14/07/2011 15:07 BST | Updated 13/09/2011 06:12 BST

MPs Progress Royal Finances Plan

PRESS ASSOCIATION -- Plans for historic reforms to the royal finances that will see the Queen's official duties supported by profits from the Crown Estate have passed their first Commons hurdle.

The Sovereign Grant Bill, which received an unopposed second reading, will replace the current Civil List and other grants with a new mechanism, based on a percentage of the profits of the Queen's £6.7 billion property portfolio.

Chancellor George Osborne said the new system would provide the Royal Family with "dignity" in a way that is "accountable, that is transparent and delivers value for money for the taxpayer".

Under the new Sovereign Grant, which will be in place from 2013-14, the amount of money to fund the Royal Household in its public duties could be 9% lower in real terms by 2015.

The Queen is expected to receive a grant worth around £34 million in 2013-14 - equivalent to 15% of the profits of the vast Crown Estate.

The Bill will also allow the National Audit Office to scrutinise how the money is spent and the Royal Household could be called to give evidence to the Commons Public Accounts Committee.

Mr Osborne said the present arrangement had relied on a reserve of public money built up over the last 20 years which was now depleted.

"That money has run out, so in other words the system is broken and we've got to fix it," he said. "We don't want a cut price monarchy, nor do we want an excessively lavish monarchy. What the country wants is a monarchy properly funded to do the job we ask of it."

But Labour's Paul Flynn, MP for Newport West, said cash from the Crown Estate belonged to British taxpayers. He told MPs: "It's quite clear the Crown Estate is the property of the country and the revenue should go to health and social security and the other issues we have."

But shadow chancellor Ed Balls said the reforms would finance the monarchy for the modern era. He told MPs: "It is the responsibility of Parliament to ensure a fair and proper balance is struck between the interests of the taxpaying public and the needs and dignity of the Royal Household."