Crown Estate Bill [HL]

Lord Livermore Excerpts

2nd reading
Monday 2nd September 2024 Lords Chamber

Moved by

[Lord Livermore]

That the Bill be now read a second time.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the purpose of this Bill is to bring legislation governing the Crown Estate into the 21st century.

The Crown Estate is a commercial business, independent from government, that operates for profit and competes in the marketplace for investment opportunities, yet it is restricted in its ability to do so by legislation that has not changed since 1961. With less ability to compete and to invest, it is less able to deliver returns for the public purse than it otherwise might be. Existing limitations on the Crown Estate’s powers have meant that it has had to generate capital for investment by selling its assets, which is neither desirable nor sustainable, and under current legislation the Crown Estate is constrained in its ability to support sustainable projects and to preserve our heritage for generations to come.

These are the reasons why this Bill is necessary, and why the Crown Estate has asked successive Governments for these reforms. The changes the Bill proposes will give it new freedoms, including the power to borrow as its competitors can, enabling it to adopt a sustainable and competitive business model.

The Bill has two key objectives. First, it broadens the scope of activities that the Crown Estate can engage in, in order to support the delivery of its core purpose across net zero, nature recovery, economic growth and generating returns to the public purse. In its current form, it is predominantly a property estate and is significantly limited in its investment options. The proposals in the Bill therefore seek to provide it with the ability to invest more widely in new growth opportunities—for example, investing in the further mapping of our seabed. This will enable it to undertake significant de-risking activity, such as preconsent survey and supporting grid co-ordination, thus increasing the frequency of leasing for offshore wind and supporting the clean energy transition.

The second objective of the Bill is to enable the Crown Estate to invest in capital-intensive projects more effectively. It does so by empowering the Crown Estate to reduce the size of the cash reserves it needs to hold, thereby expanding its ability to use its land and property assets far more efficiently. As a result, the Crown Estate will be able to accelerate investment in redeveloping and decarbonising its Regent Street and historic London portfolio, as well as investing in projects to support science and innovation. The Bill will unlock potential investment of up to £1.5 billion into the science, technology and innovation economy over the next 15 years, building on the Crown Estate’s recent investment in the city of Oxford.

To reduce the size of its cash holdings and engage in more capital-intensive activity in the long term, the Crown Estate needs the ability to borrow, as its competitors currently can. Such borrowing will be from the Government at commercial rates, meaning that the interest it pays will outweigh the Government’s cost of borrowing. This will therefore be of net benefit to the public finances, building on the Crown Estate’s long track record of delivering significant revenues to the public purse year after year—more than £4 billion in the last decade. Above all, the Crown Estate will be borrowing for investment, maximising the profits returned to the public purse. Any such borrowing will require Treasury consent and will be within the fiscal rules. Given that these new powers will enable the Crown Estate to first draw on its cash holdings, it is not envisaged that these borrowing powers will be used until towards the end of this decade.

The Bill contains a set of necessary reforms sought by the Crown Estate, ensuring that these two objectives can be met and that it can continue to operate effectively both now and in the years ahead. The Bill is composed of three key elements. First, it widens investment powers by removing existing restrictions on investing in the current Act and clarifies the Crown Estate’s ability to invest in complementary activities such as research, digital technology and energy supply chains. Secondly, it grants the Crown Estate a power to borrow with Treasury consent. As well as generating returns for the public purse, this new ability to borrow will free it up to make better use of its existing assets, leveraging these to give it more room to invest. Thirdly, it makes amendments relating to the governance of the Crown Estate to provide legislative simplification and to bring it in line with best practice for modern corporate governance. By expanding the number of commissioners, the board will be able to better reflect the growing breadth of the Crown Estate business and ensure a greater range of expertise and diversity at board level.

Three specific clauses achieve these ends. The first inserts two new sections into the Crown Estate Act 1961 to clarify the powers of the commissioners. These new sections explicitly broaden the investment powers of the commissioners and grant a power to borrow, subject to Treasury consent. This clause also clarifies that the commissioners have the powers to do that which is connected, conducive or incidental to meeting their general functions, including enhancing and maintaining the estate and the returns obtained from it. It also allows the Crown Estate to borrow from the National Loans Fund, the Treasury or otherwise, subject to Treasury consent, and authorises the Treasury to provide financial assistance to the commissioners or to provide loans from the National Loans Fund.

The second clause makes two amendments to modernise governance by increasing the maximum number of board members from eight to 12 and removing the requirements for the salaries and expenses of its commissioners to be paid out of voted loans. The third clause sets out procedural matters relating to the extent and commencement of the Bill.

These clauses give the Crown Estate the flexibility it needs to meet its core duty of enhancing and maintaining the value of the estate and the returns obtained from it. The Bill broadens the scope of activities that the Crown Estate can engage in, enabling it to further invest in the energy transition, and it empowers the Crown Estate to invest in capital-intensive projects more effectively. Critically, these measures will unlock more long-term investment, increasing the contribution of the Crown Estate to creating high-quality jobs and driving growth across the UK. The Bill delivers a targeted and measured enhancement to the Crown Estate’s powers and governance, modernising it for the 21st century.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, it is a pleasure to close this debate on the Bill. I am grateful to all noble Lords for their contributions and questions. As I noted in opening, the purpose of this Bill is to make a targeted and measured enhancement to the Crown Estate’s powers and governance. Without this Bill, the Crown Estate would continue to be restricted in its ability to compete and invest, and therefore to deliver returns for the public purse. This Bill therefore broadens the scope of activities that the Crown Estate can engage in, enabling it to invest further in the energy transition, and empowers it to invest in capital-intensive projects more effectively.

The noble Lord, Lord Young of Cookham, asked whether the current governance arrangements of the Crown Estate were fit for purpose. The Crown Estate is subject to the same governance as other central government bodies. As such, its accounts are laid before Parliament and audited by the NAO. In addition, it has an accounting officer who is answerable to Parliament for the stewardship of Crown Estate resources. However, ensuring that the Crown Estate has the best possible governance arrangements is central to this Bill. The Bill therefore increases the number of Crown Estate commissioners from eight to 12. This change 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 expertise and capacity to enable the commissioners to operate more effectively in the constantly evolving business environment.

The noble Lord, Lord Young of Cookham, also raised concerns about escheat, which relates to the complex process by which land that is ownerless falls to the Crown. On the specific example he raised, I will raise this with the Crown Estate and come back to the noble Lord with a more detailed response in due course.

The noble Earl, Lord Russell, asked about borrowing by the Crown Estate. The exact profile of lending would depend on a number of factors, including the timing and financing requirements of specific investments, as well as the extent to which the Crown Estate can generate funding by the disposal of non-strategic assets. The current expectations are that borrowing will not be needed until 2029 and is expected initially to be in the low hundreds of millions.

The noble Lord, Lord Bourne of Aberystwyth, also asked about the Crown Estate’s borrowing powers. To clarify, the Crown Estate will have those powers as soon as the legislation is passed, but the first impact of the borrowing powers will be to enable the Crown Estate to run down its cash assets and make more efficient use of them. It therefore does not envisage using those borrowing powers, as I said, until the end of the decade.

My noble friend Lord Liddle asked about wider borrowing to meet our net-zero objectives. These borrowing powers are essentially about enabling the Crown Estate to make better use of its existing assets and to compete in the marketplace. They are, of course, not the full extent of our ambitions for new investment in clean energy. I point my noble friend, for example, to the national wealth fund that the Chancellor has announced, amounting to some £7 billion.

To reassure the noble Lord, Lord Howard of Rising, these borrowing powers in no way politicise or compromise the independence of the Crown Estate. It is the Crown Estate that has asked for the powers to make better use of its assets and to continue to maintain its estate. All borrowing will be subject to Treasury consent and will be within the fiscal rules.

The noble Lord, Lord Holmes of Richmond, mentioned additional financial instruments in terms of borrowing. The provisions contained in the Bill do not change the Crown Estate’s existing powers to enter into joint ventures. With the benefit of the measures proposed in the Bill, though, the Crown Estate is less likely to engage in joint ventures and equity share opportunities as it will have greater flexibility to fund its capital investments.

Several noble Lords asked about the partnership with GB Energy, including my noble friend Lord Liddle, the noble Lord, Lord Bourne, and the noble Earls, Lord Courtown and Lord Russell. As important as the strategic partnership with GB Energy is, the Bill is not about that strategic partnership between the Crown Estate and GB Energy, nor about setting up GB Energy. The Government obviously share many of the ambitions set out by noble Lords ahead of the introduction of the GB Energy Bill; the Great British Energy Bill led by DESNZ has been introduced in the other place and its Second Reading is due to take place on Thursday. Throughout the next few months, DESNZ will take the important steps to put Great British Energy on a delivery footing, including announcing the location in Scotland of its headquarters and starting to recruit key roles into the organisation.

In answer to the noble Earl, Lord Courtown, the initial investment criteria for the Crown Estate will remain unchanged. The partnership will facilitate strategic alignment through a co-ordinated approach to deliver clean power. The Crown Estate will continue to be independent of the Government and the King; the partnership with Great British Energy will not affect its independence, which is set out in the Crown Estate Act 1961.

The noble Lord, Lord Turnbull, and my noble friend Lord Berkeley asked about the sovereign grant. The reforms contained in the Bill are separate to funding provided to the King; the King is not involved in the management of the Crown Estate. Since 1760, each monarch has surrendered the Crown Estate’s revenue to the Exchequer in return for government support. Government support for the King is provided by the sovereign grant, which is currently set by a reference to 12% of Crown Estate profits.

However, the Sovereign Grant Act includes a statutory requirement to review the percentage rate used in the calculation every five years to determine whether it remains appropriate. Under the Sovereign Grant Act, the grant will next be reviewed in 2026. The review is conducted by the three royal trustees: the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse. Where necessary, the Government lay a statutory instrument to amend the percentage used. For example, following the royal trustees’ review last year, the rate was cut from 25% to the current 12%.

My noble friend Lord Berkeley also asked about the Duchy of Cornwall. As he knows, it is a long-established principle that income from the Duchy is independent of any government control.

My noble friend Lady Young of Old Scone asked specific questions on housing, nature recovery and biodiversity, supply chains, grid and environmental performance. On her question on the Crown Estate and housing, I agree wholeheartedly with the objectives she set out for the affordability and quality of housing. Housing is primarily a matter for the Ministry of Housing, Communities and Local Government. I hope that its forthcoming legislation will achieve many of the objectives she set out. However, while the Crown Estate is not a housebuilder at scale, it recently committed to supporting the country’s need for better-quality housing. With the support of the measures proposed in the Bill, the Crown Estate can leverage its pipeline of 20,000 homes over the next 20 years and further its commitment to quality, sustainability and innovation.

On her question on nature recovery and biodiversity—which the noble Lords, Lord Teverson and Lord Holmes of Richmond, and the noble Baroness, Lady Bennett of Manor Castle, also touched on—stewarding the natural environment and biodiversity is core to the Crown Estate’s strategy. These powers will accelerate the Crown Estate’s leadership of nature recovery across land and sea through investment into the latest remote sensing and geospatial tools to map natural assets, developing its rural portfolio into an exemplar of large-scale, sustainable agriculture and environmental best practice.

On my noble friend’s third question on supply chains, the Crown Estate prioritises the ethics of its suppliers, focusing on ethical and inclusive practices, health, safety and well-being, sustainability, privacy and information security and innovative business practices. Its suppliers must also commit to diversity, equity and inclusion, pay the living wage and comply with legal and industry standards.

Several noble Lords also touched on questions of the grid—which my noble friend originally raised—including the noble Lords, Lord Bourne, Lord Teverson and Lord Holmes of Richmond, and my noble friend Lord Liddle. The Government are committed to speeding up connections to the grid. Ofgem and government published a joint Connections Action Plan at the end of 2023 to improve the connections process and reduce connections timescales, which this Government are taking on.

The Crown Estate is already using its experience, data and expertise as managers of the seabed to feed into the new strategic spatial energy plan. The Crown Estate is also already working in partnership with National Grid to ensure that its current pipeline of projects, including its round 5 floating offshore wind opportunity in the Celtic Sea, can benefit from a more co-ordinated approach to grid connectivity up front.

On the question of environmental performance, the Crown Estate is committed to net zero within its own operations and developing net-zero targets and pathways to reduce emissions within its wider value chain, in line with a 1.5 degrees centigrade trajectory. To meet this ambition, its commitments include removing fossil fuels from its activity, reducing operational emissions for all assets and producing decarbonisation road maps for all assets and sectors.

The noble Lords, Lord Howard of Rising and Lord Teverson, asked about transparency. Ensuring the Crown Estate has the best possible governance arrangements is central to this Bill. The Crown Estate is subject to the same governance as other central government bodies. As such, its accounts are laid before Parliament and audited by the NAO. In addition, the Crown Estate has an accounting officer who is answerable to Parliament for the stewardship of Crown Estate resources.

The noble Lords, Lord Bourne, Lord Wigley and Lord Holmes of Richmond, and the noble Baroness, Lady Smith, touched on the question of devolution to Wales. The Government believe there is greater benefit—for both the people of Wales and the wider UK—in retaining the Crown Estate’s current form. I know that the noble Lords who raised these points will not agree with me, but the Government’s view remains that devolving the Crown Estate to Wales at this time would significantly risk fragmenting the energy market, undermining international investor confidence and delaying the progress towards net zero by an estimated 10 to 20 years, to the detriment of the whole nation. I know that we will discuss these issues further in the noble Lord’s Private Member’s Bill.

The noble Lord, Lord Wigley, and the noble Baroness, Lady Smith, also asked about the communities of Wales benefiting from wealth generated by offshore activity in the Celtic Sea. The Crown Estate pays all its net revenue surplus into the Consolidated Fund—a combined total of more than £4 billion in the last decade—which is used to fund vital public services. Local communities already benefit from wider decisions on public spending as well as the investment by the Crown Estate.

Over the last 20 years, the Crown Estate has enabled successful delivery of a number of renewable energy projects in Wales, investing to position it at the vanguard of clean energy technology and growth. The Crown Estate has looked to ensure that the benefits of these projects are felt through communities and supply chains across Wales, including through the design of its most recent leasing round 5 and the launch of a pilot £10 million supply chain accelerator fund in 2024. Furthermore, while the scale of investment in Wales remains under development, it is anticipated that it could take up to 10 to 15 years to see a return on that investment. The breadth and diversity of the Crown Estate’s broad asset base means that it is well placed to support these longer-term investments.

The noble Lord, Lord Wigley, also asked about the Bill applying to Scotland. The 1961 Act applies to Scotland and, under that Act, the commissioners can exercise their functions in relation to Scotland—so extending the Bill to Scotland is consistent with that position. The Crown Estate retains powers in relation to its ability to operate in Scotland. The Bill does not affect the management of property, which was devolved in 2016.

The noble Baroness, Lady Hayman, raised the possibility of introducing an objective for the Crown Estate to ensure that it has due regard for the environment and climate. The Bill does not propose a statutory objective, given the importance of preserving the independence of the Crown Estate and enabling it to compete on an equal footing with other private sector operators. However, the Crown Estate has existing governance structures in place to ensure that environmental impacts are a central consideration of its investment decisions. This includes a value creation framework, to ensure that decisions about its strategy, investments and other decisions are all reviewed through an environmental and social filter.

The noble Baroness also rightly raised the need to balance different priorities, particularly the need to ensure that there are adequate environmental protections in place for the development of offshore wind—a point also raised by the noble Lord, Lord Teverson, the noble Baroness, Lady Bennett of Manor Castle, and the noble Earl, Lord Devon. As with any developer, the Crown Estate’s proposals go through standard planning approval processes, which include 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 this aim is managing the seabed in a way that reduces pressure on, and accelerates the recovery of, our marine environment.

The noble Lord, Lord Teverson, asked about the discussions that the Government have had with the Scottish Government on this Bill. Government officials have met with Scottish Government officials to discuss the nature and content of the Bill.

The noble Lord also asked about the responsibility for bottom trawling across the UK seabed, as did the noble Lord, Lord Holmes of Richmond, and the noble Baroness, Lady Bennett of Manor Castle. The scope of the Crown Estate’s authority does not include the regulation of commercial fishing, which includes trawling. The regulation of fishing, including trawling, falls under the jurisdiction of the fisheries management regime, which is managed by the relevant marine environment management organisation of each devolved Government. A new by-law protecting an area of almost 4,000 square kilometres of our seas from damaging fishing activity, such as bottom trawling, came into force on Friday 26 March 2024. It prohibits the use of bottom-towed gear in specific areas in 13 English offshore marine protected areas that contain valuable reef and rocky habitats.

The noble Lord, Lord Holmes of Richmond, asked about how the Crown Estate will bring forward the development of the seabed and speed up offshore wind. The borrowing powers for the Crown Estate proposed by the Bill will act to accelerate and de-risk the sustainable delivery of offshore wind and other technologies, such as carbon capture and storage, wave, tidal and hydrogen. That activity may include but is not limited to: finding the best locations for energy projects, while considering nature and other seabed users, delivered via a new marine delivery route map; conducting technical and environmental surveys early to speed up development and approval processes; facilitating earlier co-ordinated grid connections by working with NESO, developers and stakeholders aligned with other strategic planning processes for the energy sector; and supporting the growth of the UK’s energy supply chain with targeted investment.

The noble Baroness, Lady Bennett of Manor Castle, asked about the skills needs of the energy transition in relation to the North Sea. I completely agree with her that that must be key factor in, and a key part of, our skills agenda. The Government recognise that our offshore workers have vital skills that will unlock the clean industries of the future. We will continue to recognise the ongoing role of the oil and gas industry and workforce in our current energy mix, while ensuring that the sector contributes more to our clean energy transition.

My noble friend Lady Ritchie raised some concerns about the development of offshore wind and the fishing industry. The Crown Estate is committed to the sustainable management of the seabed and, where appropriate, collaborates with industry stakeholders, marine licensing bodies and environmental NGOs to ensure that activities on the seabed are conducted responsibly. I will seek more information on the specifics of the consultation she asked about and will gladly write to her about them. I add that the Crown Estate will be happy to offer a further meeting with the relevant fishing representatives.

My noble friend also asked about how the partnership between the Crown Estate and Great British Energy would work for Northern Ireland. The Crown Estate has a diverse portfolio that includes the management of the seabed and half the foreshore around England, Wales and Northern Ireland. It plays a fundamental role in the sustainable development of those assets, including the UK’s world-leading offshore wind, renewables and greenhouse gas reduction technologies. Together, Great British Energy and the Crown Estate will accelerate the development of the seabed in supporting infrastructure along the coasts of England, Wales and Northern Ireland, creating a pipeline of sites for private developers to invest in. That means more clean power happening faster than would otherwise be the case.

My noble friend also asked about the extent of the engagement between the Crown Estate and the Northern Ireland Executive. As custodians of the seabed, the Crown Estate has a role to play in supporting Northern Ireland’s energy strategy, which includes the goal of delivering 1 gigawatt of electricity from offshore wind from 2030. As such, the Crown Estate works closely with stakeholders and officials in Northern Ireland across the Department for the Economy and the Department of Agriculture, Environment and Rural Affairs. The Crown Estate also collaborates with Northern Ireland in relation to the offshore renewable energy action plan, as it sits on its steering group. In the last 12 months, the Crown Estate has had more than 30 meetings with stakeholders in Northern Ireland on offshore wind and coastal and rural matters.

My noble friend Lord Rooker rightly drew attention to the nature of this Government’s economic and wider inheritance—points I hope that he will have heard the Chancellor and other Treasury Ministers make repeatedly.

The noble Earl, Lord Russell, and the noble Baroness, Lady Kramer, raised concerns about the framework agreement underpinning any borrowing. The noble Baroness also asked about the business case. The business case was agreed by the previous Government in February 2023. I am happy now to commit to publish a version of that which removes any commercially sensitive information.

The specific information setting out the detail underpinning the borrowing powers will comprise two elements: a framework agreement and a memorandum of understanding. The framework agreement, which will be incorporated into the Crown Estate’s existing framework document, will set out broad principles, such as limits on overall loan-to-value ratios and the requirement for borrowing to be at market rates. The memorandum of understanding will be in place between the Treasury and the Crown Estate and will govern how the borrowing powers will be exercised. The relevant work on the document has, until now, been on a slower timeframe than the legislation we are debating today. The Crown Estate does not expect to borrow until towards the end of the decade. I add that the changing investment landscape, with the creation of the national wealth fund and Great British Energy, may also make it sensible to complete this work to a slightly different timescale.

It is important to be clear that any such detailed borrowing contained in the memorandum of understanding is, by necessity, likely to include commercially sensitive information, and there has never been any intention that the MoU will be published. However, I can tell the noble Baroness that the memorandum of understanding will make clear that any borrowing by the Crown Estate will be at commercial rates, for subsidy control reasons, and be subject to Treasury consent. Values will be based on the total gross audited asset value of the enterprise, as reported in the annual report and accounts.

The noble Baroness is right to push us on a timeframe for the publication of the framework agreement, and I commit to write to her, before Committee stage, setting out the expected contents of the framework. I further commit that the framework will be published in draft by November.

The noble Earl, Lord Courtown, asked me a number of very specific questions. In the interests of time, if he does not mind, I will write to him with specific answers on each.

This Bill broadens the scope of activities that the Crown Estate can engage in, enabling it to further invest in the energy transition. It empowers the Crown Estate to invest in capital-intensive projects more effectively. Critically, these measures will unlock more long-term investment, increasing the contribution of the Crown Estate to creating high-quality jobs and driving growth across the UK.

[The Earl of Devon (CB)]

Before the Minister sits down, I remind him that I asked a number of specific questions, as well as making some general points. I also emailed him in advance with those questions. I note that none was addressed in his summing up. Will he please undertake to write to me?

[Lord Livermore (Lab)]

Of course, I am happy to write to the noble Earl. I beg to move.

Bill read a second time and committed to a Committee of the Whole House.

Crown Estate Bill [HL]

Lord Livermore Excerpts

Committee stage
Monday 14th October 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My Lords, I am enormously grateful to all noble Lords who have spoken before me in this debate today. Predominantly, this is obviously around the devolution of powers over the Crown Estate in Wales to the Welsh Government. On these Benches, we have thought long and hard about this, and I hear the concerns of some noble Lords about how the devolved powers differ between Wales and Scotland and, indeed, Northern Ireland. But this is not a unique situation and I have concluded that I would encourage the Minister to resist any change at this time.

A number of noble Lords have raised certain challenges as to why this might be a good or a bad idea, and I look at this in a purely practical sense. If I look at the documents that have been provided and are available not only for the Crown Estate but also the Crown Estate’s relationship with GB Energy—the enormous commitment that the Crown Estate has made in terms of the amount of seabed licences it wishes to grant to enable energy generation by 2030—I agree with the noble Baroness, Lady Kramer, that change is coming and coming very significantly for the Crown Estate. In 10 years’ time, it is not going to look the same as it does now. Therefore, I think that we would introduce risk into what is already a very ambitious target set down by the Government to develop offshore wind should we be sidetracked by the desire to devolve limited powers over the Crown Estate at this time.

It is also worth bearing in mind that the Crown Estate is very clear in its documents—and I think the Committee will discuss this a bit more later—that it is an independent business and competes against the private sector. Splitting it at this time and taking out a chunk of the assets and going through all the procedures as to how you recognise those assets—as pointed out by the noble Lord, Lord Berkeley—and how you think about which revenue streams go where would be a sideshow.

I note the point made by the noble and learned Lord, Lord Thomas, but I am going to run with it slightly. At the moment, the Labour-run Welsh Government do not have the best record of governance. Of course, that might improve in the future and progress may well be made, so I conclude by saying that we encourage the Minister to resist these amendments and we believe that they would be unwise at this time.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate in response to the amendments from the noble Lords, Lord Wigley and Lord Hain, and the noble Baronesses, Lady Smith and Lady Humphreys. I hope to be able to explain the Government’s rationale for retaining the existing structure of the Crown Estate.

First, let me set out how the Crown Estate currently operates and why the Government believe this remains the best approach. The Crown Estate Act 1961 requires the Crown Estate commissioners to manage the Crown Estate as a commercial enterprise to enhance long-term value and generate profit and to do so with due regard to the requirements of good management. A key purpose of the 1961 Act was to repeal various detailed statutory provisions that had built up over 150 years previously 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 for which they can be held to account.

While the Crown Estate has goals which under its own strategy align with wider national policy objectives, the 1961 Act provides the Crown Estate with independence and autonomy to set and achieve its goals. The Government believe that the Crown Estate should continue to operate in this way, as a commercial business independent from government, because it has shown itself to be a trusted and successful organisation, with a proven track record in effective management.

The Crown Estate is multibillion-pound public corporation, which is required to pay its profits into the UK Consolidated Fund each year, worth more than £4 billion over the past decade. Those revenues are then allocated to public service priorities by the Government, subject to the usual parliamentary controls. That is a valuable outcome, which we need to be careful not to undermine.

I turn to the amendments that deal with devolving the Crown Estate in Wales. I fully recognise that there are now two Labour Governments in the UK. While I believe that there is greater benefit for the people of Wales and the wider United Kingdom in retaining the Crown Estate’s current form, I shall of course continue to discuss these issues with the First Minister and the Secretary of State for Wales to ensure that Wales sees the full benefits of the Crown Estate and other forms of investment.

In response to the arguments made by noble Lords during this debate, I make a number of points. First, devolving the Crown Estate to Wales would most likely require the creation of a new entity to take on the role of the Crown Estate in Wales. This by definition would not benefit from the Crown Estate’s current substantial capability, capital and systems abilities. As my noble friend Lord Hain and the noble and learned Lord, Lord Thomas, referred to, this would indeed 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 and disrupting the National Energy System Operator’s grid connectivity reform, which is taking a whole-systems approach to the planning of generation and network infrastructure. That reform aims to create a more efficient system and reduce the waiting times for generation projects to connect to the grid. The cumulative impact of these effects would likely delay the pathway to net zero by decades.

Furthermore, the Crown Estate’s marine investments are currently made on a portfolio-wide basis across England and Wales. To devolve to Wales would disrupt these existing investments, since they would need to be restructured to accommodate a Welsh-specific entity. Let me give two examples. The first is the Crown Estate’s £50 million supply chain accelerator, which will match-fund early stage projects related to offshore wind leasing round 5, and the £50 million investment in the offshore wind evidence and change programme, which brings together government bodies, the industry and key stakeholders from across the UK to better understand environmental impacts of offshore wind.

[Lord Wigley (PC)]

The Minister has explained the need for a restructure. As Scotland has devolution of this dimension already, clearly it is not impossible for people to come together after devolution for Wales, too.

[Lord Livermore (Lab)]

I shall go on to address some of those points further in my speech.

To devolve the Crown Estate at this time would also risk jeopardising the existing pipeline of offshore wind development in the Celtic Sea planned 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 this year and is expected to contribute 4.5 gigawatts of total energy capacity, or 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 UK. 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 create a £1.4 billion boost for the UK economy.

As I have said, devolution would also delay UK-wide grid connectivity reform. The Crown Estate is using its data and expertise as managers of the seabed to feed into the National Energy System Operator’s new strategic spatial energy plan. For Wales, the Crown Estate is working in partnership with the energy system operator to ensure that its current 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. Introducing a new entity, which would have control of assets only within Wales, into this complex operating environment, where partnerships have already been formed, would not make commercial sense.

Secondly, the Crown Estate’s assets and interests in Wales, as compared to its assets in England, are of a fundamentally smaller magnitude, which would very likely not be commercially viable if the costs were unsupported by the wider Crown Estate portfolio. The Crown Estate, in its present form, has the ability to take a longer-term approach to its investments and spread the costs of those investments across its entire portfolio. A self-contained, single entity in Wales would not have the same ability, nor would it benefit from the expertise that the Crown Estate has developed over decades in delivering offshore wind at scale. A devolved entity would be starting from scratch, midway through a multimillion-pound commercial tendering process, at a time when the Crown Estate is undertaking critical investment in the UK’s path towards net zero.

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[Lord Hain (Lab)]

My Lords, before my noble friend sits down, I want to ask him specifically about what he said in relation to Welsh Government Ministers. I pressed him hard to talk to Welsh Government Ministers and consult on this matter. Nobody expects this to be done overnight or, indeed, relatively soon, given everything else and what he has said, but that seems to me the crucial thing which would release me from an obligation at least to press this on Report.

[Lord Livermore (Lab)]

I am very happy to reiterate what I said: I will, of course, discuss these issues with the First Minister and the Secretary of State for Wales to ensure that Wales sees the full benefits of the Crown Estate and other forms of investment.

[Lord Wigley (PC)]

I am sure that the noble Lord, Lord Hain, listened to that response, as I did, with some amusement. If the line that the Minister is going to take in discussion with Welsh Ministers, who have very strong opinions on this matter, is the line that he has taken in responding to this debate, there is quite clearly not going to be a meeting of minds. We are talking about a Labour Government in Cardiff and a Labour Government in London, and this is going to be the backdrop to the politics that are running through the next few years, including the run-up to the 2026 election. I beseech the Minister to think more carefully about the way he is handling this.

The way in which the Crown Estate has been devolved in Scotland has not caused immense difficulties. They have been able to disaggregate the things that need to be disaggregated. It has been possible for the Scottish Government to get the benefits they need. The most important thing that I regard as coming from this sort of structural change is to give the Welsh Government the levers and powers—and the encouragement—to take initiatives themselves, to maximise the economic return that they can get in Wales and thereby to generate the income we need to run our government services. We do not want to be for ever and a day coming with cap in hand to the Treasury in Whitehall, begging for money.

On that point, perhaps it was the same noble Lord, Lord Macpherson, who was at the Treasury in 2010-11, when the Welsh Government had aggregated £400 million from money they had not spent on a revenue basis, in order to have a capital fund to build hospitals and schools, and the Treasury took back the whole £400 million. Being careful how they spent money at year end was a policy that the Labour Government in Wales could be proud of, but that is what the Treasury did to us. The Treasury is still, with the same game, trying to stop us taking initiatives on our own behalf to sort out our own problems.

I was grateful to the noble Lord, Lord Hain, who made a persuasive argument, and I hope we return to these matters on Report. I was naturally grateful to my noble friend Baroness Smith of Llanfaes—she will possibly come in on other debates on these matters. I realise where the noble Lord, Lord Macpherson, comes from on these issues. I too had a financial background; I was a financial controller in manufacturing industry and I know the responsibilities that go with finance. I also know the need to have the incentive and inducement to create the money that can then be used for the social services and all the other responsibilities of government —that is what we want to trigger and encourage in Wales.

I was grateful to the noble Baroness, Lady Humphreys, for her substantial speech, which laid out her party’s view. I am glad to see that the Labour Party in the Senedd Cymru, the Liberal Democrats and Plaid Cymru stand together on this, and, indeed, a number of Conservatives there do too, which perhaps Conservative colleagues could bear in mind.

The noble and learned Lord, Lord Thomas of Cwmgiedd, excellently summed up the whole thing. The problem that we have had down the years when it has come to wanting to take responsibility for doing things for ourselves rather than always going cap in hand to others to bail us out is that we are told we cannot do it, or that it will cut across the unity or the way the commercial sector sees it, et cetera. We have got to be able to stand on our own two feet, whether it is in the context of the structures of government we have now or different ones. As in the case of Scotland, we want to stand on our two feet and be able to pay our way in the world, and at least take responsibility on our own shoulders for doing that.

I take the point about Northern Ireland made by the noble Baroness, Lady Ritchie of Downpatrick, and, indeed, Northern Ireland is mentioned in some of these amendments. There is, of course, a need for a co-ordinated approach, but that does not mean that we have all to be lumped together under one overarching structure. The whole point of devolution is to give power and responsibility to those who are best placed to make the most of it, and, in this context, to develop and use our own resources. The noble Lord, Lord Berkeley, mentioned the situation in Cornwall, where there are resources that can be used and maximised for, I hope, the benefit of the people of Cornwall rather than for profits to be syphoned off elsewhere. The noble and learned Lord, Lord Thomas, mentioned our experience with coal, where we were left with the coal tips, industrial disease and all the environmental problems to clear up at our own cost, but when we try to do something about it, we are told we are not capable of doing so. Quite frankly, that is not acceptable.

I thank the noble Baroness, Lady Kramer, for painting her party’s viewpoint on a UK basis so clearly. Obviously, the response from the noble Baroness, Lady Vere, is not one I identify with; I am not entirely surprised as we have had such responses from Conservative Governments for many years. I am, however, surprised at the response from the Labour Front Bench, where we would have hoped for more.

There is currently a shortfall in the Welsh budget of some £250 million a year, which the Government are going to have to find. There is also an increasing dynamic to that figure: it will reach some £750 million by 2028. We want to be able to do something about it ourselves, so why do they not give us the tools we need to do the job when we are willing to take the responsibility to do it? I beseech the Labour Government to look at this again between now and Report. As the noble Lord, Lord Hain, suggested, they should speak to colleagues in Cardiff and try to get a solution that enables us to do more to help ourselves, rather than telling us for ever and a day to come with a begging bowl and hope that somebody will bail us out. I beg leave to withdraw my amendment.

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[Baroness Vere of Norbiton (Con)]

My Lords, this group of amendments on the investment and borrowing powers in the Bill for the most part seeks to put in place limits on borrowing by the Crown Estate. I am grateful to the noble Earl, Lord Russell, who introduced the group, and I agree with him that there should be a limit on the borrowing powers that the Government intend to extend to the Crown Estate commissioners.

I also associate myself with the comments made by both the noble Earl, Lord Russell, and the noble Baroness, Lady Kramer, about the absence of the business case and the draft framework agreement. This is not the first Treasury Bill where accompanying documents have not appeared, but this is a new Government.

I am also grateful to my noble friend Lord Howard of Rising for his Amendment 8—I understand that the Committee will come back to his Amendment 9 separately—which seeks to probe the Government’s intention on borrowing. My noble friend made his points clearly: it is not just about this current Government, or the subsequent Government, but any future Government under whom there may need to be checks and balances in place to prevent the overleveraging of a very important group of national assets run by an independent company or organisation.

Extending the borrowing powers was planned by the previous Conservative Government, and we absolutely support the principle of the Bill. As I said on the previous group, the Crown Estate will be a very different organisation in 10 years and so has to do a lot of things very quickly. It is going to need money and there is an opportunity here. However, I am struggling to figure out how its relationships with GB Energy, on which I still lack clarity, and—one step removed—the national wealth fund, which I understand does not have as much money as was originally planned, will all fit together. Therefore, to protect the integrity of the Crown Estate it is important that a borrowing limit is put in place.

Previously, the Crown Estate commissioners were constrained by the 1961 Act, but we support other noble Lords who have spoken today on considering what the mechanism might be. Different noble Lords have proposed different mechanisms. I appreciate that the noble Earl, Lord Russell, picked a number, and I accept that that might be an outcome, but of course it is not really inflation-proofed; it would be in the Bill and therefore it might not be helpful in due course. I went away and thought about having 2% of total assets as the limit. If one looks at the portfolio as it stands for 2022-23—£15.5 billion—one sees that a 2% cap would represent a cash limit of around £310 million. That would be a more generous cap than that proposed by the noble Earl, Lord Russell, but it is broadly equivalent to the “hundreds of millions”—I think that was the phrase—envisaged by the Minister. We are just trying to be helpful here, by putting a statutory footing underneath the Minister’s intention in any event.

Another thought I had was not only doing this as a percentage of total assets but giving Parliament some sort of say over a five-year horizon. I think this was the point that the noble Lord, Lord Macpherson, was making, but in a separate way. I was not actually aware that borrowing forecasts appear in documents relating to the Crown Estate—maybe they do, and in any event it would be worthwhile to have a look at them. There is a significant loss of parliamentary oversight in this Bill. There is very little parliamentary oversight at all of the Crown Estate anyway, despite it holding some of our national assets, but the Bill takes even more of that parliamentary oversight away, which I will come to in a subsequent group.

I believe that there is an opportunity to add some oversight, and therefore I came up with the idea that Parliament should be required to pass regulations that set out, by year, a five-year borrowing cap. Parliament could do that every year quite simply. That would obviously give flexibility, and it would enable debates to happen about the Crown Estate and whether it was heading in the right direction. The Treasury could be challenged about its involvement—apparently there is a transparent relationship between the Treasury and the Crown Estate, although I have found no notes relating to that which would indicate such transparency. That was my other idea.

There are many ways that the House might decide on Report to put a limit on borrowings. I am happy to hear the views of the Minister; I very much hope that he will appreciate that many noble Lords are trying to help.

Briefly, my Amendment 10 picks up the point made by my noble friend Lord Howard about the situation where the Treasury is going to be lending to the Crown Estate, and that will be down as an asset, and then that money could circulate back and go into day-to-day government spending. To me, that seems slightly odd. It would be good to get some sort of commitment to ensure that that sort of mechanism is somehow broken.

I am grateful to all noble Lords, especially my noble friend Lord Holmes of Richmond. I might come to his element about additionality when we come on to the reporting of the investment strategy of the Crown Estate in a later group.

[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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[The Deputy Chairman of Committees (Lord Geddes) (Con)]

As the noble Lord has spoken to the amendment, the Government may reply if they so wish.

[Lord Livermore (Lab)]

No.

Amendment 9 withdrawn.

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[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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[Lord Young of Cookham (Con)]

Before the Minister sits down, I am grateful for what he said. Can he confirm that he has not ruled out amending the draft memorandum of understanding in the way that I proposed?

[Lord Livermore (Lab)]

I would like to be helpful to the noble Lord. I am told that the memorandum of understanding deals exclusively with borrowing powers, so it may not be the most appropriate vehicle to insert that into.

[Lord Berkeley (Lab)]

Before the Minister sits down, I have a very simple question to ask him. We have had a very interesting debate, and I have understood much of it, but who does the Crown Estate—and therefore the Duchy of Cornwall—report to? Is it the Government or Parliament? Who controls them, or are they a law unto themselves? In spite of the amendment tabled by the noble Baroness, Lady Smith, I do not think the King comes into it.

[Lord Livermore (Lab)]

It is a very good question, and I shall endeavour to find the answer and write to my noble friend.

[Baroness Vere of Norbiton (Con)]

I am grateful to all noble Lords. That was an excellent debate and a lot of ground was covered. My favourite line of the debate came from the noble Baroness, Lady Kramer. She put her finger on it when she said that the Crown Estate was not a “cuddly organisation”. It does not need to be—it does not report to anybody, apart from its commissioners, and that is at the heart of the issue that I think many noble Lords are grappling with. The noble Baroness, Lady Kramer, was pleased with my recent conversion to pre-appointment scrutiny. I cannot guarantee that that will continue. I understand a new leader is in the offing in my party, so who knows what will happen?

The amendment that I put down was a useful way of probing some thinking around why the number of commissioners had to go from eight to 12. The response from the Minister was the sort of management jargon I used to learn at business school about 25 years ago. I am not much the wiser, but I will go back to Hansard and study his words carefully. Pre-appointment scrutiny, for the chair in particular, would be a very small but important change, particularly as we are dealing not with a cuddly organisation but with one which happens to own and manage some very important and valuable national assets. Therein lies the tension, and that is my concern.

Turning to the points raised by my noble friend Lord Young, it was a forensic analysis. I am sure many noble Lords learned much from it, not least how to structure a really good argument, which has stumped the Minister. I am pleased that he is stumped because I am sure that he will go away and look at it—indeed, I implore him to do so, such that we do not have to return to this, at length, on Report.

I hope that my noble friend Lord Holmes feels satisfied by the Minister’s response to his amendments. On the point raised by the noble Earl, Lord Russell, I presume that both he and I are pleased that the Crown Estate can already do what he wants it to do. I agree with him that it sounds completely obvious.

I am afraid that I am not happy with the Minister’s response on the question of disposals; in fact, I am probably more concerned by his response than I was beforehand. I am not sure that the nation would expect the complexion of the assets held by the Crown Estate to significantly change, so we may well come back to that. In the meantime, I beg leave to withdraw the amendment.

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[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.

[Lord Livermore (Lab)]

I thank all noble Lords for their powerful arguments made during this debate. I will address the amendments tabled by the noble Lords, Lord Holmes, Lord Teverson and Lord Young, the noble Baronesses, Lady Hayman, Lady Young and Lady Vere, and the noble Earl, Lord Russell, which all seek to make changes to the Crown Estate’s objectives and duties.

Before I move on, I will address two specific questions from the noble Lord, Lord Teverson, which I may not pick up in my subsequent remarks. He asked about conflicts of interest with leasing rounds. Under UK habitats regulations, the Crown Estate is deemed to be a competent authority for offshore wind leasing rounds. As such, it has a legal obligation to carry out a plan-level habitats regulation assessment for planned activities such as an offshore wind leasing round. It could be challenged through legal action if it fails to do this in line with the prescribed requirements.

The noble Lord also asked about the marine delivery route map’s interaction with the offshore wind report. The marine delivery route map gives the holistic context across sectors and sea users to support and inform individual sector delivery planning, while the offshore wind report offers technical insights and data, with both working in concert to ensure that offshore land development is efficient, sustainable and aligned with national and environmental goals.

The noble Baroness, Lady Kramer, also asked about a point of clarification. I will go away and check the questions she raises. Obviously, I apologise if I have inadvertently confused the two things she mentioned.

Amendments 14 and 28, tabled by the noble Lords, Lord Holmes and Lord Teverson, and the noble Earl, Lord Russell, seek to introduce new duties for the Crown Estate to protect the condition of the seabed. Amendment 14 would require the Crown Estate commissioners to take steps to protect the seabed, which forms part of the Crown Estate, and would include a prohibition on all activities, business practices, leisure pursuits and other actions that permanently or temporarily cause damage to the seabed.

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[Lord Teverson (LD)]

I make this comment as a former board member of the Marine Management Organisation. The 2010 regulations, in particular, which have come through Europe, have been very ineffective, as has much on the Minister’s list. Hence, I believe it important that we put the responsibility down to the owner, rather than to some high-level legislation and regulations that departments have not paid a lot of attention to in the past.

[Lord Livermore (Lab)]

I am sure the noble Lord is much more expert in those things than I am. I take what he says seriously.

The decision to grant leases is informed by advice from the relevant statutory nature conservation body, either via the statutory consent process or, where appropriate, direct engagement. It can include enhancement requirements. Statutory nature conservation bodies are responsible for providing advice to government and regulators on the management, monitoring and assessment of marine protected areas. For those activities that are deemed exempt from statutory consents, the Crown Estate requires applicants to demonstrate that advice has been sought from relevant environmental bodies to inform their decision on leasing.

More broad protections, which would prohibit even temporary damage anywhere on the UK territorial seabed owned by the Crown Estate, would also cause major disruption to many critical marine sectors. These include, for example, offshore renewable energy, which requires the burial of power cables in the seabed to transport energy to shore; the laying of subsea and telecom cables, which carry 99% of all intercontinental data traffic for the UK; the UK’s ports, harbours, marinas and shipping channels within UK waters that require dredging for the creation and maintenance of navigable depths; and the manufacturing industry, which relies on marine aggregates, which are used, for instance, on major construction projects, beach replenishment and coastal protection schemes across the UK. The Government therefore consider these amendments to be unnecessary given the existing statutory protections and the Crown Estate’s existing practices.

I turn next to Amendments 37A, 37B and 37C, tabled by the noble Baroness, Lady Vere, which would all place new duties in respect of granting licences to access the seabed. Amendments 37A and 37B would prohibit the Crown Estate from granting new licences to access the seabed unless it has considered the impact of those licences on commercial fishing and commercial shipping. While the Government support the spirit behind these amendments, the Bill will not directly impact how much commercial fishing or shipping takes place in areas managed by the Crown Estate, nor is the Crown Estate responsible for the regulation of these sectors.

The Crown Estate collaborates extensively with industry stakeholders, statutory nature conservation bodies, environmental non-governmental organisations and marine licensing bodies to ensure activities on the seabed are conducted responsibly and enable a restored and thriving marine environment. A recent blog post from the National Federation of Fishermen’s Organisations, for example, noted on engagement with the Crown Estate ahead of the offshore wind leasing round 5 in the Celtic Sea that the

“process succeeded in identifying and avoiding the places where it would be most harmful to the fishing industry to see turbines installed. The cooperation between the Crown Estate and fishermen was unprecedented and the outcome was a positive one”.

The Crown Estate has also invested £50 million in the offshore wind evidence and change programme, which includes several initiatives to consider and support the fishing industry. I will give two examples. The first is the fisheries sensitivity mapping and displacement modelling project, which identifies areas of offshore wind development that present risks to the fishing industry to try to reduce the likelihood of conflicts between the two sectors. The second example is the ecological effects of floating offshore wind research programme, which focuses on understanding how marine ecosystems will react to the planned large-scale expansion of floating offshore wind in UK waters over the next decade. The goal of this programme is to change the way the Crown Estate deploys floating offshore wind on a large scale, ensuring nature recovery and enabling co-existence with other sea users, including fisheries.

Amendment 37C would prohibit the Crown Estate from granting new licences to access the seabed unless it has considered the impact of those licences on coastal communities. Coastal communities are already a primary consideration of any investment decision by the Crown Estate. For example, it has 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, more 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.

We could of course make this an explicit duty for the Crown Estate in legislation, but if we did that then there are many other points we have debated today that could also be added as statutory duties. As I said earlier, a key purpose of the 1961 Act was to repeal various detailed statutory provisions that had built up over 150 years previously, to avoid the Crown Estate having to work through a maze of requirements for each investment decision.

I turn next to Amendments 15, 17 and 29, tabled by the noble Lord, Lord Holmes, and the noble Earl, Lord Russell. These amendments seek to create new objectives for, or impose new duties on, the Crown Estate. Specifically, Amendment 15 would require the Crown Estate to seek to prioritise the objectives of UK food security and to support the development and promotion of new technologies, including artificial intelligence, in the managing and turning to account of Crown Estate land.

Amendment 17 would require the commissioners to publish a review assessing how Crown Estate assets can be deployed to support nature prescribing. The amendment would also require the commissioners to work with NHS England and devolved counterparts to enable the Crown Estate’s nature assets to form part of a major UK-wide nature prescribing scheme.

Amendment 29 would require the commissioners, when exercising their duty in Section 1(3) of the 1961 Act, to act in a way best calculated to further the achievement of sustainable development and to seek to manage assets in a way likely to contribute to the promotion or improvement of economic development, regeneration, and social and environmental well-being.

Before I speak to these amendments it is worth reiterating that the Crown Estate is a commercial business, independent from government, that operates for profit and competes in the marketplace for investment opportunities, yet it is currently restricted in its ability to do so. As I have already set out, the Government believe that it is right that the Crown Estate continues to operate as a commercial enterprise. A key purpose of the 1961 Act, as I have noted, was to repeal various detailed statutory provisions that had built up over 150 years previously, which were hampering the effective management of the estate. Since then, the Crown Estate has shown itself to be a trusted and successful organisation with a proven track record in effective management. That is a valuable outcome, which I stress we need to be careful not to undermine.

This track record includes its commitment to enable the development of new net-zero technologies and to invest in artificial intelligence to enhance its habitat and environmental monitoring system. The Crown Estate has also made it clear that it is prioritising food security alongside nature recovery and enabling the diversification of income for its tenant farmers. The investment and borrowing powers proposed in this Bill will allow for even greater investment in these areas by the Crown Estate.

The Government believe that the Crown Estate’s existing duties give it a clear focus, leading to a consistently significant return to the Exchequer to support the funding of public services. At the same time, the Crown Estate is already able to, and does, focus on activities which also closely align with wider national needs, including energy security and sustainable economic growth. As a public body, the Crown Estate seeks to work with the grain of prevailing government policy.

I turn next to Amendments 25 and 30, tabled by the noble Earl, Lord Russell, and the noble Baroness, Lady Hayman. Amendment 25 would create a new duty for the Crown Estate commissioners in the exercise of their functions to take all reasonable steps to contribute to the achievement of targets under Part 1 of the Climate Change Act 2008; the achievement of biodiversity targets under Sections 1 to 3 of the Environment Act 2021; and to adapt to any current or predicted impacts of climate change as identified in the most recent report under Section 56 of the Climate Change Act 2008. This amendment would also require the Crown Estate to include conditions in all seabed leases for the leaseholder to contribute to the conservation and enhancement of the natural environment.

Amendment 30 would create a new nature recovery duty. This would require the Crown Estate to take steps to embed nature into spatial planning and seabed leasing, allocate space for nature recovery in all projects and invest in clean energy projects.

Before I explain the Government’s position, let me express strong support for the intention behind these amendments. It is right that the public and private sectors make every contribution they can to help achieve our climate change targets, and the Crown Estate should continue to be a national trailblazer in this regard. The Crown Estate has committed to becoming a net-zero carbon business by 2030, aligning with the 1.5 degrees trajectory, and will prioritise activities which help enable a reduction in national carbon emissions, such as building net-zero homes, transitioning its holdings to sustainable agricultural practices and working in partnership with government to meet the national renewable energy targets.

On the biodiversity targets in the Environment Act, the Crown Estate is committed to delivering a measurable increase in biodiversity by 2030. It will publish its delivery plan to meet this goal next year, which will include commitments to restore habitats in line with targets in the Environment Act. As I have already noted, all leases granted by the Crown Estate for development that affects the seabed already require the leaseholder to have the necessary statutory consents in place before development can begin.

The Crown Estate also published its approach on nature recovery last week, where it has committed to delivering increased biodiversity, to protect and restore freshwater, marine and coastal systems, and to increase social well-being benefits from nature. However, as I have already set out, the reforms being introduced in this Bill are not intended to alter the fundamental statutory basis of the Crown Estate as a commercial business independent from government.

The commissioners operate under a clear commercial objective, as set out in the 1961 Act, to maintain and enhance the value of the estate. I know that some noble Lords take a different view as to how the Crown Estate should operate, but it is the Government’s view that the existing statutory commercial focus, coupled with adherence to environmental and other nature requirements as set out in other legislation, as well as the need in the 1961 Act for the commissioners to have due regard to the requirements of good management, remains the best approach. One of the functions of the Crown Estate is to return its profits to the Exchequer each year, and it has returned a combined total of more than £4 billion in the last decade. This is used to fund the priorities of the Government of the day, which currently include spending on policy that helps achieve our climate change goals.

The more the Crown Estate’s core purpose in legislation is expanded, particularly with additional duties or objectives that may unnecessarily complicate, conflict with or risk compromising the achievement of that core commercial objective, the harder—

[Baroness Young of Old Scone (Lab)]

I know the Minister is anxious to get on to the dinner break business, but I think he misunderstands exactly what we are saying by asking for biodiversity and climate change target achievement to be included. The reality is that we want the Crown Estate commissioners to be able to walk, talk and chew gum. They have to be able to be smart enough to deliver on the commercial and economic imperatives that the Minister has been absolutely clear about—he has repeated them several times—and do the biodiversity and net zero delivery at the same time. That is doable but not if, as the Minister has just done, he continues to say and reinforce for the Crown Estate commissioners that their primary purpose is a commercial one, because that will always take precedence.

[Lord Livermore (Lab)]

I thank my noble friend for that intervention. With the greatest respect, it is not a lack of understanding; it is just a slight difference of opinion. As I said, I have great sympathy with the motives underlying this amendment, but the Government would seek to achieve them in a slightly different way from my noble friend.

[Lord Teverson (LD)]

I am very grateful to the noble Lord for giving way; I will make one final intervention. I welcome very much what he said about biodiversity and the wish to do that, but he has not mentioned biodiversity net gain. It is a government policy to introduce marine biodiversity net gain. Will that apply? As one of the co-developers to the Crown Estate, will they be responsible for that when they implement that policy?

[Lord Livermore (Lab)]

I will be completely honest and say I do not know the answer to that question. I will find out and let the noble Lord know.

I hope these explanations have been helpful and that the noble Lords, Lord Holmes, Lord Teverson and Lord Young, the noble Earl, Lord Russell, and the noble Baronesses, Lady Hayman and Lady Young, will feel able not to press their amendments as a result.

Crown Estate Bill [HL]

Lord Livermore Excerpts

Committee stage
Monday 14th October 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My Lords, I am very grateful to my noble friend Lord Holmes of Richmond for introducing his amendment, which leads this group, which is fundamentally concerned with the generation of energy on assets owned by the Crown Estate. This is even more important now that there is a formal relationship with GB Energy, which has been announced, although I accept that details of the relationship are quite thin on the ground. I entirely support the intention of my noble friend Lord Holmes of Richmond to require the publication of a report on the potential for energy generation on the Crown Estate, and I draw attention to my Amendment 35, which would ensure that no new electricity generation licences are granted without confirmation that a corresponding grid connection exists.

The problem of grid capacity, connection and storage is real and important. In May of this year, a House of Commons Environmental Audit Committee report found that in order to achieve net zero targets,

“the transmission and distribution network must develop and expand alongside the growth in supply and demand”.

It concluded that renewable energy generation may be stunted by “slow grid connections” and “limited grid capacity”. That is the issue I am trying to fix, and that all noble Lords are very much focused on. The Government must continue to look at it urgently if they are to build on the previous Conservative Government’s progress toward our clean energy targets. However, it is not an easy task. Even Green Party parliamentarians have been known to be vociferously opposed to measures to boost national grid capacity. I hear a Liberal Democrat laughing, and I am not entirely sure that that is appropriate. However, in the face of that kind of opposition, I ask the Minister to reassure the House that the Government have a plan to get on with increasing our national grid capacity.

At this point, I think it worth pushing the Minister, although we will come back to this on a later group, on the partnership with Great British Energy, which was announced to great fanfare a few months ago. I am still at a loss to explain how the new partnership between the two organisations, the Crown Estate and Great British Energy, will work and what difference it will make; indeed, this is the point of my amendment.

When the previous Conservative Government announced in the 2023 Autumn Statement plans to work with the Crown Estate to increase offshore wind capacity, that was predicted to unlock a further 20 to 30 gigawatts of new offshore wind seabed rights by 2030—great; that seems very fair. The Government have claimed that this new partnership will

“cut the time it takes to get offshore wind projects operating and delivering power to homes by up to half”.

Okay, but their press release of 25 July 2024 stated:

“The Crown Estate estimates this partnership will lead to up to 20-30GW of new offshore wind developments reaching seabed lease stage by 2030”.


To coin a phrase, nothing has changed. What difference does the partnership with GB Energy actually make, or did the Crown Estate get it wrong when it was working with the previous Government? Noble Lords can see the issue I have here: I do not understand how the tie-up with GB Energy is going to benefit that organisation, the Crown Estate and, indeed, the nation.

That, among other reasons, is why I tabled Amendment 34, which also requires a report on the energy generation supported by the Crown Estate. Its scope is wider than Amendment 16 and it facilitates greater oversight via reporting. It requires the Crown Estate commissioners to report annually on not only the expected impact of the relationship between the Crown Estate and GB Energy, but the actual impact. It would also include the investment strategy for capital investment in the infrastructure, including port infrastructure. This is where I am confused, because when I speak to the port sector, it tells me that finances are not particularly an issue. In a report published last month, the British Ports Association recognised that the sheer scale and speed of the investment needed to meet the ports’ offshore energy ambitions is significant. However, it called for a carefully managed investment in ports that fills gaps in ports’ supply chains that cannot be met by the private sector. These gaps can be filled by, for example, the national wealth fund, the Crown Estate or Great British Energy. Can the Minister explain who is managing, and which organisation will be investing how much in what, and when? I, for one, am confused. It is right to get some insight into this now, and to monitor progress in the future.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I will address the amendments tabled by the noble Lord, Lord Holmes, and the noble Baroness, Lady Vere, both of which touch on the topic of energy. I will start by addressing Amendment 16, tabled by the noble Lord.

This amendment would require the Crown Estate to publish a report within 12 months on the potential for energy generation on the Crown Estate, covering onshore and offshore wind grid capacity and energy pricing. While the Government are not in principle opposed to the Crown Estate producing specific reports on energy generation on its own estate, it is not within its remit or ability to report on grid capacity or pricing. As I have set out previously, the national grid and relevant transmission and distribution network operators are responsible for the UK-wide strategy on grid connectivity, and the new National Energy Systems Operator will be responsible for creating a strategic spatial energy plan, which will provide future clarity on grid connectivity.

The Crown Estate has already published, in September, a 53-page report entitled Future of Offshore Wind: Considerations for Development and Leasing to 2030 and Beyond, which looks at, among other things, the prime areas of opportunity for new wind farms. It has also recently published a Marine Delivery Routemap, which sets out its vision for the seabed and coastline.

Amendment 34, tabled by the noble Baroness, Lady Vere, would require the Government to publish a report on the scope, nature and expected impact of the relationship between the Crown Estate and Great British Energy within six months of the passing of the Act, and thereafter publish an annual report. The Government have no principled objection to such a report, but the timing might be more usefully linked to the passing of the Great British Energy Bill, currently in the other place, rather than the Bill we are discussing today.

--- Later in debate ---

[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.

[Lord Teverson (LD)]

My Lords, strangely enough, I am going to withdraw my amendment, to the shock of the Minister. However, I am seriously disappointed with the response.

I get absolutely all the supply chain arguments about development and maintaining offshore windfarms after the event, once they are operating. However, as the Minister knows himself, although some of the beneficiaries of those supply chains are local, some of them are international and are certainly not anchored to the region and those communities. The great thing about the Shetland example was that while the oil industry did very well—suppliers and lots of people came in—there were whole areas of the population of the Shetland Islands that did not benefit directly from those developments. Yet they did in the end, because of community wealth schemes—two of them, I think—that happened in Shetland. The same is true regionally.

When it comes to the argument that the Crown Estate would lose out on money or whatever from this, I would put the opposite view. A community or regional wealth fund would actually accelerate the ability to deliver these projects, because there would not be the opposition that there might be otherwise. I absolutely agree with the noble Lord, Lord Bellingham, and thank him for his contribution. It was good, as always, and emphasised the effect of coming onshore and all the facilities that are required, such as pylons and all the rest of it.

What it comes down to is a matter that I think everybody normally agrees with: a just transition. A regional wealth fund allows a just transition. I was going to quote back the Labour Party manifesto on just transitions, but strangely enough it does not mention that the transition should be just. That is a shame, but I genuinely believe that this will allow this important programme, which the Government are rightly pushing forward, to accelerate, be successful and have local and regional acceptance. At this point, I beg leave to withdraw my amendment.

Crown Estate Bill [HL]

Lord Livermore Excerpts

Committee stage
Tuesday 22nd October 2024 Lords Chamber

[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.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am grateful to the noble Earl, Lord Russell, for his amendment and I will seek to address some of the points that he has raised. This amendment would require the Government, within one year of the passing of this Act and annually thereafter, to lay before Parliament a report into the effect of this Act on the size of the sovereign grant. The Government agree that it is important that there is transparency in how the sovereign grant is affected by changes in Crown Estate profits. Indeed, the Sovereign Grant Act 2011 includes a number of requirements that provide for regular effective review and reporting to Parliament.

As the noble Earl observed, under the Act, the grant for each financial year is set by reference to the profits of the Crown Estate. In broad terms, under Section 6 of the Sovereign Grant Act it is currently the higher of 12% of the Crown Estate profits two years previously or the previous year’s grant. For example, the level of the grant for 2025-26 will be set at 12% of the profits the Crown Estate reported in its annual accounts for 2022-23, published in July.

Section 7 of the Sovereign Grant Act provides for regular reviews of the percentage used in calculation of the grant to ensure the grant remains at an appropriate level. These reviews are conducted by the three royal trustees—the Prime Minister, the Chancellor of the Exchequer and the Keeper of the Privy Purse. The trustees must lay a copy of the report of their review before Parliament. The last review concluded in July last year and concluded that the reference rate should be reduced from 25% to 12%, reflecting an expected increase in the Crown Estate’s profits. The next review will commence in 2026, with a view to making any change to the grant calculation for 2027-28 onwards. As with previous reviews, it will consider both the future funding needs of the Royal Household and the likely future path of Crown Estate profits—including, of course, the effect of the Crown Estate Bill that we are debating today on those profits—to determine the appropriate percentage to use.

I should note in this context that the grant for 2026-27 will include the final tranche of funding for the current 10-year programme of reservicing of Buckingham Palace’s infrastructure. The percentage for 2027-28 onwards will therefore need to reflect the significant downward adjustment to the household’s funding requirements. The Sovereign Grant Act currently restricts the level of the grant itself being reduced from one year to the next. That provision was written into the Sovereign Grant Act to reflect the view that many of the duties of the Head of State cannot be abruptly stopped, and therefore it would not be appropriate to significantly reduce funding in response to a sudden drop in Crown Estate profits. That will, however, constrain the ability to reduce the grant by the likely appropriate amount once the reservicing of Buckingham Palace is complete. In 2016, when the previous Government agreed to provide funding for the resurfacing programme, they noted an intention to bring forward legislation to reset the level of the sovereign grant to an appropriate level once the reservicing works have been completed. I can confirm that it is also the intention of this Government.

Those statutory reviews therefore provide Parliament with a report of the impact of this Bill on the sovereign grant. They also provide a mechanism to ensure that additional Crown Estate profits do not lead to excessive funding for the Royal Household. Where that is not possible under the Sovereign Grant Act, the Government will legislate accordingly.

On reporting requirements, the Sovereign Grant Act also requires two further reports on the grant to be produced and laid before Parliament each year. First, Section 5 requires the royal trustees to produce a report annually stating the level of the grant for the following financial year and how that has been determined in line with a prescribed method set out in Section 6 of the Act. This report must be laid before Parliament. Secondly, Section 2 requires the Keeper of the Privy Purse to produce annual accounts relating to the Royal Household, including the use of the sovereign grant. In common with other central government bodies, the accounts are prepared in accordance with an accounts direction issued by the Treasury, audited by the National Audit Office and laid in Parliament. The Crown Estate Act 1961 also contains a requirement for the Crown Estate to produce an annual report and accounts.

The Government therefore agree that it is important that there is regular reporting to Parliament on how the changes in this Bill will impact the sovereign grant. As I have detailed, there is already a considerable set of statutory requirements in this respect and beyond.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords for the points raised during this debate and for powerfully highlighting such important issues. I will respond to the amendments tabled by the noble Lords, Lord Forsyth and Lord Douglas-Miller—who was the Minister for Animal Health and Welfare in the previous Government—and the noble Earl, Lord Leicester, which all touch on environmental and animal welfare protections.

These amendments would require the Crown commissioners to assess, on an ongoing basis, the environmental impact and animal welfare standards of, respectively, salmon farms, offshore energy installation and generation and aquacultural practices on the Crown Estate. Where that assessment determines that a salmon farm, a relevant offshore energy installation and generation, or relevant aquaculture is causing environmental damage or has significant animal welfare issues, the Crown Estate would be required to revoke the relevant licence. The commissioners would also be required to make the same assessment of any applications for new licences for salmon farms or the installation and generation of offshore energy on the estate. Where the commissioners determine that an application may cause environmental damage or raises significant animal welfare concerns, the Crown Estate must refuse the application.

The Government wholeheartedly support the objectives behind these amendments. It might help noble Lords if I set out the protections that currently exist in regulations and legislation, which apply regardless of the landlord. All aquaculture activity in England, including salmon farming, is regulated with the intention of ensuring that it is carried out in a responsible manner that respects the environment and protects consumer health and animal welfare, although I appreciate from the powerful speech by the noble Lord, Lord Forsyth, that this intent is not currently being achieved. At present, virtually all salmon aquaculture in the UK takes place in Scotland. As has been observed, the management of the Crown Estate in Scotland is a devolved matter.

The Government’s starting point is that these amendments may duplicate existing protections that already exist in legislation or protections that are required by regulators as part of the licensing process for aquaculture and offshore energy installations. Specifically, the Animal Welfare Act 2006 makes it an offence to cause unnecessary suffering to any protected animal. The assimilated Council Regulation No. 1099/2009 on the protection of animals at the time of killing requires that farmed fish are spared avoidable pain, distress or suffering during their killing and related operations. The Aquatic Animal Health (England and Wales) Regulations 2009 contain provisions to protect farmed fish from serious disease by introducing a system of authorisation for businesses involved in aquaculture.

To address a point on environmental impacts made by the noble Earl, Lord Leicester, the Conservation of Habitats and Species Regulations 2017 require the competent authority—in this context, the Crown Estate —to determine whether a plan or project is likely to have a significant effect on a European marine site. If so, it is then subject to an appropriate assessment. If that assessment shows that the plan or project could have an adverse impact on the integrity of the site that cannot be mitigated, authorisation of the activity must be refused unless specific derogations apply. For marine areas that are designated as a marine conservation zone under the Marine and Coastal Access Act 2009, a marine conservation zone assessment is carried out by the public authority to test activities that may hinder the achievement of the conservation objectives of the specific zone and decide from the assessments whether the application for an activity can be authorised.

The Crown Estate seeks to supports the regulators through the inclusion of necessary requirements on any leases and requires all practitioners to comply fully with all legal obligations, including animal welfare practices. When developing or managing its assets, especially in areas such as offshore wind farms, coastal management and urban redevelopment, the Crown Estate must comply with regulations that require environmental impact assessments. An example of this happening in practice was in February 2017, when the Crown Estate launched an opportunity for existing wind farms to apply for project extensions. Following a habitats regulations assessment, the Crown Estate confirmed that seven of these extension application projects would progress to the award of development rights.

The Crown Estate also received an application for an extension project where the majority of the site of the proposed extension sat within the Inner Dowsing, Race Bank and North Ridge special area of conservation. The plan-level habitats regulations assessment determined that it would not be possible to rule out an adverse effect on the integrity of the special area of conservation. Therefore, the Crown Estate decided that this extension project would not progress to the award of leasing rights as part of the 2017 extensions round.

On the point raised by the noble Lord, Lord Teverson, about looking at impacts holistically, that is exactly what this Bill seeks, by enabling the Crown Estate to map the whole seabed and therefore improve the understanding of how to ensure benefits for nature for the long term.

I would be interested to know in due course whether noble Lords consider that these existing regulations and the legislation are inadequate or are currently being inadequately applied. I hope that, for now, the noble Lords, Lord Forsyth and Lord Douglas-Miller, and the noble Earl, Lord Leicester, feel able not to press their amendments.

[The Earl of Leicester (Con)]

Is the Minister able to address the issue of pollution from all these crew transfer boats? I mentioned 125 million litres of diesel every year. If we are to have many more wind farms out to sea, that amount of diesel may get very large. Can he comment on converting these boats to electric?

[Lord Livermore (Lab)]

I am afraid that is not something I know about, but I am happy to write to the noble Earl.

[Lord Forsyth of Drumlean (Con)]

My Lords, I am grateful to the Minister for that reply, which was clearly written by Treasury officials who do not get out very much. The Minister has been kind enough to say that we should indicate whether we think the existing legislative requirements and regulations are working. We have just had an excellent debate, which has made it absolutely clear that wild salmon are being destroyed, not just in this country, but elsewhere, so the answer is: it is hurting, and it is not working. A very modest requirement on the landlords, the owners of the seabed to—

[Lord Livermore (Lab)]

Just to be clear, I wanted clarification as to whether the existing legislation could work, or, in itself, could not work.

[Lord Forsyth of Drumlean (Con)]

I would be very happy for the Minister to come back with an amendment that would indicate how it could be made to work, because it is not working. It seems to me a very modest measure that would say to the Crown Estate that it has given a licence to these people, so it is therefore under a duty to make sure that they act in accordance with all regulations and in a way which protects the environment for which they have responsibility. I cannot imagine why the Minister would reject that.

In view of the very inadequate response, I am very tempted to test the opinion of the Committee, but I will not because I hope that, perhaps in further discussions with the Minister, we can get an amendment which will actually offer some degree of protection to the hundreds of thousands of fishermen who are concerned about this, to the communities who are concerned about this and to the many, many people on a cross-party basis. I cite the example of the noble Baroness, Lady Jones, and I who are united; we are linked at the hip in our determination to make this happen.

However, I would like to thank everyone who has spoken in the debate in support of not just my amendment but that of my noble friend Lord Douglas-Miller, who made a very fine speech explaining precisely why things are not working. I am grateful to my noble friends Lord Trenchard, Lord Strathclyde, Lord Moynihan and Lord Caithness, the noble Baroness, Lady Jones, of course, and the noble Earl, Lord Kinnoull—it is quite a gathering. The Minister ought to go back and think about this again, and we will table a further amendment on Report.

I am most grateful to my colleague my noble friend Lord Roborough for the support that he gave to this amendment and his careful consideration. I have to say that I am not sure the Minister’s officials have shown the same diligence in looking at what is a major problem which, if not tackled with immediacy, will see the extinction of the wild salmon in this country. That is not something that any Government would want on their record. Given the response, I beg leave to withdraw my amendment.

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[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.

[Lord Livermore (Lab)]

My Lords, Amendment 37D, tabled by the noble Earl, Lord Kinnoull, would require the Secretary of State to lay a report before Parliament within 12 months of the day this Act is passed that assesses any differences between the provisions made by this Act for the management of the Crown Estate in England, Wales and Northern Ireland, and equivalent provisions for the management of the Crown Estate in Scotland.

It is possible now to provide such an assessment, and I am happy to set that out. Section 36 of the Scotland Act 2016 inserted a new Section 90B into the Scotland Act 1998. Subject to certain exceptions, Section 90B provided for the devolution in relation to Scotland of the commissioners’ management functions relating to property, rights or interests in land in Scotland and rights in relation to the Scottish zone.

Devolution occurred on 1 April 2017 under, and in accordance with, the Crown Estate Transfer Scheme 2017. The relevant property, rights and interests are now managed separately by Crown Estate Scotland under the Crown Estate Scotland (Interim Management) Order 2017 and the Scottish Crown Estate Act 2019, as enacted by the Scottish Parliament. They do not form part of the Crown Estate as currently managed by the Crown Estate commissioners.

The relationship between Crown Estate Scotland and the Scottish Government is governed by a public framework document which sets out a broad framework within which Crown Estate Scotland operates, and certain financial aspects. Any changes to that framework document or the wider legislation that underpins it are a matter for the Scottish Government.

I turn to the principal differences and similarities. The Bill grants the commissioners of the Crown Estate a power to borrow with Treasury consent and provides the Treasury with the power to issue loans and financial assistance to the commissioners, including out of the National Loans Fund. The Bill also specifies that the Treasury may determine the rate of interest on any loan and requires the Treasury to pay any sums received in respect of the loan into the National Loans Fund.

In comparison, Part 2, Section 1.1 of the framework document for Crown Estate Scotland explains that

“Scottish Ministers may make grants and loans to Crown Estate Scotland”

and such grants and loans are

“subject to such conditions (including conditions as to repayment) as the Scottish Ministers may determine”.

Part 2, Section 2.1 requires that:

“All borrowing by Crown Estate Scotland … shall be from the Scottish Ministers in accordance with guidance in the Borrowing, Lending & Investment section of the”


Scottish Public Finance Manual.

On investment, this Bill clarifies the commissioners’ existing ability to invest by inserting into the 1961 Act that:

“The powers exercisable by the Commissioners in the discharge of their functions under this Act include powers to do anything which is calculated to facilitate, or is conducive or incidental to, the discharge of those functions”.

It also omits subsection (4) from Section 3 of the 1961 Act, which will broaden the commissioner’s investment powers.

In comparison, Part 1, Section 3.2 of the framework document for Crown Estate Scotland explains that Scottish Ministers are responsible for

“approving Crown Estate Scotland’s Corporate Plan”,

which includes their investment strategy. Part 2, Section 7.3 requires Crown Estate Scotland to

“undertake investment in line with its legislative duties”,

which are set out in the Scottish Crown Estate Act 2019, principally in Part 3, across Sections 7 to 21.

On the constitution of the commissioners, the Bill increases the maximum number of commissioners from eight to 12 and omits the requirement that the second Crown Estate commissioner, if any, be deputy chairman. It also simplifies the legislative process by which commissioners are paid, such that the commissioners’ salaries and expenses are paid directly out of the income of the Crown Estate, rather than out of money provided by Parliament, which comes from the return made by the commissioners to the Government each year.

In comparison, under Part 1, Section 3.5 of the frame- work document for Crown Estate Scotland, the board membership is limited to nine members, including the chair. On remuneration, Section 7 of the Crown Estate Scotland (Interim Management) Order 2017 makes it clear that

“Crown Estate Scotland … must pay each member such remuneration and allowances (including expenses) as the Scottish Ministers may determine”.


The differences between these two organisations reflect the fact that the organisations have formed in different ways. The 1961 Act, which, as I have set out, is the legislative basis of the Crown Estate in its current form, was fulfilling a recommendation of the government Committee on Crown Lands—as set out in its report presented to Parliament in June 1955—to appoint an independent board of commissioners to manage the Crown Estate, with provisions designed to enable Parliament and the Treasury to know how it is discharging its responsibilities. To briefly quote from the 1955 report:

“The board should be a public authority, but not a government department in the sense of an organ of executive government. … We do however respectfully advise that the board should be more, not less, independent than the present Commissioners and that they should be given defined powers and duties as trustees and allowed to work them out with the minimum of direction and control.”


In comparison, Crown Estate Scotland was created by the Scottish Crown Estate Act 2019, which makes specific provisions about the management of the Scottish Crown Estate and followed on from a process of devolution established by the Scotland Act 2016. Crown Estate Scotland is specifically required to align its aims and objectives with the Scottish Government’s published programme for government, and Scotland’s economic strategy and national performance framework.

I hope this assessment was helpful and that I have provided some clarity on the points raised.

[The Earl of Kinnoull (CB)]

It is very interesting that the Minister has not mentioned—unusually, because he is always incredibly well briefed—the Crown Estate Transfer Scheme 2017, which was the scheme under Section 90B of the Scotland Act, under which this was transferred. Schedule 4 of that is headed, “Protection of UK-wide interests”, which is quite a thing, and the subject we have been talking about this afternoon. I wonder whether he would comment on that and how it affects the assessment that he has just made.

[Lord Livermore (Lab)]

I am happy to write to the noble Earl on that point. In the meantime, I hope he will feel able to withdraw his amendment.

[Lord Forsyth of Drumlean (Con)]

The Minister has not really addressed the fundamental point made by the noble Earl, Lord Kinnoull: fish and birds do not know where the border is between Scotland and the rest of the United Kingdom, and there are common interests. All he has done is read out a list of regulations and statutes that apply to the two commissions. I think the noble Earl was asking what provisions can be made, so that the two sets of commissioners are able to operate in the interests of the United Kingdom as a whole. As a unionist, he will surely appreciate the importance of that.

[Lord Livermore (Lab)]

What I read out was a response to the amendment tabled, which asked for exactly that; that is why I read it out. The noble Lord raises profound constitutional questions which I may not be the right person to address them to.

[The Earl of Kinnoull (CB)]

I asked a question as well: is the Minister going to afford every assistance to what is going on? This is something worth discussing. There is a danger here, and it is in the interests of all of us, as sub-owners of the Crown Estate, that the position is regularised. I am sorry if symmetry is too strong a word because they are differently enacted, but it is important to be in a position where they have very similar powers. It is in the interests of everyone in these islands that the two things can work together when required and that they have similar powers, so they can engage in the same energy deals and the same things in aquaculture.

It would be very helpful to have a meeting with the Minister to go through some of this in detail. Sadly, obviously, he has not been showing me the scheme and the scheme deliberately had—I cannot remember which subsection of Section 93 it was—the power to lay the scheme and to have some exceptions in what is going on. It is not as simple as everything simply being exported. It is being exported and there is essentially an option over every square inch of the land that is exported to come back into the UK as a whole in certain circumstances. That is the effect of Schedule 4 of the Crown Estate Transfer Scheme 2017. It is very important, so I ask the Minister, before he sits down, whether he would agree to have a meeting. It sounds as if the noble Lord, Lord Forsyth, would like to come to that meeting as well.

[Lord Livermore (Lab)]

I am very happy to have that meeting. I do not know whether the noble Lord does want to join, but of course he is always welcome.

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[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]

Lord Livermore Excerpts

Report stage
Tuesday 5th November 2024 Lords Chamber

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am grateful for the contributions from all noble Lords on this group of amendments. As I set out in Committee, the Government recognise that the matter of controls on borrowing is an important consideration for noble Lords.

I listened carefully to the concerns raised at previous stages of the Bill. I found the arguments put forward by the noble Baroness, Lady Kramer, to be particularly compelling. As such, I committed to sharing the underpinning memorandum of understanding, which sets out the parameters and controls relating to the power to borrow, as well as the original business case and the framework document. Following on from my commitment, these documents were shared with noble Lords and have been deposited in the Library. I am grateful to the noble Baroness for her words just now.

The memorandum of understanding set out that borrowing by the Crown Estate will be limited to a maximum of 25% loan to value, defined as net debt-to-asset value, and that any borrowing within that limit can be undertaken only with the consent of the Treasury.

The framework document will be amended, as I have shared, to include references to borrowing powers, and the original business case produced by the Crown Estate makes the argument for the Crown Estate being able to borrow with the consent of the Treasury, in line with its peers, to ensure that it can continue to operate sustainably and drive maximum returns to the Exchequer.

I trust that having sight of these documents has been useful for noble Lords and has provided an additional opportunity for scrutiny of the proposed borrowing. Let me be clear that the Government agree that controls on borrowing must be in place. As I have set out previously, borrowing can be undertaken only with the consent of the Treasury and, as outlined in the memorandum of understanding, borrowing is not to exceed 25% of loan to value, defined as net debt-to-asset value. This is a clear and carefully chosen guard rail to ensure that sufficient limits are in place. The proposed powers will enable the Crown Estate to draw on its cash holdings first and, as such, it is not envisaged that these borrowing powers will be used in the short term.

Amendment 1, tabled by the noble Baroness, Lady Vere, and supported by the noble Lord, Lord Howard, would require the Secretary of State to limit borrowing by the Crown Estate by affirmative regulations, and for the first set of regulations to set the limit at 25% net debt-to-asset value.

As debated in Committee, the principle here is whether a specific cap should be in statute. The Government’s view remains that the limit is better placed outside of legislation. The primary control, set out in the Bill, is the requirement for Treasury consent to be obtained prior to undertaking any borrowing. In addition to this important safeguard, we are retaining the requirement for the Crown Estate commissioners to maintain and enhance the value of the estate, while having due regard to the requirements of good management as set out in the 1961 Act.

Taken together, these two elements maintain and strengthen the existing and important fiduciary duty of the commissioners not to take decisions that could endanger the estate. The Government believe that these safeguards and the limits set out in the memorandum of understanding provide clear guard rails to the powers set out in the Bill.

The 1961 Act also contains a power of direction. This power is not altered by the Bill. It remains open to the Government to use in extremis; if, for example, there were concerns that the commissioners were endangering the core statutory purpose of the Crown Estate.

As I have set out previously, the Crown Estate is a commercial business, independent from government. It operates for profit and competes in the commercial markets for investment opportunities. To ensure that it can compete effectively, it needs the ability to borrow as its competitors can. Imposing a legislative cap on borrowing would likely place additional restrictions on the Crown Estate that its competitors in the private sector do not face. This would not be consistent with the Government’s vision for the Crown Estate: to ensure that it has flexibility to invest in activities that will drive increases in its revenues and, consequently, its returns to the public purse.

As set out in the Crown Estate’s original business case, which I have shared with noble Lords, the limit of 25% loan to value is consistent with its peers. I hope this demonstrates to noble Lords that these plans have been considered carefully.

Let me also be clear that any request by the Crown Estate to draw down on debt will be carefully considered by the Treasury in the context of the fiscal position and in line with our fiscal rules. As the Chancellor set out in the Budget, the Government have set out our robust fiscal rules alongside a set of responsible reforms to the fiscal framework to improve certainty, transparency and accountability. The stability and investment rules will put the public finances on a sustainable path while allowing the step change needed in investment to drive long-term growth.

I hope that these explanations are useful and reassure the House that the Crown Estate’s power to borrow will be carefully monitored and controlled within these parameters. I hope I have provided some clarity on the Government’s position and that as a result the noble Baroness, Lady Vere, feels able to withdraw her amendment.

[Baroness Vere of Norbiton (Con)]

My Lords, I am grateful to the Minister for his response and to the noble Baroness, Lady Kramer, although I am sorry to hear that she will not be able to support the amendment. Noble Lords will not be surprised to hear that I do not agree with her.

While I agree with the noble Baroness’s assessment of the documents that were published by the Minister—it was helpful to see the memorandum of understanding, the draft framework and the business case—that is not really the point, because they do not go far enough. Those documents can be amended by this or any future Government. As the Minister referred to, and as I tried to explain in my opening remarks, this is the original business case, but there is no business case that currently sets out what the relationship with GB Energy looks like and what it will do to borrowing.

GB Energy is going to invest billions of pounds. How much of that is going to come from GB Energy and how much from the Crown Estate? No one knows. It is important that we make sure that it is impossible for the Crown Estate to ramp up borrowing without at least some oversight from Parliament. The Minister said, “It’s okay—the maximum is 25%”, but of course this Government or any future Government can change that unilaterally.

The Minister mentioned that competitors somehow do not have any caps on borrowing. Of course they do; they are commercial businesses, so the caps on their borrowing will be set by their banks. If the Minister looks at the original business case that he shared with us, he will see that all the competitors sit around the same sort of level of loan to value.

To go back to the original point, this is a sensible, simple and reasonable amendment. It would put in place just two checks: first, whether the Crown Estate should be borrowing now, and up to 25%, with the assessment done on a new business case, including GB Energy; and, secondly, another check, at some point long in the future, if ever, should the Crown Estate ever want to go above 25%. I think our nation’s assets need that sort of protection, and I therefore wish to test the opinion of the House.

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[Earl Russell (LD)]

My Lords, I rise briefly to speak to Amendment 2 in the name of the noble Baroness, Lady Vere of Norbiton. This simple amendment seeks that the chair of the Crown Estate commissioners be appointed by the Treasury Select Committee. On these Benches, this seems like a reasonably sensible idea. This is an important appointment and should have an adequate level of pre-appointment scrutiny.

I welcome the letter from the noble Lord, Lord Livermore, sent yesterday, pointing out the established process for the Cabinet Office and that this could be added to the pre-appointment scrutiny list. To our minds, that is a very sensible answer and a way forward. It is a way of resolving this issue. My only real question in relation to this is that the Minister says this will be done in “due course”. Can he give us a clearer idea of what he means by that? What is the timeframe?

Further to that, in relation to the amendment from the noble Lord, Lord Hain, calling for commissioners from individual countries to be appointed to the Crown Estate, I ask the Minister: will those appointments also be subject to this type of pre-appointment scrutiny?

I turn now to Amendment 14, also in the name of the noble Baroness, Lady Vere. It seeks to require the approval of His Majesty’s Treasury for the disposal of assets over £10 million, and the commissioners to inform the Treasury if assets over a value of £10 million are disposed of in a single year, then requiring the Treasury to approve of the disposal of those assets and to report that to Parliament within 28 days.

Again, the noble Lord, Lord Livermore, responded to this in his letter to all Peers yesterday, and we welcome that response. The Minister pointed out that this was a complicated matter, and that he would bring forward an amendment to address this concern. His engagement with that is welcome. This is an important issue—assets should not be disposed of by the Crown Estate without ministerial approval—but I seek further clarification from the Minister. When he says that this will be brought forward, will it be before Third Reading in this House? If it is not possible to bring that clarification forward before Third Reading, can the Minister give an undertaking that it will happen before Report in the other place?

On this amendment, our preference is that a compromise way forward is agreed. In fact, both amendments are matters that should be resolved without resorting to testing the opinion of the House.

[Lord Livermore (Lab)]

My Lords, I thank all noble Lords for their contributions to this debate. First, I would like to address the points raised by the noble Lord, Lord Young of Cookham. I thank him very much for his engagement on this issue since Committee. I am also extremely grateful to him for raising the issues around the law relating to ownerless land and the process of escheat. It is a legally complex area and long overdue for reform. As a result of his intervention, Treasury officials are now engaging with the Law Commission on options for longer-term reform.

On the specific issues raised by the noble Lord, I am grateful to him for meeting with me, Treasury officials and the Crown Estate after Committee to discuss his specific concerns in detail. At the meeting we gained useful clarity that in cases of escheat the Crown Estate follows the valuation formula set out in the Leasehold Reform, Housing and Urban Development Act 1993, as he said.

As the noble Lord requested in Committee, I have agreed to update the framework document that governs the relationship between the Treasury and the Crown Estate to make this clear. The addition in paragraph 7.2 will set out that the commissioners have a responsibility to ensure that all public undertakings given on the Crown Estate’s behalf by Ministers in Parliament are met. I have raised the noble Lord’s suggestion about the specific accounting change with the Crown Estate and will follow up in due course.

Amendment 2, tabled by the noble Baroness, Lady Vere, would require scrutiny by the Treasury Select Committee, or any successor committee, of future chair appointments before the appointment can be made. She spoke persuasively on this in Committee, and I agree with many of the points she raised. For this reason, I am happy to confirm that the Treasury will work with the Cabinet Office to add the role of chair to the official pre-appointment scrutiny list. This will be in accordance with the already-established process by which significant roles, such as this, are added to the Cabinet Office’s pre-appointment scrutiny list. As I have set out, I will be very happy to update noble Lords in due course. The noble Earl, Lord Russell, asked when that will be. I will come back as soon as I have relevant information. We are already working with the Cabinet Office, and I do not envisage there being a significant delay.

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Moved by

[Lord Livermore]

3: After Clause 2, insert the following new Clause—
“Annual reportsIn section 2 of the Crown Estate Act 1961 (reports and accounts), after subsection (1) insert—“(1A) The annual report for a year in which a partnership between the Commissioners and Great British Energy is in operation must include a report on—(a) the activities of the Commissioners during the year under that partnership, and(b) any effects or benefits experienced during the year which were the result of activities of the Commissioners under that partnership.”” Member’s explanatory statement
This amendment would require the Commissioners to include in their annual reports a summary of the things done, and of any effects or benefits or effects resulting from things done, under any partnership between themselves and Great British Energy. The duty will only apply in relation to a year in which such a partnership was in operation.

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[Lord Livermore (Lab)]

My Lords, I will address other noble Lords’ amendments in this group during my closing speech, after listening to the debate.

I have listened to the arguments and concerns put forward at Second Reading and in Committee by the noble Baroness, Lady Vere, on how the new partnership between the Crown Estate and Great British Energy will work and the difference it will make. The Crown Estate is of course keen to ensure that details of this partnership are publicly available on an ongoing basis, and the Government therefore propose an amendment to require the Crown Estate to include, in its existing annual report, a report on the activities of the commissioners during that year under the partnership with Great British Energy, and any effects or benefits during that year resulting from activities of the commissioners under the partnership.

I am grateful to the noble Baroness, Lady Vere, for her engagement on this matter, and to other noble Lords who have raised similar concerns, and I trust that this amendment meets those concerns. I hope that noble Lords feel able to support this amendment as a result. I beg to move.

[The Earl of Kinnoull (CB)]

My Lords, I will speak to Amendment 5, which stands in my name. I thank the Minister and his Bill team for their time in what is always the busiest period of the Treasury’s life. He was happy to give time, and I am very grateful for that and for the sensible discussion that we had.

The amendment is designed to be the gentle pencil in the back, as I put it in Committee, in order that the Crown Estate Scotland be afforded the same freedoms and flexibilities that the Crown Estate will have following the passage of the Bill. I described in Committee how the Crown Estate Scotland had advised me that the Scottish Government were keen that it has those. I know that the UK Government are keen that it does so, as is the Crown Estate itself.

There are many opportunities for collaboration, particularly for energy projects in the North Sea at the moment, but there will be other opportunities as well for aquaculture. There is the ability to copy the good and avoid the bad, given that a number of copycat transactions might be done using Crown Estate property going forward. This is of course in all our interests, because ultimately this is very much part of the net-zero agenda, and the more the two Crown Estates can be aligned the better it will be for everybody in the long term.

The amendment is, as I said, a gentle pencil, designed to ensure that the UK entities do not down tools following the passage of this Act but carry on enthusiastically to ensure that Crown Estate Scotland benefits from the same freedoms and flexibilities. I therefore ask my only question of the Minister: does he share this aim of ensuring that those freedoms and flexibilities are afforded, and does he feel that this amendment is a proportionate way of going about it?

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[Baroness Vere of Norbiton (Con)]

My Lords, I entirely agree with my noble friend Lord Forsyth. In tabling Amendment 5, the noble Earl, Lord Kinnoull, has hit upon something here; it is a report that would be worth doing. When I was having discussions about the Bill between Second Reading and Committee, I spoke to people in the port sector and they were very concerned that, if there is to be investment in ports in one part of the country, that investment should be equally likely to happen in another part of the country—namely, Scotland. It is an important opportunity, and I am sure that the Minister will respond in a positive fashion, as far as he can.

Turning to government Amendment 3, I am grateful to the Minister, who listened to concerns from all sides of the House about ensuring that sufficient information is forthcoming about the relationship between Crown Estate and Great British Energy. I am somewhat disappointed that we never saw the partnership document. I still suspect that that is because it does not exist, so I am not entirely sure what the partnership is; but let us put that to one side. I am looking forward to seeing information come through on the results of this partnership as we go forward.

I note what the noble Earl, Lord Russell, said about the intention behind his Amendment 8. Any noble Lord who has looked at the Crown Estate annual report will know that it is already quite detailed, and I appreciate that a lot of work has been put into sharing information about the organisation with stakeholders. I suspect that his amendment is too detailed to be wholly useful, but I am sure that he has picked out various elements that the Crown Estate will no doubt take note of and include in future reporting.

[Lord Livermore (Lab)]

My Lords, I thank all noble Lords for their contributions to this debate. Let me once again say that I am particularly grateful to the noble Baroness, Lady Vere, for her constructive engagement prior to today in relation to Amendment 3, tabled by the Government. It is important that certain details on the partnership between the Crown Estate and Great British Energy are publicly available on an ongoing basis, and I trust that this amendment meets the concerns raised on this matter by the noble Baroness and others across this House.

Amendment 8, tabled by the noble Earl, Lord Russell, would create a new reporting requirement on the Crown Estate commissioners, requiring them to publish an annual report, to be sent to the Environmental Audit Committee of the House of Commons, which must consider the commissioners’ activity in the contribution to supporting local communities and economies, the achievement of the United Kingdom’s climate and environmental targets, the relationship with Great British Energy, a just transition to green energy, a jobs and skills transition into the green economy, the promotion of animal welfare in aquaculture on the Crown Estate, the protection of the foreshore on the Crown Estate and the protection of the seabed in the Crown Estate. It would also require the commissioners to appear before the Environmental Audit Committee if requested.

I thank the noble Earl for his constructive engagement on this matter prior to today. I agree with him that these are important areas and, as a result, we have agreed with the Crown Estate that we will make a further update to its public framework document to clarify that its annual report must continue to include a report on the Crown Estate’s activities in terms of sustainable development, covering the impact of its activities on the environment, society and the economy.

It is important that this Bill stands the test of time and that, as new, relevant areas of concern on the environment, society and the economy emerge over the coming decades, these are covered in the Crown Estate’s annual report too. The proposed changes to the framework document, which also directly address other concerns, have been made deliberately broad in an attempt to cover the wide range of specific concerns the House has raised, including those raised by the noble Earl. On Great British Energy specifically, as I have set out, the Government have also now tabled an amendment that creates a reporting requirement for the Crown Estate to cover in their existing annual report a summary of its activities in relation to Great British Energy.

I turn next to Amendment 5, tabled by the noble Earl, Lord Kinnoull. This amendment would require a report to be laid before Parliament within 12 months of the day on which this Act is passed, assessing any differences between the provisions made by this Act for the management of the Crown Estate in England and equivalent provisions for the management of the Crown Estate in Scotland. I am grateful to the noble Earl for his engagement on this matter. He has also raised specific concerns about ensuring that the Crown Estate and Crown Estate Scotland are in analogous positions should this Bill pass.

As I set out in Committee, Section 36 of the Scotland Act 2016 inserted a new Section 90B into the Scotland Act 1998. Subject to certain exceptions, Section 90B provided for the devolution in relation to Scotland of the commissioners’ management functions relating to property, rights or interests in land in Scotland, and rights in relation to the Scottish zone. Devolution occurred on 1 April 2017 under, and in accordance with, the Crown Estate Transfer Scheme 2017. The relevant property, rights and interests are now managed separately by Crown Estate Scotland under the Crown Estate Scotland (Interim Management) Order 2017 and the Scottish Crown Estate Act 2019, as enacted by the Scottish Parliament. They do not form part of the Crown Estate as currently managed by the Crown Estate commissioners.

I share the noble Earl’s commitment in this area, and I would like to make that clear. The Crown Estate and Crown Estate Scotland hold similar operational priorities, and, naturally, the chief executives of both organisations must be, and are, in regular contact. There is also significant collaboration between the two organisations, for example on the offshore wind evidence and change programme, which is an initiative led and funded by the Crown Estate and in which Crown Estate Scotland is a key partner. The programme aims to de-risk and accelerate the delivery of offshore wind projects by funding research and data collection. Both organisations contribute to and benefit from research projects that address knowledge gaps and support the offshore wind consenting process. At a project level, Crown Estate Scotland was a partner in the predators and prey around renewable energy developments project. That focused on Scotland, particularly the Moray Firth and the Firth of Forth and Firth of Tay regions, but the project had broad relevance for the whole of the UK. The improved understanding gained from the project informs marine spatial planning and guides future offshore wind development.

The two organisations also share data on offshore activities through their partnership with the Marine Data Exchange, a digital platform established by the Crown Estate to provide a more comprehensive and integrated understanding of the UK’s seabed. Founded by the Crown Estate in 2013 as the first resource of its type, the Marine Data Exchange provides a world-leading digital platform for gathering and disseminating vital information on a wide range of offshore activities. It currently holds one of the world’s largest collections of freely available data relating to the seas around England, Wales and Northern Ireland and, thanks to the partnership with Crown Estate Scotland, is now extended to cover Scottish waters.

The two organisations also hold frequent discussions through the carbon capture utilisation and storage collocation forum, which is a collaborative effort run by the Crown Estate with input from Crown Estate Scotland and other stakeholders to explore the potential for collocating carbon capture and storage with offshore wind projects. If there are further areas of potential co-operation, I know that the Crown Estate will be more than willing to discuss them with its counterparts in Crown Estate Scotland. The Treasury is, of course, open to any request for a meeting from the Scottish Government and Crown Estate Scotland to discuss this Bill, and we are more than happy to share any policy thinking to help inform any changes they may wish to propose in the Scottish Parliament. I hope these explanations have been helpful and have provided some clarity on these points. I hope that the noble Earls, Lord Russell and Lord Kinnoull, will not press their amendments as a result.

Amendment 3 agreed.

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[Lord Roborough (Con)]

My Lords, I declare my interests in the register as an owner of fishing rights and president of South West Rivers Association. I will also speak briefly, as the arguments have been well made by many noble Lords.

We have heard from noble Lords around the House that this is an important amendment that strikes at the heart of our care for the environment and animal welfare. It imposes reasonable obligations on the Crown Estate to take responsibility for environmental damage caused by salmon farming on its property, and for the welfare of the fish being farmed. As I understand it, there is only one salmon farm in our waters, off the coast of Northern Ireland, although there are 210 in Scottish waters. But this amendment will ensure that any future salmon farms are developed with those obligations in place.

In Committee, the Minister highlighted existing legislation and regulations that cover the salmon farming industry. However, given that the wild Atlantic salmon in our country is now on the IUCN red list, and given the sometimes dire conditions that farmed salmon are kept in, it is hardly surprising that my noble friend Lord Forsyth of Drumlean continues to press this amendment. We are disappointed that the Government have so far failed to see its merits, and we hope for a more constructive reaction from the Minister today. We on these Benches will support my noble friend if he decides to test the opinion of the House.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords for their points. The amendment tabled by the noble Lord, Lord Forsyth of Drumlean, would require the Crown Estate commissioners to assess the environmental impact and animal welfare standards of salmon farms on the Crown Estate on an ongoing basis. Where that assessment determines that a salmon farm is causing environmental damage or has significant animal welfare issues, the Crown Estate would be required to revoke the relevant licence. The commissioners would also be required to make the same assessment of any applications for new licences for salmon farms and, where the commissioners determine that an application may cause environmental damage or raises significant animal welfare concerns, the Crown Estate must refuse the application.

The noble Lord, Lord Forsyth, again made a powerful speech on his amendment. As I noted in Committee and can repeat today, I wholeheartedly support the objectives behind it but I regret that the Government are unable to support it. I recognise that this is not what the House wants to hear, but it remains the Government’s position that this amendment would duplicate protections that already exist in legislation or that are required by regulators as part of the licensing process for aquaculture. I say to the noble Lord, Lord Douglas-Miller, that, like the noble Lord, Lord Forsyth, I have had no contact with the industry. I may have written to the noble Viscount, Lord Trenchard, following Committee, but, if not, I will absolutely ensure that I do.

All salmon farming in England is regulated with the intention to ensure that it is carried out in a responsible manner that respects the environment and protects consumer health and animal welfare. As noble Lords know and some have observed, the management of the Crown Estate in Scotland is a devolved matter. My officials have been in contact on this matter with the Scottish Government, who have said that it is their view that salmon farming is strictly regulated to ensure that the environment on which the aquaculture sector and others rely is protected for future generations. They have also stated that Crown Estate Scotland works to ensure responsible use of Scotland’s seas through leasing the seabed. However, as is proper, it is the role of local authorities and the Scottish Environment Protection Agency to conduct a thorough assessment of development proposals, including environmental impact assessments and habitats regulations appraisals, with advice from statutory and other consultees.

I am aware of the strength of feeling on this matter, and I recognise that many noble Lords will not agree with the case I have set out. However, I respectfully ask the noble Lord, Lord Forsyth, to withdraw his amendment.

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[Lord Berkeley of Knighton (CB)]

My Lords, as someone who lives and farms in mid-Wales as well as writing music, I support this amendment. Living among people there, to me it seems that the comments we have just heard are very apposite. There is a feeling that we are slightly out on a limb and that, if devolution is to mean anything, this is a perfect example of where some empowerment could take place and, as the noble Lord, Lord Wigley, said, we could see a certain amount of money returned to Wales to help with the preservation of all those things that people value there, not least the coast and countryside. We are threatened with all kinds of things—possible massive pylon building and massive problems with the Wye, which has been coming up today in various amendments. To be able to decide for ourselves, or for the Welsh Government to be able to decide on our behalf, seems an extremely important point in this debate. Therefore, I very much support the amendment.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate in response to the amendments from my noble friend Lord Hain and the noble Baroness, Lady Humphreys.

Turning first to Amendment 11, tabled by my noble friend Lord Hain with my noble friend Lord Murphy speaking on his behalf, I thank my noble friend Lord Hain for his constructive engagement on this topic and thank other noble Lords across the House who have spoken in favour of this amendment, which the Government support. The amendment requires that the board of Crown Estate commissioners must include a commissioner who is knowledgeable about Wales and that such a commissioner, alongside their existing responsibilities, must be responsible for giving advice about Wales to the board. It also requires equivalent positions for Northern Ireland and England and grants Welsh Ministers and the Executive Office in Northern Ireland the right to be consulted about the Welsh and Northern Irish appointments. These legislative requirements will ensure that the board of commissioners continue working in the best interests of Wales and Northern Ireland alongside their existing duties as commissioners. To answer the noble Baroness, Lady Humphreys, I say that I do not believe that the amendment in any way deliberately excludes the seabed.

I reassure the noble Lord, Lord Wigley, that the Crown Estate absolutely welcomes the opportunity presented by the increase in the number of commissioners from eight to 12, to bring knowledge of the devolved nations even more directly to the board table. It is an enthusiastic supporter of this amendment. This will supplement the expertise of its director for the devolved nations, who is based in the Crown Estate’s recently opened Cardiff office and whose knowledge and extensive local engagement over the last two years is evidence of the importance to which it attaches understanding local conditions in Wales.

The commissioner responsible for giving advice to the board on Northern Ireland will provide valuable insight as the Crown Estate’s engagement and activities in Northern Ireland continue to evolve. For example, the Crown Estate’s chief executive was in Belfast last month meeting officials and Ministers from the Department of Agriculture, Environment and Rural Affairs and the Department for the Economy. That form of engagement will move from strength to strength with the knowledge that such commissioners will offer to the board. These commissioners will certainly strengthen the Crown Estate’s ability and mission to deliver benefit for the whole UK at a time when devolution of the estate would significantly risk fragmenting the energy market, which would undermine international investor confidence and delay the progress towards net zero by an estimated 10 to 20 years, to the detriment of the whole UK.

Amendment 6, tabled by the noble Baroness, Lady Humphreys, would require the Treasury to complete a transfer of the responsibility for the management of the Crown Estate in Wales to the Welsh Government. As I have set out previously, the Government’s position is that there is greater benefit for the people of Wales and the wider United Kingdom in retaining the Crown Estate’s current form. As I set out in detail in Committee, the Crown Estate Act 1961 requires the Crown Estate commissioners to manage the Crown Estate as a commercial enterprise and with due regard to the requirements of good management. While the Crown Estate has goals which, under its own strategy, align with wider national policy objectives, the 1961 Act provides the Crown Estate with independence and autonomy to set and achieve its goals. It has shown itself over the last 60 years to be a trusted and successful organisation with a proven track record in effective management.

The Crown Estate is required to place profits into the UK Consolidated Fund each year, worth more than £4 billion over the past decade. This enables those revenues to fund UK government spending in reserved areas in Wales and Northern Ireland and supports the funding provided through the block grant. Those revenues are then allocated to public service priorities by the Government, subject to the usual parliamentary controls. As I have noted previously, that is a valuable outcome which we must be careful not to undermine. Devolving the Crown Estate to Wales would, as I have explained, most likely require the creation of a new entity to take on the role of the Crown Estate in Wales. As I have previously set out, this entity would not benefit from the Crown Estate’s current substantial capability or capital and system abilities, nor benefit from the Crown Estate’s marine investments currently being made on a portfolio-wide basis across England and Wales. To devolve to Wales would disrupt these existing investments, since they would need to be restructured to accommodate a Welsh- specific entity.

I will not repeat the examples that I gave in Committee, but it remains the point that to devolve at this time would risk jeopardising the existing pipeline of offshore wind development in the Celtic Sea, planned into the 2030s, and the vital investment and jobs that this would bring across south Wales. As I noted in Committee, in addition to energy, the extensive jobs and supply chain requirements of the round 5 offshore wind opportunity in the Celtic Sea would also likely deliver significant benefits for Wales and the wider UK. As I mentioned in Committee, an advisory firm to the Crown Estate estimated that manufacturing, transporting and assembling the wind farms could create around 5,300 jobs and a £1.4 billion boost for the UK economy.

Devolution would also delay UK-wide grid connectivity reform. For Wales, the Crown Estate is working in partnership with the energy system operator to ensure that its current pipeline of Welsh projects, the biggest of which is round 5—which is expected to contribute enough energy capacity to power 4 million homes across the United Kingdom—can benefit from this co-ordinated approach to grid connectivity up front. Introducing a new entity, which would have control of assets only within Wales, into this complex operating environment where partnerships have already been formed, would not make commercial sense. A devolved entity would be starting from scratch midway through a multi-million-pound commercial tendering process when the Crown Estate is undertaking critical investment in the UK’s path towards net zero. I therefore respectfully ask the noble Baroness, Lady Humphreys, to withdraw her amendment.

[Baroness Humphreys (LD)]

I thank the Minister for those comments and everyone who has spoken in this debate, especially those who have supported the devolution of the Crown Estate to Wales. I was looking for a little more from the Minister about the responsibility of the commissioners. It seems that they are there to give advice, but there is no responsibility to report to Welsh Ministers or to discuss with them, which I hope that they will do in any case.

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[Baroness Vere of Norbiton (Con)]

I rise only briefly to say that we on these Benches want to see the Crown Estate taking action to improve our environment, and we share the concerns of other noble Lords in this area. We note that the Government have expressed their support for the amendment in the name of the noble Baroness, Lady Hayman. I agree with her that it is all about outcomes in these circumstances. We agree that this is a sensible amendment and that it deserves the Government’s support.

[Lord Livermore (Lab)]

My Lords, I am very grateful to all noble Lords who have spoken in this debate in response to the amendments tabled by my noble friend Lady Young of Old Scone and the noble Baroness, Lady Hayman. Before I respond to the amendments relating to the environment, I reaffirm my strong support for the intention behind them. As I set out in Committee, it is right that the public and private sectors make every contribution they can to achieving our climate change targets. The Crown Estate should continue to be a national trailblazer in this regard.

The Crown Estate’s commitment to becoming a net zero carbon business by 2030, aligning with a 1.5 degree trajectory, and its commitment to prioritising activities that help enable a reduction in a national carbon emissions, such as building net-zero homes, transitioning its holdings to sustainable agricultural practices, and working in partnership with government to meet the national renewable energy targets, speaks to how seriously it is already committed to these goals.

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[Earl Russell (LD)]

My Lords, it is quite late and we have run over our time, so I will be brief with this amendment. To be honest, my plan was never to call it to a vote. This is an amendment that I tabled at previous stages of the Bill. It calls on the commissioners to do two things: to establish a regional wealth fund and a skills training fund. I believe that both are important. That is why I have brought this amendment back today. As I said, I will speak to it very briefly.

On the regional wealth fund, we are going through one of the biggest energy transitions that this country has experienced since the dawn of the Industrial Revolution. A lot of stuff needs to be built; a lot of change is coming. The Government need to take people with them on that journey. It is not for Whitehall and central government to do this to people. It is for this Government to do things with people, for people, and to take people with them on that journey. I say these things because they are important. We on these Benches want to see Labour succeed in these missions. If public support wanes, that will not happen.

I believe also in devolution; we believe in devolution on these Benches. We believe that local communities should benefit from the energy that they host, and from the infrastructure that sits in their communities. We believe very much in community energy as well. In legislation to come, we will have GB Energy. From these Benches, we will be pushing the Government strongly to go further on community energy. We think it is an important part of the puzzle that can be achieved within the GB Energy Bill.

I move on finally to skills and training. The green revolution is a revolution; it will change all our lives. It offers real opportunities, not just to decarbonise and meet our climate commitments but for Britain to grow new industries to be new world leaders and to train people to take on new jobs, the jobs of the future, which we need to grow our economy.

The Budget this week, for all the investment, had very little growth coming out of it. I personally worry that there was very little money in the Budget for skills and training. The year 2030 will be here in a blink of an eye. To meet our targets, we need people to be able to build all this stuff, to make this thing happen; otherwise, our targets will not happen and will not be met.

The Crown Estate sits at an important juncture between the big industries and the local communities. It is already doing a very good and imaginative job in this area. I simply call on the Government to do more: to work with the Crown Estate to help create these skills; to help support our local communities; and to help bring people with them and alongside them on this journey, so that we can all transition together. I beg to move.

[Lord Livermore (Lab)]

My Lords, I will respond to Amendment 9 tabled by the noble Earl, Lord Russell, on the topic of local and community benefits. As I set out in Committee, the Government are committed to working closely with the Crown Estate to support our target of clean power by 2030 by collaborating to accelerate and derisk the sustainable delivery of technology such as offshore wind. As I noted in Committee, 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, homegrown power to boost Britain’s energy independence and security. The Crown Estate has also specifically designed the leasing process for the 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 windfarms.

I turn to the second part of the amendment, on a skills training fund. As I have previously made clear, the Government of course support the spirit behind the amendment. We are committed to clean energy by 2030, accelerating to net zero and promoting biodiversity. To meet those ambitions, we need to make sure that our workforce has the knowledge and skills to succeed in the green economy, both now and in future.

As part of that 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 among other things will help to support the establishment of Skills England. As I highlighted in Committee, the Crown Estate is dedicated to supporting skills and training.

As I have said previously, 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 that flexibility in how its skills initiatives are funded and delivered to ensure that it can contribute to skills training in the best possible way.

I hope these explanations have been helpful and I have provided some clarity on the points raised. I hope the noble Earl, Lord Russell, feels able to withdraw his amendment as a result.

[Earl Russell (LD)]

My Lords, I thank the Minister for his response. I am of course able to withdraw my amendment. I recognise the work that the Government are doing in these areas, but there is a need for more to be done. I do not think that working with the Crown Estate would impact other work; it would actually strengthen it. As I said, it sits in a unique juncture that would be particularly helpful in bringing industry together with communities to create local jobs and provide training. However, I note the work that the Government are doing and I thank the Minister for his response. I beg leave to withdraw the amendment.

Crown Estate Bill [HL]

Lord Livermore Excerpts

3rd reading
Monday 18th November 2024 Lords Chamber

[Motion]

Moved by

[Lord Livermore]

That the Bill do now pass.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, this Bill focused on modernising the Crown Estate by removing existing limitations that hamper its ability to compete and invest as a commercial business and to ensure it has a sustainable financial future for years to come. In doing so, it supports the Crown Estate to build on its strong track record of creating long-term shared prosperity for the nation.

I thank all noble Lords who have given their time and expertise to scrutinise the Bill during its passage through your Lordships’ House, genuinely strengthening the Bill in the process. Specifically, I formally thank the noble Baroness, Lady Vere, for her constructive engagement and scrutiny—in particular, on the partnership between the Crown Estate and Great British Energy and the disposal of national assets. On the latter, the Government are continuing to advance this in relation to the seabed with legal experts and will progress it in the other place if necessary. On pre-appointment scrutiny, which the noble Baroness also raised, my officials are continuing to engage with the Cabinet Office, as discussed at Report.

I sincerely thank the noble Baroness, Lady Kramer, for her engagement on the Bill. She was instrumental in ensuring that this House had access to the draft memorandum of understanding, which improved the scrutiny we were able to give to the Bill. I also thank the noble Earl, Lord Russell, for the thoughtful scrutiny he provided throughout the debates.

On specific amendments, my thanks go to the noble Baroness, Lady Hayman, for her engagement on climate change, which resulted in a genuinely meaningful difference to the Bill; to the noble Lord, Lord Forsyth, on the important issue of salmon farming, where I recognise the strength of feeling in this House; and to my noble friend Lord Hain, for his amendment on the Crown Estate commissioners, which will ensure the commissioners continue to act in the best interests of Wales. I thank the noble Lord, Lord Young of Cookham, for his engagement around the law relating to ownerless land and the process of escheat.

Finally, I thank my Bill team, who behind the scenes put in a significant amount of time and effort—specifically, Sophie Gladman, James Watkinson, Ella Waters, David Fairbrother and Will Smith.

I am grateful for the engagement with the Bill and its broad support across all Benches, which will ensure that the Crown Estate can operate successfully for many more decades to come. I beg to move.

[Lord Berkeley (Lab)]

My Lords, I intervene briefly to congratulate my noble friend on getting this Bill as far as he has. I was very pleased to see that His Majesty the King has given consent to a Bill which will make him many times richer over the course of the next decade or so—that is good. I ask why the Duke of Cornwall has not been included in this. We have been debating his involvement for some time and it would be good to know whether the Duchy approved this Bill or not.

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[Baroness Vere of Norbiton (Con)]

My Lords, the core objectives of this Bill were of course supported by all sides of your Lordships’ House, and there has been a bit of progress on so many fronts. There are a number of issues where I still have some concerns, and I know that there is some unease on these Benches. I hope that the Government will deliberate further.

I note the improvements relating to environmental concerns that were raised by the noble Baroness, Lady Hayman. They were somewhat addressed by the Government. I am sure that she would have liked them to go further, but it was progress none the less. I hope that the Government do not seek to reverse the changes relating to salmon that were spearheaded by my noble friend Lord Forsyth.

I remain disappointed that sensible checks on unconstrained borrowing did not make it into the Bill. They garnered significant support from these Benches, but sadly we did not get that vote over the line. I appreciate the Minister’s comments about the sale of certain assets, particularly the seabed, which all noble Lords should be concerned about.

I am grateful to the Minister, his Bill team and all noble Lords who participated on the Bill. On a personal note, after more than 3,000 spoken contributions in eight years, this is my last outing at the Dispatch Box. I look forward to serving your Lordships’ House from the Back Benches.

[Lord Livermore (Lab)]

My Lords, I thank all noble Lords who have spoken today. My noble friend Lord Berkeley will know that only the King’s consent is required for this Bill. Once again, I thank all noble Lords for their efforts on the Bill and thank the noble Baroness, Lady Vere, for all her exchanges from both sides of this Dispatch Box over the past year. She has always been ferocious in this House but friendly outside it, which has been the perfect combination. I wish her well in what she does next.

Bill passed and sent to the Commons.