Wednesday, 6 July 2011

Is the Queen Good Value for Money?

It has been reported recently that the cost of the Royal Family to the UK taxpayers was £32.1 million during the last fiscal year. Is this a lot? Are we getting good value for money?

Having a royal family used to be a very foreign concept to me. I gradually developed a liking for it, however. Many other countries have a president who does little beyond holding a largely ceremonial office: Germany is a good example. Such presidents are not much more useful than monarchs. Royal families, however, have an important sideline in providing entertainment to their loyal subjects. The recent royal weddings – here in the UK or in Monaco – are evidence of that. I wouldn’t be surprised if someone found evidence that events such as royal weddings or births of royal babies are good for the economy. At 52p per person per year, which is what the £32.1 million amount to, I think we are getting a good deal.

Until recently, my favourite example of inefficiently expensive public goods was multilingualism in the EU. This costs way more than the UK Royal Family: the cost of maintaining 23 official languages is estimated as over €1 billion per year. Per person, this amounts to approximately €2.30 – 4 times as much as the Queen and her extended family. Plus the entertainment value of official EU business is usually close to zero.

The €2.30 figure, however, is misleading. Nearly two Europeans out of five speak English well (either as native speakers or because they have learned it). Therefore, the remaining 22 official languages cater to less than two thirds of Europeans. Moreover, if the six largest languages – English, German, French, Italian, Spanish and Polish – were the only official languages of the EU, only 16% of the EU population would not be able to speak any of them. The bulk of official languages, 17 of them, are thus needed only for one sixth of the people. Moreover, even the remaining 17 languages are not all equal: the cost per person per year ranges from around €7 for Hungarian to a whopping €831 for Maltese (assuming translation and interpretation services are only required for those who do not speak English, German or French; these figures are based on my article with Victor Ginsburgh published in the European Economic Review in 2007).

But even these figures pale with the costs of the on-going Greek bailout. The one-off cost of that exercise has been estimated currently as in excess of €500 euros per household. Moreover, over the next three years, this figure is expected to increase to €1,450 per household (these estimates are due to Open Europe, a think tank). Assuming the average household has 2.5 members, this comes up to £524 or the cost of the UK Queen and the whole Royal Family over the course of a millennium! Some of it can be recovered subsequently but few believe that €1 in Greek government bonds is worth anywhere close to that value. Of course, the bailout will bring certain benefits: Greece need not go into a sovereign default (which would in turn be costly for many European banks), it forestalls contagion to other vulnerable countries and prevents the embarrassment of Greece being potentially forced to leave the Euro area. Whether all this is worth the costs, I have my doubts.

The cost of the Greek bailout is to be borne by Eurozone taxpayers so that the UK is off the hook. We can consider ourselves lucky that we only have to put up with supporting the Queen.

Jan Fidrmuc

No comments:

Post a Comment