Almost every major news outlet is running a story today about the Queen apparently facing a cut in her finances thanks to the Scottish Government.
We think it’s nonsense. Here’s why…
For centuries, rent from the Crown Estate – a vast property portfolio including Regent’s Street in central London, rural estates across the country and most of the UK’s seabed – went straight into the coffers of the monarch.
In 1760 George III signed over all the income from the royal estates to the Treasury in return for a regular payment. That’s basically still the system we have now.
The “sovereign grant” the Queen gets each year “for use for that year by the Royal Household in support of Her Majesty’s official duties” comes from general taxation.
But it is pegged to the revenue generated by the Crown Estate – now essentially run like a property business whose profits go to the state.
As things stand the monarch receives the equivalent of 15 per cent of the surplus brought in by the Crown Estate two years earlier. That percentage is reviewed regularly and can change.
In 2012/13 the estate ran a surplus of £252.6m, so the queen got 15 per cent of that in 2014/15 – some £37.9m.
Today’s headlines are all about what will happen if plans to hand over Crown Estate assets in Scotland to the Scottish government go ahead.
The plans were laid out by the Smith Commission, which was set up after last year’s independence referendum to make sure promises made to Scots about further devolution were kept:
That sounds like a lot of assets, but the Scottish bit of the Crown Estate actually only represents 2.6 per cent of the value of the whole UK-wide portfolio, and generates 3.9 per cent of overall gross revenue.
Nevertheless, if the size of the whole Crown Estate shrunk next year, we would expect to get about 3.9 per cent less revenue, so a 15 per cent slice of the total surplus would presumably be slightly less than this year.
But there are two reasons why this won’t actually result in the Queen getting less money.
First, the Smith Commission also contains a “no detriment” principle, which states that neither the UK nor the Scottish Government should make or lose money at the expense of the other from further devolution:
In other words, any revenue gained by Scotland from a change in the Crown Estate system would have to be paid back to the UK Treasury.
In practice, the profit lost by the UK government would be deducted from the block grant paid to the Scottish government under the current funding rules.
So it looks like Nicola Sturgeon has played a blinder here, getting access to millions in extra revenue for Scotland from the Crown Estate – but in reality there will be no net gain.
Second, the money actually received by the Queen cannot be cut by law. The Sovereign Grant Act 2011 states that any money paid to her in any given year must not be less than the year before.
Of course, she might still receive less than she would have done if the Scottish Crown Estate properties had stayed in the hands of the UK government.
But there is a straightforward way in which the system can be adjusted to award her more money.
The Royal Trustees decide what percentage of Crown Estate surplus to use when setting the sovereign grant, and it can be revised regularly.
The current benchmark of 15 per cent is up for review in April 2016 and it can easily be adjusted upward to make up for any small loss of overall revenue.
The Treasury said in a statement that the sovereign grant “will not be adversely affected by devolution”, adding: “Under the Sovereign Grant Act it cannot be reduced and the statutory review of the grant will ensure that it continues to provide the resources needed to support the Queen’s official duties.”
It’s true that Scotland is set to take over control of Crown Estate assets north of the border, under the terms of the Smith Commission.
But under the commission’s “no detriment” rule, that does not mean that Scots will end up paying less towards the cost of the monarchy.
Any windfall scooped up by the Scottish Government would be cut from the funding Scotland gets from Westminster.
The Queen cannot legally get less money as a result of the change, and the government could easily adjust the rules to make sure she gets a bit more to make up for the loss of the Scottish estates.
All of which makes this look very much like a storm in an exquisite bone china teacup.