Plenary, 01 Nov 2007

Meeting date: Thursday, November 1, 2007

Official Report 678KB pdf

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Crown Estate (Taxation on Harbour Developments)

The final item of business is a members' business debate on motion S3M-568, in the name of Tavish Scott, on Crown Estate taxation on harbour developments. The debate will be concluded without any question being put.

Motion debated,

That the Parliament notes the vital importance to island and coastal communities of their ports and harbours which serve lifeline transport links and, by supporting such industries as fishing, aquaculture, offshore oil, tourism and renewable energy, provide major employment opportunities; further notes that ports and harbours in the Highlands and Islands are largely owned by local authorities, trusts or other public bodies that operate for the benefit of the communities they serve and reinvest any profits in these communities; views with concern the charges such ports and harbour owners have to pay to the Crown Estate for the rental of areas of seabed; further views with concern the royalty charges imposed by the Crown Estate when material dredged from the seabed to assist navigation is used productively by harbour owners for land reclamation rather than being wastefully dumped at sea, and believes that serious consideration should be given as to how the Parliament's powers to legislate over the property rights of the Crown in Scotland, as outlined in the December 2006 report of the Crown Estate Review Working Group, could be used to lift this unjustifiable burden of Crown Estate taxation from ports and harbour operators.

Looking round the chamber, I am tempted to say,

"Wherever two or three are gathered together".

Scotland's national portrait gallery currently features an exhibition called "Telford: Father of Modern Engineering". Thomas Telford designed, upgraded and built many Scottish ports. Today's ports and harbours play an essential role in Scotland's life. The sea provides transport, fishing and, in modern times, energy. Harbours are economic cornerstones of this country.

In Shetland, Lerwick harbour and the council's ports and harbours, including the Sullom Voe oil terminal, are vital to island life. Some 80 per cent of Scottish ports have either trust status, like Lerwick, or are owned by public bodies, such as councils. They are all run to benefit the communities that they serve. Many are successful commercial businesses, such as Lerwick Port Authority, whose profits are reinvested in improved harbour facilities and in businesses, to benefit the wider community. Others can never be a commercial proposition. Ferry terminals or piers on small islands such as Foula can never make a profit, but they serve the people of those islands in a vital way.

Investment must continue, whether the harbour was designed by Thomas Telford in the 1800s or by firms such as Arch Henderson today. No harbour can stand still as ships get larger and need greater quays and deeper water. This week, Aberdeen Harbour Board announced a £20 million investment programme. Peterhead, in the minister's constituency, is doing much the same thing, as is Scrabster. In Shetland, buoyed by the intensely competitive marketplace for the decommissioning of oil rigs, Lerwick is looking to expand. I hope that the enormous oil jacket at the Gremista industrial estate that is being dismantled by international consortia will be the first of many.

The debate is about the barriers to and the costs of investment. Ports face a series of charges that are imposed on them by the Crown Estate: for the leasing of the sea bed below their piers; for purchasing the sea bed for land reclamation projects; and for consents to dredge in areas where the Crown sea bed gets in the way of safe navigation. A harbour that defrays the dredging costs by using the material to build quays is charged a royalty on every tonne used. On land, landfill taxes give developers an incentive to reuse excavated material on their sites. At sea, the Crown Estate's royalty on reused dredged material has precisely the opposite effect.

In Shetland, the Crown Estate collects more than £75,000 a year in lease charges from the council and the port authority. Over the past 10 years, those bodies have together paid nearly £900,000 to the Crown Estate. Lerwick Port Authority is about to embark on a major port development project to improve its competitiveness for the oil industry. The port authority will, despite comments suggesting the contrary, have to pay the Crown Estate in excess of £600,000 for that project. If the project expands—I hope that it will—those charges will rise. That money could and should be spent on investing in the ports and harbours of the constituency that I represent: in the future of the islands' economy and in the people.

I acknowledge that the Crown Estate's marine policy has changed. It no longer just taxes—it now wishes to invest. There are, however, some profound questions about the Crown Estate's role. If it invests in one port and not others, the Crown Estate potentially distorts the marketplace, which in this area is highly competitive. What investment appraisal system can, after all, explain why the Crown Estate invested in Peterhead, but not in Aberdeen or Lerwick? How would the competition authorities consider such a role, and where does that leave Government guidance, which states that port investment must make a commercial return? It cannot be argued that Peterhead, Aberdeen or Lerwick has failed to invest and gain investor confidence in the past.

The question must be whether the Crown Estate's role, and the income from the charges that it receives as a landlord, is compatible with an investment strategy that raises profound questions of which port and why. Those assets are being developed by successful harbour businesses, and every penny that is earned goes back into the business. Why should the Crown Estate charge on an asset that could be managed professionally over the long term by the ports themselves? That is the business outcome that I want to see.

There are other areas of concern. Salmon farmers in my constituency still question what they get from the charge that they pay to the Crown Estate—the same applies to boat owners and community marina operators. The new telecom cable from Faroe to Shetland and onwards—I am please to note that it has been welcomed by the minister's colleague, Mr Mather—incurs additional costs. The enormous potential of green energy, not just in my constituency but in those of Liam McArthur and Alasdair Allan, and that energy's transmission to the marketplace are all affected by the current regime.

The Scottish National Party Government has said much about reducing regulation, and Jim Mather has argued for lower business taxes. I agree, but the Crown Estate's presence in the Parliament this week, sponsored by Jamie McGrigor—I congratulate him on that effort—is positive. So, too, was the Crown Estate's appearance before the Rural Affairs and Environment Committee, and its commitment, as I understand it, to some form of increased dialogue and collaboration with Parliament through reports.

I will support the Government and the minister, if he is prepared to look at reform. Liberal Democrat MPs at Westminster hope to use the much-delayed United Kingdom marine bill to drive change in this area, and I hope that the minister will support that work. The Crown Estate review working group, which has in many ways initiated a healthy debate in this area, shows that Parliament can use existing devolved powers.

The SNP has had a Government conference on Trident—so what about action on the Crown Estate? The Scotland Act 1998 states:

"The Scottish Parliament will, however, be able to legislate to affect the Crown Estate".

As a minister, I initiated consideration within Government on reform. Such issues are complex—I am sure that Mr Stevenson would tell me that. There is and there was—I make no bones about it—institutional reluctance to rock the boat, but that boat must firmly be rocked.

Scotland's ports need investment—Telford would have argued for that, and I do too. However, as businesses they need to be freed of additional taxes and charges that potentially slow and blunt their competitiveness. That is why I have brought the debate to Parliament.

I commend Tavish Scott for the motion.

The charges that are levied by the Crown Estate on harbours affect many communities in Scotland, not least in my own in the Western Isles and the others that have been mentioned. I realise that, as has been said, the Crown Estate is in many ways doing its best to engage with the public and with parliamentarians, or at least to engage better than it has done in the past, but I am afraid that for many people it remains a pretty opaque organisation.

The Crown Estate is accountable to the Crown and its ministers but not, at least as far as its revenues are concerned, to either the United Kingdom or Scottish Parliaments. Although I do not want to take away from the various works that the Crown Estate does in research and investment, it is ultimately an institution that raises £14 million annually for the Treasury in London. Although that money is raised in Scotland, it is not completely—indeed, not anything like completely—returned to Scotland, far less to the communities from which the moneys are generally levied.

I am afraid that many people seriously question what the Crown Estate is all about. I am sure that Parliament wants to work constructively with the Crown Estate for as long as it exists, despite the lack of any direct parliamentary accountability that it enjoys. I am sure that the Crown Estate will likewise be thick-skinned enough to accept that it is not a popular organisation in many parts of Scotland.

I will give an example of what I mean. Stornoway Port Authority is among a number of organisations in my constituency that have to deal regularly with the Crown Estate. The authority and its predecessor organisations have been investing continuously in their harbour for a century and a half, yet it still has to lease the seabed underneath it from the Crown. That means that it has to provide the Crown with a payment for every leisure craft that uses the harbour—a cost that it would be impracticable to try to pass on, even if the port authority believed that that was in the island's economic interest.

As has been mentioned in respect of other places, Stornoway Port Authority has to lease the foreshore on which its piers are built and on which its own linkspan is built. In 2006 alone, the authority had to pay more than £16,000 in such rentals to the Crown Estate—the community in Lewis must wonder to what end.

The Western Isles is, like other island communities, in urgent need of economic renewal, and the cost that its communities incur from the Crown Estate has to be passed on to someone—inevitably, that means the people who use the services and, therefore, in large part, the fragile fishing industry. The justification for the situation is, as far as I can see, that the foreshore just belongs to the Crown—except in parts of Uist where the chiefs of Clanranald ingeniously managed to appropriate it a couple of hundred years ago. The reasoning is that the Crown is therefore entitled to expect payments in return for its trouble, but the question is: for what trouble?

Why is the Crown Estate not accountable to this Parliament? Why is the Crown Estate land not subject to the same principles of land reform as other parts of the land in Scotland? Stornoway is one community among many where people struggle to see why, in the modern age, the Crown can charge communities for use of the sea. As one person locally put it to me, "They might as well charge for use of fresh air, and it would make about as much sense."

I appreciate that all those questions may tend towards dangerous conclusions as far as the Crown Estate is concerned, but they are questions that Scotland's coastal communities are asking. I commend Tavish Scott for asking them, too.

I, too, congratulate Tavish Scott on securing a debate on a subject that is very important for my region of the Highlands and Islands. I also want to put on record that, purely by coincidence, I acted as sponsor to the Crown Estate for its exhibition at the Parliament. I am pleased to note that, as a result, many MSPs were able to put their views and concerns directly to senior Crown Estate management.

I know that Tavish Scott has specific concerns with regard to Lerwick harbour. Of course, it is his right and duty as member for Shetland to raise any concerns that exist in the local community. I am also one of their MSPs and am well aware of the problems that have existed in relation to Lerwick Port Authority and Shetland Islands Council reaching agreement on the way forward for development at Lerwick harbour.

However, it is worth putting on record the fact that the Crown Estate continues to say that if a way forward can be found, it is willing to be involved in Lerwick harbour's development, and its investment in that could be many millions of pounds—something we would all want—so that Lerwick harbour could benefit from potential decommissioning activity from the oil and gas sector.

Furthermore, on the specific issue of the cost of the dredge material for reclaiming land from the harbour, it must be pointed out that the Crown Estate will charge Lerwick Port Authority about 60p per cubic metre. That compares with a typical cost in the marketplace of up to £8 per cubic metre, which is massive difference.

Moving on from Lerwick, last week, I was pleased to receive a press release from Tarbert (Loch Fyne) Harbour Authority in my native Argyll about a joint venture for development of the harbour with the Crown Estate. The plans are for additional berthing at the north pontoons together with improved shore-side facilities. The possibility of additional facilities within the development, such as a boatyard, a heritage centre, a chandlery and other retail outlets, will also be looked into. The Crown Estate is also part-sponsoring the Bell Lawrie Scottish series 2008 at Tarbert, which is of great importance to the local economy.

That joint working at Tarbert comes on top of the successful work that has been achieved in partnership between the Crown Estate and Tobermory Harbour Association: the Crown Estate has invested £300,000 in building extra pontoons at Tobermory that will provide more berths for the summer sailing season, and help to reinforce Tobermory's reputation as one of our premier sailing destinations.

The member lists some very worthy projects that the Crown Estate undertakes. However, will he concede that, in many places where there is no such investment, it is only too obvious that the Crown Estate is ultimately a revenue-raising organisation for the Treasury?

I take the member's point, but we are all taxpayers. The Crown Estate is extremely efficient and businesslike in what it does.

I also want to touch briefly on the Crown Estate's important role in the aquaculture sector, which is important as an employment source in some of the Highlands and Islands' most fragile and remote communities. The Crown Estate owns 930 aquaculture sites. It has pledged that supporting the fish farm industry will continue to be one of its priorities and it has committed to investing in priority research and development projects.

I acknowledge some of the concerns that Tavish Scott and other members have expressed today, but I hope that all those who have concerns will engage directly with the Crown Estate to see whether ways forward can be found. The Crown Estate is willing to address concerns that have been expressed, and wants to work constructively with port authorities and local authorities wherever possible.

We should also recognise the significant investment that the Crown Estate makes in Scotland every year, and the very real skills and expertise that exist within the Crown Estate's workforce. It manages in the public interest what was traditionally the personal property of the Crown, thus generating a return for local communities and the taxpayer. I hope that those factors will be given full consideration in any further reviews of the Crown Estate's functions.

I welcome tonight's debate and add my congratulations to Tavish Scott on securing it. As two of the very few members, along with Alasdair Allan, who are unable to get back to their constituencies after voting on a Thursday evening, if nothing else, the debate provides us with a good opportunity to put to productive use the enforced extension of our time away from the islands.

As the motion makes clear, and as Tavish Scott highlighted in his remarks, the importance of ports and harbours to the island communities that I represent cannot be overstated. That is reflected in the fact that all but one of Orkney's ports is owned by the local authority, which recognises the fundamental importance of those assets to the economic and social well-being of the islands.

As other members have made clear, development of those assets involves negotiation with a monopoly owner—the Crown Estate. I wish to associate myself with the sentiments that are expressed in the motion, that Parliament should have more say in and control over how the Crown's assets in Scotland are managed and how they benefit communities across Scotland. That is the firm recommendation of the Crown Estate review working group, which was mentioned, and I hope that the minister will be willing to work constructively with the Government in Westminster and the cross-party group of MPs to explore ways of changing the structure of the Crown Estate.

I acknowledge that, in recent times, the Crown Estate has adopted a change in tone and has shown more willingness to consider seriously investment opportunities that would serve Orkney's long-term interests. It is, however, fair to say that it has not to date delivered much by way of tangible benefits on the ground, but it would be churlish not to at least acknowledge the welcome, if belated, recognition of the need to exploit Crown marine assets for the benefit of the communities that are so reliant on them. I know that the Crown Estate takes violent exception to the Callander report's recommendations, but it is perhaps interesting to observe the coincidence that exists in the review group undertaking its work and the Crown Estate's change in approach, to which I have referred.

I want to look ahead and leave aside the structural and constitutional changes that we want. I want to draw members' attention to three issues in my constituency in respect of which the Crown Estate has an opportunity to deliver on its stated good intentions and make a positive contribution.

On harbour developments, the minister will be well aware from his recent visit to Orkney that Orkney Islands Council recently carried out a Scottish transport appraisal guidance appraisal of future internal transport needs. The process identified that significant investment will be needed not only in new ferries, but in substantially upgraded harbours and even, potentially, in new harbours. I hope that the Crown Estate recognises the importance of that investment to the future success and sustainability of some of our most remote and fragile communities, and the need to avoid adding to the overall costs of that vital work to the local council and the Scottish Government. I also hope that it recognises that my constituents and I will be watching very closely over the coming months to find out whether the new rhetoric is matched by a new more enlightened approach in practice.

It is not only local harbour developments that are key to Orkney's future success. Orkney is leading the way for Scotland in developing a trans-shipment container hub at Lyness. It is still early days, but potential operators of such a facility have already shown firm interest in it. The potential benefits not only to Orkney but to port facilities and communities from Caithness south are particularly exciting. From meetings that I held recently with Scrabster Harbour Trust and Wick Harbour Authority, I know that they fully recognise that potential, but Invergordon and Inverness also stand to benefit directly. As I said, the project is still at an early stage of development, but it is encouraging that the Crown Estate is engaged in supporting work on the business case for the Scapa hub as well as the essential environmental impact assessment work. I hope that the minister will offer his support to those of us who are encouraging the Crown Estate to capitalise on that constructive beginning and to work co-operatively to progress the Scapa hub project.

Members may be tiring of my constant references in the six short months that I have been an MSP to the marine energy potential in and around my Orkney constituency. However, that is another matter about which the Crown Estate has made positive noises recently, not just in respect of supporting research but—more important—in respect of helping to address the fundamental issue of an interconnector linking the resources of the islands to demand further south. There are, however, issues to do with the Crown Estate's decommissioning approach.

I welcome the opportunity that I have been given to participate in this debate, which has touched on issues that have, and will continue to have, an important bearing on my constituency. Again, I congratulate Tavish Scott on securing the debate and on his long-standing commitment to arguing for changes so that we prevent the leakage of revenue from areas—such as Orkney and Shetland—in which it is raised.

We must all acknowledge that there has been a long-standing debate on the Crown Estate. Indeed, it has taken the 10 years since a Labour Government came in, in which time devolution has been introduced, to take control of salmon farm leases out of the hands of the Crown Estate and put it into the planning process. Progress has been far too slow.

Anyone who reads the Official Report of the proceedings of the Rural Affairs and Environment Committee will recognise a perfectly clear Westminster orientation in the answers that members of the Crown Estate have given. They simply do not get the Scottish outlook. The Crown Estate craves continued life, but it has no credibility with most of the communities that I represent. It takes out of Scotland four or five times what it puts back. Such behaviour inhibits economic development and must be addressed seriously. It should not simply be scrutinised by a parliamentary committee—the Government should take over some of the regulatory and other powers of the Crown Estate for the Scottish Parliament.

I commend the Callander report, as I did during the debate on the Scottish National Party's legislative programme earlier this session. The point is that we can manage Scotland's sea bed and foreshore as a marine estate, just as Scotland's national forest estate is managed. The Government could ensure that very quickly.

The plight of harbours, whereby those that are good for business incur greater levies, is a nonsense. Scrabster harbour has just paid £90,000 to the Crown Estate. Many other commercial ports, including the ports at Invergordon on the Cromarty Firth and at Lerwick, are similarly burdened. We should think about what such sums could do for local development, in contrast to the pittance that is received back from the Crown Estate.

Choices for investment must be made by local people, rather than by people who have been hand-picked for publicity purposes by the Crown Estate. A recent advertisement for a senior renewables project manager in the Pentland Firth area said:

"in conjunction with the Nuclear Decommissioning Authority, Highlands and Islands Enterprise and the Highland Council, The Crown Estate wishes to appoint an experienced project manager".

It is time that our ministers took a lead by telling our agencies in Scotland to have nothing to do with the Crown Estate and stating their intention to take over its powers to ensure that they are exercised democratically, as Tavish Scott mentioned.

You have one minute left.

Will the member give way?

I am sorry, but I do not have time.

It is important that such a lead be given because the great prize that is before us is the potential to integrate property rights over Scotland's sea bed with the Scottish Government's existing marine responsibilities, which offers considerable scope for improvements in policy delivery and consequent benefits. Therefore, I hope that the minister will give us a hint that progress will be made on that after so many years.

I thank Tavish Scott for securing the debate. Let us hope that the Scottish Government now takes the initiative.

This evening's debate has provided a welcome and well-timed opportunity to discuss an issue that I know Tavish Scott took a keen interest in when he was the Minister for Transport. He mentioned Telford, who built harbours; I remind him that it took a Stevenson to build the lighthouses.

I am highly appreciative of the speeches that have been made by the other participants in the debate—I listened to those of Liam McArthur and Alasdair Allan, as island representatives, with particular interest because the island communities are most affected by imperfections in ports and harbours. I share the interest in harbours, which play an important role in my constituency, just as they do for island communities.

The debate is well timed because, as members know, the Rural Affairs and Environment Committee is examining the role of the Crown Estate in Scotland and, in particular, the recent report of the Crown Estate review working group. As part of that work, it heard from the Crown Estate on 24 October. On behalf of the Government, I welcome the committee's interest, which allows the views of all parties, including the Crown Estate, to be aired and placed in the public domain and—importantly—enables Parliament to fully debate the issues. The Government will consider carefully the outcome of the committee's deliberations and what members have said in tonight's debate. We await that outcome with interest, especially given the wide range of evidence and views that have already been presented to the committee.

I am aware of the view that is held widely in parts of the Highlands and Islands and in other parts of rural Scotland that, as a landlord, the Crown Estate raises significant amounts of rental income from the sea bed in particular, but offers very little benefit to the people of Scotland and the communities from which that income is derived. Many of those communities have few other assets that can deliver the regular income stream that the sea bed provides.

There is a broad grouping of local authorities that believe that the Crown Estate charges rents that are too high and that it fails to invest enough in marine infrastructure, such as harbours. I am also aware that some—although by no means all—members of the port sector believe that the Crown Estate takes from Scotland, but does not give back, with the money simply going to the Treasury. I certainly sympathise, to a degree, with those views.

The Scottish Government is already engaging positively with the Crown Estate on a range of marine developments. I hope that that addresses the wish that Liam McArthur expressed in his speech.

I take the point that the minister makes about lighthouses—in the coming weeks I will look more closely at those in my constituency.

The minister referred to the Government's work with the Crown Estate. Is he able tonight to say how he views that fact that although, as a landlord, the Crown Estate takes charges for its ownership of the sea bed, it now wishes to invest in port facilities at one port, but possibly not at others?

It is important to encourage the Crown Estate to recycle the money into investment in our ports. The Official Report of the meeting of the Rural Affairs and Environment Committee of 24 October suggests—I base my comments on that source only—that there may be substantial investment in Lerwick, to take forward that port's interests. If the money were always to be returned to each port when it was raised, it would not make a substantial contribution to major projects. We should consider the approach that I have outlined: over the piece and over the calendar ports should be dealt with equitably. The bottom line is that we want more investment in our ports and harbours, and we want the Crown Estate to pay a significant role in that.

I take the points that the minister makes. The Crown Estate commissioners to whom I spoke made clear that they are open to applications for funding for projects, but that such applications have not been made. However, they are pursuing a number of projects, which is most encouraging for the future.

That is a useful observation. I suspect that at least three or four members in the chamber will encourage people to come forward with projects. I hope that the Crown Estate will respond positively to those, because harbours and ports are vital parts of many fragile local economies. When it comes to lifeline services, harbours are as important as ships and crews are.

The Crown Estate has expressed willingness to work collaboratively with us for the benefit of the Scottish marine estate, albeit that it operates within guidelines that the Treasury has set for it. Those guidelines include the stipulation that it must make a financial return on its estate.

The Crown Estate has made some progress as a partner in the development of infrastructure for renewable energy. At the end of the day, the basic legal position is clear: management of the Crown Estate is reserved to Westminster. However, the Scottish Parliament may legislate on devolved matters such as planning and the environment—planning is my responsibility, whereas the environment is the responsibility of my colleague Mr Russell—that affect the Crown Estate's activities in Scotland. The deliberations of the Rural Affairs and Environment Committee on the subject will be very relevant to our considerations.

I am grateful for the opportunity to highlight in the chamber the important role of ports and harbours. We place great importance on the port sector's economic contribution locally and nationally. Ports contribute to the health of our economy, not just by providing employment opportunities but indirectly, through related services. They make possible connections with Scotland's dispersed and remote communities, as well as with the international world, creating new business opportunities and links; I refer to the proposals for Scapa Flow. Efficient transport of goods and passengers, supporting Scotland's fishermen, the seafood industries, the energy sector and tourism, and regenerating and supporting local areas and communities are all part of the essential and economically significant role that our ports play.

The Scottish Government will do all that it can to support a constructive relationship with the Crown Estate as we move forward, but I say to Mr Scott that, if necessary, we will rock the boat. My colleague the Minister for Environment will have primary responsibility for developing our relationship with the Crown Estate, but I will work with him in relation to ports and harbours.

I thank Tavish Scott for securing this useful debate, which is an important contribution to where we will go from here.

Meeting closed at 17:35.