Crown Estate interim body establishment: consultation

Introduction

1. This consultation is the first opportunity to help shape the devolved management of The Crown Estate in Scotland. It focusses on the interim arrangements that are needed to progress a smooth transition, from the point of devolution, until the Scottish Parliament has legislated on the long-term framework for management of the assets.

2. Good management of our land, marine environment and other natural resources is of crucial importance to the Scottish Government and essential for Scotland's future prosperity. Through the devolution of the management of The Crown Estate assets in Scotland there is an opportunity to ensure that decisions on use of Crown Estate assets in Scotland are more transparent, and new processes for decision-making are put in place to take account of the priorities of Scotland and which meet the needs of the Scottish people and local communities.

3. The devolution of the management and revenue of The Crown Estate assets also provides an opportunity to use capital assets in a way that enhances their contribution to the achievement of 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.

4. Establishing the interim body is only the beginning of the transfer journey for The Crown Estate in Scotland. Scottish Ministers plan a further consultation on the long-term management framework, including opportunities for further devolution of management of Crown Estate assets. Progressing the smooth transition of devolution for The Crown Estate in Scotland through first establishing the interim body will begin to help deliver greater benefits to Scotland and its communities.

Background

5. The Crown Estate Commissioners is a unique body which administers certain property, rights and interests which historically belong to the Crown. In Scotland, The Crown Estate manages leasing of the seabed out to 12 nautical miles and rights to renewable energy, cables and pipelines on the Continental Shelf; 37,000 hectares of rural land; gold and silver; and approximately half of Scotland's foreshore including 5,000 licensed moorings, 800 aquaculture sites, and salmon fishing rights. The Crown Estate Commissioners exercise powers under The Crown Estate Act 196 ^[1] in managing The Crown Estate on a UK-basis, and currently transfer surplus revenues to the UK Government. Further information on The Crown Estate is contained in Annex A .

6. There is an overriding duty placed on the Commissioners to maintain and enhance the value and the return obtained from The Crown Estate while having due regard to the requirements of good management.

7. It has been a long-standing policy of the Scottish Government that there should be reform of the administration of The Crown Estate. The Scottish Government is committed to the principle of Scotland's communities benefitting directly from our natural resources, and ensuring that decisions on use of Crown Estate assets in Scotland are more transparent and take account of the priorities of Scotland and its communities.

8. The Crown Estate Commissioners' operations in Scotland have been considered in recent years by a number of Parliamentary Committees and inquiries including the 2006 Report of The Crown Estate Review Working Group Report and the 2012 House of Commons Scottish Affairs Committee Report on The Crown Estate in Scotland. The 2014 Empowering Scotland's Island Communities and the 2014 Report of the Land Reform Review Group also include sections on The Crown Estate.

9. Most recently, the Smith Commission (November 2014) ^[2] made recommendations on The Crown Estate:

32. Responsibility for the management of the Crown Estate's economic assets in Scotland, and the revenue generated from these assets, will be transferred to the Scottish Parliament. This will include the Crown Estate's seabed, urban assets, rural estates, mineral and fishing rights, and the Scottish foreshore for which it is responsible.

33. Following this transfer, responsibility for the management of those assets will be further devolved to local authority areas such as Orkney, Shetland, Na h-Eilean Siar or other areas who seek such responsibilities. It is recommended that the definition of economic assets in coastal waters recognises the foreshore and economic activity such as aquaculture.

34. The Scottish and UK Governments will draw up and agree a Memorandum of Understanding to ensure that such devolution is not detrimental to UK-wide critical national infrastructure in relation to matters such as defence & security, oil & gas and energy, thereby safeguarding the defence and security importance of the Crown Estate's foreshore and seabed assets to the UK as a whole.

35. Responsibility for financing the Sovereign Grant will need to reflect this revised settlement for the Crown Estate.

10. The Scottish Government is fully supportive of the Smith Commission's recommendations to devolve powers in relation to the management and revenues of Crown Estate assets in Scotland. Over the longer term Ministers intend to put in place a new legislative framework for management of Crown Estate assets -accountable to the Scottish Parliament and ensuring alignment with Scottish policy objectives. The new permanent framework can only be delivered once the transfer completes the devolution of legislative competence. Interim arrangements for the management of The Crown Estate are required until the longer term arrangements come into force.

11. The Scotland Act 2016 provides for the transfer of specific functions, rights and liabilities to a single Transferee on a transfer date. It is only then that the Scottish Parliament has legislative competence for the management and revenue of the Crown Estate in Scotland.

12. Under the interim arrangements, it is proposed that The Crown Estate assets, and the associated rights and liabilities, will be managed as a single entity commencing from the point of transfer of the existing Scottish functions. Section 36 of the Scotland Act 2016 ^[3] which gained Royal Assent in March 2016 enables the Treasury to make a Transfer Scheme to transfer the management functions and revenues of The Crown Estate in Scotland to Scottish Ministers, or another body nominated by Scottish Ministers. The Transfer Scheme has not yet been made by Treasury but will require agreement from Scottish Ministers as well as the approval of the UK Parliament. The Scotland Act also makes provision for an Order in Council to be made, making arrangements for the management of the transfer of Crown Estate assets, including establishing the interim body.

13. After the transfer, the Scottish Parliament will have the power to legislate on the new framework for managing Crown Estate assets in Scotland. There will be a further public consultation prior to a Bill being brought before the Scottish Parliament.

Policy Statement

14. There are a number of options that can be considered for the day-to-day management of the Crown Estate assets in Scotland as a single entity during the interim period. That function could potentially be undertaken by the Scottish Government or an existing or new public body.

15. Our aim is to ensure that the business is operational on day one of the transfer and that it continues to be so until such time as decisions are made on the long-term future. The Scottish Government is mindful of the need to ensure that service delivery is maintained, but also that the interim arrangements do not constrain further devolution opportunities.

16. The following draft principles and criteria which have been developed with input from stakeholders have guided our proposals for the most appropriate delivery model for the interim body:

• Continuity of business delivery
• Opportunity for community input at an appropriate stage of decision-making
• Ability to maintain a commercial approach
• Human resource implications in terms pay and staff morale
• Ministerial oversight at an appropriate level with potential to take long-term decisions without requirement to take day-to-day decisions on assets
• Ability to maintain existing fiscal and tax benefits available to the Crown Estate Commissioners
• Ability to establish robust governance, risk management structures and processes in time for the transfer.

Proposals

17. The following sections set out the proposals in relation to the establishment of the interim body for managing The Crown Estate assets in Scotland. Respondents are invited to give their views ( Annex B ) and use the response form ( Annex C ).

Establishing the interim body - Type, name and status

18. We propose that the interim body will be a body corporate and a separate body from Scottish Ministers. The reason for proposing this is that this model provides the best fit according to the criteria set out in paragraph 15 above. The organisation currently administering The Crown Estate is a body corporate.

19. We intend for the interim body to be in place until permanent arrangements will be made in due course through a Scottish Parliament Bill, following legislative devolution on the transfer date. It is possible that the interim body will be retained on a more long-term basis for certain specified functions.

20. The name we have proposed for the interim body is Crown Estate Scotland (Interim Management).

21. The interim body is to have Crown status and enjoy the fiscal, tax and other benefits normally available to the Crown.

Membership of the interim body

22. We propose that instead of 'Commissioners' there will be board members who will manage and lead the interim Crown Estate body in Scotland. It is proposed that we make provisions for the Board to be of an appropriate size, probably no fewer than two and no more than ten members (including the Chair and Deputy Chair), appointed by Scottish Ministers. One member is to be appointed as the Chair, and there will also be a Deputy Chair. The period of appointment is to remain unspecified to allow for flexibility for different phases during the set-up of the interim body. Members are to be eligible for re-appointment.

23. The following eligibility criteria are suggested for members:

a. relevant skills, expertise and experience.

b. no financial or other conflict of interest that is capable of giving rise to a conflict of interest with the interim body.

c. exclusion of MSPs, MPs, members of the House of Lords and MEPs.

24. The appointment of the board provides new opportunities for community interests to be represented.

Members' terms of appointment, resignation and cessation

25. We envisage that Scottish Ministers determine the terms of appointment of members. Members may resign by writing to Scottish Ministers.

Removal of members

26. We propose that a member may be removed from office by Scottish Ministers under the following circumstances:

a. Insolvency.

b. absenteeism from meetings for more than 6 months without permission from the Chair.

c. and/or being unable or unfit to exercise the functions of a member or being unsuitable to continue as a member.

Chief Executive and employees

27. The interim body is to have a Chief Executive, and the first Chief Executive is to be appointed by Scottish Ministers, and subsequent ones appointed by the interim body, with the approval of Scottish Ministers. The interim body may employ and appoint such employees as it considers appropriate.

Committees and meetings

28. We envisage that the interim body should have committees, one of which must be an audit committee. There may be sub-committees.

29. To provide flexibility we propose that the quorum for meetings of members, including committees, is not specified, and that the interim body is to regulate its own procedure.

30. We envisage that proceedings are not to be invalid by any vacancy of membership or defect in the appointment of the Board. The appointment of any member is invalid if there is a defect in the appointment process.

Functions

31. The functions of the interim body are all those functions which are currently exercisable by the Commissioners under the 1961 Crown Estate Act relating to the management of The Crown Estate in Scotland which will transfer to the interim body under the Transfer Scheme.

Grants and loans

32. A loan making power for Scottish Ministers is proposed.

Ministerial direction making power

33. We suggest that Scottish Ministers shall have a direction-making power whereby they can direct the interim body in writing with regards to the exercise of its functions, such as in relation to the number of board appointments and the terms and conditions of employment. The proposal is that Ministers must publish the directions.

Annual report and corporate plan

34. The proposal is that the interim body shall report on its performance and activities annually, submit this report to Ministers, who will lay the report before Parliament.

35. In addition, there shall be a corporate plan, to be updated annually. This plan is to set out the main objectives, outcomes, activities and risks for the planning period. We suggest that the plan will be sent to Ministers for approval ahead of publication.

Regulation

36. We propose that the interim body will normally follow the standard procedures (unless Scottish Ministers determine otherwise or specific procedures for the Crown apply) and is to be subject to the standard requirements intended to cover all relevant public bodies in Scotland, including coverage under Freedom of Information and public appointments (subject to oversight of the Commissioners for Ethical Standards in Public Life).

General powers and Ministerial guidance

37. We propose to give the interim body general powers to do things which are necessary or expedient for the purposes of its main functions or otherwise conducive to the performance of its functions.

38. We propose to require the interim body to have regard to guidance issued by Scottish Ministers.

Scope of consultation

39. This consultation document is about establishing the interim arrangements, relating only to the Order in Council.

40. There will be full public consultation on options for the long-term framework and further devolution in due course, ahead of a Scottish Parliament Bill.

Your views

We would welcome your views on the proposals.

Please note that the closing date for this consultation is Friday 26 August 2016.

Crown Estate Strategy Unit