International Finance

UK Monarchy: The Royal Family Empire

UK Monarchy

The United Kingdom royal family gains significantly from the surge in offshore energy, which could lead to a discussion over how to pay for the monarchy. The sovereign grant, valued at £86.3 million annually, is undergoing an official review, which the Treasury has indicated will take effect in April 2023. However, according to the officials, the money is at “acceptable” levels.

The organisation that oversees the management of the crown’s public lands, including coastal and marine assets, is known as the ‘Crown Estate’. It receives public funding from a fixed percentage of its revenues. However, because of the energy firms’ push to harness wind power, these revenues are anticipated to increase significantly. According to a Whitehall source, “The review will take account of the huge additional revenues the crown estate expects to get from the next wave of offshore wind initiatives — projected to be several hundred million pounds each year while these projects are in construction.”

The Crown Estate owns nearly the whole seabed surrounding the United Kingdom, which extends to 12 nautical miles. Its marine portfolio is worth £5 billion, primarily due to the demand for seabed leases for wind farms. As Chancellor George Osborne announced a change to the monarchy’s public funding in 2011, the sovereign grant will replace the civil list. For staff expenditures, official travel, and royal household expenses, the first such grant in 2012–13 was for £31 million. However, by 2021–22, the primary funding for these expenses had grown to £51.8 million, with an extra £34.5 million for Buckingham Palace renovations.

Under these arrangements, the monarchy benefits from a “golden ratchet” clause, which states that money can only be increased yearly or maintained at the same level. Parliamentarians have to change the law to reduce the grant. The Prime Minister, Chancellor, and Privy Purse Keeper are the royal trustees who oversee the review. Under the sovereign grant agreements, the royal household initially earned 15% of the crown estate’s income, but this was boosted to 25% starting in 2017–18, to help pay for Buckingham Palace renovations.

Over ten years, the expected £369 million in “reservicing” operations will repair 20 miles of skirting boards, 6,500 electrical outlets, and 100 miles of electrical cabling. The project is scheduled to be finished around 2026–2027 and the royal household will continue to receive 25% of the crown estate income till then. However, given the increased anticipated revenues at the crown estate, the United Kingdom government might now re-examine it.

The Queen has a private estate called the Duchy of Lancaster. Profits from the Duchies of Lancaster and Cornwall pay for royal obligations as well. It has a total area of 45,667 acres, or 18,481 hectares, most of which are in northern England. The Goathland estate in North Yorkshire, which served as the setting for Hogsmeade Railway Station in the first Harry Potter movie, quarries in the High Peak regions of Derbyshire, an airstrip in Staffordshire, and other properties are among its assets. The duchy’s net worth is £652 million, and in the year ending March 31, 2022, it generated profits of £24 million. Although it has primarily been used to pay for the late Queen Elizabeth II’s formal obligations, tax is still spent on income not allocated to royal duties.

Twenty counties, mainly in the southwest of England, total 52,449 hectares in the Duchy of Cornwall. Its holdings include — Most of the Scilly Islands, substantial farming parcels in Cornwall, Dartmoor Prison in Devon, The Oval cricket stadium in south London.

It has a net worth of more than £1 billion and generated over £23 million in earnings in the fiscal year that ended on March 31, 2022. The duchies are not subject to corporate taxes. Furthermore, by a “sovereign to sovereign” exemption negotiated by Prime Minister John Major in 1993, King Charles will also not pay inheritance tax.

The late author David McClure, who wrote ‘The Queen’s True Worth’, a book about the royal finances, came across a telling HM Treasury note while researching it. The message read, “The state provides for the monarchy in two ways: first through explicit finance and second by forgoing tax on the sovereign’s private fortune.” David found it in a cache of papers about a 1989 review of the civil list.

“In practice, it should be highlighted that immunity from taxation has enabled the government to pay a small civil list confined to specified official aspects and therefore keep the entire question of financing the monarchy in a somewhat lower key than would otherwise be the case,” the author writes.

The royal household’s emphasis on value for money and the reduction of the number of royals performing frontline activities may prompt new scrutiny of the funding arrangements. Former Liberal Democrat MP Norman Baker revealed that he had written to the National Audit Office and the Commons public accounts committee to request a thorough assessment of the funding arrangements. Norman Baker is the author of the royal family biography and What Do You Do?” Their money can stay the same or increase,” he remarked. It will never decrease. They now have considerably better circumstances thanks to the money from wind turbines.

King Charles will likely examine the royal family’s vast real estate holdings. Twenty-two residences are listed on the royal family’s website, including Windsor Castle, St. James’s Palace, Kensington Palace, and Buckingham Palace. In addition, private ownership can be seen at Scotland’s Sandringham and Balmoral. On the grounds of Balmoral, Charles and the Queen Consort reside at the Birkhall palace. Additionally, he owns a home in the Welsh county of Carmarthenshire with rental cottages right next to it. The King reportedly bought a five-bedroom house in Romania in 2006 to use as a secluded vacation property.

Prince Andrew and Prince Edward both have leases from the crown estate for the surrounding Bagshot Park and the Royal Lodge at Windsor. Princess Anne resides at privately owned Gatcombe Park in Gloucestershire. In his book, McClure pegged the monarch’s wealth at roughly £400 million. In addition, the crown has assets worth several billion pounds in its name. Regarding the review of the sovereign grant, the Treasury declined to comment.

So how big is the crown’s fortune?

Prince Charles will inherit more than USD 500 million in personal property that Her Majesty left behind during her 70 years as monarch. The Queen’s fortune—and what happens to it now—is complicated, even though much of what is perceived as her property belongs to the USD 28 billion “Royal Firm,” a USD 28 billion empire that former members of the British royal family like King George VI and Prince Philip once referred to as “the family business.” What will happen to the Queen’s money after her passing is detailed below.

How is the Queen compensated?

The Sovereign Grant, an annual taxpayer payment to the British royal family, provided revenue to the Queen. It has its roots in a deal King George III struck to give up his income from Parliament in exchange for a set annual payment for himself and future royal heirs. It was once referred to as the “Civil List” until the Sovereign Grant took place in 2012.

In 2021 and 2022, the government set this grant’s size at just over 86 million pounds. These funds are for official travel, property upkeep, and operational or maintenance expenses for Buckingham Palace, the Queen’s home. The Queen, however, gets more than just a yearly income. The Royal Firm is an enterprise worth USD 28 billion. The Firm, sometimes known as the Monarchy PLC, is a collection of prominent figures from the House of Windsor, the monarchy’s reigning family, and of which the Queen served as the head. They jointly run what might be described as a global economic empire that annually injects hundreds of millions of pounds into the British economy through televised events and tourism.

The Firm is made up of Her Majesty and seven other royals, including Prince Charles and Camilla, the Duchess of Cornwall, Prince William and Kate, the Duchess of Cambridge, Princess Anne, the daughter of the Queen; Prince Edward, the youngest son of the Queen, and Sophie, the Countess of Wessex.

According to Forbes, the monarchy has unsellable real estate holdings worth close to $28 billion as of 2021. That includes — The Crown Estate (USD 19.5 billion), Buckingham Palace (USD 4.9 billion), The Duchy of Cornwall (USD 1.3 billion), The Duchy of Lancaster (USD 748 million), Kensington Palace (USD 630 million), The Crown Estate of Scotland (USD 592 million). The Windsors don’t personally benefit from the business. Still, it stimulates the economy, bringing them wealth through free media coverage and royal warrants, which, according to Forbes, are essential “stamps of approval” on high-end goods and increase revenue for warrant holders.

Royal Estate

The Crown Estate is a group of properties that belonged to the British monarchy and were under the control of Queen Elizabeth II. However, this is not private property that she owns herself. It is managed by a somewhat independent public board. The Crown Estate reported a USD 312.7 million net revenue profit for the fiscal year 2021–2022, an increase of USD 43 million from the previous year, in June.

Dan Labbad, chief executive of the Crown Estate, said in a statement that “in what has been another year of upheaval and turmoil, our broad portfolio continues to demonstrate its strength and resilience through our return to the public purse.”

According to the Royal Household, a portion of the revenue’s profits—fixed initially at 15%—goes toward paying the Sovereign Grant. However, to help refurbish Buckingham Palace, the grant was increased in 2017–2018 to 25%. By 2028, it is expected to be lowered to 15%. The funding covers costs associated with conducting business, such as personnel salaries, security, travel, housekeeping, and upkeep. In addition, the Privy Purse, a separate budget, covers the Queen’s and her extended family’s private costs.

The Secret Wallet

The Queen’s Privy Purse, which gives Her Majesty private income from the Duchy of Lancaster, is essentially an assets portfolio held in trust since the 14th century. The Duchy of Lancaster had net assets of USD 652.8 million at the end of March 2022, resulting in a USD 24 million net surplus. According to a statement on the Duchy of Lancaster website, these come from real estate and financial assets. The USD 24 million in excess money is paid to the Queen, but the net assets are not. Instead, this taxable money is mainly used to pay for expenses that the Sovereign Grant does not already cover.

Personal possessions of Her Majesty

According to Business Insider, the Queen has amassed over USD 500 million in personal assets, primarily due to her investments, art collection, jewellery collection, and real estate holdings, which include the Sandringham House and the Balmoral Castle. Most of her personal belongings will now be given to Prince Charles as he ascends to the throne after her death. When the Queen Mother passed away in 2002, Her Majesty also received a similar endowment of about USD 70 million, which included investments in artwork, a stamp collection, fine porcelain, jewels, horses, and even a priceless Faberge egg collection. The collection of paintings includes pieces by Monet, Nash, and Carl Fabergé.

The Queen is immune from paying inheritance tax on the estate left by her mother thanks to a specific legal provision in existence. This clause will also cover Prince Charles. As agreed upon in 1993, to prevent the dilution of the royal family’s riches, inheritance from the sovereign to the sovereign is exempt from the 40% inheritance tax. But the USD 28 billion empire, which includes the Buckingham and Kensington Palaces, the Duchy of Lancaster, the Duchy of Cornwall, and the estate of Scotland, will not be passed straight to Prince Charles. Instead, the Monarchy PLC will give only the personal property Queen Elizabeth II authorised for him.

Will such an expensive monarchy be abolished?

If the British government ever decided to abolish the monarchy, it would be a constitutional issue that would require parliamentary action. Even before that, it would need to receive the support of the British people in a referendum, which the government would have to call for (just as the Brexit referendum was). According to June polling, if such a referendum were held today, the nation would likely choose to maintain the monarchy by a sizable plurality. And other countries would join Britain in doing so. Despite the fact that past referendums resulted in the monarchy being abolished in Italy and Greece, they also reinforced support for the institution in Belgium, Denmark, Luxembourg, Norway, and Spain.

According to Hazell, abolishing the monarchy or just stripping it of its ceremonial obligations would be “a huge change,” in large part because it would necessitate a comprehensive overhaul of the way the British state is run. Britain’s parliamentary system divides those duties between the monarch, who assumes the role of head of state at birth, and the prime minister, whose position is chosen by the British public. This is in contrast to the United States, where the elected President serves as both the country’s head of state and its head of government (or, in the case of the current occupant of 10 Downing Street, a select group of Conservative Party members).

As is necessary for almost all parliamentary systems, Britain would need a new head of state if the queen were to pass away. The President, a position that currently exists in parliamentary systems in countries like Germany and Italy, would most likely play this job. The majority of the monarch’s current duties, including approving laws, making state visits, and addressing the nation in times of crisis, would fall to one person. But according to Hazell, an elected head of state would also likely be required to serve as “a kind of constitutional umpire”—something that a monarch could never do.

The monarchy’s eventual extinction is improbable in the near future because republicanism isn’t now a potent force in Britain. But that might alter if the institution succeeds or if the younger British population does not support it. Support for the monarchy has decreased among individuals between the ages of 18 and 24 from 59% in 2011 to just 33% currently.

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