Scottish and UK governments deny potential cuts in monarchy funding

The Scottish government has denied reports it could cut its contribution to the monarchy by between £1m and £1.5m when further powers are devolved.

The monarch is paid 15% of the Crown Estate's profits by the UK government - including profits from Scotland.

A royal source claimed there could be a cut if Crown Estate profits are retained by the Scottish Parliament.

But both governments said they did not expect devolution to have any negative impact on Scotland's contribution.

And Buckingham Palace also said that to imply Scotland would not pay for the monarchy was "simply wrong".

First Minister Nicola Sturgeon said the story, which was reported by several newspapers, had "no basis in fact" and stressed that Scotland would pay its full contribution to the sovereign grant "by hook or by crook".

In an interview with the BBC, Ms Sturgeon said the Scottish government had "no intention" and "no desire" to cut Scottish contributions and said there had not been any discussions about that.

The first minister added: "I can't be any more categoric about this. There has never been and never will be any suggestion that the Scottish government doesn't continue to meet that contribution in full."

'Clawback of funds'

Ms Sturgeon said she expected the Scottish government to lose a proportion of the block grant it receives from the Treasury when the Scottish assets of the Crown Estate are devolved.

The Sovereign Grant sets the level of funding the Queen receives from the Treasury by reference to 15% of the Crown Estate's profits.

A Scottish government source said this arrangement could continue after devolution of the Crown Estate, with Scottish profits and those from the rest of the UK added together to calculate a 15% figure "if that remains desirable".

ANALYSIS

By BBC Scotland political correspondent Glenn Campbell

The assets of the Crown Estate in Scotland are to be devolved.

This was agreed by the Smith Commission on further devolution following the independence referendum.

The Scotland Bill which is making its way through Westminster will make this happen.

It is not a free gift from the UK to Scotland. The Scottish government will gain access to new revenues from the Crown Estate and as a consequence, it will lose a portion of the block grant it receives from the Treasury.

That's why both the Scottish and UK governments insist the Sovereign Grant "will not be adversely affected".

There are other reasons too - the Sovereign Grant is paid from general taxation rather than directly from the Crown Estate and t he grant cannot be reduced under the terms of the Sovereign Grant Act 2011.

The only potential complication is the way in which the Sovereign Grant is calculated.

It is currently equivalent to 15% of the surplus generated by the Crown Estate.

Scotland's first minister, Nicola Sturgeon, says there's "no reason" why that formula cannot be maintained.

In other words, after devolution the grant could be based on 15% of the combined surplus of the Crown Estate in Scotland and the rest of the UK.

What the palace seems to be worried about is that their percentage might only be derived from the surplus in the rest of the UK.

In those circumstances, the percentage applied would need to rise to make sure the Queen does not lose cash.

This appears to be an accounting issue for the Royal Trustees to resolve when they review the Sovereign Grant arrangements next year.

The Scottish government has absolutely no role in this process as the trustees are the prime minister, the chancellor and the Keeper of the Privy Purse, Sir Alan Reid - who manages royal finances.

There are ongoing discussions between the Scottish and UK governments about the financial implications of Crown Estate devolution and whether or not there will be some kind of "clawback" of funds by the Treasury.

This is what happened when some tax powers were previously devolved.

A Treasury spokeswoman confirmed details on Scottish devolution were currently under discussion but, "consistent with the Smith Commission's no detriment principle, Scottish taxpayers will continue to make the same financial contribution to the Monarch".

The spokeswoman said the Scottish government's block grant would be adjusted to reflect any revenues foregone by the UK government as a result of devolution of the Crown Estate.

Official duties

She added: "Scottish taxpayers will continue to fund a full and fair share of the Sovereign Grant, paid via the Consolidated Fund.

"The grant will not be adversely affected by devolution - under the Sovereign Grant Act it cannot be reduced and the statutory review of the grant will ensure that it continues to provide the resources needed to support the Queen's official duties."

Sir Alan Reid, Keeper of the Privy Purse at Buckingham Palace, said: "Yesterday's media briefing on the sovereign grant report 2014-15 was intended to highlight some of the issues that may arise when the first review of the sovereign grant begins in April next year.

"The comments and observations were about a principle and never intended to be a criticism of Scotland or of the first minister or to suggest that the first minister had cast doubt on the continued funding of the monarchy."

Sir Alan added: "The principle is about what happens if profits from certain crown estate assets, such as those in Scotland, are not paid to the Treasury and the impact that may have on the calculation of the Sovereign Grant in future years. This question will form part of next year's review.

"As we made clear at the briefing, Scotland contributes in many ways to the Treasury's consolidated fund - out of which the sovereign grant is paid.

"We said explicitly that to imply Scotland would not pay for the monarchy was simply wrong and we accept unreservedly the assurances of the Scottish government that the sovereign grant will not be cut as a result of devolution of the crown estate."