Is the British monarchy a bad business?
Commentary:
(MoneyWatch) Earlier this week, Sir Alan Reid, who manages the British royal family's household accounts under the title Keeper of the Privy Purse and Treasurer to Her Majesty the Queen, described in gruesome detail the current state of the royal finances. The family may be exceptional but the problems it faces are strikingly ordinary.
The royal family earns about $15 million through rental income on its vast estates and from such recent money making ventures as charging admission to Buckingham Palace. But it spends over $50 million on living costs, staff, travel, IT and property maintenance. In other words, it's like many families around the world: Spending more than it makes. And like most businesses, the biggest cost is people: Some $30 million are staff costs.
In Britain, there's always a tension around the royal finances. On the one hand, extravagance is out of fashion and the idea of having a manservant to squeeze the toothpaste onto the toothbrush inspires derision, not awe. On the other hand, the British do love their monarchy and republican sentiment (at its height when Princess Diana died) is at a low ebb. Moreover, calls to cut staff are unlikely to garner huge support since, with unemployment already hovering around 7.7 percent, there's no enthusiasm for putting more people out of work.
Central to Sir Alan Reid's testimony was his description of the decrepit condition of Buckingham Palace. Peeling paint, leaking roofs and worn out furniture were all part of a careful fundraising pitch, aimed at inspiring patriotic generosity. But Reid has to tread a fine line: Many of the elderly in Britain today (where food prices and energy costs are both increasing) confront a choice between eating and heating. If the Queen complains too much about her working conditions, this could throw unwanted light on the living conditions of many British retirees.
For all that royal finances have become more transparent in recent years, the truth is that they are still ornate and not fully susceptible to public scrutiny. Any calls for greater public contribution inevitably increase cries for greater accountability. It is hard to see how this family can justify needing staff that cost over $30 million a year while making so little from the many assets (historic properties and a vast art collection) of which the Queen is custodian. With property valued at $13 billion, it seems fairly extraordinary that the yield is so low. The Queen has a lot of staff -- but does she have the right business managers?
If the royal household were a business, consultants would have a field day: Just another old-fashioned, overstaffed business lacking in entrepreneurial zeal and in urgent need of modernization. What keeps it cocooned from financial realities the rest of us face is the hope that the British taxpayer will stump up. In that, the royal household looks almost as arrogant and unaccountable as banks. The crucial difference is, of course, that while everyone hates banks, almost everyone loves the Queen.
