Environment, Climate Change and Land Reform Committee

Meeting date: Tuesday, November 22, 2016

Official Report 524KB pdf

---

Subordinate Legislation

---

Crown Estate Scotland (Interim Management) Order 2017 [Draft]

The third item on the agenda is an evidence-taking session on the draft Crown Estate Scotland (Interim Management) Order 2017.

I welcome the panel of witnesses, Humza Yousaf, the Minister for Transport and the Islands—I particularly welcome him as it is his first appearance before the committee—and his officials David Mallon and Douglas Kerr. I ask the minister to speak to the instrument.

Good morning, Convener. Thank you for the opportunity to speak to the draft order that has been laid to establish an interim body—Crown Estate Scotland (Interim Management)—to manage Crown Estate assets in Scotland.

On 21 October, the Cabinet Secretary for the Environment, Climate Change and Land Reform wrote to the committee to set out the actions that she was taking to prepare for Scotland taking early control of the management and revenues of the Crown Estate assets. We are taking that step at the earliest opportunity, to ensure that the early transfer of those assets can be completed.

The Scotland Act 2016 provides for establishing a body by order in council for the purposes of receiving the functions that are covered by the United Kingdom Government’s transfer scheme. The draft order will establish a new body to manage Crown Estate assets in Scotland on an interim basis. That needs to happen to ensure that we can progress a smooth transfer as quickly as possible and until the Parliament has legislated on the long-term framework.

Marine Scotland received support for the single-entity approach that was outlined in the recent consultation on proposals for establishing an interim body post-devolution. The draft order that we are discussing today was finalised as a result of that consultation. Other specific issues arising from the recent consultation will be considered as part of the forthcoming consultation on what the longer-term arrangements will be.

The devolution that is provided for in the Scotland Act 2016 requires the transfer to either the Scottish ministers or a person nominated by them, meaning a single transferee. It is our intention for Crown Estate Scotland (Interim Management) to be the body that is nominated to receive the transfer.

It is proposed that the body will take up its full powers in April 2017, obviously subject to the UK Government completing the transfer through the statutory transfer scheme, and the Parliament approving the draft order in council.

Crown Estate Scotland (Interim Management), as established by this order, will be a body corporate, separate from the Scottish ministers. To ensure that the body has a fully functioning board, there will be a chairing member and up to eight other members, appointed by the Scottish ministers. The order provides that members will need to have relevant skills, experience and expertise. The intention is for the chair to be in place to assist in the appointment process for the chief executive and other board members prior to the body taking on its functions next April.

The body will be required to operate in a transparent and accountable way, which is consistent with the principle of good governance. The body will have the usual reporting arrangements for a public body and an annual report will be laid before Parliament.

Establishing the interim body is only the beginning of the transfer journey. We plan to initiate a consultation in December on the options for the long-term management of the Crown Estate assets.

I am happy to take any questions that the committee may have on the draft order.

11:45  

Thank you, minister. I will begin the questions. How will the interim body work? Is it a holding operation or do you envisage it operating in a way that is recognisably distinct from how the Crown Estate has operated up to now?

We might describe it as a landing platform—it needs to be in place for the transfer of powers. Let me talk about long-term arrangements, which will reflect the consultation in their ethos, principles and structure. We want the interim body to be right from the beginning in that we want to ensure that the principles and good governance arrangements are all correct so that they can inform the long-term arrangements.

The long-term arrangements will not be in place overnight and there is a process to go through—not just the consultation, but a legislative process as well. Therefore, although the body that we are discussing today is an interim body, it is important that we get it right.

Surely there is a balance to be struck between, on the one hand, enabling the new chair and board to take decisions that need to be taken, rather than postponing them, and, on the other hand, ensuring that the successor organisation is not committed to courses of action that it might not want to take forward. How will you strike that balance in practice?

The direction to the board is that it should start as we mean to go on. Although it will be an interim body, what it does in the interim could well shape how people perceive the devolution of the Crown Estate assets. In the interests of those who benefit or draw their livelihood from the Crown estate—residents and tenants—it will be important for the body to start as we mean to go on.

We will be looking for a mix of relevant expertise and experience when it comes to the board, bearing in mind that we are going through a transitional period.

I presume that producing a corporate plan for the interim body will be uppermost on the board’s to do list. Do you have any timeframe in mind for the delivery of that?

Again, that will be a matter for the board. From the consultation, we have a lot of information about what people want to see. In terms of principles, continuity of business will be right up there, but the consultation also revealed a strong desire for the opportunity for community input to decision making. There are also human resource implications to be resolved in relation to staff transfers.

All of those issues will need to be discussed as soon as possible. That is why the appointment of a chairperson before April 2017 is so important, with the appointment of a board thereafter. There is a body of work to be done and there should not be any delay in doing it. Although we are working on an interim basis, the way in which the body starts is incredibly important for the future and long-term management of the Crown estate.

You have highlighted the important role of communities. Can you flesh out the detail of how the new body will work with communities? In what practical ways can communities input to the workings of the body?

That is a very good question. Over the summer months, I had the pleasure of travelling around a lot of island communities in all six of our local authority areas that have islands, and the issue of responsibility for island communities and the Crown Estate came up on many an occasion. There was a feeling that there is a disconnect between communities. That is important because we can talk about the transfer of the estate to local authorities—that was in black and white as part of the Smith commission—but we have to ensure that communities also have access and input with regard to how the Crown estate can work for them.

There are a couple of practical things. The consultation gave a very strong steer that communities and community organisations want to be involved. We would expect the board and the chief executive to be cognisant of that—I am sure that they will be, but I will not be shy of reminding them.

The appointment of the board also provides opportunities for community interests to be directly represented. We encourage the new board to go out. It should not be stuck in its base in Edinburgh, where it might be located; it should go out to communities and have that ethos.

On what other mechanisms might be in place to enable communities to regularly input, I do not want to prejudge what the board and the chief executive want to do but, it is fair to say that, from my perspective and, perhaps importantly, from the cabinet secretary’s perspective, community input on the Crown estate, even on an interim basis, has to be there from the very beginning.

Does that point about a strong community ethos relate to the skills and expertise that you are looking for the board members to have?

Most certainly.

You have said that the maximum size of the board is eight, but do you know what the figure will actually be?

The maximum number is nine—a chair plus eight others. The Scottish Government has made the point that the chair plus one other would be the minimum number of members. I would not like to be prescriptive about the ideal number. The first step involves getting the chair and the chief executive appointed, plus one other member, and then it will be for them to ensure that there is relevant expertise and that community interests are represented. That should be part of the discussion.

In the previous session, as part of the Rural Affairs, Climate Change and Environment Committee’s regular engagement around the Crown Estate’s annual report, I and others raised the issue of the mission statement and the remit. That fits in with the production of the corporate plan, which the convener asked about. Given the points that you have made in answer to Mark Ruskell’s questions, will there be an opportunity for a change to the mission statement? How would that happen? Do you see any problems with that being done early by the interim body, or should it be a longer-term thing?

That is a good point. The immediate priority for the chair, the board and the chief executive will be continuity of business. That will be incredibly important but, as you say, it has to be informed by a corporate plan, a mission statement and all the other relevant documents. I do not see any issues with the mission statement being discussed by an interim chair, body and board, but it is important to say that it is an interim body and that what happens in the long term must be informed by consultation with the public. We must hear from the public what they want with regard to the mission statement, ethos, principles, structure and governance of a long-term body. I am happy for my officials to put some meat on those bones, but I do not see a particular conflict for an interim body in doing that. It is important that, for the long term, the community and the public have a say on what the ethos should be.

The duties that govern how the assets are used, which are set out in the Crown Estate Act 1961, will of course remain, but there is an opportunity to change how things are done—it is about how people go about their duties rather than what those duties are. As the minister said, it is about reaching out to communities, including island and remote communities, so that the decisions can still be made in the interim under the existing legislation, with a better understanding of the priorities of and implications for local areas. There are opportunities in the long term beyond that.

I will just push you on that. In your understanding, there is nothing in the 1961 act that prevents the mission statement from developing a complementary social aspect or the remit from being developed in that way. There would not be a conflict.

No—I do not see anything conflicting with that, given that the 1961 act includes provisions on good management, as well as best consideration.

Good morning, minister. You mentioned that the interim body will take on its asset management role on 1 April and you mentioned the consultation on long-term arrangements for the management of the Crown estate. How long do you expect the interim body to be in place for?

That is a tricky one. We do not want to be definitive on a timescale, for the obvious reason that the consultation on the long-term arrangements might well lead to further Scottish legislation, which must go through a process, as all legislation must. We might need to incorporate other, non-legislative measures for the long-term management of the Crown estate. That will be informed by the views of the public and stakeholders who input into the consultation.

We see a timescale of two to three years for the interim arrangements; we would not be more definitive than that. However, there certainly will not be any dragging of heels. I think that the consultation on the long-term arrangements will be launched next month—I should be corrected if I am wrong. We will not wait long to look at the long-term arrangements.

That is good to hear. In the consultation document, the Government indicates that the interim body may be

“retained on a more long-term basis for certain specified functions.”

What do you have in mind when you speak about “certain specified functions”?

That goes back to my earlier remarks. It is important to get the interim body right because, if we have good practices, procedures and governance, there is no reason why they cannot be replicated nationally and in the long term in the permanent body. It will be for the board, the chair and the chief executive to advise whoever is in charge of the long-term arrangements on what worked well, what lessons have been learned and what they would not recommend doing. That will inform the long-term arrangements. It is premature for me to suggest what they would be, but it certainly should not be the case that the long-term body is not informed by the interim body’s experience.

Good morning, minister, Mr Kerr and Mr Mallon. I am interested in what the consultation document says about piloting work to be carried out primarily in the three wholly island authority areas: Orkney, Shetland and the Western Isles. Will you say a bit more about that and about how minded you are to look at that model—particularly for the devolution of marine assets to community organisations such as the Harris trusts?

It is worth reiterating that there was a commitment in black and white from the Smith commission about further devolution to island communities, and the three wholly island communities were specifically mentioned. When I travelled to those local authorities, they mentioned Crown Estate pilots, which were also mentioned when I had the first meeting of the ministerial group. I salute the indefatigability of the leader of Western Isles Council, who mentions them at just about every opportunity. He is, of course, right to do that.

I have said to those local authorities on each occasion that we are open minded about the idea of a pilot. There are some obstacles—for example, there are potential legislative obstacles. Once the full transfer of powers has been made to an interim body, we will have some issues to discuss, particularly when we do not have the long-term arrangements in place. Can there be a pilot from the interim body to the long-term body? That is where the discussions are, and they are moving constructively. The local authorities will always want to push us to go more quickly, but the issue is certainly on the agenda whenever we have meetings.

For the record, I share your view on the leader of Western Isles Council. We are meeting in a couple of hours.

I will raise a wider issue. I understand the interaction with the Crown Estate and our islands, our future, which focused on the three wholly island communities. You will know that previous Administrations looked at powers that would help the north mainland of the Highland Council area—I think that that happened in the first session of Parliament. The air discount scheme, for example, did not apply just to the three island authorities; it applied to elements of Argyll and Bute and of Highland. That was very much aid of a social character.

Have you looked at extending the pilots to island communities that are in the Highland Council area and in Argyll and Bute? As you know, they have considerable island communities, such as those on Skye, Rum, Eigg, Muck, Islay and Jura. I appreciate that that goes beyond our islands, our future, but do you accept that there are specific needs in island communities, which Europe appreciates in its various funding packages and the Parliament has reflected in the air discount scheme? Will you look at the pilot model?

12:00  

I assure the member that every local authority that has responsibility for island communities—all six of them—has mentioned to me the potential of a pilot. That is why, when I became the Minister for Transport and the Islands, I extended the ministerial working group, which previously involved just the wholly island councils, to ensure that the Highlands and Islands, Argyll and Bute and North Ayrshire were also part of the discussions. It is fair to say that we are looking at the issue. More details have come from the three wholly island councils; there may be other requests and more details from the Highlands and Islands, Argyll and Bute and North Ayrshire, and we will treat them in exactly the same fashion.

I have a couple of further questions. How are the discussions that you have had with the UK Government about funding of the body progressing?

Fair funding and a fair financial framework are essential for devolution of any function or any powers. It is fair to say that the discussion is on-going. Some staff are to be transferred, as the member is probably aware, and we have to ensure that that is done on the same terms and conditions, within the principle of no detriment. I have not been aware of any major issues. The member will be aware that there are always discussions to and fro, back and forth; they are on-going on the principle of fair funding and no detriment to the Scottish and UK Governments.

All committee members are aware that it is crucial that new bodies are adequately funded so that we avoid—to use a cliché—the strangled at birth syndrome. We have had issues with Police Scotland, the Scottish Fire and Rescue Service and perhaps new set-ups for Highlands and Islands Enterprise, which I am sensitive about, as the minister knows. How important is it to have adequate funding for the interim body straight away, so that we do not start with the problem of deficit financing, which would mean that the new chief executive and board were struggling to run the organisation because, frankly, it was underfunded?

I have spoken to the Cabinet Secretary for Environment, Climate Change and Land Reform, who is committed to ensuring that the body is adequately resourced. All that I can do at this stage is assure the member that that is part of our thinking and part of our discussions. The member is absolutely right—we want the body to be adequately resourced because the transfers of powers are important to us. I give him that assurance and I know that the cabinet secretary is cognisant of the matter.

My final question is on something that the convener is familiar with. With regard to Crown Estate properties, the minister will be aware that the tenant liaison group met Crown Estate officials and was informed that, on the transfer of powers in April 2017, no cash will be transferred. Will he confirm whether that is accurate?

I am concerned about the key issue of how the Crown Estate and the individual estates will be funded to pay salaries and meet day-to-day running costs, other than by having to sell assets. The minister will be aware that we do not want the unintended consequences of the sale of agricultural assets to have a long-term consequence for communities. Would there be issues with loaning funding temporarily to make sure that the estates were adequately funded?

I will defer to my officials on the specific point. I have been familiar with positive discussions with tenants in which we have reassured them that their tenancy agreements will transfer and that there should be no detriment. That is the last thing that we want; we want continuity upon transfer. Continuity is the key word—I said to the convener at the beginning of the discussion that it is hugely important.

It has been suggested that the Crown Estate should organise workshops for discussions with tenants to agree improvements that will be made and to consider other suggestions, and I am happy to suggest that to the Crown Estate board once it is in place. On the specifics, I will ask David Mallon to provide some detail, if you do not mind.

It is true that, so far, the transfer will not include any share for Scotland of the liquid assets of the Crown Estate commissioners. However, individual lease agreements are set so that some are paid annually and some are paid up front, so there will be a pro rata share for Scotland of the annual lease payments that are due to Scotland. That is how the draft transfer scheme operates, to ensure that the funds for Scotland reach Scotland. If someone inadvertently pays Scotland wrongly, funds are sent in the other direction.

Let us think of a scenario. It is May 2017, and you are running a Crown estate. How are you paying the wages of workers on and the running costs of that estate?

That will happen not only through leases that are paid from 1 April but through the transfer in advance of 1 April of the pro rata share of lease charges that are paid to the Crown Estate commissioners, some of which are due to the Scottish body.

Can the Scottish Government lend funds to the estates so that they do not have to sell off vital assets in order to pay running costs and salaries?

Yes. The order in council that is before us proposes to give the Scottish ministers the ability to provide a loan or a grant to the new body. We see that as something that can happen if it needs to happen, but so far we do not think that it will be necessary.

Will that, in effect, be enacted if the order goes through? Would any other legislative action need to be taken to ensure that a loan facility was enacted?

If, as you have said, the order in council were to go through, it would have to be completed by the Privy Council.

That usually happens quite quickly.

Yes—well, we hope so.

I think that that answers my point. Thank you.

One issue that I want to ask about—Mr Mallon is aware of it, as we have previously discussed it—is the suggestion emanating from the tenant farmers on the Crown estate of a backlog of repair work on their agricultural holdings. The Scottish Government will inherit the responsibility for addressing that issue and its financial implications. Has any work been done to identify whether there is such a backlog and, if it exists, what its scale is?

We have had discussions with the Crown Estate in light of our previous engagement with the committee, and it has assured us that it has maintained its investment in Scotland during the period of uncertainty that we have had over the past few years about the ultimate set of arrangements for Scotland.

Nevertheless, our discussions with stakeholder representatives through the stakeholder advisory group have perhaps identified a need for cross-subsidy between different parts of the estate. We are actively looking at that to best ensure that the investment that needs to be made can be made.

In light of visits that the committee has had, I wonder whether it would be appropriate to have dialogue with tenants as well as with the Crown Estate about any backlog of repairs and maintenance.

It is not really for me to say, but I would probably advise engaging with NFU Scotland and the Scottish Tenant Farmers Association. I am aware that in the four rural estates tenants have nominated their own representatives. One of those options would be entirely possible and appropriate, but I guess that the committee has to form its own view.

I apologise for jumping back to an earlier discussion, but I want to take the minister back to my point about island communities. Is he aware of the Japanese island development act—[Interruption.] I just want to make sure that the minister is earning his corn, convener.

The act inspired the distinct nature of Japanese islands. It is useful for the debate that we will have on Thursday, but it also provides a distinctly important example of powers. The issue of the Crown Estate and the islands is crucial. Will the order give a legal status to our islands, which are vital? If the minister cannot answer now, perhaps he can say something about that in Thursday’s debate.

I know that the member has been called the fount of all knowledge, and he has just adequately demonstrated why that is. I undertake to look at the act that he refers to before Thursday’s debate. I am also looking at how we can strengthen the devolution of powers and functions to local authorities, but particularly to island communities. If there is a blueprint that we can look at in Japan—we have previously looked at it for devolution comparisons—we should not be shy in doing so.

I apologise for the swotty point.

I would not describe the point in that way, and I am happy to look at that legislation before Thursday’s debate.

Looking at geography that is closer to home, I will ask about the location of the offices. Given that that is up for review, are there any concerns about, say, the hiring of staff? Can the minister update us on the interim and final locations of the offices and whether there are any barriers to locating them outside Edinburgh, good transport links permitting?

No questions have been raised about the location so far. For us, the ethos is that the board, the chief executive and—I hope—the staff should move around the country and get out to rural parts and the islands to engage. A common criticism that I have heard is that the Crown Estate management has been disengaged and has not got down to the grass roots. I am not talking about all those involved—I certainly do not want to overgeneralise—but there has been a bit of a disconnect and a bit of distance. The push from the Government will be for the new body to get out there instead of being stuck in offices in the central belt.

The suggestion in the consultation is that the offices could be located in Inverness, with meetings taking place across the Highlands and Islands. Is there a commitment to ensuring that meetings are held in rural areas of the Highlands and Islands, which will contribute to engagement with communities?

That suggestion and the suggestion from Mr Burnett are absolutely correct. Meetings should be held outside Edinburgh. It will be for the board to decide on that, but the advice from the Scottish ministers about the board’s ethos will be that board members should travel around the country for meetings.

As for the location of the offices, I have been helpfully reminded that the lease that is in place limits opportunities for relocation in the short term. However, we will consult on the longer-term arrangements, and the issue that we have discussed might emerge as a general theme. We will have to look at the lease at that point. As I said, our preference is for the interim body to hold its meetings outside Edinburgh.

I am sure that other members will want meetings to be held in the south-west of Scotland, too.

We move to agenda item 4, which is consideration of motion S5M-02399, in the name of Roseanna Cunningham.

Motion moved,

That the Environment, Climate Change and Land Reform Committee recommends that the Crown Estate Scotland (Interim Management) Order 2017 [draft] be approved.—[Humza Yousaf]

As no member has indicated a desire to speak, I ask the minister to wind up.

I am pleased that the order will, I hope, be agreed to. As I said, it is important that we get the interim arrangements correct, and I look forward to the consultation and the committee’s input on the long-term arrangements.

The question is, that motion S5M-02399, in the name of Roseanna Cunningham, be agreed to.

Motion agreed to.

I thank the minister for his time. At its next meeting on 29 November, the committee will hold a pre-appointment public hearing with proposed Scottish land commissioners.

As agreed earlier, we now move into private session.

12:13 Meeting continued in private until 13:00.