THE Prince of Wales has agreed to provide an inventory of every gift worth more than £100 that he has received in the past five years in an attempt to discover how many have been sold for profit by his employees.

The move comes as the inquiry into cash for gifts is likely to be extended to Buckingham Palace after reports suggesting that the practice is endemic in the Royal Household. “They are all at it and have been for years,” one courtier said.

Sir Michael Peat, Principal Private Secretary to the Prince, who is leading the inquiry, has warned all 85 employees at St James’s Palace and Highgrove that they face disciplinary action, dismissal, and possible police involvement if they are caught selling gifts. The apparent scale of the gift sale raises the question whether members of the Royal Family condoned it or benefited financially.

The Times reported last week that Michael Fawcett, a senior adviser to the Prince, had sold more than £100,000 of merchandise. He was paid a commission and the Prince kept the rest.

The Prince was told, even before the death of Diana, Princess of Wales, in 1997, about the trade, The Times has learnt. The practice came to light after an employee was caught stealing cash from a shop on the Highgrove estate.

Sir Stephen Lamport, the Prince’s private secretary for six years until this September, will be interviewed by Sir Michael about what was done to try to eradicate the practice.

Weekend press reports alleged that the grey market in royal artefacts included chairs used at the investiture of the Prince of Wales, menus from the Queen’s Flight, books given to the late Queen Elizabeth the Queen Mother by her grandchildren and wrought-iron chairs from the garden at Highgrove. They were apparently sold through upmarket jewellers, via the internet and newspaper advertisements.

Last week in an interview Sir Michael initially denied that there was any evidence for the allegations, but then conceded that the status of royal gifts had become “blurred”.

Guidelines at the palaces state that official gifts given during engagements have to be catalogued, displayed, put on loan or in storage. They are not subject to tax because they belong to the nation. Private gifts are barred to royals if they are in the form of cash or of a commercial nature. Staff members are entitled to gifts: they are logged if they are valued at more than £50.

The courtier said: “The headlines over the sale of these goods have been very damaging. Sir Michael has promised to leave no stone unturned. It may have been going on in the past but anyone caught doing it in the future will be in big trouble.”

The Paul Burrell trial collapsed when the Queen recalled that he told her that he had taken some of the Princess’s papers from Kensington Palace. The Scotland Yard detectives who investigated Mr Burrell are prepared to defend their actions to the Peat inquiry and produce notes, logs and briefing papers of discussions with officials and advisers to the Prince.

Courtiers have accused the police team led by Detective Chief Inspector Maxine de Brunner of winning support from the Prince for a prosecution by claiming there was intelligence that Mr Burrell was selling some of the Princess’s possessions. During the trial, police admitted that no evidence had emerged and that the Prince had not been told this but Ms de Brunner denied that he had been misled. Glen Smyth, of the Police Federation, said: “I am confident the documents will show the case was properly brought.”

• New claims that prostitutes were allowed into royal palaces, including Clarence House, were reported last night. Liam Brooks, who worked as a footman to the late Queen Elizabeth the Queen Mother for four years, told a newspaper that male and female prostitutes had been taken into her residence. Buckingham Palace was unavailable for comment.

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