LONDON — King Charles III has vowed to streamline the royal family, which would make it less of a burden on British taxpayers. But a report on the family’s finances, released on Thursday, shows that goal remains elusive: The king had to dip into reserves to pay for swelling expenses in a year of momentous royal change.
The death of Queen Elizabeth II and the inflation-fueled cost of refurbishing Buckingham Palace drove the family’s official expenses to more than 107 million pounds ($135 million) in the last 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 grant that the family receives from the government.
The report — an annual accounting of the palace’s operating expenses — revealed a royal family that is grappling with a cost-of-living crisis, albeit of a very different kind than the soaring gas bills and spiking mortgage rates that plague ordinary Britons. Charles is midway through an expensive home improvement project at Buckingham Palace, which means he and Queen Camilla are still living at his nearby residence, Clarence House.
A string of ceremonies — from the queen’s Platinum Jubilee celebration to her state funeral last September to planning for the king’s coronation in May — has also driven up expenses. The funeral cost the palace 1.6 million pounds ($2 million), while the jubilee, which marked Elizabeth’s 70 years on the throne earlier in 2022, cost 700,000 pounds ($885,000).
It was “a year of grief, change and celebration, the like of which our nation has not witnessed for seven decades,” said Sir Michael Stevens, who as the Keeper of the Privy Purse oversees the royal family’s finances, according to the text of a briefing he provided for reporters.
But Mr. Stevens said everyday woes, like Britain’s double-digit inflation, also contributed to the cash crunch. Because of the rising cost of food and fuel, the royal family’s operating expenses, he said, rose five percent from the previous fiscal year, roughly half the rate of the Consumer Price Index.
Buckingham Palace is also falling short of its goals to recruit a more diverse work force. The palace said 9.7 percent of its employees were ethnic minorities, missing its goal of 10 percent by 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 quizzed a British-born Black woman, Ngozi Fulani, about where she came from at a palace reception. The lady-in-waiting, Susan Hussey, resigned and later offered a face-to-face apology to Ms. Fulani.
As Charles settles into his reign, royal watchers say they expect him to make the royal family more accessible and reflective of a diverse country. But reducing the family’s financial footprint will be harder, they said, given the personal sensitivities and the complexities of how the royals are financed.
The palace confirmed that Charles had evicted his estranged son, Prince Harry, and his wife Meghan from their residence, Frogmore Cottage. But it left unclear what the king plans to do with the house, which sits in a park near Windsor Castle and underwent a $3 million renovation paid for by the couple after their 2018 wedding.
London newspapers reported that Charles wants his younger brother, Prince Andrew, to relocate 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 vacant, joining a list of empty or scarcely used royal properties. Buckingham Palace has not housed a monarch since the queen abandoned it for Windsor Castle in early 2020, as the pandemic was bearing down. Charles and Camilla are scheduled to move back in when the 10-year, $467 million renovation is completed in 2027. But they are said to prefer the cozier Clarence House.
The king, royal experts say, is receptive to the idea of opening more of Buckingham Palace to paying visitors, which could turn it into a lucrative tourist attraction. But that raises another potential problem: If the family demonstrates it can cover much of its operating expenses by opening the palace or other residences, it could jeopardize the “sovereign grant,” as their government subsidy is known.
Under an arrangement that dates 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 fixed sum — currently 86.3 million pounds ($108 million) — that is calculated as a percentage of the profits from the estate.
That number has stayed constant for the last two years while expenses have continued to rise. The palace supplements the grant with revenue from the Royal Collections Trust, which charges visitors to see royal residences, like the Palace of Holyrood in Edinburgh. But the pandemic depressed those numbers.
The Crown Estate, which draws rental income from an array of sources, including designer stores 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 real estate holdings plummeted in value by 500 million pounds ($629 million) because 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 enormous and borne by the government. Last month, the Treasury said the queen’s funeral cost 162 million pounds ($204 million), about half of which went to security.
Citing the transitional 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 touch the tax bills of Charles and William or their private fortunes. Each own vast amounts of property through duchies that generate millions in profit.
“There is limited transparency at the best of times,” said Peter Hunt, a former royal correspondent for the BBC. “Royal family finances are such a toxic issue for the government. Both sides want to limit Parliamentary scrutiny.”
