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Second Reading (and remaining stages)

Sovereign Grant Bill – in the House of Lords at 3:00 pm on 3rd October 2011.

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Moved by Lord Sassoon

That the Bill be read a second time.

Photo of Lord Shutt of Greetland Lord Shutt of Greetland Lords Spokesperson (Northern Ireland Office), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 3:06 pm, 3rd October 2011

My Lords, I have it in command from His Royal Highness the Prince of Wales to acquaint the House that his Royal Highness, having been informed of the purport of the Sovereign Grant Bill, has consented to place his prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Photo of Lord Sassoon Lord Sassoon The Commercial Secretary to the Treasury

My Lords, I am pleased to have the opportunity to introduce this important Bill and I look forward to our debate. It was clear from debates in another place that there is wide recognition of Her Majesty the Queen's long and conscientious contribution to public life. It is vital that we continue to provide the Queen and the Royal Household with the finances to perform her official duties with dignity, but it is equally important to take this opportunity to modernise the current system for supporting the Royal Household.

The sovereign grant will replace the current three-grant system with a single consolidated payment. It will provide the household with flexibility to prioritise its use of resources in the most effective way. The level of the grant will usually be equivalent to 15 per cent of the profits made by the Crown Estate in the financial year two years earlier. That is, profits in the current financial year, 2011-12, will determine the level of the sovereign grant in 2013-14, the first year the new calculation method will be used. Of course, we cannot say with certainty what that profit will be, but the Crown Estate has indicated that it expects profits to be broadly the same as last year. That would mean a 2013-14 sovereign grant of about £34 million. That is in line with Royal Household expenditure in the five years between 2006 and 2010, which averaged about £34 million per year. However, that can be only a projection, so there are safeguards to ensure that the sovereign grant can be kept on a sustainable path.

First, the Bill would establish a sovereign reserve fund. Any unspent sovereign grant will be paid into the sovereign reserve at the end of the year, and could then be called upon in a subsequent year to cover a shortfall. Importantly, there will be a target limit on that reserve to avoid it rising above about half of the total expenditure in that year. If the sovereign reserve were to exceed that level, the royal trustees could intervene to reduce the sovereign grant to an appropriate level.

Secondly, the Bill provides for regular reviews to determine whether the percentage used in the formula, initially 15 per cent, remains appropriate. My right honourable friend the Chancellor of the Exchequer has already accepted the principle of some of the Opposition's amendments on this matter. In response to those, the Bill now provides for the first review to happen in 2016 rather than 2019, as previously envisaged, and reviews will take place every five years thereafter instead of every seven. Any increase in the formula would require agreement from Parliament by affirmative orders.

Thirdly, there will be a cash underpin that will go some way to protect the monarch from dips in the profit of the Crown Estate. It is important to note that the royal trustees may override this underpin should there be sufficient funds in the reserve.

Because the sovereign grant is being brought into the Treasury estimate, it will be treated like other central government bodies. The Treasury will apply in-year controls on public expenditure to avoid waste, seek value for money and prohibit spending ahead of need. At the same time, we are improving accountability to Parliament for the spending of public money. From 2012, the National Audit Office will have full access and will become the statutory auditor for all the Royal Household's use of the sovereign grant and the sovereign reserve. This is a significant step that should be welcomed.

The Bill is also an opportunity to modernise other aspects of current legislation. For example, under current arrangements, only a Duke of Cornwall receives financial support from the Duchy of Cornwall. The Bill will enable the Treasury to provide a grant to heirs to the throne who are not the Duke of Cornwall, to ensure that they can be supported to similar effect. A significant result of this modernisation is that, in effect, it enables female heirs to benefit from the Duchy of Cornwall.

In addition, the Bill repeals a number of parliamentary annuities that are currently payable to other members of the Royal Family to relieve expenditure incurred in connection with their official duties. These annuities have for many years been reimbursed on a voluntary basis to the Exchequer by Her Majesty from her Privy Purse. The Bill puts an end to this anachronism. Noble Lords will be aware that Her Majesty intends to continue to provide for these annuitants from her Privy Purse. Those arrangements were set out in a letter from Sir Alan Reid, Keeper of Her Majesty's Privy Purse, to my right honourable friend the Chancellor of the Exchequer, which was placed in the Library on 30 June. There is no change to the parliamentary annuity paid to the Duke of Edinburgh, which will continue to be payable from the Consolidated Fund. I am sure that the House will welcome this simplification.

The Sovereign Grant Bill provides for a system of royal support that is modern, efficient and accountable. I beg to move.

Photo of Baroness Royall of Blaisdon Baroness Royall of Blaisdon Shadow Leader of the House of Lords, Shadow Spokesperson (Cabinet Office) 3:13 pm, 3rd October 2011

My Lords, noble Lords may well wonder why I am speaking on a Treasury Bill. The reasons are two. First, my colleagues in the Treasury team all have long-standing engagements at this time during this unexpected week of business. Secondly, I hold Her Majesty in the greatest esteem, and, since I am a former Lord President of the Council and a former Chancellor of the Duchy of Lancaster, both positions of which I was immensely proud, it seemed appropriate for me to speak on behalf of the Opposition.

The Bill seeks to modernise and simplify the way in which we finance our Royal Family. It brings up to date the method of grant allocation and greatly increases the transparency of the finances of Her Majesty and the wider Royal Family. It facilitates accountability to Parliament via the National Audit Office and the Public Accounts Committee. On behalf of Her Majesty's loyal Opposition, I begin my contribution to this Second Reading debate by putting on the record our particular support for this element of the changes that we are discussing today.

I am glad that the business managers in this House have made proper time available for consideration of this short but important Bill. I understand that in the Commons there was no Second Reading because the previous business overran. This is yet another signal to the Government that their legislative programme really is far too full to enable the proper scrutiny that is rightly demanded by the citizens of this country.

This debate is happening 250 years after the current system for allocating funds to the Royal Household was first decided upon. It was in 1760 that King George III surrendered the entirety of the income from the Crown Estate to Parliament in exchange for an annual grant to fund his and his family's duties in his role as monarch. With time, this grant has in fact developed into four separate allowances. The Civil List is the annual grant to meet the core official expense to enable the Queen to carry out her role as Head of State and Head of the Commonwealth, and it comes from the Treasury. There is a grant in aid for royal travel, which is funded by the Department for Transport, and the Department for Culture, Media and Sport provides both a grant in aid for maintenance of the royal palaces and a grant for expenditure on communications and information.

There is no permitted crossover between those pots of money. Their hypothecated nature has prevented a surplus in the travel grant being put towards the urgent upkeep of a particular royal palace, for example. The Bill before us today will put an end to this rigidity, giving the Royal Family the flexibility that they have always wanted, and it is extremely welcome. The new sovereign grant will be able to be used as the Royal Household sees fit under the guidance of the Keeper of Her Majesty's Privy Purse, and the Opposition have absolutely no objection to this sensible rationalisation of the way in which the monarchy is funded.

I shall focus my comments around three broad areas: the level of the grant, the mechanisms to review it, and the audit of public funds apportioned to financing the monarchy. The Minister has informed the House that the value of the sovereign grant in any given year will be equivalent to 15 per cent of the profits of the Crown Estate in the two years prior. This means that in the first year of the new system, 2013-14, the sovereign grant will be determined as 15 per cent of the profits from the Crown Estate in 2011-12. The Minister has told your Lordships that this is predicted to equate to £34 million. This figure is broadly in line with the expenditure of the Royal Family in recent years. In another place, the Chancellor of the Exchequer explained that the effect of choosing this particular percentage of Crown Estate profits, in order to determine the level of the sovereign grant, would be to provide the Queen with a sum throughout this Parliament that was broadly the same as the sum she received throughout the last. The Chancellor is right to say:

"In the end, it is a matter of judgment whether £34 million or so is the right amount for the future".-[Hansard, Commons, 14/07/11; col. 540].

From the opposition Benches, I wish to stress to your Lordships, and to the Government, that the key issues are the values and priorities that underpin that judgment. Her Majesty the Queen and the Royal Family continue, and must continue, to play a vital role in the affairs of our nation in the new century. They must be financed in a way that enables them to fulfil this role-at home and in the wider Commonwealth-and to maintain the support of the public. Accordingly, the funding arrangements need to strike a fair and workable balance between the legitimate needs of the household and the interests of taxpayers. Setting the sovereign grant at 15 per cent of Crown revenues will mean, from next year until the end of the current Parliament, a 3.2 per cent real-terms rise in the grant available to the Royal Household. I ask the Minister for reassurance that, in these times of austerity, when the impact of the Government's policies and priorities, as well as the state of the global economy, are causing tough times for hard-working people across the country, the interests of taxpayers are being carefully considered. I also ask whether he is able to make available to Parliament detailed projections of the value of the sovereign grant over the coming years.

I turn to the scope for adjusting the level of the sovereign grant as outlined in this Bill. In the other place, the Chancellor of the Exchequer explained that the Government had chosen the mechanism of a percentage of the Crown Estate profit because it was,

"broadly in line with the economy".-[Official Report, Commons, 14/07.11; co1. 536].

The Chancellor described the Crown Estate as a large commercial property company run in a conservative way, which was not a bad proxy for how the country as a whole was doing. We on the opposition Benches are not sure whether the figure of 15 per cent of Crown revenues will prove to rise in line with the overall performance of the economy going forward. The Crown Estate's annual report describes current growth as "exponential" and growth over the next 10 years as "significant". We know from recent figures and forecasts, including from the OBR, that the UK is flat-lining. We are disappointed that in another place the Government resisted calls from the opposition Front Bench to require the grant's trustees to review the funding arrangements if the Crown Estate's income rose faster in the previous financial year than the underlying trend growth rate of the economy. We felt such a provision to be particularly sensible considering the Crown Estate's stake in offshore wind farms, and with Crown Estate income from renewables growing by 44 per cent in 2009-10. Notwithstanding this, we are pleased to say that the Government heeded the Opposition's calls for more frequent reviews of the new funding mechanism. The Bill requires, as the Minister said, the calculation of the sovereign grant to be reviewed every five rather than seven years.

I am pleased to inform your Lordships' House that Her Majesty's Opposition fully support the auditing arrangements of the new system, as laid out in the Bill. It is welcome that, for the first time, the National Audit Office and the Public Accounts Committee will have the same powers to audit and scrutinise the Royal Household in the same way as any Government department. We welcome this unprecedented increase in transparency and scrutiny of the Royal Household. It is not only the proper thing to do; it will likely serve to build further trust and support for the monarchy in our country. We hope that the PAC will decide to take frequent looks at the Royal Household's accounts to monitor the suitability of the new sovereign grant mechanism.

In times of real economic hardship, and also at a time when the pressures on the Royal Family seem to be increasing in various ways, it is vital that in arriving at a settlement for funding the monarchy, Parliament balances the interests of the taxpayer with the dignity and needs of the Royal Household. The Bill seems to strike that balance, but I look forward to hearing the Minister's response to my questions and those which will undoubtedly follow from other noble Lords.

Photo of Lord Newby Lord Newby Liberal Democrat 3:21 pm, 3rd October 2011

My Lords, the briefing circulated in respect of the Bill said that debates in your Lordships' House on the funding of the Royal Household tended to be brief. When I see the formidable array of experience on all matters royal on the Benches opposite me, I am tempted to be even briefer than I might otherwise have been.

The first question to be raised in any debate on royal finances going into the future is whether the level of funding proposed is broadly in the right ballpark. I suspect that if you told most people in the UK that they were paying, in effect, a penny a week to fund the Royal Household, they would think that they were getting exceptional value for money. It might be virtually the only area where people might almost voluntarily be prepared to pay marginally more. It is a remarkable achievement to run an institution such as the monarchy at a penny a week per head. The fact that the real cost of running the monarchy has fallen by more than 50 per cent over the past 20 years is another remarkable achievement that many other outposts of government would do exceptionally well to emulate. In terms of the quanta and whether the country will believe that the amount of money currently spent on the Royal Household is in the right area, I doubt whether there is more than a very small minority of people who would question that.

My next question is whether this extremely elegant way of funding the Royal Household into the future is likely to be sustainable in the longer term. Given the current incumbent of the monarchy and her heirs and successors, and the extent to which they have been taken to the heart of the nation in various forms, we are looking at an institution which, to the extent that one can predict anything, looks set fair for the next 60 years. Therefore, any long-term funding mechanism has to be capable of being sustained over the long term. The great advantage of the Crown Estate as a method of calculating the income of the Royal Household is that it is a very sustainable long-term operation, and it is easy to see why the Crown Estate will be around in 60 years. That choice of mechanism is very sensible.

The noble Baroness, Lady Royall, raised the question of what happens if the income from the Crown Estate changes beyond what was expected and there seems to be some suggestion that in certain circumstances it could rise significantly. The Bill seeks to deal with that by having a five-year review and a clawback if the sovereign reserve increases. One is tempted to think that the keeper of the Privy Purse will have up his sleeve a whole series of refurbishment and other measures that could be reeled out in any particular year if it looks as though significant increases occur in Crown Estate profits that had not been anticipated. Perhaps it is not too ungenerous to think that the monarchy should benefit from an increase in the profitability of the Crown Estate, because it has given up income from the Crown Estate for 250 years. However, the more serious point is that there could be circumstances in which, over a period of two, three or four years, the monarchy could receive a significantly greater income than was envisaged. This will not necessarily go into the sovereign reserve: therefore, the clawback powers will not necessarily obtain. There is nothing in the Bill to stop that. Are the Government content that, at a time when Crown Estate profits might rise exponentially, or at least very significantly, the Royal Household should have the ability to spend significantly more over a two or three-year period before any review takes place?

In another place, my colleague John Thurso asked why the Crown Estate was getting income from offshore renewable energy. It seems slightly odd that the income of the royal family should depend on the number of wind farms that will be constructed off the coast of Scotland. Might there be an opportunity at some future point to discuss this rather odd aspect of the income of the Crown Estate and whether, given that the income is likely to increase significantly, it might be possible to use it-as my noble friend in another place suggested-to support those communities nearest to the wind, as it were, or more generally to support renewable energy? That is a debate for another day. In the mean time, like the noble Baroness, I support the measure.

Photo of Lord Turnbull Lord Turnbull Crossbench 3:27 pm, 3rd October 2011

My Lords, I am a member of a select band of brothers, most of whom are clustered in this corner of the Chamber, who worked on the last major change to the Civil List. That was the announcement in July 1990 of a 10-year settlement-or, more accurately, the reintroduction of the 10-year settlement envisaged in the 1972 Act that collapsed after three years under the weight of runaway inflation. The briefing produced by the parliamentary Library, whose briefings are normally impeccable, has an important omission. There is no mention of the Civil List Act 1975, which shored up this failing system with an annual supplement to the Civil List. The effect of this was that the Palace's finances were run on a hand-to-mouth basis. It also introduced an annual opportunity for mischief-making in Parliament and the media, producing misleading and undignified headlines such as "£200,000 Pay Rise for Queen". Therefore, the first lesson in all this is that we need an arrangement that provides some distance between the monarchy and the hurly-burly of politics.

Our aim in 1990 was to get back to a 10-year framework, with a flat-rate annual sum that was the average requirement over the period. Any surpluses that accumulated in the first five years were to be run down in the second five years. Clearly, that required an assumption about inflation. I and my Permanent Secretary Peter Middleton went to see the then leader of the Opposition, the noble Lord, Lord Kinnock. Naturally, he quizzed us on the inflation assumption. I said that it was 7.5 per cent, which was the average of the preceding 10 years. He said: "You can't do fairer than that". Inflation at the time was 9.8 per cent. Neither of us knew that by the spring of the following year, inflation would fall below 7.5 per cent and go on to average about 3.5 per cent over the subsequent 20 years. The result was that the reserves built up had not even begun to be drawn upon by the 10-year mark, and the system lasted for 20 years.

The fall in inflation was not the only reason that the life of the scheme was twice as long as expected. Here we should pay tribute to the two keepers of the Privy Purse, Sir Michael Peat and Sir Alan Reed, for getting the costs of the monarchy and the Palace under control. In its own terms that scheme was pretty successful but all schemes are capable of improvement and the new proposals before us introduce a number of welcome changes.

First, it is not just a 10-year arrangement; in principle it could last in perpetuity and can be renewed periodically, and it avoids the need to renegotiate new arrangements in the first six months of a new reign when I am sure a new monarch has better things to do. Secondly, the consolidation of four grants into one will enable this whole consolidated grant to be better managed, which the Palace has demonstrated its capability to do. Thirdly, it resolves a long-running argument about the role of the C&AG in Parliament in the oversight of spending.

There is only one false note in an otherwise excellent scheme, as has been hinted at by two previous speakers: the link with the Crown Estate. In my view, this link is pretty artificial as there is no relationship between the net income of the Crown Estate and the funding of the monarchy, and there has not been since 1760, when the hereditary revenues of the Crown Estate were first surrendered. The Treasury's briefing note makes it clear that the sovereign grant surplus is not being taken out of the Crown Estate; that will be paid into the Exchequer as it has been for the last 250 years. In effect, the growth in the Crown Estate surplus is being used as the index to uprate the grant. The Treasury's note describes the Crown Estate revenues as,

"an appropriate benchmark ... in the expectation that it will deliver similar sums in real terms to the amount the Crown receives now".

However, the revenues of a property company, albeit an unlevered one that is run very conservatively, seems an odd benchmark to determine the appropriate level of funding for the monarchy. It is unlikely that this index will maintain the value in real terms at its current level. In the past two decades, the revenues of the Crown Estate have increased by 6.5 per cent a year, against 3.5 per cent of inflation, so it is a significant increase in real terms, which over a decade will produce an increase in the sovereign grant of a third, which I am sure the Palace neither needs nor is seeking. There is no necessary reason why this index would produce the best guide, particularly as we are now at a relatively low point in the property cycle.

In practice, this grant, as the Minister has told us, is so hedged about by caps, floors, reviews, in-year Treasury controls and parliamentary scrutiny that not much damage is going to be done in either direction, of making the grant too small or too large. However, if maintaining the grant in approximately real terms is the true objective, which seems reasonable to me, it would have been better to use some index of inflation, pretty much as we have done for decades with the BBC licence. We would thereby avoid perpetuating or even entrenching the confusion between the Crown Estate and the Crown itself. It all looks like someone being a bit too clever by half. So rather than 10 out of 10, I give these proposals in an otherwise excellent Bill nine out of 10.

The final, highly commendable feature of the Bill is the change in the rules on the Duchy of Cornwall which allow a grant to be made to an heir to the throne who is not a Duke of Cornwall, so that in future daughters of the monarch as well as younger sons could benefit. One can only hope that this is a precursor to a change to the male-only succession and when that has been done we can move on to the next step in the modernisation of the monarchy by redrafting the outdated and, to many, unacceptable language of the various oaths sworn by a new monarch.

Photo of Lord Fellowes Lord Fellowes Crossbench 3:34 pm, 3rd October 2011

My Lords, first, I declare an interest as a holder of an honorary appointment in the Royal Household. In my view, these new arrangements for a sovereign grant have much to recommend them. First, they keep the correct constitutional relationship between sovereign and Parliament in that Parliament retains ultimate control, in general terms, of the funding of the sovereign, a relationship underscored by the auditing of the figures involved by the National Audit Office. However, at the same time they release both parties from a system that over the years has become convoluted and clogged up with unnecessary detail. This simplification process, whereby a single grant takes the place of different grants from different departments, dealt with at different times and with differing frequency, must be a great step forward.

Without wishing to repeat what has been said before, there are two particular points that I regard as being important improvements. First is the ability of the Royal Household to build a reserve, monitored by the royal trustees, which can be drawn down in years when, for one reason or another, the household is in deficit. The other point I particularly commend is the tidying up of the anomaly whereby the income from the Duchy of Cornwall can go only to the eldest son of the sovereign as heir to the throne.

All in all, this legislation is both timely and efficient. It provides for an institution founded on permanence and the assurance of a long-term, fair and flexible method of funding by successive Governments who are, in the nature of democracy, themselves ephemeral.

Photo of Lord Janvrin Lord Janvrin Crossbench 3:35 pm, 3rd October 2011

I, too, declare an interest as an honorary member of the Royal Household, and take this opportunity to add my voice to those welcoming the Sovereign Grant Bill. As others have stated, the funding of the official expenses of the monarchy has in recent years become a complicated mix of the Civil List and the grants in aid, which were introduced at different times and in different ways over recent years. The system was indeed in need of a makeover.

I welcome the introduction of the sovereign grant, as set out in this Bill, for three reasons. First, it gives the Royal Household greater flexibility to manage as effectively as possible all public funds made available to it. Secondly, it introduces full accountability of the sovereign grant expenditure, which brings its auditing arrangements into line with the levels of scrutiny expected of public expenditure more widely. Thirdly, and most importantly, it introduces a long-term stability into the arrangements for funding the monarchy that is entirely appropriate to the role of the institution in our national life.

Perhaps I may expand briefly on these three points. I want to confine myself to the principles rather than to numbers. I welcome the introduction of one consolidated grant to replace the existing sources of funding because I have every confidence in the capacity of the Royal Household to make better use of the total public funds at its disposal by having this additional flexibility.

I pay tribute to work of the current finance director, or Keeper of Her Majesty's Privy Purse, and his predecessor in the way they have managed the royal finances, reduced overall costs and introduced efficiency savings over a number of years. However, they have been constrained by the complicated funding system: for example, not being able to transfer money between, say, the travel grant and building maintenance or vice versa. The introduction of this unitary grant will allow for much better use of resources, more effective financial planning and more value for money.

I am sure that the full system of accountability now introduced in the Bill will ensure that this search for efficiency and value for money will continue. For years, the opening up of the Civil List to auditing by the National Audit Office has been resisted as being inappropriate, although the Royal Household tried to ensure that the fullest possible set of Civil List accounts was in the public domain. However, public attitudes towards transparency and accountability have evolved and it is entirely right that that is recognised in this Bill. Far from it having anything to hide, I have every confidence in the Royal Household being able to continue to demonstrate that it is both efficient and innovative in the way it uses the public funds allocated to it.

Scrutiny will continue to focus attention on which expenditure is public and which is private, which is always a difficult area. I am absolutely clear that the amount of parliamentary scrutiny the Royal Household will enjoy of its grant in the region of £31 million will almost certainly be greater than the scrutiny given to government departments with budgets a hundred times the size. That is the way of the world-or rather a measure of public interest in the monarchy.

That brings me to my final point. The long-term nature of the funding arrangements in the Bill is entirely appropriate for the monarchy, which, among its several roles, has such an important part to play in contributing to the long-term stability and continuity in our national life. Unlike my noble friend Lord Turnbull, I think that linking the sovereign grant to the Crown Estate's revenue is both historically appropriate and practically sensible as a way of reflecting the growth or otherwise in our national wealth. I welcome the mechanisms to ensure that this link delivers effectively-not too little, but certainly not too much-both in the introduction of the sovereign grant reserve and the regular review of the percentage figure, now every five years. I welcome, too, the tidying up of the anomaly in the revenues to the Duchy of Cornwall, the repeal of a number of parliamentary annuities and the option of extending the sovereign grant arrangements into the new reign.

I congratulate those who have negotiated these arrangements. They are a rationalisation and a streamlining of the complicated system of royal finances that has grown up in recent years. They are measured and sensible and should stand the test of time. They are also timely; it is particularly good to see this issue resolved well before the Diamond Jubilee next year, when I have no doubt that many thousands of people up and down the country will have a chance to recognise the extraordinary personal contribution of the Queen to our national life over 60 years.

Photo of Lord Luce Lord Luce Crossbench 3:41 pm, 3rd October 2011

My Lords, I, too, declare an interest as an honorary member of the Royal Household. In case noble Lords are beginning to think that there is some conspiracy on this Back Bench, they will already have noticed that there are variations in views about the Bill.

In broad terms, I, too, welcome the Bill and congratulate the Chancellor and the Keeper of the Privy Purse, Sir Alan Reid, on the imaginative proposals in it. It seems extraordinary that it is exactly 250 years since King George III made the dramatic gesture of surrendering the revenue of the Crown Estate to the Government, although 40 years ago, when I entered the other place, there were debates about reforming the Civil List and introducing 10-year reviews and cycles.

I agree with my noble friends that much about the arrangements in recent years has been both confusing and unsatisfactory. The mechanism has been discussed-the Minister has described it to the House, as well as the supporting arrangements and restrictions that are introduced with regard to the reserve and the ultimate decision-making of the three trustees-and we can discuss what should be the most appropriate benchmark. However, I certainly agree with my noble friends that there are a number of advantages to the legislation. First, the consolidation of the grant into a unitary grant gives freedom to managers at the Palace to manage resources efficiently. Instead of negotiating grants from the Treasury for the Civil List, from the DCMS on property matters and from the Department for Transport on travel grants, they have one overall grant and it is up to the Household to decide how those resources can most efficiently be spent.

The noble Lord, Lord Newby, made the point that the upkeep of property in itself will always be a big expense. The poor condition of the Victoria and Albert Mausoleum in Windsor Great Park, for example, which is now on the English Heritage risk register, is an indication of how the Household will have to face the choice in its budget as to whether it spends money on that, rather than arguing with Governments as to how much money should go to it. That is healthy. I also agree that it gives the monarchy a measure of independence, greater flexibility in management and certainly greater transparency-annual reports in recent years have been much more transparent-and allows much more long-term planning and certainty. Above all, it provides strengthened accountability, which is a good thing.

My noble friend Lord Turnbull made a point about the right benchmark. He may be right or he may be wrong about using the net revenue of the Crown Estate as the benchmark, but a safeguard has been injected by Her Majesty's Opposition in amendments that have been accepted by the Government, in the form of reviews, the first to be in 2016 and then every five years rather than every seven years, thus enabling the Government of the day to check whether the system is working adequately.

I shall make one general point about the monarchy in the context of this Bill. The monarchy cannot withdraw behind a moat and ignore the reality of the outside world. The world has changed enormously in the past 60 years, and the monarchy is the pinnacle of our very important institutions. It needs to do its job effectively, whether running garden parties, investitures, state visits or royal engagements around the country, but it also needs to set an example to the country and to carry the confidence of the country. First, it must to ensure that the staff are highly professional in management and, in general, in the services that they provide. In recent years, they have become even more professional. Secondly, they should be transparent in their actions and, as I have already said, the annual accounts and so on have become much more open and the Public Account Committee has taken evidence. Thirdly, the monarchy must set an example of restraint and prudence in expenditure, especially in tough times. I think the noble Lord, Lord Newby, was very fair to point out that in the past 20 years there has been a reduction of 50 per cent in real terms. If Governments had followed that example, we might not have the kind of problems we face in the country today. In the past five years, expenditure has reduced by 19 per cent in real terms and the plan, as I understand it-the Minister will put me right if I am wrong-is to reduce it overall by 9 per cent over the five-year term of this Parliament. The monarchy costs only 51 pence per person in this country, which is good value for money. In his book The Pursuit of Italy, which was published this year, David Gilmour points out that the Italian presidency costs four times as much as the British monarchy.

There is only one other point that I wish to make, and it is to welcome the decision in, I think, Clause 10, to do away with the payment, made under the Civil List, of annuities to the monarchy supposedly to support working members of the Royal Family which Her Majesty then repays to the Government. That seems to be the most ridiculous way of carrying on finances. It has led to the misunderstanding that working members of the Royal Family, with the exception of the Duke of Edinburgh, are supported in all that they do by the taxpayer, when in fact they are supported by the taxpayer in the travel budget only. Of course, it is right that the annuity should continue for the Duke of Edinburgh.

In broad terms, I welcome these measures in modernising the financing of the monarchy.

Photo of Lord Sassoon Lord Sassoon The Commercial Secretary to the Treasury 3:49 pm, 3rd October 2011

My Lords, I thank all noble Lords who have contributed to an interesting debate this afternoon. I am particularly grateful to the noble Baroness, Lady Royall of Blaisdon, for her confirmation of the Opposition's support for the Bill. Any time that she would like to oppose me on further Treasury Bills, she is very welcome. She does not need to apologise or explain.

I am also grateful for the support from the experts on what I will now come to think of as the Household Bench. I knew of the concept and of the existence of the Household box at Ascot; I had not realised that there was a Household Bench in the Lords. Every time here I learn something and that is what I have learned this afternoon.

More seriously, this is an important Bill. Her Majesty the Queen has provided exemplary service to this country throughout her reign. The Queen and other members of the Royal Family will continue to play a vital role in representing and promoting the UK and the Commonwealth. I am sure that we all particularly look forward to the Diamond Jubilee celebrations next year. It is only right that we provide the Queen and the Royal Household with the sufficient support to continue these services to the country and do so in a way that provides greater transparency, accountability and value for the taxpayer. As the noble Lord, Lord Luce, pointed out, the expenditure forming the sovereign grant is only equivalent to some 50 pence per person per year, a remarkably low price to pay for the Royal Family's profound contribution to public life.

Let me respond to some of the points that have been made in the debate. First, on the numbers themselves, there were questions from the noble Baroness, Lady Royall, and the noble Lord, Lord Luce, about the projections. Let me be clear about the numbers: the sovereign grant itself in 2011-12 is £30 million. It will rise to £31 million next year because of the one-off special bonus of £1 million for the Queen's Diamond Jubilee. In 2013-14 and 2014-15 it depends on the profits of the Crown Estate but the numbers are forecast or projected to be £34 million and then £35 million. As the noble Lord, Lord Luce, pointed out, in real terms this represents, in 2010-11 prices, a decline in expenditure from £34.9 million in 2011-12 to £31.5 million in 2014-15. These projections do not run away in any sense at all.

The noble Baroness quoted from something that I think the Crown Estate said about profits rising exponentially. It is important to realise that that just applies to the renewable profits, which themselves make up only a very small percentage of the Crown Estate. It was not a reference to the profits as a whole. My noble friend Lord Newby also referred to offshore wind-and rightly said that that is a question for another day. There are of course lots of questions about the way that the offshore wind market will develop in future years because it is a very new market.

There were a number of questions and comments about the review of the level of income, both within the year and from one year to the next. Without repeating all that I said in opening, it is perhaps worth stressing that in-year, normal Treasury controls on public expenditure will apply in future. The accounting officer of the Royal Household, the Keeper of the Privy Purse, will be guided by the key publication, Managing Public Money, which among other things prohibits spending ahead of need and counsels against waste and extravagance. I think a proper balance will be struck between my noble friend Lord Newby's encouragement to put in place proper repairs and a normal regard for control of public expenditure.

In relation to the basic link to the Crown Estate, I am sorry that the overall package gets only a nine out of 10 rating. However, I take it that a nine out of 10 rating from a former Permanent Secretary to the Treasury is about as good as it gets. The noble Lord, Lord Turnbull, is nodding, so I am relieved about that. The noble Lord, Lord Janvrin, really answered the point as well as I could in referring to the historical appropriateness of the link to the Crown Estate as well as the practical basis for a long-term settlement, which it gives.

I hope that that deals briefly with the main points that have been raised. The Bill will, in summary, put funding for the Royal Household on a sustainable footing and provide for it to be fully accountable to Parliament and to the public. These are necessary reforms, and I ask the House to give the Bill a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.