Funding for the Queen's household by the taxpayer through the Civil List will remain frozen at £7.9 million for the coming year, Chancellor George Osborne announced today.
Delivering his first Budget statement to the House of Commons, Mr Osborne said the freeze was made with Her Majesty's full agreement.
A new means of support for her will be proposed at a later date, he added.
He said: "The amount provided by the Civil List has remained unchanged over the last 20 years at £7.9 million.
"This has required careful management. Because of inflation, the annual payment is today worth only a quarter of what it was 20 years ago.
"I can announce that with the full agreement of the Queen, the Civil List will remain frozen at £7.9 million for the coming year and I will propose a new means of consolidated support for Her Majesty for the future at a later date."
The royal households have agreed that in future, Civil List expenditure will be subject to the same audit scrutiny as other Government expenditure through the National Audit Office and the Commons Public Accounts Committee, he added.
Mr Osborne said: "I believe this will mean clear accountability in this House and it will strengthen public confidence."
He paid tribute to the Queen's "loyal service and immense contribution to public life."
The Civil List pays for staff costs and running expenses of the Queen's household and is set every 10 years. A revised figure was due this year.
The Queen was reported last month to have asked for an increase in taxpayer funding.
The sum paid to her household was raised to £7.9 million a year by Sir John Major in 1990 but frozen in 2000 following a deal with the Treasury to compensate for 10 years of over-generous payments.
The Sunday Telegraph reported that Buckingham Palace had told Government officials that spending was now £7 million above the annual limit and that the surplus would run out in 2012.
But a cross-party group of MPs is understood to have backed a call for a freeze.
An ICM poll commissioned by Republic, a group campaigning for a democratic alternative to the monarchy, showed 56% of people opposed an increase in the Civil List.
The results, published yesterday, revealed that just 28% believe the Queen should receive more money from taxpayers.
The Queen and the Duke of Edinburgh are the only members of the Royal Family to receive a Parliamentary allowance each year.
The funding dates back to 1760, when King George III agreed with the Government that the Crown Lands would be managed on the Government's behalf, with surplus revenue going to the Treasury.
It was agreed that the King would receive a fixed annual payment in return, which later became known as the Civil List.
About 70% of the funding is used to pay staff salaries. The money is also used to help fund official functions such as garden parties, receptions and entertainment during state visits.
The Royal Household employs about 1,200 staff, including caterers, gardeners, secretaries, press officers, property surveyors and furniture restorers.
The Queen entertains nearly 50,000 people each year.
Republic welcomed the decision not to raise the Civil List payment this year but suggested Mr Osborne could have gone further and cut the taxpayer funding for the Queen's household.
Campaign manager Graham Smith said: "This is a huge victory for our campaign. We've been demanding these sorts of reforms for the last five years.
"The devil is in the detail but we welcome the fact that the National Audit Office will be monitoring the accounts.
"The big question is, when everything is being cut, why is the Civil List only being frozen? This is an opportunity to cut tens of millions of pounds off the public spending bill."
The group called for a "genuine review" with a view to cutting the overall cost.
Mr Smith added: "We believe a much greater level of transparency will be very embarrassing for the monarchy as it will reveal a lot of spending of public money that is clearly inappropriate."
The latest report on Civil List expenditure found that the royal household had been a "good housekeeper" since the last report, in 2000.
The Report of the Royal Trustees also revealed the salaries and pension payments for members of the Lord Chamberlain's Committee who are paid from the Civil List.
Sir Alan Reid, the Keeper of the Privy Purse and royal finances, was paid £180,000 in 2009-10.
As Treasurer to the Queen, Sir Alan's role includes overseeing the management of the Civil List.
The Private Secretary to the Queen, the Rt Hon Christopher Geidt, earned £146,000 over the same period.
The report revealed that during the past decade, the royal household was responsible for additional expenditure of £2.2 million a year, which had previously been met by other Government departments.
It also agreed to take on responsibility for £600,000 a year of additional expenditure on security and freedom of information.
The amount of extra expenditure absorbed by the royal household now totals £3.6 million a year.
The report recommended that in 2011 the royal household takes on responsibility for £200,000 of costs formerly covered by the Home Office and Ministry of Defence.
But Government departments are expected to spend £3.8 million in this financial year on functions such as state visits to and by the Queen and maintenance of the Palace of Holyroodhouse in Scotland and Home Park at Windsor Castle.
The new means of supporting the Queen in her public duties, referred to by Mr Osborne in the Commons, will be developed "beyond 2011".
The Budget said: "The current arrangements for supporting the royal household, established in 1972, need to be replaced.
"There will be a simple modern means to provide consolidated finances for the Queen's future expenses as head of state in an efficient, dignified and accountable fashion."