Kwasi Kwarteng makes gaffe over how royal family gets its money

Kwasi Kwarteng endured a humbling Monday morning as he toured the TV and radio broadcasters to explain his U-turn on abolishing the top rate of income tax.

And to add to his list of woes, the under-fire chancellor made another gaffe by incorrectly stating how the royal family is funded.

Questioned by LBC broadcaster Nick Ferrari as to whether the Royal Family should pay inheritance tax, the Chancellor replied that: "The Royal Family has a settlement with the government [...] the Civil List, that's been going on for what 250 years, 300 years.

"And that's lasted I think since the time of George III I think, and it's something that is very, very credible."

Kwarteng claimed that 'since George III' this is how the Royal Family has received its funding.

Unfortunately for Kwarteng, the funding of the royal family by the civil list was abandoned in 2012 and replaced by the Sovereign Grant - something he should know only too well because, as Chancellor, he acts as a Royal Trustee for the grant.

His role includes deciding the percentage of the Crown Estate profits that go to make up the royals' annual settlement.

Where do the Queen and royal family get their money from?

What is the Sovereign Grant?

The Sovereign Grant Act was written in 2011, and officially came into effect in April 2012 when it replaced the Civil List.

It works through government funding of the House of Windsor based on profits received by the Treasury from the Crown Estate, which is made up of property and other assets.

The Crown Estate is independently managed by a board and its surplus revenue is surrendered to the Treasury. While it is the property of the monarch for the duration they sit on the throne, it is not their personal property, so they can't sell it off or take the profits for themselves.

A percentage of the profits — normally between 15-25% — is then assigned to fund the Royal Family's official engagements, travel and other expenditure like payroll and the upkeep of property.

The Crown Estate has been existence since the reign of George III, unlike the Sovereign Grant. He agreed in 1760 to hand over the estate's profits to the government if they provided him with a fixed annual payment: this was known as the Civil List.

The Civil List and three separate grants — for travel, communications and maintenance of the palaces — were the sources of public funding for the Royal Family, prior to the establishment of the Sovereign Grant.

How much is the Sovereign Grant?

For the last financial year costs rose by 17% reaching a total of £102 million. It had been set by the government at £86.3 million, but expensive refurbishments to Buckingham Palace, amongst other things, have driven up costs.

A decade-long refurbishment project at Buckingham Palace set to cost £369 million began in 2017. For the duration of this the Sovereign Grant will be set at the top end of the usual range — 25% of the Crown Estate's profits.

The Crown Estate's profits sometimes fall, as they have done recently during the pandemic. When this happens, funds are either taken from the Reserve Fund —where any unspent Sovereign Grant is paid into — or are kept in line with the previous years grant through additional funds provided by the Treasury.

However, no breakdown of security costs is made available to the public, with the government arguing "disclosure of such information could compromise the integrity of these arrangements and affect the security of those protected."

This leads some to believe that the actual public cost of the Royal Family is far higher than the total amount in the Sovereign Grant.