The source added that Harry was growing increasingly concerned: “Harry was at a point where British passports for his children with their updated Sussex surnames (since the death of Queen Elizabeth II) were being blocked with a string of excuses over the course of five months.”

“In frustration, he went to his uncle and essentially said: ‘My family are supposed to have the same name, and they’re stopping that from happening because the kids are legally HRH. So, if this becomes a bigger issue and they won’t allow the children to be called Sussex, can we use Spencer as a surname?’”
People confirmed that Harry did in fact speak with his late mother’s brother, Charles Spencer, about potentially using the family name. However, a source rejected earlier reports that Spencer advised against the move or that it would be legally too complex, calling those claims inaccurate.
A spokesperson for the Duke told People, “We do not comment on private issues pertaining to the Duke and Duchess of Sussex’s children.”

Eventually, the passports were issued after lawyers representing the Sussexes contacted the U.K. Home Office with a legal warning, suggesting they might file a data subject access request—an official step that could have forced disclosure of internal communications behind the holdup.
The Guardian noted that prior to the recent applications, Prince Archie held both U.K. and U.S. passports under the Mountbatten-Windsor surname.