Scottish Crown Estate draft strategic management plan: consultation

Objectives, Priorities and Policies

50. The Plan includes 22 objectives, priorities and policies to realise the vision. These are arranged by theme in the following three sections.

Theme 1: Delivering Benefits and Realising Opportunities

The following objectives, priorities and policies are focused on Delivering Benefits and Realising Opportunities.

1 Scottish Crown Estate assets should be managed for the benefit of Scotland and communities, with market value being charged for sales or leases, unless the manager of the asset can demonstrate that wider benefits of equivalent scale will be delivered.

51. It is important that the capital value and revenue generating potential of the Scottish Crown Estate is maintained as the Monarch owns the assets and the Scottish Government's block grant was reduced by an amount equivalent to the estimated net revenue from the assets in the year prior to the transfer. It is also important that the assets of the Scottish Crown Estate are managed for the benefit Scotland with opportunities to also deliver local benefits.

52. The principle of equivalent scale is intended to recognise that it is possible to charge less than market value, but that it is important any return to the Scottish Crown Estate being foregone by a manager should be complemented, or balanced, by wider benefits of an equivalent scale as a result of any sale or use of the asset for less than market value. Managers should consider – and demonstrate – that it can be reasonably expected that the non-monetary benefits which will accrue as result of a transaction for less than market value are equal to or greater than the income or capital foregone by the transaction. The prospect of achieving these wider benefits should be equally as certain as the financial benefits being foregone to realise these benefits.

53. A manager must also consider the impact on the overall capital value of the estate when making the decision to charge less than market value. For example, the sale of a small area of foreshore to the local community for less than market value may not have a significant impact on the capital value of the Scottish Crown Estate as a whole.

54. Scottish Ministers consider it important that managers favour the delivery of long-term benefits and projects that can be self-sustaining when agreeing to charge less than market value to derive wider benefits, and also those which will not require future financial support from other managers of the Scottish Crown Estate. Decisions to charge less than market value to derive temporary or one-off benefits should normally only be agreed where there will be no significant impact on the value or revenue of the Scottish Crown Estate.

2 In order to realise the benefits potential, and in recognition that some land and property has been acquired over time for specific investment purposes, there is likely to be sales of assets or parts of assets over the five year period of the Plan, particularly on land or at the coast in response to requests for public benefit purposes or opportunities to increase value to Scotland, recognising that the seabed is a national strategic asset that Scottish Ministers do not wish to become fragmented.

55. In order to maintain and seek to enhance the capital value and revenue, and make future investments to maximise wider benefits, Scottish Ministers acknowledge that parts of the Scottish Crown Estate need to be sold from time to time.

56. The nature of some assets or the arrangements for future management may mean that sales are not appropriate. A one-size-fits-all approach on handling sales is also not appropriate for the unique nature of some of the Scottish Crown Estate assets. The seabed and some Scottish Crown Estate assets may be better retained within the Scottish Crown Estate and managed on a national basis.

57. To manage the risk of fragmentation, consent of Scottish Ministers is required for seabed disposals. Consent is also needed where a manager intends to sell the last remaining asset for which a manager has responsibility. In order to support such decisions, Scottish Ministers require a business case and further guidance may be developed on what is required.

58. A manager of a Scottish Crown Estate asset that has powers to dispose of an asset and acquire new assets should incorporate an Investment Strategy in their Corporate Plan or Management Plan so that stakeholders can express views on the proposed sales. It is acknowledged that some opportunities for sales or acquisitions may arise once a plan is finalised.

3 Strategies and Plans for Scottish Crown Estate assets should consider the potential for delivering benefits to island communities and assessment of possible impacts will be completed as required under the Islands Act 2018.

59. The Scottish Crown Estate Act requires a manager of one or more Scottish Crown Estate assets to prepare a Corporate Plan or Management Plan in respect of the assets. The plan will set out how the manager plans to manage the asset over a three year period. In particular, how the manager proposes to carry out the duty to maintain and seek to enhance the value of the Scottish Crown Estate assets, and what plans the manager has as regards the disposal of any Scottish Crown Estate assets during the period covered by the plan. Management Plans are an important part of the framework for public scrutiny of managers.

60. The Islands Act places a duty on relevant authorities to undertake an impact assessment when developing, redeveloping and delivering a policy, a strategy or a service, when it is likely to have a significantly different effect on an island community compared with other communities in Scotland (including other island communities as well as non-island communities).

61. Relevant authorities are defined in the Islands Act and include Scottish Ministers, Crown Estate Scotland (Interim Management) and local authorities. It is expected that each Corporate Plan or Management Plan prepared by a manager of a Scottish Crown Estate asset, who is a relevant authority, will include measures which underpin the Scottish Government's objective of ensuring that there is a sustained focus across the Scottish Government and public sector on meeting the needs of island communities where a manager is responsible for assets in any of the island communities. If in future, other organisations take on the management of a Scottish Crown Estate asset in any of the island communities, that manager will be expected to deliver the aims of the assessment required under the Islands Act.

62. A manager of a Scottish Crown Estate asset should also recognise the National Islands Plan and support its implementation as appropriate.

4 Managers should consider the potential to contribute to wider policies on land reform and community empowerment by offering opportunities to own or manage these assets directly, and as part of strategies to consider the wider value of the existing land assets remaining part of the Scottish Crown Estate.

63. Scottish Ministers are committed to furthering community empowerment in relation to aspects of land use and ownership. This key commitment has been incorporated and developed into a number of wider policies and strategies designed to further deliver the community empowerment objective. Such policies include:

• Land Use Strategy;
• Land Rights and Community Engagement Statement;
• Land Rights and Responsibility Statement;
• Guidance issued by Scottish Ministers or other organisations such as the Scottish Land Commission; and
• New opportunities for community empowerment (through Asset Transfers/Improved Community Right to Buy/Forest Transfer Scheme).

64. A manager must be open, give consideration to these wider policies and be transparent in making decisions regarding land forming part of the Scottish Crown Estate. A manager should engage with their local communities when developing long-term proposals on land, foreshore and seabed. Equally, a manager must have regard to the likely effect on the overall value of the Scottish Crown Estate when developing policies around community empowerment for the estate.

65. Scottish Ministers expect it to be standard practice for a manager of a Scottish Crown Estate asset to involve their communities. Where a request by a community organisation is received to purchase or manage an asset, a manager should, as a matter of course, help to support these requests. The manager should assist the community with the development of their proposal by providing background information at the appropriate level of detail while protecting tenant confidentiality and other sensitive information.

5 By 2025, the balance between activity related to management of coastal and marine assets is likely to have grown compared with the rural land assets, to reflect the new opportunities that can be realised, but the Scottish Crown Estate is likely to still include a significant amount of land and property assets.

66. Now that we have secured control of the Scottish Crown Estate, any increase in revenue or capital value is a net gain for Scotland.

67. Some elements of the estate might not be expected to generate significant increases in revenue or capital value over the 2020-25 period.

68. For example, at present the scope for increases related to the current rural land assets is limited. While the rate of return on the capital invested in the rural estates is currently low, there are financial and non-financial benefits to the local community, social and other infrastructure benefits and benefits for the environment. The continued investment in rural assets also provides an opportunity to showcase best practice in tenanted farms; for example although it is mainly composed of secure agricultural tenants, the Scottish Crown Estate has a role to play in encouraging new, young entrants into the industry.

69. Other assets or activities are likely to generate increased revenue over the 2020-25 period. As regards the coastal and marine assets, there are a range of opportunities that justify increased activity:

• Scotland's long-term climate change targets will require the near-complete decarbonisation of our energy system by 2050, with renewable energy meeting a significant share of our needs.
• Potential for new commercial scale offshore wind projects to be sited within the spatial locations identified by the sectoral marine planning process. Marine Scotland, as Planning Authority for Scotland's seas, is currently undertaking the preparation of the draft Offshore Wind Plan and associated assessments.
• The Scottish Crown Estate is also a key player in the sustainable development of ports, harbours and marine transport in Scotland. There are opportunities to contribute to investment partnerships to improve ports and harbours infrastructure.
• Crown Estate Scotland (Interim Management) currently leases around 750 sites to fish farm operators to grow finfish and shellfish and issue licences for seaweed harvesting to help ensure sustainable practices are followed.
• Opportunities to support delivery of the National Tourism Strategy and contribute to the sustainable development of new uses of our seas that would require a seabed lease.

70. These opportunities are illustrated by recent studies undertaken by Crown Estate Scotland (Interim Management).

• A study commissioned by Crown Estate Scotland (Interim Management) looked at scenarios linked to a number of renewable technologies such as floating wind, wave, and tidal energy. The study analysed how they could support the development of key industries, including whisky and salmon farming, in coastal locations. The study sets out the potential, as part of a wider future strategy, for a more localised approach to offshore renewable energy deployment in coastal and island communities.
• Crown Estate Scotland (Interim Management) has also funded research by the Centre for Energy Policy at the University of Strathclyde into the potential economic opportunities for Scotland in the further development of Carbon Capture and Storage to help sustain jobs and build supply chain, helping the 'just transition' to a net zero emissions economy.

Example: Potential opportunities relating to ports, harbours and marine transport

There are over 200 ports in Scotland, from major commercial operations to small leisure and fishing harbours. Ports must continue to adapt and develop, to support trade, oil and gas sector, fishing and cruise tourism, as well as developing renewable support.

Scotland has the most comprehensive network of ferry services in North West Europe. Routes vary hugely, from arterial freight-focussed sailings linking Scotland to Northern Ireland to lifeline passenger services sustaining island communities.

Pleasure yachts and smaller holiday vessels are increasing in popularity and there is huge potential in the development of the marine and coastal tourism sector. Scotland is already the market leader in the UK for inbound cruise tourism, and the cruise sector is confident that Scottish ports are on course to shortly welcome a million cruise passengers annually.

For all of these uses, further development of port and harbour facilities are likely to require seabed leases and dredging agreements.

Example: Aberdeen Harbour

Construction of Aberdeen Harbour Board's £350 million development of additional facilities in Nigg Bay, to the south of the existing harbour, will provide the largest port in Scotland in terms of berthage.

It is expected that the expansion will support the creation of 2,300 jobs by 2026, as well as providing increased opportunity in decommissioning activity, cruise tourism and the renewables market in Scotland. This development has been facilitated by the seabed lease and dredging agreements with Crown Estate Scotland (Interim Management).

6 Scottish Ministers would like managers to consider the potential for investments that contribute to the achievement of Scotland's Climate Change Plan, and would also like managers to consider the potential for increased investment activity for the purpose of regeneration for community or national benefit, including land on the coast around ports, harbours and other infrastructure, to realise opportunities for Scotland and local economies, and for these investments to normally be prioritised over other new commercial property investments.

71. The Scottish Crown Estate assets currently have a total capital value of £385.8 million. These assets can be used in a variety of ways to make a substantial contribution to our work on climate change and wider investment strategies over the next five years and beyond. For example, capital receipts from sales or other activity will be reinvested to grow the value of the assets or to fund essential capital expenditure on assets. Future priorities for capital investment will be outlined in Crown Estate Scotland (Interim Management)'s new Investment Strategy which forms part of their 2020-23 Corporate Plan.

72. Investing in the regeneration of communities can promote sustainability and play a key part in ensuring that communities are resilient, vibrant and thriving. As part of a wider Investment Strategy, a Scottish Crown Estate manager can explore and promote opportunities for aligning budgets through joint development activities with other organisations, including coastal regeneration projects. A manager can work with partners to identify priority locations for investment and the types of development that can best meet their financial, sustainable development and regeneration objectives. Where appropriate, they can consider the development of vacant and derelict land in order to increase the capital value of the land, realise untapped potential income and deliver wider social and economic benefits for local communities and beyond.

73. Community-led regeneration is at the heart of the Scottish Government's Regeneration Strategy and there is potential for a manager of a Scottish Crown Estate asset to make investment that supports community-led regeneration which:

• Increases the number and strength of locally-controlled, enterprising community organisations;
• Supports local organisations to take over management of assets such as land or foreshore;
• Helps people to co-ordinate action and respond to challenges; and
• Helps people identify and act on the priorities in their areas.

74. In particular, given the Crown's ownership of just under 50% of the 18,000 km length of Scotland's foreshore, the Scottish Crown Estate can make a significant contribution to regeneration in coastal areas.

75. An example of investment for the purpose of regeneration for community or national benefit and which also delivers transport and tourism aims is the new pontoons for public use installed in the village of Dunvegan, on the Isle of Skye, by the Dunvegan Mooring Association with support from Crown Estate Scotland (Interim Management). The new visitor pontoons have been installed in the heart of the village as part of a development programme to attract and retain visitors.

7 Investments in the Scottish Crown Estate should not be limited to the land or property that currently forms part of the Estate, if returns or wider benefits to the Estate and Scotland can be realised. For example, to make it possible to deliver benefits to communities living on the coast adjacent to parts of the seabed contained in the Estate.

76. During the Parliamentary progress of the Act, MSPs expressed the view that there are significant potential benefits in Crown Estate Scotland (Interim Management) having the ability to hold capital reserves for strategic investment and management of the Estate.

77. The Scotland Act provides that the property, rights and interests of the Scottish Crown Estate must be maintained as an estate in land.

78. The Scotland Act also enables assets to be sold and new assets to be purchased, reflecting the fact some assets, or parts of an asset, have been sold to realise their capital value and to enable reinvestment in other assets. The reforms contained in the new legal framework provided by the Act retain the powers to buy, sell and derive revenue from capital assets that are part of the Scottish Crown Estate. The flexibility provided by these powers will be important in maintaining the value of the estate in future.

79. The new legal framework also enables managers to recognise the wider social, economic and environmental benefits that can flow from the way in which the estate is managed. This approach to recognising the potential to generate wider benefits should be considered when making decisions on investments. This could allow new investments to be made that can create greater capital value or income for the estate and generate wider benefits.

80. A manager may decide to invest in a project, or acquire land adjacent to an area of seabed, where the investment can be expected to increase the value or income of the adjacent seabed or derive other benefits.

81. Consideration will be given to whether further guidance should be developed to guide a manager of a Scottish Crown Estate asset, taking into account the Scottish Government's strategic ambitions for marine, energy, transport, economic development, community and tourist sectors.

Q3 Do you believe that the objectives, priorities and policies contained in theme 1 will allow us to achieve our vision for the future management of the Scottish Crown Estate? Please explain your answer.

a) Yes
b) No

Theme 2: How Scottish Crown Estate Assets Are Managed

The following objectives, priorities and policies are focused on how Scottish Crown Estate Assets are managed.

8 The diversity of the Scottish Crown Estate means that a one size fits all approach to management is not practical and there are potential benefits of local control, management or enhanced input to decision-making within the national governance framework provided by the Scottish Crown Estate Act, and this framework provides the potential for different approaches in different parts of Scotland.

82. The national framework seeks to provide for the continuation of strategic planning for the assets, while enabling local management to maintain consistency where appropriate. The national framework, including the potential for guidance on accounting provisions, also ensures common standards of openness, transparency and accountability across the Scottish Crown Estate.

83. The Act includes powers for Scottish Ministers to transfer or delegate the function of managing a Scottish Crown Estate assets. Decisions on the most appropriate arrangements for management of each asset will be taken on a case-by-case basis, taking account of the ambitions of local communities.

84. The Act specifies accounting and reporting procedures to ensure sufficient openness about the management of asset at the local or national level. In addition to the Plan, the framework also comprises managers' Management Plans, Annual Reports from managers, and measures to promote consistency in reporting and accounting. The Plan and Annual Reports will be laid in the Scottish Parliament and accounts will be audited by the Auditor General for Scotland.

85. Annual Reports will provide an assessment of how a Scottish Crown Estate manager has performed against the objectives and carried out the activities set out in the Management Plan. Annual Reports and Management Plans will be sources of information about the performance of the managers of the assets. Should the Scottish Ministers be concerned about the performance of a manager, they have the power under the Act to transfer the function of managing the asset to another manager.

86. As part of the governance framework, the Act provides for financial accountability. There is a requirement to keep separate income and capital accounts, which obliges the manager of a Scottish Crown Estate asset to appropriately identify and account for activities that contribute towards net revenue and those that maintain and enhance the capital estate.

87. The governance framework outlined above will provide assurance and transparency to support different models for management of the Scottish Crown Estate assets.

9 It is anticipated that by the end of the five year period there will be a variety of managers of Scottish Crown Estate assets with individual assets managed at the appropriate level and opportunities through either transfers, delegations or pilots for councils, communities and other eligible organisations to contribute to or control decisions on how assets are managed and used.

88. At present, the portfolio of property, rights and interests are managed as a whole by a single manager, Crown Estate Scotland (Interim Management). Scottish Ministers are aware of the ambitions of some local communities to have the opportunity for enhanced control or greater involvement in decision-making about Scottish Crown Estate assets in their community.

89. The Act provides the mechanism for local management of specific assets by local authorities, Scottish Harbour Authorities or community organisations, and or for another part of the public sector to manage parts of the estate. It also sets out the regulatory framework within which all managers must operate.

90. The Act creates two mechanisms for devolving the function of managing a Scottish Crown Estate asset – transfer and delegation. Scottish Ministers acknowledge that a one-size-fits-all approach is not appropriate for such a diverse range of assets. The Act provides for a case-by-case approach and for some individual assets to be managed and developed by eligible communities and councils. This approach would enable local control over decision-making, with the potential for shared supporting arrangements to reduce duplication and fragmentation. The intention is for the process of further devolution to be as inclusive as possible, while assessing each case on its merits and being mindful of the duty to maintain and enhance the value of the asset.

Image 6: How Management of Scottish Crown Estate Assets can be transferred and delegated

91. It is possible that some organisations may only want to manage one asset or part of an asset e.g. management of a stretch of foreshore in a part of Scotland. For example, Scottish Ministers can see in principle the potential for a Scottish Harbour Authority to manage the seabed under and around the footprint of the harbour structures, but would require justification to include seabed outside the harbour authority's boundaries.

92. It is also possible that some communities may prefer alternative approaches to enhanced control and involvement in decision-making to those contained in the Act. These could take a number of forms, such as:

• Local management pilots,
• Other forms of local management agreements, or
• Community and users' involvement in advisory groups.

Image 7: Example of local control or involvement in decision making

93. Scottish Ministers are also following with interest the progress of Crown Estate Scotland (Interim Management)'s local asset management pilot scheme. The experience of the pilot scheme will inform future decisions on transfer and delegation under the Act.

94. There is also a case for the management of the seabed, particularly the rights to the 12-200 nautical mile zone, and leasing for strategic national infrastructure such as telecommunication cables, pipelines and offshore wind farms being undertaken at the Scottish level. It is proposed, therefore, that some assets, at least for the time being, should be managed at a national level (see image 8).

Image 8: Opportunities for local management of assets

10 Scotland's seabed is a national strategic asset and should be managed at the national level but Scottish Ministers will keep the arrangements under review to determine whether it is most appropriate for assets to be managed at the national or local level.

95. Scotland is a maritime nation, which has always looked to the sea and views the marine environment as being critical to the culture, wellbeing and wealth of the nation. Now that we have secured control of rights to the seabed for Scotland, we need to ensure that the arrangements for management safeguard these important assets for the future of Scotland and local communities.

96. The seabed is defined in the Act and includes the Scottish marine area, which is that part of the seabed out to the 12 nautical mile limit, and the Scottish zone, which lies between the 12 nautical mile limit and 200 nautical mile limit. The Scottish Zone is not owned by the Crown, but international maritime law gives a coastal state the rights in that zone and these rights have been vested in the Crown. The part of the seabed, which comprises land lying between the high and low water marks of ordinary spring tides, is known as the foreshore.

97. The Crown owns just under 50% of the 18,000 km length of Scotland's foreshore, with exceptions relating to land owned by a third party under udal tenure in the Northern Isles or acquired from the Crown over time by other landowners.

98. The capital value of and annual gross revenue from the seabed related activity as at the date of transfer is in the table below.

Asset Group	Capital value as of 31 March 2017 (£m)	Annual Gross revenue 2016-17 (£m)
Coastal	28.5	3.2
Dredging	0.9	0.1
Aquaculture	23.7	3.5
Cables/pipelines	23.7	3.1
Renewables	61.1	0.8
Total	137.9	10.7

99. During the Parliamentary consideration of the Bill, it became clear that the Scottish Parliament views the seabed as a national asset which should be managed nationally. The Act includes powers that enable Scottish Ministers to transfer the management of an asset by laying regulations in the Scottish Parliament, which will therefore be able to scrutinise any transfers of management of the seabed.

100. This reflects the Scottish Government's view that the seabed, except that part which is wholly intertidal, should be considered a strategic national asset, or asset of significant value, and should be subject to greater scrutiny. This is because marine assets are important for critical infrastructure such as energy production, telecommunications and transport.

101. The potential impact of the transfer of management of any part of the seabed – other than the foreshore – on third parties, such as mariners, is also significant. The potential or actual financial value and the wider economic and environmental importance of these assets is also significant. The marine assets or seabed rights can control activities in ports and harbours, aquaculture leases, offshore wind and tidal energy, cables and pipeline, and carbon capture and storage. As such, it includes strategic national infrastructure and the statutory transfer scheme^[4], which governed the devolution of the Scottish Crown Estate, includes procedures which are designed to protect critical national infrastructure. Scottish Ministers will keep under review the management arrangements for the seabed.

102. The Scottish Parliament also expressed concern during the progress of the Bill about sales of the seabed. The Scottish Government supports the long-standing policy of there being a presumption against the sale of the seabed. However, it is recognised that there are some circumstances where sales of the seabed should be possible. For instance, the seabed under the footings for bridges or piers or other harbour developments. The Act contains a provision requiring any manager to obtain the consent of Scottish Ministers before disposing ownership of any area of the seabed.

11 Scottish Ministers will run an initial round to invite proposals for transfer or delegation of management of an asset, or parts of an asset to local parts of Scotland, and will consult in advance on draft guidance on what proposals should include and the criteria for assessing proposals received including potential benefits and value for money.

103. Scottish Ministers are aware of the ambitions of some communities for local management of assets. Scottish Ministers will run a process to invite local authorities, Scottish Harbour Authorities and community organisations to apply to take on management of assets in their area either through a transfer or delegation agreement.

104. Managing a Scottish Crown Estate asset is a significant commitment and Scottish Ministers expect prospective managers to consider carefully which management option is best suited to achieving their aims and whether they meet the criteria within the Act. It might be that ownership or leasing the assets is more appropriate for achieving their aims than a transfer or delegation of management.

105. Scottish Ministers want the processes of transfer and delegation of the management of assets to be open and transparent and we will consult with relevant parties. Prospective managers are also expected to be open and transparent and engage proactively within the community in which the asset they wish to manage is located.

106. Scottish Ministers will develop and publish a complete, detailed and comprehensive application process, with accompanying guidance to assist prospective managers.

107. Scottish Ministers intend that locally managed assets should continue to contribute to the overall sustainability of the Scottish Crown Estate. All prospective managers should develop a robust plan, setting out their objectives for the asset, financial considerations, and expected social impacts, and the evidence to support their proposals.

Example: Community Opportunities

Scottish Government policy supports communities taking more control of their local assets, including land purchases and leasing arrangements.

Local communities which have taken control of local assets are showing real initiative and progress in improving their place, their communities. Those communities harness the land resources at their disposal and manage those assets to support economic, social, environmental and cultural development, seeking to enrich the life of their community and the people who live there, making the community more sustainable and resilient.

Scottish Crown Estate assets associated with the foreshore that adjoin land in community ownership, are potentially valuable assets for a community to manage in association with their land assets, or independently.

There are already many examples of local communities managing piers and jetties, moorings and anchorages and there are aspirations to exploit potential renewables opportunities. Being in control of decisions over these assets, and potentially other assets in the control of the Scottish Crown Estate, can create income streams that can help strengthen local economic performance and contribute to more empowered, sustainable and resilient communities.

Manager duties

12 All managers should exercise functions when managing a Scottish Crown Estate asset in a way that is transparent, accountable, inclusive and consistent with any other principle of good governance.

108. The Act requires managers to exercise their functions in a way that is transparent, accountable, inclusive and consistent with the principles of good governance. Crown Estate Scotland (Interim Management) is currently responsible for the management of all Scottish Crown Estate assets. The importance of transparency in local decision-making in the sale and management of assets is exemplified by the legal duty on governance and accountability contained in section 4 of the Crown Estate Scotland (Interim Management) Order 2017, which establishes the legal framework for the organisation.

4. Crown Estate Scotland (Interim Management) must, so far as reasonably practicable, operate in a way which—

(a) is transparent and accountable; and
(b) is consistent with any other principle of good governance which appears to it to constitute best practice

109. Crown Estate Scotland (Interim Management) also operates under a Framework Agreement drawn up by the Scottish Government. This sets out:

• Functions, duties and powers;
• Aims, objectives and targets;
• Responsibilities and accountability, including Crown Estate Scotland (Interim Management)'s relationship with the Scottish Government;
• Plans, budgets and controls;
• External accountability arrangements;
• Staff management arrangements; and
• Financial framework.

110. Information on decisions and performance of assets and minutes of meetings are publicly accessible on the Crown Estate Scotland (Interim Management) website. An independent board, accountable to Scottish Ministers, monitors and scrutinises the key outputs of the Crown Estate in Scotland, and provides further reassurance of transparency. Crown Estate Scotland (Interim Management) engages local communities and their representatives in key decisions such as its work on pilots of local asset management^[5].

111. The Act includes new powers for Scottish Ministers to transfer or delegate management of a Scottish Crown Estate asset. Any organisation that receives a transfer or delegation in the future will be expected to operate to similar standards to Crown Estate Scotland (Interim Management).

13 Scottish Ministers will develop guidance or directions on the manner in which a manager is expected to comply with the requirements of the Scottish Crown Estate Act relating to furthering sustainable development and seeking to manage assets in a way that is likely to contribute to wider benefits to Scotland, including relevant considerations when exercising the powers in section 11 of the Act.

112. Section 7 of the Act requires managers, when managing a Scottish Crown Estate asset, to do so in the way best calculated to further the achievement of sustainable development in Scotland and to seek to manage the assets in a way that is likely to contribute to the promotion or the improvement in Scotland of economic development, regeneration, social wellbeing and environmental wellbeing.

113. Section 11 of the Act includes a further duty relating to situations where a manager is disposing of the ownership of all or part of an asset, granting a lease or giving any other right in or over an asset. The manager must not do so for less than market value, unless the manager is satisfied that the relevant transaction is likely to contribute to the promotion or the improvement in Scotland of economic development, regeneration, social wellbeing, environmental wellbeing or sustainable development.

114. During the Parliamentary passage of the Act, MSPs recommended that guidance should be available for managers, setting out how managers should demonstrate that these factors have been taken into account. The Scottish Ministers accepted the recommendation and will develop relevant guidance.

115. General guidance is already available on the promotion or improvement of economic development, regeneration, social wellbeing, environmental wellbeing and sustainable development. This can be used to inform decisions on the management of the Scottish Crown Estate in the absence of any more specific guidance. Scottish Ministers do, however, see value in developing guidance on specific examples of these concepts to cover the unique nature of the Scottish Crown Estate in order to assist managers in making better decisions in the future.

116. The development of guidance is intended to empower and enable a manager of a Scottish Crown Estate asset to realise the benefits of the asset to the fullest extent, while protecting the Crown's interest. The guidance will take account of the diverse opportunities and challenges relating to management of the Scottish Crown Estate.

117. In particular, it may not be appropriate for a manager of a Scottish Crown Estate asset to be expected to deliver the full range of possible benefits that are covered in the general guidance. This could be because the asset being managed is very specific, such as salmon fishing rights on a particular river, an area of foreshore or specific mineral rights, or because another organisation is more appropriate for delivering particular benefits. In future, detailed guidance on the requirements of the Act may be developed for managers of specific classes of assets, potentially including guidance to managers on how to balance the weight to be given to various factors.

118. This guidance will build on the current work of Crown Estate Scotland (Interim Management) to improve understanding of the economic, social and environmental value of assets and to develop new methodologies on how to assess the possible benefits of different approaches to managing the assets in future.

119. Scottish Ministers plan to develop the guidance with the involvement of key sectors represented on the Crown Estate Stakeholder Advisory Group and will ensure that the guidance is specific and relevant to the circumstances of a manager of a Scottish Crown Estate asset.

14 Scottish Ministers will develop directions or guidance on other requirements for managers including accounting requirements and any charging requirements under section 13 of the Act.

120. The Act made provision for the Scottish Ministers to direct managers or give guidance as to their functions.

121. There are particular areas where direction or guidance may be required. The Act sets out for managers the requirements in respect of keeping accounts and accounting records, audit, and reporting on the management of assets. While the provisions of the Act may be sufficient we will keep under review the possible value of developing additional supporting guidance, particularly where management of an asset or part of asset may be transferred or delegated to another organisation.

122. There are also some specific provisions within the Act, for which specific directions and guidance are likely to be required. The Scottish Ministers have taken powers to direct managers on the amounts managers may charge in rent for the lease of Scottish Crown Estate assets or in connection with any other agreement for the use of the assets, such as a licence, or how these amounts should be calculated.

123. For example, currently aquaculture rents are set by a standard formula. Finfish rents are set on net gutted weight and species, while shellfish rents are set on species, length or rope and other types of equipment. There are set charges for moorings, and fees for licenses to give developers the property rights they need to lay, maintain and operate cables and pipelines on the seabed up to 12 nautical miles from the shore and undertake other activities. This includes oil and gas pipelines, electricity and telecommunication cables. These have been set following consultation with industry and third party experts. The fees are charged consistently except where specific circumstances merit otherwise and any guidance on these matters will also consider the possible need for specific exceptions.

124. In addition, Crown Estate Scotland (Interim Management) must comply with the Scottish Public Finance Manual (SPFM), which is issued by the Scottish Ministers to provide guidance to the Scottish Government and other relevant bodies on the proper handling and reporting of public assets and funds. The SPFM sets out the relevant, statutory, Parliamentary and administrative requirements, emphasises the need for economy, efficiency and effectiveness, and promotes good practice and high standards of propriety.

125. Guidance may be needed to make clear that provisions contained in the SPFM (and any other relevant guidance issued by the Scottish Ministers) should be regarded as "applicable guidance" for a manager of a Scottish Crown Estate asset as the accounts of Scottish Crown Estate managers are subject to audit by the Auditor General for Scotland under section 35 of the Act.

126. In future, where the manager of a Scottish Crown Estate asset is not a Scottish Public Body, the manager would be required to comply with requirements similar to those in the SPFM. The requirements are likely to be specified in a transfer order and accompanying guidance for such managers may also be necessary.

Q4 Do you believe that the objectives, priorities and policies contained in theme 2 will allow us to achieve our vision for the future management of the Scottish Crown Estate? Please explain your answer.

a) Yes
b) No

Theme 3: Revenue, Management of Liabilities and Other Issues

The following objectives, priorities and policies are focused on revenue, management of liabilities and other issues.

15 The net revenue will be used for the benefit of Scotland and communities with appropriate arrangements to co-ordinate funding for programmes and projects that cannot be undertaken by a single community or council.

127. The net revenue from the estate – the income from leasing and all the other activities, less the costs of managing the assets – is paid into the Scottish Consolidated Fund (SCF).

128. Scottish Ministers have committed to distribute the net revenue generated by the Scottish Crown Estate marine assets out to 12 nautical miles to coastal local authorities for community benefit. The balance in net revenue from other Scottish Crown Estate assets will be used for wider national benefit through the SCF.

129. Crown Estate Scotland (Interim Management)'s net revenue to the SCF in 2017-2018 totalled £9 million. The share of total net revenue from marine assets in the 0-12 nautical miles zone was around £7 million in 2017-2018. This is currently the most significant element of the revenue and is expected to grow further in future years as leases from renewable schemes increase.

130. The first payments to coastal local authorities from the net revenue generated by Scottish Crown Estate marine assets out to 12 nautical miles in 2017-2018 represent a significant increase in the total available funding for coastal communities.

131. The opportunities associated with the distribution of net revenue need to be balanced with the need to fund investment in the estate. This will ensure that our coastal communities continue to derive financial benefits from the assets in future.

132. We see value in exploring with local authorities the potential for regional or national co-ordination to co-ordinate funding for programmes and projects that cannot be undertaken by a single community or council. This could enable revenue from the assets to be deployed to funding strategic investment, for example, to support established and new marine and coastal industries to sustain and deliver community benefit in the coming years and ensure that we can maintain and enhance wider benefits from the assets.

Image 9: How revenue generated from Scottish Crown Estate assets is distributed

16 The net revenue from marine assets out to 12 nautical miles should demonstrably benefit coastal communities and all arrangements for the use of net revenue should be transparent and accountable with opportunities for communities to express views on how the revenue is used.

133. Scottish Ministers have committed to ensuring coastal communities will benefit from 100% of the net revenue from the Crown Estate marine assets out to 12 nautical miles.

134. Scottish Ministers expect local authorities to ensure that all of the funding received from the net revenue generated from the marine assets out to 12 nautical miles is used to fund additional expenditure that specifically benefits coastal communities.

135. Local authorities will be empowered to make decisions on funding of those projects that will deliver coastal community benefit while ensuring transparency and accountability to communities and others. This will include transparency on how decisions will be made and proportionate reporting arrangements on how the funding has been used.

136. It is anticipated that local communities will have an opportunity to be involved in the decision-making process on how the revenue from the marine assets is used. Greater consideration of local needs and the flow of additional revenue into coastal communities will help to empower and enhance coastal communities.

17 The Scottish Government will work with COSLA to complete a review of the future arrangements for net revenue from marine assets out to 12 nautical miles. The review will take account of the management requirements of the estate, how future revenue can be increased through strategic funding, the potential for other communities of interest to be managers and the case for these organisations to directly benefit from the net revenue.

137. A driver for reform of the management of Scottish Crown Estate assets has been to seek to ensure that local communities benefit – through realising wider benefits, opportunities for local management of parts of the estate and the Scottish Ministers' commitment to bring financial benefits to coastal communities.

138. The Scottish Government and COSLA have agreed an interim approach to distribution of the net revenue from Scottish Crown Estate assets, based on each local authority's share of the of the adjacent sea area in the 0-12 nautical mile zone.

139. The formula-based approach will be reviewed and the Scottish Government and COSLA will collaborate on the detail of this process, including how the delivery mechanism for the funds can ensure that benefits to communities can be maximised. Annual allocations to individual local authorities in future will depend on the net revenue generated by Scottish Crown Estate marine assets out to 12 nautical miles in the relevant year of Scottish Crown Estate operations that provides the basis for the total allocation.

140. The review will take into account change brought about by the Scottish Crown Estate Act, recognising the potential for there to be a variety of managers, in determining how the net revenue from the assets out to 12 nautical miles should reach communities in the future. This also needs to be balanced against the need to fund investment in the assets to ensure future revenue streams for coastal communities and maximise the benefits in future.

18 Local organisations interested in management of a Scottish Crown Estate asset, should consider how they could take on the function and liabilities for the longer term and manage the asset in a way that delivers added value, transparency and efficiency and which is compatible with their core remit.

141. Transfers and delegations and other models to enhance local control represent a significant opportunity to maintain improvement in how Scottish Crown Estate assets are managed and should be accompanied by no deterioration in transparency or efficiency in order to ensure benefits are achieved. In response to the 2017 public consultation on the long term management the Scottish Crown Estate^[6], 80% of respondents who provided a view considered that the person taking on the responsibility for management of an asset should normally take on the responsibility for managing the associated liabilities. Scottish Ministers' policy in general is rights and liabilities relating to a Scottish Crown Estate asset will be transferred to the new manager and if an asset is sold, the liability in general will be transferred to the new owner.

142. 74% of respondents who provided a view on the consultation also considered that the costs associated with management of liabilities should be included in the overheads. This approach ensures that costs and liabilities associated with the management of an asset are met from Scottish Crown Estate funds themselves and that managers do not use any funds that they may hold in respect of another capacity for this purpose.

143. The Scottish Crown Estate encompasses a wide range of assets, some of which will have liabilities associated with them, such as decommissioning offshore renewable infrastructure.

144. An issue of significant concern to MSPs during the Parliamentary consideration of the Act was that of liabilities. Liabilities relating to an asset will normally be transferred to the manager of the asset, on the understanding that the manager will meet the liabilities associated with the asset from its capital or revenue depending on whether the liability should be charged to the capital or revenue budget. When applying for a transfer or delegation prospective managers will be required to consider fully how they will manage and meet liabilities, including any liabilities which may be attached to newly acquired assets. Liabilities may relate to all or any of the following:

• A Scottish Crown Estate asset;
• A former Scottish Crown Estate asset; or
• A historic Scottish asset within the meaning of paragraph 1 of schedule 2 of the Crown Estate transfer scheme.

19 Scottish Ministers have a preference for shared services approaches to administration of the assets in order to maximise efficiency and hence net revenue available to Scotland and local communities.

145. Local management of assets using the powers in the Act can allow for local control over decision-making in the context of a wider governance framework. There are various possible models for how devolved decision-making can be supported. This ranges from shared services arrangements to maximise efficiency and economies of scale to each manager having separate administrative and support systems.

146. As it cannot be guaranteed that individual assets will generate sufficient revenue to cover costs, or that the liquid capital associated with individual assets will be sufficient for future investment requirements, the Scottish Government consider that a preference for shared services is needed, where management of assets is transferred or delegated to another manager.

147. There is potential for contractual arrangements for shared services to support delivery in a way which reduces administration costs compared with each manager incurring them separately. One possible example of this approach would be to continue to access Crown Estate Scotland (Interim Management)'s administrative and staff support. This would enable local areas to take democratic decisions on the use of an asset while minimising the additional costs of administration.

148. Shared services could provide a central support function for core strategic services and potentially some operational activities that may be provided on a joint basis or for those which may be out-sourced, such as legal advice.

149. This approach can:

• Minimise duplication in working; and enhance efficient working practices;
• Ensure consistency of approach to management; and to standards of practice including computer systems;
• Ensure management practices align with wider national strategy and commitments; and
• Limit financial risks.

20 An organisation that wishes to take on direct management will normally be expected to manage the associated liabilities, including those arising from their decisions on the management, and cover the associated costs from the income generated from the asset.

150. Liabilities include all current, future and past liabilities. When seeking a transfer or delegation, the future manager should be prepared, when managing a Scottish Crown Estate asset, to cover the costs of the liabilities associated with the asset to be managed.

151. Not all Scottish Crown Estate assets will have significant liabilities. All managers must ensure the asset contributes to generating additional revenue into the SCF, after meeting running costs and other commitments, from their Scottish Crown Estate accounts.

152. Managers will also be responsible for making decisions on the future of the assets and will, therefore, be responsible for all their actions and decisions including the current and future liabilities associated with these. Managers must have regard to the likely effect that actions and decisions on the future of the asset may have on the overall value of the Scottish Crown Estate.

21 Crown Estate Scotland (Interim Management) staff rights will be respected and protected in the reform of the management of the Scottish Crown Estate and they will have opportunities to contribute their views.

153. The skills, knowledge and commitment of Crown Estate Scotland (Interim Management) staff are highly valued by the Scottish Ministers. These skills and knowledge will be required in future whether an asset is managed at the national level or new models for local control are implemented.

154. The preference for shared service models for any transfers or delegation of management is likely to minimise change for staff currently employed by Crown Estate Scotland (Interim Management). This option would retain economies of scale relating to managing assets at a national level and ensure the most cost efficient allocation of staff and resource costs.

155. The rights of Crown Estate Scotland (Interim Management) staff will continue to be protected throughout the process for completing reforms to the management of the Scottish Crown Estate.

22 Crown Estate Scotland (Interim Management) will assist Scottish Ministers in implementing the Strategic Management Plan and will develop new roles in contributing to the co-ordination of the management of the wider Scottish Crown Estate, facilitating delivery of the Plan and realisation of potential benefits, including piloting new partnership working models and potentially including joint ventures.

156. This role will be additional to Crown Estate Scotland (Interim Management)'s requirement to have regard to the Plan. It takes account of the value and benefits of accessing the wider expertise of staff within the organisation to assist with work on co-ordination and contributing to and supporting new models on how the assets can be managed.

157. The possible models may relate to how Crown Estate Scotland (Interim Management) manages the assets for which it has responsibility or how expertise, support or assistance could be provided to assist others to take on management of specific assets. Further information on these new roles is outlined in Crown Estate Scotland (Interim Management)'s draft Corporate Plan.

Q5 Do you believe that the objectives, priorities and policies contained in theme 3 will allow us to achieve our vision for the future management of the Scottish Crown Estate? Please explain your answer.

a) Yes
b) No

Q6 Do you feel the objectives, priorities and policies will deliver success to the Scottish Crown Estate? Please explain your answer.

a) Yes
b) No

Q7 Do you feel there are any other opportunities for revenue generation that have not been identified in the draft Plan? Please explain your answer.

a) Yes
b) No

Q8 Do you feel the objectives, priorities and policies will impact you positively, negatively or have no impact on you as an individual or as part of an organisation? Please explain your answer.

Positively
Negatively
Not at all

Q9 Do you feel that the objectives, priorities and policies align and take account of wider Scottish Government objectives? Please explain your answer.

a) Yes
b) Partially
c) No