Harry and Meghan pay upfront for rent and refurbishment of Frogmore Cottage

The Duke and Duchess of Sussex have paid an undisclosed sum upfront for the rental and refurbishment of Frogmore Cottage – as royal accounts showed a potential £35 million shortfall due to Covid-19.

Critics had called for Harry and Meghan to pay back the £2.4 million spent renovating their Windsor property, after they stepped down as working royals for financial and personal freedom and moved to the US.

The couple’s reimbursement of the renovation costs had been announced, but as royal accounts were published a senior palace source said: “The Duke and Duchess of Sussex have made a substantial contribution to the Sovereign Grant that covers refurbishment and rental obligations for Frogmore Cottage.

“The reporting method for this contribution has yet to be determined and will have to be agreed by the National Audit Office before appearing in next year’s accounts.”

The Duke and Duchess of Sussex
The Duke and Duchess of Sussex

Harry and Meghan were able to afford the repayment after signing a lucrative Netflix deal rumoured to be worth more than £100 million.

Graham Smith, chief executive of Republic, the anti-monarchy organisation, called for a review of Harry and Meghan’s financial dealings with Frogmore, which is owned by the Crown Estate and was a gift from the Queen.

He said: “What we have is a family taking advantage of their position (in relation) to public property. They’re working out their own finances, doing their own books and then reporting their own finances – there needs to be independent scrutiny.

“I think the Crown Estate has questions to answer about allowing the royals to use the property in this way, and why they are not more open about the financial transactions that go on in relation to the houses they let the royals have.”

As the royal accounts were released, details emerged of a £15 million shortfall expected over the next three years in money that supplements the Sovereign Grant, which funds the Queen and her household’s official expenses, due to Covid-19.

Duke and Duchess of Cambridge
Duke and Duchess of Cambridge

And a £369 million reservicing programme to update the electrical cabling, plumbing and heating at Buckingham Palace over 10 years was also expected to be £20 million short.

Sir Michael Stevens, Keeper of the Privy Purse, stressed the royal household had no intention of asking for extra funding, but would “look to manage the impact through our own efforts and efficiencies”.

A pay freeze for royal staff was implemented in April and there is also a halt on recruitment, with only business-critical posts being filled but staff have not been furloughed.

The financial report revealed the most costly official overseas trip was the Sussexes’ high-profile family tour to southern Africa, which cost the taxpayer nearly £246,000, including planning trips for royal staff.

Accounts for the Sovereign Grant have shown the monarchy cost the taxpayer £69.4 million during 2019-20 – an increase of 2.4 million on the previous financial year.

Prince of Wales
Prince of Wales

All major expenditure areas have increased, from payroll, up £1.2 million to £24.4 million, to travel, rising by £700,000 to £5.3 million, and housekeeping and hospitality, rising by £300,000 to £2.6 million.

The Sovereign Grant increased slightly by £200,000 to £82.4 million during 2019-20 – a core element of £49.4 million which funds the Queen and her household, and an additional £33 million to pay for the on-going reservicing costs.

Sir Michael outlined the report, which covered the 12 months to March 31, but looked ahead to the problems that Covid-19 will pose to finances.

He said: “So in our forecasts we are now estimating that this reduced growth in the Sovereign Grant means the likely contribution from the Sovereign Grant to the reservicing programme will be over £20 million short of the agreed £369 million ten-year budget.

“If we look at our core Sovereign Grant and the income that we generate to supplement the Sovereign Grant, both of which support the official duties of the Queen.

The Queen hosted US President Donald Trump during his state to the UK during the last financial year. Andrew Matthews/PA Wire
The Queen hosted US President Donald Trump during his state to the UK during the last financial year. Andrew Matthews/PA Wire

“We are expecting a significant reduction in income from the Royal Collection Trust, due to the impact Covid-19 has had on their visitor numbers.

“This forms the bulk of a projected shortfall in income which we estimate will be around £5 million per year for the next three years.”

He went on to say: “In responding to both these financial challenges we have no intention of asking for extra funding and will look to manage the impact through our own efforts and efficiencies.”

The Royal Collection Trust pays fees, in relation to running the opening of royal residences such as Buckingham Palace and Windsor Castle, to supplement the Sovereign Grant but closures due to the lockdown are likely to see its income fall by tens of millions.

David McClure, an expert in royal finances, said the lack of overseas tourists visiting palaces could be a serious problem for some time to come.

He said: “Covid is going to have a long-term effect, not just six months, on foreign visitors to Britain. That income is going to be depressed for a long time.”

The Crown Estate, a multibillion-pound property portfolio that ranges from London’s Regent Street to Ascot Racecourse, published its annual report last week showing a £345 million profit for the Treasury coffers during the last financial year but there were concerns about the future financial impact of Covid-19.

The Sovereign Grant is based on a quarter of the profits of the Crown Estate, but allocated two years in arrears. For the 2020-21 financial year, it has been set at £85.9 million – a core grant of £51.5 million and £34.4 million for reservicing.