The Queen is set to no longer receive funding via Scotland’s crown estate, a decision that means that the income of the monarch and the rest of the royal family could reduce by more than £2m a year.

It is understood that the Scottish parliament intends to retain the profits from the crown estate in Scotland for use in Scotland, which could have the consequence of reducing the sovereign grant, which funds the monarchy.

Buckingham Palace intends to raise the consequences for the Queen with David Cameron and George Osborne.

It had been understood that Scotland would still agree to contribute to the Queen’s costs after taking over management of the crown estate assets north of the border, worth £26m, but it appears that under Nicola Sturgeon this will not occur. “Originally, Alex Salmond did imply that might happen. But the new leadership said no,” one senior aide said.

The sovereign grant – which this year was £39.9m – funds the royal household. It is calculated on a formula that sees the Queen handed 15% of the annual surplus of the crown estate, one of the largest property owners in the UK. This year, revenue from the crown estate in Scotland stood at £14.5m, which represents a £2.2m contribution to the sovereign grant.

Palace officials raised the issue as they presented the Queen’s annual accounts. Sir Alan Reid, keeper of the privy purse, said the Scottish plans created a complication over future funding. “The transfer of the Scottish assets of the crown estate to the Scottish government does confuse the issue of renegotiating the percentage in due course because the total assets under the crown estate management will fall, and therefore 15% will be less than it would be if the transfer of the Scottish assets had taken place,” he said.



Under Alex Salmond, the SNP last year pledged that Scotland would retain the Queen as head of state, if the country had voted for independence from the rest of the UK last September. But the monarch faced criticism in Scotland after she was asked to make a rare public intervention in the final days of the Scottish independence referendum, speaking publicly to a well-wisher outside church near Balmoral saying: “I hope people will think very carefully about the future.”



Buckingham Palace stressed that the funding issue would not affect the royal family’s relationship with Scotland. The Queen will “continue to go to Balmoral, and to Holyrood, and she’ll continue to be Queen of Scotland”, said one source.

There appears to be no other mechanism in place for Scotland to contribute to the monarchy. Scottish ministers are thought to be considering transferring the management of the crown estate assets in Scotland on to the local authorities, with the intention of using the surplus for more social purposes.

A Buckingham Palace spokesman said it was wrong to infer that Scotland would no longer contribute to the monarchy based on the change to the operation of the crown estate and its impact on the grant received by the Queen.

The spokesman said it was an “entirely hypothetical” situation, and that though the sovereign grant was calculated on a percentage of the crown estate income, “there is a formulaic connection between the two, but there is no financial connection between the two”.

Scots would effectively still contribute to the costs of the monarchy because they pay taxes to the Treasury, which in turn supplies the money for the sovereign grant, he said.

A Scottish government spokeswoman added: “Scotland will continue to make the same financial contribution to the monarchy as at present – there will be no reduction in the sovereign grant as a result of devolution of the crown estate.”



The Scottish government said that the level of funding the Queen receives from the Treasury under the sovereign grant is set by reference to 15% of the crown estate’s profits and does not come directly from crown estate profits themselves. With most taxes paid in Scotland continuing to be controlled by the Treasury, Scotland will continue to make the same contribution to the monarchy through general taxation.

The sovereign grant – which apart from security costs represents the main public funding of the monarchy – was introduced in 2011 to replace the annual civil list and property and travel grants. It is based on 15% of crown estate profits from two years previously, but its amount cannot drop below the previous year and the exact percentage is renegotiated every five years. It is due for review from April 2016.



The crown estate income was surrendered to the Treasury in return for an annual civil list by George III.



The Queen’s accounts show a 6.7% increase in funding last year to £37.9m, of which she spent £35.7m, setting the rest aside in a reserve account.

Defending the increase, at a time of austerity, aides said money had to be found for major repairs on property, including at Buckingham Palace. As part of a 10-year plan, aides have looked at re-servicing Buckingham Palace, with an initial estimate of £150m to bring it up to date. One option would involve the Queen and royal household moving out for the duration of repairs.

The Prince of Wales and Duchess of Cornwall notched up the largest travel bill – a £446,159 tour of Mexico and Colombia, a £239,710 tour of the United States and Charles’s visit to the Middle East, which cost £262,212 – all of them using charter flights.

Royal travel costs rose to £5.1m, up 21% on 2013-4. The Duke of York spent £62,856 on a charter flight to Kuwait and £43,343 on a charter to Saudi Arabia. Prince Harry’s tour of Brazil and Chile cost £43,872 on scheduled flights and £41,754 on charter flights.

Prince Charles saw his income from the Duchy of Cornwall rise by 1.7% to £19.8m. His tax bill, after the deduction of business expenditure, was £4.5m.

Presenting the accounts, which will be laid before parliament, Reid said: “The Queen, the royal family and the household continue to provide excellent value for money: at 56p per person annually.”

He added: “Over the coming years, the maintenance of the estate and in particular Buckingham Palace will present a significant financial challenge. We will continue to work closely with the royal trustees to ensure that the funding for the royal household reflects that challenge.”

The headline on this story was updated on 24 June 2015 to make it clear that the Scottish government had not taken a decision to stop funding the Queen.



