My Lords, I declare an interest: I live with my wife in the Isles of Scilly; she has lived there for over 40 years. I have been following royal transport costs for many years and make no secret of my opinion that some of the Royal Family’s transport costs have been justified and are seen to be frugal, but some are excessive, including a charter flight to Saudi Arabia for a funeral.
The point of the Duchy of Cornwall is clearly to provide an income for the heir to the throne. We can dispute how much is needed and whether the confused and non-transparent operation of the Duchy is justified to achieve this. As the Duchy has been telling us for many years, it is a private estate and private estates often provide income for their owners in a transparent and non-discriminatory manner. I note that this Bill requires the consent of both the Queen and the Duke of Cornwall. I question why the Duke of Cornwall: is there not a conflict of interest? I do not think we will get that far, but it is an interesting question to debate.
I think this is the fourth time I have put down this or a similar Bill. This is simpler than previous ones and seeks to concentrate on what I think are the most important issues to be addressed. I argue that because the Duchy now firmly says that it is in the private sector, it should be treated as such. I am also very grateful to Dr John Kirkhope, an eminent scholar and notary public who has spent years examining the Duchy issues and helped with the Bill and what I am going to say.
The trouble is, the Duchy sometimes chooses to be treated as a private estate and sometimes as a Crown body, which receives privileges and is largely unaccountable and silent on many issues. It is wrong that the Duchy should be able to choose its own status based on what is apparently the most financially advantageous option. It should be one or the other—and it has chosen the private option. My Bill is designed to put that option into effect, making it a private estate with no special privileges. I emphasise that the Bill is not about the Duke of Cornwall per se, apart from the first clause. I should also tell the House that a year or two ago, when I previously put forward a Bill, I had a meeting with Duchy officials. We went through all the clauses in that Bill, which was very similar to the Bill today, and, at the end, I asked if they agreed with what I had said and they replied “Yes, largely”. Then when I asked if they would say so in public they said, “No”. I wrote to them again before today asking if they would like to discuss this Bill and I did not get a reply. So there we are. We ought to compare what the Duchy of Cornwall does with what the Duchy of Lancaster and the Crown estates do, which are much more transparent and open.
Clause 1 is on the succession to the title “Duke of Cornwall”. We have debated this in the past and I could go on about it for a long time. The key thing is that it should be open to women as well as men; I am not quite sure whether they would be called the Duchess of Cornwall, but it does not matter that much. The point is that they should have the same privileges and rights as the Duke of Cornwall. After all, the Duke of Lancaster is always the sovereign, regardless of gender, so why should that not apply to the Duke of Cornwall? We can debate that, and I am sure that when the Minister replies he will go back to the royal charter of 1842, although it probably goes back to long before that. But I will not get into that now, because there are many important things that I need to put to the House.
Probably the most important issue is Crown immunity, which is addressed in Clause 2. To illustrate the lack of transparency, a friend of mine who has been trying to buy his house in the Isles of Scilly under the right to buy, and other colleagues, put in 64 freedom of information requests about the Duchy and the Crown immunity issue. I will give only one example. In August 2011, they asked the Ministry of Justice:
“Please provide any papers which explain the basis on which the Duchy of Cornwall enjoys Crown Immunity”.
At least the ministry answered it, but its answer was: “We do not hold any material which you request”. So how can they do it?
There are other examples in various Acts of Parliament which need to be considered. One is the Marine and Coastal Access Act 2009. It states that the provisions of the relevant part of the Act “bind the Crown”, which includes the Duchy of Cornwall, and that:
“No contravention by the Crown of any provision of this Part is to make the Crown criminally liable”.
The Data Protection Act gives the same information, and Section 14 of the Nuclear Explosions (Prohibition and Inspections) Act 1998, the Transport Act 2000, the Licensing Act 2003, the Planning and Compulsory Purchase Act 2004—I have nearly finished—and the Planning Act 2008 all contain the same exemptions.
Most people would find it odd that if the Duchy of Cornwall caused a nuclear explosion—which is highly unlikely—it would not be subject to criminal sanctions. Surely, it is a pretty remarkable state of affairs that an estate that asserts it is private is given exemptions from criminal sanctions under numerous Acts of Parliament, should it act in breach. I can go on about Crown immunity but I will not, because I would like to move on to tax.
We have debated in your Lordships’ House many times the issue of tax and the Duchy of Cornwall. The Duchy pays tax on a voluntary basis, but no other estate that I know of in this country does so. I do not know how many other noble Lords pay tax voluntarily—we would probably all like to—but the fact remains that the Duchy should be assessed and treated in the same way as any other estate or private individual.
Clause 4 addresses exemptions under the Leasehold Reform Act. As noble Lords will know, there is a consultation out on this at the moment. I have a friend who has been trying for many years to buy a property in St Mary’s on the Isles of Scilly, and he has completely failed. He has responded to the consultation and I hope he will be successful. This goes back to the issue that the Duchy of Cornwall is not bound by the Leasehold Reform Act because it has an exemption. You can understand the need for an exemption for London’s Royal Parks and other national parks and buildings, but some not very special houses on the Isles of Scilly—I am sure my friend would agree with that assessment—have this exemption and my friend is not allowed to buy his house. Whatever we think of the Leasehold Reform Act, the fact remains that everybody should be treated the same, but in this case they are not.
I think the Duchy will like Clause 5, as it would enable it to purchase land in the UK outside England. Why is there a restriction? I am told that it is a hangover from Victorian times, because of very different land and inheritance laws in Scotland at the time. Apparently, Balmoral was purchased in the name of Prince Albert because, despite the fact that Victoria was Queen, as a female she could not own land in Scotland. I am sure that many noble Lords will know more about this than I do, but that is what I am told. After the death of Prince Albert, the Crown Private Estates Act 1873 was passed to rectify the situation.
Clause 6, on the Stannaries Act, is a bit of a Cornish situation; not many people know about Cornwall’s stannaries. It is time to remove this Act because under it, the Duchy can appoint anyone to be a Duchy solicitor or barrister; they do not have to be legally qualified. That seems unnecessary. The Law Commission recommended that this provision be repealed, and I am told that the Crown lawyers, Farrer & Co, objected. They would, wouldn’t they? They would probably lose revenue if the cases ever came forward. That is another classic conflict of interest, but it is time to move that one on. The same applies to the Solicitors Act 1974.
The issue of the Treasury Solicitor is a serious one. The Duchy is a private estate. Which other private estate gets free legal advice of unlimited quantity—and, presumably, quite good quality—from the Government’s lawyers? I know several people who have had disputes with the Duchy. There was a case concerning the Helford river, which I think we have discussed before. A friend of mine won his case against the Duchy, probably because the Duchy’s representative said, “We believe we are above the law”, or something like that; but of course, when the Treasury Solicitor got involved he lost on appeal, which is no great surprise.
My noble friend referred earlier to the tax position of the Duchy of Cornwall and the fact that it pays tax on a voluntary basis. My understanding is that the revenue surplus of the Duchy of Cornwall has increased by 50% in the last seven years and that its property asset base has increased from £630 million in 2011 to £940 million in 2018, which is a huge increase. Does my noble friend have the figures for what the increase in the voluntary tax paid by the Duchy of Cornwall has been in that seven years? I cannot find them. Has there been a 50% increase in the tax paid by the Duchy of Cornwall to the Treasury over that period? If my noble friend does not have the figures, it may be that the Minister, who is in full command of all the figures to do with the Duchy of Cornwall, could tell us.
I am most grateful to my noble friend for that question. He will not be surprised that I do not have the answer to it. Of course, we are not talking only about income tax—it is about capital gains tax and everything else as well. We can do an FoI on it, but I suspect that it will take a long time, and that is part of the lack of transparency. I very much doubt that similar estates are subject to the same exemptions, so it is a very good question.
I think it is time that the apparent right to Crown immunity for this private estate, with the privileges that it seems to enjoy without any clear basis, came to an end, and my noble friend’s question is very germane to that. The Duchy asserts, as it is entitled to do, that it is a private estate, yet to avoid a suite of laws and because it would not be seemly for the Duchy to be seen in court, it has been granted taxation privileges and property rights and—a procedure that continues today, I think to the detriment of other taxpayers and also to some of the residents—has no parliamentary approval or judicial oversight. It is also free from criminal sanctions should it break the law—something that I think is just crazy.
Let us be quite clear: this is not the Duke but the Duchy of Cornwall. The Duke of Cornwall is completely different. Various Acts of Parliament relating to tax and many other matters in relation to this private estate have been “suspended”, as it has been called. I recall that the last time I managed to question the Chief Whip, he kindly said—I think it was before the Third Reading of a Bill—that the Queen and the Duke of Cornwall had kindly put their interests at the disposal of Parliament. When I asked why, it took about six weeks to get an answer. That was not the Chief Whip’s fault; the answer probably came from the palace, but it was completely meaningless. Therefore, we really need to bring all this into the 20th century and put the situation on to a clear and transparent footing.
Noble Lords ask me: what next? That is a fair question because I am sure that this Bill will not find its way on to the statute book in this Parliament. However, the Duke of Cornwall could decide to do much of what it seeks to do on a voluntary basis. I hope that he will read today’s debate and perhaps consider what he and his successors can do in the short term to put this matter on to a more transparent footing. I beg to move.
My Lords, first, I congratulate the noble Lord on his persistence. He has obviously done a lot of work and, as he said, this is the fourth time he has produced a Bill, although I think it is only the second time that any of them have been debated. That, in itself, constitutes the greatest measure of congratulations that I could give him on this Bill.
The Bill raises many important issues and, as the noble Lord realises, introduces changes that would dramatically alter the role of the Prince of Wales and the Duchy of Cornwall. At this stage, I certainly do not want to debate the substance of his Bill. I oppose quite a lot of it but I agree that some of the issues in it could well be, and probably will be, considered in the years to come.
What interests me is why the noble Lord thinks that a Private Member’s Bill is the way to deal with these issues, although in his closing remarks he rather implied that he did not think it was. In the interchange with his noble friend, they seemed not to be talking about the same thing—one was talking about assets and the other about income—and that indicates that this is a very much more difficult subject than can, in my view, be dealt with in a Private Member’s Bill.
I confess that I have some form on this matter. In the early1980s I was one of the people involved in trying to negotiate a Bill which became the Duchy of Cornwall Management Act. Its purpose was to modernise the financial arrangements of the Duchy of Cornwall and how it made investments. The existing arrangements were very restrictive and came under a Duchy of Cornwall Act passed in the middle of the 19th century, which I am told was considerably influenced by Prince Albert. I suspect that Prince Albert and the noble Lord might have had quite a lot in common on some of the Duchy’s financial arrangements. As I am totally opposed to what the noble Lord is doing, I am trying to be as nice as I can be to him in my remarks. It is interesting to note that in the course of that research it was made quite clear to us that the Duchy of Cornwall was always far better run when there was a Prince of Wales of the right age to take a proper interest in the estate, and for hundreds of years that has been the position.
Faced with having to decide how to deal with the Duchy of Cornwall’s finances, we felt that the first thing we should do was consult. I spoke to the then Labour Chief Whip, the great Michael Cocks, who told me that he wanted a meeting with Prince Charles’s private secretary, Edward Adeane. We arranged a meeting, at which I provided the drinks and the charming Edward Adeane produced a paper. Michael read it very carefully and then looked up and said, “Who wrote this unstructured drivel?” Actually, the word he used was rather stronger than that but I was advised that parliamentarily I should not say it. The Labour Chief Whip was not opposed to what we were trying to do, and in fact he eventually agreed to it. He was trying to say that it was not possible for one party to change the rules that govern our monarchy and the Duchy and so on. In our society, it could be done only through all-party agreement. He told me in no uncertain terms that the Bill we wanted to bring in did not stand a chance unless I had got the Opposition to agree that it was a sensible thing to do. We worked at it and did our best. It was not difficult to reach a compromise, as the Labour Chief Whip was not really opposed to what we were trying to do, and we got the Bill through the House of Commons in spite of the republican remarks of the great Willie Hamilton, whom some people will remember.
The lesson is quite clear: if you want to make changes to our monarchy and the way that the Duchy of Cornwall is run, it has to be done with all-party support. That means consultation with all the parties before bringing in a Bill, as well as consultation with the Commonwealth, the Churches and many others. I am not unsympathetic to some of the things that the noble Lord wants and I suspect that they will happen in the next 20 or so years, but my view is that it is not sustainable to bring about those changes through a Private Member’s Bill.
My Lords, because of the great respect and loyalty that we have for Her Majesty the Queen and the Prince of Wales, we pay little attention to the royal finances and royal income, but I think it is time that we started to do so because the situation is very unsatisfactory and is becoming more so. I wish to make a few observations on my noble friend’s Bill, which, although it clearly will not pass, performs a great public service in bringing the issue of the Duchy of Cornwall and the wider royal finances to the attention of the House and giving us the opportunity to debate them.
The first point to make is that the position of both the Duchy of Cornwall and the Duchy of Lancaster is highly anomalous. The deal done in 1760, when George III came to the Throne, was that the Crown would surrender the Crown Estate, from which of course prior to that the monarchy had enjoyed the full income, in return for a settlement with Parliament on the royal finances. That situation continued until 2011 and the passing of the Sovereign Grant Act, to which I shall return in a moment, as it is crucial to understanding what has gone wrong with the royal finances in the last seven years. However, an equivalent deal was not done in respect of the Duchy of Cornwall and the Duchy of Lancaster, which clearly should have happened. There is no reason why a set of historical estates, which just happen to be a function of long history, should rest in the Crown, totally unrelated to the income requirements of the monarchy, and of course the heir to the Throne is part of the monarchy.
My noble friend referred to a lack of transparency. I agree that that is an issue, but a big issue also is the fact that there seems to be no relationship whatever between the income enjoyed by the Duke of Cornwall and the requirements of the office of the Duke of Cornwall for the income.
The noble Lord, Lord Wakeham, said that I was confusing capital and revenue. I was not. My analysis of the accounts of the Duchy of Cornwall found that both the capital and the revenue have increased substantially in recent years. The figures I gave in my intervention are striking. The capital base of the Duchy of Cornwall has increased from £630 million to £940 million in just the last seven years, and the revenue enjoyed by the Duke of Cornwall has increased by a similar proportion. My questions for the Minister are these. First, how does he justify this? Secondly, what contribution is being made in voluntary tax—and in my view it should not be voluntary; I see no reason at all why the Duchy of Cornwall should pay tax on a different basis from any other estate in the country—and what has happened to that tax revenue?
The other substantial income of the monarchy is the sovereign grant, which used to be called the Civil List. That situation appears to have become seriously out of sorts in the last seven years. In 2011, a peculiar deal was done between George Osborne, who was then Chancellor of the Exchequer, and the Keeper of the Privy Purse to end the previous system of the Civil List, which as I said went back to the 18th century, and to replace it instead with a formula whereby the monarchy would be funded by 15% of the net revenues from the Crown Estate. There was no basis for this formula, because of course the Crown Estate was no longer the Crown Estate in anything other than name—it is part of the ordinary income of the Treasury. It was done for effect more than anything, I think, to try to establish some connection and to put the royal finances substantially beyond the process of annual negotiation with the Treasury and with Parliament. These was no other basis at all for doing it. Indeed, when the Sovereign Grant Bill was debated in your Lordships’ House on
“the link with the Crown Estate … 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”.—[
Leaving aside the formula, it is its impact that ought to be of concern to the House. When setting out the formula in 2011, George Osborne said that the effect would be to keep the income of the monarchy roughly stable. On
“the important thing, is that the amount of money going from the public purse to the royal family will be broadly the same … We can have a debate about the mechanism”— that is, the new sovereign grant mechanism—
“but the effect will be pretty much to continue through this Parliament with the sums that they were getting during the last one”.—[
He went on to say that, because of efficiencies, there would be a 9% net reduction over the course of the last Parliament. That did not happen. On the contrary, the reverse happened: the baseline income that the Royal Family received in respect of the Civil List, which was £30 million in 2011, went up to £36 million in 2013, £39 million in 2014, £40 million in 2015, £42.8 million in 2016, and last year it was £76 million. The £42.8 million figure was a 38% increase in a settlement that was presented to Parliament as a steady-state settlement in a period which, I need hardly remind the House, was one of great austerity in the funding of other parts of the public service.
Far from improving, the situation got worse last year, because of the suddenly announced decision—which was not debated in your Lordships’ House at all—whereby the formula for the allocation of the Crown Estate to the funding of the monarchy was, overnight, increased from 15% to 25% to accommodate the refurbishment costs of Buckingham Palace. I could make a whole speech on the cost estimates and the refurbishment of Buckingham Palace, which have been subject to no parliamentary oversight whatever. The initial projection made to Parliament in a Select Committee appearance by the Keeper of the Privy Purse was that the refurbishment would cost about £150 million. The last figure on which the calculation of the increase from 15% to 25% took place was £368 million—a more than doubling in the cost. We think that the renewal and refurbishment—or whatever it is called—of the Palace of Westminster is out of control, but proportionately, what is going on in Buckingham Palace is far worse. But because we do not debate these issues and there is no relevant parliamentary committee or any oversight process whatever in respect of the royal finances, it is entirely shielded from public view.
The 25% figure is entirely arbitrary—it looks to me as if it was done on the back of an envelope, because it is a round figure. That 25% has already taken the allocation from the Crown Estate to the Royal Family from £30 million in 2011 to £76 million in 2018. The projection is that it could go up by £10 million, £20 million or £30 million in the next five to 10 years. It depends entirely on what happens to London property prices, which is where the bulk of the Crown Estate is. Although Brexit is having some effect on London property prices, noble Lords will be aware that they are pretty resilient.
The arrangement that was made in 2011 has become a one-way ratchet for a significant and extra-parliamentary increase in the revenues of the Crown. As if that is not enough, the arrangement under which this formula is calculated provides that there can be no diminution in the income going to the Crown. If that happens, under the Sovereign Grant Act the Exchequer will simply make up the difference. It provides also that the formula that set the 15% and then revised it to 25% is set by a committee of commissioners of the Crown: the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse. They are three very worthy people, and I admire them all, but no one can pretend that this is an open and accountable process subject to parliamentary control.
The Minister is always immensely well briefed when he appears before the House, and I hope he will be able to comment on what I have said, and provide us with the justification for the 15%, the 25% and what is happening to the tax paid in respect of the Duke of Cornwall.
My final comment is simply to quote the noble Lord, Lord Luce, who enjoys great confidence in the House as a former Lord Chamberlain, and who has performed great service to the state while in government and to the Royal Family. When the Sovereign Grant Bill was presented to the House on
“the monarchy must set an example of restraint and prudence in expenditure, especially in tough times”.—[
I completely agree. However, the exact reverse has happened and the situation is very unsatisfactory.
My Lords, I thank the noble Lord, Lord Berkeley, for introducing the Bill and for the comprehensive way in which he opened the debate. We welcome the Bill. As the noble Lord, Lord Wakeham, and the noble Lord, Lord Adonis, suggested, I do not suppose that the noble Lord, Lord Berkeley, expects his Bill to sail on to the statute book, but that does not stop us discussing its principles in a Second Reading debate on a Private Member’s Bill.
I handled for my party the Succession to the Crown Act 2013, which provided principally that succession to the Crown should not depend on gender, as well as removing the unjustified and discriminatory disqualification from the succession by marriage to a Roman Catholic, a disqualification that dated from the late 17th century and the conflict about the departure from the Throne of James II and the accession of William and Mary. The Succession to the Crown Act was passed by the legislatures of all the Queen’s realms in a complicated exercise of diplomatic co-ordination when the Duchess of Cambridge was expecting a child. It was passed in time for the newborn, whichever gender it happened to be, to take a confirmed place in the line of succession and not be liable to future demotion if the child was a girl. As it happened, he was a boy, and Prince George duly became third in line to the Throne, but the Act has had the effect that Princess Charlotte comes next, notwithstanding the birth of a younger brother, and that is as it should be.
Clause 1 of the Bill of the noble Lord, Lord Berkeley, replicates that Act in its removal of gender preference for the title of the Duke of Cornwall. The present rule, embodied in the 1377 charter, is an arbitrary and discriminatory preference, which is a hangover from the 14th century, and it is high time for its removal.
One might say the same about the rest of the hereditary peerage—that daughters should inherit on the same footing as sons—and that the present arrangements in most letters patent are also discriminatory and quite unacceptable in a contemporary context. The noble Lord, Lord Lucas, certainly takes that view and introduced a Bill to reform the system in the 2012-13 Session, although the Bill never proceeded. I, and no doubt many others, can see why the Government may not see this kind of reform as meriting a high place on their legislative agenda, because it affects only a limited number of families and usually highly privileged ones at that. But the question does arise as to how far and for how long we should tolerate this kind of blatantly unfair discrimination, in spite of its limited application. The noble Lord, Lord Berkeley, is quite right to challenge it in this Bill in the context of the Duchy of Cornwall.
Clause 2 would remove Crown immunity from suit for the Duchy of Cornwall and we agree that there is no reason for Crown immunity to extend to the Duchy. The only proper purpose of Crown immunity is to give immunity from suit to the sovereign and to organs of government in certain tightly defined circumstances which Parliament has sanctioned, as set out in the Crown Proceedings Act 1947. As the noble Lord said, the Duchy is effectively a body in the private sector and there is no earthly reason why Crown immunity from suit should extend to the Duchy of Cornwall.
Again, Clause 3 would remove the anomalous exemption from tax for the Duchy, which was the subject of much of the speech of the noble Lord, Lord Adonis. Under the present arrangements, tax for the Prince of Wales is an entirely voluntary matter, as is tax for the Duchy estate, and the estate is immune from income tax, corporation tax and CGT. The Prince of Wales does not pay voluntary tax on any increase in asset values as the Duchy is a royal body and the Duchy is the owner of the assets. I do not regard that as a desirable or defensible state of affairs. Many would say that the right to the very substantial income of the Duchy is good fortune enough without its being compounded by the Prince’s only paying tax on an entirely voluntary basis. The income of the Duchy is now well in excess of £20 million a year. The Prince pays voluntary income tax of about £4.9 million, but only on his income after meeting the expenditure on royal duties, and no CGT, as I said. Those are substantial sums, and substantial sums of tax forgone are involved.
If the Duchy’s income is to go to maintain the Prince of Wales and his household, then so be it. But why there should also be a tax break for the heir to the Throne, I entirely fail to see. The Royal Family has done great things to pull itself into the 21st century. Not being required to pay tax on income in the same way as other citizens do is likely to feed controversy and questioning and bring the institution into disrepute. Nor is there any reason why the Duchy should be immune from claims by its leaseholders under the Leasehold Reform Act when they want to secure the freeholds or long leases on their homes—a reform that has been broadly welcomed and has worked well over many years for private landlords..
Closer to home for me, Clause 7 would remove access from the Duchy to the Treasury Solicitor. I see no reason why the Duchy should have access to the publicly funded legal services of the Treasury Solicitor— effectively, the Government’s legal department. We have had enough trouble with legal aid cuts for the vulnerable. Why we should be providing extensive legal aid to the Duchy of Cornwall escapes me.
For the monarchy to thrive, it needs to be contemporary, understood and trusted by the public. Maintaining discriminatory rules of succession, unfair immunities from tax, an out-of-date exemption from the Leasehold Reform Act and publicly funded legal services for the heir to the Throne is not a great way forward, and we need to start changing the rules.
My Lords, I also congratulate my noble friend Lord Berkeley on his perseverance on this matter, on today’s Bill, and on his fascinating introduction, which was then reinforced by my noble friend Lord Adonis’s speech. Along with the noble Lord, Lord Marks, I am delighted to be able to return to the issue covered in Clause 1 of the Bill because it follows a long discussion that we had back in 2013 when we were dealing with the Succession to the Crown Act prior to the birth of Prince George. Indeed, I have to confess that I was personally rather disappointed by his gender when he appeared as it delayed the impact of the Act to which we had put in a fair number of hours. Nevertheless, the Act does mean that the young Prince Louis does not overtake Princess Charlotte in the batting order, so we achieved something.
It seems eminently sensible to amend the existing rule passing the Duchy of Cornwall title to the eldest male child of the monarch given that at some future date this may no longer be the heir apparent. If the income is indeed needed to help prepare the future sovereign for their role, then surely that and the whole training that goes with running that estate should be with the heir to the throne and not to her younger brother in those particular circumstances.
A very helpful Lords Library research paper reminded us that the then principal private secretary to the Prince of Wales confirmed that the charter could be amended, so this seems an excellent moment to put that in train. I am afraid that when the noble Lord, Lord Wakeham, talked about doing something in 20 years’ time or so, my heart failed. We have had enough of kicking tin cans down the road. If something needs fixing, let us fix it now.
On the taxation immunities, the other aspect of the Bill that has been well covered, that matter could appropriately go to the constitutional convention that my party has long sought because it deals with some important constitutional issues. That would also reflect the advice of the noble Lord, Lord Wakeham, to do these things on a cross-party consensus basis. The difference between us is probably that we think we should get on with it and his feeling was to forget about it for now.
There is one aspect, however, that the Minister could clarify when he comes to respond—one already described about the Duchy’s exemption from the Leasehold Reform Act, which prevents leaseholders buying the lease in the way that they could from any other landlord. Given that the noble Lord, Lord Bourne of Aberystwyth, has just announced a review of this very issue of leases on houses, and put them in the very capable hands of our colleague, the noble Lord, Lord Best, who is not in his place at the moment, might this specific case also be referred to that group so that it could be looked at in a timely manner? It involves the individual property rights of UK citizens, so it warrants some close and more urgent scrutiny than perhaps some of the other measures might achieve.
I want to reflect on one of the other issues raised by the noble Lord, Lord Wakeham, which is whether a Private Member’s Bill is the right mechanism for this. When the Government fail to act on something that needs to be done, it is a very appropriate way for your Lordships’ House to do it. Indeed, shortly we will move on to another Bill that seeks to implement something which the Government want to see but cannot find legislative time for, so therefore it is being taken through in a Private Member’s Bill. On occasion it seems highly appropriate to use this mechanism for something that needs to be done. As I say, it is better than waiting another 20 or more years.
I look forward to the Government’s response, in particular on their plans for changing the gender rules as regards the inheritance of this title and therefore its assets so that they will indeed go to the heir to the Throne, especially when the heir is a woman.
My Lords, I am grateful to the noble Lord, Lord Berkeley, for raising once again this important issue. He has brought these measures forward in a number of guises and is a true crusader for reform in this area. I thank all noble Lords for their valuable contributions to the debate, in particular my noble friend Lord Wakeham for putting the issue in a broader historical context and for explaining the basis of the current settlement. He also stressed the importance, a point underlined by the noble Baroness, Lady Hayter, of trying to seek a consensus before we make changes in this area.
Every day we say a prayer for the Prince of Wales, prospering him with all happiness. I am sure that nothing which has been said in this debate will go against the daily injunction we are given by the right reverend Prelates. The Duchy of Cornwall is an important institution. Since it was established in the 14th century, the Duchy’s main purpose has been to provide an income that is independent of the monarch for the heir apparent. The land, property and other assets of the Duchy and the proceeds of any disposal of assets are subject to the terms of a number of Acts, including the Duchy of Cornwall Management Acts 1863 to 1982, the combined effect of which is to place the Duchy’s assets in trust for the benefit of the present and future Dukes of Cornwall and to govern the use of the assets.
The current Prince of Wales chooses to use a substantial proportion of his income from the Duchy to meet the cost of his public and charitable work. The Duchy funds the public and private lives of five other adult members of the Royal Family—the Duchess of Cornwall, the Duke and Duchess of Cambridge and the Duke and Duchess of Sussex.
Turning to Clause 1, the noble Lord, Lord Berkeley, and others have raised the matter of the inheritance of the Duchy of Cornwall. The issue of gender equality is a priority for this Government and quite rightly the matter has been raised again today. Noble Lords are correct to say that at present the title can pass only to the eldest son and heir of the monarch. Thus, when the Queen was heir presumptive to the throne, she did not hold the title of Duke of Cornwall and the Duchy lands were vested in her father, the sovereign. The mode of descent specified by the Charter of 1337 is unusual and differs from that which commonly occurs in respect of hereditary titles. The monarch’s eldest son is automatically the Duke of Cornwall immediately he becomes the heir apparent. However, the manner of descent of the Duchy would preclude a grandson who is heir apparent from gaining the title of the Duke of Cornwall if he were heir to the sovereign because he is not the son of the monarch. With the Duchy of Cornwall we have a very unusual piece of English history that does not conform to the standard rules of descent for hereditary titles.
If we look back over recent years, there have been long stretches when there has been no eldest son to be the Duke of Cornwall, in which case the Duchy estate vests in the sovereign who oversees the affairs of the estate in lieu of a Duke. Viewed from today’s perspective, as opposed to that of the 14th century, I can understand why noble Lords have raised concerns about the descent of the Duchy of Cornwall, and indeed the Government have some sympathy with those concerns against the background of the changes made to the Succession to the Crown Act 2013 and other moves to increase equality. However, parliamentary time is currently scarce and noble Lords will agree that there are other more pressing priorities. Furthermore, given that currently there are three male heirs to the sovereign—Prince Charles, Prince William and Prince George—I do not believe that the time is right to dedicate parliamentary time to this matter when it is badly needed elsewhere. Indeed, the issue raised by the noble Baroness may not arise until the next century.
The noble Lord, Lord Marks, raised the more general issue of the succession of hereditary titles, on which I am sure a number of noble Lords have different views. However, they are not the subject of this particular legislation. Perhaps I may reassure the House that a female heir apparent will not find herself at a financial disadvantage because the Sovereign Grant Act 2011 broadly ensures that financial provision equal to the income from the Duchy is made for the heir apparent.
I turn now to the amendments on enfranchisement which are of particular interest to many in this House and to myself as a former housing Minister. The Leasehold Reform Act 1967 gives leaseholders the right to purchase a property from the landlord if certain circumstances are met. The Leasehold Reform, Housing and Urban Development Act 1993, which I put on the statute book, gives the tenants of flats in a building the right to collectively acquire the freehold of that building, again if certain conditions are met. The Act also provides the right for a tenant to extend the lease if certain conditions are met. Both Acts exempt the Duchy of Cornwall and other Crown lands from these provisions. This is because the capital raised from the Duchy cannot be distributed and is reinvested in the Duchy; the Duke of Cornwall receives funds only from the surplus. The general exemptions are important to protect land and property associated with the Crown and to ensure that the Duchy continues to perform its role for future Dukes.
However, I shall turn to what I think is the crucial point: Crown authorities have voluntarily committed, most recently in 2001, to abide by the same terms as private landlords in most circumstances. The Duchy has more than 600 residences, around 20% of which would be subject to these Acts had the Duchy not been exempted. The number of tenancies which the Duchy has sold or granted a lease extension to tenants under the terms of the enfranchisement Acts is around 120. There are some exceptions, as the noble Lord, Lord Berkeley, implied, including the historic Royal parks and palaces, property or areas which have a historic association with the Crown or where there are security considerations.
The Bill would represent a significant change to the legal status of the Duchy of Cornwall. There is a presumption that legislation does not bind Crown lands, including the Duchy of Cornwall. Removing Crown immunity for the Duchy of Cornwall could be problematic in the future. As the Duchy of Cornwall vests in the sovereign when there is no Duke of Cornwall, the sovereign has a residual personal interest in matters affecting the property of the Duchy of Cornwall. When vested in the sovereign, the Duchy of Cornwall would have a different legal status from other lands belonging to the Crown.
I turn to the tax status, again raised by a number of noble Lords. The Bill proposes that the Duchy of Cornwall will be liable to income tax and capital gains tax. Let me start by confirming the current arrangements. The Duchy enjoys Crown exemption and is not in any case a corporation within the charge to corporation tax. The Duke of Cornwall is not entitled to the proceeds or profits from the sales of the Duchy’s capital assets, which are retained in the Duchy to provide income for the Duke and future beneficiaries.
The Prince is liable to pay income tax and capital gains tax on any income and capital gains he may receive from other non-Duchy sources. In line with the Memorandum of Understanding on royal taxation, he pays income tax voluntarily on the surplus of the Duchy of Cornwall after deducting official expenditure, applying normal income tax rules and at the 45% rate. In his annual review, the Prince of Wales stated that he paid £4.85 million in the 2017-18 financial year, although this figure includes VAT, income tax and capital gains tax from non-Duchy sources. If employer’s national insurance contributions and council tax are included, the total tax paid increases to £5.3 million. Of course, the expenditure varies from year to year, as does the value of the surplus.
The tax status of the Duchy of Cornwall reflects that of the sovereign, who is also not legally liable to pay income tax, capital gains tax or inheritance tax because the relevant enactments do not apply to the Crown. The Queen also pays income tax and capital gains tax on a voluntary basis in line with the Memorandum of Understanding. Moreover, the unique nature of the Duchy of Cornwall means that, in order to produce a workable income tax and capital gains tax regime, deeming the Duchy as a settlement would not be sufficient. Further provisions would be necessary to ensure that the legislation would work effectively without unintended consequences.
In his speech, the noble Lord, Lord Adonis, focused mainly on the Sovereign Grant Act rather than the Bill before us. I will write to him in answer to some of the issues that he raised. In summing up, I again pay tribute to the noble Lord, Lord Berkeley, for pursuing this important matter.
I have the figures for only the past three years in my brief. I think that the noble Lord’s queries went further back than that, so I will write to him. I would just say that the Labour Party voted for the Sovereign Grant Act.
I want to make one comment prior to the Minister’s response to my noble friend. There may be good reasons—I can see them in principle and in practice—for insisting on more transparency surrounding the costs at Buckingham Palace, for instance, but the expectation that it will hold costs stable or reduce them is not one of them. Witness the increase in the cost of refurbishing this Parliament and the cost of the Scottish Parliament building, which was overseen by not one but two Parliaments. The cost rose from the estimate of £40 million to more than £400 million. There may be good reasons for the transparencies regarding Buckingham Palace, but the expectation that oversight by this or any other committee will reduce the price is not one of them.
The noble Lord said that he wanted to make a comment rather than ask a question and he did exactly that.
I conclude by expressing reservations about the Bill. The Duchy of Cornwall plays an important role in providing funds to support the public and private lives of six members of the Royal Family. The Government are keen to ensure that the Duchy can continue to perform that function. Noble Lords have made informed contributions to the debate and given pause for thought. However, the Government believe that now is not the time to attempt this reform. I repeat the valid point made by my noble friend Lord Wakeham: if we make progress, it should be on a consensual basis. Considering other pressures on the legislative timetable, the Government have reservations about the prospects for the Bill in future.
My Lords, I am grateful to all noble Lords who spoke. We have had a fascinating debate. I am not surprised by the comments from the Minister—or the noble Lord, Lord Wakeham, for that matter—which I would have expected.
However, this demonstrates the confusion over what is part of government and the monarchy and what is part of private ownership and businesses. The Duchy frequently says that it is in the private sector. In his response, the Minister said that if there is not a Duke of Cornwall, the Duchy reverts to the Crown, with which I agree; it therefore presumably becomes public. How can you have a body or estate that changes between public and private depending on whether there is a male Duke of Cornwall? That seems to need looking at in a bit more detail.
The same principle applies to the property of Buckingham Palace and the discussion started by my noble friend Lord Adonis about its cost. Which bits of Buckingham Palace are Crown property because it is part of our constitution and which bits of it, including all the pictures and the ornaments, belong to the Queen personally? If she were not Queen, would she still have them? I do not know, but it seems that this obfuscation could go on for another 20 years if we are not careful.
The noble Lord, Lord Wakeham, asked why the Bill is a Private Member’s Bill. My noble friend Lady Hayter responded to that, but I would say that it is because it has been a good forum for debate. If we are going to talk about the monarchy as a whole, we could include Prayers; the Minister mentioned that we pray for Prince Charles. We could have a discussion about whether we should get rid of the link between the Church and the state, but the Minister started that one and I will leave it there.
I am also grateful to noble Lords for commenting on the Leasehold Reform Act. I do not accept what the Minister said, because it is nothing to do with a private estate, but we will follow up on that in other areas. I share other noble Lords’ views that we may not get this on to the statute book in this Parliament, but the debate has been very good anyway and I thank everyone for it.
Bill read a second time and committed to a Committee of the Whole House.