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Since the Queen pays income tax on her vast personal fortune - something she volunteered to do in 1993 - and the palace now publishes annual accounts, it ought to be simple to work out how much the royal family costs the taxpayer.
Indeed, when the first annual accounts were published last year, showing that royal spending stood at £35m for 2001 (including the £157,000 spent on redecorating the throne room), the keeper of the privy purse, Sir Michael Peat, claimed that the monarchy effectively cost the taxpayers nothing, and was even in credit.
"People are inclined to talk about how much the Queen costs the taxpayer," he said. "In fact the Queen doesn't cost the taxpayer anything."
This claim does not stand up to close inspection. The truth is that the real cost of the royal family to the taxpayer remains shrouded in confusion and secrecy. The briefest foray into royal finances reveals only that nothing is straightforward, and much is obscured.
A set of more than 25 newly released Treasury files does, however, throw some light into this murky world of private negotiations. The papers were released to the public records office earlier this year, but have until now escaped public notice.
The files detail the complex deals that were struck by the palace and Whitehall during the shaping of the 1972 Civil List Act, the legislation that governs how we fund the royal family. "It has been a long haul. There have been interminable meetings and problems," the chancellor, Anthony Barber, told the prime minister, Edward Heath, in the course of the negotiations.
The papers record palace officials and Whitehall mandarins striking private deals and then striving to keep them from MPs and ministers. They are peppered with references to matters that are "sensitive" or "embarrassing" or that are "not for disclosure". In one or two cases Treasury officials are told "there would be an advantage in keeping the paperwork provided for other ministers as brief as possible". When the chancellor asked for details of how members of the royal family financed their private spending, the Lord Chamberlain, Lord Cobbold, said he could only tell him on "privy counsellor" terms and nothing could be put in writing.
The papers also provide a wealth of curious detail, such as that one duty of the office of the lord chamberlain's department responsible for royal garden party invitations was, and may still be, to read the newspapers "for information relevant to compiling the 'blacklist'."
The civil list
In 1760 King George III agreed to surrender all the revenues from the "crown estates" in return for parliament agreeing to pay the costs of the army and the navy, and a fixed sum of £800,000 a year to "defray the charge of his civil government". This became known as the civil list. Although the basic deal remains the same, with the government paying the monarch a set sum, and in return drawing the revenues from those crown estates, this arrangement has been much tinkered with. Today the flow of money between monarch and state is the product of more than two centuries of often secret deals between the Treasury and the palace.
The Treasury papers detail a deal, brokered in 1971 and enshrined in the 1972 act, which ended the tradition that the civil list was negotiated once, at the beginning of a monarch's reign, and then set in stone for their lifetime.
Inflation had left the royals with civil list payments worth only a fraction of what they had been when set at the beginning of Elizabeth's reign, which had led to the unfortunate "civil list crisis", during which the Duke of Edinburgh joked on American television: "We are in the red and we might have to move out of the house next year."
In 1971 it was agreed that a review of civil list payments every 10 years was a far better idea, to take account of inflation. When it came time for a review in July 2000, Tony Blair told the Commons that the previous agreement, struck in 1990, had proved so generous that the civil list account was £35m in the black. But this did not mean that payments could be cut.
Labour MPs complained that it was "really quite extraordinary" that the 1972 act meant that unlike any other item of public expenditure they must be kept at a minimum level. But Mr Blair insisted there was no power in the 1972 legislation to reduce the payment, and so agreed a new deal (reported as "Queen agrees civil list freeze") with the palace being paid a further £7.9m a year until 2010 - despite the huge surplus.
The 1972 Treasury files reveal, however, that when the "minimum guarantee" was written into the legislation, Whitehall and the palace never intended to block future cuts. The files show that the parliamentary counsel who drafted the legislation, Sir John Fiennes, believed that MPs should be given the power to cut the payment if necessary. "It is not clear (or not to me) what is to happen if at the end of any 10 years the Treasury think the present provision will be good enough for another two, five, or even seven years," he told Lord Cobbold during the negotiations.
In a backstairs exchange, the palace told him not to worry: "The legislation should provide for a review and a new order to be made even if at the end of 10 years there proved to be a substantial balance in hand. No doubt miscalculations will be made but it seems unlikely that there would ever be enough in hand to last for a further 10-year period without a new order."
It will be eight years before MPs have the opportunity to question the level of civil list payments again.
The Queen's "private income"
When the profits from the crown estates were surrendered to the state by King George III, exceptions were made, and some of these are still enjoyed as the "private income" of the Queen and royal family. Money from the Duchy of Cornwall, for example, goes to the heir apparent. Revenues from the Duchy of Lancaster go to the Queen. A Treasury historical note implies that the Duchy of Lancaster was largely overlooked during the handover from monarch to state because it "only produced the derisory sum of £16 18s 4d in that year [1760]".
Today the estate pays the Queen £5.9m a year. The Duchy of Cornwall paid Prince Charles £7.4m last year.
For more than 130 years persistent political voices have insisted that these revenues, particularly from the Duchy of Lancaster, are no different from the cash from other crown estates and cannot be regarded as the royal family's "private property".
The Treasury papers show that ministers believed that position was only defensible in 1971 because money from the Duchy of Lancaster (which was then worth £300,000 a year) was being used to fund the deficit in the civil list caused by inflation.
Now that the royal family is £35m in the black and the Queen's annual take has risen to £5.9m, the official justification looks even more threadbare. As the Treasury itself admits in the files: "It may not be easy to offer a convincing defence for the retention of so large a sum [then at £300,000] were it not for the fact that the privy purse is meeting the deficit on the civil list in 1970 and 1971."
The Treasury advised the chancellor that nothing could be done about this: "We know of course that the Duchy revenues have grown to a significant level, but we could not force an issue here without being prepared to embark on a fundamental reappraisal of the whole constitutional relationship and nature of the monarchy."
So the question of this "private income" was left undisturbed for 30 years, and cannot be reopened until a new monarch takes the throne and a new civil list act is passed.
But it is interesting to know that for much of the Queen's reign the revenues of the estate did not only consist of rents and dividends from the Duchy's 19,200 acres and £72m investment portfolio (all of which are exempt from capital gains and corporation tax). She also benefited from what are known as the duchy's bona vacantia and bastardy funds. These are the proceeds from the sale of estates of people in Merseyside and Yorkshire and the rest of the duchy of people who die intestate and who have no traceable next of kin.
Over the years the sale of these estates has often made up more than 30% of the duchy's revenue. The fund did "surprisingly well" as a result of the deaths of widows of soldiers who were killed in the second world war. In 2000 more than £2.1mwas raised from 276 people who died intestate and the proceeds of 232 companies which were dissolved. Since 1993 the money from this source has gone into a Duchy of Lancaster benevolent fund.
In 1971, the palace and Treasury were only too well aware that using such money to bail out a monarchy in the red would not look good to the public or even MPs. "It was agreed that it would therefore be inappropriate to show the transactions in the duchy's parliamentary accounts. Perhaps you would be good enough to confirm that this is your understanding of the arrangement," the palace wrote to the Treasury.
Labour and the royals
When Tony Blair announced the latest 10-year financial deal for the royal family in July 2000 he slapped down Labour MPs' demands for reform saying he had "bigger priorities" for legislation.
But Labour's leaders have not always taken such a dismissive attitude towards reforming the royal finances. The newly released papers reveal that the Queen threatened to leave Buckingham Palace if a 1972 Labour plan went ahead to turn the monarchy into a government department.
The proposal, from Douglas Houghton, a former Labour chancellor of the Duchy of Lancaster, attracted widespread support at the highest levels of the Labour party, including from Roy Jenkins, and had the advantage that a minister responsible for royal finances would answer questions in parliament.
But the Queen's reaction was so hostile that Lord Cobbold made clear to the Treasury that her views should not be passed on even to the senior ministers and MPs on the select committee examining the new civil list proposals unless there was a guarantee they did not receive publicity.
"It is not clear that the Queen would wish to continue to occupy Buckingham Palace on these terms. If the palace were in effect a government department she might well wish to live elsewhere in a private capacity and appear at the palace only for official functions," noted the Treasury file.
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