Land Matters

The provisions in the Scotland Bill for the devolution of the management of the Crown Estate in Scotland are complex and unclear (see previous blog for background).

Last week, the Scottish Parliament’s Rural Affairs, Climate Change and Environment Committee (RACCE) heard evidence from representatives of the Crown Estate Commissioners (CEC) and some significant points came up. (1) Here are my latest thoughts on why Clause 31 of the Scotland Bill fails to implement the Smith Agreement on this topic.

In 1999, Crown property rights were devolved under the Scotland Act 1998. However, the management and revenues were reserved and remained under the control of the CEC. The Smith Agreement is to devolve the management and the revenues. To achieve this is straightforward. The two reservations (of management and of revenues) in Schedule 5 of the 1998 Act need to be removed.

Once these removals take effect, the responsibility for the management and revenues of the Scottish Crown property, rights and interests that currently make up the Crown Estate in Scotland would fall by default to the Scottish Parliament and Scottish Government. While Scottish Ministers would need to put in place the necessary administrative arrangements to deal with these new responsibilities, there is no need for any further legislation. Once this has happened, the Scottish Parliament can begin the process of decentralisation (to which all political parties are committed) and some of which will require legislation to put into effect.

In contrast with that approach, the Scotland Bill provides for a “transfer scheme” whereby functions of the CEC may be transferred to a transferee in Scotland and continue to be governed by a modified Crown Estate Act 1961, until such time as the Scottish Parliament determines otherwise. One of those giving evidence to RACCE was Rob Booth, the Head of Legal at the CEC. He said, in response to a question that,

“The position after the transfer date will be that the Crown Estate Act 1961 will be applied as a fallback, to fill a potential vacuum. At the transfer date, if no Scottish legislation has been brought forward to set up the structure to take on the new role, a modified version of the 1961 act will be applied as an interim measure until Scotland has had an opportunity to pass that legislation. 

In my reading of the Scotland Bill, it is not anticipated that there will be an on-going application of those 1961 act principles to management in Scotland. After the transfer date, as things stand, the 1961 act will apply only to the Crown estate in the rest of the UK, so Scotland will have freedom as far that particular aspect is concerned.” (2)

In other words, the Scotland Bill would remove the Schedule 5 reservation on management (we will deal with revenues shortly) but rather than keeping things straightforward as outlined above, Clause 31 would put in place a Treasury transfer scheme which binds nominated transferees into a legal framework governed by the Crown Estate Act and which needs to be undone by the Scottish Parliament if and when it wishes to do so in relation to the various Crown property rights and interests involved.

It remains unclear why this added complexity is necessary. Four other aspects remain unclear.

The first is the question of the revenues. It is now clear that the Scotland Bill will not devolve the revenues. Instead, it amends the Civil List Act to the effect that all revenues will be paid to the Scottish Consolidated Fund. The reservation in Schedule 5 remains in place, however, and so it will be incompetent for the Scottish Parliament to make any change to this arrangement. This, in effect, makes decentralisation very problematic. The promise that the First Minister, Nicola Sturgeon made in Orkney two weeks ago, that “coastal and island councils will benefit from 100 per cent of the net revenue generated in their area from activities within 12 miles of the shore” is made rather difficult if all of the revenue has, by law, to flow to the Scottish Consolidated Fund. (3)

The second matter relates to the idea that, after devolution, the CEC will continue to be able to acquire land in Scotland. This is legally incompetent. The CEC does not acquire land or property interest in its own behalf but does so on behalf of the Crown. Constitutionally and legally, the Crown is a distinct entity in Scotland from the rest of the UK. Were the CEC to acquire, say a shopping centre in Scotland in 5 years time, it would be owned by the Crown in Scots law but acquired from revenue derived from the English Crown. Constitutional experts will be better placed to address this question than I but I do not think this is constitutionally possible.

Thirdly, the Scotland Bill at Clause 31(10) stipulates that any management of Crown property in Scotland shall maintain the property, rights and interests as “an estate in land”. Rob Booth described this as “a fundamental founding principle of the Crown Estate”. (4) But after devolution there will be no Crown Estate in Scotland (the term will only apply outside Scotland). Crown property rights have been devolved since 1999 and this constraint represents a reversal of the current competence of the Scottish Parliament for no good reason.

Finally, the Fort Kinnaird retail park in the east of Edinburgh will not be included in the devolved settlement. Rob Booth explained this in the following terms.

“As a lawyer reading the Smith proposals, I can see that Smith talked about Crown Estate economic assets in Scotland being devolved to Scottish ministers. There is a statutory definition in section 1(1) of the Crown Estate Act 1961 of what the Crown estate is, which is those assets that are managed by the Crown Estate Commissioners. Fort Kinnaird undoubtedly is an economic asset in Scotland, but we do not manage it. The underlying asset is not owned by the Crown; therefore, to my mind as a lawyer, it does not fit the definition of a Crown Estate economic asset in Scotland as described by the Smith report.” (5)

Fort Kinnaird is owned by a partnership – The Gibraltar Limited Partnership. In Scots law a partnership is a legal entity and may own property in its own right. The Gibraltar Partnership, however, is governed by English law, specifically the Limited Partnership Act of 1907. Such partnerships are not legal entities and it is the partners that are the legal owners of the property. There are two partners in the Partnership – the CEC on behalf of the Crown and the Hercules Unit Trust. Since Fort Kinnaird is in Scotland, the interest that the CEC has is an interest owned by the Scottish Crown. (6)

Rob Booth’s explanation is unconvincing, disingenuous and wrong. The underlying asset (the interest) is owned by the Crown, the CEC manages that interest, and it does therefore form part of the Crown Estate.

To conclude, the Scotland Bill does not implement the Smith Agreement. Instead it creates a complex and incoherent muddle where there should, instead, be clarity and simplicity. The Scotland Bill is about devolving further powers to the Scottish Parliament. That is achieved by removing the two key reservations. That’s all, in essence, that it needs to do (although there are minor consequential amendments) and it doesn’t even achieve that. In the Committee stage of the Bill on 29 June 2015, MPs should ensure that it does.

NOTES

(1) Official Report here
(2) Official Report Cols 12-13
(3) See Shetland Times, 21 June 2015
(4) Official Report Col 14
(5) Official Report Col 6
(6) See here for Companies House filing history on the Partnership

Introduction

One of the Smith Commission agreements was that responsibility for the management and revenues of the Crown Estate in Scotland should be devolved to the Scottish Parliament. (1)

This Agreement reflected the widespread consensus in Scotland that the management of  the Crown Estate should be devolved. There have been several inquiries into this topic over the last ten years, from the Crown Estate Review Working Group (2007) to Westminster’s Scottish Affairs Committee (2012), which also recommended the devolution of the Crown Estate in Scotland. (2)

The Smith Commission also agreed, like the Scottish Affairs Committee before it, that devolution should be followed by further decentralisation to local authorities, communities and others, of responsibilities for the various Crown property, rights and interests that make up the Crown Estate in Scotland. Both the Scottish Affairs Committee and the Smith Commission were clear, however, that this decentralisation was to take place after the devolution of the management of the Crown Estate to the Scottish Parliament. (3)

The Scotland Bill was published on the 28th May by the UK Government and is now on its hurried passage through the UK Parliament. (4) It is intended to implement the Smith Commission agreements.  Clause 31 of the Bill that deals with the Crown Estate, however, completely fails to do this and needs to be re-drafted.

But, first, some background.

The Crown Estate

The Crown Estate is the name given in the Crown Estate Act 1961 to the various Crown property, rights and interests that are managed by the Crown Estate Commissioners (CEC).  The CEC is a statutory corporation first constituted by the Crown Estate Act 1956 and now operating under the 1961 Act.  The CEC transfers its net surplus revenue or ‘profit’ each year to the UK Government’s Consolidated Fund for use in public expenditure. (5)

The CEC is thus the manager of property rights that belong to the Crown. However, there can often be confusion between the manager and the property, because the CEC has branded itself for its corporate identity as ‘The Crown Estate’.  The Treasury Committee also felt it necessary to emphasise in its report on the Crown Estate, that “the CEC are a public body charged with managing public resources for public benefit”. (6)

The Crown property, rights and interests that make up the Crown Estate in Scotland are legally and constitutionally distinct from those in the rest of the UK, because they are owned by the Crown in Scotland and defined in Scots law.  Scotland’s Crown property rights are of ancient origin and continued to be administered with their revenues in Scotland following the Union of Crowns in 1603 and the Treaty of Union in 1707.  Some of these Crown rights continue to be managed in Scotland by the Scottish Government and Crown Office. However, the administration and revenues of many of Scotland’s Crown property rights were transferred from Edinburgh to a government department in London in the 1830s.  That department and its successors, were the predecessors of the current CEC.

The Crown property rights managed by the CEC in Scotland include Scotland’s territorial seabed and Crown rights over the Scotland’s continental shelf zone (see map above), around half of Scotland’s foreshore, the right to mine gold, salmon fishings, four rural estates and two urban properties.  The Crown Estate in Scotland only accounts for around 3-4% of the value attributed to the UK wide Crown Estate and revenue produced by it. The CEC’s annual ‘profit’ from its operations in Scotland, has been around £5m in recent years. (7)

The Scotland Act 1998 devolved legislative competence over Scots property law, including Crown property rights, to the Scottish Parliament.  The first Scottish Parliament, for example, used this legislative authority to abolish the Crown’s ultimate ownership of land in Scotland under feudal tenure.  However, the reservation of the management of the Crown Estate in the Scotland Act, precludes the Scottish Parliament from being able to legislate over the rights managed by the CEC and also means that the CEC is not accountable to either the Scottish Parliament and Government for its operations in Scotland. Implementing the Smith Agreement would complete the devolution process started in 1999 and bring the rights and the management together under the legislative competence of the Scottish Parliament.

The Scotland Bill

The Smith Agreement to devolve the management and revenues of the Crown’s property rights should be straightforward to implement in legislation.

The two main requirements are to amend the Scotland Act 1998, Schedule 5 Part 1 by;

1. removing clause 2(3) that reserves the management of the Crown Estate in Scotland and,

2. removing clause 3(3)(a) that reserves the revenue from the Crown Estate in Scotland.

Removing these two reservations would mean that responsibility for managing the Crown property rights that currently make up the Crown Estate in Scotland, automatically falls to the Scottish Parliament.

Appropriate legislation also needs to cover some consequential amendments to other legislation, in particular to the Crown Estate Act 1961 to reflect that it would no longer apply in Scotland.  In addition, the legislation requires some procedural provisions dealing with the transfer date and process.

Unfortunately, clause 31 in the Scotland Bill manifestly does not implement the Smith Agreement.  The clause does not devolve the responsibility for the management of the Crown Estate in Scotland to the Scottish Parliament. Instead, the clause delegates existing functions of the CEC as a statutory corporation to Scottish Ministers or others transferees through a Treasury ‘scheme’.

The current clause 31 attempts to enable the CEC to continue to operate in Scotland and to bind those to whom functions are transferred to the restrictive terms of the Crown Estate Act 1961 under which the CEC operates.  The clause’s provisions to try to achieve this are, as others have commented, complex and unclear. (8) They are a recipe for confusion and legal anomalies.  They do not devolve legislative responsibility over the Crown property rights and revenues involved in Scotland to the Scottish Parliament and will frustrate the widespread consensus for the further decentralisation of these within Scotland. (9)

Re-framing Clause 31

The Smith Agreement to devolve responsibility over the Crown Estate in Scotland reflects the longstanding agreement in Scotland over this matter and it should be straightforward to implement through the Scotland Bill.  Why then does the existing clause 31 fail to do this?

This blog argues that this current state of affairs has arisen because of the degree of influence that the CEC has had on the nature of clause 31. The sequence of Committee inquiries and reports into the operations of the CEC show how CEC corporate policies have been aimed at maintaining it as a UK organisation.  IN 1998, the CEC declined to participate in the devolution process in the way that the Forestry Commissioners did (and have continued to do).  The starkest example, however, was in 2001/02 when, against the flow of devolution, the CEC ended its management of the Crown Estate in Scotland as a separate management unit with its own manager and financial accounts, so that the CEC could assimilate its operations in Scotland into those in the rest of the UK. (10) The current clause 31 with its stretching and twisting of the Crown Estate Act 1961, can be seen as the CEC’s latest move to try to retain the Crown Estate as a UK wide estate.

Furthermore, it is distressing to note the continuing mis-understanding of what exactly the Smith Commission agreed. For example, a briefing issued by the Scottish Parliament, claims that it is the “powers of the Crown Estate Commissioners [which are set out in the 1961 Act] which would be transferred to Scottish Ministers.” (11)

This is wrong.

The Smith Agreement patently does not say this. It says that responsibility for management will be devolved to the Scottish Parliament. That is an entirely different matter from a mere delegation of functions to be exercised within the framework of continuing reserved powers.

The Scottish Government’s initial response to the Scotland Bill recognises the need to re-frame clause 31, so that the clause removes the reservations in the Scotland Act 1998 over the management and revenues of the Crown property rights in Scotland forming part of the Crown Estate. (12) The terms of the Scottish Government’s proposed alternative clause 31 still suffers from some other weaknesses. However, it is to be hoped that all the parties involved in the Smith Commission will recognise that the issues over clause 31 are not party political.

Solving this problem is a simple matter of re-framing the clause in a competent was so as to implement the Smith Agreement in as straightforward a manner as possible.

1. Smith Commission page 16
2. See Crown Estate Review Working Group Report and Scottish Affairs Committee Report.
3. See, for example, Lord Smith’s evidence to Scottish Affairs Committee 3 December 2014. Q137-Q140
4. Scotland Bill
5. Section 1(2) Civil List Act 1952
6. House of Commons Treasury Committee Report, 2010 para 10
7. Scottish Affairs Committee Report para 39
8. See Devolution (Further Powers) Committee report
9. For example, the Bill amends the Civil List Act 1952 to obligate the payment of all Crown revenues to the Scottish Consolidated Fund. Decentralisation to, for example, to harbour trusts will be constrained by a continuing legal constraint to hand over all revenues to the Scottish Government.
10. Scottish Affairs Committee Report para 21
11. See SPICE/Clerks/Legal Briefing page 15 “Provision has been made to amend the Crown Estate Act 1961 to reflect the new role for Scottish Ministers (SMs), but to retain the requirement to manage and improve etc the property, rights and interests being transferred subject to the remaining provisions of the Crown Estate Act 1961. This reflects the Smith Commission recommendation that it would be the powers of the Crown Estate Commissioners [which are set out in the 1961 Act] which would be transferred to Scottish Ministers.”
12. See Scottish Government alternative clause, pages 12-13 and 43

OTHER DOCUMENTS

House of Commons Library Briefing on Scotland Bill