For Peat's sake, what is going on in the House of Windsor?

Was it a conspiracy or palace blundering? Were there back-handers or was it little more than below-stairs gossip? Cole Moreton on the question marks that now hang over the heir to the throne

The honey and wine the Prince of Wales received as gifts during his visit to Bulgaria will go to the kitchen at Highgrove. That much we know as a result of Sir Michael Peat's inquiry into the running of the royal household – but rather than end the rumours and revelations about the secret lives of the Windsors, the report has left the troubled Prince facing more unanswered questions than ever.

Was there a rape? Was there a cover-up? Did staff take bribes from suppliers? Sir Michael failed to provide convincing answers. Why did Michael Fawcett, personal consultant to the Prince, resign immediately after the report was published on Thursday? There was no real clue on its pages, which cleared him of acting improperly.

The report completely ignored the dramatic allegation, made just before Sir Michael began his inquiry, that a member of the Royal Family had been seen having sex with a member of staff who was of the same gender. And the section in which Edmund Lawson QC investigates the collapse of the Paul Burrell trial made no mention at all of video tapes currently held at Scotland Yard on which, it emerged yesterday, the late Diana, Princess of Wales, discusses her sex life.

These were regarded as so embarrassing to Prince Charles that the prosecution agreed not to use them. The drama coach Peter Settelen helped Diana to make the 16 video recordings in the early 1990s as part of his work to transform her public speaking style. She talked intimately about her relationship with Prince Charles and her childhood. Mr Settelen asked Kensington Palace to return 16 tapes after the Princess died in 1997 but was told they could not be traced. Six of them then turned up in Paul Burrell's house during investigations that led to his trial at the Old Bailey.

The Peat inquiry was meant to end damaging speculation but Sir Michael had no legal right to demand that people tell the truth. Paul Burrell was one of those who declined to be interviewed. The Queen was never asked. Sir Michael was both witness and judge, as he investigated the running of the household he helped to run. Small wonder, then, that the questions will not go away.

Was there a rape?

Don't ask me, says Sir Michael in his report. It was not his job to investigate whether George Smith, a former valet, was telling the truth when he claimed a senior aide had raped him. So why does the report state so firmly and repeatedly that nobody in the royal household believed the claims?

Sir Michael goes into great detail about Mr Smith's personal problems and instability, and describes his claims to have been threatened in the street as "a figment of a disturbed imagination". Despite all this Sir Michael maintains of the rape allegations: "We do not express and should not be thought to be expressing any view as to their truth or otherwise." This is also the position of Her Majesty's constabulary.

Was there a cover-up?

No, says Sir Michael. Not exactly. It depends what you mean. The report is surprisingly specific in asking whether there was "an improper cover-up", which it defines as "actions taken with a view to suppressing the truth or at least preventing an investigation of what may be true".

Sir Michael does say the prince and his aides failed to investigate the claims properly or even take them seriously. This was partly because Mr Smith had gone to Diana for help at a time when the hostility between her household and that of the Prince of Wales was at its fiercest. Charles's press secretary gave "deep background" briefings to people in the media, telling them Mr Smith was "extremely disturbed" and "mentally ill". His solicitor even outlined potential threats: "I'll tell him that if he brings it into open, then we look v heavily into his background" and therefore "ruin chances of getting another job".

The report says Mr Smith left royal employment with a settlement of £38,000. Sir Michael describes this as "very generous" and "more than twice the maximum" he could have hoped for, which "does attract some suspicion". Everyone denies it was an attempt to gag the valet, he says. "We recognise, of course, that no one is likely to make an admission to us to the contrary."

So the Prince's closest aides were prepared to threaten Mr Smith, brief against him, and offer suspicious amounts of money. But according to Sir Michael, none of those who tried so hard to stop the story getting out believed it was true. Therefore, in his terms, there could not have been an "improper cover-up". Was it a proper one?

Did anybody accept back-handers?

Sir Michael begins by saying he found "no evidence" of staff selling gifts without permission and "no evidence" of them taking a cut when they did so with the Prince's knowledge. But then he says the records were "deficient". He does not explain why apparently authentic royal possessions have been offered for sale on the internet.

The terms of employment made it clear that staff were forbidden from taking "corrupt payments" from outside companies, says Sir Michael, who found "no evidence" that this was happening. But then he admits the rules were not enforced and that senior management implicitly approved of the practice of accepting presents and entertainments. In one case the value amounted to several thousand pounds. So in what sense was there "no evidence"?

Having found no signs of anybody taking gifts from suppliers, the report then says Michael Fawcett did exactly that. However, this was apparently OK because his bosses turned a blind eye and he made no secret of what he was getting. Mr Fawcett has certainly developed impressive contacts to help him get started in business as a freelance event organiser: besides the continuing patron- age of the Prince he can presumably call on some of the "professional friends" who sent gifts "as a mark of gratitude" including a Tiffany watch and a Cartier alarm clock.

The close aide they called "Fawcett the Fence" was acting on instructions when he took a rug that had been given to the Prince and sold it to a dealer in part exchange for another one that was a little classier. Likewise when he sold on a pen and a watch worth £9,600 from a foreign royal. The people who gave the gifts knew nothing of this. They do now. The truth is Sir Michael has no idea what really happened, and no real hope of finding out.

"If secret commissions were paid or improper payments made to induce favour, neither the donor nor the recipient would be likely to admit such practices to us," he admits. "And, because the payments would be illegal, they would be most unlikely to be recorded in writing."

Why would anyone send Prince Charles a gift?

No idea. It's not like he doesn't have enough stuff. In the three years to 2001, the Prince received at least 2,394 gifts, including five animals and more than a thousand books. Those figures are only an estimate because no proper records were kept. Some gifts were given directly to those working for him. If he won a pen or a watch at a polo match it might go to his driver, for example.

"The Prince of Wales has not as a matter of principle passed on official gifts to staff unless they are food or other perishable items," asserts Sir Michael. But then he goes on, "or small lower-value items which he feels that the member of staff might enjoy". So that's clear: the Prince doesn't give the stuff away. Absolutely not. As a matter of principle. Unless someone might like it.

The household took an even more slack-handed approach to items sent in by devoted subjects. Unwanted items were thrown in the charity box and auctioned for a good cause or piled on the bonfire along with the unsolicited gifts that he probably never saw. The Prince may not receive as much underwear as he did in his bachelor days but devoted subjects will continue to send in china poodles, favourite albums and videos of themselves. The report offers no clue why.