I think the cap is either £6.4m or £7m
Plus
Up to £600k academy credits
The current level of the Salary Cap for 2017-18 is £7m, plus two Excluded Players whose salaries sit outside the cap, enabling clubs to recruit and retain world class talent. Within the £7 million Salary Cap ceiling, clubs are encouraged to develop home grown talent by accessing up to £600,000 of Home Grown Player Credits.
I'm undecided with the language used whether the case level of the cap is £7m and then you add on £600k for your home grown players, or if it's £7m including that allowance.
On top of that, you get up to £80k player who represents England (not other nations)
a new England Senior EPS or International Player Credit of up to £80,000 per player has been introduced to cover for player absence during international periods
They probably have 9 or 10 England EPS players. For arguments sake, I'll say 10 and assume they get the full £80k.
Best case scenario, their full salary cap is £8.4m
There's also the overrun tax of £350k. So if I'm being charitable, they can spend up to £8.75m
and there is a new overrun tax on any Salary spend of up to 5% over the Base level (5% being £350,000 in 2017-18).
Let's assume that Vincent Koch and Owen Farrell are the 2 marquee players, and that Itoje is on the rumoured £750k.
Their highest paid players are presumably therefore:
Itoje - £750k
Billy V - £500k
Maku V - £500k
Liam Williams - £500k
Jamie George - £400k
George Kruis - £400k
Elliott Daly - £400k
Those 7 listed above come to £3.45m
I would also assume that Brad Barritt, Richard Wigglesworth and Will Skelton are well paid too.
Adding these 3 in as well, that's probably half their cap gone in 10 players + 2 marquees.
Their squad is 41 players, so the remaining 29 players are sharing ~£4m between them, which is about £140k each
To be honest, put like that it doesn't seem so crazy, especially if there's any truth that some players would play for £25k-£50k per year before market value of they're likely to win stuff.
However, as Mike909 says, the real proof is that no other club can even come close to putting that kind of squad together