it would be "‘unduly punitive" to remove the couple's HRH titles.
A source told the paper: "They are still the Duke and Duchess of Sussex and Your Royal Highnesses, although they won’t be using the latter.
"That was agreed last January and nothing has changed."
They added: "He was born Prince Harry and will always be Prince Harry, while the [Sussex title] was a wedding gift.
'Regardless of what has happened, he will still be the grandson of the monarch, the son of a future monarch and the brother of a future monarch. That will never change.
"And he will still be those things even though he has chosen to walk away.
"He would rightly argue that he will always be portrayed as a royal and a prince, even if he worked as a landscape gardener in LA.
"He will never escape [the titles]. So why change?"
Insiders claimed the couple's new commercial plans in the US were "simply incompatible" with retaining their official titles.
The Queen and her courtiers became increasingly alarmed at their lack of control over the couple and ruled it impossible for them to continue with royal duties from the US.
The Sussexes were told they could not be “half in and half out.”
The Palace announced yesterday that Harry and Meghan couldn't continue with “responsibilities and duties that come with a life of public service”.
The Sussexes hit back with their own statement, insisting: "As evidenced by their work over the past year, the Duke and Duchess of Sussex remain committed to their duty and service to the UK and around the world, and have offered their continued support to the organisations they have represented regardless of official role.
We can all live a life of service. Service is universal.”
They will lose their patronages, with Harry being stripped of his honorary military titles as part of the agreement.
Harry and Meghan had wanted to keep representing their military, Commonwealth and other royal patronages — while making millions from private deals.
A spokesman for the Sussexes insisted there was "absolutely no question" Harry and Meghan wanted to keep the positions they had lost.
The spokesman told the Mail: "They do respect the decision but they always made clear they were committed to doing the roles."
Following the Sussexes statement, senior royals were said to be furious at the couple's “hurtful jibe” especially as 99-year-old Prince Philip lay sick in his hospital bed.
Royal author Penny Junor said: “It does draw a line. It’s hurtful but every divorce is hurtful.
"This is the decree absolute."
The Sussexes’ decision to quit royal life indefinitely came a month before the March 31 deadline for a review of their new post-Megxit life.
Meghan was not involved in the talks with the Queen who spoke only to Harry directly via video call.
Harry also held “amicable” talks with other senior royals, including brother William and dad Charles, as early as January.
They have also started their own foundation, Archewell, and launched a podcast series with Spotify believed to be worth £30m.
It means Harry will no longer hold his military titles including The Royal Marines, RAF Honington, Royal Navy Small Ships and Diving.
He is also no longer the patron of England Rugby.
Meghan also lost her patronages with The Royal National Theatre and The Association of Commonwealth Universities.
Meghan and Harry are now living in the US, raising their son Archie, after paying back £2.4million they spent renovating their Windsor home, Frogmore Cottage.
The couple this week announced they were expecting another baby with the Queen saying she was delighted with the news.
Harry and Meghan now live in their own £11m home in California.
Queen calls emergency meeting over Meghan and Harry’s royal patronages as Prince Wills ‘tipped to take over Marines role’