BRIEFING PAPER Number SN00819, 25 July 2017 By Cassie Barton Finances of the Monarchy Contents: 1. Sources of funding 2. The Crown Estate 3. Previous arrangements 4. Taxation 5. The Prince of Wales www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary 2 Finances of the Monarchy Contents Summary 3 1. Sources of funding 5 1.1 The Sovereign Grant 5 1.2 The Privy Purse 6 1.3 Private income 7 2. The Crown Estate 9 3. Previous arrangements 10 3.1 The Civil List 10 3.2 Grants-in-aid and other sources 11 3.3 Official expenditure 1992-2011 11 4. Taxation 12 5. The Prince of Wales 13 5.1 Income and expenditure 13 5.2 Duchy of Cornwall 13 Cover page image attributed to: Max Pixel / Fence Detail Buckingham Palace London. Licensed by Creative Commons Zero (CC0 1.0) 3 Commons Library Briefing, 25 July 2017 Summary This briefing provides information about the Royal finances. It includes figures for the official income and expenditure of the Queen and the Prince of Wales. The Sovereign Grant Act 2011 changed the way in which the Monarchy is funded. The Act removed two existing sources of funding for the Queen – the Civil List and grants-in- aid from Government departments – and replaced them with a single ‘Sovereign Grant’. This arrangement has been in place since 1 April 2012. The Queen currently receives three kinds of income: • The Sovereign Grant is used to meet official expenditure. To date, the Grant has been set at 15% of the profits of the Crown Estate, although this will rise to 25% next year. The rest of the Crown Estate’s profits go to the Treasury. The Sovereign Grant was £42.8m in 2016-17, of which £41.9m was used to meet official expenditure and £0.9m was transferred to the Sovereign Grant Reserve. • The Privy Purse is the private income to which the Queen is entitled as Sovereign, and comes from the net revenue of the Duchy of Lancaster (£19.1m in 2016-17). The Privy Purse is taxable to the extent that it is used for private purposes, but is also used to meet some official expenditure. • Her personal income, derived from her investment portfolio as an individual. As with any other individual, information about the Queen’s private funds is not made public. The chart below summarises how this income was generated and used in 2016-17. Finances of the Monarchy, 2016-17 15% of net 100% of net revenue from revenue from Private The Crown The Duchy of investments Estate Lancaster The Sovereign The Privy Personal Grant Purse income An annual The private Of the Queen as payment to meet income of the an individual – official costs Sovereign* information not £42.8m £19.1m made public Official Private expenditure expenditure Including staff costs Including expenses of (£21.7m) and property other Royals, upkeep maintenance (£17.8m) of Balmoral * Privy Purse income is primarily used for private expenditure, but helps meet some official costs. 4 Finances of the Monarchy Prior to the Sovereign Grant Act 2011, official expenditure was met using an annual Civil List payment and grants-in-aid provided by government departments for specific purposes. Direct payments from the government and Crown Estate were also used to meet official costs, although this type of expenditure declined over the last twenty years of the old system. More detail on the previous system is available in a Library research paper published when the Sovereign Grant Bill was in progress (RP11-57). The National Audit Office (NAO) also published a report on the Sovereign Grant in 2013. The Prince of Wales’ official costs are primarily met from his income from the Duchy of Cornwall. He is entitled to the net revenue of the Duchy, but currently pays income tax at the top rate. In 2016-17, the Prince of Wales received £20.7m from the Duchy of Cornwall (before tax). He also received £1.8m in payments from government departments and the Sovereign Grant in order to meet official expenditure. Overall expenditure (including tax and personal expenditure) was £22.3m, leaving a net surplus of £0.2m. All statistics used in this report are published in full in supplementary tables, available online. 5 Commons Library Briefing, 25 July 2017 1. Sources of funding There are currently three sources of funding for the Queen, or officials of the Royal Household acting on Her Majesty’s behalf, in both a public and private capacity. 1.1 The Sovereign Grant Following the passage of the Sovereign Grant Act 2011, the Sovereign Grant replaced two of the four previous sources of funding for the Monarchy on 1 April 2012. Before 2012, the Queen received an annual Civil List payment as well as several grants-in-aid from the Government intended to meet specific costs. Section 3 describes the previous system in more detail. The Sovereign Gant is administered by the Treasury and the Act provides for: 1 • new consolidated Sovereign Grant payment to support HM The Queen in Her official duties; • full parliamentary approval and scrutiny of grant expenditure; • continuation and modernisation of support to the heir to the throne; • continuation of grant arrangements on accession of a new monarch; and • rationalisation of payments to annuitants. The Grant is designed to be a more permanent arrangement than the old Civil List system, which was reign-specific. Since 2013-14, funding for the Sovereign Grant has been based on a proportion of the net revenue of the Crown Estate. This was initially set at 15% of the profits for the financial year two years previously. The grant is reviewed every five years by the Royal Trustees.2 The Royal Trustees have agreed that, from 2017-18, the Sovereign Grant will rise to 25% of profits of the Crown Estate two years previously. This means that the Sovereign Grant for 2017-18 will be £76.1m. The additional revenue is to be used to fund the refurbishment of Buckingham Palace. Section 2 of this briefing has more information about trends in the net revenue of the Crown Estate. The table overleaf shows how the Sovereign Grant has been used in combination with other income to meet official expenditure to date. The Sovereign Grant for 2016-17 was £42.8m, of which £41.9m was 1 HM Treasury, Sovereign Grant Act – Accessed 11 September 2014 2 The Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse. For detailed information about the Sovereign Grant Bill see Library Research Paper 11/57 at http://www.parliament.uk/briefing-papers/RP11-57.pdf 6 Finances of the Monarchy used to meet official expenditure and £0.9m was transferred to the Sovereign Grant Reserve. Expenditure met with the Sovereign Grant has risen 26% over the last five years. This has partly been driven by a rise in spend on ‘property maintenance and other major projects’, which increased by 96% in the same period. Table 1: Income and expenditure of HM The Queen £ million 2012-13 2013-14 2014-15 2015-16 2016-17 Sovereign Grant income 33.3 35.7 35.7 39.8 41.9 Sovereign Grant 31.0 36.1 37.9 40.1 42.8 Transfer to / from Sovereign Grant Reserve 2.3 -0.4 -2.2 -0.3 -0.9 Other income 11.6 13.4 13.3 13.9 14.9 Property rental 3.0 3.2 2.8 2.9 3.1 Facilities management charges 3.7 4.4 4.5 5.1 5.3 Recharges for functions and other income 4.9 5.8 6.0 5.9 6.5 Total expenditure 44.9 49.1 49.0 53.7 56.8 Payroll costs 18.3 18.2 18.7 19.5 20.3 Other staff costs 1.2 1.3 1.2 1.4 1.4 Property maintenance and other major projects 9.1 13.3 11.7 16.3 17.8 Travel 4.5 4.2 5.1 4.0 4.5 Utilities 3.1 3.3 3.4 3.3 3.1 Housekeeping and hospitality 1.9 2.0 2.1 2.1 2.2 Other 6.8 6.8 6.8 7.1 7.5 Expenditure met with Sovereign Grant 33.3 35.7 35.7 39.8 41.9 Surplus 0 0 0 0 0 Source: The Sovereign Grant and Sovereign Grant Reserve annual report and accounts, various years (via www.royal.uk/media-packs) 1.2 The Privy Purse The Privy Purse represents the private income to which the Queen is entitled as Sovereign. It is currently used to meet both official and private expenditure. Income from the Duchy of Lancaster funds the Privy Purse. This income is subject to income tax, but the Duchy itself does not pay tax. The Duchy is a landed estate of approximately 18,500 hectares in England and Wales held in trust for the Sovereign since 1399. The Sovereign is not entitled to the Duchy’s capital but the net revenues of the Duchy are the property of the Sovereign in right of her Duchy of Lancaster. Accounts for the Duchy of Lancaster are published and laid before Parliament annually. The Chancellor of the Duchy of Lancaster, who is the equivalent of the chairman of trustees, has in recent years been a Government minister, 7 Commons Library Briefing, 25 July 2017 although this is not a requirement. The current Chancellor of the Duchy of Lancaster is the Rt. Hon Patrick McLoughlin MP.