Royal Family: Civil List

Lord De Mauley Excerpts

Wednesday 10th November 2010 Lords Chamber

[Lord De Mauley]

My Lords, I congratulate the noble Lord, Lord Berkeley, on securing this opportunity to debate a matter that is of considerable interest to people and I thank him for the clarity with which he advanced his arguments and sought information about the royal finances.

I am sure that noble Lords will join me in recognising the Queen’s long and loyal service and her immense contribution to public life, as several noble Lords mentioned. I will in a moment explain the proposed new arrangements for supporting Her Majesty’s official business as monarch, but I should perhaps first give some context.

Since 1760, successive sovereigns have surrendered to the Exchequer their hereditary revenues, such as from the Crown Estate, in return for an annual income, known as the Civil List, and certain other financial support. The Queen’s Civil List covers the central staff costs and running expenses of Her Majesty’s official household. Certain other expenditure of the Royal Household is met by government departments through annually voted supply grants, including, in particular, the grants in aid for royal travel and maintenance of the royal palaces. The Civil List Act 1972 requires the Royal Trustees to keep under review and report on Civil List expenditure and the sums available to meet it, with reports to be made every 10 years.

In the trustees’ 1990 report, the fixed annual amount of the Civil List was set to exceed projected expenditure in the earlier years, with the surplus being accumulated to meet later expected deficits as a result of inflation. Rather than forecasting inflation for the 10-year period, the Royal Trustees recommended £7.9 million as the fixed annual amount of the Civil List for the ensuing 10 years, assuming annual inflation of 7.5 per cent. In the event, of course, annual underlying retail prices index inflation averaged about 3.2 per cent during those 10 years, while Civil List expenditure increased by approximately 10 per cent less than inflation. Additionally, interest of about £12 million was earned on the surplus, leaving a reserve of about £35 million to be carried forward into the 10-year period to the end of December 2010.

In view of that substantial reserve and the expectation of low inflation, in July 2000 the Royal Trustees recommended that the fixed annual amount of the Civil List should remain at £7.9 million. Also, at the suggestion of the Royal Household, it took on responsibility for some £2 million of expenditure previously met from the votes of government departments or from the consolidated fund, utilising a substantial part of the reserve during the new 10-year period.

In his Budget Statement on 22 June this year, my right honourable friend the Chancellor of the Exchequer announced the decennial review of the Civil List. As the noble Lord, Lord Berkeley, said, my right honourable friend also announced that payment of the Civil List for the calendar year 2011 would remain unchanged at £7.9 million. Therefore, the amount provided for the Civil List will have remained unchanged for more than 20 years and is today worth only a quarter of what it was in 1990. The Chancellor also said that he would, in due course, propose a new means of consolidated support for Her Majesty in future. He made it clear that he wanted a durable settlement for the Royal Household that would not require frequent government intervention in future.

Before coming to the new arrangements, let me give your Lordships some details of the principal grants in aid that are made by the Department for Culture, Media and Sport and the Department for Transport. The property services grant in aid is the annual funding provided by DCMS to the Royal Household to meet the cost of property maintenance and other costs at the royal palaces used by Her Majesty in fulfilling the role and functions of head of state, known as the occupied royal palaces. DCMS has overall responsibility for the maintenance of and provision of services to the occupied royal palaces. However, since 1 April 1991, management and operating responsibility has been with the Royal Household.

The royal travel grant in aid is the annual funding provided by the Department for Transport to the Royal Household to meet the costs of official royal travel by air and rail. As with support for the occupied royal palaces, support for official royal travel is one of the expenses met by the Government in return for the surrender by Her Majesty of the hereditary revenues of the Crown. The Department for Transport has overall responsibility for the use made of moneys voted by Parliament for royal travel. However, day-to-day responsibility for that expenditure has been with the Royal Household since 1 April 1997.

In his spending review Statement on 20 October, the Chancellor announced the new arrangements for support of the Royal Household. He announced that grant support will be static in 2011-12 and 2012-13 at £30 million. As Her Majesty has graciously agreed, this will call for a 14 per cent reduction in cash terms for Royal Household spending in 2012-13, as the Civil List reserve will by then have been exhausted. In addition, in order to support the costs of the historic diamond jubilee, to which the whole country is looking forward, as the noble Lord, Lord Brooke of Alverthorpe, said, a one-off additional £1 million will be provided. I am sure that the whole House will join me in appreciating the Queen’s considerable achievements in leading and guiding the country with dignity and grace for such a sustained period.

From 2012, support for the Queen in her official duties will be simplified. It is intended that there will be a straightforward unitary grant to Her Majesty, replacing the current system of multiple grants. From 2012-13, the new sovereign support grant paid to the Royal Household will support Her Majesty’s expenditure on her official business, replacing the Civil List, which is paid directly from the Exchequer, and the voted grants in aid for royal transport and royal palaces. It will be set by a formula related to the revenue of the Crown Estate and paid through the Treasury vote. Her Majesty has graciously agreed that, for the first time, funding through the sovereign support grant will be audited by the National Audit Office, providing transparency and accountability. A single grant structure will allow the Royal Household to set its own priorities and control costs. These arrangements will be transparent, accountable and dignified, generating a durable outcome that gives the Royal Household security over future funding.

Giving effect to these proposals will require primary legislation. The necessary Bill has not yet been drafted, but the Government hope that it will be introduced so that it can pass in time for the start of the sovereign support grant in 2012. The proportion of the Crown Estate’s revenue to be used will be decided by Parliament, but there will of course be safeguards to ensure that the formula is fair.

The noble Lords, Lord Berkeley and Lord Brooke of Alverthorpe, and the noble Baroness, Lady Jones, expressed concern about the volatility of earnings from the Crown Estate and whether it was an appropriate basis for annual funding. I quite accept the question. It is important to be clear: the Crown Estate’s earnings will continue to be remitted directly to the Exchequer as now. They will not be hypothecated to the Royal Household. Several noble Lords mentioned a figure of 15 per cent and I should like to try to correct a misunderstanding. The setting of the formula for the SSG, which is for Parliament to decide, will simply use Crown Estate revenue as an appropriate starting point. It will not continue into the future to be based on a simple percentage. However, I am not clear on that point; I shall write to noble Lords afterwards, as there may be a misunderstanding.

The noble Lord, Lord Berkeley, asked whether the Prince of Wales accepts the need to reduce his costs and how the mode of transport for members of the Royal Family is decided on. In deciding those things, the household will have to bear in mind criteria including the safety not only of the royal person but also of people in their vicinity, security, value for money, the length of the journey, whether the transport is consistent with the requirements and dignity of the occasion, the most effective use of the Royal Family’s time and minimisation of disruption to others.

The noble Lords, Lord Berkeley and Lord Brooke of Alverthorpe, commented on the need for transparency. The new sovereign support grant will mean that all royal expenditure will be audited by the National Audit Office.

My noble friend Lord Addington suggested that a president would be no cheaper. Other countries are strangely coy about publishing the full costs of their presidencies, so it is difficult either to agree or disagree with confidence, but I note the rumoured $100 million cost of President Obama’s inauguration. I wonder whether we perhaps do not enjoy a bargain in this country. My noble friend also made a strong point about security in answer to the question asked by the noble Lord, Lord Berkeley, and I agree with him.

The noble Lord, Lord Brooke of Alverthorpe, asked about the publication of the finances. They are published annually. All trips of greater than £10,000 by air and rail are listed separately from the royal travel grant in aid.

The noble Lord, Lord Brooke, asked about a cap. The formula for the sovereign support grant will be set by Parliament. It is envisaged that there will be a mechanism to ensure that the formula is fair and neither adversely too high or too low.

The noble Baroness, Lady Jones of Whitchurch, asked about the opportunity for parliamentary scrutiny and for more detail about the new arrangements. The details will be set out in a Bill that will be subject to full parliamentary scrutiny.

I suspect that I have not been able to answer all noble Lords’ questions—

[Lord Berkeley]

I am grateful to the Minister for his explanations. It is an excellent idea to put all the different grants from different departments in the one pot, which will come from the Treasury at the end of the day. However, what is the argument for linking it to the Crown Estate’s profit, which goes into the Treasury in the first place? If he does not have the answer now, perhaps he could include it in his letter.

[Lord De Mauley]

I am grateful to the noble Lord for that question. I am conscious that I have not adequately answered it. I am finding it difficult to express the answer in words; I am out of time. I will write to him if I may and put a copy of the letter in the Library.

I hope that in the short time available I have been able to give some help to noble Lords in obtaining a better understanding of the provision of financial support for the Royal Household. The Government are extremely grateful to Her Majesty for accepting a measure of austerity in grant support in the near term and we all hope that she has a continuing long and happy reign.

House adjourned at 8.35 pm.