Prince close to divorce settlement offer

The Prince of Wales is set to offer the Princess a divorce settlement after 10 weeks of deadlock. A meeting between lawyers for the two sides is expected shortly, possibly this week, at which proposals will be put forward in reply to the Princess's demands.

Further negotiations are then likely, but insiders think a decree nisi could be granted "in weeks rather than months". The speed of the settlement largely depends on the Prince's financial offer.

Neither side is commenting on speculation surrounding the divorce following a request from the Queen that the negotiations should be confidential.

However, it now seems likely that the Prince will offer a clean-break settlement worth between pounds 15-pounds 20m, although it is believed that he would have preferred to pay a "drip-feed" annual allowance.

The Princess, who celebrates her 35th birthday today, is thought to be ready to move quickly and has already expressed her frustration to the Queen over delays.

The Queen and the Duke of Edinburgh are thought to be keen for a swift end to the protracted divorce negotiations so as to close an unhappy chapter in the history of the House of Windsor.

If the Prince's offer, to be submitted by Fiona Shackleton of the Queen's solicitors Farrer & Co to the Princess's lawyer, Anthony Julius of Mishcon de Reya, is acceptable, a decree nisi could be granted before the estranged couple's 15th wedding anniversary on 29 July. A petition from Prince Charles seeking a divorce by consent, based on a separation of more than two years, is the likeliest outcome. A decree absolute would take another six weeks.

If the Prince offers a clean-break cash settlement, he will need financial help from the Queen or may seek a loan. Although he is wealthy, he does not have the liquidity necessary to make a pounds 15-pounds 20m pay-off. His annual income of almost pounds 5m from the Duchy of Cornwall leaves him with about pounds 1.5m for personal expenses after deducting nearly pounds 2.5m in official expenditure and pounds 1m tax. He cannot sell off any Duchy assets as this wealth is held in trust by him for future heirs to the throne. His personal portfolio of stocks and shares, thought to be worth more than pounds 2m, would not finance the divorce.

As part of the eventual divorce settlement, the Princess is expected to continue living at Kensington Palace, although it is unlikely that the Prince will agree to her request to retain an office at St James's Palace, close to the Prince's London apartment.

Mounting speculation that the Princess, as the mother of a future king, will, contrary to earlier reports, retain the style "Her Royal Highness", is doubtful. It is more likely that she will be addressed "Diana, Princess of Wales".

Agreement must also be concluded, involving 10 Downing Street and the Foreign Office, on the Princess's future public role and the status of any overseas visits by her. She has expressed a wish to be a "goodwill ambassador" for Britain, as well as a "Queen of Hearts" raising funds for charity and comforting the sick and needy.

The divorce settlement will include a so-called "gagging clause" restraining the Princess - and presumably the Prince - from publishing details about their failed relationship or going public in any other way.

There is agreement between the couple that access to their children, Prince William, 14, and 11-year-old Prince Harry, will be shared equally. Both the Prince of Wales and the Princess will have a continued close involvement in their sons' upbringing.