- The Washington Times - Saturday, July 30, 2005

LONDON — A group of members of Parliament called last week for a review of the 600-year-old arrangements that provide Queen Elizabeth and Prince Charles with millions of pounds each year in private income from the duchies of Lancaster and Cornwall.

A report by the Public Accounts Committee said that as the agreements stem from the 14th century, the income received today is “an accident of history,” and it is time for the Treasury to assess whether the ancient arrangements remain “appropriate to present-day circumstances.”

Last year, the prince received more than $23 million from the Duchy of Cornwall, one of the oldest landed estates, which is worth more than $881 million.

Elizabeth received more than $17 million from the Duchy of Lancaster, which has a capital value of nearly $538 million.

Both have paid tax on the incomes voluntarily since 1994.

But the Public Accounts Committee called on the Treasury to justify why the duchies are exempt from corporate and capital-gains taxes.

One committee member, Labor backbencher Ian Davidson, claimed that the Duchy of Cornwall has saved up to $70 million through its tax-free status, a figure dismissed by one of the prince’s senior aides as “ludicrous” and “plucked from the air.”

The committee wants the National Audit Office to be given the power to audit the accounts of both duchies, which have traditionally been checked privately.

It voiced fears that Charles’s position as chairman of the Prince’s Council, the committee that governs the Duchy of Cornwall, creates “a potential conflict of interest” since he is the beneficiary.

He should step down and have no direct involvement in running the estate, it said.

The prince’s private secretary, Michael Peat, a former accountant and treasurer to the queen, said that while Clarence House (the prince’s residence) would “consider fully all the recommendations,” it seemed the committee “may have misunderstood” what the duchies are.

“They are not public bodies. They are well-run private estates, specifically created to provide private income for the sovereign and the heir to the throne. This means the taxpayer does not have to fund the large majority of the prince’s public duties.”

The prince is said to spend almost half of his private income “on official duties and charitable causes,” although the transport costs relating to his duties come from the taxpayer through grant-in-aid. Officials argue that this averages only 7 cents a year per head of population and relates to costs concerning four members of the royal family — the prince, his two sons and the Duchess of Cornwall.

“That’s pretty good value,” said one aide.

The Duchy of Cornwall was created in 1337 by Edward III to provide an income for his son, the Black Prince.

By tradition Charles, the Prince of Wales, who became the 24th Duke of Cornwall on the queen’s accession, is entitled to its annual surplus. He pays tax on what is left after expenses for official duties and charitable causes are deducted.

About a third of the income goes to personal expenses and the upkeep of Prince William, Prince Harry and the duchess, none of whom receives money from the government.

Edward Leigh, the Public Accounts Committee chairman, said: “As these arrangements have been in place for over 600 years, a review would hardly be overhasty.”

The committee’s report stated: “The accounts of the duchies are required to be presented to Parliament, and it is anomalous that they are not audited by the Comptroller and Auditor General.”

The lawmakers expressed surprise that the prince, as chairman of the committee that governs the Duchy of Cornwall, has “the right to determine the level of income raised.”

Although major capital-investment decisions must be approved by the Treasury, “the direct involvement of the Prince of Wales in the management of the Duchy of Cornwall creates a potential conflict between the interests of the current beneficiary and those of future beneficiaries.”

The report recommended that the prince emulate the queen’s approach. She has no direct involvement in the running of the Duchy of Lancaster, which is administered by a government minister.

It emerged that Highgrove House, another residence for Charles, was purchased by the Duchy of Cornwall for the prince in 1980 at a cost of about $1,513,750, and that he pays about $588,000 a year rental on it.

“The committee was surprised to learn that the rental income is credited to the duchy’s revenue account, as this must mean that it contributes to the surplus, and therefore effectively goes back to the prince.”

A Clarence House spokesman said: “Successive governments concluded that the two duchies are the right way to provide a private income for future heirs to the throne, the Treasury oversees all major transactions and its accounts are laid before Parliament.

“The role of the Treasury ensures that the possibility of a conflict of interest through the Prince of Wales’s management of the duchy has already been addressed.”

In other words, controls are already in place to make sure one generation “does not sell the family silver,” it said.

The prince takes a “long view” and has increased the duchy’s capital value by 80 percent in the past six years, more than any predecessor, the Clarence House spokesman said.

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