BUCKINGHAM Palace has backed down over claims the Scottish Government was planning to cut up to £1.5 million of funding for the Royal family.
Officials issued an extraordinary clarification after sources briefed journalists that First Minister Nicola Sturgeon was poised to back out of a deal to continue contributing to royal funding when control over Crown Estate property is devolved to Holyrood.
The figure was put at between £1m and £1.5m by the Royal sources.
The Scottish Government maintained a diplomatic silence after the climbdown, which followed a day of intense behind-the-scenes pressure on the Palace.
However, Nicola Sturgeon was understood to be pleased with outcome.
A source close to the First Minister said: "It simply confirms the true situation is exactly as we and the Treasury explained it."
The unfounded claims had threatened to sour relations between the Queen, whose official residence in Scotland, the Palace of Holyroodhouse, lies across the road from the parliament, and the Scottish Government.
Sources had suggested the "threat" to withhold funding was in retaliation for an intervention by the Queen during last year's independence referendum.
In comments seen at the time as helpful to the No campaign, she said Scots should "think very carefully about the future".
Senior Palace sources were quoted as saying the Scottish Government planned not to contribute a share of Crown Estate income to the sovereign grant, the Royals' annual budget, reversing an informal agreement made by Alex Salmond when he was first minister.
Crown Estate revenues are worth £216m per year in Scotland. Palace sources indicated the Scottish Government's contribution to the sovereign fund would be about £2.2m.
The claim, which appeared to be based on a misunderstanding of how the sovereign grant is paid, was immediately dismissed by the Scottish Government.
Ms Sturgeon continued to apply pressure on the Palace, using social media network Twitter to stress there was "absolutely, categorically, no intention" to cut Scotland's contribution to the sovereign grant, which will amount to £42.7m next year.
The Scottish Government and the Treasury both pointed out the grant is paid directly by the Treasury, from general taxation, though the amount is calculated as 15 per cent of Crown Estate revenues.
Scotland's block grant from Treasury will be reduced to take into account devolution of Crown Estate properties.
In a statement designed to restore relations with Holyrood Sir Alan Reid, Keeper of the Privy Purse, insisted Palace officials had not meant to criticise the Scottish Government or suggest ministers were backing out of a deal.
He said: "Yesterday's media briefing on the Sovereign Grant report 2014-15 was intended to highlight some of the issues that may arise when the first review of the Sovereign Grant begins in April next year.
"The comments and observations were about a principle and never intended to be a criticism of Scotland or of the First Minister or to suggest that the First Minister had cast doubt on the continued funding of the Monarchy.
"The principle is about what happens if profits from certain Crown Estate assets, such as those in Scotland, are not paid to the Treasury and the impact that may have on the calculation of the Sovereign Grant in future years. This question will form part of next year's review."
He added: "As we made clear at the briefing, Scotland contributes in many ways to the Treasury's consolidated fund - out of which the Sovereign Grant is paid.
"We said explicitly that to imply Scotland would not pay for the Monarchy was simply wrong and we accept unreservedly the assurances of the Scottish Government that the Sovereign Grant will not be cut as a result of devolution of the Crown Estate."
Only seven months into the role of First Minister, Ms Sturgeon does not yet enjoy the same warm relationship her predecessor built up with the Queen. However, it is expected the two will meet at Balmoral later this year.
The First Minister met Prince Charles at the Palace of Holyroodhouse on Tuesday, before the claims about her government appeared in print.
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