Environment, Climate Change and Land Reform Committee

Meeting date: Tuesday, April 17, 2018

Official Report 587KB pdf

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Scottish Crown Estate Bill: Stage 1

Item 2 is consideration of the Scottish Crown Estate Bill. We are joined by Alex Kinninmonth from the Royal Society for the Protection of Birds, representing Scottish Environment LINK; Councillor Norman MacDonald, from the Western Isles Council; Audrey MacIver from Highlands and Islands Enterprise; Dr Calum MacLeod from Community Land Scotland; and Andy Wells from Crown Estate Scotland. We have a number of questions for our panel, the first of which is from Stewart Stevenson.

Given the diversity of the panel, there is probably no better group of people to answer my question. The bill has a focus on good management. What makes a good manager?

I see that they are all dodging that one, convener.

Perhaps I should start, given that the question concerns one of the terms in the Crown Estate Act 1961. Obviously, the committee must consider how that term transfers into the new legislation.

The interpretation of the term “good management” in the act has involved the question of operating the business in such a way as to deliver growth in the business, to deliver capital growth in the assets and to turn that to account by delivering revenue—but doing so according to good management. That covers a wide range of different ways of doing things in terms of how you operate, collaborate and work in partnership. It is also about how you take into account a wider range of benefits that you can deliver as the result of any particular transaction or decision. The bill specifies that that should be interpreted more in terms of social, economic and environmental objectives, with more of a focus on a sustainable approach to management, but that is how the Crown Estate has historically interpreted “good management” in any case. It involves making decisions that are in the best interests of a range of different considerations, while, clearly, given the terms of the act, taking account of commercial factors.

Before I ask others to comment, I would like to clarify one point. You are saying that good management is about more than simply the measurable outcomes and that it is also about the process by which the Crown managers have to operate and the respect that they give to those with whom they work. Am I correctly hearing what has been said?

I think that that would be a fair interpretation.

Thank you for that question, Mr Stevenson—it is an important one to start off with. There are various characteristics that make a good manager, such as the transparency of how you act and your accountability to the stakeholders for whom you are managing assets. It is important to have that process in place and to meet those best-value characteristics. In thinking about what constitutes a good manager in the context of the management of Crown Estate assets, I think that it is heartening that the bill contains a clear and unambiguous iteration of the fact that—as Andy Wells just mentioned—we are not thinking about managing assets only in relation to their financial components and that the focus on environmental and social aspects is fundamentally important, too.

Community Land Scotland would suggest that good management is very much to do with the focus on the broader considerations and on ensuring that the assets are managed in a way that ties into a wide array of public policy objectives, not least of which is community empowerment, and what that might mean in practice.

I have a question for Mr Kinninmonth in particular. In response to the consultation, 79 per cent of respondents said that environmental considerations should be part of good management. I take it that that is something that you and the organisations that you represent are particularly interested in.

Absolutely. I would also echo the comments that you have just heard about good management involving transparency and accountability for the wider public objectives, because the environment is a key consideration for Scotland in that regard.

Andy Wells mentioned the interpretation of the 1961 act. The Crown Estate Commissioners have taken that act as giving them a very narrow financial remit. Although they have had to operate under the principles of good management, it has always been up to the commissioners to define what good management is. There has been a lot of progress in recent years towards defining good management in terms of environmental wellbeing and in looking at approaches to widening what value means to include natural capital or the ecosystem services that can be got from natural assets.

It is encouraging that, as the responses to that consultation question note, the bill widens the manager’s duties to include other considerations and wider benefits. I can see the intention in the bill to bring those into play more. I am concerned, however, that section 7, on the duties of managers, still retains the primary duty to

“maintain and seek to enhance—

(a) the”

financial

“value of the assets, and

(b) the income arising from them”,

with the additional outcomes being seen as secondary or discretionary. There is room for improvement in the bill to make it clearer that financial gain and getting a good return from the assets are not necessarily in conflict with achieving wider societal aims.

Councillor MacDonald, your council area has some significant areas of community ownership, such as Stòras Uibhist. Do these provide a model for the relationship between those who are stakeholders and live in the area and the duties of managers on good management?

The principles of good management, as we have heard previously, are about collaboration and consultation with all interested parties and communities. Through consensus if not agreement, it should be possible to manage the assets in a way that is sustainable, both for the community and, importantly, for the environment.

The model of community land ownership is a good example of how collaboration can work positively across the Hebrides and parts of mainland Scotland. Along with community empowerment, that will drive the policy forward in a positive way, but it has to be done in collaboration, by consensus and taking account of the environment.

Local government is very conscious of that. For almost 30 years, we have been involved, on the marine environment in particular, with an international organisation called KIMO, or Kommunenes Internasjonale Miljøorganisasjon. We and other coastal communities call ourselves KIMO UK but in reality we are KIMO Scotland, because the communities that are part of it are in Scotland.

We have been involved in some of the things that, over the past year, are being seen as important for the marine environment, such as the Blue Ocean Network and the efforts of Sky News to take plastics out of the marine environment. We have been engaged, not because doing that will transform our communities but because managing our marine assets, including the oceans, sustainably will prevent significant damage to our communities in the future.

The focus of the Scottish Crown Estate bill is much narrower, but I believe that the community land experience is a positive one and there is nothing to fear about the accountability that goes with it, either for community land owners or for those who work with them. We work in partnership with community land owners, including the Crown Estate, over major projects. There is nothing to fear from devolving that degree of control to local level, provided that it is managed in the way we have already discussed.

Does Highlands and Islands Enterprise consider that the bill as presently cast adequately describes the range of responsibilities that all witnesses have articulated, with which HIE might or might not agree?

The bill provides a good framework around management in terms of the strategic plan requirement and the management plans that would need to be put in place. It would help ensure that there is forward planning, accountability and reporting back on that. Those are absolutely required from a governance point of view, whether you are managing a relatively modestly sized asset or a very large and complex asset.

To add to the point about what good management requires, it is essential to have the knowledge and expertise in the management outfit. It is a key requirement to recognise the diverse portfolio of the Crown Estate Scotland asset and the range of expertise that is required to manage it. Good governance is essential.

It is also about whole-life asset management and management for the longer term. Looking at the wider social and environmental considerations, and not just immediate financial gain, is a key part of that.

You have specifically said, in relation to the required management skills, that it is a “complex” and varied environment. Given that Crown Estate Scotland is a comparatively small organisation, does that lead you to say that you would expect the management to be delegated to experts in particular areas in some circumstances, without the Crown Estate necessarily being relieved of responsibility?

With regard to the expertise required, the offshore environment in particular—which is what I am more familiar with, with my HIE energy hat on—is a very complex environment to operate in. It does not necessarily need lots of individuals, but it needs very knowledgeable individuals. It is not necessarily about numbers of individuals or teams or resources; it is about having a strong understanding of the complexity of the environment and the due process that needs to be gone through. Having that understanding is possible at a local level, but expertise at a national level is also required in terms of the industry and the learning that the industry is undergoing, as the offshore renewables sector—if that is what we are talking about—is still in its infancy. That expertise can be quite close and modest in size, but it needs to be very well developed.

It is a case of horses for courses for the more modest assets. We in HIE have been advocating community ownership and community management for a number of years. We are very much working with partners to build the capacity and capability in communities to manage local assets very well and to realise the wider benefits from doing so.

As a supplementary, Highlands and Islands Enterprise has highlighted the potential for conflict if a local authority is both the awarder of planning permission and the receiver of revenues when it comes to aquaculture. Do you think that the potential for such a conflict of interest goes beyond aquaculture? How do you propose that that could be mitigated?

In our response, we highlighted that there is a potential for conflict when a landlord can also give consent. I acknowledge that that is already the case where local authorities own the land and can also consent to new housing developments. We wanted to highlight the potential for conflict and the need to ensure that in any structures there are clear remits and responsibilities and there is transparency around process.

I also acknowledge that at an early stage of leasing for the offshore energy market—round 3 of the Scottish territorial waters and Pentland Firth and Orkney waters leasing in 2008 and 2009, in particular—leasing activity may have been slightly ahead of the planning process, because in that case the marine spatial planning process had not been completed. There has been a lot of learning since that time, and I now see much greater integration of what we look at in terms of spatial and resource planning at a national level and future leasing activity. That alignment can facilitate a more successful planning outcome and having different organisations take that forward. Again, it is about scale. In certain circumstances, it will be fine to have both roles, but in others there might need to be a degree of separation.

10:00  

We have raised the matter in our submission and I see that it is highlighted across a number of other submissions. I do not think that it is insurmountable, but care needs to be taken. As Audrey MacIver stated, a number of organisations—not least local authorities—deal with it on a day-to-day basis, and they are well equipped to do so. It is essential that care is taken to ensure that there is adequate internal separation of decision making. The roles of landlord and regulator are very different and it is important that there is clear separation between those two functions within an organisation. In the not too distant past, the Crown Estate was the regulator for fish farming. That situation was untenable at the time and has since changed, but it is a useful recent example in which it was decided that something needed to change. There is no reason why that could not happen in the future. However, what is really important is the internal separation of decision making.

Is there a potential conflict of interests with ports and harbours? There has been a lot of controversy over ship-to-ship oil transfers in terms of the statutory responsibilities of ports and harbours to the environment, but there are also commercial opportunities.

Exactly. Ports and harbours must tackle those dual roles. Lessons can be learned: that is one example in which there is certainly risk. We need to establish how successfully ports and harbours discharge both those duties and learn from that.

There is a great deal of separation. In terms of the Crown estate historically, we know that the first that local authorities would have known about consent and a lease having been given would have been when a planning application for the associated onshore facilities came in. They had no say whatsoever in whether it was appropriate to have granted the lease in the first place. More local control of the Crown estate is one of the key drivers for the campaign that has been worked on for many years, and the United Kingdom Government has recognised that and has devolved powers to the Scottish Parliament. We are seeking further devolution of those powers to local communities, because they are where a lot of the expertise on, and understanding of, the impact on the marine environment lies.

Undoubtedly, situations arise every day in local government in which such conflicts of interests need to be dealt with. It is important that conflicts of interests are recognised at the earliest possible point, and that there is then separation in the decision-making process. Ultimately, that will lead to the right decisions being taken. Local government is very well regulated in terms of its ability to do that, and it is something that it is quite accustomed to doing.

Local governments are harbour authorities, as well as being authorities that work with harbour trusts and others. You could not find better examples than those of Sullom Voe in Shetland and Scapa Flow in Orkney, where local authorities very ably manage facilities that are of great benefit to the whole UK.

Given the topical and contentious nature of aquaculture consenting, do you feel that there is an additional perception of a conflict of interests, of which you might need to take account?

I am not sure whether there is a conflict of interests. There are interests: local authorities have a real interest in the continued existence of aquaculture, particularly for our coastal communities. Comhairle nan Eilean Siar has, with the aquaculture industry, entered into voluntary management agreements on the amount of biomass that is put into particular sites. The amount relates to the kind of site and whether there is a constant flow of water that effectively flushes out the area. I see no issue with extending such arrangements beyond that to ensure that where conflicts arise between the aquaculture industry and other industries that use the marine environment, they can come together and reach consensus on how to make the best sustainable use of that resource.

I would like to clarify a point in relation to the process. Crown Estate Scotland would not normally grant a straightforward lease, but would grant an option to lease, prior to a developer or an aquaculture property going through the planning process. We would grant the lease only once all regulatory conditions had been met.

There is broader issue that touches on the question that Kate Forbes asked about the connection and fit—or otherwise—between asset management, community empowerment and planning processes. As members will be aware, the Planning (Scotland) Bill is currently going through Parliament, and there is potentially a disconnect in respect of communities having their voices heard in planning. It is important that we make connections between the broader planning process, community empowerment and how communities interact in relation to asset management.

I want to raise a point that follows on from Stewart Stevenson’s question, and that Alex Kinninmonth touched on slightly. The Scottish Crown Estate Bill sets out that managers

“of ... assets must maintain and seek to enhance ... the value of assets, and ... the income arising”,

but

“may do so in a way that”

contributes to wider objectives including

“economic development ... regeneration ... social wellbeing ... environmental wellbeing”

and so on. Could interpretation of “value of assets” be about anything other than purely financial value? For example, could the phrase be interpreted in terms of the non-monetary value that the asset provides, such as ecosystem services or its recreational or health value?

The short answer is yes.

I thought that you would say that.

I touched on the issue earlier. From the evidence that the bill team has received so far, it seems that, as drafted, the bill interprets “value” and “income” derived from assets in purely financial terms. Perhaps Andy Wells can touch on this from his experience in Crown Estate Scotland. I know that in recent years there has been a big move—not just in Scotland, but globally—towards considering value in terms of natural capital and what we can receive from natural heritage assets that is of value to society in relation to ecosystem services. Clean water, clean air, provisioning of food and pollination are just a few examples.

The Crown Estate has been an early adopter of the natural-capital protocol and in its rural estates it has been piloting approaches on how to use ecosystem services in decision making about how land is managed. That is crucial. I ask whether the bill, as drafted, allows for such innovation to happen and continue. I hope that it does.

However, there needs to be clarity about how “value” is to be interpreted and how it relates to wider societal objectives and delivery of broader national outcomes, which go far wider than just having a strong economy, because that is fundamentally underpinned by the environment.

Absolutely. Creation of value in addition to financial value in a wide variety of ways is something to which sustainable long-term businesses such as Crown Estate Scotland should aspire. The bill creates real opportunities for future managers—Crown Estate Scotland or any other manager—to consider how they can enhance value in a range of areas, and not just in terms of natural capital, but in terms of social capital. We see driving of economic benefits alongside social and environmental benefits as part of operating a sustainable business: they go hand in hand. Large amounts of the Crown Estate assets in Scotland are in remote rural communities, and we need sustainable and viable businesses operating in those areas. We need communities there to be prosperous and we need the environment to support the businesses, so it is very much in the long-term interests of all managers and businesses to seek to enhance such value.

Highlands and Islands Enterprise has a unique remit for economic and social development, so I very much welcome the move in the bill to consider value not just in a monetary or financial sense but in terms, too, of wider regeneration, and of environmental and social aspects. However, we have picked up on the fact that the bill states that managers “must ... enhance ... the value” but “may” take into consideration other factors. We want to understand whether either there is a hierarchy or all the factors that the bill mentions will be taken into account.

HIE wants to alert the committee to our concern about whether financial imperatives, as opposed to wider benefits, will become the drivers. Those can be at odds with one another. There could, for example, be a drive towards maximising value through new house building in order to get value up as quickly as possible, as opposed to there being thinking for the longer term about energy efficiency and other social developments that could support the community, and which might take a bit more capital investment and might not be at the heart of what the current manager is driving. Through the bill, we need to ensure that management is not seen as secondary to those wider aspects, which we believe are absolutely integral to the overall asset value.

It is really important that the bill and subsequent management of assets make people think about value beyond assets’ simple financial value. That is tied to some aspects that colleagues around the table have mentioned.

Stewart Stevenson started by asking what makes a good manager. In thinking about value and management of assets, a good manager needs to think more widely than just about the financial or commercial aspects of the asset. If you want management of assets to contribute to the ways in which communities are empowered, that is not necessarily easy to do in practice, in terms of value being measurable. However, qualitative value can be shown in some ways—with regard to community confidence, and how social cohesion is increased within communities once they have more control over how they shape their natural and social environments, for example.

There are ways of doing that at grass-roots community level. There can be profound value in such processes in terms of what assets mean for communities more qualitatively, rather than assets being the focus of naked financial valuation. That is important when we think about cohesion of communities and how managing and, in some respects, owning assets contribute to the communities and, more broadly, to Scotland.

Let us not forget that the national performance framework is to be reviewed imminently. Although the focus is on sustainable economic growth as its purpose, there is also the addition—a welcome addition, to be frank—of wellbeing, which is a rather amorphous but very important concept, when we are thinking about how our society and our communities function. The bill’s broader concept of “value”, not as a hierarchy but as something that is on a level playing field, is an important dimension that will contribute to that national purpose.

There is no doubt that the socioeconomic aspects of the transfer of an asset must be part of the equation, otherwise transfer just will not work. That is already happening when land is being made available for housing, as Audrey MacIver said. When local authorities are divesting themselves of assets, that has to be the subject of a rigorous business case, so that what is being transferred is actually an asset and not a liability. That should apply equally to Crown Estate assets; the asset should be an asset financially and socioeconomically. That is a vital part of the equation.

I am glad to know that it will not come down just to pounds and pence. Most of my other questions have been answered.

10:15  

Good morning. I will pin the issue down with a final question on it—unless other members want to come in. All the witnesses have helped with a wide discussion of financial gain, sustainable development, community empowerment and a range of other issues. Professor Andrea Ross and Professor Colin Reid state in their written submission that section 7(1) of the bill has

“focus on narrow financial gain”

and

“may or may not be in the public interest”.

Is the word “may” in section 7(2) enough to cover consideration of the other issues that we have been discussing, which go beyond the financial aspects that the managers of assets

“must maintain and seek to enhance”,

or should the section say “must”? One-word answers will be great, but it will be fine for witnesses to qualify it.

You do not all have to answer.

Achievement of sustainable development should be a requirement. The submission that Claudia Beamish quoted is helpful and worthy of serious consideration by the committee.

Achievement of sustainable development must be a requirement, although “sustainable development” is a slippery term that is used in a wide range of ways, and so becomes everything or nothing to everybody and anybody. It should provide the overarching framework for the bill.

I toss out the idea that widening the duties of managers and different responsibilities being given to others, such as local authorities and communities, will come at some cost. Will those things dilute the ability of the Crown Estate to yield revenues to the Scottish Government? Is there a balance to be struck? I see us charging down one road. Local authorities want very much to have the benefits of what were previously Crown Estate assets. Will not that ultimately lead to disintegration and fragmentation of the Crown Estate?

I guess that that might dilute the Crown Estate’s ability to cross-subsidise the agricultural estates—

—or to work efficiently, at any rate.

That does not necessarily have to happen. If an organisation is taking responsibility for management of an asset, it should also be able to accrue some of the revenues. In all the discussions so far, we have spoken about the net revenues from the Crown Estate being transferred in order to support sustainability in management of the asset. However, Crown Estate Scotland will still have to retain responsibility for the land-based estate in particular, but not exclusively, and some kind of control over it. We welcome some of the recommendations that it has made and how it is changing from its historical position.

I do not see widening of managers’ duties and giving of responsibilities to other bodies as threatening dilution of the Crown Estate. The fact that there is consensus on how to move forward on transfer of assets and the revenues that go along with them strengthens the Crown Estate’s ability to do the work that it will do.

I will respond to Claudia Beamish’s question about whether section 7(2) should say “may” or “must”. It could go different ways. To take a wider perspective, in transactions in which one might want to take a more commercial view, inclusion of “must” might result in challenges to decisions: it could be a judicial challenge, which would impact on the business. I urge consideration of that.

There could be a legal challenge to any bill. Why would there be a legal challenge if there was a “must” relating to the aspects in section 7(2) as well as to those in section 7(1)? We are talking about the new devolved settlement for the Crown estate, so I do not understand why you are saying that.

I am thinking of decisions that may be made in relation to investments, for example. A challenge might be possible. I am not a legal expert, so I cannot comment on why one may be interpreted differently from another. I am not suggesting that it is either one way or the other, but there is a consideration there.

Would the consenting of offshore wind farms perhaps be an example?

That might be one.

Surely that process must involve taking into consideration the contribution to the wider objectives of

“economic development ... regeneration ... social wellbeing, environmental wellbeing”

and “sustainable development”. I cannot see what the conflict would be in a Scotland that works for sustainable development for the people of Scotland. I do not understand.

I do not disagree with that. It just may be a consideration—that is all that I am saying.

What about John Scott’s point?

Sorry, but can you remind me what that was?

In essence, with all this devolution of responsibility and income to other bodies, what will be left for the Crown Estate to do? Will there be a body left? The bill will lead to disintegration and fragmentation, given all the devolution of responsibilities and accountability to other bodies and communities.

Again, much will depend on the scale and nature of the assets that are under devolved management and the needs of those assets. The way that we currently work as a national body managing the estate as a whole, particularly in how investments are made, is to raise capital for reinvestment from within the whole portfolio. We may sell off assets in one part of the estate to fund investments in another part. A local manager will have less scope to do that, although obviously there is scope in the bill for a national framework and for ministers to direct one part of the estate to fund another. It could be workable, but there could be an issue in relation to some of the opportunities to cross-subsidise across the estate.

A lot of people want to get in, so I ask everybody to be concise.

One perspective on the bill is that it might dilute the role of the Crown Estate; another perspective, which Community Land Scotland advocates, is that the concentration of attention on devolution is a good thing, as it adds to the democratic process by involving organisations and communities in managing assets, which is useful and adds value in the ways that we have already outlined.

I have a supplementary comment on Claudia Beamish’s question. There is a sustainable development duty on ministers in other legislation, not least the Marine (Scotland) Act 2010, which places a general duty on ministers to act in the way that is calculated to best further the achievement of sustainable development, including the protection and, where appropriate, enhancement of the health of the Scottish marine area. The Climate Change (Scotland) Act 2009 places a similar duty on ministers to contribute to the achievement of sustainable development, and the land use strategy, which comes out of that act, must also contribute towards sustainable development. It is a very well-used term in Scottish legislation. The issue comes down to the principle that the national assets should be managed for wider public benefit, and primacy should be given to managing for intergenerational equity. The framework for sustainable development allows that to happen quite well.

From an offshore energy and industry perspective, ease of doing business is absolutely critical in what is a very complex and, as I said, relatively young industry. The industry players are looking globally at opportunities. From our perspective of trying to derive economic value from supply chain development in the offshore energy sector, we believe that an approach to leasing at a national level must be maintained and that the approach should not be further fragmented.

I want to return briefly—with Mr Wells only, I suspect—to the issue of “may” versus “must”. If “must” is used, that will apply to every single decision, but I imagine that there will be essentially neutral decisions. A decision that was made in the past might have to be revisited, and it might properly be concluded that no change will be made. However, that would be a decision. If “may” is used, the decision can be made without opening up a particular hoop for legal challenge, but if “must” is used, every single decision—even on whether to move from 80 to 70 grams per square metre paper in the corporate printers to save paper—could be open to challenge. Is that a fair characterisation? In other words, one needs to look at every specific instance of “may” and “must” to see the specific effects, and one must be extremely careful in legal drafting terms.

Stewart Stevenson expressed that far more eloquently than I did.

I think that that will suffice.

As was said earlier, Professor Ross and Professor Reid suggested in their submission that the bill should be amended to include a mandatory requirement for sustainable development to be taken into account. As somebody has said, around 10 per cent of the acts of the Scottish Parliament contain sustainable development provisions, even though there is no legal definition of sustainable development. Should sustainable development be defined in statute? Should consideration of environmental, social and economic wellbeing, as well as regeneration, be required as subsets of sustainable development?

It is absolutely right that that should be the case. If sustainable development “must” be taken into account, then clearly it is also about socioeconomic and wellbeing issues—it is about all those issues. The reality is that ministers have to do that in any event. If sustainable development is taken into account, that does not mean that there has to be a huge piece of work to do that, but it must be considered before a final decision is taken. That happens right across the spectrum. If sustainable development “must” be taken into account, then that has to be done. If the word “may” is used, people can choose not to take it into account, whether or not there are socioeconomic or sustainable development benefits.

The issue of national or local management has already been touched on. We know that the Smith commission recommended that responsibility for the management of the Crown Estate’s economic assets in Scotland

“be further devolved to local authority areas”

in the northern isles and in the Western Isles.

Orkney Islands Council has said:

“While the Bill’s provisions in respect of management are deemed workable, they are not considered ‘appropriate’ when read alongside the Smith Commission recommendation.”

Comhairle nan Eilean Siar indicated that the bill should have devolved powers to island councils rather than set out a methodology to enable devolution and specifically considered the case for the devolution of lease management of offshore wind out to 12 nautical miles and for aquaculture. HIE suggested that national management of wave, tidal and offshore wind energy—we have heard this again today—is

“the preferred option of project developers and will assist in achieving the potential of offshore renewables. It will also make for simpler industry engagement”.

Will the bill deliver the Smith commission’s recommendations? If not, what is required either through a change in the bill or other action?

We clearly believe that infrastructure within 12 nautical miles, whether that is offshore renewables or aquaculture infrastructure, is something that we and our communities would want some control of, because the reality is that it will be developments within 12 nautical miles that will be most likely to have an impact on the land-based infrastructure, including on our shoreline. We see that from time to time, due to adverse weather. I do not want to focus on aquaculture, but the breaking up of cages has to be dealt with.

10:30  

There has to be some control of such assets, whether they be offshore renewables, aquaculture or other industries that we are currently not all that clear about. Communities should have a significant say as to whether a development should go ahead, because they will be most affected by it.

What about the national interest?

The national interest can be part of the equation. As regards even onshore wind developments, the planning authority is not the local authority but the Government. However, local authorities treat every onshore application as though we were the determining authorities: we make our submissions to the Government on that basis and it takes them into account. As such authorities, we have a significant say in developments and we carry out wider consultations in the community, which enables the Government to make the ultimate decisions. It is therefore important to have local control up to the 12 nautical mile limit.

With respect, the two positions that we have heard on this issue were probably fairly predictable, given where you are coming from, which is quite understandable. What views would other panellists articulate?

Community Land Scotland is clearly in favour of mechanisms that will ensure that the power to manage such assets is devolved as far as possible in relation to levels of governance and of management. While we broadly welcome the provisions in that respect that are contained in the bill, where there are opportunities for local communities to have an influence and a say in managing and shaping how such assets are used in the broader context of national interest considerations, as Norman MacDonald has mentioned, it is critically important that that actually happens and is made to happen in the legislative provisions that exist.

The committee will have seen from our submission that we make other wider points on aspects of how that might be managed with regard to foreshore elements and also—as I think has been mentioned in other evidence sessions—the ownership or otherwise of aspects of the sea bed. Bringing such matters into local consideration is paramount, from our perspective.

We are neutral on the topic of management transfer to the local level versus retaining a national, geographic or functional level. For us, the key consideration is whether the transferee has sufficient capability to discharge the duties and liabilities that come with that role and whether it is subject to appropriate scrutiny. The case-by-case approach that is proposed in the bill seems to me to be appropriate—again, subject to there being sufficient transparency and scrutiny of ministerial decisions on that.

We often talk about two very different roles relating to development in the marine environment. One aspect that the bill deals with is the leasing of the sea bed. Of course, there is a parallel regulatory process about licensing what can happen on the sea bed. Those two issues are very different but are sometimes mixed up in discussion. It is worth noting that the Marine (Scotland) Act 2010 is often lost in discussion of community empowerment but is very much aimed at that, in that planning and decision making in coastal waters were to be developed through regional marine plans developed by marine planning partnerships.

We are a number of years down the line from the publication of the national marine plan in 2015, yet we are sitting without a single regional marine plan having been adopted in Scotland. Before we start talking about the transfer of assets in terms of leasing, we really need to commit to establishing regional marine plans around Scotland’s coastline. We need to get the order right. We need to know what we want and what we aim to achieve from the use of and development and activity in our marine environment, then we can think about leasing and getting financial benefit from that. It cannot happen in the reverse order.

I want to ask Calum MacLeod about Community Land Scotland’s written submission in relation to the question that we have been exploring. The submission suggested that land ownership is a key driver for sustainable development. How does that fit with the bill? Does it give opportunities for that in relation to the Crown estate? I understand of course that, if something is sold, there has to be a quid pro quo or whatever in terms of assets, as you cannot just sell off the Crown estates. It goes back to what Councillor Norman MacDonald highlighted about the importance of community ownership. I stress that as a member for the South Scotland region; it is important not only in the Highlands.

Thank you very much for that really important question, which gets to the nub of the critical issue of the relationship between ownership of assets, whether land or other assets, and their management. You will hear two different views on that. One suggests that it does not really matter who owns the asset and that it is how it is managed and used that counts. That is important and I do not dismiss that perspective. However, ownership is a critical element in many instances with regard to how the asset is used and managed. It is critical to have and recognise the relationship between land and/or other asset ownership and the use of that asset, and the influence between the two.

If I understand the nub of your question correctly, you are asking about the importance of ownership as a driver for sustainable development.

Yes, and particularly in relation to the bill, as that is what we are taking evidence on.

We argue that ownership—where appropriate and on a case-by-case basis, but certainly with a pre-emptive right with regard to, for example, foreshore rights—is critical. Enabling communities to have ownership of particular assets allows them the autonomy and democratic process—when they are community land owners—to shape how the assets are used in practice. That is critically important in the context of how, bluntly, communities thrive, survive and prosper as, in many cases, they are quite fragile communities.

We are also thinking about the broader question whether the Crown estate will become fragmented and what its purpose will be in terms of the bill. That is not even a price that has to be paid—it is really important to follow that through. Enabling communities in appropriate circumstances to own Crown Estate assets will add value in various ways to how those communities make themselves sustainable.

I have an added comment in relation to that. We talked about the legal challenges to sustainable development issues. If we are not measuring or addressing any of the assets and how they are managed on sustainable development grounds, what are we measuring them on?

HIE suggested:

“there is scope for the rural estates ... to be managed by communities where there is an aspiration ... a viable management plan ... and capacity to deliver.”

What is the case for communities managing rural estates in the objectives of the Smith commission and in the bill?

We have already heard that there is no appetite from current tenants for a change in the status quo and no desire to become a community group to manage their own estates. What is your response to that?

The point around aspiration is key: it is about where there is indeed community aspiration, which is where Highlands and Islands Enterprise seeks, with partners, to support those communities and enable them to see that process through. The current consultation on pilots will highlight where there is appetite or otherwise, and I think that due attention will need to be paid to that.

The context in which we made that comment in our submission is that we see opportunities in particular communities for subsets of the estate to be taken into community management in order to derive the benefits that we have witnessed in other parts of the region. Again, however, there is a distinction between that context and the offshore context, where we believe that a national, strategic approach is required.

What subsets do you have in mind?

There could be community involvement in the management of assets such as small harbours or moorings, and in access to and management of land from the point of view of the creation of recreational facilities in the interests of tourism. That could bring about wider indirect benefits than would be the case if the assets were managed more remotely or at a national level.

In relation to the suggestion that communities could manage rural estates, is there a potential for conflict in a situation in which the current tenants have no desire to be managed by a community? How would that be resolved?

The question suggests that tenants are separate from the community itself. I do not think that they are, and I do not think that that is the intention.

It is important not to lose sight of the fact that whether a community would take over the management or, indeed, the ownership of a rural estate is a question not only of the community’s appetite for that—which Audrey MacIver just mentioned—but, importantly, of the will of the broad community, of which the tenants are an equal and legitimate part. As the committee knows better than most, there are legal elements in relation to the community right to buy, but the broader principle concerns the fact that a community must state clearly why it wants to take on the management or ownership of an asset, and it must understand the collective benefits that are to be achieved, which might not otherwise be achieved.

Throughout the Highlands and Islands, and certainly in the Western Isles—this does not apply to quite the same extent in the south of Scotland, although that is coming on, too—large estates that have been taken over by communities have been revitalised in economic, financial, environmental and social terms. The idea that communities are too small or do not have enough capacity to take on such roles is misguided.

Having said that, I do not want to lose sight of your question. The central point that you make concerns how we work in relation to that dynamic. I think that the processes are there to enable such issues to be dealt with where there is a will to make that happen.

In addition to the issue of resistance on the part of tenants to such a proposal, would it not be the case that a community that looked at the liabilities that are involved in a rural estate—for example, the backlog of repairs on tenant farms—would shy away from it?

That can be the case, of course. I am wearing my Community Land Scotland hat today, but my other hat, as it were, is one that involves consulting communities on sustainable development issues. Part of that process concerns how people think about liabilities in relation to assets that they might manage and how they might manage them.

There are some important questions to be addressed around how we manage liabilities with regard to the public interest and the common good in terms of the sustainable development of communities and the sustainable management of assets.

As I was going through the previous evidence sessions, I noted that there was some discussion with Scottish Government officials about how the liability element might be managed. Something imaginative, or at least progressive, could be done there, which might help communities to engage with asset management in ways that contribute to their sustainability and add to the broader common good and the public good.

10:45  

The reality is that, whether or not tenants are involved, if there is no appetite in a community, or even if there is an appetite but it turns out that, when people look at the business case, the asset is really a liability, the proposal just will not happen. As Calum MacLeod said, although many parts of the outer Hebrides are under community ownership, there are significant pockets that are not under community ownership for that very reason, so there is no imperative there—there is no forcing it. It is entirely down to the community.

Do the witnesses think that within communities there would be the capacity, or indeed the expertise, to manage the land portfolio of the Crown Estate? For my part, I am not certain that there would be, but I am interested to hear what you think.

It will clearly depend on the context of the particular estate and whether the community is in a position to manage that land. That is not to dismiss the examples of communities that have taken on very large estates and have managed them successfully. Stòras Uibhist is a classic example of that—it is a community landowner that is now involved in multi-million pound partnerships and regeneration schemes relating to that asset. Whether a community would wish to take on the management of one of the Crown Estate’s rural estates would have to be determined in terms of its will and its capacity to do that, but to suggest that that is not feasible would be to dismiss the potential capacity and expertise that communities may have, which would enable that to happen. It will vary in different contexts, but I would certainly not rule it out on principle.

I would be interested to hear the views of others.

In the context of managing the assets as they stand, either as a whole portfolio or as part of a fragmented management structure in which different managers operated different parts of rural estates, there would clearly be challenges in accounting for capital investment. I have alluded to the fact that we often have to sell property on one estate so that we can invest in another, and there are a number of overall liabilities associated with the management of certain properties that are not attached to another and which we have to plan for and manage. That is not to say that it cannot be done, but there could be some practical issues in continuing that on-going investment.

Can I take the opportunity to answer a couple of questions that I did not get a chance to answer earlier?

Briefly.

In relation to the sale of assets, under the bill, any manager is able to sell and buy assets. The key thing is that the capital that is derived from those assets is reinvested in land and property. That is something that could happen in relation to the sale of foreshore, and is happening in certain circumstances in relation to asset sales to communities.

Going back to the strategic national infrastructure, there is clearly a case for ministers to have a strategic approach to offshore wind and marine environment cables and pipelines, but I highlight the views of tenants as also being critical, not only in relation to those assets but in relation to rural estates. We operate in a business environment and we have strong relationships with future business tenants as we work to unlock potential, so the importance of those tenants’ views should not be underestimated.

One of the central arguments for community land ownership is that it is responsive to the community’s needs and helps to shape that community. The evidence from previous sessions suggests that it is not necessarily all milk and honey with the Crown Estate at the moment. I was very interested to hear Mr Brian Shaw from the Applegirth estate say that

“There are many underlying problems about which tenants are honestly frightened to go to the Crown Estate. There are some houses that need a lot of work.”—[Official Report, Environment, Climate Change and Land Reform Committee, 13 March; c 26-27.]

There are some capacity issues there, as well as issues around resolving some of the social conditions in which tenant farmers and other folk on such estates live.

One of the reasons why the Ulva buyout has been successful in getting approval from the Government is that it has a business plan and a real agenda to refurbish and renew the island’s housing—its social fabric. There is no way in which it would be appropriate to dismiss the potential of communities to replicate such a process on a rural estate or elsewhere.

Your point suggests that if the amount of money that is available to those communities was also available to the Crown Estate to carry out work for those admirable and necessary social purposes, it, too, would have the ability to refurbish housing. If it had the ability, the Crown Estate would do that work, would it not?

It would potentially have the ability to carry the work out if it made the management decision to do so. However, at the community level you find a clear commitment to doing such things, and the grass-roots process also enables communities to make decisions on such matters, which Community Land Scotland sees as invaluable.

Given that the well-performing rural estate currently subsidises the less well-performing parts of the Crown estate, if the community were to consider the economic viability of a good part of the estate, would recognition also need to be given to the impact of fragmentation on the less sustainable parts of the estate? Would the whole portfolio be recognised in any fragmentation or devolution of the viable parts of the estate to communities, including the impact on the less viable parts of the rural estate?

Any such transfer of ownership would need a measured decision on value across the different elements that we have been discussing, such as whether community, economic, social and environmental benefits are associated with ownership of one aspect of the estate or several. On balance, that would create a public interest argument for that transfer.

We are not suggesting for one second that it is a straightforward process; we are suggesting that it would be a missed opportunity to dismiss the possibility of incorporating that as a principle.

On that note, we will move on.

I refer to my entry in the register of interests as a landowner in the Highlands. I want to ask about pilot projects. The various island authorities that I have spoken to have expressed a real enthusiasm for pilot projects. They are very keen to get on with it—they have been for quite some time. Is the panel satisfied that sufficient progress has been made on pilot projects?

The three island authorities are very clear about wishing to progress with the pilots. The consultation on the pilot process has only just concluded and it will be some time before we get to see the submissions that were made to it. It is really important to take pilot projects forward. The discussions that we have had with our colleagues in Orkney and Shetland make it clear that their pilot projects will be different from ours. We are quite clear about what we want our pilot project to be about, which is Crown Estate assets out to 12 nautical miles and working with the capacity that the community can bear, which, as Calum MacLeod has already said, we have very clear evidence of through community land ownership.

There is no great difference between community land ownership in principle and ownership of the marine assets that already contribute a significant amount to those communities. It is about having local management and control, with local revenues that can be reinvested in facilities that enable things to go further. We hope that our pilot projects will be our starter for 10, because we will be able to demonstrate through them that we have the capacity and will to undertake them and that safeguards are in place for taking the process forward in a regulatory framework and—importantly—with local management. That is where the biggest gains will come from in relation to the Crown estate.

I can comment on the financing in terms of progress. Clearly, it is something that Crown Estate Scotland and the board have been keen to pursue. However, we must bear in mind that we are only a year old and that we have had a huge focus this year on getting the business up and running following the transfer from the Crown Estate. Immediate financial cash-flow difficulties were a huge priority and we had to get a corporate plan in place, which has been done. The board had to settle in and understand the assets, and the drive to develop the pilot programme was taken forward as soon as was practicable. The board and staff have visited many councils to understand their aspirations. As has been said, the consultation process has just been completed and the first pilot applications are expected to come through in June this year. It is a two-stage process and, following the responses to the consultation, we hope to refine it and get up and running as soon as possible.

On the retention of net revenues by asset managers and reinvestment in the asset, you will probably be aware of the evidence that we have had on the 9 per cent figure. I do not fully understand the methodological basis of that. However, you have all submitted strong views on that point, which I want to explore. In particular, what are your views on what the redistribution methodology should be? How do we calculate that redistribution?

I can clarify that.

It would be useful to have that clarification before hearing other panel members’ views.

It comes back to the way in which Crown Estate Scotland has to separate its revenue account from its capital account. The capital is part of the ownership, under the Crown, of the asset itself and is retained as such. As I mentioned, any capital raised from sales is reinvested in the estate. Under the terms of the Crown Estate Act 1961 and of the Scottish Crown Estate Bill, any manager needs to turn that capital into account through generating revenue from it. That revenue, minus the costs of securing it, is then surrendered to the Scottish Government. Before doing so, under the terms of existing legislation, 9 per cent of that revenue can be moved into the capital account, and that is normally calculated on the basis of the previous year’s turnover. So, 9 per cent of gross turnover can be moved into the capital account, which creates an opportunity for the business to use that capital for reinvestment in the asset. In the current year, because we do not have operating accounts for last year—we were not Crown Estate Scotland then—we are having on-going discussions with the Scottish Government as to how that 9 per cent will be determined.

I, too, admit to not being clear about how the 9 per cent is derived, but I thank Andy Wells for that clarification. In our submission, we went as far as suggesting a top-up of that 9 per cent, particularly for community organisations. We do not necessarily advocate a specific number, but we are mindful of the financial incentive. Taking on board all other comments on the issue, we have said that, although the incentive is not only about the financial aspect, we wonder whether 9 per cent is sufficient for community organisations to have good and proper management of the asset. We are flagging up the need to understand whether that is the case. Perhaps we will get more understanding of that from the pilot process.

In measuring and evaluating that incentive, do we again come back to sustainable development? If so, is it therefore about having clear objectives for reinvestment and delivery for communities?

Yes.

Can I get some more views, please?

11:00  

There is no doubt that we would prefer to refer to the First Minister’s statement in, I think, 2015, when she stated that 100 per cent of the net revenues would be returned to the communities in which they were generated. I recognise that there is still quite a lot of complexity about the distribution and there needs to be a major focus on that in the near future otherwise it will be difficult to set parameters for how the pilot schemes can be taken forward. That will have to be resolved with much greater clarity than we have at the moment before things can move forward. It is key for us to address that, for the communities who aspire to take control of the management of the assets and for the Crown Estate. There are fundamental issues around distribution that need to be resolved in the near future.

Do you see part of that reinvestment as being reinvestment in your capacity as a council to manage assets? To come back to Audrey MacIver’s point about ensuring consistency and professionalism among asset managers when it comes to renewable energy development and leasing, I presume that councils have gaps in that regard. Do you therefore see that reinvestment as reinvestment in your council teams so that they can deliver or is it about community benefit?

We do not necessarily see it as reinvestment in council teams. As you have just stated, we already have teams in the local authority that manage marine assets of different types. We want the net revenue that comes from the management of those assets to go back into the communities and for them to decide, to a large extent, whether that investment is for onshore infrastructure or managing the asset through persuading those who are involved, such as aquaculture organisations, to manage their processes in a sustainable way within the local context.

If the net revenues from the Crown estate go to local government, we will not be interested in using that to deliver services. We are looking for investment in the Crown estate, which has not happened in the past. Communities are crying out for that. We need to be clear about distribution.

Are you saying that that will be the case even if the devolution of management puts pressure on your teams?

The greatest pressure on our teams is their inability to deliver on the aspirations of local communities because of the financial resource that they have.

The 9 per cent figure is curious and intriguing in some respects. Although it has not quite been plucked out of the air, it is a historical figure. I am not clear about the rationale for it.

It is because the Crown Estate cannot borrow money. There has to be a method by which it can generate capital for reinvestment other than through sales of land.

Thank you for that helpful clarification.

That being the case, there is nevertheless an issue around the incentivising of communities to become managers of assets and whether there is scope to change that figure. We do not have a figure in mind either, but it should certainly help to do that. When David Mallon gave evidence to the committee on 20 February 2018, he said that 9 per cent is “a game changer” for communities. Perhaps it is, and I do not want to dismiss that, but it could be even more of a game changer if it was a larger figure.

There is also an interesting question about what happens to the 91 per cent that goes back into the Scottish consolidated fund. From Mr Mallon’s evidence, I gathered that there is some ambiguity around whether there is scope to redirect that money from the fund back into communities. If that is the case, we would be interested to hear how it might happen in practice.

I have a wrap-up question that I would like to pose to all the witnesses. I am looking for brief answers. Do you have any views on potential omissions from the bill or suggestions for how it should be amended, other than the ones that we have already discussed?

We have a couple of suggestions in areas in which we think that there are opportunities. One suggestion relates to an automatic right of ownership of the foreshore. When communities are not in a position to take on ownership, the right would go to local authorities, which would enable communities then to take that on. In our written evidence, we also made a suggestion relating to the scope for community ownership of areas of the sea bed that are in the proximity of foreshore rights. I will not rehearse all the arguments that we have heard already, but that suggestion relates to sustainability and community cohesion.

In real terms, what would be the benefits of both those options?

They would give communities more control and more say in what they might want to do with the assets for the benefit of the communities. There would be potential economic benefits and other broader sustainable development benefits in terms of social cohesion, community confidence and helping communities to thrive.

Mr Wells, how would you see that happening in practical terms, given your inside knowledge of the Crown Estate?

It is about balance. From our perspective, we think that the bill offers a real opportunity for people and communities to have more opportunities to get involved and have a say in how assets are managed. It is a matter of striking the right balance between empowering communities and ensuring that there is accountability and that the right systems are in place.

I will not be unfair and ask you whether the bill can be improved, given that you are here to represent the Crown Estate. That would perhaps be unkind.

On sea bed ownership, it is recognised that Scotland’s territorial sea bed is of national importance, which is why we are happy to support the presumption against the disposal of that asset without safeguards. Given that there is quite a strong consensus on that presumption, there is scope to make the bill slightly stronger. As the bill is drafted, it is at the discretion of ministers to consent to disposal of the sea bed against an unknown set of criteria. We should either be clearer about what the set of criteria is or we should make the sea bed in effect inalienable—it should be unable to be sold or Parliament should have a greater role in deciding when and where it should be sold.

From an industry and sector development perspective, as well as the further devolution, the bill should illustrate how Crown Estate Scotland can continue to play a vital role in stimulating innovation and supporting technology and development, whether in offshore energy or aquaculture.

On the point that Alex Kinninmonth raised about ministerial discretion, it would, I hope, be reassuring if there was some clarity on the criteria that are to be used. No community will take on the management of Crown estate assets if there is no benefit to it in doing so. Nobody will take on the management of an asset if it is not an asset but a liability. We should ensure that safeguards are in place so that the process, whereby people take control of the management of assets and the revenues that go with them is very clear and regulated at different levels.

Thank you all for your evidence, which has been very useful.

I suspend the meeting for a couple of minutes before we move to the next item.

11:08 Meeting suspended.  

11:15 On resuming—