Cabinet Office Minister Francis Maude, the man responsible for organising Thatcher's funeral, said the costs are a "fraction" of the figures being "banded around".
Speaking to Daybreak he said: "The state will always pay for the costs of the funeral and memorial of a former Prime Minister and Margaret Thatcher was very adamant she did not want to have a separate memorial service.
"So this is the one occasion when people will get their chance to pay their respects, give her a send off and commemorate what was, by any exception, a really remarkable life."
The Queen led mourners at the ceremonial funeral of Baroness Thatcher in St Paul's Cathedral today as thousands lined the streets of London.
Falklands residents say they owe their freedom and their riches to Margaret Thatcher. Today they paused to reflect and to remember.
Baroness Thatcher was honoured with a ceremonial funeral at St Paul's Cathedral in the presence of the Queen and dignitaries.