The coronavirus pandemic is slamming the vast property empire that provides Queen Elizabeth II with a significant chunk of her income. British taxpayers could be making up the shortfall for years to come.
Sir Michael Stevens, the Queen’s treasurer, confirmed in a statement on Friday that the size of the Sovereign Grant, one of the royal family’s major sources of income, won’t be affected by an expected slump in profits from the Crown Estate’s investments.
The Sovereign Grant is a lump sum payment from the government that covers official travel, staff costs and palace expenses. The grant is generated from the Crown Estate, a real estate company that boasts a sprawling collection of farmlands and prime central London property. Most earnings from the Crown Estate go into government coffers, but 25% are paid out by the government to the Queen in the form of the Sovereign Grant.
Last week, the Crown Estate reported a record profit of £345 million ($440.2 million) for the year to March 2020, but warned that earnings for the fiscal year to March 2021 will be “significantly down” on that amount due to the impact of the pandemic on its portfolio.
Much of central London was turned into a ghost town earlier this year as the lockdown kept millions of workers, shoppers and tourists away. Activity was beginning to pick up over the summer months but new restrictions introduced this week to combat a second wave of the virus are expected to dent that recovery.
But the Queen won’t be taking a pay cut even if income falls at the Crown Estate this year. The way that the grant is calculated means that she will receive her share of £345 million — £86.3 million ($110 million) — in the year to March 2022. Her payout will also remain at that level in future years, even if the Crown Estate’s profit remains under pressure, because the law governing the grant does not allow it to fall in absolute terms.
“In the event of a reduction in the Crown Estate’s profits, the Sovereign Grant is set at the same level as the previous year,” a Treasury spokesperson told CNN Business. “The Sovereign Grant funds the official business of the Monarchy, and does not provide a private income to any member of the Royal family,” the spokesperson said.
So less money from the Crown Estate would be entering the Treasury, but payments to support the royal household would remain steady. Taxpayers would be making up the difference.
The expected bailout was slammed by some economists on social media.
“Madness. Landlords (including the Crown Estate) have made risk bearing investments: if returns (rents) can rise rapidly in the good times, they should fall in the bad times. But as a society we don’t seem to get that,” tweeted Laurie Macfarlane, a fellow of the UCL Institute for Innovation and Public Purpose.
The Sovereign Grant is reviewed every five years by the prime minister, the finance minister and the Queen’s treasurer. It is due for review next year, meaning, hypothetically, that the taxpayer subsidy could be reduced.
The news comes as UK companies shed nearly 700,000 jobs between March and August and more layoffs are expected when the government’s support for wages is scaled back significantly next month. Britons are also facing the prospect of higher taxes to pay for rising government debt, which exceeded £2 trillion ($2.5 trillion) for the first time last month.
Royal accounts won’t be completely unscathed by the pandemic, however. The reduced growth in the Sovereign Grant will shave £20 million ($25.5 million) from the £369 million ($471.2 million) budget to refurbish Buckingham Palace, while a decline in visitor numbers to the Palace and other venues such as Windsor Castle will lead to an estimated £15 million ($19 million) loss of income over the next three years.
Stevens, the treasurer, said the royal household has “no intention” of asking for extra funding and “will look to manage the impact through our own efforts and efficiencies.”
The financial report published on Friday shows that expenses covered by the Sovereign Grant, including payroll, property maintenance and travel costs, climbed 3.6% to £69.4 million ($88.6 million) over the year to March 2020. By comparison, consumer price inflation was between 1.5% and 2% over the same period.
The hit from the pandemic highlights the “weaknesses of the funding system,” said journalist David McClure, who is currently producing a documentary on the royal finances. The real problem with the Sovereign Grant, he said, is that there are no incentives in place to encourage cost cutting.
“There seems a disconnect between requirements and revenues,” he added.
— Max Foster contributed to this story.