Sovereign Grant Bill

Lord Sassoon Excerpts

Monday 3rd October 2011 Lords Chamber

Moved by

[Lord Sassoon]

That the Bill be read a second time.

[Lord Shutt of Greetland]

My Lords, I have it in command from His Royal Highness the Prince of Wales to acquaint the House that his Royal Highness, having been informed of the purport of the Sovereign Grant Bill, has consented to place his prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I am pleased to have the opportunity to introduce this important Bill and I look forward to our debate. It was clear from debates in another place that there is wide recognition of Her Majesty the Queen’s long and conscientious contribution to public life. It is vital that we continue to provide the Queen and the Royal Household with the finances to perform her official duties with dignity, but it is equally important to take this opportunity to modernise the current system for supporting the Royal Household.

The sovereign grant will replace the current three-grant system with a single consolidated payment. It will provide the household with flexibility to prioritise its use of resources in the most effective way. The level of the grant will usually be equivalent to 15 per cent of the profits made by the Crown Estate in the financial year two years earlier. That is, profits in the current financial year, 2011-12, will determine the level of the sovereign grant in 2013-14, the first year the new calculation method will be used. Of course, we cannot say with certainty what that profit will be, but the Crown Estate has indicated that it expects profits to be broadly the same as last year. That would mean a 2013-14 sovereign grant of about £34 million. That is in line with Royal Household expenditure in the five years between 2006 and 2010, which averaged about £34 million per year. However, that can be only a projection, so there are safeguards to ensure that the sovereign grant can be kept on a sustainable path.

First, the Bill would establish a sovereign reserve fund. Any unspent sovereign grant will be paid into the sovereign reserve at the end of the year, and could then be called upon in a subsequent year to cover a shortfall. Importantly, there will be a target limit on that reserve to avoid it rising above about half of the total expenditure in that year. If the sovereign reserve were to exceed that level, the royal trustees could intervene to reduce the sovereign grant to an appropriate level.

Secondly, the Bill provides for regular reviews to determine whether the percentage used in the formula, initially 15 per cent, remains appropriate. My right honourable friend the Chancellor of the Exchequer has already accepted the principle of some of the Opposition’s amendments on this matter. In response to those, the Bill now provides for the first review to happen in 2016 rather than 2019, as previously envisaged, and reviews will take place every five years thereafter instead of every seven. Any increase in the formula would require agreement from Parliament by affirmative orders.

Thirdly, there will be a cash underpin that will go some way to protect the monarch from dips in the profit of the Crown Estate. It is important to note that the royal trustees may override this underpin should there be sufficient funds in the reserve.

Because the sovereign grant is being brought into the Treasury estimate, it will be treated like other central government bodies. The Treasury will apply in-year controls on public expenditure to avoid waste, seek value for money and prohibit spending ahead of need. At the same time, we are improving accountability to Parliament for the spending of public money. From 2012, the National Audit Office will have full access and will become the statutory auditor for all the Royal Household’s use of the sovereign grant and the sovereign reserve. This is a significant step that should be welcomed.

The Bill is also an opportunity to modernise other aspects of current legislation. For example, under current arrangements, only a Duke of Cornwall receives financial support from the Duchy of Cornwall. The Bill will enable the Treasury to provide a grant to heirs to the throne who are not the Duke of Cornwall, to ensure that they can be supported to similar effect. A significant result of this modernisation is that, in effect, it enables female heirs to benefit from the Duchy of Cornwall.

In addition, the Bill repeals a number of parliamentary annuities that are currently payable to other members of the Royal Family to relieve expenditure incurred in connection with their official duties. These annuities have for many years been reimbursed on a voluntary basis to the Exchequer by Her Majesty from her Privy Purse. The Bill puts an end to this anachronism. Noble Lords will be aware that Her Majesty intends to continue to provide for these annuitants from her Privy Purse. Those arrangements were set out in a letter from Sir Alan Reid, Keeper of Her Majesty’s Privy Purse, to my right honourable friend the Chancellor of the Exchequer, which was placed in the Library on 30 June. There is no change to the parliamentary annuity paid to the Duke of Edinburgh, which will continue to be payable from the Consolidated Fund. I am sure that the House will welcome this simplification.

The Sovereign Grant Bill provides for a system of royal support that is modern, efficient and accountable. I beg to move.

--- Later in debate ---

[Lord Sassoon]

My Lords, I thank all noble Lords who have contributed to an interesting debate this afternoon. I am particularly grateful to the noble Baroness, Lady Royall of Blaisdon, for her confirmation of the Opposition’s support for the Bill. Any time that she would like to oppose me on further Treasury Bills, she is very welcome. She does not need to apologise or explain.

I am also grateful for the support from the experts on what I will now come to think of as the Household Bench. I knew of the concept and of the existence of the Household box at Ascot; I had not realised that there was a Household Bench in the Lords. Every time here I learn something and that is what I have learned this afternoon.

More seriously, this is an important Bill. Her Majesty the Queen has provided exemplary service to this country throughout her reign. The Queen and other members of the Royal Family will continue to play a vital role in representing and promoting the UK and the Commonwealth. I am sure that we all particularly look forward to the Diamond Jubilee celebrations next year. It is only right that we provide the Queen and the Royal Household with the sufficient support to continue these services to the country and do so in a way that provides greater transparency, accountability and value for the taxpayer. As the noble Lord, Lord Luce, pointed out, the expenditure forming the sovereign grant is only equivalent to some 50 pence per person per year, a remarkably low price to pay for the Royal Family’s profound contribution to public life.

Let me respond to some of the points that have been made in the debate. First, on the numbers themselves, there were questions from the noble Baroness, Lady Royall, and the noble Lord, Lord Luce, about the projections. Let me be clear about the numbers: the sovereign grant itself in 2011-12 is £30 million. It will rise to £31 million next year because of the one-off special bonus of £1 million for the Queen’s Diamond Jubilee. In 2013-14 and 2014-15 it depends on the profits of the Crown Estate but the numbers are forecast or projected to be £34 million and then £35 million. As the noble Lord, Lord Luce, pointed out, in real terms this represents, in 2010-11 prices, a decline in expenditure from £34.9 million in 2011-12 to £31.5 million in 2014-15. These projections do not run away in any sense at all.

The noble Baroness quoted from something that I think the Crown Estate said about profits rising exponentially. It is important to realise that that just applies to the renewable profits, which themselves make up only a very small percentage of the Crown Estate. It was not a reference to the profits as a whole. My noble friend Lord Newby also referred to offshore wind—and rightly said that that is a question for another day. There are of course lots of questions about the way that the offshore wind market will develop in future years because it is a very new market.

There were a number of questions and comments about the review of the level of income, both within the year and from one year to the next. Without repeating all that I said in opening, it is perhaps worth stressing that in-year, normal Treasury controls on public expenditure will apply in future. The accounting officer of the Royal Household, the Keeper of the Privy Purse, will be guided by the key publication, Managing Public Money, which among other things prohibits spending ahead of need and counsels against waste and extravagance. I think a proper balance will be struck between my noble friend Lord Newby’s encouragement to put in place proper repairs and a normal regard for control of public expenditure.

In relation to the basic link to the Crown Estate, I am sorry that the overall package gets only a nine out of 10 rating. However, I take it that a nine out of 10 rating from a former Permanent Secretary to the Treasury is about as good as it gets. The noble Lord, Lord Turnbull, is nodding, so I am relieved about that. The noble Lord, Lord Janvrin, really answered the point as well as I could in referring to the historical appropriateness of the link to the Crown Estate as well as the practical basis for a long-term settlement, which it gives.

I hope that that deals briefly with the main points that have been raised. The Bill will, in summary, put funding for the Royal Household on a sustainable footing and provide for it to be fully accountable to Parliament and to the public. These are necessary reforms, and I ask the House to give the Bill a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.