The Blue Bloods

What is’t to us, if taxes rise or fall,
Thanks to our fortune, we pay none at all.

In 1980, Samuel, the 3rd Baron Vestey, and his cousin, Edmund, were found to have paid just £10 in tax on the family business’s £2.3m profit. When they were challenged, Edmund shrugged his shoulders and said: “Let’s face it. Nobody pays more tax than they have to. We’re all tax dodgers, aren’t we?”

The secret to the survival of the old aristocracy through the centuries was the mystique of grandeur they cultivated. They dressed, decorated and built to impress, so that nobody dared question their right to rule. The secret of their modern existence is their sheer invisibility. As the Daily Mail commented when Tatler magazine gathered a table of 10 dukes together in 2009: “Once, the holders of these titles would have been the A-list celebrities of their time. Today, most people would be pushed to name a single one of them.”

 The government formed by Theresa May in June 2017 included one earl, one viscount and three hereditary barons. Historically, the British aristocracy’s defining feature was not a noble aspiration to serve the common weal but a desperate desire for self-advancement. They stole land under the pretence of piety in the early middle ages, they seized it by conquest, they expropriated it from the monasteries and they enclosed it for their private use under the pretence of efficiency. They grasped wealth, corruptly carved out their niche at the pinnacle of society and held on to it with a vice-like grip. They endlessly reinforced their own status and enforced deference on others through ostentatiously exorbitant expenditure on palaces, clothing and jewellery. They laid down a strict set of rules for the rest of society, but lived by a different standard. Such was their sense of entitlement that they believed – and persuaded others to believe – that a hierarchical society with them placed firmly and unassailably at the top was the natural order of things. They were shocked and angered when others sought to deprive or degrade them. They clung tenaciously to their position. They developed ever more specious arguments to defend their privileges. They eulogised themselves and built great temples to their greatness. They jealously guarded access to their hallowed halls. And when democracy finally and rudely shunted them aside, they found new means of preserving their extravagant riches without the tedium of pretending they sought the common interest. Far from dying away, they remain very much alive.

According to a 2010 report for Country Life, a third of Britain’s land still belongs to the aristocracy. Notwithstanding the extinction of some titles and the sales of land early in the 20th century, the lists of major aristocratic landowners in 1872 and in 2001 remain remarkably similar. Some of the oldest families have survived in the rudest financial health. In one analysis, the aristocratic descendants of the Plantagenet kings were worth £4bn in 2001, owning 700,000 acres, and 42 of them were members of the Lords up to 1999, including the dukes of Northumberland, Bedford, Beaufort and Norfolk.

Advertisement

The figures for Scotland are even more striking. Nearly half the land is in the hands of 432 private individuals and companies. More than a quarter of all Scottish estates of more than 5,000 acres are held by a list of aristocratic families. In total they hold some 2.24m acres, largely in the Lowlands.

Many noble landholdings are among the most prestigious and valuable in the world. In addition to his 96,000-acre Reay Forest, the 23,500-acre Abbeystead estate in Lancashire and the 11,500-acre Eaton estate in Cheshire, the Duke of Westminster owns large chunks of Mayfair and Belgravia in London. Earl Cadogan owns parts of Cadogan Square, Sloane Street and the Kings Road, the Marquess of Northampton owns 260 acres in Clerkenwell and Canonbury, and the Baroness Howard de Walden holds most of Harley Street and Marylebone High Street. These holdings attract some of the highest rental values in the world. Little has changed since 1925, when the journalist WB Northrop published a postcard portraying the octopus of “landlordism” with its tentacles spread across London, charging the aristocracy with pauperising the peasantry, paralysing the building trade and sucking the lifeblood of the people.

One legal provision unique to England and Wales has been of particular importance to these aristocratic landlords: over the centuries they built many millions of houses, mansion blocks and flats, which they sold on a leaseholdrather than freehold basis. This meant that purchasers are not buying the property outright, but merely a time-limited interest in it, so even the “owners” of multimillion-pound residences have to pay ground rent to the owner of the freehold, to whom the property reverts when their leases (which in some areas of central London are for no more than 35 years) run out. This is unearned income par excellence.

Built property aside, land ownership itself is still the source of exorbitant wealth, as agricultural land has increased in value. According to the 2016 Sunday Times Rich List, 30 peers are each worth £100m or more.

Edward William Fitzalan-Howard, the 18th Duke of Norfolk, is still the premier duke of England, as well as being the Earl Marshal, the Hereditary Marshal of England, a member of the Lords and the holder of nine other titles. His landholdings are obscure, but, as he (under-)stated in his maiden (and only) speech in the Lords: “I farm in West Sussex and own moorland in North Yorkshire”, and he still lives at Arundel Castle. Many of those who have ceded their homes to the National Trust or to a charitable trust of their own devising (with all the concomitant tax advantages) still occupy their ancestral pads, with the added benefit of modern plumbing and wiring. The Dowager Countess of Cawdor still lives in her son’s castle thanks to a tax exemption, the Marquess of Curzon still lives and shoots at Kedleston, Derbyshire, thanks to the National Heritage Memorial Fund (NHMF), and the Duke of Marlborough still dines in the saloon at Blenheim, which charges a £24.90-a-head entry fee for visitors.

True, the owners of lesser homes face significant challenges and a few peers have decided to downsize. In 2005 Lord Hesketh sold Easton Neston – designed by Nicholas Hawksmoor – in Northamptonshire (but kept Towcester racecourse). The 7th marquess of Bute offered Dumfries House to the National Trust for Scotland, and when they refused it Prince Charles stepped in with a consortium that found £45m to purchase the house and its contents in 2007, and endow it for the future. (It got £7 million from the NHMF.)

Grand homes such as Chatsworth, Woburn and Longleat attract many thousands of visitors, while the stately homes that survived in private hands up until 1960 are virtually all still in the same private hands today, and many peers continue their annual peregrination from one well-appointed palace to another. The Buccleuchs, for instance, have the rose-coloured sandstone palace of Drumlanrig, in Dumfries and Galloway, as their main home, but they spend winter months at the much-enlarged hunting lodge, Bowhill, in the Borders, and at Boughton in Northamptonshire, an 11,000-acre estate that includes five villages and a stately home that hosts artworks by Van Dyck, El Greco and Gainsborough. When the previous duke made this journey, he would be accompanied by Leonardo da Vinci’s Madonna of the Yarnwinder – the only Leonardo in private hands – until it was stolen in 2003.

Twenty-first-century aristocrats still belong to the same clubs their ancestors frequented: Brooks’s, Boodle’s, Pratt’s and White’s. Like Nancy Mitfordin 1955, they entertain themselves distinguishing between U terms, as used by the upper classes (“napkins”, “false teeth”, “spectacles” and “vegetables”), and Non-U, or middle-class, ones (“serviettes”, “dentures”, “glasses” and “greens”). They play polo and love guns, horses and hounds. The 12th Duke of Devonshirehas been the queen’s representative at Ascot, senior steward of the Jockey Club and a prominent buyer and seller of fine art (in 2012 he sold a Raphael for £29.7m). The 10th Duke of Beaufort was master of his eponymous hunt for 60 years and the hunt still meets regularly at Badminton, Gloucestershire. Emma, Duchess of Rutland, hostess of the Belvoir hunt and countless shooting parties, is so committed to making shooting a central attraction at Belvoir that she toured all the best shoots in the land and published her rhapsody to hunting in Shooting: A Season of Discovery.

The primary means of squirrelling away substantial assets so as to preserve them intact and deliver a healthy income for aristocratic descendants without bothering the taxman is the trust. Countless peers with major landholdings and stately homes have put all their assets into discretionary trusts, thereby evading both public scrutiny and inheritance tax. This is the case with the Duke of Westminster’s Grosvenor estates, whose trustees, chaired by the duke, dole out benefits and payments to members of the family while keeping the assets separate from any individual’s estate. Her Majesty’s Revenue and Customs is entitled to a percentage of the value of the trust fund every 10th anniversary of its creation, but after exemptions for farms and businesses have been taken into consideration, the Revenue is left virtually empty-handed.

Income is subject to tax, but the patrimonial asset remains intact. In 1995, the 9th Duke of Buccleuch complained that the Sunday Times Rich List had overestimated his worth at £200m, as he owned “no shares in Buccleuch Estates Ltd”. Legally, he was quite correct. Despite being a parent company for a string of valuable joint ventures and property holdings, the company is vested in four Edinburgh shareholder lawyers at a total value of £4. Since today’s directors are the 10th duke, the duchess, their heir, the Earl of Dalkeith, and the duke’s two brothers, John and Damian, it is difficult not to conclude that the Buccleuchs are in reality the beneficial owners.

Dozens of the old nobility have done the same, meaning that the family trust can quietly provide a house, an income, a lifestyle (and, if required, a divorce settlement) to any number of beneficiaries without fearing inheritance tax or the prying eyes of the public. 

Aristocrats may not like paying tax, but they don’t object to taking handouts from the taxpayer. The landed aristocracy has benefited to an extraordinary degree from payments under the EU’s common agricultural policy. The figures are staggering. At least one in five of the UK’s top 100 single-payment recipients in 2015/16 was aristocratic.

The richest have carried off the most. The Duke of Westminster’s Grosvenor Farms estate received £913,517, the Duke of Northumberland’s Percy Farms took £1,010,672, the Duke of Marlborough’s Blenheim Farms got £823,055 and Lord Rothschild’s Waddesdon estates received £708,919. This is all in a single year. Multiplied across the years, the payments from the EU have benefited the British aristocracy to the tune of many millions of pounds.

british laws on land tenure, inheritance tax, corporate governance and discretionary trusts still make it easy to hide wealth from public view. Land is subsidised, and taxed more lightly than residential property. Unearned income bears less of a burden than earned income. All this quietly underpins the continued power of the aristocracy, wrapped in the old aura of entitlement, counting its blessings and hoping that nobody notices.

Exploiting the system is second nature to the landowning class. The 11th Duke and Duchess of Beaufort, the owners of Badminton House, have benefited handsomely from their property rights. Their company, Swangrove Estates Ltd, whose directors are the duke and duchess; their son, the Marquess of Worcester; and grandson, the Earl of Glamorgan, received £456,810 from the CAP in 2014/15, and in 2009 it was discovered that the duke had exercised his ancestral rights over the riverbed in Swansea by charging the council £281,431 to build a bridge across the river from a shopping centre to Swansea FC’s Liberty Stadium. With the help of the taxpayer – and no little ingenuity of his own – the duke has secured a fortune reckoned to be about £135m.

The EU is not their only source of financial assistance. Charles Chetwynd-Talbot, 22nd Earl of Shrewsbury, who lives at the 17th-century manor house of Wanfield Hall in Shropshire and is president of the Gun Trade Association, has auctioned off a number of feudal titles, including that of High Steward of Ireland, a practice that has helped keep several other peers in the style to which their families had become accustomed. In April 2015, the earl put the lordship of Whitchurch up for sale; in 1996 Earl Spencer sold the lordship of the manor of Wimbledon for $250,000; and at the time of writing Manorial Auctioneers Ltd claim to be auctioning lordships of the manor, a seignory in Jersey and a feudal barony in Ireland on the instructions of “members of the aristocracy”.

Attendance in the House of Lords brings in an income, too, although peers are keen to state that it is not a salary. When life peerages were introduced in 1958, the Marquess of Salisbury was quick to point out the three guineas a day they were paid did not represent “any additional remuneration; it is merely repayment for expenditure which has already been incurred by noble lords in the performance of their duties”. So too, today peers may claim £300 a day if the Lords records show that they attended a sitting of the house, or £150 a day if they undertook qualifying work away from Westminster.

In March 2016, when the Lords sat for 15 days, 16 earls were paid £52,650 between them in tax-free attendance allowance, plus travel costs, and 13 viscounts received £43,050. The Duke of Somerset claimed £3,600, and the Duke of Montrose was paid £2,750 plus £1,570 in travel costs: £76 for the use of his car, £258 for train tickets, £1,087 for air tickets and £149 for taxis and parking costs. The duke spoke in debate or in grand committee just twice in the whole parliamentary session, and not at all that March.

Taken from here

https://www.theguardian.com/news/2017/sep/07/how-the-aristocracy-preserved-their-power