The royal family is set to benefit from a huge windfall from the offshore energy boom, potentially sparking a debate over the funding of the monarchy.
The Treasury has confirmed that a formal review of the Sovereign Grant, which amounts to £86.3m a year, is underway and is expected to come into effect from April next year. Officials say they want to ensure funding is at “appropriate” levels.
The public finances of the royal household are paid according to a fixed proportion of the profits of the crown estate, the organization that manages the crown’s public lands, including coastal and marine assets. These profits are now expected to increase significantly due to energy companies’ drive to harness wind power.
A Whitehall source said: “The review will take into account the significant additional revenue the Crown Estate expects to receive from the next phase of offshore wind developments – which are expected to be several hundred million pounds each year for that these projects are in development.”
The Crown Estate has virtually all of the seabed in the UK within a distance of 12 nautical miles. The value of its marine portfolio is now worth £5bn, largely due to demand for seabed leases for wind farms.
As Chancellor George Osborne announced a reform of the monarchy’s public funding in 2011, replacing the Civil List with the Sovereign Endowment.
The first such grant in 2012-13 was £31 million to pay for staff costs, official travel and royal household expenses. But the base grant for those costs had risen to £51.8million by 2021-22, with an additional £34.5million for work 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 remain at the same level. A reduction in the subsidy would require a change in the law. The review is carried out by the Royal Trustees, who are the Prime Minister, Chancellor and Custodian of the Privy Purse.
The Royal Household initially received 15% of profits from the Crown Estate as part of the Sovereign Grant Agreements, but this amount was increased to 25% from 2017-18 to pay for renovations to Buckingham Palace.
The 10-year ‘retrofit’ work will cost around £369million and will replace 100 miles of electrical wiring, 6,500 electrical sockets and 20 miles of baseboards.
It was planned that the Royal Household would continue to receive 25% of the profits from the Crown Estate until the project was completed, which is expected to take place in 2026-27. But this can now be reconsidered in light of the additional benefits expected from the Crown Estate.
Royal duties are also funded by the benefices of the Duchies of Lancaster and Cornwall. The Duchy of Lancaster is a private estate belonging to the monarch. It covers 18,481 hectares (45,667 acres), most of which is in the north of England. His holdings include quarries in the High Peak areas of Derbyshire, an airfield in Staffordshire and the Goathland estate in North Yorkshire, the location of Hogsmeade station in the first Harry Potter film.
The Duchy has net assets of £652m and made profits of £24m in the year to March 31, 2022. It was 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 of them in South West England. His holdings range from most of the Isles of Scilly and large swaths of farmland in Cornwall to Dartmoor Prison in Devon and the Oval cricket ground in south London. It has net assets of over £1 billion and made profits of over £23 million in the year to March 31, 2022.
The duchies are exempt from corporation tax. King Charles will also not pay inheritance tax under a “sovereign to sovereign” exemption agreed by Prime Minister John Major in 1993.
Author David McClure, who died in June, discovered a telltale note from Her Majesty’s Treasury while researching his book on royal finances, The true worth of the queen. The note, contained in a cache of papers covering a 1989 Civil List revision, stated: “The state provides for the monarchy in two ways: first by explicit funding and second by waiving the tax on private fortune of the sovereign.
“In practice, it should be noted that tax immunity allowed the government to pay a small civil list limited to specific official aspects and thus keep the whole question of the financing of the monarchy in a rather lower key than what would otherwise be the case.”
The royal family’s focus on value for money and fewer senior royals on frontline duties could now lead to a fresh review of funding arrangements.
Norman Baker, former Liberal Democrat MP and author of And what are you doing?, a book about the royal family, said he had written to the National Audit Office and the House of Commons Public Accounts Committee asking for a thorough review of the funding arrangements. He said: “Their money can stay as it is or increase. He can never come down. It is much better for them because they benefit from the money from the wind farms.
King Charles is expected to review the royal family’s vast property portfolio. 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 owns a house in Carmarthenshire in Wales, which offers attached cottages for rent. The king also reportedly bought a five-bedroom house in Romania in 2006 as a secluded vacation spot.
The Crown Estate also leases the Royal Lodge at Windsor to Prince Andrew and nearby Bagshot Park to Prince Edward. Princess Anne lives in Gatcombe Park in Gloucestershire, which is privately owned.
In his book, McClure estimated the monarch’s private wealth at around £400million. The assets held in the name of the crown are worth several billion pounds.
The Treasury declined to comment on the sovereign grant review.