Crown Estate Bill [Lords]

(Limited Text - Ministerial Extracts only)

Report stage
Monday 24th February 2025 Commons Chamber

[Madam Deputy Speaker (Judith Cummins)]

I call the Minister.

[The Exchequer Secretary to the Treasury (James Murray)]

I thank all hon. Members who have contributed to the debate, and provided further detail about their amendments or concerns.

I start by making it clear that the Government have carefully considered all amendments throughout the passage of the Bill. Where we have agreed with the intent behind an amendment, we have worked hard to find an appropriate way forward. That was evidenced in the changes made by this House to ensure appropriate protections for our seabed. As a result of changes made to the Bill, the Crown Estate will now be required to seek the approval of the Treasury for any permanent disposal of the seabed. I thank the Opposition for a constructive debate on that matter. Alongside that, further changes made in the other place have helped to strengthen the Bill, including changes to require the appointment of commissioners with special responsibility for giving advice about England, Wales and Northern Ireland; a reporting requirement in respect of activities with Great British Energy; and a requirement relating to sustainable development. In that spirit, I have considered the amendments that are before us.

I thank the hon. Member for Ynys Môn (Llinos Medi) for tabling new clause 1, under which, within two years of the day on which the Act commences, the Treasury must have completed the transfer of responsibility for management of the Crown Estate in Wales to the Welsh Government. It would allow the Treasury, by regulations, to make provision about the transfer relating to reserved matters as necessary, and would require it to ensure that no person in Crown employment has their employment adversely affected by the transfer of responsibility.

I also thank the hon. Member for South Cambridgeshire (Pippa Heylings) for tabling new clause 4, to which her colleague, the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick), also spoke. It would require the Treasury to set out a scheme for transferring all Welsh functions of the Crown Estate commissioners to Welsh Ministers or a person nominated by Welsh Ministers. The Welsh functions would consist of the property, rights or interests in land in Wales, and rights in relation to the Welsh zone. As I set out in Committee, the Government believe that there is greater benefit for the people of Wales and the wider United Kingdom in retaining the Crown Estate’s current form.

New clause 4 would most likely require the creation of a new entity to take on the management of the Crown Estate in Wales—an entity that, by definition, would not benefit from the Crown Estate’s current substantial capability, capital and systems abilities. It would further fragment the UK energy market by adding an additional entity and, as a consequence, it would risk damaging international investor confidence in UK renewables. It would also risk disrupting the National Energy System Operator’s grid connectivity reform, which is taking a whole-system approach to the planning of generation and network infrastructure. Those reforms aim to create a more efficient system and reduce the time it takes for generation projects to connect to the grid.

[Ben Lake]

I am grateful to the Minister for outlining his concerns about devolving the Crown Estate to the Welsh Government—he listed a number of them. Am I right in saying that he believes that the devolution of powers from the Crown Estate to Scotland has fragmented the market, and is in some way to the disbenefit of people in Scotland?

[James Murray]

The matter that we are considering today, through the two new clauses that I have mentioned, is the proposal by Opposition parties for devolution to Wales. We are not analysing what may have happened in Scotland, historically; we are looking at the proposals put to us in those new clauses, which I am addressing.

To be clear, the cumulative impact of the changes that the hon. Member for Ynys Môn is suggesting in her new clause would likely be to significantly delay the pathway to net zero.

[Liz Saville Roberts]

The Minister said that the Bill would be beneficial to the people of Wales as it stands. Could he quantify that benefit, please?

[James Murray]

If the right hon. Member waits just a moment, I will come to some of the direct benefits for the people of Wales of retaining the Crown Estate in its current form.

It is important to emphasise that the Crown Estate’s marine investments are made on a portfolio-wide basis across England and Wales. Devolving to Wales would disrupt existing investments, as they would need to be restructured to accommodate a Welsh-specific entity. To devolve the Crown Estate at this time would risk jeopardising the pipeline of offshore wind development in the Celtic sea, which is planned for into the 2030s. The Crown Estate’s offshore wind leasing round 5 is spread across the English and Welsh administrative boundaries in the Celtic sea. It was launched in February last year and is expected to contribute 4.5 GW of total energy capacity—enough to power 4 million homes.

In addition to energy, the extensive jobs and supply chain requirements of round 5 will also likely deliver significant benefits for Wales and the wider United Kingdom. Lumen, an advisory firm to the Crown Estate, has estimated that manufacturing, transporting and assembling the wind farms could potentially create around 5,300 jobs and a £1.4 billion boost for the UK economy. Devolution would also delay UK-wide grid connectivity reform. The Crown Estate is using its data and expertise as manager of the seabed to feed into the National Energy System Operator’s new strategic spatial energy plan. On Wales, the Crown Estate is working in partnership with the energy system operator to ensure that its pipeline of Welsh projects—the biggest of which is the round 5 offshore wind opportunity in the Celtic sea—can benefit from this co-ordinated approach to grid connectivity up front.

[David Chadwick]

If devolution presents such enormous barriers, why are the Government choosing to put the headquarters of Great British Energy in Scotland?

[James Murray]

GB Energy is for the benefit of the whole of the UK. It is absolutely right to locate its headquarters in Aberdeen, given the strong connection between Aberdeen and use of the assets of the North sea to generate power for the entire United Kingdom. In fact, the hon. Gentleman’s example underlines my point, which is that when different parts of the United Kingdom work together, we can achieve more than we can separately. I thank him for endorsing my point.

It would not make commercial sense to introduce a new entity, with control of assets only within Wales, into a complex operating environment in which partnerships have already been formed. Furthermore, the Crown Estate’s assets and interests in Wales are fundamentally smaller than its assets in England, and would likely not be commercially viable if their costs were unsupported by the wider Crown Estate portfolio. The Crown Estate can take a longer-term approach to its investments and spread the cost of investments across its entire portfolio. A self-contained, single entity in Wales would not have the same ability; neither would it benefit from the expertise that the Crown Estate has developed over decades of delivering offshore wind at scale. A devolved entity would be starting from scratch.

[Liz Saville Roberts]

The Minister has just told the House that Wales is too small and poor to benefit from the devolution of the Crown Estate. That is an extraordinary argument, and I am sure that the Welsh Government will share my amazement. Has he discussed that with his partners in Welsh Labour?

[James Murray]

I think the right hon. Member has misunderstood the point I was making. If we were to have a devolved entity, it would be starting from scratch midway through a multimillion-pound commercial tendering process, just at a time when the Crown Estate is undertaking critical investment in the UK’s path towards net zero—something I am sure she is keen to support.

The commercial viability of all three 1.5 GW floating offshore wind project development areas in the Celtic sea, which straddle the English and Welsh administrative boundaries, benefited from the Crown Estate’s significant investment of time, expertise and capital, which enabled their entry into the market. UK floating offshore wind, an emerging offshore technology that the Crown Estate is supporting, would be particularly vulnerable to market disruption.

It is important to underline that income generated by the whole Crown Estate benefits the people of Wales. As I have noted, the Crown Estate pays its entire net profits into the UK Consolidated Fund each year. That means that much of the revenue already supports public services in Wales, either by supporting UK Government spending in reserved areas or through the funding provided under the Barnett formula and the Welsh Government’s block grant funding.

[Llinos Medi]

As I mentioned in Committee, the Barnett formula is not a fair formula for Wales. In the Scottish model, £10 million was taken out of the block grant, but those communities received £103 million back. I think that is a fair exchange. Does the Minister not agree?

[James Murray]

The hon. Member has highlighted that the changes made in Scotland led to a reduction in the block grant to Scotland.

The focus of the new clauses is the proposal to devolve Crown Estate capabilities to Wales. As I am setting out, that would not make commercial sense when it comes to advancing greater energy capacity, or when it comes to increasing the Crown Estate’s net profit, which is of course reinvested in public services right across Wales and other parts of the UK.

I draw Members’ attention to the fact that in the other place, the Government supported the inclusion of clause 6, which requires the appointment of commissioners responsible for giving advice about England, Wales and Northern Ireland. That will ensure that the Crown Estate’s board of commissioners continues to work in the best interests of Wales.

[Jim Shannon]

I seek assurance that the ambitious net zero targets will not detrimentally affect the fishing sector. I remember some years ago there was talk of a wind farm just off the coast of Kilkeel, and the fishermen were concerned that it would be in one of their prime fishing sectors, where scallops were plentiful. If that continued, the fishing sector could lose out because the Government decided to push for net zero. I sought reassurance that Northern Ireland MPs would be able to contact the Northern Ireland commissioner directly, but I ask specifically for a wider assurance about the fishing sector in Northern Ireland—for Portavogie, Ardglass and Kilkeel.

[James Murray]

I thank the hon. Gentleman for his intervention about the impact on the fishing sector, and I can reassure him that the Crown Estate is committed to the sustainable management of the seabed. As with any developer, the Crown Estate’s proposals go through the standard planning approval process, which includes the relevant environmental assessments. Under the Crown Estate’s strategy, it has an objective to take a leading role in stewarding the natural environment and biodiversity. Key to delivering on that aim is managing the seabed in a way that reduces pressure on, and accelerates recovery of, our marine environment. Of course, the Bill will not impact directly on how much commercial fishing takes place in areas managed by the Crown Estate.

I pointed out that the inclusion of clause 6 in the Bill in the other place provided for the appointment of commissioners responsible for giving advice about England, Wales and Northern Ireland. The requirement to give advice to the board about Wales will be alongside the commissioners’ existing duties. That change will strengthen the Crown Estate’s ability to deliver benefits for the whole UK.

Hon. Members may not agree with the points I have made, but I hope that I have set out clearly why the Government believe that the existing structure remains the best approach, and I hope that hon. Members will feel that they do not need to press their new clauses to a vote.

New clause 2, which was tabled by the hon. Member for South Cambridgeshire, would require the Crown Estate to ensure that any decisions about marine spatial priorities are co-ordinated with the priorities of the Marine Management Organisation, and to consult any communities or industries impacted by the plans, including fishing communities. I confirm that the Crown Estate and the Marine Management Organisation already have well established ways of working together to ensure effective collaboration for marine spatial planning and prioritisation.

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[Pippa Heylings]

We will not be pressing this new clause to a vote, but the new investment and borrowing powers change the context for the 2020 memorandum of understanding. I ask for reassurance that we might seek a new memorandum of understanding between the Marine Management Organisation and the Crown Estate.

[James Murray]

I thank the hon. Member for her intervention. As I said, the Crown Estate and the Marine Management Organisation agreed the statement of intent in 2020, and it is reviewed periodically to focus on priorities and opportunities for alignment. That may provide an opportunity for review in due course to ensure that it meets current aims.

In addition to the Crown Estate’s relationship with the Marine Management Organisation, there are various regulatory requirements on developers who lease areas of the seabed from the Crown Estate to engage with the Marine Management Organisation themselves. Those include requirements through marine licensing. Developers must obtain marine licences from the Marine Management Organisation for activities that could impact on the marine environment. That process involves consultation with statutory bodies and adherence to marine plan policies.

As part of a marine licence application, developers must conduct environmental impact assessments for projects that could significantly alter the environment. That includes consultation with the Marine Management Organisation and other relevant authorities. Developers are furthermore encouraged to engage with local communities, statutory bodies and other stakeholders throughout the planning and development process to address concerns and ensure compliance with marine plans. I welcome the indication from the hon. Member for South Cambridgeshire that she feels able to withdraw the new clause, and I hope I have gone some way to addressing the points that she made.

New clause 3, which was also tabled by the hon. Member, would require the commissioners to assess plans for benefits to local communities and coastal communities in respect of offshore activities before making any investment decisions. It would also require the commissioners to transfer at least 5% of the Crown Estate’s net profit to local communities impacted by its activities. As I set out in Committee, local communities benefit economically from onshore and offshore developments—for example, through job creation and increased business for local suppliers. Local communities will also benefit in the long term as the country transitions away from volatile fossil fuel markets towards clean, domestically produced power, enhancing Britain’s energy independence and security.

As I highlighted in Committee, the Crown Estate has specifically designed the leasing process for its offshore wind leasing round 5 in the Celtic sea to require developers to make commitments to deliver social and environmental value. Tender bidders must think about how their developments can encourage healthier, more resilient and more prosperous communities, creating lasting benefits that extend beyond the lifetime of wind farm leases. Those commitments will be monitored, reported on and enforced throughout the lifetime of the relevant round 5 developments.

As I have laid out before, the Crown Estate is committed to proactively working with local communities and partners to enable employment and skills opportunities. As I mentioned in Committee, it has invested £50 million through the supply chain accelerator to stimulate green jobs and develop a green skills pipeline. It is supporting development in the skills we need for the future, through measures that range from a GCSE in engineering skills for offshore wind, seed-funded by the Crown Estate and developed with Cornwall college, to a post-16 destination renewables course with Pembrokeshire college. It is also partnering with the employment charity Workwhile to create green construction apprenticeships.

The Crown Estate already works closely with communities, charities, businesses and the Government to ensure that its skills initiatives are sensitive to market demands and emerging technologies. While I respect the concerns reflected in new clause 3, the Government consider it important that the Crown Estate retains flexibility in how its skills initiatives are funded and delivered. That enables it to contribute to skills training in the best possible way, while—importantly—not conflicting with its statutory duty to maintain and enhance the value of the estate. On that basis, I hope that the hon. Member for South Cambridgeshire feels able to withdraw the new clause.

New clause 5 seeks to limit the ability of the Crown Estate to dispose of assets without Treasury approval, by requiring it to seek consent for disposals of assets totalling 10% or more of its total assets in a single year. It would also require the Chancellor to lay a report before Parliament within 28 days of being notified of disposals above that threshold. As the Government have set out both in Committee and in the other place, in our view imposing a limit on disposals would undermine the flexibility needed to enable the Crown Estate to operate commercially and meet its core duties under the Act. It is important to emphasise that the Bill is not intended materially to alter the independence of the Crown Estate. Requiring the Treasury to approve the Crown Estate’s ordinary business transactions, which may well be caught by the new clause, would encroach on the independence of the Crown Estate. That is inconsistent with the Government’s vision for the Crown Estate.

The hon. Member for North West Norfolk (James Wild) has concerns that the Crown Estate could choose to sell off critical or significant assets—indeed, he raised that point in Committee. I reassure the House that strong safeguards are already in place to ensure that the Crown Estate maintains and enhances the estate. The first is a legislative safeguard, namely the statutory duty on the Crown Estate to maintain and enhance the value of the estate, and the returns obtained from it, while having due regard to the requirements of good management. Those are set out in the Crown Estate Act 1961 and will remain unchanged by the Bill. The second is a requirement set out in the framework document that governs the relationship between the Treasury and the Crown Estate. That document is clear that the Crown Estate should inform the Treasury of any matters concerning spending, income or finance that are novel, contentious or repercussive. The Government’s view is that that captures any proposed sales of nationally significant assets—a point the shadow Minister raised. I recognise that he may not agree, but I hope he understands the Government’s position on the matter and, as a result, feels able to withdraw his new clause.

The shadow Minister also tabled new clause 6, which would require the Chancellor to lay before Parliament any partnership agreement between the Crown Estate and Great British Energy. As I made clear in Committee, partnership agreements are highly commercially sensitive. It is therefore right that any agreement is not made public or laid before Parliament, as to do so would likely prejudice the commercial interests of the Crown Estate or Great British Energy. I hope the hon. Member feels that he does not need to push the new clause to a vote.

I will consider amendments 1 and 4 together to try to make progress as speedily as I can, Madam Deputy Speaker. They would impose a legislative limit on the amount of borrowing that could be undertaken by the Crown Estate, and both would require the Government to introduce affirmative regulations, setting out a borrowing limit of no more than a 25% net debt-to-asset value ratio. I thank hon. Members for their contributions on this matter. The Government recognise that borrowing controls are an important consideration for the Bill. As such, the Government made available the Crown Estate’s business case, as well as the underpinning memorandum of understanding, which sets out the guardrails that will protect against uncontrolled or excessive borrowing. The key principle is whether a specific limit should be set in legislation. As I have set out previously, it remains the Government’s view that limits on borrowing are best set outside of legislation in a memorandum of understanding.

I have listened to the point made by the hon. Member for North West Norfolk that a limit outside legislation can be easily changed, but I reassure the House that the Bill has been carefully drafted to include strong controls, specifically the requirement for Treasury consent. Alongside that, the existing requirement for the Crown Estate to maintain and enhance the value of the estate, while having due regard for the requirements of good management, is maintained. Taken together, those elements provide clear guardrails around the ability of the Crown Estate to borrow.

Amendment 2, tabled by the hon. Member for South Cambridgeshire, would require any framework document published by the Chancellor of the Exchequer, the Crown Estate or the commissioners to define “sustainable development”. That definition would be required to include a reference to a “climate and nature duty”, which would mean

“a duty to achieve any targets set out under Part 1 of the Climate Change Act 2008 or under sections 1 to 3 of the Environment Act 2021.”

As I set out in Committee, the Government understand the intention behind amendment 2, but a key purpose of the 1961 Act was to repeal various detailed statutory provisions that had built up over the previous 150 years, which were hampering the effective management of the estate. By focusing the commissioners’ duties on enhancing the estate’s value and the returns generated, the commissioners have a clear objective on which they can be held to account. It is an important principle that giving an organisation too many objectives will make it far less effective than giving it clear and focused priorities, and, as I set out in Committee, the Crown Estate is a commercial business, independent from Government, that operates for profit. That mandate is unchanged by the Bill—[Interruption.]

I am getting vibes from the Whip, Madam Deputy Speaker, so I might not respond as fully as I had hoped to some of the remaining amendments. However, I will address amendment 5, which I know matters to several Labour Members who have spoken to it. Amendment 5, tabled by my hon. Friend the Member for Mid and South Pembrokeshire (Henry Tufnell), would require the commissioners, when keeping the impact of their activities under review with respect to clause 3, to have regard to the UK’s net zero targets, regional economic growth and resilience of energy security. I thank my hon. Friend for the discussions that he and I had on this topic both before Committee and last week. A version of the amendment was debated in Committee. I particularly thank my hon. Friends the Members for Truro and Falmouth (Jayne Kirkham), for St Austell and Newquay (Noah Law) and for Camborne and Redruth (Perran Moon) for engaging with me on this matter, and setting out so clearly what is important to them in the constituencies they represent.

Although I understand the sentiment behind my hon. Friend’s amendment, it is perhaps helpful to set out the context behind clause 3. The clause was supported by the Government in the other place, as it sought to clarify and enhance the accountability of the Crown Estate to deliver on environmental, social and economic outcomes. Clause 3 will require the commissioners to keep under review the impact of their activities on the achievement of sustainable development in the United Kingdom. I emphasise that the public framework document, which governs the relationship between the Crown Estate and the Treasury, will be updated in light of that clause, and will include a definition of “sustainable development”, as I have set out several times. The Crown Estate will continue to include information on its activities in its annual report, which is laid before Parliament. The Government’s intention throughout the passage of the Bill has been to ensure that it can stand the test of time without need for regular updates. That, in part, is why the term “sustainable development” was adopted.

I hope I have addressed some of the concerns raised by hon. Members, although I regret I was not able to address all the amendments with quite the level of detail I had hoped. As I made clear earlier, the Government have carefully considered all amendments throughout the passage of the Bill, and I hope that hon. Members will understand the approach we are taking. I thank my hon. Friends the Members for Reading Central (Matt Rodda), for Wolverhampton North East (Mrs Brackenridge), for Harlow (Chris Vince), and for Rushcliffe (James Naish) for powerfully setting out the benefits that the Crown Estate and measures in the Bill will provide to people in their constituencies and across the country. I hope all hon. Members will understand the approach we are taking, and support our targeted and measured changes to ensure that the Crown Estate is able to operate independently, commercially and in the national interest.

[Llinos Medi]

Diolch, Madam Dirprwy Lefarydd. The Government have tried to explain how devolution and the creation of a Welsh Crown Estate would undermine investor confidence, but that has not been the case for the devolved Scottish Crown Estate, which has raised £700 million from offshore wind investments since 2022. A devolved Crown Estate could lead to greater alignment and integration with the economy in Wales, as has been the case in Scotland. With a well-managed transition, there is no evidence that disruption would occur. Devolution would also offer opportunities to strengthen the role of the local supply chains to be used and to actually see the 5,300 jobs that the Government claim will be created for the people of Wales.

I remind hon. Members that it is projected that child poverty numbers will reach 34.4% in Wales in five years’ time, at the end of this decade, but the Joseph Rowntree Foundation says that the forecast in Scotland is 19.8%. I refer hon. Members to the words of a former Secretary of State for Wales, Lord Peter Hain. He recently said that opposing devolution of the Crown Estate

“reflects old, centralised, conservative, anti-devolution Whitehall thinking.”—[Official Report, House of Lords, 14 October 2024; Vol. 840, c. 18.]

Labour promised us that a Labour Government in Wales and a Labour Government in Westminster would benefit the people of Wales. This Labour Government do not show any ambition for the people of Wales, and I ask every Member who wants to see the best for Wales to join me in the Aye Lobby.

Question put, That the clause be read a Second time.

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20:00

Division 101

Ayes: 59

Noes: 316

New Clause 6

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20:13

Division 102

Ayes: 100

Noes: 312

Clause 1

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20:26

Division 103

Ayes: 153

Noes: 316

Clause 3

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20:59

Division 104

Ayes: 61

Noes: 316

Third Reading

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[James Murray]

I beg to move, That the Bill be now read the Third time.

The Crown Estate is an independent commercial business with a varied portfolio of assets across London, and with marine, rural and urban holdings. It operates for profit and competes in the marketplace for investment opportunities. However, it is governed by legislation that has not changed since 1961. That is why the Bill is focused on modernising the Crown Estate by removing limitations that, if unchanged, would hamper its ability to compete and invest as a commercial business.

The central aim of the Bill has been to ensure that the Crown Estate has a sustainable future for decades to come. Through these targeted and measured changes to its founding legislation, particularly in respect of its investment and borrowing powers, the Government are building on the Crown Estate’s strong track record of success in creating long-term prosperity for the nation. The changes will ensure that the Crown Estate has flexibility to support sustainable projects and preserve our heritage for generations to come. Crucially, the measures will unlock more long-term investment, helping to drive growth across the UK.

The Bill has been strengthened and improved in its passage through both Houses. It has been amended to require the Crown Estate’s board to include commissioners with special responsibility for giving advice about England, Wales and Northern Ireland. That will ensure that the Crown Estate continues to work in the best interests of the UK. There have also been changes to strengthen its transparency and accountability, for example through the requirement for the Crown Estate to report on its activities under the partnership with Great British Energy, and the requirement to keep its activities under review with regards to the achievement of sustainable development.

I thank all hon. Members and all noble Lords in the other place for their thorough consideration and scrutiny of the Bill, and for the many and varied amendments that have been tabled and debated. I also thank everyone who has played a role in getting the Bill to this stage, including my colleagues in the Treasury, Members from across the House who took the time to provide scrutiny, all the parliamentary staff who worked on the Bill, and the officials in my Department who have put in a significant amount of time and effort. I am grateful for the broad support for the Bill from across all Benches. It will ensure that the Crown Estate can operate successfully for many more decades to come. I commend the Bill to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.