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From the file

Money & monarchy |

LONDON, ENGLAND – JUNE 09: Queen Elizabeth II and members of the British Royal family stand on the balcony of Buckingham Palace during the Trooping the Colour parade on June 9, 2018 in London, England. (Photo by James Devaney/FilmMagic)
‘Hoodwinked’ over Royal finances

‘Hoodwinked’ over Royal finances

LONDON, ENGLAND – JUNE 09: Queen Elizabeth II and members of the British Royal family stand on the balcony of Buckingham Palace during the Trooping the Colour parade on June 9, 2018 in London, England. (Photo by James Devaney/FilmMagic)

The royal family’s income from the taxpayer has soared since the financial crisis, a Tortoise Investigation found last year. Now the UK’s former top civil servant says there’s been a deliberate attempt to keep the public in the dark

A taxpayer-funded grant that brings the Queen almost £90 million a year is based on a  “lie” designed to “hoodwink the public”, a former head of the civil service has said. 

Sir Andrew Turnbull, the country’s most senior civil servant for three years under Prime Minister Tony Blair, told Tortoise that laws introduced by George Osborne to reform royal finances were a “classic smoke and mirrors arrangement….cooked up” by ministers and Buckingham Palace. “The thought was that (this arrangement) would hoodwink the public into thinking that the crown didn’t cost the nation anything because the crown was paying for itself. That was wrong.”

His comments will raise new questions about the close relationship between the government and the royal family. This week a Guardian investigation revealed that the Queen successfully lobbied the government to change a draft law to conceal her “embarrassing” private wealth from the public.

The Guardian’s work came six months after Tortoise published its own investigation into Royal Money. We found that the Queen’s public income had more than doubled since the financial crisis of 2008 – hitting £100 million in 2018-19 for the first time – and is set to rise by hundreds of millions of pounds thanks to windfalls from offshore wind farms. You can read the investigation here and listen to our slow newscast on royal money here.

As our investigation showed, the main driver behind the Queen’s increased income was an increase in a taxpayer-funded grant known as the Sovereign Grant. Since its introduction by the then-Chancellor in 2012, the Sovereign Grant has risen from £31.3 million in that year to £87.5 million in 2020. 

Unusually, the size of the grant is not determined by the costs of the Royal Household. It is instead calculated as a proportion of the profits generated by the Crown Estate, a real-estate company which owns huge swathes of the UK. 

While the Crown Estate is technically owned by the Queen, its profits have  belonged to the government since 1760 when the monarch has surrendered its income entirely to the Treasury. 

By linking the Sovereign Grant to the Crown Estate, ministers misled the public into believing that the Queen “paid for herself”, Sir Andrew said. He favoured replacing the system with a new grant based on how much money the Queen needed: “a bit like the BBC licence fee.”

“It was a phantom arrangement, cooked up by clever people [in government and in the royal household]” Sir Andrew said.

In 2011 Osborne announced he would amalgamate several existing royal grants into one annual payment known as the Sovereign Grant. He told Parliament that “the amount of money going from the public purse to the royal household will broadly be the same.” But the Sovereign Grant has more than doubled since its introduction, allowing the Queen to significantly up her spending. The size of the grant is also legally not allowed to decrease, meaning the Queen is largely protected if and when the Crown Estate’s rents are hit by the economic fallout of the Covid-19 pandemic. 

“It was a nonsense thought up to achieve a presentational effect,” said Sir Andrew, who had no part in negotiating the Grant. “The monarchy is paid for out of taxation. The government has accepted a duty to ensure the monarchy is funded properly. That should be laid on the table.” 

Sir Andrew emphasised that the new system was in ways “a big improvement” on the old system, which was too disjointed.

Sir Micheal Peat, former Treasurer to the Queen and then principal private secretary to Prince Charles, is thought to have been closely involved in the Sovereign Grant negotiations. In 2010 the Mail on Sunday noted that there was “nothing” the Eton-Educated Peat “does not know about royal finances”. 

When Tortoise investigated these issues last year, both Sir Michael and George Osborne declined to comment. A Buckingham Palace spokeswoman told us that the Sovereign Grant was approved by the Treasury and reviewed every five years. “The Royal Household publishes a detailed audited annual financial review.”

She added: “Since it came into effect, increases in the core Sovereign Grant have come with a commitment to address a historic backlog in the maintenance of the occupied Royal Palaces and since that date two thirds of the increase received has been allocated to property maintenance. In 2016 Parliament agreed that the Sovereign Grant would include a temporary uplift to fund a reservicing programme of Buckingham Palace from April 2017. The ten-year programme followed a report to HM Treasury identifying that the building’s infrastructure was in urgent need of an overhaul to avoid the very real danger of catastrophic failure.”

In September a new book on Royal finances revealed that Prince Charles had suggested as far back as the 1980s that the entire profits from the Crown Estate pay for all the official costs of the royals, including their security. At that time the total cost was thought to be around £60 million a year.

The book – by investigative journalist David McClure – revealed that civil servants expressed fears that the proposal might reveal the trust cost of the royal family. 

“Any comprehensive budget will attract a great deal of attention,” a draft report prepared in December 1989 said. “Although the overall budget will in fact represent no more than the cost that would in any event arise in supporting head of state expenditure on the basis proposed, there will be an immediate contrast available between the £60 million plus to be met annually against the £6.5 million of the present Civil List.

“Whatever approach to Parliament ministers conclude is the right one, it is likely that the apparent scale of this ‘increase’ will give rise to questions about the Queen’s personal wealth and issues of taxation.”

At the time, Sir Andrew, then Margaret Thatcher’s principal private secretary, advised against the move, the book reported. “There was no obvious reason why head of state expenditure should move with Crown Estate revenue,” he said.  

Twenty-three years later, his advice was overruled by the Cameron coalition government. The royal finances have been in rude health ever since.