THE royal family could be set to benefit from a huge windfall owing to the boom in offshore energy, potentially sparking a debate about the way the monarchy is funded.
The Guardian reports that the Treasury has confirmed an official review into the sovereign grant, which stands at £86.3 million a year, is ongoing and is expected to come into effect from next April.
Officials say they want to ensure funding is at “appropriate” levels.
The sovereign grant is the amount of money provided by government to support the royal household in its official duties.
Public finance for the royal household is distributed as a fixed proportion of profits of the crown estate – the organisation which manages the public lands owned by the crown, including coastal and marine assets.
These profits are now expected to soar due to the drive by energy companies to harness wind power.
A Whitehall source told The Guardian: “The review will take account of significant extra revenues that the crown estate expects to receive from the next phase of offshore wind developments – forecast to be several hundred million pounds each year while these projects are in development.”
The Crown Estate effectively owns all of the seabed around the UK which amounts to a distance of 12 nautical miles.
The value of its marine portfolio currently sits at £5 billion, driven primarily by demand for seabed leases for windfarms.
During his time as chancellor, George Osborne announced a reform of public funding of the monarchy in 2011, replacing the civil list with the sovereign grant.
The first such grant in 2012-13 amounted to £31m to pay staff costs, official travel and royal household expenses.
However, the core grant for these costs had increased to £51.8m by 2021-22, with an additional £34.5m granted to works at Buckingham Palace.
The monarch benefits from what is known as a “golden ratchet” clause which means that the amount of money they receive can only be increased every year or stay at the same level.
A cut in the grant would mean a change in the law is needed. The review is conducted by the royal trustees, who are the prime minister, the chancellor and the keeper of the privy purse.
The royal household initially received 15% of the profits of the Crown Estate under the sovereign grant arrangements, but this was increased to 25% from 2017-18 to help pay for Buckingham Palace renovations.
The 10-year “reservicing” works are understood to cost an estimate £369m and will replace 100 miles of electrical cabling, 6500 electrical sockets and 20 miles worth of skirting boards.
It was anticipated that the royal household would still receive 25% of Crown Estate profits until the project is completed, which is expected to be finished in 2026-27.
However, this may now be reexamined in light of the additional profits they are expected to make.
Royal duties are also partly funded by profits from the Duchies of Lancaster and Cornwall.
The Duchy of Lancaster is a private estate owned by the monarch which covers more than 45,000 acres, most of which is in northern England.
Its holdings include quarries in the High Peak areas of Derbyshire, an airfield in Staffordshire and the Goathland estate in North Yorkshire, the location for the Hogsmeade station in Harry Potter and the Philosopher’s Stone.
The duchy has net assets of £652m and delivered profits of £24m in the year to March 31 2022.
It has largely been used to fund the late Queen’s official duties, although tax is not paid on the income used for these.
The Duchy of Cornwall meanwhile covers over 52,000 hectares of land in 20 counties, most of them in the south-west of England.
It has net assets of more than £1bn and delivered profits of more than £23m in the year to March 31 2022.
Both the duchies are exempt from corporation tax. King Charles will also not pay inheritance tax in a “sovereign to sovereign” exemption agreed by former prime minister John Major in 1993.
Author David McClure, who died in June, revealed a HM Treasury memo when researching his book on the royal finances, The Queen’s True Worth.
The note, found within a cache of papers covering a 1989 review of the civil list, stated: “The state provides for the monarchy in two ways: first through explicit finance and secondly by foregoing tax on the sovereign’s private wealth.
“In practice it should be noted that immunity from taxation has enabled the government to pay a small civil list confined to specific official aspects and thus keep the whole issue of financing the monarchy in a rather lower key than would otherwise be the case.”
King Charles is expected to review the vast property portfolio of royal residences, with the royal household website currently listing 22 residences.
This includes Buckingham Palace, St James’s Palace, Kensington Palace and Windsor Castle.
Sandringham and Balmoral are privately owned.
The Crown Estate also leases the Royal Lodge at Windsor to Prince Andrew.
The Treasury declined to comment on the review of the sovereign grant.
