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

Introduction

This consultation is an opportunity to help shape the long term framework for the devolved management of the Crown Estate in Scotland and how the revenue should be used to benefit Scotland and communities. A new framework will require legislation at the Scottish Parliament and this consultation focuses on the future purpose of the Crown Estate in Scotland and what changes are needed to the existing legislation to deliver that purpose.

Interim arrangements are being put in place to ensure a smooth transition, from the point of devolution, until the Scottish Parliament has legislated on the long-term framework for management of the assets.

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. Devolution of the management of the Crown Estate assets in Scotland provides an opportunity to increase the benefits to Scotland and local communities, to enhance local control and to ensure decisions on the use of assets in Scotland are more transparent and take account of the priorities of Scotland and the Scottish people and local communities.

The devolution of the management and revenue of the Crown Estate in Scotland also provides an opportunity to use the capital assets, and the net revenue generated, in a way that contributes to 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.

Background

Crown property rights are a major component of land ownership in Scotland. The ownership of Scotland's seabed, and much of its foreshore, are ancient possessions of the Crown. There is a legal presumption that an area of seabed or foreshore is owned by the Crown, unless there is evidence that it has been acquired by someone else. Ownership of Scotland's territorial seabed, which is the area of seabed from high watermark out to 12 nautical miles, is currently vested in the Crown, except for some small areas where the Crown has granted, or sold, ownership to a third party. The rights from 12 nautical miles out to 200 nautical miles (known as the Exclusive Economic Zone) are also vested in the Crown.

The Crown also owns around 50 percent 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.

The Crown is also a significant land owner in Scotland and land in rural estates owned on behalf of the Crown currently totals 37,000 hectares. Glenlivet and Fochabers in Moray were purchased in the 1930s, and Applegirth in Dumfries & Galloway and Whitehill in Midlothian were purchased in the 1960s.

The Crown's ownership of these rural estates, Scotland's seabed, much of its foreshore and a range of other properties, rights and interests, are currently managed by the Crown Estate Commissioners. These include salmon fishing rights, shooting rights and mineral rights (to quarry, mine or otherwise extract sub-surface materials) relating to the rural estates and rights to naturally occurring gold and silver in Scotland.

The Crown Estate Commissioners' role in managing the foreshore and seabed rights also means that they are responsible for leasing the seabed for a range of activities including wind, wave and tidal renewable energy developments, telecommunications cables, oil and gas pipelines, 5,800 licensed moorings and 750 aquaculture sites.

Urban property in Scotland owned by the Crown, principally at George Street in Edinburgh, are also currently managed by the Crown Estate Commissioners. The Crown also has joint venture interests in Fort Kinnaird shopping centre on the outskirts of Edinburgh.

Figure 1 illustrates how many sectors are impacted by Crown Estate management and how the Crown Estate is important to a lot of activities:

Figure 1: Impact of Crown Estate on other Sectors and Activities

The following map illustrates the location of key activities in Scotland:

Box 1: Gold and Silver

The Land Reform Review Group http://www.gov.scot/Resource/0045/00451597.pdf noted in 2014 that:

"The right to gold and silver in all land in Scotland was reserved by the Crown early in the country's history and this continues to be the case. The current legislation, the Royal Mines Act 1424, is the oldest Act still in force from Scottish Parliaments before 1707. The other current legislation related to the right is an Act of 1592 and thus also amongst the oldest Acts.

The Crown in Scotland still owns the right to gold and silver throughout Scotland, except for over a few areas where the ownership was conveyed to others in ancient grants. Scotland's Crown right to gold and silver is currently administered by the Crown Estate Commissioners as part of the UK wide Crown Estate."

The Crown Estate Commissioners is a unique body which administers these property, rights and interests on a UK-basis.

The Scotland Act 1998 reserved the Crown Estate Commissioners' management of the Crown Estate to Westminster and the Crown Estate Commissioners are currently accountable to the UK Government. The UK Chancellor of the Exchequer and the Secretary of State for Scotland also have powers of direction over the Commissioners. The Secretary of State for Scotland has responsibility for matters relating only to Scotland. The Crown Estate Commissioners currently transfer surplus revenues to the UK Government.

The Crown Estate Commissioners exercise powers under The Crown Estate Act 1961. The Crown Estate Commissioners have a legal duty to maintain the value and the return obtained from the Crown Estate while having due regard to the requirements of good management. In 2015/16, the gross revenue from the Crown Estate assets in Scotland that will be transferred was £14m and the property value was £271.8m

Further information on The Crown Estate is contained in Annex A.

The Case for Reform

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

The Crown Estate Commissioners' operations in Scotland have been considered in recent years by a number of Parliamentary Committees and inquiries. These include 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 ( LRRG) also include sections on The Crown Estate. In particular, the LRRG made the following recommendations for the Crown Estate in Scotland:

• "The Review Group considers that ending the Crown Estate Commissioners' involvement in Scotland would deliver wide ranging and important benefits to Scotland. The Group recommends that the Crown Estate Commissioners' statutory responsibilities in Scotland, under the Crown Estate Act 1961, should be devolved to the Scottish Parliament.
• The Review Group considers that, following the abolition of feudal tenure, there should be further significant reductions in types of Crown property rights in Scotland. The Group recommends that the Scottish Government reviews the current Crown property rights in Scots law and brings forward proposals for the abolition of these rights or their replacement statutory provisions, as appropriate in the public interest." ^[1]

Most recently, the Smith Commission ^[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."

Way forward

The Scottish Ministers intend to introduce legislation which puts in place a new legislative framework for management of Crown Estate assets in Scotland that ensures accountability to the Scottish Parliament and alignment with Scottish policy objectives. The long term framework can only be delivered once the transfer of functions has taken place and legislative competence has been devolved to the Scottish Parliament.

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.

The Transfer Scheme has not yet been made by Treasury and will require agreement from Scottish Ministers as well as the approval of the UK Parliament. The Scotland Act 2016 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.

After the transfer, the Scottish Parliament will have the power to legislate on the new framework for managing Crown Estate assets in Scotland. This will include the ability to depart from the Crown Estate Act 1961 which has to date been the legislative framework governing the management and revenue of the Crown Estate.

We are anticipating that the UK Government will complete the transfer scheme through the UK Parliament so that the Scottish Parliament has legislative competence by April 2017. Based on this timescale, and subject to the legislative programme, the Scottish Parliament could potentially complete consideration of a Scottish Bill on the Crown Estate during 2019 and the provisions could then potentially be commenced from 2019/2020.

Box 2: Interim Arrangements

Under the interim arrangements, the Crown Estate assets in Scotland and the revenues generated from these assets, 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 inserts new provisions to the Scotland Act 1998 which enables the Treasury to make a transfer scheme to transfer the management functions and revenues of the Crown Estate Commissioners in Scotland to Scottish Ministers or another body nominated by Scottish Ministers. The 2016 Act also provides for establishing a body for the purposes of receiving the functions transferred by the transfer scheme, by Order in Council. In addition, the revenues from the Scottish assets must be paid into the Scottish Consolidated Fund. Under new provision inserted into the 1998 Act, the property, rights and interests to which the existing Scottish functions relate must be maintained as an estate in land, or as estate in land managed separately.

The name of the interim body will be Crown Estate Scotland (Interim Management). There will be members, rather than Commissioners - consisting of a Chairperson and up to 8 other board members and staff - including a Chief Executive. Both members of the body and staff will be able to participate in committees and sub-committees of the body. The body is to regulate its own procedures. There will be reporting arrangements that are usual for a public body, and regulations the body will be subject to. Scottish Ministers may provide guidance to the body which it must have regard to.

Scottish Ministers commenced the Order in Council process by laying an SSI (the Crown Estate Scotland (Interim Management) Order 2017) in the Scottish Parliament on 21 October 2016 to put in place the legislative framework for the interim management of the assets from the point of the transfer. The Order was approved by the Scottish Parliament on 30 November 2016. It is expected to go to Privy Council for decision in early 2017.

This consultation seeks your views on how the Crown Estate in Scotland should be managed in future and what reforms are needed. The results of the consultation will shape the legal framework for implementing these long term arrangements.

The paper is divided into four chapters:

Chapter 1: 'Vision'. This section covers potential departures from the framework of the Crown Estate Act 1961 including whether to retain or modify the commercial duty; and alignment with SG policies.

Chapter 2: 'Managing Crown Estate Assets for Scotland and Communities' sets out three management options, a national, local and hybrid option.

Chapter 3: 'Securing the Benefits for Scotland and Communities' discusses the operational and governance implications as well as revenue implications and other financial issues of the management proposals.

Chapter 4: 'Assessing Impact'. This chapter asks you for comment on what the impacts on business, environment, equality groups and privacy may be. The Business and Regulatory Impact Assessment ( BRIA) is published separately.