Queen Croesus

In 1871, when Queen Victoria was in the tenth year of her widowhood, and when even the great British public was becoming increasingly irritated by her continued seclusion at Windsor, Osborne and Balmoral, a young, clever, radical MP named George Otto Trevelyan published a pamphlet which had the effrontery to ask: ‘What does she do with it?’ Where, Trevelyan wanted to know, was all the money going which the Queen was paid by the Government for the sole purpose of maintaining the duties and dignities of her position as head of state? Instead of being spent as it should have been, on court ceremonial, public appearances and regal display, he believed it was being improperly applied to the creation of a new and essentially private royal fortune. Like everyone else, Trevelyan could only guess at the true extent of the Queen’s recently accumulated wealth. ‘In the absence of authentic information,’ he observed, ‘it must not be a matter of wonder that statements which are probably great exaggerations should find belief.’ But whatever its extent, Trevelyan had no doubt that the amassing of great personal wealth by the monarch was ‘unconstitutional and most objectionable’. As far as both the history and the size of this royal nest-egg were concerned, he believed that ‘the people of England have a right to be informed.’

More than a hundred years on, Trevelyan’s arguments have lost none of their relevance, and none of their cogency. It is generally believed that the Queen is the wealthiest person in England, and very probably the fourth richest individual in the world. But no one, not even Her Majesty, seems to know the true extent of her fortune. (As Bunker Hunt, the one-time Texas billionaire, once observed, anyone who knows how much they are worth cannot be worth very much.) Estimates range from £100 million, which is scarcely serious riches at all, to more than £3000 million, which is truly a mind-boggling accumulation. One reason for this uncertainty is that no one really knows what to include among the Queen’s assets. Her shareholdings, and her houses and estates at Sandringham and Balmoral, are obviously her own, private possessions. But what of the crown jewels, the royal art collection, the royal yacht and the royal train, to say nothing of Buckingham Palace and Windsor Castle? And it is also the case, as Trevelyan had spotted, that the monarchy’s determined refusal to allow any serious investigation into its wealth leaves the field wide open for journalistic speculation. The British people may feel they have a ‘right to be informed’: but that right has been consistently disregarded, and the ‘authentic information’ has been deliberately withheld.

Yet it is not only the lack of hard data about the extent of the royal fortune which is extraordinary: it is also – and here again Trevelyan was absolutely correct – the very existence of that fortune. Before 1800, British monarchs were without private financial status, and could not personally own land. When George III’s children overspent, as they regularly did, it was Parliament which had to pay their debts. During the early years of Victoria’s reign, the monarchy was looked down on by the richest and most venerable aristocrats in the country as impoverished and parvenu, and the Queen’s marriage to a minor, hard-up German princeling did not improve matters. And when her eldest son, the Prince of Wales, resolved to live his social life among the fast set, it was feared by those in the know that he lacked the financial resources to do so. By the time Trevelyan wrote his pamphlet, things were clearly beginning to change. But not even he could have foreseen the apparently exponential growth in royal riches which has taken place during the last one hundred years, as the House of Windsor has evolved into a wealth-creating machine which even King Midas might have envied. It is to the unravelling of this extraordinary development that Phillip Hall has devoted the last ten years of his life, and as a result, he has produced a fascinating, indeed sensational book.

Between the Glorious Revolution of 1688 and the death of Queen Victoria in 1901, Hall shows that royal finances were transformed in three significant ways. The first was by the creation of what is still known as the Civil List. Before 1688, when the king’s government had truly belonged to the king, royal finance and state finance were inextricably linked. But as a result of the spiralling costs of the wars against France, and because of Parliament’s desire to keep a tight grip on the Army, the control of military finance was taken over by the House of Commons, and from 1697, the new king, William III, was paid an annual sum by Parliament, to cover his own royal expenses, and all civilian aspects of government expenditure. (Hence the name Civil List.) During the reign of George III, the Civil List (which had been fixed at £800,000 a year in 1760 when he acceded to the throne) proved insufficient to meet the growing expenses of civil government, and these were gradually taken over by Parliament. By 1830, when William IV became king, his much-reduced Civil List was allotted purely for ‘the personal dignity’ of the King and Queen. As head of state, the sovereign was paid by Parliament, and every time Victoria sought more money – as when she married Albert, or when one of her children left home – it was to Parliament that she applied for increased funds.

The second development, which was an unforeseen consequence of the creation of the Civil List, was the gradual accumulation of a personal royal fortune, where none had hitherto existed. The passing of the Crown Private Estate Act in 1800 gave the monarch private financial status for the first time, and allowed him (or her) to own land individually, and to make a will to dispose of it. It was under these provisions that Victoria and Albert were able to acquire the estates at Balmoral and Osborne, soon after their marriage, as their own personal possessions. But where did they find the money? Some of it came from unexpected legacies. Some of it came from the Crown estates in the Duchies of Cornwall and Lancaster, which were deemed to be the monarch’s personal possessions, and which were providing a significant income for the first time. And some of it may have come from the surplus which was beginning to appear on the Civil List, thanks to Albert’s managerial skills in cutting the costs of the royal establishment. During the remainder of the Queen’s reign, her personal fortune continued to accumulate, largely because – as Trevelyan guessed – money paid to her in the form of the Civil List was being transferred to her own private funds.

It was partly because of this diversion of public monies for private uses that there developed a third characteristic of 19th-century royal finance: namely, that the monarch became a taxpayer. In 1842, the then Tory prime minister, Sir Robert Peel, reintroduced income tax, which had previously been levied on a temporary basis during the Revolutionary and Napoleonic Wars. The Queen was determined – or advised, the documentation is incomplete – that ‘her own income should be subject to a similar burden,’ and this encompassed her Civil List, her revenues from the Duchy of Lancaster, and any private income. For the remainder of her reign, the Queen paid income tax, and it never seems to have occurred to her that she should not. Her eldest son, however, had other ideas, and when he acceded to the throne as Edward VII in 1901, he immediately asked the Conservative Government of Lord Salisbury whether he might be ‘relieved’ of the income tax he paid on the Civil List. Much to the King’s regret, the Cabinet refused to budge, arguing that he must continue to honour his mother’s pledge to pay, and an announcement to this effect was formally made by the Chancellor of the Exchequer in the House of Commons.

By the early 20th century, it thus appeared as though a new regime in royal finances had been satisfactorily established – satisfactorily, at least, to all except those radicals who resented the accumulation of a private fortune from public money, and the new king, who resented having to pay any tax whatsoever on his income. By the end of her reign, Queen Victoria had accumulated a considerable private fortune, largely from her Civil List surplus and the revenues of the Duchy of Lancaster, and it was no doubt as something of a quid pro quo that she had continued to pay income tax. But in 1894, she also acquired a major tax privilege when the sovereign was declared exempt from the newly-levied death duties. In the course of the next one hundred years, this immunity was to become of exceptional importance for Victoria’s successors, and it is a pity that Hall does not devote more attention to it. For while many of the greatest aristocratic fortunes were cut down once a generation, the personal wealth of successive sovereigns kept on increasing. And this novel tax exemption was very much a portent of things to come. For during the 20th century, while taxes levied by the state rose inexorably, the advisers of successive monarchs negotiated a series of exemptions, which meant that by the Second World War King George VI was paying almost no tax at all.

How was it that the tax-paying conventions, established in the reign of Queen Victoria, and reaffirmed by the Government shortly after her death, were gradually but inexorably overturned? If he had had his way, this would have begun in the reign of Edward VII. Although Queen Victoria was possessed of an ample fortune by the time of her death (though just how large is unclear, since sovereign’s wills are not published), she does not seem to have left much of it to her eldest son, beyond the estates of Balmoral and Osborne. From the age of 21, Edward had been entitled to the income from the Duchy of Cornwall, but this had never been enough to support his extravagant lifestyle. When he came to the throne, he was much in debt: hence his request, vainly renewed in 1904, for the abolition of income tax on his Civil List. But thanks to the excellent advice he received from such men as Lord Rothschild and Sir Ernest Cassel, and thanks, Hall suggests, to some shady but lucrative dealing in the market for peerages, Edward soon got himself out of debt, and on his death probably left a personal fortune in the region of two million pounds, which made him rich by the standards of the time, but by no means fabulously wealthy.

Surprisingly enough, it was during the reign of that most dull, dim and dutiful of monarchs, King George V, that royal tax exemption took off. In 1910, when he was eager to conciliate the new monarch at the time of the constitutional crisis over the House of Lords, Lloyd George, the then Chancellor of the Exchequer, agreed to relieve the Civil List of income tax. Between 1913 and 1922, the sums paid annually to Victoria’s surviving children, to Queen Alexandra, and to George V’s children, were also made very largely tax-free, as was the Prince of Wales’s income as Duke of Cornwall. And to compensate for his voluntary reduction in the Civil List of £50,000 a year from 1931 to 1935, George V obtained exemption from the tax on his income from the Duchy of Lancaster in 1933. Finally, at some point during the reign of George VI, the sovereign’s income from private investments was also declared to be free of tax. Very few of these changes were reported in Parliament, let alone the press. But in 1952, when the Civil List of the present queen was being negotiated, the then Chancellor of the Exchequer, R.A. Butler, blandly announced in the Commons that she was ‘naturally’ free of tax. And so successful had the monarchy been in concealing these recent changes in its tax status, that there was no one who could gainsay him: it was simply taken for granted that these exemptions had always existed.

But it was not merely that the reduction of the monarchy’s tax burden ran contrary to the spirit of the times: it was also that this enabled Edward VII, George V, Edward VIII when Prince of Wales and Duke of Cornwall, and George VI, to channel unprecedented amounts of public money into their own private fortunes, both from the Civil List and from the Duchy of Lancaster. As a result, when the present queen acceded to the throne, she was already a very wealthy woman, having inherited considerable sums from her father and, very probably, from her grandfather too. During the course of her reign, the increased costs of royal administration, and the proliferation of the royal family, have meant that she has not been able to save money from the Civil List in the way that her predecessors did, even though it was substantially increased in 1975 and again in 1990. But she enjoys a tax-free personal income of more than £2 million a year from the Duchy of Lancaster, and if we assume, as seems possible, that her stocks and shares were worth £20 million in 1971, then twenty years of tax-free income and reinvestment suggest that her holdings are today worth well in excess of £300 million.

Here, more than anywhere else, are the signs that the tax concessions won since 1910 have enabled the private royal fortune to grow at an unprecedented and unchecked rate during the 20th century. Assuming her investments of £300 million yield an average return (and since she is well advised, this must be an underestimate), then the Queen’s stock exchange earnings cannot be much short, Hall calculates, of £20 million a year. Because she does not pay tax at the standard rate of 40 per cent on this huge unearned income, the Queen enjoys a bonus of roughly £7 million a year, or £20,000 a day, which can be ploughed back, so as to increase her holdings – and her tax-free income – still further. As Hall admits, these figures are little more than inspired guesswork, for the true extent of the Queen’s private investments has never been disclosed. The 1971 figure, based on the then Lord Chamberlain’s evidence to an all-party Select Committee on the Civil List, may be too high, or – more probably – it may be too low. Nor is it possible to find out in which companies, or in which countries, the Queen’s money is invested, because she is exempt from any legislation compelling the disclosure of share ownership.

How, Hall rightly wishes to know, has this quite remarkable state of affairs been allowed to come about, and to persist into the last decade of the 20th century? Part of the answer lies in the single-minded skill and determination with which generations of royal advisers have presented and defended the royal case. Although British monarchs this century have been extremely well-off, this has never prevented their representatives from pleading poverty on their behalf, and asking for more money or more concessions. Despite the fact that the historical evidence is, Hall claims, at best dubious, they have persistently and successfully asserted the sovereign’s right to enjoy the incomes from the Duchies of Cornwall and Lancaster. Whenever it has been suggested that the sovereign should pay taxes, they have resorted to the vague concept of ‘crown immunity’, even though this clearly applies to the government rather than the monarchy. Yet they have also resisted attempts to inquire into the sovereign’s personal finances on the grounds that this is an unwarranted invasion of privacy. And so whenever it has been suggested that the monarch’s private wealth should be taken account of in calculating the Civil List, the Palace has simply stonewalled and refused to co-operate.

Perhaps the financiers and courtiers who advise the sovereign can be forgiven for defending the monarchy so zealously and self-interestedly. Less excusable is the behaviour of the civil servants, especially Treasury grandees, whose job is supposedly to monitor public spending. But all too often, Hall claims, they have been only too eager to accommodate the sovereign’s wishes. Least excusable has been the craven behaviour of successive Chancellors of the Exchequer, from Lloyd George, via Neville Chamberlain, to R.A. Butler, who went out of their way to help the monarchy in its remorseless pursuit of tax exemptions, not least by coming up with ingenious arrangements which meant that very often there was no need to tell Parliament what was going on. As a result, it has been quite impossible for backbench MPs to keep a proper, constitutional check on this accumulation of financial privileges and private wealth. Most MPs did not know what was going on, and even those few who had their suspicions were simply not well enough informed to ask the appropriate questions in the House. As a sustained display of dissimulation and deception, the winning of royal immunity from taxation during the 20th century, and the consequent creation of a vast family fortune out of public monies, is an astonishing story.

As a work of historical detection, Royal Fortune is a remarkable achievement, not least because its author was naturally given no assistance from the Palace, The Royal Archives were closed to him as they are to most people who wish to look at recent material, or ‘sensitive’ matters. And some essential documents from Treasury files in the Public Record Office had unaccountably disappeared. But by following up hints and suggestions in Hansard, by looking at the private papers of many of the figures most closely involved, such as Lloyd George and Ramsay MacDonald, and by combing the available official documents, Hall has managed to put together the first serious financial history of the monarchy in the modern period. Inevitably, there are parts of his account which are sketchy and speculative, his broader grasp of the historical context seems rather weak, there are some important collections, such as Lord Esher’s papers, which he does not seem to have consulted, and his prose rarely rises above the level of the pedestrian. But for all that, the book is a major contribution to the current discussions about the royal family, and the blurb writer does not exaggerate in claiming that ‘debates about the monarchy will never be the same again.’

As one of the most unattractive and avaricious of Britain’s 20th-century monarchs, King Edward VIII, once observed, albeit in rather a different context, ‘something must be done.’ But what, exactly? To begin with, Parliament should sponsor a fully comprehensive history of the monarchy’s finances during the last two hundred years, which should be written by a reputable scholar, who must be given full access to all relevant material. At the same time, there should be set up a Royal Commission on the Organisation and Finances of the Monarchy, which should establish the truth about the current scale of royal wealth, both public and private, and provide that ‘authentic information’ which Trevelyan rightly demanded more than one hundred years ago. This should then make it possible to set up a new Department of the Crown, under the auspices or the government, which would be responsible for the administration and financing of all the public aspects of the monarchy, and which should be headed by a permanent secretary, who might also double as the Queen’s private secretary, and who should be recruited from the Civil Service rather than from the grouse moors.

Most important of all, the Queen should be compelled by Parliament to declare her private wealth, and her private income, and to pay her taxes, as her great-great-grandmother and her great-grandfather did before her. Like so much else about the 20th-century monarchy, royal tax avoidance is nothing more than a recently-invented tradition. But in this case, the sooner it is disinvented the better.