Official Report 431KB pdf
Agenda item 2 concerns the Crown estate. We will hear evidence in relation to aquaculture and trust ports. It is expected that the committee will bring the Official Report of this evidence session to the attention of the Scotland Bill Committee.
Just to give some context, I represent Scrabster Harbour Trust, which is an independent trust port formed by an act of Parliament back in 1841. The act constituted the trust to manage, maintain and regulate the harbour of Scrabster. As a trust port, it is operated commercially and does not receive any public funding in its revenue operations. However, it is accountable to the wider Caithness community as well as to harbour users. We are self-financing; therefore, in common with other commercial concerns, we have a focus on cash flow and profits for our sustenance.
I start by explaining that I seem to wear two different hats. As the convener said, I am the company secretary of the Scottish Salmon Producers Organisation, which is the national trade association that represents the fin-fish aquaculture industry in Scotland. I am also the manager of Shetland Aquaculture, and the regional manager in Shetland for the SSPO. Shetland Aquaculture has a slightly wider remit and has tended to be slightly different because of the fact that we are quite a long way away. We have developed alongside the Scottish industry very successfully. Collectively, the SSPO represents the entire industry, which is the biggest fin-fish industry in Europe and is a significant contributor to the Scottish food and drink sector.
I am director of the Association of Scottish Shellfish Growers, which covers mussels, oysters and some scallop growing. I am also an oyster farmer on the island of Mull. We have had a long-term relationship with the Crown Estate and, in general, I have found it to be helpful and willing to listen to any problems over the years. I do not have anything further to say.
Committee members may wish to explore some of those matters. We are looking at trust ports, which Sandy Mackie mentioned. A number of trust ports in Scotland are slightly different to Scrabster. In the experience of those who work at Scrabster, what is the daily interface with the Crown Estate?
Such interface has been in respect of previous development and future plans. Scrabster has advanced an ambitious blueprint for the port, which we have worked up over the past four years. It is in line with what we regard as the remit and responsibilities of a trust port. We are there not just to safeguard the asset that is the harbour, but to take a longer-term view and to pass on that harbour to future generations in the same or better condition.
Can you tell us about the project and whom you deal with in the Crown Estate?
We deal with the Crown Estate based in Edinburgh and with its local land agents. We also engage with its legal representatives, Anderson Strathern. In doing so, we also need legal representation, which is costly in time and resources.
Would you say the variety of bodies you deal with, in dealing with the Crown Estate, is of benefit or should it be streamlined?
In the trust, we have held a long-standing position on the Crown Estate. It is a matter of public record that we believe the focus of the Crown Estate, although it may have altered, remains on revenue maximisation.
That is a good idea. We will focus on trust ports first.
Unfortunately, I am somewhat ignorant about trust ports. What is the process for deciding to become a trust port?
Most trust ports date back to the Victorian age, when there was great investment in infrastructure, railways and ports. The arrangements that were made then have withstood the test of time. The trust ports have modernised in the past 10 years by bringing their constitutional and governance arrangements up to speed.
On how the Crown Estate extracts revenues, in the project that you are undertaking to build a quay and deepen a berth, are there ways in which the revenue is being extracted now?
One of the issues that Scrabster has is the exercising of an unregulated monopoly by the Crown Estate. There is no transparency in its charges, going forward. We would not have an issue with the Crown Estate seeking a rental level that took into account the amount of risk involved, but the Crown Estate is not actively involved in any of the developments at the port, so it does not take the commercial risk through borrowing and so on. The risk resides with the trust. The irony is that most rental levels are related to turnover, so if the trust is successful in its risks, the Crown Estate benefits through increased rents from five-yearly rent reviews. We regard that position as being iniquitous.
I am interested in whether any dispute resolution mechanisms are available to people such as you in dealing with the Crown Estate—for example, with regard to the rent-review details, rental or any other charges that are imposed, or any operational decisions that may impact on how you intend to develop the port. What comeback, if any, do you have to try to effect a different result? Do you find that the Crown Estate listens? Failing that, what mechanism exists to give you a fair crack at the whip?
There is an appeals mechanism: bringing in the district valuer tends to be the standard approach. However, we must temper that with the practicalities of forcing on development. In reality, we have had to settle for higher charges than we had hitherto liked, although that has been offset by the benefits of being able to push on with much-needed development at the harbour.
Do you feel that if the control and administration of the sea bed were structured or configured differently and it was administered as a public entity, you would—on that issue and other issues such as economic development—have the greater flexibility that you seek, and a greater prospect of success?
Absolutely. At the moment, we pay £40,000 a year to the Crown Estate for past developments, and we have had to pay £130,000 in relation to our current developments. Those moneys could, if they were retained locally, be used for local benefit.
Just for clarification, you said that you pay £40,000 for past development and £30,000 for—
It is £130,000 for the current development.
So it is £170,000 a year in rent?
No, the £130,000 was a one-off payment.
Will that impact on your annual rent?
It will not, in this case. However, it may do in the sense that the development may enhance the overall attractiveness of the harbour, which means that when the other leases are subjected to rent review, the rent for those could be set at a higher level.
Thank you, Mr Mackie, for your interesting presentation. Has the Crown Estate ever reinvested in your trust? Are you eligible to apply to it for some money back, in the sense that a landlord may wish to improve their asset?
To my knowledge, the Crown Estate has never invested in Scrabster, although it has invested locally in the port of Wick. My understanding is that any investment that it would make would be in the form of loan financing, which is less attractive than direct grants.
My question is along a similar line to Jean Urquhart’s. In some cases in which there is a private landlord and a tenant improves the estate, the tenant will receive some payment for the improvements if they leave. I could put the same question to all the company present today. Has there been a case in which the Crown Estate has acted in a similar way, or is that not known?
I argue the reverse. For example, St Ola pier used to service the ferry link to Orkney, but the lease says that at the end of the lease, the Crown Estate could insist that the area be reinstated back to bare sea bed.
Do David Sandison and Nick Turnbull have any comment on that?
A parallel might be the basis on which the fin-fish industry is charged a lease rental. The more successful we are and the more we invest in our particular development, the more the Crown Estate takes out of the equation. Our leases are based on a production rental, so the more we produce, the more we pay.
As far as individual leases go, and as far as I know, the Crown Estate has never put anything back into them.
I thank Sandy Mackie. We might ask some more general questions later.
You are quite correct. There are many leases and they have many different purposes. Any development in Scotland that involves anchoring anything to the sea bed requires us to apply for a lease from the Crown Estate. That will generally cover the sea bed area that the mooring system will occupy. It does not necessarily relate to what can be seen on the surface. In our situation, the rental is arrived at through a combination of two things: there is a fixed rental for the space that will be occupied, which is like a baseline from which we start when production is not in place; and we pay an annual fee that is based on the area that we occupy. Thenceforward, if we produce anything on that area of leased ground, a calculation will be made and a figure arrived at that is based on production output, regardless of whether the business is profitable or not.
It is my understanding that a lot of leases have been granted. When we discussed that in terms of the Planning etc (Scotland) Act 2006, I understood that a large number of leases were lying fallow or had never been used. Can you tell us about those leases? Someone is paying for them.
You are quite correct. As you all know, the industry is relatively new in the area of food production. We have grown through various stages of experimentation. Everything that has been done has been seedcorn, if you like, for what is now sitting in the water. A number of sites that might have been productive aquaculture sites 15, 20 or 30 years ago are now not necessarily productive in the same way. They might well have passed through different owners.
So the Crown Estate gets an income each year, whether or not a site is being used. Obviously, it gets more for a site if there is production on it, but it gets an income any way.
As I say, there is a baseline income. The last rent review that we undertook with the Crown five years ago introduced a mechanism whereby if a site was laid fallow, for each production cycle—that being two years laid fallow—there would be an increase in the base rental in order to discourage people from land banking or holding on to unused facilities. We welcomed that and, at the time, the industry broadly welcomed it because it meant that there was not a situation whereby we could not find room to expand because of unused leases. We are still working through that, but the rental arrangement with the Crown was seen as being quite favourable.
In total, we are talking about the ways in which you relate to the marine legislation. The Scottish Government has working groups that have been looking at the relationship between the Crown Estate and various stakeholders such as the organisation that you represent. Have you been involved in that sort of thing?
We have not been directly involved. There has been quite a lot of liaison between the industry and the Crown on the matter and we have given evidence to various groups over the piece. Down the years, we have been involved in giving evidence and comment to a number of different groups—most recently the Scottish Affairs Committee. We have kept a close eye on the Scotland Bill and on where your committee is at in considering the whole issue.
Yes—but we are currently just looking at the relationship. Do you have anything to add to that? Do other members wish to come in?
Mr Mackie said in his evidence that the harbour trust has to deal with private agents and solicitors of the Crown Estate. I understand the solicitors aspect entirely. Are you in the same position with regard to the input of private sector agents—specifically land agents—on rental agreements and such like? Do you all have the same issue?
We are not necessarily the same as the harbour trusts in that regard. We deal with the Crown Estate’s land agents as it contracts out to land agents the more local element of the relationship. However, the situation is quite straightforward. Although we may have opinions about whether or not we like our rental system, we know what it is.
Graeme Dey, did you want to come in?
Alex Fergusson asked precisely my question.
Okay. I call Elaine Murray.
In this instance we are looking at the possible amendment of the Scotland Bill to devolve responsibility for the Crown estate in Scotland to the Scottish Government. My understanding is that the Crown Estate office with which you deal is based in Edinburgh anyway—the headquarters are in Edinburgh. Would there be any benefits to your organisations if the Scottish Government, rather than the UK Government, was in control of the Crown estate?
We broadly agree with the case that has been made for the role and accountability of the Crown Estate to be transferred and in some way brought more in line with the devolution settlement. I echo Sandy Mackie’s comments on how that power is then exercised: I would like to ensure that anything that is taken out of our industry is reinvested in our industry. Our industry requires to be competitive globally and, to do that, there is a strong requirement for us to ensure that our investment strategy is correct.
You feel that the benefit of devolution of the Crown estate would be that, because the industries that you represent are more important to the Scottish economy than they are to the UK economy, the Scottish Government might be more responsive to the needs of those industries and their communities. You see it as an opportunity to promote the industries that you represent. One argument for devolution of the Crown estate is that it would enable the Scottish Government to get the benefit of the revenue that it generates, but some of the things that you would want to see would probably result in the Government getting less money, although they would be of advantage to the industries that you represent.
I agree entirely with that. We would like a good strategic view to be taken about how the Scottish Government can support industries that contribute significantly to the Scottish economy and, importantly, to the rural economies of the Highlands and Islands. The equation must be well balanced, and we must see that things are being done to support the future development of our industries. There is huge potential in our sector, which should not be allowed to be stifled. We must ensure that strategic investments continue to be made in infrastructure and so on to support the investments that the businesses are prepared to make.
There is devolution and there is devolution. In a perfect world, would it be preferable to have devolution to each local authority area? Shetland is as far from Edinburgh as Edinburgh is from London. Should decisions be made far more locally? The shellfish industry is more important to Scotland than it is to the UK, but shellfish and other fishing interests are, in turn, far more important to the communities that you all come from. Has that model of devolution been discussed and would you prefer it?
We would need to consider that carefully, as the ports sector would add a complication. If there were devolution to the local authority level, it would need to be borne in mind that Highland Council, for example, has responsibility for certain municipal ports and there may be conflicts of interest.
There would probably be a wide range of views across the industry about the suggestion of further devolution. Certainly, there would be differences of opinion between island authority areas and mainland authority areas—there I am, wearing my two hats again.
We would also be nervous about issues around the proposal. Councils have differing views on planning and aquaculture, so there would be a bit of a mix of approaches to how planning applications for sites were dealt with.
Sandy Mackie, you talked about the ways in which money is raised and said that we have to dig deeper. In the case of the Scrabster project, could you give us an example of the Crown Estate taking a view, for example on how you deal with the deepening of the berth?
We need to consider the wider context of that engagement. The Crown Estate’s preference is for the sea bed not to be sold in parcels. It believes that the granting of long-term leases is not contentious—that it does not inhibit development or the financing of development. However, our experience in bringing forward our proposals is that having a lease is less attractive, institutionally, to banks and financiers than having ownership. Indeed, as part of our project, we have had to conduct a valuation of the harbour, which is a difficult task in itself. The advice that we received was that, if we owned and controlled all of our sea bed, the valuation would have been 12.5 per cent higher, so we would have been able to borrow a higher value, which we would have been able to use for further development that would have been of benefit locally.
I would like to pick up on the issue of moorings. It would be fair to say that Scotland has some of the most fantastic sailing waters, which means that there is a lot of demand for mooring space in our harbours and marinas. I understand that there are marine officers with responsibility for moorings. How much contact do you have with them?
I have no experience of the marine officers of the Crown Estate.
I might have some anecdotal experience, but no direct knowledge.
Same here, I am afraid.
I understand that those officers manage the provision of moorings on the Crown estate sea bed via a licensing system. Do you have any information about how that system operates in practice?
I am afraid not.
Nor do I. I am familiar with the fact that that occurs, but I do not know much about the operation of the system.
If control over the Crown estate were to be devolved to the Scottish Government, would you see merit in having more direct contact on a regular basis with the relevant officials, as opposed to dealing with third-party representatives? Would that be beneficial as a way of getting your message across about the issues that you face?
In general, I would support that. There is one thing to bear in mind about valuations. The Crown Estate would say that it uses independent expert advice, but that independent expert advice has a financial interest in maximising the price. Finding a modified way of dealing with that issue would be an improvement.
We have a reasonably good relationship in our liaison arrangements and dialogue with the Crown Estate. Since the Crown’s role of being the developing authority and the lease landlord was separated and responsibility was transferred to local authority planning, the Crown has been able to take a slightly different approach. It can be more directly supportive and, to a certain extent, can be seen to be the champion of our sector. That is a good role and a welcome development. I am not quite so sure whether it would be possible to transfer a similar role to whatever department or part of the Scottish Government it rested in. There is a slight dichotomy in that situation. From the point of view of a sector operating in a rural setting, I certainly believe that it is no bad thing to have a champion and someone to act as our spokesperson.
We have had a very good relationship with the Crown. For example, it reduced our rents at a point when there were some problems. There has been good dialogue and a good relationship, and I guess that it would be a bit of a leap into the dark if something were to change. We would need to know much more about it.
My question is also for all three gentlemen. The information that you have brought to the committee has been interesting, and it has been helpful for us to learn more about how you work on the ground and interface with the Crown Estate Commissioners. We have heard that you might be concerned about the emphasis on community benefit and economic development if there were a change in the structure, but that prompts this question: what do the Crown Estate Commissioners do at this point for community benefit and economic development? My understanding is that they do not do anything. Therefore, if those are areas in which you wish to see some movement, it will not occur under the present structure. I throw that point open to any comment.
That is fair comment. In the evidence that Roger Bright gave to the Treasury Select Committee, he made several references to being constrained on community benefit by the Crown Estate Act 1961. I am not sure how we got to the position with the proposed coastal communities or how that fits in with the legislative programme. I agree that your comment is fair.
There is a limit to how much of the revenue generated by the Crown Estate will find its way back into any form of benefit. We have to accept that, at the moment, the mechanism is simply to maximise the revenue to the Crown Estate. I do not have figures to go on but, in my experience, the return—if we call it that—is at the low end of the scale, perhaps 10 per cent. That might not be a correct figure, but it is not too far away.
It is fair to say that the ASSG has benefited from the Crown Estate. It has supported our conference every year, although that is perhaps not a massive thing. On my island, it has supported infrastructure work for the Tobermory Harbour Association. It is not fair to say that the Crown Estate has not supported communities, although perhaps it could do more.
Is it likely that the Crown Estate will do more? As has been mentioned, its prime focus is commercial, whereas a public entity must consider other issues. If the estate was under the Government’s control in Scotland, other issues would have to be considered. As far as I understand the remit of the Crown Estate Commissioners, they have to consider commercial viability in the first instance.
I guess that that is correct.
In that context, I want to ask about the marine organisations and the management of local waters. Two of the witnesses will become increasingly involved in that. Do you see a conflict between the way in which Marine Scotland is developing and what the Crown Estate does?
No, I do not see a direct conflict. In decision making about giving permission for people to do things, some aspects do not necessarily always sit correctly. The Crown Estate has a fairly extensive role in the development of renewables, which is questionable, particularly in relation to the development process. For aquaculture, there is not a major issue. There have been differences in the way in which aquaculture has developed. On the mainland, there has always been a need for a development lease through the Crown Estate. In the Orkney and Shetland islands, the situation has been different, as the local authority has had a licensing responsibility. So the situation in relation to the start-up of the industry is different. However, currently, I do not think that there is a fundamental problem in the relationship.
What about the shellfish growers?
I agree with David Sandison. In fact, it is perhaps positive to have the Crown Estate, because it is an independent body that just stands by as the owner of the land.
It is not the owner of the land—it is the factor of the Crown land of Scotland, as far as I understand it.
Well, it is the landlord, then.
But you do not see a clash there.
No.
Part of my question has been answered, but I want to go back to Mr Turnbull’s statement about good dialogue and a good relationship. I think that he expressed nervousness about local councils or maybe even local communities being consulted.
I did not say “consulted”.
My understanding is that, for many years, particularly in the early years of development of the fin-fish industry, the Crown Estate did not consult at all. Interest was shown in the fact that the Crown Estate could arrange a lease to its benefit without consultation with a local authority or community. It was the Crown Estate’s income, and it could arrange a lease regardless of what anybody else thought, other than the applicant for the lease. In more recent times, the Crown Estate has paid more attention to local communities, although that has not necessarily affected the outcomes. What should the relationship be? For example, if the estates came back under the management of Scotland, would it be right for there to be no consultation on that, or for the local authority or local community to have no role? What should the relationship be, and how would your development be affected?
People should be consulted as they are now. As far as I know, councils are statutory consultees—as are the community councils, I think. I would hope that that would continue.
You would? I thought that you had expressed some doubt about that.
I would hope that it would continue if there were a change.
I would like to ask Mr Mackie about the lease and the bank. If the control of the sea bed came back to Scotland, should Scrabster Harbour Trust have the right to buy that land, or should the lease continue? Do you question the bank for not offering development money when the lease will clearly not go to anyone else? You must have felt fairly secure with the lease that you had.
We feel that the management of the harbour is best served if we own the sea bed under our piers and quays. There would be a financial advantage: money that had hitherto been paid as Crown Estate rents could be used for other things or could be retained locally. Attached to the leases, there is also the question of operational flexibility. Many ports around Scotland are trying to promote marine renewables and trying to anticipate the required infrastructure standards. Operations will emerge over time, and dialogue and decision making among commercial operators and developers will take place in conjunction with port authorities. For the development of emerging industries, it would be better if ports had flexibility, rather than having restrictive head leases that may inhibit future development.
We have heard a lot of good evidence from our witnesses today, and I thank them very much for coming here. I am sure that we will be seeing you again in other contexts relating to aquaculture and marine issues. It is good to hear your various points of view.