Prince Harry and Meghan Markle’s home renovations cost £2.4 million in taxpayer funds.
The renovations did cost this much, and the money came directly out of public funds. But taxpayers aren’t financially worse off because these renovations happened.
“Harry and Meghan's home renovations cost £2.4m in taxpayer funds.”
BBC News, 25 June 2019
Last month it was revealed that £2.4 million was spent on the renovation of Frogmore Cottage in Windsor, the new home of Prince Harry and Meghan Markle.
It’s true that the works were paid for out of public money (which comes overwhelmingly, though not exclusively, from tax). But because of how the Monarchy is funded, that doesn’t mean the renovation cost the taxpayer any extra money.
The Crown Estate (the Monarch’s property portfolio) makes a profit each year, which adds to the total pot of money the government has to spend. The government gives some of that pot in a grant to the Queen each year, with the grant amount usually a fixed percentage of the profit the Estate has made. Part of that grant is what paid for these renovations.
Taxpayers (and equivalently the government) are not directly worse off financially because these renovations are happening, and would be no better off this year if no renovations had been made.
How the renovations were paid for
The renovations were paid for out of something called the Sovereign Grant. As the name suggests, this is a grant paid to the Sovereign (the Queen) by the government.
It can only be spent on official expenditure such as staff costs, official travel and property maintenance. As Frogmore Cottage is an official royal residence, renovations were paid for out of the Sovereign Grant. In 2019/20 the Queen will receive £82 million from the Grant.
So where does this money come from?
In her role as Head of State, the Queen owns a big property portfolio called the Crown Estate. This is public money, and all the profits from the Estate go to the Treasury. (The Queen also has other sources of income we’ve discussed before).
The Treasury collects all that money together with the income it gets from general taxation and other sources, and puts it all into one pot: the “Consolidated Fund”. We’ll refer to this pot as “public money”; most of it comes from general taxation, but some of it is from non-tax sources (such as the Crown Estate profits).
The Treasury then pays the Sovereign Grant to the Queen, which is currently calculated as the equivalent of 25% of the Crown Estate’s profits two years previously. The amount of the grant isn’t determined by how much the royal family plans to spend.
In any year, the Treasury always pays at least as much as it paid in Sovereign Grant the previous year, so if the Crown Estate’s profits were to go down then the Grant would not (and so would end up being more than 25%). This hasn’t happened yet; since the Sovereign Grant replaced the old system of funding the monarchy in 2011, the estate’s profits have increased each year.
So to frame this as “taxpayers’ money” doesn’t quite give the whole picture. It is certainly public money, but that’s not quite the same thing as taxpayers’ money. The Crown Estate makes more in profits for the Treasury than the Queen takes from the Treasury through the Grant. If the Grant were not paid at all then there would be more public money available, but under the current system this money would have been paid out anyway at the same level with or without the renovations to Frogmore Cottage.
Why the Sovereign Grant exists
To understand why the Queen gets a grant it’s important to look at how the Sovereign’s role has changed over time.
Historically, the Sovereign was responsible for lots of government expenses and used income from their lands to help pay for this.
As public taxes became more important than Crown lands income as the Government’s primary source of revenue, King George III agreed to give the income from some Crown holdings to the Treasury in exchange for an annual payment.
These holdings are collectively known as the Crown Estate. The estate includes lots of properties which generate income from things like rent.
Over time, more and more income from Crown lands was handed over to government, and as such the Sovereign was directly responsible for less and less government expense.
Correction 3 July 2019
The previous version of this article concluded that taxpayers technically didn’t pay for the renovations to Frogmore Cottage and said that money for the Sovereign Grant was generated by the Crown Estate’s profits, rather than taxes. This was misleading, and it’s not that helpful a distinction anyway.
We’ve now made clear that the money paid into the Sovereign Grant comes from a general pot of money paid into mostly by taxes and other income sources like profits from the Crown Estate. Those profits are used in the calculation of the Grant’s size, rather than strictly “generating” it. It’s not helpful to say this is or isn’t taxpayer money—it’s public money (as we originally wrote). We’ve added that in spite of that, the spending this year on these renovations hasn’t made the taxpayer financially worse off.