Palace expenses force King Charles to dip into a reserve fund

LONDON — King Charles III has vowed to streamline the royal family, making it less burdensome for British taxpayers. But a report on the family’s finances released on Thursday shows that the target remains elusive: The king had to draw on reserves to meet rising spending in a year of momentous royal changes.

The death of Queen Elizabeth II and the inflation-driven cost of refurbishing Buckingham Palace pushed the family’s official expenditures to more than £107 million ($135 million) in the past financial year. That forced Charles to draw 20.7 million pounds ($26 million) from a reserve fund to cover a shortfall between the expenses and the annual stipend the family receives from the government.

The report – an annual accounting of the palace’s running costs – revealed a royal family grappling with a cost-of-living crisis, albeit one very different from the skyrocketing gas bills and rising mortgage rates plaguing ordinary Britons. Charles is halfway through an expensive Buckingham Palace renovation project, which means he and Queen Camilla still live in his nearby residence, Clarence House.

A series of ceremonies — from celebrating the Queen’s Platinum Jubilee to her state funeral last September to planning for the King’s coronation in May — have also pushed up costs. The funeral cost the palace £1.6 million ($2 million), while the anniversary, which marked Elizabeth’s 70 years on the throne earlier in 2022, cost £700,000 ($885,000).

It was “a year of sorrow, change and celebration the likes of which our nation has not seen for seven decades,” said Sir Michael Stevens, who oversees the royal family’s finances as the keeper of the secret purse, according to the text of a briefing he provided for reporters.

But Mr Stevens said everyday problems, such as Britain’s double-digit inflation, also contributed to the cash crisis. Due to the rising costs of food and fuel, the royal family’s operating costs rose, he said, by five percent from the previous fiscal year, about half the percentage of the consumer price index.

Buckingham Palace is also falling short of its aims to attract a more diverse workforce. The palace said 9.7 percent of its employees are ethnic minorities, falling short of the 10 percent target this year. The king has set a new target that 14 percent of all employees must be minorities by 2025.

Diversity has been a fraught issue for the palace since last year, after a former lady-in-waiting to the queen repeatedly questioned a British-born black woman, Ngozi Fulani, about where she was from at a palace reception. The lady-in-waiting, Susan Hussey, resigned and later apologized personally to Mrs. Fulani.

As Charles settles into his reign, royal observers say they expect him to make the royal family more accessible and reflect a diverse country. But shrinking the family’s financial footprint will be more difficult, they said, given the personal sensibilities and complexity of how the royals are financed.

The palace confirmed that Charles had evicted his estranged son, Prince Harry, and his wife Meghan from their home, Frogmore Cottage. But it left it unclear what the king plans to do with the house, which sits in parkland near Windsor Castle and underwent a $3 million renovation paid for by the couple following their 2018 wedding.

London newspapers reported that Charles wants his younger brother, Prince Andrew, to move to Frogmore from the much larger Royal Lodge, which could then become the residence of the King’s heir, Prince William, and his wife, Princess Catherine. But Andrew, the reports say, is resisting that.

For now, Frogmore lies empty, joining a list of empty or barely used royal properties. Buckingham Palace has not hosted a monarch since the Queen left it for Windsor Castle in early 2020, as the pandemic was abating. Charles and Camilla are slated to move back in when the 10-year, $467 million renovation is complete in 2027. But they would prefer the cozier Clarence House.

The King, royal experts say, is open to the idea of ​​opening more of Buckingham Palace to paying visitors, which could make it a lucrative tourist attraction. But that poses another potential problem: If the family demonstrates it can cover a large portion of its operating costs by opening the palace or other residences, it could use the “sovereign grant,” as their government grant is called, endanger.

Under a scheme dating back to 2012, the king hands over to the government the revenues of the Crown Estate, a vast collection of land and real estate owned by the monarch. In return, the family receives a lump sum – currently £86.3 million ($108 million) – which is calculated as a percentage of the estate’s profits.

That number has remained constant over the past two years, while costs have continued to rise. The palace supplements the grant with revenue from the Royal Collections Trust, which charges visitors to tour royal residences, such as the Palace of Holyrood in Edinburgh. But the pandemic pushed those numbers down.

The Crown Estate, which generates rental income from a variety of sources, including designer shops on Regent Street and wind farms off the British coast, is a reliable source of cash. But it too has had setbacks: In its annual report, also published on Thursday, it said its London property holdings had fallen in value by £500 million ($629 million) as a result of the pandemic.

Much about the royal family’s finances remains shrouded in mystery. This week’s report does not cover the cost of their security, which is huge and borne by the government. Last month, the Treasury said the Queen’s funeral cost £162 million ($204 million), about half of which went to security.

Citing the temporary nature of this year, the palace did not disclose William’s expenses, as it did for Charles when he was Prince of Wales. And the report does not cover Charles and William’s tax bills or their private fortunes. Each holds vast amounts of property through duchies that generate millions in profits.

“There is limited transparency at the best of times,” said Peter Hunt, former royal correspondent for the BBC. “The royal family’s finances are such a toxic issue for the government. Both parties want to limit parliamentary scrutiny.”