Crown Estate Bill [HL]

Baroness Kramer Excerpts

2nd reading
Monday 2nd September 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, that was an innovative speech at the end of a long day—so thank you to the noble Lord, Lord Rooker. I thank the Minister and officials for the engagement with me and others last week, which was exceedingly useful.

The Crown Estates, as we have heard very clearly today, are a unique animal sponsored by Treasury; they are completely operationally independent, sitting between the public and private realm, undertaking a vast range of activities in pursuit of a set of objectives which, as the noble Earl, Lord Devon, said, are essentially very benign. In that context, like the noble Lord, Lord Liddle, after my first brief glance at the Bill I thought that it was rather insignificant. It was only on a second look that I realised that this represents a very consequential expansion of the powers of the Crown Estate, first to run down its very extensive cash reserves and then to move into borrowing. In principle, we as a party have no objection to that expansion, given the stated beneficial objectives that the Crown Estate has, including sustainable growth, zero carbon, energy security and community development. But today we have heard a very wide range of issues raised, and those issues need to be addressed.

Much of the debate today focused on issues ranging across the environment and I thank my noble friends Lord Russell and Lord Teverson for speaking from my party’s perspective, which means that I do not have to repeat all that. But so many others spoke today, including the noble Baroness, Lady Hayman, speaking for Peers for the Planet, the noble Baronesses, Lady Young of Scone and Lady Bennett, the noble Lord, Lord Liddle, and the noble Baroness, Lady Ritchie. There was a whole series of speeches that underscored that, within this scope, there is a great deal of tension between the development of renewable energy and new opportunities for energy, the natural world and biodiversity and regional issues. There is a great deal of choice and issue based on the expanded role that the Crown Estates see themselves playing.

What I do not understand—and I speak now with more of a Treasury and business hat on—is why there is no business case to accompany this request for such a large expansion of power and investment capacity, as well as borrowing capacity. Should it go wrong, you can be quite sure that the borrowing will have consequences in restricting other activities that the Crown Estates actually carry out, or falling back on the public purse either directly or indirectly through the National Loans Fund. Why is no business case sitting behind this to provide us with detail, direction and explanation and tease out and answer some of those very obvious tensions? It is bad practice. I say that to the Minister because that message has to go back to the Crown Estates and sit in the back of the minds of government as they go forward over the next several years and bring issues like this forward to us.

As I say, when I looked at the Bill, I decided that the best thing to do was to focus on the nitty-gritty within it. My heart went out to the noble Lord, Lord Young of Cookham, in dealing with the issues of freehold negotiation with the Crown Estate—the noble Earl, Lord Devon, raised some of those issues in a very extended context. Frankly, this is an aggressive commercial organisation. Over the years, I have dealt with many people who have held leases from the Crown Estate as freeholders, and they are extremely difficult and complex negotiations. That there seems to be no accountability and that aspects of the law do not necessarily apply are among the issues that have to be addressed as we offer the Crown Estate a much more expanded role and much more expanded powers.

I want also to pick up the issue raised by the noble Lord, Lord Liddle—or maybe it was the noble Lord, Lord Berkeley—that with this expanded range of powers, adding four seats to the board creates a real opportunity to bring in some additional resource and expertise, but again, we do not have a discussion of that. What kind of expertise is it? What are they looking to use those additional roles for? What kind of additional capacity is it? Once again, I think this is bad practice and it should come before the House.

On the sovereign grant, raised initially by the noble Lord, Lord Turnbull, but picked up by others, I have to say that it is not an area of expertise of mine, but it certainly seems to be an opportunity to separate out a real idiosyncrasy and to recognise the Crown Estate in the new, modern role it is going to play rather than trying to run a sort of pretence that it is some sort of self-funding operation for the monarch.

When I looked at the business case—and we are talking about an operation that has over £1 billion in revenues, £14 billion in property and £15 billion in total assets, so it has enormous capacity to do such things as develop a business case and look into the future—I could pick up almost nothing from the existing annual report. Nowhere in that annual report did there seem to be to be a sense of, “We wish to do this, but we can’t”, or “We need additional resource to achieve this, but it isn’t there”. We must have this additional information fed back.

As noble Lords will gather from looking at the Bill and the notes attached to it, the Crown Estate framework agreement between the Crown Estate and the Treasury sits outside the Bill but actually governs the capacity at present for the Crown Estate to raise funds and to spend. I think that even the Treasury would admit—in fact, I know it would—that the framework agreement as it sits today is not fit for purpose. It is written from the perspective that the Crown Estate is not permitted to borrow, so it provides it with a workaround that, in essence, lets it borrow indirectly by creating vehicles with various partners, typically in the private sector. Through those joint ventures it is, in effect, at present able to borrow, and the amount that it can borrow is limited, both by vehicle and in aggregate, under Clause 22. As we provide the additional powers, Clause 22 becomes completely irrelevant. My question to the Minister is: where is the revised framework agreement? If we are saying that it is urgent that these powers are passed, it is therefore surely urgent that we have the framework agreement in hand, and if not the finalised framework agreement, then surely at least a draft version of either the framework agreement or an MoU between the Crown Estate and the Treasury on what this will look like. As many people have said, we cannot allow this to be a body that has completely unlimited borrowing powers, unconstrained by shareholders or by other kinds of clauses or constraints, or unconstrained by bank agreements. We are going to have to have a framework agreement and I really will push the Treasury on this, because I think that, in principle, that kind of work needs to be done in time and brought to Parliament. Parliament should not be asked to sign off powers blind when information can and should be provided.

Almost finally, I want to comment on the Crown Estate in Wales. My party is a very strong believer in devolution of the Crown Estate in Wales to Wales, so that the proceeds are then used for Wales. I am very taken, I must say, by the proposal of my noble friend Lord Teverson for regional wealth funds to be a mechanism to make sure that in regional areas where the Crown Estate is at play in England those funds flow back into the local community, where the Crown Estate will increasingly operate.

We shall not oppose this legislation, but we can see areas where it is weak and where there is weak practice. I hope that the Government will address those issues. The underlying principle of using the Crown Estate and its assets effectively to achieve our goals in renewable energy and in the environment is obviously one that we support.

Crown Estate Bill [HL]

Baroness Kramer Excerpts

Committee stage
Monday 14th October 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, my noble friend Lady Humphreys spoke not just for the Welsh Liberal Democrats but for all of us on these Benches. At Second Reading I, among others, raised the significance of devolution to Wales and asked that this should come as rapidly as possible, for a variety of reasons which have been discussed today. I do not want to repeat arguments but there are a couple of points I will pick up.

First, I say to the noble Lord, Lord Macpherson, that this nonsense that the money for the monarchy is then translated into a percentage of the profits that come from the Crown Estate is idiosyncratic and should stop right now. These are two entirely different sets of decisions, and we should separate them. I hope the Government will at some point in the process of the Bill deal with that particular nonsense—if not, if they could deal with it in the Budget that would be extremely helpful.

Secondly, the Crown Estate of the past is not the Crown Estate of the future. In the past we have had a body that has been focused on property management, very gradually getting into economic growth, levelling up and sustainability; now, the borrowing powers envisaged make for a complete step-change in that area. Not having the proper authority resting with the Welsh Government that devolution would provide therefore becomes far more egregious than it has been historically. The time has definitely come to recognise that, with this Bill, we are changing in many ways the character of the Crown Estate and its level of activity. It is time, therefore, to make the appropriate step and ensure that Wales and the Welsh voice are properly reflected through the Welsh Government’s control of the Crown Estate in Wales.

Thirdly, my last point is one that was reflected in the speech of the noble Lord, Lord Hain, and somewhat in the speech of the noble and learned Lord, Lord Thomas. The argument has always been put that, if we split off the Crown Estate in Wales, we are building in an inefficiency, particularly within the energy sector: we would have another player; it would be more complicated; and the management would be somewhat split.

It made me interested to take a look at the Crown Estate in Scotland. The Committee will be aware from various speeches that the assets controlled by the Crown Estate in both England and Wales are in the arena of £15 billion—it is a huge asset bloc. In Scotland, the bloc is far smaller. I looked at the last annual report and found that it is about £650 million in assets. I would guess that Wales is not that much smaller. In other words, we know that Scotland is functioning well—I hear no complaints from voices in Scotland about the way that the Crown Estate is working under the auspices of the Scottish Government—and so I see no reason why there would be necessary inefficiencies by splitting off a similarly sized set of assets to be governed by the Welsh Government.

Building collaboration is obviously the answer. To pick up the point the noble and learned Lord, Lord Thomas, made, collaboration and co-operation is the language that this Government are continually using and the approach that my party supports. It underpins a sense of democracy and fair dealing, which is very important in modern-day politics. I hope that the Government will look again at this and, if they cannot make changes in this specific Bill, promise that those changes are coming, and coming soon.

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend and agree with many of his comments, and to give more than a nod to the amendments in the name of my noble friend Baroness Vere of Norbiton.

I rise to speak to Amendment 20 in my name. The Crown Estate has a unique position in our society, our economy, across many of our communities and right around our shoreline. This position will only be increased and enhanced through many of the measures set out in this Bill, not least the yet to be discovered tie-up with GB Energy. To this end, my Amendment 20 seeks to put in statute the principle of additionality for all spending decisions of the Crown Estate. It seems sound that, given the potential not least of offshore wind, the activities of the Crown Estate cannot at any point be seen to be crowding out other private funds. An additionality principle which seeks to apply measures on crowding out and ensure crowding in, and a report to that effect, would be not just a principle of additionality but a good addition to this Bill. I look forward to the Minister’s comments.

[Baroness Kramer (LD)]

My Lords, I want to pick up the point made by the noble Lord, Lord Holmes. That would be an attractive proposition if we were dealing with a “have regard”, but asking the Crown Estate to go through an extensive exercise to find out what every competitor wants to invest in would be far too challenging. However, as an underlying principle, through a “have regard”, that might be a workable way to address that issue.

I want to come back to the body of the amendments. I was fairly hopeful that we would not have to come forward with these amendments because we would have seen the language, or at least the essence of the language, that was going to be in the new framework agreement. The Minister fully accepts that the existing framework agreement completely misses the point and is unfit for purpose when it comes to adding new borrowing powers. For those who have not made the effort to look the current framework, it says that the Crown Estate may not borrow money “on security or otherwise”. There are some small exceptions for day-to-day running and working capital-type things, but that is about it. Then, the framework says that the Crown Estate’s exposure to indirect borrowing through joint ventures—this is the way the Crown Estate, in effect, has borrowed: by creating joint ventures that then go out into the market—will be no more than 40% in one vehicle, and in aggregate should not exceed 10% of the Crown Estate’s net asset value. Something along those lines strikes me as extremely appropriate and would, I think, seem appropriate to most of this House.

I raised ahead of Second Reading, and on Second Reading with the Minister, that we have never seen a business case that argues why additional borrowing or additional funds are necessary. This is an entity that is sitting on some £2 billion in cash—why is this necessary? I do not think we are opposed to this, but if we are going to approve it, it makes sense to see the thought process behind it. The Minister was quite hopeful: he said that he was happy now to commit to publishing a version of the business plan, approved by the last Government, which removes any commercially sensitive information. That was a really satisfactory step, but we have not seen it. I suppose I am slightly surprised that it is been so difficult to just black out the commercially sensitive bits, and I wonder when we are going to see it.

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[Lord Livermore (Lab)]

My Lords, I am grateful for the contributions from all noble Lords on this group of amendments. I recognise that the issue of controls on borrowing is an important consideration, and I hope to offer some reassurance. I agree with very many of the points raised during this debate, in particular that controls on borrowing by the Crown Estate must be in place. I assure noble Lords that such controls will be set out in the memorandum of understanding that will be in place between the Crown Estate and the Treasury, and will be set at a loan to value ratio not to exceed 25%.

[Baroness Kramer (LD)]

Is the Minister saying that it will be an MoU rather than a framework agreement, or are they the same thing by another name?

[Lord Livermore (Lab)]

They are the same thing by another name.

By way of background, as the noble Baroness, Lady Vere of Norbiton, said, the Bill we are considering was conceived under the previous Government, and it was continued by this Government as we share the same objective to increase the Crown Estate’s ability to compete and to invest. The default starting position I inherited was that the memorandum of understanding between the Crown Estate and the Treasury could contain commercially sensitive information and would therefore not be published.

I listened carefully to views expressed by many noble Lords at Second Reading that it should in fact be published. The noble Baroness, Lady Kramer, spoke particularly persuasively on this issue, and I gave her the commitment at Second Reading that it would be published in draft before November. I can confirm to noble Lords that it will, as a result, definitely be published before Report. In hindsight, though, I recognise that I could have reversed the position I inherited sooner and that this would have been more helpful to noble Lords considering this group of amendments. I am also grateful for the conversation I had last week with the noble Lord, Lord Howard, which I found informative and persuasive. I thank him for his time. I believe the question is not whether such controls on borrowing should exist but what those controls are and whether they should be set out in statute or in the memorandum of understanding.

I will briefly recap the purpose of this legislation. The Crown Estate is a commercial business, independent from government, that operates for profit and competes in the marketplace for investment opportunities, but to compete effectively, and to invest in order to maximise its returns to the Exchequer, it needs the ability to borrow, as its competitors currently can. That is the purpose of this legislation, and we should consider the controls we wish to place on its ability to borrow in the context of not undermining that objective. It is important to note that any borrowing by the Crown Estate will be for investment in activities that will drive increases in revenues, therefore increasing the returns it provides to the Government.

The Government’s strong intention is for the Crown Estate to borrow at levels that are proportionate to the nature of the business. I must emphasise that the powers proposed by the Bill are both targeted and measured. The Crown Estate will not be permitted to borrow without the consent of the Treasury. This is a strong safeguard and ensures that borrowing by the Crown Estate will not be uncontrolled. Furthermore, as I set out at the beginning of my comments, the memorandum of understanding will set a loan-to-value ratio not to exceed 25%. It will also set out other operating parameters in regard to the Crown Estate’s borrowing ability.

I turn to Amendments 2, 3, 4 and 8 tabled by the noble Baroness, Lady Vere of Norbiton, the noble Lord, Lord Howard, and the noble Earl, Lord Russell. These amendments each seek to cap the level of borrowing out of the National Loans Fund by the Crown Estate in specific ways. Amendment 3 tabled by the noble Baroness, Lady Vere, would restrict borrowing out of the National Loans Fund to no more than 2% of the value of total assets of the Crown Estate. Measuring 2% against Crown Estate assets would currently equate to £354 million. Amendment 2 from the noble Earl, Lord Russell, would limit Crown Estate borrowing out of the National Loans Fund to no more than £150 million, while similarly Amendment 8 tabled by the noble Lord, Lord Howard, would restrict borrowing out of the National Loans Fund to no more than 10% of capital and reserves, which on current figures equates to approximately £1.5 billion. So there is a wide range of views on the specific size of the limit. Based on current asset values, the proposed 25% loan-to-value parameter would equate to approximately £3 billion.

The principal issue here is whether a specific cap should be set out in the Bill. The Government’s considered view is that such a limit should not exist in statute. The purpose of the Bill is to afford the Crown Estate greater flexibility so that it can continue to deliver on its success, support wider national policy objectives and generate maximum returns for the Exchequer. As such, the measures proposed in the Bill are intended to endure without further amendment for many decades to come. For this reason, the Government’s view is that controls on borrowing are best set outside primary legislation, as is the case for some other public bodies with borrowing powers.

The controls on borrowing for the Crown Estate will instead be set out in the underpinning memorandum of understanding agreed with the Treasury, which I have referred to previously. I remind noble Lords that the fundamental duties of the Crown Estate commissioners, and their general duty, will remain to maintain and enhance the value of the estate and the return obtained from it, with due regard to the requirements of good management. Excessive borrowing would not be consistent with this duty.

We should also be mindful of what an appropriate maximum level of debt for an organisation such as the Crown Estate may be. It has an asset base in excess of £15 billion, overwhelmingly in the form of land and property. Included in the Crown Estate’s original business case, which I have also committed to publish before Report, is information on the loan-to-value ratio of the Crown Estate’s peers in the UK real estate sector. At the most conservative end of this scale is the Duchy of Cornwall, with a loan-to-value ratio of 14%. By contrast, a £150 million limit on Crown Estate borrowing would equate to a loan-to-value ratio of less than 1%.

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[Baroness Humphreys (LD)]

I shall make a short contribution in agreement with Amendment 22 in the name of the noble Baroness, Lady Smith of Llanfaes, and Amendment 24 in the name of the noble Lord, Lord Wigley.

When I was preparing for this debate, I looked at some figures, but they are very difficult to find. On the first group in Committee, I referred to the fact that we know that the Crown Estate has land worth more than £600 million in Wales, that it owns 65% of the coast and that it has 300,000 acres of land in Wales, but we do not know exactly how much money that raises in Wales. We know that, across England, Wales and Northern Ireland, profits have more than doubled in the past year, growing from £443 million in 2022-23 to £1.1 billion in 2023-24, but there is very little clarity about the contribution of each individual nation to the total. In the interests of transparency, I certainly support Amendment 24. On Amendment 22, I cannot understand why none of the Parliaments of the UK sends a representative to sit on the board of the commission. I support those two amendments.

[Baroness Kramer (LD)]

My Lords, I very much endorse the comments of my noble friend Lady Humphreys. I too believe that this is another opportunity to make sure that there is a far stronger voice for Wales, so let us seize it and use that as a template for how the Crown Estate goes forward.

I wanted to focus more on a couple of other issues. In a sense, I see a linkage between the comments made by my noble friend Lord Russell suggesting that, by forgoing receiving lease income and instead taking an ownership tranche in a whole series of new energy projects, the long-term income to the Crown Estate and to England and Wales would be significantly larger than the much shallower and shorter-term benefit of charging lease rent. That relates to the same kind of issue raised by the noble Lord, Lord Young of Cookham. Please could the Minister sort that problem out? This really is an unfair situation, and it will just take a Minister to absolutely slap his hand on the table and get it done.

In both cases there is a tendency, which I noticed at Second Reading, for Members of this House to think of the Crown Estate as some sort of cuddly organisation. It may be very generous, and if you read its annual report you can see that it does wonderful things for local communities and talks incredibly sympathetically about disadvantaged people, but when it operates as a commercial entity, my goodness, it is one of the most aggressive commercial entities that anyone could run into—and when you say that within the property sector, you are really saying something. It is infected by the same position adopted by many other property companies, which is to go for very short-term profit and to forget about the long term.

Everything that we hear from the Government is about patient capital—and, if you are going to look for the long term, surely you follow the pattern proposed by my noble friend Lord Russell, which says that, over the long term, you will do much better if you take some serious equity positions and perhaps make an in-kind contribution to a project, rather than charging rent over a relatively short-term period. If it acts in the same way as a commercial entity, surely in its commercial activities the Crown Estate should be treated as a commercial entity and therefore have to live up to the law that applies to other commercial entities operating in that same sector, and not to have an out because of its peculiar status, sitting somewhere between public and private. If that were done, the noble Lord, Lord Young, would not be asking why on earth it was not living up to the terms of the law for other commercial entities in dealing with leaseholders and freehold. It has to be recognised for what it is, and there are changes, consequently, that the Government may wish to make—first to create long-term thinking but also to make sure that, when it operates on a commercial basis, it is subject to the same regulations and requirements as other similar commercial properties.

I want to address very briefly the issues raised by the noble Baroness, Lady Vere. It is wonderful the change that comes when a body moves into opposition —the road to Damascus. The number of times I have asked a Conservative Government: when we have appointments, could we please have pre-appointment scrutiny by a committee of this House? In fact, I may even have requested them of the noble Baroness, Lady Vere, concerning various appointments at the Treasury—I cannot quite remember, there have been so many over the years. I am so glad of this Damascene conversion. We now have a Conservative party that is also supporting pre-appointment scrutiny. I do believe that pre-appointment scrutiny was often the Labour Party position. The noble Lord, Lord Livermore, is shaking his head but I think I may have a longer memory. I have certainly heard it from other Members, both on the Treasury Select Committee when I was in the other House, and on the Economic Affairs Committee. Pre-appointment scrutiny does make sense as a general underlying principle, and it would seem to make sense for the four new commissioners that are to be added to the existing eight.

Like others, I am really curious to know: going from eight to 12, they say, is good practice, but why? What will they do? Where will they come from? I can perfectly well see that this is a great opportunity for regional representation, and the noble Lord, Lord Holmes, touched on a very important point: we now look at most boards and want to see clearly that they understand that the ethics and attitudes of today require inclusivity; that it is not just some token item somewhere in an ethics statement by the company, but that someone is actually taking responsibility, based on knowledge, at a very senior level within the decision-making structure, and implementing that role. Here is an opportunity to seize that, and I hope very much that the Government will do so.

[Lord Livermore (Lab)]

My Lords, I thank the noble Baronesses, Lady Vere and Lady Smith, the noble Lords, Lord Young, Lord Holmes and Lord Wigley, and the noble Earl, Lord Russell, for raising these very important issues concerning the governance and management of the Crown Estate. I should emphasise again that the intention of the Bill is to afford the Crown Estate greater flexibility to ensure that it can successfully compete in commercial markets to deliver maximum benefits for the nation.

The noble Baronesses, Lady Vere, Lady Smith and Lady Kramer, asked about the number of commissioners. This change reflects the growing diversity of the Crown Estate’s business and will ensure that the Crown Estate can meet best practice standards for modern corporate governance. This will help to broaden the diversity of the board and provide more breadth of expertise and capacity to enable the commissioners to operate more effectively in the constantly evolving business environment. The Bill provides for a maximum number of 12 commissioners, up from eight at present. However, within this limit, the exact number of commissioners serving at any one time will be in the light of advice from the Crown Estate’s board on where it considers additional board-level expertise would be beneficial to the business.

I will start by addressing the issue of the appointment of commissioners to the Crown Estate’s board, reflecting on Amendments 12 and 22, tabled by the noble Baronesses, Lady Vere and Lady Smith. Amendment 12, tabled by the noble Baroness, Lady Vere, would require scrutiny by the Treasury Select Committee or any successor committee of all future proposed commissioner appointments, including the chair, before any appointment can be made. Let me first emphasise that all Crown Estate commissioner appointments are governed by the Governance Code on Public Appointments. The code is clear that commissioners must be selected based on expertise and experience.

As I have previously set out, the Crown Estate operates independently of the King and of government. Affording Parliament the opportunity to scrutinise potential appointments before they are made would significantly alter the appointments process, in a way that would change the relationship between the Crown Estate, government and Parliament. The Cabinet Office’s existing guidance on pre-appointment scrutiny is clear that it should apply only where posts play a key role in the regulation of actions by the Government, protecting and safeguarding the public’s rights and interests in relation to decisions and actions of the Government, or roles where organisations have a direct major impact on public life. It is the Government’s view, as it was of the previous Government, that the Crown Estate’s commissioner posts do not fit these criteria and that it would therefore be inappropriate to require pre-appointment scrutiny.

It should also be noted that pre-appointment scrutiny of roles elsewhere in public life is limited largely to the role of chairs. Therefore, even if the Cabinet Office’s criteria were satisfied, it would be disproportionate and unusual for all commissioner appointments to be subject to such scrutiny. In addition, requiring pre-appointment scrutiny for non-executive commissioner posts, which are not high profile or public facing, may deter some candidates from applying. As I have set out, this would be inconsistent with existing pre-scrutiny arrangements, which are generally restricted to chair positions. Consequently, this might put at risk securing candidates of the necessary quality and calibre to the board and present a more fundamental risk to the overall management of the Crown Estate.

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[Earl Russell (LD)]

My Lords, I rise to speak to my Amendments 29 and 30 in this group. I thank the noble Lord, Lord Teverson, for the powerful points he has made, particularly around our 2030 commitment, and I have co-signed his Amendment 28. I also thank the noble Baronesses, Lady Hayman and Lady Young of Old Scone; I very much support Amendment 25 and nearly all the amendments in this group. Adding environmental protections to the Bill is a key element of our work.

My Amendment 29 would require the commissioners to carry out their duties under subsection (3) with regard to sustainable development, economic development, regeneration, social well-being and environmental well-being. We welcome the plans to update the borrowing and investment powers of the Crown Estate, but we strongly feel that new and greater roles should come with updated responsibilities. The Crown Estate sits in a unique space and position. The land assets are owned by the Crown and managed by the Crown Estate and its commissioners, and they are mandated by Parliament to deliver a profit for the Treasury. The Crown Estate, in effect, floats in a unique position: it manages its land holding and assets, which really belong to the nation, but it is managed as a sub-department of the Treasury, away from much parliamentary scrutiny.

The year 1961 was a long time ago; we lived in a very different world then, as has been said. Our understanding of the environment and the need for nature protection was far less developed, as was any sense of facing an acute environmental and nature crisis. The Bill, as the Government have drafted it, is far too narrow; that is why all these amendments have been tabled. I understand the need for expediency and for the Government to put in the two clauses to amend the borrowing powers so that we can get on with GB Energy. That is all fine, but you cannot revisit a 1961 Act and expect to solely put in two clauses without updating all the other aspects of life and the world that have developed since.

My Amendment 29 shamelessly and purposely copies the text from the Scottish Crown Estate Act 2019, as I believe that these provisions are a useful precedent in our deliberation of these matters here today. When the Scottish Parliament considered many of the exact same matters that we are looking at, its conclusion was that these updated powers were useful, necessary and a helpful update to the powers contained in the original Crown Estate Act 1961. Further, they were agreed and enacted by that Parliament, and have been in force for over five years now. Unless the Minister wants to contradict me, my understanding is that, since they were passed, these new powers have not had any undue impacts on the ability of the Scottish Crown Estate to conduct its business free of undue regulation or burden. The devolution question has already been discussed, but my thinking in tabling this amendment was that I felt, in updating responsibilities, that there was value in seeking to ensure the same duties and responsibilities applied to all the devolved aspects of the Crown Estate’s land in Great Britain, and I felt that this was useful for the Crown Estate’s ability to operate and not be burdensome.

My Amendment 30 places a nature recovery duty on the Crown Estate. The amendment defines a nature recovery duty as including

“taking steps to … embed nature into spatial planning and seabed leasing … allocate space for nature recovery in all projects, and … invest in clean energy projects”.

I thank the Wildlife and Countryside Link for its briefing on the Bill, and its recommendation that this amendment should be included. I recognise and support the critical role that the Crown Estate has in the delivery of offshore wind generation and the role that the Bill has to enhance this going forward, but we really need to decarbonise our power generation, fight climate change and protect nature. However, in updating the 1961 Act, the Bill represents a missed opportunity to ensure that the Crown Estate also has a requirement to support the Government’s obligations towards achieving the nature targets under the Environment Act 2021.

All public bodies in the UK are presently not required to consider the environmental costs and benefits of their decisions and investments, as there is no statutory requirement for them to do so. I support the Private Member’s Bill from the noble Lord, Lord Krebs, and will speak when we debate it on Friday; if it is passed, we will not have to amend every Bill one at a time as there will be a cross-cutting duty, so I encourage the Government to look at that Private Member’s Bill and support it.

This duty is particularly important to the Crown Estate due to the very large area of its land and sea holdings and the fact that many of its sites are extremely ecologically sensitive. It is worth reiterating that the Crown Estate has 200,000 acres of land, 12,000 kilometres of coastline and a total seabed area bigger than the combined landmass of England, Wales and Northern Ireland. The Crown Estate owns more land than the entire landmass of Luxembourg and is the third-largest landowner in the UK. The land under the Crown Estate is vast, diverse and of high ecological importance.

The marine land, and the seabed in particular, are important as blue carbon stores, as we heard from the noble Lord, Lord Teverson. Equally important are the foreshore, coastline and many other precious ecological sites. I want to publicly recognise that the Crown Estate has existing governance structures and strong policy objectives in place to try to ensure that environmental impacts are a central consideration in its investment decisions. I also note that the Crown Estate has recently committed to embed nature throughout its policy-making process. It has begun consultation on the specific nature recovery strategy, but I understand that this final document is yet to be released. My amendment is not a criticism of its stewardship role; it is an attempt to support the existing duty but place it on a statutory footing. My amendment supports and builds on the work that the Crown Estate is already doing, which proves to me that the preparatory work is already being done to ensure that this amendment would work in practice.

I feel it is essential that this work is given a statutory basis, and that is exactly what my amendment seeks to do. It is essential that the Crown Estate makes an active contribution to meeting environmental nature recovery targets and contributes to climate mitigation and adaption targets. For this to happen, my belief is that a binding target is required.

[Baroness Kramer (LD)]

My Lords, I will just make two very quick comments. First, there has been a clear message to the Minister that, in one way or another, this Committee feels strongly that we should have in statute an expression of the climate change, environmental and nature issues. That should not be seen as a criticism of the Crown Estate as it is today but simply says that this is so important that the Crown Estate should not be given the freedom to change its mind on those issues without the intervention of Parliament.

I do not want to put the Minister on the spot, but my second brief issue concerns a previous answer, when there may have been some confusion between the memorandum of understanding and the framework agreement. I do not ask him to do this now, but could he go back and look at those two rather different things, as we need to approach them both differently? That would be exceedingly helpful, but I do not want to put him on the spot at this moment.

[Baroness Vere of Norbiton (Con)]

My Lords, I will speak briefly to this group on the objectives and duties of the Crown Estate. Many of the amendments relate to climate change and nature, and many noble Lords have spoken who are much more knowledgeable about these topics than I am, so I do not propose to add further to those points. As set out in today’s list, one must follow the rules, but I look forward to hearing the thoughts of the Minister on that.

My Amendments 37A to 37C look at another important aspect of potential disruption caused by investments by the Crown Estate, which is to local economies and national economies when it comes to shipping. I am looking to the Minister to reassure me and your Lordships’ House that very important local and national economic activities are considered appropriately by the Crown Estate, and that it does not look at what it does in a narrow and short-term way but thinks about making the cake bigger for everybody over the longer term.

The noble Lord, Lord Berkeley, made several points about the impact on commercial fishing: it should be quantified, consulted on and mitigated where possible, and I say the same for commercial shipping. Some 90% of our goods arrive by sea, and ports are often quite specialised in the goods they handle. Sadly, you cannot move a port, so you have to be quite careful not to obstruct well-established shipping lanes and ensure that the proximity of offshore developments does not cause excessive risk to vessels, particular larger vessels, were they ever to get into trouble. Comments on that would be greatly appreciated.

I did not put down an amendment on this, but it is strongly related. Where ports want to expand and they are surrounded by Crown Estate land, the balance of power is sometimes a little one sided. I would like some reassurance that the Crown Estate will act not only in its self-interest for short-term gain but will think about the longer term and growing the pie for the whole economy and the Crown Estate within that. I do not propose to add anything further at this point, and I look forward to hearing the views of the Minister.

Crown Estate Bill [HL]

Baroness Kramer Excerpts

Committee stage
Monday 14th October 2024 Lords Chamber

The Crown Estate has a really good role in this and, sitting at the heart of the partnership with GB Energy, it is in a very good position to support the Government and the need for green jobs. So I hope the Minister will look favourably on my amendment.

[Baroness Kramer (LD)]

My Lords, I will be very brief. I want to thank the Minister for the clarifications he gave on the difference between the framework agreement and the memorandum of understanding—it was really helpful of him to provide that today rather than wait for the next Committee date. While I am on my feet, I will use this opportunity to reinforce the probing amendments of my noble friends Lord Teverson and Lord Russell.

We are in an era of substantial change and I am sure the Minister is very aware of that. The greatest resistance to change comes from a measure of distrust and cynicism; people usually feel that change is not an opportunity, but will be something where they lose and others win. There is also very little trust of very big organisations and of organisations that are controlled at a physical distance from the area that people live in and know. With the proposals for a regional wealth fund and a focus on creating skills within the immediate community, the areas that have visible detriment can now also identify the possibility of benefit in a very real way. That makes change happen more rapidly.

I also come from a party that has great confidence in regional decision-making. Sometimes people use the words “postcode lottery”, but it is not that: it is that people within an area, knowing their local communities and people much more intimately, can target the programmes they put in place to benefit the lives of local people far more effectively than a distant decision-making entity can. I hope the Minister will look at this because, although we are talking about this Bill, we are in a much broader period of change. Creating a strategy such as regional wealth funds, used in this and possibly other instances, will give people the confidence that their community—their people, themselves and their families—will see some direct benefit, rather than being left in a situation where they cynically believe that they are carrying the detriment and that other people will benefit.

[Lord Livermore (Lab)]

My Lords, I will respond to the amendments tabled by the noble Lord, Lord Teverson, and the noble Earl, Lord Russell, both of which touch on the topic of local and community benefits.

Amendment 27, moved by the noble Lord, Lord Teverson, would require that a percentage of the Crown Estate’s licence fee for leases for offshore wind developments is distributed to a regional wealth fund. The Government are committed to working closely with the Crown Estate to support our target of clean power by 2030, by working collaboratively to accelerate and derisk the sustainable delivery of technologies such as offshore wind.

Local communities already benefit from onshore and offshore developments in the form of the economic benefits that such developments bring, including job creation and increased business for local suppliers. Individual developers also contribute to local initiatives. Over the longer term, local communities will also benefit as we accelerate our transition away from volatile fossil fuel markets to clean, home-grown power to boost Britain’s energy independence and security.

The Crown Estate has also specifically designed the leasing process for its offshore wind leasing round 5 opportunity in the Celtic Sea in such a way that developers have to make commitments to deliver social and environmental value as part of the development of their new wind farms. Tender bidders are required to think innovatively and constructively about how their developments can create a legacy of healthier, more resilient, fairer, vibrant and more prosperous communities, which stretch beyond the lifetime of the wind-farm leases for the benefit of generations to come. Commitments made during the tender process will be monitored, reported on and enforced throughout the lifetime of the relevant round 5 developments.

I recognise that this amendment would go even further, requiring a direct financial contribution from the Crown Estate to local communities. In essence, this is a very similar proposal to that put forward in Amendment 23, requiring a transfer of profits to the Welsh Government, as debated earlier. The concerns I set out there also apply here. Again, agreeing an appropriate level of payment would not be straightforward, because the relevant revenues and costs cannot be easily disentangled from the Crown Estate’s overall financial flows. Any arrangement of this nature would reduce the profits that the Crown Estate pays into the UK Consolidated Fund, reducing the revenues that can be allocated by the Government to the needs and priorities of the day, across all the UK.

Amendment 33, tabled by the noble Earl, Lord Russell, would require the Crown Estate to pay a percentage of its profits into a skills training fund. It would also require that this fund works to provide skills training to persons residing on or employed by the Crown Estate to equip them to perform jobs in the green economy and that the training is agreed with industry in advance.

The Government are, of course, very supportive of the spirit behind this amendment, and I agree with much of what the noble Earl said about skills. We are committed to clean energy by 2030, accelerating to net zero and promoting biodiversity. To meet these ambitions, we need to make sure our workforce has the knowledge and skills to succeed in the green economy, both now and in the future. As part of this effort the Department for Education has set up Skills England, a new body that will tackle skills shortages and support sustained economic growth. The Government also introduced the Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Bill in this House last week, which will, among other things, help support the establishment of Skills England.

The Crown Estate is dedicated to supporting skills and training. As a UK company with a payroll of over £3 million, the Crown Estate pays the apprenticeship levy—0.5% of its payroll over £3 million—and hires apprentices into its business. It also runs various targeted initiatives. For example, it has an existing partnership with the Department for Work and Pensions to address recruitment barriers and is training a pool of 60 job coaches in the east of England, with plans to expand. It is also developing a skills pipeline among the 14 to 16 age group, and has already seed-funded a pilot GCSE qualification in engineering skills for offshore wind, developed by Cornwall College. The Crown Estate also works closely with Pembrokeshire College on the Destination Renewables pilot course, which equips students with skills for careers in renewable energy. In Grimsby, the Crown Estate partners with Projekt Renewable, which aims to spark local community interest in offshore wind activities and encourage careers in that sector.

The Crown Estate consults extensively with communities, charities, businesses and the Government to ensure that its skills initiatives are sensitive to market demands and emerging technologies, to keep them relevant and effective. The Government consider it important that the Crown Estate retains this flexibility in how its skills initiatives are funded and delivered, to ensure it can contribute to skills training in the best possible way.

I hope that these explanations have been helpful and that I have provided some clarity on the points raised. I hope that the noble Lord, Lord Teverson, and the noble Earl, Lord Russell, feel able to withdraw and not press their amendments as a result.

Crown Estate Bill [HL]

Baroness Kramer Excerpts

Committee stage
Tuesday 22nd October 2024 Lords Chamber

The issue will need to be dealt with by the Scottish Parliament, and this will mean that the Scottish Parliament and the Scottish Government will need to work together. Perhaps I could ask the Minister whether he would undertake that the UK Government, at least, will render every assistance to the Scottish Government, the Scottish Parliament and the Crown Estate Scotland in the process, because they will have learned a lot in this process about why the Bill is the shape that it is, and it will be important to insist that there is complete symmetry. On that basis, I beg to move.

[Baroness Kramer (LD)]

I will not try the patience of the Committee for very long on this issue. It is fairly rare that I do not support amendments that are moved by that powerful combination of the noble Earl, Lord Kinnoull, and the noble Lord, Lord Vaux; but, on this occasion, I am rather troubled by this amendment. I believe that we have to defend the principle of devolution. There are many who want the devolution in name but not in actual fact. I am afraid that when I heard the noble Earl, Lord Kinnoull, use the word “symmetry”, every antenna was raised. I have already argued in earlier phases of this Bill that we should have devolution of the Crown Estate to Wales—that is fundamentally important—and it is important that we reinforce and understand the importance of a genuine devolution of the Crown Estate to Scotland as established in current law. That is in our collaboration, partnership, sharing practice—

[The Earl of Kinnoull]

I am so sorry. I probably did not make it clear that the reason that I was talking to the Crown Estate Scotland was because it contacted me. It is very keen to have the symmetry, and I understand through the Crown Estate Scotland that the Scottish Government is also pretty keen to have it. I am not proposing anything that is not consented to by all parties. I am just worried that the parties will get busy doing other things and will not get on with it. The idea of the pencil in the back is to get consenting adults to get on with it.

[Baroness Kramer (LD)]

I appreciate that intervention from the noble Earl because I now understand his position better, but I do not think that is how this clause would be used. It would create a level of dissent, with each side saying, “We do it better than you do”, and “You need to copy us”. We can see the kind of constant pressures that come to—I am losing language; it is just so late—dilute the power of devolution.

On that basis, I do not support this language. Co-operation, partnership, looking at best practice—all those things are extremely positive, but let us be absolutely clear: the Crown Estate Scotland falls under the Scottish Government. Interestingly, it is often much more regulated than the Crown Estate back in England. I hope we learn from the Scottish experience not that each needs to mirror the other by rote, but that devolution works and should be extended to Wales.

[Lord Roborough (Con)]

My Lords, I am afraid that I may not entirely agree with the noble Baroness, Lady Kramer, on this. I agree with the intention of this amendment from the noble Earl, Lord Kinnoull, and the noble Lord, Lord Vaux of Harrowden. While we also acknowledge that the Crown Estate in Scotland is devolved, the entity remains closely aligned in its nature and the objectives sought from it, with considerable overlap in the kind of assets that are owned and managed. The Bill before us creates considerable new powers for the Crown Estate of England, Wales and Northern Ireland. First among those is the power to borrow, with the benefits to investment and flexibility that that allows. It also creates new obligations—hopefully, to include taking full responsibility for the environmental impact of offshore energy and fish farming. Those are not present in the devolved Crown Estate of Scotland. As noble Lords have described, it may well be helpful if the Minister committed to providing clear information on those differences once the Act has been implemented in order to allow both entities to learn what is best practice. Oversight and transparency are desirable in all areas of government, and I am most interested to hear the Minister’s response to this amendment and debate.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I confess that I was fascinated by the amendments put down by the shadow Minister, the noble Baroness, Lady Vere, whom I remember on many occasions defending Henry VIII clause after Henry VIII clause. She is now calling for extraordinary levels of accountability, but I suppose going into opposition somehow changes a perspective.

The documents that have been requested, which is the main content of this group of amendments, are, in essence, documents that I requested at the beginning of the process. The Minister has been generous, in a way that I think would not have happened in the past, to assure us that those documents will be made available before we reach Report so that, at that final stage of the process, we have enough information to know whether we need to challenge the content of the Bill or can accept it. I am satisfied to take his word for it, as his comments were made on the Floor of the House.

If the Minister can add anything about timing or content, that would be interesting. We had some confusion at one point about what is a memorandum of understanding and what is a framework agreement, but that has been clarified. I am satisfied that we are getting more information from this Government than, frankly, I ever could have hoped for, on similar issues, from the Government before.

[Lord Livermore (Lab)]

My Lords, I will respond to the amendments tabled by the noble Baronesses, Lady Vere of Norbiton and Lady Smith, the noble Lord, Lord Wigley, and my noble friend Lord Berkeley, which all seek to alter the timing of the Bill’s commencement.

I start by addressing Amendment 42, tabled by my noble friend Lord Berkeley. This amendment would alter the commencement of the Bill, so that it comes into force either two months after the Bill has passed or after the Crown Estate commissioners have published the Crown Estate’s lease extension policy and a Minister of the Crown has tabled a Motion in both Houses to debate the policy—whichever is later.

Crown Estate Bill [HL]

Baroness Kramer Excerpts

Report stage
Tuesday 5th November 2024 Lords Chamber

[Lord Howard of Rising (Con)]

My Lords, I support my noble friend. In Committee, the Minister was good enough to agree that controls on borrowing by the Crown Estate must be in place and that they would be set out in a memorandum of understanding between the Crown Estate and the Treasury at a loan-to-value ratio not to exceed 25%. This figure is more than I would have wished for, and using asset value rather than capital reserves in the definition allows a still greater level of borrowing. Nevertheless, I am grateful that the Minister acknowledges that there should be a limit on borrowing. However, there must be a tighter control than a memorandum of understanding. Amendment 1 proposes an affirmative statutory instrument to achieve this. It requires the Government to limit borrowing to net debt-to-asset value of no more than 25%, purposely copying the wording of the Minister’s comment in Committee.

Should His Majesty’s Government need more flexibility in the future, this statutory instrument would provide for that. It would be better if the limit on borrowing were in primary legislation, but in seeking a solution which His Majesty’s Government might find acceptable, the amendment would be a fair compromise, retaining any flexibility that the Government might need while providing a stronger safeguard than a memorandum of understanding. As the Minister said, this limit is unlikely to be of concern to the present Government. Therefore, I hope he will accept this very modest suggestion to safeguard the Crown Estate for the future.

[Baroness Kramer (LD)]

My Lords, I think I started this hare running at Second Reading, when I basically said to the Minister that the Government were asking us to give borrowing power to the Crown Estate but we did not have the business case that argued why it needs a borrowing power—it is not evident from the annual report. Also, the framework agreement, which at that time governed the relationship between the Treasury and the Crown Estate, was silent on the issue of borrowing, other than to say it was not allowed, so clearly we needed changes to the framework report and we did not have them at Second Reading.

I am so impressed by the Minister’s response—and appreciative, because I have sat on these Benches looking at a Conservative Government for quite a number of years when every attempt to get transparency was rejected, I was handed documents based on Henry VIII powers and there was complete resistance to oversight by Parliament. Instead, the Minister has provided us with the business case—which is, frankly, virtually unheard of. It is an excellent document that completely clarifies why the change that this legislation contains has come to us. We can now understand that. It provides the draft changes to the framework document that we expect to see fully negotiated and enacted by the end of the year, we hope, but well ahead of any borrowing. Even more importantly, it provides a document that we usually cannot extract from the Treasury’s fingers, which is the memorandum of understanding that takes us into the much greater detail behind the whole rationale and sets out the rules in a very open and public manner.

This is the way that Governments should handle situations such as this. I want to respond from these Benches to those actions by the Government in a completely positive way. I understand that the Conservative Benches feel that opposition is a very different role from government and therefore they behave completely differently in opposition from the way that they would choose to do in government—that is their choice—but I am very content with the information that has been offered to us. As it has been given to us by the Government, it will last and will survive passage through this House and the other place. I think we can say with confidence that borrowing and financial liability in the Crown Estate are within a sensible and appropriate framework. Therefore, I ask that these Benches do not support the amendment proposed by the Conservative Benches and instead grasp the opportunity of a very responsible and appropriate offer from the Government.