Examination of Witnesses (Questions 280
- 297)
WEDNESDAY 3 MARCH 2010
SARAH MCCARTHY-FRY
MP, MS PAULA
DIGGLE AND
MR JOHN
HENDERSON
Q280 Chairman: And you have not come
under pressure from a minister to say, "Get some more money
out of the Crown Estate", for example?
Ms Diggle: No, because they have
been returning very good returns. If you look at their submission
to you, you will see that their actual rate of growth of revenue
has been pretty impressive. Mr Bright was a bit too modest to
actually describe it in those terms.
Q281 Nick Ainger: Minister, do you
agree with the views expressed by some of the witnesses who have
had dealings with the Crown Estate that they are an unregulated
monopoly?
Sarah McCarthy-Fry: They have
a monopoly but within the Act they have to exercise that monopoly
responsibly and there are restraints on it. I think there is a
case for looking at it. They do try to benchmark themselves as
best they can but I do think that there is a case where we could
look a bit further on this. There is the option for any operator
that thinks they have been a victim of a monopoly situation to
approach the Office of Fair Trading on this. Of course, Scottish
and Southern Energy in their written memorandum said that they
believed the tender process has been fair, even-handed and run
in a way which leads them to believe that a fully competitive
approach has been taken at all times.
Q282 Nick Ainger: We have indeed
had that evidence.
Sarah McCarthy-Fry: I have not
seen any evidence from people that believe—
Q283 Nick Ainger: That evidence was
given to us last week from a representative of the Gas Storage
Operators Association. You say that if people have concerns then
they can go to the Office of Fair Trading. My experience of the
Office of Fair Trading is that if you want to wait long enough
you may, if you are lucky, get a decision, whether it is the right
decision or not. Surely when we are dealing with the offshore
environment, which is absolutely key to the national interest
in terms of renewables, in terms of gas storage, in terms of carbon
capture and storage, tidal and wave renewable development, these
are hugely important matters and the concern that has been expressed
to us is that if there are delays, either because there is conflict
over a fair price for rental of the seabed or there may be licensing
issues, that these are international developers that can go elsewhere.
The idea of just referring a developer to the OFT, surely that
is not good enough? Surely you would be prepared to step in in
those circumstances where you could see that the national interest
was being affected by the position adopted by the Crown Commissioners?
Would you, in those circumstances, be prepared to step in and
give direction then?
Sarah McCarthy-Fry: I think this
is a matter that we do have to look at. DECC is of course the
lead department on this and they have been negotiating with the
Crown Estate and they have been having meetings over this. They
have not come to me and said that they think there is a problem.
However, with the importance of renewables as we go forward, the
importance of energy security, I think that we ought to be raising
this and looking at this again and seeing what the future should
be. I do not think it needs to have been done yet but in the future
as we move forward I think this is of concern.
Q284 Nick Ainger: The UK is unusual
in that it has, as an island, a huge area which is potential development
for renewables and other important areas both from power generation
and gas storage and carbon capture. My understanding is that other
European maritime states and North American maritime states have
a single body, the Government, which negotiates with developers
for offshore development. We have two; we have the Crown Estate
and we have DECC in terms of licensing and so on. Is that under
review because, again, the fear from some developers is that bureaucracy
may well be getting in the way, and having this two-tier arrangement
may be getting in the way of urgent, offshore development.
Sarah McCarthy-Fry: If it could
be shown that it was getting in the way then, yes, it would need
to be looked at.
Q285 Nick Ainger: Obviously the responsibilities
of the Crown Estate flow from the 1961 Act, which was before we
had any real offshore development, and the potential in terms
both of income but also the importance to the national interest
of our offshore areas is now very, very significant. Should we
be reviewing the 1961 Act in terms of the offshore environment?
Sarah McCarthy-Fry: In my view,
given the scale of what we are looking at and the scale of the
challenge in front of us in terms of energy security, energy supply
and the development of renewables, I think that is an option.
Q286 John Thurso: Mr Henderson, it
is my understanding that your Secretary of State has a rather
different view of his ability to direct from that of the Treasury.
Would you care to comment on that?
Mr Henderson: You would not expect
me, sitting next to a Government Minister, to say that the Government
actually do not have a collective view on this. I am not aware
that my Secretary of State does have a radically different view.
Q287 John Thurso: Were you at the
meeting that he very kindly chaired between myself and the Elements
of the Renewable Energy?
Mr Henderson: I was.
Q288 John Thurso: You remember that
we discussed a variety of things. It was my understanding—not
at the meeting, but afterwards—that the Secretary of State,
were a satisfactory conclusion not to be arrived at, felt that
it was completely within his power to issue a direction.
Mr Henderson: I am sorry, I do
not recall that.
Q289 John Thurso: There is nothing
about reasonableness anywhere in the Act; there is not a word
from start to finish. You have said you can only do it if it is
reasonable. There is actually nothing in the Act which says you
have to act reasonably. There are many other things you have to
do but not act reasonably.
Sarah McCarthy-Fry: I think it
is a point of general law that you have to act reasonably.
Q290 John Thurso: Actually if you
look at subsection 4, it gives the Chancellor of the Exchequer
and the Secretary of State for Scotland powers to give direction
and it then says: "But the Chancellor of the Exchequer and
the Secretary of State in giving directions to the Commissioners
under this subsection shall have regard to subsection 3 above."
That is just "have regard to" and all subsection 3 says
is that they must maintain and enhance the value of the estate
and the returns obtained from it, but with due regard to the requirements
of good management. I put it to you that there is nothing in that
to prevent either the Chancellor of the Exchequer or the Secretary
of State for Scotland, either in these property matters we have
been talking about or in respect of renewable energy, saying to
the Crown Estate, "This is the policy which we wish you to
pursue and it must be good management because it is Government
policy."
Sarah McCarthy-Fry: Up until you
came to the last sentence I may well have agreed with you.
Q291 John Thurso: I was trying to
be kind.
Sarah McCarthy-Fry: Nothing I
have said this afternoon has said that I would not be prepared
to use the power of direction if I felt it was necessary; and
I do not want anyone to go away and say that I have not said I
would do that. What I have said is that it is not a power that
is used lightly and it is something where we would have to look
at all the circumstances.
Q292 John Thurso: My concern is that
the power of direction has become in the passage of time since
1961 to be viewed as a slap on the wrist, a kind of nuclear option
that you do not exercise because they are all being quite nice
chaps; rather than what I think it was intended to be in the Act,
which is that from time to time ministers actually step up to
the plate of their responsibilities and say, "We need to
direct these guys because without that direction they cannot do
their job properly." I will stay out of the housing side
of it, but if you look at renewable energy when we did the North
Sea the Department of Energy did it all—there was no question
of the Crown Estate getting involved. Why this time do we need
to leave it to them without giving them any direction or strategic
thought or input?
Sarah McCarthy-Fry: The power
of direction is a last resort tool and if you can achieve—
Q293 John Thurso: That is what it
has become to be believed by the Treasury but it is not what is
in the Act.
Sarah McCarthy-Fry: But if we
can achieve what we want to achieve without having to use the
power of direction by consultation and negotiation, then I would
rather do that. On the housing we are still at the consultation
stage, and there are a lot of questions I need to ask the Commissioners
and the negotiations on that will go forward. On the renewables
we are still at an early stage. I have not had anything back from
DECC to tell me that I need to exercise a power of direction in
this. They are working together with the Crown Estate. DECC have
the objective of energy security, bringing on low carbon and renewables
in the national interest. They have not come to me yet, if they
are going to, because they are working with the Crown Estate.
Because we have not actually used the power of direction I think
that means that we have been able to resolve issues without having
to do that.
Q294 John Thurso: Let me put this
to you. On 8 December, when you appeared in front of us and I
asked you what contact you have had with the Crown Estate and
you told me that you had not, and you said you thought your officials
might have done and that you would check into that; and you have
now told us that they do meet on a fairly regular basis. But we
are now at 3 March and you have said, "I think this is an
area it is important to keep track of" and you have actually
between December and March managed to set up a meeting of the
Crown Estate for April. Is that enough attention by one of two
ministers of the Crown who have the actual power over the Crown
Estate?
Sarah McCarthy-Fry: As I say,
as far as the energy renewables side of it, DECC have been having
the ongoing relationship with the Crown Estate and they have not
come to me and said there is a problem. As far as the housing
side of it, it was brought to my attention by various MPs and
since then I have been trying to get a meeting with the Commissioners.
Q295 John Thurso: Let me turn quickly
to Scotland. The Calman Commission last year—and I will
direct this to Mr Henderson, who I suspect knows more about the
Calman Commission, but feel free, Minister, if you would like
to come in—recommended that the Secretary of State for Scotland
should be more active in his use of the powers of direction. They
also recommended that more of the powers in relation to the Scottish
Crown Estate, which of course until about 100 years ago was an
entirely separate operation—more than 100 years ago—should
be undertaken in Scotland. What is the view of the Scotland Office
in this regard?
Mr Henderson: In the Government's
response to the Calman Commission they accepted the recommendation
that as regards the appointment of the Scottish Commissioner there
should be consultation with Scottish ministers. The Government
did not, however, accept the recommendation that the Secretary
of State should place his power of direction. The Government did
point out in the White Paper that there were very good and developing
relationships between the Crown Estate and the devolved administration,
and we heard that from the Chief Executive earlier. We have heard
also about the Memorandum of Understanding that will shortly be
finalised with the local authorities in the Highland area. We
also heard the Chief Executive talk about being open minded about
whether there should be more Memoranda of Understanding, perhaps
with the devolved administration. We also have a separate annual
report now and we have established over the past year or so a
Scottish Liaison Committee. So there is evidence, I think, of
quite an engagement with Scotland.
Q296 John Thurso: A few years ago
the Crown Estate Commissioners stopped treating Scotland as a
separate management area and now run it all as a UK-based operation.
Given what Calman has suggested and given devolution, is that
not counterintuitive? Should it not be the other way around? Should
it not be like some of the other cross-border authorities where
there is actually a separate identifiable Scottish organisation?
Mr Henderson: Calman did not recommend
that. Calman actually pointed out, if I recall, that there were
advantages in making investments in Scotland, to have access to
the larger funds of the Crown Estate for the rest of the UK.
Q297 John Thurso: Do you think that
the body he suggested for more consultation with Scottish ministers
is a good idea? Or does your Secretary of State think that?
Mr Henderson: Clearly the more
dialogue that the Crown Estate has with the devolved administration
has to be a good thing.
Chairman: We are going to leave it there
for the moment but I think you have undertaken, Minister, just
to reflect on the power of direction point and to check whether
your description of the position is exact. If you are able to
help us further on that we need to hear from you, simply because
of our timetable, within the next seven days if that is possible.
In the meantime, I would like to thank you and your colleagues
for helping us this afternoon.[9]
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