5. The CEC's 2008-09 Annual Report describes their
objective as to "earn a surplus for the benefit of the UK
taxpayer, and enhance the value of the estates we manage."
Our Report focuses on their performance and the challenges they
face in their four business divisions: The Urban Estate; The Rural
Estate; The Windsor Estate; and, the Marine Estate, as our original
terms of reference indicated.
6. As our inquiry progressed, however, we came to
appreciate that, more fundamentally, the nature of the CEC, and
the Crown Estate they manage, was not widely understood or even
easy to comprehend. As we suggested to the CEC during oral evidence,
even their Annual Report is arguably misleading in stating that
the surplus revenue they raise is for the benefit of taxpayers,
as it goes into the Consolidated Fund, which is a general fund
that the government uses for public expenditure. We have, therefore,
widened the scope of our inquiry to include an examination of
the nature of the CEC organisation. We considered this essential
if we were to evaluate their performance in their four business
divisions. The CEC's remit was articulated by statute 50 years
ago, in the Crown Estate Act 1961. Our inquiry has also led us
to consider whether the interpretation of the CECs' remit, or
even the remit itself, needs to be reviewed.
7. As our scope widened to allow a more strategic
approach to our scrutiny of the CEC, so we had to be even more
careful to limit our work in other ways. Given the need to complete
our work before the dissolution of Parliament, this was a necessarily
short inquiry. Accordingly, our Report is not intended as the
last word on the CEC. Rather, we are seeking to lay the groundwork
for further scrutiny and more detailed consideration and review.
We have not looked, for example, at the management structure of
the CEC, or assessed the efficiency of their administration. Finally,
when considering the performance of the CEC and the challenges
they face, we have deliberately sought to refrain from entering
into wider debates; our focus is limited to the role of the CEC.
We do not, for instance, make any wider conclusions or recommendations
about the development of marine renewable energy. Nor do we seek
to revisit the devolution settlement, although we do look at the
CEC's working relationship with the Scottish Government.
The nature of the Crown Estate
8. As we started to receive evidence and advice during
the course of this inquiry, it soon became clear that our first
major task would be to arrive at a clearer understanding of the
nature of the CEC, including an appreciation of what is meant
by 'the Crown Estate.' Several submissions were keen to draw our
attention to the unusual nature of this organisation. Mr Andy
Wightman, a freelance writer and researcher on land issues in
Scotland, observed that "the Crown Estate is an oft misunderstood
term"; Mr Tom Appleby,
a senior lecturer in law at the University of the West of England,
drew attention to "the quirky nature of the estate";
and HM Treasury too told us that "it is important to bring
out the unique position of The Crown Estate."
9. It is, perhaps, a measure of how hard it is to
get a handle on the organisation, that a number of our witnesses
took time to explain to us what the CECand the Crown Estatewere
not. Mr Appleby told us that "it is tempting
to treat the Crown Estate as a sovereign wealth fund, but to do
so is a mistake."
In its written evidence, HM Treasury informed us that "while
it is part of the public sector, it is not government property.
Nor is it part of the monarch's private estate [ ... ]. This puts
TCE in a different position to that of a non-departmental public
body (NDPB)." The
CEC themselves were similarly keen to assert, in written evidence,
that the Crown Estate "is not the Sovereign's private estate,
nor is it owned by the Government" and that they are "not
a government agency, nor a non-departmental public body, nor a
company owned by the Government."
Chief Executive Mr Bright further commented during his oral evidence
session that "with respect, we are not a government organisation."
10. HM Treasury stated that "the Estate is part
of the hereditary possessions of the sovereign; while its income
forms part of Her hereditary revenues and is paid direct into
the Consolidated Fund";
the CEC explained that they exercise "the powers of ownership,
although we are not owners in our own right."
This quote does provide some greater clarity as many of the submissions
we received thought the CEC were the owners of the Crown Estate
rather than the managers of it. However, these formal definitions
provide little understanding of what the CEC do and why, and tend
to obscure the fact that the CEC are a public body charged with
managing public resources for public benefits. In the following
paragraphs, we look to explore these questions in more detail.
Indeed, given the unusual nature of the CEC organisation, we
recommend that the CEC produce a short statement in future Annual
Reports, clarifying the nature of their organisation, its duties
and the resources they manage.
The Committee on Crown Lands
11. The modern origins
of the CEC and the Crown Estate can be traced back to the Committee
on Crown Lands appointed by the Government of the day in December
1954 to "examine the present organisation for the administration
of Crown Lands and to report whether any change should be made."
The Committee reported in June 1955 and its recommendations were
subsequently given effect in two pieces of legislationthe
Crown Estate Act 1956 and the, still extant, Crown Estate Act
1961. It is a mark of the continuing relevance of the 1955 Committee's
recommendations that the 2009 CEC Annual Report refers in its
Governance Report, when interpreting the role of the CEC's Commissioners,
to the "recommendations of the Report of the Committee on
Crown Lands which visualised the role of The Crown Estate Commissioners
as analogous to that of trustees of a trust fund."
12. At the time, the Crown Lands were administered
by the Commissioners of Crown Lands under three Commissioners:
the Minister of Agriculture, the Secretary of State for Scotland,
and, an administrative civil servant. In practice, as the Report
noted with concern, the civil servant had been left 'out on a
limb' "with a wide and lonely responsibility."
The report considered that "in effect Crown Lands are a trust
estate, of which the capital belongs to the Sovereign. The income
after meeting costs of upkeep has been surrendered to Parliament
at the beginning of each reign since that of King George III,
in accordance with a Civil List Act"
and that, in sum, "the Crown Estate is the Sovereign's public
estate by right of the Crown and when Parliament assumed responsibility
for providing funds for the upkeep of the Royal household as well
as for the expenses of Government the surrender of the revenue
for the lifetime of the Sovereign was regarded as a corollary."
The Report also described the Crown Lands as "one of the
largest, most varied and most valuable holdings of landed property
in Great Britain."
13. The main recommendations of the Committee on
Crown Lands were that:
- The term "Crown Lands" was confusing,
given that they were different from land acquired and maintained
by the Government for various uses such as bombing ranges, airfields,
the erection of government offices and other public purposes.
To avoid ambiguity, the Crown Lands should, in future, be called
"the Crown Estate".
- To improve the administration of the Crown Estate,
the Commissioners of Crown Lands should be replaced by an appointed
Board along the lines of other large estates. The Report mentioned
by way of example the Forestry Commissioners as a Board created
by statute for the management of large areas of land owned by
- A specified Minister or Ministers of the Crownpossibly
including the Secretary of State for Scotland as "Scotland's
Minister"should have power to give directions to the
Board. The Report recommended that the Board be consulted before
the powers of direction were exercised. It also recommended that
the responsible Minister should not have a special interest as
Minister in the use or control of the Crown Estate.
- The general duties of the Commissioners, only
inferred and tacitly understood, should be defined and written
into statute. The Crown Estate Act 1961 subsequently stated that:
it shall be the general duty of the Commissioners,
while maintaining the Crown Estate as an estate in land (with
such proportion of cash or investments as seems to them to be
required for the discharge of their functions), to maintain and
enhance its value and the return obtained from it, but with due
regard to the requirements of good management.
The Crown Estate today
14. The Crown Estate Act 1961 defines the Crown
Estate as the Crown property, rights and interests managed by
the CEC on behalf of the Crown. The actual composition of the
Crown Estate continues to evolve in line with the general duty
of the CEC to maintain the Crown Estate "as an estate in
land", which restricts the type of assets the CEC can hold
as part of the Estate to land, gilts or cash, and to "enhance
its value and the revenue obtained from it."As Chief Executive
Roger Bright observed "we are not a static estate. We are
a dynamic estate and we buy and sell properties in order to maintain
the performance of the portfolio over time."
The CEC are required under the Crown Estate Act 1961 to retain
the Royal Park and Forest at Windsor. There is no other requirement
on the CEC to hold onto particular assets in perpetuity.
since the Crown Estate Act 1961 to extend the UK's interests in
the marine environment from the three nautical miles territorial
limits at the time, has also consequently expanded the domain
of the Crown Estate. The CEC are now responsible for managing
the Crown's ownership of virtually the entire UK seabed out to
the 12 nautical miles territorial limits and for managing the
rights vested in the Crown over the UK continental shelf areas
out to the 200 nautical miles limits. We shall examine this 'new'
area of CEC business in more detail in a later section.
16. At our request, the CEC provided us with a schedule
of the property, rights and interests that currently form part
of the Crown Estate. The schedule is attached as an Appendix.
The schedule helpfully distinguishes between ancient possessions
which are properties held by the Crown when the first of the Crown
Estate Commissioners' predecessors was set up in the early nineteenth
century, and modern acquisitions, which are properties that have
been acquired since then. The schedule also identifies that, in
addition to properties, the Crown Estate also includes ancient
rights of the Crown. Prominent examples of these are the Crown's
rights to gold and silver and the Crown's ownership of territorial
seabed and other rights in the UK's marine environment, the latter
subsequently expanded as noted above. A further distinction is
that the property, rights and interests that make up the Crown
Estate in Scotland are legally distinct from those in the rest
of the UK. The CEC's role and relationships in Scotland are considered
in more detail in section 8.
17. The schedule of property rights and interests
that currently form part of the Crown Estate is a considerable
aid to understanding the nature of the CEC's operations. In the
interests of transparency, therefore, we recommend that, in future,
the CEC update the schedule on an annual basis, and publish it
in each Annual Report.
The Crown Estate Commissioners
18. The CEC continue to operatewithin the
framework recommended by the Committee on Crown Lands as enacted
under the 1961 Crown Estate Actas a statutory corporation
managed by a Board of eight Commissioners appointed in line with
current standards for public appointments. In their evidence to
us, the CEC were very clear on the implications of the Crown Estate
Act 1961 for the nature of their operations. In their written
evidence, referring to their general duty under the Act to "maintain
and enhance" the value of the estate and return obtained
from it, they stressed that they are "a business that focuses
on a combination of income return and capital growth"
and that they are "first and foremost a commercial organisation."
Similarly, in oral evidence, their Chief Executive explained that
"we operate under a commercial remit which is set out in
the 1961 Crown Estate Act."
19. This though is not the whole story. Under the
terms of the Act, the CEC have also to pay "due regard to
the requirements of good management". However, as Mr Appleby
pointed out to us "there is no strict legal definition of
good management. As a result interpretation is left to plain English
and common practice to establish."
At one level, "good management" may be seen as no more
than standards that all organisations should observe to ensure
that their operations are sustainable in the longer-terma
limited stewardship roleand managed in a professional manner.
As the CEC put it in their written evidence:
The Crown Estate expresses its statutory duties
through three core values commercialism, integrity and
stewardship. It operates at arm's length from Government, takes
a commercial approach and embraces high standards of responsible
HM Treasury appears similarly content with this interpretation
of good management, stating in its written evidence that:
Because of TCE's unique position, the Treasury's
main concern is to make sure that TCE is well managed to modern
professional standards and exercises its stewardship responsibilities
prudently. Generally the Treasury is satisfied that the Estate
is appropriately diversified in the UK property market, controls
its risks and opportunities to suitable standards, and adopts
a sustainable method of doing business.
20. We questioned to what extent standards of good
management for the CEC as a public body also involved wider public
interests. Mr Roger Bright gave some acknowledgment that wider
interests were at stake when he sought to reassure us that:
[ ... ] we always work with the grain of government
policy, both in terms of the UK Government and also in the devolved
nations. As a public body, we have a very keen sense of our wider
responsibilities to be a good and responsible landlord.
We also noted that the CEC's duty is to enhance value
and revenue, rather than maximise them as supposed in some of
the evidence we received. We consider that there is a distinction
between 'enhance' and 'maximise'ie that enhance is less
than maximise which may give the CEC more scope to accommodate
wider public interests in fulfilling their financial remit. We
return to this matter later.
21. Questions of the wider public interest also involve
the powers of direction held under the Crown Estate Act 1961 by
the Chancellor of the Exchequer and the Secretary of State for
Scotland. The CEC pointed out in their evidence that these powers
had never been used, while both HM Treasury and CEC were anxious
to reassure us that the reason the powers have not been used is
because "there is always active dialogue among officials
about any significant or novel developments in the business before
they are undertaken" and hence "the question of exercising
the powers of direction has never arisen."
Conversely, however, this may be an indication that the CEC have,
over time, been allowed a greater level of autonomy than originally
envisaged by the Committee on Crown Lands.
22. The extent to which the CEC's revenue and capital
enhancing activities are or should be tempered by the requirements
of good management or guided by Ministerial direction is important
because a number of witnesses and submissions contend that the
degree to which the CEC are focused on their commercial duties
can, in some contexts, act against wider public interests. We
explore these arguments more fully in the Urban Estate and Marine
Estate sections, before considering in section 9 whether there
may be wider policy issues for the Government to consider.
23. In addition to the issue of the extent to which
the requirement on the CEC to enhance value and revenue may be
influenced by good management and Ministerial direction, there
are specific financial rules governing the CEC's operations. One
is that the CEC have to surrender their net revenue surplus to
the Treasury each year, and are therefore unable to use revenue
for capital investment except in limited circumstances. The CEC
are also unable to borrow to finance investment, or invest in
land through limited companies.
24. Another statutory constraint upon the CEC is
the requirement that they do not exploit monopoly positions. This
issue is considered more closely in the section on the Marine
Estate, as it is in the marine environment that their monopoly
position features most prominently.
25. Having explored the framework within which the
CEC operate, in the next sections we turn our attention to the
performance of the CEC, looking first at overall performance,
and then at performance in its individual business divisions.
As stated in their Annual Report, these operating divisions are
the basis upon which the CEC monitors their operations and upon
which decisions are made by the Board.
4 The Crown Estate, Annual Report 2009, July 2009,
Ev 37 Back
Ev 70 Back
Ev 101 Back
Ev 70 Back
Ev 101 Back
Ev 39 Back
Q 173 Back
Ev 101 Back
Q 130 Back
An annex to the Report of the Committee on Crown Lands, Cmd 9483,
June 1955,also provides a wider historical perspective Back
Report of the Committee on Crown Lands, Cmd 9483, June 1955 Back
The Crown Estate, Annual Report 2009, July 2009, p 46 Back
Report of the Committee on Crown Lands, Cmd 9483, June 1955, p
Ibid., p 3 Back
Ibid., Annex B Back
Ibid., p 4 Back
Q 130 Back
1964 Continental Shelf Act 1964, Territorial Seas Act 1987 Back
Ev 39 Back
Ev 47 Back
Q 129 Back
Ev 68 Back
Ev 39 Back
Ev 101 Back
Q 129 Back
Ev 101 Back