The Treasury will next week curb a so-called creative accounting fiddle which has allowed Prince Charles to receive up to £1.2m in "back door" payments from the Duchy of Cornwall estate to cover his personal expenses, according to documents obtained by the Guardian.
The new agreement, which comes into force two days before the prince marries Camilla Parker Bowles on Friday week, will halve the money he can borrow from the estate's capital funds in the next two years.
The prince is entitled to the revenue from the Duchy of Cornwall - currently nearly £12m a year - but is not supposed to touch the capital. But under a 1982 act of parliament, the capital account was allowed to lend the revenue account an additional £1.4m - allowing the prince access to extra cash.
Under the new deal the amount he can borrow from the Duchy will be cut from £1.2m to £950,000 next Wednesday, falling to £750,000 in April next year and to £600,000 in April 2007. Further moves could see it abolished altogether.
The prince is understood never to have paid back any of the money borrowed, according to an aide.
Details of the deal have been released to the Guardian by the Treasury under the Freedom of Information Act. The figures were kept secret from MPs when officials from the Duchy were questioned by the Commons public accounts committee in February.
The payments were the subject of a parliamentary row during the Commons hearing when four Labour MPs challenged the Duchy of Cornwall's secretary, Bertie Ross, over the transfer of cash.
The Duchy declines to disclose what the prince spends the money on, but it is thought to have contributed to renovations at Clarence House, extra cash for his sons, William and Harry, and support for Mrs Parker Bowles, as well as extra personal staff for himself.
Gerry Steinberg, Labour MP for Durham, described the process as "creative accounting". He told Mr Ross " When I was leader of Durham city [council], we fiddled as well - it was called 'creative accountancy'. If we wanted to get some money from one area to another area (which you were not supposed to do) we creatively accounted so we could use that money. This looks very much like jiggery-pokery to me, it looks as though you have been doing a bit of fiddling, have you not?"
Mr Ross admitted that the cash had been used to pay the prince's personal staff, but said: "This is very much in accordance with accountancy best practice."
Last night a spokesman for Clarence House reversed this position. Instead, he said, the new plan to curb the use of the money "was in accordance with best accountancy practice and had been approved by the external auditors".
He also pointed out that the idea of a curb had come from the Duchy of Cornwall and that the Treasury was "content" to approve the timetable.
The letter from the Duchy however says the idea followed a meeting at the Treasury with the Duchy on March 2 last year. Clarence House insisted that the move had nothing to do with criticism from MPs in February.
This further angered MPs on the committee last night. Ian Davidson, Labour MP for Glasgow Pollock, said: "This disclosure adds to the whole murky business. I am shocked that officials did not disclose this at the time. This amounts to a contempt of parliament and I shall be raising this as soon as parliament is back next week."
