Extraordinary details of the Queen's finances revealed

view gallery VIEW GALLERY

Extent of financial crisis facing the monarch revealed in secret documents disclosed to The Independent

Details concerning the mounting financial crisis facing the Queen have been disclosed to
The Independent after ministers agreed to hand over secret correspondence between Buckingham Palace and the Government.

The documents reveal that at the same time the Queen was requesting more public money to pay for the upkeep of her crumbling palaces she was allowing minor royals and courtiers to live in rent-free accommodation. They show that as early as 2004 Sir Alan Reid, the Keeper of the Privy Purse, had unsuccessfully put the case to the Department for Culture, Media and Sport (DCMS) for a substantial increase in the £15m a year public funding.

But by 2005, the papers reveal, there was mounting pressure from the Commons Public Accounts Committee for the Queen's aides to come clean about the extent of the grace-and-favour schemes being operated by the Palace. One letter shows that among the royals living rent-free in Kensington Palace and St James's Palace are the Duke and Duchess of Gloucester, the Duke and Duchess of Kent and Princess Alexandra.

The Surveyor of the Queen's Pictures and the Mistress of the Robes are two of six members of the Royal Household identified as not paying rent on their accommodation at the time.

Some of the most sensitive and embarrassing documents still remain under wraps while the Government goes to court to fight a substantial part of The Independent's Freedom of Information request.

Today's disclosure amounts to more than 100 letters, emails, memos and other documents.

The future funding of the Royal Family will be an issue facing whichever party wins the general election. Under a constitutional arrangement from 1991, the Civil List, which pays the Queen to perform her duties as head of state, must be renegotiated by the end of the year. At the moment it is an annual payment of £7.9m and the Palace is pressing hard for it to be increased.

Secret memos also show how the Palace planned to go ahead with refurbishing and renting Princess Diana's apartment at Kensington Palace after it had lain empty since her death in 1997.

In an email on 28 June 2005 the Palace informed the DCMS that the Royal Household intended to rent out Diana's rooms, anonymously known as Apartment 8-9. Having previously complained that public funds were insufficient to refurbish the rooms, the royal courtier wrote: "We have now decided that Apartment 8 will play an important role for temporary office accommodation."

But the Government was concerned about the public reaction to this re-use of Diana's apartment after it had remained empty for so long: "Apartment 8 is, of course, more difficult and I must be guided by you on how much we can say," said the DCMS official. "My view is that we should be as open as possible on the difficulties in finding an economic use for the apartment. This is an issue which is likely to attract attention and comment."

It later emerged that Buckingham Palace had rented the apartment to Prince Charles's charities.

A series of emails between the Royal Household and the DCMS also illustrate the lengths to which the Queen has gone to cut her bills.

In September 2005 the Queen's advisers complained to the Government that the "commercial market price for utilities has become untenable with price rises of over 50 per cent". They suggest a switch to a wholesale provider of gas and electricity and plump for Inenco which also serves the Prison Service and Channel 4.

The switch is approved by the DCMS officials who accept that the Queen has been "hard hit" by the cost of energy. But if the Royal Household had acted sooner Palace documents show that the Queen would have made a saving of £142,000 between 2004 and 2006.

Other documents reflect wrangles between the Palace and the Government over financing of the occupied palaces.

In October 2004 a senior official at the DCMS wrote to Sir Alan Reid taking issue with him over who has the rightful claim over the £2.5m proceeds from the sale of land from the Royal Garden Hotel in Kensingtion.

The official wrote: "We agreed that the receipt of £2.5m could affect any increased allocation which the Secretary of State is able to give to the Royal Household as result of the Spending Review. I have to say that the settlement is very tight and Ministers are not confident of being able to offer increased funding in all areas given the competing demands of the relatively small increase in the DCMS's budget."

He later adds: "That makes it more important to agree how we handle the £2.5m receipt. I cannot concede that it automatically belongs to the Royal Household. The receipts from the hereditary lands are surrendered to the Consolidated Fund [money held in the Government's bank account]. I hope we can come to an agreement on apportioning the receipt."

In further documents it transpires that the Treasury and DCMS have rejected requests for an increase to the grant-in-aid, taxpayers' money which finances the upkeep of the occupied palace. Today Royal aides say the backlog of property repairs stands at £32m which will rise to £40m in the next decade, prompting fears of a future public funding crisis.

A mounting financial crisis: Spiralling costs

The funding of the Royal Family is a complex formula comprising government grants and Civil List payments agreed by Parliament.

Much of what is perceived to be part of the Queen's fortune is not hers at all, but held in trust by her for the nation. This includes the Crown Jewels, Titians, Caravaggios, and many other priceless items.

In the low-inflation 1990s, however, the Queen was able to put some £35m to one side from the Civil List and it was then agreed that her payment would be frozen.

Over the past decade, Civil List expenditure has spiralled, meaning that she has been forced to take more money out of that fund each year. Assuming the current pattern continues, the fund will be wiped out by the time of her Diamond Jubilee in 2012.

She is still believed, however, to possess private wealth last estimated to be more than £90m.

Soon the debate over the escalating costs of the Royal Family will come to a head as the Queen is forced to go cap-in-hand to ministers for more cash to protect her constitutional position as head of state.

Palace aides have told Whitehall officials they need the extra money to offset the expense of maintaining the Royal Estate of palaces and to pay for increased staffing costs. But in the current financial climate any increase in the annual £35m state subsidy is politically sensitive.

Both sides are now engaged in a public relations battle as time runs out on negotiations that must settle the matter by the end of next year when the present deal on the Civil List expires. A second deal on the £15m paid in grants for the upkeep of the palaces is due to be finalised in 2011.

Royal aides contend the Queen's accommodation is in a parlous state and point to 2007, when Princess Anne had a narrow escape after some loose masonry was dislodged from the roof on Buckingham Palace. Another piece fell last year, missing a police officer who was on duty.

Royal expenditure: The disclosures

Land at the Royal Garden Hotel

An email and letter exchange reveals a tussle over who has control of £2.5m gained from the sale of Kensington Palace land in 2004. Ministers say it belongs to the state, while Buckingham Palace maintains it belongs to the Queen.


There was a £40,000 overspend in the refurbishment of the kitchen and coffee room of Windsor Castle. The kitchen is used to prepare hot drinks for the Queen and her household. The workmen uncovered voids under the floors which might provide "rat runs". The refurbishment of York House (St James's Palace) led to an overspend of £99,000.

Hard times

In September 2005 the Queen's advisers complained that the "commercial market price for utilities has become untenable with price rises of more than 50 per cent". They suggested a switch to a wholesale provider of gas and electricity, to Inenco, which also serves the Prison Service and Channel 4. The switch is approved by DCMS officials noting that the new contract will "undercut" traditional fuel companies by 6-8 per cent. If they had thought of it two years earlier, they could have saved £144,000.

Diana's apartment

Secret memos shine a light on plans to refurbish and rent out Princess Diana's apartment at Kensington Palace after it had laid empty since her death in 1997. After the work was completed, Apartment 8, as it is refered to by Palace aides, was controversially leased to Prince Charles's charities. The memos warn that plans for the future use of these apartments are "more difficult and an issue likely to attract attention and comment".

Grace and favour living

In 2005 the Palace was asked to declare which Royals and which courtiers were not paying any rent for their accommodation in the Royal Palaces. The Palace duly obliged by naming Prince Charles, Princess Anne, the Duke and Duchess of Gloucester, the Duke and Duchess of Kent and Princess Alexandra. Six members of the Royal household, including the Mistress of the Robes and Surveyor of the Queen's Pictures, had acquired similar grace and favour status. Their names were disclosed following pressure from the Commons Public Accounts Committee.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksA special investigation by Andy McSmith
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: UI / UX Designer

£25000 - £35000 per annum: Recruitment Genius: This firm are focussed on assis...

Recruitment Genius: General Processor

£7 per hour: Recruitment Genius: A vacancy has arisen for a General Processor ...

Recruitment Genius: Outbound Sales Executive - B2B

£18000 - £22000 per annum: Recruitment Genius: A great opportunity has arisen ...

Recruitment Genius: Online Sales and Customer Services Associate

£14000 - £16000 per annum: Recruitment Genius: Full time and Part time positio...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot