Welcome to this session of the Public Accounts Committee on Monday 13 July 2026. Today, we will examine how the Crown Estate manages its extensive portfolio of land and property, including its responsibility for the seabed around England, Wales and Northern Ireland. We will explore the arrangements for residential properties occupied by members of the royal family, where the responsibilities are shared between the Crown Estate and the royal household. The Crown Estate generates significant returns for the taxpayer. Over the past three years, it has returned more than £1 billion to the taxpayer, with much of the growth driven by the seabed leasing for offshore wind development. We will explore that area during this session. Given the scale and value of the assets managed by the Crown Estate and the royal household’s role in overseeing royal residences, it is important that both organisations demonstrate good stewardship of public resources and deliver value for money. This afternoon, we will examine how effectively the Crown Estate is managed and is managing its assets, whether its administrative costs are reasonable and justified, and whether the property and leasing arrangements managed by both the Crown Estate and the royal household are delivering the best possible value for the taxpayer. Without any further ado, I welcome all three of you, and will start with you, Dan, if I may, in asking each of you to introduce yourself, say who you are, what you do and how long you have been in post. That would be really helpful.

Thank you, Sir Geoffrey. I am Dan Labbad, chief executive of the Crown Estate. I am also the accounting officer and second commissioner. I have been in post for just over six years. My responsibility is to oversee the strategy and management of the Crown Estate on a day-to-day basis.

Hello. My name is Helen Price, the CFO of the Crown Estate. I look after all things finance for the Crown Estate. I have been there since January 2025.

I am James Chalmers, the Keeper of the Privy Purse. I have been in the role for 18 months. I look forward to the opportunity to answer your questions.

I thank all three of you very much for coming; we appreciate it. We will start with my very able deputy, Clive Betts.

In general, the Crown Estate has responsibilities that not everyone might be aware of on the seabed and along much of the coastline. Dan Labbad, could you explain whether there are any conflicts, tensions or prioritisation that has to be done about the financial returns you have to generate, as opposed to the social and environmental responsibilities you have as well?

As accounting officer, my responsibilities are to ensure that I am meeting those obligations in the context of the Crown Estate Acts 1961 and 2025. That Act gives us a number of obligations, including making sure that we are maintaining and enhancing the estate in land and assets and that we are achieving money or our money’s worth in doing so, and that we are reviewing our responsibilities towards sustainable development. As you say, at times those things can come into conflict. A good example is in the roll-out of renewable energy, between the natural world or the environment and profitability, for example. Our responsibility is to ensure that we are thinking about the long-term benefit of the activities of the Crown Estate, not only for today and the return that we need to make to Treasury, but also ensuring that the Crown Estate can go on, endure and continue to provide returns, and value in the broader sense of the word, for the UK in 50 to 100 years from now. It is important to highlight that we have a strategy that brings together our need for making a return with the needs to protect the environment and to do social good. What we find in the way that we operate through our investment committee—we have something called the value creation framework, and that is all about how we ensure that we stand up to scrutiny and that we are transparent in how we bring those things together, whether we are talking about the seabed, the way that we integrate our urban portfolio or the way that we think about our farmers and our commitments to agriculture.

To go back to the seabed, you obviously have financial responsibilities, as you explained, and some of that you can easily measure by how much money you make from, say, allowing wind farms to be progressed. How do you actually measure the success or otherwise of your environmental and social responsibilities?

First of all, we do not do anything unilaterally. Everything we do needs to be done through collaboration, and that includes working with a broad set of stakeholders. Again, a good example is the roll-out of round 5 in the Celtic sea last year. We have been working on that for the past three years, but we entered agreements for lease with a number of developers for 4.5 GW of renewable energy in the Celtic sea. We worked with a whole range of stakeholders, including international developers and investors, a devolved nation in the form of the Welsh Government, and global environmental groups; and as we looked at those things, we were making sure that we were bringing the interests of everyone together. The other thing that we do is invest heavily in data and evidence, so we spent a lot of time making sure that we really understand the underlying data that informs the environmental context—bearing in mind that the environmental challenges that we face are not necessarily specific to a local jurisdiction; they are systems-wide. Finally, we are not the ultimate decision maker. We have to work through the planning process and other regulatory approvals. Again, we don’t have the unilateral right to make these decisions, in isolation. So to answer your question, we work across a range of diverse stakeholders that have those different interests in mind. We invest heavily in data and evidence and we rely on the planning process and other regulatory processes to ensure that decisions are informed in the right—balanced—way.

Do you take account of the interests of people who get their living from the sea—fishermen and others—who may be affected by some of the wind farms or other things that you might give approval to?

Yes, we do. We work across fishing, environment, navigation, defence, renewable energy—we look at all interests. Again, when you look at the roll-out of successful leasing programmes, there is, in the procurement context that we work within, ample ability for judicial reviews and other things to be put forward to stop these leasing processes. An example of how we are doing that successfully is that we have been relatively unfettered in our deployment of the 13 GW that we have generated to date, plus the leasing rounds that we are doing to bring on new renewable energy in the years to come. The other thing we are doing that is important to mention is investing at the moment in something called the marine delivery route map. It is a tool that uses the data that we have been able to gather over 25 years of doing renewable energy and working with the seabed in that way, and that brings in other uses and other datasets, to start to map out the future scenarios of seabed deployment in all the areas that I talked about, including the interests of, say, fishing communities as one stakeholder. The reason why we are doing that is that up until three years ago, we ran one leasing programme every 10 years; now, we are looking at running one every other year, given the deployment requirements of renewable energy, in line with Government targets. To do that, we cannot rely on engaging with stakeholders scheme by scheme; we have to plan ahead, over the next 30 to 50 years, and ensure that communities understand what we are doing and why, that the economic benefit of this deployment will transverse the UK and, finally, that international investors can gain confidence from the fact that they can see where deployment will come from.

You mentioned renewables; what about drilling? Do you allow any drilling for fuel or for minerals of any kind?

No. The Crown Estate does not have the rights over oil and gas—fossil fuels. That sits with other Government authorities.

So we don’t have that problem to deal with. Helen Price, can you think of any examples of when you have forgone financial gain to preserve environmental and social benefits?

When we look at the investments that we make, we use our value creation framework, so we look at both financial capital and sustainability impacts when it comes to assessing whether we want to move something forward. It is important that we make sure we meet the financial thresholds, and also that we do not ignore social impacts.

Right. Are there any examples of where you have said, “We could make some money out of that, but we’re not going to”?

There are several examples. First, our balance sheet is not allocated simply on, say, traditional financial hurdle rates, in isolation. We have an aspect of the balance sheet that is geared that way, but we also have aspects of the balance sheet that are looking more at longer-term investments—are we planting the seeds for the future? I just wanted to make that point because often, when these questions are asked, people say, “You have a balance sheet that is geared towards short-term returns. How do you make these trade-offs?” I will give you two examples. One example is on the seabed. There are several leasing opportunities—either densification of existing wind farms or the roll-out of new wind farms—where our advice has been not to develop them out because of environmental concerns. We felt that those parts of the seabed were getting to the threshold of being over-exploited from a renewable energy perspective and were going to impact biodiversity in the area. Those impacts could not be mitigated. It would have been extremely profitable for us, but we have not done it. Again, we take our responsibilities incredibly seriously with both transparency and future scrutiny. Down the track, if somebody were to look at these decisions and see that we took short-term profitability decisions ahead of material environmental degradation, we would not stand up to that scrutiny. As another example, we are currently looking at the future of Regent Street and something called the “Park to Park” scheme. Nash’s original vision was to link Regent’s Park with St James’s Park. We could easily continue to derive an income out of Regent Street and put as little money into it as possible, but we are looking at the entire urban design from a number of areas, one being the vision, and the other being the weather that we are facing at the moment, such as flooding. How do we ensure that Regent Street is climate-resilient for the future? How do we ensure that the street, as an international and local beacon, is for everybody, not just a select few? If we took a straight commercial approach, we could derive a lot more shorter-term income out of Regent Street, but we are looking to invest for the future, because we believe that if we do not, in 30 or 40 years, we will have done things that our successors will not be able to rectify.

I am told that the blades of these big windmills are very difficult to recycle. Do you put anything in your agreement about recycling?

To take a step back, we work with the industry on a whole host of things. First, these turbines offset many factors positively against what their embedded carbon or wastage is, but we do not accept that as an excuse. We measure our business—you will see in the annual report that we talk about scope 1, 2 and 3 emissions. In that, the turbine carbon cost is measured, because we do not think that is an excuse not to try to reduce carbon regardless. With regards to the blades, they are difficult to recycle at the moment. There is a lot of innovation. Some of them are carbon fibre and some of them are balsa wood. Think about recycling boats, because shipping uses a lot of the same type of material. There is an industry emerging around the world looking at that, but it is a challenge to recycle. We work with the industry on a whole host of social and environmental areas, ensuring that the deployment of this technology is done safely, ensuring that developers are doing what they should to reduce carbon impact and wastage impact, and ensuring that we are taking socioeconomic benefit from their deployment into UK waters. We work across those things. There is a long way to go on turbine blade recycling, because of the nature of the material, but we are at the forefront of that.

I am very pleased to hear that.

We look at it from a diverse perspective. One of the challenges is that when you look out at the seas, it looks empty, but it is not. There are a lot of usages. That is one of the reasons why, in recent years, we have developed the marine delivery route map. The route map is required because, as managers of the seabed around England, Wales and Northern Ireland, we felt that there needed to be a holistic planning approach that engaged a wide diversity of stakeholders. We could then run hundreds of scenarios on different usage topologies. It is not for us to decide how that usage manifests itself; that is a decision for Government. However, we have the ability to provide a tool that can enable hundreds and hundreds of scenarios informed by the best data and evidence that we and others can find and then hear the interests of different stakeholders as these are being developed. To answer your question, we do not make those decisions. However, in enhancing the seabed as part of our objectives under the 1961 Act, we have the ability and responsibility to use what information we have to provide a tool that can enable the best decisions possible.

It is probably best to provide an example. The latest we have is round 5 in the Celtic sea. We are in the process of working through the possibility of a new leasing round in the north-east, but the Celtic sea has been in agreements for lease with a number of developers for a new technology called floating offshore wind. We are deploying that technology because it is deep-water technology and the Celtic sea is deeper water. For the deployment of renewables under Government targets, we have to move into deeper waters. That was a two-to-three-year engagement process that went through everything from environmental and geological surveys, engaging stakeholders and understanding the different interests to also having various advisory groups, including an environmental advisory group on how to work through and ensure that what was happening there was appropriate and sufficient. We also have a process called the HRA—a habitats regulations assessment process—which brings together a group of diverse stakeholders in the environmental area to look at the strategic environmental merits of a particular leasing decision. Through the outcomes of those processes, a recommendation is then made to the Secretary of State—or Secretaries of State if it is a devolved matter or includes a devolved matter—in order to ensure that all the relevant information was considered in making that decision. Our role is to ensure that we analyse the diverse elements that go into seabed use. If we are going to explore a leasing round, we also ensure that we are exploring that with a diverse set of stakeholders. There are many examples around the world where that has not happened. What then happens is that those leases get stopped through various procurement challenge processes. It is not in our interest to push through leasing activity regardless because it will never deploy if we do that. We make sure that we win the good will of a broad range of stakeholders, and where there are issues, that they are identified and mitigation measures and compromises that people accept are in place. Ultimately, the habitats regulation assessment and other processes inform the relevant Government decision makers through the planning processes on what they believe is appropriate and viable for a particular scheme.

We do not have security responsibility ourselves. However, we take security incredibly seriously and work on it with the relevant Government and regulatory authorities. As you say, it is a key issue at the moment. A number of people at the Crown Estate have the appropriate security clearance for those purposes, and we engage actively on those issues.

My questions are probably for you, Dan. I want to ask you further about the offshore wind farm sites. You have set out some of the lengthy stakeholder engagement and the processes required to progress such leases, but the Crown Estate has clearly faced significant challenge in making progress on them. Can you explain the main challenges in making progress, other than the stakeholder engagement? It appears from the reduced option fees that there are additional challenges to progressing the sites.

First of all, we think challenge is good. We are lucky enough to live in a democratic society, and everyone has a view of what good looks like. The UK offshore wind industry is a great example of this country at its very best, having deployed what we have deployed and being a world leader in this area. That has come about because a diverse cross-section of stakeholders has leant in and had an opinion on how you get this done and do it in the right way. We are now approached all the time by other parties from around the world, to give them advice as they embark on this journey. A lot of them are starting out where we have been for quite a long time, and we have the scars but also the huge success story to talk about. I guess the biggest challenge is making sure that there are adequate processes to ensure—to come back to the previous questions—that we embrace stakeholder interest in the right way at the pace of deployment required. That is why our marine delivery route map is such an important tool. The whole purpose of that tool is that rather than talk about leasing programmes two to three years in advance, we can talk about them five to 10 years in advance, so that we can engage the interests of all the different stakeholder groups we have been talking about early enough to ensure that we get ahead of the curve. That is required because, whether it is security concerns, the prosperity of our fishing communities or how we use the technology to come onshore and support this country’s supply chain and economic potential, all that requires forward planning and cannot be done on a wind farm-by-wind farm basis. That is probably the biggest challenge.

That all sounds very upbeat. I guess this is an opportunity for you to say what could be done to support the process. For example, can the Government do more to free up some of the obstacles that might be in the way, or to ease the path? Is there more that could be done?

One of the things about working with Government Departments on this—I am certainly not someone who is shy about laying criticism where I think it is due—is that in this case the offshore wind industry has been a collective Crown Estate, Government, community and stakeholder endeavour over many years. The industry has come across some significant challenges over the years. Right now, there are economic challenges and geopolitical challenges facing the industry. If you look at the international offshore wind collective balance sheet, it has shrunk considerably in the last five years as the big oil and gas majors have moved away from it. The challenge right now is making sure that the UK remains a viable destination for inward investment, not only because of the energy security or climate benefit of the technology, but because of the economic benefit, skills and jobs that the technology will bring. Thinking about your question, it is incredibly important that policy consistency remains because, to come back to the question of how we retain global interest in our market so that the UK can benefit economically, that consistency is incredibly important.

That is really helpful; thank you. I am an MP who represents the north-east, being from Newcastle. There is quite a lot of talk about round 6, based primarily off the north-east coast. Are there any particular learnings for that round that the Crown Estate will apply to make sure the opportunity for investment does happen?

I think there are a few. As you would expect, we are an organisation that, in meeting our best practice corporate governance requirements, is constantly learning, so there is always something to learn. There are a few things, from the top of my head, the first of which is working in partnership. The Crown Estate cannot deliver and deploy alone. That public finance partnership with local authorities, combined authorities and devolved nations is essential. At the national level, the public finance institutions working together is also important. There is no point in deploying offshore wind, which is an economic development pull, without at the same time thinking about how we build the infrastructure and the supply chain benefits, so that as we put obligations on our developers such that they can plug and play, we build our apprenticeships, skills, industry and ports. One of the lessons we are now deploying in partnership with the north-east, broadly, is how we ensure that we think about supply chain benefit in parallel with considering the notion of a leasing programme. Round 6 could deliver up to 6 GW. Blyth is obviously the home of offshore wind in this country, and I think the north-east has the ability to be a world leader. We are talking about over £10 billion in economic development over the next 20 to 30 years as a result of the deployment. Secondly, we have to work nationally as a system. One of the things we are up against is losing port activity to international competitors and losing supply chain opportunity offshore. To maximise what we retain as a country, we need to think about the UK as a system of opportunity, not “This part of the country will win over that part of the country.” That is the other learning we are bringing to the round 6 deployment.

Okay; that is helpful. I want to go on to urban development, which follows quite nicely from what you were saying about supporting the areas as much as the industry offshore. As you are well aware, the Crown Estate was established as a company founded for the benefit of the country and, as you say, it needs to benefit the whole of the country. How do you make sure that your urban portfolio delivers for the whole country in an inclusive way?

I might say a few things and then ask Helen to add to what I say. First, we have property interests around the country. We have earmarked a large amount of our future investment—this is one of the reasons why borrowing is so important—for supporting supply chain activity with regard to offshore wind deployment and other uses of the seabed. We have also invested heavily in science and innovation, not just in the south-east but, over the next few years, nationally. If you think about the numbers that I just rattled off with regard to the jobs and the economic benefit of the north-east, with round 5 in the south-west we are talking about 5,000 jobs and over £1 billion in economic development. That is only the first leasing round; we believe the Celtic sea has the potential for an additional 12 GW of activity. Whether it is our urban deployment or our total portfolio deployment, we measure not only what we are looking to directly invest but also—I think this is where the scale comes from—the ripple effect of that investment which, from the numbers I just provided, are quite profound.

Before you come in with some further information, Helen, I want to challenge you on the portfolio currently being heavily weighted towards London. Could you reflect on that in your answer? It would be helpful to understand what, if anything, is happening to diversify that.

You are right to say that we have a weighting towards London and the south-east—it is about 75% of our existing portfolio. As Dan just mentioned, one of the reasons why we received borrowing powers from Parliament was to enable us to invest more broadly. Over the course of the next 10 to 20 years, we are looking to invest across England, Wales and Northern Ireland. Clearly, we will be investing within London—we have a significant portfolio there that needs redevelopment—but we will look to invest, for example, around two thirds of our upcoming investment outside of London. Over time, we are looking to rebalance the shape of our portfolio.

Could you clarify whether this is to do with the partial buying out of Lendlease and the investment in that? How does that fit with the plan to invest in new developments and expand around the country?

I will give you a bit more colour in terms of the initial numbers and then hand over Dan to talk about Lendlease. The numbers that I am quoting exclude Lendlease. We look at our development pipeline both with and without Lendlease, because that transaction has only just completed. The Lendlease portfolio is not weighted towards central London in the same way that, for example, the Regent Street portfolio is. It is much more outside of London, and also Birmingham. Dan, do you want to give a bit more colour?

To build on what Helen said, we think about a few things in terms of the Lendlease portfolio. The first is the need to support housing in this country. One essential thing is whether the Crown Estate can support large-scale housing and, in the form of life science and tech space, commercial deployment. We are looking at doing a couple of things on that. One is providing diversification opportunity for our portfolio, because we have a responsibility to ensure that the Crown Estate remains resilient. The Lendlease arrangements do not commit us to follow through with vertical development. Our initial role is to enable the projects. I envisage that we will do some vertical development, but also look to crowd in capital and capability to support the industry. Again, like offshore wind, a key part of our role is to help to make the market, and there is a need to build, in particular, housing deployment capability here. Over time, in addition to Birmingham, there would be the ability to take that particular partnership to other parts of the country. We also have our own in-house portfolio, which is about 30,000 housing units, most of which are outside of London. Again, we would see ourselves doing that either directly with partners or within the Lendlease portfolio over time. We will end up taking a more active involvement in housing, but it is probably going to parallel what we do in offshore wind: we will look to take some direct interest, but ultimately enable the market to build its capability to develop and deliver more housing.

On the partnership with Lendlease, is it a new approach by the Crown Estate to have a partner that retains the position of development manager? Are you looking to expand that just with Lendlease, or perhaps with other development partners?

Looking at where we sit today, five years ago we were, for all the right reasons, a predominantly contained portfolio: we had our London holdings, our offshore wind holdings, our regional holdings and our agricultural holdings, and we worked within our means, so to speak. Given where we are in the world now, we have been actively moving the Crown Estate to be a more active actor in supporting the UK’s needs in respect of energy security, climate resilience, nature recovery and inclusive economic growth, as well as making sure that we maintain the resilience of our portfolio. Today, looking at our offshore wind future interests, we will need to deploy 30 GW to 50 GW there in future—

Is that connected to Lendlease?

No, but I am coming back to Lendlease. To answer your question on the operational approach we will take—

Sorry—I was thinking more about the property development side.

On property development, we have today a £40 billion end development value pipeline. That is unprecedented, and there is no way that the Crown Estate can deliver it under the traditional means, as it always has, so we will be looking for more partners. We have a partnership with Pioneer Group and Oxford Science Enterprises on life sciences and science technology generally, to support small businesses coming out of universities. To answer your question, yes, moving forward, we will be looking more and more at those types of partnerships as we scale.

Will that be an open competition, or do you have that relationship only with Lendlease at the moment?

We have Pioneer Group—

But in terms of housing.

In terms of housing, for clarity, we bought into an existing set of projects with Lendlease. In future, for projects that are on our land and that we have the development rights to, we would look to follow a procurement process, like we do with offshore wind.

That is really helpful; thank you. Finally, as an MP for Newcastle, I cannot resist asking you about The Gate. Obviously, the out-to-market sale proposition is at a significantly reduced value compared with the amount it was purchased at. It would be helpful if you could explain what is happening there.

I am really happy to speak to that; Helen might add to it as well. Should round 6 proceed—I am hoping dearly that it will—we will be investing a fair amount in the north-east. We also have interests in agriculture and a number of regeneration opportunities up there. There are elements of our portfolio that we cannot sell, but obviously we can sell shopping centres. With our portfolio, we always look at whether the particular asset could be managed by somebody else, and whether it is where we want to put our core investment in particular regions. A number of other people who could own The Gate could do as good a job as us. That allows us to redeploy that capital into other things, like supporting the supply chains and the other things that we have talked about. We are always looking at how we can move our portfolio to give us, for want of a better expression, the most horsepower to focus on things where we can truly add value, as opposed to where others can add value.

There is not much more I would add to that.

I guess the challenge will be making sure that whoever purchases it can run it as effectively, and that it remains a key asset in the city centre as part of that urban development.

Yes. Given the Crown Estate brand and our commitment to the north-east, as to all parts of this country, we understand the repercussions if that was not to happen.

To stick with The Gate, as Catherine said, you have suffered quite a loss on that property. Can you assure us that you are not just doing what is fashionable at the moment and looking after your better returns and leaving the poor returns? It seems to me that you could sit on this and it would probably recover, particularly given the amount of money the Government are going to put into the north of England. In the scheme of things, £15 million—you have not sold it yet, so it might be less than that—is a very small amount of money.

Yes, it is, and it is a fair question. But across the portfolio we have thousands and thousands of assets. We have to balance where we focus our efforts and add the most value, but at the same time ensure that what we are selling, disposing of or leasing can be managed in the right way. We will not be fire-selling The Gate. We have a vested interest in that part of the country, and we are looking at other investments up there at the moment. To answer your question, we have to look at things in the round, put them through our value creation framework and make sure there is a consistency in how we make these decisions. We have generally been coming out of elements of regional retail for some time. But again, we are making sure that the appropriate counter party is taking those assets on where that is their core business.

I would like to probe the deal with Lendlease a little more. The Committee has taken a great deal of interest—unfortunately—in HS2, and that involves Euston. Let us use Euston as an example. Lendlease is selling off six major property portfolios—I think to you, so that you have a greater share of the equity of those various portfolios. Can you tell us, therefore, what your role in Euston will be? It is a fiercely complicated—like four or five-dimensional chess—but we were told when we went the other day that there could be a potential GVA of £40 billion in the redevelopment around there. What exactly is your future role likely to be?

First, the role of the Lendlease joint venture—the impact partnership—is for the development of commercial and residential space at Euston around and above the station, but predominantly around it. The idea is that as the site and the station are developed over the coming years, we are ensuring that the housing and commercial space gets developed in parallel. Obviously, it is a large scheme; the GVA that you just stated means that it will happen over 20 to 30 years. We were approached by Lendlease a number of years ago about the portfolio, and we saw the potential not just at Euston but across all these schemes for housing and commercial space. Given the nature of our capital, our needing to diversify and our strategy to lean in to things like housing, it was sort of on the mark as to what exactly the Crown Estate should be doing. As I said earlier, our role, if not to self-develop—again, these options are available to us in the future if we want them—will be to enable the market to come in and put in their capital, and it will be for us to attract that and help the industry to develop Euston collectively. That is effectively the idea, not just of the Euston scheme, but across the board—we have that optionality.

We wish you well with that, because it is a very important piece of redevelopment in a much-needed area of London. Before I hand over to Clive again, I want to ask about something you mentioned that I was not really aware of, which is your investment in life sciences and other emerging scientific discoveries. I want to ask you the same question that I asked the Permanent Secretary of DESNZ the other day when we had an inquiry on UKRI: when you invest in these propositions, have you thought about either taking a small equity stake or an intellectual property licence out, so that if that company is hugely successful, the Crown Estate will get some benefit?

First, we have identified a need with regards to start-up businesses coming out of universities not having space and us losing those activities offshore. We have begun partnering with Pioneer Group and Oxford Science Enterprises, which is one of the biggest venture capital funds in the country. One early project we are doing together is that we have bought the Debenhams site in the middle of Oxford. That has just gone through planning, and we will be starting the redevelopment of that for lab space next year. What will be great about that will be showing that we can bring these businesses into the hearts of city centres. To answer your question, we do not do that. The reason we do not do that is that, unlike UKRI, we do not have the ability to invest in businesses in that way. Everything we do needs to go to land and property; it is for others to obtain the benefit of that. Our role is to support the industry with office space, lab space and so on such that we are making a requisite return out of that, of course within the remit of the Crown Estate.

Thank you.

Can I follow up on the issue that Catherine McKinnell was probing? I heard you say, Dan, that you have lots of ideas, possibilities and intentions for looking at developments and potential investments outside the south-east. I do not see much going on in Yorkshire now, or any definite plans for the future.

In Yorkshire?

Clive is a Member of Parliament for Sheffield.

There are a number of things. First of all, the four strategic areas, which I will not repeat, go to the heart of how we discharge our obligations under the Act. We look for where we can have the greatest impact in our core businesses. We have three core businesses, one being the seabed, which we have talked about, and one being our rural business—Windsor—for which we have properties around the country; we also own about half the coastline around England, Wales and Northern Ireland, and finally there is the urban piece, which is national but, as Helen said, with the predominant investment in London. We focus on two things: where we can have, or can put the most effort in to have, the biggest impact on those four areas nationally—climate resilience, energy security, nature recovery and inclusive economic growth—and making sure that we remain resilient from a financial perspective, as we are obligated to. We then have a range of other initiatives where we are looking at how we support parts of the country in different ways. We have an open book approach to the way that we share our IP nationally. We want everyone to come and look at what we do well, where we have made mistakes and how we can deploy in other areas. We are always open to approaches from different parts of the country to talk to us about a need that aligns with the Crown Estate’s obligations. Again, a lot of what we have done—not all, but some of it—has been informed by different parts of the country coming and talking to us about the art of the possible. The north-east is a good example of that. We are always open and very happy to have an offline conversation about the art of the possible.

I would suggest that it should not just be you sitting there and waiting for people to come along. If you have an inclusive policy, it has to be you going out and looking and having the intention to make sure that you are not just following where the growth is happening but investing in the growth areas rather than looking at the other areas.

I agree with that. We have something called the supply chain accelerator, which is a start-up supply chain fund. We have earmarked £50 million initially; we have a total supply chain fund of about £400 million allocated at the moment, including that £50 million. That is where different parts of the country bid. I do not have what we have in Yorkshire and the surrounding areas with me today, but we can get that information.

If you could, that would be helpful.

It is impossible for the Crown Estate to be everywhere, but we want to look more at how we can develop and evolve products that different parts of the country can access, for the obvious reasons that you have just put to me.

I will move on to administrative expenses and costs—Helen Price can probably help us with that. In the last financial year, your administrative expenses rose from £70 million to £88 million. That is an increase of over 25%. At a time when most Government Departments are under pressure to reduce admin costs, you seem to be going in the opposite direction.

You are right to say that our admin costs have gone up. The first thing I would say is that they are planned. As we have been talking about in our accounting officer’s statements for the last few years, we need to invest in our business, and this year we talk about needing to invest in finance and procurement. We are approaching cost very much in the line of allowing us to scale our business in the future. As Dan has talked about, we have a significant development pipeline, and we want to be able to do that without materially increasing our headcount or our costs. Doing the investments that we are doing, particularly in what we term group partner functions—things like finance, as I mentioned, and people and culture—should enable that in the future. I would return to my original comment, which is that all this is in line with the plan. We have not been above budget in our admin expenses this year—that is something we sought to do.

That begs the question whether the budget was realistic in the first place. Compared with 2019, your admin costs have more than doubled. Has the work produced from those costs more than doubled as well?

We have been delivering a really significant strategy over the last five years. As Dan has talked about, we have managed the deployment of offshore wind and the round 4 option fees. Over the last five years, we have returned over £3 billion to the Treasury. There has been a lot of activity. There have also been a number of hires across our business. Our headcount is now 980; it was 868 on an average basis last year. We have been doing things like insourcing our London property management business, because we felt that was better for us to run ourselves, and we are spending money on items you might expect, like cyber-security.

We will come back to that second one in a minute, but insourcing should be saving money, shouldn’t it?

Not necessarily. We would look at the quality of the service provided, the types of activities provided by the insourcing versus outsourcing and the types of activities themselves. We have a very large portfolio in London, which means that the number of parties that can provide that service is relatively small. At the moment, we are looking at stabilising those operations—we have brought them in-house—and we are determining the best operating model for ourselves going forward.

Does it cost you more to do that?

It has done in the short term, yes.

It is worth saying the business has changed enormously over the last few years, and for good reason. The world is changing very quickly, and we have had to keep up with that. We identified a number of years ago that there was more risk in standing still and obsolescence than there was in moving forward. We have invested in a number of areas, and the performance of the business has been testament to that. I hate to think where we would be today had we not done that. We have taken a number of difficult decisions; insourcing property management was one of them. Initially, the transition does cost—as all transitions do—but with a view that over the medium to long term that it will be a very efficient thing for us to have done.

Going forward, then, are admin costs going to come down?

We are looking for them to not continue to grow. We would like them to come down over time.

What does “not continue to grow” mean precisely, looking at the next two years?

We are not planning, for example, for our admin costs to grow at the same level that they have grown over the last 12 months.

We are in the middle of a transformation. Again, my accounting officer’s statement on page 104 of the annual report covers this and has done for the last few years. We are trying to deploy offshore wind at an increasing rate, and we have been successful in doing that. We are looking to modernise our London portfolio, and we have been successful doing that—part of that has been the insourcing decision. In the next two to three years, costs will continue to increase but, as Helen said, not at the rate they have. We are in the process of building an operational platform that can survive the next 20 to 30 years at the scale that the Crown Estate now has the opportunity to deliver against.

Looking at where you are going to go to, are you going to have to spend more on cyber-security?

We have, yes. Over the last two to three years, we have had a multi-year investment programme. That has been investing in the types of areas that you might expect, such as building our resilience—making sure that we have the capabilities in place. That is because the need for us to invest in the space is significant. We want to make sure that we have taken the steps that we should do.

What about AI? Surely that will create savings?

Yes, it will. Again, we are investing already. If you look at the marine delivery route map that I talked about earlier, we also have an insight tool that we have invested in. The tools that we are developing are already starting to become AI enabled, which is incredibly important, especially given some of the earlier questions about how we make sure that we are making the right decisions. We need to be using the best tools to ensure that we are making the right decisions. I do not want to just talk to the hype of AI, but broadly, from a productivity perspective, we have already seen the early signs of productivity improvements. As those tools improve and we embrace them responsibly, given the data and privacy issues with them, we are going to see more productivity improvement come through the organisation.

On pay, which you probably assumed we would get on to at some point, Dan, your salary is five times or more higher than it was in 2019. Most people looking at that would think, “My pay has not gone up that much. It’s just about kept pace with inflation. What’s so special about this job?”

I can understand the question, and it is an important one. We and the commissioners have hopefully been very transparent in the annual report on pay and reward for me and generally. It would not be appropriate for me to comment on my own salary. The board, through the remuneration committee specifically, make that decision and they work within parameters agreed with the Treasury.

Okay. But we still have to ask questions, of course. We have to ensure for ourselves that pay is at a reasonable level compared with other similar jobs. I cannot think of many public sector jobs where the salaries have increased by five times in the last six or seven years.

I am not going to comment on that because it would not be appropriate for me to. Separate to the chief executive’s pay, which I cannot comment on, today we are a FTSE 100-equivalent organisation in terms of the complexity and the commercial mandate that we have. Again, under our framework agreement with the Treasury, we have to be able to attract the best from the private sector and compete on retaining those individuals.

Right. You cannot comment on your pay, but presumably you can comment on your work. Would you manage to persuade us that your workload, both in amount and difficulty, has changed a lot since 2019?

I think the organisation has become more successful over the last five years. Its potential has been set for the future. I talked about some of the numbers that are real numbers that we have the opportunity to monetise moving forward. Again, I cannot comment on difficulty or comparisons with what has happened previously. That is a matter for others.

But you can tell us about your job and what has changed in it since 2019.

Yes. Today, we are operating across a number of sectors—the renewable energy sector and a range of sectors in the marine space. The same from an urban perspective and from an agricultural perspective. That diversity in itself is quite unique, as is the scale that we are operating at. We are close to a £17 billion organisation. We have built a pipeline of beyond £40 billion, and that is before you take our renewable energy interests into account. The obligations that we have to Parliament, the need to be commercial, the need to engage with stakeholders in areas like renewable energy and the environment, and what we are doing socially all add complexity to the role. That is why I think the commissioners have laid out in the annual report that we are the equivalent to a FTSE 100 organisation.

A lot of your pay is linked to performance targets. Are they challenging?

I think so. Again, the reality is that those things are set by the remuneration committee. I should say also that we have, under the framework agreement, a set of performance targets that we agree with Treasury annually across the financial performance of the business, the capital performance of the business outside of revenue, and the sustainable performance of the business, given our objectives. In addition to that, for our senior staff—obviously including myself—remuneration is geared to both short-term and long-term objectives, with a bias in my case to long-term objective attainment.

Are you hitting them all?

That is not something I should comment on.

But the factual assessment is there, isn’t it? I suppose you always wonder looking from the outside whether targets, if they can all be hit, are really stretching.

That is a matter for others. I am not going to comment on that.

You obviously know whether you are being stretched.

Again, it’s a comment for others. I feel I have been stretched but I do not think it is appropriate for me to judge my own performance. I think it is important for others, who are independent, to judge my performance.

Helen Price, you are probably going to give me the same answer about your pay, are you?

My pay is a matter for Dan and the remuneration committee.

So, Dan, you have a responsibility for Helen’s pay. It is five times higher than the salary level for the job in 2019; that is quite a big jump, isn’t it?

When you look at the ambitious strategy and the responsibilities that we require of a CFO, it is important, first, that we can attract a FTSE 100 CFO—which has not always been easy—and secondly, that that individual achieves their performance targets. That has occurred through the 2026 financial years. It is all there in the annual report. We are not hiding it; we are very transparent about the performance. I am not talking about myself—you need to ask others about me—but about the performance of the Crown Estate team more generally, including Helen.

Are you able to recruit people, generally, with the necessary skills to do the more challenging job that you have explained to us?

Yes, we are. Under our Treasury framework agreement for remuneration, over the last few years we have been able to both attract and retain the type of people that we need, and the capabilities that we need. We are now competing with some of the best private sector organisations. At the moment, the market is quite hot in that regard. It is challenging but we have the Crown Estate brand and our work. I should say that in the Crown Estate we have a mix of commercial skills and public service skills, because in everything we have talked about this afternoon, we have to balance how we achieve our obligations financially, in a way that is responsible, with the broader obligations that we are accountable to under the Act. That is what we are focused on every single day.

I am genuinely interested in this question, Dan. I am struck by what you have just said—that you are the size of many FTSE 100 companies—but you are a pretty diversified company: you have your London, marine, regional, Windsor and rural divisions. You have answered very comprehensively to the Committee this afternoon, but you cannot be an expert on everything. Do you have very good deputies in all those divisions?

Very good. To take a step back, the core capability of the Crown Estate is to do what the Act says: enable and enhance the land that we own. We are not doing all the building; we are not deploying offshore wind; we are not the farmers—we are creating an environment where that land can be enhanced in the way that it needs to be. The way that was done 50 or 100 years ago is going to be different from the way it will be done 50 to 100 years from now. Our role is to facilitate that. But you are right, Sir Geoffrey; you have to have an element of domain knowledge to be able to do that.

It has to be up to date, too.

I have an infrastructure property background. In areas like offshore wind and our urban portfolio, my work on the environment over many years and my technology background help, but there is no way that I could do this job without able people. To save her blushes, I talked about the ability to retain someone of Helen’s calibre. On top of that, we have a number of managing directors who run each part of our portfolio. Those individuals have deep domain knowledge of those areas. We also have a number of functional leads, whether that is for our work on strategy, corporate affairs, people, safety or operations. Again, they are the best we can find to do that. Coming back to your point about diversity, and coupling that with the scale potential that we have, it is important that we are running a lean but effective ship in the way that we operate and build the Crown Estate moving forward. I have been involved in businesses over the years that have been too complex. The Crown Estate is not complex. What it needs is just an effective and efficient operating model to enable it to scale up from where it is now. That is what we are building together.

I am going to ask the same question to you and James, and then we are going to take a break. I am sorry, James, that we have not asked you any questions yet, but I assure you that, after the break, you will be in the spotlight. You are both ultimately responsible to the Treasury. How do you ensure value for money to the Treasury? Dan, you returned just over £1 billion to the Treasury last year. Can we expect that to increase or not? How do you ensure value for money in everything that you do?

I will let Helen take this question, but I will say one thing. The £1 billion was heavily informed by a single leasing round called round 4. We have been very open and transparent that that was a one-off, and it would be coming down, but Helen can talk to that.

You are right to say that, last year, we returned £1 billion to the Treasury. You can see that our operating profit before what we call our statutory transfer declined by £200 million from £1.6 billion to £1.4 billion. That was the impact of our round 4 option fees starting to decline. We highlighted that last year. This year, we returned £487 million to the Treasury. That is driven by an increase to the statutory transfer, which is, in effect, something that is used by the commissioners to maintain and enhance the estate. With the support of the Treasury, that sits at 60% for this year and last year. In terms of where our underlying profitability is expected to be, I would point you towards our underlying operating profit, which is £370 million. We expect our business to grow in the mid to high single digits over the next few years. With the ability to borrow, we think that we have the ability to invest on a net basis up to £5 billion over the next 10 years, and that would result in the potential doubling of the £370 million that I have just referred to.

We look forward to you achieving those results. If I can take you to page 22 of the Report, it tells us that your residential assets are worth about £1.1 billion, on which you get a return of £21 million or 2.1%. I am wondering whether there is greater scope for increasing the return on residential properties.

Potentially, but I think the benefit of the Crown Estate portfolio is that we have a mixture of assets. We have some assets in the portfolio that deliver lower returns—returns at the level that you are talking about—but then we have different parts of our portfolio, for example our marine business, that are very capital-light and deliver good levels of profitability. We have seen a 20% uplift in that profit. We look at the overall return of our portfolio. The total return for this year, for example, is above 15%. That is high, because of the round 4 option fees, but having a diverse portfolio that delivers something between 7% to 10%—in the mid to high single digits—is what we are looking to achieve. We are very cognisant of the fact that we have a core portfolio. We are not here to take enormous amounts of risk, so we balance our portfolio accordingly.

James, I am sorry that we have not yet got to you, but we are now getting to you. Can you answer the same question on how you balance all those aspects, such as returning money to the Treasury and value for money for everything you do?

Yes, of course. As you say, we are also subject to Treasury oversight and a framework agreement. The framework agreement is very clear about what we spend our money on. It is also very clear that we are operating to the managing public money principles, just as any other public sector body would. We are held to those standards, which of course include a requirement for value for money. We are a little bit different, in that we are largely about expenditure, so it is about making sure you spend the money appropriately. We may come on to this later, but there also three areas where we look to achieve revenues. We charge shared service fees to others who use the services we provide. We charge the Royal Collection Trust for visitor admissions to Buckingham Palace and Windsor, which is something we agreed to do some while ago. We also try to achieve rental income on our rental property. There is a little bit of income, but there is also cost. On the cost side, we scrutinise that hard. We have procurement processes. We now have the Procurement Act and more than half our expenditure is on heritage properties and maintaining them. We need to make sure that we are really diligent in tendering the work that we do there. Of course, a year ago we announced that we were not going to renew the royal train lease. That is an example of something with tremendous historic value, if you like, and that, dare I say it, inspires fondness in the family and those who have used it. But, recognising that the world is modernising around us and the cost of investing in a train that is getting quite tired and in need of investment, we took a decision that the right thing to do from a value-for-money point of view was not to carry on the lease after March ’27.

Helen has given us an idea of the Crown Estate’s future prospects and the amount of money that the Treasury can expect; after all, this Committee is the guardian of taxpayers’ money, so we are very interested in that. How do you see those prospects for the royal household going forward?

At the moment, our funding is the sovereign grant. For the year we are in, that will be £137.9 million. That includes the final year of the Buckingham Palace re-servicing programme. As that 10-year project, which some of the Committee visited a year ago, comes to an end in March ’27, the requirement for that funding will cease. We will see a significant drop in the sovereign grant at that point. The Committee may be aware that the royal trustees have reviewed that and we have, subject to parliamentary approval, agreed the new rate; it will be running at £100 million, which is a £40 million drop.

We are going to take a break now, but before we do, I want to say that this Committee is very good at criticising things and people, but I visited Buckingham Palace on at least two occasions to see your renewal project and I must congratulate you on doing it largely on time and on budget, and on still operating the full suite of state occasions. Many congratulations on achieving that; I can see that you have one or two people in the audience who helped to do it. We will now have a short break. Sitting suspended. On resuming—

Welcome back to the session. Dan, how confident are you that your lease arrangements to deliver the best price in the circumstances, as required under the Crown Estate Act 1961, actually deliver?

I am very confident that our processes and governance to ensure best value delivers. We have a set of statutory responsibilities, and as accounting officer I am responsible for managing public money provisions in the context of the Act. Those governance processes are set out so that we ensure that we have the appropriate independent advice to demonstrate value for money.

Does that always apply to members of the royal family?

The statutory processes that have existed for a number of years, with independent advice sought, have demonstrated that the commissioners have followed their responsibilities and obligations. Today, we deploy a set of governance requirements that are, again, in line with our statutory obligations, and we apply best value in that regard.

Why are some leases held by companies or trusts rather than named individuals?

Again, it is very common in the property industry. There are a number of reasons why companies or trusts hold leases. We look for a number of things—including beneficial ownership, who the tenant is and who the occupier is—to make sure that we are meeting our legal obligations, and that we are following, for example, the flow of money. As long as those things check out—we ensure that they check out every time we undertake a transaction—then we are just discharging normal industry practice. To come back to the managing public money principles, we ensure that independent processes are in place, whether we are dealing with an individual or a company.

Finally, how do you ensure that alternative lease arrangements do not reduce transparency?

Again, we have governance processes in place. We advise the Treasury when we have transactions with a related party like the royal household, but not limited to the royal household. We own, for example, embassies, ambassador’s residences and a whole host of other assets that I would categorise as a unique type of transaction. We make sure that we go through those processes with the Treasury. We also ensure that the governance processes that we document through our board or the value creation committee—which is our equivalent of the investment committee—make sure that things are documented appropriately. Like all public organisations, we are subject to freedom of information and a number of other transparency regulatory requirements.

Thank you.

Dan, I am afraid it is back to you again. I would like to look at sub-letting in residential lease agreements. How common is it for leases to allow for income from sub-letting publicly owned property not to be returned to the Crown Estate or the Treasury?

It is important to lay out how these leases and the transactions are set up. In the case of long-term leases beyond 21 years, and in the cases here above 50 years, we look at a number of things with regards to how we transact a lease: the state of the property; the repair requirements; whether an up-front premium or a rental is beneficial; the legislative environment—a whole host of things. The properties in question are over 20, 30, or 40 years. With each transaction, we go through a valuation process. We have that independently verified—we put it through our governance processes and we inform the Treasury. If sub-leasing is an element of the overall transaction, that is part of the value-for-money equation. To come back to your question, that is reasonably common in the property industry, particularly when it comes to long leaseholds.

In the case of Royal Lodge, why did the lease allow for the three cottages to be privately rented by Andrew Mountbatten-Windsor, rather than the Crown Estate leasing them and generating income for the taxpayer?

Coming back to the transaction of a long leasehold, the governance process that led to the arrangements at Royal Lodge in 2003 was such that a whole range of things were looked at: the premium; the refurbishment needs, which would otherwise have been a Crown Estate cost; and a whole host of other elements that I will not repeat. Within that, the subleasing of the cottages was part of the independent valuation that informed both the consideration and the value-for-money requirements being satisfied.

Did the Crown Estate have any visibility or oversight over the rents that were charged for those properties?

No.

Why is that?

That is a matter for the tenant.

The leases on Royal Lodge, Bagshot Park and Thatched House Lodge contain materially different provisions on sub-letting. Why is that?

The properties were done over different periods of time, and every property is different; it has a range of different needs and different costs. For example, in the case of Royal Lodge and the £7.5 million in refurbishment costs—and with Thatched House Lodge the same type of thing—we were able to take the money that we would otherwise have had to spend and invest in other things. We look at a range of factors that go into what makes up the needs of a property, the opportunity around a property, and a whole host of other external factors. At the time that these transactions were put in place, an independent valuation process was sought, factoring in those particular elements for that particular property at that particular time. Best value was determined by that independent valuation and then, obviously, a negotiation and a transaction was had with a counterpart.

How do you monitor the income-generating sub-letting arrangements on the properties? Does that happen?

In the case of long leaseholds, no, because the consideration for a number of cottages in the context of the overall transaction for something like Royal Lodge, by way of example—we have other examples across the portfolio—is not large in the scheme of things; it is de minimis. The key thing here is that it was part of the original transaction, and those potential income streams were taken into account in determining what best value was at the time.

In your opinion, does allowing leaseholders to retain sub-letting income constitute a public subsidy or financial benefit? If not, why not?

We rely on the independent valuation process. If you are valuing a property and a lease determines that another element goes up, they look at all of that in the range of a transaction. It is not right to look at sub-letting in isolation; it should be looked at in the context of an overall negotiation that included a lease premium up front and refurbishment costs being taken on by the tenant, and then, within the demise of the property, letting the tenant lease elements of it. Again, that was taken into consideration with regard to the overall consideration, and the independent valuation at the time determined that that was best value.

Given that the Crown Estate does not collect or publish information on the receipts, how can Parliament and the Public Accounts Committee be assured that those arrangements represent value for money and are being managed transparently?

I think we have been very transparent in the 28 November 2025 submission to the PAC. We were asked about a single property; in return, we have provided all the information we have on all those properties. It is documented quite heavily in the National Audit Office Report how we go about seeking governance and valuation on royal properties, and those processes being relatively consistent in demonstrating independent assessment from the requisite experts on what best value is at the time. I think we have provided all the information to that effect that demonstrates best value through the last 20 to 30 years.

Dan, can I come back on Sarah’s questions? Normally, when somebody takes a lease on a property, you would expect that to be because they had a particular use for it—for themselves, their family or their employees. You would not expect them to make a profit on it, because if you did, you would stipulate in the lease that you ought to give permission for sub-letting, and you would want to be able to vet who was taking the sublease, because you would want to know that they could maintain the property. But particularly when a lease is so long—and with inflation, discounting and so on—they could be making a lot of money by the end of the lease, which you had not necessarily bargained for when you let it. Is there a case for being much more circumspect about the sub-letting provisions in future when you let this type of property?

There are a whole host of factors that we take into consideration when we look at contemporary leases, as we have historically, such as the statutory arrangements at the time and where the regulation is at the time—leasehold reform legislation is one example of that. For leases moving forward, we will look at them in the context of what represents best value, given the conditions of the particular property. Of course we are not going to want prospective tenants to make money in contradiction to what that particular lease was meant to do at the time. I do not want to comment, and I cannot comment, on the specific circumstances historically, but what I can say is that the Crown Estate went through all the appropriate governance processes, with the questions that you are asking being checked by experts to determine what best value was at the time. The negotiations then delivered that best value through the transactions that took place. Moving forward, we would not want something new to emerge that we have not thought of, but there is nothing to say that that has happened in the past. What we would ensure is that we were meeting the same best value requirements that we have always had to meet and that we are obligated to meet, both through the Act and through my accounting officer responsibilities.

I hear what you say about not commenting on individual cases, and I will try to frame my questions in a way that you might be able to answer. Why was Royal Lodge one of the only major high-value lease properties that had an early surrender clause?

Again, I do not want to comment on individual cases, because those transactions occurred, in this case, over 23 years ago. What we would have negotiated at the time was, “What were the needs of the customer? What were our requirements? What state was the property in? What made overall sense given the circumstances?” That would have been put through, as the records show, an independent process. That independent process determined the range of best value given those circumstances, and that is the transaction that took place.

What lessons are you learning from the recent scrutiny of Royal Lodge or royal lease arrangements?

We are always learning as an organisation. As I think I said earlier in the session, in best practice corporate governance you are constantly learning. We have a range of processes internally that look at different aspects of learning. We can talk about how we evolve our position on offshore wind or on how we do property deals for properties that are not royal generally, but also the royal properties. We really welcome this process, and as I said earlier about the 28 November submission, we really believe in transparency, as that submission demonstrated. We really believe in scrutiny and we will take on the learnings from this process once it has completed in the coming months.

If you were negotiating on Royal Lodge now, what would you do differently from what you did in the past?

Again, Sir Geoffrey, I am not trying to be difficult, but it is very difficult to relate a transaction that was done 30 years ago to today. What the commissioners did at the time was discharge their statutory obligations, and we would do the same today. In fact, the NAO Report has looked at a couple of contemporary negotiations that we have done in recent times and documents the comparison as to what we have done and why we did it. The key thing is that we would follow our statutory obligations and, in my case, my managing public money obligations under my accounting officer remit.

Given that this is within the curtilage of the Windsor estate, you will not be able to sell the property; you will have to re-let it. When do you envisage that you will be in a position to re-let it?

We expect to receive the property, as the Report suggests, at the end of October this year. As you would envisage, knowing that we are going to receive the property, we are working through the different options. Again, we have an obligation to look at the different uses. As you say, we cannot sell the property under section 5 of the Act and the excepted area demonstrated by the Windsor red line, so we will look at all uses and all tenure lengths and types and will come to a decision over the coming months about what we do when we receive the property back. I would note that we are getting the property back a number of years early and we want to make full use of that benefit.

How much was made in the sub-letting of the properties? Are you aware of that figure?

No, we are not aware of that figure. The transaction at the time enabled the tenant to sub-let that property. The property would have been for particular uses but, again, that is a matter for the tenant. Again, that is a matter for the tenant.

And you never asked questions about how much was being paid?

When a long lease is entered into—again, we understand what was probably obtained for it, but I do not have the figures—we satisfy ourselves that things are appropriate given the initial valuation of the property. But it is a matter you will need to ask the tenant about.

Right, okay. Can you give me an idea of what it is? I am not sure what that answer meant.

What it means is that we know that a number of the properties were used for staff and, in the context of the overall arrangements on these properties, in the consideration that was determined at the time that would be appropriate sub-letting under the original transaction. I would like to be able to answer your question but even if I had the information, which I don’t, it would not be appropriate for me to. It is a matter for the tenant because they have undertaken a long leasehold.

Yes, but in the end we are talking about public money here. We are talking about money that is paid for the lease of the property and it would be interesting to know how that related to the amount of money made on sub-letting, as that, in the end, is what the tenant pays net, isn’t it?

Yes but, again, that is a matter for the tenant or the royal household. I cannot answer that question as I do not have the information. Again, the consideration that was determined through the statutory processes in 2003 determined that best value was a premium, a refurbishment cost and a number of other things, and it enabled the tenant to sublease some of the cottages. The Royal Lodge is vast and we are talking about a number of small cottages on what is otherwise a vast estate.

I am not questioning whether the sub-letting was appropriate within the terms of the lease, but simply how much it made. It would be interesting to compare that with what was actually paid for the lease itself.

I apologise, but it is a matter for the tenant and the royal household.

The royal household—is it over to you, then, James?

Just to be clear, my direct responsibility is for the public money and the Privy Purse, which is His Majesty’s private element. I do not have direct oversight and cannot give you the specific answer to that. What I can say is that the role we played with the NAO Report, which we can play here, was to gather the information from the other households and, I believe, if the request were made for that information, we could provide it to the National Audit Office and therefore to the Committee.

So you have the information?

We can get it.

I think it might be helpful for the NAO to have that so that we can come to some sort of view about the value of the whole exercise.

May I stop you there? If you do provide it, there are various different ways in which you can provide it. You can provide it to the NAO in confidence, with us seeing it in confidence, because I am not sure it would necessarily want to be more widely shared. Anyway, you must make that decision.

Thank you, Chair. We will look at that.

Moving on to the valuations on the property portfolio for the non-working royals, I think the NAO found that very few of the valuations were up to date. That is a bit concerning, isn’t it?

It might be helpful for the Committee if I lay out the properties that we are responsible for in the royal household. We have 255 properties across the occupied royal palaces, and they are fairly unique properties—Buckingham Palace, Windsor Castle, Kensington Palace, St James’s Palace. Of those 255 properties, 216 are behind the security cordon, so anyone who was to take a property there would need security clearance and would need to be a suitable tenant. That is important as broader context to understand the properties we have. The bulk of properties inside the cordon are taken by staff, a subject that the Public Accounts Committee has looked at before, and over the years we have increasingly tried to ensure that we weight staff to inside the cordon; I will come on to why in a minute. We also have 12 other tenants inside the security cordon, where we charge rent based on adjusted market values, recognising that there are a limited number of potential tenants, but also that we want to get the best value for money that we can for the taxpayer. We have 12 inside. We also have 32 paying customers who are paying the full market rent outside the security cordon. In total we have 44 properties where valuations are an important part of the consideration. Of those, we have written valuations on 33 today; for all but two of the remaining ones we have a directly comparable valuation—an apartment next door or a very equivalent property—and we have a couple where we do not have written valuations, and we let those properties through an estate agent. You are right that, as the NAO review was taking place, we decided to get three valuations done, because at the time, on reflection, we thought it would make sense to do that. A clear value of the scrutiny from the National Audit Office, or internal audit for that matter, is that when things are looked at, you react and you reflect on them. I am sure we will do so at the end of this process as well.

The problem with the logic of what you are trying to do in saying, “This is a property that you can’t just put on the open market because there are security and privacy concerns, so 60% of market value seems a reasonable assessment to base rents on,” is that that is 60% of the open market valuations, but you do not have an up-to-date open market valuation. That was a bit of a lapse, wasn’t it?

The valuation was not up to date, but we had been inflating those properties. There was a valuation in two of the cases, not all three, but we had been increasing the rents year on year. Actually, when we received the valuations, it turned out that we had been increasing the rents by slightly above the rate at which the market had moved. At the end of that process, the valuation was very useful to have, because it enabled us to build confidence that we were above that 60%. In all three cases, we are above 60% rent at the moment.

So you are basing rents on 60% of the market value and you do not have the up-to-date market value, but you had started to increase the percentage figure during that period of time?

Well, we review it every year to work out whether an increase is appropriate and the cumulative position, by the time we got the values, was that we had increased it generously, to above the market value. From a taxpayer perspective, any income we make from this rent effectively reduces the burden on the public purse.

From now on, are you going to do regular valuations to ensure that you keep within the framework you have set?

At the end of this full process we will look at our valuation policy, as we have done following the external audit. We are not going to do them every year, because it would not be value for money to be paying for a valuation every year; maybe every five or six years would be an appropriate timeframe to look at valuations.

Is that something you have discussed with the NAO?

It flows directly from an NAO recommendation on the external audit.

Going forward, are you going to be transparent and open about this process, so that everyone can see exactly how you are calculating the rents on all these properties?

One of the great benefits of this Report is that it lays in one place the information that you need to understand this issue—the rate at which we charge our staff, the adjusted rate inside the cordon and market value outside the cordon are established policies that we have. We have a document called the “Treasury Financial Manual”, which we use to record the basis on which the public purse, if you like, is charging other parties for different things. That covers shared services, admissions to the palace and rentals. Those figures are in that document. They are subject to audit committee scrutiny every year, and the NAO and Treasury attend our audit committee, so they can see that process. It will be visible.

So you are comfortable with your process now, and that the charges being levied for those properties are entirely reasonable and fair.

We continually look at the portfolio. Probably one of the biggest drivers for us, which I think we are in a good position on at the moment, but which is a constant watch, is how many properties across the portfolio are vacant or under refurbishment. That number is under 10%. Given the complexity of the portfolio we are running, that is a very good statistic, but we will continue to monitor the vacancy rate and the pricing to ensure that we are optimising the value for money for the public purse.

One question arises from that: what is the rationale for assuming that the properties within the cordon are automatically at a discount to the open market rent? After all, some people might quite like being inside the cordon, because they get extra security.

The rationale is that we look at supply and demand. First of all, what is the supply of people with the right security clearance that we would feel comfortable—I should say that within some of these areas there are very sensitive locations, and we need to be very careful who we are putting where, so there is a limitation in terms of supply of people who might be suitable. Then it is a balance, frankly. At the moment we do not have every property occupied that we might at that rate; if we were filling them all up and we were fully occupied in those properties behind the cordon, we might look at whether the price was right. At the moment, we do not want to get ourselves in a position where we start charging more, or try to charge more, and find that people leave the palaces, because actually that will hurt the public purse. It is a balance.

Do colleagues have any further questions? In that case, I think you have answered our questions very thoroughly today. Thank you very much indeed, all three of you, for coming to the Committee. An uncorrected version of the transcript will be available in the coming days; please let us know if there are any particular factual things that you have said that you think need amendment. Other than that, we will look at your evidence very carefully and decide thereafter what action we will take. It has been a very interesting session and we are grateful for your time.