Funeral fit for a Queen, but at what cost to the U.K. Economy?
Queen Elizabeth II’s funeral service ensues amidst an already struggling UK market.
Queen Elizabeth II, the U.K’s longest-reigning monarch, died on September 8th, 2022, marking the start of a new era of uncertainty for the country. Though the country has united in more ways than one over the monarch’s death, the grandeur of the funeral has put a hold on an inevitable situation: the reality of an economic crisis. This new period of national mourning will be the latest blow to a British economy already in turmoil. The Queen’s funeral alone removes some of the final threads to the UK’s status as a top-tier global power. As of now, the British government has not disclosed the cost of her funeral, but the price tag, according to a House of Commons report, is estimated to have been around $954,000 for “lying-in-state” and around $5 million for security.
Steve Clayton, head of equity funds at U.K.-based Hargreaves Lansdown, claims that because her funeral was considered a public holiday, there seemed to be a depressed growth in terms of gross domestic product figures, pushing the economy into a “technical repression.” This was also evident, early this year, when an additional holiday was recognized to celebrate the Queen’s platinum Jubilee, consequently, shaving off 0.1% of the nation’s economy during the second quarter.
Britain has reached a breaking point- the country finished a ten-day mourning period for the late monarch which followed the inauguration of new Prime Minister, Liz Truss, after the resignation of Boris Johnson, who was thrown out of his own party due to a series of scandals. A cost-of-living crisis has also sprung out, as there has been a rapid increase in consumer prices that Britain has seen in almost 4 decades, with inflation at nearly 10%, leaving families anxious when it comes to how they’ll pay for basic necessities. The Bank of England predicted that a long recession is likely to start later in the year, which could last well into 2024.
Just hours before the queen’s death, prime minister Liz Truss outlined her plans to combat the crisis, unveiling a stimulus package to help Brits with the rocketing energy bills after a petition to boycott energy bills had been gaining popularity. Although the package could lower peak inflation by 4–5%, economists advised that it could make the Bank of England’s job of repressing high prices difficult, by stimulating the amount of spending on goods and wages.
Although Truss believes that tax cuts will stimulate economic activity and, in turn, produce higher tax revenues, investors disagree, saying that the plan will result in more inflation and a higher budget deficit. A weakened pound would mean that foreign investors will take less profit after conversions to their own currency.
“Recovery is not on the horizon,” said Barry Eichengreen, a professor of economics at the University of California, Berkeley. Economists from Goldman Sachs and Citi have also warned that inflation could get close to 22% by January.
U.K’s newest finance minister, Kwasi Kwarteng said that there needed to be a significant change of direction in order to kick start the growth of the economic market; he hailed a “new era” for the UK by unveiling the biggest package of tax cuts they’ve seen in 50 years. However, others believe that this was not helpful in solving the worsening living crisis and that it is a plan to reward those who are already wealthy.
This plan employs the concept of trickle-down economics, which has received criticism for helping rich people compared to those in need. President Biden criticized this economic approach in a tweet before meeting with Liz Truss regarding the policy announcement made by Kwasi Kwarteng, stating that he was “sick and tired of trickle-down economics. It has never worked.”
The British pound has also plunged to a record low against the soaring dollar, spurring concerns of even higher inflation in the world’s sixth-largest economy. The pound is now equivalent to $1.08 as of September 27, an approximate 22 percent decrease from six months earlier. Many believe that the cause of this decline is because investors are cautious of Liz Truss’ proposal to increase government borrowing.
Yet, some analysts see more practicality in Truss’ strategies, which have been compared to former President Reagan’s approach (also known as Reaganomics). This combination of economic policy, specifically expansionary fiscal policy and contractionary monetary policy, is a policy mix in which Marc Chandler, managing director at Bannockburn Global Forex, believes can somewhat help with the drop of the pound’s value.
How does the Queen’s death play a role? Beyond the funeral costs, the British treasury also funds a yearly payment given to the Royal Family for household operating costs, property maintenance, and travel, also known as a sovereign grant. This year, the total cost has amounted to approximately $100 million, not including security costs, which are paid by the government and are kept confidential.
Although state funerals are an approved taxpayer expense, Graham Smith, chief executive of Republic, believes it would be helpful if the monarch was “willing to offer compensation for this enormous cost, given that we’re struggling to pay for hospitals, police and schools.” It also costs business owners a lot of money. Though normally public holidays can be associated with an increase in spending, this was not the case, as many businesses and vendors closed down.
The new reigning monarch, King Charles III, is reportedly planning a “slimmed down” working monarch and a less expensive funeral coronation ceremony than his mother’s in response to Britain’s crisis. According to a royal source, the King sees the struggles of Brits and hopes to stay true to past traditions while also being a representative monarchy in this modern world.
In the end, Britain must face these challenges after laying the Queen to rest, an influential and notable figurehead of the nation’s culture and history.
