Crown Estate Bill [HL]

Earl Russell Excerpts

Committee stage
Tuesday 22nd October 2024 Lords Chamber

Moved by

[Earl Russell]

32: After Clause 2, insert the following new Clause—
“Report on impact of this Act on the Sovereign GrantThe Secretary of State must, within one year of the passing of this Act and each subsequent year, lay before Parliament a report into the effect of this Act on the size of the Sovereign Grant.”Member’s explanatory statement
This amendment requires the Secretary of State to review the impact of this Act on the size of the Sovereign Grant.

[Earl Russell (LD)]

My Lords, this amendment would simply require the Secretary of State to review the impact of this Act on the size of the sovereign grant. I have tabled it as I feel that, as part of our consideration of the Crown Estate Bill, it is important to look at the direct link between the future planned growth of Crown Estate activities and the increase in profits that will result directly from the partnership with GB Energy, and the interlinked direct impact these changes will also have on the practical workings of the Sovereign Grant Act 2011.

The Sovereign Grant Act came into force on 1 April 2012 and changed the arrangements for funding Queen Elizabeth’s official duties. It consolidated four separate sources of funding into one new sovereign grant. The grant is intended to be a more permanent system than the previous one, which was reign specific. The sovereign grant is paid annually by His Majesty’s Treasury at a value indexed as a direct percentage of the revenues from the Crown Estate. It was initially set as an indexed percentage of 15%. The percentage is reviewed every five years by the royal trustees, made up of the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse. The level of the grant is protected by law from decreasing because of falling Crown Estate profits, as there were during the Covid pandemic. With annual accounts published by the Keeper of the Privy Purse and audited by the National Audit Office, the process promised to be more accountable. The level of the grant has risen in recent years to help fund, in part, a £369 million refurbishment of Buckingham Palace, which was approved by Parliament. After King Charles III’s accession to the Throne, the new King approved a statutory Order in Council to allow the existing sovereign grant provisions to continue throughout his reign.

This is all very well but, to come to the heart of the matter, my concern is the direct link between the profits that the Crown Estate makes and the calculation of the amount of the sovereign grant going forward. My request is that the direct link is discussed today, and I call on the Government to consider amending it. My amendment calling for an annual review was the closest wording I was able to table on this matter.

There is a world of difference between the direct binary link that we have now, where a set percentage of the Crown Estate’s revenues is used as the only calculation basis in determining the size of the sovereign grant, and the system that I would prefer, where the Government pay due regard to the Crown Estate’s revenues as part of the process of determining the size of the sovereign grant.

I have five areas of concern about the future of these arrangements after this Bill passes. First, my personal feeling is that the present calculation is somewhat obtuse and that the Sovereign Grant Act is not a particularly helpful or appropriate way of determining how, and at what level, we fund the Royal Family. The trouble with all this is that the attempt to link royal funding to the profits of the Crown Estate is a conjurer’s trick; it is an accounting sleight of hand. The two are not related at all. The Crown Estate’s profits are, and always have been, government funds.

I am not here to have a conversation about the role, purpose or future of the Royal Family; I am not anti-monarchy. Nor do I wish to discuss the appropriate levels of funding, as none of this is relevant to the Bill. Before us is a Bill that will see the Crown Estate allowed to borrow from the Treasury, subject to approval, and if all goes well this will result in rapid investment in, and growth at, the core of the Crown Estate’s business, that of leasing seabed plots for offshore floating and offshore wind developments. When the Crown Estate is at the heart of a rapid green energy revolution, and the sovereign grant is calculated as a percentage of revenue profits and reviewed only every five years, it is only sensible for us to take a moment to examine the potential impacts that this rapid growth will have on the calculation of the grant.

My second concern is that this rapid and exceptional period of Crown Estate growth was not foreseen when the 2011 grant Act was passed, and this makes future calculations more difficult.

Thirdly, I am worried that it may potentially put the King personally in a difficult position. Your Lordships should note that, in January 2023, the Keeper of the Privy Purse, speaking on behalf of the King, asked the Government to reduce the percentage used to calculate the sovereign grant so that the total did not include the income from new offshore wind leases, calculated to be worth £1 billion annually to the Crown Estate. The request was made by the King, out of his desire that the money described as a “windfall” could be best used for “wider public good” instead of funding the Royal Family during a cost of living crisis, which he had referred to only weeks earlier. In July last year, with further Crown Estate profits, the Government announced that the grant would be changed to 12% in the following year, down from 25%, while maintaining the same level payable.

It is my understanding that a further reduction is planned to come in through primary legislation following 2026-27. In the words of the Report of the Royal Trustees on the Sovereign Grant Review 2023,

“The Crown Estate’s Net Revenue Profits are expected to increase significantly in future years”.

The trustees’ projected figures show an increase from £442 million in 2022-23 to £1.05 billion in 2024-25. With predicted exceptional linear growth forecast for the foreseeable future, will we see newspaper headlines every year to the effect of “Exceptional growth in Crown Estate’s green energy brings huge profits to the King: the King kindly wishes that these are used for the public good”?

My fourth point is that the five-year review is inadequate in this period of exceptional continuous growth. I call on the Government to amend the 2011 Act to make the review annual.

My fifth and final point relates to what is a complex and confusing system that is not only poorly publicly understood but a hostage to fortune. The system is ripe for exploitation by those who are either against the energy transition, are supportive of the old energy architecture or simply wish to use the politicisation of the energy transition to spread disinformation and propaganda. This is my biggest worry. From the challenges to well-established basic climate science to deliberate attempts to undermine the transition to heat pumps and electric vehicles to miscalculations of costs, propaganda is, sadly, ever present. A system that can all too easily be used to link the green energy transition to extra funding to the Royal Family is ripe to be manipulated by those who wish to argue that the green transition will cost you more because all the benefits are funding the Royal Family. A highly effective government communications strategy that works in partnership, wins hearts and minds, extols the benefits and lower bills is essential to support the transition, and this link does not help with that.

The move to green energy and the financial support received by the Royal Family are uneasy bedfellows. I foresee this as an opportunity that will be exploited by those aimed against the transition. My humble opinion is that the calculation of the sovereign grant as a direct percentage of Crown Estate profits represents a weakness in the system that leaves us vulnerable to interference as we transition our power generation. My wish is simply that this Government consider amending the direct nature of this link and conduct an annual review of the sovereign grant during this period of rapid growth. My amendment is here simply to allow this conversation to take place. I look forward to hearing the opinion of your Lordships and the Minister’s response on these issues. I beg to move.

[Baroness Vere of Norbiton (Con)]

My Lords, I rise to speak briefly on this group. I note that the noble Lord, Lord Berkeley, is not in this place and so was unable to speak to his amendment. I understand why the noble Earl, Lord Russell, has tabled his amendment, and I am grateful to him for his exposition of the background to it. On these Benches, we recognise the unusual role that the Crown Estate has in the stewardship of the assets held in the right of the Crown. We recognise, too, that the revenues from the assets do not belong to the sovereign, nor is any part of them payable directly to the monarch.

The issue here is one of communication. It must be—it is absolutely essential—that there be no perception of any direct financial link between the sovereign and any amounts received under the sovereign grant and the amount of revenue generated by the Crown Estate. Upon the announcement of the partnership with GB Energy, there was a perception from some of the more excitable end of the media that the sovereign was somehow party to, and specifically approving of, the arrangement. I encourage the Minister and commissioners of the Crown Estate to ensure that information in the public domain about the operation of the Crown Estate, but also any further partnerships that may come down the track, cannot possibly suggest any direct involvement from the sovereign and, therefore, that there should be no undue benefit accrued.

--- Later in debate ---

I hope these explanations have been helpful and that I have provided reassurance on these issues. I hope that, as a result, the noble Earl, Lord Russell, will feel able to withdraw his amendment.

[Earl Russell (LD)]

I thank the Minister for his comments. I appreciate that there is information of which the Government are aware from the reports that come to Parliament on this. Some of my questions might have been answered had I had sight of the business case, so I look forward to that being published.

The only slightly outstanding issue for me is about our communications strategy around the green revolution, making sure that the Government are communicating properly and taking the public with them. I still worry that there is a bit of confusion between us. I will withdraw my amendment and thank the Minister for his response, which I will go away and consider.

Amendment 32 withdrawn.