Examination of Witnesses (Questions 260
- 279)
WEDNESDAY 3 MARCH 2010
SARAH MCCARTHY-FRY
MP, MS PAULA
DIGGLE AND
MR JOHN
HENDERSON
Q260 Jim Cousins: Can you give us
a guarantee, if the housing is disposed of, that the normal rights
of tenants and leaseholders, as a matter of Government policy—as
a matter of, if I can put it like this, our Government's
policy—will be observed?
Sarah McCarthy-Fry: And the Crown
Estate have given that assurance.
Q261 Jim Cousins: No. They very specifically
said that they were not going to offer a ballot. A ballot is part
of the stock transfer process. Can you give an assurance that
a ballot will be offered? It is our Government's policy.
Sarah McCarthy-Fry: It is our
Government's policy for registered social housing landlords, I
believe; I will be corrected if I am wrong. This is a non-departmental
public body and legally they are not obliged to offer a ballot.
They have to consult and we have to be satisfied with that consultation.
Q262 Jim Cousins: But you would not
wish to fall back, I am sure, on a legal contrivance of that kind?
Sarah McCarthy-Fry: But I cannot
direct the Crown Estate to undertake—
Q263 Jim Cousins: I am seeking an
assurance from you that you will ensure that if disposal does
go ahead—and it may not—the normal rights of tenants
and leaseholders in such a situation will be observed; that they
will have a ballot.
Sarah McCarthy-Fry: The Crown
Estate follows best practice. I have to come back to—
Q264 Jim Cousins: The Crown Estate
have said to us that there will be no ballot; it is not part of
their policy to have a ballot. You would not try to tell us, would
you, that best practice does not include a ballot?
Sarah McCarthy-Fry: All I can
say to the Committee is that my power of direction is limited
to reasonableness—would it be considered that failure to
hold a ballot if any other consultation had taken place would
be unreasonable? I want to do everything that is within my power
to do.
Q265 Jim Cousins: Were you aware
that the Crown Estate Commissioners' policy is not to have a ballot?
Sarah McCarthy-Fry: I was aware
that they had a preferred method of consultation which did not
include a ballot.
Q266 Jim Cousins: Will you ensure
that they have a change of policy in this respect?
Sarah McCarthy-Fry: I am sorry?
Q267 Jim Cousins: Will you guarantee
to us that they change their policy in this respect and that—
Sarah McCarthy-Fry: I cannot guarantee;
I have no power to do that.
Q268 Jim Cousins: So you cannot assure
us that the normal rights that tenants and leaseholders would
have as a matter of general Government policy the Crown Estate
would not be allowed to duck out of?
Sarah McCarthy-Fry: If they were
legally obliged to offer a ballot then I could direct them to
hold the ballot. If they are not legally obliged to hold the ballot
I cannot direct them to hold the ballot. That is not the relationship
that we have with the Crown Estate; it is not the legal relationship
we have with the Crown Estate. I can entreat them to.
Q269 Jim Cousins: So the only time
you see yourself as being able to give a direction is in the circumstance
where they are legally obliged to do it anyway. What sort of power
of direction is that?
Sarah McCarthy-Fry: It is a power
of direction that can only be used if they are acting outside
their remit.
Q270 Jim Cousins: Is your view of
their remit that they should offer their tenants the normal rights
that any other tenants or leaseholders would have in such a situation:
that is, a ballot?
Sarah McCarthy-Fry: I told the
Committee that I have asked for a meeting with the Commissioners
and I am more than prepared to ask the Commissioners and to ask
quite forcibly that they have a ballot. I do not believe I have
the legal power under the power of direction to stop the sale
if they did not have a ballot. I do not want to give false hope
to tenants and I do not want to give false hope to the Committee,
if I do not have the legal power to do it. I am more than happy
to go and check if I have, but I do not believe I have.
Q271 Chairman: I wonder if we could
pursue this because under the Act, which I have here, under subsection
4 of section 1 it says that you have power to give directions
with regard to subsection 3, which talks about the general duty
of the Commissioners to maintain and enhance the value of their
estate and the return, but with due regard to the requirements
of good management. So it is not quite right then to say that
your power of direction is limited to keeping them within their
remit.
Sarah McCarthy-Fry: And the remit
is within lines of good management.
Q272 Chairman: You could give them
a direction on the grounds that what they were doing might not
be good management.
Sarah McCarthy-Fry: I would have
to look at my legal powers to do that. As I have said, I am more
than happy to use any power I have to ask them to have a ballot
of their tenants.
Q273 Chairman: You are going to look
at that specific point again.
Sarah McCarthy-Fry: That is why
I am going to have a meeting with the Commissioners.
Q274 Mr Love: Just on this point,
my understanding is that Government best practice is that the
consultation should last for three months. It has lasted from
the end of January to the middle of March, which is significantly
shorter. Perhaps the Minister could take that point up with the
Crown Commissioners.
Sarah McCarthy-Fry: I have a number
of points to take up with the Crown Commissioners.
Q275 Chairman: Just coming back to
the general issue of your financial relationship with the Crown
Estate, perhaps Ms Diggle could help us here. We have been told
earlier today that they have got round the restriction on borrowing
by setting up this joint venture, this Gibraltar thing, which
seems to have been a bit of a fiasco. Was that approved by ministers,
by your Minister's predecessor?
Ms Diggle: Not by ministers.
Q276 Chairman: It was approved by
you?
Ms Diggle: I looked into it very
carefully with them. I discussed it with my seniors in the office.
We first of all check that the vires existed. The vires
say that it is proper for the Crown Estate to make investments
in land and property, and this is actually an investment in a
property asset. It happens to involve incidental borrowing. I
was troubled by the apparent but not real conflict with the requirements
of the Act. We therefore discussed and voluntarily agreed a limitation—quite
a severe limitation—on the extent to which implied borrowing
could take place.
Q277 Chairman: Would you allow a
similar venture in future?
Ms Diggle: I would look at it
very carefully on its merits at the time.
Q278 Chairman: Just before we move
on to some of the other issues, could you tell us how this financial
return is set?
Ms Diggle: Certainly. We look
together, the Crown Estate and the Treasury, at its prospects
for the year ahead. We look to see whether it is realistic for
it to actually deliver a return of the previous year plus the
GDP deflator, as Mr Bright described to you. If it is, then that
is a good place to start and we ask could they do even better.
Sometimes they can and we push them to do that. Sometimes they
cannot and we try to set a realistic but stretching cash return
in terms of revenue to be delivered.
Q279 Chairman: What was your ministers'
involvement in that in previous years?
Sarah McCarthy-Fry: There has
not been an involvement of ministers because there has been no
problem to resolve.
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