Crown Estate Bill [HL]

Debate between Lord Howard of Rising and Lord Macpherson of Earl's Court

Committee stage
Monday 14th October 2024 Lords Chamber

[Lord Macpherson of Earl’s Court (CB)]

My Lords, this is an interesting and important amendment that goes to the heart of Treasury control. Historically, it is fair to say that, when it came to nationalised industries, the Treasury set external finance limits that were not subject to constraints ex ante from Parliament. The proposal to borrow is definitely the right one. I recall having to jump through extraordinary hoops to enable the Crown Estate to invest in creating special purpose vehicles, usually with foreign sovereign wealth funds, to support the financing of investment. So moving to give the Crown Estate borrowing powers is the right approach.

The question then is: to what extent do those need to be constrained by Parliament? There are precedents. For example, Scotland is constrained in the quantity of its borrowing. However, the Crown Estate has more in common with nationalised industries. I hope that the Minister will confirm that in each Budget and spending review, the Treasury will publish three-year to five-year plans for the external financing limit of the Crown Estate. This will allow Parliament to scrutinise those proposals along with the rest of the Budget but should not require overarching constraint in legislation, which would effectively constrain the Treasury’s decisions on who should borrow across government and how best to allocate borrowing resources.

[Lord Howard of Rising (Con)]

My Lords, I rise to speak to Amendment 8. There should be a limit on the level of borrowings that the Crown Estate can have. It would be irresponsible to issue a blank cheque that risks, even encourages, abuse by the political system. At Second Reading, I suggested that a limit could be set as a percentage of capital reserves, and I proposed 10% as an appropriate amount. When added to the Crown Estate’s cash position, 10% would retain a generous amount of flexibility while guarding against the risk of abuse and overborrowing. Amendment 8 does just this. I thank the Minister for seeing me to discuss my amendment, but regret that he did not agree with the principle that a limit on borrowing is necessary. He believes that the approval needed by His Majesty’s Treasury would act as a sufficient safeguard. There are two important reasons why I believe that this is not the case.

First, relying on the good intentions of His Majesty’s Treasury to provide the necessary safeguards is simply insufficient. The First Lord of the Treasury is the Prime Minister. There is also the Chancellor of the Exchequer, who could, if the political ambition was sufficient, persuade His Majesty’s Treasury that a loan to the Crown Estate was desirable. The Minister said at Second Reading that he did not envisage the Crown Estate borrowing in the near future. However, there may be a less responsible Government in the future who may make use of this possible sleight of hand to encourage profligate or political spending.

Secondly, if a current or future Government wished to disguise spending, it is possible for the Crown Estate commissioners to carry out the desired spending for the Government with funds provided by the Treasury. Loans to the Crown Estate would be classed as an asset, meaning that the spending would be seen not as an expense but as a capital asset. Without restrictions on borrowing, there is an incentive for future less responsible Governments to increase lending to very high levels. A limit on the Crown Estate’s borrowing would go some way towards safeguarding against this. However, I also welcome Amendment 10, in the name of my noble friend Lady Vere of Norbiton, which provides another safeguard against this happening by ensuring that loans made to the Crown Estate are included in the Government’s assessment of the national debt.

I remain concerned about the lack of safeguarding against excessive borrowing, which poses a significant and unnecessary risk that the Crown Estate does not need to continue operating successfully. As we have heard, I am not the only member of this House who has concerns about permitting the Crown Estate limitless borrowings from His Majesty’s Treasury. Amendments 2 and 5, tabled by the noble Earl, Lord Russell, and Amendments 3, 4, 6 and 7, tabled by my noble friend Baroness Vere of Norbiton, all propose alternative limits to borrowing which would be quite acceptable. Should the Minister find these amendments too restrictive, Amendment 8 provides him with a generous alternative.

Finally, as the Minister has been made aware, I would like to degroup Amendment 9; as such, I will save my comments on it for the next group. I apologise for any inconvenience this may cause the House, but having reflected on the matter, I feel it important to deal with that amendment separately.