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.
My Lords, I am grateful to the Minister for his clear explanation of the Bill and for the time that he spent last week talking to those who have an interest in it. I welcome its provisions, which enable us to make the best use of our natural resources—in this case, offshore wind—in turn helping us to meet our environmental targets. I know that others will speak on those targets, particularly the noble Baroness, Lady Hayman, as chair of Peers for the Planet, of which I am a very small satellite.
As the Minister said, the Bill amends the Crown Estate Act 1961. Its Second Reading in your Lordships’ House that year was over in under half an hour, with only two speeches, the response from the Labour Front Bench being made by the Earl of Lucan, father of the one who disappeared. Today the Bill may get greater analysis. I will leave others to address the specific issue of the seabed and turn my attention to the broader issue of the governance of the Crown Estate.
The Bill’s Explanatory Notes say that it makes amendments to Schedule 1 to the Crown Estate Act 1961 which are
“intended to bring The Crown Estate’s constitution in line with best practice for modern corporate governance”.
In 1961, the Crown Estate was the fairly passive holder of land owned by the Crown, at a time when issues of transparency and accountability were very different. Now, if we look through the impressive 173 pages of the Crown Estate’s annual report, we see that it is a totally different organisation. The briefing notes to the King’s Speech said:
“The Crown Estate plays a critical role in maintaining and improving public infrastructure of England, Wales and Northern Ireland and generates a financial return for the Government worth over £3 billion in the last decade. This money helps fund vital public services”.
My Lords, there is much to welcome in this Bill. We welcome Labour’s mission to decarbonise power generation by 2030. While we are supportive, we will closely scrutinise these proposals to ensure they work and provide value. We will encourage Labour to be bolder. The partnership between the Crown Estate and GB Energy is key. GB Energy will be a state-owned energy company sitting at the heart of Labour’s plans to decarbonise our power generation. Backed by £8.3 billion of government investment over this Parliament, the aim of GB Energy will be to leverage some £60 billion of private investment—a state-owned investment vehicle working alongside the private sector.
The Government will take on some of the risk and provide much-needed stability in policy. This will help to accelerate private investment, speeding up the transition to cleaner energy, ensuring energy security and lowering energy bills over time. It is good for the environment, for jobs and growth, and for lower energy bills, potentially saving each household £300 a year, if all works well.
A typical household’s annual energy bill will rise by 10% from October. This is necessary because of higher international energy prices, which is a stark reminder of the impact of our continued dependence on imported gas. Ambition is good, but are the financial resources provided adequate? Labour has decided to cut its own green budget: £23.7 billion for green policies over this Parliament is far less than the £28 billion a year that Labour had originally planned. We call on Labour to reconsider.
This partnership brings together the Crown Estate’s experience of delivering renewable projects, especially offshore wind, with new investment powers. It is hoped that 20 to 30 gigawatts of offshore wind will reach seabed lease stage by 2030. This partnership makes sense and the Conservatives had similar plans.
The Crown Estate owns the seabed and has the experience. The UK has the world’s third-best wind resources and we should make use of them. The Crown Estate in England, Wales and Northern Ireland is a multibillion-pound business managed by the Crown Estate commissioners. In Scotland, the Crown Estate is managed by Crown Estate Scotland, since the Scottish estate was devolved in 2017. The Crown Estate is one of the largest property managers in the United Kingdom, administering property worth some £15.6 billion, including more than half the UK’s foreshore and virtually its entire seabed to the limit of 12 nautical miles.
My Lords, that brings me to the starting point of my remarks. I have no issues with the Bill—indeed, I welcome most of its provisions—although I am unclear on the impact on the sovereign grant if a more highly geared Crown Estate manages to increase net revenue. At face value it would appear that the sovereign grant would be increased, but what is the logic in this?
The sovereign grant was established in 2011, consolidating the Civil List and three other grants in aid into one stream. That change made a great deal of managerial sense. The mystery is that it was stated at the time that the sovereign grant would be set as a percentage of the net revenue of the Crown Estate—initially 15%—but what is the rationale for indexing the sovereign grant on some completely unconnected metric? The sovereign grant is not part of the monarch’s income. If it were, it would be taxable. Instead, it is paid from the Exchequer to meet the costs of the monarch’s public duties.
Some years later, the percentage was raised to 25% to meet the cost of the 10-year programme of renovating Buckingham Palace. Recently, the underlying cost has been about £50 million, and with that renovation the total is now about £86 million.
Later, the percentage was reduced to 12% when the Crown Estate net revenues boomed through the expansion of offshore wind. In other words, the percentage has been adjusted up or down to keep the sovereign grant at the level agreed between the Treasury and the Palace. We are told that in the current year, 2024-25, the sovereign grant will stay at around £86 million, but in 2025-26 it will rise to £130 million, causing howls of protest and stupid headlines in papers about a 50% pay rise for the King, or showering money on the Royal Family—as in the Sunday Times. It makes no sense to boost the sovereign grant beyond what is needed.
Will the Minister, who is smart enough to see through all this nonsense, tell us whether the percentage will be reduced again to get the sovereign grant down to an appropriate level, or whether any surplus overexpenditure—any unspent monies—will be banked in a reserve and taken into account in the next settlement period?
My Lords, I too welcome the Bill and the opportunity that it gives for the Crown Estate to make a greater contribution to net zero, but the Crown Estate is a big thing—it has 200,000 acres of land, 12,000 kilometres of coast and a seabed area that is bigger than the combined landmass of England, Wales and Northern Ireland. It is the third biggest landowner in the UK, yet I bet that the vast majority of people in this country have only a very woolly concept of what the Crown Estate does. It keeps its light well hidden under a bushel, which I suspect is a tactic.
We need to recognise that the Crown Estate owns more land than the entire landmass of Luxembourg, and it is particularly important land, because it is marine land, which is clearly hugely important for net zero; it is coastal land—likewise; and it is urban land. So the Crown Estate has even more opportunities to do good for the nation in a multifactorial way than the Bill outlines, and I would like to ask the Minister for further commitments from the Crown Estate in return for these new powers.
I am sure that others will dwell on a number of issues connected with the core purpose of the Bill, particularly how the relationship between the Crown Estate and Great British Energy will deliver the pace and extent of offshore wind, carbon capture and storage, and other net-zero developments that we need to achieve our net-zero targets.
The one I would like to focus on in this area is joining up to the grid. The process of revamping the grid in this country and changing the way in which join-up to the grid happens needs to be fundamentally reformed to become much more agile. It continues to drag behind the pace we need in order to meet the net-zero commitments and to develop a new, more distributed system to join up with the renewables pattern that we are seeing emerging. We cannot be behind the pace on that particularly important item.
My Lords, it is a great pleasure to follow the noble Baroness, who obviously knows a great deal about this area. Her concerns should be taken very seriously.
I declare my interests as set out in the register. I draw the attention of the House to the fact that I chair a charity, namely International Students House, whose landlord is the Crown Estate and has been for some considerable time.
I thank the Minister for setting out so clearly the purposes of this legislation. As we have been hearing, the legislation itself is generally non-controversial; it is the broader canvass against which it is set where questions will arise. Indeed, the last Conservative Government announced plans in 2023 to legislate in this general area in much the same way. It is worth noting that the Crown Estate has itself welcomed the legislation, as do I.
The mainspring of the legislation is to unlock investment in infrastructure to the benefit of the whole of the United Kingdom, doing valuable work on net zero, which I support passionately and wholeheartedly, although some questions do arise. The Minister quite rightly said that certain actions that this legislation will permit—he indicated possible examples such as investing in the infrastructure of a port, facilitating the development of the seabed, investing in digital mapping of the seabed and carrying on commercial activities on land owned by the Crown—are to be welcomed. Indeed, it was arguably already implicit in the Crown Estate Act 1961 that those activities should happen. What is new is the express power to borrow money.
The Minister indicated why a delay is going to be implicit in this. I think it says in the Explanatory Notes that the borrowing power will not be exercised immediately and he indicated there would be some delay towards the end of the decade. I do not know whether he is able to be more explicit on that. Given that this is a desirable power, and notwithstanding that there are some cash assets available, if it is desirable, it would be good to do it sooner rather than later.
My Lords, I am delighted to follow the noble Lord, Lord Bourne of Aberystwyth, and I agree with him that we must certainly consider the broad canvas against which this Bill comes before us. I thank the Minister for his courtesy in offering meetings last week to discuss the content of the Bill. I was not able to take advantage because of family commitments, as is obviously a problem at holiday time, but I was delighted that my noble friend Lady Smith of Llanfaes was able to go along. We both hope to play a role in further discussion of the Bill at its later stages.
I am glad that the Government are bringing forward a Crown Estate Bill, but I am less happy about its content—or, rather, what is missing from it. The noble Lord, Lord Bourne, touched on this, certainly as far as Wales is concerned. I note that the Crown Estate’s assets in Wales extend to 65% of the Welsh foreshore and tidal riverbeds, including the key port of Milford Haven, a number of marinas, 50,000 acres of common land and tidal streams such as Bardsey Sound and Ramsey Sound.
I should mention that my Private Member’s Bill, the Crown Estate (Wales) Bill, is awaiting presentation. I had resolved to put it forward several months ago. That was before I knew that there would be a new Government and that they were also minded to legislate on these matters, but that is something for another day.
I have listened carefully to the case that has been made for the government Bill, both in what it contains and in the rationale presented to the House by the Minister opening this debate. I will address what I regard as a missed opportunity in not proposing in this Bill matters that Senedd Members of all parties in Cardiff have demanded be devolved—in particular, provisions that members of the Labour Government in the Senedd have supported. This Bill has a broad Long Title:
My Lords, it is always a pleasure to follow the noble Lord, Lord Wigley. I share many of his values, but it is too dangerous and difficult for me to get into the questions of devolution that he raises. I wish him the best of luck.
When I first looked at this Bill, I thought that it was rather a minor and technical Bill, and was not really worth speaking on, if you see what I mean. What excited me to make me think that this was an important Bill was the announcement, in July, of the partnership between the Crown Estate and our newly established Great British Energy. I was a little disappointed that in my noble friend’s excellent introduction to the Bill he did not focus on that more. It seems to me that the change in borrowing powers and the requirement that the Crown Estate takes a more proactive role, particularly in our struggle to reach net-zero electricity generation, are the really interesting aspects of this legislation, along with what the extra borrowing power that the Crown Estate will have will mean in practice.
Given that this partnership with Great British Energy has been announced with such fanfare, it has to be said, with objectives to invest in ports and new technologies, and to take a more proactive, leading role in the development of the seabed and of wind and offshore wind, why is it that we are not proposing to borrow any more until the end of the decade? There seems to be a fundamental contradiction there: if we want to reach the 2030 goal then we are going to have to do something about it, not in five years’ time but now. I will be very interested in my noble friend’s response on that point.
If the Crown Estate is to take on these new responsibilities, there will have to be a change of culture. My father-in-law was a Crown Estate commissioner, and it is fair to say that it was a very conservative—with a small “c”—institution, extremely cautious in everything that it did. If it is going to do the things that were announced in the partnership with GBE in July, it will have to have a complete change of culture and become a more enterprising institution. Is that what is envisaged?
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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.
I applaud its many achievements, which the Minister touched on. However, it has no shareholders. It is independent of the Government and the monarchy and is run by 12 commissioners. It floats in a public space on its own, with an umbilical cord to the Treasury in a framework agreement, on which more in a moment.
This raises the question of whether the governance structure is still appropriate, 60 years after the legislation introducing it was passed, with very minor amendments touched on by the Minister today. Is the modest addition of an extra commissioner, as proposed by the Bill, adequate? Does it really bring the Crown Estate in line with best practice for modern corporate governance? How is it held to account? The noble Lord, Lord Berkeley, who will speak later, may address this issue in more abrasive terms than those that I plan to use.
To make my point, I turn to the issue of undertakings given to Parliament by the Crown in return for not being covered by legislation, a privilege not accorded to any other organisation and which underlines the need for proper accountability. The undertaking that I want to refer to was given on the last day of the last Parliament, 24 May. I quote the relevant passage:
“The Crown as landlord, will, subject to the conditions described below, agree to the enfranchisement or extension of residential long leases or to the grant of new residential long leases under the same qualifications and terms which will apply by virtue of the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993, to lessees who hold from other landlords”.—[Official Report, 24/5/24; col. 1368.]
The 1993 Act was one that I put on the statute book as a Housing Minister in the other place. The Crown gave me a similar undertaking to the one that I have just read out, which I relayed to the other place at the time. However, there is evidence that the Crown Estate is not abiding by that undertaking in respect of freeholds for which it now has a responsibility under a process known as escheat. I will summarise as briefly as I can the reason for that assertion.
The freeholder of a block of flats in Southampton could not be traced, and initially an encouraging dialogue was opened on behalf of the leaseholders with the bona vacantia division of the Treasury. It confirmed that it would be happy to sell the freehold to them as qualifying tenants and pointed them to the so-called BVC4 formula on the government website, which details the procedure compliant with the relevant legislation. That formula calculated the cost of buying the freehold, as a multiple of the ground rent and the leases that remain, as £17,850.
However, this encouraging dialogue with the Treasury Solicitor was abruptly terminated, as it was stated that the liquidator had disclaimed the asset and it was now vested in the Crown Estate. The Crown Estate in turn appointed Burges Salmon, which responded to the leaseholders by saying that it did all the Crown Estate work regarding enfranchisement and collective freehold purchases and that:
“We consider that a disposal of the Property might be possible in this instance”.
There was no reference to the undertaking I gave a moment ago. Burges Salmon would do nothing before £750 was paid to open a file. It further advised that the government BVC4 formula did not apply to the Crown Estate, saying that:
“It is not obliged to follow guidance from the Bona Vacantia Division as that is a separate entity and we have dealt with this matter in this way for many years”.
That was again in defiance of the undertaking.
In addition to its fees, Carter Jonas would be instructed to provide the price at which the Crown Estate would sell, with all fees to be paid in full by the tenants. The total cost would be over £60,000, over four times the figure produced by the BVC4 formula in the legislation, which requires no valuation, and a contribution of only some £600 would have been made to the costs of the solicitor at the Treasury. I do not think that can be reconciled with the undertaking given to Parliament. Nor can it be right that leaseholders had certain rights under their original freeholder but lose those rights when the freehold defaults to the Crown Estate. The Crown Estate might argue it has a duty to secure best value, but that cannot override the clear undertaking I have given. There is now deadlock, causing problems for leaseholders who need to sell. As Burges Salmon conceded in a letter:
“Where a block of flats is subject to escheat lessees will generally be unable to sell”.
I note that when the Crown Estate gave evidence to a Treasury Select Committee in 2017, the then chief executive said on escheat:
“The Crown Estate’s role in respect of escheat properties is pretty narrow; it is limited to helping to respond to an owner who comes along and basically getting them back into private hands”.
She went on to concede that
“I do not think we are best placed to deal with properties that are subject to escheat”.
That issue is not confined to the one I have just quoted from. A letter from the Crown Estate says:
“The sheer volume of properties which become subject to Escheat each year means that we outsource this work to Burges Salmon and Carter Jonas”.
Further, following the Grenfell tragedy and the Building Safety Act, which places responsibility for remediation on freeholders, many freeholders are likely to go bankrupt, in turn putting more properties into escheat.
So what should be done? I mentioned earlier that the Treasury is the sponsor department, and the relationship with the Treasury is set out in Framework Document: The Crown Estate of June 2023. This refers in paragraph 2.1 to the need for “good management”, and later to
“strong collaborative relationships with customers”
by the Crown Estate. Crucially, it also says that the Treasury shall
“inform The Crown Estate of relevant government policy in a timely manner”.
Government policy on enfranchisement has been clear for many years. It is not being delivered, and I hope the Minister will use his powers to put right the injustice I have referred to.
The Bill seeks to amend the Crown Estate Act 1961 to enable the Crown Estate to continue to fulfil its core duty of maintaining and enhancing the value of the Crown Estate and the return obtained from it, while maintaining the Crown Estate as an estate in land. The Act will continue to be the main legislation governing the Crown Estate.
The Bill broadens the Crown Estate’s investment powers and confers a wider power to borrow, subject to Treasury consent. It also makes some changes to the governance of the Crown Estate, in line with modern best practice.
The Bill authorises the Treasury to lend to the Crown Estates commissioners from the National Loans Fund and to provide financial assistance to the commissioners from money provided by Parliament. The Explanatory Notes say that
“the government does not anticipate The Crown Estate borrowing in the short-term. Any borrowing will either be from, or subject to the consent of, the Treasury”.
This question is in my speech, but the Minister has already answered on the definition of “short-term”. I think he said 10 years or so. How much money do the Government anticipate might be borrowed before 2030? What oversight will Parliament have of this borrowing process?
The Explanatory Notes also say that:
“Further details on the arrangements for lending from government to The Crown Estate will be set out in an updated Framework Document”.
Why is this framework document not ready and why are we being asked to approve the Bill without it?
This Bill has only three clauses. I ask the Minister why the decision was taken to present two separate Bills to Parliament. While GB Energy talks of partnerships, this is the only one that has been announced and it appears to be key to GB Energy. Having two separate Bills makes the job of scrutiny harder. Was this about limiting the scope of both Bills or are there other, practical reasons for it?
The Conservatives have left the building. The last Prime Minister decided to play political games with environmental policy. The UK did not gain any additional energy security and bill payers are now paying the price.
The Conservatives have criticised the Bill and the cost, but they would do well to remember the £22 billion black hole that they left behind. Dither, delay and pointless climate culture wars mean that UK energy bills were £22 billion higher over the past decade than they would have been had action been taken earlier. Precious time and inward investment were sacrificed.
The Government need to make sure that GB Energy has the finances to succeed. With a five-year timetable to set up GB Energy, will energy bill payers see the reductions promised before the next election? What actions are being taken to ensure that these plans are not reversed by subsequent Governments?
Why not make GB Energy an energy supplier? The Government are taking a lot of financial risk for little long-term reward. We admit that this helps to leverage investment, but where is the extra long-term benefit if the state does not own or supply anything at the end? Have the Government considered allowing the Crown Estate to waive the licensing fees in exchange for part ownership of the infrastructure? This would provide a continued source of revenue.
The concerns and questions we have relating to this Bill centre on the parliamentary and financial scrutiny. The next offshore wind auction round must succeed after the complete failure in 2023. If it all goes wrong, whose fault will it be? The Crown Estate has all the skills and experience, but how will Parliament know whether the Government are listening to its concerns and taking them seriously?
The UK Government say that they are in discussions with the Scottish Government and Crown Estate Scotland on how GB Energy could help to support new development and investment within Scotland. There are also calls from Wales for similar devolved powers and financial benefits. The Government reply that the more times the overall pie is sliced, the fewer benefits there are for anyone. Perhaps a greater concentration on small community energy projects and increased local benefits offer a way forward? Enabling work and community energy should be at the heart of these plans. The devolution issue feels problematic in this Bill.
Bringing benefits to energy bill payers early in the process is essential to success. Ed Davey has said that the withdrawal of the winter fuel payment is Labour’s first mistake. This decision should be reversed, as it will increase fuel poverty. Worse, it sends entirely the wrong message about the future of energy bills at the start of the energy transition.
Are these the only two clauses in the original 1961 Act that need updating? Surely with new powers should come some updated responsibilities. The Scottish Crown Estate Act 2019 provides that the estate must act in a way that is likely to further sustainable development in Scotland, as well as contribute to the promotion or improvement of regeneration, social well-being and economic well-being. Why does this Bill not contain anything similar?
A lack of national grid capacity and investment is also a major stumbling block. There is absolutely no point in creating lots of new renewable energy if it cannot be connected to the grid or it takes years to do so. I welcome the letter dated 29 August from the Secretary of State for Energy Security and Net Zero to ESO, asking for independent advice on the pathway going forward, but this is not a solution; it is simply a request for advice. I encourage the Government to remove zombie projects to help speed up the connections.
We welcome the intentions to strengthen the Crown Estate’s ability to develop spatial strategies. Our seabed needs to fulfil many competing functions while maintaining marine environments. Work must be co-ordinated across government. We welcome floating offshore wind, but more work is needed to mature and develop other renewable energy sources.
Finally, misinformation and disinformation are very much part of the environmental space. I wonder whether the link between the Crown Estate’s profits and the process of calculating the amount of the sovereign grant is a continued hostage to fortune and whether it might be worth considering some alternative process.
How did this all come about? I suspect that it was a too-clever-by-half ruse by the Chancellor of the time—you can work out who that was—to pull the wool over the eyes of Parliament and the public by implying that the monarchy was meeting its own operating costs from its own resources rather than drawing on taxpayer funds from the Exchequer.
The net revenues have not accrued to the monarch since 1760 when a hard-up Monarch—I suppose that was George III—gave up the hereditary revenues in return for a guaranteed annual payment. That was the Civil List, which has morphed over time into the sovereign grant. In its annual report and accounts, the Crown Estate records the £1.1 billion net revenue as paid to the Treasury
“for the benefit of the nation”.
There is no mention of any link with the sovereign grant. In other words, it is perfectly capable of distinguishing between the reality and the spin. It would be much more honest to make a clear separation between the two and settle the sovereign grant at whatever level is required, not on whatever net revenues the Crown Estate adventitiously manages to generate.
We also need to understand how the new powers that the Crown Estate will have will increase investment, not just in seabed leasing partnerships, which have been its stock in trade primarily in the marine area so far, but in technological development, innovation, port development and the development of provisioning systems. Can the Government give us some assurances on all those things and on how the Crown Estate will use its improved investment powers to take them forward?
I shall also focus on beyond the net-zero objectives of the Bill, because the Crown Estate has other strategic objectives. One is the promotion of the natural environment and biodiversity, and one is about communities and urban centres. The Crown Estate briefing on this Bill says that it will unblock investments for nature recovery across its portfolio as a result of the provisions of the Bill, but the Bill and the Explanatory Notes are remarkably silent on how investment for nature recovery will be unblocked. Can the Minister fill us in on this and on how it will happen? The Crown Estate, as a major landowner, would be a hugely powerful player in biodiversity recovery.
Associated with that, and connected to it, is the role that the Crown Estate is playing in the development of the strategic spatial energy plan. Noble Lords who have heard me bang on about a land use framework will recognise that I am just about to bang on about a land use framework. That strategic spatial energy plan needs to be nested in an overarching land use framework that will allow energy needs for land to be considered alongside the multitude of other land use needs and requirements, such as housing and development, biodiversity, food resilience, flood risk management, other climate change and adaptation needs, timber, trees, green space infrastructure, to name but a few.
The Conservative Government endlessly promised a land use framework but failed to deliver it. The new Government have also committed to such a framework, and I am very grateful for that, but I received an Answer to a Written Question during the Summer Recess that rather disappointed me, and I had no Minister to be able to rant to immediately, because it was very non-specific on dates and seemed to focus primarily on land use issues as defined by Defra and a few CLG issues rather than including energy, transport and other infrastructure needs for land.
Can the Minister tell the House when we might expect the much awaited land use framework, how the Crown Estate and its enhanced powers will be a key player in delivering a land use framework, and how the Government’s very welcome commitment to join up policy across government departments will work in this particular area of land use to ensure that we see the needs of all factors in UK public life across all departments in a multifunctional way brought together in a land use framework?
A further principal strategic objective of the Crown Estate is the promotion of communities and urban centres. The Crown Estate is a major urban landowner, as I said. Can the Minister tell the House what requirements will be laid upon the Crown Estate to use its assets of land, buildings and powers, both old and new, to ensure that it helps the nation to turn the corner in delivering not just houses to pace but the right sort of houses? The current speculative developer-dominated system in this country is broken. We do not build enough genuinely affordable houses with a range of tenures. Instead, volume housebuilders wriggle out of commitments to deliver affordable houses using the viability challenge.
The houses we now build in this country are the smallest and meanest in Europe—that has happened over the last 15 years—and they have inadequate environmental standards. Can the Minister assure us that the Crown Estate will be required to play a key role in promoting housing management and building that is affordable, well designed and environmentally progressive, rather than expensive, spatially inadequate and environmentally lacking? I was encouraged by the noble Lord’s mention of the work already done by the Crown Estate to make its own estate more environmentally sound and appropriate for future needs. We want to see more of that, both in the Crown Estate’s existing estate and in the future development that the Bill will enable it to undertake.
I will make one last point. The Crown Estate is a key player in climate change mitigation but, as a major landowner and property owner, it also has a great opportunity to promote a better way forward in adaptation to the very real impacts of climate change that we are already seeing. I am talking about increased flooding and heatwaves—especially urban heat—as well as challenges to water supply and quality, and increased storminess.
The Crown Estate is a major property owner and developer. It can do much to make land and property more resilient in the face of climate change challenges. The noble Baroness, Lady Brown, who is chair of the Adaptation Sub-Committee of the Climate Change Committee, has reported very critically in successive reports on the lack of progress being made across the board in improving the resilience of this country in the face of climate change impacts. The time has now come to start taking seriously this Cinderella/poor relation on the climate change spectrum. We are simply not making progress on adaptation and we need to do so because the effects are not something that will happen in the future; they are happening now. It is only a matter of time before we will see a serious flood risk incident where lives will be lost—and we will have been asleep at the wheel.
Can the Minister tell us how the Government will ensure that the Crown Estate will step up to the mark and drive forward the big difference it can make, in its roles, to climate resilience in the UK? The Minister very kindly had a conversation with me and other noble Lords. I am sure he will say that this is a modest Bill but, in reality, the Crown Estate is a big opportunity and I hope that we will hear big assurances from the Minister today.
The legislation sets out in Clause 3 that the Bill
“extends to England and Wales, Scotland and Northern Ireland”.
It is worth noting, as others have done, that the Bill does not apply to the management of property of the Crown Estate that is managed by the Crown Estate Scotland under the Scottish Crown Estate Act 2019. That is one aspect I wish to concentrate on, because it seems that an issue arises in relation to the Crown Estate in Wales. As I am sure Members of your Lordships’ House will appreciate, I am keen that Wales gets a fair deal. I would be interested in understanding from the Minister why it is the view that Wales should not have similar treatment to Scotland.
This is particularly relevant given that any profits made from the Crown Estate Scotland go into the Scottish Consolidated Fund; they do not of course go to the monarch and do not go to the Treasury—or not directly. It would be interesting to hear why that approach is not applied in relation to the devolved Government in Wales and I look forward to hearing on that.
The portfolio of property owned by the Crown Estate comprises, as we have heard, property that ranges from pretty much the whole of Regent Street and much of St James’s to 10,000 hectares of forestry and 160,000 hectares of arable and livestock land. But most significant for our purposes is the area of shore between high and low tide and, particularly, the UK seabed. The management of that is really at the heart of this legislation, although, as has been noted by others, it is coupled with another piece of legislation which we need to touch on and examine to some extent: that relates, of course, to Great British Energy.
The context of the Bill is that a partnership between the Crown Estate and Great British Energy to bring forward new offshore energy developments amounting to 20 to 30 gigawatts of new offshore wind projects should reach the seabed lease stage by 2030. That is a great ambition and I certainly support it—it is admirable—but my prime concern, which has been raised by others, is in relation to the capacity of the grid. It seems that the grid is not able to handle that without massive extra investment. This appears to be urgent, so what is the Government’s thinking on this?
The new scheduled division of the Crown Estate, to be called Great British Energy: the Crown Estate, will have the potential to deliver these new projects which I have mentioned. Great British Energy is also to be based in Scotland; Scotland seems to be doing rather well out of all this and I hope that Wales can do similarly. In addition to government borrowings, there are hopes of accessing private finance. What level of private finance are we hoping to leverage here? As I say, I support this very much, but it is important that we know the parameters here. What are we looking at and what sort of commitment are we making? I also entirely support the reduction in the time needed to get these wind projects operating, but how is this streamlined planning to be achieved? Again, what is the cost to the public purse of that? I support it, but we need to know how much it is costing.
I would certainly like to hear from the Minister in relation to capital finance and on the issue relating to devolution and Wales. I will also associate myself, if I may, with what my noble friend Lord Young of Cookham said about bona vacantia. Here is another issue that is not mentioned by the legislation but is very relevant while we are looking at the powers of the Crown. Of course, this is not the Crown in any personal sense but it raises the issue of why any body—any institution within the United Kingdom—should be subject to different rules. This vital issue of the rights of and undertakings given to leaseholders, and of bona vacantia, needs looking at in that context. With those concerns, I certainly otherwise support this legislation wholeheartedly and look forward to the Minister’s response.
As such, it could act as a vehicle to meet those concerns. I am glad that the noble Earl, Lord Russell, referred to the concerns felt in the Senedd.
My own detailed proposals, provided for by my Private Member’s Bill, are a matter for another day, but certain aspects of them may arise at later stages on this Bill. First, there is the generality of the provisions of the Bill before us. It has been presented on the basis that there is a need to modify existing legislation to improve the effectiveness and contribution of the Crown Estate. I note in particular the important points made by the noble Lord, Lord Young of Cookham, in relation to leasehold property.
The briefing note supporting this Bill states that it will reform the management of the Crown Estate to enable its long-term strategy to support the nation. According to Clause 3, the Bill
“extends to England and Wales, Scotland and Northern Ireland”,
but Crown Estate Scotland was devolved under the Scotland Act 2016 and nothing in the Bill amends that Act. Quite clearly, in the Government’s mind it is possible for Crown Estate Scotland to be a fully devolved function, while at the same time the Bill can extend to Scotland.
The briefing note published by the Crown Estate states that it occupies a space between public and private sectors, managing a diverse portfolio stretching across England, Wales and Northern Ireland, to create lasting and shared prosperity across the nation. The map that appears on that briefing sheet shows an empty space as far as Scotland is concerned. Assuming that the Government do not intend to reverse the devolution of the Crown Estate to the Scottish Parliament, presumably there is nothing incompatible between this Bill and its interpretation by the Crown Estate. That being so, can we take it that nothing intrinsic to the Bill militates against or prevents the devolution of the Crown Estate in Wales to the Senedd?
I understand that the Westminster Labour Party has not yet made that concession to Wales, although it has support within the Welsh Labour Party, as I shall clarify in a moment. If, during this Parliament, the UK Government respond positively to requests from their colleagues in Wales for the devolution of the Crown Estate in Wales to the Senedd, nothing in the Bill precludes that possibility. If that is so, it is all well and good and I do not demur from the general objectives of the Bill, although no doubt specific details will need to be addressed in Committee. Issues have already been highlighted by noble Lords, and no doubt others will emerge.
I turn now to the central issue, as far as I am concerned. It is of central importance to my party, Plaid Cymru, and it has been raised on many occasions in Wales over the past three decades. It is the fundamental issue that control of the Crown Estate in Wales should be in the hands of Senedd Cymru, and the financial benefits from it should aggregate to Senedd Cymru and the Welsh economy.
When the establishment of the National Assembly took place through the Government of Wales Act 1998, a considerable element in the momentum generated in support of that Act arose from a widespread perception that the resources of Wales—our coal, minerals and water resources—had historically been exploited for the benefit of others. I particularly note the drowning of the Tryweryn valley to enable Liverpool to profiteer by selling water on to industrial customers. That one Act—passed by Westminster in the face of the opposition of every Welsh MP bar one, who abstained—fired up the national movement that led to devolution.
Many people in Wales today see the insistence of politicians in Westminster that the Crown Estate in Wales remains under UK control as a re-run of the battles regarding water resources half a century ago. That is reflected in the debates in the Senedd. For example, in January 2022 the then Labour Climate Change Minister, Julie James, said of the Crown Estate that it is
“outrageous that it’s devolved to Scotland and not to us”.
Speaking in the Senedd last year, she said:
“It’s very clear from the latest annual report and accounts that the Crown Estate benefits significantly from its assets in Wales and our offshore waters. It’s also clear that the United Kingdom as a whole benefits from the income that is generated and the investment that the Crown Estate supports. But it is sadly not at all clear exactly how much Wales benefits from these incomes generated, and it’s our view that we need greater control of the Crown Estate in Wales to ensure that the scale of its activities generates much greater benefit to Wales and brings into much closer alignment the management of its assets and resources in Wales with our distinct Welsh policy”.
That was a Labour Minister in the Senedd in Cardiff. On that occasion, Labour supported Plaid Cymru’s Motion in the Senedd calling for the devolution of the Crown Estate and its assets in Wales.
In the Welsh Labour Government’s response in March this year to the recommendations of the Independent Commission on the Constitutional Future of Wales, chaired by Archbishop Rowan Williams, they stated:
“Our longstanding position is that the Crown Estate should be devolved to Wales in line with the position in Scotland”.
That is the long-held view of the Labour Government in Cardiff.
In a Senedd debate, the Conservatives called on the Crown Estate to engage with the Welsh Government to deliver a hydrogen strategy for Wales, a Welsh national marine development plan, a blue carbon recovery plan for Wales and support for small-scale hydroelectric schemes in Wales.
The arguments for devolving Crown estates in Wales are not restricted to financial considerations but are directly relevant to the Senedd’s environmental responsibilities. In particular, there is significant further potential off the Welsh coastline to develop floating offshore wind generation of electricity, with associated on-land job opportunities that could be so valuable to the Welsh economy. This is a key dimension in Wales’s green strategy, and my noble friend Lady Smith of Llanfaes may well expand on this. In fact, there is near unanimity in the Senedd that the revenues from the Crown Estate in Wales should be directed to meet the social, economic and environmental strategies supported by parties across Wales—although there are of course differing views on the mechanics by which that should be achieved.
The reluctance of the UK Labour leadership to give any commitment to Wales in these matters during the recent general election was a cause of considerable embarrassment to the Welsh Labour Government and to their Senedd members. In 2022-23, the net profits generated by the Crown Estate from its overall activities amounted to over £440 million, some of which emanates from activities in Wales. Not a single penny stays in Wales. This is not an enormous sum, but the scope for developing economic benefit from these assets is huge. The Welsh Government want to maximize the benefit for Wales from our natural assets. To keep a stranglehold over them in the hands of the Crown is little short of exploitation, and the economic exploitation of our country carries a certain resonance in Wales. To avoid such unnecessary bitterness and hostility, as well as for better co-ordination of public policy, control over the Crown Estate in Wales should be in the hands of the Senedd, as it is in the hands of the Scottish Parliament for activities in Scotland—a step that was supported at the time by the Labour Party.
These considerations will become increasingly important. There are currently three offshore wind farms in the Welsh sector of the Irish Sea, and two more are being developed in the same area off the northern Welsh coast, with the Crown Estate expecting to place a further four gigawatts by 2035, with an additional 20 gigawatt potential thereafter. In 2023, the House of Commons Welsh Affairs Committee, in its second report, Floating Offshore Wind in Wales—HC 1182—stated that
“floating offshore wind in the Celtic Sea represents perhaps the single biggest investment opportunity for Wales in decades with the potential to create thousands of high-quality, long-term jobs”,
if government makes this a reality. However, it warned:
“Local supply chains did not benefit from the rollout of conventional, fixed-bottom offshore wind”,
and there have been numerous calls not to repeat this failure. That is where the role of the Welsh Government is absolutely essential.
Over the past two decades, the proportion of purchases made by government in Wales, from Wales-based suppliers, has grown from some 30% to over 50%, with a target of 70%. This means supporting more local jobs and helping local economic survival. When such matters are managed from outside Wales, we invariably see contracts being placed with suppliers outside Wales. Clearly, there has to be value for money and proper maintenance of standards, but the Senedd is quite capable of doing this. When such matters are devolved, the interests of the Welsh economy are foremost. That is why there is now a cross-party demand that these responsibilities are devolved. Please will the new Government show that they have faith in the Senedd, and in the Welsh Labour Government, and move forward with devolving the Crown Estate for this very purpose?
I ask the salient question: why was it deemed appropriate to devolve responsibility for the Crown Estate in Scotland by way of the Scotland Act 2016—an Act that had been fully supported by Labour Members in both Houses—yet it is deemed inappropriate to devolve to Wales similar responsibilities? I shall be grateful if the Minister, in responding, will address this aspect and, at the very least, undertake to discuss these issues with Eluned Morgan—the noble Baroness, Lady Morgan—and her colleagues in Cardiff.
It is interesting that provision is made in the Bill for an additional four Crown Estate commissioners—presumably, this is to bring in the kind of expertise that the Crown Estate presently has. That is essential, particularly to bring people in from the private sector. In effect, if the ambitions of this partnership are right, we are talking about the Crown Estate becoming part of what will be a risk-taking investment business—and that requires expertise.
A lot of people think that investment in wind is a no-brainer, but tell that to the Siemens board, which at the moment is struggling with having to make billions of pounds of provision for the fact that its turbines have been shown to have major flaws. This job has to be extremely well done, by private sector people working with the Crown Estate and Great British Energy, and that means recruiting people who are able and not constrained by public sector salary constraints. Is this what is planned, or are we getting carried away with an excess of ambition about what might happen? I do not know; it is very difficult to tell.
Other noble Lords have mentioned that one of the constraints on the Crown Estate becoming a developer of offshore wind is the lack of grid connection. Something is actually being done about that. I was very interested that Ed Miliband, as the Secretary of State, has asked the National Energy System Operator—one of the good things that the Conservative Government did was to bring that into public ownership, so it is now a public body—what is needed to deal with the problems of grid constraints. Where does this Crown Estate partnership fit into that?
I also noted what the noble Lord, Lord Wigley, said about offshore developments in the Celtic Sea off the coasts of Wales and the south-west. When I was on the European Affairs Committee and we were looking at the role of co-operation between the UK and our continental friends, one of the great opportunities was in the North Sea—on the other side of our country. The concept of wind power linked to interconnectors that go across the North Sea is very attractive because if too much electricity is generated by wind on one side of the North Sea, it can be sold in markets on the other side and vice versa. Is this prospect being seriously examined? What would be the role of this partnership between the Crown Estate and Great British Energy?
I am an optimist about this. I want to think that we will be bold and get something done on our net-zero target by 2030. I hope that, in its minor way, this Bill might make a significant contribution.