In the past, the UK's Civil Government day-to-day costs were paid for by the Sovereign under normal circumstances, the monies in this Public Purse being raised by from the income of the Crown Estate lands and holdings. Under "extraordinary" circumstances, namely in time of war or during budget shortfalls, Parliament raised additional monies through taxation. The system was to a large degree self-funding through the Crown's large holdings, taxes being applied only when necessary, and almost always at the risk of public outcry. Taxes were normally very low, and the necessity to go to Parliament to fund wars was an effective check on the monarch's power.
As the role of the government increased in the 18th century, the Public Purse was increasingly unable to raise enough to fund the development of the country. In 1760 when George III came to the throne, it was decided that the whole cost of civil government should be provided by Parliament, with the crown surrendering most of the hereditary revenues (principally the net surplus of the Crown Estate) by the king for the duration of the reign. In this new system Parliament was responsible for the finances of the UK, including paying the crown the Civil List allowance to meet the Sovereign's official expenses. (In 2002-03 the Crown Estate paid the Treasury £170.8 million in return for an allowance of £7.9 million.)
The Privy Purse is the Sovereign's remaining private income, mostly from the Duchy of Lancaster. This amounted to £7.31 million before tax for the year to 31 March 2001. The Duchy is a landed estate of approximately 46,000 acres (200 square kilometres) held in trust for the Sovereign since 1399. It also has 190 miles (500 kilometres) of foreshore. The land is organised into the Lancashire Survey, the Yorkshire Survey, the Crewe Survey, the Nedwood Estate and the South Survey. The Sovereign is not entitled to the Duchy's capital, but the net revenues of the Duchy are the property of the Sovereign in right of her Duchy of Lancaster.
While the income is private, the Queen uses the larger part of it to meet official expenses incurred by other members of the British Royal Family. Only the Queen and the Duke of Edinburgh receive payments from Parliament which are not reimbursed by the Queen.
The Chancellor of the Duchy of Lancaster, who is the equivalent of the chairman of the trustees, has in recent years normally been a Government minister, although this is not a requirement.
The Keeper of the Privy Purse looks after the Sovereign's personal financial affairs. His title is derived from the Privy Purse—an embroidered bag borne by the Keeper at a coronation—which contrasts with his Department's present-day use of computers and up-to-date accounting procedures. He manages the revenues which come from the Duchy of Lancaster. The Privy Purse meets both official expenditure incurred by The Queen as Sovereign and private expenditure. In recent years the office of Keeper has been held jointly with that of Treasurer to the Queen, who is responsible for the use of the Civil List, money paid from public funds to meet official expenditure relating to the Queen's duties as Head of State. He also oversees the grant-in-aid from the Royal Household for the maintenance of the occupied Royal Palaces and for Royal travel.
He is also responsible for the property maintenance of the Occupied Royal Palaces (such as Buckingham Palace and St. James's Palace) and their gardens, for the financial aspects of Royal travel, for personnel matters in the Royal Household, for The Queen's private estates (which include Balmoral Castle and Sandringham House) and for the commercial activities of the Royal Collection Trust (for which annual accounts are published).
A member of his staff is the Keeper of the Royal Philatelic Collection, the most comprehensive collection of UK and Commonwealth postage stamps in the world, formed from the private collections of George V and other members of the Royal family.