Royal economics – regal revenue or taxpayer’s burden?

Following multiple recent scandals and exposés, ranging from Prince Andrew’s disreputable ties to paedophile Jeffrey Epstein to Prince Harry and Meghan Markle’s allegations of racism and subsequent estrangement, the British Royal Family have again become a hotly debated topic [1]. The Royals have ruled England for 1200 years and whilst they no longer hold power to make decisions for the state, they remain a powerful institution within British society [2]. The legitimacy and usefulness of the British Royal Family have been questioned lately, leading many to wonder if the costs of running the Royal Family outweigh the benefits. Who pays for the Royal Family’s lavish lifestyle, and what do they get in return?

Like any intelligent financial advisor would recommend, the Royal portfolio is highly diversified. One of their main assets is property and land, known as the Crown Estate. This includes famous landmarks such as Ascot Racecourse, parts of Central London as well as coastal land around Great Britain [3]. The total profit generated by the Crown Estate is collected by the government, who then pay back 25% to the Royal Family though what is known as the Sovereign Grant. This Grant is used to pay for staff wages, travel costs, and other official expenses [5]. The Sovereign Grant is funded by taxpayer money, rather than the share of profits earned by the Crown Estate [3]. Last year the Crown Estate generated £345 million in profits, of which the Royals received £82.4 million [5]. This has long been a point of contention, with many taxpayers frustrated about paying for the Royals’ lavish lifestyle. However, business valuation consultancy Brand Finance estimated the cost  incurred by the average taxpayer to be £4.50 per year, the cost of 2 cups of coffee [4].

The Royals also own independent properties from which they directly receive profits. These include Buckingham Palace and Kensington Palace, and, along with other generational residences, are important streams of income for the royals [5]. By leasing out large plots of land passed down through the Crown, known as Duchies, they earn a private source of income which does not go to the government [5]. Whilst the Royals are incredibly affluent, they are dependent on sharing income and funding with each other as they cannot earn income from external sources [6]. Since these independent properties and land are owned by the Queen and Prince Charles, they distribute their earnings to fellow Royals. Last year, Prince Charles paid his children Prince William and Harry around £5.65 million from his earnings [5]. The Queen has by far the greatest amount of assets, with a personal portfolio of £360 million from her land, property, and art and jewellery collection. [5].

On the flipside of the coin, the influence of the Royal Family is said to stimulate the British economy. Prior to the pandemic, multiple sources estimated the Royals to  annually contribute £50.6 million to the media industry, £550 million to the tourism industry and £150 million in increases in trade[7]. Although the Royals do not have any legitimate power,  their celebrity status gives them substantial cultural and political influence [7].  Through this influence they effectively promote the British lifestyle and products both domestically and internationally. They maintain diplomatic relations with world leaders and act as spokespeople for Britain, which promotes trade. Globally, many people admire the Royals and their lifestyle, which strongly boosts international consumption of British media. The tourism industry also benefits, with many royal buildings and spaces serving as tourist attractions.  All of these factors are said to have contributed around £1.8 billion per year to the pre-pandemic British economy [7]. The Royal Family also exert indirect influence and stimulate consumer expenditure by using certain brands. Endorsements by the Royals are effective, with brands used by them experiencing increased sales. This influence is estimated to have added almost £120 million to the British economy in 2017 [5].

The estimated £1.8 billion per year brought in by the Royals pre-pandemic far outweighs the £82 million paid by taxpayers to support the royal lifestyle. Whilst the Royals lifestyle seems very glitz and glam, most of it actually doesn’t come from the taxpayer’s Pound. The British Royal Family appear to bring more money into the economy than they take, making it a profitable investment in the eyes of a traditional economist. As prominent role models within both British society and worldwide, the Royals have significant ability to stimulate the British economy and  even support their nation’s pandemic recovery.

[1] McCarthy, Niall. 2021. “The Growing Cost Of The Royal Family To U.K. Taxpayers [Infographic]”. Forbes. https://www.forbes.com/sites/niallmccarthy/2021/03/09/the-growing-cost-of-the-royal-family-to-uk-taxpayers-infographic/?sh=23dfff6f4d6d.

[2] Wood, Stephen. 2020. “What Is The Queen’s Role In British Government?”. HISTORY. https://www.history.com/news/what-is-the-queens-role-in-british-government.

[3] “Where does Britain’s royal family get its money from? The Economist explains.” The Economist, March 11, 2021. Gale Academic OneFile. https://link.gale.com/apps/doc/A654613091/AONE?u=monash&sid=AONE&xid=6c37dce5.

[4] Brand Finance. 2017. “Monarchy 2017”. Brand Finance. https://brandirectory.com/download-report/bf_monarchy_report_2017.pdf.

[5] Shapiro, Ariel, and Deniz Çam. 2021. “Inside ‘The Firm’: How The Royal Family’s $28 Billion Money Machine Really Works”. Forbes. https://www.forbes.com/sites/arielshapiro/2021/03/10/inside-the-firm-how-the-royal-familys-28-billion-money-machine-really-works/?sh=42632c6d2bcc.

[6] Praderio, Caroline, and Taylor Nicole Rogers. 2020. “Here’s Where The Royal Family Gets Their Money”. Insider. https://www.insider.com/where-does-the-royal-family-get-money-2017-1#royals-who-work-for-the-crown-full-time-arent-allowed-to-earn-any-money-from-outside-sources-however-5.

[7] Chu, Ben. 2018. “How Much Is The Royal Family Really Worth To The UK?”. The Independent. https://www.independent.co.uk/news/business/analysis-and-features/royal-wedding-family-how-much-uk-economy-benefits-cost-meghan-markle-expense-a8345436.html.