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

Chapter 2: Managing Crown Estate Assets for Scotland and Communities

Devolution of the management of the Crown Estate assets in Scotland will end the management of the assets being controlled from outside Scotland and it will be possible, for the first time, to retain the surplus revenue in Scotland, rather than the surpluses going to the UK Treasury.

Ownership of the Crown Estate will remain vested in the Crown, or in other words, the reigning Monarch will continue to own the assets. Only the management and the revenue generated from these will transfer. New provision inserted into the Scotland Act 1998 imposes certain requirements (see Box 8 below) which includes the concept of a single Crown Estate in Scotland (even though the estate may, in fact, be managed by more than one manager) to ensure the potential capital value of the estate for investment opportunities is maximised. The Act requires the estate to be managed as an 'estate in land' (or as estates in land managed separately) and capital receipts need to be reinvested into the estate.

Box 8: 'Estate in Land' Duties

The Crown Estate Commissioners currently have a function of maintaining the Crown Estate as an 'estate in land' with such proportion of cash or investments as they consider necessary under section 1(3) of the Crown Estate Act 1961. By means of this function the Crown Estate is (in effect) held in trust for the Sovereign.

The Scotland Act 2016 ensures that the Scottish assets will be protected as an estate in land in perpetuity:

• Section 36(1) inserts a new section 90B (the Crown Estate) into the Scotland Act 1998.
• Section 90B(5) requires post-transfer management to be on behalf of the Crown.
• Subsections (6) and (7) of section 90B allow the disposal and acquisition of property post-transfer and all acquired property (excluding hereditary revenues) must also be managed on behalf of the Crown.
• Post- transfer, new section 90B(8) requires the property, rights and interests to be maintained as an estate in land (or as estates in land separately managed).

As discussed in the introduction, interim arrangements for the management of the assets, from the point of transfer, are designed to ensure that devolution to Scotland can be completed at the earliest opportunity and to ensure a smooth transfer for staff, tenants and other customers. Decisions need to be made on what should be the long term framework for management Scotland's Crown Estate assets.

2.1 Principles

Ministers have set out the following general three principles to explore opportunities for democratic renewal and decentralisation:

1. People should be able to influence decisions that affect them and their families, and trust the decisions made on their behalf by those they elect.

2. Arrangements should be appropriate and tailored towards the needs and aspirations of people and places, to support the delivery of shared national outcomes.

3. Arrangements should be effective, efficient and represent value for money for Scotland as a whole.

Ministers will use these principles as a guide when exploring opportunities for democratic renewal and decentralisation in the long term framework for management of the Crown Estate in Scotland.

Q14: Do you have any views on the proposed application of the above principles to guide the long term framework for managing Crown Estate assets?

YES

NO

Don't know

Comment:

2.2 Design Options for the Crown Estate in Scotland

In this consultation, we present the three options for designing the long term framework which were identified through stakeholder engagement:

Option 1: Retain management of all assets at the national level.

Option 2: Devolve management of all assets to local authorities or communities.

Option 3: Consider on a case-by-case basis the appropriate governance arrangements for each asset of the Crown Estate in Scotland.

Option 1: This is likely to have the lowest cost and would minimise disruption, retain economies of scale and be the simplest approach for marine industries as it would enable them to deal with one manager in Scotland. This option would also enable the continuation of the approach where the capital value of the land and property can provide collateral for investment in new opportunities elsewhere in the estate.

However, it could potentially limit community empowerment and it would not implement the Smith Commission's recommendation of further devolution. In addition, the diversity of the portfolio does not necessarily mean its long term management is best suited to the assets being managed by one manager.

Option 2: This option would provide for local control and would deliver the Smith recommendation of further devolution for the islands or other local areas who wish to take responsibility for the management of Crown Estate assets. It has also been argued that some of the assets may be better managed at the local level because of synergies with other local responsibilities.

However, at this time it is not clear that all local authorities or communities would prefer to manage the assets in their area and whether the skills and expertise are currently available at a local level or whether they can be developed in a timely and efficient manner. This option could also lead to fragmentation, or local competition, between different parts of Scotland. However, a national framework to define the roles and responsibilities of local managers within a framework of national oversight could help address these risks (see section 2.6). Not all assets may be sustainable in their own right which could result in financial burdens being placed on councils or communities. The interim arrangements will provide vital information on whether some assets are likely to require cross-subsidy. It may also not be possible for individual local authorities to take on the liabilities associated with every asset in their area due to the potential scale of the liabilities.

Box 9: 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.

Crown Estate assets associated with the foreshore that adjoin land in community ownership, and the seabed reaching out from the foreshore, 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. Inshore shellfish assets can also be harnessed, 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 Crown Estate, can create income streams that can help strengthen local economic performance and contribute to more empowered, sustainable and resilient communities.

Option 3: This option would involve a case-by-case assessment and enable a geographic or functional approach to be followed. This would enable the principles of the Smith Commission to be delivered, while recognising that the Crown Estate in Scotland is a diverse portfolio ranging from management of small jetties, ancient rights to the foreshore, salmon fishing rights, rural estates, urban property and the management of the seabed as a national strategic asset.

This option would enable a tailored approach to be put in place for the management of each asset (functional or geographic approach) based on the Smith Commission's principles and allow local authorities, local tenants, local communities and others who have an interest in, or depend on, the use of Crown Estate assets to be directly involved in their management. This option could be designed to increase local control over decision-making with shared supporting arrangements to reduce duplication and fragmentation.

The following diagram has been produced by a stakeholder as a potential way of delivering option 3:

Figure 1: Stakeholder Model

Scottish Ministers have not ruled out any option and are inviting views on all options so they can take a decision on the future framework for management of the assets.

In summary, option 1 would be the most streamlined approach but would not fully implement the Smith Commission's recommendation of further devolution. Option 2 would deliver on the Smith Commission recommendation of further devolution. However, concerns have been expressed about the availability of local skills and expertise to deliver this option, as well as fragmentation and financial burden. Option 3 would avoid the imposition of a 'one size fits all' approach across Scotland and provide scope for further devolution opportunities to be tailored to the aspirations of communities and provide space for alternative solutions if some assets, or interactions with industry, cannot sensibly be run on a fragmented basis. On this basis, Scottish Ministers currently see merit in option 3, subject to views received through this consultation.

Q15: Which of the three proposed options for managing Crown Estate assets in Scotland do you prefer?

Option 1 (national)

Option 2 (local)

Option 3 (hybrid)

Don't know

OTHER

Q16: If OTHER, what approach to management do you propose?

Management of the Crown Estate could either be kept in one organisation or be reformed on a functional basis or a geographic basis. Particular types of assets could be managed by one type of organisation under a functional approach, or assets in particular areas could be managed by one type of organisation under a geographic approach. The Smith Commission's recommendations envisaged further devolution of management of the land, property and rights being pursued on a geographic basis, with particular reference to the Orkney Islands, Shetland Islands and Western Isles and a process for other local areas to express interest in local management.

Q17: Should a geographic or a functional approach guide the reform of the management of the Crown Estate in Scotland?

Geographic

Functional

Don't know

Other Please Specify:

Q18: Do you have a preference for management on a geographic basis being led by either local authorities or communities?

Local authorities

Communities

Don't know

The issues outlined above are explored further in the remainder of this chapter. Some of them apply to all options while the detailed consideration of the opportunities for local decision-making and management are focused on option 3 but the issues are also relevant to option 2.

2.3 Enabling Ministers to Reform the Management of the Crown Estate

To recognise the diversity of the estate and the scope for different solutions over time, Scottish Ministers are considering whether the new legal framework could include a power for Ministers to transfer the responsibility for management of the estate, or parts of the estate, to a particular person or persons. This could include Scottish Ministers, a local authority, a public body or another person including a community organisation. Scottish Ministers believe that they should be able to use this power to vary who manages the estate, or parts of the estate, in future. This would enable Ministers to either reform the management of the Crown Estate across Scotland immediately or undertake a phased approach to reform.

Scottish Ministers are also considering whether they should have the power to extinguish rights currently held in the Crown Estate where management of the asset can be adequately covered by other legislation. This would provide for simplification of the legal framework for managing activities, where appropriate.

Q19: Should Scottish Ministers have the power to hand responsibility for management of the estate, or parts of it, to a particular person or persons?

YES

NO

Don't know

Q20: Should Scottish Ministers have a power to vary management arrangements held by other parties over time?

YES

NO

Don't know

Q21: Should Scottish Ministers have the power to extinguish rights currently held in the Crown Estate where management of the asset can be adequately covered by other legislation?

YES

NO

Don't know

2.4 Delivering More Control for Communities

In light of the Smith Commission's recommendations and Scottish Ministers' policies on community empowerment, Scottish Ministers wish to consider opportunities for enhancing the local control of property, rights and interests currently managed by the Crown Estate.

Scottish Ministers consider that management of the foreshore and management of harbour areas operated by a local authority or trust port are examples of functions that could be successfully devolved further to communities.

Scottish Ministers consider there to be a case for the management of the seabed, particularly the rights to the 12-200nm zone, and leasing for strategic national infrastructure such as telecommunication cables, pipelines and offshore wind farms to be undertaken at the national level.

Scottish Ministers will consider the potential to retain management of the rural estates at national level, subject to the views of the tenants of the rural estates, including whether they would like to be responsible for management.

There may also be a need for management of some assets at the national level because individual local authorities may not be best placed, or interested in, taking on the management of some Crown Estate property, rights and interests. A breakdown on the assets and proposed potential level of management are detailed in the Box below.

Box 10: Further Devolution Opportunities

Functions that could potentially be further devolved to councils or communities

• Foreshore rights
• Leasing for wave and tidal energy out to 1nm, 3nm or 12nm
• Land in local authority operated ports
• Non-operational ports and jetties

Functions that may be better managed at the national level

• Offshore renewable leasing (12-200nm zone)
• Rights over cables and pipelines (which can transcend national borders within the UK)
• Other seabed rights (12-200nm zone) - gas storage rights, mineral rights (not hydrocarbons)
• Rights to naturally occurring gold and silver
• Reserved mining rights

Functions that need more consideration

• The rural estates - Applegirth, Fochabers, Glenlivet and Whitehill estates
• Urban property - principally at George St, Edinburgh
• Offshore wind leasing in the 0-12nm zone
• Aquaculture (may need mechanisms for management of conflicts of interest)
• Salmon fishing rights, possibly retained as part of the rural estate or aligned more closely with wider reform of wild fisheries)
• Land in other ports

Box 11: Ports and Harbours

There are four main types of ports in Scotland:

• 1. Trust ports are independent statutory bodies managed by a board;
• 2. Ports that are privately owned;
• 3. Ports that are owned by a local authority;
• 4. Ports owned by Caledonian Maritime Assets Limited used in the provision of lifeline ferry services.

Many ports currently lease areas of seabed from The Crown Estate within their port limits. In some cases, for the construction of harbour infrastructure such as piers or jetties, and in others where seabed has been reclaimed for quayside or laydown areas.

Smaller harbours or marinas may lease areas for boat moorings which may then be leased out to local boat owners or visitors. In some cases, moorings associations will already have arrangements in place to manage a moorings area on behalf of The Crown Estate.

If the management is to be devolved to bodies other than ports themselves, then it will be important to ensure there is a mechanism to ensure consistency in relation to procedures and charges across different areas to ensure that existing operations and future port development are not impacted (in terms of overall costs of development or timing of approvals).

The following text box lists the key Scottish Crown Estate assets:

Box 12: Crown Estate Assets in Scotland

The land forming the seabed of Scottish coastal waters i.e. inside 12nm

Seabed rights within 200nm:

• (gas) storage rights
• energy rights (offshore renewables)
• mineral rights (not hydrocarbons)
• powers to lay cables and pipelines
• other leasing rights

Foreshore rights

Rural estates:

• The Whitehill estate in Midlothian

• The Glenlivet estate in Moray
• The Applegirth estate in Dumfries and Galloway
• The Fochabers estate in Moray
• 1 and 2 Kings Park Cottages, Stirling
• 10 the Homesteads, Stirling

Commercial estates:

• 39 to 41 George Street, Edinburgh
• the lock-up garage at 3 and 5 West Thistle Street Lane, Edinburgh
• the car parking spaces to the rear of 37, 39 and 41 Frederick Street, Edinburgh
• the land at Rhu Marina on the Firth of Clyde

Salmon fishing rights (rivers and coastal waters)

Rights to naturally occurring gold and silver

Reserved mining rights

Any other property, rights and interests held by Commissioners on behalf of the Crown - including internal waters, the land owned by Her Majesty in Scotland

Source: Provided by The Crown Estate

Q22: Do you have any views on which assets should be managed at the (i) national level (ii) by local authorities or (iii) by communities? ( Please provide details in the space below)

2.5 Delivering Further Devolution of Crown Estate Assets

Local ambitions for management of assets

Under both options 2 and 3 (Q15), Scottish Ministers would expect local authorities or communities to make a business case for the devolution to the local level of the decision-making of particular property, rights and interests of the Crown Estate and to demonstrate that they have the capability to take on the management of these assets, to maintain service delivery to customers and deliver increased benefits.

Q23: Should local authorities or communities be expected to make a case for further devolution?

YES

NO

Don't know

Q24: If YES, should they demonstrate the capability to ensure appropriate management, to maintain service delivery and to deliver increased benefits?

YES

NO

Don't know

How to deliver enhanced local control

Local management would enhance local accountability but there are different options on how this could be achieved. The existing functions of the Crown Estate Commissioners could, in theory, be replicated in each area that has local assets. Each area could also have the ability to set local charges for leasing for the same type of activity and each area could be responsible for research funding and planning. This approach to local management is more likely to lead to fragmentation, competition between different parts of Scotland and reduced net revenue for communities due to loss of economies of scale and duplication of administration costs. Fragmentation of the estate could pose significant risk to realisation of net revenue in future.

Q25: Replicating functions in each area is likely to lead to fragmentation of the estate which would pose significant risk to realisation of new revenue - how can these risks be avoided? ( Please provide details in the space below)

An alternative model could be to encourage a 'shared services' approach for assets managed at the local level. This could involve either a national administration to support local decision-making or a similar administration at a wider regional level to provide support services for clusters of council areas or communities. This would enable individual councils or communities to take decisions on the use of some, or all, assets in their area, based on reports on options and assessments prepared by a central or regional administration. The central or regional administration could also undertake day to day management of, and planning for, the assets under local control.

This approach would enable local areas to take democratic decisions on the use of an asset, even if the council or community has no, or limited, experience in managing similar assets. Scottish Ministers' current view is that further devolution of decision-making should be based on a shared services approach to support decision-making being organised at the national level or in a small number of clusters.

Q26: Should shared services be a requirement of devolution to the local level of decision-making on property, rights and interests of the Crown Estate? ( Please provide details in the space below)

Q27: What are the opportunities, if any, of further devolution? ( Please provide details in the space below)

Q28: What are the challenges, if any, of further devolution? ( Please provide details in the space below)

2.6 Strategic Planning Role

Leaving aside the options for who manages the assets, Scottish Ministers consider that there will be a continuing need to provide for strategic planning and investment strategy development on a national basis or for industry sectors, in order to co-ordinate work to enhance the value of the estate, in future.

Strategic planning will ensure continuity of investment in strategic research and initiatives, including activity to enable new industries to develop, grow and mature to a stage where they become new sources of revenue for the estate.

Q29: Is there a need for strategic planning and a long term investment strategy, in order to co-ordinate work to enhance the value of the estate?

YES

NO

Don't know

A National Framework

Scottish Ministers believe it would be appropriate to put in place a national framework to govern further devolution opportunities. A national framework could define powers, duties and responsibilities and would set the context for local decision-making where further devolution of management is possible. The framework could include:

• Definition of the extent of local management or decision-making responsibilities.
• A power for Ministers to develop policy guidance and procedures for co-ordination between managers or to ensure consistency of service.
• A power for Ministers to set bands for charging for leases by sector.
• A power for Ministers to require independent reviews for charging for leases.
• Arrangements to ensure that charging does not exert monopoly power or that managers are not at risk of claims for collusion.
• A power for Ministers to set scales of charging for local managers.
• The circumstances where there should be a role for Scottish Ministers in local decision-making.
• A power for Ministers to set targets for managers.
• A possible duty for managers to obtain Ministers' approval for sale of an asset and planned use of the capital proceeds.

The national framework could include rights as well as duties, making clear what other legislation needs to be followed.

The national framework could also include procedures for managing potential conflicts of interest between a manager's duties for Crown Estate assets and their wider set of duties and responsibilities.

The national framework could also include procedures to ensure that assets are returned, and they are not put to the intended purpose within a reasonable timescale.

The framework would also include national reporting and accounting arrangements, for example, an annual report by managers on the performance and activities, submitted to Ministers, which sets out the main objectives, outcomes, activities including targets.

Q30: Do you have any views on the value of a national framework to guide local decision-making? ( Please provide details in the space below)

Q31: Should there be consistent charging approaches between areas to avoid competition between different parts of Scotland?

YES

NO

Don't know

Q32: Are there any other issues that should be covered by a national framework for management of Crown Estate assets in Scotland? ( Please provide details in the space below)

2.7 Implementing Devolution at the Scottish Level: A phased Approach

Where further devolution is considered appropriate, the transfer is likely to take place at different times in different parts of Scotland to give councils and/or communities the time to prepare for taking on the new responsibilities.

Scottish Ministers consider there to be a strong case to reach a decision on which property, rights and interests of the Crown Estate should be managed at a local level in Orkney, Shetland and the Western Isles as a first priority and, indeed, the local councils have made clear their ambitions for further devolution.

Scottish Ministers promote taking a phased approach before reaching a decision on how best to devolve in other areas, as it will take time to complete discussions with other councils and interested communities. Ministers are, therefore, interested in your views on the phased approach, which will help inform the process of devolution to the local level and shape the further opportunities for different groups.

Pilots may help shape the further devolution opportunities but the purpose and potential value of any pilots needs further discussion. The next text box summarises the current position on pilots:

Box 13: Island Authorities' Pilot Scheme Proposals

As part of the Our Islands : Our Future ( OIOF) campaign's engagement with Scottish Government the Islands Councils - Comhairle nan Eilean Siar, Orkney Islands Council and Shetland Islands Council - have outlined proposals for a single pilot scheme, applying to all three island areas, involving a body empowered to sign leases.

Political commitment to explore a pilot scheme was given by the then Transport and Islands Minister, Derek Mackay, at the 12 ^th Island Areas Ministerial Working Group on 22 February 2016. This has since been reaffirmed by Mr Yousaf, the new Transport and Islands Minister.

Marine Scotland and OIOF have had various meetings to explore a pilot scheme.

The following criteria have been developed by OIOF with input from stakeholders:

• An agency agreement on an administrative basis, a one-stop-shop, which would involve local decision-making and would not require legislation. The islands councils would act as agents with Crown Estate Scotland (Interim Management), as principal, giving authority for leases to be signed.
• One single pilot applying to all three island areas.
• Aim is to streamline the consenting process, enable local and/or community input at the earliest opportunity, provide transparency and maintain developer certainty for developments between MHWS and 12nm (territorial limit of waters).
• The pilot scheme would focus on decision-making.

It has been highlighted that Scottish Ministers could not require any pilot arrangements in the Islands to be implemented until the UK Government had completed the Transfer Scheme, currently scheduled for April 2017. OIOF's preference is to have details worked up, agreed and ready to run for a pilot arrangement to take place as soon as possible after the point of devolution.

Progress is being made and discussions are ongoing over what a pilot could look like, how it can be delivered and the timing of when a pilot could start. This will enable Scottish Ministers to take a decision on whether it will be possible to pilot arrangements for enhanced local management ahead of further devolution opportunities being legislated for ‎by the Scottish Parliament.

We would like your views on:

Q33: Should the future arrangements in Orkney, Shetland and the Western Isles be considered first?

YES

NO

Don't know

Q34: Is a phased approach needed to introduce reforms to the management of Crown Estate assets across Scotland?

YES

NO

Don't know

Q35: Is there value in a pilot scheme prior to implementing reforms?

YES

NO

Don't know

2.8 Other Issues

We have attempted to set out the full range of issues for managing the Crown Estate assets for Scotland and communities in this chapter. There may be areas of governance or local management which can be developed that we have not covered and, therefore, we would like to hear your views on any other matters on governance or local management.

Q36: How can people influence decisions in relation to the management of the Crown Estate assets? ( Please provide details in the space below)

Q37: How should the long term governance arrangements differ from the interim arrangements? ( Please provide details in the space below)