Queen's Royal Financial Reserves Decimated by Palace Building Work

Queen Elizabeth II's Royal Household is due to nearly decimate its financial reserves during two years in which palace building works will blow the roof off its annual budget.

Buckingham Palace has been undergoing a 10-year program of reservicing at public expense. Over the last year, the project has accelerated with the annual costs surging.

The outcome was that by March 2022, the palace had spent its annual budget and begun tapping into its reserves, according to a policy paper published by the U.K. Treasury that month.

However, the Royal Household anticipated the increase in the cost of the reservicing project and reserves had been building during preceding years, meaning the mood among staff remains positive.

The palace Reserve Fund stood at £45.4 million ($55.25 million) at the end of 2020-21 but dropped to £20 million ($24.21 million) in the tax year 2021-22.

The fast pace of reservicing work is expected to continue in 2022-23 meaning an additional £14 million ($16.95 million) of extra funding will be needed, leaving reserves predicted to stand at £5.3 million ($6.45 million) by the end of that tax year.

The treasury document maintains an optimistic tone, however, describing the increased pace of the work as positive.

The document, published online, read: "The Royal Trustees are pleased that reservicing has accelerated further during 2021-22 and as a result, the Reserve is expected to reduce to around £20 million by the end of 2021-22 and to be drawn down further in 2022-23."

Before the tax year ended, the Royal Household anticipated spending £120.4 million in 2021-22, significantly more than its £86.3 million public funding for the year.

The overspend meant drawing on £22.3 million from the Reserve Fund, which was then reduced to £20 million.

The report stated: "Forecast expenditure for 2022-23 is driven by a significant increase in reservicing activity, as work has now commenced across a much wider area of the Palace."

The household is expecting to spend £110.1 million in 2022-23, overspending annual funding of £86.3 million, and has asked royal trustees for permission to use £14 million of reserves.

The report added: "The Royal Household, therefore, forecasts that the adjusted value of the Reserve Fund will fall to £5.3 million by the end of 2022-23."

The extra spending will bring the Reserve Fund back down to a little more than the £4.8 million it held in 2017 before the palace began receiving extra public funding to pay for the work on Buckingham Palace in 2018.

More detail on the increase in expenditure will likely be included in the Sovereign Grant Report, the palace's annual financial document, due to be published at the end of June 2022.

Last year's report described how the major palace reservicing program had been slow to burn through funding in its early years, leading to an increase in reserves.

However, that trend has started to reverse with an increase in costs over the last two years and also anticipated over the next year, too.

The 2020-21 Sovereign Grant report, published in June 2021, read: "The current excess Reserve is therefore a matter of timing in the early years of a ten year programme, and the position has begun to reverse in 2020-21, with Reservicing expenditure drawing from the Reserve brought forward."

The increase in cost was already visible in 2020-21 but was offset that year because the Royal Household spent less than expected in other areas.

The March 2022 Treasury document read: "While expenditure on the reservicing programme did increase by £15.2 million in 2020-21, overall expenditure in that year was lower than the forecast of £89.6 million noted in the 2020-21 report.

"As a result, and after accounting for capital expenditure, the Reserve Fund at
the end of 2020-21 stood at £45.4 million."