The Royal Family have secured a lucrative deal that will earn them tens of millions of pounds from the massive expansion of offshore windfarms.
They will net up to £37.5 million extra income every year from the drive for green energy because the seabed within Britain’s territorial waters is owned by the Crown Estate.
Under new measures announced by Chancellor George Osborne last week, the Royals will soon get 15 per cent of the profits from the Estate’s £6 billion property portfolio, rather than the existing Civil List arrangement.
Experts predict the growth in offshore windfarms could be worth up to £250 million a year to the Crown Estate. There are already 436 turbines in operation around the UK’s 7,700-mile coastline – but within a decade that number is set to reach nearly 7,000.
Prince Charles is a vociferous campaigner for renewable energy sources such as these, but is opposed to turbines being erected on land – particularly near his own homes.
He has described windfarms as a ‘horrendous blot on the landscape’ and has refused to have any built at his Highgrove home or on the Duchy of Cornwall estate.
But he has expressed enthusiasm for siting them offshore.
The Crown Estate said profits from windfarms in Britain’s territorial waters – which extend almost 14 miles from the coast – could rise to £100 million a year, giving the Royals £15 million.
But industry experts said this was an under-estimate and that the true figure was likely to be nearer £250 million by 2020, with £37.5 million for the Royals.
They currently receive about £30 million a year from the Civil List and other grants – a figure that will be frozen until 2012 when it will be replaced by the new mechanism, called the Sovereign Support Grant.
The level was calculated based on the Crown Estate’s current annual profit of £211 million – 15 per cent of which would be in line with current income.
But if the experts are correct about windfarm returns, the Monarchy’s budget would more than double, to around £68 million.
The canny boost to Royal finances was quietly slipped through as part of last week’s Comprehensive Spending Review.
In what one source described last night as a ‘masterstroke’ by the Prince’s closest adviser Sir Michael Peat, 250 years of history was overturned by scrapping the arrangement under which taxpayers’ money has been used to fund the Royals and pay for the upkeep of their palaces.
The Civil List – which has financed the Monarchy since King George III surrendered all revenues from the Crown Estate after running up massive debts – meant the Royal finances were accountable to Parliament, but the Sovereign Support Grant will avoid such scrutiny.
Old Etonian accountant Sir Michael, 60, Charles’s Principal Private Secretary, is the former Keeper of the Privy Purse at Buckingham Palace. He is the great-grandson of the founder of accountancy firm Peat Marwick.
‘There is nothing Michael does not know about Royal finances,’ said a source. ‘His depth of knowledge will have been invaluable. Charles has always believed the money from the Crown Estate was taken away from the family. Now they have got it back. One could say they have pulled a fast one.’
Last month, the Prince visited an exhibition in Wales about offshore energy. David Jones, of Marine Energy Pembrokeshire, said the Prince had asked a number of questions about wind-driven technology.
‘Charles seemed enthused about the potential for marine energy in Pembrokeshire. He asked about how the devices worked, where they would be deployed and whether there was public and governmental support.’
By 2020, 6,400 turbines – each one rising 500ft above the sea – are expected to be in operation around the UK coastline. Household energy bills will have to rise to pay for the £75 billion expansion, which has been described as one of the biggest engineering projects in recent history.
The EU has told Britain it must generate more of its energy needs from renewable sources. But critics say the plan to increase Britain’s dependence on green energy is flawed and could leave homes and business suffering routine power cuts within five years.
Sir Martin Holdgate, former chief scientist at the Department for the Environment, said: ‘There is pressure to act on climate change. But when you look at the cost per unit, it is a rather expensive way of providing electricity.’
In its latest accounts, the Crown Estate says that its offshore windfarm business is ‘experiencing exponential growth and we expect it to provide a significant source of total income in the next ten years’.
Revenue to the Estate from the windfarms rose by 44 per cent last year to a ‘low base’ of £2.6 million. But with the third round of contracts handed out in January, companies bidding for the work say a bonanza is on the horizon.
The UK’s first offshore windfarm was commissioned in December 2000 off Blyth Harbour in Northumberland. In the following year, leases were awarded for the development of 18 sites.
North Hoyle off Merseyside was switched on in December 2003, Scroby Sands off Norfolk followed in 2004 and Kentish Flats in the Thames Estuary became operational a year later.
Since then, the pace of expansion has quickened substantially. There are now a total of 436 working turbines at 13 locations from Walney Island in the Irish Sea to Foreness Point off Margate, Kent. A further 309 are being built at four sites.
Planning permission has been granted for 817 more windmills at seven farms. Yet another 519 turbines at five sites are being considered by planning authorities.
Eon, Centrica, EDF, Scottish Power and npower are among the suppliers that have been awarded contracts to develop windfarms.
The firms pay the Crown Estate a rental fee to run their cables along the seabed from the turbines to the shore. The companies also have to pay a percentage of the money they make from generating electricity.
When new windfarm developments are proposed, experts from the Crown Estate identify possible locations before carrying out esurveys to examine the effects on bird and marine life. They then pass the data to developers, who are invited to bid for contracts.
A spokesman for Republic, which campaigns for a more accountable Royal Family, said: ‘It is wholly inappropriate that the Palace should have such a direct interest in a subject like windfarms, given Prince Charles’s obsession with renewable energy.
‘It raises the question as to whether he is seeking to increase his own investment portfolio each time he makes a favourable reference to wind power.’
A Crown Estate spokesman said last night: ‘Offshore wind is a significant programme for the UK. It will create 50,000 to 70,000 jobs by 2020 and provide energy security and inward investment.
‘We only expect to see a return on this investment from 2015 onwards when the revenue stream from offshore wind should increase significantly. This will enable the UK to achieve the EU target of 20 per cent energy from renewable sources.’
A Treasury spokesman said: ‘The 15 per cent of Crown Estate profit is an indicative figure of how the Sovereign Support Grant may work. There will of course be safeguards in place to ensure that this is not adversely high. The details will be for Parliament to decide and will be outlined in due course.’
A Buckingham Palace spokesman said: ‘Nobody yet knows how the Sovereign Support Grant is going to work. The details have not yet been finalised with the Treasury. It is wild speculation to discuss what might or might not happen in 2020.’
Clarence House declined to comment on behalf of Prince Charles.
The Chancellor may regret handing Charles a licence to meddle
Analysis by Phillip Hall
The Chancellor, George Osborne, sounded tetchy. As part of his Comprehensive Spending Review, he outlined a new method of funding the Monarchy. He told the Commons it would mean ‘that my successors do not have to return to this issue as often as I have had to’.
Reading between the lines, it appears that Mr Osborne has already been on the receiving end of considerable Palace pressure during the five months he has been in the job. He sounded relieved to be freeing himself from it.
Instead of Parliament granting an annual fixed income for the Civil List, in three years’ time the Queen will receive ‘a new Sovereign Support Grant, linked to a portion of the revenue of the Crown Estate’.
But in agreeing to this, Mr Osborne has ceded an important principle. Having to justify State expenditure on the Monarchy to the Commons might have been irritating to Chancellors and Royalty, but it is an essential part of our constitution.
The Palace has been pushing for income from the Crown Properties since the end of the 19th Century. The Palace can immediately claim that by being paid from the Crown Estate, the Royal Family really costs the taxpayer nothing.
But Mr Osborne’s proposals seem to be an automatic means of guaranteeing annual increases in funding at least in line with inflation and maybe much more.
New legislation would have to be brought in for the Sovereignty Support Grant but that would be the last time Parliament would debate how much the Monarch is to receive in guaranteed income, a right which it has maintained (albeit under pressure) since 1760.
That was when George III surrendered the Crown Estate – lands acquired by William the Conquerer and Henry VIII – to the Government in exchange for a fixed income from the Civil List. In truth, by the 18th Century, the Crown Estate was controlled by Ministers who rented the land to MPs for tiny sums to bribe them to vote with the Government.
So the Crown Estate was never the Monarch’s ‘private possession’ as such.
Yet there are still those who talk of the good deal the taxpayer gets from the Monarch having given up the now sizeable Crown Estate income. And that’s where the Palace thinks it has lost out.
The Crown Estate today is valued at £6.6 billion and includes prime streets such as Pall Mall and Regent Street in London. It has 265,000 acres of farm land, it owns quarries, forests and parkland.
Last year, the Estate handed over £211 million to the Treasury and 15 per cent of that would be handed over to the Palace.
On current figures, this would yield much the same as the £33.3 million Civil List. The Treasury say that in future years, this sum could be adjusted if it became too large or too small.
The Crown Estate also owns all the seabed out to 12 nautical miles. And from 2015, wind farms are likely to generate up to £250 million a year for the Estate.
The proposed new arrangements are a surprise turnabout for the Treasury. Previous senior civil servants there had always resisted any claims by the Royals to the revenues of the Crown Estate.
Burke Trend, a Treasury official who went on to be Cabinet Secretary, wrote a memo to the 1952 Chancellor, Rab Butler stating it was ‘a historical fallacy to suppose there is anything in
the nature of a bargain between the Crown and Parliament whereby the Crown surrenders hereditary revenues, in return for a fixed Civil List’.
But it seems George Osborne has accepted many false arguments about the historic relationship between the Monarch and the Crown Estate and ignored the long-held opinion of his own department.
The National Audit Office will be able to audit royal expenditure, but Parliament will no longer be able to debate and determine financial support to the Monarchy.
The purpose of a Civil List was to bring the Monarchy under Parliamentary control. As long as the Monarch depends financially on Parliament, they can be brought to heel if they try to interfere, unconstitutionally, in political debate.
A large and inflation-proofed stream of revenue from the Crown Estate removes that constraint. The Queen has resolutely resisted the temptation to meddle.
Her son, with his fondness for memos to Ministers, shows no such restraint. Future politicians may bitterly regret the concession made by George Osborne last week.
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