Le capital humain de la famille royale britannique

It’s that time of year again.

The Crown has submitted its annual accounts which have shown expenditure up 5.3% and the Royal Family now costing the UK taxpayer a whopping 66 pence per annum. At a time when everyone from MPs to Russian moguls are tightening their belts, you can imagine the chorus of disapproval emanating from Hoxton to the Houses of Parliament when they learn that the cost of running this enterprise is now over £40m per year.

We wonder however if those concerned are being a bit harsh. After all, the Press has covered only one side of the story, which is the cost of running the Royals. This gets us frankly nowhere. Every company thinks its staff are overpaid and every employee thinks they’re invariably worth more than their monthly paycheque.

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So here at Talent Talk, we have done a ‘back of the envelope’ human capital analysis of the UK Royal Family, to see whether, from a financial perspective at least, the complaints are justified.

On the one hand you have a ‘tangible cost’ column. As we have seen, this comes in at £40m per annum. Onto this we would need to add some future costs which the present figure has not taken account of (for example urgent renovation work, plus we never know quite how long it will be before there is another addition to the household, or worse, a divorce). So let’s not split hairs (no pun intended) and say that the real cost of running the Royals is £50m p.a.

Then we need to look at the ‘intangible cost’ column. Intangibles are tricky things, so bear with me, but there is no doubt that an institution which seems to glorify the past, accident of birth, as well as being synonymous with numerous wars, massacres and injustices, carries with it an additional cost. The stigma involved in that cost can be counted as lost opportunities, as well as (more significantly) a feudal superstructure which some economists would argue destroy social mobility in the UK and with it entrepreneurship and wealth creation.

A tricky one to guage, as I mentioned, so we’ll move swiftly on to tangible benefits. Tangible benefits include income on assets which the Royal Family have passed on to the state (the Royals in turn get paid from the civil list, noted above). The media doesn’t seem to mention this much, but the income passed onto the UK Treasury from the Crown Estates came to over £200m in the 2006/2007 fiscal year. Now, there are one or two people who would say ‘hey, that’s our land!’ but the legal situation is that it isn’t. And, if anyone would advance an argument for seizing the title deeds in the name of the UK taxpayer, they would open themselves up for having to do similar with hundreds of other hereditary peers, an action that would lead to a bigger land grab than modern-day Zimbabwe.

So right there we can see on the tangible side, the Royal Family cost less than a quarter of what they earn.

Let’s look at the intangible income items. Some of these are more tangible than others, but on top of surrendering their income to the state in return for a guaranteed annual income, the Royal Family carry out some 3,000 engagements per year. Some of these include trade visits, leading to the signing of contracts (in turn earning the state tax income). The value of these deals can be tracked by it’s rather too time-consuming for the purposes of this blog. The Royal also open up their living spaces for visitors and arguably attract more tourists than they repel to the UK.

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In addition to this, the Royals spearhead a number of charities, making UK-based charities especially effective at tackling problems from conservation to poverty, and boosting their fund-raising efforts.

In return for her personal income of £700,000, the Queen gets all manner of intrusions, from lunatics breaking into her bedroom to smoke a quick cigarette to the more erstwhile attentions of the tabloids having the occasional pop at an institution they regard as an offshoot of the entertainment industry. The phalanx of Royal correpsondents and experts in the papers is certainly another intangible, though I am not sure if they would be counted as an asset or a liability.

Human Capital, as I hope we will discover in future articles, is a fascinating topic and in many cases a help to see people in more dimensions than simply their cost. If we are able to account more effectively for intangibles, I hope this will help people’s ability to form perceptions and make more effective decisions.