Duchy of Cornwall Bill [HL]

(Limited Text - Ministerial Extracts only)

2nd reading (Hansard): House of Lords
Friday 26th October 2018 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I am grateful to the noble Lord, Lord Berkeley, for raising once again this important issue. He has brought these measures forward in a number of guises and is a true crusader for reform in this area. I thank all noble Lords for their valuable contributions to the debate, in particular my noble friend Lord Wakeham for putting the issue in a broader historical context and for explaining the basis of the current settlement. He also stressed the importance, a point underlined by the noble Baroness, Lady Hayter, of trying to seek a consensus before we make changes in this area.

Every day we say a prayer for the Prince of Wales, prospering him with all happiness. I am sure that nothing which has been said in this debate will go against the daily injunction we are given by the right reverend Prelates. The Duchy of Cornwall is an important institution. Since it was established in the 14th century, the Duchy’s main purpose has been to provide an income that is independent of the monarch for the heir apparent. The land, property and other assets of the Duchy and the proceeds of any disposal of assets are subject to the terms of a number of Acts, including the Duchy of Cornwall Management Acts 1863 to 1982, the combined effect of which is to place the Duchy’s assets in trust for the benefit of the present and future Dukes of Cornwall and to govern the use of the assets.

The current Prince of Wales chooses to use a substantial proportion of his income from the Duchy to meet the cost of his public and charitable work. The Duchy funds the public and private lives of five other adult members of the Royal Family—the Duchess of Cornwall, the Duke and Duchess of Cambridge and the Duke and Duchess of Sussex.

Turning to Clause 1, the noble Lord, Lord Berkeley, and others have raised the matter of the inheritance of the Duchy of Cornwall. The issue of gender equality is a priority for this Government and quite rightly the matter has been raised again today. Noble Lords are correct to say that at present the title can pass only to the eldest son and heir of the monarch. Thus, when the Queen was heir presumptive to the throne, she did not hold the title of Duke of Cornwall and the Duchy lands were vested in her father, the sovereign. The mode of descent specified by the Charter of 1337 is unusual and differs from that which commonly occurs in respect of hereditary titles. The monarch’s eldest son is automatically the Duke of Cornwall immediately he becomes the heir apparent. However, the manner of descent of the Duchy would preclude a grandson who is heir apparent from gaining the title of the Duke of Cornwall if he were heir to the sovereign because he is not the son of the monarch. With the Duchy of Cornwall we have a very unusual piece of English history that does not conform to the standard rules of descent for hereditary titles.

If we look back over recent years, there have been long stretches when there has been no eldest son to be the Duke of Cornwall, in which case the Duchy estate vests in the sovereign who oversees the affairs of the estate in lieu of a Duke. Viewed from today’s perspective, as opposed to that of the 14th century, I can understand why noble Lords have raised concerns about the descent of the Duchy of Cornwall, and indeed the Government have some sympathy with those concerns against the background of the changes made to the Succession to the Crown Act 2013 and other moves to increase equality. However, parliamentary time is currently scarce and noble Lords will agree that there are other more pressing priorities. Furthermore, given that currently there are three male heirs to the sovereign—Prince Charles, Prince William and Prince George—I do not believe that the time is right to dedicate parliamentary time to this matter when it is badly needed elsewhere. Indeed, the issue raised by the noble Baroness may not arise until the next century.

The noble Lord, Lord Marks, raised the more general issue of the succession of hereditary titles, on which I am sure a number of noble Lords have different views. However, they are not the subject of this particular legislation. Perhaps I may reassure the House that a female heir apparent will not find herself at a financial disadvantage because the Sovereign Grant Act 2011 broadly ensures that financial provision equal to the income from the Duchy is made for the heir apparent.

I turn now to the amendments on enfranchisement which are of particular interest to many in this House and to myself as a former housing Minister. The Leasehold Reform Act 1967 gives leaseholders the right to purchase a property from the landlord if certain circumstances are met. The Leasehold Reform, Housing and Urban Development Act 1993, which I put on the statute book, gives the tenants of flats in a building the right to collectively acquire the freehold of that building, again if certain conditions are met. The Act also provides the right for a tenant to extend the lease if certain conditions are met. Both Acts exempt the Duchy of Cornwall and other Crown lands from these provisions. This is because the capital raised from the Duchy cannot be distributed and is reinvested in the Duchy; the Duke of Cornwall receives funds only from the surplus. The general exemptions are important to protect land and property associated with the Crown and to ensure that the Duchy continues to perform its role for future Dukes.

However, I shall turn to what I think is the crucial point: Crown authorities have voluntarily committed, most recently in 2001, to abide by the same terms as private landlords in most circumstances. The Duchy has more than 600 residences, around 20% of which would be subject to these Acts had the Duchy not been exempted. The number of tenancies which the Duchy has sold or granted a lease extension to tenants under the terms of the enfranchisement Acts is around 120. There are some exceptions, as the noble Lord, Lord Berkeley, implied, including the historic Royal parks and palaces, property or areas which have a historic association with the Crown or where there are security considerations.

The Bill would represent a significant change to the legal status of the Duchy of Cornwall. There is a presumption that legislation does not bind Crown lands, including the Duchy of Cornwall. Removing Crown immunity for the Duchy of Cornwall could be problematic in the future. As the Duchy of Cornwall vests in the sovereign when there is no Duke of Cornwall, the sovereign has a residual personal interest in matters affecting the property of the Duchy of Cornwall. When vested in the sovereign, the Duchy of Cornwall would have a different legal status from other lands belonging to the Crown.

I turn to the tax status, again raised by a number of noble Lords. The Bill proposes that the Duchy of Cornwall will be liable to income tax and capital gains tax. Let me start by confirming the current arrangements. The Duchy enjoys Crown exemption and is not in any case a corporation within the charge to corporation tax. The Duke of Cornwall is not entitled to the proceeds or profits from the sales of the Duchy’s capital assets, which are retained in the Duchy to provide income for the Duke and future beneficiaries.

The Prince is liable to pay income tax and capital gains tax on any income and capital gains he may receive from other non-Duchy sources. In line with the Memorandum of Understanding on royal taxation, he pays income tax voluntarily on the surplus of the Duchy of Cornwall after deducting official expenditure, applying normal income tax rules and at the 45% rate. In his annual review, the Prince of Wales stated that he paid £4.85 million in the 2017-18 financial year, although this figure includes VAT, income tax and capital gains tax from non-Duchy sources. If employer’s national insurance contributions and council tax are included, the total tax paid increases to £5.3 million. Of course, the expenditure varies from year to year, as does the value of the surplus.

The tax status of the Duchy of Cornwall reflects that of the sovereign, who is also not legally liable to pay income tax, capital gains tax or inheritance tax because the relevant enactments do not apply to the Crown. The Queen also pays income tax and capital gains tax on a voluntary basis in line with the Memorandum of Understanding. Moreover, the unique nature of the Duchy of Cornwall means that, in order to produce a workable income tax and capital gains tax regime, deeming the Duchy as a settlement would not be sufficient. Further provisions would be necessary to ensure that the legislation would work effectively without unintended consequences.

In his speech, the noble Lord, Lord Adonis, focused mainly on the Sovereign Grant Act rather than the Bill before us. I will write to him in answer to some of the issues that he raised. In summing up, I again pay tribute to the noble Lord, Lord Berkeley, for pursuing this important matter.

[Lord Adonis]

What has happened to the tax paid by the Duchy of Cornwall in recent years? The Minister gave last year’s figure. Can he say how that figure has changed?

[Lord Young of Cookham]

I have the figures for only the past three years in my brief. I think that the noble Lord’s queries went further back than that, so I will write to him. I would just say that the Labour Party voted for the Sovereign Grant Act.

[Lord Reid of Cardowan (Lab)]

I want to make one comment prior to the Minister’s response to my noble friend. There may be good reasons—I can see them in principle and in practice—for insisting on more transparency surrounding the costs at Buckingham Palace, for instance, but the expectation that it will hold costs stable or reduce them is not one of them. Witness the increase in the cost of refurbishing this Parliament and the cost of the Scottish Parliament building, which was overseen by not one but two Parliaments. The cost rose from the estimate of £40 million to more than £400 million. There may be good reasons for the transparencies regarding Buckingham Palace, but the expectation that oversight by this or any other committee will reduce the price is not one of them.

[Lord Young of Cookham]

The noble Lord said that he wanted to make a comment rather than ask a question and he did exactly that.

I conclude by expressing reservations about the Bill. The Duchy of Cornwall plays an important role in providing funds to support the public and private lives of six members of the Royal Family. The Government are keen to ensure that the Duchy can continue to perform that function. Noble Lords have made informed contributions to the debate and given pause for thought. However, the Government believe that now is not the time to attempt this reform. I repeat the valid point made by my noble friend Lord Wakeham: if we make progress, it should be on a consensual basis. Considering other pressures on the legislative timetable, the Government have reservations about the prospects for the Bill in future.