The Treasury’s latest consultation on the Sovereign Grant has thrown up three anomalies that ought to make any fiscal hawk choke on their Earl Grey. First, the King’s tax — the formal revenue from the Crown Estate — is set to be redirected into a sovereign wealth fund, bypassing the Exchequer entirely. This is a constitutional sleight of hand. The Crown Estate’s profits have historically been surrendered to the Treasury in exchange for the fixed Sovereign Grant. But now, Whitehall wants to carve out a portion for a ‘national endowment’ to fund green infrastructure. That is a direct raid on public finances, dressed up as fiscal prudence.
Second, the mechanism for this wealth fund raises eyebrows. It would be capitalised by borrowing against future Crown Estate revenues. So the state will issue gilts to buy assets that might not generate returns for decades. In a market already jittery about UK debt, the timing is laughable. The yield on 10-year gilts has already ticked up 15 basis points since the rumour leaked. The market is sniffing out another unfunded liability.
Third, and most disturbing, is the precedent. If the Crown’s income can be repurposed without parliamentary scrutiny, what stops the next government from seizing private pension pots or nationalising utilities by executive whim? The rule of law is being stretched like a rubber band. The City is watching. Capital flight is not a threat here; it is a rational response to a government that treats property rights as optional.
Let us be clear: sovereign wealth funds are not inherently evil. Norway’s is a model of transparency and intergenerational equity. But this proposal reeks of opportunistic window-dressing. The Treasury is trying to finance a spending spree without admitting it is debt. Markets are not fooled. The pound is nudging lower against the dollar as I write. If this goes ahead, the only thing accumulating will be losses for British taxpayers.
I have sat through three decades of Chancellors trying to pull rabbits out of hats. This one is a dead cat. The constitutional implications are worse than the financial ones. For now the gilt market holds its breath. But patience, like liquidity, can evaporate.
