Sovereign Grant Bill

George Osborne Excerpts

Thursday 14th July 2011 Commons Chamber

[The Chancellor of the Exchequer (Mr George Osborne)]

I beg to move, That the clause stand part of the Bill.

I concede that we are engaged in a rather unusual procedure. To have what I hope will amount to a Second Reading debate, we will debate clause 1 stand part. Clause 1 will create a sovereign support grant and so, in effect, it lies at the heart of the Bill. I completely respect and understand what has just been said by hon. Members on both sides of the House. I would point out that we had something akin to a debate on Second Reading a couple of weeks ago, when we debated the principle for several hours. I freely concede that we did not have the Bill in front of us.

I was following the procedure established over many decades, and I worked with the Clerks and, indeed, through the usual channels to try to create something akin to a debate on Second Reading a couple of weeks ago. Our intention was to debate the Bill in Committee and on Report on the Floor of the House, because it is a constitutional Bill. In effect, the House of Commons will have two days on the Floor of the House to debate the legislation, but I am the first to accept that we have adopted a rather archaic procedure. I am glad that we used a bit of modern innovation to allow this debate to take place under clause 1 stand part.

[Mr David Winnick (Walsall North) (Lab)]

Obviously, I have listened to what the Chancellor said, but will he bear in mind that we did precisely the same thing last Thursday, on a subject that is not his responsibility? It is all the more irritating that on two successive Thursdays we have had this situation in the House.

[Mr Osborne]

I cannot speak on what happened last week, but I would just draw the hon. Gentleman’s attention to this distinction: two weeks ago, on the Floor of the House, we had something like a Second Reading debate about the principles of the Bill. In the comprehensive spending review statement last October, I set out how we proposed to proceed on the subject; that was quite well known. There is not a great deal of surprise about the idea in the Bill of a sovereign grant, linked to the revenues of the Crown Estate and so on. As I say, I accept that the procedure is rather unusual, but the effect is that the House had something akin to a Second Reading debate a couple of weeks ago, and we will use the debate on clause 1 to have something akin to a Second Reading today, too. I hope to address all the issues that people raised two weeks ago in my response on clause 1. Of course, we will have time later today to go through other parts of the Bill.

[Paul Flynn (Newport West) (Lab)]

A fortnight ago, the House was exceptionally thinly attended, even for a Thursday. Will the Chancellor tell the House when Back Benchers were informed that the Bill was coming before the House?

[Mr Osborne]

The problem that Parliament had was that under the procedures of the House, we had to receive a gracious message from Her Majesty the day before. I do not expect the hon. Gentleman to agree with the procedure, given his broader views on the monarchy, but we had to wait for that gracious message before making it publicly known that we would have a debate in the House. That is what happened. I spoke to the official Opposition, and the Prime Minister spoke to the Leader of the Opposition a week earlier, but I accept that the debate was not as fully attended as it might have been. However, we did spend a couple of hours discussing the matter a couple of weeks ago, and there were quite a number of speeches made, so even though the debate was not as fully attended as, for example, yesterday’s proceedings in Parliament, attendance was not that dissimilar to attendance today. Of course, there has been lots of notice of today’s debate.

[Paul Flynn]

rose—

[Mr Osborne]

I will give way, and then I should probably make some progress on clause 1 stand part.

[Paul Flynn]

I do not think it is fair to blame the monarch for the way in which the measures were rushed into the House. Normally, if there is a change to business, a business statement is made to the House as early as possible; I cannot remember one being made at all in this case. Most hon. Members had other pressing business on that day, and only those who were here in the morning had any idea that the measures were going ahead.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. I have sympathy for the hon. Gentleman, but we have just decided on the process that we are following; we now have to stick with where we are.

[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 Kevan Jones]

rose—

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

rose—

[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 Davidson]

The Chancellor mentioned his view that income from the Duchy of Cornwall and the Duchy of Lancaster is private money of the royal family. Surely he recognises that in the previous Parliament the Public Accounts Committee established quite clearly that that is not the case—that this is not the private property of the monarch or her family but a trust established by the nation in order to fund the various members of the royal family. That is different from saying that it is the private property of the royal family themselves.

[Mr Osborne]

I should make it clear that it is an established principle that the income from that property, which is held in trust, is for the private purposes of the royal family.

In response to the hon. Member for North Durham (Mr Jones), I point out that there are of course some areas of royal financing—I will come on to say something about royal protection—where it is very difficult to be public about some of the sums of money involved. The Bill—I hope that we will soon get into the meat of it—is a mechanism for helping to continue the current level of spending. As I say, it is perfectly within the rights of the National Audit Office and the Public Accounts Committee, if they want to, to look at payments from the Ministry of Defence, but that has to be a matter for them.

[Matthew Hancock (West Suffolk) (Con)]

As the most senior member of the Public Accounts Committee in the Chamber—because I am the only one here—I think that I speak for everybody on that Committee when I say that we welcome the additional transparency and very much look forward to bringing the royal household before it to answer the questions that have rightly been raised across the Chamber.

[Mr Osborne]

I thank my hon. Friend. When the Chair of the PAC, the right hon. Member for Barking (Margaret Hodge), spoke in the debate two weeks ago, she was very generous in her tribute and made it pretty clear that the PAC would be getting to work on its job. I served on the PAC, as its most junior member, with the hon. Member for Glasgow South West, and I remember us making an interesting visit to Kensington palace to investigate royal finances. For some years, therefore, the PAC has been establishing a reputation for examining the books in this area.

[Paul Flynn]

rose—

[Mr Kevan Jones]

rose—

[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.

--- Later in debate ---

[Jacob Rees-Mogg (North East Somerset) (Con)]

Will my right hon. Friend confirm that in the theoretical circumstance that a new monarch decided to keep the Crown Estate revenues, it would be open to such a monarch to do so?

[Mr Osborne]

I think that that is pretty unlikely and pretty theoretical, to be honest. Since 1760, it has been an established precedent that the monarch hands over the revenues of the Crown Estate to the Government of the day. There are many powers that we vest in our monarch. The Queen has wisely, like her predecessors, chosen not to use those powers. As I say, I think that that question is pretty theoretical.

[Paul Flynn]

In the debate two weeks ago, the Member who represents the middle ages, the hon. Member for North East Somerset (Jacob Rees-Mogg), suggested that the Queen paid income tax at a higher rate than any other citizen. Will the new arrangements be so transparent that we know the precise rate of tax the monarch pays and whether the monarch gets the expected windfall of revenue from wind and tidal generation in their 15%? If that revenue becomes excessive, will it be curtailed to a suitable level?

--- Later in debate ---

[Mr Osborne]

I will deal in my remarks with that specific point about what will happen if the revenues of the Crown Estate suddenly grow beyond people’s expectations, or even in line with the expectations of those who think that there will be a windfall from the marine estate.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

The guidance to the Bill suggests:

“The Crown Estate is not the sovereign’s private property”.

However, we know that in 1760, as the guidance states, George III

“surrendered these revenues (but not ownership of the capital assets)”.

Where do we stand on the clarity of ownership?

[Mr Osborne]

It is understood that there are certain pieces of property, such as Buckingham palace, Windsor castle and the Crown Estate, that belong to the institution of the monarchy, and certain pieces of property and assets that are the private property and assets of the Windsor family. That is a well-established precedent and has been recognised by the House for many decades. Nothing in the Bill changes that.

[Mr Davidson]

Will the Chancellor of the Exchequer give way on that point?

[Mr Osborne]

I will give way on that point and then make some progress on clause 1.

[Mr Davidson]

I am very grateful. The Chancellor is undoubtedly correct that some pieces of property are tied in with the institution of the monarchy, such as Buckingham palace, but the coastline of Scotland and the undersea surface are not intimately connected with the monarchy and have never, as far as I am aware, been visited by the monarchy. In those circumstances, I am not clear why the two categories are being conflated. Surely it would be better, if the Chancellor wants a method that is tied to growth in the economy, if it were simply tied to, say, gross domestic product. If GDP went down the Queen and the monarchy would suffer the same as the rest of us, and if it went up, they would benefit in line with the rest of us. That would be better than tying the fund to a measure that I envisage will make it grow at a far greater rate than the economy as a whole.

[Mr Osborne]

First, I do not want to speak for the Queen, but I think she is quite familiar with the Scottish coastline.

[Chris Ruane (Vale of Clwyd) (Lab)]

Underwater?

[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 Kevan Jones]

Will the Chancellor give way?

--- Later in debate ---

[Mr Osborne]

May I make some progress before taking a few further interventions?

I should just mention, although the change to the Duchy of Cornwall is in a later clause, that as I explained to the House a couple of weeks ago, all Dukes of Cornwall are heirs to the throne, but not all heirs to the throne are Dukes of Cornwall. As a result, there is potential for there to be an heir to the throne who was not the Duke of Cornwall, because the Duke of Cornwall can only be the eldest son of the monarch. The heir to the throne could be either a daughter, granddaughter or grandson of the monarch, and they would not have access to the duchy’s income. The Bill proposes a change to that, but does not propose to change the Act of Settlement.

[Keith Vaz (Leicester East) (Lab)]

rose—

[Mr Osborne]

I suspect that the Chairman of the Home Affairs Committee wants to intervene on that point.

[Keith Vaz]

I feel very guilty that the Chancellor has been speaking for so long and, because of all the interventions, is only on clause 1. I will not detain him for long, but I thank him for giving way. Will he update the House during the course of his speech, if he ever gets to complete it, on the negotiations that have been conducted by the Deputy Prime Minister with the Prime Ministers of 17 other Commonwealth countries, and let us know whether there has been any progress on the matter?

[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 Davidson]

The Chancellor will be aware, from discussions on the Scotland Bill, of a proposal for part of the Crown Estate to be devolved to the Scottish Parliament in Edinburgh, or handed to local authorities, community groups and so on. What would happen to the Crown Estate and the money going to the royalty if that proposal were passed?

[Mr Osborne]

That is not something that the Government are proposing today. If we were to propose it, we would of course address the impact of such a decision on the royal finances. I am assuming that even under such arrangements, the Queen would remain the Queen of Scots. I believe that most of us are happy with the current arrangements.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Will the Chancellor give way?

[Mr Osborne]

I will give way, but then I really must make more progress.

[Mr MacNeil]

Will the money from the Crown Estate be paid directly to the royal family or will it go to a third party?

[Mr Osborne]

The money is not paid directly. It comes into the Exchequer, like other revenues, and is then paid out to the royal family. It is paid out of general public funds through estimates voted by Parliament. The only link is that we have a formula for how much we give the royal family. However, there is no direct transfer of money from the Crown Estate to the royal family.

[Paul Flynn]

rose—

[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 Kevan Jones]

rose—

[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.

[Paul Flynn]

I have listened carefully to what the Chancellor has said, but I am still baffled as to why a simple mechanism that could be easily understood has not been used, perhaps similar to the one used to change pensions every year. Instead, we are to have a complex system under which, if the Crown Estate does well, royalty will win, and if it does badly, the taxpayer will lose.

[Mr Osborne]

As I have said, we could have chosen another mechanism, but I thought that it was not unreasonable to take a large, conservatively run property company to determine expenditure by the royal household, given that a lot of its expenditure is on property maintenance and the like. I completely accept that not every Member of the House will agree with that, but the effect, which is surely the important thing, is that the amount of money going from the public purse to the royal family will be broadly the same. They were receiving about £34 million on average from the civil list, the palaces grant and the travel grant, plus the money put into the reserves by the taxpayer, and they will go on receiving £34 million. We can have a debate about the mechanism, but the effect will be pretty much to continue through this Parliament with the sums that they were getting during the last one. We are of course talking in cash terms, which will mean about a 9% real cut, coming on top of a more than 15% real cut over the past 20 years.

I know that we are still debating clause 1, but I hope that the Committee will acknowledge that, in accepting the shadow Chancellor’s amendments to clause 7, we have tried to show that we are open to argument and open to trying to work on a cross-party basis. We want to ensure that the Bill proceeds with the consent of those in all parts of the House of Commons.

I want briefly to deal with the shadow Chancellor’s third and fourth questions. He asked about the issue of accountability, and he has tabled amendments proposing annual value-for-money studies. I would much rather leave the discretion with the Comptroller and Auditor General and the Public Accounts Committee. If they want to undertake such studies, they may do so, but I propose to leave that discretion with them. I remind the Committee that we are undertaking a pretty historic transfer of accountability to Parliament here. Parliament has fought for many decades to get scrutiny of the official expenditure of the royal family, and that is now happening through the Bill. Of course, the Public Accounts Committee will be able to ask the Keeper of the Privy Purse, as the accounting officer, to come before it to give evidence.

Let me deal with the fourth question, which was about royal protection. I am afraid that I will not be able to answer the shadow Chancellor’s request here. I have looked into it and made quite a number of inquiries to probe whether it would be possible for me to give the Committee more information about how much is spent on royal security. I have to say that I have run into a metaphorical brick wall in Whitehall, probably for very good reason, which is that it would not be appropriate—this was a view taken by Home Secretaries over many years—to reveal how much was spent on royal security because that might present a security risk. Unfortunately, I am not able to accede to the shadow Chancellor’s request. Let me reassure the Committee, however, that in the process, I have taken a look at the protection arrangements and costs, and I certainly satisfied myself that they are reasonable, proportionate, in line with the current threat assessment and pretty cost-effective. I am fairly confident that the Queen and her family are adequately protected.

I hope that I have answered the various questions asked. My hon. Friend the Member for Gainsborough asked a question about Frogmore, particularly the mausoleum for Queen Victoria and Prince Albert. The royal household has confirmed that it expects to carry out conservation work on the mausoleum over the next five to eight years, so in a few years’ time, my hon. Friend will be able to visit a much restored and improved mausoleum at Frogmore.

[Stephen Williams (Bristol West) (LD)]

Given that the mausoleum is currently on the English Heritage buildings at risk register, will the Chancellor confirm whether what he announced means that it will shortly be removed from that register?

--- Later in debate ---

[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 Kevan Jones]

rose—

[Mr Osborne]

I give way one final time, but then I shall conclude.

[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.

[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 Leigh]

I do not know the exact truth about that particular aspect.

[Mr George Osborne]

The part about my involvement is completely untrue.

[Mr Leigh]

All that I know—the Public Accounts Committee having had all those accounts over the past two decades—is that steps are constantly being taken to deliver a better-value-for-money monarchy. If that is not true, why has the cost gone down from £49 million to £34 million? I shall sit down now, because we are only on clause 1 stand part.

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[Mr Davidson]

No, I want to proceed because we are short of time.

I am seeking clarification from the Chancellor, who, I remember, was on the Public Accounts Committee when he was a young whippersnapper—I have often wondered what happened to him since. Will the National Audit Office, the interventions of which I will welcome, also be able to look at all elements of royal involvement? In particular, can it look at the royal art collection, about which there were serious discussions and disputes in the past? That would seem to be covered by what he has said, but it is not immediately clear.

Is the Crown Estate the right body to take into account when determining the monarch’s income? Those of us on the Public Accounts Committee who examined the Duchy of Cornwall’s accounts were absolutely clear that the Duke of Cornwall was manipulating the money involved, by playing a major role in determining the amounts of expenditure and income, thereby determining how much money came, or was available, to him as an individual.

Quite clearly, the Crown Estate could be leant on by the monarchy to make decisions on expenditure and income in the short term to affect the amount of grant that the royal family receive. The grant would then be on, as it were, a golden ratchet—a bit like EU expenditure, it would always go up, and never down. There is clearly scope for abuse in those circumstances. Will the Chancellor clarify those points?

Will the Chancellor also take into account the fact that there is due to be a windfall from wind and wave power? Will he assure the Committee that all of that will be taken into account when the review takes place in due course?

[Mr George Osborne]

I shall deal briefly—because time is short—with the points raised. I should say first, however, that I am grateful to the Committee and the Opposition Front-Bench team for the general support they have given to clause 1 and indeed the whole Bill.

My hon. Friend the Member for Gainsborough (Mr Leigh) raised the key question: how do we create a mechanism that preserves the dignity of the monarchy while ensuring that the House is accountable for the expenditure of public money? As I said in my opening remarks, there is the question of whether the money provided is enough or too much. I said that we do not want a cut-price monarch or a lavish monarchy. As a general guide, I have looked at how much the monarchy has spent over the past five years. On average, £34 million of public money has been given per year through various forms of grant and money drawn from a reserve built up using public money. I have said that that is not a bad guide for the future and that 15% of Crown Estate revenue will provide that amount over the rest of the Parliament. In 2016, we will review whether that is the right amount.

[Mr Cash]

The Chancellor referred just now to something that I found difficult to accept. He distinguished between a cut-price monarchy and a lavish monarchy. Given Her Majesty’s incredibly distinguished performance over the past nearly 60 years, to which my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) referred, does he appreciate that this is not about being lavish, but about effectiveness and dignity?

[Mr Osborne]

I agree that it is all about effectiveness and dignity, and I think that the Bill strikes the right balance between those who say that the monarchy is spending too much and those who say that it is not getting enough money for its official duties. The Bill has been discussed with the royal household, and it is content with it, which is why the whole process began with a Gracious message.

I want to clear up a misunderstanding. There will be a real-terms increase in the annual sums that Parliament provides, but that is because the royal household has been relying on a reserve of public money that has built up over time. That reserve has come to an end, and as I said a couple of weeks ago, the previous Chancellor of the Exchequer, perfectly reasonably when confronted with this issue before the general election, said, “I think we’ll wait until after the general election and let whoever are the Government then deal with it.” We are here because we have been relying on a reserve of public money that has run out. However, with the mechanism we are putting in place there will be a real-terms reduction of up to 9%—on our estimates—in public support for the royal household.

The shadow Chancellor and others, including the hon. Member for Glasgow South West (Mr Davidson), asked what would happen if there was a windfall from, for example, the offshore marine estate. At the moment, that constitutes a very small part of the revenues of the Crown Estate—about 1%, as I understand it. It is perfectly possible that, in the latter part of the decade or in the next decade, there will be a big increase, but, because I have accepted the spirit of the Opposition amendment, we will now have a review in 2016 and will be in a much better place to assess whether there will be such a windfall. However, I think that it is highly unlikely. No one is predicting a massive windfall in the next three or four years leading up to that review.

The reserve provides a check. The expenditure of the royal household is audited by the National Audit Office and if the money is not being spent for purposes for which it is provided by Parliament, it will come out in the audit. If there is an excess—in other words, if the sovereign grant is more than it needs—it goes into a reserve. That is a long-established principle. There is now a check on that reserve so that it cannot rise above 50% or thereabouts of the money from the sovereign grant, which was not the case before the Bill was presented to the House. The trustees—the Prime Minister, the Chancellor and the Keeper of the Privy Purse—have to provide an annual report to the Treasury, and through the Treasury to Parliament, on that reserve.

A couple of specific points were made about Marlborough house. The hon. Member for North Durham (Mr Jones) raised this point a couple of times. Marlborough house will remain the Government’s responsibility and is currently used by the Commonwealth Secretariat, as I am sure he knows. It will be up to the royal household to decide what premises it needs. It would, for example, be able to rent premises if it needed to, but I do not think that that is relevant to the support that we are providing.

The hon. Member for Bristol West (Stephen Williams), who is no longer in his place, asked about the mausoleum. It will stay on the English Heritage buildings at risk register until it is repaired in five to eight years’ time. My hon. Friend the Member for Gainsborough asked about the governance of the Duchies of Lancaster and Cornwall. I did not think it appropriate to open up that issue in this Bill, which is more narrowly focused on the official support that Parliament provides to Her Majesty.

I hope that I have now answered all the questions that have been raised, and that clause 1 can now proceed to stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Accounts of the Royal Household

[John McDonnell (Hayes and Harlington) (Lab)]

I rise to speak to amendment 1, page 2, line 31, at end add—

“(4A) The statement must be accompanied by information showing the numbers of directly or indirectly employed hourly-paid staff of the Royal Household working in or in connection with the Royal Palaces in London who in the financial year in question were paid at or below £8.30 an hour.”.

I shall be as brief as possible, given the time constraints. The amendment is straightforward. Clause 2 proposes that the royal household’s accounts are to be reported. I am asking that a statement be included in that report to show the number of employees who are directly or indirectly employed by the royal household and who are being paid at or below £8.30 an hour. The reason that I have arrived at the figure of £8.30 is that that is the London living wage, as set by the Mayor of London, who has described it as the wage level designed to provide a

“minimum acceptable quality of life”

for people working in the capital.

The London living wage was started by a group of religious organisations, churches and trade unions 10 years ago, as part of a campaign by London Citizens. They came together to try to tackle poverty, and recognised that the national minimum wage did not allow people to avoid living in poverty in the capital city. They have campaigned over the past decade to press employers to pay the London living wage. They have targeted cleaners, in particular, who are living in poverty. They campaigned and they won. First, they won in a number of banks at Canary Wharf, then they came to Parliament and ensured that we paid our cleaners the London living wage. The campaign continued right through the capital, and more than 200 major companies have now signed up to the London living wage campaign. The Prime Minister himself described it as

“an idea whose time had come”.

The Leader of the Opposition appeared with him on a platform before the general election with members of London Citizens to sign up to the London living wage. Every mayoral candidate has supported it. Why? They did so because all of us want to see people living out of poverty. Yet in the royal household, which is only a mile and a half away from here, the workers who are employed by contracting companies including KGB—

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[Kerry McCarthy (Bristol East) (Lab)]

I wish to speak briefly to amendment 8. This would introduce a check on potential future rises in income from the Crown Estate. At a time when Departments and the public generally are having to take very difficult decisions to make their limited budgets cover the essentials, we should at least apply careful analysis to what sort of income the 15% figure would bring in for the royal household over future years. I would appreciate any information Ministers have on forecasts for the sovereign grant over the coming years, particularly regarding this spending review period.

We are very short of time, but I shall press on with the issue of meeting the royal household’s needs. When I met the Economic Secretary yesterday—I was pleased to have the opportunity to discuss these issues with her and the Bill team—we had a discussion about the fact that the civil list has not adequately reflected the needs of the royal family in the past. At one point, it was being paid too much money and amassed significant reserves; then, it was not paid enough to meet its needs and had to draw down on the reserves. I appreciate that the current formula may not be appropriate, but a formula fixed to income on the basis of something like the Crown Estate is not necessarily any more likely to meet royal spending needs.

In 2010-11, the Crown Estate profits were £230.9 million. If the new mechanism were already in use, that would mean a grant in two years’ time of £34.7 million. Instead, the 2012-13 grant has been set at £31 million in recognition that 15% would not be appropriate or proportionate. This is why we are asking the Government to consider a more flexible mechanism in future.

When the Chancellor spoke in the preliminary debate the other week, he said that the grant to the royal family should reflect generally how well the economy is doing. The particular concern we have—it has been touched on already—is that the Crown Estate includes investment in offshore wind, particularly the new wind-power projects that are coming on board. I think the chief executive of the Carbon Capture and Storage Association said that the carbon capture and storage industry is likely to be very big in the future, probably measured in trillions of dollars. We think that could have an impact on the accounts, too.

We were grateful for the Chancellor’s assurances during the debate on the funding resolution that we will not allow revenues from offshore wind to lead to a disproportionate rise in revenues for the royal household. I would be grateful for any further information about what safeguards could be put in place.

Amendment 8 would help. It would limit disproportionate increases to the royal household. I welcome the fact that the Government have tabled manuscript amendments in response to our amendments which would provide an earlier review period. As the Bill was originally drafted, the first review of the new arrangement would not have taken place for seven years and there would then have been a review every seven years after that. We thought that the first review should take place within three years and that subsequent reviews should take place every five years. We have listened to what the Government had to say about three years being unfortunate in that it would coincide with the next general election. We are happy to accept the Government manuscript amendments that the first review should be four years and subsequent reviews every five years. We do think, however, that there should be another mechanism to address the fact that no cap is in force. There is a cap on the reserves, but there is no cap on the potential increases that the 15% figure, linked to the income of the Crown Estate, could generate.

I shall skim over much of what else I was going to say, but we think it important to have some upward cap. I shall be interested to hear what the Minister or the Chancellor have to say in response.

[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.

--- Later in debate ---

[Mr George Osborne]

I beg to move, That the Bill be now read the Third time.

I shall be brief. I want to thank the House for the two days of debate and for the scrutiny and entertainment that has been provided. We have discussed chocolate biscuits, Tupperware, secret treaties and what the hon. Member for Bolsover (Mr Skinner) said in 1971, the year in which I was born. I particularly want to thank various participants, such as the hon. Member for Newport West (Paul Flynn), the hon. Member for Glasgow South West (Mr Davidson), who is not in his place, and my hon. Friends the Members for Gainsborough (Mr Leigh) and for North East Somerset (Jacob Rees-Mogg). They all showed a passionate interest in this subject and knew what they were talking about. They argued from different points of view but helped to enlighten the debate.

Of course, it is not just Ministers and the Chancellor who do the work on such proposed legislation. An official team at the Treasury have been working on it for more than a year and I want to thank them for their hard work. I thank the royal household for its engagement as well as Alan Reid, the Keeper of the Privy Purse, with whom I have been liaising throughout. We have got the balance right between providing the funds to allow the monarch and her family to do their official duties with dignity and the kind of support we would expect for our Head of State while at the same time providing checks and balances on how that money is spent and allowing Parliament to scrutinise those resources for the first time. I suspect that such scrutiny would have been unthinkable decades ago.

Many people have referred to the fact that in 1760 the arrangement was put in place whereby the revenues from the Crown Estate were handed over for the lifetime of the monarch in return for a parliamentary grant. I do not know whether the arrangements in the Bill will last for 250 years—that is probably a bit ambitious—but I hope they last for many years and decades to come. That might mean that the House will miss the entertaining debates we have had over two days, but it will also ensure that our monarchy is properly funded, that it is above the annual political fray and that it can get on with doing what it does so well: representing our country and being our Head of State.