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Lord Higgins: My Lords, I thank the Minister for his helpful reply. As I indicated earlier, his letters on the subject were most useful. His comments on the form the accounts should take will require careful study. I take his point about contingent liabilities being in the notes to the accounts rather than on the balance sheet. However, as regards pensions, we may well find that the notes to the accounts cover an amount far greater than almost any other item in the whole of government expenditure. We shall need to scrutinise that most carefully.

In my opening remarks I conceded that there were certain deficiencies in my amendments and thought it better to deal with the Government's amendments and my amendments to them. I do not accept the Minister's point about the inflexibility of an arrangement in which the ASB and the FRAB fulfil the functions he mentioned but the Government cannot automatically accept their recommendations.

As the Minister rightly said, the crux of the matter is who, at the end of the day, determines what the standards should be. The Government's amendments seem to us to give them and the Treasury in particular

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too much flexibility. Our experience of the presentation of government accounts shows that they may give a misleading impression of what is happening. I give the classic example of the working families' tax credit.

For that reason, while I do not propose to move the main group of amendments, at an appropriate moment I shall ask my noble friends to support me in the Lobby in taking the feeling of the House as regards my Amendment No. 22 as an amendment to Amendment No. 21. In the meantime, I beg leave to withdraw Amendment No. 2.

Amendment, by leave, withdrawn.

[Amendments Nos. 3 to 6 not moved.]

Lord McIntosh of Haringey moved Amendment No. 7:

    Page 3, line 29, at end insert--

("( ) For the purpose of subsection (3)(a) and (b) the Treasury shall in particular--
(a) have regard to any relevant guidance issued by the Accounting Standards Board Limited or any other body prescribed for the purposes of section 256 of the Companies Act 1985 (accounting standards), and
(b) require resource accounts to include, subject to paragraph (a), a statement of financial performance, a statement of financial position and a cash flow statement.").

On Question, amendment agreed to.

Clause 7 [Other departmental accounts]:

[Amendments Nos. 8 and 9 not moved.]

The Civil List

3.54 p.m.

Baroness Jay of Paddington: My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

    "With permission, I should like to make a Statement on the Civil List which supports Her Majesty the Queen in carrying out her official duties as head of state.

    "The Civil List Act 1972, requires the royal trustees--my right honourable friend the Chancellor, the Queen's Treasurer and I--to report at least once every 10 years on the royal finances and to make recommendations to the Government for future Civil List arrangements. The current 10-year period ends later this year. We have therefore reviewed the current arrangements and are today laying a report before the House.

    "It proposes that the amount of the Civil List should remain exactly the same over the next decade as it has over the preceding one. It also proposes that the Civil List should take on some costs of the monarchy currently met from other sources.

    "The report also sets out not only expenditure on the Civil List but on the monarchy more widely. This includes the grants-in-aid for the royal palaces

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    and travel and spending undertaken by government departments. The report records the very substantial savings of 55 per cent in real terms over the past 10 years on spending on the monarchy generally.

    "The annual figure for the Civil List was set by the previous government at £7.9 million in 1990. With Her Majesty the Queen's agreement, and following consultation with the right honourable gentleman the Leader of the Opposition, the Government propose that the annual payment should remain at £7.9 million for the next 10-year period. By the year 2010 therefore the cost of the Queen's Civil List will have remained at exactly the same level for 20 years.

    "In addition, there will be costs transferred from public spending of other departments which will now be met by the Queen's Civil List. All in all, this will represent a substantial saving as a result of lower inflation and the efficiency of the way in which the Queen's expenses have been managed.

    "The principal additions to Civil List expenditure will be pension contributions to be paid to the Consolidated Fund and some of the running costs of the royal palaces which are currently funded within the Property Services grant-in-aid. In total, around £25 million of extra spending over the next 10 years will be transferred to Civil List expenditure from other sources.

    "By expanding the costs for which the Royal Household is directly responsible, we will contribute to the continuing drive for efficiency to which I know they are committed.

    "We are able to make these proposals for two reasons. First, the Royal Household has achieved very substantial efficiencies in the Civil List over the past decade, amounting to some 10 per cent in real terms. Indeed, the actual increase in expenditure over the decade has been held below inflation.

    "In addition, when the figure of £7.9 million was set 10 years ago, it allowed for an inflation rate of 7.5 per cent per annum, in line with the average annual inflation of the 1980s. Inflation has turned out much lower than was allowed for. As a result of these factors, a surplus of £35 million on the Civil List has accumulated, including interest of around £12 million.

    "Under the Civil List Act 1972, Civil List provision may be increased by order but it may not be reduced. However, the Act also provides that any surplus at the end of one Civil List period is carried forward to meet official expenditure in later years. This is what will now happen.

    "We expect, nevertheless, that there will be a prudent balance at the end of the period, amounting to around one year's spending at that time. That will enable unforeseen eventualities to be met, should any arise. If not, the surplus will be available to fund Civil List spending during the current reign from 2011 onwards.

    "The Queen, supported by other members of the Royal Family, carries out a wide range of duties on behalf of the nation as head of state. The

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    arrangements that I have announced will provide proper support for Her Majesty in that role. They also reflect the principles which Parliament has embodied in legislation, and which I am happy to reaffirm. They support continuing improvements in efficiency by ensuring that financial and management responsibility go hand in hand. And they are in keeping with the honour and dignity of the Crown, the importance of the role carried out for the nation and the high regard and affection in which the Queen and Royal Family are held".

My Lords, that concludes the Statement.

3.58 p.m.

Lord Strathclyde: My Lords, I am immensely grateful to the noble Baroness the Leader of the House for repeating the Statement made by the Prime Minister in another place. I assure her that we welcome and support the stability which the arrangement she has announced will provide for the Queen and the Royal Household. I am sure that I speak for the whole House in expressing loyal admiration for the way in which Her Majesty continues to contribute so generously to the overall costs of the monarchy and for the way in which the running expenses of the monarchy have been contained. It has been done so well that may be the Treasury should invite those responsible in the Royal Household to give advice to the Government.

The institution of the monarchy is of inestimable value to this country. No one has given such sterling service to the nation as Her Majesty over almost 50 years including all the other hardworking members of the Royal Family, not least Her Majesty Queen Elizabeth the Queen Mother, whom we have particularly in mind this year.

One only has to contemplate the expense of heads of state in other countries to realise the value for money that we get from our Royal Family, even if that narrow mercenary consideration were all that mattered which, of course, is not the case. If one must look at the cold figures of the balance sheet only, will the noble Baroness agree with me that the monarchy and all the traditions that surround it attract huge sums to this country from overseas visitors?

I have only one question of substance. The deal that was struck in 1991 was on the basis of an average inflation figure which was not reached. If the figure for inflation increases over the course of the next few years, will the figure given in the Statement be reviewed?

Finally, in welcoming the Statement I invite the noble Baroness, as Leader of the House, and on behalf of this House, to agree with me that a hereditary monarchy is a binding thread that has run through the history of our country for well over a thousand years and that it is our firm and common cross-party resolve that it should continue to do so?

4.1 p.m.

Lord Rodgers of Quarry Bank: My Lords, on behalf of these Benches I also welcome the repetition of the

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Statement by the noble Baroness the Leader of the House. I welcome what appears to be a sensible outcome to the latest review by the royal trustees. However, I mention in passing that the report to which the Statement refers was not available in the Printed Paper Office at 3.45 this afternoon. It would be helpful to all Members of the House if such a report could have been available at the time the Statement was taken.

Apart from the outcome, I too welcome the substantial overall savings on the monarchy in the past 10 years, which reflect our reasonable expectations in today's world. By that I mean that there should be proper support for the Royal Family in the performance of its constitutional duties, but without extravagance.

I also welcome--I believe that everyone will have learnt from it--that there is much greater transparency and openness as regards royal finances although there may still be some way to go. At one time there was great reluctance to reveal more than the very minimum of the royal finances. I believe that everyone has benefited, including the Royal Family. If anything, this openness has strengthened the monarchy by showing a much greater willingness to discuss the realities.

Some of the figures are not entirely clear to me--that is why I would have enjoyed reading the report--especially as regards the consequences of lower inflation. The noble Lord, Lord Strathclyde, referred very properly to inflation over the next 10 years. I thought he referred to any variance from the figure that has been assumed. The fault may be mine, but I cannot find in the Statement any indication of the assumptions about the rate of inflation which have gone into this particular agreement. If the understanding of the rate of inflation on the previous occasion, based on the figure for the 1980s, was indicated here of 7.5 per cent, there must be an equivalent figure based on the rate of inflation in the 1990s. Perhaps the noble Baroness will confirm that that is the case and say what the figure has been.

Finally, as I understand from the wording of the Statement, were there to be a succession to the throne in the next 10 years of this present agreement, the Civil List would then be open to further renewal. Can the noble Baroness confirm that that is the case?

4.4 p.m.

Baroness Jay of Paddington: My Lords, I am grateful to both noble Lords for their positive response to the Statement. I believe they said that it was a sensible agreement. The noble Lord, Lord Strathclyde, referred to the stability which the Statement created. I believe that those sentiments are accepted and agreed around the House. I am sure that noble Lords are aware that the right honourable gentleman the Leader of the Opposition was, as I mentioned in the Statement, a party to the understandings contained in the agreement. One assumes that the basic understandings were accepted by his party.

The noble Lord, Lord Rodgers, made an important point about transparency. One of the interesting factors about the way in which the Civil List, relations

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and the financial basis reached with the monarchy have developed in this country is that if one makes international comparisons, particularly European ones, one realises that we now have the most transparent system that can compare with any other. That is a great tribute to Her Majesty the Queen and those who serve her in that capacity.

A question was raised about the inflation rate over the next 10 years. As I understand it, the projected inflation rate on which the figures have been agreed is approximately 2.5 per cent. That is the rate at which the figures have been compiled. I imagine that if there were some great disparity between that projection and reality, the figures could be revisited as the Statement and agreement are not set in concrete. That is not precisely set out in the terms of the agreement.

I apologise greatly to the noble Lord, Lord Rodgers, for the absence of the fuller report in the Printed Paper Office. I shall look into the matter. If there are any further questions or points that the noble Lord wishes to raise when he has had the opportunity to examine the report, I am sure that I shall be able to answer them in correspondence.

I reaffirm to the noble Lord, Lord Strathclyde, that the Government accept the enormous value and importance of the hereditary monarchy. I had the opportunity to make that point at several stages during the passage of the House of Lords Bill last year. In response to some amendments that came from the other side of the House suggesting that perhaps the abolition of the hereditary right to sit and vote in your Lordships' House could be equated in principle with concern about the right of the monarchy, I believe that I made clear on the Government's behalf, as I have always done, that the value of the monarchy expressed in the Statement is very well understood. If one uses the time-honoured Bagehot definition of the difference between the efficient and the dignified parts of the constitution, we understand very well that Her Majesty the Queen fulfils the dignified part in an absolutely first-class way.

4.7 p.m.

Lord Molyneaux of Killead: My Lords, can the noble Baroness indicate whether the freeze will also apply to the Queen's annual gift to the Treasury which amounted to £130 million in the last financial year? In response to the plea for transparency from the noble Lord, Lord Rodgers, should not that latter figure be given equal prominence with the £7.9 million granted in the Civil List, given that the Treasury and the taxpayer are doing rather well out of the monarchy?

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