[The Squatter of Amon Rûdh]

Actually the Royal Counsel (at least in England) was a committee of senior nobles and churchmen who advised the king on state affairs. Gandalf is saying that Saruman sounds like a parody of a counsellor (politician if you will), whereas originally he had been the real thing. A very biting comment indeed, considering Saruman's new status. As Carlas says, he had become little more than Sauron's sidekick, so jester was an apt description.