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

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. 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.