Sovereign Grant Bill

Lord Turnbull Excerpts

Monday 3rd October 2011 Lords Chamber

[Lord Turnbull]

My Lords, I am a member of a select band of brothers, most of whom are clustered in this corner of the Chamber, who worked on the last major change to the Civil List. That was the announcement in July 1990 of a 10-year settlement—or, more accurately, the reintroduction of the 10-year settlement envisaged in the 1972 Act that collapsed after three years under the weight of runaway inflation. The briefing produced by the parliamentary Library, whose briefings are normally impeccable, has an important omission. There is no mention of the Civil List Act 1975, which shored up this failing system with an annual supplement to the Civil List. The effect of this was that the Palace’s finances were run on a hand-to-mouth basis. It also introduced an annual opportunity for mischief-making in Parliament and the media, producing misleading and undignified headlines such as “£200,000 Pay Rise for Queen”. Therefore, the first lesson in all this is that we need an arrangement that provides some distance between the monarchy and the hurly-burly of politics.

Our aim in 1990 was to get back to a 10-year framework, with a flat-rate annual sum that was the average requirement over the period. Any surpluses that accumulated in the first five years were to be run down in the second five years. Clearly, that required an assumption about inflation. I and my Permanent Secretary Peter Middleton went to see the then leader of the Opposition, the noble Lord, Lord Kinnock. Naturally, he quizzed us on the inflation assumption. I said that it was 7.5 per cent, which was the average of the preceding 10 years. He said: “You can’t do fairer than that”. Inflation at the time was 9.8 per cent. Neither of us knew that by the spring of the following year, inflation would fall below 7.5 per cent and go on to average about 3.5 per cent over the subsequent 20 years. The result was that the reserves built up had not even begun to be drawn upon by the 10-year mark, and the system lasted for 20 years.

The fall in inflation was not the only reason that the life of the scheme was twice as long as expected. Here we should pay tribute to the two keepers of the Privy Purse, Sir Michael Peat and Sir Alan Reed, for getting the costs of the monarchy and the Palace under control. In its own terms that scheme was pretty successful but all schemes are capable of improvement and the new proposals before us introduce a number of welcome changes.

First, it is not just a 10-year arrangement; in principle it could last in perpetuity and can be renewed periodically, and it avoids the need to renegotiate new arrangements in the first six months of a new reign when I am sure a new monarch has better things to do. Secondly, the consolidation of four grants into one will enable this whole consolidated grant to be better managed, which the Palace has demonstrated its capability to do. Thirdly, it resolves a long-running argument about the role of the C&AG in Parliament in the oversight of spending.

There is only one false note in an otherwise excellent scheme, as has been hinted at by two previous speakers: the link with the Crown Estate. In my view, this link is pretty artificial as there is no relationship between the net income of the Crown Estate and the funding of the monarchy, and there has not been since 1760, when the hereditary revenues of the Crown Estate were first surrendered. The Treasury’s briefing note makes it clear that the sovereign grant surplus is not being taken out of the Crown Estate; that will be paid into the Exchequer as it has been for the last 250 years. In effect, the growth in the Crown Estate surplus is being used as the index to uprate the grant. The Treasury’s note describes the Crown Estate revenues as,

“an appropriate benchmark … in the expectation that it will deliver similar sums in real terms to the amount the Crown receives now”.

However, the revenues of a property company, albeit an unlevered one that is run very conservatively, seems an odd benchmark to determine the appropriate level of funding for the monarchy. It is unlikely that this index will maintain the value in real terms at its current level. In the past two decades, the revenues of the Crown Estate have increased by 6.5 per cent a year, against 3.5 per cent of inflation, so it is a significant increase in real terms, which over a decade will produce an increase in the sovereign grant of a third, which I am sure the Palace neither needs nor is seeking. There is no necessary reason why this index would produce the best guide, particularly as we are now at a relatively low point in the property cycle.

In practice, this grant, as the Minister has told us, is so hedged about by caps, floors, reviews, in-year Treasury controls and parliamentary scrutiny that not much damage is going to be done in either direction, of making the grant too small or too large. However, if maintaining the grant in approximately real terms is the true objective, which seems reasonable to me, it would have been better to use some index of inflation, pretty much as we have done for decades with the BBC licence. We would thereby avoid perpetuating or even entrenching the confusion between the Crown Estate and the Crown itself. It all looks like someone being a bit too clever by half. So rather than 10 out of 10, I give these proposals in an otherwise excellent Bill nine out of 10.

The final, highly commendable feature of the Bill is the change in the rules on the Duchy of Cornwall which allow a grant to be made to an heir to the throne who is not a Duke of Cornwall, so that in future daughters of the monarch as well as younger sons could benefit. One can only hope that this is a precursor to a change to the male-only succession and when that has been done we can move on to the next step in the modernisation of the monarchy by redrafting the outdated and, to many, unacceptable language of the various oaths sworn by a new monarch.