Special Investigation:

Revealed: The secret deal that changed the monarchy

view gallery VIEW GALLERY

Sovereign's debt crisis sparked 2006 agreement surrendering ultimate financial autonomy

The Queen has been forced to give up the ultimate right to manage the Palace's financial affairs in a secret deal signed by Palace aides and the Government,
The Independent has learnt.

A "financial memorandum" formalising the relationship between the sovereign and ministers also sets out tough terms on how the Queen can spend the £38.2 m handed over by Parliament each year to pay for her staff and occupied palaces.

The document, disclosed under the Freedom of Information Act, grants ministers the constitutional right to take over the direct management of the Queen's public wealth in the event of a disagreement over how the subsidy is awarded or spent.

It places the Palace in a weak position in its current negotiations with Government for an increase in Royal funding. Last night constitutional law experts said the memorandum could be used by ministers to force the Queen to cut back on her spending or even make her fall back on her considerable private wealth.

The deal follows disputes between the Palace and the Government over the growing costs and management of public money given to the Royal family.

Click here to see key clauses of the financial memorandum between the royal household and the Department for Culture, Media and Sport: Page 1 | Page 2 | Page 3

Paul Flynn MP, a member of the House of Commons Public Administration Committee, said: "Someone appears to have gone to extraordinary lengths to protect the Royal family from public scrutiny. The more information we have about the public subsidy paid to the Queen the more confidence will we have in the institution.

"The Royal family is part of the dependency culture of Britain in the same way that Mr Cameron spoke about people living in a council house accommodation for life."

Graham Smith, campaign manager of the anti-monarchy group Republic, said that, given the growing disagreements between the Palace and ministers over Royal funding, he was surprised that the Secretary of State hadn't already activated the clause.

"It's good to know that the Government can use this power. But there are already 'irreconcilable differences' between the Government and the Royal household over how much of taxpayers' money the Queen requires, and between MPs and the Royal household about public access to the palaces."

The memorandum lists 70 clauses dictating the financial relationship between the Queen and the Government. But the key clause declares: "in the event of any irreconcilable differences over the interpretation of this financial memorandum or the memorandum of understanding, the Secretary of State shall be entitled to cease payment of grant-in-aid and take over directly the execution of her responsibility for the provision of property services for the occupied Royal palaces, funding for Royal communications, and provision of property and guard services for Marlborough House."

Under a court order approved by the Information Tribunal, the Department for Culture Media and Sport (DCMS) has disclosed hundreds of letters, emails and reports in respect of the growing public cost of the Royal family. Correspondence reveals the history of antagonism between the Palace and the Government over the public subsidies paid to the Queen.

In one exchange, it emerged that the Queen was handed £2m by the Government to help her cash-flow problems. Under pressure from the Palace, ministers surrendered disputed funds from the sale of land at Kensington Palace Gardens to boost the annual £15m grant-in-aid already given to the Queen. Ministers claimed all the sale fund should be paid into Government coffers while the Royal household countered that it belonged to them. The letters also reveal that the Queen won a £1m rates rebate for her palaces in the same year that she built up more than £20m in reserves from public money.

A spokesman for the DCMS said the sovereignty clause was based on the then new memorandum for non-departmental public bodies or quangos. He added: "This [the standard memorandum] would include whether there was still a need for the body, and whether it was as efficient as required. In the case of the Royal household property services, as Government does not have the same control over the Royal household, the paragraph was modified to achieve the same aim when there was a difference in interpretation that could not be resolved."

A centuries-old wrangle...

Ever since Charles I paid with his head for his attempt to impose on a fearful Parliament the notion that a king's power came direct from God, the English monarchy has fought a losing battle for control of the nation and its own finances.

Although the divine right to unquestioned rule had been relied upon from the Plantagenets to the Tudors, it took the protestations of Charles Stuart that his power was absolute and the English Civil War to secure a passing of the nation's purse strings from the Crown towards its uppity subjects. Charles I in effect sounded the death knell for the totalitarian monarchy by insisting: "Kings are not bound to give an account of their actions but to God alone."

With the supremacy of Parliament assured by Oliver Cromwell, the Glorious Revolution of 1688, which overthrew of James II, resulted in the separation of the expenses of monarchy from the general cost of running the state. Less than a decade later, the ability of the monarch to spend the Crown's income was curtailed under the reign of William and Mary.

Under an 1697 Act granting William III "subsidy... for the Service of His Majesties Household & other Uses", the monarch was granted £1.2m, of which £700,000 was to be used for the new "Civil List" to pay for the expenses of the civil service, the Royal Household and his lifestyle.

By the reign of George III, the monarch had surrendered all hereditary revenues apart from the Duchy of Lancaster, which to this day provides the Queen with her private income. In 1830, a new law restricted the Civil List to the personal expenses of the Crown and it has remained largely the case since. The Government expects a new system of "consoli- dated support" to be in place by 2012.

Battlegrounds: Palaces, pavilions, postage: spending issues that caused the auditor concern

Buckingham Palace

Much of the Government's 2005 investigation concerned royal spending on the upkeep of Buckingham Palace and other palaces. The Department for Culture, Media and Sport later complained of a significant decline in the number of "jobs" considered to be good value for money.

Cricket at Windsor

The creation of a cricket pavilion for the Royal Household Cricket Club at Windsor Castle caused the auditor to complain: "During my review... I have noted several anomalies. The procurement of the prefabricated building does not appear to have been conducted in accordance with RHPS desk instructions... The property manager is investigating the situation."

Birkhall

The Prince of Wales's increased use of Birkhall, his private residence in Scotland, led the Department for Culture, Media and Sport to ask why his "dispatches (cost of redirecting his mail) have increased, and whether it is likely to continue". The Palace said it believed the increase "is likely to be permanent because of the frequency of his visits to Birkhall".

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

C# Algo-Developer (BDD/TDD, ASP.NET, JavaScript, RX)

£45000 - £69999 per annum + Benefits + Bonus: Harrington Starr: C# Algo-Develo...

Senior Data Scientist (Data Mining, Apache Mahout, Python,R,AI)

£60000 - £70000 per annum + Benefits + Bonus: Harrington Starr: Senior Data Sc...

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

Java Developer - 1 year contract

£350 - £400 Per Day: Clearwater People Solutions Ltd: Our client based in Cent...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone