Sovereign Grant Bill
Debate between Lord Beamish and George Osborne(13 years, 3 months ago)
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Mr Osborne
All I would say is that I have followed the advice of the House authorities throughout. The procedure has been unusual. People have said that this is the most important change since 1760, but of course in the early 1970s the House made some significant changes, so we are partly following procedures laid down then.
Let me get on to the substance of the Bill. Everyone has now had a chance to read it. Amendments have been tabled by Opposition Back Benchers, Opposition Front Benchers, and Government Front Benchers, and I shall say something about that. We have basically accepted some of the amendments that the shadow Chancellor and his team tabled, and I will explain why later.
I will begin, as we should do on such occasions, by putting on the record the House’s gratitude for the service that the Queen has provided to our country over many decades. Indeed, her time on the throne recently exceeded that of George III and she now has Queen Victoria in her sights. The recent visit by the Duke and Duchess of Cambridge to Canada and California reminded us that other members of the royal family also make an enormous contribution. As I said a couple of weeks ago—it is a view shared by nearly everyone in the House—we want a system that provides the Queen with dignity and allows her and her family to do their official jobs, which in her case is Head of State, but to do so in a way that is accountable, transparent and delivers value for money for the taxpayer.
The current system of financial support has some very serious shortcomings. It is very inflexible, so money saved in one spending area such as travel cannot be spent in another area such as the maintenance of royal palaces. It is not very transparent, as the National Audit Office is not the auditor of royal finances; that is done by the permanent secretary to the Treasury. I pay tribute to my hon. Friend the Member for Gainsborough (Mr Leigh), the former Chair of the Public Accounts Committee, for the work it did in recent years to look at value for money studies on particular areas of royal financing, which has been quite opaque and which this Bill seeks to change. Critically, the current system has relied on a reserve of public money that was built up over the past 20 years and is now depleted. That was a crucial part of the royal household’s annual funding for the continuance of their official duties. That money has run out, so in other words the system is broken and we have to fix it.
Mr Kevan Jones (North Durham) (Lab)
Does the right hon. Gentleman agree that if we are to have true transparency in the costs of the royal household, we need to know about all expenditure, including, as I suggested a couple of weeks ago, the contribution made to the household by the Ministry of Defence in terms of staff? We learnt last week from The Mail on Sunday that Prince Charles has apparently objected to the full costs of the royal flight being put on the royal household, which effectively means that the MOD is subsidising the household. If we are to get the true costs, do we not need full transparency on everything paid to the royal household?
Mr Osborne
I will move on shortly to some of the issues that the hon. Gentleman raised two weeks ago on the use of accommodation on the royal estate, for example by the MOD, and say something on that and other areas of royal spending. The Bill establishes a distinction between the royal family’s public expenditure and their private finances. It is a long-established principle of the system that their private finances, for example from the Duchies of Lancaster and Cornwall, are their private money. There are checks and balances on that, such as the Chancellor of the Duchy of Lancaster having to be a member of the Government. We are saying that all the royal family’s public expenditure, which goes to their official duties and those parts of the royal estate that are not part of their private income or assets, should all now be auditable by the National Audit Office and that the Public Accounts Committee should be able to look at it. That is a fairly dramatic increase in the transparency before Parliament.
Mr Osborne
Let me just answer this point before giving way again.
Although I do not want to speak for the Comptroller and Auditor General or the PAC, I suspect that if they wanted to look at the funding arrangements between the MOD and the royal family, they would be able to do so under the provisions of this Bill.
Mr Jones
A couple of weeks ago I welcomed the increased transparency in the auditing process that the proposals bring forward, but if we are to determine the size of the sovereign grant—it is £30-odd million a year—surely a good starting point would be to find out what the actual cost of the royals doing their public duties is. I accept that some of the things the Ministry of Defence does are directly linked to the royals’ public duties and I do not suggest for one minute that the royal household should subsidise that, but surely to determine the size of the sovereign grant we need a better understanding of all costs coming from the public purse, whether from the Ministry of Defence or any other Government Department.
Mr Osborne
Let me give way to the hon. Member for Glasgow South West (Mr Davidson) and then I will answer both hon. Gentlemen’s points.
Mr Osborne
I would like to make a little progress, if both hon. Gentlemen will allow me. Let me say a little more about the Bill, and then I will be happy to take questions.
Clause 1 proposes the creation a sovereign grant designed around three principles. First, it is sustainable, so that it provides reliable, long-term financing for the sovereign that is free from annual political argument but gives the House of Commons proper checks and controls. Secondly, it is flexible in dealing with the problem I described whereby money saved on travel cannot be spent on palace maintenance and vice versa. Thirdly, it is accountable, as I have been saying, because of the historic increase in parliamentary scrutiny of royal expenditure.
The Queen is one of the few Heads of State in the world who is genuinely completely above the party political fray. I want to take this opportunity to thank my opposite number, the shadow Chancellor, and his team for conducting themselves in a very proper way as the loyal Opposition in asking questions. We will come on to the questions that he has rightly asked. [Interruption.] I suggest that his Parliamentary Private Secretary, the hon. Member for Vale of Clwyd (Chris Ruane), banks this moment, because it might not come again in this Parliament. We have tried to be as open as possible. I know that members of the shadow Chancellor’s team met the Treasury officials on the Bill team yesterday. As I will explain, I propose to accept a couple of his amendments.
The shadow Chancellor asked four questions in the debate two weeks ago. I propose, for the rest of my remarks, to answer those four questions. It will be up to him and the House to decide whether they are adequate answers, but I thought that that was the best way to approach this matter. His first question was about the level of the sovereign grant, the second was about the mechanism for uprating it, the third was about the new arrangements for greater parliamentary scrutiny, and the fourth, which relates to some of the interventions we have just heard, was about the way in which the Government provide other forms of support to the royal family. I will take each question in turn.
Mr Osborne
Let us try to keep focused on the issue at hand.
Secondly, I completely accept that I could have brought other mechanisms before the House, but the Crown Estate is a large commercial property company that is run in a pretty conservative way. It is not a bad proxy for how the country and the economy are doing. That is why we are proposing this mechanism, but of course if people want to propose something else they are entitled to do so.
Mr Osborne
I think I will leave it to the Deputy Prime Minister to update the House on that. It is one of the many benefits that come from being Deputy Prime Minister that he gets to conduct these important negotiations. [Interruption.] They are extremely important negotiations. The right hon. Member for Leicester East (Keith Vaz) makes a good point in reminding the House that this question involves a lot of other countries. That explains why something that people assume would be quite simple to deal with in the House of Commons is not.
Let me talk about the actual numbers. How much is 15% of the Crown Estate profit, and how does it compare with what the royal family has spent in recent years on its official duties? In 2006, they spent £33 million; in 2007-08, they spent £35 million; and then £37 million and £34 million. The latest annual accounts, which were last week, showed that they spent £32 million. The amount varies a bit, because one-off capital projects are either undertaken or not in given years, but the average of the past five years is £34 million. It is interesting to note that it was £49 million 20 years ago, so the latest figure shows quite a dramatic reduction compared with what they used to spend. In real terms, the reduction is more than 50%.
Mr Kevan Jones
That is very interesting, but if we do not know which Government Departments are subsidising the royal household, how can we tell whether those efficiencies are real ones? I suspect that in some cases, Departments are cross-subsidising them. At the moment, the grant in aid for certain palaces comes from, for example, the Department for Culture, Media and Sport. I know that in 1999, Marlborough house was included as part of that. Will there be limitations on what other royal properties can be added so that the sovereign grant can be spent on them?
Mr Osborne
I will get back to the hon. Gentleman specifically on that point—I do not have specific information on Marlborough house with me at the moment—but on his broader point, for the first time, we will allow the National Audit Office to crawl over the arrangements that he describes.
I was going to go on to explain that some senior members of the Ministry of Defence and our military live in properties that are rented from the Crown Estate at below the market rate. The properties are within extremely secure zones, and it would not be possible to rent them to virtually anyone else. That arrangement suits the MOD, because it gets properties—not very many—at below the market rate, and equally, it suits the royal estates, in that they can rent out properties that they would not be able to rent out otherwise.
Let me talk about those sums. As I have pointed out, the average over the past five years is £34 million, which is much less than 20 years ago, when it was £49 million. In 2013-14—the first year in which the new sovereign grant mechanism will apply—the level will be determined by the profits in 2011-12, as I said earlier. We do not know precisely what those profits will be, because we are in the middle of the financial year, but the recently published Crown Estate annual report for last year showed profits of £231 million, and the Crown Estate confirms that that is pretty much what it is expecting in profits for 2011-12. The result of all that—this is the key point for the House—is that the sovereign grant in 2013-14 would be £34 million, which is in line with the average for the past five years. I would not say that that is a coincidence, because we have partly designed the mechanism to ensure that that has happened.
If projections for the Crown Estate are correct over the rest of this Parliament, we should see a real-terms cut of up to 9% in the funding for the official duties of the sovereign in that period.
Mr Osborne
If the hon. Gentleman will allow me, I will make some progress.
I hope that I have answered the shadow Chancellor’s first question about the level of funds. In the end, it is a matter of judgment whether £34 million or so is the right amount for the future. The newspapers’ reaction to my statement a couple of weeks ago was not much of a guide. The Independent headline read, “Queen guaranteed £35m ‘recession-proof’ income”, while The Daily Telegraph wrote, “Monarchy ‘shorn of its dignity’ to save money”. I think we probably got it about right somewhere in between the two.
That leads to the second and probably most important question that the shadow Chancellor asked: how can we ensure that the sovereign grant is neither too high nor too low, and what can we do about it if it is judged to be either? Basically, the Bill introduces a number of important safeguards. First, it provides for a reserve fund so that any unspent surplus from the sovereign grant that year will go into a reserve fund. Under the civil list, there has always been a reserve fund. Indeed, it reached £37 million early last decade. We propose that the reserve fund should be capped so that it does not go above about 50% of the annual grant. In other words, assuming that the grant is likely to be £34 million, the reserve fund would not be allowed to rise above £17 million. However, it is right that the royal household has a reserve to call upon for major capital works that it needs to undertake, although, as I said, we are introducing for the first time a cap on that reserve.
The Bill retains as the three royal trustees the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse. It is our responsibility to act in any given year to ensure that the reserve remains within that 50% cap. If it is going to be higher, we can act to reduce the cash going to the royal household through the grant to below 15% of Crown Estate profits. That is one check.
Mr Osborne
May I set out the checks and then invite questions—I mean interventions? I am not going to make the mistake of some right hon. Members in thinking that interventions are questions.
The second check concerns the in-year controls that the Treasury operates for all public expenditure. The permanent secretary to the Treasury remains the accounting officer for the disbursal of Treasury funds, and the Keeper of the Privy Purse will be the accounting officer for the royal spending we are talking about and can be summoned and asked to give account for that. The hon. Member for Bristol West (Stephen Williams) asked whether Buckingham palace will be able to open for longer this year than it did last year. I can confirm that that will be the case, as the palace is looking for additional sources of income.
The key check, however, for ensuring that the level of funds is appropriate and that the 15% amount is being paid will be the review of the 15% mechanism. The legislation requires that a review is carried out seven years after the Bill comes into effect and every seven years thereafter. The shadow Chancellor and his team have suggested some amendments. I have discussed them with him and I am now proposing, through Government manuscript amendments today, basically to accept his amendments. That means that the first review will be carried out four years after the grant comes into effect—he suggested three years, but having discussed it, I have decided on four years—and therefore that the first review will be carried out in 2016. That will be one year after the general election, which is a good and sensible moment for us to review royal finances.
I am also accepting the right hon. Gentleman’s amendment that proposes a five-yearly, instead of seven-yearly, review thereafter. In other words, in every Parliament, assuming that the fixed-term Parliament provisions are adhered to, the review will take place one year after the general election. There will be a review in every Parliament, assuming that they are five-year Parliaments.
Mr Kevan Jones
Will the Chancellor explain how the controls over the reserve will work? Who will take the decisions about how it is spent? It does not take a genius or a financial wizard to work out that, if we draw down the reserve, we can certainly keep up the annual income at 15%. Who will have a say over how the reserve is spent? Will the Government of the day have any control over how it is spent?
Mr Osborne
First, the reserve will be audited by the National Audit Office, as the Bill makes clear. Secondly, the trustees of the royal finances—the Keeper of the Privy Purse, who is the Queen’s appointment, but also the Chancellor and the Prime Minister of the day—have oversight of the reserve. That is similar to the current arrangement. The Chancellor of the Exchequer—who undertakes this work more than the Prime Minister—and the Treasury will ensure that the reserve is used for proper purposes. As I have said, the reserve is also accountable to the National Audit Office and the Comptroller and Auditor General.
Mr Osborne
The honest answer is that I have absolutely no idea, but I will find out and let the hon. Gentleman know. I might even be able to find out during this debate.
Mr Jones
Has not the Chancellor just confirmed that we are giving the royal household freedom to spend the sovereign’s grant on additional properties? [Interruption.] It is an additional property if the facts are understood. At the moment, the properties covered by grant in aid are Buckingham palace, St James’s palace, Clarence house and Marlborough House Mews, the residency opposite Kensington palace, the Royal Mews royal paddock and Windsor castle and the buildings in the Great park. Are we thus going to see an extension? Who in the royal household makes the decision on that, or does the Chancellor have any say over which other properties not currently covered by the grant in aid from the Department for Culture, Media and Sport can be added in, increasing costs?
Mr Osborne
We do not propose to add anything in. Frogmore is part of the Windsor castle estate, or part of the Windsor Great park, which I am sure the hon. Gentleman knew before he made his intervention.
Let me sum up this rather lengthy clause 1 stand part debate. We do not want a cut-price monarchy; nor do we want an excessively lavish monarchy. What the country wants is a monarchy properly funded to do the job we ask of it. It does that job well. Long may that continue. I commend the clause to the Committee.
Oral Answers to Questions
Debate between Lord Beamish and George Osborne(13 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
My hon. Friend alerted me to the fact that he might ask this question. The House will understand that it is too early to give a robust estimate of the costs of the operations in Libya, but I can say that they should be modest compared with some other operations, such as Afghanistan. The MOD’s initial view is that they will be in the order of tens of millions of pounds, not hundreds of millions. I can tell the House today that whatever they turn out to be, the additional costs of operations in Libya will be fully met from the reserve.
Mr Kevan Jones (North Durham) (Lab)
T9. The Chancellor said on Sunday that the present financial difficulties were the result of “a decade of overspending”, so can he tell the House why in July 2008, 11 years into a Labour Government, the then Leader of the Opposition, now the Prime Minister, told the CBI conference“we are sticking to Labour’s spending totals”?
Mr Osborne
What we did on coming into office was set out a credible plan to reduce the budget deficit that has moved this country out of the financial danger zone. One month ago, the shadow Chancellor told his entire Front-Bench team not to make any spending commitments, and after that they committed to more than £10 billion of spending commitments. They have opposed £50 billion of the cuts. It is completely incredible, and that is why they cannot find any reputable organisation in the world to agree with them.