Finances of the British Royal Family
The British Royal Family is financed mainly by public money, but there are also a number of private sources of income. The official reported annual cost to the British public of keeping the Royal Family was £41.5 million for the 2008-09 financial year. However, this figure is disputed since it does not include the cost of security provided by the police and the Army, the lost revenues of the Duchies of Cornwall and Lancaster and other expenses.
On 1 April 2012, the old Civil List and the Grants-in-Aid were replaced by the single Sovereign Grant. The British Parliament meets the cost of the Sovereign's official expenditure from public funds. This includes the costs of the upkeep of the various royal residences, staffing, travel and state visits, public engagements, and official entertainment.
Estimates of costs and wealth
The Sovereign Grant Annual Report states that net expenditure for 2012-13 was £33.3 million.
The Sovereign Grant funding system, which covers the royal costs, has been set at £36.1 million for the 2013-14 financial year.
Until 1760 the monarch met all official expenses from hereditary revenues, which included the profits of the Crown Estate (the royal property portfolio). King George III agreed to surrender the hereditary revenues of the Crown in return for the Civil List, and this arrangement persists. The Crown Estate is one of the largest property owners in the United Kingdom, with holdings of £7.3 billion in 2011. It is held in trust, and cannot be sold or owned by the Sovereign in a private capacity. In modern times, the profits surrendered from the Crown Estate have exceeded the Civil List and Grants-in-Aid. For example, the Crown Estate produced £200 million for the Treasury in the financial year 2007–8, whereas reported parliamentary funding for the monarch was £40 million during the same period.
From 1 April 2012, the Civil List and Grants-in-Aid were replaced by a single Sovereign Grant. This will be £31 million for 2012/13, and 15% of the surplus generated by the Crown Estate for 2013/14 onwards. The changes were introduced by the Sovereign Grant Act 2011. The annual percentage-based amount will be calculated using the Crown Estate revenue from two years previously, and the arrangements will be reviewed by 2016 (subsection 7(5) of the Act).
Forbes magazine estimated the Queen's net worth at around US$450 million in 2010, Official Buckingham Palace statements in 1993 called estimates of £100 million "grossly overstated", and Jock Colville, a former private secretary to the Queen (when she was Princess Elizabeth) and a director of her bank, Coutts, estimated her wealth at £2 million in 1971 (the equivalent of about £24 million today).
The Crown Jewels in the Tower of London (including the crown, orb and sceptre) are state-owned rather than private possessions, the Treasury referring to these assets as "vested in the sovereign and cannot be alienated".
Keeper of the Privy Purse
Under the Civil List, The Queen received £7,900,000 a year from public funds to support the exercise of her duties as head of state of the United Kingdom (the Head of State Expenditure). The Civil List ceased on 31 March 2012, and was replaced by the Sovereign Grant (see below).
Parliamentary annuities of £1,254,000 a year are refunded by the Queen from her private funds.
In 2010, it emerged that that the Royal Household asked for a handout from the Department for Culture, Media and Sport for a government grant "aimed at schools, hospitals, councils and housing associations for heating programmes which benefit low-income families". In 2013, it became known that Buckingham Palace uses zero-hour contract for its summer staff.
Duchy of Lancaster
Like the Crown Estate, the land and assets of the Duchy of Lancaster, a property portfolio valued at £383 million in 2011, are held in trust. The revenues of the Duchy form part of the Privy Purse, and are used for expenses not borne by the Civil List.
Duchy of Cornwall
The Prince of Wales receives revenue from the Duchy of Cornwall, a property portfolio held in trust to meet the expenses of the monarch's eldest son.
Members of the Royal Family other than The Queen and The Prince of Wales are subject to tax in the ordinary way. There is a Memorandum of Understanding on Royal Taxation, dated 5 February 1993, which records the arrangements for the payment of tax by The Queen and The Prince of Wales. Only a proportion of capital gains arising on assets belonging to the Privy Purse are subject to capital gains tax. The Memorandum of Understanding justifies this on the basis that the Privy Purse meets both public and private expenditure. The proportion of gains and losses to be taken into account is:
(A - B)/A
A is the Privy Purse income
B is any excess of Privy Purse expenses over Duchy of Lancaster income.
The Prince of Wales is not legally obliged to pay tax on his income from the Duchy of Cornwall but has chosen to pay income tax at the normal rates pursuant to the Memorandum of Understanding on Royal Taxation. The income of the Prince of Wales from sources other than the Duchy of Cornwall is subject to tax in the normal way.
From 1969 Prince Charles made voluntary tax payments of 50% of profits from the Duchy of Cornwall, but this reduced to 25% in 1981 when he married Lady Diana Spencer. This arrangement was replaced by the Memorandum of Understanding on Royal Taxation in 1993.
The Official Expenditure of the Queen and the Prince of Wales is regarded as tax deductible. The rules on what constitutes Official Expenditure are set in the Memorandum of Understanding.
Property passing from monarch to monarch is exempt from Inheritance Tax, as is property passing from the consort of a former monarch to the current monarch.
Under the Civil List arrangements that were in force until 31 March 2012, the Royal Family faced criticism for the lack of transparency surrounding Royal finances. The National Audit Office was not entitled to audit the Royal Household. Under the Sovereign Grant, which replaced the Civil List and took effect on 1 April 2012, the National Audit Office will be able to audit the Royal Household.
It was announced in October 2010 that the Royal Household would face a freeze on its funding in the financial years 2011/12 and 2012/13 at £30m, followed by cuts of 14%. The Treasury will provide an additional £1m to pay for Diamond Jubilee celebrations in 2012. Furthermore it was stated that after that, funding for the Royal Household would be linked to revenue from The Crown Estate. This proposal was enacted by the Sovereign Grant Act 2011, which replaced the Civil List from 1 April 2012. For 2013/14 onwards, the amount of the Sovereign Grant will be 15% of the income account net surplus of the Crown Estate for the financial year that began 2 years before the beginning of the relevant financial year (i.e. starting with 2011/12).
Revenue from the Crown Estate is thought to be due to double in real terms in the period to 2020 with additional lease revenues deriving from the development of offshore wind farms within the UK's Renewable Energy Zone, the rights of which were granted to the Crown Estate by the Energy Act 2004. Step 4 of subsection 6(1), and subsection 6(4), of the Sovereign Grant Act 2011 provide a mechanism to prevent the amount of the Sovereign Grant increasing beyond what is necessary because of the growth in Crown Estate revenue.
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