What the royal family costs us

published 29 April 2011

What does the royal family cost us?

Each year, when the Keeper of the Privy Purse (the queen's chief accountant) releases details of the royal finances, he traditionally compares the cost per person to a pint of milk, or a loaf of bread. But last year, he gave us a precise figure: the royals cost us 62p each a year (in 2009-2010) £38.2m in all. Of that, £7.9m is the Civil List money provided by Parliament to let the queen discharge her duties as head of state. A further £7m is Civil List money left in reserve from years past. This covers the royal household's current running expenses everything from salaries and pensions for 450 staff (£10.3m last year) to garden parties, investitures and public engagements in Britain and abroad.

£15.4m is provided by the government as a property services grant-in-aid for the maintenance of the occupied royal palaces (including Buckingham Palace, St, James's, Kensington, Clarence House and Windsor Castle; Sandringham and Balmoral are the queen's private property, inherited from her father). A further grant-in-aid provides £3.9m for travel costs. The rest is made up of small grants and annuities. These days, no Civil List money goes to the queen's children or other relatives. Other than the queen, the only person to receive Civil List money is The Duke of Edinburgh £359,000 a year, plus office costs. Prince Charles draws around £16m a year from the Duchy of Cornwall, which has provided an income for the heir to the throne for 673 years.

Falling. The £7.9m Civil List payment (reassessed every ten years or when a new monarch comes to the throne) has been frozen since 1990 when John Major was chancellor, so it has lost about 75% of its value in real terms. The royal household spends more than this: this year its budget is £14.9m (from £15.1m last year). The £7m difference is covered by a reserve mostly built up in the 1990s. Head-of-state expenditure, including all the grants, is falling too. According to figures on the monarchy's official website (royal.gov.uk), the overall cost of the royals has fallen "significantly over the past decade, from £87.3m in 1991-1992 (in today's pounds) to £38.2m in 2009-2010". That's a fall of more than 50% over two decades, implying that Britain is moving towards a slimmed-down monarchy. But it is still the costliest in Europe. A study by Herman Matthijs, a Brussels academic, put the cost of the British monarchy (using 2008/2009 figures) at £41.5m, compared to £33.8m for the Netherlands, £23.9m in Norway and £11.7m in Belgium.

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It's hard to quantify the economic benefits of a monarchy. Critics argue that the real cost, once security and policing is factored in, rises to £180m. The "boost to tourism" is hard to detect if analysed solely in terms of fees paid at Windsor Castle and Buckingham Palace. Yet such a narrow analysis ignores the monarchy's role in shaping foreign perceptions of Britain and attracting visitors. No one has ever argued that the queen is anything other than a hard worker, with more than 300 official engagements a year. Moreover, supporters of the monarchy do have some grounds for arguing that Britain gets an exceptional bargain.

For the past 250 years, Britain's method of funding the monarchy has been based on a delicate 18th-century trade-off in which King George III agreed to hand over the income from the Crown Estate property and land acquired by the crown since William the Conqueror's day in exchange for a fixed annual payment from the Treasury. At the time, it was a good deal for George: he had no money and the estate brought in very little. But these days it brings in far more than the state pays out on the royals: last year its £7.3bn portfolio from beef farms in the north of Scotland to swathes of Regent Street in London's West End provided about £236m of income to the Treasury.

The Palace is notably assertive on this, its website states that: "Head of State expenditure is met from public funds in exchange for the surrender by The Queen of the revenue from the Crown Estate. In 2008-2009 the Treasury's gross receipts in respect of the Crown Estate were £230m." Whether the revenue is really the queen's to "surrender" when it is not legally her property is a moot point. But the controversy is likely to intensify in coming years. The estate also owns all the seabed out to 12 nautical miles, and some analysts reckon it will be earning £250m from wind farms by 2015.

In last autumn's spending review the chancellor, George Osborne, announced a major revamp: from 2013-2014, the system based on the Civil List plus grants is to be replaced by a single "sovereign support grant". The change is unlikely to result in a big increase or drop in the level of funding, but it's significant because the grant will be based on a proportion of Treasury revenues from the Crown Estate (probably 15%). It gives the royals more flexibility over how they spend their money. But since it means, as Osborne put it, that future chancellors "will not have to return to the issue" of royal funding as frequently as in the past, there is a risk that it will loosen parliamentary control over the monarchy, especially in the event of a monarch who is more prone than the queen to interfering politically.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.