Thursday, 6 April 2017

Devolving the Crown Estate

Devolution of the Crown Estate in Scotland (CEiS) was one of the recommendations of the Smith Commission set up to agree further devolution of powers in the wake of the 2014 Independence Referendum. The Smith recommendations were enacted by the Scotland Act 2016 and on 1st April 2017, management of the Crown Estate in Scotland was transferred from the Crown Estate Commissioners to a new quango called "Crown Estate Scotland (Interim Management)". The name reflects the fact that Smith anticipated that management of the CEiS would in turn be sub-devolved from Edinburgh to local authorities and/or communities and a Scottish Government consultation on options for that closed recently.

So it was a bit of a surprise when veteran land reform campaigner now Scottish Green Party MSP Andy Wightman, who has long taken a deep and critical interest in the doings of the Crown Estate, tweeted:-

Andy's quite right that Smith specifically recommended that the revenues from the CEiS be devolved (para. 32 of the Report) and there's no doubt that s.36(13) of the Scotland Act 2016 (SA16) has amended s.1(2) of the Civil List Act 1952 so that CEiS revenues are now paid into the Scottish Consolidated Fund (SCF) instead of the UK Consolidated Fund as hitherto. But Andy's point is that there is no devolved power to the Scottish Parliament to redirect CEiS revenues from the SCF to another body in pursuance of the envisaged sub-devolution from Edinburgh to the localities. He used the example of Lerwick Port Authority - management of the seabed around the port (which is part of the CEiS) can be delegated to LPA but there's no devolved power to allow it to keep any revenue arising from the seabed in the form of mooring dues etc.

Andy's basis for this claim is that the SA16 has not amended para. 3(3)(a) of Schedule 5 (Reservations) to the Scotland Act 1998 which refers to the reservation to Westminster of "the hereditary revenues of the Crown" of which the revenues of the CEiS are a subset. Now if Andy's right, this does indeed go contrary to Smith and the Scotgov will be in for a nasty surprise at what I suspect must be a legislative cock-up rather than a Tory conspiracy. But I don't think Andy is right (with respect). I think CEiS revenues have been duly devolved for the following reasoning.

The CEiS is a subset of the hereditary revenues of the Crown and paragraph 1 of Schedule 5 (Reservations) to the Scotland Act 1998 (SA98) reserves these (with two exceptions not important for present purposes). Although para. 1 doesn't explicitly mention hereditary revenues, we know that it nevertheless reserves them because para. 3(3)(a) explicitly tells us that it does.

But para. 2(1)(b) provides that para. 1 does not reserve (i.e. there is devolved) "functions exercisable by any person acting on behalf of the Crown". That these functions would include (i.e. there must be devolved) those of any person acting on behalf of the Crown by managing its estate in Scotland (or to put that a simpler way, would include the management of the CEiS) we know because, before it was devolved pursuant to Smith and the changes made by the Scotland Act 2016, para. 2(3) carved the management of the Crown Estate out of the functions stated by para. 2(1) not to be reserved.

In order to implement the devolution of the management of the CEiS mandated by Smith, s.36(3) of the Scotland Act 2016 (SA16) amended para. 2(3) of Sch. 5 of SA98 to redefine the Crown Estate, the management of which it carved out of the functions stated by para. 2(1) not to be reserved, as being the property etc. "under the management of the Crown Estate Commissioners". As the CEiS is no longer (since 1 April 2017) under the management of the CECs, its management falls back in to the functions stated by para. 2(1) not to be reserved.

That demonstrates, I hope, that the management of the CEiS is now devolved but what about the revenues (rent and other income) arising from it? Well, the ingathering of these revenues and their payment into the Scottish Consolidated Fund pursuant to s.1(2) of the Civil List Act 1952 is amongst the "functions exercisable by any person acting on behalf of the Crown" which includes the management of the CEiS. And as these functions are devolved, there's nothing to stop the Scottish Parliament legislating to amend s.1(2) of the CLA52 to say that CEiS revenues can be paid other than to the SCF, for example to Lerwick Port Authority. (I can’t see anything else relevant to reserve s.1(2) of the CLA52 except perhaps para. 2(3A) of Sch. 5 telling us that para. 1 reserves s.90B(5)-(8) of SA98. But note in that regard that subs.(7) tells us that subs.(5) doesn’t include revenues to which s1(2) of CLA52 applies. So these revenues aren’t reserved via that line of reasoning either.)

A slightly different way of looking at all this is to say that para. 3(3)(a) (hereditary revenues of the Crown) of Sch. 5 (Reservations) of the SA98 doesn't reserve anything at all. It's para. 1 that does the reserving where the Crown's concerned in this context and para. 2 (as amended following Smith and the SA16) tells us that it doesn't reserve the management of (which includes disposal of the revenues from) the CEiS.

Under new management

It's nevertheless a resonable question to ask, what does para. 3(3)(a) intend is to be reserved if not revenues from the CEiS, bona vacantia (ownerless property) ultimus haeres (property of people dying without heirs) and treasure trove?

It would originally have embraced the reservation of the concepts that the Crown Estate is, and is to remain, the property of the Crown and is to be maintained as a landed estate. These are reserved because, in theory, the Crown Estate is only under the management of the Crown Estate Commissioners with its revenues going to the Consolidated Fund during the lifetime of the Queen who (like previous monarchs back, I believe, to George III) surrendered them in exchange for an annual payment called the Civil List (or, since 2012, the Sovereign Grant). But the next monarch would, in theory, be entitled if so advised by his ministers (which is perhaps unlikely), to discontinue that arrangement and resume the Crown Estate and its revenues in lieu of the Sovereign Grant. Anyway, these concepts are not devolved and were not intended to be devolved by Smith because he was only about transfer of existing powers rather than constitutional innovations. In essence, then, the revenue of the CEiS is devolved but the capital is reserved. Maintenance of the CEiS as an estate in land (with a cash float) as the property of the Crown post devolution is specifically mentioned by s.90B(5)-(8) of SA98 (inserted by s.36 of SA16) and these requirements are specifically reserved by para. 1 as emended by para. 2(3A) (also inserted by SA16, s36(4)). But insertion of 2(3A) was arguably unnecessary if 3(3)(a) was to be left standing.

This is so flipping complicated that I've almost certainly made a mistake somewhere!

UPDATE 9 April - I got feedback on this in the shape of Tweets from Andy Wightman and Professor Aileen McHarg of Strathclyde University.

Andy tweeted [sorry, don't know to link to a tweet and doing this on a tablet and don't know how to grab, cut and paste either]:-

I think you are straining the meaning of 2(1)(b) which relates to Law Officers, Ministers etc.

I would have had some sympathy with that view but for the fact that para. 2(1)(b) of Schedule 5 (Reservations) of the Scotland Act 1998 must be apt to include those acting on behalf of the Crown by managing its estate in Scotland or else why, before it was devolved, was it felt necessary to declare (in para. 2(3)) that 2(1) doesn't devolve the management of the Crown Estate? And would it not also follow from that reasoning (that 2(1)(b) is restricted to ministers and law officers etc. but doesn't extend to managers of the CEiS) that even the management of the CEiS still isn't devolved?

Professor McHarg wrote an article in the Edinburgh Law Review (read it here) in which she said: "It [the Scottish Parliament] will also be unable to alter the recipient of Crown Estate revenues, as the “hereditary revenues of the Crown” remain reserved.", quoting as authority for that para. 3(3)(a) of Sch. 5.

Now, with all the respect that's due to a Professor of Public Law from a retired solicitor with a mere dilettante interest in the subject, I don't think (as I said above) para. 3(3)(a) reserves anything at all. It merely tells us what para. 1 reserves. And para. 2 (as it's been amended by The Scotland Act 2016) tells us that para. 1 doesn't reserve the management of the CEiS. Para. 2 trumps para. 3 meaning that the answer to what is or isn't devolved in this context lies in para. 2, not para. 3.

Professor McHarg tweeted to me:-

I don't think you are right to say management includes disposal of the revenues.

That's the weakest point of my argument - that disposal of the revenues (in the sense of permitting Lerwick Port Authority (or whoever) to retain them instead of paying them over to the Scottish Consolidated Fund (SCF)) is part of the "functions" of the manager of the CEiS which para. 2(1)(a) says are devolved. You could argue that the functions include "gathering in the income, settling liabilities to third parties and remitting the balance to the Scottish Consolidated Fund" and thus all of that - including the last four words - is devolved. But it's an entirely credible contra-argument that the choice of to whom the balance is paid is not a "function" of the manager: the choice of payee was pre-ordained by an Act of [the UK] Parliament and, as it concerns the hereditary revenues of the Crown, it's reserved (Sch. 5, para 1. as explicated by para 3(3)(a)). I don't know what the answer is but that, I think, is where the battleground lies.

Two final thoughts: (1) would legislation be needed to allow Lerwick Port Authority to keep the balance of the revenue? This is an aspect of public law on which I claim absolutely no knowledge at all and I only mention it because the Civil List Act 1952 says that the non-Scottish CE revenues are to be paid into the Exchequer but that doesn't seem to prevent the Treasury reaching an extra statutory agreement with the Crown Estate Commissioners (here) allowing it retain (i.e. not pay in to the Exchequer) 9% of the revenues: could the Scotgov not reach a similar sort of agreement with LPA? (2) Is the matter not wholly academic in that the Scotgov could simply give back to LPA an amount equivalent to the amount it remits in to the SCF?