Crown Estate Transfer Scheme 2017 - Motion to Approve

– in the House of Lords at 12:32 pm on 23 March 2017.

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Moved by Baroness Neville-Rolfe

That the draft Scheme laid before the House on 1 March be approved.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Commercial Secretary to the Treasury

My Lords, this instrument seeks to ensure that it is Scottish citizens who benefit from the revenues raised from the wholly-owned assets of the Crown Estate in Scotland. That was a specific recommendation made by the Smith commission agreement in its report on the further devolution of powers to the Scottish Parliament. We have worked closely with stakeholders to make sure that we are ready to implement it, and to transfer the management of the Scottish assets efficiently. The draft scheme has been agreed with the Scottish Government.

Allow me to clarify two important aspects of the provisions in this scheme: first, the nature of the change and, secondly, the important protections it incorporates. Under this draft scheme, all rights and liabilities connected to managing these Scottish assets will be transferred to Crown Estate Scotland (Interim Management). Revenues will henceforth go to the Scottish Consolidated Fund and the commissioners currently managing these assets will have no further role in doing so. Assets will, however, continue to be managed on behalf of the Crown and maintained as an “estate in land”, which ensures that any sale receipts must be reinvested. This is in accordance with the Scotland Act 1998.

I should also be clear that the assets include both rural and urban holdings, and mineral and salmon fishing rights. This includes an area that incorporates around half of the coastal foreshore and almost all of the sea bed, covering all the Crown Estate’s activities up to the 200 nautical miles limit. Your Lordships will recall the amendment proposed by the noble and learned Lord, Lord Wallace of Tankerness, during debate on the Scotland Bill to ensure devolution of aspects of the management of the Scottish assets to the island authorities. As my noble friend Lord Dunlop said at the time, we believe that the devolution of management responsibilities will be quicker, simpler and come with fewer practical difficulties if the UK Government devolve these responsibilities in a single transfer to Crown Estate Scotland (Interim Management). This is what the transfer scheme delivers.

A consultation is now under way by the Scottish Government to consider the long-term management of the Scottish assets. The Government will make a Written Ministerial Statement to Parliament six months after the transfer of the assets. This Statement will outline the progress that the Scottish Government have made on the onward devolution of these assets.

I now turn to the second point, the important protections set out in this instrument. One of the key considerations is that this scheme ensures the continued safety of citizens across the UK by ensuring that the transfer is not detrimental to defence or national security. The Scottish assets are key to delivering strategic capabilities for the defence and security of the whole of the UK. It is prudent to ensure that there are powers which the Secretary of State for Defence can exercise where there is an overriding public interest to do so. These powers will enable the UK Government to protect all of their citizens both now and in the future. It also protects other UK-wide interests, such as maintaining a consistent approach to telecommunications throughout the UK and keeping pipeline rental increases at market value so as not to hold back our oil and gas industry.

Lastly, the draft scheme protects the rights of existing members of staff as they transfer to Crown Estate Scotland (Interim Management). Provisions are in place to cover dismissal, contract variation and pensions. They will ensure that the arrangements for transferred staff will be no less favourable than those that they currently enjoy.

We are now in a position to make this transfer of powers to Scotland smoothly on 1 April 2017. I beg to move.

Photo of The Earl of Kinnoull The Earl of Kinnoull Crossbench

My Lords, I thank the Minister for her usual eloquence in explaining the transfer scheme. However, I ask her for help on a number of matters in relation to the scheme. I should say that I am not in any way wanting to object to the devolution contained in the Scotland Act 2016, of which this forms a part and which was the statutory embodiment of the Smith commission agreement of November 2014. I emphatically feel, however, that where these precious assets are concerned, we must be very careful to go no further than the Smith commission agreement, especially in relation to their status.

The framework document between the Treasury and the Crown Estate puts the status of these assets well. It is,

“a trust estate, independent of government and the Monarch”.

These assets are not therefore available for political uses. The first issue I will ask the Minister about is that of the onwards devolution which she spoke about a moment ago. Paragraph 33 of the Smith commission agreement saw this onward devolution going to named local authorities and to other authorities that ask. We debated this at length. As the Minister pointed out, the noble Lord, Lord Dunlop, made a ministerial undertaking in respect of the report six months after the transfer. In making the commitment, he also said that the UK Government would continue to press the Scottish Government on this issue. Can the Minister can update us on what progress has been made on that issue?

The Crown Estate is governed by the Crown Estate Act 1961, which sets out the duties and powers of the Crown Estate Commissioners and the general environment under which the assets are held. In her remarks, the Minister went some way towards this, but can she confirm that these provisions remain fully in force, now and in the future, over the Scottish assets that are transferring and the only real change is in the people and institutions who will be involved in the management of those assets?

The Treasury and the Crown Estate have a framework document, which I have already referred to. It is four pages of common sense in plain English. It contains two further important phrases:

“The Crown Estate ... is not an instrument of government policy”,

and, when referring to ministerial direction:

“A direction may be given only within The Crown Estate’s statutory duties”.

Can the Minister tell us whether a similar framework document is ready for 1 April in Scotland, given its importance in underlining the independence of the Crown Estate commissioners and providing clarity?

Lastly, I turn to the Scottish Government’s Crown Estate consultation document. The noble Baroness referred to the consultation, which started in January and finishes on 29 March. The document is 70 pages and contains, early on, a “Way forward” statement which says:

“The Scottish Ministers intend to introduce legislation which puts in place a new legislative framework for management of Crown Estate assets in Scotland”— then, the part I emphasise—

“that ensures … alignment with Scottish policy objectives”.

Later on, it says:

“After the transfer, the Scottish Parliament will have the power to legislate on the new framework for managing Crown Estate assets in Scotland”.

Then there is the part that I would emphasise:

“This will include the ability to depart from the Crown Estate Act 1961”.

Could the Minister comment on those two assertions as well?

Photo of Lord Wallace of Tankerness Lord Wallace of Tankerness Liberal Democrat

My Lords, as the Minister indicated, I moved an amendment on Report, and possibly also in Committee, on the Scotland Bill, which the noble Earl, Lord Kinnoull, has already referred to. The Minister has already answered one of the questions I was going to ask, which was whether it was still government policy to have a statement after six months. I am delighted to hear that it is, and we look forward to the statement.

The noble Earl has asked the second question, which is a request for a bit of colour and flavour to the commitment made by the noble Lord, Lord Dunlop, when he was replying to the debate on my amendment and said that the Government would continue to press the Scottish Government to deliver what was promised to the island communities and other communities in the Smith agreement: some detail as to what the Government have been doing to “hold the feet of the Scottish Government to the fire” on this matter, which I think were the words used during the debate. This is a welcome first step in fulfilling the intention of the Smith commission and we hope that onward devolution will become a reality sooner rather than later.

Photo of Lord Adonis Lord Adonis Labour

My Lords, I am sorry to add to the questions that have been posed to the Minister, but could she tell the House a bit more about the relationship between the income from the Crown Estate that is being devolved to Scotland and the sovereign grant? Under the Sovereign Grant Act, a substantial proportion of profits from the Crown Estate go to fund the monarchy, and that proportion is rising significantly with the arrangement that the Government have entered into for the refurbishment of Buckingham Palace. The agreement in respect of the Crown Estate profits in England is for 25% to be used that way. Will a similar share of the profits from the Crown Estate in Scotland be allocated to the sovereign grant from the profits of the Scottish Crown Estate under this arrangement? If not, are the Scots making any contribution to the monarchy at all?

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Treasury)

My Lords, I have no wish to pile Pelion upon Ossa, because the Labour Opposition of course fully endorse this instrument. It would be surprising if we did not, as after all we were closely associated with the development of the Smith commission. We are very much in favour of devolution of income tax to Scotland and of course see the benefits to the Scots of them being able to obtain financial advantage form the Crown Estate in Scotland, so I am very much on the Minister’s side. She has been asked some interesting questions, which I am sure she will answer in a moment or two. I have only one, very general question, which was asked by a colleague in the other place, to which I think we have had no indication of an answer subsequently. On the question of resolving disputes between the UK and Scottish Governments, there has been a substantive change since the publication of the original draft seen by Parliament in October 2015.

Will the Minister say a little about the negotiations with Scottish Ministers, particularly as the process seemed to involve the resolving of disputes through determination by independent experts? We do not know who those experts might be, nor do we know how they will be chosen. That seems a very important point, to which the Minister should address herself in the context of this instrument.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Commercial Secretary to the Treasury 12:45, 23 March 2017

I am grateful to so many noble Lords for taking an interest in this important order. Again, I apologise for not being able to answer every question due to the difficulties that our officials have had getting into our House, which I fear may be a problem for a day or two.

I think there is general agreement on the usefulness and timeliness of this order, which follows on from the Smith report and many hours of constructive debate in this House. It was good to hear the noble and learned Lord, Lord Wallace of Tankerness, express his general satisfaction. I will agree to check on the latest position relating to the conversations that my noble friend Lord Dunlop has had with the Scottish Government, and write to noble Lords with an interest.

The noble Lord, Lord Adonis, has asked me quite a detailed question about exactly how finances work. I would prefer to take advice and write to him with a proper answer on that.

Photo of Lord Adonis Lord Adonis Labour

The Minister says my question was detailed, but in fact is it not a quite fundamental one? One-quarter of the profits of the Crown Estate in England are going to fund the monarchy. Under this arrangement, are one-quarter of the profits of the Crown Estate in Scotland going to fund the monarchy or not? If not, is the inference to be drawn that it is only the English who will be funding the monarchy henceforth?

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Commercial Secretary to the Treasury

In the absence of expert advice, I would rather write to the noble Lord and engage if the need arises.

Photo of Lord Adonis Lord Adonis Labour

I am very sorry to detain the House but, given how important a point of principle this is, if the House is not even aware of what the situation is, is it reasonable for us to agree to the order today with no knowledge at all of how the funding of the monarchy is going to continue henceforth?

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Commercial Secretary to the Treasury

If I may, I will answer the other questions that have been raised, and we will see if we can get an answer for the noble Lord.

The noble Earl, Lord Kinnoull, asked a number of questions following on from the debates in this House at an earlier stage. Devolution, as he knows and as I have said already, is a matter for the Scottish Parliament to determine. The Scottish Government are currently consulting on the long-term management arrangements.

On the question of whether Scottish Ministers will adopt the Treasury Crown Estate framework, particularly regarding the independence of the Crown Estate commissioners, Scottish Ministers will make their own arrangements for the oversight of Crown Estate Scotland interim management, consistent with the Scotland Act and the Smith commission agreement. The Crown Estate commissioners will not be involved in the management of Scottish assets once they are transferred. This will have no impact on the independence of the Crown Estate commissioners, who will continue to manage Crown Estate assets in the rest of the UK.

The Scotland Act 2016 will enable the Scottish Parliament to legislate for the management of Scottish assets. Section 1 of the Crown Estate Act will not apply since this makes provision for the giving of directions by UK government Ministers to the Crown Estate commissioners. Scottish Ministers are currently consulting on the long-term management arrangements, as I have already said. On the management of assets, the ownership will remain with the Crown.

To respond to the noble Lord, Lord Adonis, we will ensure fiscal neutrality by making a block grant adjustment, ensuring that the Scots do not profit from the transfer.

Finally, the noble Lord, Lord Davies, asked me about the process for resolving disputes between the UK and Scottish Governments and how independent experts will be chosen. In the current draft of the scheme, we have ensured that dispute resolution processes will be carried out by an independent person. Where there is a dispute about market value, an appropriate independent person with specialist expertise will be appointed by agreement between the interested parties, or between Treasury and Scottish Government Ministers, as the case may be, and in the event that agreement cannot be reached, the Royal Institute of Chartered Surveyors can be asked to nominate an appropriate person instead.

This is an important transfer of powers to the devolved Administrations. We want the administration to be seamless and to take effect, as I said, from 1 April.

Photo of The Earl of Kinnoull The Earl of Kinnoull Crossbench

I am not sure I have quite had an answer on the simple issue of whether the assets can now become political footballs: whether the Crown Estate Act absolutely applies, or whether the Scottish Government can depart from the Act or order the managers of the Crown Estate assets in Scotland to ensure alignment with Scottish policy objectives. Those are critical points—certainly for me.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Commercial Secretary to the Treasury

Those points were considered. The order before us today reflects what was agreed during the passage of the Bill. We have consulted and come forward with these arrangements. I have reassured the House that the Scottish block grant will be adjusted to take them into account, so the Scottish Government will not be getting extra funding from the UK and Scottish taxpayers will continue to contribute to the sovereign grant. It is paid out of the Consolidated Fund, to which all taxpayers contribute and is calculated with reference to the Crown Estate revenue, but not paid directly out of it.

Motion agreed.