Sovereign Grant Bill - Second Reading (and remaining stages)

House of Lords, 14 October 2026.

Lord Pitt-Watson (Labour)

My Lords, this Bill relates to the sovereign grant, which Parliament has provided to support the official duties of the monarch and the work of the Royal Household.

The Bill implements the conclusions of a recent royal trustees’ review of the sovereign grant. It does three things. First, it will reset the grant level for the next financial year at £99.9 million, with the anticipation that this will be the grant for the next five years. Currently, the grant is £137.9 million. This gives effect to the commitment of successive Governments, and the expectation of the Royal Household, to a reduction in the level of funding following the completion of the Buckingham Palace reservicing programme. The Bill also aims to make two targeted improvements to the statutory framework for this funding, introducing limited flexibilities to ensure that funding levels remain appropriate, both on an annual basis and within each year, in response to exceptional circumstances. This will make it easier to respond where funding would become inappropriately low or high.

The sovereign grant supports the monarch’s official duties; it funds the staff, official travel, property maintenance and essential services required for the sovereign to fulfil their unique constitutional role. That role extends beyond ceremonial functions: it includes hosting Heads of State, supporting diplomatic engagement, representing the United Kingdom overseas and strengthening our relationships across the Commonwealth and the world. These activities support UK interests, including trade, investment, security and diplomacy. At home, the grant supports the sovereign’s significant role, from recognising charitable and voluntary service to bringing communities together across the United Kingdom. I note that, with a new and younger monarch, there have been more activities than in the immediate past.

I turn to the Bill. Since 2012, the level of the sovereign grant has been determined through a statutory framework established by Parliament in the Sovereign Grant Act 2011. That framework requires the annual grant amount to be calculated by reference to the previous year’s expenditure and a percentage of the profits of the Crown Estate, which is an independent corporation, the net revenue profits of which are returned to the Exchequer. To ensure that the funding levels remain appropriate, the 2011 Act also requires that the royal trustees—the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse—conduct regular reviews.

A key piece of context for the House is that Parliament agreed a temporary uplift in the grant from 2017-18 to 2026-27 to fund the Buckingham Palace reservicing programme. That programme has been a major 10-year investment to modernise ageing infrastructure, replace critical electrical and mechanical systems and safeguard the long-term future of one of the nation’s most important historic buildings. As that programme nears completion, now is the time for the level of funding to be reassessed.

Earlier this year, the then royal trustees completed the latest review and considered the Royal Household’s projected expenditure and the Crown Estate’s projected revenues for the period of 2027-32. The trustees concluded that, with the Buckingham Palace reservicing programme nearing completion, the exceptional funding requirement that justified the temporary uplift no longer existed. They therefore recommended that the level of the sovereign grant should fall from £137.9 million in 2026-27 to £99.9 million in 2027-28. That represents a reduction of almost £38 million, or more than a quarter, compared to the current year.

At the same time, the trustees recognised that the Royal Household continues to face operational pressures. For example, the recommended level of funding will enable the household to address a maintenance backlog that was exacerbated by the pandemic and replace ageing digital infrastructure to strengthen cyber security. The grant level provided for by the Bill therefore ensures value for money for taxpayers and that the Royal Household can continue to discharge its functions effectively.

In conclusion, the Bill delivers a fair and proportionate funding settlement. It will reduce the level of the sovereign grant following the completion of the major capital programme, improve the resilience and sustainability of the statutory framework while maintaining parliamentary oversight, and ensure that the sovereign grant can continue to fulfil its core purpose: supporting the official duties of the monarch and maintaining the occupied palaces on behalf of the nation. I beg to move.

Lord Redwood (Conservative)

My Lords, I support the Minister in his aims and am pleased that he set out so well the important work that the Royal Family does on behalf of our country, promoting our diplomatic efforts, entertaining important guests of the nation and supporting the Government of the day in the work that they are doing in trade, diplomacy and wider world affairs.

I accept fully the Minister’s case that this needed review. I was a supporter of extra money being made available to renovate and modernise Buckingham Palace—it is a most important national building and, importantly, a working building. So many people have the pleasure of going there and so many of our international guests have the privilege of a great dinner or social event at the palace, which they normally much value because it is something that many other countries in the world cannot match.

I broadly welcome this legislation and agree that the amount should be adjusted downwards, but I would like to stress that the amount must be sufficient and the formula and details for future years sufficiently well thought through that we accommodate without argument or unseemly exchanges the legitimate increases in costs that will clearly take place, as inflation still stalks our land and as modernisation and the amount of service we expect will probably increase. We should expect the amount of money to go up.

I am sure my noble friend on the Front Bench will rightly have detailed issues to raise, but I think it will be in the spirit that we fully support the monarchy in its work and believe that there should be a proper sovereign grant. I leave one last thought with the Minister that he may be able to clarify at the end. It is good to have a formula that you can normally rely on and that gives a fairly predictable outcome, as it allows the Royal Household to plan rather than having to battle over budgets year by year in the way that others may have to do, because that is a distraction and, if it gets into the press, would be damaging to the very diplomatic image we are trying to create.

Lord Foulkes of Cumnock (Labour)

My Lords, I have great respect for the Minister. As a fellow Scot, he will make sure that every bawbee gets value for money. I understand that he will have had a brief from down the Corridor. In fact, having read Commons Hansard, the words were quite familiar. But I hope that he will listen to the debate here in the House of Lords and transmit the views of Members, because unfortunately the Bill was not given the full scrutiny it deserved on the Floor of the House of Commons, which was rather regrettable. The Lords needs to give it some scrutiny today. Although we are not in a position to table any amendments because, understandably, the Speaker of the House of Commons has designated this as a money Bill, we still have a duty to shine a light on the inequality built into this mechanism and the lack of transparency and accountability.

The reality is simple. If the Government genuinely wanted a needs-based system, the Royal Household would submit an annual Budget request to the Treasury like any other public entity. Instead, we now have a formula tied to Crown Estate profits. That is a system designed as a “heads I win, tails you lose” proposition—frozen against losses when profits fall, yet fully open to the upside when they surge.

When we ask the public to fund an institution to the tune of about £100 million a year through the sovereign grant, at a time when, sadly, we know many people in this country face severe pressure on their household budgets, we here have a duty to ask two fundamental questions: first, are we getting value for money and, secondly, do the actions of the institution match the value that it preaches? I argue that in both cases the answer is no.

We hear various royal pronouncements on climate change, yet official reports reveal hundreds of private jet and helicopter flights for short domestic trips, one recently to the races where the royal concerned could have easily gone by car. The taxpayer has funded two new helicopters for the Royal Family, whereas Mountain Rescue has to raise money for its helicopters through charitable efforts. Is that right in the 21st century? Then we see commendable statements on homelessness, from the Prince of Wales in particular, but the Crown maintains many empty or underutilised luxury estates across the country: in Scotland at Balmoral, in London—not just Buckingham Palace but all over the city—and at Sandringham.

In terms of value for money, our monarchy remains by a vast margin the most expensive state-funded royal family in Europe. In Spain, the public grant is only about £7 million. In Sweden, it is under £15 million, and in the Netherlands, it is £45 million. In European terms, we are one of the big spenders, as far as the Royal Family is concerned. If we take a baseline of 2011, £31 million, and adjust that for inflation, our sovereign grant, even allowing for this kind of expenditure, would be between £45 million and £50 million, not the £99.9 million proposed. That figure does not even account for police security; I have had letters from local councils about the cost that they are required to meet for security. The tax advantages of the income from the Duchies are not taken account of.

I am not challenging the role of the sovereign, in particular, but while European neighbours have streamlined their royal houses, we continue to fund a sprawling network of so-called working royals on ribbon-cutting duties or pulling open tableaux. That is not real work. It is not like a teacher who works five days a week or a nurse in a geriatric hospital who might be working a 12-hour shift. It is not real work that they do. I might just say that Princess Anne is a notable exception. It is interesting that all her offspring have given up their royal titles and work for a living. Perhaps that is an example that other members of the Royal Family might think about.

The fundamental issue here is accountability. When George Osborne introduced the sovereign grant, he claimed that removing parliamentary debate would depoliticise the monarchy. In reality, it has stripped away democratic oversight, and the tightening of freedom of information rules means that transparency is now virtually impossible, breaking the assurances that were given previously to Parliament. Shielding the institution behind FoI exemptions and blocking debate has enabled a runaway increase in public funding.

To achieve such accountability, three key actions are necessary, and I sincerely ask the Minister to take account of the debate here today and to take these suggestions to his fellow Ministers in the Treasury and elsewhere. We should consider, first, a return to annual parliamentary scrutiny through regular debates and votes, as with other public bodies. Secondly, we should also treat the Royal Household like any other public body under the Freedom of Information Act. Thirdly, we should ask the Commons to task its Public Accounts Committee to conduct a full, root-and-branch review of all royal funding and finances. Parliament is here to safeguard public money, and it is time we modernised, streamlined and properly brought transparency to this institution. I hope the Minister will genuinely and sincerely take account of this debate and, with colleagues, look again at this matter.

Lord Sikka (Labour)

My Lords, it is a great pleasure to follow my noble friend Lord Foulkes of Cumnock. This Bill comes at a time when many households are struggling to make ends meet. Under this Bill, the core funding of the Royal Household—that is, after ignoring the money allocated for refurbishment of Buckingham Palace—rises from £51.8 million for 2024-25 to £99.9 million for 2027-28. That is an increase of 97%. I am not aware of any ordinary household that has secured an increase of this magnitude in its income to discharge its essential duties. The average real wage of workers has barely changed since 2008; 25.3 million people live below the minimum income standard. Around 300,000 people a year are dying while waiting for an NHS hospital appointment, but here we are giving away a large chunk of money.

This massive increase is being given to a family which, according to Forbes magazine, could be worth £21 billion. Anyone with lifetime savings of over £16,000 is generally disqualified or severely restricted from receiving universal credit, housing benefit or income support, but under this Bill, a mega-rich family would continue to receive public money. Many people would not be happy with that arrangement, and clearly the Government must notice that issue.

Profits from the Crown Estate, which is, in essence, a property business owned by the monarch but run independently, go to the Treasury. Its profits are used as a benchmark to calculate the funding given by the Government to the Royal Family in the form of sovereign grant. But then there are questions. Do the Crown Estate, the Crown jewels, the Duchy of Cornwall and the Duchy of Lancaster belong to the nation, or are they private property of the Royal Family? If they are public property, all revenues must go to the public purse. If they are private property, those assets and related income streams must be taxed in the same way as any other private property and the beneficiaries must pay income tax, capital gains tax, corporation tax and inheritance tax. Perhaps the Minister can clarify what makes something a public property or a private property and why they need to be treated differently in this case.

What we have had for decades is what I call a medieval fudge. We distinguish good societies from the rest by appealing to the rule of law, but the laws do not apply equally to all. Some get privileged treatment. The King is exempt from inheritance tax. Ordinary mortals are not. The duchies do not pay corporation tax or capital gains tax. The King voluntarily pays income tax on his private income and a portion on the privy purse not used for official duties. Why should payment of income tax be voluntary for anyone? Do not we have a rule of law? I am sure many people would like to pay taxes voluntarily, but they will never get that chance. Can the Minister explain why the King’s exemptions from income tax, inheritance tax and capital gains tax continue, and what revenues could be collected if those exemptions were to be abolished?

In June 2026, the King published data showing that he paid around £30 million in voluntary income and capital gains taxes for the period 2022-23 to 2024-25, which continued the practice started during his time as the Prince of Wales. The current Prince of Wales also embraces similar disclosures. These selected snippets should not be confused with transparency. Anyone completing a tax return must disclose employment income, income from trade or profession, investment income, dividends from home and abroad, capital gains, business profits, inheritance and more—but there are no such disclosures in the snippets which are put into the public domain. There is no transparency about the wealth or income of the Royal Family, and this is in the early 21st century. Nothing is known about the King’s investments, how they are held, where they are held, or income therefrom. Various tax exemptions erode the UK’s tax base as well.

In the absence of meaningful data, it is hard to know what the correct amount of tax paid by the King or the Prince of Wales actually should be. The sovereign grant does not count for income tax purposes, but if normal individuals receive sums from the state to enable them to make ends meet, they are taxable. For example, the state pension, carer’s allowance, contribution- based jobseeker’s allowance and contribution-based employment and support allowances are all taxable. There is one rule for the poor and another for somebody else. The King does not pay capital gains tax on capital off the Duchy of Lancaster and pays income tax on his private income only to the extent that it is not used for official purposes.

In the House of Commons debate on this Bill, Ministers referred to “personal”, and another word they used was “official” expenses, but none offered any clear distinction between the two. Are support staff, palaces, various residences, servants, kitchens, and chauffeurs really for personal or official purposes? Hopefully, the Minister can clarify. Presumably, whatever is personal should not be funded by the public purse, so it would be helpful to see details of that particular information.

One of the most anomalous positions is that of the Duchy of Cornwall. Is it really a public organisation? Is it a Crown body? Is it a corporation, or is it just a private fiefdom, a state within in a state? If it is part of the Crown, then all the checks, balances, scrutiny and accountability that apply to public assets should also apply to the Duchy and its custodian, who is the Prince of Wales. Its records should be subjected to periodic scrutiny by the National Audit Office to determine whether the organisation is operating efficiently, effectively and lawfully and whether the public is getting value for money. However, none of this applies to the Duchy, because we are told that it is a private estate.

Is it really a private estate? The business of the Duchy extends far beyond Cornwall. It is one of the biggest landowners, spread across 20 counties in England and Wales. Its operations include, or have recently included, the manufacture and sale of biscuits, snacks, jam, marmalade, honey, chocolate, organic food, seeds, holiday cottages and farm produce. It owns warehouses, Dartmoor prison, the Oval cricket ground and more. It certainly does not easily fit with the word Cornwall here. It extends far beyond Cornwall and it is really a conglomerate. Its 2026 accounts show that it has assets of £1.3 billion and a financial surplus of £21.55 million. It is a commercial entity, and it competes with local, national and international businesses, but it does not pay corporation tax or capital gains tax because now we are told that it is actually a Crown body. So the Duchy claims exemption from taxes on the basis that it is a Crown body.

Inevitably, these exemptions must lead to unfair competition. The payment of taxes provides for education, pensions and healthcare for the workers and social infrastructure used by the Duchy to make profits. However, because of the tax exemptions, the Duchy does not bear any of the social costs of that infrastructure. It is effectively having a free ride on the back of ordinary taxpayers. That cannot be right at all.

The Duchy complies with the UK’s employment and health and safety laws. It collects PAYE and national insurance; it collects and pays VAT. This gives the appearance that it is actually a business, subject to the laws applicable to all other businesses. But then at the same time, we are told that it is not a commercial organisation and cannot really be treated as a corporation. Well, what is it? I hope the Minister will be able to tell us exactly what it is and why on earth it should be exempt from the laws which apply to any other commercial entity.

Page 92 of the Duchy’s 2026 accounts, which noble Lords might want to have a look at if they are finding it hard to go to bed tonight, contains interesting information. It says:

“Certain Duchy properties were occupied by His Majesty The King and his … staff for living accommodation or commercial activities. These were let at open market values; the total value of annual rent charged amounted to £503,711”.

This is a rent that the Duchy receives by renting out Highgrove House. So, the King pays rent to the Duchy of Cornwall, presumably out of the sovereign grant—but the Duchy is owned by his son, the Duke of Cornwall, so one member of the family is paying rent to another. Money does not go to anybody outside at all. It is retained within the family, so can the Minister explain how this interfamily transaction affected the calculation of the sovereign grant? Is it really a cost in any way whatever?

To sum up, major reforms are needed on transparency, accountability, calculation and the grant of the sovereign grant. The Royals frequently say that they wish to be treated as normal people. I urge the Minister and the Government to fulfil that particular wish.

Lord Berkeley (Labour)

My Lords, it is a real honour to follow my two colleagues who spoke before me and have given so much detailed information about what is wrong with the Crown Estate and the sovereign grant system. I welcome my noble friend the Minister’s clarification of what is in the Bill; it is certainly an improvement on what we had before, but there is an awful lot more to do.

I deprecate the lack of scrutiny that the other place has given this Bill because it is the kind of thing where they could, with all the help that they can get, provide some useful challenges to what the trustees produce. Of course, the first thing is that any challenges need to be independent. Most people would think that the trustees, who are the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse—which we can look upon as the royal family—appear to be marking their own homework, which is not a satisfactory way of providing an independent assessment.

A related point is the continued feeling, among many in the country and in both Houses, about deference. People seem to have stepped back from being positively critical of some things that have happened for fear of upsetting members of the Royal Family. This is coupled with a feeling that many members of the Royal Family—and I exclude those whom my noble friends have spoken about—have an expectation that people consider to be out of touch with a reduced monarchy and the financial situation in which many find themselves. It is unclear to me which royals are on “official duties”, as they are apparently called. As my noble friend Lord Foulkes said, why do they need two helicopters? I am probably seen as the black sheep of the Royal Family-critical group, because I have the honour of having been quoted in a book a few years ago by the then Prince Charles, who said, “Don’t worry about Lord Berkeley, he’s a nutcase”. I think that is a bit of an honour, actually.

In any future investigation, one of the most important things that must be done is to address the question of the expenditure that is applicable to the Royal Family and the King as the Head of State—let us call these “official duties”—and what ends up in their private use. Where does the revenue sit: is it private or public? Is the grant value for money?

To give an example, Buckingham Palace has been mentioned as a cost to the taxpayer, and it seems as though as good job has been done. The costs are reasonable and it is now nearly finished, and that is to be welcomed. Not many noble Lords will know, however, that the income from visitors to Buckingham Palace goes into the pocket of the sovereign. If the taxpayer has paid all these millions to rebuild it, as an emblem of the state and everything else, surely the income from visitors should go to taxpayers, as a small reimbursement of what they have paid.

In passing, this is rather a good example of how a building can be refurbished to a high quality at a reasonable cost. Perhaps those who are in charge of trying to upgrade the Houses of Parliament should get a few lessons from them, but that is a little beside the point. The taxpayer is paying renovation costs, and the King or the Duke of Cornwall are getting the income benefit. This is very odd, and it is not declared.

A similar example is when royalty go on official visits. As noble Lords will know, it is normal for royalty to give a gift to their host and to receive one in return. Sometimes they are small gifts and sometimes they are large ones. But, again, it seems as though the gifts that go to the sovereign or whoever it is are retained by the sovereign, when it is the taxpayer who has paid for the gift that the sovereign gives. It should be one or the other but, of course, it is hard to ask questions as it is all very secret.

Other noble Lords have mentioned the problem of property. Recently, I found it very interesting to read Royal Mint, National Debt, a book by Norman Baker, the former Member of Parliament for Lewes in East Sussex. It lists 21 properties that are royal residences, as well as 13 others. Do the royals really need 21 properties to fulfil their royal duties? Every time the incumbent changes, it seems the new one insists on buying a new property without giving up the old property. Do they let it out? If so, where does the income go?

My noble friend mentioned the Duchy of Cornwall, which, as noble Lords will know, made a profit of about £22 million last year. But, as my noble friend said, it does not operate like other estates. The duchy also receives income from people in Cornwall who die intestate, and it gets a nice cut of the mineral rights from the mining in Cornwall, of which there is quite a lot. However, that does not mean that the profit—or even some of it—goes to housing in Cornwall or on the Isles of Scilly, or to maintaining services and transport. As noble Lords will know, there is a big issue with air services to Scilly at the moment. A useful contribution would be to improve the airport on St Mary’s to category 3 so that it did not get closed because of fog so often. The duchy has offered a very nice site on St Mary’s for building an abattoir, which is useful for the local farmers—although it took a long time for that offer to be made. But we can be quite sure that, the abattoir having been built—which other people will fund—any charge for its use will go straight into the pocket of the duchy, rather than those who funded it.

I welcome the National Audit Office’s input so far, but it needs to be much wider in scope—in addition to what the House of Commons should do. The first thing to look at is need. Is there a need for this expenditure? Secondly, is it official or private, as some of my colleagues have said, or is it the usual thing: the Treasury pays the cost, and the income goes as a profit to the private part? There needs to be a debate about affordability. Taxpayer value for money is not evident at the moment, and it needs to be.

The most important thing is that this must be seen to be undertaken by an organisation that is separate from the Government and the Royal Family. I do not know whether that organisation should be a separate committee or the National Audit Office, but something needs to be done to remove the deferential attitude—that we must not upset anybody—that seems to cover so much of this. As my noble friend said, this is a business. If it is a business, it should be treated on business terms, where everybody is equal. In the future, I hope we will have a longer debate. I hope my noble friend the Minister will take comments from many noble Lords this evening and, with his colleagues, consider what we can do to make this a modern, affordable monarchy.

Baroness Kramer (Liberal Democrat)

My Lords, I will focus on the Bill and not on the broader issues. I also intend to be brief, as my colleagues in the Commons spoke to the issues and we will support the Bill.

First, with 10 Prime Ministers of the UK in a decade and a President in the US who feels free to make play with the traditional balance of power, I feel very relieved that we have a stable, non-political head of state—even if monarchy is a legacy of a very different past. That role as head of state must be properly funded, as must the heritage buildings, although why we go through the complex myth that the monies are related to the Crown Estate is quite beyond me. Given that that mechanism remains, I find it peculiar that future grants are set at a fixed percentage of Crown Estate revenues when these vary year on year. How does that enable sensible planning and not encourage overspend?

My colleagues in the Commons raised issues around the transparency of grant spending and submitted an amendment that the National Audit Office—rather than just the royal trustees—should independently assess the submission up front, rather than waiting to review the spend in a retrospective audit. That value-for-money assessment would be laid before both Houses and require the approval, by resolution, of the Commons, thus returning some democratic accountability and oversight. A process such as that might, for example, have answered the obvious question, in looking at the numbers in the briefing on the Sovereign Grant Bill, of why the increase in core funding in the grant is well above inflation; that was true for 2025-26 and is true again for 2026-27. If that work had been done, we would surely have had more detail. We could have had a fleshed-out answer from the Minister in the other place, who simply said that costs have risen. Such additional transparency and oversight would give the public more confidence in the use of the monies that are given as the sovereign grant.

My colleagues also sought assurances that neither these funds nor taxpayer funds generally will fund state honours for Andrew Mountbatten-Windsor. I am not sure that the Minister gave a direct response, but I interpreted what he said as an assurance that that will not happen—I see that the Minister here is nodding.

I have one last question: with the King choosing to live at Clarence House, rather than returning to Buckingham Palace, and the younger members of the Royal Family generally choosing a more modest lifestyle, are there plans for what we are going to do with Buckingham Palace when its restoration is completed? Will it continue in its current roles? Are new roles being contemplated? How does the funding work through for all that? The sovereign grant process could benefit from significant simplification and greater transparency. However, given that we are where we are, we will support the Bill.

Baroness Neville-Rolfe (Conservative)

My Lords, I am grateful to the Minister for introducing the Bill and the context for its passage so clearly.

The sovereign grant provides the public funding that is necessary to support the monarch in carrying out their official duties and to meet the associated costs of the Royal Household, including the maintenance of the occupied royal palaces. Those tasks are vital, and it is right that they are provided for.

His Majesty’s Official Opposition support the Bill. Like the Minister and my noble friend Lord Redwood, we recognise the considerable contribution made by His Majesty the King and other working members of the Royal Family in carrying out their constitutional and public duties, both at home and overseas. Most of that is admired around the world. The working members work hard, and the profits from the Crown Estate go to the Treasury—as I remember when I sat in the Minister’s seat and the receipts were rising.

Buckingham Palace alone attracts some 683,000 visitors each year, which is a big boost to the wider economy. It is not only a symbol of the monarchy and the Royal Family but one of the most recognisable symbols of the UK itself and our national history, which we want people to understand, both here and abroad.

Buckingham Palace, Windsor Castle and the Mall provide the setting for some of the great occasions on which this country comes together: royal weddings, state ceremonies, the award of honours, remembrance days and moments of national celebration. These sites are seen by millions at home and around the world and form an important part of how our country presents itself internationally.

The sovereign grant helps to ensure that the buildings and spaces for which it is responsible remain fit for purpose, properly maintained and worthy of the national institutions they represent, so that they can continue to be a source of national pride for generations to come. The sovereign themselves plays a vital role in representing our country at home and abroad. They remain, I believe, a significant source of British soft power and of stability, as the noble Baroness, Lady Kramer, pointed out.

The central purpose of the Bill is straightforward. The sovereign grant was temporarily increased to meet the costs of the 10-year Buckingham Palace reservicing programme. As that programme reaches its conclusion, it is reasonable that the level of funding should be reconsidered and that those exceptional capital costs should no longer be reflected in the baseline grant. Indeed, the principle that the grant should be reset once the reservicing programme had concluded was established under the previous Government.

As we have heard, the Bill accordingly sets the sovereign grant at £99.9 million for 2027-28, compared with £137.9 million in 2026-27. That is a sensible objective, but this Bill does rather more than reset the grant for a single financial year, and I would be grateful for further clarification on the longer-term changes. As the noble Lords, Lord Foulkes of Cumnock and Lord Berkeley, said, it is our job to do the scrutiny that the House of Commons has not had time to give this—although I am not in the same place as them or the noble Lord, Lord Sikka. I will leave the Minister to respond to their wider comments.

I turn to my questions on the Bill itself and to Clause 2 and the new reference percentage of 20.5%. The Government have explained that this figure arises from the review undertaken by the royal trustees and that it reflects a bottom-up assessment of the expected requirements, alongside forecasts for Crown Estate revenues. Ministers in the other place also explained that the assessment includes future expenditure on the occupied palaces, modernisation of digital infrastructure and cyber security, and other operating costs. That is helpful, but I hope the Minister can provide the House with a little more detail about the calculation; after all, 20.5% is a very precise figure. Can the Minister explain more fully how the royal trustees translated their assessment of the future needs of the Royal Household into that particular reference percentage?

That leads to a wider question of whether the revised mechanism is sufficiently resilient to future changes in Crown Estate revenues. The attraction of a statutory formula is that it provides predictability and a degree of separation between the day-to-day decisions of Ministers and the funding necessary for the discharge of the monarch’s official functions, but any formula is as effective only as the assumptions on which it rests. It would therefore be helpful if the Minister could explain how the Government expect the new arrangements to operate if the Crown Estate revenues depart significantly from current forecasts. How quickly will the system be capable of responding?

That brings me to Clause 3, which is the most constitutionally interesting. It provides for an appropriate amount of the sovereign grant to be one that would leave the adjusted value of the reserve fund at no less than 10% and no more than 50% of annual expenditure. Where the normal formula produces a result outside that range and the royal trustees cannot correct it under the existing mechanism, they must identify an appropriate alternative amount and the Treasury must make regulations giving effect to it. Can the Minister explain the basis for those two thresholds? Why were 10% and 50% considered the appropriate lower and upper limits? What assessment has been made of the level of reserves genuinely required for financial resilience?

More fundamentally, Clause 3 slightly changes the balance of the existing framework. The 2011 system is principally formula-based. The Bill retains that principle but it also creates circumstances in which the Treasury will have a direct role in altering the amount of grant. There may be perfectly good practical reasons for providing flexibility. Nevertheless, when Ministers are given powers to alter the level of public funding provided under a statutory framework, Parliament is entitled to understand precisely how those powers are intended to operate. That is particularly relevant to new Section 6B, which allows the Treasury to increase the sovereign grant during the course of a financial year when Ministers consider that there are “exceptional” circumstances requiring them to do so. The Treasury must consult the royal trustees, and any such regulations require the approval of the House of Commons. Can the Minister give the House some indication of what the Government envisage falling within that definition?

Finally, I return to the underlying purpose of the Bill. There is a perfectly clear rationale for revisiting the sovereign grant as a substantial, time-limited programme of work at Buckingham Palace comes to an end. There is, equally, a strong case for ensuring that the statutory framework is capable of responding where its normal operation would otherwise produce an obviously inappropriate level of funding. We therefore support the Bill, but I look forward to the Minister’s response to the questions I have raised.

Lord Pitt-Watson (Labour)

My Lords, this has been an interesting discussion, and rightly so. I will do my best to respond to those parts of the debate where I can. If I fail so to do, please contact me afterwards; a written response might be better.

It is right that we have this discussion because where public money is concerned, this House is entitled to expect clarity, discipline and proper accountability. Where the constitutional arrangements supporting the official duties of the monarch are concerned, this House is also entitled to expect a framework that is stable, proportionate and fit for purpose. That is what the Bill provides. At its core, it does three things. First, it resets the level of the sovereign grant to reflect the fact that the exceptional funding requirement associated with the Buckingham Palace reservicing programme is coming to an end, therefore bringing down the sovereign grant, which would otherwise be rolling forward into the future with the existing formula. Secondly, it establishes a mechanism for calculating the grant in future years: one in which, if the reserve was to fall below 10%, it might trigger a discussion as to whether more was needed. If it went above 50%, that might trigger a discussion about whether less was needed. Thirdly, it introduces powers to adjust the grant in exceptional circumstances. The noble Baroness, Lady Neville-Rolfe, asked what those might be. If we imagine a catastrophic fire, for example, one would want to respond to that. Taken together, hopefully those changes amount to a measured and sensible reform.

However, I want just to be clear about what the sovereign grant does and does not cover. It does not provide any personal income to any member of the royal family. It does not fund private properties, to answer the question asked by the noble Baroness, Lady Kramer. Its purpose is to support the monarch’s official duties as the Head of State and maintain the occupied palaces from which those duties are carried out. It supports staffing, official travel, upkeep of buildings used for state occasions, public engagements and constitutional functions. That is its purpose, and that only is the purpose of the Bill.

I know that the noble Lord, Lord Sikka, and other noble Lords would like a wider debate about the Royal Family and its funding. I recognise that they have raised questions about taxation and the position of the Duchy of Lancaster, and the noble Lord, Lord Berkely, asked about the Duchy of Cornwall. I know these are matters on which the noble Lords hold strong views and considerable expertise, but this Bill is a targeted piece of legislation. Its purpose is to amend the statutory framework governing the sovereign grant so that it continues to operate effectively at the end of the reservicing programme, with appropriate funds being made available. I will turn my attention to those matters.

We have had questions about adequacy—or inadequacy—from the noble Lord, Lord Redwood, and the noble Baroness, Lady Neville-Rolfe. The completion of the capital programme at Buckingham Palace does not mean that all capital programmes have disappeared. There remains a large and complex historic estate that requires ongoing maintenance and long-term planning; that has been included in this budget. There is a need to address the maintenance backlog, to address ageing systems, to strengthen cyber resilience—I mentioned this in my opening speech—and to improve energy efficiency. These funding requirements have been assessed through a detailed bottom-up assessment of the Royal Household’s costs, and an assessment of the Crown Estate’s expected profits over this period. But the key thing is the bottom-up assessment, which comes to £99.9 million; that is reflected across to the 20.5% of the Crown Estate. I will come back to this issue in a little while.

While the Bill reduces the grant, it is done in a way that should reflect the Royal Household’s genuine funding requirements for the years ahead, rather than setting the grant to an arbitrary figure. This has gone via the royal trustees, including the Prime Minister and the Chancellor of the Exchequer. The Chancellor of the Exchequer is my boss, and he would not assent to any thought that money had been spent where he was marking his own homework. This has been a process of some rigour, and a bottom-up process.

However, this still raises the question—it is a big question for some noble Lords on this side of the House—of whether this is value for money. The noble Lord, Lord Sikka, raised a number of questions about the poor and needy people we have in this country, and about how you think about expenditure on the sovereign relative to all the other ways that this money could be spent.

Might I just be a wee bit challenging on this? I tried to think my way through that, and of what I could compare the sovereign grant to. I thought I could compare it to a similar budget for your Lordships’ House, which would be 2.5 times the size of the sovereign grant. I wondered whether we might reflect on how the people of Britain listening to this debate—who, by the way, pay both of those bills—would assess the value of each.

I do not know for sure the answer to that question, but I thought my noble friend Lord Foulkes of Cumnock would recognise the quotation from Robert Burns:

“O wad some Power the giftie gie us

To see oursels as ithers see us!”

I do not know what the answer to that question is. By the way, I am big supporter of your Lordships’ House, and I have a sense that the people of Britain would give considerable support to the payment of a sovereign grant for our King to be able to carry out his duties.

Lord Foulkes of Cumnock (Labour)

There is another quotation from Robert Burns:

“Wee, sleekit, cowrin, tim’rous beastie,

O, what a panic’s in thy breastie!”

If each of us were not to stand up and raise questions, we would be accused of being a “Wee, sleekit, cowrin, tim’rous beastie”. I hope my noble friend recognises that Members of this House have a duty and a responsibility to raise these matters, and we do so with honour and seriousness.

Lord Pitt-Watson (Labour)

Absolutely, and I was not offering that in any way as a put-down of the debate. Rather, I was thinking of something that I could compare in government expenditure to the sovereign grant, and I chose House of Lords expenditure. I cannot see how I can compare it to nurses’ pay; it is just entirely different.

The noble Baroness, Lady Neville-Rolfe, asked about the 20.5%. I reassure noble Lords that the way in which trustees arrive at the relevant figure is through a bottom-up assessment of what is required to enable the Royal Household to carry out its duties. It is not by guessing a percentage. The anticipation is that the £99.9 million will carry forward in future years but with the ability to adjust, which I have already discussed.

The noble Baroness, Lady Kramer, raised questions about transparency and scrutiny. The Government agree that these matters should be subject to proper parliamentary oversight, but it is also important to be accurate about the framework that exists. The sovereign grant is covered by statute and subject to reporting and audit requirements, on a par with government departments. The annual amount is authorised by Parliament through the usual supply processes. The relevant accounts are laid before Parliament and audited by the National Audit Office, so this is not a case of public funding operating without scrutiny. The task before the House is to ensure that the underlying framework remains workable and proportionate and that the smaller amount that we are offering for the smaller grant in coming years is both adequate and not excessive.

The question before us tonight is a practical one: do we leave in place a framework that no longer properly reflects the end of exceptional reservicing expenditure, or do we put in place a revised framework that resets the grant, improves flexibility and preserves the ability of the grant to fulfil its core purpose? The Government’s view is that the right course is the latter. These measures are targeted, proportionate and fair. I thank all noble Lords for raising their questions. The Bill delivers value for money for taxpayers, improves the existing framework governing the sovereign grant, so that it continues to operate as Parliament intended and ensures that the grant will continue to fulfil its core purpose of supporting the official duties of the monarch and maintaining the occupied royal palaces.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.