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

My Lords, I am grateful for the contributions from all noble Lords on this group of amendments. As I set out in Committee, the Government recognise that the matter of controls on borrowing is an important consideration for noble Lords. I listened carefully to the concerns raised at previous stages of the Bill. I found the arguments put forward by the noble Baroness, Lady Kramer, to be particularly compelling. As such, I committed to sharing the underpinning memorandum of understanding, which sets out the parameters and controls relating to the power to borrow, as well as the original business case and the framework document. Following on from my commitment, these documents were shared with noble Lords and have been deposited in the Library. I am grateful to the noble Baroness for her words just now. The memorandum of understanding set out that borrowing by the Crown Estate will be limited to a maximum of 25% loan to value, defined as net debt-to-asset value, and that any borrowing within that limit can be undertaken only with the consent of the Treasury. The framework document will be amended, as I have shared, to include references to borrowing powers, and the original business case produced by the Crown Estate makes the argument for the Crown Estate being able to borrow with the consent of the Treasury, in line with its peers, to ensure that it can continue to operate sustainably and drive maximum returns to the Exchequer. I trust that having sight of these documents has been useful for noble Lords and has provided an additional opportunity for scrutiny of the proposed borrowing. Let me be clear that the Government agree that controls on borrowing must be in place. As I have set out previously, borrowing can be undertaken only with the consent of the Treasury and, as outlined in the memorandum of understanding, borrowing is not to exceed 25% of loan to value, defined as net debt-to-asset value. This is a clear and carefully chosen guard rail to ensure that sufficient limits are in place. The proposed powers will enable the Crown Estate to draw on its cash holdings first and, as such, it is not envisaged that these borrowing powers will be used in the short term. Amendment 1, tabled by the noble Baroness, Lady Vere, and supported by the noble Lord, Lord Howard, would require the Secretary of State to limit borrowing by the Crown Estate by affirmative regulations, and for the first set of regulations to set the limit at 25% net debt-to-asset value. As debated in Committee, the principle here is whether a specific cap should be in statute. The Government’s view remains that the limit is better placed outside of legislation. The primary control, set out in the Bill, is the requirement for Treasury consent to be obtained prior to undertaking any borrowing. In addition to this important safeguard, we are retaining the requirement for the Crown Estate commissioners to maintain and enhance the value of the estate, while having due regard to the requirements of good management as set out in the 1961 Act. Taken together, these two elements maintain and strengthen the existing and important fiduciary duty of the commissioners not to take decisions that could endanger the estate. The Government believe that these safeguards and the limits set out in the memorandum of understanding provide clear guard rails to the powers set out in the Bill. The 1961 Act also contains a power of direction. This power is not altered by the Bill. It remains open to the Government to use in extremis; if, for example, there were concerns that the commissioners were endangering the core statutory purpose of the Crown Estate. As I have set out previously, the Crown Estate is a commercial business, independent from government. It operates for profit and competes in the commercial markets for investment opportunities. To ensure that it can compete effectively, it needs the ability to borrow as its competitors can. Imposing a legislative cap on borrowing would likely place additional restrictions on the Crown Estate that its competitors in the private sector do not face. This would not be consistent with the Government’s vision for the Crown Estate: to ensure that it has flexibility to invest in activities that will drive increases in its revenues and, consequently, its returns to the public purse. As set out in the Crown Estate’s original business case, which I have shared with noble Lords, the limit of 25% loan to value is consistent with its peers. I hope this demonstrates to noble Lords that these plans have been considered carefully. Let me also be clear that any request by the Crown Estate to draw down on debt will be carefully considered by the Treasury in the context of the fiscal position and in line with our fiscal rules. As the Chancellor set out in the Budget, the Government have set out our robust fiscal rules alongside a set of responsible reforms to the fiscal framework to improve certainty, transparency and accountability. The stability and investment rules will put the public finances on a sustainable path while allowing the step change needed in investment to drive long-term growth. I hope that these explanations are useful and reassure the House that the Crown Estate’s power to borrow will be carefully monitored and controlled within these parameters. I hope I have provided some clarity on the Government’s position and that as a result the noble Baroness, Lady Vere, feels able to withdraw her amendment.