Sovereign Grant Bill

Ed Balls Excerpts

Thursday 14th July 2011 Commons Chamber

[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.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

I commend your patience and flexibility, Mr Hoyle, in allowing this clause stand part debate to include the status of mausoleums and the role of English Heritage, which somewhat stretches the clause. Having a Second Reading-type debate on clause stand part in this way is probably a revolutionary approach to parliamentary procedure. After the events of the last few days, that may not be surprising. However, I should reassure the hon. Member for North East Somerset (Jacob Rees-Mogg) that he need not feel destabilised by my use of the word “revolutionary” in this context.

A fortnight ago, during the debate on the financial motion relating to the Bill, the Opposition made it clear that

“the monarchy continues, and must continue, to play a vital role in the affairs of our nation in the new century, but that to play this role and to command public support, the royal household must… be financed in a proper, open and fair way”.

We expressed our intention to support the Chancellor’s proposals to reform the current 250-year-old arrangements and

“to strike a fair and workable balance between the legitimate needs of the household and the interests of the taxpayer.”

However, we also made clear that it was

“the responsibility of Her Majesty’s Opposition to scrutinise the actions of the Government to make sure that it is done in a fair and proper way”.

Those are the guiding principles that lie behind today’s debates on clause 1 and, more widely, our amendments.

In that debate a fortnight ago, I cautioned the Chancellor that

“At a time when many families and businesses are under real financial pressure”

there was more work to be done, and a need for more “detail and reassurance” on Second Reading—which we have not had—or in Committee

“to establish a consensus not only across the Dispatch Box but in the country as a whole in support of these reforms.”—[Official Report, 30 June 2011; Vol. 530, c. 1150.]

I also asked the Chancellor to provide more clarity and detail on the level of the sovereign grant and the wider costs of the royal household, the arrangements for regular parliamentary scrutiny, and the mechanisms for uprating the grant.

I thank the Chancellor for the detailed way in which he has sought to answer those questions in the debate so far, and for the serious consideration that he has given to our amendments. I am also grateful to him for giving Members more information than they were given two weeks ago. However, it is difficult to hold a debate such as this when time is so constricted, and I share the concern expressed about that by Members on both sides of the House. As I said to the Chancellor earlier, I think that he could have provided even more information to help Members to understand the debate.

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[Mr Kevan Jones]

I hear what my right hon. Friend says, but unless we know the full amount of money that is being paid to the royal household by other Departments—for instance, the Ministry of Defence—how can we determine, first, that those efficiencies are real and this is not just about moving money across and, secondly, that 15% is the right level?

[Ed Balls]

I shall deal with that point in a minute.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

Does the right hon. Gentleman agree that if those costs are indeed taken into account the reduction between 1991-92 and the present day becomes even greater? The figures do not include, for instance, the royal yacht, which has been decommissioned and is no longer a burden on the Ministry of Defence.

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[Ed Balls]

What concerns me is not the fall in expenditure over the past 10 or 20 years, which most people would consider sensible—notwithstanding the issues raised by my hon. Friend the Member for North Durham (Mr Jones)—but the fact that we are set to see real-terms rises in the years ahead. That is where we should focus our scrutiny.

On the other hand—on the side of the ledger that does not feature efficiency savings—we are seeing rising pressures on the royal family. As I said a couple of weeks ago, the combination of the success of the wonderful royal wedding and the visit of the Duke and Duchess of Cambridge to Canada and the USA, following Her Majesty’s historic visit to Ireland, has resulted in a rise in both the popularity of the royal family and the demands on them around the world, and that trend is set to continue. It is important that we scrutinise whether the resources that are in place are sufficient and right.

I raised in the last debate the fact that it has been reported that a number of members of the royal family have had their security reduced or removed over the past year. I accept the Chancellor’s assurances that there are no concerns in that regard, but it was right that we raised the issue. We have tabled amendments to clauses 2 and 4 that are designed to ensure both that there would be full and independent scrutiny of all the different aspects of royal expenditure, including the level of the grant and, more widely, value for money and the effective spending of resources across the piece, and that the National Audit Office would have sufficient powers and resources to do that job. My hon. Friend the Member for North Durham asked about wider expenditure outside the sovereign grant. As I understand it, it should now properly come within the purview of the NAO to look across the piece. In our upcoming debate on those clauses, perhaps we could receive an assurance that the NAO will be able to look at all the budgets, not just this particular one. Clearly, the NAO will not be able to reach a judgment on value for money in terms of royal household expenditure under this grant unless it can do so in the context of the other expenditures by Government Departments for the royal household. It is important to maintain royal protection and security, but protecting value for money is also important. The NAO and the Public Accounts Committee will need to respond to the issue my hon. Friend has raised and make sure they can see the full picture. I say again that we seek assurances in the upcoming debate on those clauses that the NAO will be able to look right across the royal household’s expenditures, rather than only at the expenditure financed by the sovereign grant.

The Chancellor has moved very much in our direction on our second issue. I argued a couple of weeks ago that, given the historic importance of these reforms and the inevitable uncertainties at the beginning of a new financing regime, Parliament would need to keep a closer eye on the arrangements. I also said that that needed to be consistent with the Chancellor’s proper desire to give the royal household stability and certainty. In our judgment, waiting seven years for a review, and certainly seven years for the first review, was too long. In our amendments to clause 7, we propose that the first review should happen in the period up to April 2015—three years from now—with five-yearly reviews after that. The Chancellor has gone pretty much to where we would like to be on these matters. Therefore, we thank him for taking our concerns seriously and making sure Parliament will be able to take an early view on these arrangements.

On our third issue, however, I have a continuing concern, which has prompted our amendment 8 to clause 7. The issue is the level of profits from the Crown Estate. The Chancellor has told the House that

“we need a funding mechanism that prevents the sovereign coming to Parliament each year for resources, and that provides funding broadly in line with the growth of the economy…There will be a cash floor to protect the monarch from cash cuts, but basically the monarch will do as well as the economy is doing.”—[Official Report, 30 June 2011; Vol. 530, c. 1146.]

We do not know that the figure of 15% of Crown revenues will prove to rise in line with the overall performance of the economy. That obviously depends on the performance of the Crown Estate and Crown revenues. As I pointed out, the Crown Estate income from renewables grew by 44% in the year 2009-10, and it is widely expected to increase again in future years because of the financial potential of the exploitation of wind and tidal energy on the foreshore around the country.

The Crown Estate’s annual report describes current growth as “exponential” and growth over the next 10 years as “significant”. Given the potentially significant changes in income from renewables and, perhaps, wider sources, as well as the prospect that this could lead to an unintended rise in either reserves or, as described in the Bill, simply the overall level of expenditure, it is important that the proposals are robust in meeting significant unintended rises in revenues.

Some have called for a cap on the overall level of the sovereign grant. Instead, we have tabled amendment 8, which would require the trustees to review the arrangements if the Crown Estate’s income were to rise faster in the previous financial year than the underlying trend growth rate of the economy. I think that the public would expect the trustees to review matters immediately if revenues were to rise much faster than had been expected. I also think that the amendment is fully consistent not only with the spirit of the Chancellor’s reforms, but with their detailed intention, as he set out in his spending review speech. Therefore, I ask him to look at the issue again over the next hour and a half. Our proposal is fully consistent with protecting stability for the monarchy and the proper role of Parliament in scrutinising the arrangements. In order to ensure that his reforms are implemented as he intended, we should agree to the amendment.

[Paul Flynn]

As I understand it, the royal trustees are the Prime Minister, the Chancellor and the Keeper of the Privy Purse. Does my right hon. Friend not think that we would get a more balanced decision if Members of this House were represented among the trustees? They would give a much better opinion than the establishment one on this issue.

[Ed Balls]

It is obviously nostalgic for me to be back in Committee debating with the Chancellor of the Exchequer across the Dispatch Box, although I would remind my hon. Friend—these moments have been rare in my parliamentary career—that the Chancellor and the Prime Minister are both Members of this House. Therefore, they are representatives of both the Government and the House of Commons in those discussions. The important thing is that the trustees should not be able to sit on their hands if there is an unexpected surge in revenues that is faster than the trend growth rate of the economy. When the trustees produce a report, Parliament should be able to scrutinise it properly, after a report of the NAO. The latter is clearly set out in the Bill, but at the moment, whether there is a review in the five-year period is at the discretion of the trustees. Parliament should legislate today to say, “If you see something happening to revenues that is outside the Chancellor’s intentions as clearly set out by him, then there should be an immediate review.” It would still be for the trustees to decide what recommendation to make. We are not imposing a cap, because although some would like that, it would be outside the Chancellor’s intentions. I said from the beginning that I would support his reforms, and our amendment 8 delivers his reforms in detail. Therefore, I hope that he will reconsider and support our amendment.

[Mr Kevan Jones]

I think the Chancellor has tried to have an effect on that by, for example, putting a cap on the reserve, but does my right hon. Friend agree that it is also important to see how the reserve is spent? I said to the Chancellor that it does not take a genius or a financial wizard to work out that the way to do it is by keeping the reserve as low as possible by spending the money, so the Government’s proposals will actually lead to more inefficiency, rather than driving up efficiency.

[Ed Balls]

As I said, part of the motivation behind our amendments to the clauses that deal with the role of the NAO is precisely to ensure that the value-for-money question is at the centre of the NAO’s thinking and the PAC’s reports to this House. I am happy with the Chancellor’s view that it should be for the PAC and the NAO to decide when to do those reports, but they clearly cannot have a report looking at value for money without looking at all aspects, and that includes all expenditure that is financed by the taxpayer, and the use of reserves. For Parliament, that is the right mechanism. I understand that not everyone in the House will agree with those proposals, which is why it is important to get on to that debate.

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[Mr George Osborne]

As was acknowledged by the shadow Chancellor, we have taken on board what I consider to be the most significant amendments in tabling our own manuscript amendments. There will now be a review in 2016, and there will be a review every five years after that. If the House accepts our amendments we shall be able to prevent some windfall from offshore renewable energy from not being taken into account before it comes about. We will have a chance to do that in 2016, and that is partly because we have accepted the Opposition’s amendments.

I have already dealt to some extent with the point raised by the shadow Chancellor, and by amendment 8, about whether some other mechanism is needed. A fair number of checks are already in place. If the grant turns out to be more than the royal household needs—and the assessment of need will be checked by the National Audit Office—it will go into a reserve. If the reserve hits 50% of the grant, the trustees will step in and reduce the amount of money coming in. They will turn down the taps. That is a sensible mechanism, and it means that we will not be having an annual debate in the House about royal finances, entertaining though the last few hours have been.

The hon. Member for Bristol East (Kerry McCarthy) specifically asked why the figure for 2012-13 was £31 million. In a sense, that question lies at the heart of the issue. I accept that this is a complicated concept. The royal family have been relying on grants from Parliament—either the civil list or the royal travel or royal palaces grant—and supplementing them with a reserve which has been built up, with the use of public money, in the last decade or two. In 2012-13 the royal family will get the £31 million, but they will also expect to draw on the last of the reserve that was built up in the 1990s and 2000s. They will, in effect, receive more than £1 million from public money—money raised through taxation—because they will be using the last of that reserve.

[Ed Balls]

When I said that there would be a 3.2% real-terms rise from next year until the end of the Parliament, I did not mean a rise in the grant; I meant a rise in total expenditure. Total expenditure in 2012-13 will be £33 million and will rise to £35.5 million, which, in 2010-11 prices, is a rise from £31.3 million to £31.9 million. Although the Chancellor has made an important historic point about the reserves, the 3.2% real-terms is not driven by the reserves: it is merely an overall rise in total expenditure. I do not think that the Chancellor was entirely right on that point.

[Mr Osborne]

The point I was making was that, although there are lumpy movements in individual years—in 2010-11, for various reasons, some capital works were delayed and will be undertaken next year—the average of £34 million, which was £37 million two years ago, amounts in effect to a cash freeze and a real-terms reduction.

[Ed Balls]

Over the Parliament.

[Mr Osborne]

Over the Parliament. But the point is that it strikes the right balance between too much and too little.

I think that the checks are adequate, and for that reason, although I have accepted a couple of the Opposition’s amendments, I do not wish to accept amendment 8.

Manuscript amendment A agreed to.

Manuscript amendment made: B, page 6, line 8, leave out paragraph (b) and insert—

‘(b) every period of 5 years beginning at the end of another review period.’—(Mr George Osborne.)

Amendment proposed: 8, page 6, line 8, at end add—

‘(6) The Trustees shall also review the percentage for the time being specified in Step 1 of section 6(1) as soon as practicable if, over the financial year immediately preceding the base year, the income account net surplus of the Crown Estate increased by more than the trend rate of GDP growth.

(7) In subsection (6), “the trend rate of GDP growth” means the estimate of the trend rate of GDP growth most recently published by the Office for Budget Responsibility which is applicable to that year.

(8) Subsections (2) to (4) shall also apply to a review carried out under subsection (6).’.—(Ed Balls.)

Question put, That the amendment be made.

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[Ed Balls]

I echo the Chancellor’s thanks to Members on both sides of the House for the way in which they have participated in the debate. In particular, I thank my hon. Friends for the way in which they have helped us play the Opposition’s proper role in scrutinising such legislation. There have been many historical references and when we look back to the last serious debate in Parliament, in 1971, we can see that the tone of those debates was very different from that of our debates today and a fortnight ago. That shows that there have been many changes since the early 1970s, including more pressure on and exposure for the monarchy, as well as an unprecedented degree of international exposure. The consensus on the role of the monarchy in our constitution and in our country is stronger now than it was during the previous debate, which has been shown by the speeches from both sides of the House as we have scrutinised the Bill. I thank the Chancellor of the Exchequer for being willing to brief us and to be involved in serious discussions that have led to changes in the Bill. The manuscript amendments that he was willing to table following our suggested amendments were welcome.

The change will lead to an unprecedented increase in the scrutiny of the royal household by the National Audit Office, the Public Accounts Committee and Parliament. As the Chancellor has said, that is a good thing in building further trust and support for the monarchy in our country. Obviously, I regret the fact that we did not manage to get agreement on our trigger mechanism if revenues from the Crown Estate rise rapidly in coming years, but there are measures, checks and balances to make sure that we can properly do our job as parliamentarians in ensuring that money is well spent but also that the monarchy is properly financed.

Let me conclude by saying it is of great regret that the—oh, he is still here. For a second, I feared that the hon. Member for North East Somerset (Jacob Rees-Mogg) had left and I wanted to thank him for his contributions to the debates. It is an open question whether the financial settlement for the Crown Estate that the Chancellor generously set out will make affordable the finest horses and the gold-gilt carriages that the hon. Gentleman called for in the debate a fortnight ago as befitting Her Majesty. However, I assure him that it will certainly be enough to pay for Bath Oliver biscuits with chocolate on the outside; there is no doubt about that. His contributions have been welcome. As I said, this has been an important debate about history as well as the future and it is good to have present an hon. Member who has a great grasp of that history. Indeed, some of us sometimes think he might have been there in 1760—more in style than in substance. We thank him and all hon. Members who have contributed to the debate. The job of scrutinising these matters now starts for Parliament and I thank the Chancellor for helping us to ensure that that will be done properly in the years to come.