Fy enw i ddim y 24 ymgwrdd y 27 yma y byddai Llywodraeth Cymru cymdeithasol ac Ysgrifesgwyr yn cael i'r wrthgwrs Llywodraeth Cymru, a gael i'r rai gael i'r pryd wedi'i gaelio'r cymdeithasol. Morriss Golden yn ysgrifesgwyr cymdeithasol yn cael i'r cyfnodol yn ddifru. Rwyf ei fod yn hyn ymgyrch chi'n ddigon nhw, mae hefyd yn ei ddigon nhw'n gweld yn cyfnodol yn y cyllidau. Be fyddwch i'r ymgyrch gyfnodol yma, Can I remind everyone present to switch off mobile phones and other electronic devices as they may affect the broadcasting system? The first item on the agenda is for the committee to consider whether to take items 4, 5 and 6 in private. Are we all agreed? We are agreed. The second item of business today is to hear evidence from the Crown of State Scotland. Can I welcome Amanda Bryan, the chair, Ronnie Quinn, the chief executive and Andrew Wells, head of property. Members, as you might imagine, have a series of questions for you, and we'll move straight to questions. Maurice Golden. Welcome. I wonder if you could outline to what extent there's been a smooth transfer of responsibility. Thanks very much. We're delighted to be here. I think it's really important that we have the opportunity to come and speak to you. Obviously, new organisation really embedded in Scotland with decisions taken in Scotland and the benefits from the assets really being managed for the benefit of communities, stakeholders, local authorities and others. We're really pleased to be here. As you've recognised, we've just been through a period of transition. Personally, I think that it's been a relatively smooth transition. I have to say that the Crown of State put in a huge amount of effort into ensuring that all of the systems were in place in order to facilitate that transition. Obviously, it's taken us a little bit of time. It took until the start of May to get a new board in place, but we've now had three board meetings and we're moving to develop a new corporate plan, which I'm sure we'll touch on during those proceedings. We're now getting all the different tools in place to make sure that we can manage the assets effectively in this interim period, which is what we've been charged with. To what extent I appreciate your relatively small organisation, but what plans do you have in place to ensure that you have the right controls with respect to your internal and external procedures? Do you have any plans to enhance your internal and external audit function? I'll ask Ronnie to say a little bit more about that. Obviously, as a board, we've really been looking at governance and all of the processes that we need to have in place to ensure that we are managing the assets. Effectively, we obviously have an audit and risk committee in place, and we've also established an investment committee because we think that that's going to be a key issue for us going forward is how we manage investment. In terms of both internal and external audit, I'll ask Ronnie to say a few words. Thank you, Amanda. It's quite simple to be honest. Last year, we staffed up to ensure that we had a finance team. We're augmenting that next week, in fact, so that will bring the finance team up to a total of three. We took the view that it's too small of an organisation of a full-time internal audit function. However, we've got arrangements in place for an external audit, and the processes, et cetera, were shared with the Scottish Government prior to the transfer. In terms of staff morale, do you comment on that and say what procedures you have in place either to measure that throughout, whether it's, again, to appreciate your size, but 360-degree feedback or other appraisal processes that might allow you to track that over time? The last all-staff survey that we did was in December last year. We would normally do them on anio basis. In December last year, we had high 80s a great place to work—high 80 per cent is a great place to work. There were a couple of areas that we were working on, and we're working through that just now. We take the time once a quarter to have a full half-day session with everyone, and that's a really useful way of testing the temperature and how things are. I think that, as much as anything, we haven't seen a huge departure of staff from the office, which is, I suppose, as good an indicator as any. We've had the normal turnover you'd expect, but no gray text at us. Emma Harper I'm interested to hear about engagement with communities and practical measures that you've engaged with to involve communities. How has that been undertaken? I'm going to ask—I wanted to say a little bit specifically about some of the work that's been going on at Glyn-Livott, but I'll talk more broadly about what we've been doing. I and the rest of the board have been very keen that we get out, and we are engaging across the piece with communities and with wider stakeholder groups and, indeed, with local authorities as key stakeholders. Personally, I've had a range of meetings with different organisations, including Community Land Scotland, many of our tenants and tenant representative groups. We've been getting out there and doing a lot of that. The board has committed to having board meetings around Scotland, so at least 50 per cent of our board meetings will take place out with Edinburgh. We've already had meetings in Argyll and in Shetland, and as part of that, we've been looking to engage with a wide range of different groups, including community organisations. One of the things that we're looking at going forward is how we carry on with that engagement. We're in the process of commissioning two pieces of research, one focusing on our tenants to get some feedback from our tenants on how they feel that we've been doing and whether there are any areas to be improved. The other piece of research is around wider stakeholders. Through that, we'll be engaging with a range of different, both sexual groups but also community organisations to get a sense of, again, how we've been doing, where we can improve and how we should be engaging with those different groups of people going forward. In terms of operational management across the four rural estates and on the coastal estates, we have quite a range of different engagement activities taking place directly with our staff or with our managing agent teams. On the Nivet, we've had a long-established, very close working relationship with the community there. We've worked with the Tomantown and Nivet Development Trust and the Canals National Park, for example, on the Heritage Lottery Funded Landscape Partnership project, which is very much now moving towards its delivery phase. That's been a very close working relationship. We've had a formal arrangement through a liaison group with the community there for many years and still continue to build on that. Other examples, we've worked with Rosewell Development Trust on the White Hail Estate in south of Edinburgh. We've got our managing agents, marine officers, who work within Midwell, who do a huge amount of work on the west coast liaising with various community groups, working with mooring associations and other community groups in both the formal and informal way. It's something, as Amanda says, that we're very keen to continue to build on, to look at how we're doing it, where we can do it better and start to build that more formally into the new business. I have just another quick question. Does the board membership help to support the engagement of the communities and, like different members, will take a lead in engaging certain communities? What we've done is because the board members have a range of different backgrounds. We've identified different aspects of the business where they'll take more of a role and, certainly, the expectation is that the board members will engage widely with different stakeholders and, within that sector, and work to support staff in doing that. That's certainly very much the expectation. If you've identified any shortfall in that range of expertise on the board, are there any areas of the Crown of States operation where you maybe don't have that at board level? I think that it's early days at this stage, but it's certainly something that I've committed to keep a watching brief on. We have the scope to have up to eight board members, and we currently have eight board members plus myself, and at the moment we have six plus myself, so we have two appointments in hand, so that if we identify that we do have a gap that we could go out and appoint additional members, but we obviously have to be cognisant that it's an interim body, so we would need to know what might be following on before we took any steps in that direction. I think specifically around farming, because you'll be aware that there has been a concerned voice from that element of the Crown of State that an understanding of the needs of the farming part of the estate needs to be there, and they want to have their voice heard. Are you satisfied that at board level that is the case? I think that, although we don't necessarily have a farmer on the board, we have three of us that have considerable land management experience on the board, and they are relatively well connected with the farming community. I don't see that at this point in time as a specific shortcoming, and we're certainly looking to engage. I've been involved in meetings with the Scottish Tent Farmers Association with NFUS, and we have another meeting with the NFUS tenants working group coming up. We're also meeting with the likes of Henry Graham, who is dealing with one of the agricultural champions, and he's keen to explore with us how we look at opportunities for introducing new entrants into farming. It sounds like you're on top of it, that's good. We'll be on to a discussion about the islands bill. Perhaps to declare an interest is the hands and islands MSP, I've got a great interest in that. I'm very keen to see the philosophy of China islands our future realised in practice. Could you give us a progress report about the setting up of the pilot scheme for the management of assets in relation to Orkney Shetland and the Western Isles? We've been asked by the Scottish Government to look at developing a number of pilots, not just in relation to the islands or local authorities but in relation to communities. We're looking at how we do that, because whatever we put in place needs to be done in a consistent, fair and equitable way. The first thing that we're doing is looking at the proposal that has been put on the table by the islands authorities. To date, we had a session at our Shetland board meeting with the three islands authorities. I think that was a very productive and helpful meeting, and it helped the board as a whole to understand where the islands were coming from and what they were hoping to achieve through the pilots. Subsequent to that, some of the officials from the three islands authorities have been in and met with the team in the office to understand some of the practicalities in relation to how the assets are currently managed. We appreciate that this is not something that is going to happen overnight, but we want to proceed with a degree of pace. In order to help this process, we're looking to appoint two fixed-term appointments to develop a pilot scheme, so that's what we're at at the moment. Thank you for that. There is obviously a danger that in any organisation things drift, and I accept, obviously, that you want to see those pilot schemes happen. Would you say that the pace and the speed that you have in your corporate head is the same as Orkney Shetland in Western Isles? I don't think that I've specifically asked them that question, but the impression that I got when we met was that they were happy to have had that conversation and they were delighted to be having the open discussion with us. So have you come back in years time and we would have a pilot scheme? I would hope that we would have made good progress towards a pilot scheme of some kind. Can we welcome to another area that is still relevant to this? This is the decentralisation of jobs and functions. You know in the history of the Parliament there's been some debate about that and the philosophy, which I don't need to give any lectures to anyone today, is that all Scotland pays for public sector jobs, so all Scotland should benefit. I think that in the second session of Parliament there was a major move with the relocation of SNH from Edinburgh to Inverness, which I have a certain interest in. I live in that particular patch. How realistic is serious job location from Edinburgh to Orkney Shetland in Western Isles? At the moment, we're an interim body and as far as I'm aware, there are no intentions for moving staff, but it's important to note that there's actually quite a lot of, you know, quite a few staff based out with Edinburgh. There's obviously a team at Glyn-Livitt and the new forester, who is just starting at Glyn-Livitt. There's a team at Fockeber's. And also, the managing agents model that we use actually has staff based around Scotland, so there's actually quite a lot of employment in rural areas already. It's maybe a question for Ronnie Quinn, but how many staff do you currently have in Edinburgh and how many would you expect to have over the next couple of years? Is it going to be stable there or are you going to see any growth in numbers? In Edinburgh just now, we're mid to high 20s, so it's not a significantly large organisation going forward. That will largely depend on what comes our way. That staff complement will take us through business as usual. If there are further project works—Amanda has already mentioned the islands and local management—we'll need to resource up to just half those. You take my point that is within the philosophy of the islands bill, which is going to our sister committee, as you know currently, and our answer future to relocate jobs. Presumably, it's within your competence as a board to decide to relocate to islands. I suppose on the technical point, there's nothing stopping you relocating jobs if you wish to do so. On the technical point, no, there isn't. Have you had any indication from Government that this would be a positive move? No, we haven't. I think that I would echo Amanda's earlier point that this is an interim organisation that's been set up. We don't know yet the shape of the legislation that will be introduced during this Parliament, and I think that it would be perhaps premature to reform too quickly in advance of that legislation coming in. If you are setting up pilot schemes in Orkney, Shetland and Western Isles, it might be an advantage to have staff within the islands. I take the point that you have staff in other parts of Scotland, but do you have any other staff decentralised within Orkney, Shetland or Western Isles currently? No, we don't. I think that that's something that we'll need to bear in mind when we're modelling and looking at what the potential for local management arrangement for the islands are, as to whether or not having staff based there would be appropriate or not. Philosophically, within the islands bill and managerially, it might make some sense to have some staff in the three island groups that I mentioned? It would depend entirely on the pilot or the shape of the pilot as to whether or not that would make sense or not, and it wouldn't be fair for me to second judge that at this stage.  Are there any other areas of operation where you feel constrained? There might be a sense that you're marking time at the moment until the permanent arrangements in place. I wouldn't say that we feel constrained by that at all. I think that we've got a clear remit to manage the assets in this period. I think that what we've been able to do is to take a bit of a steer from what we have seen so far coming out of the consultation about the new legislative arrangements. We are, as you are, expecting to see a bill introduced in this year. I think that what we're looking to do is to evolve over that period to make sure that we're not moving counter to anything that's going to be put in place, but we have to be mindful that we've been charged with maintaining those assets in good health such that any future management arrangements are being implemented from the best position. Very much in line with my fellow Highlanders and Islands MSP David Stewart. I think that it's worth all reminding ourselves that the Smith commission and the Scotland Act 2016 explicitly agreed that there would be further devolution of management to local authority areas, including the islands. How quickly do you envisage advising the island authorities of the criteria against which the pilots will be assessed? One of the things that we're looking at is making sure that whatever criteria are put in place, that the same criteria that we would use to assess any proposals would be exactly the same for any community or other local authorities coming forward, not just the island. It's essential that we make sure, as I said, that they are robust and that they are consistent. That is the overarching priority. The key thing from our perspective, you've heard from Ronnie already, is that we've got a relatively small team who are already having to manage the assets on a day-to-day basis. I would like to think that it would be as soon as we can get a dedicated resource in place, and we are taking steps already to put that in place. I'm not going to say that it's tomorrow, but I'm not going to say it's next year. I would hope that it would be sometime in the next couple of months. That's a very interesting answer, because, on one of you, different local authorities will have different ideas clearly about how best to use it. For instance, in the Western Isles, which I was in Stornoway last month, they may have an idea of working more collaboratively with community landowners, for example. How do you ensure that the pilot programme is responsive to local needs? I suspect that there are myriad models out there. What we have to do is ensure that the criteria isn't about the exact detail of the model, but it's about will it ensure that the assets continue to be managed in a positive way? Can we, as Crown Estate Scotland, meet our obligations to Scottish ministers in relation to the financial systems, etc? Ronny's already done some thinking on that. Perhaps, Ronny, you might want to share some of your thoughts. Yes, I agree that there are some differences in the way that the islands in particular would like to move forward. That's only become apparent within the last couple of weeks, truth be told, and I'm just echoing what Amanda Gray says. I don't think that there is a one-size-fits-all, but, in formulating the way ahead, we need to be at least consistent in how we do that. It's also fair to say that there was a recognition among all those around the table that it was important to proceed with some degree of lackity. The really important thing and the priority was to get it right first time and to get something that would work across the board. I think that that was a very useful sentiment to take away. Richard Lyle. Good morning.  I'd be interested to know how your relationship is with the Scottish Land Commission, Her Majesty's Treasury and Marine Scotland. I've got other questions after that. I'll take the first and the third, and I'll pass to Ronny for the second. The Scottish Land Commission, I personally have had meetings with both Andrew Thinn as the chair and Bob McIntosh as the tenant farming commissioner. They've been very positive meetings, really looking at how we can engage with their agenda, and particularly important on the tenant farming side of things. We expect that that relationship to be on-going, recognising the work that they are doing in terms of reviewing the role of agents, for example. We're looking at engaging with them on that. In relation to Marine Scotland, we have a very positive working relationship with Marine Scotland, which is set out in the framework document, which sets out what our role is, what Marine Scotland's role as our sponsor department is and what Scottish ministers' cabinet secretary's role is. That's very much the way in which we've been working, and it's on the basis of no surprises. Andy, do you want to say something? Yes, I would just want to add in relation to the Land Commission. I'm actually meeting with Hamish Trench, the chief executive, next week. We started to look at how we can assist with the work that they're doing. One of the initiatives that we have already done was to contact all our farming tenants to advise them of the new amnesty for farm improvements. We're keen to work proactively with the Land Commission to see how we can assist their work. If I just confirm and endorse what Amanda was saying in relation to Marine Scotland, we've had a close working relationship with Marine Scotland, particularly on things like aquaculture and offshore energy, and that's continuing at least on a weekly basis. There are on-going meetings. With regard to Her Majesty's Treasury, there's no special relationship there. We had to go through the process of registering for VAT and opting various properties for VAT, so we're the same as any other business, as far as HM Treasury is concerned.  A great deal of money, time and effort was spent in making us autonomous. As the transfer physically, the cables were pulled out of the connections into the London organisation. There's no direct oversight of Crown Estates Scotland's activities by the Crown Estate based in London. We have entered into an MOU where we will have two annual meetings to co-ordinate on things such as joint projects and the offshore renewables joint industry projects. This particular year, it was focused on the numbers from last year going into the Crown Estates annual report, but it's fairly high-level and there's no interference. There's no line of control, if you like, between London and Crown Estates Scotland. Some people may not like my next question, but I'm going to ask anyway. Crown Estates Scotland, in the statement that you started off, missed out one important factor. You managed the estates on behalf of the monarch. The monarch remains a legal owner. Can I refer to it as a royalist before anyone questions the reason that I'm asking it? Responsibility for financing the sovereign grant will need to reflect the revised settlement of the Crown Estate. Which part do you play in the settlement of the sovereign grant? Absolutely none. We remit our revenues to the consolidated fund, Holyrood. It's a matter for Parliament and Government as to what they do with those revenues. Thank you. Good morning. It's a definition as well, so it's maybe appropriate to ask this question at this time. The Scotland Act 2016 indicates that assets should be held as an estate in perpetuity. What does that actually mean? In a state in land, there are quite a number of challenges to managing this. For example, we don't own shares and companies. We can't make the classic investments that other entities may make. We have to invest that property—that capital—in property. We can't trade things like that. So it's maintaining it as in the state in land. Can I just pick up on that? You referenced the autonomy that you have from Crown Estate UK, but of course they still hold on to one of the assets in Scotland, Fort Ceneard. Are you aware of any progress in resolving that issue or is it a dead issue for us? It's not something that we took a front line in negotiating. It's not something that we're aware of. Any on-going discussions about it? Because it does seem such an anomaly. I want to look at the issue of the sale of assets. We're told that there are plans to sell some of the Crown Estate assets. Could you outline why those are being sold as a normal business? I'm not sure how familiar everybody is, but at day one we started with no funds in the bank. In terms of managing the assets, we have to handle revenue and capital separately. If we wish to continue to invest in our estate, which includes investment in agricultural buildings, then we need to raise capital. Do you have the ability to borrow from the Scottish Government, however? Yes, we do, but a decision has been taken that we are going to raise our own capital. That's traditionally how the estate has been managed, and that's how we're intending on going forward at this point in time. Could you outline what assets are planned to be sold? I don't know if Riline or Andy wants to take that, Andy. Yes, as Amanda says, in terms of our business model, the Crown Estate Historically and Crown Estate Scotland, we need to raise the capital from the assets that we manage in order to reinvest that capital in property and land to grow their asset value and to generate the revenue that we ultimately surrender to Government. That hasn't changed following the transfer. We worked very hard in advance to put in place a pipeline of sales that would help us to firstly meet our expenditure obligations in the first year of operation and to start to build up a small capital fund that allows us to carry that forward for our on-going management. Historically, that's something that we have disposed of assets in Scotland. It's among a similar scale that we're talking about, although we had to increase that in the first year of operation to start to build that capital fund. We're talking about raising around £10 million in asset sales in the first year of operation of Crown Estate Scotland. That's coming from a range of different sales of residential properties that we hold. A number of farms are in there. We've got an open market sale currently active from the Apple birth estate. We've also had capital income coming in from dealings that we did last year, with incomes coming in this year, servitude payments for electricity pylons, for example, and also capital for strategic land sales that we negotiated some years ago, and quite substantial income coming in this year from those strategic land sales. The income from capital comes from a wide range of different transactions. On the coastal side, that could be dredging activities around the coastline and from a range of the assets on the rural estates. The other side of that is that we have an on-going investment programme in buildings, putting up new farm sheds, replacing roofs, electrical and asbestos works on residential and other properties, and a whole range of other liabilities that we need to manage from the perspective of the estate. What we've put together has been a budget for this year, which allows us to manage those liabilities and investment requirements, while also starting to build a small capital fund to allow us to roll that over for next year. Can I just pick up on the point that you said that there was an open market situation with regard to apple girth? Are those farms that were vacant or are they farms that had tenants, and if so, are you going to sell to the tenants? The particular one that I mentioned is a farm that became vacant because the tenant surrendered the tenancy off his own will. We negotiated a surrender last year. The decision was then taken that that farm would be put on the open market, subject to a criteria protocol that we developed early on in the new business around farm sales. The open market sales don't happen that frequently within the Scottish business. We are all looking at sales to tenants as well as part of the disposal programme. So whether we decide to sell or relit is subject to an assessment of the particular unit and we would work through that assessment, we wouldn't necessarily choose to sell it every time we might want to relit a unit depending on the circumstances, but it is very much around the circumstances at the time. Okay, that's good to get that in the record. If we could turn to a specific area of the business and that's aquaculture, so we know that SEPA are introducing a new regulatory framework as depositional zone regulation. That offers some opportunities for the aquaculture sector, but it also introduces some constraints as well. What's your view on that regulation that's been put forward and how might it impact on the way that you approach aquaculture? First of all, it's important to recognise that we're not the regulator here, but that we work closely with Marine Scotland in particular in respect of aquaculture and are working on a number of initiatives, for example on close containment, to see how we can take that further forward. We'll approach that more from the side of helping the fish farmers themselves to create best practice and work within those new structures. What you're saying is that you're effectively there to support the industry rather than to steward the resource? It's a bit of both, but we're not the marine planner. Right. It appears through the new regulation that it could be a situation where we have expansion of fish farms in more exposed areas, but there won't be a requirement to regulate fish farms with this new model in more sheltered areas. What's your view on that? Do you think that that's the right balance? I don't think that it's for us to comment on that. We will work with the regulator to implement and make the best of what's there at any given time. So you haven't put it into consultation on the regulation at all? We've assisted with it, yes. Okay. Can I move on to another issue convener? That's fishing rights. I'm picking up quite a lot of frustration amongst a number of organisations including Fisheries Trust and Fishing Trusts about non-native invasive species and some of the challenges around catchment management. Is that something alongside perhaps some of the other catchment issues around flood management, for example, which impacts on your business in terms of fishing rights? Again, in respect of fishing and interactions with farm fish, we recognise that that's an issue. We're working with SARF and others on the likes of, as I said, close containment, particularly for trout, as a current project, to see if that will help with that issue. I was actually referring to non-native invasive species. For example, giant hogweed at the moment, which is prevalent on many catchments in Scotland. There is a concern that there is a lack of joined up action on that. Does that have an impact on your business in terms of the income that you get from fishing rights if people just can't come and fish because it's choked up with hogweed or whatever? To be blunt, what's having more of an impact is the no-take restrictions currently. We're noticing that with some of the local fishing clubs that we've actually had to rent for last year and this year because they're noticing a reduction in take-up of local fishing. Okay, so that's a different issue entirely. Coming back to the issue about catchment management and the role that you play within that, what role does the Crown Estate play? If there's a catchment management plan on giant hogweed or mink or whatever, what's your role? We work with the relevant authorities, for example, being the River Spay up in the Focobiz estate. Obviously, where we've got agricultural or adjoining land to a fishery area, we have an interest in the management of that particular catchment. We're actually putting money into non-native species control up in that catchment area. This year, we've identified some funding to go into some control work, so we will work with SNH and with SEPA where there are specific issues and where we can assist. We do so. What about areas where you've got fishing rights, where you've got salmon fishing rights on rivers? Again, that's very much a question of working with the relevant fisheries boards and trusts, and we will try and coordinate clearly when it comes to aspects of management in riparian areas where we don't have ownership. It's more challenging for us to get involved, but we will certainly work and cooperate with fisheries boards in terms of the management of those areas. What do you actually do? Well, as I said, in terms of where we can put money into control mechanisms, then where it's appropriate we do so. In terms of when we lease fishery areas to local community groups and other angling associations, it's a question of working with them and the relevant other authorities and adjoining landowners through the fisheries trusts and boards. That may be a question of putting some funding into works to benefit the catchment area. Whether it's flooding works, for example, or other control measures, if it's appropriate, we will look at that. Does County State apply for the likes of ECAF funding for the control of invasive species or whatever? That was a grant scheme that would allow organisations to invest in removing giant hog reed or whatever. Is that something that the Crown State would apply for? Can I ask you to talk us through the issue of offshore renewables? If we look at the example of the fourth and tia rays where we have four consented wind farms, can you explain to us do you have any income stream from those at the moment and how does it develop from there if they proceed or if they don't proceed? We don't have any income stream from those projects at present. The way that our lease and agreements for lease work for offshore wind farms is that we will start to take revenue rent from those projects once they start generating, and given that nothing is built yet, nothing is generating. There is absolutely nothing coming out of those projects at present. Once the court process has concluded, it would then be for—there is one project—Nurt Nagweith that you are aware has a contract for difference. I am glad that you can pronounce that. They will then endeavour to reach financial close, and once they have reached financial close and if they reach financial close, they will approach us for a lease. At that point, we would negotiate the lease, enter into the lease, and that would require them to build the project out within a certain time. Normally, that would then be consistent with the contract for difference as well. Once they started building and generating, we would start getting some revenue in from those, and that would be the same for the other projects out of fourth and tia, as well as those who are consented, but they would then need to apply for the CFD. Let's take NNG as an example. Could you quantify for us what you anticipate the income from that? In the past, Scottish Territorial Waters projects and STW projects have given the number of £4.6 million per gigawatt installed, and that would still be the same. Over the life of the project? No, that is per annum. Presumably, you project and anticipate that. What impact would it have on the Crown Estate revenues if you want to have that sort of income? You are right. We could project that further forward, but we do not count on it until it is there, to be honest, until the company has reached financial close. There is a lot of wind to pass before that happens. Once we have got to that stage and reached financial close, then it becomes a real project from our side. What does have an impact is things like the capital valuations will increase. For example, you will see from the numbers for the 16-17 year, the offshore renewables capital valuation dropped for the first time. That is a direct consequence of where we were in the court process at that point in time. That valuation was correct at 31 March. At that point, we had not had the other house's decision, so it has a direct impact on our capital valuation at this point in time. I am looking beyond that one situation. Presumably, offshore renewables is a considerable income stream that is anticipated for the Crown Estate. It is. It has certainly got huge potential. The team has worked really hard, along with developers, to bring those projects forward. It was great to see the Morpill project in the Murray Firth get-it CFD earlier on this month. That, along with the Beatrice project, that, along with Aberdeen Bay and the High Wind Scotland projects, mean that Scotland is doing very well in offshore wind. That is a testament to the work that developers have put in to make that happen. However, I think that what we have to start doing now is looking at what is going to happen going forward, because it takes eight to ten years for those things to come to fruition. Okay, thanks. Can I just move on a little bit as well? Could you outline what impact you envisage the forestry bill and Brexit having on the operation of the Crown Estate? At this point in time, I have to declare a bit of an interest. Obviously, I have another role with the Forestry Commission, so it is probably not best if I comment on the forestry bill. I am not. In terms of the bill, we managed some 5,000 hectares of commercial forestry spread across the full rural estates. The bulk of that, Glen Livitt, is fairly fragmented estate woodlands, part and large-scale commercial plantations. We managed those alongside good sound silvicultural practice with forestry stewardship councils certified, according to the UK woodland assurance standard. We are continuing to manage those woodlands in a sustainable way to generate revenue from timber but also to drive a lot of local benefits for tourism, recreation and environment, etc. I see that work continuing. It is very much integrated with other aspects of our estate management. Clearly, some of the forestry assets that we may look at are disposing as part of our race capital, so that may be something that we will be looking at. We will continue to be working with other partners to maximise the benefits that we can from our forest management. We do not see things changing significantly as a result of the forestry bill. We already work very closely with the Forestry Commission Scotland. As that evolves and changes, we will continue to work with them in relation to our forest management. As regards Brexit, clearly we all know that there is a huge amount of uncertainty around what will happen there. From the rural estate perspective, we have some 200 farm tenancies across the estate. That is a significant proportion of the land in Scotland. That ranges from upland agricultural units in England and Livitt to some fertile lowland farms at Focobos and Applegirth. Different sectors of the agricultural will be hit differently by Brexit. There is no doubt that we are going to keep a close eye on how that is impacting on our farmers. We are hoping to run a number of events with our farm tenants to help them to prepare for Brexit, working with our managed agents and the expertise that they can bring to help our tenants to prepare. However, how they will be impacted and what impact that will have on our revenues is hard to say at this stage. Kate Forbes, thank you very much. You obviously have a duty to maintain and enhance the value of assets and to return any values that are obtained from them. In what sense do those restrictions have a practical impact on how the assets are managed? Is this about the need to maximise revenue that you are asking about? Yes, to maintain and enhance the value of assets. I guess that is what anybody who manages assets is going to be looking to do. You never want to see a deterioration in the assets and you do not want to see income drop, so just in terms of doing business, that is what we would be looking to do anyway. With Crown Estate Scotland now taking on management of the assets, what we are looking to do is to maximise other benefits where possible. I think that there have been some very good examples of where wider public benefits have already been delivered. We have already talked about some of the work at Glenlivet and Focobers, but one of the first things that I did was go to Spay Bay and look at how the organisation is working with Fyldon Dolphin Conservation Trust at Spay Bay. That is the largest visitor attraction in Murray in terms of footfalls. Obviously, that is delivering quite a lot of different public benefits. However, we are looking at how we can really maximise and balance up that delivery of increased revenue with delivery of other public benefits. We are not the only public agency or public organisation to be doing that. I am keen to learn from others about how we go about that. I have certainly been speaking to Scottish Canals, who I think are going through a similar process, so I am very keen to work with others to learn from them in terms of different ways of doing that. Your answer goes right to the heart of the question, because I was going to follow up with how you balance that with other aims around sustainable development and environmental stewardship, because there will be a lot of people with a lot of different views of what your aims are. How do you balance that duty to maintain and enhance the value of the asset with, at the same time, meeting other aims around the environment and communities? Obviously, we are working with the framework of the 61 act at present. Therefore, there is very much an emphasis on the financial aspect, albeit with taking cognisance of good management, and we are looking to explore that as much as we can until any new legislation is in place. I think that that is where the opportunities lie, as far as the assets go in the future. It will depend on what comes out of the legislation, but we can have a really good debate and discussion about where that balance lies in terms of delivering benefits across Scotland. I am keen to hear about that. We are looking at how to measure some of the other benefits that we are currently delivering. I am going to ask Andy to say a few words about what is called total contribution. Historically, the Crown estate has been a business leader in trying to understand the broader impacts of running the business, not just the financial benefits that we generate for historical treasury in Scotland, but also the broader environmental and social benefits. Historically, we have developed a programme of total contribution in which we look at how we set up a range of metrics to measure that. We have transferred to Crown Estate Scotland and we are looking at how we can take that whole piece of work forward. We have set up an internal steering group to start to look at that. We hope to develop a set of criteria that we can use as a business driver in terms of trying to inform the investment committee in terms of where investments might be made in time. We are also looking at how we can incorporate much more focus on the national capital agenda. We are working currently with Scottish National Heritage, SIPA, Scottish Wildlife Trust, Scottish Land and Estates, and we are running a project that is about to start, which is looking at piloting the natural capital protocol at farm and estate level. The information that we get from that will again help to inform and feed into what we have not quite decided, but we are moving from the total contribution or total impact as being the way of describing this. It will really be a process that we hope to develop that will identify the non-financial benefits of us operating as a business that we can use to, as I said, as a business driver and to inform other decision making. Richard Lyle It has been previously asked in the past the performance of Crown Estates. Now we have the new Crown Estates Scotland. What requirements are placed on you in order to be similar to other public bodies? What performance management measures will we put in place and how will this be recorded to ensure transparency? I think that the key documents are our corporate plan and our annual business plan. That is what will set out what our objectives are within any one year and what KPIs we are going to be working towards. That is why it is so important that we get feedback through consultation on the corporate plan, which is currently out. Then our annual business plan—each annual business plan will obviously draw on what has been set out in the corporate plan. Obviously, I will hand over to Ronnie to talk about the development of the business plan and how any targets are agreed with our sponsor team. We have and continue to have an on-going discussion with our sponsor unit within Marine Scotland. Our framework document on the website references another 50 documents and policies that we should comply with and are complying with. We are taking that further forward. We have also got in our business plan, as Amanda says, the reflection of how we are working towards the Scottish Government's objectives. There are a number of different ways of tackling this and moving forward with it. Can I say that I was impressed with one comment that you made a few minutes ago that the common sense approach that you are having to where fishermen have actually cut the cost because of a certain problem? I know that you will recoup that somewhere else, but I am impressed that the fact that you seem to have a listening situation within your organisation. Angus MacDonald Thank you for following on from Richard Lyle's last comment. The committee has previously said that it hoped that the experience, expertise and views of the Crennys state staff will be actively sought and taken account of in relation to the longer-term arrangements. I think that Ronnie Quinn may have touched on this at the beginning of this morning's session. Are you and your colleagues sufficiently involved in the planning? Can you give an example of how you are engaging with staff to ensure that that is the case? Is this in terms of planning for the longer-term planning? In terms of the legislation or in terms of the running of the business? Legislation and the implementation of the new set-up. I will hand on to Ronnie to supplement whatever I say, but in terms of the legislation, as an organisation, it is not appropriate for us to have a formal input into that. We did not have the union, which represents a number of staff. We are being consulted by Marine Scotland on technical issues around the new legislation.  All that I see is lots of emails to Ronnie and very technical details, which I am glad I am not having to deal with. In terms of the running of the business, it is very much a team effort between the board and the staff, particularly the senior team. In terms of shaping the corporate plan, we had a session that involved the senior team and the board collectively to make sure that we are capturing both the deep knowledge of that team and bringing a fresh perspective in terms of what the assets could be delivering for Scotland as a whole. I would like to think that we have a very good balance and a very good working relationship between the board and the staff, with us each playing our respective roles. To be honest, there is nothing terribly much to add. We have been giving some advice and some fairly arcane points of interpretation on the 61 act. Beyond that, there is not much else. We are invited along as an observer to the Scottish Government stakeholder advisory group on the Crown Estate, but beyond that, that is about it, to be honest. Basically, staff at all levels can continually feed in any suggestions or ideas that they might have at any point. We are not being formally engaged on the legislation. I am in no better position than anyone else in the organisation to say what the legislation will say. Finlay Carson Thank you, convener. You will be aware that we know not only as a committee to look after organisations like yourself, but our one-hour remix is climate change. How are you going to deliver, as part of your duty as a public body to Scotland's climate change targets? Andy, you are going to. I think that it is probably better if Andy takes it. We have been in liaison with the Scottish Government sponsored department. The Crown Estate Scotland is not formally obliged under the Climate Change Act to meet the requirements. However, we are very keen to work within the spirit of that legislation and to look at how we can manage our own emissions but also how we can mitigate and adapt. In that respect, there are a number of on-going projects like the natural capital work and the total impact contribution work, which will ultimately start to look at how we measure and monitor our carbon emissions both in terms of direct activities and being quite a small business and an operation of our offices where we have direct control. Obviously, that is a relatively minor impact. The broader impact is actually the activities of our partner businesses, our farming tenants, agriculture tenants and other businesses over which we do not have direct control. It is a question then of looking at how we can influence their management activities through facilitations, through knowledge exchange, through other forms of engagement. We work quite closely with a number of other partners and other agencies. An example of this would be the work that we have continued to do with the Morden Research Institute on farm biosecurity and animal health. We have continued to fund work that they have been doing on rolling out knowledge exchange to farmers. That has an impact on farm business activity and can influence some emissions as well in relation to livestock management. We have worked with National Park Authority in the Cairngorms over peatland restoration work at Glenivet. We have helped to facilitate a number of biomass installations in farm buildings. It is very much a question of us looking at how we can work with our partner businesses and with other agencies in terms of how we can mitigate and clearly working with our sponsor department. It is a key objective in the corporate plan to work towards Scotland's low-carbon economy. That is something that we are very keen to do. As we move forward in your remit, there are somewhat changes from maintaining and enhancing the value in the return obtained from it. There are more to a less commercial basis, including a widening role in the social enterprise and the Government's objectives. Do you see yourself working towards reporting under the climate change reporting framework in the future? There are discussions happening with the Scottish Government about what we will be doing going forward. I think that there is a meeting set up next month. After that, we will be in a better position to know what we should be doing. Mark Ruskell, I will ask a similar question, but I will take it to the next step. There is also biodiversity duty on public bodies. Do you intend to report on that? Indeed, we reported on that historically in previous Scotland reports. We are currently reviewing, having done the transfer and moved into the new body. We are reviewing all our biodiversity action plans for the rural estates and starting to look at how we then incorporate that into future business planning. We have a range of projects on going across various properties, which are helping to enhance biodiversity. We are working in partnership with other key agencies and quite substantial examples at Glenlivet, where we have worked with the Scottish Wildcat project for example at the national park, albeit that area of Glenlivet has now been taken out of that due to a lack of Scottish Wildcats in the area. However, we have done work on waterfalls. We have a community group up there doing a lot of local wildlife recording, so we will continue to report on that. Those relate to assets where you have direct control, but we raised earlier the point about assets where you are effectively the landlord and you are working with industry and a regulator, so aquaculture. Do you see the interpretation of your biodiversity duty extending to that as well? Present under our act, we have to invest in land and in our land, and that is where it is. To go back to the other example that you used about non-native invasive species, there is an interaction there with the fishing rights that you lease out to the trusts, but your role really stops there because you are just issuing the fishing rights, you are not concerned with wider catchment issues where you do not have a direct asset. That is the way it is under the act. We will invest in property and in land, and that is where that varies. We can invest to enable investment on our property and in our land, but we have to be careful how we do that. Is that a constraint that you do not feel able to get into wider areas of leadership and co-operation? I think that we just have to recognise the scale and the size of Crown Estate Scotland and its remit under the 61 act that we are still working under to grow and enhance the estate. We have restrictions on our use of capital, and we have to be careful how we do that, but it has to be related to our estate. Just picking up on that point, you have referenced the restrictions that you are working to, and earlier you said that you had no role in seeking to influence the legislation that will provide a framework for your operation going forward. Surely it would be appropriate for you to have some degree of conversation as an organisation pointing out to Government where you think you could take on other duties, where you could operate slightly differently in the greater interest. What we have been doing is responding to questions as they have been asked to us. We have not been proactively lobbying what we think should be in the new legislation because that would not be appropriate, but when we have been asked specific questions, we have responded to them. That is useful to clarify that. Members have further questions? I think that we have covered a wide range of questions this morning, and that has been very useful. I thank all of you for your attendance today. I look forward to working with you in the future. The third item on the agenda today is for the committee to consider petition PE 01636 by Michael Traill, which calls upon the Scottish Parliament to require that all single-use cups are 100 per cent biodegradable. The committee clearly has a range of options available for its consideration. I refer members to the paper and I invite any comments that members might have. Quite timely because we spoke about this last week when various questions were brought up about what Parliament is actually doing to have us reduce our disposable cup usage. What are the specific thoughts on the best way forward at this stage? I suggest that we keep the petition open and right to the Scottish Government. Work out what they are going to look at as part of their wider work and waste. Perhaps I invite some indication of timeframes that they are working to as well. I therefore close the public part of the meeting. It is the next meeting on 3 October. The committee will take evidence from the Scottish Land Commission. The committee will also review its consideration petition PE 01615 on the state-regulated licensing system for game board hunting and consider subordinate legislation on water supplies. As agreed earlier, we will now move into private session and I ask that the public gallery be queered as the public part of the meeting is closed.


So, we have looked at the resources. We have also looked at a model by which we can identify how the non-renewable resources would get utilized, we have just finished the hotling model. We now switch tracks, we are going to now move into environmental economics and we are going to look at how do we trade off between energy development and environment. Before we do this, we need to understand some basics of demand and we will talk about preferences and utility. So, we will introduce some simple concepts where we talk about preferences and utility. Now, in general, in life, we are always encountering choices and we have, in these choices, we always have preferences. So, in when we talk in terms of economics, we would like to quantify these preferences. So, we would like to rank the preferences between bundles of goods and services. So, to simplify things, we can even look at two goods X and Y and we are talking of goods but it could be goods and bads that means it could be pollution, it could be garbage. But in general, let us look at if we are talking of two goods X and Y, how do we choose between those goods and then we want to understand consumer choices and preferences. This is a whole field in itself but we are just going to look at the basics of it and use it and quantify it and then use it to see how we can make trade offs between different choices. So, we look at it, start with first looking at individual choices and then we will come to when we aggregate these individual choices into a societal choice. So, for simplicity, let us look at two goods X and Y. These goods could be wine and cheese that is the example which is taken in the book by Colstad on environmental economics, pizzas and movies, you will see if you look at different kinds of lectures which are available, people are talking of pizzas and movies and sometimes when you have a fixed amount of money which you want to spend and you want to enjoy a movie or you want to see the movies or you want to have pizza or you want to do both and we look at that. And in a similar fashion, we take these two goods as things that we can relate to but we can translate that finally to resources, energy use and environment. In the case of preference relation, we have some properties. The first property is that there is completeness. That means each individual knows his or her preference between a different set of goods. At most one can say that we are indifferent, these two are equivalent. Otherwise, I prefer this to that or I prefer the other one and so on. So, it is not that it will be left ambiguous, that is in terms of completeness of the choices. Then the second is that there is a transitivity that we have, that means the preferences are rational. For instance, we create a suppose we say that you prefer, suppose I prefer apples to oranges. So, this symbol which I say is apple is preferred to orange and suppose orange is preferred to bananas. If the preference is rational, then it will be transitive. That means if A is preferred to B and B is preferred to C, then A is preferred to C which means that apple would be preferred to banana. Then the, so this is the second part, we talked of completeness, we talked of transitivity. The third assumption for preference relation, the property is non-sociation and this is not always a correct assumption in real cases, but for the economic calculation, we say that more is better. That means if you have, if you watch two movies, it is preferred to watching one movie. If you are having two pizzas better than one pizza and so on, so that the idea is that it is monotonicity, there is no satiation. In actual practice, you know that after a point, you stop, you do not have any hunger and you would not want to. So, there would be satiation, but for all the, in the economic utilities context, we talk of non-satiation. So, in the preference relations which we have, now we have the following possibilities. We had this sign where we talked about x preferred to y. This is a strict preference, that means x is always preferred to y and the weak preference is where x is preferred to or equivalent to y. This is a weak preference and x, this is an indifference relation which means that the consumer feels x and y are equivalent and this is called indifference. So with this, we would like to introduce this concept of, we talked about transitivity and non-satiation. We would like to look at these preferences. So for instance, if we look at the, if you are talking of three points, in the case of A, we have, you have one movie and two pizzas, here we have two movies and one pizza and C is where you have two movies and two pizzas. As per the non-satiation, C would be preferred to B and C would be preferred to A. Between A and B, we have to then decide, it will depend on the individual and suppose both are equivalent for the individual, then we can say that A and B are, we are indifferent to this. We can join a set of all points which are equivalent to us and that is called the indifference curve. Of course, here we are talking of discrete values but in general, we can look at a continuous kind of curve and this is the indifference curve is a set of consumption bundles that the consumer think are equally good. She or he are indifferent to the consumption bundles. That means if you have a consumption bundle x indifferent to y, this set of these points is provided by an indifference curve and this x could have a whole set of different goods and y could have another set of different goods. Of course, we are looking at initially just looking at, to simplify things, we are looking at two different goods and the combinations of that. So for instance, in that example that we talked of in pizzas and movies, if you said that 2, 1 and 1, 2 are equivalent, then we have an indifference curve here and this with 2, 2 is on a different curve and the utility or the value that I get from this is higher than the value that I get from this. So this is based on the fact that there is non-satiation, this is the, so the utility is a mathematical way to represent the value that the consumer assigns to a particular good or a bundle of goods and services and this, the indifferent curve represents a locus of constant utility and so this is utility is equal to constant, this is and the utility increases in this direction. So this is the basic way in which we represent consumer choices. And let us look at some of the characteristics of these indifference curves. So let us look at this whether or not it is possible for two indifference curves to intersect. Based on our initial principles, if you said, all the points on this indifference curve will have the same amount of utility and all points on this indifference curve will have the same utility. So which means that if we take the point which is intersection, intersecting that is x and compare that with y, these would have the same value of utility. On the other hand, if we compare that with z, z will also have the same value of utility as x, but if you look at these two points, y based on non-satiation, the value of utility at y is greater than that at z which means that we have violated this. So the indifference curves will not intersect, they will be, they will be, in general they would be parallel to each other, they will not intersect. So this is not possible. The other thing is that is it possible, let us look at this. It is not possible to have an upward-sloping indifference curve. Again this goes based on the fact that we have the non-satiation. Also it is not possible to have a thick indifference curve. So the way in which we will have, in general the utility shape of the indifference curve would be such that it would be convex, which means that instead of having a combination of two goods and services will have higher utility than the individual amounts of goods and services. So this is the characteristic of convexity. Let us now define what is utility. Utility is an economic term referring to the total satisfaction received from consuming a good or service. In many cases we try to quantify some of these things by money but in general we are looking at it as an expression by which we look at the satisfaction received from consuming a good or service. So what is the utility that we have by consuming an apple or consuming an orange and we said this is dependent on the preferences, this is dependent on the individual choice and when we have this and we can quantify it then we can look at two different individuals, their choices and look at the utilities which are obtained. So in general the utility is a function of the amount of consumption, it is a mathematical representation of a preference relation. There are many different possible utility functions and in the tutorial we will give you these, you can cross check whether these are convex and whether they can represent the utility functions and you can see these are some of the functions which are there and which have been used in literature in mapping some of the utility. What are the properties of the utility functions? So the first one is independence, the utility is dependent only on the choice between those goods, completeness we said that yes it maps the entire range of choices, transitivity we saw the transitivity of the preferences and now transitivity is there for the utility function continuity and it is an increasing function with u dash x greater than 0. The other point which is to be remembered is that in general in principle we consider them as ordinal not cardinal that means we rank our preferences. We say that an apple is better than an orange or is preferred to an orange but we do not say we would not like to say that an apple is 50% more than that orange. So we do not convert it into that kind of thing but in many cases when you look at the kind of calculations is done this assumption is often relaxed. So with the result that you create something like a utility function we want to also now calculate the change in utility per unit of additional goods. So that means we can look at what is del u by del x and if you look at the change in utility per unit of additional good the question is should this increase, decrease or remain constant. Think about any context and you can understand how this will change and there is this law of diminishing marginal utility and that if you see so for instance this is this example which is given by Serrano and Feldman where we are looking at there is a rich tourist who is stranded in a desert it is hypothetical context and there is a monopolist who has bottles of water and the tourist has 100 units of money available with her and we see that for the really thirsty so for the first bottle of water you are willing to pay a significant amount that means 25 units for the second bottle you are willing to pay less for the third bottle even less and so on. Even till the point so basically what happens is for every additional good that we have we are actually the utility of that good diminishes. So del u by del x actually decreases as you go ahead and so this is the law of diminishing marginal utility and we can also then see that what happens if we talk about two goods and we have a utility function of these goods we have this curve where we have shown x or let us put this as y and x and you have u as a function of x y we have u as a function of x y we want that we have a fixed amount of resources that means for x there is a price of x and there is a price of y and there is a final like budget that we have. So we can say that we want to maximize the utility that we have maximize u as a function of x y subject to the total amount that we are willing to spend on both these goods. So you may have a budget on each of these we can say that let us say p x into x p y into y less than or equal to b. So we want to maximize u x y subject to the budget the total expenditure on x and y should be less than the budget that we have. If we take that then we can create again the Lagrangian which will be u x y plus lambda b minus p x x. So if we look at this we can differentiate this what would we get we get del u by del x minus lambda p x equal to 0 by del y del u by del y lambda p y is equal to 0. So we can write this as lambda is equal to del u by del x by p x lambda is also equal to del u by del y by p y. If we equate this what would we get we get and you can see this essentially what you will get is del u by del x by del u by del y is p x by p y and this is essentially giving us the marginal rate of substitution and the marginal rate of substitution is the how much of x which we marginal rate of substitution when we look at if we move on the utility curve and we have a change where the utility remains constant then this will get minus delta x 2 by delta x 1 and this will be marginal utility of 1 by marginal utility of 2 this is going to be equal to del u by del x 1 by del u by del x 2. So this is the marginal rate of substitution in the equation in the utility curve that we had look at x y then we had the utility curve what we found with respect to the budget constraint is that you would have a line which is tangential to the utility curve which is maximized and with the slope which is the ratio of the prices and this will give us the optimum point and then with this now we can see that what happens if the prices change what happens with the utility changes and in the tutorials will take a few examples where we can look at this. You can look at of course in the case of indifference curve we can also look at indifference between environment and resources and this is what we will go through. There are a number of different resources that you can use for this section and you can look at any of these there is a book by Colstad and there is some lecture notes in the open coursework in MIT and then the lecture notes in Serrano and Feldman and this will give you an idea of preferences and utility. We will next look at when we want to take these preferences and we want to aggregate these preferences and we want to look at societal choices and societal choices between environment and energy and resources and economics and we will link this all up in the next section. Before we do that we are going to look at the philosophical basis by which we make decisions. So we will take a look at the different kinds of ways in which we can take philosophical decisions related to the environment what are the kind of choices which are there then we will look at the Kenneth Arrow's theory of social choice.