Finance Committee, 02 Feb 2010

Meeting date: Tuesday, February 2, 2010

Official Report 258KB pdf

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Crofting Reform (Scotland) Bill: Financial Memorandum

I welcome to the committee John King, registration director at the Registers of Scotland; Bruce Beveridge, head of the rural communities division in the Scottish Government; and Ross Scott, interim finance team leader for rural affairs and environment finance at the Scottish Government. That is the longest title so far, but there is one bigger to come, and that is Iain Dewar, bill team leader in the future of crofting team at the Scottish Government. Finally, I welcome Iain Matheson, head of the crofting branch in the Scottish Government. I invite the witnesses to make an opening statement.

As I am sure all members are aware, this is the second bill on crofting to come before the committee and the Scottish Parliament in the past four years. During consideration of the Crofting Reform etc Bill in 2006, the Executive of the day decided to withdraw sections of the bill at stage 2 and to establish a committee of inquiry on crofting to take an independent look at what was required to secure the future of crofting. Professor Shucksmith was appointed in December that year and brought together a committee that gathered written and oral evidence before submitting a report to ministers in May 2008. The Government considered the report and, in its response, which was published in October 2008, accepted some of the recommendations, rejected others and agreed to give further consideration to still others.

Some of the proposals have been taken forward administratively, but others require changes to legislation. To that end, the Government prepared a draft bill for consultation. The consultation took place from May to August 2009 and included a partial regulatory impact assessment. Comments were invited on the estimated impact of and costs associated with the draft bill. Responses to the consultation were analysed and published in November, and a bill was introduced in December.

The financial memorandum that accompanies the bill includes the best estimates of costs associated with it, based on information supplied by a number of sources, including local authorities, the Registers of Scotland, the Crofters Commission and the Scottish Land Court. Making such estimates has been a challenging task, not least because many of the costs associated with the bill will depend to a large extent on a number of variables, such as the number of regulatory cases that require a full enforcement mechanism to be implemented and the number of challenges or appeals that are made to the Land Court. In those cases, we have sought to be helpful by providing information on the current costs and the number of cases and by presenting scenarios that show what the effect of the bill would be in certain circumstances. Other variables in relation to meeting the costs associated with the regulation of crofting include the extent to which ministers make use of the proposed power to charge for regulatory applications and the extent to which the regulator—the Crofters Commission—delivers on its efficiency target of 5 per cent per annum.

There was a fair bit of questioning about the bill in the Rural Affairs and Environment Committee, so you will not be surprised by the fact that we want to ask a question or two. The Crofters Commission does not appear to have costed much, even within the ranges that you provide, but there are clearly additional work implications for it. Although the financial memorandum hints that there is extra work for the commission, no costs for that are provided. Can you indicate what you think the increased costs for the commission will be?

In the financial memorandum, we set out the costs that the Crofters Commission is likely to face in those areas where we think that it will incur costs, such as the compilation of an electoral roll for elections to the reformed commission. However, some of the costs that the commission will incur are difficult to estimate because, as I said in my opening statement, they will depend largely on, for example, the extent to which the full enforcement measures require to be implemented.

The costs are not necessarily additional, as much of the bill replaces existing parts of the principal act, the Crofters (Scotland) Act 1993, as amended by the Crofting Reform etc Act 2007. There is plenty of scope for efficiencies. An example in that regard is the registration form for the proposed new crofting register, when that is triggered by certain regulatory applications. In the course of its work to assess regulatory applications the commission will review the information that is contained in the registration form, a lot of which will be broadly the same.

Additional costs that we have identified include an estimate that the requirement to compile an electoral roll will cost about £25,000. There is also a cost associated with the proposal to increase the number of commissioners from seven to nine—I have information on that in my notes, so I will come back to the issue. Other costs are associated with the reform of the Crofters Commission. The cost of the conduct of elections will be borne by local authorities, which will be reimbursed by central Government, because local authorities will oversee the elections, given their experience and expertise in that regard.

You are asking the commission to undertake additional work to combat the problem of absentee crofters. It is clear from the bill that you want to bear down on absenteeism. I am sure that all members agree with that approach and want crofts to be occupied. However, you seem to be claiming that no additional costs will be attached to chasing absentee crofters. Surely that cannot be right.

The Government has provided £100,000 of additional resource to begin to tackle absenteeism. The resource was made available to the commission following the transfer of crofting development to Highlands and Islands Enterprise and is expected—

Must the tracking down of absentee crofters come from that £100,000?

The £100,000 is certainly being used to start the process. The commission announced in January that it had started its absentee initiative and had posted in the order of 500 or 600 letters to people who have been absent from their crofts for 10 or more years. The expectation is that the money will enable the commission to deal with the initial pulse of activity. The resource will remain available to the commission in the foreseeable future.

Must that extra money also pay for the map that the commission will be asked to produce to show where all crofts are?

No. The maps relate to the registration of crofts. The Government has agreed to fund the establishment of the crofting register, but the cost of individual registration will be borne by crofters. A crofter may choose to submit their own map with their registration form, or they may acquire a map from Registers of Scotland for a fee.

As Mr Dewar said, the bill will replace large chunks of administrative provisions with new provisions. The opportunity for the commission to take action on absenteeism is already there in one form or another; what is new is placing a duty on the commission to strengthen that action. So activity is already under way, and the additional resource—the £100,000-odd that Mr Dewar mentioned, which was saved by the staff—are to bolster that activity in preparation for the bill. The undertaking is not entirely new.

We anticipate that the commission as newly constituted might want to review how it carries out activities. We have used the current evidence on numbers to give such information as we can, but we acknowledge that there might be opportunities for efficiencies and that the new commission might want to consider that further down the line. It is therefore quite difficult to predict accurately the activity that the bill will generate and what its implications will be in an arrangement that might differ in detail from existing one.

Does Mr King want to add anything before I ask my next question?

The intention is that the crofting register be map based. The impact on the crofter will be that they will have to supply a plan that shows the croft's boundaries. That will have to be submitted along with the application to the commission and subsequently to ourselves.

As I understand it, the commission is being asked to do a lot of extra work to establish the new map while it maintains the existing register. It has to receive new applications, check the details against existing records and perhaps even ask for more details. That information has to be forwarded to the keeper of the records, and the commission has to receive anything that comes back from the keeper of the records, notify the croft's neighbours of the registration, and arrange for a period of time in which to hear objections—I am told that there might be some objections given that some people have not been on their croft for 10 years or more. After that, Land Court hearings would have to be held as a result of disputes about boundaries. Is the Government seriously suggesting that that can all be done without any extra cost to the commission?

I am sorry; perhaps you have been misinformed. When the Crofters Commission receives a registration form, it does not even look at the accompanying map because the current register is not map based—there is nothing against which to compare the map. The crofting commission will be required to confirm only details such as the names of the tenant and the landowner; those already exist on the current register of crofts, which is largely an administrative database. Where there is a discrepancy—for example, if a registration is submitted in the name of Andy McDonald, but the current register of crofts has the name Archie McDonald—the commission will want to know why the existing register is incorrect. It might well be that Archie McDonald was Andy McDonald's father, and the commission was never notified of the bequest. That type of issue would have to be sorted out.

But there might also be an Arthur McDonald who says that he has a claim to the croft. How do you sort that one out?

The commission will seek to resolve such discrepancies during the course of its business in any case, because it is important that the commission has an accurate administrative database. Following that process, the commission will forward the registration application and the map to the keeper, who will then register the application on the new crofting register.

The commission will notify those people who have land adjacent to that croft that the croft has been registered, which is an additional task. It is anticipated that that will be done through existing provision and more efficient processes in the undertaking of the regulatory work—

You say that that additional task will be met from existing provision. If there are a lot of objections, surely the commission will face extra costs.

The commission would not have a particular role in relation to objections to the registration of a croft. The objection or challenge to the registration would be made directly to the Land Court.

If there were an objection or disagreement about who owned a croft, there would be a dispute in the Land Court. Presumably, the commission would have to go to the Land Court hearing, would it not? There would be a cost associated with that.

No. The objection would be raised by someone who disputed the tenancy of a croft and they, rather than the commission, would go to the Land Court to resolve that dispute.

Is it correct that the Government is paying for the new map of all common grazings?

That is right. The Government will fund that exercise.

At a cost of about £1.5 million.

No. That is the cost of establishing the whole crofting register. There are currently about 800 common grazings. A common grazing is land that has a number of shareholders, each with a souming. There are many interests in a common grazing; there are potentially 100-plus shareholders, plus the landowner. It was therefore considered that the most effective and efficient way in which to register common grazings would be to undertake a rolling programme of registering both the area of common grazings and the shareholders.

And you are confident that that would take around four years.

Yes. As I said, there are about 800 common grazings. We have drawn on the experience in our department to estimate the time that it will take to map and digitise those vast tracts of hillside.

So you would dispute estimates that it is not possible to do that in four years and that it is more likely to take eight.

I would be interested to hear why people thought that it would take eight years rather than four.

We will see whether we can get you that opinion.

Can you give us a bit more detail on the cost to crofters? Apparently, in the consultation, the cost to register was given as about £250. You now say that that figure is down to between £80 and £130, but that does not seem to include all the costs associated with registration, such as having to advertise in a local paper—that is an interesting thing to have to do, given that last week we debated taking public notices out of local papers, but there we go, that is just the way these things happen. Advertising in a local paper could cost a couple of hundred quid, depending on the paper. The crofter might require the services of a surveyor to detail the boundaries of their particular croft, and might even need the services of a lawyer. It is therefore not really true to say that it will cost the crofter only £80 to £130, is it? There are associated costs.

Certainly, the £80 to £130 is associated with registering the croft on the crofting register. As I am sure the committee is aware, most people pay a certain amount of money to register their title on the land register.

About half of the regulatory trigger points that trigger registration require public notification. For example, if someone wanted to apply to decroft—that is, take part of a croft out of crofting tenure—that would be a regulatory trigger point for registration in a new register. That process requires public notification—that is, the crofter must advertise in a local newspaper that they are going to do that. It is perfectly possible for them to advertise at the same time the fact that they are registering their croft on the new crofting register, so it is not the case that at every regulatory trigger crofters are required separately to notify the public about their registration.

I am sorry, I have forgotten the other point.

The cost of a surveyor to determine the boundaries of a croft.

That was it. Throughout the consultation, there was some concern about other costs. There was a general fear that it would be necessary for crofters to engage surveyors to map the area of their croft and so forth, but that is not a requirement. The requirement that is set down by the keeper of the registers of Scotland is simply to delineate clearly the boundary of the croft on a map. I will ask John King to add to that.

There is not much more that I can say on that point. The requirement is set out; how the crofter goes about meeting it is up to them. We will provide all the guidance on preparing the plan that we can, and for some crofts it may well be very straightforward for the crofter to prepare the plan themselves. In other circumstances—for instance, if there is a large estate in which a number of crofts are being registered—it may be more appropriate to involve a surveyor, but it is very much up to the crofter or person involved.

There could therefore be a cost to the crofter apart from the registration cost. They will have to advertise, and they may have to hire a surveyor to be absolutely certain where the boundaries lie. There might also be an objection for which they are taken to the Land Court and have to hire a lawyer.

There could be those additional costs—

And you have not factored them in.

I will take the costs in reverse order. Disputes on land ownership already go to the Land Court—that happens already. We are still working on the detail of how we can best ensure that the registration process happens with agreement and as quickly and cheaply as possible, especially as a potentially large number of registrations may happen around the same time. We are working closely with the keeper on that. The work is still in train, but we have a clear eye on that.

On advertising, as Mr Dewar said, a lot happens already and it is not a new requirement. In many cases, the regulatory trigger—the action that triggers registration—is something that requires advertisement under the existing procedure. You asked about the work that the commission has to do on registration applications and, in the same way, the commission is already considering these matters because registration is a regulatory application that it has to process anyway. Any increase in the work will be marginal because it already deals with the same information to process the regulatory action that triggers registration.

Just for my own interest—or even amusement, I suppose—what would be the likely outcome if the registrations were put on the internet rather than in local newspapers?

I had in mind the statutory instrument that the committee debated last week. I do not think that it was intended to apply to the advertisement that we are discussing, certainly not at the present time. I do not think that we would propose at present that the advertisement went on the internet. As with what you discussed last week, internet publication will be closely watched.

I welcome your views, Mr Beveridge. I would not recommend such advertisements going on the internet either, but that is something else.

I was interested in the submission from the Scottish Land Court. It feels that its comments are accurately reflected in the financial memorandum, but it suggests that it has now thought matters through further. It has concerns that the numbers of registrations and resultant appeals have been underestimated. You recognise in the memorandum that it is difficult to estimate the numbers and that, at the start of the new system, there may be a lot of additional appeals, with the rolling effect of one decision leading to someone's neighbours making an appeal. How confident are you, as a team, that the figures in the financial memorandum relating to the Land Court are feasible and accurate?

The figures in the financial memorandum are not so much estimates as illustrations. As you rightly pointed out, it is difficult to ascertain any evidence on the likely number of appeals. At the moment, roughly six boundary disputes are heard by the Land Court each year, and I am not terribly convinced that there will be a huge surge in the number of disputes as a consequence of the regulatory trigger point, which will be the main trigger for registration. It is estimated that the regulatory trigger point will result in around 13,000—sorry, 1,300 registrations a year.

Your colleagues got a fright when you said 13,000.

Another trigger point will be an application to resume croft land heard by the Land Court. That will ensure a steady process of registration, unless people take the opportunity voluntarily to register their crofts on the proposed crofting register. We expect that the process will be relatively gradual.

There is absolutely no way of telling how many crofters have boundary disputes that are lying dormant. The Land Court's written submission suggests that there might be a 5 per cent appeals rate, and we provide an illustration of the effect if the rate were 2 per cent. It could as easily be 1 per cent or 3 per cent. As I said at the outset, the purpose of citing the figure of 2 per cent was to illustrate what the effect would be if 2 per cent of registrations were challenged in the Land Court.

I have two quick questions regarding the finance and how it is scheduled. Where is the money going to come from?

Where is the money going to come from?

Yes.

The crofting budget is currently the crofting assistance line that appears in the budget documents. That is the primary source of funding for the Crofters Commission, for example. It also includes provision for the croft house grant scheme. The funding for the measures in the bill will come from that budget line. As I said, the Crofters Commission also has an annual time efficiency saving target of 5 per cent, which will release time that it could redeploy in, for example, increasing its efforts to address absenteeism and neglect. There is also the funding for the crofting register.

I see that part of the expenditure is due in 2010-11. Has provision for that been made in the 2010-11 budget? I am talking about the £25,000 plus the £187,500 for the establishment of the register.

I am sorry, but I did not hear that, Mr Purvis.

Sorry. Two items of expenditure are due in 2011—the establishment of an electoral roll and the establishment of the crofting register—which amount to £212,500. Is there provision for that in the 2010-11 budget?

Are you referring to the table at the end of the financial memorandum?

Yes. It is described as

"known additional costs associated with each part of the Bill."

I refer to the 2010-11 column.

We have included the establishment of an electoral roll in the 2010-11 column, but the spend will be determined largely by ministers' decision on when to hold such an election. Clearly, the decision will depend on other electoral cycles. There is a need to ensure that there is no interference with local government, Scottish Parliament or United Kingdom Parliament elections and so forth. The figure is included in the 2010-11 column, but there is flexbility in the crofting assistance budget to cover it. Bruce Beveridge may want to add something on the crofting register and the funding for that.

Registers tend to be built on the payment-based model. Three rolling years of funding are shown in the table for the register, but we have already identified the resources with which we intend to defray the entire costs of its set up. The years that we have shown happen to be the budgeting time during which the costs are likely to occur.

Have you indicated provision in the budget for 2010-11 for these additional costs?

We have identified where the funds for the total cost for the register will come from and we have set them out over those three years. As Iain Dewar said, in terms of electoral and other costs, there is sufficient flexibility in the crofting assistance budget to cover the arrangements. That is certainly the case for 2010-11.

How did you do that? The overall cost of £1.5 million for the register is spread over three years to 2012-13. How can you know now what is in your budget for that year, particularly as there is no 2010-11 budget line for the implications of the bill?

That is why I separated out the two things. The set-up costs for the crofting register are intended to come from the realisation of a surplus capital asset that has been lying unused or unrealised. The intention is to realise that—

What is that asset?

The intention is to use a large number of acres of unused land outside Inverness that are not productively used at present. The receipt of the set-up costs of the register will come from that. Ministers have agreed that.

That is now public knowledge, but has the intention to sell off the land been stated publicly in the past?

I think that it is no secret. It was mentioned somewhere in the consultation document.

If I heard you correctly, you mentioned efficiency savings of about 5 per cent to address and reduce absenteeism and neglect. Will you explain how?

I beg your pardon. I did not catch that.

If I heard you correctly, you are looking for efficiency savings that are part of reducing—or addressing and reducing—absenteeism and neglect. How will you get those efficiency savings?

The total budget for the commission—including staff and operating costs—amounts to about £3.5 million. Five per cent of that gives a figure of about £175,000-worth of efficiencies—

How will you get them?

Through redesigning the regulatory decision-making process. That will be precipitated by the requirement of the newly created commission to produce a policy plan in which it sets out its policies on certain regulatory matters.

In doing that, we have stripped out a lot of what are termed special conditions in the legislation, which means that the commission will no longer have to consider particular regulatory applications of specific points. The reference point will be the policy plan, which will be set out at the start. That should lead to more efficient decision making in relation to the routine regulatory application work that the commission does, which will release efficiency savings that can be deployed to address the absenteeism and neglect that are considered to be damaging to crofting interests—I have previously mentioned the £100,000 that has already been made available to the commission to begin its work in that regard.

Other efficiency savings are being made, such as the move from Castle Wynd to Great Glen house, which is due to take place this month. That will enable the commission to share services with Scottish National Heritage, which will also be located in that building. The commission is committed to driving towards efficiencies and to focusing its efforts on tackling absenteeism and neglect, which is consistent with the Government's purpose of sustainable economic growth.

So the efficiencies are to be made by doing less of one thing and directing resources to another. I would like to see that in practice.

That is pretty much what people in public sector bodies are likely to have to do as a matter of course. I am operating on the expectation that I will have to do that. There are always opportunities to consider how one does things. Although the figure is bullish, we do not consider it to be unreasonable.

Every part of the public services faces restrictions. I am just interested to know how you are going to achieve such efficiency savings in practice. I am not quite sure that I have been told that so far.

The bill presents the commission with the opportunity to review its decision-making process because of the changes that are being proposed to regulation, which we consider will enable it to be more streamlined and efficient in terms of the routine applications to divide crofts, apportion common grazings and so on.

The issue is not only to do with what is in the bill; it is also about modernising work processes and so on.

A lot of processing of applications is done in the way that it has been done for years, with application forms and reports being sent by post from the area offices to the commission and from the commission to the common grazings clerks and so on. However, with e-mail, the work can be done a lot more quickly, which means that the timescales can be shortened. Work that has previously taken about three or four weeks to complete could be done within 10 days.

I wish you well in that.

I was just thinking of crofters sitting at their keyboards and filling in forms—

They do. Do not be so patronising.

I was not being patronising; I was just interested in that.

How many crofts are there and how many absentee crofts are there?

There are currently about 18,000 crofts, and there are about 13,000 crofters—it is possible for a crofter to have more than one croft. The absenteeism rate is currently around 10 per cent of crofts. That figure was included in the Shucksmith inquiry report. The rate varies from area to area. In Sutherland, for example, it is about 15 per cent.

I am afraid that this market day is wearing late. Do you wish to make any final comments?

I have no final comments to make.

I thank you for your attendance.