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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2017/nov/06/queen-barred-investing-abroad-duchy-lancaster-finances-paradise-papers
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| The Queen was once barred from investing overseas. She can be again | The Queen was once barred from investing overseas. She can be again |
| (13 days later) | |
| If you take your investments offshore, don’t be surprised if eventually you sail into some choppy waters. A growing swell of criticism threatens to swamp the Queen’s financial vessel after the Paradise Papers revelation that the Duchy of Lancaster – her private estate – had invested more than £10m in the tax havens of Bermuda and the Cayman Islands. | If you take your investments offshore, don’t be surprised if eventually you sail into some choppy waters. A growing swell of criticism threatens to swamp the Queen’s financial vessel after the Paradise Papers revelation that the Duchy of Lancaster – her private estate – had invested more than £10m in the tax havens of Bermuda and the Cayman Islands. |
| The MP Margaret Hodge, the former chair of the public accounts committee, said she was “pretty furious” with the Queen’s investment advisers for sullying her reputation, while John McDonnell, the shadow chancellor, has demanded that they give evidence to a public inquiry into offshore tax havens. | The MP Margaret Hodge, the former chair of the public accounts committee, said she was “pretty furious” with the Queen’s investment advisers for sullying her reputation, while John McDonnell, the shadow chancellor, has demanded that they give evidence to a public inquiry into offshore tax havens. |
| I have spent months investigating the duchy for a new book on the Queen’s wealth, and believe the public would expect the sovereign to act to the highest standards over her financial investments. The head of state must be beyond reproach. | I have spent months investigating the duchy for a new book on the Queen’s wealth, and believe the public would expect the sovereign to act to the highest standards over her financial investments. The head of state must be beyond reproach. |
| Given that the Queen is permitted by convention only an arm’s-length role in the management of the duchy, it seems highly unlikely she would have known of any individual investments in offshore equity funds. Day-to-day running of the private estate is handled by around 18 full-time staff (including a specialist financial investments manager), and their actions are scrutinised every two to three months by the duchy council, which acts like a board of directors. | Given that the Queen is permitted by convention only an arm’s-length role in the management of the duchy, it seems highly unlikely she would have known of any individual investments in offshore equity funds. Day-to-day running of the private estate is handled by around 18 full-time staff (including a specialist financial investments manager), and their actions are scrutinised every two to three months by the duchy council, which acts like a board of directors. |
| So why did no one on the council kick up a fuss about £10m being invested in offshore tax havens? Wouldn’t it have been prudent to ask whether any of the investments were – to put it politely – in “controversial companies”, and demand a full list of the names? | So why did no one on the council kick up a fuss about £10m being invested in offshore tax havens? Wouldn’t it have been prudent to ask whether any of the investments were – to put it politely – in “controversial companies”, and demand a full list of the names? |
| The council members seem rich in financial experience but poor in political judgment. What would happen, they should have asked, if the Queen’s investments in the tax havens became known to the public? Maybe after decades of duchy secrecy they presumed this would never come out, but they should have been alive to the reputational damage to the monarchy if it did. | The council members seem rich in financial experience but poor in political judgment. What would happen, they should have asked, if the Queen’s investments in the tax havens became known to the public? Maybe after decades of duchy secrecy they presumed this would never come out, but they should have been alive to the reputational damage to the monarchy if it did. |
| In some ways the duchy appears to be acting like a commercial machine rather than a quaint ancestral estate. Things were simpler when the Queen came to the throne in the early 1950s. For a start, profits were modest (£100,000 in 1952, compared with £19.2m in 2017) and the rules of the game clearer. The duchy was allowed to invest its financial portfolio only in gilts – UK government securities. Then in the late 1950s the duchy began to lobby the government to relax the rules, and after some prevarication the Treasury agreed. We now know where this led – offshore. | In some ways the duchy appears to be acting like a commercial machine rather than a quaint ancestral estate. Things were simpler when the Queen came to the throne in the early 1950s. For a start, profits were modest (£100,000 in 1952, compared with £19.2m in 2017) and the rules of the game clearer. The duchy was allowed to invest its financial portfolio only in gilts – UK government securities. Then in the late 1950s the duchy began to lobby the government to relax the rules, and after some prevarication the Treasury agreed. We now know where this led – offshore. |
| A simple way to avoid a repetition of the present embarrassment might be to reimpose the old rules and ban all overseas investment. The duchy would no doubt argue that this would weaken profitability, since most other financial funds invest abroad; but given that last year 95% of its profits came from land rentals (and a few mineral rights) in the United Kingdom, it might just survive by staying in Blighty. | A simple way to avoid a repetition of the present embarrassment might be to reimpose the old rules and ban all overseas investment. The duchy would no doubt argue that this would weaken profitability, since most other financial funds invest abroad; but given that last year 95% of its profits came from land rentals (and a few mineral rights) in the United Kingdom, it might just survive by staying in Blighty. |
| If the duchy is not prepared to accept this friendly form of internal exile, then parliament should insist it open up its books to proper public scrutiny. Since the National Audit Office now oversees the spending of the Queen’s royal household, maybe its remit could be extended to her ancestral estate? | If the duchy is not prepared to accept this friendly form of internal exile, then parliament should insist it open up its books to proper public scrutiny. Since the National Audit Office now oversees the spending of the Queen’s royal household, maybe its remit could be extended to her ancestral estate? |
| The duchy would probably respond that the NAO monitors only public money, and estate funds are clearly private. But this forgets that in the past duchy money was sometimes used to supplement public funding from the civil list (for instance, to the tune of £70,000 in 1970 and 1971) and today private estate cash is regularly used to fund the public duties of junior royals such as the princesses Anne and Alexandra. | The duchy would probably respond that the NAO monitors only public money, and estate funds are clearly private. But this forgets that in the past duchy money was sometimes used to supplement public funding from the civil list (for instance, to the tune of £70,000 in 1970 and 1971) and today private estate cash is regularly used to fund the public duties of junior royals such as the princesses Anne and Alexandra. |
| In truth, the duchy is not as private as it likes to make out. After all, there can’t be too many private estates that have as estate manager a senior member of the government (the chancellor of the Duchy of Lancaster has in recent years sat in cabinet); and how many private estates are by law required to submit their annual accounts to parliament? | In truth, the duchy is not as private as it likes to make out. After all, there can’t be too many private estates that have as estate manager a senior member of the government (the chancellor of the Duchy of Lancaster has in recent years sat in cabinet); and how many private estates are by law required to submit their annual accounts to parliament? |
| Something positive might come out of the current storm over the murky manoeuvrings of the duchy in Bermuda and the Cayman Islands if it ended in greater transparency all round. When it comes to offshore tax havens in the Caribbean, sunlight is the best disinfectant. | Something positive might come out of the current storm over the murky manoeuvrings of the duchy in Bermuda and the Cayman Islands if it ended in greater transparency all round. When it comes to offshore tax havens in the Caribbean, sunlight is the best disinfectant. |
| • David McClure is the author of Royal Legacy | • David McClure is the author of Royal Legacy |
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