Does the Royal Family really make financial sense for the UK economy?

Prince Harry will marry Meghan Markle in the St George Chapel of Windsor Castle on Saturday 19 May. The cost of the wedding itself – the food, the Ralph & Russo Couture dress etc – will be picked by the Royal Family.

But the security costs have been estimated at more than £20m. And that will be borne by the public purse.

Yet the wedding might also attract additional tourists from abroad, whose expenditure will help defray some of those public costs.

Some have even claimed that sales of memorabilia will boost the overall economy.

Which leaves us with the perennial questions: How much money do we spend on the British monarchy? How much of an asset is it to the economy? Is the Royal Family really “worth it”?

Direct funding to meet the monarchy’s official expenditure is now through something called the “Sovereign Grant”.

This replaced the old Civil List and grants-in-aid from government departments in 2012 and is supposed to be reviewed every five years.

In 2016-17 the Sovereign Grant was £42.8m, rising to £76m in 2017-18, with the increase earmarked for refurbishing Buckingham Palace.

Royalists often point out that these costs represent only around £1 a year to every person in the UK.

However, this does not include the security costs of looking after the family.

One republican pressure group has estimated that these add up to £100m a year and help push the actual annual public cost of the monarchy closer to £350m.

No, that’s the funding of their official duties – opening buildings, chairing charities, hosting garden parties, travelling the country and abroad etc.

The Queen, Prince Charles and other members of the Royal Family have private incomes too from their private landed estates and financial assets.

A sum of money called “The Privy Purse” goes to the Queen as revenue from a landed estate called the Duchy of Lancaster. This was £19.1m in 2016-17.

The Queen has voluntarily paid income and capital gains tax since 1992 on her private income and the revenues not used to finance her official work.

Prince Charles has also voluntarily paid income tax on his income from another landed estate, the Duchy of Cornwall, since 1993.

In 2016-17 that estate yielded him revenue of £22.5m, on which he paid tax of £4.76m.

But the situation is complicated.

The majority of Prince Charles’ official duties are financed from the Duchy’s income. This income also covers the costs of the official duties of Camilla, William and Kate and Harry.

All this expenditure offsets Charles’ tax liability. And all the “working royals” in Charles’ direct family also get some revenues from the Sovereign Grant too.

Meanwhile, some of the Queen’s Privy Purse is also used to fund her official duties, which means she doesn’t pay tax on that element of her income.

VisitBritain reckons that tourism linked to royal residences such as Buckingham Palace and Windsor Castle adds up to 2.7 million visitors a year.

And a consultancy called Brand Finance estimated in 2017 that the monarchy’s annual contribution to the UK economy to be around £1.8bn a year, drawing in an additional £550m of tourism revenues a year, and an increase in trade, from the Royal Family acting as ambassadors, supposedly worth £150m a year.

That might sound impressive – and it’s certainly more than the higher estimates of the Royal Family’s costs to the public purse – but it’s important to put those numbers in context.

Overseas visitors are estimated to have spent £22.5bn in the UK in 2016. And total UK exports summed to £543bn. Viewed from that perspective, the additional royal-related revenues start to look somewhat trivial.

Moreover, we should treat even estimates of economic activity linked to the royals with a large dash of scepticism.

The only way to reach these numbers is to estimate the counterfactual – what would have happened to UK tourism or trade if the Royal Family didn’t exist? Or if the official Royal Family was significantly smaller and less expensive to run?

That’s not easily done. Would foreigners really be less likely to visit the UK’s historic palaces if they were no longer lived in, from time to time, by the Queen, or Prince Charles?

Would the monarchy be less of a tourist draw if the likes of lesser working royals such as Princess Alexandra and the Duchess of Kent were no longer funded by the Sovereign Grant?

The economic boost from visits and festivities related to royal celebrations should certainly be treated with caution given these can displace economic activity as well as create it.

This seems to have happened around Prince William’s wedding in 2011, when many UK residents appear to have left the country.

Royalists might make the historic argument that the monarchy brings political stability to the UK, which has a high value to the economy. But, again, this is difficult to put a price on. Especially when the appropriate counterfactual is not anarchy, but a stable republic like France or Germany.

In the end, the question of whether the Royal Family is worth it, or not, is probably less a financial question than a political, moral and aesthetic one.