The royal family stands to benefit from a huge windfall from the boom in offshore energy, potentially sparking a debate about funding the monarchy.
The Treasury has confirmed that an official review of the sovereign grant, which stands at £86.3m a year, is ongoing and is expected to come into effect from April next year. Officials say they want to ensure the funding is at “appropriate” levels.
Public finance for the royal household is paid as a fixed proportion of profits of the crown estate, the organisation that manages the crown’s public lands, including coastal and marine assets. These profits are now expected to rise significantly because of the drive by energy companies to harness wind power.
A Whitehall source said: “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 owns virtually all of the seabed around the UK to a distance of 12 nautical miles. The value of its marine portfolio in England, Wales and Northern Ireland (Scotland is managed separately) is now worth £5bn, driven largely by demand for seabed leases for windfarms.
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 was £31m to pay staff costs, official travel and royal household expenses. But the core grant for these costs had increased to £51.8m by 2021-22, with an additional £34.5m for works at Buckingham Palace.
The monarchy benefits from what has been described as a “golden ratchet” clause under these arrangements, in which the amount of money can only be increased each year or stay at the same level. A cut in the grant would required a change in the law. 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 pay for Buckingham Palace renovations.
The 10-year “reservicing” works will cost an estimated £369m and will replace 100 miles of electrical cabling, 6,500 electrical sockets and 20 miles of skirting boards.
It was anticipated that the royal household would continue to receive 25% of crown estate profits until the project is completed, which is expected to be in 2026-27. But this may now be re-examined in the light of additional expected profits at the crown estate.
Royal duties are also funded by profits from the Duchies of Lancaster and Cornwall. The Duchy of Lancaster is a private estate owned by the monarch. It covers 18,481 hectares (45,667 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 the first Harry Potter film.
The duchy has net assets of £652m and delivered profits of £24m in the year to 31 March 2022. It has been largely used to fund the late Queen’s official duties, but tax is paid on income not used for royal duties.
The Duchy of Cornwall covers 52,449 hectares of land in 20 counties, most in the south-west of England. Its holdings range from most of the Isles of Scilly and vast tracts of farmland in Cornwall to Dartmoor Prison in Devon and the Oval cricket ground in south London. It has net assets of more than £1bn and delivered profits of more than £23m in the year to 31 March 2022.
The duchies are exempt from corporation tax. King Charles will also not pay inheritance tax in a “sovereign to sovereign” exemption agreed by prime minister John Major in 1993.
The author David McClure, who died in June, discovered a revealing HM Treasury memo in researching his book on the royal finances, The Queen’s True Worth. The note, contained in 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.”
The focus by the royal household on value for money and a smaller number of royals on frontline duties may now lead to fresh scrutiny of the funding arrangements.
Norman Baker, the former Liberal Democrat MP and author of And What Do You Do?, a book on the royal family, said he had written to the National Audit Office and the Commons public accounts committee calling for a wide-ranging review of the funding arrangements. He said: “Their money can stay as it is or go up. It can never go down. It’s got much better for them because they’re benefiting from the money from windfarms.”
King Charles is expected to review the vast property portfolio of the royal family. The royal household website lists 22 residences, including Buckingham Palace, St James’s Palace, Kensington Palace and Windsor Castle. Sandringham and Balmoral in Scotland are privately owned.
Charles and the Queen Consort have a mansion at Birkhall on the Balmoral estate. He also has a house in Carmarthenshire in Wales, which has adjoining cottages for rent. The King is also reported to have purchased a five-bedroom home in Romania in 2006 as an isolated holiday retreat.
The crown estate also leases the Royal Lodge at Windsor to Prince Andrew and nearby Bagshot Park to Prince Edward. Princess Anne lives at Gatcombe Park in Gloucestershire, which is privately owned.
In his book, McClure estimated the monarch’s private wealth at about £400m. The assets held in the name of the crown are worth several billions of pounds.
The Treasury declined to comment on the review of the sovereign grant.
• This article was amended on 20 September 2022 to clarify that the crown estate in Scotland is managed separately, having been devolved in 2017 to Crown Estate Scotland. Revenue from the estate in Scotland, including seabed leases, is not linked to the sovereign grant.
