February 22, 2014

Queen Elizabeth Feels The Recession’s Bite

By: Emma Elliott Freire

Queen Elizabeth II is known for her frugality. For breakfast, she likes to eat Corn Flakes, which she stores in Tupperware to extend its shelf life. She wears the same outfits for decades. Allegedly, she even walks around her palace at night switching off any lights that may have been left on.

But she’s not doing enough. That’s the conclusion of a report released by the Public Accounts Committee, a UK parliamentary committee that oversees government expenditure.

The report found that the Royal Household (which consist of the Queen and her family, her staff, and her palaces and grounds) has overspent. Her royal reserve fund has fallen from £35 million ($58 million) to £1 million. Efficiency savings of just 5 percent have been made over the past five years. Last year, the Royal Household spent £2.3 million more than its annual budget. This is believed to be due to the cost of national celebrations for the Queen’s Diamond Jubilee, the 60th anniversary of her coronation.

The Royal Household is funded via a “sovereign grant,” usually around £31 million per year. That sum has to go a long way. It pays for items such as the Queen’s staff, the upkeep of her palaces, and the costs of her royal duties, including foreign travel.

The committee’s report expressed concern over the condition of many royal palaces, which are in dire need of repair. For instance, the roof above the Buckingham Palace picture gallery is so leaky that staff put out buckets when it rains. “A significant financial priority for the Royal Household is to reduce the backlog in essential maintenance across the occupied royal palaces,” the committee writes.

The report criticizes the Queen’s advisers for not taking the problem seriously. “The Household has not even costed the repair works needed to bring the estate back to an acceptable condition.”

The committee recommends that the Queen find new ways to generate revenue, particularly through tourism. They see Buckingham Palace as an underutilized resource. The Tower of London has 2 million visitors a year, while Buckingham Palace only attracts about 600,000. However, the Tower is uninhabited, while the Palace is a residence and office for the Queen and a large number of staff as well as the location for many state occasions. The committee acknowledges that this constrains the Palace’s commercial potential.

Buckingham Palace was opened to the public in 1992 in what was intended to be a temporary arrangement to pay for restorations to Windsor Castle. It remained open and last year it generated nearly £12 million in income.

Founded in 1861, the Public Accounts Committee is the oldest committee of Parliament’s House of Commons. It plays an important oversight role in UK government. To avoid conflicts of interest, a member of the main opposition party serves as chairman. Margaret Hodge, the current chair, has helped raise the committee’s profile. Last year, she accused Google, Starbucks, and Amazon of evading tax. She is known for her vigorous questioning of witnesses. For instance, she told a Google representative who was testifying, “We’re not accusing you of being illegal, we’re accusing you of being immoral.”

Clashes over spending between the British monarch and Parliament are nothing new in UK history. In past centuries, this could lead to armed conflict. Queen Elizabeth, however, has chosen to take the path of least resistance.

Responding to the report, a spokeswoman for the Queen said, “The Royal Household was charged by the [Public Accounts Committee] in 2009 to generate more income to supplement the funding it receives from government. This has been done successfully. In 2012-13 the Household generated £11.6 million in comparison with £6.7 million in 2007-8. Work on income generation continues.”

The Queen has no shortage of defenders, in politics and the media, speaking out to say the report’s findings are unfair. Journalist Allison Pearson writes in The Telegraph, “I feel mortified that our Queen, who has given this country a mere 60 years of service and maintains a schedule that would fell a person half her age, is publicly humiliated this way.”

George Osborne, the Chancellor of the Exchequer, the UK’s second highest elected office, also weighed in on the Queen’s behalf. “I have to say I think the Public Accounts Committee chair is being unfair to the way the Royal Household has managed its finances,” he says. “They’ve lived within a frozen budget over the last years and indeed the cost to the royal family for the taxpayer has come down quite sharply over the last couple of decades.”

Jacob Rees-Mogg, a member of Parliament, wrote an article pointing out that the Public Accounts Committee already conducted a review of royal finances in 2009. The Royal Household represents less than 1 percent of overall public spending. It’s quite unusual for the committee to revisit such a small budget item again so soon. He says the committee “is sometimes tempted by the siren voices of the publicity hounds to deliver unworthy, grandstanding reports.”

While that may be true, the committee’s concerns about the needed renovations for historic palaces are valid. Turning out lights and conserving cornflakes will do little to offset such large expenses.

Follow Emma Elliott Freire on Twitter. Queen Elizabeth II image courtesy of Big Stock Photo.