(1 day, 19 hours ago)
Commons ChamberRead Hansard Text Watch Debate Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Dan Tomlinson)
I beg to move,
That—
(1) provision be made amending the Sovereign Grant Act 2011—
(a) to specify the amount of the Sovereign Grant for the financial year 2027-28;
(b) to specify the percentage of the income account net surplus of the Crown Estate to be used by the Royal Trustees to determine the amount of the Sovereign Grant in subsequent financial years;
(c) to confer a duty and a power on the Treasury to specify the amount of the Sovereign Grant in subsequent financial years in certain circumstances; and
(d) for connected purposes;
(2) any increase attributable to such provision in the sums payable under that Act should be payable out of money provided by Parliament.
The motion stands in the name of the Chancellor of the Exchequer. If we approve it, the Bill to establish the sovereign grant will be published later today, and I am sure the House will have an opportunity for a longer and more detailed debate on Second Reading. The sovereign grant is the annual funding provided to support the sovereign’s official duties and the work of the royal household, including staffing, official travel and the maintenance of the occupied royal palaces.
Since 2012, the level of the grant has been determined through a statutory framework that links it to a specified percentage of the revenue of the Crown Estate—an independent public business whose net revenue profits are returned to the Exchequer. Additionally, in 2016, the previous Government agreed a temporary £369 million uplift to the grant over 10 years from 2017-18 to 2026-27 specifically to fund the Buckingham Palace reservicing programme, a major 10-year project to modernise and safeguard the palace’s essential infrastructure.
Periodically, Parliament requires the royal trustees to review whether the arrangements for the sovereign grant remain appropriate. Earlier this year, the then royal trustees completed that review and made recommendations for the appropriate level of sovereign grant funding from 2027 to 2032. The trustees recognise that with the Buckingham Palace reservicing programme nearing completion, the exceptional funding requirement for the scheme no longer exists. They therefore recommended that the overall level of funding provided through the sovereign grant should reduce from next year from £137.9 million to £99.9 million in 2027-28.
The recommendation was made based on an assessment of the royal household’s expected costs and the Crown Estate’s expected revenues between 2027 and 2032. The new level of the grant will ensure that the royal household can continue to deal with property maintenance backlogs, following some years of constrained funding during the pandemic. It will also allow the royal household to replace ageing systems to strengthen cyber-security and install energy-efficient heating systems.
With the consent of the House, given that we will debate the clauses in the Bill in more detail on Second Reading later this month, I will bring my remarks to a close. Overall, these measures ensure that the grant will continue to fulfil its core purpose of supporting the official duties of the monarch and maintaining the occupied royal palaces. I hope the House will agree that the clauses in the Bill will improve the existing framework governing the sovereign grant so that it continues to operate just as Parliament intended.
James Wild (North West Norfolk) (Con)
The background to this motion dates from 1760, when the agreement was reached with George III to surrender the Crown Estate revenues to the taxpayer in return for Government support, but it was not until the Sovereign Grant Act 2011 that financial support was delivered through the sovereign grant. The purpose of the Act was to bring together a patchwork of funding streams and arrangements into a more transparent system with greater accountability to taxpayers.
The motion that the Minister has moved proposes three important changes: it sets the baseline for the sovereign grant for next year, it updates the percentage and, finally, it creates a mechanism to allow the Treasury to set the grant in future years in certain circumstances, which includes potentially reducing the amount in the sovereign grant. Given that the grant funds the duties of the monarch and the royal household, we support this approach and the motion.
It is worth reflecting that in an era when many institutions struggle to find public support and respect, the monarchy continues to play a unique role in our lives. Whether it is representing Britain overseas, supporting charitable organisations, strengthening diplomatic relationships or bringing communities together at moments of celebration or national reflection, the royal family performs an indispensable public service. We saw that in the response following the death of the late Queen and in the support that His Majesty the King has had as he has taken on the responsibilities of the Crown. I should note that His Majesty is a constituent when he is resident at Sandringham in my constituency—[Hon. Members: “He can’t vote!”] He cannot vote. Although Sandringham is a private residence, it hosts official events that are covered by the grant.
The value of the royal family is not simply symbolic. Independent analysis has shown the substantial soft power and economic benefits flowing from the institution, whether it is trade, tourism, cultural influence or the prestige associated with royal warrants, which many firms in our constituencies are fortunate to benefit from. The grant enables those benefits to be realised.
For this financial year, the sovereign grant stands at £137.9 million, with £97 million of that in core funding and £40 million as the final payment for the Buckingham Palace reservicing programme. When many construction projects—I could mention a number—seem to miss their budget and targets, it is right to acknowledge the National Audit Office’s finding that the 10-year programme has managed to remain in budget, despite challenges, by making trade-offs, actively managing risk and learning lessons. Despite the completion of the reservicing programme, without these proposed changes the funding would remain at the £137.9 million level in 2027, which clearly could not be justified. That is what lies behind the resetting of the baseline to £99.9 million, with the reference percentage raised to 20.5% for the period through to 2031-32.
At first glance, that looks like a significant reduction from the current level, but it comes after the completion of the 10-year programme, and core funding has actually increased to £97.6 million this year, from around £52 million in 2024-25. According to the House of Commons Library, if it had simply increased with inflation from 2016, it would now be £59.4 million. We have to ask what lies behind that growth. The jump from £52 million to £72 million in 2025-26 was largely driven by property maintenance, higher payroll and other spending, alongside a top-up to the reserve sovereign grant after a period of largely flat grants. More than half the total grant was allocated to the preservation of the occupied royal houses, which must be right.
The further rise to £97.6 million appears to mainly relate to royal travel, digital services, housekeeping and hospitality, although I would welcome the Minister shedding some more clarity on where the remaining costs come from. As we move forward, there is a considerable backlog of maintenance at the occupied royal palaces, a need to modernise ageing systems, to improve cyber security and to invest in more energy-efficient infrastructure. I am grateful to the royal household and the Keeper of the Privy Purse for the constructive conversations I have had with him on behalf of His Majesty’s Opposition regarding the settlement, which does two things: preserve the historic national buildings and run a modern, secure, fit-for-purpose operation.
I have a few points that I would like the Minister to clarify. First, ahead of Second Reading, when we will be able to get far more into the detail than we can this evening, will he commit to writing to me with a breakdown of the planned expenditure behind the new £99.9 million figure? For example, why is payroll expected to rise by £7 million between 2026-27 and 2031-32? Core property maintenance rises by 25%. The case for addressing maintenance, particularly in stateroom areas, is clear. Is he confident that the broader programme reflects value for money? Can he confirm that any capital expenditure above £6 million, such as replacing the boilers at Windsor, would require Treasury approval of a business case?
Encouragingly, income supplementing the grant is forecast to increase by a quarter over the period. How confident is the Minister in those projections? It is important that there is a focus on efficiency. What external benchmarking of the royal household cost base has there been? Which comparator organisations were used, and what specific efficiencies have resulted or are planned as a result?
The reserve, as I have mentioned, fell with the impact of covid and now stands at £21 million. Is there a formal target reserve level that the household is managing toward for resilience purposes, distinct from the statutory 50% reduction trigger threshold? If so, over what timeframe is that expected to be reached?
The motion provides for the reference percentage used to calculate the grant rising from 12% to 20.5%, as the Government have set out. That is described as being calibrated to the household’s expected costs for that five-year period. What specific cost forecast underpins that rate? Has it been independently tested or benchmarked, or is it effectively set simply by reference to the household’s own submitted budget? For those who may be concerned that this settlement is too generous, the reality is that there will be a real-terms reduction as the grant remains flat in cash terms over the period.
One of the significant parts of this motion, which we will scrutinise carefully in the legislation, is a mechanism to allow the sovereign grant to decrease when circumstances warrant it. This reforms a long-standing feature of the existing system, the “golden ratchet” provision in section 6 of the 2011 Act, under which funding cannot decrease in cash terms. The Government’s briefing note on the King’s Speech tells us that the proposed change means that
“the Grant can be reduced from one year to the next, preventing inappropriately high funding”.
Of course it is important for all taxpayer funding to represent value for money, but can the Minister elaborate on the rationale for that, given that the settlement is expected to be flat cash over the period? In what circumstances would a reduction be considered appropriate, and what role would Parliament have in scrutinising any such decision?
We support the motion and the resetting of the sovereign grant following the completion of the Buckingham Palace works. It is important that we establish a sustainable funding framework for the years ahead. However, there are important questions that I have raised about the increases in the last year ahead of the setting of this new baseline, and in what circumstances the Government may look to reduce the funding. Those questions are asked in the spirit of supporting both the institution of the monarchy and the principle of responsible stewardship of public money.
Neil Duncan-Jordan (Poole) (Lab)
I welcome the Government's decision to introduce legislation to make it possible for the sovereign grant to be reduced, but there remain a number of issues surrounding the grant that I believe they should also address. The first is the link between the grant and the profits of the Crown Estate. The Crown Estate is quite separate from the monarchy, and operates to generate revenue for the Treasury. That seems a very odd form of indexation, and raises the question of why the grant is not based on the needs of the monarchy or its costs. That, I believe, needs to be reviewed. The fact that the grant could only ever go up—until the Government tabled this motion—was described by the Financial Times as an arrangement whereby in a good year the monarchy would win, and in a bad year the taxpayer would lose. It is therefore right that the Government are addressing that anomaly.
The motion also raises the question of how the grant should be set. I believe that the Treasury should have the power to specify the amount on an annual basis. It is important for the funding of the monarchy to be transparent and open to MPs for debate. On numerous occasions I have tried to table questions about these issues, only to be told that this is not something for Parliament to discuss. That has to change.
Finally, there are some anomalies relating to the monarch’s wider financial arrangements. Why, for example, are they not subject to inheritance tax? Why is no account taken of the profits of the Duchy of Lancaster in the setting of the level of the sovereign grant, and why are the monarch’s financial affairs exempt from freedom of information legislation? While the Bill might be viewed as an administrative adjustment, it is important that we ask why the grant needs to be 322% higher than it was when it was first introduced in 2012. Even when we allow for inflation, the proposed grant is well over twice the real value of its starting point.
I would be grateful if the Minister commented on those issues when he sums up the debate.
Lisa Smart (Hazel Grove) (LD)
The sovereign grant does not provide personal income for the King, the Queen or any member of the royal family. It funds the work of the institution, and the largest part of it funds buildings. Between 2025 and 2026, £67.5 million went on property maintenance alone, including the Buckingham Palace reservicing programme and the installation of more energy-efficient heating. These are heritage sites carrying a maintenance backlog that has built up over decades, and the purpose of the reservicing work is to stop a serious risk of fire and flood. We should, of course, take the action that is needed to protect these national heritage assets.
The grant is also funding green infrastructure across the estate and better cyber-security, which, in the current international climate, is not an optional extra for any national institution. However, we should treat the increase as temporary in nature, and it is right that the sovereign grant will be readjusted once those projects have been completed. The Government have already committed to legislating for exactly that when the reservicing works finish.
That brings me to a key issue: transparency. The taxpayer is funding this grant. Taxpayers are entitled to see where their money goes, and as the hon. Member for Poole (Neil Duncan-Jordan) has already mentioned, Parliament is entitled to hold the Government and the Treasury to account for it. Some of that framework already exists, and it works. Under the Sovereign Grant Act, the royal household’s accounts are audited by the Comptroller and Auditor General and laid before this House, and the royal household sits within the National Audit Office’s value-for-money remit. But that is not the whole picture.
We have an institution spending more than £130 million of public money a year, and its published accounts are the beginning and end of what the public can ask for. If one of my Hazel Grove constituents wants to know how a figure in the report came to be, there is no route for them to find out. May I encourage the Minister to let us know whether he has any plans to review the reporting requirements attached to the grant, so that Parliament and the public get spending detail at a level that allows genuine scrutiny? It is right that taxpayers will have questions about where and, importantly, whom this money goes to.
Andrew Mountbatten-Windsor holds no title, no office and no public role; as far as the state is concerned, he is a private citizen. As such, not a penny of this grant should reach him. Neither should any other taxpayer funding, and that has to include what happens at the end of his life. Frequently, members of the royal family have received publicly funded funerals, having either ceremonial funerals or state funerals. For context, the Queen Mother’s ceremonial funeral in 2002 cost more than £5.4 million, of which £4.3 million was spent on policing. Can the Minister confirm that no public money from the sovereign grant or any departmental budget will fund a ceremonial funeral, a lying-in-state or state honours of any kind for Andrew Mountbatten-Windsor?
Jim Shannon (Strangford) (DUP)
I thank the Minister for his introduction, and for setting the scene for the motion. Clarification is needed, and the Minister has provided that in a way that I think is transparent. The nation needs to know as well.
Do the Minister and this House agree that although we must always ensure absolute value for money for every single taxpayer in my constituency and right across the United Kingdom of Great Britain and Northern Ireland, the monarchy provides an immeasurable service, stability and global prestige that far outweighs the costs?
Looking at the figures, we see that the Treasury is rightly acting to reduce the overall sovereign grant to £99.9 million for the 2027-28 financial year. Will the Minister acknowledge that that demonstrates a clear commitment from the palace to be transparent and to tighten its belt alongside the public, and that it will ensure that the continuous maintenance of our historic national heritage can continue?
Dan Tomlinson
I thank Members from across the House for their questions and for beginning the scrutiny that will take place, should the House agree that the Bill should be laid and for debate to proceed at Second Reading. Let me turn to some of the points that were raised.
The shadow Exchequer Secretary, hon. Member for North West Norfolk (James Wild)—I hope he still has that title, given the Opposition’s ongoing junior ministerial reshuffle—raised a whole range of important questions and asked whether I would write to him on these matters. I would be very happy to write to him, and I am sure the letter can be made available to others in this place, given that a whole range of questions were asked and I may not be able to cover them all in concluding.
One key question asked by Members on all sides was on the increase in the value of the sovereign grant above inflation. That is, of course, an important question, and one that the trustees went over in detail in making the decision to increase the grant, relative to the pre-Buckingham Palace servicing costs, up to £99.9 million. It is reducing by a quarter from the current year to next year because of the Buckingham Palace refit finishing. A large part of the increase in expenditure has been on the refurbishment and the servicing costs of the occupied royal palaces. That was at £18 million in 2016-17 and next year it will be at £33.6 million. That accounts for a large share of the above-inflation increase.
The shadow Minister mentions—the House of Commons Library and others have also pointed to these—other increases in expenditure faced by the royal household: yes, on buildings and maintenance, but also on ensuring the palaces can take proactive steps to improve the energy efficiency of their heating in line with broader net zero goals that have at least some level of consensus across the House. I hope that one day we may be able to rebuild that consensus, which seems sadly to have been lost in recent months, on ensuring that we, along with our international allies, can reduce our domestic carbon emissions. There is the need for investment in cyber-security, which is growing in line with AI, and we must target other long-term measures to make sure the royal household is more resilient.
There was a whole range of questions on whether the trustees have ensured a focus on external benchmarking and on what work has been done to scrutinise the costs. I am assured that that work has taken place, and we can discuss it in more detail on Second Reading. That touches on the point raised by my hon. Friend the Member for Poole (Neil Duncan-Jordan) and others about the fact that the sovereign grant will now be set at close to 20% of the revenue of the Crown Estate, rather than 12.5%. That reflects the bottom-up assessment that has taken place, looking across the needs of the royal household and making sure it is being funded adequately for the public duties that His Majesty the King and the royal family carry out.
It is worth pointing out that those activities have increased significantly in recent years. Towards the end of her reign, the late Queen was not carrying out a large number of foreign engagements and was also hosting a smaller number of state visits. The King has increased the engagement he is carrying out on our behalf as part of his public duties. That has involved more expenditure in staff costs and to ensure that those engagements and the benefits the shadow Exchequer Secretary talked about—the representation of our country and supporting good causes here in the UK—can get the funding and support they need.
It is worth noting, in response to the question raised by the hon. Member for Hazel Grove (Lisa Smart), the Liberal Democrat spokesperson, that the sovereign grant is very clearly focused on the official duties that the royal family carry out on our behalf. It is not about supporting or funding their private activities, or things it would not be appropriate for the sovereign grant to fund.
My hon. Friend the Member for Poole raised the need for debate on these topics. We will get plenty of time on Second Reading to debate the issues that he and others have raised on transparency and clarity on where the sovereign grant is being spent. I have set out today some initial outlines. I will respond in writing and I am sure we will have a thorough debate later in the month.
I will have to get back to the shadow Exchequer Secretary on the business case thresholds, but the Treasury does of course make sure that every penny of our money is well spent, and that includes the £99.9 million that will be allocated.
I have, I hope, responded to many of the points that have been raised. I thank Members for their contributions. I look forward, if we proceed, to debating this matter on Second Reading.
Question put and agreed to.
Ordered,
That a Bill be brought in on the foregoing Resolution;
That the Chairman of Ways and Means, the Prime Minister, the Chancellor of the Exchequer, Secretary Alex Norris and Dan Tomlinson bring in the Bill.
Sovereign Grant Bill
Presentation and First Reading
Dan Tomlinson accordingly presented a Bill to specify the amount of the Sovereign Grant for the financial year 2027-28 and the percentage of the income account net surplus of the Crown Estate to be used by the Royal Trustees to determine the amount of the Sovereign Grant in subsequent financial years; to confer a duty and a power on the Treasury to specify the amount of the Sovereign Grant in subsequent financial years in certain circumstances; and for connected purposes.
Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 137) with explanatory notes (Bill 137-EN).