Royal Legacy: How the royal family have made, spent and passed on their wealth
Page 25
Let’s consider first the status of lot number twenty-eight. In 1947 on her first solo engagement at the Harland and Wolff shipyard in Belfast the seventeen-year-old princess was given by the builders of the new royal mail ship a diamond and emerald heather brooch housed in a case engraved "RMS Edinburgh Castle Oct. 16th 1947". It was the first of her many ship-launchings. Another apparently unambiguous item was a West Indian gilt cigarette box which bore a plaque reading: "presented to Her Royal Highness the Princess Margaret by the Government and People of the West Indies as a token of their abiding loyalty and affection on the occasion of her visit to Port of Spain in April 1958 when on behalf of Her Majesty the Queen she graciously inaugurated the Parliament of the West Indies." Then there was the Canadian salver which bore the equally unequivocal inscription "presented to HRH the Princess Margaret Rose by the Government of Canada May 1939."
Perhaps the most clear cut public gift was given by President Tito during a state visit to the United Kingdom in March 1953. Not previously noted as a close friend of the royal princess, the Yugoslav communist leader gave her a filigrée cigarette case and cigarette holder. Inside was a note in an unknown hand: "From Tito 1952 or 3." Its sale brought in £6,600.
The other striking feature is the apparently arbitrary way in which items were designated public or private. Take two wedding gifts from two Commonwealth countries. A pair of silver model kiwis from the government of New Zealand was deemed public and consequently the proceeds from the sale were given to charity - a move diplomatically welcomed by a spokesman from its London High Commission: "we are pleased that the proceeds from our gift are going to a good cause".4 Yet a set of four gold candlesticks given by the government of South Africa (then still a member of the Commonwealth) was not granted charitable status. It was sold for £31,200.
In some cases it was a close judgement call as to whether a gift was given in an official capacity or not. A set of Iranian cups and saucers - which bore the crown and arms of the Shah of Iran who had "presented" the gift in some unrecorded capacity - was according to the official catalogue re-designated a charitable item with a blue title, although curiously after it was sold for £5,400 the Christie’s website of auction results omitted to classify it a charitable item. This might of course have been just a clerical mistake. A more ambiguous case was a present from the Pope which fetched £14,400. A travelling icon depicting the Virgin and Child mounted in a gem-set frame and presented to the princess by Pius XII in May 1949 was not granted charitable status. At first sight, this was surprising since it appeared on a state-like engagement on a par with President Tito’s cigarette case or the Canadian government's silver salver. A possible explanation why this gift slipped through the net was that the princess received it during a private audience with the pontiff, although one wonders whether she would have been given a papal audience and a gift if she had not been a member of the royal family. After visiting the Pope, the princess lunched with the Italian head of state, President Einaudi, and the leaders of the Chamber of Deputies and the Senate.
If there was a whiff of arbitrariness about how the choice was made, then one might also wonder whether there was a tendency to choose less valuable items for charitable status. When you analyse the lots as a whole it is obvious that the more valuable items were not given charitable status. The top priced non-charitable items hit seven figures with the Fabergé clock realising £1.24m and the Poltimore tiara just falling short on £926,400, while the bulk of the other lots went for five figures. The top priced item among the charitable lots was the £36,000 pair of silver kiwis followed closely by the Harland and Wolff brooch at £31,200 but two thirds of all the items went for four figures. At the low end, the cigar case from the King of Cambodia was sold for £1,560 and the silver water jug from Bolton Borough Council realised £4,200, while at the top end the army's wedding present of a dining table sold for £18,000 and an Irish oak linen chest from the women of Belfast went for as much as £26,400.
At the time of the sale, Christie’s declared that the proceeds from forty-seven lots would be donated to charity and it was also reported that the actual amount was around £410,000. But if you examine Christie’s auction results with the final list of realised prices, you can find recorded – and again this might be just an innocent clerical error - only forty-one charitable lots and a final total of £314,700 - a sizable amount by anyone's standards but still less than 3% of the total receipts from the sale.
In fairness to the sellers, the charitable status of items was established before the start of the auction and at that stage no one could have predicted how much would be realised. In the case of the two Commonwealth wedding gifts, the non-charitable South African gift had an estimated price of £10,000-£15,000 and realised £31,200, while the charitable New Zealand gift had an estimate of just £600-£900 but fetched £36,000. So, there was a strong element of lottery in how much each lot realised at auction. It should also be pointed out that one reason why the charitable items were relatively low priced is that they tended to come from public bodies whereas many of the other non charitable items came from wealthy friends and relatives.
The grey area of what is public property and what is private was dramatically put under the spotlight by lot number seven hundred and ninety-three - Pietro Annigoni's portrait of Princess Margaret. Painted in 1957 and hung in the National Museum of Wales and then at the entrance to the Kensington Palace apartment, it was a companion piece to his more famous portrait of the young Queen Elizabeth II in a deep blue cloak that hung in the National Portrait Gallery. In the view of several commentators, such an iconic image should have been presented to the National Portrait Gallery or at least retained in the family.
When Christie’s released details of the number of foreign buyers on the first day of the auction, there seemed a real danger that the painting might be lost to the nation the following day. The auction house revealed that while 58% of sales came from the UK (many of whom were private bidders), 15% resulted from the rest of Europe, 16% from the Americas, 10% from Asia and 1% from the Middle East. But the crucial figures concerned the top selling five items - two of which went to Asia and one to continental Europe.5 When twenty-four hours later they gave a similar breakdown for the concluding day of the auction, the top selling item was the Annigoni portrait whose buyer was listed as "anonymous". It transpired that the mystery buyer was Lord Linley himself - paying £680,000, three times the original estimate and a world auction record for the artist.
Another item that many thought should never have been offered for auction was a ten inch high glass crucifix. Made by the renowned French glass maker René Lalique, it was given to the princess by the Queen Mother almost exactly a year before her death with a note saying that the crucifix was given to her early on in her marriage by Princess Beatrice, Queen Victoria’s youngest daughter. The shaky handwriting of her dying mother on the letter paper is testament to the highly personal nature of the gift. It was rumoured that the Queen was concerned about the sale of such an intimate family heirloom and at the last moment, Lord Linley withdrew it from the auction. In the end its sentimental value outstripped its reserve price of £500-£800.
The crucifix was not the only item that many wanted withdrawn. At the end of the first day a storm of controversy suddenly blew up over a set of cast iron railings called the Royal Ascot Balustrading. After the Duke of Norfolk decided in 1963 to build a new stand at the race course, the old ironwork dating back to 1929 was “presented" to Princess Margaret who duly put it in her rose garden at Kensington Palace. Under Lord Snowdon's supervision, it was reassembled to create a shadowed arbour replete with climbing plants and later - as the catalogue highlights - it became a backdrop for some of Cecil Beaton's My Fair Lady-like portraits of the princess. Christie’s put a reserve price on the lot of £8,000-£15,000 warning bidders that it had to be "removed from Kensington Palace London at the purchaser's risk and expense."
At the last moment, the Historic Royal Palaces - the agency
in charge of running the princess's Kensington Palace apartment - expressed their fear that the ancient balustrade might fall to pieces if removed and questioned whether it was permissible for such "a fixture and fitting" to be put up for sale in the first place. According to advice received from English Heritage, as a Grade I listed building the Wren-designed Kensington Palace was covered by Scheduled Monument Consent and so dismantling the balustrading would have required special permission. In practice, the purchaser would have to convince English Heritage that the railing could be removed without detriment to the palace. Unlawful removal of a fixture from an historic site was punishable by a prison sentence of up to seven years.
Faced with another banana skin, Lord Linley this time deftly sidestepped the danger, leaving it to a Christie's spokeswoman to announce: “the client has decided to give it to the nation. After the success of yesterday, we were told to withdraw the lot so that it could remain in situ at Kensington Palace." He could afford to be generous because on the first day, the auction realised £9,597,680. The staggering prices reportedly left him and his sister “hoarse” with disbelief. By the close of day two, the total figure had risen to £13,658,728 - £10 million more than the original estimate and significantly £6 million more than the probate value of the estate.
Given that most or possibly all of the sale items apparently came from their mother’s estate, how can one reconcile the auction figure of £13.6 million with the probate figure of £7.6 million? Does it suggest that the estate was undervalued and if so was the apparent undervaluation aided by the fact that the contents of the will were kept secret?
An interesting parallel to the sale of Margaret's possessions is the auction of the property of Prince Henry, the Duke of Gloucester, which took place at Christie’s six months earlier on January 26 and 27, 2006. Again it was undertaken to pay a large inheritance bill, again controversy surrounded the sale of personal items and again the sale realised many times the value of the estate. As we shall see in more detail in Chapter Sixteen, the probate value was set at £734,262 while the auction realised £5,063,362 (although in this case there was a gap of 32 years between the two events).
But by 2006 the heirs of the estates of both the Duke of Gloucester and Princess Margaret benefited from extremely favourable market conditions. It should be remembered that Margaret's auction took place in June 2006 at the height of an unprecedented arts bubble when many foreign buyers were paying outrageous sums for paintings and other precious objects. As the novelist and columnist Frederick Forsyth wrote at the time: "what happened was that the bidders went bananas…there are a lot of people around with more money than sense.”6 If the sellers had waited until the crash of 2008/9 the prices would have been much lower. It should also be pointed out that even without the art market bubble normal price inflation between the probate valuation and the auction four years later would also have pushed prices up a few percentage points.
The other factor inflating prices was of course the cachet of a royal name. "Her glamour and aura were such that collectors flew especially from Asia and America for just one day to participate in this landmark auction," cooed the auctioneer Francois Curiel in his own inflationary rhetoric.7 But he was not exaggerating when he added - "pieces fetched…up to one hundred and fifty times their original estimates, which is unprecedented, as the market decided the added value of the royal provenance."
So when it came to putting a price tag on the assets should the executors have taken into account their added royal value? According to Her Majesty’s Revenue and Customs, the responsibility for correctly valuing the property lies with the executors and if there are any special items with an extra value brought on by celebrity status or some other exceptional factors then they should be factored in too and assessed if necessary by a professional valuer. The value is based on the price an asset would command if passed between a willing seller and buyer immediately before the owner’s death. At a later stage, the tax office may reassess the valuation if they consider it too low or high.
But even if the celebrity premium was taken into account, was the estate still undervalued? This is a trickier issue. It should be emphasised that the total value of the estate is based on its worth at the time of death and it is possible that the celebrity cachet and the arts bubble pushed the "fair price" of the princess's possessions up several million pounds, but whether it could explain a difference of £6 million is open to debate. Another complicating factor is whether the sale might have included items outside of Princess Margaret’s estate – in other words, property that she may have passed on as non-chargeable lifetime gifts more than seven years before her death. But on the other side of the ledger, it could be pointed out that not everything in her formal estate was put up for sale.
Perhaps the fairest judgement one can make about the way the estate was valued is similar to the one made by a royal biographer about how Christie’s went about their own valuation: they were “conservative with their estimates."8
The extra profit from the auction inevitably meant that there was more tax to pay. But this time it was capital gains rather than inheritance tax. The children were liable to CGT at 40% on the increase in the value of the princess's possessions between when they inherited them and when they were sold. The tax bill on the gain was estimated at £2.1 million.
From a tax perspective, it could be argued all the children succeeded in doing by putting their mother's possessions up for sale was to swap inheritance tax at 40% for capital gains tax at 40%. So, was the whole exercise tax neutral? Did the Revenue get the same yield but under a different tax regime?
Although it is indisputable that the heirs were landed with a large tax liability, the CGT bill would have been lower than the IHT one. Under the CGT regime they would have benefited not just from taper relief but also from certain exemptions. For instance, chattels (tangible and moveable private property) worth less than £6,000 were exempt from CGT. But even if the children had saved a few thousand pounds or even ten thousand pounds, the difference between the two regimes was at best marginal - as they would have still had an additional tax bill of anywhere between £2m and £3m.
But few tears were shed on their behalf. Assuming that the tax calculations above are broadly accurate, the children were still left with a net profit of a few million pounds. The popular press saw this as pure greed. The Daily Mail called the auction a "vulgar royal car boot sale" and Lord Linley was branded "the Del Boy at the palace."
In a later interview with the Sunday Telegraph in January 2007 Lord Linley offered a robust defence of his actions - "I had the sale for a very simple reason, which was an inheritance tax situation, and wanting to build for my family's future and my children's education – normal family requirements.” He went on to point out that: “We are a modern family who need to live in a certain way. The sale rationalised the collection. We still have some of the best pieces, which we will always treasure, but it was an opportunity to put everything on an even keel." When it came to the contentious sale of the Poltimore Tiara, he insisted that: "We looked very long and hard about whether to include it or not, but I think that my mother would have felt it was a good idea. It was an iconic piece, but who in the family would be in a position to wear that very often, versus the opportunity it gave? So it was a very rational decision." He also rejected rumours of any family splits and said he still remained "very close" to his father and his sister.9
Ironically up until the auction, Lord Linley had generally received a good press. He was praised as one of the better behaved royals who was not snobbish, kept out of the limelight and earned a living from his furniture business. His parents had sent him to Bedales in Hampshire - a progressive boarding school that encouraged his passion for carpentry. He went on to study at the Parnham House School for Craftsmen in Wood before setting up his own workshop in Dorking. When the business began to take off and furniture shops were opened in the King's Road and then Albemarle Street, he took the decision at the age of twenty-two to
stop doing the carpentry himself and concentrate on being a businessman. The Queen Mother was one of the first shareholders in the enterprise. He once said of his shop that "he was in it for the money." He also set up a chain of restaurants called Deals with his relative Lord Lichfield. Some believe that he had long harboured grander entrepreneurial ambitions. Before the auction, he had already been a non-executive director of Christie’s for two years and later he was also made Chairman of Christie’s (UK). Past chairmen had numbered Lord Hindlip and Lord Carrington and no doubt when Christie’s made the decision they took into account both his business skills and the cachet of his royal name. Foreign clients could not fail to be impressed by a call from the Queen's nephew.
A few years before the auction, the Royal Rich Report had valued his wealth at £20.7m.10 This included £10m from trust funds, £4.3m from property, £7m from art and furniture and £4.4m from business assets. This might be a slight exaggeration - especially when it came to business assets as his furniture company had not made enormous profits but the Royal Rich Report included assets from his immediate family. In 1993 he wed the Hon. Serena Stanhope, daughter of the Earl of Harrington who had a vast property portfolio valued at one point at £250m. Serena is believed to benefit from a generous trust fund, but the family wealth is shared around a large tribe of siblings.
Linley's younger sister Lady Sarah was also not short of money. Thanks to a trust fund and two London properties, her wealth was put at £4.7m by the Royal Rich Report.11 A professional painter who trained at the Camberwell School of Art, she married fellow artist and erstwhile actor Daniel Chatto in 1994. His mother is the successful theatrical agent Ros Chatto who represents among others Alan Bennett. Both Lady Sarah and Lord Linley would benefit from her father's £4 million town house in South Kensington that as part of the divorce settlement with Margaret had been purchased by the Queen for his lifetime use although, according to Land Registry documents, the freehold was now in their joint names. She is also thought to have been gifted some jewellery by the Queen as well as a diamond pendant once owned by her grandmother, Queen Mary.