Crown Estate Bill [HL]

Earl of Courtown Excerpts

2nd reading
Monday 2nd September 2024 Lords Chamber

[The Earl of Courtown (Con)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Kramer, and to have had the opportunity to hear so many wise contributions from across your Lordships’ House today. Unfortunately, my noble friend Lady Vere of Norbiton is unable to be here today, but I anticipate that she will take part in the Bill’s later stages.

I am pleased that the Crown Estate Bill has been brought forward by the Government early in this Session as they work to develop what I am sure will be more challenging legislation in the months ahead. The Opposition support the aims of the Bill, and I will restrict my remarks to five areas: the relationship with GB Energy; the new investment powers; the new borrowing powers; accountability; and the Crown Estate’s relationship with other stakeholders. I have a number of questions which I hope the Minister will be able to respond to, but of course a letter at a later date before Committee would be fine.

The most significant development is in the presentation of the Bill. It had its First Reading on 25 July and then the Government announced a partnership between GB Energy and the Crown Estate which was described as “major” and “unprecedented”, as was highlighted by the noble Lord, Lord Liddle. The Minister subsequently described it to my noble friend as “a strategic partnership”, which does not sound quite so grand, but it is worth taking a step back. The Crown Estate essentially operates independently. As other noble Lords have said, it is a collection of public assets being managed on commercial terms for the benefit of the nation, including for Treasury coffers. Revenue targets are agreed with the board and discussed with the Treasury. The Crown Estate’s obligations, as other noble Lords have said, are set out in the Crown Estate Act 1961 and, quite reasonably, they relate to enhancing and maintaining the value of the estate and the return obtained.

The strategic objectives of GB Energy are somewhat different, and it is reasonable to expect that they might not always be aligned with those of the Crown Estate. Ditto the priorities pursued as part of His Majesty’s Government’s clean energy superpower mission, in which the Crown Estate is to play a key role via this new partnership. In this context, what practical difference will the recently announced “unprecedented partnership” with GB Energy make to the Crown Estate? What activities will the Crown Estate undertake that it would not otherwise have done? Will returns be higher, lower or about the same as other investment opportunities? If the answer is that there will be no change to the Crown Estate’s investment strategy, given the statutory duty to maximise returns, what is the point of the partnership and what is the role of the Crown Estate in this mission? My noble friend has looked for more clarity on the partnership, but to no avail. Will the Minister publish the partnership agreement so that parliamentarians can see what has been agreed?

I turn to broader issues relating to investments. One key change in the Bill is that it gives the ability to undertake activities not expressly mentioned in the Crown Estate Act 1961. Examples given in the Minister’s letter include

“investing in the infrastructure of a port owned by a third party to facilitate seabed development”,

investing in seabed mapping technologies, and funding research and development. On the face of it, some of this is perfectly reasonable, but I am concerned about what guardrails exist around these new investments—and, I presume, divestment powers, as the change relates to activities.

Has the Crown Estate identified privately owned ports, for example, currently unwilling to invest in infrastructure and how much does it intend to allocate to these investments? Would this investment not more rationally sit with GB Energy, if at all? Is there a risk that such a public statement of intent ends up crowding out investment by the private sector? It is worth pressing further on the ill-defined activity of research and development. How much will the Crown Estate spend in this area and on what sorts of activities? Why would these activities not be supported by the private sector or other government R&D funding pots?

Finally in this area, I return to divestments. The Crown Estate holds a collection of national assets and seeks, in its own words, to

“leave a positive legacy for generations to come”.

When my noble friend spoke to the Minister and his officials last week about the Bill, she asked about the decision-making process around the asset base. She was told that the Crown Estate “would not sell off part of the seabed, but may decide to divest part of Regent Street”. I am not sure that I see the difference. I would therefore be grateful if the Minister could reassure me that if—I recognise it is just an “if”—some of the new Crown Estate investments do not go as well as I am sure all noble Lords hope, there are appropriate mechanisms by which significant changes to the asset base are approved by the Treasury and notified to Parliament.

A further key part of the Bill, as mentioned by many noble Lords, including my noble friend Lord Bourne of Aberystwyth, gives the Crown Estate the power to borrow. From a purely commercial perspective, a bit of leverage is a good thing and we support it. But I also note that in the last financial year the Crown Estate generated free cash flow of over £1.5 billion and had £3 billion of cash and cash equivalents at the end of the year. By borrowing or setting up borrowing facilities, the Crown Estate will have less need of such a large cash cushion. In the light of this, will the Government press the Crown Estate to increase the payment to the Consolidated Fund this year or in subsequent years, or will the freed-up funds be used to invest? All borrowing must be approved by the Treasury, which we support. Will the Government commit to a maximum borrowing level for the Crown Estate, to be set annually or in agreement with the Crown Estate commissioners and then laid before Parliament?

This brings me to accountability. I recognise that the Crown Estate is an unusual organisation that plays an important part in our nation’s future and prosperity, and that it is the guardian and steward of assets that belong to everyone. I welcome what the Minister said about the increase in the number of Crown Estate commissioners and the other changes which will modernise its governance. However, I press him on oversight by the Government and Parliament, which the noble Earl, Lord Devon, mentioned.

On the first, will the Minister put on record the relationship between the Treasury, Ministers and the Crown Estate? How often are meetings held and what is discussed? Is the Crown Estate open to input from the Government and in what circumstances does it cite independence? Essentially, how does the relationship work? Will it change given the Crown Estate’s role in the mission via the partnership with GB Energy? I am aware that the Government have the power to direct the Crown Estate, in accordance with the statutory duties, and that this power has never been used. I hope that it never is, but can the Minister reflect on the sort of circumstances in which Ministers would have to step in? Are there red lines that, if crossed, could prompt quick action?

It is not clear to me how accountability to Parliament will work. One element of the Bill shifts the funding of the Crown Estate’s office from funds agreed by Parliament to payment directly by the Crown Estate. This removes an important lever and reduces accountability. Given this, what mechanisms exist by which Parliament can raise legitimate questions and concerns over the management of these national assets? The Crown Estate is currently recruiting for the key role of chair of the commissioners within its structure. Might it be appropriate for the selected candidate to appear before the Treasury Committee, for example, before final appointment? Perhaps the Minister would like to comment.

Finally, I will touch briefly on ensuring that the Crown Estate is a good neighbour. Many noble Lords have noted the key role of the Crown Estate and the enormous responsibility that rests with its leadership. There is pressure for that leadership to perform, to meet the statutory duty to maximise returns to the Treasury, and to meet performance targets for pay. Yet sometimes the most profitable course of action for the Crown Estate may not be the one that increases the overall prosperity of the nation—for example, as mentioned by noble Lords, access to and use of the sea above the seabed, which is owned and managed by the Crown Estate. I would be grateful if the Minister could confirm that well-established rights and routes of navigation for shipping, fisheries and other sectors will be maintained as offshore wind is developed further.

My noble friend Lord Young of Cookham made an important point about how much the Crown Estate has changed in recent history. He also asked whether its current structure, even with this modernisation, will be in line with best practice of modern governance. My noble friend Lord Bourne of Aberystwyth and many others mentioned the relationship with Wales. As I am sure other noble Lords do, I look forward to hearing what the Minister has to say on that.

As I said at the start of my remarks, we support the aims of this Bill. I recognise too that the Crown Estate is keen for the changes to be made. I am keen only to test that, given the haste with which the Bill has been brought forward by the new Government, their thinking behind those aims is fully developed, particularly in light of the setting up of GB Energy and the clean energy superpower mission. I look forward to the Minister’s response.