Baroness Vere of Norbiton:

Moved by Baroness Vere of Norbiton

12: Clause 2, page 2, line 11, at end insert—“5A The Chair of Commissioners and each Commissioner may not be appointed until the appointment has been scrutinised by the Treasury Committee of the House of Commons, or any successor committee.”Member's explanatory statementThis amendment would require the appointment of the Chair of Commissioners of The Crown Estate to be subject to scrutiny by the Treasury Select Committee.

My Lords, my Amendments 12 and 36 focus broadly on the governance and management of the Crown Estate. Amendment 12 in my name seeks to introduce a process by which Parliament can scrutinise the appointment of new Crown Estate commissioners. If passed, the Bill will increase the number of commissioners from eight to 12. The Government have not given a clear reason for this change, arguing merely that the new number will bring the number of commissioners in line with best practice for modern corporate governance. Further information and thoughts on that from the Minister would be welcome. It would be interesting to hear what problems this change will solve, what particular skills he feels the Crown Estate is missing and why those additional four commissioners will deliver the change needed.

As many noble Lords have remarked already in Committee today, the Crown Estate bears the most enormous responsibility as the custodian of many of the nation’s important assets. That responsibility is significant, yet the level of parliamentary oversight—over not only the activity of the commissioners but their stewardship of these billions of pounds’ worth of incredibly important assets—is weak and has been further weakened by the Bill.

My Amendment 12 would give Parliament a role in scrutinising commissioner appointments to ensure that candidates were qualified for the role that they are anticipated to play. That would include the new commissioners who will be introduced after the Bill becomes law, as well as the chair of commissioners, for which I believe a recruitment process is currently under way. The chair of the commissioners will be an incredibly important role. Again, I believe it would be beneficial and reassuring to all parliamentarians if a committee—for example, the Treasury Select Committee—had the opportunity to question the candidate for that role before they took up the reins.

The amendment in the name of my noble friend Lord Young of Cookham identifies a specific issue when it comes to oversight. Commitments are made on behalf of the Crown Estate but there is no mechanism to ensure that those commitments are implemented. Therefore, I hope that the Minister will listen carefully to what my noble friend has to say, and will agree that the amendment in my noble friend’s name would improve the Bill.

Amendment 36 also seeks to improve parliamentary scrutiny of the governance of the Crown Estate, by ensuring that the disposal of assets owned by the Crown Estate is reported to the Treasury and then to Parliament. The Minister will know that I was concerned about this, as I asked in a meeting what restrictions there were over sale of assets. I did not receive a satisfactory response at all. Again, I note that the Crown Estate owns some of our most important landmarks. These are valuable pieces of land, buildings or indeed seabed, but they are not just valuable; they are iconic.

There is limited transparency to the decisions of the Crown Estate beyond the annual report. This measure is simply designed to ensure that Parliament has some visibility in the decision to dispose of assets. In this case, I picked an amount of £10 million, but it could be higher than that. This seeks to discourage the commissioners from taking inappropriate short-term decisions about the ownership of national landmarks, and indeed the natural environment, for short-term gain.

I am grateful to my noble friend Lord Holmes of Richmond for his amendments in this group about creating public good, and I will listen with great interest to the response from the Minister. The spirit of my noble friend’s Amendment 19 aligns closely with my Amendments 37A, 37B and 37C in a later group, and will touch on that there.

Finally, I was interested to note the proposal from the noble Earl, Lord Russell, to grant the Crown Estate commissioners the power to grant leases in exchange for full or part ownership of any project. Again, that is something the Minister may wish to consider.

I hope the Minister will look carefully at these constructive amendments, and specifically confirm to the Committee whether he agrees that Parliament should have a greater role—or indeed, in my view, any role at all at this stage—in scrutinising the work of the Crown Estate. I beg to move.

My Lords, Amendment 13 in my name is a follow-up to an issue I raised at Second Reading, where I spoke about a case where the Crown Estates were not honouring an undertaking that they gave to your Lordships’ House earlier this year: that they would adhere to the terms of the various Leasehold Reform Acts on the statute book. By appointing a commissioner, as my noble friend has just mentioned, with the specific responsibility of ensuring that such undertakings are honoured, we could reduce the risk of this happening.

To recap, briefly, Parliament has given certain rights to leaseholders. Included in those rights is the right to buy out the freehold or to extend the lease on specified terms. The Crown is, as a general rule, exempt from legislation but it agrees to abide by its terms. The relevant undertaking to so abide was given by me in 1983, when I took what is now the Leasehold Reform, Housing and Urban Development Act through the other place. The undertaking was repeated by my noble friend Lady Anelay, then the Government Chief Whip, on 24 May this year as the then Leasehold Reform Bill got its Third Reading; it can be found in Hansard for that day and says that

“The Crown … agrees to the enfranchisement or extension of … leases”—[Official Report, 24/5/24; col. 1368.]

as set out in the various Acts.

How does the Crown acquire new freeholds? When a freeholder disappears or goes bankrupt, the Crown Estate takes possession under a process known as escheat. At that point, leaseholders appear to lose the rights that Parliament has given them. In the case that I cited, leaseholders applied to buy the freehold but were told by agents acting for the Crown Estate that it was not obliged to dispose of the freehold under the relevant formula in the legislation, but offered to sell it at a far higher price—over four times as high.

Solicitors acting for the Crown Estate conceded that, until this issue is resolved:

“Where a block of flats is subject to escheat lessees will generally be unable to sell”,

and that is indeed the case. We have a stalemate, as described at Second Reading, with longer-terms risks to the fabric of a building. I referred then to the framework document, which sets out the terms of agreement between the Treasury and the Crown Estate, in particular the sentence which says the Treasury shall

“inform The Crown Estate of relevant government policy in a timely manner”.

I suggested that the Minister told the Crown Estate that policy on enfranchisement has been clear for many years and that the Crown Estate should respect it.

In his reply to the debate, the Minister said:

“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”.—[Official Report, 2/9/24; col. 1018.]

I note in passing that at one point the Treasury had responsibility for this property through its bona vacantia division and was happy to sell and enfranchise, in line with the government formula. But the Crown Estate, which reports to the Treasury, has rules of its own and it is now in charge of that property. The Minister’s private office was in touch to confirm details of the property involved, but I heard no more until 4.30 pm on Friday. I was luckier than the noble Baroness, Lady Kramer, who is still waiting for her answer. I will come to the Minister’s reply in a moment.

In the meantime, there has been an interesting development involving the ombudsman. The leaseholders referred the Crown Estate to the parliamentary ombudsman, alleging maladministration. I quote a key paragraph from a long decision letter:

“Furthermore, we cannot achieve the outcomes you are seeking as it is not within our power to compel the Crown Estate Office to negotiate with you to reach an agreed valuation and price. In order to seek any changes to how the Crown Estate … operates, this will need to be pursued via parliament which you have told us you are doing”.

That indeed is what I am now doing.

At this point, I am afraid that the Minister’s office appears to have let him down. The ombudsman’s letter was dated 20 September, making it clear that he could not intervene. The Minister’s reply—undated but, as I said, received on 11 October—says:

“The Ombudsman is therefore the appropriate mechanism to resolve issues of this kind”.

He is not; the ombudsman has made it clear that this is a matter for Parliament, so the buck that the Treasury passed to the ombudsman is now firmly back on the Minister’s desk. Crucial to the debate we are now having, the Minister’s letter said:

“However, TCE’s long-standing position is that it is required by the 1961 Act to achieve best consideration, having regard to all circumstances for any disposal of the land unless other provisions of that Act enable TCE”— the Crown Estate—

“to act otherwise ... Consistent with this, most disposals of escheated land by TCE are for market value.”

It appears that the Crown Estate is sheltering behind that remit to deny leaseholders rights that they have been given by legislation.

I shall come in a moment to the argument as to whether that 1961 Act trumps later undertakings and legislation, but in the meantime we must dispose of another argument that the Minister deployed in his letter which self-detonates. He explains at the beginning of that letter that

“where freehold land is subject to escheat, the freehold interest will be extinguished”,

so there is an element of finality about that. But three paragraphs on, in the very same letter, what do we find referring to the specific case that I raised? He said that the Crown Estate

“has an established procedure for valuing the freehold to proceed with a sale”,

so the freehold that had been extinguished has now re-appeared. As Michael Palin asserted of the Norwegian Blue parrot in the “Monty Python” sketch, it was not dead. It had simply been resting or stunned. Crucially from the point of view of the Crown Estate, or at least its legal advisers, during the process of reincarnation that very same freehold had shed all the obligations it had had. It was now a new freehold, exempt from all legislation.

That argument is an ill-disguised attempt to throw one off the scent, and a piece of legal sophistry. What the leaseholders would acquire from the Crown Estate would be the freehold. The simple question for Parliament is: which statute should prevail? Is it the 1961 one, setting out the Crown Estate’s remit, or the subsequent Acts giving leaseholders rights? The answer is clear. After the Bill was passed earlier this year, Parliament gave certain rights to leaseholders and the Crown Estate agreed to honour them, and so it should. Many organisations have a duty to get best price for their assets—pension funds, local authorities and trustees —but they are all bound by the law. There is no reason why the Crown Estate, a commercial organisation, should be any different but there is in my view an even more powerful argument. Leaseholders who have been given rights by Parliament should not forfeit them when their freehold “disappears” and then reappears when the Crown Estate takes over, but mysteriously shorn of any conditions.

There are wider implications from all of this. Following the Building Safety Act post Grenfell, many freeholders could go bankrupt. Without going into the details of that Act, it produced what was called a waterfall of liabilities, with the sub-contractors and developers in the frame first, then in some cases the Government, then freeholders and then leaseholders. But remediation costs can be substantial, and many freeholders could go bankrupt; those blocks will then fall into escheat and, in addition to all the problems those leaseholders have of living in an unsafe block, they will then find themselves deprived of their rights.

At the end of the Minister’s reply, which, as I have made clear, I find very disappointing, there is a classic sentence crafted by the authors of “Yes, Minister”:

“The Government recognises there is potential for reform in this complex area”.

There is a solution, which I touched on at Second Reading: the framework document setting out the agreement between the Treasury and the Crown Estate. It says that the Treasury shall

“inform The Crown Estate of relevant government policy in a timely manner”.

We know what government policy is on this matter: it is set out in the various leasehold Acts. However, the Minister’s letter says that the Crown Estate

“does not believe the 1992 parliamentary undertaking applies to escheat”.

In effect, the Crown Estate is seeking to make a profit on the backs of leaseholders, who are being offered the freehold at a far higher price than they would have had to pay had their freeholder not disappeared. That is what the Crown Estate believes, but what does the Minister think? How does he begin to defend what I have just said? In his Written Answer to me, published today, the Minister confirms that we will have a new “draft Memorandum of Understanding” between his department and the Crown Estate. The solution is for that document to make it clear that the Acts of Parliament apply when the Crown disposes of freeholds under the process of escheat. I look forward to his reply and to the views of others who had the patience to listen to what I have just said. I make it clear that I will come back to this on Report if there is no satisfactory resolution before then.

My Lords, I rise to add a little extra interest to the statements made by the noble Lord, Lord Young of Cookham. We discussed this at Second Reading and my Amendment 42, which will come at the end of tomorrow night if we ever get that far, is about the same issue. I go back to the statement made by the Chief Whip of the previous Government, who basically said that the Crown will comply with the legislation if it chooses to; that is a summary. The way it chooses to do it will be published at some time, which is relevant to my amendment.

The reason I am speaking now is because the comments made by the noble Lord, Lord Young, beg the question: who is in charge? Is it the Government or the Crown Estate or, in my case, the Duchy of Cornwall? Each one blames the other and says that they are not in charge, but they actually probably are. They then refuse to have correspondence. I am pleased that the noble Lord, Lord Young, got a letter.

I have a good friend, Dr John Kirkhope, who advises on many issues around the Duchy of Cornwall, which is not much different to the Crown Estate. He tried to get a freedom of information decision on whether he could seek copies of correspondence between the Duchy and the Government—I think that includes the Crown Estate, the Duchy and the Government—on matters of policy. The answer was no. He went back and said, “Here you have an unelected body apparently advising government on matters of policy and that does not seem very right to me”.

Paragraph 16 of the eight-page response from the Information Commissioner’s Office on whether any information should be disclosed says:

“The Commissioner considers that the following factors will be key indicators of the formulation or the development of government policy”.

There are then three bullet points.

“the final decision will be made either by the Cabinet or the relevant minister; … the government intends to achieve a particular outcome or change in the real world; and … the consequences of the decision will be wide-ranging”.

The Crown Estate therefore

“advised that it considered direct correspondence as well as correspondence where the Crown Estate and the Duchy of Cornwall had been copied into” and decided that it is reasonable to withhold information.

It looks as if the Crown Estate and the Duchy of Cornwall—we never mention the Duchy of Lancaster, but I think it is rather less difficult—seem to be a Government of their own. This is back to the feudal system, where Ministers, whom we elect and appoint, are unable to effect any legislation regarding the Crown Estate or the Duchy because they are not so important. It is back to the feudal system, and I shall come back to this on Amendment 42.

I hope my noble friend will give the noble Lord, Lord Young, a pretty strong response, because this is something that will go on and on—whether it is escheat or something else. The people affected are getting pretty fed up with the Duchy and Crown Estate playing them and not coming back with a decent response.

My Lords, it is a pleasure to take part in this group of amendments, not least to give full-throated support to my noble friend Lord Young of Cookham, who gave us an excellent lesson in escheat and how it is being applied by the Crown Estate. He took us on a whirlwind journey, from “Monty Python” to “Yes, Minister”, without needing at any point to go near Mornington Crescent. He also added greatly to the work of land law scholars across the country with the new common-law concept of the resting parrot freehold. I hope the Minister will respond in the only way possible to such a clear and erudite presentation from my noble friend—with a clear, unequivocal agreement to every last word.

I will speak to Amendments 18 and 19, which are in my name. In many ways, they are underpinned by a simple connection: it is all about the people involved. Amendment 18 looks at the issues of governance and those inside the Crown Estate—the stewards of the land and ocean. It suggests that, as the remit and in many ways the extent of the Crown Estate’s activities are being significantly and materially changed by this Bill, this would seem an opportune moment to review all the practices, policies, procedures, assets and investments of the Crown Estate. This would be to assess how they shape up around the principles of inclusion and inclusive by design, and ensure that they reflect what we want from 21st century Britain. Similarly, on the new appointees at the board table, we should look at those appointments and ensure that, when they come about, they really deliver on all the elements of inclusion in its broadest conception.

Amendment 19 is about the people who are impacted by the Crown Estate land, those who butt up against it, and who are on Crown Estate land and properties. They are the stakeholders. It seems to me that, again, this Bill offers the opportunity to completely reimagine that relationship between the Crown Estate and its stakeholders for the benefit of both. These are the people who understand the issues at the sharp end. As part of their daily experience, they come across the highs and lows of working the land and the ocean or being in the energy field. Crucially, they see where the difficulties and shortcomings are. I suggest to the Minister that, with modern technology, there is potential to engage with all these stakeholders in a completely reimagined fashion in real time if so required. This would really transform that relationship, drive greater benefits for both parties and completely change the sense of how those on the land and in the properties connect to the Crown Estate. I look forward to the Minister’s response.

My Lords, I will speak to my Amendment 31. I apologise in advance that I have no “Monty Python” sketch references, but I support the amendments from the noble Lord, Lord Young, and the other amendments already spoken to.

Amendment 31 seeks to give an explicit power to Crown Estate commissioners to lease parts of their holding in exchange for either part or full ownership of any project or development, as the commissioners see fit. For the sake of clarity, the full wording of the proposed new Section 3(1)(a) of the Crown Estate Act 1961 is:

“The Commissioners may waive lease fees in exchange for full or part ownership of any project or development”.

I say this only as the Member’s explanatory statement used the word “land”. My amendment is intended to—and does, as far as I am concerned—cover all the Crown Estate’s holdings. That is particularly important because, as we all know, most of its money comes from the leases of the seabed. This amendment is designed to help the Government and the partnership with GB Energy. It is designed to help the Crown Estate itself. I want to see a transition to net-zero power by 2030. I welcome that commitment from this Government.

But I also want to see us grow and develop as an economy and as a country. I want the energy transition, which is arguably one of the greatest transitions in our use of energy since the Industrial Revolution, to be of benefit to ordinary people. I want the UK to be able to own at least parts of our new energy infrastructure—the energy infrastructure of the future. That is my thinking in my amendment. I want the UK to receive long-term benefits above and beyond just the green and environmental benefits that come with these things.

The Crown Estate generates its income primarily from the lease of seabed plots for offshore wind and floating offshore wind developments. The Crown Estate reported record profits for 2023-24 of £1.1 billion, boosted by round 4 sales. Round 5 of the offshore wind auction was not as successful but we have just had a successful round 6, which I welcome, which generated some 4.9 gigawatts of capacity but at somewhat lower prices than in round 4. Labour has plans to generate 20 to 30 gigawatts of offshore wind capacity by 2030. For context, that is enough to power 20 million homes.

We still have quite a long way to go with this offshore wind and floating offshore wind transition in particular. The hope is that £8.3 billion of investment by the Government will help to leverage some £60 billion of private investment. It is interesting that we are talking about this today, the day on which the Labour Government are holding their investment summit. I wish them well with that because the UK economy needs to grow and we need inward investment to do that.

We welcome, obviously, the plans for GB Energy and this partnership and tie-up with the Crown Estate. But although I very much welcome Labour’s ambition to decarbonise our power generation by 2030, it is worth noting that GB Energy will not be an energy supplier or own any energy generation assets. To my mind, that is a missed opportunity and I think we could do better.

To quote the Labour Energy Forum document title, Who Owns the Wind, Owns the Future. The Floating Offshore Wind Task Force has predicted that floating offshore wind could be the UK’s biggest industrial success by 2030, worth £47 billion to the UK economy and employing some 10,000 people. We should never lose sight of the fact that the UK is well placed and is estimated to be the third-best country in the world for the generation of wind energy. We are extremely lucky in that regard.

Other significant parts of the Bill seek to make rights that were implicit in the 1961 Act explicit. From my reading of the original Act, I can see no reason why the Crown Estate could not waive lease fees in exchange for part-ownership of offshore or floating offshore energy wind projects—but, at the same time, I can find no implicit right in the original Act. Frankly, I think there should be an implicit right.

As far as I can tell, the Crown Estate does not own or part-own any offshore wind installations now. It has a helpful page on its website that shows who owns all the offshore wind under its control. In many cases it is foreign Governments, hedge funds and other nations and their capital which own it. In 2022, for example, nearly half the UK’s offshore wind capacity was owned by state-owned or majority state-owned foreign companies. They are getting the long-term benefit of the investment in our third-best wind energy in the world and are using it to support their economies.

I want our wind energy to generate and support our economy. While leasing plots brings in revenues, part-ownership of the infrastructure itself could bring in much-needed longer-term and consistent revenue streams to the Crown Estate. I believe there is greater long-term financial gain from part-ownership of energy infrastructure than from simply leasing the seabed.

This would be good for the Crown Estate. As we have heard today, the Crown Estate is in a period of transition and allowing it the ability to explore this, if it wants to, would be useful at the start of the partnership. I also believe that allowing this to happen could be useful for the generation of small-scale community energy projects. This is something that I believe in strongly and would like to see the Government do a lot more of, and this amendment would be useful in helping that to happen. It could be the basis of a new model for the way the Crown Estate works, generating much smaller, local community benefit projects.

This would be good for energy transition, good for the Crown Estate, good for the UK economy and good for jobs and growth. I welcome your Lordships’ responses and look forward to hearing from the Minister. I hope that this amendment finds approval.

My Lords, I will speak briefly to Amendment 22 in my name, which is included in this group of amendments. I also add my support to Amendment 18 from the noble Lord, Lord Holmes of Richmond, on inclusion in governance and Amendment 24—my noble friend Lord Wigley will follow with further commentary—on the transparency of financial reporting.

One of the aims of bringing forward the Crown Estate Bill was to increase the number of commissioners on the board. Increasing the size of the board is a good opportunity to reflect on its composition, and I share the curiosity of the noble Baroness, Lady Vere, in relation to what the Government hope the additional commissioners will add, specifically, to the committee.

At present there is no representation from our national Parliaments on the board, which makes investment and borrowing decisions across England, Wales and Northern Ireland. Having representation from our national Parliaments on the board will improve the Crown Estate’s alignment with the public policy aims of our national Parliament, in particular on crossovers with policy on devolved areas such as energy and the environment. My amendment would give each of our national Parliaments where the Crown Estate has activities the opportunity to nominate a representative to the board.

This amendment provides a meaningful mechanism for our democratically elected Parliaments to have a say on decisions made by the Crown Estate. I welcome support for this amendment from all corners of the Chamber and look forward to hearing the Government’s position too.

My Lords, I briefly intervene on this group of amendments, not least to support my noble friend Lord Young of Cookham in the point he made. I think it raised—as did Amendment 31 from the noble Earl, Lord Russell—the question of the interpretation and interaction of the powers in the 1961 Act and how they are being used. I want particularly to raise one issue with the Minister. I should also say that in the register of interests noble Lords will see that I chair the Cambridgeshire Development Forum, and the Crown Estate is a member of that, although I do not think any of its activities or that interest impinge on this Bill in any way.

My noble friend Lord Young of Cookham referred to the way in which the Crown Estate interprets its statutory duty in Section 3(1) of the 1961 Act, which says that it must secure

“the best consideration in money or money’s worth” in

“all the circumstances of the case”.

That is indeed what the statute says, but I have had the benefit of looking at the Crown Estate Act and talking with officials. I am grateful for their time, not least because it seems to me that there is an inherent restriction on the function of the commissioners which, as the Minister earlier made clear, is in Section 1(3) and sets out that they should “maintain and enhance” the value and return obtained from the estate with

“regard to the requirements of good management”.

As far as I understand it, the view of the Government and the Crown Estate is that, over 60 years or thereabouts, the requirements to obtain best consideration in money or money’s worth have effectively been trumped where necessary by the function of the commissioners, particularly as regards securing the requirements of good management. My first question to the Minister is: in the light of what the noble Lord, Lord Young of Cookham, was saying, does he agree that the requirements of good management in that instance mean that the Crown Estate would live by the practice of other public authorities, or those with public responsibilities, in relation to the interests of the leaseholders?

I have a second question for the Minister. Is it wise, as we are reviewing the Crown Estate Act 1961, to make it fit for purpose, as the essential Act for the Crown Estate, to keep that best consideration requirement? What does it add to the function in Section 1—that of securing, maintaining or enhancing the value of the estate, subject to the requirements of good management? Does it actually add any restraint? In that instance, of course, many noble Lords on other amendments are talking about how the Crown Estate could go about trying to secure other, wider national interest objectives, not least in relation to environmental considerations —and then we come on to talk about the seabed and other issues.

There is a risk associated with Clause (3)(1) and best consideration: that it might prevent the Crown Estate from fulfilling what it might regard as its core objective, which is to secure the maintenance and enhancement of the value of the estate but with the requirements of good management. In this context, good management embraces many of the issues that no doubt we will discuss in other amendments. We will probably not amend the Bill because putting them into the statute will be onerous, but we want to be assured that the Crown Estate, by virtue of Section 1 of the 1961 Act, has all the powers—and they are not just implied, because the Minister makes it clear that it actually has the powers—to do these things, meet these obligations and secure these objectives, and that Clause (3)(1) will not prevent it from doing so.

Before I pursue the subject of the amendment, I am glad to follow the noble Lord, Lord Lansley, on that subject. I suggest that, if the Crown Estate has the powers, it also has the responsibilities that go with it. The noble Lord, Lord Young of Cookham, has highlighted some important responsibilities, and I suspect that it will need a lot more attention in coming months and years.

I shall speak primarily once again on issues relating to the devolved dimension. It is to better understand the financial dealings of the Crown Estate in Wales that Amendment 24 in my name and that of the noble Baronesses, Lady Smith and Lady Humphreys, is on the Marshalled List. It asks for the disaggregation of the annual reporting of capital and revenue items to provide transparency in regard to the Crown Estate finances relating to Wales, England and Northern Ireland respectively. We have gone through some of the general arguments in this sphere, so I am not going to repeat them, but I stress that this is a modest proposal that surely cannot be rejected by any Government who have some sympathy with the position of the devolved Government.

I shall make a short contribution in agreement with Amendment 22 in the name of the noble Baroness, Lady Smith of Llanfaes, and Amendment 24 in the name of the noble Lord, Lord Wigley.

When I was preparing for this debate, I looked at some figures, but they are very difficult to find. On the first group in Committee, I referred to the fact that we know that the Crown Estate has land worth more than £600 million in Wales, that it owns 65% of the coast and that it has 300,000 acres of land in Wales, but we do not know exactly how much money that raises in Wales. We know that, across England, Wales and Northern Ireland, profits have more than doubled in the past year, growing from £443 million in 2022-23 to £1.1 billion in 2023-24, but there is very little clarity about the contribution of each individual nation to the total. In the interests of transparency, I certainly support Amendment 24. On Amendment 22, I cannot understand why none of the Parliaments of the UK sends a representative to sit on the board of the commission. I support those two amendments.

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.

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.

Amendment 22, tabled by the noble Baroness, Lady Smith, would see the nomination of commissioners from the House of Commons, the Welsh Senedd and the Northern Ireland Assembly via procedures to be determined by the Speaker of each legislature. The amendment would also require His Majesty to ensure equal representation of any individuals nominated in this manner by legislatures. The Government fully recognise the importance of ensuring that appropriate candidates are appointed to these significant public posts, and the need to ensure diverse representation on the board. However, allowing national Parliaments to nominate commissioners would risk politicising the Crown Estate. It is absolutely right that the Crown Estate remains free from direct political influence, as intended under the 1961 Act. Politicising appointments in this way would impede the ability of the organisation to operate independently.

Amendment 13, tabled by the noble Lord, Lord Young of Cookham, would require one commissioner to have responsibility for ensuring that the Crown Estate abides by public undertakings given on its behalf. I know that this is an important issue for the noble Lord, and I thank him for raising it. Under the Crown Estate Act 1961 and specifically the duty to have due regard to the requirements of good management, the commissioners are already required to ensure that they comply with their public undertakings. Placing such responsibility on one individual would, in the Government’s view, undermine the Crown Estate’s long-held principle that all commissioners have equal responsibility for the actions, purpose, risk appetite, strategy and values of the Crown Estate. In respect of the interaction between escheat and public undertakings given by the Crown, raised by the noble Lord, Lord Young of Cookham, the 20 September letter from the ombudsman that he refers to has not been seen by the Treasury or the Crown Estate. I hope he will allow me to look into the matters he raises further and come back to him. I am of course very happy to meet with him if he would find that helpful.

This may not satisfy my noble friend Lord Berkeley, but a number of existing governance arrangements are in place to ensure that the Crown Estate is accountable for the exercise of its statutory functions. This includes the requirement for the Crown Estate to lay a report and its accounts before Parliament, audited by the National Audit Office, setting out the performance of its functions in that year. In addition, the Crown Estate has an accounting officer who is answerable to Parliament for the stewardship of the Crown Estate’s resources.

The noble Lord, Lord Lansley, raised Section 3(1) of the 1961 Act. As I understand it, it requires the Crown Estate to have regard to all the circumstances of a case when evaluating best consideration. The Crown Estate includes social and environmental benefits alongside financial value and considers portfolio applications for both the short and the longer term, as well as the specific proposal, aligning with its broader purpose to create lasting and shared prosperity for the nation as it maintains and enhances the estate. For emerging sectors and nature recovery, applying best consideration in this way, by adopting a portfolio approach which balances financial drivers with broader value creation in different situations, has enabled the Crown Estate to support sector development and scaling to create long-term value.

For instance, floating wind test and demonstration sites prioritise innovation and enabling new technology over immediate financial returns. Although the initial commercial return may be lower, the long-term value from floating wind for the nation will lead to greater value over time. The Crown Estate structured the commercial terms for the Morlais tidal stream demonstration to support technology development and invested over £2 million in data-gathering to benefit the wider tidal stream sector, with a view to realising longer-term financial and social value.

The Crown Estate does not charge environmental organisations for leasing the seabed to enable non-commercial pilot activity linked to nature recovery and restoration. It is working with restoration practitioners to understand how best to accelerate activity to deliver seascape-scale projects. This comprehensive strategy demonstrates its commitment to considering all circumstances in evaluating what represents best consideration in each case. If I have not sufficiently covered the question from the noble Lord, Lord Lansley, I will happily write to him.

I turn to the matters raised by the noble Lord, Lord Holmes. Amendment 18 would require the Crown Estate to publish a review assessing the inclusivity of its policies, practices, procedures and assets. In particular, the review would consider the Crown Estate’s corporate governance and assess whether new board roles are required to support inclusion. While I wholeheartedly agree with the sentiment of the amendment, I stress that the Crown Estate already takes the matter of inclusion very seriously. For example, it has recently launched an open-source measurement tool to help commercial property owners assess and improve building inclusivity. It has also co-created an inclusive design brief for new developments and established the Accessible and Inclusive Places Industry Group to foster sector-wide collaboration.

Amendment 19 would require the Crown Estate to review its methods of stakeholder consultation and to consider alignment assemblies as a method of involving local communities in decision-making. The Crown Estate already engages extensively with stakeholders across all its business areas. In addition, it has a clear value creation framework which ensures that all its decisions, including in relation to its strategy and investments, are considered through an environmental and social lens.

On reporting, Amendment 24, tabled by the noble Lord, Lord Wigley, would require the Crown Estate to disaggregate, in its accounts, capital and revenue for England, Wales and Northern Ireland. At present, the Crown Estate’s operations are not divided into business units by nation. Disaggregating costs associated with the activity in each nation is a complex task which would inevitably require a high degree of subjective judgment. While it is possible to identify gross revenues from each nation, reporting these without costs would be entirely misleading. Therefore, it is the Government’s view that it remains appropriate for the Crown Estate to continue to report on a whole-business basis, supplementing its annual report with its Wales review.

Amendment 31, tabled by the noble Earl, Lord Russell, would make it clear that commissioners may waive lease fees in exchange for full or part ownership of any projects or development. While the Government recognise the sentiment behind the amendment, the Crown Estate already has such flexibility. Section 3 of the Crown Estate Act 1961 states that it should get

“the best consideration in money or money’s worth”,

which would allow the Crown Estate to accept consideration in forms other than monetary payment, valued on a fair basis.

Finally, I will seek to address the concerns raised by the noble Baroness, Lady Vere, in respect of disposal of assets. The Government’s view is that imposing a limit on disposals would undermine the flexibility needed to enable the Crown Estate to operate commercially and meet its core duties under the Act. For example, there may be instances where it makes commercial sense to dispose of high-value assets, particularly when taking a longer-term view of the business and its strategy. However, I understand there may be concerns in respect of the Crown Estate’s ability to fundamentally change the nature of the estate. Under the 1961 Act, the Crown Estate is required to maintain an estate in land, and this fundamental basis is not altered by the Bill.

I hope that I have been able to provide the appropriate reassurances to noble Lords—

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?

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.

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.

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

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.

Amendment 12 withdrawn.

Clause 2 agreed.

Amendment 13 not moved.