Royal Legacy: How the royal family have made, spent and passed on their wealth

by McClure, David

  Following in the Rothschilds' footsteps, in 1885 the Prince of Wales opened his own stud at Sandringham and soon after bought the prized mare Perdita II. His horses went on to win the Ascot Gold Cup, the St Leger and in 1896 the Derby, when much to his delight Persimmon beat by a neck St. Frusquin owned by Leopold de Rothschild. In his most successful year, 1900, he earned £29,586 in prize money but prior to that his annual average was as little as £250.5

  Such earnings hardly offset the considerable outlay of running a large stable of horses that ran both on the flat and over fences. Some of his closest advisors - including his private secretary, Sir Francis Knollys and the soon-to-be auditor of the Civil List, Sir Edward Hamilton - had come to the conclusion in 1896 that HRH ought give up racing.6 The only way to balance the equine books would be to put out to stud his two prize stallions Persimmon and Diamond Jubilee whose sires according to Hamilton's later estimate might bring in £20,000 a year. Bertie was highly sensitive to any criticism that his horse racing hobby might be extravagant and in any way a drain on his finances telling dinner guests as late as December 1902 that "his racing paid [for] itself owing to his valuable sires" - although given his poor head for figures one suspects he was overstating their true value.7

  He also loved ocean racing at Cowes, a fashionable playground for the rich akin to today’s Monte Carlo or Porto Cervo, where in 1863 he succeeded his father as commodore of the Royal Yacht Squadron. At considerable expense he then developed his yacht “Britannia” into a three hundred ton racing cutter with a crew of twenty-eight. It won a number of prestigious races in 1892-3 and was later used as a base during his tours of the Mediterranean. In the early 1890s he was spending each year tens of thousands of pounds on yachting alone. One courtier who had the thankless task of managing the Privy Purse after Bertie acceded to the throne wrote “the king has no idea of the value of money and consequently gives orders wholly irrespective of expense which it is difficult to avoid executing".

  No wonder the new king soon found himself heavily in debt. According to a 1904 letter to the Treasury from Sir Edward Hamilton, now the auditor of the Civil List, “The King does not think that the present state of things ought to be allowed to carry on…For he has absolutely no private fortune on which to fall back."8 One other reason for his financial woes were the high overheads of maintaining the Sandringham estate, although his own extravagance - particularly when it came to fitting the latest household installations in the Big House - was in large part to blame for this. Even Sir Edward Hamilton, who customarily took the king's side on financial matters, blanched in April 1904 when he discovered that the cost of Sandringham in the previous year was - "no less than £52,000. The Civil List was fixed on the belief that the cost was about £30,000 a year. Last year there were some special items in connection with the installation [of electric light] but notwithstanding them the total is appalling."9

  When the new Civil List first came up for discussion in 1901 the king dropped thinly veiled hints that he wished to be exempted from income tax. Hamilton records in his diary on February 2, 1901 that "he liked the idea of being relieved (if it were possible) of such charges as the payment of income tax." Such discreet lobbying went on for a number of years until he grudgingly ceded to the inevitable with Hamilton writing in a Treasury memo in June 1904 "the present king only agreed to continue the arrangement under protest."10

  He was left with no option but to turn to his banker friends to bail him out. The most influential of these was Sir Ernest Cassel whom he had first got to know when Prince of Wales through their shared interest in horseracing and who was a close friend (and later executor of the estate) of his previous main advisor Baron Hirsch who died in 1896. On top of his lucrative investments in bloodstock, Cassel had amassed with the help of his network of associates in every European financial centre a multi-million pound fortune, mainly through investments in booming overseas ventures like North American and Mexican railways. He also financed the building of the Central Line on the London Underground and Egypt’s Aswan dam. A dour, humourless widower devoid of social graces, Cassel at first sight seemed an unlikely friend to the sybaritic Bertie but through a long and frequent correspondence with “Ec” (sixty-three letters in 1901, forty-five in both 1904 and 1905 and fifty in 1906, the majority on financial matters) he became the king’s most intimate male friend.11 Almost inevitably, censorious courtiers dubbed him “Windsor Cassel.”

  The king’s other financial advisors included Nathan Rothschild, chairman of the London bank NM Rothschild and Sons (on the board of which also sat his brothers Leopold and Alfred) and the two Sassoon brothers, Arthur and Reuben ("the Rothschilds of the East"). The fact that they were all Jewish (although Cassel later converted to Catholicism) caused muttering among an establishment that was openly anti-semitic. His mistress Lady Paget voiced her regret that he was always surrounded by “a bevy of Jews” and racing people and that he shared their “love of pleasure and comfort.”12 This view was reinforced in January 1881 by his attendance at the Central London Synagogue for the marriage of Leopold de Rothschild to Marie Perugia which received wide press coverage and elicited many a raised eyebrow in polite society.

  In 1885 he also helped elevate to the peerage his friend Nathan (“Natty”) Rothschild who as Baron Rothschild of Tring became the first professing Jew to take a seat in the House of Lords. For all his failings, the king was not prejudiced (at least not towards Jews) and he went out of his way to be friendly towards society newcomers - particularly if they were rich and smart. But the more traditionalist Prince George (known as "HRH") took a dim view of some of his father's financial friends and was not afraid to voice his dismay in public: "HRH (Lady Londonderry says) was a good deal down on Mrs G Keppel and spoke, as I have heard him speak, strongly against the moneyed associates around the king," Hamilton recorded in his dairy. "The crown will certainly not fall off Prince George's head. It might be a dull Court, but it will certainly be a respectable one."13

  Bertie gave his rich Jewish friends the easy entrée into high society that their background often denied them; in return they gave him the financial guidance that his background never provided. The exact details of how his portfolio of shares and bonds was reorganised remain to this day a closed book but his official biographer records that his banker friends helped him “make handsome profits out of judicious investments" and that by 1907 he was out of debt. His advisors took out life insurance policies and established an amortisation scheme that proved a big money-spinner.14

  It has sometimes been unfairly rumoured that the king may also have sold titles to boost his bank balance. It is certainly true that he conferred on Ernest Cassel the Grand Cross of the Royal Victorian Order, the highest rank in the sovereign's personal order of chivalry, and also honoured him with a knighthood, the title of Privy Councillor and the Grand Cross of the Order of the Bath (his attempt to make him a peer was vetoed by the Salisbury government) but there is no suggestion that any cash payment was part of the deal. Some evidence, though, has been unearthed that he may have helped Alfred Harmsworth, the wealthy proprietor of the Daily Mail and the Times, get a baronetcy in 1904 ("the father of modern journalism” was later created baron and then viscount), but again there is no definite proof that the king acted in a corrupt manner or personally benefited from any financial transaction. One writer, however, has suggested that if money did indeed change hands, it might have gone not to the king but his long-term mistress, Alice Keppel, who was experiencing difficulties financing her new elevated lifestyle and had sought financial advice from Sir Ernest Cassel.

  What is beyond dispute is that he had long used his royal status to request, push or garner honours for his friends and favourites. This had begun in the 1880s when as Prince of Wales he yearned to be allowed a say in public affairs and was not averse to doing political favours to business associates like Nathan Rothschild, who was once a Liberal MP and now took a shine to Disraeli's One Nation Toryism. In the light of Bertie’s affair
with Lady Kilmorey who as we shall see in the next chapter had a penchant for lovers who were members of the royal family, it is interesting to note that in 1888 he made representations to the Conservative government to grant her husband, the third Earl of Kilmorey, the Order of St Patrick, the highest Irish honour. Bertie wrote a letter to the Prime Minister Lord Salisbury saying that Kilmorey was a longstanding friend from his days at Oxford and would be pleased if his name were given proper consideration.15 Lord Kilmorey was made a Knight of St Patrick in 1891 and in 1902 selected as one of the king's aides-de-camp. It is not known exactly when Lady Kilmorey was having an affair with the king (although it must have been before the coronation of 1901 when she was included in the entourage for royal mistresses) but whatever the precise chronology of events, the favour to the earl would be repaid in kind.

  In July 1901 he conferred another of his personal honours for services to the royal family, the Knight Commandership of the Victorian Order, on Sir Edward Hamilton, who had advised him while Prince of Wales. A frequent guest at Balmoral, Windsor and other royal residences the Eton-educated Hamilton was a trusted member of Bertie's social set. He was also a firm friend of Sir Ernest Cassel whom he regarded as "the ablest man in the city" and was often invited to his country estate in Newmarket and even stayed at Villa Cassel in Switzerland. They shared a friendship with the Rothschild brothers and attended luncheons at their Ascott and Tring family seats. It is worth recording that fourteen months after awarding him the KCVO, the king asked him in September 1902 to be auditor of the Civil List. Despite the occasional grumble, the king's old advisor who had also counselled his son Prince George on constitutional matters backed the king in most disputes over the Civil List. Although in the official Treasury papers he gives the impression of neutrality on questions of whether the king should be exempted from tax, in his private diaries in 1901 he reveals that he thought the paying of income tax was "on the whole wrong and unnecessary"16 and then a few years later writes: "we came to the conclusion that no (1) [‘he might be released from his undertaking to pay income tax'] is the best alternative."17

  It is impossible to give a definitive answer to the question of how Edward was able to get out of debt and leave behind such a large legacy as his private secretary Sir Francis Knollys assiduously followed his instructions and burnt all his personal and financial papers, but the most likely explanation lies in the generosity of Ernest Cassel. When Bertie first got into serious debt in the late 1870s, his then financial advisor Baron Hirsh lent him money (rumoured to be of the order of £250,000-£300,000) but when Hirsch died in 1896 he left instructions to his executor Cassel that the whole debt should be written off. But according to the king’s latest biographer Cassel went one step further and took over the administration of Bertie’s financial portfolio, fully understanding that he himself would absorb any losses.18

  In 1901 Edward gave Cassel £20,865 to invest and not long after the king’s anxiety over money seemed to alleviate. It was only on his deathbed that the true extent of his benefactor’s largesse became apparent. On hearing that the king was slipping away, Cassel rushed to Buckingham Palace and deposited a thick envelope by his bedside. It contained £10,000 in bank notes, the equivalent of £250,000 today. When the money was returned to Cassel after the king’s death, he refused to accept it saying that “it represented interest I gave to the King in financial matters I am undertaking.”19 If it had indeed been interest then the initial investment would have had to have been much larger than the £20,865 invested in 1901. Many biographers now believe that the money was a gift intended for the king’s mistress Mrs Alice Keppel whose husband’s modest salary was insufficient to keep her in the style to which she was accustomed. Soon after Bertie’s death, she moved into a sumptuous Mayfair mansion in Grosvenor Street.

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  Any attempt to put a monetary value on the estate of Edward VII must take into account that most of his inherited fortune came from landed rather than liquid assets. When Queen Victoria died in 1901 she left him little if any cash - as is the convention with the Prince of Wales who benefits from generous revenues from the hereditary estates of the Duchy of Cornwall. Instead, she bequeathed him her private residences: Osborne House and Balmoral Castle.

  During her long reign Queen Victoria had been able to build up a highly valuable portfolio of private property thanks in large part to the financial astuteness of Prince Albert and the passing of one important piece of legislation in 1800. Prior to that date, the monarch had only a public legal identity - and no private one. This meant that his or her private possessions were inextricably linked to the public possessions of the crown. In effect, the sovereign was the state - and vice versa. It also meant that his will was probably not legally binding. Since he owned property only in his capacity as king and not as a private person, then on his death it should automatically pass to his rightful successor rather than to any private individual named in his will. The Crown Private Estate Act (1800) changed all that. It gave the monarch a private financial status: he could own land privately and make a will.

  After his marriage to Victoria in 1840, Prince Albert with no constitutional duties to perform devoted his considerable energies and Germanic zest for order to the reform of the royal finances, conducting a cost-cutting drive in the royal household and ensuring that the queen had an independent source of wealth. She had succeeded to the throne, according to one royal biographer, penniless: “her father had been so poor he had driven the family in his own carriage because he could not afford servants.”20 Her husband went so far as to complain to the Prime Minister Lord John Russell that the nation takes from the monarch his hereditary monies but does not allow him to amass a private income.21 When prior to 1800 the sovereign was unable to have a private income, there was little incentive to boost revenue from the crown estates or landed property since it all went into the public pot, but now Queen Victoria enjoyed an independent financial status it was in her interests to manage and maximise her wealth. One way to achieve this was through capital accumulation. She is now known from Treasury papers to have saved £824,000 in the first fifty years as queen from her Civil List revenue22 and gained an estimated £1.5m more from her Duchy of Lancaster revenues.23 She also received a £250,000 windfall when in 1852 the eccentric property developer John Nield left her almost all his landed fortune.

  Wisely Prince Albert converted much of this cash into the more solid long-term investment of bricks and mortar. The royal couple’s first private purchase was Osborne House, a large estate near Cowes on the Isle of Wight which was to be their summer palace. In 1845 they paid £45,000 for the property but the total cost rose to £200,000 (over £10 million in today's values) after all the interiors were rebuilt in an Italianate style complete with marble columns and palazzo-type fittings. This was not to the taste of Edward, Prince of Wales, and Alexandra who detested the mausoleum-like atmosphere (their grandson George VI called it the family necropolis). This posed a problem when after the death of Victoria at Osborne in January 1901, Edward VII inherited a part share of the house along with his siblings. We now know from a 1901 Treasury document that the property cost a hefty £17,000 a year to run.24 His immediate response was to hand it over to the nation for conversion into a naval college and nursing home but after it was pointed out that his mother's wish as clearly stated in her will was for the property to remain in the hands of the family, he felt obliged to consult with his three sisters about the matter. Following considerable arm-twisting, it was decided after all to give it to the nation but to achieve this a special act of parliament had to be passed in order to overturn Queen Victoria's testamentary wishes.

  Victoria's most important property investment by far was Balmoral castle in the Scottish Highlands - but she did not acquire it in her name. The freehold was formally bought in June 1852 by Prince Albert from the Earl of Fife after it was discovered that the 1800 Crown Estates Act did not apply to Scotland and as such the property would belong to the state if the qu
een signed the contract (this loophole was closed in 1864 to allow Victoria to inherit the property after Albert's death). Albert had been able to knock the price down to £31,500 since he had cleverly leased the property for the previous four years which meant that the vendor could hardly sell the land to anyone other than the royal couple and had to settle for a below market rate. The rugged setting on Deeside reminded Albert of his German homeland and with the assistance of the architect William Smith he spent the next three years building on the 23,000-acre estate a new castle in a Teutonic style. He turned it into a romantic time capsule, a world away from metropolitan life where one could hunt, shoot and fish to ones heart’s content. Once again it was not to everyone’s taste - the Prime Minister Lord Rosebery observed that he had thought the drawing room at Osborne was the ugliest room in the world until he witnessed the drawing room at Balmoral. When Edward VII inherited the property, the only thing he liked about it was the shooting; his wife reputedly loathed the place. As with Osborne, the running costs also put a significant strain on his finances representing in 1901 £20,000 a year and as with Osborne he even tried to transform its status into an official rather than private residence, presumably to make it eligible for more public funding.

  Prince Albert also turned his business brain to the reform of the hereditary revenues from the Duchy of Cornwall. Consisting of 135,000 acres mainly in the south west of England, the duchy was created in 1337 by Edward III for his son and heir, Edward, the Black Prince, and thereafter it became the main source of private income for all Princes of Wales. Under the 1337 charter the Duke of Cornwall was not entitled to the proceeds from the sale of land but only from their rental income. Since much of the land was only semi-arable and the urban properties were in poorer areas of south London it never produced great profits and this may in part explain why it was unaccountably excluded from the 1760 financial settlement that transferred the Crown lands to the state in return for the Civil List. But by the mid 19th century with the rise in city rents and the expansion of the railways requiring the acquisition of rural land this seemingly worthless anomaly became potentially profitable. Under Prince Albert's guidance, city dwellings were modernised, arable land improved and tenancy agreements renegotiated. Over the next quarter of a century net revenue from the duchy almost doubled rising from £25,000 to £46,000 a year.25 Although Bertie complained bitterly about having nothing to do during his long apprenticeship to be sovereign, the wait did have a considerable financial advantage in so far as it meant that for forty years he was Duke of Cornwall and in receipt of on average £35,000 a year. He even benefited from the accumulated revenues built up as a minor before he became duke. According to a confidential 1937 Select Committee Report which examined the Duchy of Cornwall revenues he "possessed the revenues which were then somewhat fewer during his whole minority. It appears that the accumulated sum which he received on majority was about £600,000 in stock, bringing in £18,000 a year."26