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

by McClure, David

  It was predictably left to the Labour backbencher Dennis Skinner, who made his name in the house by lampooning among others the royal family, to introduce a note of levity into the proceedings. The seventy-nine-year-old Beast of Bolsover was in the Commons when the last major reform of the Civil List was debated:

  “I remember well, way back in 1971, being joined by a lot of people in the House who were on the left wing at the time in voting against the Queen’s money. Quite a number of them are now in the House of Lords—[Laughter].”

  But what he could never have remembered – because it was unknown to all but a few who had access to the released Treasury documents - was that a remarkably similar scheme to the Sovereign Grant was dismissed in 1971. As we saw in Chapter Eight, the plan of John Boyd Carpenter to hand over all Crown Estate revenue to fund the Civil List was seriously considered by the government and palace. It was eventually rejected on the grounds that it would provide no incentive to the palace to economise and that because it gave the palace so much licence it might perversely lead to more work for the Treasury since it would be obliged to account to parliament how the money was spent.

  So why was a scheme that was rejected in 1971 now acceptable in 2011? Could it be that the Chancellor was ignorant of the opposing arguments on account of the fact, as he mentioned in the debate, that he was only born in 1971? It should be admitted that the Boyd Carpenter plan was more far-reaching than the Sovereign Grant in that it proposed that all Crown Estate revenue as opposed to just 15% be handed over to the palace. But the effect might have been similar in so far as any surplus unused by the royals would revert to the Treasury.

  It should also be remembered that the scheme was rejected by the palace as well. Even though the scheme was enormously attractive in terms of the size and independence of its income stream, palace officials were worried that if the hereditary income from the Crown Estates were thrown in the pot, then it would automatically lead to calls to include the lucrative revenues from the Duchies of Cornwall and Lancaster which were vital to the funding of the private lifestyle of the Queen and the Prince of Wales.

  The most likely explanation why the scheme was acceptable to the government was that at a time of extreme cost cutting it got the departmental expenditure for grants-in-aid off the books – making an above the line saving of over £18m a year. By setting up a scheme that would be reviewed only every five years it avoided annual rows with parliament about “a pay rise for the Queen”. The reason why the scheme was acceptable to parliament is that MPs were allowed for the first time to open up the palace books to ensure that public funds were being properly spent. The National Audit Office would perform their audit and the accounts would be laid before the house and scrutinised by the Public Accounts Committee.

  But there was one significant exemption to the scrutiny from the National Audit Office. The Comptroller and Auditor General would not be allowed access to the accounts of the Duchies of Cornwall and Lancaster on the grounds that they were regarded as “private funds.” This must have been greeted with a sigh of relief from the palace who had long defended the privacy of its two milk cows. The royal family would also have been pleased with the one important change to the rules over who receives the income from the Duchy of Cornwall which under the old system was paid to the male heir to the throne (the Duke of Cornwall). Under the new arrangement, the money would go to the sovereign’s eldest child, regardless of gender, which would have had significance if the firstborn of the Duke and Duchess of Cambridge had been a girl.

  In many people’s eyes, the palace was the big winner in the Sovereign Grant reform. A government source admitted when the plan was first under review that “the royal family must have been getting the champagne out when we considered this.”3 There were whispers that some Lib-Dem members of the coalition government had reservations about the generous settlement.

  The Financial Times was one of the few newspapers to scrutinise the new scheme in any depth. In a leader entitled “Casino Royale” it argued that the royal pay plan was “excessively discretionary” and bore a remarkable resemblance to the generous performance-related pay packages granted to business executives by their indulgent boards. The perverse incentives of the scheme were frightening: “When the Crown Estate does well, royals win; when it does not, taxpayers lose.”4

  Some saw the changes as a missed opportunity for a root and branch reform. Although it was billed as an historic change, it did not address some of the underlying problems of expenditure. “If there is to be a serious assessment of efficiency and economy and effectiveness [of the monarchy]” Margaret Hodge, the chair of the Public Accounts Committee, pointed out in an earlier debate, “one has to look at the total income and expenditure” [author’s italics].5

  When it came to hidden expenditure items, the elephant in the chamber was security. The Chancellor refused the opposition’s request to give a clear figure for the costs of protecting the royal family arguing that the information might help terrorists, but some estimates put the figure as high as £100m a year with the Metropolitan Police’s bill alone thought to be close to £30m. Such figures are never included when the palace claims that the royal family’s annual cost is little more than £35m – or just 56p a year for each citizen – and come under the Home Office budget. Other hidden costs take the form of cross-subsidies by government departments. In one well-publicised instance the Ministry of Defence reportedly gave a generous deal to the royal family when after lobbying from Prince Charles it reduced the fees of some royal flights.6 Under the new funding arrangement, it was agreed that the MoD would still pay for many palace equerries and orderlies.7

  * * *

  At the time of writing it is too early to say whether some of the backbench fears will prove justified, but some of the early signs are not encouraging. In the scheme’s first year 2012-13 the palace overspent its £31m grant by £2.3m and had to make up the shortfall – as anticipated by Kevan Jones – by delving into the reserve fund, reducing it to the dangerously low level of £1m. The Royal Household could of course have simply drawn back on expenditure to live within its means but the palace thought it “not wise” to limit the activity of the monarchy in the Diamond Jubilee year.8

  The new settlement was supposed to encourage greater efficiency savings. The Royal Household employs four hundred and thirty people, a headcount that has remained constant for six years and a labour cost that eats up almost two thirds of the budget. But despite a pay freeze for the general staff, in 2013 the palace still managed to reward three of its top five senior managers (all earning over £80,000 pa) with extra money. This was justified on the grounds of them taking on extra responsibilities but the Public Accounts Committee questioned whether this was unfair to the rest of the staff and sent the wrong signal at a time of a general squeeze on the public finances.9

  In its second year, 2013-14, the grant rose by £3m to £36.1m and in 2014-15 it is expected to increase to £37.9m (a rise of more than 20% in just two years). The palace claims that half of this extra money will go on vital repair work on the crumbling royal palaces (Windsor Castle’s leaking lead roof needs replacing and the antiquated boilers in Buckingham Palace have not been upgraded in sixty years) but those Jeremiahs in parliament who warned of “a golden ratchet” might be excused a wry smile.

  The real test will come in 2016 with the first review by the Royal Trustees of the level of the Sovereign Grant. If the grant continues to rise at the same pace, will they be strong enough to kick up a fuss and demand a cap on spending? This might be political suicide if the royal family’s popularity ratings were still very high or if it coincided with a mood of public sympathy after, say, a royal death. In such circumstances it might be easier to let sleeping corgis lie.

  To its critics, the key weakness of the new settlement is the absence of any clear connection between the level of funding and the actual requirements of the palace. Just as the revenues from the Duchies of Lancaster and Cornwall are in no way directly l
inked to the needs of the Queen and the Prince of Wales, so the revenues of the Crown Estate seem to be divorced from the requirements of the Royal Household. To some, this amounts to an invitation to inefficiency. Why try to make economies when your income is on a golden escalator going up every year as the profits of the Crown Estate rise?

  19.THE DUKE’S FAREWELL - 2014

  “It wasn’t my ambition to be president of the Mint Advisory Committee. I didn’t want to be president of the WWF. I was asked to do it. I’d much rather stayed in the Navy, frankly.”

  Prince Philip on having to give up his naval career1

  It was typical of the man that he should want a simple, unostentatious ceremony. Around 2013 Prince Philip reportedly told palace officials that there was no need to go to all the “fuss” of a lying-in-state ahead of a full state funeral.2 There should be no gun carriage or grand procession through the streets of Westminster. His preference was for a private service at St George’s Chapel, Windsor before being interred in the mausoleum of Frogmore House.

  At first sight this seemed at odds with all the elaborate procedures drawn up by the Lord Chamberlain, the Earl Marshal and other palace planners. If there is one aspect of succession planning that is never left to chance then it is royal funerals. They are all given codenames associated with famous bridges – the Duke of Edinburgh’s is Forth Bridge, the Queen Mother’s Tay Bridge and the Queen’s London Bridge. Linked to each name is a D number, D+9 down to D+1 indicating the number of days between the death and the funeral and giving precise details of the procedures of the lying-in-state and the public processions. The start date and length of mourning would also be specified along with which public buildings would fly the union flag at half mast. The details are normally confirmed with the royal concerned, although in the case of Diana’s funeral there was little preparation due to the suddenness of the death and the fact that it occurred on foreign soil. Lessons were learnt and there are now detailed plans for having an aircraft on standby to repatriate the body of the sovereign or senior royal who dies overseas.

  In the end Prince Philip’s arrangements were left “under review” with the most likely scenario being that prior to the funeral his body would be laid in state not at the customary Westminster Hall where in 2002 two hundred thousand mourners filed past the Queen Mother’s coffin but at the more discreet St. James’s Palace where Diana, Princess of Wales had laid for several days after her death in 1997. Hers was not a state funeral.

  Some palace watchers believed that the longest serving royal consort in history merited a better send-off. “The British public will expect him to have a state funeral and will be disappointed if the commemoration of his life and death happens behind closed doors,” observed his biographical chronicler Philip Dampier. “Many people regard him as the glue that keeps the royal family together.”3

  There was no denying that after six decades of dutifully standing two feet behind the Queen, Prince Philip, Duke of Edinburgh, Earl of Merioneth, Baron Greenwich, Member of the Order of Merit, had done well for himself. He first arrived in this country as an eighteen-month-old baby with the help of a Royal Navy frigate and fruit crate as a crib after a military coup had overthrown his uncle King Constantine I and the Greek royal family had been forced into exile. Most of their wealth was left behind in Greece. “Stateless, nameless and not far from penniless” was how one royal biographer summed up his status.4 But in the ninth decade of his life, another royal commentator estimated his wealth at £28 million.5

  It was a remarkable turn-around in fortunes. But what does Prince Philip’s change in circumstances tell us about the House of Windsor’s capacity to generate wealth? Can it really turn paupers into millionaires? And if Philip is as rich as is claimed what form does his wealth take? Can he really, as some say, have accumulated millions of pounds in gifts?

  By royal standards, his childhood was poor but hardly impoverished. He told one biographer that he was not exactly well off but did not recall ever wanting for anything.6 His father Prince Andrea of Greece decided to settle just outside of Paris at St Cloud where his aunt, Marie Bonaparte, owned a large estate. An interesting feature of his upbringing was how a succession of rich aunts – none of them blood relatives and all heiresses – came to his financial rescue. Marie Bonaparte, the granddaughter of the founder of the Monte Carlo casino, put the family up in one of her lodges. The wealth of aunt Nancy, the widower of the tin-plate magnate William B. Leeds who remarried Prince Christopher, the younger brother of Philip’s father, paid for the fees at his progressive American school in St Cloud.

  But by far the richest aunt was Edwina, wife of Lord Mountbatten, his mother’s brother, who had inherited the banking fortune from her German-born grandfather, Sir Ernest Cassel. In 1924 she generously took out a life insurance policy for her nephew and allowed him to use their luxurious Park Lane mansion when he passed through London on his peregrinations between his boarding schools, guardians and absentee parents. He was also allowed to enjoy the facilities of her country retreat Adsdean in Hampshire which boasted a golf course, three tennis courts, a shooting range and a polo practice ground.7 As we saw earlier, Philip was just following a well trodden family path, becoming the third generation of Windsors to benefit from the Cassel coffers.

  While one German provided a taste of wealth another supplied a check on extravagance. Kurt Hahn, the Berlin-born educationalist, was probably the most important influence on the young Philip’s attitude not just to expenditure but life in general (the prince later described him as a great if eccentric man).8 The Jewish intellectual believed that society was suffering a malaise caused by a decay of fitness, self-discipline and initiative and when Nazi persecution forced him to flee his school at Salem on Lake Constance, he set up on the windy Moray Firth in Scotland a new spartan academy called Gordonstoun designed to drum into the pupils the virtues of hard work, thrift and self-reliance. After five years of bracing cold showers, early morning runs, sailing in the foulest of weathers and all manner of discomforting, character-forming outdoor pursuits, Philip ended up as head boy.9

  Philip was soon left to his own devices when his parents separated and he was shuttled amongst relatives. From the age of eleven to twenty-six when he got married, he had no permanent address (he famously wrote on the Mountbattens’ visitor’s book “No fixed abode!”)10 In December 1944 his father died of a heart attack at the age of sixty-two. At the time the prince was serving on a Royal Navy destroyer in the Indian Ocean and there was no possibility of attending the funeral in the South of France. Although he was left seven tenths of the estate in the will, the inheritance proved meagre. It turned out that Prince Andrea had debts of more than £17,500, the result of living beyond his means in Monte Carlo with his long-term mistress Comtesse Andrée de la Bigne, granddaugh-ter of the chère amie of Napoleon III, who according to some accounts frittered away much of his money.11

  When after the war Philip managed to arrive in Monaco to pick up his personal effects, he got on surprisingly well with the elegantly-attired “Comtesse” who turned out to be a former actress. But all that was left of the chattels were some moth-eaten suits, a pair of monogrammed hairbrushes, an ivory-handled shaving brush, a small collection of books and a few paintings. The only item of real value was a gold signet ring which he wore for the rest of his life. There was also the bejewelled Star of the Order of the Redeemer which he planned to wear at his wedding until he discovered that his father had substituted the real diamonds for paste ones.12

  When his engagement to Princess Elizabeth was announced in July 1947, a few court gossips wondered in an echo of the cynicism surrounding Prince Albert’s nuptials whether Prince Philip might be a fortune hunter. As a first lieutenant in the Royal Navy on a salary of less than £350 a year, he was certainly not flush with cash. He travelled third class by train and often wore the most threadbare of clothes. According to the Mountbattens’ butler who looked after the young prince when he stayed at their Chester Street townhouse,
his wardrobe was “scantier than that of many a bank clerk.”13 He often turned up with nothing more than a razor and during the night his makeshift valet would have to darn his socks and wash and iron his one shirt.

  As a counter to any spurious gold-digging charge, it should be pointed out that the marriage was clearly a love match and Prince Philip was later reluctant to accept a Civil List allowance from the state and had to be talked into it by his uncle Louis Mountbatten. After considerable horse-trading with Attlee’s Labour government it was agreed that he should have an annual allowance of £10,000. After the coronation he had new duties as consort to the Queen and had to give up his naval career (and salary). He would later admit that his one big regret in life was having to leave the navy.14

  Up until the coronation he had shown great promise – becoming one of the youngest first lieutenants in the Royal Navy at just twenty-one and taking command of his first ship HMS Magpie before he was thirty – and some thought he might have emulated his uncle and gone to the very top. “Prince Philip was a very talented seaman,” commented Lord Lewin. “If he hadn’t become what he did he would have been First Lord Sea Lord and not me.”15 For his part, Philip took a less sanguine view of his chances of advancement, suggesting to one interviewer that the British media would have viewed every promotion as a case of special treatment.16

  In setting his Civil List annuity, the government had to take into account compensation for his potential loss of earnings. When the head of the Royal Household, Lord Cobbold, was questioned on this point by a parliamentary select committee in 1971, he referred to “the high salary which he would undoubtedly command in the outside world” and admitted that “the real remuneration amounted to £15,000-£20,000” (£180,000-£250,000 at today’s prices).17 He also let slip that some of the allowance was “to build up savings for the future”, a surprising admission given that when the annuity was first established it was generally considered to cover only his official expenses and not to be set aside for his retirement or purposes of capital accumulation. Since 1992 his personal allowance has been £359,000 a year.