Duchy of Lancaster consults on changes to the treatment of capital spend

The Proposal
The Duchy of Lancaster is consulting with Her Majesty the Queen, as Duke of Lancaster and other members of the Royal family on the proposal by the Council of the Duchy to seek a Legislative Reform Order under section 1 of the Legislative and Regulatory Reform Act 2006 to reduce the restrictions imposed by the Duchy of Lancaster Act 1817 on the Duchy’s power to spend capital other than on physical improvements to land.

A Legislative Reform Order is a statutory instrument which can amend primary legislation and can be used to remove or reduce burdens which are a result of primary legislation.

The Background
The authority for such powers as the Duchy has to administer itself and to deal with its assets are largely found in the Duchy Charters of 1399 and 1461 and subsequent Acts of Parliament. In particular, the Duchy of Lancaster Act 1817 which authorises limited expenditure of capital money arising from the disposal of Duchy assets on certain specified physical improvements to land, the Duchy of Lancaster Lands Act 1855 which authorises the application of capital money in the purchase of land and the Duchy of Lancaster Act 1920 which broadened previously held powers of investing capital money which have subsequently been broadened further by the Trustee Acts of 1961 and 2000.

The position today is therefore that capital funds arising from sales of Duchy land must either be invested in accordance with the Trustee Act 2000 or spent on the limited physical improvements permitted by The Duchy of Lancaster Act 1817 or on the purchase of land permitted by The Duchy of Lancaster Act 1855.

Why is the change needed?
The effect of this restriction on capital expenditure is to limit the costs and expenses which the Duchy can charge to capital, which therefore reduces net income and is, we believe, an obstacle to good and efficient modern estate management. Introducing this change would help support the Duchy’s desire to invest in local areas to drive economic development, job creation and infrastructure improvements.

Costs incurred, often over a number of years, in bringing forward land for development through the planning permission process, including fees paid to local authorities and consultants, costs of investigation works, boreholes and infrastructure works, all of which can amount to substantial sums, can only be charged to capital if and when a successful planning permission is obtained and the land sold or developed with the benefit of that permission.  Thereby reducing the number of projects we are able to deliver in the communities in which we operate.

If the Duchy was a trust or a company such expenditure would be attributed to the capital account in the case of a trust or the balance sheet in the case of a company minimising the impact on income.  The Duchy believes that the restriction on capital expenditure imposed by The Duchy of Lancaster Act 1817 places a unique restriction on the Duchy’s ability to consider embarking on large projects in bringing forward and promoting land for development in our estates.The Duchy considers this to be an antiquated obstacle to the efficient running of a modern landed estate.

What is the objective of the change?
The Duchy’s objective in seeking a Legislative Reform Order is to remove the legislative burden imposed by the Duchy of Lancaster Act 1817 on capital expenditure in order to permit charges to capital on a fair and consistent basis in the interests of good modern estate management.

Who will be affected by this change?
The change will affect Her Majesty the Queen as the Duke of Lancaster and future Dukes of Lancaster.

Both Houses of Parliament scrutinise draft Legislative Reform Orders.  This is done by the Regulatory Reform Committee in the House of Commons and by the Delegated Powers and Regulatory Reform Committee of the House of Lords.

The Duchy intends to lay the draft order before Parliament early in December 2014.

This consultation is being made in accordance with the Legislative and Regulatory Reform Act 2006.  All Responses should be received by the Solicitor for the Affairs of the Duchy of Lancaster, 1 Lancaster Place, Strand, London, WC2E 7ED (tcrow@duchyoflancaster.co.uk) by 5th December 2014.