Crown Estate Bill [Lords]

I beg to move, That the Bill be now read a Second time. May I commend my hon. Friend the Member for Gloucester (Alex McIntyre) on his moving ten-minute rule Bill, which he just presented?

The purpose of the Crown Estate 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, yet it is restricted in its ability to do so by legislation that has not been amended since 1961. With less ability to compete and to invest, it is less able to deliver returns for the public purse than it might otherwise be able to do.

Existing limitations on the Crown Estate’s powers have meant it has had to generate capital for investment by selling its assets, which is neither desirable nor sustainable. 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 the Bill is necessary and why the Crown Estate has asked successive Governments for reforms.

The Bill has been expanded and improved during its passage in the other place, with requirements relating to sustainable development, GB Energy and the composition of the board. Fundamentally, the changes that the Bill proposes will give the Crown Estate new freedoms, including the power to borrow as their competitors can, enabling them 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 invest 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 Bill would 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 pre-consent surveys and supporting grid connections, thus increasing the frequency of leasing for offshore wind and supporting the clean energy transition.

I hope the Minister will not hear much disagreement about the points he is making so eloquently. However, may I query why these provisions and powers, which he believes are relevant for the Crown Estate in England and Wales, are not also being provided to the Crown Estate in Scotland?

As the right hon. Gentleman knows, Crown Estate Scotland is a separate organisation to the Crown Estate that is the subject of the Bill. Of course, we continue to have conversations and we will be pleased to talk to him and others about that issue for the future.

On that point, will the Minister give way?

I will make some progress.

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.

Let us be clear that this is a huge departure for the Crown Estate. The Bill basically allows it to go to the City and to raise capital based on its assets, most of which, as the Minister highlights, are property. As he knows, the sponsor Government Department for the Crown Estate is the Treasury, but investments go up and down. What if those investments go down? Who will be the guarantor for those liabilities? Will it be the taxpayer or the Crown Estate?

I will come to a number of those points later in my speech. If I have not answered the right hon. Gentleman’s points as I get towards the end, I will take another intervention from him.

As a result of the changes in the Bill, 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 in 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 or from other sources, but only with Treasury consent. Borrowing from the Government will be at commercial rates, meaning the interest the Crown Estate pays, funded from its own income, will outweigh the Government’s cost of borrowing the money they loan to the Crown Estate. This will enable the Crown Estate to build on its long track record of delivering significant revenues to the public purse year after year—it has delivered over £4 billion in the last decade.

Is there not a potential conflict of interest? The Minister mentions GB Energy, a new national organisation introduced by Labour Government policy. Because of the Crown Estate’s partnership with the Treasury, the Government are encouraging the Crown Estate to invest in GB Energy, but what if people out there do not like that policy? What if GB Energy is a failure? It is there not a clear potential conflict of interest between the Crown Estate and the incumbent Government?

The right hon. Gentleman is doing a brilliant job of anticipating sections in my speech. Once again, I will point at him when I come to the relevant section; in fact, it is the next section, so he is in luck.

There will be a memorandum of understanding in place between the Treasury and the Crown Estate that will govern how the borrowing powers will be exercised. 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 our fiscal rules.

Given that the 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 the end of the decade. As with any public sector borrowing, the Treasury will ensure that this is consistent with “Managing Public Money” principles to ensure value for money for the taxpayer. The fiscal impact of any Crown Estate borrowing will be fully considered, starting with this year’s spending review, to ensure it is consistent with our fiscal rules.

The Bill contains a set of necessary reforms, ensuring that the two key objectives can be met and that the Crown Estate can continue to operate effectively, both now and in the years ahead. It is composed of five key elements. First, it widens investment powers by removing existing restrictions on investing in the current Crown Estate Act 1961, 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 the power to borrow with Treasury consent. As well as generating returns for the public purse, the 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, the Bill 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. The Bill also requires the appointment of commissioners to advise on Wales, England and Northern Ireland, which will ensure that the board continues to act in the best interests of the areas in which it operates.

I understand that the Minister is proposing that, in relation to the seabed, the Crown Estate will be a licensing authority for renewable energy projects and will now be able to invest in them too. The commissioners have a primary duty to maximise the return to the Crown Estate of any activity they undertake. To comply with the law, will the Crown Estate be compelled to side with renewable energy development at the expense of the fishing industry if, for example, there is a conflict between the siting of an offshore wind farm and the use of that sea by the fishing industry, and is that fair?

That is a great question. I have no idea, so I will commit to writing to the right hon. Gentleman with an answer, if he will forgive me for not knowing.

Will the Minister give way?

Only if it is a question to which I know the answer.

I might be able to help a little with the question asked by the right hon. Member for Orkney and Shetland (Mr Carmichael). The Crown Estate has engaged in supporting the evidence and change programme that has brought the fishing industry and the renewables sector around the table to enable earlier planning to prevent some of the conflicts we have seen. My speech will highlight some good examples of where those plans and the evidence and change programme have started to be implemented. The industries are working together, hand in hand, to prevent the kind of conflict about which the right hon. Gentleman is rightly concerned.

I am grateful to my hon. Friend for her help, which I hope gives the right hon. Member for Orkney and Shetland (Mr Carmichael) some reassurance, as it sounds eminently sensible.