Diana accepts Charles's divorce terms

Frosty exchanges as Palace says, 'Details remain to be discussed'

PETER VICTOR and COLIN BROWN

Buckingham Palace was involved in frosty exchanges with the Princess of Wales last night as she announced that she has agreed to the Prince of Wales's demands for a divorce. The announcement, yesterday evening, took Buckingham Palace by surprise and provoked an irritated response from the Queen's spokesman.

A statement issued on the Princess's behalf said: "The Princess of Wales has agreed to Prince Charles's request for a divorce. The Princess will continue to be involved in all decisions relating to the children and will remain at Kensington Palace with offices in St James's Palace. The Princess of Wales will retain the title and be known as Diana, Princess of Wales."

But the Palace responded with a cool statement saying the Queen was "most interested" to hear the Princess had agreed to a divorce. And in an open contradiction of the Princess's statement a Palace spokesman said: "We can confirm that the Prince and Princess of Wales had a private meeting this afternoon at St James's Palace. At this meeting details of the divorce settlement and the Princess's future role were not discussed. All the details on these matters, including titles, remain to be discussed and settled. This will take time."

The Princess's announcement last night was thought to have been influenced, at least in part, by the Queen's desire that the royal couple divorce without dragging out the process. The Queen has been awaiting her decision since last December after she wrote to both of them advising that it was in their best interests to seek an early divorce. The Queen stepped in after the Princess's controversial Panorama interview in November during which she admitted adultery and cast doubt on the Prince's suitability to take on the role of king.

Prince Charles responded quickly that he was content to follow the Queen's advice, taking the opportunity to state publicly that he had no intention of remarrying.

The Princess made clear at the time that she would not be hurried into making a quick decision. Last night's statement was interpreted by some royal watchers as an attempt to secure her position. Royal sources in turn made it clear that the details released in the Princess's statement were her "requests" and had not yet been agreed.

The announcement also caught Downing Street by surprise. A spokesman said: "We only have press reports of this. It really is a matter for the Royal Family itself."

The couple's separation was officially announced in December 1992. During 1993, they attended some functions together - but mostly led separate lives. In December of that year, the Princess announced her withdrawal from public life and asked to be allowed to live away from the media spotlight. In June 1994, Prince Charles admitted to Jonathan Dimbleby, in a television documentary, that he had been unfaithful to his wife. In October of that year, Anna Pasternak's book about the former Army officer James Hewitt's five-year affair with the Princess was published, fuelling speculation that the royal couple would divorce.

In August last year, the Princess was linked with another man, the England rugby captain Will Carling, after they became friends while training at an exclusive gym in Chelsea, west London. The rugby player and his wife Julia later separated.

In November last year, the Princess gave her Panorama interview in which she vowed she would not "go quietly".

"That's the problem. I'll fight to the end, because I believe that I have a role to fulfil, and I've got two children to bring up," she said. Again, Palace officials were angered by her decision not to inform them about the interview until shortly before it was broadcast.

It is likely that lawyers for the Prince and Princess are already working on a detailed financial settlement and the basis for formal terms could have been set out. However, custody of - and access to - Prince William, 13, and Prince Harry, 11, will be uppermost in the couple's minds.

At present, under the terms of separation, the Prince and Princess have equal access to their children. Last night's statement makes clear that she will continue to be involved in all decisions regarding the children.

The Queen will be an interested party in the future of the young princes and could also contribute to any cash settlement paid to the Princess.

Press speculation has focused on a pounds 15m clean-break settlement which would provide the Princess with an annual net income of about pounds 500,000.

It is doubtful, however, that the Prince has sufficient capital to afford such a settlement without help from the Queen. As Duke of Cornwall, he controls Duchy of Cornwall assets worth more than pounds 90m. But he holds the Duchy in trust for future Princes of Wales and cannot sell off assets to raise cash.

The Duchy provides an annual income for the Prince and Princess of an estimated pounds 3.5m after tax of which he spends pounds 2m on official expenses and pounds 1.5m on private expenditure. Dividend income from the prince's pounds 2m Stock Exchange portfolio nets an additional pounds 50,000 a year. The Princess's personal wealth is less obvious. Her brother inherited the bulk of the Spencer family fortune including Althorp. But she does have possession of jewellery worth an estimated pounds 20m. However, it is unclear whether the Princess or the Crown owns the gems.