Yes, convener. I have an opening statement for this agenda item. To set the generality, the Scottish Crown Estate Bill proposes new powers for the Scottish ministers to change who manages Scottish Crown Estate assets and opens up the possibility of local authorities and communities taking control of the management of those assets.
The Crown estate consists of a diverse portfolio, including thousands of hectares of rural land, half of Scotland’s foreshore, urban property and sea bed leasing rights for activities such as renewable energy. We quite quickly came to a view that a one-size-fits-all approach was simply not practical. Therefore, the bill lays the foundation for changes in the management of individual assets. We want to maximise the benefits of the Crown estate for communities and the country as a whole, while ensuring that assets are well maintained and managed with high standards of openness and accountability.
I know that the bill and the proposed arrangements for the Scottish Crown estate are complex, so it is understandable that there will be some misunderstandings. With that in mind, I thought that it might be helpful if I explained how we see the financial flows working, and I hope that members have had circulated to them our attempt to produce a paper that allows a simple explanation in flowchart form. How effective it is will be for members to decide. The paper has not been circulated as a basis for members’ questions so much as with a hope that, by putting it into that form, we have made life a little simpler in terms of understanding what is happening.
The first and most important thing for everybody to understand—by “everybody”, I mean those beyond the committee, given that the committee knows this already—is that the Scottish Crown estate has not brought any new money into Scotland. The UK Government’s block grant to Scotland has been reduced by the estimated annual amount of net revenue earned by the Scottish Crown Estate assets. Under the terms of the Scotland Act 2016, the net revenue from the estate—the income from leasing, licensing and all the other Crown Estate Scotland activities, minus the costs of managing the assets—is paid into the Scottish consolidated fund. We are clear that whoever manages the assets has to
“maintain and seek to enhance”
the value of those assets and the income arising from them, otherwise Scotland as a whole is out of pocket.
However, the money that is earned by the Scottish Crown Estate assets can now be used differently. The net revenue that is generated by the marine assets out to 12 nautical miles will be disbursed to the three islands local authorities and the other 23 coastal local authorities. The local funding will not be hypothecated, but we would expect the local authorities to be transparent and accountable to their communities on how that money is spent. We are in constructive discussions with the Convention of Scottish Local Authorities on an interim mechanism for local authority areas to receive a share of the revenue, and we expect to reach agreement on that soon.
As members know, the bill places a duty on the manager of an asset to
“maintain and seek to enhance”
the value of the asset and the income arising from it. When the management of the Scottish Crown Estate assets was transferred to Scotland, we inherited the pre-existing arrangements, which mean that whoever manages the assets—currently, it is Crown Estate Scotland (Interim Management)—can retain 9 per cent of the gross revenue for investment in the estate, for example for renovations and repairs to farm buildings or the purchase of new assets. Thus, before the net revenue is surrendered by the manager to the consolidated fund, the 9 per cent figure is subtracted. We are keeping that facility in the bill, but we are taking the power to be able to vary in the future the percentage that is subtracted. It might be that some assets need more capital investment than others and that provision in the bill will allow a more responsive approach to be taken.
That is not the only way in which managers will be able to invest in the assets that they manage. At present, the Crown estate is managed as a single estate, although there are many different types of assets. If one part of the estate is not earning enough income to cover its maintenance and management costs, it can be subsidised by the better-performing assets, which we all know as cross-subsidy. We want to keep the ability to cross-subsidise even when there are several managers of the assets. We are taking powers to enable ministers to direct a manager to transfer a sum of money from their account to another manager’s account. In that way, a community organisation should be able to take over the management of a local asset, even if the asset will not in itself generate enough income to cover costs. To be clear, that money would come from a manager’s Scottish Crown estate accounts and not from a manager’s personal accounts. The bill requires a strict separation between a manager’s Scottish Crown estate accounts and any accounts of the manager’s own.
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The bill also sets up a national governance framework that will specify accounting and reporting procedures that should result in openness and transparency about the management of the assets, whether they are managed locally by communities or nationally by Crown Estate Scotland.
I put that statement firmly on the record because there is a bit of confusion out there about what exactly is going on with the devolution of the Crown estate to Scotland.