The independence proposition and the Crown Estate portfolio

(Developed piece) In working to understand a complex situation, we have come to understand it is quite different -  less and more – than is represented.

The Crown Estate Commissioners have just issued an annual Scotland Report for 2010-11 in which they trumpet a 76% increase in investment in Scotland in the past year – £7.4 million.

This is an obvious attempt to try to still the hardening will of the Scottish people to see the authority to administer the rights to the country’s sea bed and foreshore returned to Scotland.

The first hypocrisy in the move could not be more in your face. It blazes from the overscale cover title of the document: ‘Building Strong Partnerships’.

The sort of ‘partnership’ with Scotland that informs the Crown Estate Commissioners saw their immediate decampment from Scotland to London in the teeth of devolution and the absorption of their Scottish accounts into a amalgamation that frustrates separate accounting.

Contrast this with the action of the Forestry Commission – which not only stayed in Scotland but opted to become an integrated department of the Scottish Government – and has been an energetic innovator in the revision of the role and ownerships of the forest estate.

The notion of a partnership with Scotland has never been in the DNA of the Crown Estate Commissioners. These are the grab-it-all merchants who are only appearing to sing a slightly different tune now that they are fighting for their own continuation.

We say that they are singing only  ‘a slightly different tune’ because the reality of their vaunted increased investment is not what it seems.

By their own account, £2 million of the £7.4 million invested has had to be spent on repairs to buildings on their land estates, some of which had fallen into disrepair and some had been damaged in recent bad winters.

This is not investment for Scotland. This is no more than fulfilling the legal duties of a landlord to a tenant – and it amounts to 27% of the total ‘invested’.

Then the Commissioners doubled to £4.4 million their investment in the Scottish marine estate. This too is not investment in Scotland, this is speculating to accumulate, with marine renewables a reliable coming cash cows. Crown Estate portfolio revenues go straight to the UK Treasury.

And we’re supposed to be impressed.

Another perspective is that the property value of the Scottish portfolio increased by 13% to £207.1 million in 2010-11. This increase in value amounts to £23.826 million of which bonus they invested 31% in ‘Scotland’.

An endemic disease in the Crown Estate Commissioners is that they are unelected and unaccountable. They face no requirement to consult with the elected Scottish Parliament on any aspect of what they do. They exist in the curious miasma of quangoland and in this case, a quango hung about with the classist accoutrements and ad hockery of British culture.

That the Commissioners do not see themselves as other than autonomous is highlighted in the language of the Scottish Commissioner, Gareth Baird, in his announcement of the Scotland Report on the Commission’s website.

Appointed at the end of 2010 and paid around £19,000 for 20 days work a year, he says:

‘In terms of the marine and rural sectors, I am committed to sustainable development amongst Scotland’s communities, as well as bringing people together to work collaboratively. In this respect I am strongly supportive of local enterprise and production which I believe can benefit Scotland as a whole.’

Note the repetition of ‘I’. This is not collective accountability. This is a fiefdom.

Today’s Sunday Herald has a piece by Rural Affairs and Environment Secretary, Richard Lochhead, arguing the case for the devolving to Scotland of the Crown Estate portfolio of Scottish rights and assets.

While the action he wishes to see must indisputably take place, one way or the other, there are serious weaknesses in the case he puts forwards.

He repeats the mantra that the Scottish Government, were it in possession of these revenues, would ‘invest them directly back into our communities’.

Again, no mention of investing into the sort of necessary infrastructural fund for development and for rainy days. This is a shoddy populist bribe which devalues the Scottish people’s grasp of reality.

Since devolution, Scotland has had the legal ability unilaterally to alter the administration of some of these rights and assets – and it has already taken similar action in amending feudal land rights.

The current Scottish Government, an SNP administration, has had – since it came to power in 2007 – a report on this very situation commissioned by six Scottish local authorities, one of which – and let’s celebrate it – was Argyll and Bute.

This fully evidenced document spelled out what the devolved Scottish administration had already done and what it had the legal authority still to do.

It advanced the value of exercising it legal rights to abolish certain crown rights – such as the rights to mussels and oysters, on the grounds that this would both tidy up nuisance anachronisms and demonstrate the Scottish Government’s interest in exercising what powers it has in this area.

Were it to be seen to take such action, it would become an exemplar for actions requiring to be taken in the rest of the UK to tidy up crown rights. This would open up the whole issue of the most acceptable form of administration of such rights.

That the current Scottish Government did not choose to take this action leaves it’s  current campaign open to reasonable suspicion that it is a confection to build nationalist outrage to support an independence referendum.

In fact, the likelihood is that they did not do so because almost no one fully understands the issue, the figures concerned and the management of relevant government finances.Those who do not understand the situation fully include the Scottish and Westminster governments and the Crown Estate Commissioners themselves.

As we understand it, the Scottish Government cannot alter the arrangements for the administration of the Crown portfolio of Scottish rights and assets – but it can abolish some of these rights as outlined above.

The administration of crown rights

As with everything in the UK, this is an untidy and illogical business, owing the muddles to ad hoc historical actions.

The Scottish Government does actually have the authority to administer and benefit from the revenues arising from some crown rights – such as those relating to property which no longer has an owner.

The authority to administer the bulk of the crown’s Scottish rights and assets, however, went south with the series of Crown Lands (Scotland) Acts of 1832, 1833 and 1835.

What the Scottish Government wants to see can, as a reserved matter, only be legally enabled at Westminster. This is to have the right returned to Scotland to administer and retain the revenues from the bulk of the Scottish rights and assets held in the portfolio known as the  Crown Estate.

These are currently managed from Westminster by Crown Estate Commissioners, appointed by the Westminster Government and with surplus revenues going to the Treasury’s Consolidated Fund. This is the fund from which the block grants are paid to the devolved administrations.

The Crown Estate Commissioners and the Westminster Government are each resisting this revision of authority for the simple reason that they see it as ‘giving’ something to Scotland.

What it would ‘give’ is, in monetary terms, very much less than is popularly (and even governmentally) imagined.  But politically it would confer an autonomy that the UK government fears  – and the Scottish Government hopes – would fuel a desire for greater independence.

Myths and realities

96% of the gross capital value and the revenues of the Crown Estate portfolio derive from English rights and assets. The Scottish estate accounts for no more than 4%.

This underlines the fact that the problem for Westminster in devolving the authority to administer the crown’s Scottish rights and assets is not about financial loss or gain.

While developments in marine renewables will earn increased revenues for the Scottish marine estate, these will be much more modest than is imagined and again, the English marine estate is likely to account for greater revenues from this source.

The cost to developers is much greater in the more difficult physical circumstances of the Scottish west and north coasts. While Scotland has significant potential resources in this field and in these areas, they will be less immediately attractive to developers on these grounds and on those of related higher maintenance costs.

The benefit from marine renewables will be a more or less sustainable power source and the reliability of regular revenues rather than the scale of those revenues. In. reality, this is not going to be the Yukon but is going to be very important.

Given the modest overall value of the crown’s Scottish rights and assets, the Scottish marine estate brings in 50% of its total revenues.

For the rest of the UK, given that the major earner is the property portfolio in London and the south east of England, revenues from its marine estate amount only to 15% of the total revenues generated

The Crown Estate’s projected revenue from the Scottish marine estate for 2020 is somewhere in the range of £12 – £48 million. This would amount to 18% of the projected revenues from the marines estate of the rest of the UK.

This amount of money for Scotland would not be enough to bring the A9 up to a state of being fit for purpose. It would also be no more than a pocket money contribution to the £1.5 billion cost of the new Forth bridge.

The total gross surplus revenue deriving  from the entire crown estate portfolio is now around £264 million per annum.

Since Scottish devolution in 1999, the surplus revenues returned to Westminster from the reserved administration of the crown’s Scottish rights and assets has totalled £130 million – in just short of 12 years.

Over the same period, the revenues coming direct to Scotland from those crown rights and assets it has itself the authority to administer have totalled £24 million.

Argyll and Bute Council had reserves of £48 million earlier this year – until it had to spend some of it retrieving an unexpected deficit incurred by negligence on the part of the Council Leader in the now infamous matter of COSLA’s reintroduction of the old Supporting People Grants.

The former devolved Scottish Executive spent something like £54 million on the Skye Bridge fiasco between 2009 and 2005 – with a £12 million capital grant towards its building, £27 million to buy out the contract and around £15 million in annual subsidy payments (+VAT) to the contractor.

All in all, the reality of the revenue generating capacity of the crown’s Scottish rights and assets was always modest – and seems even more so in the inflationary consequences of the 2008 collapse of the financial institutions. Since then, figures in the millions have had the emotional impact of petty cash.

The swerves

The Crown Estate Commissioners’ main argument for the retention of their operation in Scotland under the status quo is their boasted capacity to bring external capital to Scotland from elsewhere in the crown estate.

The reality is that, in the five years from 2005-2010, their operations have seen a £50 million net outflow of capital value from Scotland, largely from the Commissioners’ sale of their property in Edinburgh – which was used to invest in retail property in south east England.

In the presentation of the 2010-11 Scotland report the Commission makes much play of the fact that in the past five years it has invested (with the caveats we have already expressed above) a total of £16 million; and intends to invest £20 million in the next five years.

These figures have to be read in the context of an annual gross revenue surplus from its Scottish operation of almost £10 million.

Then there is the valuation of the Scottish marine estate – and the other marine estates administered by the Commissioners. This is arrived at by a blend of real capital value and massageable theoretical value.

For instance, Rhu Marina is a property owned by the Scottish Crown Estate – so the value it contributes to the overall estimated value of the Scottish marine estate can be fairly well verified by market testing.

The rest of the marine estate is regularly revalued in a cart-before-horse process.

The Commission works out the levels of rents and leases it thinks it can get away with charging – and then reverse engineers the capital value of the marine estate needed to produce the desired charges as the given percentage of capital value.

Another swerve in the current quotation of the value of the Scottish marine estate is that it does not include the revenue raised by asset sales.

While the Crown Estate Commissioners’ preferred approach with harbour developments is to lease the relevant area of the sea bed, producing an annual income, it made an exception in the case of Lerwick in Shetland.

The local political needs of the LibDems, whose former leader Tavish Scot is the sitting MSP for Shetland,  led to pressure from the current Scottish Secretary, the LibDem Michael Moore, for the popular sale of sea bed for harbour development at Lerwick.

But the revenue raised is not included in the £7.8 million given as the value of the Scottish marine estate in 2010-11.

So what’s the real story?

When you look at the figures, contrary to popular and political myth, the issue cannot be about respective financial gain and loss. It’s all far too modest and as we ave said, it’s never going to be the Yukon. None of it would, in total, get near the foothills of a run of the mill defence contract.

The reality is political – centred on independence and the preservation of the union. It’s about the emblematic value of more autonomy or not.

The Westminster government is so concerned about the impact of the Scottish government forcing the devolution of the authority to administer these Scottish crown property, rights and assets – and under Scottish law ‘the crown’ is, of course, Scotland – that it is prepared to pay in the effort to neutralise Scottish public opinion.

As Treasury Secretary, Danny Alexander announced on 22nd July 2011 (and we assessed critically here), the Westminster government is establishing a Coastal Communities Fund for the whole of the UK, giving each of the home nations half of the revenues generated by their marine estates for the Crown Estate portfolio.

This gives Scotland a total allocation initially of £3.9.  The criterion for a ‘coastal community’ is so generous that this modest sum will be available for bids from the majority of Scotland’s communities.

However the cost to the Treasury of this cheap sop to Scotland is , in reality, the cost of the entire scheme – £23.7 million.

The sole purpose of the fund is to dull Scottish public opinion on control of the Scottish rights and assets in question. The UK Treasury would not otherwise have spent the additional £19.8 million to be given to the rest of the UK.

Emphasising the collectivity and the common good that is the political basis of the argument for the union, the coastal communities from the other three home nations had to be included in the scheme – yet there has been absolutely no pressure from them to benefit from the revenues of the crown estate portfolio.

Only Scotland has been agitating about this – and of course it is the second highest earner of the four from renewables.

This entire scheme is literally a giveaway in what Westminster sees as the larger political intereet – £18.2 million to England, whose marine estate is by far the most valuable, with £1.15 million to Wales and £450,000 to Norther Ireland.

There is additionally an evidenced argument that it would actually save money for the UK Treasury if the authority for administering the Scottish crown’s rights and assets were to be devolved to the Scottish government.

The Crown Estate Comission has itself recognised this, being quoted in the Holyrood magazine in 2007 as saying:

‘It is important to recognise that the revenue that comes into the Crown Estate from Scotland is almost entirely passed on to the Chancellor and then, through the Barnett formula, there is a return to Scotland at a level which exceeds, in percentage terms, the money coming from Scotland.’

The overall picture is one of a UK government hunkered down – almost at all costs – to retain its emblematic authority over the administration of the Scottish element of the crown estate portfolio.

And the Scottish Government?

The Scottish Government should already have set about using the authority it has to abolish minor archaic crown rights in Scotland. This is not abut financial gain, It’s about demonstrating the interest in exercising devolved powers and about demonstrating the will to run a tidy ship..

Such determination would have a positive collateral impact. It should get on with this programme now. The current Scottish government is the party of independence. It should be seen to exercise that independence and unilaterally clean up these archaisms in Scotland.

And for the issue of the disputed control of the major rights and assets in question?

Oddly, it has been useful for each of the participants in this dispute to allow the perpetuation of the myth that the revenues from the Scottish crown estate portfolio are substantial.

For the Scottish government, the notion that Scotland is being seriously ripped off is a handy recruiting serjeant for potential independence.

For the Westminster government, it is preferable to let people imagine that its position is based on the will to retain significant present and potential revenues than that it is simply using a petty control device to  baulk the SNP – and that it is actually willing to pay heavily for the baulking.

The issue is not the monetary value of this portfolio of property rights and assets – and it is important to recognise that this will always be modest enough.  It is that they rightly belong to Scotland.

The Scottish government’s accountability to the people for managing them productively will be a part of a necessary skills development programme.

NOTE: This is the Crown Estate Commission’s description of the ‘Scottish Marine Estate’:

‘The marine estate in Scotland consists of approximately 50 per cent of the foreshore and beds of tidal rivers and almost all the seabed out to 12 nautical-miles which results in an estate that is both extensive and diverse.  It includes oil and gas pipelines, telecommunication and power cables, marinas, ports and harbours, and aquaculture. The marine estate also includes rights to gas storage and renewable energy Scottish territorial waters and in UK waters adjacent to Scotland.’

ORIGINAL DOCUMENTS:  

• Here is a downloadable pdf of the full Scotland Report: scotland_report_2011
• Here is a downloadable pdf of the full Report of the Crown Estate Review Working Group, commissioned by six Scottish Highland local authorities, including Argyll and Bute: CERWG.Published.Report-1