1.00 The Department made it clear to the Armouries, prior to the signing of the revised agreement, that cost savings would be required in the wake of the agreement in return for extra grant-in-aid to enable the Armouries to meet its new responsibilities. However it also said that it would make substantial further grant-in-aid available in support of the new agreement.
1.101 In September 1999, after considering the Armouries' revised expenditure plans, the Department agreed to increase the Armouries' grant-in-aid by £1 million a year from and including 1999-2000. However the Armouries estimated that this would still leave them with an annual funding gap of £1.8 million in respect of its new responsibilities. In order therefore to meet its new responsibilities while containing expenditure within the increased grant levels, the Armouries made cost savings of £1.3 million in 1999-2000, with a full year effect in 2000-01 of £1.9 million. These savings were made across the whole range of the museum's activities.
1.102 In the Armouries' view these savings have been partly achieved by increased efficiency, resulting in savings that are sustainable in the long term. These efficiency savings include reductions in manpower and the redirection of resources to the core museum product and customer services. The Armouries also attributes other of the cost savings to the fact that it has been able to absorb the management and central services workload transferred from RAI with minimal increases in its own staff and costs. In addition, it told us, other economies involved the deletion of some projects and enhancements across all areas of activity including reductions in capital investment and maintenance, and the costs of exhibitions, acquisitions and marketing.
1.103 The immediate impact on the museum's service has been limited. The need to reach a revised agreement and then make these cost savings took priority. Consequently the Armouries has failed to achieve in 1999-2000 some of its lower priority performance targets. However the Armouries has found that the cost of running the museum has been less than it expected in 1999. In the short term the Armouries aims to lay a sound platform for the future by arresting the decline in visitor numbers and achieving stability in the early years. In the longer term its objectives are to build on this success and reverse the previous decline through continued improvements and enhancements to the museum product and visitor services (paragraphs 1.91 to 1.92).
1.104 In November 1999 the Department and the Armouries commissioned, at a cost of £67,000, a detailed assessment by PricewaterhouseCoopers of the longer-term sustainability of the museum with the additional grant of £1 million per annum. The study concluded in January 2000 that the museum would be sustainable at this level of additional funding, providing that there were radical changes in the management structure in order to increase commercial awareness in the Armouries, the implementation of a number of economies, and changes in the presentation of the collection and the marketing of the museum.
1.105 In line with these recommendations the Armouries has appointed a new Chief Operations Officer in October 2000 to work with the Master of the Armouries to develop the Armouries' strategy, to oversee the operation of all departments, and to take responsibility for the day-to-day running of the museum. The Armouries has also established a new marketing section, with a new Director of Marketing in place from July 2000, and new appointments have been made to the Board of Trustees, including a marketing specialist.
1.106 The Armouries has also commissioned a fundamental strategic review in 2000 by an independent consultant. It will aim to establish what needs to be done by way of new management structures, improvements in marketing and other strategies to ensure that the level of funding available is sufficient in the medium term to allow the Armouries to respond adequately to the Government objectives for national museums at the same time as meeting its statutory duties. The results of this review will be amalgamated in the museum's strategic plan which is due to be completed by the end of 2000.