Crown Estate: a consultation on the long-term management of the Crown Estate in Scotland

Chapter 1: Vision

The devolution of the management of the Crown Estate in Scotland creates an opportunity to manage the assets differently, to maximise the benefits to the nation and communities. The Scottish Parliament will have the competence to legislate on the management of the Crown Estate in Scotland but it cannot amend the reservations in the Scotland Act 1998. ^[3] In this section, we would like your views on what the vision for the Crown Estate in Scotland should be.

1.1 Current Arrangements

To date, the property, rights and interests of the Crown Estate have been managed mainly on a commercial basis through the buying and selling of land and property. The aim has been to maintain the value of the estate and lease the estate to secure the best consideration. This is normally equated to the best revenue stream that can be secured from the lease without extracting a monopoly value. These commercial aims stem from the duties on the Crown Estate Commissioners contained in the Crown Estate Act 1961:

• "Managing and turning to account land and other property, rights and interests and of holding such of the property rights and interests under their management.
• It shall be the general duty of the Commissioners, while maintaining the Crown Estate as an estate in land (with such proportion of cash or investments as seems to them to be required for the discharge of their functions), to maintain its value and the return obtained from it, but with due regard to the requirements of good management.
• Subject to some specified exceptions in the Act, the Commissioners shall not sell, lease or otherwise dispose of any land of the Crown Estate, or any right or privilege over or in relation to any such land, except for the best consideration in money or money's worth which in their opinion can reasonably be obtained, having regard to all the circumstances of the case but excluding any element of monopoly value attributable to the extent of the Crown's ownership of comparable land."

The 'specified exceptions' to the requirement to obtain the best consideration discussed above mainly relate to: disposing of land; a right or privilege over, or in relation to, land; the development, improvement or general benefit of any land; or of a right, or privilege over, or in relation to, land for certain purposes. Currently, the Crown Estate Commissioners may dispose of land, or of a right or privilege over or in relation to land, without consideration, or for such consideration as they think fit, where the land is to be used and occupied, or the right or privilege is to be enjoyed:

"(a) for the purpose of any public or local authority, or for the supply of water; or
(b) for the construction, enlargement, improvement or maintenance of any road, dock, sea-wall, embankment, drain, water-course or reservoir; or
(c) for providing, enlarging or improving a place of religious worship, residence for a minister of religion, school, library, reading room or literary or scientific institution, or any communal facilities for recreation, or the amenities of or means of access to any land or building falling within this paragraph; or
(d) for any other public or charitable purpose in connection with any land of the Crown Estate, or tending to the welfare of persons residing or employed on any such land."

The Scottish Parliament will be able to depart from these duties to provide a new or revised purpose for the Crown Estate in Scotland but the Parliament's legislative competence is restricted by the Scotland Acts 1998 and 2016 and the draft Transfer Scheme which is currently being finalised via negotiations between the Scottish Government and the UK Government.

A new provision inserted into the Scotland Act 1998 by the Scotland Act 2016 requires all capital receipts from sale of assets to be reinvested into the estate. There is also a duty to manage property, rights and interests as an estate in land, or as estates in land managed separately. The draft Transfer Scheme includes provisions to restrict charges for leases for the estate in Scotland for electricity infrastructure, telecommunication cables and pipelines. These restrictions provide for independent review and ensure that monopoly value is excluded. The Transfer Scheme also specifies the basis for essential use of the estate for defence purposes.

As well as the core activity of acting as a landlord by buying and selling and leasing land and property, the Crown Estate Commissioners in Scotland also undertake strategic planning and develop investment strategies on a national or industry sector basis with the aim of enhancing the value of the estate in future. This activity has involved investment in strategic research and initiatives to enable new industries to develop, grow and mature to a stage where they become new sources of revenue for the UK-wide estate through new leasing activity. This work has also sometimes involved leading, or contributing to, initiatives to co-ordinate research or strategic initiatives. We would like your views on whether these activities should continue in future.

1.2 Overall Vision for the Future

The manager of the Crown Estate has some discretion to take account of the requirements of good management when seeking to maintain the value of the estate and/or the return from the estate. There is also some discretion to waive the best consideration for a sale or lease in specific circumstances. The development of the long term framework provides an opportunity to review what can be included under 'good management' and the circumstances when the best consideration is not required.

More fundamentally, there is a basic question about whether the estate should continue being managed on a primarily commercial basis, or whether there is a case for a wider set of considerations to be taken into account. There have been suggestions from stakeholders for wider socioeconomic benefits, including community benefits, to be taken into account when managing the estate's assets. For example, a decision could be favoured even if a development project did not generate a sufficient commercially return because the estimated employment, wider socioeconomic and well-being benefits for a community would be significantly larger than the commercial return to the estate. Currently, there is some discretion to waive the best consideration for a sale or lease in 'specific exceptions' but there is an opportunity to review what can be included under 'specific exceptions'.

The new provisions inserted into the Scotland Act 1998 require the manager of the estate to maintain the estate in future and we need to ensure that such discretion does not compromise compliance with that duty. In addition, the net revenue from the estate available to communities will be lower where such discretion is exercised. We need to ensure that we do not reach a tipping point where the future revenue from the estate is only a small proportion of the revenue potential. This is important as this would reduce revenue for communities and create financial pressures on the Scottish block ^[4] as the UK Government will apply a block grant reduction to the Scottish block equivalent to the net revenue of the Crown Estate in 2016/17.

Scottish Ministers consider there to be merit in reforming the duties for management of the Crown Estate. This could involve continuing to normally require assets to be managed on a commercial basis but to provide discretion for the manager of a Crown Estate asset to take account of wider socioeconomic or environmental benefits when charging for a lease or sale of land. For example, existing legal duties such as the duty on local authorities to secure best value, the duties for Highland and Islands Enterprise and sustainable development could be adapted for this purpose.

Box 3: Best Value

Under the Local Government in Scotland Act 2003, local authorities in Scotland are under a statutory duty of Best Value. This is defined as being to make arrangements to secure continuous improvement in performance while maintaining an appropriate balance between quality and cost; and in making those arrangements and securing that balance, to have regard to economy, efficiency, effectiveness, the equal opportunities requirements and to contribute to the achievement of sustainable development.

Box 4: Recognising Community Benefits

Highlands and Islands Enterprise ( HIE) takes a distinctive approach to regional development - supporting the growth of communities as well as businesses and economic sectors.

Operating across a largely rural region that covers half of Scotland, the agency has its origins in the Highlands and Islands Development Board, which was set up in 1965 to combat chronic depopulation. Fifty-one years on, HIE's integration of economic and social powers is widely regarded as having been a key component in a remarkable turnaround of the region's fortunes.

Since the 1960s, Highlands and Islands population has risen by 22% - more than seven times the rate of Scotland as a whole. Unemployment levels, which used to be among the highest in the country, dropped below both the Scottish and UK averages a decade ago, and have remained there ever since.

The business base, once dominated by primary industries such as farming, fishing and forestry, now encompasses thriving energy, life sciences and creative industries sectors, universities and business services, as well as tourism and food and drink.

HIE's broad remit recognises that strong and sustainable communities are essential pillars that support economic growth across the region, particularly in remote mainland and island areas. Increasingly, this has meant empowering communities to acquire and manage key assets for themselves, including land, property and infrastructure.

With HIE support, Highlands and Islands communities have pioneered a huge variety of innovative community projects, from renewable energy schemes to social enterprises providing vital services, and most recently delivering broadband.

Time has proved the HIE model so successful that plans are now being considered to introduce a similar approach to support rural development in the south of Scotland.

Box 5: Sustainable Development

"The Scottish Government's commitment to sustainable development is reflected in its Purpose. It is also reflected in the continuing support for the five guiding principles set out in the UK's shared framework for sustainable development:

Achieving a sustainable economy, promoting good governance and using sound science responsibly are essential to the creation and maintenance of a strong, healthy and just society capable of living within environmental limits."

Scotland's National Marine Plan (March 2015)

This discretion to take account of wider benefits will impact on the gross revenue of the Crown Estate and, in turn, this will impact on the net revenue that is available for communities or any other purpose. In order to ensure that this discretion does not risk breaching the duty to maintain the estate as an estate in land, or as estates in land managed separately - which will continue in perpetuity - Scottish Ministers propose that this new discretion is accompanied by a duty to have regard to the implications for the estate as a whole. When this involves disposal of land, it is also proposed there would be a requirement to have regard to the implications for the overall value of the estate. When this involves leasing an asset, there would be a requirement to have regard to the overall implications for the revenue of the estate.

This could enable the manager to charge a lower amount for social or other purposes with reassurance that this will not significantly risk the overall position of the estate. Likewise, it would enable the manager to charge a lower amount to enable an economic development project to be pursued, on the basis that the likely wider benefits of the project outweigh the potential loss of revenue to the estate and this approach will not risk the overall position of the estate.

We would, therefore, like your views on the following:

Q1: Should the future approach be changed from the duty to manage the assets on a commercial basis?

YES

NO

Don't know

Q2: If YES, should there be a power to take account of wider socioeconomic or other benefits?

YES

NO

Don't know

Q3: If YES, which assets should be managed on a commercial basis and which should be managed differently? ( Please provide details in the space below)

1.3 Good Management for the Future

As discussed in the background section, Crown Estate managers already have some discretion to take account of 'good management' (section 1(3) of the Crown Estate Act 1961) when seeking to maintain the value of the estate. We now have an opportunity to review 'good management' to ensure it fits Scotland.

There have also been calls for an explicit duty to take account of the environmental implications of decisions on use of the estate. Legislation on the environment normally makes clear whether or not it applies to the Crown and the Crown Estate Commissioners.

We would like your views on the following:

Q4: Should the requirement on 'good management' be retained?

YES

NO

Don't know

Q5: Should the requirement on 'good management' be amended to take account of environmental implications in relation to the management functions?

YES

NO

Don't know

1.4 Sale of Assets

The Scotland Act 2016 inserts new provision to the Scotland Act 1998 which does not prevent disposal of assets by the manager for the purpose of that management, so there is no requirement to preserve the existing assets in the Crown Estate portfolio. The current portfolio has been accumulated over time and has been managed as a UK-wide portfolio, so there may be a need to rebalance the estate on a Scottish basis. In addition, preserving the portfolio may lead to opportunities being missed, which could lead to substantial losses for Scotland and communities.

Scottish Ministers consider that there are strong grounds to enable assets to be sold, recognising that there is a legal duty to re-invest the proceeds in the estate. Historically, there has been a general presumption against selling the seabed so that this national strategic asset does not become fragmented and Scottish Ministers plan to maintain this policy. There may be a need for manager(s) of Crown Estate assets to seek the approval of Scottish Ministers for sizeable sales and Scottish Ministers propose to introduce this policy.

Q6: Should the existing Crown Estate portfolio in Scotland be preserved in its current form?

YES

NO

Don't know

Q7: Should Scottish Ministers' approval be required for sizeable sales?

YES

NO

Don't know

Q8: Should the existing policy - the general presumption against selling the seabed - be maintained?

YES

NO

Don't know

Q9: Do you have any other views on how the management of the Crown Estate in Scotland can ensure delivery of the duties in the Scotland Acts 1998 and 2016? ( Please provide details in the space below)

1.5 Transparency

Devolving the management of Crown estate assets to the Scottish Parliament provides new opportunities to enhance the accountability and transparency of how the assets in Scotland are managed. As with any commercial activity, there will always be constraints on full disclosure of all activities due to data protection requirements and the commercial nature of some activities.

Box 6: Transparency

Scottish Ministers expect all public bodies to communicate clearly with their stakeholders, make information widely available, consult thoroughly and imaginatively and seek feedback on performance.

Some public bodies in Scotland have a policy of publishing board papers on their website and enable members of the public to attend all or part of board meetings as observers. For example, Health Board meetings are open to members of the public and all relevant papers are available online.

There are many examples of public bodies promoting opportunities for local communities to comment and influence decisions. Public bodies in Scotland are encouraged to undertake reviews of performance and some enable communities to contribute to performance reviews. For example, Health Board Annual Reviews provide for scrutiny of the Boards' performance whilst encouraging dialogue and accountability between local communities and NHS Boards. The review process includes:

• advertising the Review, elements of which are open to trade unions, staff, user groups, patients and members of the public to attend;
• publication of information prior to the Review online;
• opportunities for the public to attend a Q&A session;
• the results of the review are made available on the Board's website.

We therefore seek your views on:

Q10: How can transparency on the sale and management of the Crown Estate assets be enhanced? ( Please provide details in the space below)

1.6 Greater Alignment with Scottish Government Policies

As outlined in the Introduction, Scottish Ministers see this as an opportunity to use the Crown Estate assets and revenues in a way that contributes towards achieving the following National Outcomes:

• We value and enjoy our built and natural environment and protect it and enhance it for future generations.
• We realise our full economic potential with more and better employment opportunities for our people.
• We have strong, resilient and supportive communities where people take responsibility for their own actions and how they affect others.

This requires better alignment between policies for managing the Crown Estate in Scotland and other key policies of Scottish Ministers in related areas such as community empowerment, access, land reform and marine planning. Scottish Ministers envision that the manager(s) of the Crown Estate, going forward, will continue to be involved in implementation of these wider policies. For example, the national marine plan and regional marine planning will set an important context for the management of marine assets.

Box 7: Community Empowerment

We want communities across Scotland to have a stronger voice in the decisions that matter to them. The Community Empowerment Act 2015 will provide new rights for communities, place new duties on public sector bodies and reform community planning. Where communities are empowered, we expect to see a range of benefits: local democratic participation boosted; increased confidence and skills among local people; higher numbers of people volunteering; and more satisfaction with their quality of life. Better community engagement and participation can lead to the delivery of better, more responsive services and better outcomes for communities.

We want to push the boundaries of community empowerment and community-led innovation. We are determined to see a Scotland where community-led action is celebrated and community ownership is both desirable and viable. Scotland's communities are a rich source of energy, creativity and talent. They are made up of people with rich and diverse backgrounds who each have something to contribute to making Scotland flourish. Government needs to help communities to work together and release that potential to create a more prosperous and fairer Scotland.

Q11: How can the devolution of the management of the Crown Estate contribute to community empowerment? ( Please provide details in the space below)

Q12: How can the devolution of the management of the Crown Estate contribute to land reform? ( Please provide details in the space below)

Q13: How can we further improve alignment with Scottish Ministers' objectives to deliver on the national outcomes? ( Please provide details in the space below)