What is next for the Scottish Crown Estate?

In the midst of a period of substantial constitutional debate and change, one significant piece of devolution has been (relatively) quietly underway. The devolution of the management of the Scottish Crown Estate was, along with new tax, borrowing and social security powers, one of the most noteworthy outcomes of the Smith Commission in 2014.

The devolution process has already started. The management of the Crown Estate in Scotland was devolved on 1 April 2017 and associated functions of the Crown Estate Commissioners were transferred to Crown Estate Scotland (Interim Management) through the Crown Estate Transfer Scheme 2017.  The Crown Estate (Interim Management) Order 2017 set up the new management body in readiness for it to take on the new functions on the same day.

Now the Parliament has before it the Scottish Crown Estate Bill.  The Bill will put in place the long term arrangements for Scotland to make the most of a valuable and diverse array of assets.

What are the assets?

And the assets of the Scottish Crown Estate are indeed valuable (estimated to be worth around £276m) and diverse; they include:

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(Applegirth Estate: image from Crownestatescotland.com)

  • 37,000 hectares of rural land with agricultural tenancies, residential and commercial properties and forestry on four rural estates (Glenlivet, Fochabers, Applegirth and Whitehill)
  • Rights to fish wild salmon and sea trout in certain river and coastal areas
  • Rights to naturally-occurring gold and silver
  • Just under half the foreshore around Scotland including 5,800 moorings and some ports and harbours

CrownEstateFishFarmLochStriven

(Loch Striven fish Farm: image from Crownestatescotland.com )

  • Leasing of virtually all seabed out to 12 nautical miles covering some 750 fish farming sites and agreements with cables & pipeline operators
  • The rights to offshore renewable energy and gas and carbon dioxide storage out to 200 nautical miles
  • Retail and office units at 39-41 George Street Edinburgh

The devolved Scottish assets don’t however include Fort Kinnaird Retail Park in Edinburgh, which the (rest of UK) Crown Estate Commissioners hold in partnership with a property trust.

It should also be noted that it is the management of the assets that has been devolved, not the ownership. The assets are held ‘in right of The Crown’ and the Monarch remains the legal owner.

The Bill

According to The Crown Estate website (ie the Crown Estate Commissioners, the body looking after the rest of the UK assets) the Crown Estate itself dates back to 1066. A little more recently the Crown Estate Act 1961 gave the UK commissioners “a duty to maintain and enhance the value of the estate and the return obtained from it, but with due regard to the requirements of good management”.

The new bill before the Scottish Parliament, the Scottish Crown Estate bill, disapplies the 1961 Act and sets out a new role for the new body and other future managers of the assets.

The Bill states that managers of the assets must maintain and seek to enhance the value of the assets and also the income they generate. Having said that they may do so in a way that is likely to contribute to a range of wider objectives including:

  • economic development,
  • regeneration,
  • social wellbeing,
  • environmental wellbeing,
  • sustainable development

In practice this means that a manager will have a duty to obtain “market value” if they are selling or leasing an asset, but also the power to make a transaction for below the market value if it contributes to one of the objectives above.

The bill also sets out the governance importantly setting out how decisions will be made on who will be the new managers of the assets.

The Smith Commission had recommended that “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.”

The Bill however includes a number of options as to who could be a manager:

  • Scottish Ministers
  • Crown Estate Scotland
  • Public authorities
  • Local authorities
  • Community organisations

The Scottish Government’s consultation on the long term arrangements for the Scottish crown estate set out three broad options for how the assets could be managed; all at a national level, all devolved to local authorities and communities; or considering the approach on a case by case basis. Respondents to the government’s consultation on the long term arrangements for the Scottish crown estate (Question 15) showed mixed views with 32% opting for the national option, 17% for the local option, and 38% for the hybrid approach.

The bill gives the Scottish Ministers two routes through which powers can be devolved:

  • It can be by a transfer through regulations, which identifies who the manager will be, and exactly what powers are being transferred
  • Scottish Ministers can also direct an existing manager to delegate the management to another person

What next?

The Scottish Crown Estate Bill provides a framework for the future management of varied and valuable public assets. However it perhaps represents the start of a process, with many of the big choices – such as who will manage the assets, and what will they do with them – still to come.  The Environment, Climate Change and Land Reform Committee will be looking closely at the bill.  It has invited views and will start taking evidence later this month

Finally, some money questions – what happens to…

  • The Sovereign Grant? – the UK government decides what funding it provides to the Monarch. The revenue profit of The Crown Estate (the body for the rest of the UK) is used as a reference point to calculate the amount of the Sovereign Grant. This sum is then paid by the Treasury out of funds raised by general taxation.
  • Scotland’s Block Grant? – The fiscal framework agreed that Scotland’s block grant from the UK government would be reduced by an amount equal to the net revenues generated by the Crown Estate assets in Scotland in the year immediately prior to the transfer. The net revenue was estimated to be £6.1m in 2016-17 (around 0.02% of Scotland’s block grant
  • Revenues generated by the assets? – The Scotland Act 2016 (and the subsequent UK Government Transfer Scheme) creates some constraints on how finances must be handled. Revenue from the Scottish assets must be paid into the Scottish Consolidated Fund (the Scottish Government’s main budget) and Scottish Ministers can then decide how the revenue returned to the Scottish Consolidated Fund is used. If a manager sells an asset it must re-invest all the capital proceeds in the Scottish Crown Estate. While there are separate accounting arrangements for revenue and capital, the manager is currently able to retain 9% of the revenue profits for investment in the estate.  The Bill includes provisions to enable similar arrangements to operate in future, whereby a manager can retain a proportion of the revenue as the Scottish Ministers direct, for investment in the estate.

Simon Wakefield, Head of Research and Knowledge Exchange.