Our friends Gavin and Pete from the outstanding podcast Economics in Ten have kindly shared this guest blog post with us.
As the nation looks forward to celebrating the Queen’s Platinum Jubilee it might be a good time to consider the economic arguments in favour of The Royal Family – in simple terms do they benefit the economy or not? This is especially so during the Jubilee weekend where an additional Bank Holiday has been added to the calendar. Like many, we are excited about the celebrations and look forward to getting involved in lots of local events.
According to Forbes, the House of Windsor is worth £19 billion and pre-pandemic, the Royal Household contributed an estimated £1.9 billion to Britain’s economy. This mainly comes through the tourist industry and in 2019/20, a record number of 3,285,000 visited the official royal residences. This obviously creates a spillover effect in local communities, where visitors will use local cafes, shopping centres, hotels and so on, which then create more jobs and more spending. In Economics, we call this ‘the multiplier effect’ and it was originally introduced by Richard Kahn, before it became associated with his more famous fellow economist, John Maynard Keynes.
There is an argument though that without the Royal Family, these attractions would still be visited due to their historical nature, in very much the same way we visit the Palace of Versaille in France for example. In fact Paris is the most visited city in Europe and their Monarchy was abolished in 1792! However, the media coverage of Britain that is supposedly derived from the Royal Family is estimated at £283 million and many would argue that multi-million pound deals happen on the back of Royal visits around the world. This would suggest that having a living and breathing Royal Family is a good thing for the economy.
When there are big celebratory days like the Queen’s Platinum Jubilee, where street parties are organised, fetes are held and pubs and clubs can stay open later, we also see this ‘multiplier’ in action and the boost in spending that it brings about. Special events being run by Town Councils up and down the country will hopefully have this impact, as families follow Treasure Trails around town, grabbing a bite to eat and popping into the odd shop. Having additional Bank Holidays also reduces the working week and some studies have shown that a four day week boosts productivity in the workplace. Microsoft’s four day working week saw a boost in productivity of 40%, so imagine what a three day working week will do?
The data on Bank Holidays is very mixed though and many studies have shown that they actually cost the economy money as many firms lose a day’s trade. Although a recent study by the CEBR (Centre for Economic and Business Research) suggested that an additional Bank Holiday can boost the British economy by £500 million, their original viewpoint was that every Bank Holiday costs £2.3 billion. It is clearly very difficult to quantify and the CEBR suggests that special Bank Holidays like the Platinum Jubilee one are different to normal ones due to the boost in external tourism.
One final thing to think about related to the Royal Family is the concept of ‘opportunity cost’. This is one of the first concepts you learn in Economics and it simply means that when you have made a choice, there is always an alternative that you have given up. For example, if I buy a ticket to watch a football team play, that money could have been used to go to the cinema and buy some popcorn. One of the ways the Royal Family makes money is through The Crown Estate and in 2018/19, the revenue raised from it was £343.5 million. The Crown Estate includes the entirety of Regent Street, Ascot Racecourse, around 1,960,000 acres of agricultural land and more than half of Britain’s foreshore. Many would argue that in a world where the cost of living is crippling their lives, can we afford a situation where one family owns so much, through inherited wealth? What would be the next best alternative use for all the land and property that the Royal Family own? When the Liverpool fans recently booed the National Anthem at the F.A. Cup, the manager Jurgen Klopp asked the media to reflect why the fans would feel this way. When you can’t afford to feed your family or heat your house, it does seem rather odd to see the adulation given to a very rich family, no matter how much economic benefit they bring to the country, especially when the UK taxpayer contributes to the Crown via the Sovereign Grant.
Overall though, it does seem that the Royal Family is good value for money and like most people, we will be joining in the festivities for the Queen’s Platinum Jubilee. We know that there has been a record number of requests made for street parties and anything that brings communities together has to be a good thing both from an economic and social point of view. So what will you be doing? Celebrating like everyone else or shouting ‘Abolish The Monarchy!’ from the rooftops?