Sovereign Grant Bill

Lord Shutt of Greetland Excerpts

Monday 3rd October 2011 Lords Chamber

[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.