1.49 In an attempt to reduce its costs RAI introduced operational efficiencies based on the experience it had gained in operating the museum since its opening in 1996. This facilitated a reduction in its operational staff in July 1997 from 215 to 120. It also reduced its expenditure on the marketing of the museum in the expectation that the museum had established itself in the market place after almost two years of operation. As the marketing and promotion of the museum were jointly financed by the Armouries and RAI (paragraph 1.27), the Armouries' own annual contribution to this expenditure also fell from £250,000 to £150,000. This reduction in marketing expenditure concerned the Armouries as it considered that more marketing was needed if visitor numbers were to be increased. Although the Armouries jointly staffed and financed the museum's marketing and was involved in the decisions about the marketing budget, it told us that it viewed itself as the junior partner and that, as RAI had assumed the risk of operating the museum under the 1993 contract, RAI should have the final say on these matters. RAI, for its part, told us that it did not consider that it had the final say.
1.50 The Armouries was also concerned that RAI's financial difficulties would mean that RAI would be unable to maintain the museum and its displays adequately. According to the Armouries RAI did reduce its maintenance expenditure below the level that the Armouries considered was required to maintain the museum and its exhibitions. RAI however disputes that it allowed the condition of the museum to deteriorate.
1.51 RAI's ability to cut operating overheads where they related to core museum functions relating to the Armouries' statutory duties, such as education and interpretation, was limited. Therefore, in late 1997 RAI asked the Armouries to consider funding some of the museum operational overheads associated with education and library services, interpretation, and security of the collection, totalling over £600,000 a year. The Armouries said that it was willing to discuss the re-negotiation of the 1993 contract that this request would entail. However it first wanted more details of RAI's financial performance before reaching any agreement.