Good morning and welcome to the third meeting of 2016 of the Environment, Climate Change and Land Reform Committee. Before we move to the first item in the agenda, I remind everyone present to switch off mobile phones as they may affect the broadcast system. However, you may notice that some of the committee are using tablets during the meeting because we provide meeting papers in digital form. As this is the environment committee, we want to encourage that sort of practice. We have apologies from Gail Ross. Item number one is a decision on taking business in private. The first item of business on the committee's agenda this morning is to consider whether to take item four in private. Do you have the agreement of the committee to do that? Very good. Okay, that's fine. Thank you very much. We move to agenda item two, which is the committee's approach to RPP3. We understand that the Government plans to lay this report in late December. However, a non-intended consequence of this timing is that a potential two weeks of parliamentary scrutiny would be lost due to the Christmas and New Year recess period. I'm sure that members would be as keen as stakeholders and other interested parties are to have maximum opportunity to consider what is a very important draft report. We would like to have the fullest possible parliamentary scrutiny across a number of relevant committees. I would ask the committee, therefore, if it's content for myself as convener, to write to the cabinet secretary to ask if the Scottish Government might consider delaying RPP3's publication until Monday, January 9, 2017. Is the committee so agreed? Thank you very much. Obviously, a fuller discussion of the committee's approach to scrutiny of RPP3 will follow later this month. When I move to agenda item two, which is an evidence session with the Crown Estate in Scotland, I welcome the panel. We have Gareth Bair, the Scottish Commissioner. We have Ronnie Quinn, the general manager, and Andrew Wells, the recently appointed head of property for Crown Estate. I particularly welcome Mr Wells along with him for the first time in that role. Welcome gentlemen. We have a number of questions for you, as you can imagine. We will start off by having a general look at the operations of the Crown Estate. Emma, do you wish to start on that? Yes, thanks very much. Welcome everybody. Just on reviewing the report, I was just curious about whether there are any underlying reasons that could be identified for the drop in revenue in Scotland in the 2015-16 report. You're right. There's a marginal drop in revenue. It's just a timing thing and I don't think anything that's systemic attached to it. Will you be able to give us further information on previous years, maybe? Sorry. I think that we had a particularly high year last year. The reports have all been available with that gross revenue number associated with them. We can certainly go back five or so years and provide a committee with those revenue numbers. It's there or there is a bounce to me. Last year's number was a particularly high number. There's a lot dependent on, for example, the number of fish that are harvested, the rental income that receive in respect of certain activities that are seasonal. Sometimes there are good season, sometimes there are bad seasons. Is there a general sense that the direction is positive? Yes. I'd like to assure the committee that there's no question of the current state denuding the Scottish portfolio of capital or revenue. There's no underlying plan there. It's very much business as usual. It's a general question on the remit. What is the on-going ideology of the Crown Estate when it's devolved with regard to future plans? Is it just a money making vehicle or what do you see your social and rural responsibilities going forward rather than just money making? I don't think that the Crown Estate in Scotland has taken that view for some time now, but we've taken a lead from the former statements that have been made by the former cabinet secretary that this transfer is a going concern. We are preparing plans to that effect. That will continue our engagement, continue our input to local communities, continue the balance of capital and revenue focus, but ultimately it's going to be for the new board of the new entity to establish the direction going forward under guidance from Scottish ministers. I wonder if I could just add to that, please. The management of the assets that the Crown Estate has undertaken over a long time now is very much being directed towards long term. At all times, we are trying to enhance those assets with a view to commercialism. They have to be profitable for the public purse. The stewardship element of not taking any shortcuts in the management of those assets is very important. As Ronnie correctly said, it will be for the new board and for direction from Scottish ministers to look how we go forward. I would imagine that we will go forward on the same basis. This long-term view is very important, particularly for the businesses of our tenants and stakeholders and communities. Good morning to you all. This is reassuring to hear about the long-term thoughts that you have expressed already this morning. In a previous session, I and others on the previous rural affairs committee had asked about the development of a new mission statement once, whether it is an interim body or once the Crown Estates is fully devolved as far as it can be. I wonder if you could explain building on Finlay Carson's question, if you could identify what that process will be and whether environmental stewardship and sustainable development might be considered as part of that mission to give a robust and clear statement? Just before I hand over to Andy, if I could just speak about where our overarching vision at the moment is. It is not for us to determine the forward strategy clearly, but we are very sure in our minds about the long-term view. It is so important. If you think of many of our tenants, for instance the rural tenants, they are multi-generational businesses in many cases. We absolutely have to have due regard to the long term for these businesses and our stakeholders in the marine estate are absolutely no different. Many of the activities and initiatives that we help and deliver now will have huge implications in the long term, in the environment and in the productivity of those assets. I can only reassure you what our thinking is at the moment unless we are directed in a different direction in the future. I sincerely hope for those assets that will be in the same vein. I hear what you are saying about the fact that it is not for you to determine the future strategy, but given that you have a very detailed knowledge of how the Crown Estate has worked previously, all of you surely must have some thoughts on how it could work more effectively under control of the Scottish Parliament. I will not try to put you in the spot here, but I am sure that you do. In which case, what do you think that, freed from operating under the Crown Estate UK model, you might do things differently? What do you think that a new approach could bring to the operations of the Crown Estate in this new world that we are headed into? Thank you, convener. If I could start to address that because it is not a straightforward question and it is all going to be subject, as you are aware, to the caveat that it will have to be informed by Scottish ministers and indeed yourselves and the new board. However, areas that would be of interest would be more actively trading, there would be the possibility of accessing funds by way of joint venture or co-investment, looking at alternative markets and opportunities for management of the assets, still within the bounds of the 1961 act, which the new entity will still have to comply with. Ideally, building up some capital reserve to optimise timing of further investment decisions, and incentivising and encouraging new entrants into farming in the rural estates, and looking at ways to support future growth in aquaculture, consistent with the Scottish Government's policy. That sits alongside some of the ambitions that we have for renewable energy offshore. We are quite ambitious about what the opportunities are going forward. Are you being afforded an opportunity as we go through this process to feed in those thoughts? Again, we have to be mindful of the fact that there is a lot of attention just now on the transfer. We are looking at internally how we can inform that debate, particularly with the new board, and preparing what I do not think would be a good idea is to present a blank sheet of paper. We are looking at various options that we can present to that new board that they can consider. That is useful. In relation to the broader functions of the potential for the new body, we believe that there is a huge opportunity to look at how the Crown Estate can build on its values and on combining its commercial remit with the broader stewardship and sustainable objectives in Scotland. We feel that we can become more collaborative. A broader partnership approach, working with a wide range of stakeholders and communities, could be something that could be brought into the DNA of the new organisation so that we can work harder to achieve that balance between commercial objectives and adding value in lots of other different ways. There is also an issue about balancing the needs of our existing tenants and customers. I am keeping a steady ship, if you like, over this period. Going back to the previous statement of business as usual, I am concerned, and I am very keen to keep focus on that as well. That is appropriate to move on to looking at the transition in management arrangements. Alex Rowden will answer that. It is a question that I will be repeating to the next panel on what value is being transferred to Scotland. On valuation and due diligence, I can ask ourselves what you put behind the property value that you write about here and to what level is that done. There are various methods of valuation, whether it is statutory valuation or red book valuation or more cursory look around a farm in terms of the rural sector. Can I just ask what work you have done on valuation and, in particular, maybe what changes in some of valuation, especially in the likes of a tenant property that you have seen and what figures you might have in terms of improvements that have been requested to improve the income and profitability of some of the enterprises when you talk about looking at the long-term viability of those places? Take the first part and then hand over to Andy about some of the specifics. So far, as the valuation is concerned, it is red book. It is done independently, and it is assessed and is part of the Crown Estate Audited Report. If we take the offshore world, for example, if there is no activity on the seabed that is not valued, the valuers have quite a heavy discounting policy with regard to projects that have not yet reached FID. Once they have reached financial close, the valuation goes up. Once they are built, it goes up again, but until then, there is quite a low value attributed to it as an opportunity value. It is different valuers that we use for different areas, as you would expect. The rural valuation is done differently from, for example, cables and pipelines valuation, which is done differently from the renewables valuation. It is done red book and it is done independently. Our input to that is really only advisory as to what stage various things are at and what the estate is. The valuations are normally done late in the year and in the first quarter of the year. Yes. As Ronnie says, the rural valuation is done according to external professional valuers who do it by the red book in terms of investments. Clearly, when we make decisions around investments in particular properties, we take a view as to what impact that will have on valuations. It is within our responsibilities to enhance the capital value in the longer term, so we would be making decisions on that basis. I am going to let Mark Ruskell in here with apologies. I should have allowed them in earlier. Follow on from that. You have talked about where you want to take the organisation, the areas of growth. What kind of structures and changes in practice are required to achieve that? We have just had a question about valuation. I am aware that, with the new interim body, you will be moving towards an audit committee governing your financial risk. What kind of changes are you going to have to put in place in terms of the management of the organisation and how you are going to work with those new structures? The Crown State has been quite active in setting up the Scotland portfolio as a standalone, separate accounting business unit. We have been operating on that basis from 1 April. We have recruited a new management team. We have now brought in a finance manager, Lyn Higgins. We have had communications, Esther Black. We have reformed a management team. We have brought in HR as well. That management team, I believe, is structured to perform what we are doing just now and can flip across into the new entity and take that new entity forward. Of every confidence in that, we have identified a couple of additional support areas where that new entity would need support and identify new posts. We have advised our colleagues and Scottish Government of those areas. It is things such as company secretariat duties, freedom of information, knowledge management and that type of thing. However, for the actual day-to-day business and on-going business, we have taken steps to form that team, to make that as self-sufficient as we possibly can. At this stage, we are putting a lot of effort and money into creating our own IT environment. The intention is that that will be up and running by the end of this calendar year, so that we are targeting the transfer date of 1 April for day 1 of the new entity. We have every confidence that we will get there from the current estate side and have that environment ready to flip across. How much support will you require to service the new governance structures? In particular, you have an audit committee and a board. Board papers need to be produced and things need to be considered. Audit committees need to be reported on and scrutiny has to take place. That is quite different from where you are right now. How many extra people would you need to bring in to service the new governance structure surrounding the interim body? I think that it is fair to say that we do service committees at present. What we have identified, however, is a new role of corporate secretary to help service and administer the committees and the board going forward. We have identified at least one and a half, if not two, FTEs. Over the last few years, in one form or another, there has been an increasing degree of autonomy in the Scottish operation. Our Scottish management board now is very well equipped to take that forward. There was just a wee bit that I wanted about while it is for the new board and Scottish ministers to determine absolutely our route forward. I would say that we have increased our level of communication for everyone's benefit with our stakeholders over the past few years. We were made aware that there were deficiencies in that area and we have worked very hard. I really think that we are seeing the benefit of that now. What I can say to you amongst the senior management team at Bellsbray is that there is a real appetite for more collaboration with stakeholders. We have seen examples of that over the past year. An example of that would be with our Glen Livett rural tenants. We had an issue with cryptosporidium, which was not having to do with our tenants' livestock. It was coming out of deer, but the modern research institute went up to discover the route of that infection. Whilst that was going on, it was very clear that there was a very strong appetite between both scientists and farmers to discover more about it. That has led on over the course of about 18 months to knowledge transfer seminars and to farm visits. I have to say that the farm tenants are tenants and the modern research scientists have engaged in that fully. That culminated in the issue of a biosecurity device with a joint venture between the modern institute and the Crown Estate to all Scottish livestock farmers this year. I have to be a livestock farmer myself. The advice and technical expertise that has come forward on this could well provide a quantum leap in red meat production in Scotland. This is something that we have been looking for before for a long time. This is an example of how with an enormous investment, collaboration— That is a lot of work, isn't it? Do you outsource some of that? The project was developed through our broader stewardship and partnership working. We have a relationship with Morden whereby our tenants can get up-to-date access by phone to modern scientists as part of a corporate membership. This particular project was done and delivered by modern scientists. We helped fund it. The work has brought together a huge amount of up-to-date information about biosecurity, the key livestock diseases in Scotland and presented it in a format that is easily digestible by farmers. We will, hopefully, make a significant difference to the management of on-farm biosecurity in Scotland. There is an example of good practice in dealing with external providers, but you operate as I understand a system in which you have land agents doing your factoring on your rural estates. Could you outline for us how well you think that works and how much money Crowry estates Scotland might spend every year on external provision of that nature? In terms of how the system works, for most purposes it works very well, very smoothly, by employing external firms and managing agents. We buy into a huge amount of expertise from people who are working broadly in the rural sector and we can apply and use that expertise in relation to our management. Clearly it involves a wide range of different management activities and our management agents have to act on our behalf in a lot of different circumstances, both in terms of negotiations of rent reviews with tenants, in terms of liaising with local communities, in terms of managing repairs and maintenance on farms. They have a lot of local and detailed knowledge, work with a lot of contractors, can make efficiency savings in how they organise that work, so it is of benefit to the organisation to have access to that service. I'm afraid I can't give you a figure at something I can provide for the committee in terms of the exact cost of that across the board. We do review this from time to time obviously and we're constantly looking and working with our managing agents at ways in which we can reduce that cost as we would as part of a good business activity. I think that it's also fair to say that the cost of providing some of the services in house could be prohibitive. We call on some of those very specialist services very rarely and to have that in house, if you like, would be probably an inefficient way to run the business. I'm a tenant farmer myself, so the relationship between agent and tenant, as everybody will know, can often be rather fraught. I can assure you that I keep a very close watch on how our agents are engaging with our stakeholders. It really is very, very important. A good relationship will produce a lot of dividends for both parties. A bad relationship can get toxic very quickly. I'm delighted to say that our team issues very strict methods of engagement with our tenants, and I genuinely think that those are upheld. I could just add to that in relation to the Crown Estate team in Bell's Bray. They are a very experienced team with a lot of expertise and have worked for many, many years with managed agents and also spend time with our tenants and out on the estate, not always with managed agents so that they can get a perspective coming back from our tenants in relation to how the managed agents are working. That's just what you pick up on something. You mentioned contractors there, and we hear the anecdote of small-scale local contractors choosing not to seek Crown Estate work because they believe that the process around that is complicated and time-consuming. Do you find that yourself? Do you accept that your process perhaps puts the small local guy off from trying to tender for work? I think that we have had issues because of our financial systems sometimes in relation to the requirement for contractors to meet the conditions that we set, and some of the smaller contractors find that difficult. We try to help them wherever we can and try to ensure that we use local contractors whenever we possibly can. Is that something that you think there's an opportunity to look at again as you transfer over to Scotland? There's always that opportunity to review how we do things, and certainly going forward we'll be a smaller business. The financial systems that we have in place currently are designed for a large UK business. Our new systems will be more straightforward and will hopefully enable us to operate more efficiently in that sense. Can I ask you in relation to tenant farmers? We had a very interesting day when we were welcomed to Dumfruce and Galloway, to the Aplagarth estate. I was wondering if you could make any comment on whether there would be any concerns from your perspective about investment, capital investment particularly, in tenant farms in the interim period, or that period leading up to it. If we could see perhaps some figures on that, if that's possible. Yes, in terms of reassuring our tenants clearly it's our ambition to operate as largely as much as we can as business as usual as we move through the transition process. There are some challenges around that as we know in relation to when we start the new body, we'll be looking at the business from a Scotland perspective only, and that has implications for cash flow. It's a cash flow issue that we need to plan for and work through. In terms of our overall capital investment, we've invested £12.3 million in the last, since 2010, in the rural estates. That's roughly around £2.2 million on average every year. It does fluctuate from year to year depending on investment requirements across the portfolio. Some years it's around about 1.1 other years it's been up to 3 plus million and that's purely, as a result of circumstances, weather-related capital requirements for investment in buildings and the pipeline of development that's in progress which causes that fluctuation. We've budgeted around about £2.2 million of investment for this financial year and we're expecting a similar figure for next year. We haven't yet developed the full cash flow position for that but we're working on that at the moment. We also have a pipeline of sales which is an on-going part of our activity. It's part of the general management of the crown estate, both UK and Scotland, to be looking at sales so that we can raise capital for reinvestment in the property. We've identified a number of those as part of our normal business planning and subject to market conditions and that programme being put through in practice. We're confident that we can cover our capital requirements in the first year of operation. When we first transfer, there may be initial problems with cash flow but we're working very closely with Scottish Government in terms of how we handle that. It would be helpful if you're not able to give us details of this today. If you were able to reassure the committee by writing to us about any requests for either joint investment or capital investment with rural tenants over the past two years and going into the future with the interim body and whether those have been able to be taken forward on what basis, that would be helpful in terms of reassuring us as a committee. I'm certainly very happy to do that. I think that you can also include that in giving us an understanding of how you monitor your performance in responding to tenants' requests for improvements. The figure that you touched upon there about investment in rural estates wouldn't just be about the farms, it would be things like going a little bit about the mountain bike trails that you've built, that sort of thing. You've invested very effectively. What we're trying to get to here is how does the Crown Estate interact with its tenants when you're getting requests for perfectly reasonable repairs? How do you judge if and when to carry these out? Bluntway, is there a backlog that's going to have to be cleared under the new regime? We have a rolling programme of repairs and maintenance and this is identified each year by our managing agent teams who have, as I mentioned earlier, a sort of detailed knowledge of the properties and the requirements and will liaise with tenants regarding the repair and maintenance. That figure has been continuing at roughly the same level for the last few years and we expect that we're budgeting again for a similar level next year. There is always a requirement for on-going repairs and maintenance and it is a matter of identifying what the requirements are for each holding, what our financial position is and managing it accordingly. If I could just add that the criteria that we would normally consider for repairs would be the age of the structure, its use, is it used seasonally or is it central to the unit as a whole functioning, any health and safety considerations or is a light for light repair actually the best solution. In some instances that repair request prompts us to reconsider the whole unit and work with the tenant on a wider investment or a restructure of that unit. There's a number of criteria that we take into account there. If we were to respond to absolutely every request that came in, that would be a substantial burden on the estate. If I could just add just in terms of the figure, it's around about £390,000 per annum in repairs and maintenance across the rural portfolio. It's also worth adding that a lot of work that we've been doing recently is in relation to asbestos related work and electrical wiring inspections and meeting new standards that are required. I've got a number of members who want to come in and brief up the entries. Finlay Carson, followed by Mark Ruskell. I suppose that it's in the back of what Claudia Beamish mentioned earlier on with the emissions statement. What pressure are you going to be under to make the right sort of sales looking at the business going forward? You're going to have quite an urgent need to generate income to keep the business going over this transition period. What pressures are on you to pre-empt what the emissions statement is going to be to to influence what your sales are going to be in this short term? I could perhaps just clarify and make a distinction between capital and revenue. So far as revenue is concerned, there are absolutely no concerns there, and I think that the revenue position will be very straightforward very early on. I don't foresee any reason for a revenue issue and, of course, revenue that's used in the maintenance of properties, so that isn't an issue. Where we do foresee and it's something that we're in very active discussion with colleagues in the Scottish Government about is the capital position, which we've identified. Where do we get the capital, the liquid capital, to invest and that's going to be subject to an on-going programme? This is going to be business as usual, as far as we can possibly make that, and we'll identify as part of normal business where we can take opportunities and optimise those.  But to what extent do you kind of systematically benchmark against other public bodies? If I was a tenant of the Forestry Commission, would I expect the same kind of level of service or response to questions or requests for investment as I would from the Crown estate? Where's a good practice here? If I could perhaps give some concrete numbers here, perhaps not directly for the rural estate but where we carry out from time to time surveys of tenants. Recently, we had one in 2014 for coastal tenants where 70 per cent of the customers rated the Crown estate good or excellent in terms of overall customer satisfaction for energy in 2015-16. There was a 69 per cent return that customer service was good or excellent. We'll be conducting further UK-wide studies this year. Is that just about looking at the relationship with your own tenants or would you look at benchmarking within the wider public sector as well? Would you have a benchmarking operation with Forestry Commission to look at their practices and then look at your practices and see which is delivering greater tenant satisfaction and maybe borrow from each other? It's fair to say that we don't have a direct dialogue with Forestry Commission on benchmarking across other public sector organisations. Not in respect of that. We do benchmarking in respect of financial return and the Crown estate performs very well in respect of those benchmarks. The IPD benchmark, we normally exceed. Kate Forbes, what is the process when tenancy becomes available? How are you doing much to encourage new entrants to take up tenancies? The process is one that depends on the nature of the unit that is becoming available, its size, its scale, the fixed equipment, the fertility of the holding, that sort of thing. We were taking into account a wide range of factors, including the requirements of existing tenants, maybe neighbours and their businesses and what they potentially would be seeking if an opportunity arose. We would take a view in relation to what opportunities there were in relation to whether the unit would be suitable for re-letting on the open market, whether it would lend itself better to being re-let within the estate to existing tenants. Depending on that decision, we would first look at whether or not it was an opportunity for a starter unit, and if not, then we would look at a different decision in relation to that. We recently re-let a farm at the Fock of the States, the Den farm, which provided an opportunity for a young farmer to get on the farming ladder. It often depends on the individual circumstances of the unit. I want to add a comment to that. As you will understand, it is pretty close to my heart about how particularly younger generations are getting into farming. I think that there are two aspects to add to what Andy Wightman said. We have been very rigorous in looking at business plans of applicants for tenancies. I know all too well in my industry that some people will really push the boat out, perhaps to their own detriment in the future, so we have been very rigorous in that regard. The other part of it that I would like to say is that members will be aware that the average age of farmers in Scotland is climbing horribly. There is an issue about allowing tenants or farmers in general to exit the industry with capital and pride. Sometimes, when farming businesses come on hard times, we can help in that regard a wee bit so that, if you like that, potentially the older generations of the family out of the business allows the younger ones to come in. The other thing that Andy Wightman referred to is that we will look at the viability of a unit that comes up for tenancies. Perhaps it is not big enough, perhaps it is not fertile enough, perhaps it needs to be bigger, and we will use that opportunity to recalibrate that unit when it is needed. It is very much this business perspective that is coming in. It is not there to grab heaps around all the time. It has got to be on-going for the future. Maurice Golden Thank you, convener. I recognise that the financials are important, such as the committee's questioning along those lines. From a Scottish point of view, we have to recognise that there are aspects beyond the balance sheet, particularly around natural capital, and I wonder how that is currently being integrated into particularly rural estates and forestry, and whether there might be opportunities to further integrate that into your strategies going forward. How it is currently dealt with, the Crown Estate is one of the industry leaders in relation to how it measures its added value through our total contribution and integrated reporting. We are about to launch a second version of our total contribution report later this year, and that has looked at the value creation beyond purely financial returns that the business generates as a whole in a range of different sectors, one of which includes natural resources. Going forward, and certainly in the new business, it is a real opportunity for us to look at how we can help to capture and understand the value that we as a land business generate, and certainly working with our partners and stakeholders how we can help our tenants to understand their impact on the natural resource base as well. We are currently working a project up with Scottish land and estates, SNH, Scottish Wildlife Trust and potential other partners, looking at how the new natural capital protocol was launched last year in July, which is a global protocol that is aiming to help businesses to understand their dependencies on natural capital and the process at which they can use to help to measure and capture the value that they create and their impact. The project is in a scoping stage at the moment, and we hope that we can continue to develop that work and really help to develop that in Scotland, so that land-based businesses can be provided with a set of tools using the natural capital protocol to understand the dependencies and measure the value that they create. Would you consider the further integration of that into rental agreements? One of the advantages that you have as the overseeing body with a number of tenants is that you can build in holistic benefits for the wider environment because you have a number of tenants that you have a relationship with. Do you see that as a more informal communications role or something that could be more formalised in terms of your relationships with tenants? I think that it is only the bigger landowners such as yourself that are able to integrate that approach. It is perhaps a bit early to say how we could make material changes to tenancy arrangements in relation to how that happens, but certainly when it comes to working with our tenants to develop those processes to help them to understand it as a large landowner, it is something that we have the capacity to do and it is something that we would hope to do in the new entity. We know, for example, that there have been concerns expressed by your farm tenants about what the future model will be and how that will impact on them. To what extent are you taking on board those concerns and articulating them in your discussions with the Government about the way forward? Are you representing those concerns that are being brought to you? We recognise that any future model is one for Scottish ministers and we know that our tenants, through their stakeholder groups, attend the Government Secretary's stakeholder advisory group, etc. We are aware that they are making representations directly through that group. So it has been done by that means? Primarily, yes. We are cutting out the middle man, as it were, and the stakeholders are responding directly. David Stewart wants to come in at this point. Can I just move on to the issue around coastal issues? What lessons can we learn from the foreshore sale to the Calaway estate trust? We can learn that it is a positive move. We respond positively to requests from communities for acquisition of the foreshore. The Calaway estate acquisition was a very positive opportunity for the buy-out of that particular estate. We have not had too many other requests, but we are very happy to look at those when they come forward. Generally, we work very closely with a lot of the coastal communities through the provision of local management agreements, of which there are eight, which create an opportunity for communities to come forward when they have proposals that involve management of the foreshore and the coastal environment. Those have been very successful. We also, through our marine officers, working for Bidwells, are one of our management companies. There are four marine officers around Scotland who work very closely with coastal communities and have been very proactive assisting with the development of mooring associations to help communities to manage moorings in their local area. Those have also been very successful. I think that this was the first community land organisation that acquired the foreshore. Would you do anything differently in the future? I think that that will be very much a matter for general policy within the new body. It would be a continuing policy to look at how we can acquire foreshore if there is a demand there. Just earlier today, I received a letter from the three island authorities—Western Isles, Orkney and Shetland—who are very interested, as you know, in the control of the seabed and the foreshore. Does it require the islands legislation to go through before they are able to acquire the foreshore? Not necessarily if there was a demand. We have to take a strategic look at the foreshore sales in terms of how they might impact on other activities, but there should not be any barrier to acquisition if there is a demand. It is also clear to say, however, that we are still bound by the terms of the 1961 act and are required to obtain best value for that. That is not something that we can negotiate. That is a requirement that we have—a legal responsibility that we have at this time. Presumably, that test was met in the case of the Carlyway estate trust. Mr Wells, earlier, in another context, talked about a pipeline of sales. Is the same true for the foreshore? No, because the demand from communities has not come forward in that sense. My final point in this context, convener, is that, of course, there are other local authorities, apart from the island authorities, which I strongly support, incidentally. We would also be interested in the foreshore, for example, a Gailan Bute and Highland Council. Would that be something that you would consider if they made applications to you? Indeed. One final question in this section is from Angus Macdawld. Just while we are on coastal issues and the islands have been mentioned, you might have heard good morning Scotland this morning, in which Council Gordon Murray from the Western Isles Council discussed his petition calling for an emergency towing vessel to be stationed on the west coast. Clearly, the protection of the Crown East States assets should be paramount. As we heard yesterday, unfortunately, the Marine and Coast Guard Agency refused to reinstate the emergency towing vessel for the west coast of Scotland. Would that be an issue that the Crown State could consider in the future perhaps paying a share of the cost of an ETV vessel on the west coast? Or should that be an issue that could be left to local authorities to come at the devolution of Crown East States assets? If I may, the revenue coming from the Crown State assets will, in its entirety, go to the Scottish ministers. If the Scottish ministers want to use that for that purpose, then that would be an ideal way of doing so. I am conscious that we still have some areas around coastal to cover, so Kate Forbes. How are you managing your coastal stakeholders, the ports, harbours and marinas, at the time of transition? Part 2, how do you envisage developing those assets in terms of two objectives? One, conservation, and two, marine tourism. In terms of the first part of the question, how are we managing that? It is in line with our business-as-usual contact through our managed agents and our internal team with our key stakeholders, so we are maintaining regular relations with stakeholders in that respect. That is a business-as-usual process, and we will continue to put more effort into that in the intervening period up to devolution to ensure, as with our farm tenants, that they are kept informed of progress. In terms of how the development of the marine assets are taken forward in future, clearly there is opportunity in relation to marine tourism, and the Crown State has been very active in relation to how it has supported the marine tourism survey, and we part-funded that in working with the Scottish Government in relation to the marine tourism development strategy. That work will continue, and again it will be a matter for the new body to look strategically at how we can take that whole agenda forward. Keeping tenants advised of the transitional process is concerned. We have engaged fairly formally in respect of that. We wrote out to tenants in December during the spring time and then more recently in July to keep them advised of what the transitional process is, and we proposed to keep that engagement on-going. In addition to that formal writing, all the members of staff, all the managing agents and indeed the coastal officers are entrusted to keep tenants advised whenever they are in a meeting with them, which is quite frequently. They are members of the local community. They work very actively within communities. There are two to three visits a week from all the officers around the coastline. They are mariners. They have hugely experienced in relation to coastal issues. They have been an immensely valuable resource to us in terms of how we have continued that engagement at that level. Thank you. It is really just to clarify whether you see that there is any role for the interim body in helping to take forward effective marine planning with the new national marine plan and the pilot regional plans in terms of support with any revenue, whether that is an appropriate thing that you have been considering at all, any Crown Estates revenue to support taking forward the national marine plan, those objectives. Savire's revenue is concerned. As I said previously, the revenue from the new entity will be apothecated to the consolidated fund here, and it would be for the Parliament to decide how that goes forward. What I can say is that we continue to work with colleagues in Marine Scotland on several joint projects, particularly with regard to renewables. There is one project in respect of offshore renewables, joint industry project or programme for offshore wind. There is an equally snappily titled one for ocean energy, whereby we have collaborated with Marine Scotland, with industry and with other UK Government agencies to put funding into various projects and programmes. In addition, we have been happy to support Marine Scotland with access and use of our marine planning tool to help assist in that. We move on to forestry now, Finlay Carson. Do you have some questions around that? Thank you, convener. What relationship has the Crown Estate currently got with the Forestry Commission? What does the forestry business plan look like over the past few years in regard to growing the business and employment? Is there a case that the forestry side of the Crown Estate could transfer to the likes of the Forestry Commission? Forestry in our Scottish portfolio extends to around about 5,000 hectares across the four real estates, just to help you with a bit of background to forestry. Most of that is at Glendivit, about 3,000, just over 3,500 hectares at Glendivit. The rest of the forestry estate is fairly fragmented, 600 hectares also at Applegirth, and then the other bits and pieces at Whitehill and Flockerbys. Outside Glendivit and Applegirth, these woodlands tend to be fairly fragmented. A lot of them serve as shelter belts for surrounding agricultural land, and they are very integrated into the agricultural estate. Glendivit is the core of our commercial forestry and Applegirth in Scotland. We work very closely with the Forestry Commission in relation to the development of the long-term forest plans for all our holdings. We have long-term 20-year plans in place for their management. That management is very much focused on integrating multiple use management ambitions and long-term restructuring of the woodland resource. We have an on-going programme of thinning and felling across these areas, and as I said, we work very closely with the Commission on the management of those areas. We also invest heavily in broader public benefit in forestry. We have mentioned the amount of bike trails at Glendivit, which have been very successful. We have put in a lot of other visitor infrastructure, footpaths, trails, car parks, interpretation and education. We have a dedicated range of service at Glendivit, which undertakes a huge amount of educational work with local schools and providing facilities for visitors. It is very much multiple use. We have been recognised by a large number of forestry awards for the sustainable management of our woodland asset. They are all certified by the Forestry Council under the UK Woodland Assurance Standard, which verifies sustainable management. We hope to continue that management in the new body, whether it was appropriate for transfer of those assets to the Forestry Commission, that would be a matter for the new body to consider. Is that something that you are looking to do at the moment, to look at the potential of possible savings with a transfer? Again, looking at our forest assets, we will be part of our host of the strategic review of the portfolio and whether there is opportunity for trading some of those assets as part of providing the capital fund for the new business. That will be something that we will consider with other potential asset sales as well. Those assets are managed as part of a profit centre and we will look to continue that. Moris Goulding Obviously, on the apple girth estate, a number of tenant farmers have installed biomass facilities and are using externally sourced biomass for those. Again, on the apple girth estate, there is a Crown Estate Managed Forestry that produces biomass and thinking from a carbon point of view about the transport costs. If you could shed any light on that and whether there are any plans that those two demand and supply could somehow be interlinked? There is always opportunity for that. You will be aware from your visit that we have a very large industrial bioplank very close to the apple girth estate at Stevenscroft. Clearly, our timber goes into there and transport is very short. There is always opportunity for a small-scale biomass and it is something that we are very happy to look at. Over the years, we have undertaken biomass trials with various agencies and forestry commission in the past up at Glen Nivet. We have our own wood-fueled heater on our estate at Glen Nivet. We support a local business who harvests our timber and then sells the chip back to us to heat our information centre. We are very happy to consider that. I appreciate that, from a logistical point of view, it is easier to deal with one big supplier. I appreciate that. That is a local arrangement. It is incumbent on all agencies to look at small businesses, tenant farmers and going the extra mile to perhaps facilitate smaller contracts, which are logistically a little bit more tricky but ultimately make a lot more sense. Indeed, going back into the early 1990s, we did something very similar at Glen Nivet, where we worked with a local farm tenant. We identified a lot of small forestry blocks around the estate that were uneconomic to harvesting conventional terms. We facilitated him to diversify his farm business, put in a wood-cutting machine, sell timber that he had actually harvested himself for small local markets. That was a direct example of something that we did over 10 years ago. We are always looking at those opportunities. We also have a contract in place with Estover Energy to supply the new McCallan distillery bioplant at McCallan distillery. That will be low-value timber coming out of Glen Nivet, which we will supply into that contract. In general, how long are your contracts with, so when would the opportunity be presented to re-look at that? Is it a five-plus-two contract? The contract with Estover is over 12 years, and that will again deal with a lot of that. At Glen Nivet, the particular issue that we have is that we have a lot of historical planting, post-war planting, a very low-value timber that does not easily go into traditional markets, a very low-value lodgepole pine. The biofuel market is a very good opportunity to be supplying that. The volumes that we have up there are substantial. The contract that we have with Estover is actually a very small part of the actual resource that we have available, so we are not tied into—sorry, that does not prevent us from supplying other suppliers, if we so wish. That is fine. Can we move on to the issue of aquaculture? Kate Forbes will take that forward. Earlier on, you mentioned that you have a lot of ambitions for the future. What are your ambitions for aquaculture? How might the transition period and those ambitions have an impact on rights for approving and consenting to fish farms, for example? First of all, consenting of fish farms is no longer part of the Crown Estate scheme. It is standing through local authorities in Marine Scotland. That is an evolution that the Crown Estate used to be involved in. It is not. I think that separation of duties is actually quite useful and quite valuable. As far as taking the industry forward, it is a challenge that we have asked ourselves as to where we can look to make an investment that would have a direct line of sight to increase production. That is something that we are currently looking at. It is not as straightforward as people might think to see a way of making a direct investment that creates value like that. We continue to fund various research projects in respect of parasites to maximise the existing fleet of aquaculture sites. We are doing what we can to encourage new sites and identify those sites, but we have challenged ourselves to find ways where we can actively invest that would see an increase in production. Therefore, there is an increase in capital and an increase in revenue, to be honest. Who is Self Virtuous? I wonder if I could just add to that, Ms Forbes. Just last month, our aquaculture manager Alex Adrin and myself went up to Perth to meet the chairlady Ann McCall and chief executive of Scott Lansborough of the Scottish Salmon Producers Organisation. Just to speak exactly about those issues or opportunities to be more accurate, Ronnie has just referred to. We are very aware of the targets that are set by the Scottish Government for the salmon industry. We will do everything that we can to facilitate that. On another industry, although it is an allied industry, Alex and I are going to see the Scottish Shellfish producers shortly to try and develop a blueprint to drive that industry forward. There is enormous appetite for the quality shellfish production coming out of Scotland. We are very engaged with industry and we are really trying to boost opportunities for them. I recently had a briefing from two biologists from UHI about clothes containment for aquatulture. Does Mr Quinn or many of his colleagues have done any work on that particular issue, in other words, having aquaculture outwith locks because of the issues to do with pollution and sea lice? By which you mean land-based? Yes. It is not connected to the Crown Estate assets. It is not directly something that we would invest in or it would be within our various to invest in, to be honest. We are going to move on finally to deal with energy. I know that Mark Ruskell has a number of questions that he wants to ask, but before we do that, can I refer you, Mr Quinn, to one of the comments that you have in the annual report? You reference that there has been substantial support to the offshore renewable sector, but it will be nearer 2020 before we start to see the real returns from that. Can you expand on that and advise us what sort of sums we are talking about? I mean, I think that what I am getting at is the Scottish Government in for a nice surprise in terms of income in a couple of years' time. I am glad to have the opportunity to quote the numbers that I have traditionally quoted to predecessor committees. To be honest, the big numbers will come from, at this point in time, offshore wind. For round three sites, that would include the Moral site in the Murray Firth and the Sea Green site in the Outer Forth and Tay. The expected revenue based on 2020 values would be in the region of £7.6 million per annum per gigawatt. For non-round three sites, we would be looking at something in the region of £4.3 million per gigawatt per annum. For wave and tidal sites, if we are looking at those, the numbers are looking something in the region of about £30,000 per annum for a 10 megawatt site. The numbers are deliberately scaled because the opportunity or the numbers in respect of wave and tidal are much smaller at this point in time. Put in simple terms, what would you anticipate that would mean by wave income? If I say that the Beartres site, roughly speaking, is about half a gigawatt and we would expect that to start first energy in 2019, should all go according to plan. The sites in the Outer Forth and Tay, as members will be aware, is not the matter. Yes, because we have a problem there. There is an on-going judicial issue in respect of that. I am interested in the area around cost reduction because that is a big issue for offshore renewables and how we would get a more competitive industry. What kind of work are you doing at the moment? How does that feed into the broader strategy of the Scottish Government's forthcoming energy strategy? You are absolutely right. Cost reduction is key for not just the offshore wind, but also the wave and tidal centres to be competitive going forward. Crownist Day took part in and published its own report in respect of reducing the levelled-wise cost of energy. There is a fairly weighty tome that is in the office complete with quite a full cd of data supporting data behind that, pointing out where the savings can come from. It is fair to say that there is no silver bullet in respect of that. It is incremental improvements in lots of areas. We are starting to see that, and the benefits of that are now coming through. We have also published a supply chain guide for anyone looking to introduce themselves to the supply chain that effectively sets out your business plan, frankly. The levelled-wise cost of energy for offshore wind has come down dramatically over the past number of years. Offshore wind was often quoted at over £150 per megawatt hour. The cost of the levelled-wise cost of energy for some of the latest Danish projects or Dutch projects was down to the high 70s in respect of that. I accept that we are not comparing like with like there, because there are some transmission issues and transmission costs that are different there. There is a different consenting regime that applies there, but we have seen evidence of costs coming down dramatically. The next option for CFDs is due to be announced within the next number of weeks. We will be giving a guide as to what the level is there. I would expect that to be significantly lower than the previous number. I know that we are working with our developers to help to structure documentation across the board to support their bids going forward. The levelled-wise cost of energy is dropped by at least a third fairness, which is a huge gain for the industry to balance. The original electricity market reform process was set out to identify a route to the industry obtaining £100 per megawatt hour by 2020. We are going to be exceeding that in 2016. You have been very closely embedded with Government energy policy and also with the industry for a number of years. What would you expect that would come through this new setup? Would you expect explicit ministerial direction in relation to the work that you are doing around energy, research and collaborative work? Are you effectively an offshore arm of the Scottish Government's energy policy? Again, I do not mean to sound like a broken record here, but it will be for the new board and for the ministers to determine where we focus. I certainly see huge opportunities here to take that further forward in certain areas, not across the board. I think that there are areas where it would be useful for the new entity to focus its attention on where there is a route to market and where we can identify opportunities that are unique to Scotland. I think that we have to play to Scotland's strengths. To where your strengths and weaknesses as an organisation are in terms of your capacity staff, the team that you have in place and the team that you hope to get in place, where would you see as being the areas where you can make the greatest contribution in terms of being that delivery arm potentially of Scottish Government policy? I think that, in respect of, to be honest, being a trusted adviser on where we can identify those, we are already looking at areas that we would be happy to recommend the new entity to take very seriously and go forward with. We are already in discussions with colleagues in Scottish Government, with colleagues in SDI, with colleagues in the department for business, energy and industrial strategy. I am saying that that way because I do not know how to say the acronym, but we are working with colleagues across the piece on where we can identify opportunities in Scotland where, as I say, we will play to Scotland's strengths. We have got the people within Bellsbury to do that. I am confident that that will go on. I was just wondering on your assessment and you have touched on this in terms of revenue projections, particularly on tidal but also wave. Was there any thought about when that may begin to make some sort of decent contribution to your overall revenues? Is that something that you have looked at? Yes, it is. The tidal sector—I think that it is sensible to separate those at this point in time—is starting to see its way through commercially. There is the recent announcement of the tidal development in Shetland at Blue Mill Sound by Nova Innovations. It now has two tidal turbines, two 100-kilowatt tidal turbines operating on a much larger scale. The committee will be aware of the major project in the Pentland Firth, where the Crown Estate has committed a £10 million investment into that project. That is now well advanced and we are expecting offshore works with regard to deployment of devices to be starting within the next number of weeks. The offshore cables have already been laid. I was up there myself a couple of weeks ago, having looked at the onshore substation and how that was working. That is all looking very positive. Key to that is going to be how those projects are seen by the investment community at large, because, while I think that it has been right that the public sector has invested heavily in those projects up until now, I still think that that is something that should continue going forward. It has to be with an eye to those projects reducing their costs and becoming much more self-sufficient in bringing in private sector finance going forward. With regard to the wave sector, it is fair to say that the technology is not quite as advanced yet commercially for wave. There is absolutely no doubt that electricity can be generated using the power of the waves, but it is doing that on a consistent and commercial basis. As to when that will start to go forward, we are waiting on the right technology to be honest. Gentlemen, I thank you for attending today. That has been a very useful session. Those are quite challenging but exciting times for the Crown Estate. As we have heard today, there are quite a lot of opportunities going forward for you to operate in different, better and more effective ways. We, as a committee, look forward to engaging with you and the Government over the coming months and years to look at that. Thank you very much and we look forward to seeing you again in the future. We will now take a five minute break for the swap over our witnesses for the second panel. We will now resume. I welcome the second panel of witnesses. We have Linda Rosbryd, director of Marine Scotland and David Mallan, head of Crown Estate Strategy Unit, Marine Scotland and the Scottish Government. I will kick things off. What due diligence the Scottish Government has done around what it is inheriting from the Crown Estate in terms of asset value and liabilities? You might have heard of what you were in earlier about questions around potential backlog on tenancy repairs. I understand what work is being done to inform your view of what you are inheriting. I will kick off, but it is obviously a complicated issue because it is a very large estate and a rather complex estate. We have secured the services of external consultants in the Crown Estate and have made available to us information on their tenancies, assets and documentation around their holdings and relationships with their lilies. We have had an initial report on that in August at the end of August and we are sorting through some of the details arising from that at the moment. David, do you want to come in on that? It is also worthwhile to highlight that this is not a normal commercial transaction. It is a Government-type transfer, so full-scale commercial due diligence is not really our objective here, but we have been looking to best ensure that we are aware of any issues and any liabilities. Primarily, we think that the devolution will also provide an opportunity to secure the position and manage the liabilities for the future in a way that is appropriate for Scotland. We will come on to that. How would you, at this early stage, characterise what it is that you are inheriting and what sort of condition it is in? There are duties in the Scotland Act to maintain an estate and land, which in practical terms means that we have to carry out maintenance and look for opportunities for investment once the assets are devolved to Scotland. Those are obviously liabilities in the technical sense that have to be honoured. The potential implications should things go wrong with an investment in part of the estate, even though the strategy is to ensure that those liabilities are managed and sit with the appropriate body. There is the possibility of liabilities stemming back to the interim body, as is envisaged, or, potentially, ultimately, Scottish ministers if those liabilities are managed by other parties cannot be funded. It is one of the active subjects of discussion between us and the Treasury. The Crown Estate has been, over the years, good at ensuring that, as it has taken on additional responsibilities, it has ensured that other parts of Government that were interested in taking on those responsibilities took on the liabilities. One of the issues that has arisen around that is in respect of offshore renewable energy. That has come up in relation to DEC. We are also pursuing the issue of any liabilities in relation to MOD use of assets, which could be an issue as well, but those are quite live issues that are on the line. We still have to agree that the transfer scheme with the Treasury has an essential prerequisite to the devolution of the powers in relation to the Crown Estate. What is the latest position regarding the drafting of the transfer scheme and the timeline that you are working to? On that, we are still in active dialogue. We had hoped that we would have had a further draft, further to the one that the previous committee saw, but we have not yet had that. I wrote last in detail in June to the Treasury with a set of requests, picking up some of the points that have been made by committees of this Parliament and also in relation to stakeholder views and other technical matters. We are still awaiting a further draft of the transfer scheme. That seems rather a delay, does it not? It is slower than we had expected, yes. Do you feel that the Scottish Government has been able to contribute to the development of the transfer scheme adequately in a general sense? It certainly was not as originally envisaged that this would be a joint process. We have seen some movement in the Treasury. It has responded positively to some points that we have made, but it was never a joint process. The transfer scheme, as proposed, goes beyond what Smith recommended in that it has a lot of constraining detail to be within it, which Smith recommended should be for a memorandum of understanding in terms of how the interests of national infrastructure are safeguarded, for example. It also leaves out certain properties that ministers are not happy with and other matters. David, do you want to add anything to that? I think that you summarised the position quite well. We are awaiting an updated draft of the transfer scheme. We are informed that it will be supplied by the end of September. The Treasury is still working to a timescale, despite that delay, to enable the transfer by 1 April. On the subject of, perhaps, surprise emissions, is there any movement at all in Fort Canard? Is that still being discussed? Have we given up on that? Where do we stand? There is no movement on that. We could continue to press the issue. You are pressing it? Yes. Yes, right. Thank you. I have got a number of colleagues who want to come in on this. Dave Stewart. Can I raise the philosophical point? Would you argue that the Crown Estate protects the public interest? I had a quick glance before I came out this morning. Over the last few years, there have been two or three areas of conflict. For example, with salmon farmers in Shetland, conflict over the moorings in Russia, and conflict with salmon fishing rights in the River of Yarrow in Selkirk. Conflicts have been a part of the issue. Some argue—I am not necessarily saying that I agree with this—that you are just another absentee landlord and that you are not actually looking after the rights of tenants or rights of community land organisations. How would you respond to that? Obviously, we are not Crown Estate. We are working for the Scottish Government, looking at change. The position at present is that the Crown Estate is required under the legislation under which it operates to pursue a commercial objective maximising the economic return to the Treasury. An issue for the Scottish Parliament in future is whether, in terms of the management of the estate, regardless of who manages it, for what purpose should it be managed. That is the question that underpins some of the issues that you are highlighting. I should also say that, from my day job responsibility for Marine Scotland, conflict in the marine environment is part and parcel of what happens quite a lot of the time. You spoke with feeling on that. I am just on a valuation question again, as I am sure you are hearing getting the most accurate valuation, be it statutory or red book, given that this will form the baseline, which is obviously very important in the process. Can you clarify two points? We heard from the earlier panel that the valuations are normally done in the third quarter or towards the end of the year, with the transfer being 1 April. What will be the timing of valuation in terms of this first and most important valuation? Secondly, in terms of transparency, what publication of valuation and what breakdown will it be? Will it just be by activity, as in the current report, or will it be more detailed by asset? I would say that we have started from a process of seeking to understand the assets, the financial processes within the Crown Estate better, and we have been working on that and moving in a positive direction. Up until now, the Crown Estate has obviously operated on a UK-wide basis. The assets are complex and the information is not always ready to hand. David, can you come in on where exactly we are now in terms of that process? Yes. It is important also to highlight that the assets are the assets. There is obviously a connection with the point of transfer and knowing at that point the best estimate of what their value is. The most significant point is that the assets will be transferred over to the control of Scotland and will ultimately be reporting to the Scottish Parliament. Any valuation exercise in advance of or after the transfer will be able to take account of changes in the valuation of individual assets, but the actual control is a major development arising from the transfer. There is a set process that the Crown Estate is normally involved in to periodically value any changes in the asset base in terms of buildings and properties. There is also the valuation of an asset, such as a portion of the seabed that is associated with a third-party agreement. Those are obviously different. As Linda said earlier, the diversity of the portfolio creates a challenge in having a valuation that is bang up to date across the entire estate, but there will be an opportunity to better understand that there has been significant change between the last valuation and the transfer date. Assets that cannot be measured in financial terms, i.e. the people who work in the Crown Estate. I am just wondering two points around that. How confident are you that the transition is being managed well for their benefit, keeping them on board and informed? What effort will you put in to listening to the staff of the Crown Estate who may very well have some excellent ideas about how the organisation could work more effectively in the future? We have a formal joint project with the Crown Estate to look at the process of change. We hold our formal programme management meetings in the Crown Estate premises in Bellsbury, so we are always there and visible to staff. We are working through a number of different work streams around HR issues, IT issues, other process issues, financial management issues, looking to ensure that we have a good basis for transition to the new arrangements. I am a senior-responsible owner for that process and the arrangements are working well at the moment. David Scott, perhaps a little bit closer to the staff views. I would first of all highlight that the staff are a very important part of the business, the knowledge base, given that diversity portfolio. It is very important that we do best ensure the transfer in terms of a smooth navigation for staff. They are very much taken account of when it comes to the people element of the work programme that Linda described. I am thinking through all the issues to ensure that we comply with the duties in the Scotland Act over no detriment but act on behalf of the new employer to ensure that their welfare is taken into account. That is involving a lot of joint working with the Crown Estate. The Crown Estate is looking for opportunities to provide background information on the way to state of play when significant developments have arisen, so that is also the understanding proving beneficial to employees and understanding what the process involves, what the timing is, to provide that reassurance on what the direction of travel is. The Crown Estate has been helpful in ensuring that it has created a core body of staff that covers the functions that need to be covered by the new body. To start with, there were some functions that were done outwith Scotland and some within Scotland, and they have reorganised so that they are in the position that we have, the skills that are needed based in Scotland, so that we can move forward with confidence. I appreciate the difficulties of timing and valuations. I was really trying to make a point. I hope that you appreciate that the performance of Crown Estate Scotland in return on capital will be based on when the baseline starts. That was really the point of that. The second part was—I do not know if I had an answer to the publication of valuations and will it be by activity or by further breakdown by Acid? In terms of, if you are referring to the Scotland report that is normally produced by the Crown Estate and provides that, yes, yes, that one, I think that we will be looking to whether there are any opportunities to provide more detailed information in part of an overall direction of travel to look for new opportunities for increased transparency. We have not got a blueprint on what the new report looks like, but I think that there is an opportunity to be a bit more detailed. Thank you, convener. Good morning to you both. In a previous life in the rural affairs committee, I and others asked about the mission statement of the Crown Estate. It was suggested in the previous committee that there might be possibilities for looking at that again in relation to some issues around sustainable development and possibly environmental stewardship. I would also add community involvement and there may be other issues that other committee members would want to highlight. Has there been any work done on that? I appreciate that there is going to be an interim board and all that and where the responsibility of Scottish ministers lies, but it does seem very important in terms of looking to the future as to how this work could be developed and who would be engaged in it. Yes, I think that that is a very valid point. I referred initially to the fact that on transfer, the 1961 act provisions still apply, so the statutory purpose for which the assets have to be managed remains the same as at present. Obviously ministers are looking to ensure that we have a body that works for Scotland as an interim body as fast as possible. In setting up the proposed arrangements, the criteria that ministers have agreed that they are looking for in terms of people to be or the chair and subsequently people to be on that body, you are looking for a range of skills that would encompass some of those elements. I understand that, but I can just press you a bit further on that. It is quite clear in relation to the 61 act that there is a statutory responsibility. Beyond that, is there any reason why it would be inappropriate for Scottish ministers to make additions along the lines that I have highlighted and others highlighted in the previous committee, to broaden out the mission statement? I think that ministers can look at the framework documentation for the new body with that very much in mind. The fundamental purpose is still there, though, which would need to be properly taken into account. Through a consultation on the long-term framework for management of the assets, there could be opportunities to amend that legal duty that will exist in the interim to think about other drivers such as socioeconomic benefit and environmental responsibility. However, as I was hearing in the latter stages of the evidence session just beforehand, the crown estate is already contributing in some way, shape or form, to the delivery of environmental objectives. I think that we are talking about a question of degrees here and the extent to which that can be enhanced in future through the interim arrangements. We will be looking at that opportunity within the legal framework and also for the future. I think that it is more like a direction of travel and degrees of contribution rather than a black and white situation. Mark Ruskell The objectives that might be put on to the new body are refined on the back of the 61 act. The other side of that is the ministerial direction powers that will come through the new interim body. How exactly would you envisage those being used? I mean, we will be looking at something along the lines of Scottish Water, whether it is high-level objectives, strategic investment programmes, etc., or are we looking at something a bit more detailed? I think that you highlight direction powers. They tend to be powers of last resort, which are in themselves not used. In terms of the framework, I think that we will be looking at general objectives within which the body would work in the first instance, but that would need to be agreed by ministers. That is my normal moment. Mark Ruskell Powers of last resort, so you would be interested in that. Parts of direction generally in the public sector tend to be powers of last resort. It is not something that ministers are issuing on a routine basis. Generally, we provide frameworks within which organisations operate. How would the Scottish Government envisage working with that new framework then? As an independent board, would the Scottish Government be representing on that board? Had ministers exert influence in terms of the delivery of those objectives in a practical sense if ministerial directions are a last resort at the end of the day? What generally happens is that they set forward a framework. There will also be some one would envisage some sort of restrictions, for example, in relation to abilities to sell assets that are novel or contentious matters that might need particular agreement with ministers. That is a fairly normal set of circumstances. In the decisions around the appointment of the board and the chair, that would also be minister setting their sort of direction of travel in terms of the body that was being set up. Okay. Can I just give one example of that? When we were at the apple girth of state last week, there seemed to be some ongoing flood management issues which were being partly resolved with the tenants and the agents and everybody else, but what there was lacking was a strategic approach to river basin management planning. That is the kind of thing that I would expect a public body just to slot straight into that wider strategic work. Is that something that ministers would go all in a minute? This is not happening. We want to see more good practice here. We want to see benchmarking with our public sector organisations on that work. I think that the ability to align public policy better with other parts of the public sector is one of the big opportunities on devolution, obviously subject to the constraints of the commercial remit, which it will have at the outset and the need to ensure that its assets are properly managed. I would imagine that there will be quite a lot of tensions particularly in the early period, because a lot of people will be looking to see change for the things that they have maybe been unhappy with for some time, and that in itself will need to be carefully managed. Ministers would not wish to be drawn into day-to-day decisions on individual tenancies. I think that it is proper that ministers should be at one remove from that. OK, talking about stakeholders, Dave Stewart. Change can obviously be very threatening to stakeholders and leaseholders. What are you doing to reassure stakeholders and leaseholders through the change management period? The way in which we have approached the whole change management has been about ensuring that we both retain knowledge and expertise and key ability so that the delivery of the services is as smooth as possible. That has been a very strong objective of ministers right from the start, while at the same time providing a good platform for the future direction of travel, which might well be different and take us in a different direction. Ensuring that we manage those two aspects has been key to how we have gone about it. Those stakeholders are involved in our stakeholder advisory group. David has met a number of different representatives and we have tried to ensure that they are fully involved. One of the issues that they have of concern is cross-subsidy, and the fact that some sectors and the tenants are perhaps subsidised by resources coming from elsewhere in the portfolio. That is one of the issues that we need to address in thinking about future arrangements. David, do you want to come in on the specifics? I know that you have met that. First of all, on the stakeholder advisory group, that is very much designed so that the individual sectors and interests that rely on the Crown Estate present for a service can help to influence what the future opportunities are. It is also a space for them to raise any concerns that they have here and now. It is very important to us as a set of discussions in terms of understanding what the issues are and what the opportunities are. In addition to that, we are trying to provide open lines of communication to individual stakeholder representatives so that we can understand the concerns that they have, so that we can address them in the short term or through the consultation and ensure a smooth transfer in the meantime. Of any of the issues that have been raised by stakeholders, it has been a surprise to you that you mentioned cross-subsidy. It has been one of them earlier. Has there been any other issues raised that you were not shocked? It is certainly a surprise that stakeholders were raising. It is not necessarily a surprise to us. I think that the dynamics of the group are also interesting in that it has been possible for individual members to more clearly understand what the views of other sectors are. That has helped in understanding what the opportunities are for the future. There is a fundamental concern among the agricultural tenants that, depending on how that plays out, there might be less of a pot there for their interest to be protected. How are you aware of those concerns? I am aware of them. As I say, they are a surprise to me, but that is very much part of the set of discussions to understand what the existing maintenance requirements are, what the future ones are and the way in which those obligations can be fulfilled so that we are complying with the duties in the act in respect of those needs. We are going to drill down into the operations of the interim body and the longer term management arrangements now. Just as we do that, can I ask you about both in terms of the interim period and the long term, what measures will be put in place to ensure that the performance of the Crown Estate internally is measured appropriately and the way in which other public bodies would be measured? For example, and I use it just as one example, how responsive are they to approaches from agricultural tenants for repairs? How long does that take? Overall performance framework, are you minded to put that in place for them? It is part of the set of discussions that we want to have with the new interim body, referring back to what Linda said about the framework. That would involve normally the objectives and targets being developed by a public body for approval by Scottish ministers, with ministers able to influence those targets and add in new ones. Given the importance of the staff base for successful delivery, that is something that would be open to looking at. We have not got that far yet, as the honest answer in terms of the transfer. We are focused on day 1 and ensuring that the first year does not result in stakeholders and customers receiving a reduced service. Okay, that is fine. Moving on to the interim body and how it will work, Maurice Golden. I wonder if you can just highlight the plans, processes and timescales for the set-up of the interim body. Yes, the plans are very much focused on trying to make it possible for the new body to take on functions from April next year. That requires further legislation at Westminster, the transfer scheme, to effect the transfer. It also requires the legal establishment of the interim body through secondary legislation at the Scottish Parliament. The processes also involve joint working with the Crown Estate to, in simple terms, although it is very complex, move from a situation in which the Scottish operation is managed as part of a UK-wide set-up and can receive services and support and headquarter functions from that UK body to a position where the new body has the necessary systems and services installed at Bellsbury. That is another key component of our work moving towards 1 April. I could expand a little bit on the wider timescales, if that would be useful, in parallel with that priority work for the interim body that we are engaged in. We also want to demonstrate early action on what the future may look like. The April timescale is focused on trying to deliver devolution to Scotland as soon as possible through that legal process set-up in the Scotland Act. That is to try and reduce uncertainty as much as possible for stakeholders, investors and staff. Likewise, there is a degree of uncertainty about what the future will look like in the longer term, so we are aiming to launch a consultation later this year on the options for long-term management of the assets. Thinking about things from quite a practical point of view, I am aware that in the past, when agencies have received a devolved status, there is a great opportunity there to better reflect the Scottish Government's overall view. Mark has alluded to some of those aspects, and that should be welcomed. There is also an opportunity to be more innovative and to connect better with relevant stakeholders by virtue of the size. Are you aware of how, for example, the civil service currently interacts with the Crown Estate and how you would envisage that going on? It is a concern that, where we have seen agencies being devolved in the past, suddenly the levels of scrutiny—not by a public committee but by the civil service—clogs up various processes, and suddenly it is very difficult to achieve the aims that we all wish. Are you aware of the current interaction and how you view that going forward? At the moment, it is a UK body answering to the Crown Estate commissioners and there will be change. The Scottish Government has proposed that that is a statutory corporation with a board. That will be the governance framework. That means that there is not the day-to-day intrusion that you might expect if it were brought within the Scottish Government that some people might have suggested it. It gives it a bit of flexibility working within a framework to do the job of delivery. I think that there will be a lot of expectations because people are rightly looking forward to the division of the Crown Estate around Scotland, often for different reasons in different parts of Scotland. There is going to be quite a lot of challenge around ensuring that the benefits are delivered and managing those expectations. I think that that will require quite a lot of work at the same time as ensuring that the day job is delivered. Quite a lot of the day-to-day work is done through managing agents. The core staff is actually very small. Those systems have been set up on a contractual basis, so much of that work will continue in relation to that. Will you be considering a scheme of delegation so that we have transparency over who is able to do what and who is responsible for things such as land transactions, for example, at what appropriate level they would be signed off? I will pick up on the deputy convener's point about innovation. In the earlier session, we asked the Crown Estate if it had given any thought as to, in moving into this process, it would bring forward ideas about how it could operate more effectively and in better ways, given its expertise. We would not present a blank sheet of paper, so it has given some thought to that. Is this Government geared up to listen to that and to work actively with them to implement some of those changes for the benefit of everybody? I can certainly say that in my engagement with Crown Estate staff who live and work in Scotland, there is an obvious sense of expectation around change that enables them to do a better job for the people of Scotland. That comes across. Ministers are meeting with staff soon, and we have created the opportunities for that dialogue. That being said, there is the Smith's commission overall setting out of the position in relation to the future of the Crown Estate that needs to be worked through thoroughly. That will mean that staff feel a bit uncertain. What we are committed to doing is setting out the options for consultation going forward. A lot of people are very aware of the expertise that rests within the Crown Estate core and the opportunities that flow from that, potentially for Scotland, and the need to safeguard that going forward. Claudia Beamish It is a follow-up question related to accountability with the interim board. I wonder whether there are yet plans as to how that will be transparent to the general public and whether there will be written reports and whether those will be put on a website. If you have had any discussions about that, that would help to reassure the whole range of those who we have been touching on today. We would expect normal procedures of openness to apply, subject to the commercial confidentiality, which there can be around a number of issues that are relevant to the management of the Crown Estate. Alexander Stewart Clearly an exciting time of a transfer. I see that the closing date for applications for the chair was yesterday. Can you give an indication of how many people applied for the job? Claudia Beamish We have had applications, I know that. I do not know if I have got the final figure. Alexander Stewart Could you outline for us the thinking around allowing the Crown Estate to borrow money? Alexander Stewart I repeat the question. I understand that there may be an opportunity for the Crown Estate to borrow money going forward, Crown Estate Scotland, which has not been up until now. Is that correct? Claudia Beamish Yes, that is right. It is stemming from our wish to best ensure that there can be a going concern approach to the transfer and that there is flexibility to make the most of the assets and to ensure that there is security and resilience to funding. That is one example of the inefficiencies that were seen in the 1961 act by Crown Estate staff. Given the age of that piece of legislation and the fact that there is less detail than we would ideally like on the origins of that control, we have been looking at the possibility of that flexibility being introduced to the devolved setup. Alexander Stewart Just by way of guidance for this committee, I realise that it is difficult to quantify perhaps, but what sort of timescales do you want in terms of the secondary legislation that might come to us? We are hoping now that the consultation closed on 26 August on the secondary legislation proposals to be able to analyse them very quickly in a matter of weeks, and hopefully in the autumn, October, ideally, to be able to lay that order. That is our current timescale, subject to ministerial approval and so on. Mark Ruskell Just a brief follow-up to that. It is early days that the consultation is finished on the 26th, but out of the conclusions of that, are there any changes that you might want to make to the interim body as proposed in the consultation? Are there been any tweaks as a result of that consultation that you could point to at this point? Nothing specific at this stage in time. We will be producing a summary of the responses along with the draft order, and we are in the middle just starting that analysis to weigh up the contributions that have been provided to the consultation process. It could be useful if we could get at least sight of that. Clearly, your focus now is to get everything that you have to do done, get things up and running, but I am just wondering at this stage what thoughts are being given to consulting on the longer term arrangements of the Crown of State and whether that would link into the proposed IWINS legislation. Quite a lot of thought has gone into the consultation for the long term that has involved discussions with the stakeholder advisory group. There are some kind of key questions that we need to try and leach a view on a final view through the consultation, and there are implications that flow from the preferred way forward on each of those issues. For example, we were discussing earlier about the duty to obtain the best consideration, the maximum commercial value for the asset, be it the controlling factor on decision making, on sales or on leasing of assets looking forward into the long term, or is there a better approach to provide flexibility, for example, to take account of wider socio-economic benefit, wider economic benefit, the environmental issues. To provide the idea of flexibility is one set of issues that we want to obtain wider views on. Coming to final decisions on what the further devolution opportunities look like, and who that might be in terms of level of government or communities, etc. We are thinking about how we can fulfil the duties in the Scotland act, irrespective of what the 1961 act says, to ensure that we are managing, as an estate and land, to come back to some of those points about investment and maintenance and to do that in a way that is efficient for Scotland to maximise the benefits for Scotland are the themes that we are exploring, and also how best to manage why abilities exist or might exist as another stream of thinking. The islands have a particularly strong appetite for early progress in the islands, and they are pressing for what they call a pilot to go ahead of other legislation. We do not have the power at the moment to provide for a change specifically for the islands. That would only happen once we have reached the point of the transfer having taken place, and that will be well into next year. There are some timing issues and challenges around that, as well as the principle of whether it would be sensible to do something in one place ahead of looking at the overall long-term future. Those will all be matters for the consultation. In essence, the opportunity to shape, to alter the future direction of the Crown Estate is very much going to be there. Can I just look around colleagues? I think that they have asked everything that they wanted to ask. Are there any areas that you feel that we have not covered in any comments that you want to make that would provide further insight into what is happening? No, I do not think so. I think that the key thing is the transfer scheme and ensuring that that is done in a timely way, in a way in which Scottish ministers are arching to end because Scottish ministers need to agree to that transfer scheme. That is the key going forward, ensuring that that is fit for purpose. It is also going to be a key area of interest to the committee, I would suggest, so we would welcome being kept updated on the progress with regard to the transfer scheme as we go forward over the next few weeks and beyond that. Can I thank you for your attendance today? It has been most useful. I would thank the earlier panel as well. The committee will now move into private. At its next meeting on 13 September, the committee will take evidence from the committee on climate change on the Scottish greenhouse gas emission targets and from the clerk to the Scottish Parliament on its climate change and environmental policies. As agreed earlier, we will now move into private session. Can I ask the public gallery to be cleared and the public part of the meeting is now closed?


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