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11 Feb 2003 : Column 245WH—continued

Seabed Management

4 pm

Mr. Alistair Carmichael (Orkney and Shetland): I am delighted to have secured this opportunity to examine the workings of the Crown Estate Commission, which is one of the slightly gloomier corners of Government business. It is an area of public life that is not often overly troubled by the bright lights of public accountability, but it has a profound and real effect on the life of my constituents and many people who live in coastal and island communities throughout the United Kingdom. It was the subject of a considerable part of my maiden speech.

I would be delighted if the Minister were to say today that the Government will examine the question of ownership of the seabed. Such an initiative is long overdue. However, I realise that this is a Westminster Hall debate. I have been an MP long enough now to be realistic about what can be achieved. For that reason, I have asked that today's debate be limited to the management of the seabed. Nevertheless, it never hurts to place on record my belief that it is fundamentally obnoxious that a body such as the Crown Estate Commission should exist and should exert power in the way that it does over coastal and island communities. I speak as one who represents several island communities and was born and raised in one.

It is questionable that we should allow such a body to raise money from things on which we depend, such as piers and marinas. We have no alternative but to use them, but rent is exigible by the Crown Estate Commission on them. It is worth noting that the Scottish Parliament has just debated the Land Reform (Scotland) Bill, which does a great deal to remove the blight of landlordism from the highlands and islands, but for some reason the extension of community involvement and democratic accountability stops at the low water mark.

I have no doubt that the ministerial brief will contain all sorts of details about the great munificence of the Crown Estate Commission in giving this much for this course and that much to the North Atlantic Fisheries college and so on. Of course, I am very pleased that such projects get money. However, I hope that the Minister does not expect me to be grateful for it, because it is an exercise in giving beads to the natives. Why should the Crown Estate Commissioners have the right to say that a project here or a course in a college there deserve support? Surely, people who are better qualified should have such power in their grasp, rather than the Crown Estate Commission.

I wish to examine three areas in which the Crown Estate Commission's work affects island life: aquaculture, which is a significant contributor to the economy in my constituency; the use of sub-sea cabling, which will be of interest and concern to the hon. Member for Western Isles (Mr. MacDonald), who is here today; and the development of renewable energy on the islands and through offshore wind farms, about which I may have an opportunity to say more later.

From our perspective, the roots of the difficulty lie in the terms of the Crown Estate Act 1961. When one speaks to the commissioners and the chief executive, there is always a great deal of wringing of hands and

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sucking of teeth. They say, "Of course we would like to help you, but we are bound by the terms of the Crown Estate Act 1961." When one then asks them, "If I were to find legislative time, perhaps in the private Members' ballot, to introduce a proposal to reform the 1961 Act to give you more freedom, would you be prepared to accept that?", the answer is always a resounding "Well, definitely maybe." They have never yet given a commitment.

The first provision of the Act of which hon. Members should be aware is section 1(3), which provides:


The following subsection is interesting. It gives a power of direction to the Chancellor of Exchequer or the Secretary of State for Scotland, or a combination of the two. As far as I am aware, that power has never been exercised. That gives me cause for regret, because it appears to have been narrowly construed. It is a power that can be exercised having regard to subsection (3)—the general duty on the commissioners—but that having regard is not exclusive. There would be scope, if the Government had the political will, for a direction from the Chancellor of the Exchequer or the Secretary of State for Scotland, or the two combined, to use the power to alleviate some of the worst effects of Crown Estate policy.

The more significant point is that section 3(1) provides that the right of the Crown Estate Commissioners to


is subject only to


The Crown Estate's attitude to a number of issues is based on an unnecessarily narrow construction of that subsection.

For example, rents for salmon farms are set not, like a normal rent for land, as a cost per acre or per hectare but as a percentage of the turnover of the business. In my experience, that is pretty well unique. The Crown Estate will take about 0.8 per cent. of a salmon farm's turnover as a right. It is not exigible in profits, so it is a top-line cost of the business. That is the Crown Estate Commissioners' figure. The industry, particularly in my constituency, would argue that the figure is 1 per cent. or even higher. However, it is a complex formula and I am prepared to give the commissioners the benefit of the doubt.

We refer to it as a tax. I do not see what else we can regard it as. It borders on the disingenuous to call it a right. I do not understand why we consider it necessary to tax our own agriculture industry in that way. No other significant agricultural country—not Norway, Ireland, Canada or Chile—has anything even slightly similar. Scottish Quality Salmon estimates that that makes our salmon industry 15 per cent. less competitive than those of other European Union countries, and that figure was supported by EU research.

Scottish Quality Salmon is an industry body. It also estimates that 35 per cent. of the industry's profits are taken in Crown Estate rents. Why should an industry

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that already pays corporation tax and all the other taxes, and that provides jobs—some of which are very good—in some of the most economically fragile peripheral communities in this country, where such jobs are most needed, have to sustain such an extra burden? What do we get in return? The only return that I can see is that I, my Member of the Scottish Parliament colleague and a handful of councillors and industry representatives get one meal every year in the Shetland hotel, at which occasion the chief executive and a handful of commissioners come up and get roundly abused for the privilege of feeding us for the evening—although it remains to be seen whether that will continue now that the Scottish Parliament has outlawed blood sports.Why do the Government continue to allow the Crown Estate Commissioners to charge rent based on turnover? Does that place them in breach of their obligations under section 3(1) of the 1961 Act? The level of the tax and its destination are unacceptable.

If rent is to be charged for use of the seabed it should benefit the islander coastal communities concerned, and that should be something that they can set. That is a long-term goal. Of more immediate concern, I wish to know whether the Minister will use the power of direction given to the Chancellor of the Exchequer under the Act to ease the immediate crisis in our aquaculture business by allowing the 30 per cent. cut in rents that Scottish Quality Salmon and other industry bodies are seeking.

I turn to sub-sea cabling. The Minister may be aware that a project to lay a fibre optic cable between the Scottish mainland and Shetland is under consideration, although it is rather on the back burner. It would be in tune with an important Government policy on broadband to get that cable laid, and it might well be supported both financially and politically by the Scottish Executive, the Shetland Islands council charitable trust, the Shetland Islands council and the Orkney Islands council. However, if that is achieved, the Crown Estate Commission will charge no less than £64,000 a year in rent simply for the privilege of allowing that cable to lie on the seabed.

The same situation will transpire in the event that we are able to lay electricity cables to allow the export of electricity generated by tidal or wave power or wind power in the islands, which are uniquely well placed for the development of renewable energies. Island communities have welcomed such developments in a way that mainland communities further south have not.

Mr. Calum MacDonald (Western Isles): I support everything that the hon. Gentleman has said. On the central point of the importance of seeing the Crown Estate levy as a tax rather than a rent, does he agree that the sums that will be raised by the Crown Estate Commission for the development of renewable energy will be in the tens or hundreds of millions of pounds? To continue operating the system through the commission as rents will become more untenable as the years go by.

Mr. Carmichael : That is a well-made point. It highlights why it is necessary for a body such as the Crown Estate Commission to be constantly subject to review and reform. The powers were previously considered in 1961. Island communities have moved on a lot in those 42 years. Cabling is charged on a linear

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rate, not on turnover. I raised the point with the Sir Denys Henderson, the former First Crown Estate Commissioner and Chairman, who replied to me on 5 September 2001 and said:


I did not agree with Sir Denys on that matter. It seems patrician nonsense to suggest that the Crown Estate's rights supervene the Government's policy on the role of broadband. It is complacency of the worst sort. He also prayed in aid European Union competition law. We have within the treaty of Amsterdam the concept of peripherality, which allows the Government to make special provision for remote and island communities. That may be news to the Minister. I recommend that she read the treaty. It makes good reading for those of us who care about island communities. Why have we not taken that concept on board?

As for renewable energy and the development of offshore wind farms, I was told in an answer on 15 October 2001 at column 862W of Hansard that, in respect of the wind farm at Blyth, and no doubt others, the Crown Estate will be charging rent at 0.5 per cent. of turnover. Several questions spring to mind. The hon. Member for Western Isles made a good point. When the offshore wind farms are up and running, the take for the Crown Estate Commission will be enormous and disproportionate. Can the Minister explain why the figure is 0.5 per cent. for an offshore wind power station, but 0.8 per cent. for a salmon farm?

Most recently, the Crown Estate Commission announced that it has appointed management agents for the highlands and islands. We shall wait to see what difference that makes. My one worry is that it will put management one step yet further removed from the local community. I hope that the Minister can reassure me that that will not be the case and that the little accountability that we have through Parliament will not be lost or diminished.

If the Crown Estate was considering how to change its dealings with local coastal and island communities, it could have taken the opportunity to say to the communities that it wanted to make changes and was thinking about management agents. It could have asked whether the communities were interested in that, what they would expect from a management agent and how they would expect him to interact with them. The first that I heard about it was when a journalist from the Shetland Times telephoned me at Heathrow airport. That speaks volumes about how the Crown Estate Commission conducts its business.

I have spoken for 19 minutes, and I am anxious to leave time to heap scorn and derision on the Minister's efforts to justify the unjustifiable, so I shall conclude my remarks.

4.19 pm

The Financial Secretary to the Treasury (Ruth Kelly) : I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing this debate and enabling the House to throw some light on the activities of the Crown Estate. As the hon. Gentleman rightly

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said, the role of the Crown Estate is defined by statute under the Crown Estate Act 1961, which places a duty on the Crown Estate Commissioners to


That is an important consideration. The Crown Estate must comply with the requirements placed upon it by Parliament under the Crown Estate Act. That includes ensuring an acceptable return on its assets, while excluding any monopoly value. The revenue obtained from the estate cannot be used to provide hidden subsidies for either public or private purposes; nor can it be hypothecated or ring-fenced.

The management of the Crown Estate is a reserve function under the Scotland Act 1998. In discharging its management functions, the Crown Estate consults the Scottish Executive, Scottish Natural Heritage, the Scottish Environment Protection Agency, local authorities and other public bodies in Scotland. The land of the Crown Estate is held in right of the Crown, but all the revenue that it raises—£163 million in 2001–02—is passed directly to the Exchequer for the benefit of all United Kingdom taxpayers.

The portfolio is worth more than £4 billion; the Marine Estate provided net revenue of £30.6 million in 2001–02, of which £4.8 million came from Scottish marine holdings. About 40 per cent. of that came from fish farming. In this financial year, the figure will be significantly less as a result of the salmon farm rent review implemented with effect from 1 January 2003.

The Crown Estate must operate within the framework of law and regulation established by Parliament including, but not restricted to, the Crown Estate Act. It must not favour particular projects, but it must approach business in an open and even-handed manner. The Crown Estate has committed itself to the principles of commercialism, integrity and sound stewardship.

Mr. Carmichael : I know everything that the hon. Lady has said, but why will she not make changes to avoid the absurd situation in which the Crown Estate can stymie a project such as the fibre optic cable project that was so much in tune with Government policy?

Ruth Kelly : I will certainly come on to the issue of cables in due course, if I have time.

The role of a landowner requires the Crown Estate to manage the estate according to sound commercial principles, but also to understand and seek to work with the industries that use its assets to ensure that high standards of management and stewardship are followed. Aquaculture is a good example of how the Crown Estate has worked with the industry and has overseen an impressive growth in fish farms—more than 550 on Crown Estate foreshore and sea bed in Scotland. That development bears witness to the fact that Crown Estate charges are not repressing the industry.

In the remaining time left, I shall try to address some of the points that have been raised by the hon. Gentleman. The Crown Estate is landlord to more than 550 fish farms located on its foreshore and sea bed around the Scottish coast. It issues leases for fish farms,

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following a recommendation from the local authority subsequent to consultation with the Scottish Executive, the Scottish Environment Protection Agency, Scottish Natural Heritage and the general public. Royal Assent to the Water Environment and Water Services (Scotland) Bill, which has been debated on Third Reading in the Scottish Parliament, will probably mean that planning responsibility for fish farms will pass from the Crown Estate to local authorities, a fact that is welcomed by the Crown Estate.

The hon. Gentleman raised specifically the charge that approximates on an annual rental basis to about 0.8 per cent. of turnover. The rent for salmon farms was agreed in conjunction with the fish farming industry. It is based on production and it is linked to the annual average selling price rising or falling in step with the market. The formula is subject to five-yearly reviews, conducted in direct consultation with the industry. That seems an appropriate method of determining the charge that is levied.

Since 1987, the Crown Estate has invested about £2 million in research projects related to fish farming, which will help to improve environmental performance and to ensure the long-term future and sustainability of that important industry.

The hon. Gentleman mentioned the support given in the Shetlands to the North Atlantic Fisheries college, although I have heard that he is not particularly appreciative of that support. If one adds that support to the provision of a gas chromatograph, two student bursaries and the establishment and running costs of a Benthic survey unit, there is significant support for the industry. Elsewhere in the hon. Gentleman's constituency, another current meter has been provided to fish farmers on Orkney. Funding for further projects in the northern isles has been committed for the coming financial year.

The hon. Gentleman asks why the Crown Estate should have the power to determine how resources are used to support the industry and what sort of research should be supported. I point out to him that the Crown Estate is advised by a fish farming resources committee, on which environmental interests and business interests are represented. The best possible advice is therefore taken on how to use the money to best effect.

The hon. Gentleman also mentioned the power of direction over the Crown Estate, but I remind him that the power of direction can be used only with regard to the commissioner's duties. It is not such a wide-ranging power as he seems to envisage.

Mr. MacDonald : Does my hon. Friend accept that although the out-of-date system might have been tolerable from the Government's point of view in running what is effectively a tax on the relatively small salmon farming industry, when it comes to the huge potential of renewable energy the Government must consider reviewing how the money will be raised in the future and how they can manage it directly?

Ruth Kelly : In the remaining minutes, I shall try to address the points raised about cables and renewable energy. If I fail to address all the points, I shall perhaps write to hon. Members with additional information.

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The Crown Estate has an agreement with the United Kingdom Cable Protection Committee in respect of telecommunication cable systems that either transit UK waters or land at some point on the UK coast. The agreement relates to international systems and sets out fixed charges based on capacity agreed with the industry within the standard legal framework established in order to regulate the use of the sea bed. Annual revenue from telecom cables is £6 million. There are around 65 cable systems on the UK sea bed, and seven of those land in Scotland while three transit through Scottish waters.

The Crown Estate has been asked to provide information on the likely rental for such a length of cable, and the hon. Member for Orkney and Shetland quoted the figure of £64,000 per annum, which is consistent with charges for similar cables elsewhere. I look forward to reading the Amsterdam treaty after the debate to check out his point, on which I shall write to him, on peripherality. As I understand it, competition law requires the Crown Estate to treat all cable providers equally, but I shall look into his additional point.

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The Crown Estate is actively supporting the Government's initiative on renewable energies from marine sources, and in particular offshore wind farms. The first round of offshore wind farm development resulted in 18 sites being identified, which will potentially provide 1.5 GW of electricity to the national grid. The next round of tenders will provide even more electricity, resulting in a potential contribution of almost 50 per cent. of the UK Government's renewable energy target. It is clearly important that renewable energy is encouraged by the Crown Estate, which takes its responsibilities seriously. Recognising the benefits to local communities, there will be a substantial increase in funding for marine stewardship initiatives for the financial year 2003–04, primarily through a new community and renewables fund. That recognises the need to provide coastal communities with funding opportunities to benefit from the progress in offshore renewables development.

Mr. Deputy Speaker : Order. The debate is very important, but time is up.



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