What is the Crown Estate?

LONDON, ENGLAND - MAY 10: Prince Charles, Prince of Wales reads the Queen's speech next to her Imperial State Crown in the House of Lords Chamber, during the State Opening of Parliament in the House of Lords at the Palace of Westminster on May 10, 2022 in London, England. The State Opening of Parliament formally marks the beginning of the new session of Parliament. It includes Queen's Speech, prepared for her to read from the throne, by her government outlining its plans for new laws being brought forward in the coming parliamentary year. This year the speech will be read by the Prince of Wales as HM The Queen will miss the event due to ongoing mobility issues. (Photo by Alastair Grant - WPA Pool/Getty Images)
Charles at the state opening of parliament last year, representing the Queen. (Getty Images)

King Charles has asked that windfall profits from offshore wind farms owned by the Crown Estate be diverted to the "wider public good" rather than be reflected in the sovereign grant as increased funding for the Royal Family.

The new monarch referenced the cost of living crisis in his first Christmas Day message since taking the throne, in a move that was deemed by some not to "not shy away from a political edge" and address something with a "hot political issue".

However, the way the Royal Family are publicly funded means that this isn't entirely Charles' call in a practical sense. That's because the profits of the Crown Estate always go to the Treasury in their entirety, before a chunk of that cash is used to fund the royals – the sovereign grant.

Yahoo UK breaks down exactly what the Crown Estate is, who owns it, and how the royals get their money:

What is the Crown Estate?

The Crown Estate is an independent commercial business run by a board — the Crown Estate commissioners — that holds a wide-ranging portfolio of investments and generates income for the government.

It dates back to 1760, when George III agreed with the government that surplus revenue created by lands held by the estate would be given to the Treasury, and they would then give the monarch a fixed payment in exchange.

An Act of Parliament in 1961 gave authority to the commissioners to manage the estate and work to increase the revenue generated from it.

The Crown Estate holdings include the seabeds around some of the UK, premium London property, and Ascot Racecourse.

Do the Royal Family own the Crown Estate?

Put simply, no, they don't. However, it belongs to the King for the duration of his reign as sovereign, just as it did the Queen before him.

SANDRINGHAM, NORFOLK - DECEMBER 25: (L-R) Camilla, Queen Consort, King Charles III and Prince William, Prince of Wales attend the Christmas Day service at St Mary Magdalene Church on December 25, 2022 in Sandringham, Norfolk. King Charles III ascended to the throne on September 8, 2022, with his coronation set for May 6, 2023. Now he is monarch, Charles owns the Crown Estate in the capacity of head of state, but cannot personally profit from it. (Photo by Stephen Pond/Getty Images)
Now he is monarch, Charles owns the Crown Estate in the capacity of head of state, but cannot personally profit from it. (Getty Images)

This doesn't mean that Charles as a private individual owns the Crown Estate, but as part of his role as monarch which makes him a mechanism of state.

This means he cannot sell anything held by the estate nor can he derive income from any of its profits. All the Crown Estate's surplus revenue goes to the Treasury as public money.

What public money does the Royal Family receive?

The Royal Family receives public funding from the sovereign grant — this used to be through the civil list, but it changed in 2011 to make the process simpler as one consolidated payment.

The sovereign grant doesn't fund all of the royals, just those who undertake official engagements on behalf of the Crown. It pays for the upkeep of royal palaces that are owned by the reigning monarch and the costs of the King's official household, like travel and wages for his employees.

It doesn't cover the Windsor's security costs, and no breakdown of these is made publicly available – this is because the government believe doing so could compromise the safety of the Royal Family.

How does the Crown Estate work with the sovereign grant?

The sovereign grant is based on a percentage of the Crown Estate net profits, that have all been given to the treasury.

Initially, this was set at 15%, but it increased to 25% in 2017 for the following decade to cover refurbishments to Buckingham Palace, estimated to cost £369 million.

If the profits of the Crown Estate fall, the Treasury will top up the sovereign grant so that the royals receive the same amount as the year before and if they don't spend it all, the rest goes into a reserve fund.

The final amount given is decided by three royal trustees, these are the prime minister, the chancellor and the keeper of the privy purse.

So while it might be Charles's "wish" that the windfall profits go to the public, the final call lies with the three trustees.

Watch: The Royal Family's biggest spending sprees