British Royal family exempted from cash cuts

LONDON: The royal family is to be exempt from cuts in public spending next year when funding of the civil list — the money provided by the state to cover the family’s official expenses — is settled for the next 10 years.

Although all major political parties are vying to show their willingness to wield the axe on public spending, MPs will be powerless to reduce the GBP7.9 million a year paid under the civil list because of an obscure deal struck between Buckingham Palace and the UK Treasury in 1972 when current legislation governing royal finances was drawn up.

Palace officials made clear earlier this summer that they are seeking a rise in the annual civil list payment to cover “increased costs” despite the fact that they have a GBP21 million surplus in the reserves on the civil list account.

Informal talks between the Treasury and the palace are already under way. A Treasury order settling the annual civil list until 2020 must be laid before parliament by next July to come into effect from January 2011.

But with Gordon

Brown and the leader of the Opposition Conservative party, David Cameron, acknowledging the need for public spending cuts, any bid for a royal rise looks politically fraught. Earlier this month, Cameron said cuts were an “issue of leadership and the burden had to be shared fairly, including by the rich and powerful”.

The palace, when it published its annual report on royal finances in June, claimed that without any increase there would be a GBP40 million backlog of repairs and environmental improvements by 2019.

Uniquely in the public sector, royal civil list finances are negotiated — and debated by MPs — only once every 10 years. A serious misjudgment approved by John Major in the 1990 settlement made provision for an annual inflation rate of 7.5 per cent for the following 10 years and the annual civil list payment was fixed at GBP7.9 million a year.

But inflation in the 1990s turned out to be only 3.7 per cent and the palace built up a huge surplus of GBP35 million, including GBP12 million in interest by the time Tony Blair came to decide the 2000 settlement.

Despite protests from a handful of MPs that the royal family should hand back some of that surplus to the Treasury it was confirmed that parliament could not amend the annual payment downwards. The deal under the 1972 Civil List Act confirmed by background Treasury papers in the National Archives seen by the Guardian means they can only ever vote to increase it. Labour MPs protested at the time that this applied to no other category of public expenditure.

Blair tried to make a virtue out of “freezing” the payment at GBP7.9 million a year and played down the existence of the GBP35 million reserves. He said the palace had agreed to finance from the civil list an extra GBP2.5 million a year that had previously been paid directly by other government departments.

Taken together with the predicted effects of inflation it would mean a real terms reduction by 2010, said Blair.

But the inflation rate

has tumbled further since 2000 and the latest accounts show there is still

a GBP21 million surplus on the civil list account.

A further GBP7 million of the reserves will be used this year but the Queen will still be GBP14 million in the black as the negotiations for her pay rise get under way.