Examination of Witnesses (Questions 240
- 259)
WEDNESDAY 3 MARCH 2010
SARAH MCCARTHY-FRY
MP, MS PAULA
DIGGLE AND
MR JOHN
HENDERSON
Q240 Mr Love: It was indicated to
us earlier on that it has been a policy for some months now for
the Crown Estate to hold vacancies of properties on the estate.
The presumption would be that they are doing that to make it more
attractive. The presumption would be that if it is more attractive,
it would be more attractive to a housing organisation that felt
that vacancies would be a commercial opportunity to maximise the
sale value of those properties, which will over time reduce the
affordable accommodation available across London. The question
I asked you is: would you investigate something of that nature
and would that be reported back as a concern and something which
should be a part of the judgment at the end of the day as to whether
it is appropriate that the sale goes ahead and the sale goes ahead
to whoever the appropriate housing organisation should be?
Ms Diggle: If there was a serious
problem, yes of course I would. But what Mr Bright told you, if
we heard correctly, was that there are 32 vacancies out of about
1,200 tenancies. That does not sound like a very high vacancy
rate to me. I would want to investigate that as part of looking
at the whole process of sale as and when that proposal, if there
is one, comes forward.
Q241 Mr Love: All I would put to
you is that the concern, I do not think, is with the Crown Estate
who have been, as I understand it, a good landlord; the concern
is about who would purchase, who would start with 30 or 40, who
will find the eventual figures; the concern would be that that
would rise fairly precipitately over as short a period of time
as possible as they chose to sell off property, rather than continue
with a key worker. But I do not want to go further into that.
Ms Diggle: I am not sure that
we can speculate on that.
Q242 Mr Love: A final question from
me: would it be appropriate for this Committee to ask you to look
at this situation?
Sarah McCarthy-Fry: I can assure
you that I had intended to do that anyway when it was brought
to my attention.
Q243 Mr Love: Absolutely. And just
assure yourself that we are not asking the Crown Estate to do
more than they already have within their objectives, but I do
think in terms of public policy issues it may be an issue that
you would want to look at carefully.
Sarah McCarthy-Fry: I have sought
a meeting with the Commissioners on this very issue.
Q244 Mr Todd: Is this not a typically
English archaic compromise?
Sarah McCarthy-Fry: In what way?
Q245 Mr Todd: Because the Crown Estate
is governed by an Act which we know to be quite restrictive in
its purpose and yet the Crown Estate Commissioners over the last
40 years or so have pottered along doing mildly benevolent things
and carrying out purposes which probably do not generate a substantial
return for them. As soon as someone says, "Actually the Act
does say that we are supposed to be maximising our return"
then of course there comes about a difficulty. So it is what I
normally describe as a typically English compromise of a disassociation
between actually what is written down as a purpose and what people
understand to be the behaviour of individuals.
Sarah McCarthy-Fry: Can I say
that it certainly has not been the Treasury that has told them
that they have to maximise their revenue over and above any other—
Q246 Mr Todd: No, the law says that.
Sarah McCarthy-Fry: The point
you made was someone told them that the law said it; it certainly
was not us.
Q247 Mr Todd: The law has always
been there, it is just the rather polite way in which we carry
on our affairs. I am sure that is not unknown to you, that people
understand that what they are supposed to be doing is not quite
the same as what is written down in the statute.
Sarah McCarthy-Fry: I understand
the point you are making. Yes, you may be right; it may be that
is the reason that the Treasury up until now has not felt the
need to intervene.
Q248 Mr Todd: Okay, but then that
suggests that there is something we need to do. Either the Crown
Estate needs to be given a clearer direction within the Act—and
I think you have made the perfectly fair point that that has to
be reasonable in law—or there has to be some transaction
which takes this assumed social purpose from outside of the Crown
Estate and place it somewhere where it should be exercised properly,
and that would be the correct Government action. I can understand
the criticism that has been directed at the Crown Estate in this
exercise but they can reasonably say that the law has said that
that is what they are supposed to do. Government has the task
to try and resolve this confusion in purpose which I think is,
as I said, built into the way we choose to produce law in our
country, which is that while everyone behaves as we expect gentlemen
to behave it turns out okay, does it not? But at some point someone
starts to be a little tougher about it.
Sarah McCarthy-Fry: But we do
have the power of direction that we have never up to now, as I
say, needed to use.
Q249 Mr Todd: That may be one of
the approaches to use, but the other is to look again at the Act
itself and indeed the purpose of the Crown Estate.
Sarah McCarthy-Fry: It is a very
old Act.
Mr Todd: It is.
Q250 Jim Cousins: Have any Government
departments expressed concerns to you about the Crown Estate and
the way they are managed or their own dealings with them.
Sarah McCarthy-Fry: Not to me.
Ms Diggle: Nor to me.
Q251 Jim Cousins: Have any other
public bodies, local authorities, whatever, done that?
Sarah McCarthy-Fry: Not to me.
Ms Diggle: Nor to me.
Q252 Jim Cousins: Do you think that
the Crown Estate Commissioners should consult you on, as it were,
on issues of policy and strategic direction?
Sarah McCarthy-Fry: I will pass
that to Paula, because they do.
Ms Diggle: They do consult me
and if I have any concerns they go straight to ministers. We talk
about general investment policy, prospects for the year ahead,
general, medium-term prospects and so on, as you would expect
us to do.
Q253 Jim Cousins: We have just heard
that they have taken the decision to get out of housing and to
get into retail parks. Did you approve of that?
Ms Diggle: Can I please pause
on that? These were two separate decisions and they were not decisions
quite as clear-cut as you describe them, I am afraid. They took
a decision to investigate the possibility of selling off part
of their residential estate in the way that Mr Bright described
to you earlier. They also took the decision stepwise, in very
small steps, to make minor investments in retail investment parks
as part of the general diversification of their portfolio. As
Mr Bright described to you, we discussed and we agreed restrictions
on the extent to which they would do that because it seemed a
very cautious and sensible thing to do, in line with the general
cautious nature of the estates' constitution.
Q254 Jim Cousins: Ms Diggle, you
have given us a version of what the Crown Estate perhaps would
have been wiser to have said, but I am afraid it is at some variance
with what they actually did say, because they actually did say
that they were getting out of housing and they were getting into
retail parks. Can I be clear about this: is this part of the strategic
direction with which you are comfortable, Minister?
Sarah McCarthy-Fry: As I understand
it, it is a suggestion that was put to their board. As I understand
it, the consequence was not one leading to the other; it was the
fact that they did not feel that they were able to operate as
good landlords, and it was not part of their core business. That
is what I understand, but you had the conversation, did you not,
Paula?
Q255 Jim Cousins: Do you have any
evidence on the housing front that they had not been acting as
good landlords?
Ms Diggle: Can I explain to you
the case that the Crown Estate made to me? What they said was
that these days modern residential landlords are typically very
much larger than they are and they feel that they are not able
to act as the best quality residential landlord and therefore
it made sense to explore the possibility of divesting that part
of the portfolio. They have not yet made the decision on that
one.
Q256 Jim Cousins: Minister, this
housing that they have has been with them for a great number of
years, and it was a product of legislation that was designed to
provide homes fit for heroes after the Great War. Do you not think
that this experience of housing brought about in that way is a
strategic resource for the Government that you might wish to develop
rather than to abandon?
Sarah McCarthy-Fry: Can I say
that the Government do not own this property; the property is
owned by the Crown Estate on behalf of the Queen. The Government
is only entitled to the revenue from this.
Q257 Jim Cousins: The Queen constitutionally
is not able to express views about it, so you are the proxy for
the Queen.
Sarah McCarthy-Fry: That is a
very interesting position to be in, to be the proxy for the Queen.
I have to act within the legal framework that I have, and the
legal framework I have is to ensure that the Crown Estate is operating
within the remit it has been given, and within that framework
the Treasury meets with them to agree their plan, to ensure that
we get the revenue return and to ensure the principles of good
management, which we explored before. I think you are going a
step further with what you are suggesting the Treasury's role
may be in this.
Q258 Jim Cousins: You are not suggesting
from your point of view, in terms of your powers of direction,
the overriding consideration is to maximise the return?
Sarah McCarthy-Fry: No, I am not.
I am suggesting that the power of direction for the Treasury is
if the Crown Estate are not acting within their remit. I am not
convinced, as of yet, that that includes the wider public policy—Government
maybe, public policy—issues to which you are referring.
I am not convinced and I would need to look at it closer. I am
concerned about the tenants in these properties and I am concerned
about tenants' rights in these properties, and I am concerned
that the Crown Estate, as part of its role in good management,
seeks to be a good landlord and they would seek to make sure that
the tenants enjoyed those same benefits if they considering selling
on those properties. But they are managing the properties.
Q259 Jim Cousins: We cannot second-guess
what your decision would be about this matter and whether you
think housing forms part of the strategic interests that you would
wish to maintain, but if the housing were to be disposed of can
you give us an assurance, Minister, that the normal rights that
would be available to tenants and leaseholders in a stock transfer
situation will be observed?
Sarah McCarthy-Fry: Can we get
one thing clear? It is not my decision that they sell it off,
that is a decision for the Commissioners of the Crown Estate.
I would want them to assure me that that is what they were going
to do in the negotiations that we have with them. The power of
direction is something that has to be used legally and has to
be used where we feel that the Crown Estate have not acted within
their remit; and, as I say, it has to be used reasonably. So it
is not my decision whether the Crown Estate, after consultation,
go on to sell. I would then have to be satisfied, if they were
to do that, before I was able to take the only power I do have,
which is a power of direction, that they were not acting in a
way which I felt was reasonable.
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