Royal fortune stays secret: 'The Queen has been forced into paying taxes and the last thing she wants to do is to give the impression to the people that there is a tax regime for her and another one for the ordinary punter'

THE voluntary arrangements by which the Queen and the Prince of Wales will pay income tax were unveiled yesterday with some pomp and little precision.

The exact amount that the Queen will pay, and the size of the private fortune from which the income will be taxable will remain secret. Bequests to the next sovereign will remain free of inheritance tax; gifts to her other children will be taxed.

The Prince of Wales will replace his present arrangement - paying 25 per cent of the profits of the Duchy of Cornwall to the Treasury - with an agreement to pay tax at 40 per cent and deduct legitimate expenses. This would leave him no worse off, according to a Buckingham Palace spokesman, but it does make him vulnerable to any rise in the rate of income tax.

John Major assured MPs yesterday that Britain would not be getting a cut-price, bargain basement monarchy as a result of the voluntary agreement by the Queen to pay tax and restrict the size of the Civil List. She will return to the Treasury the money voted to all members of the Royal Family except herself, the Duke of Edinburgh, and the Queen Mother.

The Prime Minister told the Commons: 'The Conservative Party, and I believe every member of it and many beyond it as well, are very strong monarchists and would not wish to see changes in the constitutional hereditary monarchy that we have in this country.'

By far the greater part of the money spent on the Queen's behalf will remain exempt from tax because it is paid by the Government for her work as head of state.

In 1990-91, the Royal Family received a total of pounds 45,357,807 on the budgets of government departments. In this category came the pounds 16.8m spent by the Ministry of Defence on royal transport and the pounds 25.6 m spent by the Department of the Environment on the royal palaces.

The Lord Chamberlain, Lord Airlie, the official in charge of the Queen's finances, said yesterday that such moneys could not be counted as part of the Queen's income and that if tax were levied on them, they would have to be increased to compensate.

Published estimates of the Queen's disposable worth have ranged from pounds 50 m to pounds 500 m. Yesterday Lord Airlie pooh-poohed most of the speculation: 'Her Majesty has authorised me to say that even (an estimate of pounds 100m) is grossly overstated.'

The circumstances in which these details were announced, in a reception chamber in St James's Palace, were a curious blend of the old and the new. The opening speech by Lord Airlie, nervous and large-eyed like a lemur dragged into the light, was given on the record.

But the subsequent questions were answered only non-attributably by members of a panel consisting of Lord Airlie, Michael Peet, director of finance in the Royal Household, and Andrew Turnbull, second permanent secretary at the Treasury.

They were not trying hard to persuade anyone that the reform was very egalitarian. One young man from Sky television asked them: 'Do you not accept the argument that she is not like me?'

The answer - 'yes' - came like a trombone blast of disdain.

The income from visitors to the public sections of the royal palaces is to be devoted to a new charity that will look after the royal art collection. Some idea of the magnificence of these treasures could be gained from the portraits covering the walls of the room in which Lord Airlie spoke. From one end of the room in St James's Palace, Holbein's portrait of Henry VIII glowered towards the distant press conference. Charles II looked down on the press from above a picture of one of his mistresses, Louise de Kerouailles; opposite were James II and his Queen, Mary of Modena.

James II came to a sad end from ignoring public opinion, and there was in Lord Airlie's statement a repeated wish that these concessions help the House of Windsor escape the fate of the Stuarts.

Lord Airlie was anxious to divert attention from the Queen's tangible, and calculated contribution to the public purse, to her intangible and immeasurable contributions to 'our national life', a phrase he used three times.

'Perhaps we tend to forget, except in times of grave crisis or celebration, the importance of the Sovereign as a focus for national unity, as a source of stability and continuity and as someone to encourage and reward excellence and achievement and to bring people together at every level.

Lord Airlie continued: 'It is only by moving with the times, not too fast and not too slow, that the institution itself can continue to make its essential contribution to national life.'

The new arrangement was criticised by some Labour MPs. Dennis Skinner said: 'The Queen has been forced into paying taxes as a result of the pressure outside this place and the last thing she wants to do is to give the impression to the people outside that there is a tax regime for her and another one for the ordinary punter.' But Lord Airlie justified the Queen's partial exemption from inheritance tax on the grounds that 'in order to be constitutionally impartial, the Sovereign must have, and be seen to have, an appropriate degree of financial independence.'

Tax arrangements, page 3

Leading article, page 18