 We've received apologies from Gil Paterson and Alex Rowley, and being advised that Richard Lyle is hoping to join us a little later this morning. I want to take this opportunity to bid farewell to Kate Forbes, who's been a member of the committee since it was established. I think that on behalf of all of the members, I can say that we thank her for her contribution to the work of the committee over the last two years and wish her well in her new committee roles. Before we move to the first item on the agenda, I want to remind everyone present that the switch-off mobile phones and other electronic devices may affect the broadcasting system. The first item on the agenda is for the committee to consider whether to take items 4, 5, 6 and 7 in private. Are we agreed? We are agreed. The second item on the agenda is to take evidence on the Scottish Government's national performance framework national outcomes that we have joined by Cabinet Secretary for Scotland, Zana Cunningham. Good morning. Professor Colin Moffatt, Dr Linda Pooley, Sarah Granger and Roger Howaday, who will be assisting her. Cabinet Secretary, do you wish to say anything or can we move straight to questions? I just want to apologise for being a couple of minutes late, convener. I just got to Parliament and realised I'd forgotten my pass, so I'm sure everybody has been in that position. Indeed. No, I don't have opening remarks, so if you want to go straight to questions. We'll move straight to questions. John Scott. Good morning, cabinet secretary and your team. The first question is, how did the Scottish Government determine what the communities in Scotland are in this? I think that there's a fairly widespread and throughout a variety of different pieces of legislation understanding of the idea of community in Scotland. Obviously for some purposes there are particular definitions and in other parts of what we do there are rather broader ideas. I think that from the point of the national performance framework, I'm just wondering where it is, from the point of view of where it is. I have quite a lot of stuff here, as you can imagine. Are you talking about the consultation aspect of this, as to how we consulted? In terms of the performance and the key national indicators. Yes, it's about the consultation. It's about consultation, because from a legislative perspective, obviously some pieces of legislation have particular definitions of community organisation or community representation, and others have slightly different. What we did in terms of consulting on that was to try and establish the widest representation possible from a range of sectors, a range of interests. That would include policy makers as well as people like experts, practitioners, academics, businesses—all were involved. We actually included the children's parliament as well to ensure that that aspect of Scotland was involved. There were about 200 external organisations invited to take part in this, so it's a very, very wide range of groups. For obvious reasons, a significant number of those would have had a rural and or environmental remit, and there was a round table, which also included COSLA and the STUC. From the point of view of consulting communities, what we've done effectively is, as wide a range as possible, that we could do consonant with actually being able to deliver something practical. How were those representing their interests identified? Are there key criteria for identifying stakeholders and community? We are almost self-identified. There is a wide range of sectoral interests, third sector interests, policy groups and all the rest of it that are almost self-identifying that you would hardly not have included. As I said, there are around 220 of those external organisations invited to take part. The identification would have been, I suspect, to try and include as many as possible who would be able to contribute sensibly and quickly as well as effectively, so I might be wrong and I'm just looking at officials now. I don't think that it was a definitive list at the outset that we didn't depart from. I think that it was a situation where there would be a wide range of organisations, individuals and groups consulted, but if it became clear that there might be others required, you would look to others too. It wasn't a set list that we were working from, it was almost like a living list that changed as we went. I don't know if you wanted to say something very specific about that. I guess that the starting point was networks that colleagues from the Scottish Government had of expert stakeholders, but we also have a round table that advises on the national performance framework of which Claudia Beamish is a member, but that has experts or leaders from the public, private and third sector, and we use the networks that they had in order to try to get as wide a reach as possible. In the consultation that we worked with Oxfam Scotland and the Carnegie UK Trust to go out in particular to communities across Scotland, the criteria was to make sure that we had coverage in each part of Scotland, in each of the eight electoral regions, in particular in the community engagement that we did, to go to places where people were already meeting, such as social clubs, sports clubs and other existing environments. Oxfam Scotland, on top of that, did a set of street stalls where they looked across Scotland, and in thinking about that, they looked at making sure that we had a mix from the most deprived parts of Scotland to the most affluent parts of Scotland, so that we would try to build up as coherent a picture as possible. Would it be fair to say then that it is ad hoc rather than formulaic in the process? To some extent, it's ad hoc, but it's opportunist. It wasn't a prescribed list, I think, is what we're saying. It wasn't a prescribed list that we set out with that list to do that consultation. There would be some very obvious people that you would speak to, and as the process goes through, it could well draw in others. There were a variety of different ways of doing things as well, because at one point there was an online survey, as well as various kinds of conversations. The way of doing it was—I guess ad hoc makes it sound like you were just making it up as you go along, but it wasn't that either. It wasn't a prescribed list, but we did pull in other people as the process went on. We've identified that there were around 220 bodies all thereby. To what extent has the Government responded to stakeholders' views on the outcomes and the indicators? Do you go back to those people? Having given them, them having given you their advice, do you respond? I think that there would be a continuing conversation that was around that. It wasn't them formally giving a piece of advice, us taking the advice away and using that piece of advice to inform what we were doing. There would have been a more dynamic process involved in a lot of that conversation. Sorry. It's an on-going interactive process. Those are two particular stages. The first stage, we—as I laid out the group of people about the Scotland that they want to live in and what was important to them in their lives—helped us to shape the proposal that you have seen before in terms of 11 new national outcomes. There was a second phase that was looking at the indicators that sit behind those outcomes, and, in doing so, we engaged with a similar group of expert stakeholders and played back the outcomes that we'd come out with, drawing upon all those views. Things were revised slightly as a result of those second conversations about indicators. For example, we followed in suggestion on the environment outcome and added the words to enhance our environment that was suggested by some stakeholders at that event. I think that it's also worth adding at this point that there were previous Scotland-wide consultations that formed some of the foundation for that. Dating from 2015 and 2016, when there were two national public consultation exercises, one around what a fairer, more equal Scotland would look like and the other, what a healthier Scotland would look like. Both of those exercises comprised very substantial public engagement. There were over 16,000 participants in public events and more than 400,000 people reached online. That formed a basis for what we were doing. My understanding is that some of our delivery partners—Carnagay, UK, Trust and Oxfam Scotland—also themselves did street stalls in communities. There is a lot of very organic stuff going on throughout the whole process that feeds back, not just in a very formal sense but, in some cases, quite informally as well. I just naturally want to identify that it's a robust process. No, I understand that. The more I look at the notes, the more I see what's going on. I'm pleased to see you reading them. Yeah, absolutely. I haven't got this off my heart, I'm afraid. There would be lots of aspirations at the round table events. How many of these, in a ballpark sense, were found to be feasible, measurable and affordable? Or 30 per cent of the ideas? Or 50 per cent? That would definitely be one. I suppose that, with the indicators, we started before this review, it's important to mention that, in 2015 and 2016, we did a review of the environment and rural indicators that were in the national performance framework. Working with Environment Link, who is one of the partners here, we introduced indicators on green space and on the natural capital assets index. However, we did 22 workshops with 250 stakeholders as part of looking at the indicators on our national performance framework last year. That generated about 150 ideas of which we were currently measuring 66 indicators. Looking around internationally, other systems who tried to do a similar thing to us, measuring environmental, social and economic measures, had 50 or less indicators. We had to try and turn that from 150 to 50. The first age that you're asking about is the feasibility of those indicators. I would say that the majority of things that were suggested were feasible, but some of those attracted a cost to collection. That was part of the criteria for thinking about which indicators to bring in. I will finish off by saying that the other criteria that I had to think through in doing that were whether the measures were a decent, robust measure, so that whether they were based on good data, whether an increase or decrease meant an improvement or a worsening, so whether they helped to measure each of the 11 outcomes and whether they worked together or whether they were measuring similar things. We wanted to make sure that we had as wide a set of measures measuring different things as possible. Thank you very much. Very briefly, Stuart Stevenson. It's your Roger Halliday. Do you think that the final list covers every policy area for which the Government is responsible? It's not necessarily meant to be that. As my role as the chief statistician, I'm aware that we've got 79 indicators here, but we've published an awful lot more statistics. I was just being very specific. I understand that, of course, there's a lot of detail underneath that. I'm just simply seeming to see. I think that you're suggesting that our policy area is not included and not covered by this. Could you identify what they are then for us? That's clearly not a straightforward question, but I guess that, overall, what we've worked to is having the outcomes for Scotland that are meaningful to people and align with the UN sustainable development goals, align with the Scottish Government policy and help us to measure progress not just for Scotland but for communities in Scotland. Therefore, the Scottish Government policies all feed up into the outcomes, but I'm not sure that necessarily the indicators will measure track progress on all Government policies within the national performance framework, but we collect a much wider set of data and evidence in order to be able to do that. Can I ask about a sustainable economy and about the definitions that we have on that? Does a sustainable economy refer to economic growth that can continue indefinitely or to an economy that's in line with sustainable development? How do those differ? From the Government's perspective, we regard them as consistent with each other. Obviously, our outcome is to have an inclusive and sustainable economy, so that's in the overall purpose statement, but it's not the only element. Effectively, what we're trying to do is balance economic, environmental and social progress and keep the three of those in that balance. It is the case that the Government believes that economic growth is still an important driver for both Scotland's ability overall to flourish and for making sure that opportunities are available, but that growth can really only be via inclusive and sustainable measures. It's what lies underneath people's assumptions when they hear the phraseologies. The notion that economic growth at any cost is not one that the Scottish Government adheres to. When we talk about sustainable economic growth, we have underlined the understanding that things have to be kept in balance to ensure that we get the best possible outcomes for Scots as a whole. From our perspective, we don't see the two things as being somehow inconsistent. Can I use the example of salmon farming? Do you see that as being consistent? The target to double production by 2030 is being consistent with sustainable development. You acknowledge that there are tensions between the economic and the environmental and the social. Do you think that that's a target that is primarily driven by indefinite economic growth, or is there a sustainable development aspect to that target? A sustainable development aspect to that target will be achieved in a way that ensures that we don't either get environmental or, indeed, remember for aquaculture that there is a social and economic aspect. However, the point is about keeping all those in balance. No Government is going to pick any industrial sector and say that it can run out of control, so all sectors are subject to that same test, that application, that we are looking at balance across the board to make sure that the growth is sustainable. It wouldn't do aquaculture any good if the growth was unsustainable because it would just end up leading to collapse, and that's the case in almost any sector of our economy. Is there a growth with the aquaculture sector? You would probably need to have that conversation directly with those people who are involved in the aquaculture sector. With respect, I should imagine that for any country in the world that has an aquaculture sector, they may feel that there is a point beyond which it becomes difficult to sustain the growth, but it's about the sustainability of that growth, and I can't foresee what that sustainability might look like in the future, because the technologies around all those things and the understanding and the science changes all the time, so what might look sustainable now may not look sustainable in five years' time and vice versa. All we can ever do at any one point in regard to any sector in our economy is to make our best estimate at present on the basis of what our current understanding is. Is sustainable economic growth the only way to achieve a flourishing Scotland? Do we need to be focusing more on wellbeing and do we have the appropriate basis to make judgments on our progress through wellbeing? From my perspective, wellbeing would be so bound up with people's economic and social lives. I don't think that you can just split the two off as if they were separate. We know, for example—I know this from a previous portfolio responsibility—that being involved in good and productive work is an enormous part of people's wellbeing, so economic growth is absolutely fundamental to people's wellbeing. I don't see a sense in which you can pit the two against each other. I think that that would be a false way to look at the way Scotland or, indeed, any country works. Defining wellbeing as if it was somehow separate from economic growth or how we work in terms of the economic aspect of our culture is not helpful. There are things around wellbeing that we can measure, but I have just indicated one that I know from a previous portfolio responsibility, which is that good productive work is absolutely fundamental to people's wellbeing. Access to that work is fundamental to people's wellbeing. That is an indicator that would come out of the economic growth side but would be fundamental to the wellbeing side, so I don't think that it is so easy to pick it apart. Are there indicators that the Government is working on beyond GDP, which is problematic because it counsels the bad things as well as all the good things? Well, there may very well be interesting conversations going on elsewhere about how one measures, and I do know that there is a debate around whether or not GDP is the best way to measure economic growth that there may be other ways to do it. I think that the point that I was trying to make is that you cannot just separate out things in the way that we could say that there are indicators for wellbeing, as if they do not somehow are impacted by the state of the economy. We know that they are. I would say that that is exactly why we have a basket of indicators so that we can tell economic, environmental and social progress in Scotland. Indeed, we have got indicators or we have had in the framework an indicator about mental wellbeing for quite some time. We have introduced or chosen to introduce here an indicator on child wellbeing and happiness as well as children's physical and social development as well. Thank you. That moves us on to a line of questioning. I wanted to pursue inevitably when you go through a process like this or items considered and dropped, things not included and inevitably people take issue of where we have ended up. In terms of outcomes, we have gone down from 16 to 11. I ask for an understanding of the rationale behind why climate change and adaptation of mitigation are not included in any outcomes and why research and innovation was removed from the outcomes by way of example? Obviously, a lot of change backwards and forwards. Some things have expanded, others have not. I would need to say that the outcomes that we have chosen do stem directly from that consultation process that we were talking about earlier, which is an important thing to say as a broader statement. It is the fact that outcomes do not fit into neat policy boundaries. Some of the discussion around this pulls in discussions around individual indicators as opposed to broader outcomes. Whether or not something sits in the outcome list does not necessarily mean that it is not important, and there may be indicators that relate directly to that. Our feeling about climate change is that there are important indicators already in relation to that, such as the greenhouse gas emission and carbon footprint ones. We have already encompassed that in the framework. The broader climate change outcome line fits into the sustainable development, sustainable economic growth part of the much broader outcome. The difficulty with an exercise like this is that you could end up just replicating everything at every stage throughout the entire process, and you would end up with a document that would be enormous and lose some of its functionality. There is an entire conversation to be had about what is in and what is not in, but the point that Roger made earlier about the numbers of indicators that we already have is at the top end compared with most countries that do that exercise. They try to keep it around about 50, and we have ended up with about 79, so we are already pushing the boundaries on that. To indicate to us in a moment with Donald Cameron. The question is about indicators. Okay, I will let you in a minute then. Turning to the indicators, cabinet secretary, we have gone from 55 to 79. However, there are no specific indicators for climate change, mitigation and adaptation. There was an indicator considered around growth in green economy, but it is not included. There is nothing on resource efficiency, circular economy, recycling rates or one on land ownership. Those are issues that stakeholders have highlighted. Again, just a general rationale behind things that are quite important to this portfolio. I understand that, but there are other indicators that are important to this portfolio that we have increased the number of. This is a constant balancing exercise in and of itself. The climate exchange has in fact developed indicators to monitor adaptation in Scotland, and that covers the natural environment, buildings and infrastructure and society themes. They are in the Scottish climate change adaptation programme, so we do not actually feel that separate indicators are necessary. I think that it goes back to what Roger Scott said. We are not trying to encompass everything that is measured. It would become an impossible exercise then, because everything that is measured is already public and available. In terms of trying to inform this framework, we are trying to choose things that are, I suppose, more ultimately fundamental. There are lots of suggestions by stakeholders for indicators that would have covered things such as climate change leadership or demonstration of commitments internationally, but a lot of what was being talked about would have been extremely difficult to measure and the comparability. That is the other issue that you need to remember, that there has to be an ability to make real comparisons through time internally but also externally, when we are looking at ourselves against other countries. Trying to make decisions about that and keep that manageable, yes, it means that some things that some people want to see there are not going to be there. Other things are going to be brought in that were not there previously. On the subject of measurement, how will the outcomes and indicators being measured go forward? What future work is planned? For example, with the climate change indicators for greenhouse gases and carbon footprint, will those identify a target against which to track progress? Would inevitably those be revisited after the climate bill? As you are well aware, under the Climate Change Act, there is a target for the greenhouse gas emissions reduction. That is one of the key indicators in the framework and that is staying in the framework. The precise formulation of it and the target will need to be updated in the framework following the bill. As regards the carbon footprint, that has been in the framework for several years and is remaining in the framework. Whether there is anything in relation to the carbon footprint indicator that happens through the bill process remains to be seen. If it does, then yes, the national performance framework will need to be brought up to date with that. Is it a living document in many ways? It has to be, really. It is a constant process. Obviously, there has to be an iteration of it at some point, but at no point should it be seen to be some kind of final document for good and all, because that is not how we are working. We are constantly looking at this over a number of years. I have referenced things that happened before the review, because they were important for the review, but they will just keep moving. That is fine. Donald Cameron will be followed by John Scott. I want to ask specifically about recycling rates and why that appears to have been considered, but not ultimately included. You want specific reasons why? Yes. Right. I think that there is a lack of a circular economy indicator. Now, are you talking about that or are you talking about a very specific waste recycling? It is being considered, but it is not ultimately included. We have a waste-generated measure, which is very similar. Do you have a second one, or do you accept that the waste-generated measure is similar enough to deal with the figure that you are talking about? That is back to the replication of indicators. We chose waste-generated rather than recycling, and that is because waste prevention is further up the hierarchy than recycling. Some of the conversations that we have about the issues in food waste, and Claudia Beamish and I have had those conversations in the chamber and privately, just about what we are talking about when we are talking about food waste, and our targets in terms of food waste are about prevention, not recycling. In a sense, we have chosen the slightly hierarchically higher measurement for a particular basis. Because prevention is higher up the hierarchy, it fits, we think, better into the broader sustainability discussion that we were talking about earlier. Yes, there are many indicators of waste, and I dare say that if we legislate for the food waste target, people may want to argue that that should be part of this. There will be lots and lots of different things that you could put in, but if you put everything in, it is not really functioning documents. I hope that that explains why we went the way that we did. There is a logic to that. It was not a random thing. John Scott forward, Mark Ruskell. What are the criteria for identifying what should be an indicator and what should not be? It seems the kind of arbitrary process. How are we to judge whether you, the Government, are getting it right with this committee? How are we to judge? Is there an identifiable list somewhere that we can go and check and say, yes, the Government is doing a good job of this, the Government is not making a good job? We do benchmark, so we look at what is seen in other places that we are looking at to make sure that we are not missing things that would be seen internationally. There are a couple of things that I would say, and I can see Rodgers itching to come in here, but before he does, I would say among other things that what is really important is that what you have got is able to be captured in terms of information and is robust and is able to be compared chronologically with what has gone before, because otherwise you cannot show performance, or as I indicated with a broader benchmarking internationally. You are picking indicators that are meaningful, but the meaningfulness is not just how meaningful it sounds in a subjective sense, it has to objectively be meaningful as well. That is an important part of what—there is no point in picking an indicator, which, when you publish it, is open to too much dubiety about what you have measured. I do not know Rodger Rodger, if you want to. Self-evidently, what we are in the process of doing is evaluating whether or not the Government is making a good job in this process. It is not easy to know how to do that, since the criteria are not entirely clear against which you are working, and therefore it is harder for us to get a handle on that. It is not easy, because it is quite a large and time-consuming process that we are going through, but at the end of the day any indicators have got to be objectively robust, they have got to be capable of being measured, as I said, in time backwards and forwards, but they have also, in my view, from Scotland's perspective, got to be able to be looked at across the board and with international comparators as well. The Government produces a vast amount of data, a huge amount of statistics, and some of it is very, very singular to Scotland for very obvious reasons. If you chose something out of that, it would not really give you much of a perspective about where you were in terms of national performance. I do not think that you are wanting to look across and out beyond our boundaries. That is an aspect of what we are looking at, as well as the ability for that data to be tested and considered to be highly robust and very understandable. I do not want to stray into other people's portfolio areas, but, for example, I have not looked at the justice performance stuff, but I know from my former days that the difference between incidents reported and crimes reported and all the rest of it, which are all very important, nevertheless can lead to a misunderstanding and a confusion. We do not want there to be that kind of confusion here. We want it to be straightforward. That is a few things. First of all, we are doing this review under a community empowerment act, which means that we need to review and just present the outcomes, but we have decided to go beyond that and present the whole of the national performance framework, including the indicators. The criteria that we used were in the consultation document that we put into Parliament, but I will go through them for looking at indicators. There is a technical assessment, and that was based on international best practice, as was laid out by the Royal Statistical Society. As Ms Cunningham said, things about making sure that the data is consistent over time, it is consistent between areas, and the data on which it is based is precise enough to identify change and so on. There is another criteria that is about the meaningfulness of indicators. That is really to make sure that they have meaning to people, that we identified in our workshops—that was part of that—and that enables us to measure progress against each of the 11 outcomes and avoid any major gaps in measurement. We want it to be as consistent as possible with the UN Sustainable Development Goal indicators. We also finally wanted to make sure that we were describing progress not just for Scotland but where we have data for different equality groups in Scotland and areas that are based on the Scottish Index in Multiple Deprivation. When it comes to reporting, we publicly report progress against each one of the indicators on our Scotland Performance website. If we had good wi-fi in here, any of us could go through and check now exactly what the state is of that data. What we will be doing in reporting is moving from a place where we had just report on progress for Scotland overall to one where we are reporting on the different equality groups and areas that are based on inequalities as well. The indicator that you considered on air quality was the lives lost through poor air quality. I am reading here that the Government rejected that because it wanted more of a whole system measure. Can you explain that? On the face of it, there is perhaps no better indicator of whether the whole system is working as to whether people's health is being impacted or not through a multiplicity of air pollution sources. Why was that indicator rejected and what replaces it? I think that if I could just pick up first, one of the difficulties is that with that particular area it is ascribing the cause and effect very precisely, which is not really capable of being done. I know that there are a lot of figures being banded about, but one of the awkward aspects of that is that it varies enormously depending on individual people's responses to air quality. There was a 2010 report that produced estimates of the burden of added mortality associated with ambient fine particulate pollution at UK level, but that was based on particulate levels in 2008. I think that that is another problem with some of that sort of measurement, is that the time lag that is involved creates a real issue. That report, which was a UK Government Department report, however noted that there was an enormous variation across the UK. In actual fact, for Scotland, the attributable life lost was less than compared to England and Wales. I am not sure that we would really see that as being a particular—it was measured in months, by the way—and I am not sure that we felt that that was a particularly useful way to go forward in terms of trying to do that. The actual Government Department that instructed that advised against using those statistics because they are not precise enough to be particularly helpful. That does not mean that we will not continue to look at this if there is a better and more effective way to measure it, but, at the moment, as an indicator in something like this, we do not think that it would really help us across Scotland. Part of that will be down to the very particular, very localised impacts of some of that for certain populations. As a national indicator, it is not particularly helpful. I need to declare an interest, as Roger Halladay has already highlighted, that I represent Scottish Labour on the Cabinet Secretary for Finance Derek Mackay's roundtable on the national performance framework. As my colleague Mark Ruskell says, I feel free to ask me questions, but that is not the point. I have stepped a little back from the broader questions about the indicators deliberately because of that. I would like to ask some specific questions about the marine environment. Just to highlight that, my colleague Stuart Stevenson will be asking about the fish stocks indicators, so if we could take a pause on that until we come to my colleague on that. I would like to ask what the process for developing the new indicators was and who was involved in that. I think that that would be a helpful start, please. That is probably for Roger Halladay. I am not afraid that I was not involved at that granular level of proceedings. The basis of it is that Marine Scotland has been looking at the indicators that have been required for issues such as the marine strategy framework directive. Over a couple of years, we have been looking at how we can best meet the requirements of those particular aspects together with servicing and being able to answer questions on delivery with respect to the vision of having clean seas, healthy seas and biologically diverse seas. We have gone through a process, whereby we have looked at the indicators that exist together with the fact that, as the cabinet secretary indicated, we want indicators that are able to tell us something, that we are able to act upon. We have gone through a process of review such that, at the end of the day, we have concluded on developing indicators that are associated with the cleanliness of our seas, biodiversity of our seas, sustainability of our fishing. Thank you. Could you just highlight for us some of the range of the groups that were consulted and in discussions with yourselves on that, on the marine indicators, simply because there have been some concerns expressed about where things have gone. I will just highlight that in a minute, but I would be interested to know if you could highlight for us who was involved. I know, for instance, that the Scottish Environment Link was, and if there were other groups that you could just highlight for the committees. I just saw something in passing a few minutes ago, if you just bear with me. I did see a... Where did the team? The team just asked... When we were discussing earlier on a slightly different subject, here are some of the people that were involved. The Scottish Environment Protection Agency was involved, and I dare say that they would have had quite a lot to say about that. I am just looking at the moment about some of the Scottish Environment Link marine conservation society. Scottish Wildlife Trust probably would have had WWF. My friends of the earth were involved. I think that you would have known about marine conservation society because they are a round table member as well, she said pointedly. Scottish Wildlife Trust was involved in indicator workshops, online survey and structured conversations. Friends of the earth were involved in indicator workshops. Sorry, friends of the earth were involved in online survey, WWF were involved in indicator workshops. I am trying to see if there was any on this other. As I said, sea power was involved in the indicator workshops and the SDG workshops. I think that that probably covers the ones that you might think would have had an issue around some of this stuff. Marine conservation society has obviously been the most prominent of the third sector. Could you help us with the next question? The development of the marine and terrestrial ecosystem health indicators was considered. In our notes, it says to be developed, which I would highly welcome, the diversity index of both land and marine environments, but I am just wondering if there is any comment from your cabinet secretary or anyone else who is with us this morning on the decision not to include the marine and terrestrial ecosystem health indicators. If there is any comment on that. I think that the feeling was that those ecosystem health indicators that are currently published by SEPA are too limited in their coverage of the marine environment, particularly when it comes to the state of the offshore environment. That is why Marine Scotland went to the marine strategy framework on indicators instead. There is a proposed new biodiversity indicator, which aims to provide an indicator that captures the state of both terrestrial and marine biodiversity, and that is currently in development. I understand that you have only focused on terrestrial birds before and now. We are looking at how that can be more widely drawn. Could I just move us very specifically and finally from my perspective to, if I can get the phrase right, the Contaminant Region Combinations assessment, which I wonder if there could be a short explanation from your cabinet secretary or from one of the panel today. Is that what I have been given as an explanation? If it does not suffice perhaps one of my colleagues here. If I just say that I am interested to know how that will fit into the marine environment assessment, because it is a complex assessment arrangement. Will that be part of the overall indicator for the marine environment? There are, as I understand it, five groups of contaminants that are monitored annually in four regions around Scotland. That is covering both fish and shellfish and sediment. For the fish, for the animals, if you like, and sediment in turn—this is where I am afraid you have to have some understanding of how science works—the mean concentration of each contaminant group—remember, there are five, and we are talking about four different regions and two measurements, the animals and the sediment. Each contaminant group in each region is compared to a threshold, and that is typically called the environmental assessment criterion. If that mean concentration is below the threshold, then the contaminant group is unlikely to cause harm in marine life. That means that the specific region combination has good environmental status, but you can see with five contaminants four regions and two groups being measured. The combinations are quite extensive. Effectively, what it would give is 40 different assessments of environmental status—a single way of looking at things. The indicator will be the proportion of those that show good environmental status. The indicator would be a broad brush across all those 40. If more than 20 show good environmental status, then it is going up the way. If less than 20, then it is going down the way, etc. However, it is overlying the myriad of different pieces of information. We need to adapt it to assess Scotland's marine environment by focusing it on the four regions around Scotland. That is the Northern North Sea, the Scottish Continental Shelf, the Minches and the West of Scotland and the Irish Sea. We will try to provide an overall indicator out of all that underlying information to indicate the cleanliness of Scotland's marine environment. An overall assessment of the marine environment is going to need other indicators, and that is where things such as fish stocks and biodiversity come in. That is the way that it has been explained to me. I am reproducing that explanation. There may be more technical bits of information required there. Perhaps to take on as far as we need to go on the set of the calendar. Is that more information than you want it? I think that it demonstrates the complexity. I hope that answers in some sense one of the points raised by my colleague John Scott in that we do want to know how are these things measurable. This is measurable. My final question is, if anyone can clarify for us how regularly this testing will be done so that we can see the differences before I hand over to my colleague Stevenson on the fisheries. We take samples every year in January. We undertake a cruise that goes right around Scotland, which covers all four regions, and we collect the samples on an annual basis. I might ask if I could come with you. Thank you, convener. Let me just start a couple of things for the record. The area that we are looking at in relation to fish stocks is out to the 200-mile limit or an adjacent jurisdiction's boundary. Right. That is the first thing. The second thing is, how has the indicator word now proposing changed from the previous one? A little outside my comfort zone. The key thing is that we wanted the new indicator to relate far more to the sustainability of the actual fisheries. The current indicator relates to the proportion of stocks that are within the total allowable catch. That was something that did not directly tie in with the sustainability of the actual fisheries in the fish stocks. By moving to using fishing mortality, that directly ties in with the sustainability of the fish stocks. That is fine. The TACs are set politically and therefore may or may not relate to science. I think that we would all basically accept, whereas MSY is a scientific measure, so I suspect that that is a good thing. However, round our coasts, the different fishing areas have very different sustainability and MSYs for different stocks. How is that reflected in the way that we look at those things? In particular, the Clyde and the west coast are under very big pressure in certain stocks that are relatively abundant in the North Sea. Basically, the work that we are doing in terms of determining what we call FMSY, which is the fishing mortality rate that will give us maximum sustainable yield, is determined, as you say, on specific stocks. The stocks in specific areas—so stocks in the North Sea stocks in the west coast and, as you say, stocks in the Clyde—the key thing is that we are measuring those stocks to try to ensure that each of the stocks is sustainable. Then, what we are going to look at is the percentage of those stocks across the whole area, which are actually within FMSY. You said that the area—are you referring to the whole of the Scottish waters, or are you referring to the particular fishing areas—area 4A, 4B, etc.? The particular fishing areas is what we are looking at. So each area you are looking at, but of course we are ending up with one indicator. So how does, if areas 4A and 4B are doing very well for HADACs, but area 7 is doing incredibly badly for HADACs, how is that reflected in the indicator? What will happen is that we will have the basic data for each of the areas, so we will have, say, the HADAC data for the west, the HADAC data for the east, and that will give us the specific value for those areas. As I say, the final indicator, as it will appear, will be the percentage of those stocks, which are within FMSY, but we will have the data for the specific stocks in the specific areas, which will be underlying the final indicator that is going to be quoted. Do forgive me, I understand that there is a huge amount of data and I am confident that that is being measured, recorded and published, but I am back to that we end up with one indicator. In other words, if the HADAC stocks in the west coast of Scotland vanish to far below FMSY, does that mean that that indicator goes red, even though the HADAC stocks everywhere else are? If that area was not being considered, it would be green and certainly green. The point that you have picked up is a very relevant point in terms of the fact that, in any indicators where you are taking data and you are trying to get it down into one specific outcome, there is a chance that you would lose some of the underlying granularity. Based on the percentage, as it is, it would not necessarily go red, should one of the stocks go down, so that, in effect, the spawning stock biomass goes below the limit that is acceptable, so below BLIM. However, this is again a wee bit where, in planning and developing the indicator, we will be looking at the granularity of it. I am absolutely content that Marine Scotland will be managing at a granular level and responding to granular problems. I absolutely understand that, and I am not trying to suggest otherwise. On the contrary, I am content that that is happening. We are trying to produce a relatively small number of indicators, albeit that it is more than 50 that appears to be the international standard. I am just wondering what the value of the indicator that relates to that actually is when it might be green, but you have very significant problems that are geographically constrained. That is my issue. I am perfectly persuadible, but I just do not get it at the moment. At one level, it is a similar response to the one on contaminants. You have so much detailed information that any handful of these could drop below what would be considered unacceptable, but the overall picture remains good. That, from my perspective, would apply equally in the situation that you are talking about. In a sense, a little bit of the same conversation was picked up on the air quality one as well, because we know that, for vast parts of Scotland, air quality is fine, that there are very small areas where it is not. A national indicator in those circumstances is trying to find the right way of expressing that, and that applies in that as well. To a certain extent, even some of the regions that we are talking about are artificial. You could change the regional boundaries for measurement and come to completely different outcomes, so they are a bit arbitrary to start with. I would have thought that it remains, from my perspective, the case that, if we are talking about Haddock stocks, if Haddock stocks were good in all but one regions, overall the picture is good, that does not mean clearly as a Government that you are not going to be looking at the problem that is in one area, but it does not pull down the whole of the national picture unless there is more than one area with the same problem. I guess that is really where we are with a lot of this, and a lot of the indicators will have this very detailed granular information lying beneath them, but, at the end of the day, every single statistic that we have is compiled from a set of myriad things that are good, middling and bad, and we amalgamate them to produce a picture in almost every bit of statistical information that is put out there. Cabinet Secretary, I am perfectly content with that, and I think that it touches on really all the indicators, is the real point, is the philosophical point. I just want to ask a little bit about fishing mortality and how we assess that, because many of the landings are not at our ports, even though the fish were caught in our waters. Indeed, 60 per cent of our catch is in foreign vessels. Many of the foreign vessels land at our ports, but many of them don't. Particularly if they are up at the top left, it may be much more convenient to go to Norway, for example. How do we deal with that mortality? In relation to mortality, are we only looking at the commercial stocks or are we looking at things that are not commercial stocks that are part of the mortality of the fishing process? How do we account for that? Fishing mortality, as you are probably aware, is quite difficult to measure per se. First of all, we have to measure the abundance of the different stocks in the different areas, and we do that through our classical fisheries surveys. The point that you are making in relation to the fact that some of the fish caught within our waters are landed elsewhere is the reason why the assessment is done through the international council of the exploration of the sea, where we actually take the data not just from Scotland, but from Norway and from other countries around, for example, the North Sea. What we do is work out the abundance of the fish, and then we work out the catchability of the fish to allow us to calculate the fishing mortality rate, but we do that in conjunction with other countries. We have surveys that are common to Scotland and common to the other ICs member states, and the fisheries that we use are calibrated. The other thing that we do is that across the ICs area, scientists analyse the pickup fish at the landing ports. We try to, across the fishing communities, measure 200 fish per 1,000 tonnes of fish landed, which means that across the ICs area, we analyse 1.6 million fish a year. We are taking a huge sample of the population, not just from the Scottish ports, but from the whole of a specific area that we are analysing. That is how we take account of determining fishing mortality in the areas where we have multiple countries involved. Why, precautionary enough, are all fish stocks? I have heard arguments that with pelagic fish that we should be fishing, the effort should be aiming for a target below MSY. MSY is set, but we have precautionary limits related to the spawning stock biomass, so what we call BPA. We do not just look at fishing mortality. We look at the spawning stock biomass because one of the challenges that we have is that in any one year, the fish year class may vary quite significantly. That is why we assess the current state of the population. What we can see is that year class is coming through the system. If we have a particularly good year when there is a lot of little fish born, then what will happen is that in a few years' time, we will see that year class become very large. Therefore, we know that the abundance has increased. It is a very fluid picture that we have. With the pelagic stocks that you mentioned, we assess them in a slightly different way. With the demersal stocks that are on the ground, we do it through trolling and capture. With the likes of mackerel, we do a mackerel egg survey. We have to measure the stocks in slightly different ways in order to come up with the required information. However, the key thing is that, to relate it to FMSY or Fishing Mortality Maximum Stainable Yield, it is not just that particular value that we are taking when we are doing the actual calculations. It is a good indicator in terms of providing information in relation to the national performance framework. However, as part of the overall picture, we also take account of the spawning stock biomass. The change in the biodiversity indicator, as we heard earlier, has been broadened to include terrestrial and marine biodiversity. I am going to put two or three questions together to make it easier for you to answer. Why is there no clear descriptor for the biodiversity indicator? Can you provide more details on what the marine biodiversity indicator will be? On the back of that, is the current monitoring activity in place to provide the data for the indicator in relation to baselining, or will new monitoring activity need to be developed? We are still developing the new indicators, so it would be difficult for me to answer very specific questions about that, simply because that is still in the process of development. We are trying to develop that so that it covers marine and land. One thing that we are looking at is to expand the current indicator, which is based on terrestrial birds, to cover seabirds and wetland birds. We do not want to close off our options at this stage, so that is one thing that we are currently looking at. There is another possibility to select a number of key species from each environment, terrestrial and marine, and assess each in terms of their direction of travel—how healthy, how not healthy they are—and then make some overall assessment. Those are things that we are still looking at in terms of how we are going to develop the new biodiversity indicator. I am not quite sure what the timescale is for us getting something that is more definitive. Do we have a timescale for that? We do, yes. We want to have it developed by 2019. One of the key things is that there are already indicators relating to marine birds, marine bird abundance and marine bird breeding success or failure, which are reported for the Greater North Sea and indeed for our west coast. We have a data stream that allows us to report currently on the status of marine birds. That was reported on by the OSPAR commission as part of its intermediate assessment 2017 last year, where, to give you an example of the number of biodiversity indicators, it was using 25 individual biodiversity indicators to try and assess biodiversity in our seas, which gives it an idea of the number. In fact, it hopes that it will probably increase that to about 40 different indicators. The good thing is that, in the likes of birds, cetaceans and seals, we already have a significant amount of data. That was my next question. Is there enough scientific knowledge of the biodiversity? Who are you consulting at the moment with regard to that indicator? Will the indicator be aligned with EU and international biodiversity strategies? I have already read out a number of the relevant groups who have been involved in the consultations, and they will have been involved in that consultation in respect of biodiversity. I expect that some of them, Marine Conservation Society, WWF and so on, will have been more interested in that than perhaps some of the others. They are already actively involved in that. I do not know whether there is an intention for it to be more specific and beyond those groups. I would imagine that a lot of the individuals that we have talked about—the academic input, et cetera—will be relevant here, too. I do not know if there is anything that you want to add to that, but that indicator will have been discussed along with others as part of the work that has been getting done already. There has just been a workshop, which was at the UK level, on biodiversity indicators, and it covered a significant range of organisations, the Joint Nature Conservation Committee, SIPA, Scottish Natural Heritage, Environment Agency, Marine Scotland. The other thing is that, in terms of some of the indicators that I have mentioned, as part of the UK's commitment to the Marine Strategy Framework Directive, the report on the UK position relative to the indicators for the Marine Strategy Framework Directive is going out to general consultation later this year. All the indicators that we have used to date in terms of biodiversity will be put out for full public consultation. In terms of the international thing, we are a contracting party to the OTHBAR convention, so that would be part and parcel of our thinking. We are involved in those international organisations. Frequently, I think that I want to ensure that Scotland continues to be able to perform in terms of its international obligations, notwithstanding any word beginning with B. Fascinating work in progress. Can I secure from your commitment, cabinet secretary, to update the committee in due course as that progresses, because it is obviously something that we are going to take an interest in? Do you want us to make the updating the specific things that the committee has expressed an interest in this morning or just in broader general terms? Anything in general, but I think that the specific theme that we are exploring at the moment around biodiversity, I think that we will obviously be interested in how that progresses. One final line of question from Donald Cameron. I suppose that this is a very general question, but one of the issues that emerges is policy coherence and the fact that we all share an endeavour, which is that different policy areas can work together. My question really is how will the framework support the development of a coherent policy across both across Government and wider public sector? Where do you see it helping? I suppose that, first of all, it is trying to give an objective picture across economic environment and social progress. That in and of itself is an important part of when we are looking at policy development, getting that sense of an objective picture of where we are. We will, as ministers, continue to use the data alongside other evidence. As we have already explored, there is a great deal more information out there that can be added to specific policy areas. We take the national performance framework information and a lot of the other evidence that we have already discussed here to ensure that we are making progress coherently. That is an on-going process, as you would expect. I would assume that almost any Government would be trying to do precisely the same thing. The indicators are available to ministers and the wider public at the same time through our website. We get advised of progress in terms of the national performance framework at the same time as the whole of Scotland gets advised of it, and we see straight away whether areas within our own cabinet responsibilities are improving or otherwise or are simply level pegging. That is something that we are constantly getting updated on. I am trying to think that there is probably a cycle for doing it, but it seems to come through relatively frequently. It is something that we are having put in front of us as cabinet secretaries responsible for particular policy areas for us to be able to look at. That does then, from my perspective, lead to a return response on mine. Why is that going down? What is behind that story there? Is there something different that we should be doing? That is, in a sense, really what this is all about. I do not know how true it is, but I would have expected parliamentary colleagues to also use it for the same purpose in effect. If the national performance framework indicators are going in the wrong direction in any particular policy area, as well as the expectation that the cabinet secretary involved will be looking at that and saying, how has that come about? I would have expected parliamentary colleagues to be looking at that and using that as an exercise, a tool in which to explore issues in particular areas. That is effectively the sum total of what the national performance framework is there for and does. Thank you, cabinet secretary. That has been useful. You have undertaken, obviously, to update us in due courses as matters progress. Thank you for giving evidence this morning. I am going to suspend for a few moments until we change your officials round, and then we will move on to the Crown of State Bill. I suspend for a few moments. The second item on our agenda this morning is to take evidence on the Crown of State Bill that we have joined again by cabinet secretary Roseanna Cunningham, and this time her officials Douglas Kerr, David Mallan and Mike Palmer. Cabinet secretary, do you wish to say anything at the outset before we move to questions? Yes, convener. I have an opening statement in respect of this item on the agenda, just to set the generality that, of course, this Crown of State Bill is proposing new powers for the Scottish ministers to change who manages Scottish Crown of State assets and opens up the possibility of local authorities and communities taking control of the management of those assets. The estate obviously consists of a very diverse portfolio, including thousands of hectares of rural land, half of Scotland's foreshore, urban property and seabed leasing rights for activities such as renewable energy. We quickly came to a view that one size fits all as an approach was simply not practical. The Bill therefore lays the foundation for changes in the management of individual assets. We want to maximise the benefits of the Crown of State for communities and the country as a whole while ensuring that assets are well maintained and managed with high standards of openness and accountability. I know that the proposed arrangements for the Scottish Crown of State and the Bill are complex, so it is understandable that there are going to be some misunderstandings in respect of this. With that in mind, I thought that it might be helpful to explain how we see the financial flows working. Members, I hope, have circulated an attempt by us to produce a paper that allows a simple explanation in flowchart form on how effective it is for you to decide. It is not being circulated as a basis for you to specifically ask questions so much as a hope that, by putting it in this form, it makes life a little simpler in terms of understanding what is happening. The first and most important thing for everybody to understand—and by everybody, I know that the committee will understand that already, but beyond the committee—is that the Scottish Crown of State has not brought any new money into Scotland. The UK Government's block grant to Scotland has been reduced by the estimated annual amount of net revenue earned by the Scottish Crown of State assets. Under the Terms of the Scotland Act, the net revenue from the estate—that is the income from leasing and licensing and all the other Crown of State Scotland activities—minus the costs of managing the assets is paid into the Scottish Consolidated Fund. We are clear that whoever is managing the assets has to maintain and seek to enhance the value of those assets and the income arising from them, otherwise Scotland as a whole is out of pocket. The money earned by the Scottish Crown of State assets can now, however, be used differently. The net revenue generated by the marine assets out to 12 nautical miles will be dispersed to the three islands local authorities and the other 23 coastal local authorities. The local funding will not be hypothecated, but we would expect local authorities to be transparent and accountable to their communities on how that money is spent. We are in constructive discussions with COSLA on an interim mechanism for local authority areas to receive a share of that revenue, and we expect to reach agreement on that soon. As you know, the bill places a duty on the manager of an asset to maintain and seek to enhance the value of the asset and the income arising from it. When the management of the Scottish Crown of State assets was transferred to Scotland, we inherited the pre-existing arrangements, which meant that whoever manages the assets—currently Crown of State Scotland interim management—I can retain 9 per cent of the gross revenue for investment in the estate, for example renovations and repairs to farm buildings or the purchase of new assets. Thus, before the net revenue is surrendered by the manager to the consolidated fund, the 9 per cent figure is subtracted. We are keeping the facility in the bill, but we are taking the power to be able to vary the percentage that is subtracted in the future. It may be that some assets need more capital investment than others, and the bill provision will allow a more responsive approach to be taken. That is not the only way that managers will be able to invest in the assets that they are managing. At present, the Crown of State is managed as a single estate, although there are many different types of assets. If one part of the estate is not earning enough income to cover its maintenance and management costs, it can be subsidised by the better performing assets—we all know that as cross-subsidy. We want to keep the ability to cross-subsidise even when there are several managers of the assets, so we are taking powers to enable ministers to direct a manager to transfer a sum of money from that manager's account to another manager's account. That way, a community organisation should be able to take over the management of a local asset even if that asset is not in itself going to generate enough income to cover costs. To be clear, that is money that would come from a manager's Scottish Crown of State accounts and not from any personal accounts of the manager. The bill requires a strict separation between a manager's Scottish Crown of State accounts and any accounts of their own that they may have. The bill also sets up national governance frameworks, specifying accounting and reporting procedures that should result in openness and transparency about the management of the assets, whether they are managed locally, by communities or nationally by Crown of State Scotland. I want to put that statement very firmly on the record, because I think that there is a bit of confusion out there as to what exactly is going on with the devolution of the Crown of State to Scotland. Okay, thank you, and we'll cover some of that as we go along. To kick off, my question would probably be around the vision and the purpose of the bill. If we were to come back here five years, ten years from now, what would be the judgment of whether the bill had been a success? What would we be looking for from the Crown of State and what it was delivering for Scotland in five years, ten years from now? Well, there are probably a lot of different things that you could say, but I think that in total what you would want to be ensuring is ultimately that it is operating to the benefit of Scotland and its communities, and there has been a long history of concern that the Crown of State didn't function necessarily with community interests at the forefront of what it was doing. That was an old criticism and one that was taken up by predecessors to this committee. That benefit of Scotland is obviously financial as I've outlined there, but it's also socioeconomic and environmental too, so it encompasses everything. That means that we would look to a position where managers, whoever they are, are actually placing more emphasis on those wider benefits when making decisions. In five years, ten years, I would hope that at least some local authorities have wanted to take over direct management. Most of the interest at the moment has come from a handful—Orkney, Shetland, Western Isles and Highlands and Islands—perhaps not even Highlands and Islands. Beyond that, there hasn't been an expression of strong interest from any other coastal local authorities. I would hope that if we were looking at five or ten years into the future, more coastal local authorities will have certainly considered it and may have taken on management. However, I would also hope that we saw more community organisations having done so as well. I don't want this just to be a conversation about devolution to local authorities. It should also be about local communities, and I hope that a number of local communities will be in position in five or ten years' time when they will have taken that on, because it was particularly local communities that felt that their interests weren't being taken into account previously. Obviously, there is a financial issue with the net revenue issue, which I have outlined in my opening statement. I very much hope that when we are talking about the Crown Estate in five or ten years' time, that it is contributing to the Scottish consolidated fund and not a drain on it. That is obviously a fairly fundamental point to make. I certainly would hope that for those local authorities that are getting the net revenue from the marine assets out to 12 nautical mile limit, that they are using those revenues for the benefit of coastal communities. That is why I made the point about transparency and accountability. While we are not hypothesising the purpose of the money effectively is to enhance the coastal communities. Five or ten years' time, I hope that you are going to see if not the whole of Scotland's coast tied up in this way. Nevertheless, a significant percentage of it, at that point, would be. Sorry, did I go on too long? No, I talked about it. We went into a question from a constituency area hat. When you talk about the issue about local authorities securing funding that they have not had in the past and transparency and accountability, would you, for example—I do not want to put words in your mouth—a local authority inheriting some of money to deploy it on issues such as coastal erosion and things like that when it has come from a coastal source? That may very well be something that a coastal local authority would want to consider. I know that, depending on which local authority we are talking about, there will be different drivers for what they want. However, I think that the expectation from us and Government as well as I suspect from people on the ground would be that the money that any local authority obtains through this mechanism is actually used for the betterment of coastal communities in some way, shape or form. At the end of the day, the amounts of money that are transferred will be transparent. You will know exactly what that money is. Everybody will be able to track how that money is then spent. I suspect that it would not be a wise move for any coastal local authority to displace that money elsewhere. Is it recurring sums of money as opposed to one-off? It is an annual calculation, an annual process. It will not be exactly the same amount of money every month because of the way every year, but it will be roughly the same. I need to make just the point here about the distribution mechanism that I am talking about. There will be a shorter-term interim distribution mechanism to get us over the first year or two, but the form of distribution may change. However, there will be an understandable logical calculation that people can look at and significant and specific amounts of money that will then emanate from that to each local authority, each coastal local authority. You indicated that there is dialogue with COSR on how sooner we are likely to get an indication of what the sums of money would be or the mechanism. I have asked officials—I do not know whether they have had time to be able to do it—to give us an indicative indication of what it might have looked like last year or the year before on the basis of some of the current distribution models that we are discussing for the interim process. We are still hashing out with COSLA what the more final distribution model will look like. I do not know how close we might be to that. That is a difficult one to gauge. Let me put it this way. The first calculation for payment will be next March for payment for the 1920 year. That will have to, I think, be on a necessity beyond an interim distribution model for understandable reasons. However, because the payments are annual, it is a pretty big incentive to stay at the table until an actual decision is properly made. Just to pick up on that last question before I move on to the one. You said that you hope, while the Crown Estates at the moment are contributors to the consolidated fund, that you hope in the future that there will not be a drain on that fund, and given the expectations raised, do you see that as a real risk, a real possibility that it will end up being a loss, as it were? I do not think in Scotland-wide terms. That is why we want to retain the cross subsidy. We know that, in the case of some very specific assets, it would be difficult to to say that you, as the new managers, have got to run this at a profit when, perhaps in specific terms, that has not been the case before, because in actual fact it has been getting cross subsidised. It would be an unfair imposition. By maintaining the cross subsidy, we are able to allow that to be evened out across the whole of the estate. I know that there have been debates here about what aspects of benefit are important, but it is why getting value out of the management of these estates is important. It is rather than the risk that that will be the case overall. The issue might be that people managing a local asset forget that they are part of that national figure. They would become so focused on their local issue that they would stop seeing themselves as part of the national picture. However, it is not new money. It is coming in, but we have had money removed. It is absolutely imperative that everybody who is managing a crime estate asset, whether that is a crime estate nationally, whether it is local authorities or whether it is communities, manages that to the very best of their ability and with that outcome of success being in the forefront of their minds. It would appeal that it is a risk, because it will not be a net contributor to the consolidated fund. Moving on and declaring an interest as a farmer, in terms of management of assets at national and local levels and its consultation on the long term arrangements for the current estate, the Scottish Government set out a table, indicating at what geographical level it considered different assets would be most appropriately managed. Does the Scottish Government still hold broadly the same view on this as it did at the time of the consultation? What is the Government's view now on those assets that, at the time of the consultation, needed more consideration? I do not think that we have made absolute final decisions on the assets that are split, if you like, between national and local, but what we indicated at the outset is a sensible and likely to be the basis of how we move forward. As we have already had a conversation about, not all assets may be sustainable in their own right, so I do not want there to be financial burdens placed on communities or local authorities, and that would be invidious. While John Scott's pessimism does not stand out, I do not see from the national picture there being a risk in that. It would be an unfair imposition to put people into a position or organisations into a position where they were having to manage assets that were not individually sustainable in their own right. As we go forward, we will be giving us really good information on whether some assets are likely to require cross-subsidy. Do not forget that that level of detail in Crown State finances has not really happened before in the same way. From a point of view of practical management, there are some issues that need to be taken on board. We do consider there to be a case for the management of the seabed, particularly the 12 to 200 nautical mile zone, leasing for strategic national infrastructure such as telecoms, cables, pipelines, et cetera, all to be undertaken at the national level. We also heard very strong submissions, as I think did the committee from the tenant farmers on the Crown Estate, landed estates in respect of what they wanted to do, and we have responded to that by taking a view that, at this stage, that should be retained as part of the national management of the Crown Estate. That could only change if those people who are actively involved in the farming on those estates wanted there to be some change themselves. At this point, there is no indication that that is what they want to do. I am just being reminded that the rising income for newables will mean that overall net revenue is expected to increase. It goes back to your very pessimistic outlook in terms of the overall picture. We might also flag up that we might charge some assets at less than market value, but it is overall not expected to balance out as a drain. We would be keeping a constant eye on that anyway. That is an expectation, but that is determined by external factors. For example, offshore wind developments will only proceed with contracts for different support, for example. There are factors that play that you have no control over. That is the purpose in setting it up the way we have. Mike, do you want to commit to that? I just wanted to add that, in terms of the risk of a drain on the Scottish finances, just to remind the committee that section 7 of the bill places a duty on each manager to maintain and seek to enhance the value of the asset. That is a very clear duty that is being placed on each manager, which reflects the importance that we place on the financial efficiency of the Crown Estate in Scotland. Do there appear to have been promises and expectations raised in that regard, that much of the income from the Crown Estates will now go to local communities and councils? I think that there is perhaps a job to be done there in terms of managing expectations. I will come to that in due course. I thank you for reminding me of all that. I just wanted to ask a question about the managers who have taken over from the Crown Estate, particularly where they represent community interests. The recognition that has been said up to now is that some of the assets that are now being managed by community bodies are, in fact, in accounting terms, liabilities rather than under section 7. They can maintain but seek to enhance. There may be very limited opportunity. I just want to ask an accounting question. If this asset, which is this body, which will presumably be a limited liability company or registered as a charity or will have some formal structure, how does it deal with the fact that its only asset is in fact a liability in accounting terms? Who stands behind them to make sure that the legal requirements for them to be able to balance their own internal books is met? How does that actually happen? I think that that is Mr Palmer, but I could be wrong. I am generally not doing accounting questions. I can have a first stab at that, and David might want to come into on some of the detail. I think that the first point to make would be that there would be a separation of the accounting between the Crown Estate elements of the accounting of that organisation and any other elements. That is very important to understand at the outset. Can I just say that, part of my question, that that very separation, the Crown Estate part, is separate and separately accountable, but in some cases will never ever, and there will be no expectation that it will anything other than a drain rather than a drain. That is why we want to retain the cross subsidy. Sorry, I understand that point. I am only asking you in accounting terms. How is that? Does that mean that the cross subsidy has to appear as an asset for them, and therefore they need to know what it is before they get it? Could I perhaps attempt to answer the question? I suppose that it is a hypothetical question, and there is a prior question about whether, at the end of the day, it would be a wise thing to give a loss-making asset to another body, but there may be situations where that is considered to be a good thing to do. In accounting terms, cross subsidy is quite an important part of the framework here, because the accounts of that manager would not only show what income is received directly by the manager, but it would also show where there has been an injection of funding through the cross subsidy arrangements to enable it to be a zero balance sheet from year to year. The accounting is designed to be flexible to take account of that scenario, and when it comes to the duty in section 7 to maintain and seek to enhance, if the income is zero at present, it is not too challenging to maintain it at that level. Indeed, it may be that the asset has just been underutilised to date because the national manager has been focusing on bigger assets, and through further devolution, a local community organisation might be able to make more of that particular asset and therefore potentially enhance the value. That is my final point, convener, but there will be assets that will always be a negative that you might feel would be better managed by the community, but not necessarily better managed to the extent of becoming a positive income. Who ultimately bears the liability? In other words, where does that liability transfer? Is it consolidated with the Crown and States accounts or the Government's accounts? Who's accounts? Obviously, what appears in one balance sheet is a liability, and it has to appear in another balance sheet in those circumstances with the opposite sign. That brings in the concept of the Scottish Crown and States. It might not be Crown and States Scotland, although it could be that they are providing the cross subsidy that could be coming from another manager of a Crown and States, but the same is the case that the liability has been covered by the Scottish Crown and States rather than the community organisation. Mr Stevenson has taken us off on a slight tangent, but we will stay with us just now. Do we have a queer picture at the moment of the liabilities of Crown and States Scotland as things stand? Quite a lot of work was done in advance of the transfer on 1 April 2017 to better understand the liabilities. In simple terms, it mainly boils down to the landlord responsibilities and the employer responsibilities. I think that it is the landlord responsibilities that are the more unusual aspects of the liability question. Those liabilities split down into contingent liabilities as the landlord and residual liabilities. By contingent liabilities, we mean that, as the landlord, there is an expectation that, after use of part of the estate, there will be a restoration of the estate to the condition that it was in before. Normally, through the lease agreement, the requirement to restore would be for the developer to undertake, in the case of the use of farmland for mining activity. There is an expectation that the developer would restore the land to a condition fit for farming or for another use. However, the contingent liability sits with the manager because there is a possibility that that developer may not be able to honour those undertakings. As a landlord, there would be an expectation that the Crown Estate picks up that amount of money. For residual liabilities, that is after the decommissioning of an activity. It could be that, in the case of a wind farm, where the Government is responsible for ensuring that there is a decommissioning scheme in place and that it is for the developer to ensure that the decommissioning scheme is completed. At the time of decommissioning, the developer may get approval not to remove all of the infrastructure from the marine environment, and so some infrastructure remains in place. The residual liability would exist in that scenario if a third party was subjected to damages by the fact of that infrastructure remaining in the water. Those are the main liabilities. There are some less expensive ones, for example maintenance of property and the stewardship of the estate. Mr Stevenson is chomping at the bit. There must be a subjective element to that in so much as a tenant farmer might be of a view that there is a backlog of repairs that the Crown Estate Scotland does not entirely share that view. It must be, in some respects, difficult to entirely gauge the level of liability. I think that there is the difference of opinion that may exist. There is also an estimation of what future requirements may be, which requires assumptions to be made. In the case of lease agreements between a farmer and Crown Estate Scotland at present, that agreement does normally make clear what is the responsibility of the Crown Estate and what is the responsibility of the farmer farming the estate. Usually, it is a mixture of both, but there is clarity in the agreement, so there could sometimes be a feeling on the part of a farmer that it is for the Crown Estate to undertake something that, in actual fact, Crown Estate Scotland has written into agreement is for the farmer to undertake, but usually there is dialogue between the two parties on that to try to resolve the situation. John Scott and then Stuart Stevenson. Thank you very much, convener. Just going back to the evidence that SSEN stated that asset managers should be responsible for the liabilities associated with their assets, while Community Land Scotland suggested that the bill might include provisions enabling Scottish ministers to assume responsibility for liabilities when assets are managed or owned by communities. Which view does the Government prefer? Should Scottish ministers assume responsibility for potential liabilities when devolving power to local community groups or not? Well, I think that what we have done is, at the moment, include within the bill a power for ministers to, in fact, assume responsibility for potential liabilities when we devolve to local community groups. However, we would only be looking at that on a case-by-case basis. I do not think that we want to just take a view that says across the board that that is how we would proceed. That would be one of the things that got weighed up at the time of the application being made when we would be looking into all the effects and circumstances around a community group who wishes to take over that management. On a bigger scale, I think of the East Ayrshire coal fields, where there were insufficient bonds created by East Ayrshire Council, as I recall, and there is a huge liability there for the extraction of coal when all of that went terribly wrong. So, would you envisage a system of insurance like that of bonds being established by those who use the assets? I mean, I think essentially what the bill is proposing is that these cases are taken on a case-by-case basis and I think there would have to be a judgment made on each business case that was being put forward. I think that we would ordinarily expect that in most cases of community organisations or local authorities coming forward with proposals to manage assets, that both the assets and the liabilities would be being transferred to them. One would normally expect that that would be an incentive behind the business case that they would be coming forward with. You would not expect organisations, particularly to wish to manage an asset where they were at risk of taking on liabilities that they really did not feel that they could deal with and where you might need to get into some quite complex arrangements around bonds. However, what we are trying to set up here is a discretionary system that is open to any kind of case coming forward and then that needs to be considered in the round. All of those issues around whether it is reasonable for liabilities to be managed away from that community organisation more on a national level is reasonable and that is something that it felt could be agreed to or not that that would need to be considered at the point that that case comes forward. Basically, the presumption is that the liabilities would pass to the new managers as well as the asset. That would be the normality. I would have expected that in the vast majority of cases that would happen without much discussion or conversation. There may be the odd occasion when a bigger conversation has to be had around liabilities and we have allowed for that. However, the presumption that we are operating under is that organisations will take on liabilities as well as the asset, which is what you would expect in the normal course of events. Absolutely. I just want to be absolutely clear, because it is for the once in a generation inadvertent liabilities that emerge that could not have been foreseen. Then, who is the banker of last resort, Matt McGart, presumably the Scottish Government? Those are all issues that we have to deal with all the time. That is not a conversation that you would not have to have in government across a whole range of things, not just the crown estate. What we are talking about here is trying to put in place a system where there is a presumption, and that is how it will operate unless there is a particular set of circumstances. No legislation can legislate for the unforeseeable. It was just a very small point on what Mr Marlin said about marine assets and decommissioning. The phrase used was residual liabilities. I do not recognise that phrase. I only recognise liabilities and contingent liabilities. I presume that we are talking about contingent liabilities. In other words, there is no liability until a future contingency occurs. Therefore, it would not have to be in the numbers and provided for financially by the manager. I will be it, although there would have to be a reference to that in the notes to the occurrence. You are right that they are all either residual or contingent. They are all theoretical liabilities, rather than actual liabilities. Just to clarify, the residual liability is a phrase that has been used by the UK Government in the decommissioning schemes for offshore renewables. Okay. It is just not in the international financial reporting standard. It is my… Right. Thank you, convener. Just to seek a bit of brief clarification in relation to the supporting of community ownership. Organisations such as Community Land Scotland have welcomed the inclusion of community organisations as one of the possible potential asset managers. What will community organisations have to do to prove that they are capable of running a Crown Estate Scotland asset? What support will CES and others provide to them? What monitoring will be provided to ensure reassurance but also allowing community organisations to be in control? First of all, can we just remind ourselves that it is not the ownership of the Crown Estate that is being passed over its management fundamentally? I just worry a little when there is a sort of shorthand use that makes it feel as if somehow ownership is what is involved in this. I would very much hope that communities are going to step forward in terms of taking over local assets. In my opening remarks, I referred to communities that were most critical in the past of how things were being managed and they felt not in their specific interests. Members will be aware that there are also pilots that are going to be launched in respect of that. We are going to follow their progress pretty closely in terms of how that works. The experience of those pilots is going to inform some of the decision-making process around transfer and delegation. In terms of the support for communities, we have in place the existing capacity to support communities at an early stage. In the same way that we do with those who are coming forward with an intention to register an interest in community right to buy, if anybody has been involved with a community doing that, they will know that there is an enormous amount of support available from officials at that very early process to make sure that their application is in the best shape it can be. That is something that we want to build into this system as well, so that communities that do come forward with an idea that they would like to think about this, that they can have an early conversation and get early support in respect of how they proceed. I think that I am right in saying that there will be actual grants available for communities to help them in terms of the capacity that they have to come forward with an application as well. If I can find the specifics around that, I will do so. We want to make financial support, but from my perspective, knowing about communities that I have wanted to progress right to buy, the more important support is the support that they get from officials right from the outset to help them through this process. It will be one of the Crown Estate's jobs to be as facilitative as possible with communities that express an interest. Yes, I am just being reminded that section 31 of the bill, clause 31 of the bill, does provide for grants for preparation for management changes. There are going to be different kinds of support available for communities, and it will be interesting to see how many do want to step forward. At the moment, there are some expressions of interest from communities, as opposed to authorities, but not an enormous number. It may be that the publicity about the bill going through Parliament will begin to have other communities thinking about that as well. I do not want to sound too negative, cabinet secretary, but I need to ask the question about in relation to community managers. It may be the same answer to with every other manager taking on assets in relation to the Crown Estate, but what would happen if things went wrong? We very much hope that things do not go wrong. I suppose that it is in the nature of things that there will occasionally be hiccups. From our perspective, both the Crown Estate and us as ministers would need to be looking very closely at defining wrongness. I think that some of the earlier conversations that we had about whether a community has taken on something that can make money or whether it is prepared to take on the off chance that it might make money, which is a slightly different category. What is the wrong thing in those circumstances? The absolute nuclear option is that we would take management back off them, but we would try, if possible, not to be in that position. However, we have provided for that being the nuclear option, if needs be. At the end of the day, the bigger picture about financial viability and the Scottish Consolidated Fund is the final red line, if you like, that we have to keep in mind. John Scott. Thank you, convener. I am returning now to the Crown Estate Scotland staff. Cabinet Secretary will be aware that the committee carried out a confidential survey of all Crown Estate Scotland interim management staff seeking their views on the bill. In that survey, there were many fears expressed among the staff. The fear of fragmentation and a number of people believe that the bill will lead to their jobs being lost and other not very positive comments would have to be said. What reassurance can the cabinet secretary give to the current staff of Crown Estate Scotland? Always creates uncertainty. I do not expect that Crown Estate staff are excluded from that feeling. They have known the way that they have worked is clearly going to change. However, as we have already discussed for the foreseeable future, the staff who work for Crown Estate will have a continuing role. I have taken the time and trouble to personally go and visit the staff on a number of occasions because I was very conscious that this whole policy change could take place without reference to them at all. We have not done that. That is not how we have proceeded. I would very much hope as well that potential new managers would also think about that aspect, as we have done. At present, I think that the uncertainty is of the nature that you would see whenever there is change coming, regardless of what that change is. I suspect that the continued retention for national management of a significant part of what Crown Estate does means that in actual fact that change will probably be far more minimal than perhaps at the outset the staff might have feared. I think that whatever the concerns about the fragmentation of management were by the experience so far of those bodies prepared to and asking about a transfer of management, the numbers are not as many as I would have anticipated, so it remains to be seen how attractive an option this is to some organisations and some local authorities. I think that we could be many years down the line before the final verdict is out on the devolution, the internal devolution of the Crown Estate. I am sure that the staff will find that reassuring, cabinet secretary. You do not envisage any jobs being lost. Is there a policy of no redundancies in place for the staff? The Crown Estate is not legally obliged to comply. It is one of the groups that can choose to do that. We would ask them to do that. Most of the bodies that are not legally obliged to comply with that do comply with that, and we would look at that. There is obviously a future that I cannot foresee. It is important to remember that staff terms and conditions would always need to be borne in mind. Contractual arrangements such as pension provisions, et cetera, still have to be absolutely catered for. I am hoping that that change will have as little impact on the staff as it possibly could. It is a change in the way things are managed, but I think that there has been reference already to some of the smaller community facilities. Perhaps a feeling there that things have not been quite as hands-on as they might otherwise have been. That is the bit that we are hoping will be changed by this internal devolution of management. However, I cannot see that significantly impacting on the staff in Edinburgh. I hear what you say. I am sure that they would seek to have their phase allayed, but notwithstanding, it appears from what you have already said this morning that there will be a prepondence of other experts invited to advise communities and local authorities on how to proceed and manage assets. Those who have either done that within the Crown of States will be their role. What will be their future role? How will their jobs change then, given that they will be no longer to require the assets that they were previously? I do not know a single organisation anywhere in the country that does not have to deal with change at some stage or another. That applies to the Crown of State as to anywhere else. There will perhaps be a change in the way that they do some of the management. They are still doing strategic plan. There are likely to be very significant parts of the Crown of State that remain to be managed nationally. To be honest, I think that at the moment, and for the foreseeable future, I do not see an enormous amount of change for the staff. I promise that there will be no change for any staff at any point in the future. No, of course I cannot, but I could not have said that about any organisation either. In that sense, the Crown of State is not in a different position to any of the other organisations within the general purview of the portfolio. I remind members that we still have a lot of ground to cover. Claudia Beamish. Parallel with the financial asset obligations that we have explored in considerable detail, I would like to turn to the wider social economic development and environmental duties that are focused on in section 7 and 9 in the bill. You will know, cabinet secretary, that the committee has not heard of any outright opposition to the inclusion of the wider duties highlighted in those sections in the bill. However, some stakeholders have called for them to become mandatory duties, or for their effect to be strengthened. The word must, which is in connection with the financial asset obligations in the bill, have been argued for rather than may. In your view, should the wider duties be mandatory? If so, in what way could those be strengthened? I gave a fairly reasonable explanation why we have chosen to make the financial duty mandatory. There is a significant impact for that. It is important that, when we talk about maintaining the value of an asset and that being a mandatory duty, we, however, communicate to managers that the way that they fulfil that duty includes the promotion or improvement of the various other socio-economic factors at 7. That is, from our perspective, a good reason if we can use the May must terminology. That is, in our view, a good reason for the May rather than the must. In many instances, those factors have to be borne in mind in order to maintain the must of the value. The duty in 7.1 is not a maximisation of value but a duty to maintain value and improve where possible. I would not want there to be a false understanding of it being a maximising of value at the expense of everything. That is clearly not what we have in mind and that is very much borne out by the language. I also think that it is important to see the legislation in a broader context, and that is the broader context of the principles of sustainable development. The Crown Estate has been asked to look at the extra line, and it is working it so far, effectively. We think that that can go on being the case. At the moment, we do not feel that we need to move everything to a must in the way that some have suggested. We do not see there being the conflict that some people do. For the reasons that I have already said, so to maintain and improve the value, some of those other things will have to be brought on board anyway. If that is the case, the must, for instance, in relation to environmental duties, should be considered as the Crown Estate is a public. Any environmental duties that are imposed by statute will have to comply with anyway. They are not exempted from any of those formal duties, but I think that one of the issues that we would perhaps need to take into consideration is that those factors might not be relevant in if absolutely everything a manager does. If you say must and then they have to take something into consideration that actually is not a relevant factor in a particular decision, that becomes an exercise of futility. I do not really see that that would be particularly helpful for trying to get managers to make the decisions that they need to make. In truth, the reason why communities will want to take on the management of those assets will be to maximise across a whole range of benefits. The traditional criticism has been that that has not been the case, that has not perhaps been what is happening. Whether that was a fair criticism or not, we are not really in a position to judge, but the reason why communities will want to take on management of those assets is precisely in order to maximise benefits across a range. I do not see the things as in conflict. Mark Ruskell. Very briefly to the points that you made in your opening statement, cabinet secretary, about dispersing net revenues to communities. I just wanted to say anything more that you would like to add in terms of the process and the mechanism behind that. Would it be the intention, for example, that some of the financial benefits to communities would be put through participatory budgeting or could it go through council budgets? Are there any restrictions or thoughts on how they should or shouldn't be done at this point? Well, I think that the point that I made in my previous remarks on this is that however the distribution is made, whatever the calculation and the formula for that distribution is, the money will not be hypothesised because that is the nature of the settlement that we have with local government. However, the amounts of money involved will be known, and I would have anticipated that any managers, and I suppose that in this particular sense we are talking mostly about the local authorities, will themselves want to account for how they are using that money. Now, how they choose to do that is a matter for them. I was not at the moment thinking about mandating some mechanism by which a local authority would then make its decisions thereafter about what it considered to be the best way to spend that money, but what we would do is expect to see it spent for the betterment of coastal communities, however that might be defined. However, I do not think that it would be the proper place for us, given the nature of the local government settlement, to send up money to local authorities and try to attach a set of strings to it. To do that would require a change in the way that the relationship between government and local authorities works at the moment. However, the amounts of money that are sent to local government will be known, and I would hope and expect that people will hold their local authorities to account on that. John Scott Turning now to the 9 per cent figure and thank you for the revenue chart 2, which you have helpfully provided us with, it is a simple question, and it is essentially around the 9 per cent figure, and should county state managers of assets be able to retain and invest more than 9 per cent of the revenue that they earn, how do you see that story unfolding? In the bill you have said that you expect to introduce a flexibility into that 9 per cent figure. That is the flat rate that comes effectively with the devolution, and it is the flat rate that is being applied by the UK Government in respect of the crown estate over the UK as a whole, and what will be the residual England and Wales crown estate. Our view was that we will start off with 9 per cent simply because that is where we are, but what we wanted to try and do was to keep that situation under review and consider whether 9 per cent does simply apply across the board or whether there might be occasions when you allow managers in some areas or depending on the asset to retain more. There might be more management required for some assets than for others, but equally that means the likelihood that others might get to retain less. It is not just about retaining more, it is also about perhaps that there are some where the actual management function is not as great and therefore the retention might be less. All that we are doing is trying to retain that flexibility and not to be tied to an across-the-board 9 per cent figure, which might not apply in every case. That will enable us to respond to the different kinds of management that there are. To go back to some of the conversations that we had earlier, if a community group is wanting to step up because they see an asset and they say to themselves, well, that is simply not generating what it could for the community. We think that we can do better and we want to set out a plan that does that. We may then take the view that in those circumstances they get to retain a greater percentage because they are going to be putting more effort into that management than perhaps a different group who are just wanting something to take over. It really is just to allow us that flexibility, but there are no immediate plans. I have nothing in mind at the moment that we are thinking about. It is just that that is the figure that we inherit and we think that it is a very big axe to take to what might actually be something that can be dealt with more flexibly. No, I appreciate the need for flexibility. It will depend on good years. It will depend on income that you have available to you, whether or not you can allow the need to return money to the Scottish consolidated fund and the potential to give the Scottish Crown Estates more to invest. I perfectly well understand that. However, my second question is if the Scottish Crown Estates become fragmented and if a higher proportion of asset managers are able to retain a higher proportion of their revenues, that is not the Crown Estate Managers. What impact will that have on the ability of the Crown Estate Scotland to invest in the forms in the rural estate, for example? That is why we are keeping the cross subsidy. That is a very specific example of why we want to retain that cross subsidy. As unpopular as it might make a minister to step in and say to one set of managers that they are going to have to transfer money over to another set of managers, that is nevertheless how we wish to be able to proceed. Otherwise, that estate as a whole would begin to be in difficulty. The cross subsidy part of that has been well understood. There has been a very active stakeholder advisory group all the way along this process. We have never hidden that part of the conversation from them. I think that people are well aware that that is a possibility. I bear in mind that we have already discussed the cross subsidies. How will the potential impact on other assets be taken into account when you are making the initial decision to transfer or delegate management of assets? If you have got to make a decision on transferring assets, what part will the decision be taken? If I have to make a decision about a community taking on responsibility for management—absolutely, yes—because I was using transfer in a different sense. If we are looking at how we can support the non-profit making parts of the estate across subsidising will be won, what will you assess the potential financial impacts prior to transferring or not transferring to the management of assets? Every single one of the applications for taking control of management of an asset will have to be looked at very carefully in terms of its merits. There will be a lot of factors to be considered. That may be one that we would look at. It goes back to the conversation that I had with John Scott. It may be that some organisations, whether they are community or not, feel that they can make a far better fist of running it than has been the case, in which case they can turn an asset into one that is actually not needing transfers of money in but might be in a happier position in a few years' time. That would be a conversation that we would need to have with them at the time of the application, because we would be expecting, when people came forward, to consider taking on the management, that they would have a clear plan and proposals that they were looking at. It is not simply to sign a brief form and then get the management transferred. It is too important for that. That will be part of the conversation. If it is an asset that they do not realise that they are not individually making money, they will be made aware of that as part of that application. I am just being reminded that managers or prospective managers are going to have to show three-year plans. When we are talking to people about taking over management, they have to be thinking about it not just on day one or six months down the line, but they have to think about it over that period. All of that will be part and parcel of the conversation that we have. I anticipate, as sometimes will happen, that sometimes a group will come forward and then decide, oh well, that is not really what we thought. We thought that there was more in this or we thought that there was something or whatever. I am also hoping that what we get is communities that come forward and say, look, we want to do this because we think that it could be better run. Here is why we think that it could be better run. Here is our plan for it being better run. That is a conversation that I hope I am having or the Crown of States having with more people rather than fewer people. That will turn assets into income-generating assets rather than those that are not. That does not necessarily apply to some of the the bigger ones, but who knows in the future that it might. Is there any thought given at the moment that there may be some parts of the Crown of States that you do not want or that you would choose not to allow communities to take over because they are key to the overall performance of the Crown of States and its ability to support the state, the parts of the state that are not quite so viable? I have not looked at it in quite those terms. We have been thinking more about national strategic priorities. We have been looking at the pressure from the tenant farmers within the four tenanted estates. It has not been so much from a perspective of what asset is income-generating and what is not. It has been more about a slightly bigger picture about what is a more appropriate way to look at it. When you think about the big telecoms, the big renewables and all the rest of it, that is perhaps understandable that that does not get chopped up. It should not be harder to see how that would work chopped up, but they are also some of the really big income-generating sectors, too. We must not lose sight of the fact that, while we might want to focus on some smaller assets that are not such big income generators, there are some big income generators, too. That is why it was important to keep the cross-subsidy idea, because there are some big income generators. That cross-subsidy idea is important. There will also be a strategic management plan for a national perspective on that, too. We are not losing sight of the bigger picture with the very individual conversations that might be getting had in this. At this stage, I have a clear idea whether or not the Crown Estate could point to each individual asset and say with certainty that that is or is not income-generating. That is something that will probably emerge over the next year or two. I will make a shrewd guess and suspect that that will tend to be the much smaller assets, more localised, rather than the bigger strategic ones. That is a bit of a guess at this stage. Moving on, Angus MacDonald. I thank you, convener. If we could touch on the coastal communities fund, cabinet secretary, we know that it has been historically tied at a UK level to revenues generated by the Crown Estate and it is delivered by the Big Lottery fund. I am glad to say, convener, that even in my constituency in the industrial heartland of central Scotland, we have managed to tap into the coastal communities fund for some of my groups. I can ask the cabinet secretary what the plans are for the fund from now on. The short answer is that we are considering what the best way forward is for that. The member is correct. It is a scheme that we have inherited from the United Kingdom Government, along with the various financial pressures that are created by the fiscal framework and the reduction in the Scottish block grant. It is linked to the Crown Estate as well. It is currently competitive. There is no guarantee of success. There are a lot of coastal parts of Scotland that have never received any CCF funding and it has traditionally been administered by the Big Lottery fund. We are looking at it in the context of the changes that are being made in terms of the Crown Estate. I am absolutely committed to supporting the current projects through to completion, but no final decision has been made about the coastal communities fund because of its link to the formula from the Crown Estate funding. We are now at a national level in a different set of funding circumstances and coastal communities will now be receiving monies directly dispersed from the Crown Estate. We need to look at whether or not the coastal communities fund is now in Scotland at least a fund that is going to get continued in the current circumstances, but no final decisions have been made yet. We need to work through a number of things, but I just need to remind people that the commitment to all coastal local authorities getting money will mean a number of coastal local authorities getting money in an area where there has never been any coastal community fund money given to them or to their communities. We are in a different set of financial circumstances now. There is, of course, a suggestion that there will be a revised funding formula of what, from 50 per cent of the revenues from marine activities down to 33 per cent, as far as I understand it, the UK Government? I am not sure whether any of the officials know more about that or what impact, if any, that would have on us. Is that the coastal communities? That is about the coastal communities fund. That is our understanding that the Treasury recently reduced the amount of money that was made available by them under the coastal communities fund from an equivalent of 50 per cent of Crown Estate marine income to 33 per cent. The fiscal framework agreement on the devolution of the coastal communities fund was based on the expenditure in the year prior to the transfer, so that should all have worked through the system. During our consultation, we received a submission from the Grangemouth Yacht Club in my constituency, which stated that the only contact that they have with the Crown Estate or Crown Estate Scotland is to pay an annual bill of £640. As a matter of principle, would you say that the Crown Estate Scotland and other asset managers have to provide a service in relation to what they charge their tenants? Is there scope for smaller community organisations such as Grangemouth Yacht Club to be exempt from such charges? Well, the rent of the property is the service. They are paying rent for something, they are not paying rent for nothing, so that is a very short answer. I think that they have the exclusive use of the mooring, so that is what their rent is for. On the wider position about smaller community organisations being exempt, at the end of the day, you have to bear in mind the duty in section 7 to maintain and seek to enhance the value of the estate and the income arising from it. Managers are empowered to do what is considered appropriate to that, so there will not be any blanket exemptions. I think that that would be very much a matter locally for managers. A different set of managers may decide to do that if they felt that there was a bigger picture that they wanted to pursue. I would be sceptical as to whether that was likely in the shorter term, frankly, given the duties on managers. You certainly cannot blame him for trying. Whether or not they are successful is a matter. I refer to my register of interest as a landowner in the Highlands. I have two questions. The first is about cross-subsidy, which we have discussed a little already. In terms of giving the Crown Estate Scotland financial flexibility—you will forgive my ignorance—is the Crown Estate currently able to, for example, borrow or enter joint ventures or other aspects that will give that financial flexibility to it? Does the bill change that? If I could attempt to answer that. At present, the ability for Scottish ministers to give loans to Crown Estate Scotland is extended for inclusion in the bill to apply to other managers. The Crown Estate Act was limited by a number of situations in which the manager could enter into borrowing, but there were very narrow set of circumstances. That was viewed by Crown Estate Scotland in its nasiat form as a constraint on viability. Scottish ministers decided to extend the facility to provide loans. Beyond that, there is no intention for wider loans to be taken out because of the risk that could pose to the monarch's ultimate ownership of the estate. When it comes to joint ventures, the bill was specifically designed not to preclude joint ventures being entered into. That is something that we continue to have discussion with Crown Estate Scotland about on an operational basis to see whether there is, in fact, the need for that or not. That is very helpful indeed. Can I then move on to delegation and transfer of management responsibilities? I think that it is right that sections 3, 4 and 5 set out the processes for transfer and delegation. Is the panel satisfied that those processes are effective in terms of being firstly transparent and allowing proper parliamentary scrutiny, secondly, that they give asset managers clear lines of accountability that they can work to, and thirdly that there is an effective process of dispute resolution? Yes. In broad terms, I think that the bill provisions are appropriate and allow for what is being raised. In terms of parliamentary scrutiny, there will be SSIs, transfers will be made by SSIs, so that in itself will be subject to parliamentary scrutiny, and the terms and conditions of the transfer will be set out in the SSI, so the detail of some of that will be available. Similar provisions will be made in respect of delegation. Although, when it comes to delegation, that would not be subject to a parliamentary procedure, because, effectively, the Crown Estate Scotland will retain aspects of management that have not been delegated to another manager. Our position at the moment is that that section of the bill, that part of the bill, does exactly what it should do. Also, having flagged up to me that there will be annual reporting, and the dispute resolution will be part of the SSI or delegation agreement, and that will be built into what you see up front when the transfer of management is made. Do you see a potential conflict of interest for local authorities given their function as a planning authority in relation to agriculture, and the fact that, obviously, they would be net receivers of revenues under this bill? Do you see a similar conflict of interest in relation to harbour authorities, which arguably have less stringent, democratically accountable governance processes compared to councils in some cases? I think how I view pretty much is that councils already have to make a huge range of decisions across a whole number of areas where objectively you could argue that they have a conflict of interest. When it comes to building a school, it is their own planning authority that has to make the decision about planning. Handling conflict of interest is already part and parcel of what local authorities have to do. To my knowledge, they already have pretty rigorous governance arrangements to manage that way of taking things forward, and I do not see why it would be any different in respect of that. I cannot imagine that any council is going to intentionally try to mismanage. I do not want to be drawn down the road of specifically talking about aquaculture, because that could apply to almost anything. I think that they will be trying to ensure that their management is as well done as the management of almost any aspect of the rest of their duties. I think that councils particularly are very well versed in managing that. If a harbour authority becomes a manager, it will have to comply with the duties that are legislated for, for example, in areas such as reporting. They will have to bring themselves into compliance with that. I think that that is manageable, because it is a thing that has had to be managed for decades. We have single local authorities who do that on a regular basis, and I do not imagine that the management of Crown Estate assets is going to be managed any differently to that. Do you see attention in relation to harbour authorities, if you look at the issue of ship-to-ship oil transfers, where there is a commercial incentive to develop ship-to-ship, but there is also a regulatory function that the harbour authority has to discharge? They will have to comply with any manager that takes on the management of an asset, regardless of what it is. We will have to comply with all the statutory requirements that are out there that relate to that particular area of endeavour. I am perhaps misunderstanding what you are trying to raise here, because all of that will be part and parcel of the management. The Crown Estate has to abide by that as it is. We are not actually bringing anything new in by asking devolved managers to comply with any legislative authorities. Paragraph 18 pointed out that the exercise of functions has to be transparent and accountable, so any harbour authority or anybody else who makes a decision for whatever reason has to be very clear about why it is doing that. It will also have to comply with the whole range of other statutory obligations that are required for any area of endeavour. I was just referring to the functions that harbour authorities have, their own regulatory functions and the potential conflict there. What potential conflict do you have in mind? I do not understand what specific conflict you have in mind. If a harbour authority wants to take over the management of the harbour, it will have to manage it in a way that delivers all the objectives that we have set out. It will do that. That is a perfect assessment under the Habitat's Directive, for example. They are not excluded from that. That will still be in place. None of that flies off because they have become a manager of a Crown Estate property. Can I perhaps add something on the original question? As I understand it, the harbour authority already has functions in relation to ship-to-ship oil transfer. The Crown Estates functions relate to the seabed ownership, primarily about maintenance dredging and other forms of dredging for navigational purposes and the dumping of spoil that has been collected through the dredge. The bill's provisions are about the control of those latter activities. As the cabinet secretary has said, those would still have to be undertaken by any manager in the context of wider regulations that exist. I turn now to section 6 of the bill. The law society has expressed concerns in relation to the drafting of section 6. I have stated that we do not consider the meaning of relates to a community where it appears in section 61A is clear. What is the definition of relates to a community in section 61A? Further, when I'm speaking, the requirements set out in section 62 do not appear to be inclusive, particularly those in section 62C and 62D. The law society considers that there would be merit in amending the requirements for a community organisation to fall within the terms of the bill. Does the Scottish Government agree with the law society that section 62C and 62D could be amended to be more inclusive? The provisions in section 6, in terms of community organisation, are similar to the ones that are already in the community empowerment act. In my view, that means that they are sufficiently inclusive. Obviously, we have to recognise that evidence of community control is important, but, in my view, the fact that they have effectively been imported from existing legislation means that I'm not sure whether the law society is aware of that or not, but that is where that definition has come from. We consider that to be sufficiently inclusive. Further, in section 62F, in the law society's view, it refers to promotion of a benefit for that community. We note that the concept of public benefit is already recognised in the law, for example, in section 8 of the Charities and Trusty Investment Scotland Act 2005. It would be helpful, in the law society's view, if there was some consistency between those statutes, particularly when section 17 of the bill refers to the public benefit provisions under the 2005 act. On one hand, you have promotion of a benefit for that community. On the other hand, you have public benefit. Should there be more consistency around the terminology of public benefits, as the law society suggests? Again, we have taken the definitions from the Community Empowerment Act 2005. They exactly replicate the definitions in the Community Empowerment Act 2005. In our view, that, from our perspective, seems to provide sufficient consistency. I have not seen the specific law society evidence that you are talking about, whether or not they were conscious of that. We are using what is—I cannot think of any better example of consistency than to use those definitions across other legislation. I have a final question on that from Finlay Carson. Some of the evidence that we have heard in committee has argued for the strengthening of protection against the sale of the seabed. Can the bill be strengthened to prohibit sales of the seabed and should it? Do you agree with COSLA for example that there are circumstances under which the seabed might be sold? We are not convinced by the COSLA position. It is the Government's view that the presumption against selling the seabed should be maintained. We have talked a lot about cross-subsidy, so that the fact that a bit of seabed is a loss-making asset is not a reason to sell because there is the capacity to cross-subsidise. By maintaining the element of cross-subsidy, we think that the presumption against selling the seabed should stay. It is a debate that I no doubt expect to continue, but from our perspective at this stage, we are not convinced that the COSLA approach is correct. Cabinet Secretary and your officials, thank you for that. That has been a long morning, but we have covered a lot of ground. At the next meeting of the committee on 1 May, it will consider subordinate legislation relating to the Loch Karen Marine Conservation Order, which the committee considered last year. The committee will also consider draft correspondence on the national performance framework and its approach to the gender diversity of witness panels. It will also review its work programme. As agreed earlier, the committee will now move into private session and I request that the public gallery being vacated as the public part of the meeting is now closed. Just as my phone goes off.