§ 7.24 p.m.
§ Lord Beaverbrook
My Lords, I beg to move that this Bill be now read a second time.
The Duchy of Lancaster is primarily a land and property-owning institution whose revenues support the privy purse. The creation of the inheritance which became the Duchy dates from 1265 and its affairs have been administered by a chancellor of that name since 1399.
Although a royal possession since the accession of Henry Bolingbroke, the Duchy—by virtue of its earliest charters—has always been held for the sovereign's benefit separately from all other Crown lands.The original charters placed no restrictions upon the chancellor and his council in the management of the Duchy's estates. However, the legislation which was introduced early in the 18th century to restrain the alienation of Crown lands encompassed the Duchy's holdings in its application. These restrictions have either been gradually removed or substantially amended over the years. Other bodies which were originally affected by the restraints, namely the Crown Estates and the Duchy of Cornwall, are now able as a result of legislation granted for their benefit to enter into leasing arrangements for their properties which meet the requirements of the market place of today. The Duchy of Lancaster seeks no more than to be put in the same position as any other landowner—Crown or commoner—in this respect; and that is the purpose of the short Bill which I bring before your Lordships today.
The restrictions which still have an adverse effect on the management of the Duchy's properties are those which limit the letting of land or land and buildings to a term of 99 years, and which restrict the amount of rental which may be taken under those circumstances by way of a prepayment or premium. No more than one-third of the revenue receivable in this way may be capitalised.
The Duchy would not itself object to entering into leases on this basis as no landowner wishes to grant a longer term than is absolutely necessary; and it is one of the Duchy's management objectives to sustain its revenue income in preference to making capital disposals. There has, however, been a change in market conditions. The circumstances under which such leases are granted are normally those where a new building is to be erected or a substantial refurbishment of existing property is to take place. For many years builders and developers have been prepared to invest money in property on a leasehold basis in exchange for a term of 99 years. They are now no longer able to obtain funds for their investments on such a basis. Periods of 125 or even 250 years are sought according to the scale of the development and its location. The Duchy of Lancaster now finds itself in the unfortunate position of being one of the very few landowners who are unable to meet the requirements of the market place in this way.
Commercial considerations also determine the extent to which a builder or developer is prepared to pay a rental under a building lease as opposed to pay part rental and part premium. This point may be 972 illustrated by way of a simple example. Suppose a block of property containing buildings which are ready for redevelopment or substantial reconstruction are worth, in their existing condition, £1 million. The costs of developing or refurbishing those buildings may amount to a further £1 million. Under a typical modern leasing arrangement the landowner contributes the former element (the land) while the building lessee contributes the latter (the finance) and executes the development. In return, each party may seek to share the rental from the completed development in proportion to the value of their original contributions. In the example given, the rental received would be shared equally.
However, the property funding market may dictate otherwise. Financing institutions may insist that, while recognising the basic division of value, they are prepared to provide funds only if the landowner's share is partly redeemed from the start by the payment of a capital sum or premium. There are no set rules for such negotiations and the attitude of the institutions varies according to market conditions. However, it is not uncommon for the stipulation to be made that something of the order of 80 per cent. of the landowner's share is capitalised. The effect of the present restrictions, which limit both the length of lease that the Duchy may grant and the percentage of income which may be capitalised, is that redevelopment or refurbishment opportunities for property which the Duchy owns may prove impossible to fund by way of a building lease.
The problem is not a theoretical one. Part of the Duchy's historic inheritance—dating back to 1284—includes properties in the Manor of Savoy. Recently a group of properties on the Strand became in urgent need of renewal. Planning permission for a new building was obtained and for over 12 months a leading firm of surveyors endeavoured to negotiate terms on the open market for the redevelopment of the property within the framework of the Duchy's existing leasing powers. This unfortunately proved to be impossible. The costs of redevelopment were beyond those which the Duchy was able to fund internally and the freehold of the site had to be sold. Although the terms of the sale itself were satisfactory and the proceeds were reinvested, were the process to be repeated over a period of years the Duchy would find that either it retained the ownership of properties which were becoming dilapidated or that it had to sell the freehold of an historic inheritance.
I refer briefly to the schedule to the Bill. It details enactments which would be repealed. I have previously referred to the fact that the original restrictions on the Duchy's powers have been modified over the years. These modifications have taken the form of extending the Duchy's powers in certain instances, either in legislation specific to the Duchy or in other legislation which referred to the Duchy. The Bill before your Lordships would make redundant these limited extensions of the Duchy's powers and consequently their repeal is sought for administrative tidiness.
In summary the Bill seeks to do no more than to put the Duchy of Lancaster in the same position—no better but no worse—than that of other landowners and I therefore recommend the Bill to your Lordships.
§ Moved, That the Bill be now read a second time.—(Lord Beaverbrook.)
§ 7.32 p.m.
§ Lord Mishcon
My Lords, who would think that the Government had entered into some kind of conspiracy in regard to an innocent Bill of this kind which is brought before your Lordships for Second Reading? I say that because today is the day before Budget day. The Minister, I think deliberately, did not read the section from the Act which we are meant to be dealing with today. I say in all solemnity that the House should be reminded of the section of the Act passed 286 years ago—I repeat that the Bill comes before the House on the eve of the Budget. I refer to Section V of the Crown Lands Act 1702. I say with a slight smile that your Lordships ought to be reminded of the relevance of that section to the present occasion. Section V reads as follows:And whereas the necessary Expences of supporting the Crown or the greatest part of them were formerly defrayed by a Land Revenue which hath from time to time been impaired and diminished by the Grants of former Kings and Queens of this Realm so that Her Majesties Land Revenues at present can afford very little towards the Support of Her Government nevertheless from time to time upon the Determination of the particular Estates whereupon many Reversions and Remainders in the Crown do now depend or expect and by such Lands Tenements and Hereditaments as may hereafter descent escheat or otherwise accrue or come to Her Majesty Her Heirs or Successors the Land Revenues of the Crown in Fines Rents and other Profits thereof may hereafter be increased and consequently the Burthen upon the Estates of the Subjects of this Realm may be eased and lessened in all future Provisions to be made".The Act was passed some 286 years ago so that the burden upon the taxpayer might be alleviated and the estates of the Crown might increase in value. Here we are, the day before the Budget day, altering the whole of this provision. Accordingly, one would have thought, it is a deliberate measure to increase tomorrow the burden upon the taxpayer. All the forecasts that have been made so far would appear not to carry out such a conspiracy, but I merely mention this for your Lordships' amusement, together with the fact that, again possibly in anticipation of tomorrow, Section VII of that old Act refers to the following:And to the Intent the Inheritance which Her Majesty hath of and in the said Hereditary Duties of Excise upon Beer Ale and other Liquors and of and in the said Revenue arising … in the small Branches of Her Majesties Revenue".Again with great diplomacy and care, the Minister did not anticipate the Budget speech by a reference to these hereditary duties of excise upon beer, ale and other liquors.
Beyond these completely irrelevant observations I have nothing but support for the Bill now before your Lordships.
§ 7.35 p.m.
§ Lord Houghton of Sowerby
My Lords, I am glad to be reminded by my noble friend of the terms of Section V of the Crown Lands Act 1702, because I have mislaid my copy and have been unable to consult it.
I am probably the only Member of your Lordships' House now who was at one time Chancellor of the Duchy of Lancaster. I had the responsibility of looking after the affairs for quite a time when I was in the Government of Harold Wilson in 1964. I 974 arrived there just in time for the celebrations of the 700th anniversary of the beginning of the Duchy, which was quite a party at St. James's Palace. We had other most enjoyable proceedings in connection with the long history of this turbulent creation, which is now becoming more of an anachronism than ever.
The beginning of the Duchy of Lancaster was in conflict and war, the plunder of civil war, rebellions against the Crown and retaliations by the Crown. When I see the plaque in the parish church at Evesham to the memory of Simon de Montfort, the founder of English representative government, I can scarce forbear to say that he was a Plantagenet adventurer who came over here to claim the title and the estates of the Earl of Leicester. He married the King's sister, rebelled against him, defeated him at the Battle of Lewes in 1264 and then trailed Henry the monarch, around the country like a performing bear, a virtually captive monarch. The supporters of the King reassembled their forces and in counteraction at the Battle of Evesham they defeated the rebel forces and slew Simon de Montfort. That is how the Duchy began, because on his death the Crown sequestrated the whole of the lands and estates of the Earl of Leicester, Simon de Montfort, and created the Earldom of Lancaster. That is how the Duchy began.
When I first went there I was intrigued to define the origin of the estate of the Duchy. Was it war booty? Was it plunder? Was it nationalisation without compensation? Was it sheer confiscation? What was the moral basis for the Duchy? How did it come to have this preferential position in the affairs and fortunes of the Crown.
We ought to bear in mind that the proposed changes (which I fully support) will result in the increased wealth of the Duchy of Lancaster, and the whole of the revenues of the Duchy are the property of the Crown. The only substantial payment made from Duchy funds goes to support the privy purse, as my noble friend said. The proposals contained in this short Bill will add to the resources of the Duchy, will add to the resources and income of the Duchy and thereby will add to the tax-free resources available to the Crown. We must not overlook that matter. I do not begrudge it but we must bear in mind the fact that it is a relic of the days when the Crown had vast estates throughout the land and decided to put them into the hands of the state in return for a civil list provision.
During my time in office the Duchy of Lancaster was the Queen's hedge against inflation. At that time the monarch had to come to Parliament for the revision of the financial grants made to the privy purse. No monarch liked coming to Parliament to apply for more money because it could arouse all kinds of criticisms of the monarchy, the behaviour of the royal family and so forth.
While people such as William Hamilton were around—who is no longer in another place but who was vocal on such matters—the Crown did not like coming to Parliament unless it was forced. Queen Victoria hated coming to Parliament for more money because during her reign there was a strong republican element in society. No one likes to come to Parliament to ask for more money, least of all Members of the House of Commons. The privy 975 purse, along with the salaries of the Members of the House of Commons, is now on a regulatory basis and it is no longer necessary to trouble Parliament for increases in pay.
The Duchy is still a substantial supplement to the resources of the monarch. The Budget of tomorrow will make no difference to the Duchy, whether or not the standard rate of income tax is reduced. Plenty of other concessions that might be made in the Budget tomorrow will not benefit the Duchy because it pays no tax. Exemption from direct taxation is part of the prerogative of the Crown. Again, I do not begrudge that. I believe that if one has a monarchy one should keep it in proper repair and at a standard of dignity and affluence consistent with the life, work and heavy responsibilities of the Head of State. I am all in favour of that. However, we have not had a Duchy of Lancaster Bill before Parliament for 68 years, and I am taking the opportunity to remind noble Lords of the existence of this unique institution which still remains as part of the history of our country.
When on social occasions I have been asked about the Duchy of Lancaster, I have explained that it is an independent territory within the United Kingdom with only taxation and foreign policy reserved to the Westminster Government. The Duchy appoints the magistrates and county court judges and it owns all the river beds. What is the Duchy expected to do with all the river beds in Lancashire? It owns 120 farms; it has the gift of 40 clergy livings; it owns nearly all the pot holes in Derbyshire and it charges people to go down the pot holes, look at them and get lost in them. The Duchy has all kinds of wonderful things at its disposal.
I tell the House quite frankly that I became bored with my Cabinet job as a link-man of Cabinet committees. I had the responsibilities of a great landowner with broad acres by the thousand and woodlands which I refused to cut down. The fact I would not cut down any trees upset the Duchy, which stated that that surrendered all the principles of good forestry. I said, "I don't cut down trees even so". I felt that the Ducal power that had been in the hands of the aristocracy of Britain for centuries was at last in my hands and I greatly enjoyed it. I went to rent dinners. It was wonderful but I still had a link job in the Cabinet and was in charge of the future of social security.
To be serious, this Bill is necessary to bring the situation up-to-date. The restrictions previously placed on the funds and uses of the Duchy of Lancaster have existed largely to restrain the monarchs from exploiting their control over the Duchy. Some monarchs almost scattered the resources of the Duchy in a profligate way and they had to be restrained. The restrictions were implemented to safeguard the capital assets of the Duchy. It is quite clear that they cannot be fully exploited within the market and property conditions of today, and the proposals are necessary.
One must not lose sight of the fact that it is an anachronism in the provisions for the royal money of today. It is still virtually a private fief and it has not been surrendered because of its origin. The rest of the Crown lands were surrendered to the state in return for Parliament's provision of a privy purse and a Civil 976 List to sustain it. One wonders how long that will continue.
The Duchy of Cornwall is in a somewhat different position. The convenience of the Duchy of Lancaster to government is that there is a Chancellor of the Duchy who is nearly always in the Cabinet. He is a convenient person to whom responsibilities can be given within the government machinery and with no immediate departmental responsibility. In 1988 we are fundamentally changing the straitjacket which has surrounded the freedom of the Duchy to use its assets to the best commercial advantage.
I cannot imagine that the Chancellor of the Duchy will need to take much advantage of the new power to give charities easy terms in land tenure because in my time in office the whole of the Duchy was almost a philanthropic institution. I raised the rents of over 100 farms by one-third and was questioned as to why I was doing so. My answer was that it was in order to bring them up to the level of 1870. I said that if any farmers had a grievance against that they could go to an independent tribunal. I undertook that if it recommended a reduction the farmers would receive that, but that if an increase was recommended I would not impose it. I do not believe that many farmers appealed on those terms. The Duchy will now have the opportunity of giving more attention to charitable appeals, at least in the conditions of leasing land. I support the Bill. I greatly enjoyed my stay in office, and I have also enjoyed talking about the work of the Duchy of Lancaster.
§ 7.48 p.m.
§ Lord Harris of Greenwich
My Lords, with the leave of the House I should like to say a few words about the Bill. One would have to be extremely unreasonable to say that there is anything inherently objectionable in the Bill; it is manifestly desirable and has the approval of us all. One of the advantages that it has provided is to give the House the good fortune of hearing a former Chancellor of the Duchy speaking a few moments ago. I have asked three previous holders of the office exactly what is done by the Chancellor of the Duchy. I knew that he appointed magistrates, but I was unclear as to his other responsibilities. All noble Lords now have the advantage of knowing precisely the powers of the Chancellor of the Duchy.
It is right to say that the Duchy has a strange historical background. I understand that when the Duchy was first incorporated there were no limitations on the power of the Chancellor. However, it was found necessary eventually to introduce some limitations on his powers because of the misbehaviour at the time of the Stuart monarchs.
It is useful to remember what the Stuart monarchs did which was criticised by Parliament and led to a whole series of legislative provisions through the centuries. Their greatest offence was to sell off the assets of the Duchy of Lancaster and to use the resulting capital as immediate revenue. We have heard of that matter in a rather different context in the last few years. On this occasion my noble friend Lord Diamond is not present. He normally draws attention to the fact that the present Government have an enthusiasm for selling off the family silver. That was precisely the issue which engaged the attention of Parliament three centuries ago and led to 977 the beginning of the whole series of legislative processes, of which this is the most recent.
Having said that, I believe this has been an interesting debate. We have had the historical researches of the noble Lord, Lord Mishcon, and the noble Lord, Lord Houghton of Sowerby, has reminded us of the significance of the battle of Lewes in 1264 and, indeed, the significance of a most agreeable party in 1964 to which, unhappily, some of us were not invited. With those words, I support the Bill.
§ Lord Howie of Troon
My Lords, as always in this House, I shall be extremely brief on this matter. I am drawn to my feet by the notion that the Duchy of Lancaster goes back to the battle in 1264 and is obviously a very ancient part of our constitutional arrangements. However, I must remind the House—however gently and however briefly—that we are a United Kingdom; and apart from 1264, in 1603 there was the union of the crowns, and in 1707 there was the union of parliaments. Although the Duchy of Lancaster is of great interest to some parts of the United Kingdom, it is only of marginal interest to some other parts of the United Kingdom. We wish it no harm in that respect but we wish merely to remind constitutionalists that the Duchy of Lancaster is a very local matter and is a local matter only to part of the United Kingdom.
Beyond that, I have very little to say except to take up a point made a few moments ago by the noble Lord, Lord Harris of Greenwich, when he referred to the iniquities of the Stuarts. They were no doubt worthy of criticism. Coming from my part of the world—namely, the Lowlands, where the Stuarts were not the most popular of people—I have no doubt about that. However, being aware of the shortcomings of the Stuarts does not necessarily mean that one is enthusiastic about the activities of the Hanoverians. They were all right in their way and I dare say, in a sense, we still have them with us.
My last words are these. The inquity of the Stuarts and the follies of the Hanoverians must not lead us to imagine that the peculiarities of the younger royals of the present day are exactly what we want in our society. We have nothing to say against our younger royals apart from the fact that we think they ought to behave themselves rather better than they do.
§ Lord Beaverbrook
My Lords, the noble Lord, Lord Howie of Troon, will not wish me to follow him down that route. I am certainly not going to and I do not believe that he would expect it.
I am grateful to the noble Lord, Lord Houghton of Sowerby, for giving us such an interesting insight into his stewardship of the Duchy. He comes from a long line of distinguished chancellors which included my grandfather many years ago. I am grateful to the noble Lords, Lord Harris of Greenwich and Lord Mishcon. I am sure that the noble Lord did not really expect me to give the House a preview of tomorrow's Budget but I am sure he will not be too disappointed! In the meantime, I commend the Bill to the House.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.
§ The Earl of Arran
My Lords, I beg to move that the House do now adjourn during pleasure until 8 p.m.
§ Moved accordingly, and, on Question, Motion agreed to.
§ [The Sitting was suspended from 7.55 to 8 p.m.]