Examination of Witnesses (Questions 200
- 219)
WEDNESDAY 3 MARCH 2010
MR ROGER
BRIGHT, CB
Q200 Mr Todd: You mentioned some
of them in an earlier answer, I think.
Mr Bright: Yes, that is correct.
Predominantly, that is—
Q201 Mr Todd: The tenants that you
are discussing in this suggested disposal have always been aware
that leasehold enfranchisement is an option available to them.
Is that right?
Mr Bright: Yes.
Q202 Mr Todd: Have many exercised
that?
Mr Bright: I do not believe that
many have chosen to do so.
Q203 Mr Todd: Could you give a figure
separately in a note as to what level of enfranchisement has taken
place?
Mr Bright: Yes, of course.[6]
Chairman: These are important issues
and we shall return to them when the Minister appears in front
of us shortly. We are now going to move on to the rural estate.
Q204 Mr Breed: You indicate that
you are a good landlord to your tenants. I suspect that is for
the urban estate. If we take the rural estate, the National Farmers'
Union in its evidence to us said you could do an awful lot more
to assist individual tenant farmers who are wishing to retire
from agriculture but suffer no doubt from a scarcity of rural
housing to move into. What are you doing to assist these tenants,
if you are being a good landlord?
Mr Bright: We certainly would
like to think of ourselves as a good landlord. We have a policy
which is to enable retirement with dignity so that farmers, when
they wish to retire, are able to do so. The first thing that we
do—and it is what happens in the majority of cases—is
that we have a long term relationship with our agricultural tenants
and we take a close interest in their business. What we try to
do is ensure that they are building up within their businesses
sufficient profits, a revenue reserve if you like, so that when
the time comes to retire they have the wherewithal to enable them
to find alternative accommodation.
Q205 Mr Breed: You keep stuffing
up their rents. How does that allow them to build up this nice
reserve?
Mr Bright: With respect, we do
not keep stuffing up the rents. We operate within the rent review
regime that applies to—
Q206 Mr Breed: You keep taking more
and more rent. In an agricultural sense, how are they to build
up this reserve to buy a rural house, in my part of the country
in Cornwall, which is going to cost them, what, £150,000?
Mr Bright: I think it is fair
to say that until a couple of years ago rents were by and large
almost static for about five years and that reflected the state
of the agricultural—
Q207 Mr Breed: They were not making
any money.
Mr Bright: Indeed.
Q208 Mr Breed: Precisely. When they
start making some money, you stick the rents up so where is this
reserve coming from?
Mr Bright: I hasten to say it
would make no sense at all for us to increase rents by an amount
which simply wiped out the increase in business which farmers
are getting.
Q209 Mr Breed: You think you are
doing enough?
Mr Bright: What I was going to
go on to say is that if that is not possible what we will do is
put in equity to help a farmer buy a house when he comes to retire,
or it may be possible to—
Q210 Mr Breed: Buy him a house and
then rent it to him?
Mr Bright: What we tend to do
is put in an equity stake and the farmer might well put in an
equity stake as well. The other thing that we can do sometimes
is on a farm where there is maybe a cottage that becomes available
and that can be made available to the retiring farmer.
Q211 Mr Breed: And it is sold off
sometimes by yourselves.
Mr Bright: Not all of them have,
with respect.
Q212 Mr Breed: Not all of them, no;
I accept that. Not all of them and not all of them have been done
by the Duchy either, but both of you have been undertaking the
selling off of such cottages. Moving on to evidence we had from
Natural England, which notes that you are exempt from the duty
placed on other public bodies to have regard to the purposes of
National Parks and the Areas of Natural Beauty designation. They
also refer to a lack of legal clarity over whether you have to
meet the Government's condition targets for all SSSIs. Could you
explain these situations to us and perhaps clarify whether there
are similar provisions that do not apply to the Crown Estate Commissioners.
What is this almost unique situation under which you have been
able to operate?
Mr Bright: I am not exactly clear
what Natural England is driving at there. The Natural England
submission, as I recall it, was overall extremely complimentary
about the way in which we look after the land that is within our
care. More to the point, we had a target which was that we should
achieve the fact that 95% of all our Sites of Special Scientific
Interest should be in good or better condition by, I think, 2009,
and we have actually beaten that target.
Q213 Mr Breed: 95% of all SSSIs by
the end of 2010.
Mr Bright: I beg your pardon.
But we have already achieved that, so I would like to think that
we are actually exercising good stewardship of the land that is
in our care.
Chairman: We will turn briefly now to
the Marine Estate in Scotland before the Minister appears.
Q214 Nick Ainger: Last week we had
evidence from the Renewable Energy Association, the Gas Storage
Operators' Group and the Carbon Capture and Storage Association.
Certainly the Gas Storage Operators' Group was quite critical
of the current approach of the Crown Estate. They said that the
current approach which the Crown Estate is taking towards offshore
development is purely focused on revenue generation and will be
of potential huge detriment to other Government policy. Obviously
it is in the national interest that we develop offshore gas storage;
also in the national interest that we have carbon capture and
storage facilities developed offshore. We obviously need more
renewables and so on and these are all part of the national interest.
Why do you think an organisation like the Gas Storage Operators
Association was so critical of the current approach?
Mr Bright: I have to say, Mr Ainger,
that I was pretty surprised and disappointed by that. The first
thing to say is that on all aspects of offshore energy and related
activities we are doing all we can to facilitate the development
of these things in the national interest—offshore wind,
wave and tidal and so on. The position on gas storage is that
we have made available our proposed terms for the renting of gas
storage facilities undersea since, I think, 2007. We have been
in negotiation with four main operators in this area. We have
reached agreement with three of the four operators and there is
one that we have not reached agreement with. The one that we have
not reached agreement with takes a fundamentally different view
from us about the basis on which we should charge. They say that
we should charge on a cost plus basis; we say that we should not.
We have offered to go to independent arbitration but this fourth
company has so far refused to go to independent arbitration.[7]
Q215 Nick Ainger: The Renewable Energy
Association was saying that in terms of the offshore wind farms
the relationship was working extremely well and we are now into
round three of the offshore development, which seemed to be a
success. But they are saying that in terms of small demonstration
units with pilots perhaps greater consultation is needed, greater
understanding that these developments in their early stages need
to have a quite different approach from the large offshore wind
farms, which is a mature industry now—the technology is
known, and so on. Again, they are saying that there should be
greater consultation but there seems to be an element of criticism
there again. How do you respond to that?
Mr Bright: When it comes to wave
and tidal one of the things that the Crown Estate has done is
actually groundbreaking—we are the first country in the
world that has actually launched a wave and tidal bidding round.
I think that is something of which we can be proud; but equally,
of course, there are going to be lessons to be learnt along the
way. We have actually had a huge amount of interest in the wave
and tidal round that we are conducting in Pentland Firth and the
Orkney Waters. We had over 40 bidders and we are going to be announcing
on 16 March to whom we are going to award contracts. One of the
things that was a mistake, there was a perceived need to get on
with this as quickly as possible because there was a lot of pressure
to get the wave and tidal industry off the ground, and we were
obviously very keen to play our part in that; but with the benefit
of hindsight perhaps we could have undertaken more consultation
in the early stages. That was not a deliberate omission, if I
can put it like that; it was because we wanted to get this moving
as quickly as we could. The Pentland Firth wave and tidal round
does provide for demonstration models of about 10 megawatts, and
also anywhere else in the UK developers who want to install demonstration
projects under 10 megawatts can apply for us to do so.
Q216 Nick Ainger: As you are the
monopoly owner of the seabed, how do you calculate the rents that
you are charging these developers? One of the other criticisms—well,
it was not a criticism—was from the Carbon Capture and Storage
Association, who have yet to enter into direct discussion, that
they want the process to be open, transparent and fair. Obviously
at the back of their mind there are concerns there. As a monopoly
how do you actually set a fair price for the rental of these developments?
Mr Bright: That is a very good
question. Basically, the first thing to say is that our Act expressly
says that we may not take advantage of our monopoly position;
so we are quite clear, it is spelt out that we cannot exploit
our monopoly position. How do we do this? Basically, we have to
find a starting point and the starting point is, if you like,
an analogous activity that might be undertaken on dry land. Many
of these activities—not all of them, obviously wave and
tidal are not one—cables, pipelines, wind farms and so on,
there is a dry land starting point. We then go to independent
valuation experts who will arrive at a value using the guidelines
of the RICS Red Book which actually explains how you discount
any element of monopoly value. On certain new industries we will
take advice from other independent consultants, so in relation
to carbon capture and storage, for example, we took advice also
from Ernst and Young and also from an energy consultancy called
Oxera to satisfy ourselves that we were actually looking for a
fair rent from these sites. So that is what we are trying to do.[8]
Q217 Nick Ainger: Are you aware of
any developers who have had to withdraw from a renewable development
because of the rents that you have been demanding from them?
Mr Bright: I have not been aware
of any that have withdrawn because of the rents. They may withdraw
for a whole range of reasons, and it is in the nature of these
things that people do withdraw but I am not aware that it is because
of the rents.
Q218 John Thurso: You and I have
had a great deal of toing and froing over marine energies. Can
I put on record that I do actually appreciate the fact that the
Crown Estate stepped up to the plate and became a part of the
project team that kicked the whole thing off in the Pentland Firth?
But I think it is fair to say that there have been some bumps
in between before the announcement came out. What are the main
lessons you take from that and would apply at the next licensing
round?
Mr Bright: I think the principal
lesson that we would take from this is, as I mentioned a moment
ago to Mr Ainger, that we should perhaps have conducted more extensive
consultation with the industry before we launched the round. As
I say, the reason that we did not was not ill intent but because
we know that there was a lot of expectation that we wanted to
get this moving. The other lesson that we learnt—and indeed
you and I have exchanged views on this—is that we were initially
over optimistic about how quickly we could get the leases signed.
We initially hoped that we would be able to get the leases signed
on the Pentland Firth in the middle of last year and for a variety
of reasons, not least because we were, frankly, very pleasantly
surprised by the huge level of interest, we were not able to move
as quickly as we had hoped. So be careful of over promising and
make sure that we consult properly.
Q219 John Thurso: On a completely
different issue but related, you of course own the seabed where
a lot of ports place their infrastructure.
Mr Bright: Yes.
6 Ev 116 Back
7
See Ev 115, Ev117 and Ev 122 for clarification on this point. Back
8
Ev 216 Back
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