Maintain or abolish the Monarchy? The impact of the Royal Family on the economy

The British Monarchy has been under question for years with campaigners and pressure groups such as the Republic calling for the end of their procession and for the King to be replaced with a democratic head of state. While more royalist groups, such as the British Monarchist League, believe the RF still plays an important and historical role, serving as the ‘personal link and human symbol of the Commonwealth’.

King Charles III was officially crowned the Head of State and Church of England with Camilla being crowned Queen Consort on May 6. In the coronation ceremony, he declared that he will be “serving the people of the United Kingdom, the Realms and Commonwealth.” It is reported that this event cost taxpayers at least £100 million, which has caused some concern amid an ongoing cost of living crisis.

During the coronation, 64 people were arrested for protesting against the King as they allegedly planned to ‘disrupt the ceremonies’. Graham Smith (CEO of Republic) was also arrested which led to the pressure group’s membership to almost double in numbers. Republic estimates that the RF costs the government around £345 million annually.

I’m now out of the police station. Still waiting for my colleagues.

Make no mistake. There is no longer a right to peaceful protest in the UK.

I have been told many times the monarch is there to defend our freedoms. Now our freedoms are under attack in his name.

— Graham Smith 🇺🇦 🏳️‍🌈 (@GrahamSmith_) May 6, 2023

With the UK’s inflation rate is sitting at 8.7%, GDP growth at only 0.1%, and around 1.33 million people reported as unemployed – the cost of King Charles’ coronation is nearly double as much compared to Queen Elizabeth’s coronation in 1953 which was reported to cost £1.5 million (equivalent to around £50 million in 2023).

Other government expenses have included the Queen’s mourning period from September 8, 2022, to September 19, 2022, for which the government spent £162 million. This type of Royal event differs from weddings such as the Duke and Duchess of Cambridge (William and Kate), and Prince Harry and Meghan Markle, which are covered directly by the Royal Family Treasury.

The popularity of the British monarchy has divided the population for decades because of several controversies such as Prince Andrew’s association with Jeffrey Epstein, Harry and Meghan’s decision to leave the UK – also known as Megxit and the breakdown of Princess Diana’s marriage to the former Prince of Wales.

And following the death of Queen Elizabeth II, the popularity of the current British Monarchy has dropped. According to live YouGov rating polls, the late Queen’s approval rating is 80% in comparison to King Charles at 55%. Polls have also revealed that the younger generation has lower support ratings for the Monarchy than those over 65 years old.

The British Royals, who are famous and renowned around the world, continue to gain global coverage from documentaries about their life to hit drama shows on Netflix.

An estimated 4.1 billion people watched the funeral of Queen Elizabeth II on September 19, 2022. According to The Conversation, it is indicated that 60% of overseas visitors to Britain are likely to visit places associated with the royal family and more than a third of tourists visiting London list Buckingham Palace as a bucket list top attraction. Interest in the institution is shown by the viewership figures of Netflix’s The Crown, which saw over 73 million households tune in for seasons 1-3.

The RF brings hundreds of millions in revenue to the UK’s economy each year through tourism, media and arts, as well as trade. It is estimated that the annual contribution to the economy is around £1.766 billion, including indirect economic effects on these sources of revenue. They also host grand annual events such as the Royal Ascot which attracts millions and stimulates their collective popularity.

Such interest is said to be beneficial for the UK economy as a whole which opposes the view of the Republic, with the view that the RF brings in more than they take away.

The role of the monarch and how they are funded

The UK’s political system is based on a constitutional monarchy. The monarch’s main functions are to appoint the Prime Minister, and all other ministers; to open new sessions of parliament; and to give royal assent to bills passed by parliament, signifying that they have become law. They hold annual audiences like the Diplomatic Reception, which helps strengthen relations with foreign and Commonwealth nations.

The King is funded primarily by the Sovereign Grant – an annual payment made by taxpayers to the monarch by the government in order to fund official duties.

According to the annual report of HM Treasury, the total Sovereign Grant for 2020-21 amounted to £85.9m – equivalent to £1.29 per person in the UK. The core funding was for official travel of £51.5m, with £34.4m spent on property maintenance, the operating costs of The Queen’s household and an additional dedicated amount for reservicing.

Other sources of income include the Privy Purse and personal assets. The Privy Purse is a private income that the monarch receives largely via the Duchy of Lancaster – which is the portfolio of land, property, and assets held in trust for the Sovereign. This income is used for both official and private expenditures.

The Monarch possesses sovereign immunity which includes privileges such as being exempt from paying taxes (income, capital, and inheritance tax).

The UK has a progressive taxation system – as income rises, the percentage of tax increases. Under the highest band (additional Income) the RF does not pay 45%, unlike taxpayers who receive an annual income of over £125,140. Everyone is obligated to pay 40% tax after a person dies to estates that are worth over £325,000 – or more if a home or the sale proceeds of a home are included.

The former Queen Elizabeth II had paid tax voluntarily in the form of Income and Capital Gains Tax since 1993 and King Charles III has promised the same.