficiary sells all the familysilver, so to speak, thereby depriving future Princes of Wales of income tosupport their official and private activities. Similarly the Duchy’s accountsare laid before Parliament, even though the Duchy is a private estate, toenable MPs to be sure that the Treasury is fulfilling its statutory duties inthis respect.

(v)The Prince has “ a unique and very privileged tax position”The Prince of Wales does not have “a unique and very privileged taxposition” and the rules that apply to him in terms of deducting expenditurefor tax purposes were drawn-up by the Inland Revenue to reflect those thatapply to other tax payers. They are set out in Appendix B of the Report ofthe Royal Trustees dated 11th February 1993.All companies and individuals are allowed to deduct expenditure incurredfor business or work purposes and in order to give a framework for howthis should be done in the case of The Prince of Wales the Inland Revenuebased its approach on Section 199 of the Income and Corporation TaxesAct 1988. In other words, the difference between The Prince and othertaxpayers is that he pays tax voluntarily on his income from the Duchy ofCornwall; however, the way in which the tax payable is calculated is thesame as for anyone else in that business or work expenditure is deductiblewhile personal expenditure is not. His Royal Highness’ charities are subjectto tax in exactly the same way as other charities.4. Miscellaneous(i)The Prince has an Audi RS6 QuattroThe Prince of Wales has never owned or leased an Audi RS6 Quattro,although a member of staff who has now left leased one from Audi at onestage. The Prince’s Jaguar and Range Rover are run on 100% biodiesel. Heonly drives his Aston Martin for 100 miles or so a year.(ii)The Prince who enjoys a lavish life-style should not lecture othersThe Prince of Wales lives in a way appropriate for his role and position,and uses the large majority of his money to finance his official andcharitable activities and to pay tax. Details are given in the enclosedAnnual Review. He and his Household are now carbon neutral andextensive steps are being taken to reduce carbon emissions; for example,His Royal Highness has stopped playing polo in part to reduce carbonemissions and has cancelled private trips overseas. Full details in thisrespect will be given in this year’s Annual Review.(iii)The fact that the support for The Prince and his family from publicfunds costs each person in the Country 3.5p is questionedHow the three and a half pence has been calculated can be seen from theenclosed copy of our latest Annual Review. As shown on page 3 totalexpenditure (excluding security for which figures are not available) metfrom public funds amounted to £2.073 million in 2005-06. As you suggestthis figure includes £1.149 million in respect of air travel and the Royal

Train and £355,000 for the maintenance of Clarence House. £2.073 milliondivided by the 60 million people in the Country gives 3.455p per person.The flights and train journeys are undertaken to fulfil official duties as partof The Prince of Wales’s role and are subject to review by the GovernmentDepartment responsible for the expenditure and to audit by the NAO, withthe largest part of the travel expenditure being in respect of overseas toursundertaken at the request of the Foreign Office.(iv)£4.5 million was spent on the refurbishment of Clarence HouseClarence House is an important part of the national heritage and has around1,900 official guests a year and 42,000 paying visitors, with approximately100 staff working in it and adjoining offices. It had not been refurbished forover 50 years and £4.5 million was considered a very reasonable amount.The £4.5 million did not come from the taxpayer, but from the incomefrom the Crown Estate.(v)Many engagements are a “bit of a scam”I am not clear how you define an engagement. It may be that you believethat something is only an engagement if the Member of the Royal Familytravels to an external event; however, all Members of the Royal Familyundertake important engagements at their residences, from receivingforeign Heads of State to welcoming and thanking (on behalf of us all)people who have made significant contributions to their local communities.These non-travelling engagements take as much time and preparation, andoften achieve as much, as external visits. Please provide details of howyour figure of 212 engagements is calculated. As far as I am aware noofficial engagement has ever taken as little as 10 minutes. Most last for anhour or more, before taking into account preparation and, if applicable,travel time.The Prince of Wales tries to support all areas of British life and excellencefrom the Armed Services (by, as you say, taking a Salute) to farmers (by,as you say, viewing cattle). A feeling for the range and extent ofengagements undertaken is given in the enclosed copy of the AnnualReview. Some people will, no doubt, think that some engagements aremore important than others, but the intention is to cover a broad spectrum.As well as contributors who regard royal engagements as a “bit of a scam”,I hope that you will speak on the programme to some of the thousands andthousands of people who request royal engagements and who say that theyenjoy and appreciate them enormously and that they make a real differencefor the better.(vi)The Prince takes three months holidayThe Prince of Wales is exceptionally busy and works for at least part ofevery day in the year. Just because he travels to Scotland or to anotherlocation does not mean that he is not working. He uses his time at Birkhall,

for example, to catch-up with official paperwork and meetings which hehas not had a moment to address when undertaking engagements inLondon, round the Country and overseas.(vii)The Duchy is “extracting” the last ounce out of the Isles of ScillyThe first general point to make is that the Duchy of Cornwall receivesminimal financial return from the Isles of Scilly and contributes, in effect, alarge financial subsidy to support the islanders, The Duchy is, for example,currently investing over £2 million refurbishing the off-island quays on theIsles of Scilly for no direct financial return.The Duchy lets 153 residential properties on the Isles. Of these 85% (or130) are let at between 50% and 75% of open market values, whichrepresents considerable support to local people. In the last four years theDuchy has constructed seven new, locals only, dwellings and released landfor the provision of six Cornwall Rural Housing Association rental onlyproperties. In addition the Duchy is discussing with the Cornwall RuralHousing Association the provision of land to construct a further 12affordable homes.In comparison, two refurbishments are on course for Duchy visitor letswhich will give a total of four Duchy visitor lets. For the Isles as a whole25% of properties are holiday or second homes. Fewer than 3% of theDuchy’s properties are holiday homes, which of course provide the bestfinancial return.In other words it could not be further from the truth to say that the Duchy is“extracting the last ounce out of the Isles of Scilly”.(viii) The Duchy’s letting of the Little House to holiday-makers was “blatantprofiteering” and “immoral”Little House on Bryher was leased to tenants who lived in Middlesex andused the property as holiday accommodation for their own use. The leaseof Little House was due to expire on the 25 th March 2003. The Duchymade the tenants aware that as this property was holiday accommodationthey were not protected tenants and that the Duchy would not be granting anew tenancy. The Duchy suggested that they surrender the property, whichthey did three months before the expiry of the lease. The initial intentionhad been to re-let the property for full-time local use; however, followingits surrender an inspection of the property revealed it to be in extremelypoor condition with £300,000 needed for a total rebuild. The tenants’ returnof the Little House to the Duchy was agreed without any charge fordilapidations. These would have been likely to have run into tens ofthousands of pounds.In view of the very high cost of the repairs needed to the property it wasdecided to let it as a holiday let; however, this did not mean that there was

any reduction in the Duchy property available to local people on Bryher.On the contrary, two semi-detached houses were built at Furze Lea onBryher and let to local people at the same time as the Little House wasreconstructed. The Little House had not been let to local people before andtherefore the number of properties let to local people increased by two.Higher rents can be obtained by letting to people from the mainland. Thelocal islander who referred to this as “blatant profiteering” and “immoral”cannot have been aware of the full facts.28th FEBRUARY1. The Prince of Wales has double standards because he has five homeswhile the Duchy’s submission for planning permission in Cornwallsuggested that the number of people able to buy second homes shouldbe restrictedThe Prince does not have five homes as explained in 3. below.Second homes in Newquay are a matter of local concern that was raised inthe community consultation process carried out by the Duchy. In theparticular circumstances in Newquay, where it is hoped to build new shopsand schools and to create a community, rather than just put up houses, thecontrol of second homes is a particular concern, with a feeling that toomany second homes would be detrimental to the vitality and viability of thedevelopment. This was explained in detail in the planning submission. Ifyou do not have a copy I should be pleased to send you one.These factors do not apply in all circumstances, and The Prince of Wales isnot opposed to second homes as a matter principle. In some instances theycan invigorate and create employment.2. The Prince of Wales travelled to the United States to collect the 10thAnniversary Global Environmental Citizen award and wasaccompanied by 20 staffThe Prince of Wales did not travel to the United States to collect the 10thAnniversary Global Environmental Citizen award and was notaccompanied by 20 staff. He was travelling to the United States toundertake official engagements on behalf of the Foreign Office. After thisvisit had been requested and agreed the Harvard Medical School askedwhether he would accept the environmental award. We replied that hecould not do so in person because he was not prepared to travel to theUnited States to receive it. The School then asked whether there was anoccasion on which he was travelling to the United States in any event whenhe could receive the award. We said that this would be possible but that theonly time he would have free when in the United States would be on theevening of Sunday 28th January. It was for this reason that the awardsdinner was held very unusually on a Sunday evening in late January!

The Prince of Wales and The Duchess of Cornwall were accompanied by14 staff. The other members of the party were Police. 14 staff (including adoctor and hairdresser) is normal for a tour of this complexity with twosenior Members of the Royal Family.3. The Prince of Wales has five homesI am not sure how you calculate that The Prince of Wales has five homes.His home is Highgrove. Clarence House is his official office and residencein London. Birkhall is lent to His Royal Highness by The Queen on theBalmoral Estate. It is regarded as being appropriate that The Prince shouldspend time in Scotland. For similar reasons the Duchy has bought a housein Wales, but for the large majority of the time it will be let for conferencesand holidays. His Royal Highness only spends a few days a year atSandringham, which is owned by The Queen, and I can confirm that henever has more staff than when The Queen is there.4. The Prince of Wales has a Royal Mail van and driverThe Prince does not have the use of a Royal Mail van and driver. The PostOffice organizes the transport of official papers for senior Members of theRoyal Family, the details of which are dealt with by The Queen’sHousehold rather than by this Office.5. The fact that The Duchess of Cornwall cost £2,000 from public fundsin 2005-06 is questionedWhen it was said that The Duchess of Cornwall had herself only costaround £2,000 from public funds during 2005-06 it was made entirely clearthat this figure excluded security costs, as the significant number of peoplepresent at the time can confirm. Both this Household and The Queen’s arealways very careful to make it clear that the figures for the cost of theMonarchy which we give do not include security.I am not sure how you know how much the security for The Duchess costsbecause as far as we are aware figures are not available. Neither TheDuchess nor this Household has any control over security or security costswhich are the responsibility of the Home Office.It might be helpful if I add, as a postscript, that the costs of the Monarchy,including those attributable to The Prince of Wales and The Duchess ofCornwall, are not met by the taxpayer but from the income from the CrownEstate which is surrendered by The Queen to the Exchequer. This incomeamounts to around £200 million a year. This is confirmed on page 4,paragraph 3, of the Report of the Royal Trustees published on 4th July2000 and signed by the Prime Minister and the Chancellor of theExchequer. It may be helpful if you refer to this document.

Your questions and assertions suggest that you have sought to identifyissues detrimental to The Prince of Wales, rather than all the many excellent thingswhich he does to contribute to this Country and internationally, and that you havemainly spoken to people who disagree with the approach he has taken rather thanto the, in my view, many, many more people who approve of and admire what HisRoyal Highness does. In view of this, I hope that you do not mind my referring toSections 5 and 7 of the Ofcom Broadcasting Code which require impartiality andfairness in news and other programmes.If any of the above is not clear please come back to me.I have sent a copy of this letter to Luke Johnson, the Chairman of Channel4 Television.We may publish the letter on our website and I should be grateful for yourpermission to publish your letters to me as well so that people can see thequestions which I am answering. I should be grateful if you would give me yourresponse on this point by the end of the week.Yours sincerely,Sir Michael PeatDavid Henshaw Esq.,Executive Producer,Hardcash Productions Limited,35 Waterside,44-48 Wharf,Islington,London, N1 7UX.

CLARENCE HOUSELONDON SW 1 A IBAPRIVATE AND CONFIDENTIALFrom: The Principal Private Secretary to TRH The Prince of Wales and The Duchess of Cornwall/" p4tio,^ I.... ^^- I22nd September, 200 5I am writing both as The Prince of Wales' Principal Private Secretary and asActing Chairman of His Royal Highness' Foundation for Integrated Health.There has been a breach of confidence by Professor Edzard Ernst in respect ofa draft report on the efficacy of certain complementary therapies sent to him by Mr.Christopher Smallwood. The report was commissioned by The Prince of Wales.Mr. Smallwood sent Professor Ernst an early and, at that stage, incompletedraft of the report for comment. The accompanying e-mail requested and stressed theneed for confidentiality. Professor Ernst implicitly agreed to comment on the reporton this basis but then, as you probably saw, gave his views about the report to thenational press. I attach a copy of a letter from the Editor of the Lancet published byThe Times which summarises the issues well. I also attach a copy of the e-mail sentto Professor Ernst by Mr. Smallwood.I apologise for troubling you, but I felt that you should have this matter drawnto your attention.4 1/t 1Professor Steve Smith AcSS,Vice-Chancellor,University of Exeter,Northcote House,The Queen's Drive,Exeter,Devon,EX4 4QJ.Sir Michael Peat

DISPATCHES COMMENTS ON THE SMALLWOOD REPORT AND RELATEDMATTERSPerhaps the most helpful thing would be for me to comment on the reported comments byinterviewees in turn.I am not an accountant; I am an economist. Until March 2005 I was chiefeconomic adviser to Barclays, and in earlier phases of my career was senioreconomist at BP and an economic adviser to the Treasury and the CabinetOffice. In the late 1980s, I was also economics editor of The Sunday Times.It is true that I have no medical background, but it was nevertheless perfectlyreasonable that I should be asked to carry out a study looking at the costs andbenefits of complementary medicine. This is because economists are skilledat appraising costs and benefits. Hence, Nick Stem, with no background inclimatology, was asked to compile the Stern Report, drawing on inputs fromexperts in that field. This is exactly what I did in another area. I hadextensive inputs from across the world of complementary medicine of whichfull account was taken. Although Ernst refused to cooperate, other professorsof complementary medicine did so: if you look at Appendix B, you will find12 pages of interviews with professors and other medical experts who helpedus. Ernst was very much alone in choosing to stand apart. A large number ofpractitioners also took part and allowed me and the team of consultantsworking for me to examine their records of the benefits and costs associatedwith treatments given. I believe that this was a perfectly respectable way toproceed.I was asked to undertake this study precisely because I was a leadingeconomist who had no connection with any of the entrenched factions in thisarea. The value of the exercise lay in asking a reasonable outsider to take adetached view of the complementary medicine scene and to report in astraightforward way what he found. I undertook the study on the explicit basisthat there would be no attempt to influence my conclusions, and none was evermade. I did not meet the Prince of Wales until well after the study wascompleted. I began with a sceptical frame of mind, and I simply reported whatI and my team found.ii. On the second collection of points, far from being selective in its evidence, theReport went out of its way to be as comprehensive as possible. To understandhow we went about it I ask you, in a fair frame of mind, to read theattached piece from the Sunday Times, where this is explained. There was a

2threefold approach which incorporated a literature scan, which may not havebeen perfect, but was the best we could do with the guidance of experts,including academic experts, in the field; a statistical examination of theexperience of complementary health centres on the ground; and widespreadinterviews with academics and practitioners to see if there was any sort ofconsensus about what worked and what didn't. We then `triangulated' andcame up with a rather limited set of conclusions which no fair-minded personcould characterize as either `irresponsible' or `dangerous'. These are set out inthe newspaper article, and more fully in the carefully-considered executivesummary of the Report which again I hope you will read.I hope I have dealt with the clam that there were preconceived conclusions.They were precluded by our approach, and I give you my personal assurancethat there were none.As for the claim that the Report contradicted available objective evidence,again you will see if you read it that that was the last thing we were tryingto do. The `recent report' you refer to on back pain may have been too recentto be included. The idea that the Report made false claims about the efficacy ofhomeopathy, especially in relation to asthma, has been repeatedly peddled byMr Ernst and is entirely false. The considered summary says quite clearly:"Our survey indicates that the best evidence for homeopathy is associated withits use as an alternative to conventional medicine in relation to a number ofeveryday conditions, particularly asthma. The evidence is however fragmentary,and the most that can safely be said is that these are conditions commonlytreated by homeopaths for which they report good results (italics added)."The report is therefore very cautious, but not arrogant enough to dismiss theclinical experience of thousands of practitioners in the field.On glucosamine, chondroitin, it is true that there was a mistaken reference onp.78 to glucosamine in the herbal medicine section. This was a survival from amistake made when the team was assembling an earlier draft. It does notappear anywhere else, so it would be a great distortion to use this to make ageneral claim that the Report contains factual inaccuracies. It doesn't.iii. Although it may be for Sir Michael Peat to reply about this, I must respond tothe account given of Mr Ernst's breach of confidence. What you have been toldis an outrageous travesty of the truth. I wrote to Ernst months before the Reportwas published, as I did to many other academics and experts in the field,explaining that we were trying to present a detached and balanced picture ofwhere thinking about complementary medicine had got to and asking if he wouldbe prepared to help us come up with the right conclusions. Everyone else readily

3agreed to do so and observe confidentiality. Because he had a difficultreputation, I wrote to Ernst saying quite explicitly that I would appreciate hishelp, but that I could only show him early drafts and speak to him on the basis ofcomplete confidentiality because it could be very damaging if anything leakedout before our conclusions were properly considered and finalized. He agreed toobserve confidentiality, so I went to talk to him and showed him some very roughearly drafts of our work and asked for his inputs, along with the other academics'.Shortly afterwards, there appeared a full-scale attack on "the Smallwood Report"all over the first two pages of the Times with extensive quotes from Ernst,attacking the Report as unscientific, biased and all the rest. What he had seen wasof course not the "Smallwood Report" but early working drafts of one sectionwhich had not yet been shaped to support any conclusions, as he very well knew.And to go to the papers after his undertaking to me was the most blatant anddisreputable breach of confidence I have ever known.Nor was this just my view. The editor of the Lancet (quite independently) wroteto the Times on 29 August in the following terms. "Prof Ernst seems to havebroken every professional code of scientific behaviour by disclosingcorrespondence referring to a document that is in the process of being reviewedand revised prior to publication. This breach of confidence is to be deplored."I attach the letter which also stresses the scientific importance of peer reviewwhich can only be carried out in conditions of confidentiality.Ernst was fully entitled to comment on the Report after it came out, and attack itall he wished, but he couldn't wait, and did a lot of damage by claiming in the TheTimes and on the Today programme (again before the Report was published) thatthe Report said lots of things which in fact it didn't.I cannot believe that if the individuals you have interviewed knew the true story,they could possibly complain about a "wholly improper attempt to put theProfessor's career in jeopardy". The purpose of the letter, as I understand it, wasneither to silence Ernst or put his career in jeopardy, but to complain about thethoroughly disreputable way he had behaved, which in my view was thoroughlyjustified. If he behaves with more circumspection in the future, that will be anexcellent outcome, but from the notes you sent me I am not holding my breath!If you want to call me on 020 8946 7434, I shall be happy to talk to you about all this.Christopher Smallwood 27 February 2007

Nineteenth ReportHM TreasuryThe Accounts of the Duchies of Cornwall and Lancaster.,Is the Duchies of Cornwall and Lancaster are not Government departments, thefirst part of the response to the Nineteenth Report from the Committee of Public.-Iccounts, is in respect of the recommendations made direct to kIM Treasury. Theresponses by the Duchies of Cornwall and Lancaster to recommendations made tothem are attached below.Recommendations made to HH Treasury:PAC conclusion (v): The Treasury should amend its Accounts Direction so thatthe Duchies have to follow public sector good practice and thereby comply withthe sane disclosure requirements as most other accounts presented toParliament....1. The Treasury will review and re-issue its Accounts Directions to the Duchies.The intention of the current directions is to require the Duchies to prepare theiraccounts in accordance with generally accepted accounting practice in the UK (UKGAAP), taking account of their legal structure. This will remain the case. TheTreasury does not believe that it will be appropriate to specify in the revisedaccounts directions the detailed presentation of specific statements and notes to theaccounts: the accounting standards themselves and other sources - eg theCompanies Act(s) - deal with such presentational issues.PAC conclusion (ix): The Duchies do not pay corporation tax or capital gainstax. As the Duchies are trading entities , it would be useful for the Treasury toprovide justification for the tax position of the Duchies , as distinct from that ofThe Queen and The Prince of wales , and explain the impact of this favourabletax position on the Duchies ' competitive position in the property and othermarkets in which they operate.2. The Duchies are not within the charge to Corporation Tax. The Duchies wereestablished for the sole purpose of providing an income for the Sovereign and Heirto the Throne. This ensures that they maintain a degree of financial independencefrom the Government of the day. The tax treatment of the Duchies must be seen inthis context, alongside that of their beneficiaries. This was the basis of the RoyalTrustees' report on Royal taxation and the Memorandum of Understanding,published in 1993.3. The Treasury does not believe that this treatment impacts on the competitiveposition of the Duchies. In this context, they can be considered to "compete" withother property investment organisations in the buying, selling and renting ofproperty. However, this is done in the open market. The Duchies have no advantagehere and are subject to market forces and prices in the same way as the otherorganisations operating in this area. Moreover, other very significant organisationsoperating in the investment property market face similar tax treatment to that of theDuchies.PAC conclusion (x): There should be an assessment of how well the surpluses ofthe two Duchies correspond to the respective needs of the Households of TheQueen and The Prince of wales....1

24. The Duchies are required by their governing legislation to provide incomes forcurrent and future Dukes. It is their responsibility to generate as much income as isreasonably possible, subject to having regard to sustainability, good managementpractice and, in particular, balancing the interests of current and future beneficiaries.It is also worth bearing in mind that the Civil List legislation makes no provision forsupporting the official duties of the Prince of Wales.

DUCHY OF CORNWALL10 BUCKINGHAM GATE LONDON SW 1 6LAThe DUCHY of CORNWALL' s response tothe Public Accounts Committee ReportPAC conclusion (i): The direct involvement of The Prince of Wales in themanagement of the Duchy of Cornwall creates a potential conflict between theinterests of the current... [and] future beneficiaries. The Duchy should:(a) modify the governance arrangements so that... the [current]beneficiary has no role... in the management of the Duchy, and(b) ... [make ] the appointment of Members to The Prince's Council.... onmerit [so as to]... command public confidence.(a) The Duchy of Cornwall does not accept this recommendation. The potentialconflict of interest was recognised and addressed in the Duchies of Lancaster andCornwall (Accounts) Act 1838 and the Duchy of Cornwall Management Act 1863.The Acts provided, in effect, that the Treasury should act to protect future interestsby, in particular, directing that proper accounts are maintained and by approving allsignificant capital transactions. Section 8 of the Duchy of Cornwall ManagementAct specifically states that in considering any authorisations the Treasury shall haveregard to the interests of both present and future Dukes of Cornwall. Thearrangement has stood the test of time and has worked well as reflected in theperformance of both the Revenue and Capital account. It should also be borne inmind that it is the close involvement of the Duke that has contributed to theconsiderable success over recent years.(b) Appointments to The Prince's Council are made on merit. The current Prince'sCouncil is comprised of individuals who are eminent within the primary areas ofactivity in which the Duchy operates, including experts from the fields ofagriculture, commercial property, landed estates, law and finance. Having said this,in view of the Public Accounts Committee's recommendation the Duchy of Cornwallwill give further consideration to the way in which appointments to The Prince'sCouncil are made.PAC conclusion (ii): The role of the Treasury should be made clear in the Duchyof Cornwall's accounts....The Duchy of Cornwall accepts this recommendation and indeed had alreadyexpanded the references to the Treasury in its latest accounts which were issuedbefore the Public Accounts Committee report was published. The report andfinancial statements for the year ended 31st March 2005 included the following:The management of the Duchv is subject to extensive review by ThePrince 's Council and by the Treasury (which in particular ensures that theDuchvs Capital is maintained for future beneficiaries)'.,the Treasury has an important role in overseeing the Duchy 'financialtransactions and reporting, as set out in the various Management Acts,and, for example, land transactions over £200, 000 can only be carried outwith Treasury approval'.3

Additionally, the annual accounts list Treasury consents under Section 7 of theDuchy of Cornwall Management Act 1982.PAC conclusion (iv):.... The Duchies' accounts are required to be presented toParliament.... scrutiny and accountability would be more effective if theComptroller and Auditor General were to be the auditor of the Duchies, or atleast... have access to their books and records.The Duchy of Cornwall does not accept this recommendation. The primary roles ofthe National Audit Office are to audit the financial statements of all governmentdepartments and to report on the economy, efficiency and effectiveness with whichgovernment bodies have used public money. The Duchy is a private estate and is notfunded by public monies.The role of the auditor is set out in the Duchy of Cornwall Management Acts, mostrecently under Section 9 of the 1982 Act. The responsibilities of the auditor includereporting to the Duke of Cornwall on the truth and fairness of the financialstatements as presented and also reporting on the satisfaction of or compliance withother provisions set out in the Management Acts which seek to protect the Capitalaccount.The Duchy of Cornwall Management Acts stipulate that the appointment of asuitably qualified auditor be made by the Duchy of Cornwall. The Duchy is currentlyaudited by Rodger Hughes, who is a partner in PricewaterhouseCoopers LLP whoprovide the resources to conduct the audit. The audit report confirms that theaccounts have been prepared in accordance with the Treasury directive and that therequirements of the Duchy of Cornwall Management Acts have been adhered to.The Duchy audit report as required by law is an independent report addressed to theDuke of Cornwall. It is not considered that the National Audit Office would be ableto report independently both to the Duke and Parliament where the Comptroller andAuditor General has a statutory duty.The Duchy of Cornwall considers that the scrutiny by the Treasury andPricewaterhouseCoopers is in excess of that applied to most companies, includingthose who have many outside shareholders requiring protection.PAC conclusion (vi): The Duchies' accounts should be made clearer and moretransparent... [so as to[ assist readers of the accounts....The Duchy of Cornwall is always keen to increase the transparency of its accountsand several of the recommendations have already been adopted in the Duchy Reportand Accounts for the year to 31st March 2005.With specific reference to borrowing from the Capital account , additional disclosurein the accounts to 31st March 2005 has already been provided. 'There is no questionof the utilisation of the borrowing facility inflating the Revenue surplus. For theavoidance of doubt , any borrowing facility drawn down is classified as a balancesheet item and does not therefore impact on the Revenue surplus for the year.Interest is payable by the Revenue account on any borrowing that is undertaken. Thespecific purpose of the loan is to provide for the possibility of very short termRevenue cash flow deficits that may arise due to many of the historic tenancyagreements being payable half-yearly in arrears.Historically, the Duchy has voluntarily given disclosures that have gone beyond theminimum requirements.4

PAC conclusion (vii): [To assist Parliament and other readers of the accountsthe Duchies should include in their accounts details of the targets they have setand performance against them....This recommendation is not accepted. The Duchy of Cornwall is a private landedestate; not a government department which is given public money. Hence, the Duchydoes not consider that disclosing targets is appropriate. No other entities, includinglisted public companies, publish detailed target figures as they are regarded as beingcommercially sensitive. It is therefore not considered appropriate for the Duchy todo so.PAC conclusion (viii): The Duchies should report more information on theircharitable and other activities, and the principles that underline them. Thenarrative section of the Duchy of Cornwall's accounts is a helpful supplement[in that regard].This recommendation is accepted. The Duchy places considerable importance on thereview of activities narrative within the financial statements. The Duchy supports awide range of charities. However, the Capital account by virtue of Section 36 of the1863 Management Act has very limited powers in relation to charitable activities.The Duke of Cornwall in his private capacity spends a huge amount of time oncharitable activities and last year helped to raise £109million in support of thosecharities. A significant amount of the income from the Duchy of Cornwall is usedby HRH The Prince of Wales to meet the cost of this charitable work. Further detailscan be obtained from HRH The Prince of Wales Annual Review 2005.5