 Felly gan cymorth, iawn, dyna'r newid y gwir mor erbyn i'w gwlad arbyn dyn nhw Ieil yma. Mae'n gwybod i'r gwnaeth ymylfaeth i'r newid agendaethau ar ddechrau'n mylfaeth vary— – ac mae'n gwybod i'r gwir eich cyfasydd yn ei wneud a'r newid yn y ether, curlch, i'r newid y mawr i'r gwyrdd— 14Indngwch, 14Indngwch, 14Indngwch, four, five, six, and six in private? Are we all agreed? Yes. We are agreed. On the second item on the agenda, the number seven is the Scottish Crown Estate Bill. We have joined by a panel of witnesses. Can I welcome Alex Kinerman entitled the RSPB, Councillor Normie MacDonaldListener and Andreas MacDonald from western isles, Audrey MacHiwe van Hollins on右 beat including te silk, Doctor Calum MacLeod from Clearland and Scotland and Andy Wells from the Crown Estate Scotland. Rwy'n meddwl, mae'r cwestiynau o'r cwestiynau, ac mae'r cwestiynau o'r cwestiynau, Stuart Stevenson. Thank you very much, convener. There probably is no better group, diversited, as it is, that I might ask my question to. The bill has a focus on good management. What makes a good manager? Oh, they're all dodging that one, convener. I'll make a start, given that it's one of the terms of the Crown of State Act 61, and it's obviously a subject for the committee to consider in relation to how that sort of transfers into the new bill. The term of good management in the act and how it's been interpreted today has been around a question of operating the business in such a way as to deliver growth in the business, deliver capital growth to the assets and to deliver revenue and turn that into account, but according to good management. That covers a wide range of different—how you do things in terms of how you operate, how you collaborate, how you work in partnership. It's also about how you take into account a wider range of benefits in relation to what you can deliver as a result of any particular transaction or a particular decision. Although the new bill specifies that that should be interpreted in more in terms of social and economic and environmental objectives as a more of a sustainable approach to management, that's something that the Crown of State historically has always interpreted good management to be. It's around making decisions that are in the best interests of a range of different considerations and one that clearly is backed against a commercial decision given the terms of the act but also takes account of wider considerations. Before moving to others, I hear from that that it's more than simply the measurable outcomes. It's also about the process by which the Crown of State Crown managers have to operate in the respect that they will give to those with whom they work. Is that my correctly hearing what's being said? I think that that would be a fair interpretation. Thank you very much, Mr Sears. I think that it's a really important question to start off with. There are various characteristics, I suppose, of dimensions that make up a good manager. One is around transparency of how you act, certainly, in terms of accountability as well in relation to your various stakeholders and in relation to serving the range of stakeholders that you're managing assets for. Having that process in place and meeting those sort of best value characteristics are very important, clearly, but it's actually very heartening as well, I think, in terms of thinking about what constitutes a good manager within the context of managing Crown of State assets that we now, in this bill, have a clear and ambiguous iteration of the fact that, as Andy just mentioned, we're not just thinking about managing assets in relation to their financial components. The focus on environmental and social aspects are clearly fundamentally important in terms of that, too. I think that a good management, as I would suggest in Cymru, would suggest, is very much around focusing on those broader considerations and ensuring rather how the assets themselves are managed in ways that tie into a wide array of public policy objectives, not least, of course, community empowerment and what that might mean in practice. Can I just go to Mr Kenneth Muth, in particular, given that the consultation had 79% of respondents saying that environmental consideration should be part of it? I take it that's something in which you would be particularly interested in the organisations that you represent. Yeah, absolutely, but as well as that, I would echo what you've just heard in terms of good management being around transparency and accountability to those wider public objectives, of which environment is obviously very key for Scotland. If you look at the 1961 act and how that's been interpreted, as Andy was covering there, it's been very much given the current estate commissioners that have taken that as a very narrow financial remit, albeit under the principles of good management, but it's always been up to the commissioners to define what they feel good management is. I think there's been a lot of progress in recent years towards defining good management in terms of environmental wellbeing and certainly looking at approaches on widening what value means in terms of value in terms of natural capital or the ecosystem services that you can get from natural assets. I think that what's encouraging in the bill and in response to that consultation question is actually widening out those duties on the manager to include other considerations and those wider benefits that were talked about. I think that, certainly, I can see the intention in the bill to bring those into play a lot more, but I'm concerned that section 7 on the duties of managers still retains that primary duty to maintain and enhance the financial value and the income generated from it, with additional outcomes seen as secondary or discretionary indeed. I think that there's certainly room for improvement in the bill to make it clearer that on the financial gain and getting good return from the assets, it's not necessarily in conflict with achieving those wider societal aims. Can I go to Councillor MacDonald? I think that you've got in your council area some significant areas of community on a ship store, as you used to be one of a range of them. Do those provide a model of the relationship between those who are stakeholders who live in the area and the duties of managers to good management? I think that the principles of good management, as we've heard previously, are very much about collaboration and consultation across all interested parties and communities, and then, hopefully, through consensus, if not agreement, to move forward and manage whatever assets you have in a sustainable way, both in terms of the community but also in terms of the environment, and that is very important. I think that the model of community land ownership, land-based, is a really good example of how that collaboration can work in a very positive way right across the Hebrides but also parts of mainland Scotland as well. I think that, along with community empowerment, it is going to drive this forward in a very positive way, but it has to be done in collaboration and it has to be done by consensus and it has to take account of the environment. As local government, we are very conscious of that in terms of the environment, and we have been involved with an international organisation for almost 30 years now in terms of the marine environment in particular, and that is through CHEMO, which is Communes Internationale Milorganisation, and ourselves and other coastal communities. We call ourselves CHEMO UK, but in reality we are CHEMO Scotland because it is the coastal communities around Scotland that are part of that, and we have been involved in some of the things that are now, in the past year, being seen as really important in terms of the marine environment, and that is through Blue Ocean and the Sky News efforts to take plastics out to the marine environment. We have been engaged in that, not because it is something that is going to transform our communities, but it is something that is going to prevent significant damage to our communities in the future if we do not manage that our marine assets, and that takes in the whole of the oceans as well in a sustainable way. However, the focus through the current state is much narrower than that, but I still believe that the community land experience is a very positive one. I think that there is nothing to fear in terms of the accountability that goes with that, both in terms of the community land owners and those who work with them. We work with community land owners in partnership, in some cases with the county state, for fairly major projects. There is nothing to fear from devolving that degree of control down to a local level, provided that it is managed in the way that we have already heard about. Well, let me finally come to the Highlands and Islands Enterprise. In relation to what others have said and what you might say, do you think that the bill as presently cast adequately describes the range of responsibilities that I have heard all witnesses so far articulate, and with which you might or might not agree? I think that the bill provides a good framework around management in terms of that strategic plan requirement and also in terms of management plans that would need to be put in place and ensuring that there is indeed the forward planning and there is the accountability and the reporting back on that. That is absolutely required from a governance point of view, whether you are managing a relatively modest-sized asset or a very large, complex asset. Just to add to what good management requires, it is essential to have the knowledge and expertise in that management outfit and again recognise the diverse portfolio of the Crown Estate Scotland asset and the range of expertise that is required to manage that is a key requirement. Good governance is absolutely essential. The one thing that I would just add is that it is about the whole-life asset management. It is looking at the management in the longer term and absolutely bringing in the wider considerations around social and environmental. It is a key part of that, not just immediate financial gain. You specifically said that there is a complex and varied environment in relation to the management skills. Given that the Crown Estate is comparatively small organisation, is that leading us to your saying that therefore you would expect the management to be delegated to experts in particular areas in some circumstances without necessarily relieving the Crown Estate of responsibility? I think that the expertise that is required, particularly for the offshore environment, and that is where I am more familiar with my energy hat on, it is a very complex environment to operate in. It not necessarily needs lots of individuals, but it needs very knowledgeable individuals. It is not necessarily about numbers of individuals or teams or resources, but it is about a strong understanding of the complexity of the environment and the due process that needs to be gone through. That is absolutely possible at a very local level, but the expertise at a national level is required in terms of the industry that they are engaging with and the learning that the industry is still relatively in its infancy, if I am talking about offshore renewables in particular. That expertise cannot be quite close and modest in size, but it needs to be very well developed. It is a case of horses for courses in terms of more modest assets. We absolutely in the Highlands and Islands have been very much advocating community ownership and community management for a number of years and very much working with partners in building capacity and capability in communities to absolutely very well manage local assets and realise the wider benefits from doing so. Supplementary to that, Highlands and Islands Enterprise has highlighted the potential for conflict when it comes to aquaculture, if local authorities are both the awarder of planning permission and a receiver of revenues. Do you think that there is potential conflict of interest that is wider than just aquaculture? How do you propose that that could be mitigated? I guess that in our response we did to highlight that there is indeed this potential for conflict with landlord, then also consenting. However, I do acknowledge that already that is the case in local authorities where they may own the land and then also consent for new housing development. So, I think that it is just to highlight the conflict potential there, but to ensure in any structures that there is clear remits and responsibilities and transparency around process. I think that what I would also acknowledge is that from early stage of leasing for the offshore energy market, going back to round 3 Scottish Territorial Waters and Pentland Firth and Orkney Waters leasing back in 2008 and 2009, leasing activity in particular may have been slightly ahead of the planning process because the marine spatial planning process had not been completed. There is a lot of learning at that time and I see much greater integration between what we are looking at in terms of spatial planning and resource planning at a national level and then aligning future leasing activity to that. That then can facilitate a more successful planning outcome and that is having different organisations taking that forward. So, again, I think that it is about scale and it is about in certain circumstances it will be absolutely fine to have both roles but in others it may be need that degree of separation. Yeah, I mean just something that we've raised in our submission as well and I see across a number of submissions this is highlighted. I don't think it's insurmountable but care needs to be taken around it and, as Audrey McIver has stated, it is something that a number of organisations, not least local authorities, deal with on a day-to-day basis. They're very well equipped to do so. I think that what's essential is that its care is taken to ensure adequate internal separation of decision making. Those two functions of landlord and regulator are two very different roles and it's very important that there's sort of clear separation between those two functions within an organisation. In the not-too-distant past, current estate was the regulator for fish farming and that situation was untenable at that time and it's changed. It's a useful recent example of where it's perhaps been something that's been decided and needed to change but there's no reason why it couldn't happen in the future but what's really important is that internal separation of decision making. The conflict of interest with ports and harbors. We've seen a lot of controversy over ship ship oil transfers, ports and harbors' statutory responsibilities to the environment but also the commercial opportunities that that would present. Exactly and I think they have to tackle those kind of dual roles in that sense as well and I think that there's certainly lessons can be learned from and that's one example. There's certainly the risk there. I think that you need to really establish how successful they discharge both of those duties and learn from it going forward. I think that there is a great deal of separation and if you go back to historically with attorney state, the first thing that local authorities knew about consent and at least having been given was when we had the planning application for the onshore facilities associated with that and had no say whatsoever in whether it was appropriate to have granted the lease in the first place and that's one of the key drivers for the campaign that's been worked on for many years to get more local control of the county state and the UK Government have recognised that in devolving that to the Scottish Parliament and what we're seeking is that that is devolved further into into local communities because that is where a lot of the expertise and the understanding of the impact of the marine environment is but coming back to the conflict of interest there is undoubtedly situations arising every day in local government where that conflict of interest has to be dealt with and the important thing is that it's recognised as a conflict of interest at the earliest possible point and then you create the separation in terms of the decision making process and that's what ultimately will end up with the right decision being taken. Local government is very well regulated in terms of its ability to do that and it is something that local government is quite accustomed to and we are also in local government we are harbored authorities as well as working with harbored trusts and others and you couldn't find a better example than in Sulunvo and in Scatbufflo in Orkney and Shetland where they very ably manage that facility which is of great benefit to the whole of the UK. Given the topical and contentious nature of aquaculture consenting do you not feel there's an additional perhaps perception of a conflict of interest there that you may have to take account of? Again I'm not sure that that is a conflict of interest I think there is an interest there as local authorities we have a real interest in in the continued existence of aquaculture particularly in our coastal communities and we ourselves as a local authority have entered into voluntary management agreements with the aquaculture industry in terms of in terms of the amount of biomass that they put into a particular site and that is in relation to what kind of site it is whether there is a constant flow of water effectively flushing out the area and we have entered into voluntary management agreements with aquaculture industry on that and I see no issue whatsoever with extending that beyond that to make sure that conflicts arise between the aquaculture industry and other industries that use the marine environment to come together and have a consensus as to how to make the best out of the sustainable resource that is there. To clarify a point of process in relation to this because Crown Estate, Crown Estate Scotland would not normally grant a straightforward lease it would grant an option to lease prior to a developer or an aquaculture industry going through a planning process so we would only grant the lease once all regulatory conditions had been met. Thank you. Just to say that there's actually a broader issue that touches very clearly on the question that you asked there Ms Forbes in relation to the connection or otherwise and fit or otherwise between asset management and community empowerment and planning processes there's a planning bill as very well aware going through the Parliament at the moment and there's something about disconnect potentially there in relation to where communities sit with regard to having their voices heard in that regard. So I think how you connect community empowerment and how communities interact in terms of asset management and the broader kind of planning process an important aspect in terms of how you connect make these sort of connections in that context certainly. Okay, thank you. Richard Lyle. Good morning. To follow up Stuart Stavison's question and that's what Alex Kinmouth touched on it slightly. The bill sets out that the managers of assets must maintain and seek to enhance enhance the value of assets and income arising but may do so in a way which contributes to a wider objective including economic development, regeneration, social wellbeing etc. Could the value of assets be interpreted in any other way than purely financial? For example could it be interpreted in terms of the non-monitory value it provides or could it be such as an ecosystem or a recreational health value? The short answer is yes. I touched on it earlier and it seems to me clear from the evidence that the committee has received from the bill team so far that the bill as drafted does interpret those terms of value and the income derived as in financial terms but I think we and I know and perhaps Andy Wells from Crown of States Scotland could touch on that from his experience but there has been in recent years a big move not just in Scotland but globally at looking at value in terms of natural capital and the value that you can receive from natural heritage assets in terms of values to society around ecosystem services, clean water, clean air provisioning of food and pollination as just a few examples. I know that the Crown of States Scotland has been an early adopter of the natural capital protocol and have been piloting approaches on its rural estates in terms of looking at how to use the provision of ecosystem services in the decision making about how they manage the land. I think that that is absolutely crucial going forward. I would look at the bill and say does the bill as drafted allow for that kind of innovation to happen and continue and I would hope that it does but I think that there needs to be some clarity about really how value is to be interpreted under this bill and how it works with those wider societal objectives and towards delivering broader national outcomes, which are far wider than having a strong economy, which of course is underpinned by the environment, essentially. Anyone else? Andy Willson? I would say absolutely that, again, creating value in a wide variety of ways as well as financial value is something that a sustainable long-term business, like Crown of States Scotland, should be aspiring to. The bill creates real opportunities for any future manager, Crown of States Scotland or other managers, to look at how they can enhance value in a wide range of different areas, not just in terms of natural capital but also in terms of social capital. We view driving economic benefits alongside social and environmental benefits as part of operating a sustainable business. They go very much hand in glove in terms of Crown of States assets in Scotland. Large numbers of them are in remote rural communities. We need sustainable, viable businesses operating in those areas. We need those communities themselves to be prosperous and we need the environment to support those businesses. It is very much in the long-term interest of any manager, any business, to seek to enhance that value. At the Townsend Islands Enterprise, we have a relatively unique remit in terms of economic and social development. We welcome the move in the bill to look at value, not just in a monetary financial sense but wider aspects in terms of regeneration, environmental and social. In the bill, what we were picking up was that it must enhance the value and may take into consideration those other factors. It was just to understand whether there is a hierarchy there or whether all those factors were taken into account. We wanted to alert the committee on the financial imperatives to become the driver as opposed to the wider benefits. Sometimes those can be at odds. It could be about driving towards maximising the value through new house building and getting the building up as quickly as possible, as opposed to thinking a longer term around the more energy efficiency house building and other social developments that could support that community, which might take a bit more capital investment and not necessarily be the heart of what the current manager is driving. It was just through the bill to ensure that management going forward is not seen as secondary in terms of those wider aspects. We think that that is absolutely integral to the overall asset value. It is really important that the bill and the subsequent management of the assets think about value in ways that go beyond simply thinking about the financial value of the asset itself. That is very much tied into some of the aspects that colleagues have mentioned already around the table. Mr Sieven started the session asking about what makes a good manager. Thinking about value and management of assets needs to think more widely than simply the financial and commercial aspects of the asset itself. If you want the management of those assets to contribute to the ways in which communities are empowered to show value—which is not necessarily easy to do in practice in terms of measurable aspects but can show value in a kind of quality way in some respects with regard to the kind of community confidence that that gives, the way that social cohesion is increased within communities, the way in which they have more control in terms of how they are actually shaping their own natural and social environments and ways that can actually be done at the grassroots level, at community level itself. There is real profound value in terms of those processes and what that means for communities in a kind of qualitative way than is the focus of pure, naked financial valuation of the asset itself. That is really important in terms of thinking about the cohesion of communities and the way in which managing and, indeed, in some aspects, owning those assets makes a real contribution to those committees themselves and more broadly in Scotland. Let us not forget, of course, that there is a national performance framework that is being reviewed imminently. Although the focus is on sustainable economic growth as its purpose, there is also a welcome addition, frankly, of wellbeing as well. That is a rather amorphous concept, but it is a very important concept in terms of thinking about how our society functions and how our communities function as well. Having that broader conceptualisation of value in the bill not as a hierarchy but as something that has a more level playing field has to be a really important dimension of contributing to that national purpose. Briefly, on Norman MacDonald. There is no doubt that the socio-economic aspect of any transfer of any asset has to be part of the equation. Otherwise, it just won't work. I think that that is already happening, where land for housing is made available when local authorities are divesting themselves of some of those assets. However, that has to be subject to a rigorous business case, so that what you are actually transferring is an asset and not a liability. That would apply equally to county-state assets as well. It will be an asset both financially but also socio-economically. That is an absolutely vital part of the equation. I will come down to £8. I think that most of my further questions have been answered. Claudia Beamish Thank you, convener. Good morning to all. I would like to just pin this down possibly as a final question on this unless other members want to come in. You have all helped with a very wide discussion of these issues in relation to financial gain, sustainable development and a whole range of other issues in community empowerment. What I would like to know is that I want to highlight something first of all before I ask the question that Professor Andrew Ross and Colin Reed highlighted, and they stated in their written submission that section 71 of the bill has a focus on neurofinancial gain. That is the end of the quote and they also stated that it may or may not be in the public interest. I would really like to know your view on whether section 7 of the bill should highlight that beyond the financial aspects, which the managers of assets must maintain and seek to enhance, whether the word may is enough for the other issues that we have been discussing or whether we should see must. If you just want to give a one-word answer, that is great, but if you want to qualify it, then fine. I will have to answer that. I think that very simply achievement of sustainable development should be a requirement. I think that the submission that you have quoted is a very helpful submission that is worthy of serious consideration by the committee. It must be a requirement. It must be because sustainable development is one of those slippery terms that gets used in such a wide range of ways and becomes everything to everybody and nothing to nobody. That should be the overarching framework for this, so all that feeds into that. Very briefly, John Scott. I just want to toss out the idea that with the widening of duties of managers with different responsibilities being given to other bodies such as local authorities or communities, will that not dilute—all of that will come at some kind of cost? Will that not dilute the ability of the Crown Estate ultimately to yield revenues to the Scottish Government? Is there a balance to be struck in there somewhere? I see us charging down one road very much. The local authorities very much want to have the benefits of the hazard to Crown Estate assets. Will that not ultimately lead to disintegration and fragmentation of the Crown Estate? I guess that it is potentially to dilute the ability of the Crown Estate to cross-subsidise the likes of the agriculture estates. Or to work efficiently. Do you only want to come in on that? Right, not on that one. I don't think that that necessarily has to happen. If an organisation is taking responsibility for the management of an asset, it should also be able to accrue some of the revenues. In all of the discussions so far, we have been talking about the net revenues from the Crown Estate being transferred to support the management of that asset in a sustainable way going forward. However, I do think that Crown Estate Scotland will still have to retain the responsibility, particularly for the estate that is land-based in particular, but not exclusively. It will still need to retain some kind of control over that. We welcome some of the recommendations coming through from Crown Estate Scotland and the way that they are already changing from the historical position. I do not see that as a threat to the dilution of the Crown Estate. I think that it actually strengthens the Crown Estate in terms of the work that it will be doing. There is again a consensus on how to move forward in relation to the transfer of assets and the revenues that go along with that. Andy Wills, on that point, and Claudia Beamish's original question. Yes, I will go into Claudia's question. There may or there must be a different way in certain transactions where you may want to take a more commercial view. Having a must in there in terms of taking a wider perspective may cause some challenge to a decision, which could potentially become a judicial challenge to a decision that may have an impact on the business. I would urge consideration of that fact. That could be a legal challenge on anything in any bill, but why would it be the case that there would be a legal challenge if there is a must about the other aspects as well? That is the new devolved settlement for the Crown Estate, so I do not understand why you are saying that. I am just in terms of some of the decisions that you may be making in relation to investments or something, whether it is possible. I am not a legal expert, so I could not comment and understand why one way is interpreted differently than the other. I am not suggesting that it is either one way or the other. I think that there is a possible consideration there. Perhaps an example of consenting offshore wind farms would be one? That might be one. Surely that must take into consideration ways that contribute to wider objectives. I am reading that out, including economic development, regeneration, social wellbeing, environmental wellbeing and sustainable development. I cannot see what conflict could be there if we are going forward to a Scotland that works in a way that works for sustainable development for the people of Scotland. I do not understand that. I do not disagree with that. As I said, I do not see it just may be a consideration. That is all. John Scott's point. John Scott's point. I can remind me that that was on— On the essence of all this devolution of responsibility and income to other bodies, what will be left for the Crown Estates to actually do and will there be a body essentially left because it will lead to disintegration and fragmentation, given all of this devolution and accountability to other bodies and responsibilities, etc. Communities, etc. Again, much will depend on the scale and nature of the assets that are under devolved management and the needs of those assets. The way that we currently work at the moment as a national body, managing the estate as a whole, particularly in terms of how investments are made, are such that we raise capital for reinvestment from within the whole portfolio. We may be selling off assets in one part of the estate to fund investments in another part of the estate. Any local manager will have less scope to do that, although there is obviously the scope within the bill for a national framework and there is scope within the bill for ministers to direct one part of the estate to fund another. It could be workable. I think that the issue could potentially be in relation to some of the opportunities that there may be to cross-subsidise across the estate. I have got a lot of people wanting to get in. Can I ask people to be concise on their contributions? Carlham, I am a cloud follow-up by Alec and Inmouth. One perspective on the bill is that it might dilute the role of the Crown Estate, another perspective, which I think that community land Scotland will advocate, is that the concentration of attention on devolution is a good thing in the sense that it adds to the democratic process with regard to how organisations and communities are involved in managing assets, which is useful and adds value in the ways that we have already outlined. It is just really a supplementary on Claudia Beamish's original question. There is a duty on ministers in other legislation for sustainable development, not least the Marine Act, where there is a general duty on ministers to act in the best way calculated to further the achievement of sustainable development, including the protection and where appropriate enhancement of the health of the Scottish marine area. Climate Change Act also has a very similar duty on ministers to contribute to the achievement of sustainable development. The land use strategy, which comes out of that act, must also contribute towards sustainable development. It is a very well-used term in Scottish legislation. It comes down to the principle that national assets should be managed for wider public benefit and that primacy should be given to managing for intergenerational equity. The framework for sustainable development allows that to happen quite well. From an offshore energy perspective and from an industry view, ease of doing business is absolutely critical, which is a very complex and, as I said earlier, a relatively young industry. Those industry players are looking globally at opportunities, so from our perspective and trying to derive economic value from supply chain development in the offshore energy sector, an approach to leasing at a national level, we believe, must be maintained, not further fragmented. I just wanted to respond very briefly with Mr Wells only, I suspect, at the May versus must issue. If you have must, then every single decision must, etc. Whereas there will be decisions, I imagine, that are essentially neutral, where a decision has been made in the past, it has to be revisited and you might properly conclude that you would make no change, but that is a decision. If it is May, then you can make that decision without opening up a particular hook for legal challenge, but if it is a must, every single decision, even deciding whether you move from 80gsm paper in the corporate printers to 70gsm papers to set paper, could be open to challenge. Is that a fair characterisation? In other words, one needs to look at every specific instance of May and must to see what the specific effects are, and one must be extremely careful in legal drafting terms. You expressed that far more eloquently than I did. Alex Rowley. As we said earlier, the submission for Professor Rossan Reid has suggested that the bill be amended to include a mandatory requirement for sustainable development to be taken into account. As somebody has said, about 10 per cent of the arcs of the Scottish Parliament contain sustainable development provision, even though there is no legal definition of sustainable development. Should sustainable development be defined in statute and should consideration of environmental, social and economic wellbeing, as well as regeneration, be required as subsets of sustainable development? I think that that is absolutely right, that that is the case. If you must take sustainable development into account, then clearly sustainable development is about socio-economic issues, it is about wellbeing, it is about all of those issues. The reality is that that is something that ministers have to do in any event. I do not think that if you take it into account, that does not mean that it has to be a huge piece of work to do that, but it is something that must be considered before the final decision is taken. That happens right across the spectrum. If you have to take it into account, you have to do that. If it is just made, then you can choose not to do it, whether it is socio-economic benefits or sustainable development benefits or not. Angus MacDonald. Okay, thanks, convener. With regard to national or local management, which has already been touched on, we know that the Smith commission recommended that the responsibility for the management of those assets will be further devolved to local authority areas in the northern and western Isles. Now, Orkney Islands Council said that, while the bill's provisions in respect of management are deemed workable, they are not considered appropriate, if one read alongside the Smith commission. Corinnell and Scheer indicated that the bill should have devolved powers to islands councils rather than setting out a methodology to enable devolution and specifically considered the case for devolution of lease management offshore wind out to 12 nautical miles. For aquaculture, however, I suggested that national management of wave and tidal in offshore wind, as we have heard again today, is the preferred option of project developers and will assist in achieving the potential of offshore renewables. It also suggested that it would make it simpler for industry engagement. In the panel's view, does the bill deliver the Smith commission recommendations? If not, what would be required, either through a change in the bill or other action? We clearly believe that infrastructure, whether that be offshore renewables or aquaculture within 12 nautical miles, is something that we and our communities would want some control of, because the reality is that it will be developments within 12 nautical miles that are most likely to have an impact on the land-based infrastructure, whether that be our shoreline. We see that from time to time due to adverse weather. I do not want to focus on aquaculture, but in relation to cages breaking up, that has to be dealt with. I think that there has to be some kind of control of those assets, whether they be offshore renewables or aquaculture or other industries that we currently are not all that clear about. We would want to have some control of that, and the communities have a significant say as to whether that development should go ahead or not, because they are the ones who are going to be most affected by it. What about the national interest? I think that the national interest is something that can be part of that equation. Clearly, even in terms of onshore wind developments, local authorities are not the planning authority, it is the Government, but as local authorities, we treat every application onshore as if we were the determining authority and make our submissions to the Government on that basis, and that is taken into account by that. However, we clearly, as a local authority, have a significant say in the development, and we carry out the wider consultation within the community. That is what enables Government to make the ultimate decision. It is important to have that local control up to the 12 nautical mile limit. With respect to probably the two positions that we have held on this issue, we are fairly predictable, given where you are coming from. That is quite understandable. What about the other panellists on this issue? What view would you articulate on that subject? From a community-land Scotland perspective, we are clearly going to be in favour of mechanisms that are going to ensure that power of managing those assets is devolved as far as possible in relation to the levels of governance and levels of management. Broadly welcome the provisions that are contained in the bill in that respect. It is important that, as Norma has mentioned, there are opportunities for local communities to have an influence and a say in managing and shaping how those assets are going to be used. Within the broader context of national interest considerations, it is critically important that that happens. It is made to happen within the legislative provisions that exist. You will have seen from our evidence submission that we have some other wider provisions in relation to aspects of how that might be managed with regard to foreshore elements. It has been mentioned in other evidence sessions about the ownership or otherwise of aspects of the seabed. Bringing it into local consideration is paramount from our perspective. On the question of transfer to the local level versus retaining at the national or geographic or functional basis, we are essentially neutral on that topic. The key consideration for us is whether the transferee has sufficient capability to discharge the duties and liabilities that come with that role. Is it subject to appropriate scrutiny? I think that that is really key. What is proposed in the bill as a case-by-case approach seems to me to be appropriate, again subject to sufficient transparency and scrutiny around the ministerial decisions around that. In terms of development in the marine environment, we are often talking about very two different roles here. The one aspect that the bill deals with is around the leasing of the seabed. Of course, you have a parallel regulatory process about the licensing of what can happen on the seabed. Those two things are very different issues, and they can get sometimes mixed up in discussion. It is worth noting that the marine act of 2010 often gets lost in the community empowerment discussion, but it is very much aimed at community empowerment in that planning and decision making in coastal waters was to be developed through regional marine plans developed by marine planning partnerships. We are a number of years down the line from the national marine plan being published in 2015, and we sit and we don't have a single regional marine plan adopted in Scotland. Before we start talking about transfer of assets in terms of leasing, we really need to commit to establishing regional marine plans around Scotland's coastline so that we get the order of things right. What do we want? What do we aim to achieve from the use and development of that activity in our marine environment and then think about leasing and getting financial benefit from that? I don't think that things can happen in the reverse order. Claudia Beamish Right. Thank you, Gavina, and indeed briefly. Can I ask specifically of your self-calamate, Donald, about your submission in relation to this whole question that we've been exploring. Community Land Scotland, in its written submission, highlights where you suggest that the ownership of land is a key driver for sustainable development. I'm wondering how that fits with how you would see the bill or does indeed the bill give opportunities for that in relation to the Crown Estate. I do, of course, understand that if something is sold then there has to be a quid pro quo or whatever in terms of assets that cannot sell off the Crown Estate. It does go back to what Councillor Norman MacDonald was highlighting about the importance of community ownership. I would stress, as a South Scotland regional member, not just in the Highlands. Thank you very much for that question. It's a really, really important question. It actually gets to the nub of a critical issue in relation to the relationship between ownership of assets, whether they're land and other assets, and the management of assets. You will get two different views on that. You will get one view that suggests that it doesn't really matter who owns the asset. It's how it's managed that counts. It's the use of the asset. Clearly, that's very important, and that is not at all to dismiss that perspective. However, ownership is a critical element in many instances with regard to how the asset is used as well and managed. Having that relationship and recognising the relationship between land and or other asset ownership and the use of that ownership is critical in terms of the influence between the two of them. If I understand the nubbier question correctly, you're asking about the importance of ownership as a driver for sustainable development within that. In particular, in relation to the bill, is that what we're taking? Yes, in terms of that. We would argue that ownership, where that's appropriate on a case-by-case basis, but certainly when there's a pre-emptive right as well with regard to, for example, foreshore rights, is critical with regard to that. In enabling communities to have ownership of particular assets, that allows them the autonomy, the democratic process when they're community land owners, to shape how those assets are used in practice. That's critically important in the context of how those communities bluntly thrive, survive and prosper in many cases when you have quite fragile communities. That's important when we're thinking about this broader question about what is the crowning state going to get fragmented and what's going to be the purpose of the crowning state in terms of this bill. That's not even a price that has to be paid, because it's something that's really important to follow through. Enabling communities' inappropriate circumstances to own crowning state assets is something that will add value in various different ways to how those communities make themselves sustainable. I added a comment in relation to that when we talked about the legal challenges to sustainable development issues. If we're not addressing any of those assets and how they're managed on sustainable development grounds, what are we actually measuring them on, fundamentally? Finlay Carson. Good morning. I suggested that there was scope for the rural estates to be managed by the community where there's an aspiration, a viable management planning capacity to deliver. So if the rural estates could be managed by communities, what is the case for this within the objectives of the Smith commission and the bill that we've got and also in relation to tenants? We've already heard that there's no appetite from the tenants, the current tenants, for a change in the status quo and no desire for them to become a community group to manage their own estates. Can you give us a response on that basis? Absolutely. The point around aspiration is really key. It's about where there is indeed community aspiration and that's where HIEs and organisations would seek with partners to support and enable communities to see that through. The current consultation around pilots indeed I think will highlight where there is appetite or otherwise and I think that we'll need to pay due attention to that. I think that in our response the context was we do see perhaps opportunities in particular local communities where subsets of the estate could be taken under community management and to derive all the benefits that we've already witnessed in other parts of the region. Again, the distinction was in that context, yes, in the offshore context we still believe that a very national strategic approach is required. What sort of subsets do you have in mind? In terms of communities where it could be in the context of small harbours or moorings, it could be in the context of access to land and managing that land from a tourism benefit in terms of recreational facilities and that the community involvement in that and the management of that might derive wider indirect benefits than just managed more remotely or at a more national level. Rural estates, you suggested that communities could manage rural estates. Is there a potential for conflict where the tenants, current tenants, have no desire to be managed by a community? How would that be resolved? How would you get around that issue? A ton of the question suggests that tenants are separate from the community in terms of the estate. I don't think that they are, and I'm sure that that's not the intention with regard to that. What's really important, not to the site of, I think, in relation to whether a community would or would not take over the management or ownership of a rural estate is something that, in terms of the appetite for that, but more importantly, the will of the broad community, of whom the tenants are an equal and legitimate part of that broader community in relation to whether they want to take on the management process or, indeed, the ownership process itself. Clearly, as this committee knows better than most, there are legal elements in terms of community right to buy, but there is a broader principle and issue as well. If we want to take that on as an asset in terms of its management or, particularly, in terms of its ownership, why do we want to do that? What are the collective benefits that are achieved in relation to that that might not otherwise be achieved? We've seen throughout the Highlands and Islands, not quite enough in the south of Scotland, but that's coming too, and certainly we've seen in the western Isles, where largest states have been taken over by communities and have actually been revitalised by community ownership across the economic, financial, environmental and social aspects. The kind of concept that communities are too small or don't have enough capacity or are unable to take on those types of roles is, frankly, a misnomer and it's misguided in relation to that, but not to lose sight of your question, which is a central point you make, is how do we work at that dynamic? I think that the processes are there to enable that to happen where there's a will or otherwise to make happen. In addition to resistance, as Finlay Carson has touched on from tenants to this, would it not be the case that, when a community looked at a rural estate and looked at the liabilities around some of the tenant farms, the backlogger appears or whatever, they would just shy away from that in reality? That can be the case, of course, and I'm wearing a community land Scotland hat today in terms of this, but my other hat is in relation to, for what I'm going to say, consultant on sustainable development issues with communities and part of that process is around how you manage and think about liabilities in potential assets that you might want to manage your own in relation to that. However, if we're talking about the public interest and the common good with regard to the sustainable development of communities and the sustainable management of assets, there's some really important questions to be addressed as well with regard to how we actually manage liabilities. I noted when I was going through the previous evidence session that there was some discussion with Scottish Government officials of regard to the liability element there and how that might be managed. I think that there's something potentially imaginative or at least progressive to be done with regard to that, which might help communities engage with asset management in ways that contribute to their sustainability, but also add to the broader common good and public good. Normally, don't. I think that the reality is that if there is no appetite in a community, whether there be tenants or not, and even if there is an appetite and they start looking at the business case for it and it turns out to be a liability rather than an asset, it just won't happen. As Callum said, although many parts of the Outer Hebrides are under community ownership, there are significant pockets that are not for that very reason. There is no imperative there, there is no forcing on that. It is entirely at the community or whatever community that is. It's at their doorstep, as it were. John Scott, briefly. I would like to ask if there would be the capacity or, indeed, the expertise within local communities to manage the land portfolio of the Crown States. For my part, I'm not certain that there would be, but I'm interested to hear where you think that would lie. Callum McLeod. It will depend clearly in relation to the particular context of the estate itself and whether the community is in a position to do that, but that is not to dismiss very large, as I've alluded to already, very large-skill examples of communities that have taken on very large estates and have managed them very successfully. I mean, Storys Vecis is a classic example of that with regard to a community landowner, which is now involved in multi-partnership, multi-million-pound regeneration schemes with regard to that asset itself and what it's doing. So, whether a community would wish to take on the management of one of the Crown States estates is something that would have to be determined in terms of what their will for that is and also their capacity with regard to that. To suggest that that's not feasible, I think, would be to dismiss the potential of the capacity and roles and expertise that committees may have in order to enable that to happen. It will vary for different contexts clearly, but I wouldn't rule that out as a principle to think about, certainly. In the context of managing the assets as they stand, either as a whole portfolio or as part of a fragmented management structure where you potentially have different managers operating different parts of the real estate, there are clearly some challenges in there in terms of how certainly capital investment would be accounted for, and I've alluded previously to the fact that we often have to sell property in one estate to invest in another. There are a number of overall liabilities that are associated with management of certain properties that aren't attached to another that we have to plan for and manage. Any form of—it's not to say that it has been clearly said that it can't be done, but there would be some potentially practical issues in terms of how that on-going investment would be continued. Can I take the opportunity to answer a couple of questions? I didn't get a chance to. If you could brief with. Just in relation to the sale of assets, under the terms of the bill, any manager is able to sell and buy assets. The key thing is that the capital that is derived from those assets is reinvested in land and property, which is in the terms of the act, so that's something that could happen just of sale of foreshore or is happening in certain circumstances in terms of asset sales to communities. Going back to the strategic national infrastructure, clearly there is a case for particularly offshore wind and marine environment cables and pipelines for ministers to continue to wish a strategic approach, but I would also highlight, not just in terms of that asset but also the real estate that the views of tenants is absolutely critical. We operate in a business environment and we have strong relationships working with future business tenants in terms of unlocking potential and the importance of the views of tenants should not be underestimated. One of the arguments for community land ownership is that it is responsive to communities' needs and helps to shape them. Just from the previous evidence sessions, it doesn't sound as if it's all milk and honey necessarily even with the crowning state at the moment. I was very interested to hear what Mr Brian Shaw had to say from the apple girthy state where he said, there are many underlying problems about which tenants are honestly frightened to go to the crowning state. There are some houses that need a lot of work. There are some capacity issues there and some issues around resolving the social conditions perhaps in which maybe tenant farmers and other folk are in those estates. One of the reasons that the Ulva buyout has been successful in getting approval from the Government is that there is a real agenda there and a business plan around refurbishing and renewing that island in terms of its housing and by that it is a social fabric. There is no way that it is appropriate, I would suggest, to dismiss the potential of communities to replicate that type of process elsewhere. To your point, then, if the amount of money that was available to these communities was also available to the crowning states to carry out these social purposes, absolutely admirable and necessary, then they too would have the ability to carry them out. Would they not, in terms of refurbishing, how is it? They would potentially have the ability to carry them out. If they made those management decisions to do that, what they would find at a community level is their actual commitment to do that. That is clearly there. In the process, from the grass roots and the community level itself, enabling the communities to make the decisions with regard to that, which, certainly from a community land Scotland perspective, is not an invaluable thing to do. Very briefly, given that the well-performing rural estate in some way subsidises a less well-performing estate, if a community was to look at the economic viability of a good part of the estate, would the recognition need to be given to the impact of the fragmentation of the good bit on the less sustainable parts of the estate? That would have to be recognised as the whole portfolio, so actually fragmenting the viable parts of the estate that could be devolved down to communities. What would impact that would be on the less valuable parts of the rural estate? I can measure the decision in terms of what the actual value is across the different elements that we will be discussing already with regard to the transfer of ownership in that context. Whether there are community benefits, economic and social environmental benefits associated with ownership from one aspect of the estate or several, which, on balance, would create a public interest argument to do that, basically. I am not suggesting for one second that it is a straightforward process. All I am suggesting is that it would be a missed opportunity to dismiss that as a principle to actually be incorporated. On that note, we will move on to Donald Cameron. Can I refer to my register of interests as a landowner in the Highlands? I would like to ask about pilot projects. The various island authorities that I have spoken to have shown a real enthusiasm for pilot projects, and they are very keen, putting it frankly, to get on with it and have been for quite some time. Is the panel satisfied that sufficient progress has been made in respect of pilot projects? From our point of view, the three island authorities are very clear about wishing to progress with that. The consultation on the pilot process has only just concluded, and that will take some time before we get the submissions that have gone in in relation to that. However, we certainly see our real importance in taking forward pilot projects. From the discussions that we have had with our colleagues in Orting-Shetland, their pilot projects will be different from the ones that we have. We are quite well cited on what we want our pilot project to be about. It is about the Crown Estate assets. It is about the Crown Estate assets out to the 12 nautical mile, and it is about working with the capacity that the community can bear. We have really clear evidence of that, as Calum has already said, through community land ownership. Community land ownership in principle is not a great deal different to ownership of the marine assets that already contribute a significant amount to those communities. It is about giving local management and local control and local revenues that can be used to be reinvested in making facilities that enable that to go further. I think that we would see our pilot projects, hopefully, as a starter for TIN, in that we can demonstrate through the pilot project that there is the capacity, there is the wish to do it and the safeguards are in place in terms of how the process is taken forward in our regulatory framework, but also more importantly in terms of local management. I think that is where the biggest gains will come from in relation to the Crown Estate. Anyone else on the panel? The progress. Clearly, it is something that the Crown Estate Scotland and the Board have been very keen to pursue. We have got to bear in mind that we are only a year old. We have had a huge focus this year on getting the business up and running, following the transfer from the Crown Estate. Immediate financial cash flow difficulties were a huge priority. We have got to get a corporate plan in place, which has been done. The board has got to settle in and understand the assets. As soon as it is practicable, the drive to deliver the pilot programme has been taken forward. The board has been visiting as staff. There are many councils to understand their aspirations, and the consultation process, as has been said, has just been completed. There is an expectation that, following that, the first pilot's applications could come through in June later this year. It is a two-stage process. Following the responses from the consultations, we hope to refine that and get that up and running as soon as possible. Retention of net revenues by asset managers and the reinvestment into the asset. We have had, and you are probably aware of the evidence that we have had around this 9 per cent figure, which I do not fully understand what the methodological basis is to that. However, you have all put in some quite strong views on this point. Can I explore that? In particular, if you have got any views on what the methodology should be around redistribution, how do you actually calculate that? If I could start with Andy Walsall, a clarification would be useful. I would like to get views. I think that this comes back to the way in which Crown Estate Scotland has to separate its revenue account from its capital account. The capital is part of the ownership under the crown of the asset itself and is retained as such, and any capital raised from sale to others, as I mentioned, gets reinvested into the estate. From that capital, under the terms of the Crown Estate Act and the bill going forward, any manager needs to turn that capital into account through generating revenue from it. That revenue minus costs of securing that revenue is then surrendered to Scottish Government. Before doing so, under the terms of previous legislation, 9 per cent of that revenue can be moved into the capital account, and it is normally calculated on the basis of the previous year's turnover. It is gross turnover, and 9 per cent can be moved into the capital account, which creates an opportunity for the business to use that capital for reinvestment in the asset. That clarifies how it actually works. In the current year, because we do not have operating accounts for last year, not being Crown Estate Scotland, there are still long-going discussions with Scottish Government as to how that 9 per cent will be determined. I admit not to be very clear as well about how the 9 per cent was derived, but thank you for that clarity. In our submission, we went as far as offering a top-up of that 9 per cent, particularly for community organisations. We are not necessarily advocating a specific number, but we are very mindful of the incentive from a financial point of view, taking on board all the other comments that we have said. Incentive is not only about the financial, but for community organisations, having to undertake good and proper management of the asset is sufficient. That is flagging up that we need to understand that that is the case, and perhaps from the pilot process as well, that we will get a bit more of an understanding of that. In terms of how we measure and evaluate that incentive, that comes back to sustainable development again, does it? That is about the clear objectives about what we are trying to reinvest in and what we are trying to deliver for communities. I do not think that there is any doubt that we would prefer to refer to the First Minister's statement in NANIC in 2015, in which the First Minister stated that 100 per cent of the net revenues would be returned to the communities in which the revenues were generated. I recognise that there is still quite a lot of complexity about the distribution. I think that that is something that needs to be a major focus on in the very near future. Otherwise, it is going to be difficult to set the parameters for how the pilot schemes can even be taken forward. I think that that is something that will have to be resolved with much greater clarity than is there at the moment before things can move forward. That is a key thing for us to be addressing both in terms of communities who aspire to take control and management of the assets, but also in relation to the Chinese state themselves. There are fundamental issues there that need to be resolved in the very near future in relation to distribution. Briefly, on that point, do you see part of that reinvestment in your capacity as a council to manage assets? To come back to Audrey McKeever's points on ensuring consistency and professionalism among asset managers when it comes to renewable energy development and leasing, presumably there are gaps that councils have. Do you see reinvestment as being reinvestment in your council teams to be able to deliver that? Is it about community benefit? Not necessarily. We already have teams within local authorities, as you just stated, that manage marine assets of different types. What we want to see is that the net revenue that comes from the management of those assets goes back into the communities and for them to decide to a large extent what that investment is about, whether it is about onshore infrastructure, whether it is about managing the asset in terms of persuading those who are involved in the various whether it be aquaculture, for them to manage their process in a way that is sustainable within that local context. Certainly, we have no wish to be seeing that money being... There is no benefit if the net revenues are coming from the Chinese state to local government. We are not interested in using that to deliver our services. We are looking for that investment to go into the county state, something that has not happened historically and that is what communities are crying out for. That is what we see with focus, but we need to be clear about the distribution formula. Devolution of management puts pressure on your teams? I think that the greatest pressure on these teams is their inability to deliver the aspirations of local communities in terms of the financial resource that they have. The 9 per cent figure is a curious and intriguing one, in some respects, because it seems to have been not plucked at the air, certainly, but it is a historical figure, so I am not quite clear as to the rationale for that specific figure itself. It is because the current states cannot borrow money, so there has to be a methodology by which it can generate capital for reinvestment other than through sales of land. Thank you, that is very helpful in time for clarifying that. That being the case nevertheless, there is certainly an issue around the incentivising of communities, if you like, to become managers of assets in relation to that. Whether there is, indeed, scope to raise or certainly change that figure... We do not have a figure in mind either, but it is certainly something that is going to help in order to do that. I was interesting as well when David Marlin gave his evidence to yourselves in 20 February, I think it was. He talked about, he said, 9 per cent as a game changer for communities. Well, maybe that is certainly not to dismiss that in relation to what it is, but it could be even more of a game changer, frankly, if it is a larger figure. There is also an interesting question as well with regard to what happens to that 91 per cent that goes back into the Scottish consolidated fund itself. I took from Mr Marlin's evidence that there was some ambiguity as to whether there was scope to redirect that from the fund back into communities themselves. If that is the case, then I certainly would be very interested to hear how that might happen in practice. Let's wrap up the question here. If I can pose this to all of you, I am looking for brief answers. Do you have any views on potential emissions from the bill or suggestions as to how it should be amended, other than the ones that we have already highlighted? We have a couple of suggestions with regard to areas in which we think that there are opportunities and one of those relates to an automatic right of ownership of the foreshore, and whether that is not the case for communities who are in a position to do that, they would go to local authorities and enable them to take that on. We have also made a suggestion and written evidence with regard to the scope for ownership of the areas of the seabed for communities that are in the proximity of foreshore rights, as well. Again, that is just without rehearsing all the arguments that we have had already. That is around issues about sustainability and community cohesion in relation to that. In real terms, what would be the benefits of both of those? Those options would give communities more control and more say in relation to what they might actually want to do with the assets themselves for the benefit of those communities, so there would be potentially economic benefits, and there would be the broader, sustainable development benefits in terms of social cohesion, community confidence, and helping to thrive in relation to that. I would like to bring in Alex Neil and Andy Wills. How would you see that working in practical terms, given your inside knowledge of the Crown Estate? Yes, it is about a balance at the end of the day. From our perspective, we see the bill offering a real opportunity for more people to have more opportunities to be getting involved in management of the assets for more communities to be having a say in how they manage. Equally, it is that balance about empowering those communities while striking the right balance with accountability and having the right systems and things. I am not going to be unfair and ask you if you can see the bill being improved, given that you are here representing the Crown Estate. That would perhaps be a bit unkind. Alex Neil. Just in addition to the things that we have already discussed, of course, and sticking on that seabed ownership issue, I think that it is very recognised that the territorial seabed of Scotland is clearly, we can all agree, of national importance, and that is why we are quite happy to support the presumption against the disposal of that asset without safeguards. Given that there is quite strong consensus around that presumption, there is scope to make the bill slightly stronger, I believe. I think that it is currently at the discretion of ministers to consent disposals of seabed under the bill as drafted against an unknown set of criteria. Either we are clearer on what those criteria can be or we make the seabed it is fitfully inalienable, unable to be sold and give a greater role for Parliament in deciding when and where it should be sold. Audrey McIbel. I think that, in taking it from an industry and sector development perspective, if the bill whilst acknowledging further devolution could also illustrate how Crown Estate Scotland would continue to play a vital role in stimulating innovation and support of technology and development—whether that is in offshore energy or in aquaculture. I think that the point that was raised by Alex in relation to the ministerial discussion and some clarity on the criteria of that would be, hopefully, reassuring for those of us. There is no doubt that, in terms of the Crown Estate assets, no community is going to take on the management of Crown Estate assets if there is no benefit to them in doing that. Nobody is going to take on the management of an asset if it is not an asset and its reliability. It is about making sure that there are safeguards in place to ensure that the process whereby people take control and management of assets and the revenues that go with it are very clear and are regulated at all kinds of different levels. Thank you all for your evidence this morning. That has been very useful. I am going to suspend for a couple of minutes before we move on to the next item. Thank you very much. Welcome back. The third item of business on our agenda this morning is to hear from Scottish Water and Business Stream on the organisation's 2016-17 annual reports and accounts. We are joined by Joanna Dyle, the chief executive of business stream, Peter Farer, the chief operating officer, Douglas Millican, Professor Simon Parsons from Scottish Water and Dame Susan Rice, who is the chair of both Scottish Water and Business Stream. We will move straight to questions from John Scott. Thank you, convener. Good morning and welcome everyone. I ask the first question and ask you what measures have been taken to improve Scottish Water's customer service record in recent years and how can that be sustained? There are two key things that we focus on, both the physical service and performance that we deliver to the quality of water, environmental protection, minimising interruptions of supply, trying to minimise instances of sewer flooding and the experience that is viewed by customers. How do they feel about the service in that regard? I am pleased to be able to say that we have now completed 2017-18, as well as the year under review today, that we have continued on a forward and positive trajectory. I will allow Peter to elaborate. If we start with the physical measures of customer service, we have a measure called OPA, which is the overall performance assessment, which covers 17 individual measures that are all weighted. Those measures are weighted to reflect the importance to customers of those particular measures. As Douglas said, it covers various things—water quality, environmental performance, flooding, pressure, interruptions to water supply, leakage, etc. There are 17 different measures that are important to customers. In the 2015-21 business plan, we set a target of reaching over 382.5 points on average. That level was set, which represents the threshold above which would be recognised as leading performance in the UK. I am pleased to say that, in the 16-17 year, we achieved 398 points on that OPA measure, which is a notable improvement on the target of 382.5. This year, we are continuing with that improvement. Although the numbers are not finalised yet, we have continued to improve and the number is looking like it will be more than 400 for this year. To give you an indication of the journey that we have been on, when that measure was first introduced back about 10 years ago, we were benchmarked as the worst-performing company in the UK, and we have now moved that on to be recognised as one of the leading companies in the UK. The second customer service measure, the more experiential one that Douglas talked about, we call the household customer experience measure. It is a combination of qualitative and quantitative measures, which represent things that are important to customers. It includes the number of contacts that we get from customers, abandoned calls in our contact centre, complaints, both first-tier complaints and second-tier complaints from the Scottish public sector ombudsman, customer experience score and some perception measures from customers who maybe do not transact with us on a regular basis. Again, this year, when we started this two years ago, we had a target of 82.6 points for that measure. In 1617, we achieved 85.8 points, which represent a 20 per cent improvement in that measure since we implemented it two years ago. This year, we are on a similar trajectory to improve the measure further, and over the three years since we have implemented this, it will represent a 22 to 25 per cent improvement. I think that maybe if I could just pick on a couple of the important measures within that. Complaints, for example, are one of the important measures within that. In the 1617 year, we saw a 20 per cent reduction in the number of complaints from the previous year, and that this year is looking like a 40 per cent reduction over a two-year period. Can I ask a further question? What is the Scottish Waters approach to handling the sensitive community matters referred to by the chief executive, Douglas? The Scottish Water on a daily basis is operating in communities across the length and breadth of the country just in terms of daily operations and services. Perhaps the most intrusive aspect that we have in communities is when we are going about our capital investment programme, and probably at any one point in time there are two or three hundred projects running live in communities across Scotland. I think that this is an area where we have made enormous strides, but there is still more that we can do. We now work actively with communities when we are looking to embark on a project to look at how we can maximise the level of community involvement in what we do, how we do things or when we do things. For example, if we are doing an infrastructure project around a primary school, how can we try to coincide the traffic flows, so that it has a minimal impact on people going to and fro schools? That is a general position that we are in. Clearly, when we are doing so much work in communities, we do not always get it right. The first thing to say is that when we create sensitive communities, it is to recognise that, look at what we need to do in that specific situation to recover it and make progress, but crucially all the time, what insights can we get from that to learn and build into processes to improve what we do going forward? To give a very live example relative to the capital city, we have a very significant project that we are doing in the Haymarket area of Edinburgh, just opposite Haymarket station, where we are expanding the size of the sewer to take away the risk of sewer flooding from some of the businesses in Haymarket Terrace. However, in that area alone, there are half a dozen different communities that we have had to engage with, whether that is businesses there, whether households in the adjacent area where traffic is being diverted, whether it is people using the train station, cyclists and so on. The whole notion of community engagement is a very multifaceted one that all the time we are seeking to get better at. Perhaps another example of that, which was the massive infrastructure project in Glasgow that Angus MacDonald and I visited some time ago. Was it not the case that there was a delay in completion in that which led to inconvenience with some of the businesses in the area? Probably a few things if I could tease out that. I think that I convene referring to the Shieldhall tunnel project, which is the largest project that we are running at the moment. It is a £120 million investment in putting in a new three-mile sewer underground of nearly five metres in diameter. It is a huge project. Again, it is a good example of many different communities. I remember going out there many times and seeing how close the physical infrastructure, getting at your piling rigs, as high as the ceiling from here, literally feet from people's houses. Seeing the way that the team had engaged so constructively with local community and kept them bored, I think that it was really tremendous. The aspect that you are referring to was that there were some businesses in one of the areas affected by traffic diversions, where with the benefit of glorious hindsight and probably in our great enthusiasm, we were too quick to commit the date by which we would be out of that area. As we do more and more complex infrastructure work in city areas, our understanding is growing that it is often more complex than perhaps our ambitious engineers' first estimate or hope, because sometimes it is what you find when you go underground. If I take my hay market example, as we have gone in there, we found all tram tracks from the trams that were lifted in the 1950s. We have found other unchartered services, so you get surprises when you go underground. I think that with hindsight, we promise to the businesses that we would be out too quickly, but as a way of a contrast to that, one of the other aspects of that project has been having to close a head road in Glasgow to do major sewer work associated with it. I was absolutely delighted when we could announce last week that we were out of there early. That is a good example of how we have tried to learn from aspects of the project that we had overpromised earlier. To come back to your original question, overall, the project is running ahead of schedule, and we are hoping that the tunnel will be operational early in the summer. That is all very well and good, but in a situation where your work has had a negative impact on those businesses, did you compensate those businesses? We, as a matter of principle, recognise that we are a public body, and all our money comes from households and business customers across the country. We do not compensate customers for delay. Our challenge is to seek to minimise the interruptions on customers and to give businesses as much notification as possible of any impact. If our business model was one where we were compensating the specific businesses that were affected across the country, that would have an upward impact on the charges that everybody across Scotland would have to pay. It is a matter of policy that we do not compensate. Can I return to something that is in the written evidence? It is an obvious point, but I want to get it on the record. It states that written customer complaints fell by 30 per cent in 2016-17. Does written customer complaints include emails? It does, because one would not have been surprised to see letters fall by that number in this day and age. Okay, thank you. It is good to get that on the record. Moving on, Richard Lyle. Good morning. I have got two questions. On page 13 of your shaping the future report, you are going to meet your charging basis. We support the continual use of council tax bans as the basis for setting household customer charges, as it is simple, cost effective and provides a level of fairness. Are water charges the same for every household A and H council tax banding? I am not sure if I understood the final bit of the question. I will be very precise. Are the charges for each house in bands A through to H the same? Let me give a bit of context behind the question. I think that you are referring to our document, which is setting out our consultation on what we see as the long-term future for Scottish Water and Services that we are delivering to our customers. The document both in terms of its document form and in terms of an online version is open for consultation and customer views right across the next six months. We are going right around the country trying to engage customers and get their views about what they want from Scottish Water in the future. Turning to the very specific question, the council tax charges are the same in any individual band, irrespective of where you live in Scotland. In band A, it is the same wherever you are in Scotland and in band H, it is the same wherever you are in Scotland and all points in between. The relationship of the charging structure between band A to band H is exactly the same as the historical basis that is being used for council tax in Scotland until the change was made recently to increase the band E to H. That is not what I asked you. If I pay £300—I will take a figure out there—if I pay £300 in band A, is it £300 for every house in the country or is it £300 for band A and £370 for band H? It is £300 for every—I will give you the actual figures. Sorry, can I just stop you? I want a precise answer to a precise question. Is the charge, water charge, for every house in Scotland the same? No, thank you. I will move on. I thought that, but I just wanted to make sure. Scottish Water is publicly owned. We, the public, effectively are your shareholders. Given Scottish Water currently made £94.2 million in its current financial situation, it is a scope to reduce the charges and make every house the same in Scotland to pay the same. If I live in a band A house, I will pay £300 and if I live in a band H house, I will pay £300. We are all drinking the same water and we are all using the same facilities, so why is there a difference? If you have taken the word that you have made this profit and I know that you are going to say, oh, we have to do these projects and we have to pay for this, we have to pay for that, can you reduce your fees to local councils and to local households to make everybody the same or can you, in fact, dare I say it, councils will love this one? Through some councils or most councils collect water charges through their household bills, could you increase their fees? I think that there is a number of different elements there. The first is to say that the principles by which we charge are set by ministers for every six-year regulatory period. The charging structure linked to council tax bans was set in late 2014 to apply for the 2015-21 period, so Scottish Water implements ministers' policy on charging. That is the first point. Second point, in terms of the activities that we do and how we finance them, it is very simple in terms of two things that we do, one of which is that we deliver the day-to-day service providing the clear fresh drinking water, taking away wastewater and safely treating that and returning that to the natural environment. That is the cost of that. The second thing that is the cost is all the investment that we do, and that investment is broadening to two categories, to repair or to replace infrastructure or assets that have come at the end of their lives, and, secondly, to enhance or to extend our networks. In very simple terms, the total cash cost of delivering all our operations and our investment is more than the revenue that we generate, and that is why we borrow from the Scottish Government to part-finance our investment programme. In simple terms, if we were to drop the charge levels, then, effectively, the level of borrowing would need to go up, but those are not our decisions. Those are done through an independent regulatory process that is a reflection of an act that was passed in this Parliament in 2005, where the economic regulator has a duty to set our charges of what is termed the lowest reasonable overall cost for us to deliver our services. If the company in the world makes a loss or a profit or an expenditure, if I am a shareholder of a company, I used to work for the Royal Bank of Scotland, I was a shareholder of the Royal Bank of Scotland. I sold them before the crash, by the way. However, the physical situation is that, as a shareholder, you have made a profit, even with all your costs that you are spending out, you have made a profit of £94 million. As a shareholder, should I not get some of that back as shareholders do with other companies to get a dividend? My answer to that would be to say that, in the model that we have, you get it back in the form of that being reinvested in infrastructure to keep delivering services for the future. My dividends pay for future projects is to keep delivering the services effectively into the future. There is always the possibility of local government tax reform sitting there and waiting in the wings at some point in the future. How close do you see the charging methodology linked into that? Do you see it as a completely separate debate to where we take council tax forward? Will you anticipate a review of the charging methodology to take place automatically if there was a review of council tax and its potential replacements? Two or three thoughts on that. I come back to the issue for ministers. Clearly, to the extent that they think about changes in local government taxation, there is a flow-through thinking about what happens with water. The great benefits of the current system is how efficient it is for billing and collection, where the costs of the billing and collection activity are shared between the local authorities and ourselves. That effectively helps to keep down council tax and water charges. In terms of investment in new development, we have a planning bill going through Parliament just now. There is a need to see major investment in housing. Take a housing estate being proposed in 900 houses. Does Scottish Water claim some of that investment back from the developers, or do you have to invest in the infrastructure yourself? That is one question. My second question is, is the level investment that you are putting in keeping up with the level demand for investment and infrastructure, or are we storing up problems for the future? I will probably take them in reverse order. We are absolutely endeavouring to be what we would term ready just ahead of need. We do not want to be creating infrastructure that might not be required, because that would effectively be what we call a stranded asset and a sunk cost for us as a business. Equally, we do not want to be late and holding up new development. Our strategic aim is to be ready just ahead of need. We have made a lot of progress on the past few years working with developers and local authorities to try to get ourselves in. Generally, we are largely in that position. Turning to the whole question of who pays for what, there is a model at the moment, which in very simple terms is a shared cost model. We pay part of it and developers pay part of it. There is quite a bit of intricacies to precisely how that works, but one of the questions that we are posing in our consultation is for the future, is that balance right? Do we have the right balance between existing customers pay and what developers and new customers pay for the cost of new investment? Are we storing up problems for the future? Is the level of investment in infrastructure to repair infrastructure a level investment? Are you satisfied that we are meeting the pressure on the infrastructure more generally or are we storing up problems? I think that it is a very topical question. We are spending a lot of time with all our regulators at the moment thinking about the next price review from 2021 and beyond. Probably the biggest issue that we are grappling with is the asset replacement challenge. We have spent a lot of time in Scotland over probably the past 20-25 years investing very significantly in upgraded infrastructure and assets, putting in place waste water treatment plants where there were not before. The big question for us is that we look into the decades ahead. When will we need to replace that infrastructure? At one level, the challenge for us is how can we sweat the assets and make them last as long as possible but equally have a good understanding of when we will need to replace so that we have the financial capacity to do that? That is a live issue under review as we are going through and working on our 2021 price review. Let us move on to business stream. When you were last in front of the committee, we had a discussion about the concerns that some of us had around your 14-day billing period for customers, when in fact you had a longer period for paying your own creditors. There was an undertaking subsequently given that that would be looked at and a 21-day period introduced for new customers. Can I ask if that has been done and what impact that has had? Certainly. When I wrote to you to provide additional evidence after the committee, we made a commitment then that we would move to 21-day payment terms, not just for new customers but for any customer that was not on a contract with us. We endeavoured to do that whilst undertaking a wider review of our debt recovery practices. We have subsequently done that, completed the review and implemented a range of changes, but our default position now is 21 days average payment terms for our customers unless they contract to take something differently. Likewise, we have reviewed all of our debt recovery practices as well. For the majority of our customers, the first interaction that they would have from business stream would be 10 days after that 21-day period has elapsed. Does that now cover the customers that you had at that point? It does. It basically covers any customer who is not on a separate contract with us, because there are some customers who opt to have shorter payment terms in return for a discount. Any customer who is not on a contract will have those 21-day payment terms in place. What is the feedback being on that? It is really positive. From customers themselves, we do not get a huge amount of direct feedback, but where we have had feedback is through some of the consumer bodies in particular, so I think that it has been welcomed. That is good news. The committee previously heard about the number of complaints regarding leakages, particularly in agricultural land, and we received an update. We have put some cases forward on those leakages and how business stream was dealing with it. Has business stream seen our reduction and the number of complaints from businesses regarding the charging for leakages specifically in relation to agriculture? I cannot comment specifically on the number of complaints that relate to leakage itself. I can certainly come back with additional information, but if I look at a high level, compared to where we were 12 months ago, the number of customers that we serve has more than doubled with our entry into the English market. The number of complaints that we have had in the past 12 months is about 1,300, which is the same as it was 12 months ago, but with twice as many customers. We have definitely seen a downward trend in the number of complaints that we are getting overall from customers. If I pick up on the particular issues around leakage and the complaints that were raised at the committee 18 months ago from the NFU, we have worked through each of those complaint cases systematically and have sought resolution for each of the individual customers. We have also been quite proactive with the NFU as well, pulling together how-to guides for their members as well around a few common themes, including leakage, shared supplies and other areas. We are much more proactively engaged with the NFU and its members around those issues. I do not believe that we have the balance right with the water industries. It seems to be one of the stock excuses that it takes taxpayers' money. I think the answer that the convener got regarding compensating businesses is that, over and over, I could give you a whole list of complaints that I have received from constituents on sewage works that have only been part-completed or that are farmers hitting water pipes that have not been buried at a prescribed depth and that they have not paid for the bill. Do we have the right balance of customer care and the duty of care from Scottish World with regard to its customers? We do not get the stock. The computer says, no, we are not going to deal with that. We are not going to get any compensation. Have we got the balance right? Surely, it cannot just be a rush to the bottom to reduce water charges when there is obviously impact in businesses as a result of some actions that Scottish Water have taken or not taken today. The first thing to say is that any specific constituency concerns, please do pass them to us and we will make sure that we look into them. In general terms, the answer is yes. The one exception that I gave to the committee last year, and it is something that we need to look at as we move into the next period, is the whole issue of where you get sewer bursting on farmland. The reason that I think that the current practice is not really up to date is that it reflects 1968 legislation, where, if you like, the liability on us is really very, very restricted. This is a personal view, but I do have an instinct that we should be looking to provide a similar level of compensation when we get a sewage issue on a farm, as we do when there is a burst pipe on a farm. That is something that I committed to the committee last year. We will take forward with the Government as part of the planning for the 2021 price of view, but generally apart from that, I think that the answer to that is yes. The reason I say yes is that things like the huge reduction that we are seeing in the level of complaints that we get, the fact that when we do get challenged in issues, we think really hard about them, about what is in the specific customer interest, as well as what is in the general customer interest. However, as we go into a time as we are now of consultation on our strategic projections for the next six months, that is a great opportunity for our customers to raise with us the issues that they think that we and or the Scottish Government should think about in framing policy for the 2020s. Do you have enough flexibility to offer the compensation that people would generally expect? I am talking about people whose houses get flooded because the waste water drains need to be updated. The answer that we get is that we do not have the budget for that. When we keep on going, they say that it is public money and we do not think that it is value for money. Do you have enough flexibility in your budget to address those types of individual concerns? There are two different issues. First, I want to put on the record that when there are very rare occasions where sewage gets into somebody's house, it is quite the worst thing, the worst impact that Scottish Water Activity can have on us. It is much something that is a function of our growing urban areas, more paving over and more intense storms. When that rain lands and sewers, it has to go somewhere. Because of that, we have made a huge priority with the Scottish Government that, for this regulatory period, we have troubled the level of investment that we are making in dealing with issues of sewer flooding in this period. However, we have prioritised areas and people and properties at risk of repeat sewer flooding inside the premise. When it comes to issues of external sewer flooding, it could be in a driveway, in a garden, in a road. Those have a real impact on people's lives but, relatively speaking, less so than when it is inside the house. Therefore, it has not been prioritised for investment in this period. When we look at the 2021 and beyond period, for us and our regulations in the Scottish Government, we will need to look at all those relative levels of priorities. However, I will give an absolute assurance on that. Whenever anybody suffers an event of sewer flooding, we will always go along and make sure that it is fully cleaned up. I want to let Angus MacDonald in on the point of sewer flooding, but before we get there, because we have moved away from the original question to business three, can I just raise a question? Do you record, Joanna Dow, your data to the level of the number of agricultural customers that you have in Scotland? I understand that the NFUS has an arrangement with a rival provider who offers a metering service. Is there any evidence that you have been losing customers to them because of that? We hold some information that would allow us to categorise the nature of the customer's business. I would say that it is not 100 per cent accurate, because it is based on the SIC codes that HMRC uses. I could not sit here and quote you the number of farms that we supply, for example. Certainly, if I look at recent trends in customer switching activity, what I am not seeing is a significant reduction in the number of farms that we supply, because I can see that information on a monthly basis in terms of who is transferring out to somewhere else. Picking up on the issue of sewage spills on farmland, I should declare an interest. I have a family member can be in dispute with Scottish Water at the court of session. Over alleged arsenic poisoning of a herd of cattle due to sewage spills on nearby land. Perhaps it should also declare that I am a customer of business stream on a non-domestic property in the Western Isles. At the last session with Scottish Water, I raised the issue of sewage spills on farmland in general and highlighted the concerns of NFUS who had identified numerous incidents of sewage spilling on to farmland. Douglas Millican referred to the comments that he made last year, December 2016, when he last appeared here. NFUS has flagged up the fact that the current law puts the onus on the farmer to prove that Scottish Water is liable for any damage that is caused by sewage spills, rather than on the Scottish Water to prove that it is not liable. Clearly, as we heard in the previous session, NFUS feels that that should be changed in law as the onus of proof is the wrong way around in their view. In your response in 2016, Mr Millican, you said that you have some sympathy for that. You have also said today that you are still looking at it, which is disappointing, because in 2016 you stated that the law was written nearly 50 years ago. It is out of step with current customer service expectations and practice. You also said that we need to look at that with the Scottish Government either to consider formalising a change in approach for the next period or to decide whether such a change should be accompanied by a change in legislation and that you said it was on your radar. A year and a half later, we do not seem to be any further forward. What progress has been made with regard to the issue of sewage spills on farmland is it still on your radar and how the discussion has gone with the Scottish Government on formalising a change in approach? I hope that the response that I gave a few moments ago really echoed that one that you recalled from December 2016. Effectively, we are in a process of all the factors to be considered for the next strategic review of charges, which will effectively come to conclusion over the next 18 months or so. Only as it comes to a conclusion will we get to a definite point as to exactly what is agreed and what the parties are for the future and indeed whether there should be any changes in policy position. I hope that what you got from the sentiment that I gave in December 2016 and again today is that I believe that this is something that we should look at. Therefore, if it is not something that will be progressed through legislation, it is certainly something that would be within our gift, subject to Government support, to do from a policy perspective. Can I just drill down into the pollution figures in a little bit more detail? With the more minor category 3 incidents, there has been a slight decrease in the last year. There has been a slight increase in, thankfully, a small number of more serious category 1 and category 2 incidents. Can you just tell us a little bit more about what the consequences of those more serious incidents have been? In particular, how your investment programme is, hopefully, ensuring that those incidents continue to reduce over time? You are referring to what we call the environmental pollution incidents. They are categorised 1 and 2 as the most serious incidents and then category 3. You are right to say that category 1 and 2 went up a bit more this year. What that actually means when they are categorised as a category 1 or 2, depending on the severity of it, can lead to fish kill or other environmental impact on rivers, etc. If it is really serious, the environmental regulator can take us to court and prosecute us for the severity of the impact. Perhaps pick one of the incidents, then, and tell us about it. One of the incidents, for example, we had a prosecution at Dunswood. It is the only one that we have been prosecuted on. It was down to the fact that one of our treatment works had a problem over the weekend. A large piece of electrical cable came down the sewer, blocked up some of the equipment and caused a discharge into the river because it was not going through the works for proper treatment. At the same time, because of power issues, our telemetry unit failed. Therefore, we did not know about it until the next morning when the operator arrived at the site about 7 o'clock the following morning. It had been running for a number of hours on Sunday, so that was classed as a serious one. Fortunately, it is not often that they are as serious as that. Clearly, we have looked at the impact of that on our equipment and telemetry, and we have made alterations to make sure that that does not happen again. How does your investment programme address those particular issues? Is that a common theme in relation to the more serious incident? It is a mechanical failure. It is an unexpected failure that you then have to go back and think about the reasons of and then reinvest, or is that predictable? Is there something here about your asset management that you need to consider? If I can just give a general answer, we have been focusing on pollution incidents for quite a while now. If you go back to 2010, there were 825 pollution incidents in the year, and I have just seen from the document here that that is down to around about 200 in total, so there is a significant improvement on that. We have done that through really focusing across our whole network, focusing on treatment works and what we can do to improve the controls within treatment works, but also in our networks. If you look at the number of pollution incidents, 70 per cent of them are caused by blockages in the sewer pipework, and we have been working really hard. You will probably have seen our campaigns that we are running to try and engage with customers to tell them not to put inappropriate things down the sewers, because those can lead to a number of those blockages that we have. So there are a number of things that we are doing to minimise that over the years. One of the areas that is inherently challenging is that we do not always know at the moment when a discharge might be going out of a combined sewer overflow. If you can imagine the situation, they are designed to relieve excess surface water at times of storm, but if perhaps there is a blockage because of inappropriate material put down at a time of dry weather, we might not know that that overflow is discharging. One of the things that we have agreed as a priority in our investment review for 2018 is to look at where we need to install greater sensors in our networks to give us insights into what is happening in our wastewater system. If, for example, there is a discharge from a combined sewer overflow on a sunny day, that would be indicative that something is actually wrong and we need to get out there and attend to it. We have quite a bit more to do over the years to come where it is cost-effective and environmentally worthwhile to get further real-time insight into what is actually happening in our sewer network. In terms of more longer-term pollution issues, I think that I used the example last year of Kinghorn in Fife, where there is bacterial loading at Kinghorn harbour. Again, that is to do with overtopping combined sewage and getting into the storm water system and into the water. Is that picked up in those figures? Are those longer-term, low-level pollution problems more dispersed pollution issues picked up and acted on and fed back into the investment program? I know that it is in that case, but I am just interested to know how you report and monitor that kind of stuff. Very much so. All of the pollution incidents such as the one in Kinghorn, for example, would be reported to SEPA and then would be categorised on the back of those. Kinghorn is a good example. We are working with SEPA to make sure that we understand how that network works and what all the contributory parts are to it and then how that impacts on the bathing water itself. We are also then to work out what investment will we need to be put in place. We are already working in Kinghorn to put in the investment which will control the discharges from that network into the bathing water. If we take it more longer-term, by far one of our biggest challenges, longer-term, is around controlling the amount of surface water or storm water that gets into our sewers. It is very much one of the ways of making sure that the sewers are used for what they are being designed for. Minimising wash-off from roads, wash-off from paved areas, for example, trying to slow that water down to allow the sewer networks to work as they have been designed to do so. Just finally, is your planning horizon the timescale adequate enough to make these long-term changes in the system? We had a submission from Consumer Futures and they were saying that Scottish Water needs to adopt a 50-year strategic review. That might be difficult to do given climate change, but you know what is coming anyway. Are the current timescales for investment adequate enough to look at where we want to be in 50 years' time? It is a great provocation from the Consumer Futures unit. When we have pulled together all the work that has informed our shaping the future consultation, we have tried to look as far ahead as one can reasonably do. There are some areas where we can have reasonable confidence as to how things might be decades on the track. There are other areas where, who knows what the world will be like in the 2020s? Never mind the 2030s and the 40s. We have quite intentionally not put a date on it. We have not said that this is 25 years ahead. We have tried to look practically as far ahead as we can. If there was an anchor, it is 2050, but it is not limited in 2050. We are trying to stretch our thinking and planning as far ahead as we can. Even in active dialogues with Government and our regulators looking at next period, we are absolutely rooting our thinking in this, not just even for six years, but trying to make sure that we are doing the right things to make sure that the industry and the service to customers will be in the right place in the decades beyond that. Does that assume regulatory alignment with European Union directives, even though we will be out of the European Union? What this is effectively just assuming are that there will be a continuation of the standards that we currently have to achieve. We are looking already at where there may be changes in EU legislation. For example, there is a proposed new EU drinking water directive and we are absolutely looking at what might we need to do to comply with that. I want to develop the climate change point in a moment, but I will let Alex Rowley enforce it. The liberty just to home in on a specific fifth question when we are talking about sewage treatment plants. You will be aware that the new Queen's Ferry crossing has opened up that part of the Queen's Ferry recite to the sewage treatment plant that is there, and there has been over a number of years real problems with smells coming from that site, given that the local communities want to home in and take advantage of the iconic bridges, et cetera. Where are you in terms of trying to address those issues? We have had some problems in the past with odour and it was the way that the treatment was carried out. We carried out treatment called lime stabilisation because of restrictions on the site. Some of that had to be done outside, which led to some odour issues. However, we have changed that practice now and we are doing treatment within a building, which has got odour control on it and then the sludge is removed from site after that. That has changed the way that we do the treatment in order to reduce or minimise the odours that come from the site. John Scott Thank you very much, convener. Moving to climate change mitigation and adaption now, Douglas Millican has highlighted three carriers of capacity of our sewage systems, assessing the flood risk to some of our critical assets and what we need to do from a drought resilience angle. Therefore, the question is, what further progress has Scottish Water made on energy efficiency and climate change mitigation? I will take the energy part of that. We have got a number of different approaches to renewable energy within our business. We already have a number of large wind schemes on our catchments, but we have also got a number of hydro installations, small wind, PV installations—that is photovoltaics—and, of course, we started heat from sewer schemes very recently. Over the years, we have increased our self-generation capacity and we are now generating about 13 per cent of the electricity that we need each year. We use a significant amount of energy. We use about 440 gigawatt hours of energy, so it is a huge amount. We are self-generating 13 per cent of that. We are working with a big milestone in March 2017, when we announced that we were generating or hosting on our assets more renewable energy than we consumed in a year. That was one of the milestones that we hit last year. We have continued on that programme. We are continuing to build renewable assets, and we are hoping to announce some more achievements in that area very soon. As well as the renewable generation, we have quite a focus on reducing the amount of energy that we need to consume in our operations. A law that comes down to optimising our treatment technologies and we are on track to deliver about 11 gigawatts hours of energy efficiency savings by the end of this period. Do you still consider capacity of the sewer system, flood risk to critical assets and drought resilience, to be the key risks arising from climate change? In terms of how do we deal with stormwater, for example, in essence having a very fixed assets in terms of our sewers, making sure that we are always able to provide an adequate high-quality drinking water in terms of both the quantity but also in terms of the quality out there. There are some of the biggest risks that we see from climate change. One of the areas that is probably slightly different on that list is around the changing quality that we are seeing in some of our waters. A lot of our waters come from upland, very petty sources, and we are actually seeing a change in those, and we are seeing an increase in the amount of organic material coming in. Going forward, if we look at climate change, some of the predictions are that that could become worse for us. It is a real challenge for us over a very long term in terms of making sure that we are able to provide both quantity in terms of the quantity of water but also the quality itself. Increased turbidity, is that the right answer? We tend to see increased turbidity but also primarily the colour associated with it. Some of the things that are very characteristic around Scottish waters, we are seeing those increases in colour, and we do not want to see that coming through to the high quality water that we provide. In the interest of moving on, can I ask you just to say a little bit about external sewage flooding in my constituents in Prestwick? Have you made any progress in that? Are you considering a pilot? How are you working with a local authority, or will it be 2021 before you get to a resolution? My constituents are certainly still very anxious about it. There are a number of areas, Prestwick being one, but there are others that I could name too. They are firmly on my radar, where we have particularly concerned customers because of the issues of repeat external sewer flooding. We are actively looking at the moment as to what else can we potentially do meantime short of formal investment. I can offer you specific solutions today, but to reassure you that we are actively looking at are there other things that we can do meantime. That is not a promise that there are but to say that we are certainly looking at it, because it is very distressing for me that here is something that is a big issue impacting people's lives, and apparently there is little that we can do about it. As a business that prides itself and put in our customers at the heart of what we do, that is not a great place to be, so I want to make sure that we do all that we credibly can. Equally, we will always operate in a world of constrained finance, because there is a limit ultimately to how much our customers will be willing and able to pay, so there will always be some difficult choices in any investment review as to what gets promoted and what we just have to get on and manage best we can. Okay, thank you. Let's move on to the issue of chloraminated water. A number of colleagues want to come in on this, Kate Forbes. Great, thanks very much. You may be aware that there is a petition in front of this committee, which has been referred by the Petitions Committee, on chloramination, which was sparked by the situation in Avymor by Arnauch and Strathe's Bay. So my first question is just a more general one as to why Scottish Water has made the decision to increase the number of areas being supplied with chloraminated water. If you lie me, I'd like to set a bit of context here. We draw water from many, many different sources across Scotland. Sometimes it's from rivers, sometimes from aquifers underground, but predominantly from upland sources in luxe and reservoirs. We then need to get that water in a safe and high-quality position to customers' properties. The two main challenges that we need to think about are what's the nature or characteristics of that natural source water in a locker reservoir and what's the nature of the distribution that the pipes and the length of the pipes, the pipe material between where we collect it and a customer's premise. Those two main factors drive what we need to do through our water treatment activities to make sure that when that water gets to any customer's premise right across that network, it is absolutely safe to drink and really high quality. Let me then drop down into specifically chloramination and the point that I'm going to make here is a general point. It doesn't specifically deal with the Badenachon Stras Bay one, but it's a general point. The reason that we now have over a quarter of Scotland's water being chloraminated, including the water that we're drinking here in the Parliament today, is because, as Simon referenced earlier, a lot of our natural source waters come from upland areas where the soil is quite rich in organics and more so in Scotland than in most other places in Europe. When the nature of that organic material reacts with chlorine, it provides water that's safe to drink, but there's always a risk in a very rich area in organics that it might breach the regulatory standards that we are required to achieve. I'll give you a bit of context here. The World Health Organization has a view in terms of guidelines for appropriate health parameters and the standards that we need to achieve are broad in order of three times more demanding than the World Health Organization's standards. In situations where we get this combination of water that's rich in organic or peat material combining with chlorine, we're at risk in some areas of breaching one of those regulatory standards. However, when we use the treatment of chloramine, which is a combination of chlorine and ammonia, that means that that level of that particular element is way below the regulatory standards and therefore is even safer for people to drink. When Scottish Water makes a decision to chloraminate water in a particular area, do you engage with consumers prior to the introduction and during the initial phase of that introduction? How far in advance do you notify consumers that there is a regulatory requirement to notify consumers about changes to their water? The principal engagement that we have done historically is with the drinking water quality regulator and the local health boards. The drinking water regulator and NHS Scotland recognise chloramination as being a very safe and appropriate way of treating water in Scotland. The principal reason that we will engage typically a year ahead of moving to chloramination with the NHS is to make sure that any of their patients who have kidney issues on our dialysis machines can get adjustments made to their dialysis machines to make sure that they deal appropriately with chloraminated water as opposed to chlorinated water. In the whole issue of informing customers, rightly or wrongly, we have historically taken a quite intentionally low-key approach. The reason that we have done this—I am not saying that we are right in this, the reason that we have done it—if I just draw from some evidence that the drinking water regulator gave to the petitions committee, she said that using a treatment process that involves the addition of aluminium sulfate to the water may sound alarming to customers, but it is recognised and approved and safe. I think that we have been low-key because if somebody gets in a postcard that we are going to add aluminium sulfate, they might be very anxious about it. We have taken the view that, for most customers, what they rely on is that there is a whole infrastructure that sits around them in terms of the national health service protecting public health, a drinking water quality regulator and Scottish Water working together to give them the assurance that water is absolutely safe and high-quality to drink, so that we do not alarm them. We have historically restricted our informing to those who need to do something about it, which is the NHS for dialysis and people who keep fish as pets. Whether that is the right approach, I think is an open question. I have certainly been quite struck that, really for the first time in East and South Ayrshire recently, we have had a bit of kickback to why did we not do more to inform in that area. It has posed a question for me as to what we should maybe do with the drink water regulator and citizens of Fife Scotland to look at the pros and cons of different approaches to informing. If I then take the question of timing, it is the health boards a year ahead and with customers typically three or four weeks ahead, because we try to do it from an angle of far enough ahead that they can take action, let's say, to get the right filter for their fish, but not so far ahead that they may be at risk of having forgotten about it by the time the change comes along. Which customers keep fish as pets? We don't even try to, so what we do is we send out a very clear A5-sized postcard, particularly drawing people's attention to, if you have fish, please have a look at what you need to do and speak to your pet shop or your fish shop. But equally on that postcard, we make it very clear what the change is to the chloramination and a link to our website, where there is a Q&A on all the issues to do with chloramination. In terms of, you mentioned that a quarter of customers are drinking chloraminated water, so three quarters aren't. Do you have plans to roll it out further or do you do it on an area-by-area basis? What might the challenges be for areas that don't have chloraminated water? Let's work back the way. This is all driven off data on what is the quality of water at customers' premises right across Scotland. We do 140,000 tests a year on the water supplied at customers' premises. Over 99.9 per cent of those meet all the standards. However, when we see an area where either there is a fail or there may be a trend towards fail, then we look at what more do we need to do from an operational practice or an investment to keep that water absolutely pure. The interesting issue on chloramination is that the major driver to that is all to do with what is called trihalomethane, which is one of those parameters that we test for. The trihalomethane is caused by the combination of chlorine with organic material. If there is either an area that historically has a very—as occasionally—had an exceedence of the trihalomethane standard, or maybe at risk of it in the future, let's say in the way that Simon said, because of climate change, more increased storms causing more organic material to run off, we will then look where we might need to change our method of treatment from chlorination to chloramination to make sure that we are always within the prescribed limit for trihalomethanes. For example, later this year we will be turning it on in the open area where we are building a new treatment plant and one of the major drivers on there is to deal with this issue. We have a number of colleagues coming in now, Finlay Carson would be followed by John Scott to be followed on this issue. Just a very simple question. Are there other methods to make heavily peated water safe, and is the decision to chloraminate the water based on the most cost-effective way to do it? Is there alternatives? Can there be heavier screening or filtering of the water, which would take away the requirement to chloramify? Yes, so there are a whole range of different options that we can look at as part of either the treatment or actually the distribution part of supplying the water, and that's often about looking at different approaches to remove these organic material from the water before we add the chlorine as a way of reducing that. Most of our water treatment works, for example, would operate to removing 80 to 90 per cent plus of this organic material. A lot of the Scottish waters that we have and a lot of our source waters are very high in this organic material, and even that 80 or 90 per cent is still not enough for us on a number of those sites to guarantee that when a customer turns on the tap that the water is free from the number of these by-products. So we always look at what of a range of different options. We have a very active research and innovation activity, which is looking at new technologies, new approaches and new ways of controlling our processes. In the end, we will make a decision based on what is the best over the whole life cost, long-term view as to what is the best way of controlling or making sure that the water is always of high quality and great to drink. John Scott Thank you very much. I am impressed by the fact that you carry out over 400 tests per day to make sure that our water is safe with regard to South Ayrshire, but more generally, East Ayrshire. How many complaints have you received regarding the chloramination process and what action have you taken to address those complaints, certainly some of which have come from my constituents, as you know? John Scott I do not have a figure for the actual number of complaints in relation to chloramination. I do not think that it is very many at all. What we have tracked is that, since we introduced chloramination a week past Monday, it has taken a number of days to get right through the system, but it is now right through the system. I think that, at our absolute peak, we had 20 contacts about issues to do with the taste or the smell of water. That has now dropped down to four or five a day, and that is in an area where we are serving over 300,000 people. I think that we are at a negligible level of inquiry. We always get inquiries every day from customers right across Scotland about taste issues to do with the water. The fact that we are down at a handful per day in an area of over 300,000 people one week after putting it into supply is a so-far-so-good type situation. John Scott Perhaps, if it is possible, you could just supply us with those figures. John Scott Happy to do so. John Scott Thank you. When a decision is taken to change a water source or alter a customer's supply, how do you ensure that you do not inadvertently create further problems in so-doing? John Scott First of all, all of the approaches, the processes, the treatment options and the chemicals that we use are very highly regulated in terms of what we can use. Their impacts when we use them are very well understood. As part of our process of putting or commissioning any new treatment process or any new chemical going into supply is a huge amount of sampling. In addition to the 400 samples today, you mentioned a huge amount of sampling analysis and science that goes on in the background to make sure that before that water goes into supply that we fully understand that it is safe, high quality, hopefully it will taste good and then we will look at the impact that that will have as it travels through our networks. There are definitely things that we can still improve and some of our learning from one of our treatment works in this year has helped us to understand a little bit more about the interaction about certain types of water with our networks. What we will do is we will use pilot rigs, we will use test methods, for example, really to understand what impact any change in terms of treatment or chemical will have on customers supply. My final question is, as universally regarded as good practice worldwide, in terms of chloramination? Chloramination as a process is supported by the world health organisation. It is used widely across the United States, Canada, Australia and various places across Europe. It is one of a number of different disinfection methods that we can use and we will select from as we put them in. It is widely acknowledged as being a suitable process. Page 14 says that we deliver high quality, great tasting drinking water every minute of the day. What right do you have to change my water? I have noticed over the last 50 or 60 years that I have been on this planet that the water taste has changed. In fact, why do you try to put in fluoridation? I do not know if it is in yet, but it is in now. Basically, you have changed our water soap. What scientific evidence do you have that what you have done in the new input into your water does not affect people? Were the complaints that people are putting in or the concerns that those petitions people have, they are asking a simple question—I will remind you that you made £94 million profit in one year. Why do you supply people who are complaining or have concerns with the filters or whatever that would cost them to install in their house? If I do not want my water affected, why should I ask you, because you have changed it, to give me the basis to ensure that the water that I am drinking is to my taste? The first thing that I want to say on filters, and I will let Simon Reddick deal with most of the question, is that I think that filters can give a superficial confidence to customers and clearers. It is absolutely their choice that they want to put them in. Our concern is that unless those filters are changed regularly, there is a risk of bacterial growth inside a customer's property and therefore would undermine the safe, high-quality water that we are supplying. In terms of the improvements in water quality, since Scottish water has been formed, that has been fairly significant. That has been improved in terms of both the quality from a scientific point of view but also the number of contacts and people's concerns about the quality and taste of the water. You are looking at a 10-fold decrease in the number of failures, for example, around drinking water standards. Significant reductions in the number of contacts that we have on customers. There is no doubt that the quality of water that customers across Scotland today get is significantly better than it was 10, 15 years ago. That is on the back of very significant investment in terms of treatment processes, in terms of operations, in terms of skills and capabilities and science as well. There has been a significant improvement in the quality, both from a safety approach but also from a consistency approach that we have seen across Scotland. There is no doubt that the taste of water is affected by where it comes from. There is absolutely no doubt of that if you travel to anywhere else in the UK, you will find that the taste of water is very different from the phenomenally good tasting water that we have here today. The taste of water is affected by the source of that. We are always looking for the most sustainable source that provides water for the long term. I just want to restate that the quality of water that we have in Scotland today is an incredibly high standard, very high and very safe. I hope that we achieve the statement that we have in the strategic projections there, which is about good to drink. I have to agree that Scottish Water is the best, but I have noticed a change in the taste over the years that I have been on this planet. You go to London and my goodness, the water down there is... I will leave it at that. Basically, to come back to my point, and I will finish by saying why, to address the petitions that we have now in front of us, why can't customers come to you and say, I have a fear, we can all get into it. I will not mention the products out there, you can go and buy them and put them in your fridge and it filters down the water at extreme cost, by the way. Basically, why can't we say to Scottish Water, right, you are changing my water, I don't want that. I am fearful for skin allergies, I am fearful for my son, I am fearful for my dialysis. It is going to cost me £2,000, I do not have £2,000. Why can't I get you to pay for that? In very simple terms, our obligation is to provide safe, high-quality drinking water, and there is a risk in us providing filters that it would undermine the safety of that water, because there is a risk of bacterial formation on the filters. I don't accept that, because at the end of the day, if I go to a doctor, I can get a prescription every so often. If I go to a pharmacy or a company that supplies me something, they send it to me every so often. If I get a filter off of you, you will supply me with a new filter. The operative word, and I will finish convener by saying, is a four syllable word, safe. You said that you will deliver me safe water. If I don't believe that, I should be safeguarded by you to get safe water. I absolutely agree, and that's why it is so important that we have an independent drinking water quality regulator who gives that assurance to people right across Scotland that the water is not just an aggregate, but area by area is safe to drink. I specifically ask about that. There are people out there who have some concerns about the process, and we hear suggestions that difficulties arise in relation to skin conditions and breathing difficulties. What of those claims would you accept, if any of them, as being appropriate and being accurate? There are potentially lots of complex issues. The area that caused me most distress was the issues that we had in bad-knock and stressed Spain—a whole bunch of different reasons there, partly because, historically, we didn't handle that situation well and we took too long to get on top of it. However, the skin issues were a particular concern that was raised there, because it was a very good example of where we actually changed the source of water from a lock-up in the Cairngorms to abstracting from an aquifer under the river Spay. There were people who undoubtedly presented themselves with having skin issues now that they didn't have before. The only way that we could deal with it properly was to engage NHS Highland, which, in that particular case, looked really hard at the data. It spoke to all the local GPs across the area. It looked at the data of skin issues after the new supply came on compared to the old supply. It looked at the instance of skin issues in bad-knock and stressed Spay compared to elsewhere in the Highlands, and the two key conclusions that came out in that area were one that was basically negligible difference between skin issues with the new supply compared to the old supply. Overall, the instance of issues was about 20 to 30 per cent lower in bad-knock and stressed Spay than against the Highlands as a whole. That was part of the evidence that NHS Highland gave to the Petitions Committee in July last year. That is the area where we looked hardest at it. I was struck, even in part of its evidence, that the significant percentage of the population as a whole suffer from skin issues. It highlighted the complex interaction of different factors that can give rise to it. It is very much a matter for the health services rather than us. The breathing issues? I must say that it is not one that I have heard of, Simon. No, not so. The science behind chloramination is really well understood. There is a huge amount of academic research, as well as organisations such as, for us in the UK, the Drinking Water Quality Regulator, the health boards elsewhere. There is a huge amount of data and information that gives us the confidence that that process is very safe for us to use. I am not aware of the specific breathing concerns in there, but I take a lot from the research undertaken by NHS Highland that talks about, in terms of the actual underlying science space that says monochloramine or chloramination, it is safe to use. Final question on the subject of micro-school. Is the need to chloraminate waters from a particular catchment related in any way to land management practices? I know, for example, Loch Hathryn, a major drinking water supply for Glasgow. You took the sheep off the hills there a number of years ago. You are reforesting the area. I understand that that is not just a biodiversity thing. It is an economic thing, but it is also about improving drinking water quality. Interested in knowing, is there a link with this particular issue? Let us start with this issue. The specific one there is associated with cryptosporidium, which is another thing that we have to control in the water. It is ubiquitous across landscapes across the whole of the UK. That would allow us in terms of how do we manage that catchment better. Elsewhere, we will look at impacts on peatland, for example, and peatlands and whether or not the source is about. If a peat is deteriorated, often by sheep or other uses young there, that can lead to more organic material coming into the water, which means a different treatment challenge to us. As such, we may then want to consider how do we control that. The catchment, for example, is primarily driven by the cryptosporidium rather than the actual other ones. We are very active in the whole area of land management. As much as anything, it is about trying to improve the source water, but it is about stabilising it from further deterioration as the climate changes. A really good example would be a super peatland restoration job with the local community around her lock supplying larywick in Shetland in the past year. Where is it going to deliver benefit to the source waters? Perhaps write to us with the detail of that, that would be quite interesting. The one in Shetland, absolutely. Yes, and any other restoration projects that are involved in it, because that obviously has climate change benefits as well. Moving on, Donald Cameron. Thank you, convener. One around Scottish Horizons and then local questions. Scottish Horizons has seen slightly lower profits in 2016-17 in previous years. Could you explain why and what is next for Scottish Horizons and Scottish Water International? The profitability of Horizons and International 2 can move about from year to year. At one level, we have set them up to be profitable. We are asking them to be quite entrepreneurial and innovative and to do things that benefit, if you like, Scottish Water and the water sector as a whole. Maximising profit per se is not the primary driver for the business. If I take Horizons, they do a lot of work in supporting the development community, for example doing impact assessments, helping with constructing new infrastructure for developers. They export water offshore into the oil sector in the North Sea. They do quite a bit of work on waste management. They have their own food waste recycling facility at Cumbernauld. They are also active in bringing waste in from third parties into some of our wastewater treatment plants. Effectively, we look to bleed that waste in alongside the sewage. As long as we can manage that within our discharge licence standards, that is a great win-win. It is getting more value out of our assets. Quite a lot they do, increasingly, is to support other Scottish businesses. We have set up two innovation test centres, one at Gorthwick in the Highlands doing water testing and a wastewater testing facility at Bones, where we are working typically with Scottish SMEs who are wanting to test potentially innovative new products. To me, that is a great example. It does not particularly feed through to the bottom line, but it is really good at supporting the Scottish economy. I move on to a local question that is around Gaeloch in Wester Ross, which I am sure you will be cognizant of. The current position is that Scottish Water is reviewing the controversial planned changes to wastewater treatment in the light of the very serious concerns that are expressed by the local community. Do you accept that the local community's concerns are justified? Can I start by referencing one of my earliest answers, which is that we work in hundreds of communities across Scotland, but occasionally we do not get it right, and Gaeloch, I would put in that category of, we did not get it right. The fundamental thing that we got wrong in Gaeloch was that we were going in from our own technical and logical perspective about what was the required level of treatment to protect the sea around Gaeloch. We did not understand sufficiently how it looked and felt from a community perspective. Simple in Gaeloch at the moment, we have got a bit of a Rolls Royce of a wastewater treatment plant far higher respect than is needed for that area, but it is so advanced that it does not work as well as it needs to do. That is why we are looking to replace it. Unfortunately, if you go to an owner of a Rolls Royce, even if it is a rather malfunctioning Rolls Royce, and say, actually, we want to go and change it to a Ford Fiesta because that is what is appropriate there, there is a feeling of loss. Therefore, given how the community feel, any person's feelings are absolutely valid, so if they feel that, even whether there is a right or not fully right basis for it, we have failed in our engagement to properly take them with us in looking at all the whys and wherefores around why we proposed the changes that we did. Alex Rowley I will ask a couple of questions on gender and diversity. First, the gender representation on public board Scotland Act, which now has royal consent and requires boards to have representation of at least 50-50 by 2020. How are you getting on with that? Are you on your way to achieving that? Secondly, as an employer of a public body, do you have proactive policies in place to encourage particularly more girls to look at a career with Scottish Water? Historically, Britain, but not Europe, seems to be that when you look at some of the trades, you look at engineering, you look at all these areas, it is predominantly seen as jobs for men, jobs for the boys. Is there anything that you are doing to change that to be able to demonstrate that you can have a good career within Scottish Water and encourage more women? I think that 27 per cent is where you are at just now in terms of the make-up of men, women, 27 per cent. Women, what are you doing to address that, and are you encouraging support for women at every level and all jobs in your organisation? Okay, why don't I start because you have asked about the board? I personally, as the chair, am very attuned to this issue, and I have been throughout my career in lots of different spaces, particularly here. Where we have had searches for new board members, we have been very proactive in spelling out, at the beginning of the search, the kinds of diversity that we would like around the board. Diversity is more than gender. I realise that gender is the one that has been crystallised just now, but diversity of thought and background and experience is what makes a really strong board. I have no hesitation about doing this at any stage in a search. I looked at the candidates who are female and pushed and spoken to a panel and whoever is considering the candidates to say, have we missed anything here? I know as a woman that women often have quite different career paths than men do, and that we need to be open-minded as we look at somebody's experience as we look at their CV to see what value they might bring. In recent searches, we have appointed two very strong women to our board, Samantha Barber and Deirdre Mickey. Again, they have very different backgrounds. They are contributing a good deal. I would love to hit 50-50. The thing about a board is that you do not change people at will. People have terms, and you change when the time comes. It is a little hard to have an instantaneous impact. Douglas can speak to encouraging younger women up through the organisation, but at board level, we talk about the gender mix and issues such as that. We talk about what programmes the organisation has to encourage women to not only start but to continue their career right up through the decades of their lives so that they have a chance to rise up. I have spoken to the women's network and talked about being professional my entire life and how you balance that with family matters and other factors. There are a lot of things that one can do, but you are right that, at the end of the day, one of the goals should be to have very senior women in the organisation. I think that we are beginning to see more of that. We have certainly, as a board, had some of our strongest up-and-coming women come and talk to us so that we become familiar with them. We give them some exposure to us. Perhaps enough said from the board level, but Douglas from the executive level. I think that the short answer to your question is yes, and many, many different examples. Maybe in the interest time, I will just share two. We are bringing lots of new apprentices into our business, and we are very consciously, in our promotional work, showcasing female apprentices doing technical roles as a way of showing that this is a place where it does not matter what gender you are, you can come and have a great career here in a technical area as well as any others. The second one that I would just highlight is that if I look in our operational side that Peter runs, we have now, in the past year, gone up to having eight operational managers who are female, where I think probably a year ago it was two. If you look at our whole future leadership programme, that is broadly 50-50, if I look at the succession planning discussion that I had with the board in March and I look at those who we see as having the potential to be in executive level positions in, let's say, 10 years out, three quarters of them are women. I just allow you the opportunity to comment that, because prior to your time in this post, I visited business stream premises and I was struck by the youthful nature of the staff. That seemed to be an emphasis in the early days. Is that still an emphasis? But perhaps moving on to the subject at hand, what work are you doing to encourage more women into business stream? A lot, as well. Myrran Whit Douglas and Susan have said before me that we have a real focus on family friendly policies to try and encourage not only working women with children but also working men that have families as well to provide that support. If I look at our gender pay reported stats for 2016-17, we are one of the very few organisations in the UK that did in 2016-17 have a 50-50 balance across both our board and our executive leadership team as well. If you look at our gender pay stats, again, we are one of the very few organisations where our mean gap for pay was actually 1 per cent in favour of women. We are consciously trying to do as much as we can to provide family friendly policies to keep women in the workforce throughout their careers. I can ask you about the customer forum. What work is the customer forum doing? How do we represent it? Is it the customers? What are the key priorities for the customer forum moving forward and engaging with your shareholders who are the public? The customer forum was a really successful part of our previous price review in terms of a very innovative way of getting customer representation and customer views right at the centre of our price review. It deemed very successfully and it has been mirrored elsewhere across the world. Myself and Douglas met some people from Australia, for example, who are now mirroring that process in the power industry in Australia. It is a very successful model. The new forum has about 50 per cent different members from the previous version of that. We are working extensively with them at the moment about our next price review. Their focus is very much on the service that customers will receive now and into the future, how we will monitor our performance, the prices and the charges for us, and things around the whole range of different services and how we interact with our customers. For me, who I am spending quite a significant amount of time with the forum members, there is a very welcome challenge and stimulation to us in terms of the types of questions that we have. We must really think about different types of customers, whether they are rural urban, the environment as a customer versus domestic customers or business customers. We are getting a whole range of different challenges. The key thing is that the forum works with us to try and understand what are the views of customers as a whole across the country. It is not about them bringing in their own views as customers or representatives. It is about us together resting with what matters to our 5 million people across Scotland and clearing the diversity of views within that to get that reflected as well as we can in a business plan that we will agree with them for the next regulatory period. The final question from Mark Ruskell. Can I end on an easy question? Private finance initiatives. Where do you go forward on this? I am aware that 2021 first contracts are going to be finalised. You are going to a processor review and analysis. Where are you with that? Do you have conclusions on whether the PFI has a role or not going forward? We have nine PFI contracts, the first one that you are referring to is one for Inverness and Fort William, which expires in December 2021. We have looked at the different options and we are actively in discussions with the PFI company on the way forward. I am about to say that it is an expectation or a commitment, but my expectation is that, if we are here in a year's time, I would be able to say definitively where we will be going on that. However, I think that if we are to give out a basic presumption or a strategic presumption against all of them, waste water treatment, which eight of the nine do, is a core competence of Scottish Water. Therefore, I would expect over time that those projects will get absorbed back into our core waste water activities. Whether precisely that happens in the date of contract expiry or whether we negotiate a small extension might vary a wee bit from contract to contract, but in principle, those eight will come back to us. The one where the biggest question is the contract that we have in Glasgow for sludge treatment and disposal that handles 50 per cent of Scotland's sludge expires in 2026. That is a much more open question as to what the right way for it is. I am not saying by that that it is another PFI contract, but I think that it is a much more open question because that is less an area where we have that core competence at that level of scale. Thanks for that clarification. Can you just very briefly outline what are the key reasons why you wish to abandon effectively PFI as quickly as possible and move services back in? Is this about your core deliveries, about meeting your core objectives, about price? Many reasons. I think that PFI has brought some benefits, but one of the downsides is that they all run a standalone work. For example, if you look at the manning levels in any of those, they are typically much higher than Peter would have in his operations, where we can manage assets on a portfolio basis. That would be one aspect. Another aspect, frankly, is that our cost of finance is much lower than if we were using private markets to pay for assets. There are a couple of things that you have undertaken to write back to us, and I obviously remind you to do that. I can also make an observation. There have been a number of points raised by members to perhaps a couple of points where issues that were discussed a year ago, there has been no great movement on them. He indicated that there may be movement on it, so please do not wait until a year from now if there are some movement on the issues that members have sought fit to raise today. If you could write to the committee and keep us updated. Thank you for your time today. At its next meeting on 24 April, the committee will take evidence on the Scottish Government's national outcomes and the Scottish County State Bill from the Cabinet Secretary for Environment, Climate Change and Land Reform. As agreed earlier, the committee will now move into private session. I request that the public gallery be vacated as the public part of the meeting is closed.