DAY ONE: The Alnwick Garden faced a precarious financial situation when it emerged from last winter in an international recession, an employment tribunal heard this week.
Its trading profit was less than £30,000 and after running costs of the garden, it made a net loss of £400,000.
Managing director David Ronn needed to cut the wage bill and looked at posts including that of director of development Philip Spencer, who was on a package worth £85,000.
Mr Spencer had been employed to bring in funds of £25million, but in 18 months he had raised nothing, the hearing at Quayside House, Newcastle, was told.
He is claiming unfair dismissal and says he was chosen because he had been a whistleblower, raising concern about the handling of finances at the charity. That is denied by The Alnwick Garden.
Mr Spencer, 59, who now lives in Surrey, says his achievements included bringing to the Garden Jamie Oliver’s Ministry of Food, which uses the celebrity chef’s recipes to educate people of all ages in an entertaining way about healthy eating.
In a statement read out as the hearing began on Monday, it was said though he had ‘made a disclosure that monies of The Alnwick Garden Trust were applied in a way that was in breach of a legal obligation, he is not suggesting that this has been done by anybody for personal gain’.
Mr Ronn said this legal concern was not mentioned until Mr Spencer’s job was on the line. Even then, a four-page letter to him about the proposed work changes had made no mention of whistleblowing.
The Charity Commission had reviewed the structure of the organisations running the Garden in 2008 and found it appropriate.
In the end, the MD saved £500,000 by making four people redundant, leaving four vacancies unfilled and cutting seasonal staff.
He said he had not wanted to lose Mr Spencer, who had very good contacts and faced a ‘tough task’ of raising £25million. That was the cost of the ‘third phase of the Garden, which was always the Duchess’s vision’. He had hoped to persuade him to work in a different and cheaper way, possibly more commission-based.
Oxford-educated Mr Spencer is a former marketing director with NatWest, World Vision Group and Procter & Gamble.
Winter was naturally a difficult time for garden attractions and the net loss had made it more so. “This is a precarious position for any organisation to be in and therefore as managing director I had constantly to keep in mind costs and how costs could be reduced.”
Mr Spencer had been given the job at Alnwick because he had a novel approach to fund-raising, inviting big companies to benefit from their association with the ‘altruistic’ garden project, which attracted hundreds of thousands of visitors a year.
But last summer, trustees had begun to ask when he would bring in funds. He had been confident of landing £3.2million for a play area, but this had not materialised. He was hoping to have talks with Olympic sponsors such as Samsung and Coca-Cola when the Olympic Torch stayed overnight in Alnwick, but without success.
It was decided that after he left, fund-raising would be taken on by the Duchess and trustees.
Mr Ronn, former regional director of the National Trust who worked on the acquisition of Seaton Delaval Hall, said: “The trustees are people with considerable contacts and we felt we could take forward the fund-raising in Phil’s absence with them.”
He said he had joined The Alnwick Garden several months after Mr Spencer and after initial problems, ‘my working relationship with Phil improved and I believe it was a good one’.
He had been disappointed to learn the fund-raiser had made covert recordings of their discussions about work.
DAY TWO: The Alnwick Garden introduced an online ticketing system despite being told it flouted HMRC guidelines on tax gift aid, the second day of an employment tribunal heard this week.
Robert Gibson, representing the garden’s former director of development Philip Spencer, said Mr Spencer had told a meeting discussing the new system – which required the
ticket purchaser to opt out of gift aid – this did not ‘flaunt the rules’ but ‘flouted them’.
Mr Spencer, 59, who lives in Surrey, is claiming unfair dismissal and says he was chosen for redundancy because he had been a whistleblower, raising concerns about the handling of finances at the charity. That is denied by The Alnwick Garden.
Managing director David Ronn admitted it was reported at a meeting that the method of collecting gift aid on the garden’s website was ‘flaunting the rules but everyone was doing it’. Mr Spencer corrected this to ‘flouting the rules’.
But Mr Ronn said Mr Spencer, who was the garden’s sole gift aid signatory and responsible for ensuring the proper procedures for claiming the money were followed, did not seem over-worried or anxious about it and said nothing more at the meeting.
When asked what he thought was meant by flouting, Mr Ronn said he believed it meant that the garden ‘was sailing close to the wind’ but not breaching any rules.
Mr Ronn stressed they had followed the rules as set out at that time on the HMRC website and most of their competitors had done the same.
The tribunal heard that for gift aid to be valid there had to be a ‘positive election’, also known as opting in. That is the garden visitor had to confirm they were a British taxpayer, had paid sufficient income tax and were willing for the garden to claim the tax gift aid on their charitable donation.
However, the proposed new online system, costing £140,000, relied on customers opting out of gift aid.
Mr Ronn said that when looking at the new system the garden ‘obviously had to go through the gift aid scenario’.
“We followed HMRC guidelines, which were silent on this specific point and we did exactly what HMRC recommended in every respect, and in this case particularly, and decided to go for opt-out, which meant you were assumed to be a taxpayer unless you pressed a button,” he said.
“But it was not as simple as that. You then went on to the next stage, which reminded you of your options and asked again if you were a taxpayer. It wasn’t as if you were tricked into it, it was very obvious what was happening. But that was HMRC guidelines at the time.
“The old system didn’t really work very well. It was very, very difficult to buy ticket online, we weren’t very satisfied with it and it was impossible to claim gift aid, which was one of the reasons why we improved the system and why we put money into it.
“The new system was one that was set up for such interaction and it was one that was set up to legally and fairly capture those people who were legitimate tax payers and who were therefore eligible to give gift aid.”
But Mr Gibson, who is being assisted by Samuel Phillips, said there was a world of difference between a system where an individual makes a positive election and one where an individual is deemed to make that election unless they say not.
“The word ‘flaunted’ was used, presumably in the context that everybody else did it, and the word ‘flouted’ was used by Mr Spencer because what he was saying is that there was a breach of the rules.”
Mr Spencer later raised his concerns direct with HMRC and subsequently received guidelines that were at a variance with those operated at the garden.
Mr Ronn said the system had since been modified to take into account of the new guidelines from HMRC.
“So, Mr Spencer was proved right?” Mr Gibson asked. Mr Ronn agreed this was the case but re-emphasised that the garden had done nothing wrong and had, as had like many competitors, followed the HMRC guidelines of the time.
When asked how much gift aid was worth to the garden, Mr Ronn estimated it would be about £420,000 this financial year (to the end of March 2013).
Mr Gibson also challenged the garden’s insistence that they had selected Mr Spencer for redundancy because he had been employed to bring in funds of £25million, but in 18 months he had raised nothing.
Under questioning, Mr Ronn admitted he had been pleased by Mr Spencer’s work and had wanted to keep him – but on different terms from those on which he had been hired.
“I was impressed by the doors he was opening and his making contacts at high levels, but nothing was coming back,” he said.
But Mr Gibson insisted: “But he’s not operating on his own, is he? He works with the Duchess. To put not too fine a point on it, his job is to make the introductions,her job is to schmooze them, wine and dine them. That’s her role isn’t it?”
Mr Ronn denied this. “Her job was to open doors as well. People are impressed by the title and that opens doors itself. I would have thought it was Philip’s [Mr Spencer’s] job to close the deals.”
The hearing at Quayside House, Newcastle, is expected to last all week.