Rae/S3/08/18/A Rural Affairs and Environment Committee

RAE/S3/08/18/A

RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

AGENDA

18th Meeting, 2008 (Session 3)

Wednesday 8 October 2008

The Committee will meet at 10.00 am in Committee Room 5.

1. Declaration of interests: Elaine Murray MSP and Rhoda Grant MSP will be invited to declare any relevant interests.

2. Budget process 2009-10 (Stage 2): The Committee will take evidence on the Scottish Government's Draft Budget 2009-10 from—

Richard Lochhead MSP, Cabinet Secretary for Rural Affairs and the Environment, Richard Wakeford, Director General Environment, and Ross Scott, Finance Team Leader, Scottish Government.

3. Rural housing inquiry: The Committee will take evidence from—

Gavin Corbett, Policy Manager, Shelter.

4. Crown Estate: The Committee will consider written evidence on the Crown Estate and Crown Estate Commissioners.

5. Petition: The Committee will consider petition PE749 by Geoffrey Kolbe, on behalf of Newcastleton and District Community Council, seeking a moratorium and legislative restrictions on the spreading of sewage sludge.

6. Budget process 2009-10 (Stage 2) (in private): The Committee will review the evidence heard earlier in the meeting.

7. Rural housing inquiry (in private): The Committee will review the evidence heard earlier in the meeting.

8. Flood Risk Management (Scotland) Bill (in private): The Committee will consider a paper on possible witnesses for future meetings.

RAE/S3/08/18/A

Peter McGrath Clerk to the Rural Affairs and Environment Committee Room T1.01 The Scottish Parliament Edinburgh Tel: 0131 348 5240 Email: [email protected] RAE/S3/08/18/A

The papers for this meeting are as follows—

Agenda item 2

Adviser briefing (private) RAE/S3/08/18/1

Scottish Budget Draft Budget 2009-10 RAE/S3/08/18/2

Supplementary information from Scottish Government RAE/S3/08/18/3

Information from Scottish Government RAE/S3/08/18/4

Finance Committee guidance to Subject Committees RAE/S3/08/18/5

SPICe briefing: Draft Budget 2009-10 RAE/S3/08/18/6

2008-09 Summary of conclusions and recommendations RAE/S3/08/18/7 from RAE budget report

Agenda item 3

SPICe paper (private) RAE/S3/08/18/8

Submission from Shelter RAE/S3/08/18/9

Agenda item 4

Note from Clerk RAE/S3/08/18/10

Agenda item 5

Note from Clerk RAE/S3/08/18/11

Agenda item 8

Note from Clerk (private) RAE/S3/08/18/12

For Information

Recent Developments RAE/S3/08/18/13

RAE/S3/08/18/03 Agenda item 2 RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

2009-10 BUDGET PROCESS

SUPPLEMENTARY INFORMATION FROM SCOTTISH GOVERNMENT OFFICIALS

Responses to points raised by the Rural Affairs and Environment Committee at the session on 1 October 2008 with officials to discuss the budget process 2009-10.

SRDP

“What is the impact of £4.7m reduction for EU Support and Related Services in Table 15 of the SPICe briefing entitled “Level 2 Budget lines by Absolute Real terms between 2008-09 and 2009-10?”

Answer: “This table shows the effects of inflation on the 2009-10 budget to show the spending power of that budget in 2008-09 prices, but the cash paid under this level 2 will be the same as in table 6.01 of the Budget document. The apparent reduction reflects the real terms effect of inflation on the Scottish Governments’ Departmental Expenditure Limit, however, this is only part of the total budget. A fuller picture needs to include all expenditure under the EU Support and Rural Services budget which includes EC expenditure such as the Single Farm Payment."

What was the exchange rate?

Answer: The exchange rate for Single Farm Payment Scheme 2008 is €1=£0.79030.

FINANCE

The Committee recommended that future budget documents should show closer links between spending plans and the National Performance Framework

Answer: This issue has been raised with Finance Expenditure Policy for consideration.

CROFTING

Request for information on crofting budget lines and apparent decrease

Answer: The Rural Affairs Committee has questioned a drop in funding for “crofting assistance” from £7.3 / 7.4 / 7.5m to £6.4 / 5.6 / 5.8m. These apparent reductions simply reflect a restatement of the budget lines, principally the transfer to the SRDP budget line of CCAGS, where annual (demand-led) expenditure runs at some £2-3m. They do not yet take account of the detailed consequences of policy decisions on the future of crofting announced on 1 October in the Government’s response to the Committee of Inquiry on Crofting (Shucksmith Committee).

1 RAE/S3/08/18/03 Agenda item 2

CLIMATE CHANGE

The Committee asked for information on the budgetary proposals for climate change.

Scottish Budget – Climate Change

1. Budget lines for specific climate change initiatives are outlined in Table 1. Table 1 also shows budgets for renewables/ micro-generation, energy efficiency and sustainable transport initiatives which will contribute to climate change mitigation (but cannot be attributed solely to this purpose).

2. As climate change is a cross cutting area there are several other budget lines which would contribute to emissions reduction e.g. Forestry, Scottish Rural Development Programme, Zero Waste, Sustainable Development etc. However the proportion of these budgets likely to contribute to climate change mitigation cannot be easily extrapolated.

3. In the Scottish Budget Spending Review 2007, the Scottish Government made a commitment to ensure that public spending across portfolios contributes to the action needed to meet emissions reduction targets. A Carbon Assessment tool is currently being developed which will be applied across all government spending in Scotland from 2009-10.

Table 1

Budget Lines (£m) 2008-09 2009-10 2010-11 Total

Climate Change Specific Climate Change Bill support (UK & 1.0 1.0 1.0 3.0 Scottish Bills including support to UK Climate Change Committee) Climate Challenge Fund 8.8 9.3 9.3 27.4

Renewables / Microgeneration Community renewables and micro- 13.5 13.5 13.5 40.5 generation Saltire Prize for innovation in marine 10.0 renewable energy Other renewable projects 4.0 4.0 4.0 12.0

2 RAE/S3/08/18/03 Agenda item 2 Energy Efficiency Energy efficiency advice to business, 10.0 10.0 10.0 30.0 public and domestic sectors Fuel poverty programmes, including 45.9 45.9 45.9 137.7 energy efficiency measures Scottish Energy Efficiency Design Awards 1.1 1.1 1.1 3.3

Sustainable Transport Support for sustainable and active travel 11.0 11.0 11.0 33.0 Sustainable Transport Towns (Smarter 10.0 Choices, Smarter Places) Support for bus services 61.2 61.2 61.2 183.6 Transport Information 3.0 3.0 3.0 9.0 Investments in public transport – rail and 840.0 917.0 897.0 2654.0 tram services and projects

Total 999.5 1077.0 1057.0 3153.5

Waste

The committee asked for a paper on Waste. Please see below.

Introduction

• At the 1 October 2008 meeting of the Rural Affairs and Environment Committee, members of the Committee asked a number of questions in relation to waste and requested a response in writing. This paper provides a response to the various points of clarification requested.

Former Strategic Waste Fund Budget and Expenditure

• The table below sets out the former Strategic Waste Fund budget and expenditure over the 2004 CSR period.

2005/06 2006/07 2007/08 Total Initial budget 130.8 134.3 144.8 409.9 (£m)

Amounts 108.7 83% 87.1 65% 88.2 61% 284 70% spent (£m)

Amounts 21.1 16% 44 33% 56.5 39% 121.6 30% returned to centre (underspend)

• The individual local authority Strategic Waste Fund awards for the period between 2000-01 and 2007-08 are detailed at Annex A. All 32 local authorities benefited from

3 RAE/S3/08/18/03 Agenda item 2 awards and the amounts varied depending on the nature and scale of proposals, and timing of awards.

Post 2007 CSR and Concordat

• Following the 2007 Comprehensive Spending Review process, and the signing of the Concordat with local government, committed spend from the former ring-fenced Strategic Waste Fund was transferred to the local authority block grant for the period of the spending review 2008-11. • The total amounts to be transferred to LAs from the both: (a) the former Strategic Waste Fund; and (b) top-ups from the Zero Waste Fund to reflect awards for successful pipeline projects that were determined following the 2007 CSR being concluded are £69.2m for 2008-09; £66.6m for 2010-11; and £66.2m for 20011-12.

• Quite separately, it was agreed with COSLA that new money resulting from Spending Review 2007 would be distributed to local authorities on the basis of each local authority’s share of the rebased 2007-08 Waste Collection Grant Aided Expenditure formula. The additional amounts for transfer are: £63.5m in 2008-09; £66.1m in 2009-10; and £66.4m in 2010-11.

• In addition to the above, resources were centrally retained within the Zero Waste Fund. The table detailed below shows the breakdown over the CSR period and the unallocated amounts that will be made available to local authorities once discussions with COSLA have been concluded.

£m 2008-09 2009-10 2010-11 Total Zero Waste Budget 41.1 54.4 58.7 154.2 Delivery Body and other budgeted spend 18.3 23.3 24.4 65.9

Additional local authority profiled spend 8.6 1.6 1.2 11.4

Unallocated 14.2 29.6 33.1 76.9

• The combined amounts arising from the former Strategic Waste Fund grant monies and additional funding distributed to local authorities on the basis of each local authority’s share of the rebased 2007-08 Waste Collection Grant Aided Expenditure formula, together with the uncommitted Zero waste Fund money that we intend to transfer to local authorities are shown in the table below.

4 RAE/S3/08/18/03 Agenda item 2

£m 2008‐09 2009‐10 2010‐11 Total Ex‐SWF £69.2 £66.6 £66.2 £202.0

Additional Money Distributed By Means Of Waste Collection GAE £63.5 £66.1 £66.4 £195.9 Sub Total* £132.6 £132.6 £132.6 £397.9 Uncommitted Zero Waste Fund Monies Available For LAs £14.2 £29.6 £33.1 £76.9 Grand Total £146.8 £162.2 £165.7 £474.8 Note: Total forms part of overall LA block grant and is not ring‐fenced

* Individual LA breakdown detailed in table below.

• The sub-total above is broken down at individual local authority level as shown at Annex D.

• The various amounts transferred to the local authority block grant are considered sufficient to deliver Scotland share of the UK Landfill Directive target.

Targets and Performance

• The additional amounts that are planned to be transferred to local authorities from the Zero Waste Fund are intended to contribute towards the 2013 Landfill Directive target. i.e. to build and improve upon 2010 Single Outcome Agreement (SOA) performance commitments.

• A summary showing the individual local authority and collective SOA commitments is provided at Annex B and it can be seen from the bottom line of the table that authorities have collectively undertaken to meet Scotland’s target in 2010.

• Performance results published by SEPA on the 7th October are summarised below. It can be seen from this that local authorities have collectively managed to operate within the overall biodegradable municipal waste allocation for the rolling year period ending March 2008.

% MSW Recycled / BMW 5 landfilled Local Authority Composted (tonnes) BMW Allowance 07-08 Aberdeen 22.2 67,322 58,080 Aberdeenshire 31.2 70,286 59,686 Angus 34.7 20,835 24,788 Argyll & Bute 34.8 25,869 29,802 Clackmannanshire 42.2 14,222 14,925 Dumfries & Galloway 31.1 37,021 39,556 Dundee 33.0 10,075 29,838 East Ayrshire 41.8 26,600 32,232 East Dunbartonshire 32.2 30,726 30,000

5 RAE/S3/08/18/03 Agenda item 2

East Lothian 35.4 28,315 25,854 East Renfrewshire 35.0 22,432 23,743 Edinburgh 27.1 109,574 114,735 Eilean Siar 20.8 9,245 11,236 Falkirk 36.0 36,336 52,806 Fife 39.1 96,095 115,648 Glasgow 18.1 180,442 167,804 Highland 30.7 70,299 67,593 Inverclyde 21.9 25,120 21,190 Midlothian 35.8 19,239 24,237 Moray 44.0 21,278 27,395 North Ayrshire 31.1 36,079 36,655 North Lanarkshire 31.8 98,973 87,984 Orkney 28.7 231 1,400 Perth & Kinross 35.9 43,184 40,511 Renfrewshire 30.1 43,358 47,331 Scottish Borders 33.5 29,875 29,867 Shetland Islands 19.2 670 2,537 South Ayrshire 43.1 27,502 35,327 South Lanarkshire 37.0 82,042 83,848 Stirling 38.7 19,836 33,058 West Dunbartonshire 32.4 25,936 26,080 West Lothian 34.2 40,596 44,257 TOTAL SCOTLAND 31.7 1,369,614 1,440,003

6 RAE/S3/08/18/03 Agenda item 2

• We will continue to monitor progress on an ongoing basis and enter into discussions with COSLA with a view to producing local authority plans that will be put in place to meet 2010, 2013 and 2020 Landfill Directive target commitments.

• Currently the performance trend indicates that we are on track to meet the 2010 target – ref graph below. However, it is recognised that plans need to be put in place now to meet the 2013 and 2020 targets as procurement of larger scale waste treatment infrastructure does take time.

BMW to Landfill projections for 2010

1.8

1.7

Tonnes (Millions) BMW Landfilled 1.6 BMW EU Target 2010

Log. (BMW Landfilled)

1.5

1.4

1.3

1.2 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10

• The table attached at Annex C shows Scotland’s share of the UK Landfill Directive targets in 2010, 2013 and 2020 (total figures at bottom of table) as well as an illustrative profile for the intermediate years for each local authority and Scotland as a whole.

• The distribution of biodegradable municipal waste landfill allowances for the period up to and including 2009-10 is administered through the Landfill Allowance Scheme (Scotland) Regulations 2005. The landfill allowance scheme allows for banking, borrowing and trading of allowances between authorities and the system is underpinned by financial penalties in the event of default. The distribution of allowances post 2010 has not been set but Annex C shows a possible distribution for illustrative purposes. Ministers are currently disposed to hold financial penalties in abeyance pending the outcome of a joint Scottish Government/COSLA review of the scheme. This review is currently underway.

Gordon Jackson Waste and Pollution Reduction Division X7660

7 RAE/S3/08/18/03 Agenda item 2 ANNEX A – Distribution of Former Strategic Waste Fund Money

£m 2000/01 to Local Authority 2007/08 Aberdeen City 10.0 Aberdeenshire 20.6 Angus 7.6 Argyll and Bute 17.4 Clackmannanshire 2.4 Dumfries and Galloway 17.0 Dundee 7.3 East Ayrshire 6.4 East Dunbartonshire 7.2 East Lothian 5.6 East Renfrewshire 5.2 Edinburgh 28.0 Eilean Siar 12.1 Falkirk 7.9 Fife 24.2 Glasgow 19.4 Highland 18.4 Inverclyde 3.8 Midlothian 9.3 Moray 6.3 North Ayrshire 6.8 North Lanarkshire 18.6 Orkney 1.8 Perth & Kinross 10.2 Renfrewshire 8.4 Scottish Borders 11.4 Shetland 2.0 South Ayrshire 7.5 South Lanarkshire 17.8 Stirling Council 10.6 West Dunbartonshire 7.0 West Lothian 12.3 TOTAL 350.4

8 RAE/S3/08/18/03 Agenda item 2 ANNEX B – LA SOA Commitments

LOCAL AUTHORITY TONNES BMW CATEGORY Aberdeen 53,004 Argyll & Bute 26,560 Clackmannanshire 13,574 Dumfries & Galloway 35,741 East Ayrshire 29,177 East Dunbartonshire 27,572 East Lothian 23,744 East Renfrewshire 22,023 Falkirk 48,144 Fife 94,500 Glasgow 151,648 Midlothian 21,915 Moray 25,437 North Ayrshire 33,823 Orkney 1,400 Renfrewshire 43,160 Scottish Borders 27,648 South Ayrshire 28,838 South Lanarkshire 77,835 Undertakes to meet or better target for biodegradable waste Stirling 30,384 Aberdeenshire 54,929 Angus 15,523 Dundee 14,922 Edinburgh 109,745 Highland 71,072 Inverclyde 25,532 North Lanarkshire 88,769 Perth & Kinross 34,658 Shetland 783 West Dunbartonshire 23,832 West Lothian 45,542 Shortfall or no target - existing target - existing Shortfall or no where no information provided. provided. no information where Western Isles 10,677 used as surrogate performance Total 2009/10 BMW Tonnage in SOAs 1,312,111 Scotland's share of Directive Target (limit) 1,320,000

9 RAE/S3/08/18/03 Agenda item 2 ANNEX C – Biodegradable Municipal Waste Allowances (tonnes)

TABLE OF ALLOWANCES ALLOCATIONS TO 2009/10 ILLUSTRATIVE FIGURES BASED ON EQUAL REDUCTIONS FOR ALL

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Aberdeen 73076 60619 58080 55541 53004 47115 41225 35336 33845 32353 30862 29370 27879 26387 24896 Aberdeenshire 74496 62045 59686 57310 54917 48815 42713 36611 35066 33521 31975 30430 28885 27340 25794 Angus 26968 24788 24788 24788 24788 22034 19280 16525 15828 15130 14433 13735 13038 12340 11643 Argyll & Bute 37009 30901 29802 28688 27560 24498 21436 18373 17598 16822 16047 15271 14496 13720 12945 Clackmannanshire 18842 15604 14925 14249 13574 12066 10558 9049 8667 8285 7903 7522 7140 6758 6376 Dumfries & Galloway 50251 41487 39556 37641 35741 31770 27799 23827 22822 21816 20810 19805 18799 17793 16787 Dundee 31686 29838 29838 29838 29838 26523 23207 19892 19052 18213 17373 16534 15694 14854 14015 East Ayrshire 40876 33775 32232 30699 29177 25935 22693 19451 18630 17809 16988 16167 15346 14525 13704 East Dunbartonshire 37485 31203 30000 28790 27572 24508 21445 18381 17605 16830 16054 15278 14502 13726 12950 East Lothian 32327 26900 25854 24802 23744 21106 18468 15829 15161 14493 13825 13157 12489 11821 11152 East Renfrewshire 29395 24582 23743 22890 22023 19576 17129 14682 14062 13443 12823 12203 11584 10964 10344 Edinburgh 144511 119815 114735 109663 104597 92975 81353 69731 66788 63845 60902 57959 55015 52072 49129 Falkirk 66506 55142 52806 50473 48144 42795 37445 32096 30741 29387 28032 26677 25323 23968 22613 Fife 147030 121339 115648 110006 104413 92812 81210 69609 66671 63733 60795 57857 54919 51981 49042 Glasgow 213142 175980 167804 159693 151648 134798 117948 101099 96831 92564 88297 84030 79763 75496 71229 Highland 86216 71037 67593 64186 60817 54060 47302 40545 38833 37122 35411 33699 31988 30277 28566 Inverclyde 26940 22233 21190 20156 19131 17005 14880 12754 12216 11677 11139 10601 10062 9524 8986 Midlothian 30770 25411 24237 23071 21915 19480 17045 14610 13993 13377 12760 12143 11527 10910 10293 Moray 33881 28347 27395 26425 25437 22611 19784 16958 16242 15526 14811 14095 13379 12663 11948 North Ayrshire 45619 38049 36655 35246 33823 30065 26307 22549 21597 20645 19693 18742 17790 16838 15887 North Lanarkshire 111756 92271 87984 83731 79513 70678 61843 53009 50771 48534 46297 44059 41822 39584 37347 Orkney 1487 1400 1400 1400 1400 1244 1089 933 894 855 815 776 736 697 658 Perth & Kinross 48252 41148 40511 39792 38990 34658 30326 25993 24896 23799 22702 21605 20508 19411 18313 Renfrewshire 59600 49421 47331 45244 43160 38364 33569 28773 27559 26344 25130 23916 22701 21487 20272 Scottish Borders 37051 30953 29867 28765 27648 24576 21504 18432 17654 16876 16098 15320 14542 13764 12986 Shetland 2694 2537 2537 2537 2537 2255 1973 1691 1620 1549 1477 1406 1334 1263 1192 South Ayrshire 44356 36833 35327 33818 32308 28718 25128 21539 20630 19720 18811 17902 16993 16084 15175 South Lanarkshire 103728 86776 83848 80868 77835 69187 60538 51890 49700 47510 45319 43129 40939 38749 36559 Stirling 41305 34383 33058 31725 30384 27008 23632 20256 19401 18546 17691 16836 15981 15126 14271 West Dunbartonshire 32772 27203 26080 24956 23832 21184 18536 15888 15217 14547 13876 13206 12535 11864 11194 West Lothian 55664 46184 44257 42331 40405 35916 31426 26937 25800 24663 23526 22389 21252 20115 18978 Western Isles 14310 11799 11236 10677 10125 9000 7875 6750 6465 6180 5895 5610 5325 5041 4756

Total 1800000 1500000 1440000 1380000 1320000 1173333 1026667 880000 842857 805714 768571 731429 694286 657143 620000

ANNEX D – Distribution of former Strategic Waste Fund and Additional Money

£m

Council 2008- 2009- 2010- LA 09 10 11 Total Aberdeen City 3.9 4.0 4.1 12.0 Aberdeenshire 6.2 6.5 6.1 18.8 Angus 2.2 2.4 2.7 7.3 Argyll & Bute 4.7 4.7 4.7 14.1 Clackmannanshire 0.9 0.9 0.9 2.6 Dumfries & Galloway 6.5 6.6 6.6 19.7 Dundee City 3.2 3.1 3.4 9.7 East Ayrshire 2.4 2.4 2.4 7.2 East Dunbartonshire 2.8 2.7 2.7 8.2 East Lothian 2.5 2.4 2.4 7.3 East Renfrewshire 2.2 2.2 2.2 6.5 Edinburgh, City of 12.3 11.3 11.5 35.1 Eilean Siar 1.6 1.6 1.7 5.0 Falkirk 2.9 3.0 3.0 8.9 Fife 9.0 8.0 8.0 25.1 Glasgow City 14.3 14.7 13.9 43.0 Highland 7.7 7.9 7.9 23.4 Inverclyde 1.4 1.5 1.7 4.7 Midlothian 2.6 2.6 2.6 7.8 Moray 1.9 1.9 1.9 5.8 North Ayrshire 4.1 3.2 3.2 10.5 North Lanarkshire 6.5 6.7 6.7 19.9 Orkney 0.6 0.6 0.8 2.0 Perth & Kinross 3.8 3.9 3.8 11.5 Renfrewshire 3.4 3.5 3.5 10.3 Scottish Borders 4.0 4.0 4.1 12.1 Shetland 0.6 0.6 0.7 2.0 South Ayrshire 2.8 2.8 2.7 8.3 South Lanarkshire 7.0 7.6 7.4 22.1 Stirling 2.6 2.9 2.9 8.4 West Dunbartonshire 2.5 2.4 2.7 7.6 West Lothian 3.6 3.7 3.7 11.0 Scotland (Total) 132.6 132.6 132.6 397.9

Agenda item 1 RAE/S3/08/18/4

RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

2009-10 BUDGET PROCESS - INFORMATION FROM THE SCOTTISH GOVERNMENT

The following annexes were issued to the Committee as annexes to the Budget Adviser’s paper for the Committee meeting on 1 October and are reproduced again below for members’ reference. All of the following information is now publicly available and therefore can be referred to on the record.

• Annexe A - Table on rural development contracts and existing commitments (pages 2 and 3) • Annexe B – Information on the use of climate change budgets (p. 4 to 6) • Annexe C – Information on the main flooding elements in local authority single outcome agreements (p. 7 and 8) • Annexe D – Information on movement of each level 2 budget line from the figures used in the 2007 Budget consideration, through changes notified in Parliament in the Autumn and Spring Budget revisions, to outturn figures (p. 9 to 14) • Annexe E – Analysis of Draft Budget (Level 3) in terms of Resource, Capital and Non-Cash spend (p.15 to 19) • Annexe F – Information matching RAE portfolio contributions to the National Performance Framework (p. 20 to 28)

Agenda item 1 RAE/S3/08/18/4

ANNEXE A

TABLE ON RURAL DEVELOPMENT CONTRACTS AND EXISTING COMMITMENTS

Table provided to the Committee in response to Chairman’s letter of 21 November 2007 set out the RDC expenditures (including legacy commitments) as:

£m 2008- 2007-08 09 2009-10 2010-2011 £000s Budget Draft Plans Plans

Rural Development Contracts 78849 99420 107120 108000 of which legacy payments on old schemes is: Agri-environment schemes 38698 35790 29970 21750 LMCMS 22000 19780 19780 6130 Farm Premium Scheme 5771 6370 5550 4860 ABDS 3510 2960 0 0 FBDS 8870 4780 0 0 leaving the following resources for new: RDCs (LMOs & RP) 29740 51800 75260

In the light of a more recent review of information this table for the SR period is now:

£m 2008- 2009- 2010- 09 10 2011 £000s Budget Plans Plans

Rural Development Contracts 99.4 107.1 108.0 of which legacy payments on old schemes is: Agri-environment schemes (including LMCMS) 35.6 27.3 18.6 LMCMS (non-agri-environment) 12.9 12.9 12.9 Farm Premium Scheme 6.3 5.5 4.8 ABDS 1.2 FBDS 9.7 leaving the following resources for new: RDCs (LMOs & RP) 33.7 61.4 71.7

Agenda item 1 RAE/S3/08/18/4

The differences are because: We have unearthed that there was double counting of both agri-environment payments (e.g. RSS, ESAs and Organic Aid payments) and agri-environment payments under LMCMS as reported previously. That is, that LMCMS amounts appear to be down in 2008-09 and 2009-10 (but not 2010-11 see below) due to the double counting.

LMCMS legacy in 2010 was previously reported as £6.1m whereas now it is £12.9. This is due to a mis-reporting of figures, £6.1m is the value of LMCMS commitments in scheme year 2010, which will be paid in 2011-12, meaning the £12.9m commitments from the 2009 scheme year are due to be paid in 2010-11.

Over time the level of legacy commitments tends to fall due to some applicants’ decisions not to carry out their particular projects and hence not come forward with a claim

ABDS and FBDS reflect the latest expected claims, with FBDS increasing due to an increased carry over of commitments from 2007-08.

Changes in Budget Headings

These changes were introduced to bring SRDP spending into line with the Scottish Government’s 5 Key Objectives. There has been no change to the level of the SRDP budget, however, resources have had to be reallocated across the new headings.

Comparing the 2008-09 budget document with that for 2009-10:

Business development consists of that part of Rural Development Contracts associated with Axis 1 business development measures, Food processing and marketing and Co-operation grants, Skills Development and CCAGS.

Agri-environment measures consist of that part of Rural Development Contracts associated with Axis 2 measures for improving the environment and countryside.

Forestry consists of Rural Development Contracts associated Axis 2 forestry measures paid for by Scottish Government budgets.

Rural Enterprise consists of that part of Rural Development Contracts Axis 3 measures for diversification of the rural economy.

Rural Communities consists of that part of Rural Development Contracts Axis 3 measures for quality of life in rural areas

Legacy Development Grants relate to legacy payments for ABDS and FBDS finishing in 2008.

Budgets for LFASS and Leader remain unchanged.

Agenda item 1 RAE/S3/08/18/4

ANNEXE B

LEVEL 2: Environment Protection, Sustainable Development & Climate Change LEVEL 3: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE

2008-09 2009-10 2010-11 Budget Draft Budget Plans Sustainable Development 13.0m 15.1m 15.3m and Climate Change

Key Issues • Largest item is the Climate Challenge Fund, announced in November 2007 Budget. • Following increase in Stage 3 of the Budget Bill in February 2008, now stands at £27.4 million over three years 2008-09 to 2010-11 (£8.8/9.3/9.3 million) • Fund originally announced at £18.8 million. New figure includes £4.3/4.3 million increases in 2009-10 and 2010-11. • Contributes towards delivery of our target to cut emissions by 80% by 2050 and promotes sustainable places and community engagement. • Designed to enable communities to come forward with their own solutions to make a significant reduction in carbon emissions. • Projects can offer a range of environmental, economic and social benefits, but must have a strong focus on emissions reduction and have the community at the heart of the decision-making. • Since launch in June 2008, 18 projects have been awarded funding (see list overleaf): – 4 exemplar projects totalling just over £2 million, chosen as case studies from which other communities can learn and to help publicise the Fund. – 14 projects totalling £705,000 were agreed on the recommendation of the first Grants Panel meeting on 13 August. 37 proposed projects will be considered by the next Panel meeting in October. • Remainder of Sustainable Development & Climate Change line divided between: – Core funding for organisations working on capacity building and/or awareness raising of sustainable development and greener issues – eg Sustainable Development Commission Scotland, the Sustainable Scotland Network, and secretariats for the Scottish Sustainable Development Forum and Scottish Environment Link. – Specific projects/programmes supporting the Greener strategic objective, such as projects on environmental volunteering, local ecological footprints,

Agenda item 1 RAE/S3/08/18/4

developing an ecosystems approach to natural resources, and cutting costs and waste by finding alternative markets for business by-products. • Detailed splits for 2009-10 yet to be established. By comparison, the budget this year included just under £1 million for core funding with the balance going to Greener projects/ programmes and a number of projects funded under the now closed Sustainable Action Grants scheme.

Projects so far supported by the Climate Challenge Fund Four exemplars Barra & Vatersay Community Ltd - Community-owned company to develop an action plan to deliver environmental benefits to its 1150 residents, including renewables, waste management, energy efficiency, recycling facilities and local food – £62,000. Transition in Scotland – Supporting Transition movement in Scotland to work with existing network of community based groups to develop their actions to tackle the challenge of Climate Change and to extend the network, especially to communities that are harder to reach or find it harder to organise - £570,000. Going Carbon Neutral Stirling – Community groups working across a big area (~90,000 people) to raise awareness and offer advice and information to community groups on key changes they might consider to tackle climate change. Also supported by Stirling Council, Big Lottery and WWF - £800,000.

Perth & Kinross Community carbon reduction project – Focused practical help to a small number of communities to develop comprehensive range of micro generation and energy efficiency measures plus advice on energy tariffs to be delivered on a ‘street by street’ basis – approx £600,000. Fourteen projects announced on 17 September Ore Valley Housing Association, Cardenden, Fife - Heat and Power Phase 1, to provide biomass-fuelled combined heat and power and other services to the local community - £343,750 Fintry Development Trust, Stirlingshire - Fintry Community Energy Project, survey work to reduce energy use within the village and ultimately make it a zero carbon and zero waste community - £67,541 Castlemilk and Carmunnock Community Windpark Trust, Glasgow - funding to ensure the continuation of a Wind Park Development Manager's post for development of a community wind park - £65,717 Penicuik Sports and Leisure Foundation, Midlothian - grant for more energy efficient and longer life lamps for the Ladywood Leisure Centre exterior all-weather pitch - £22,400 Craigmillar Community Combined Heat and Power Scheme, Edinburgh - Work Track, to provide more cost-effective energy systems and a community owned Combined Heat and Power (CHP) scheme and a feasibility study on learning,

Agenda item 1 RAE/S3/08/18/4

training and employment opportunities in the local community from the CHP scheme - £65,000 Deveron Arts, Huntly, Aberdeenshire - Sustown Huntly, using creative approaches to engage people of all ages and from all walks of life to transform understanding of sustainability and how each individual and the community as a whole can contribute on climate change - £47,318 Largoward and District Community Council, Fife - feasibility study for Green Electricity from sewage and other organic matter at Largoward - £18,000 Badenoch and Strathspey Community Transport Company, Highland - Demonstration of rural community use of a locally sustainably-powered electric vehicle - £20,000 Colston Milton Parish Church, Glasgow - Colston Milton Community Development Project, conducting a feasibility study on building and maintaining ecologically and economically sustainable buildings for the benefit of the people of Milton - £42,809 Invergordon Golf Club, Highland - to cover the costs of a planning application for a wind turbine - £390 The Haddington Bridge Centre, East Lothian - Poldrate Mill Complex Renewables Project, a technical feasibility study into the potential to generate power from the Poldrate Mill Water Wheel, and to explore further potential options for the generation of other renewable energy for a complex of community buildings - £5,875 Strathblane Community Development Trust, Stirlingshire - Energy Awareness Fair to raise awareness of unsustainable lifestyles, provide practical examples and demonstrations, reduce energy consumption, fuel poverty and the carbon footprint of Strathblane, Blanefield and surrounding villages, and encourage the installation of renewable energy systems and energy efficiency measures - £2,000 The Carrick Centre, Maybole, South Ayrshire - to employ a sustainable energy consultant on developing energy-efficient systems to reduce the carbon footprint of the new Carrick Centre, which is to be available to the community and visitors 7 days a week - £2,200 Stepping Stanes Youth Cycling Club Development Project, Dumfries - to increase cycling opportunities for young people in Dumfries, with opportunities for additional cycle training in schools - £2,700

Greener Scotland 24 September 2008

Agenda item 1 RAE/S3/08/18/4

ANNEXE C

MAIN FLOODING ELEMENTS OF SINGLE OUTCOME AGREEMENTS

Includes: ▪ local outcomes which specifically make reference to flooding ▪ local indicators which specifically make reference to flooding ▪ actions identified for local partners which specifically make reference to flooding.

DUNDEE:

National Outcome 14: LA identifies an action for local partners to develop a flood prevention and coastal protection plan for Dundee and implement appropriate protective measures.

EDINBURGH:

National Outcome 12: LA identifies an action for local partners to construct major flood prevention schemes on the Braid Burn and Water of Leith.

FALKIRK:

National outcome 12: LA identifies an action for local partners to manage the risk from flooding

FIFE:

National outcome 14: LA identifies an action for local partners to review/update and report biennially on flood alleviation issues

GLASGOW:

National outcome 12: LA identifies the White Cart Flood Prevention scheme as an “indicator” for this outcome, with associated construction milestones in 2008-09 and 2010/11.

HIGHLAND:

National outcome 14: LA identifies Flood Protection Orders as an “indicator” for this outcome; with specific entries for River Ness, Mill Burn, Dell Burn and Culloden in Inverness area, River Enrick in Drumnadrochit, River Thurso, River Lochy and Caol and Wick River.

MORAY:

National outcome 12: LA has identified a specific local outcome “The threat of flooding for Moray communities will reduce”, with progress on flood schemes - Elgin,

Agenda item 1 RAE/S3/08/18/4

Forres (Burn of Mosset), Forres (Findhorn & Pilmuir) and Rothes – used as indicators.

The LA also identifies actions for local partners to formally promote flood alleviation schemes; to ensure that all future housing developments in flood risk areas are subject to flood risk assessments; and to continue to work with Scottish Water to improve surface water drainage throughout the area.

ORKNEY:

NATIONAL OUTCOME 9: LA identifies an indicator for this outcome as percentage of dwellings in coastal or fluvial flood risk areas; and an action for local partners to identify and reduce flood risks via the Flood Liaison and Advice Group and flood risk assessments.

SCOTTISH BORDERS:

NATIONAL OUTCOME 14: LA identifies indicators for this outcome as the number of Flood Prevention Schemes implemented; and the percentage of residential property prone to flooding.

SOUTH LANARKSHIRE:

NATIONAL OUTCOME 12: LA identifies an indicator for this outcome as the number of properties at risk of flooding.

STIRLING:

NATIONAL OUTCOME 12: LA identifies a specific local outcome “Adaptation to the effects of climate change particularly flooding”, with a related action for local partners to develop a comprehensive Flood Management strategy to deal with all aspects of flooding, including local flood intervention schemes to help reduce the flood risk to local properties and infrastructure.

Agenda item 1 RAE/S3/08/18/4

ANNEXE D

2009-10 Draft Budget - Realignment and Adjustments since SR 2007:

£m SR 2007 Changes due to Other Draft Budget 2009-10 realignment to Adjustments Plan 2009-10 Plans reflect Portfolio (See detail (Table Directorate below) 24.01) structure EU CAP Support for 6.5 135.9 23.5 165.9 Farmers – now EU Support and Related Services Rural Development 145.5 -145.5 and Other Services - deleted Research, Analysis 116.3 -10.7 -7.0 98.6 and Other Services Marine and 71.0 1.3 72.3 Fisheries Natural Heritage – 84.2 19.0 103.2 now Natural Heritage and Rural Services Environmental 111.3 -1.0 110.3 Protection, Sustainable Development and Climate Change 8.6 8.6 Water Quality Forestry 67.6 67.6 Commission Scotland Forest Enterprise 26.2 26.2 Scotland TOTAL 637.2 0 15.5 652.7

Agenda item 1 RAE/S3/08/18/4

Adjustments (as detailed in the Draft Budget):

£m Description of Adjustment Adjustment EU Support and Transfer from Administration to Rural 23.5 Related Services Payments and Inspections Directorate

Research, Analysis Transfer to Education and Lifelong -7.0 and Other Services Learning for the reassignment of the funding of the Scottish Agricultural College to the Funding Council

Environmental Transfer to support the Climate Challenge 4.3 Protection, Fund Sustainable Development and Climate Change

Environmental Transfer to Local Government in respect of -1.3 Protection, the Strategic Waste Fund Sustainable Development and Climate Change

Environmental Transfer to Health and Wellbeing from the -4.0 Protection, Scottish Environment Protection Agency Sustainable (to be repaid in 2010-11) Development and Climate Change

TOTAL 15.5

Agenda item 3

Movement of 2007-08 Budget from Baseline to Spring Budget Revision

Baseline ABR Adjustment Budget after ABR SBR Adjustment Budget after SBR £m £m £m £m £m Operating Capital Operating Capital Operating Capital Operating Capital Operating Capital CAP Market Support 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Rural Development 112.8 0.1 0.0 0.0 112.8 0.1 6.5 -0.1 119.3 0.0 Agricultural and 128.6 -3.0 0.0 0.0 128.6 -3.0 -9.3 3.9 119.3 0.9 Biological Science and Other Fisheries 60.6 9.7 0.0 0.0 60.6 9.7 -4.4 4.5 56.2 14.2 Natural Heritage 77.1 0.0 0.0 0.0 77.1 0.0 6.6 0.0 83.7 0.0 Environmental 217.5 0.0 0.0 0.0 217.5 0.0 -29.1 0.0 188.4 0.0 Protection Research and 5.6 0.0 0.0 0.0 5.6 0.0 2.0 0.0 7.6 0.0 Sustainable Action/Greener Scotland Water (less 8.3 230.8 0.0 -230.8 8.3 0.0 -1.8 0.0 6.5 0.0 repayments to NLF, PWLB etc)/Water Grants Total DEL 610.5 237.6 0.0 -230.8 610.5 6.8 -29.5 8.3 581.0 15.1

AME SABRI Pensions 0.0 0.0 370.0 0.0 370.0 0.0 60.0 0.0 430.0 0.0 Total AME 0.0 0.0 370.0 0.0 370.0 0.0 60.0 0.0 430.0 0.0

Other Expenditure Outside DEL Animal Licence Fees 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 0.0

TOTAL 610.6 237.6 980.6 6.8 1011.1 15.1

Agenda item 3

Baseline ABR Adjustment Budget after ABR SBR Adjustment Budget after SBR £m £m £m £m £m Operating Capital Operating Capital Operating Capital Operating Capital Operating Capital Forestry Commission 54.7 2.0 14.3 2.4 69.0 4.4 -8.8 -1.9 60.2 2.5 (Scotland) Forest Enterprise 26.4 1.3 0.3 0.0 26.7 1.3 5.8 1.9 32.5 3.2 (Scotland) TOTAL 81.1 3.3 14.6 2.4 95.7 5.7 3.0 0.0 92.7 5.7

Outturn 2007-08 (based on SBR Budget):

The Scottish Government Rural Affairs and the Environment Portfolio Resource Outturn Statement for the Year Ended 31 March 2008

Restated 2006-07 Gross Income Outturn Expenditure Applied Outturn Budget Variance £m PROGRAMME £m £m £m £m £m

Departmental Expenditure Limit (DEL) 1 CAP Support 422 421 1 - 1 89 Rural Development 169 50 119 119 - 113 Agricultural and Biological Science and Other 118 7 111 119 (8) 48Fisheries 61124956(7) 96 Natural Heritage 82 - 82 84 (2) 140 Environmental Protection 183 - 183 188 (5) 6 Greener Scotland 8 - 8 8 - 3 Water Grants 5 - 5 7 (2) 496 Total DEL 1,048 490 558 581 (23)

Annually Managed Expenditure (AME) - SABRI Pensions 433 - 433 430 3 - Total AME 433 - 433 430 3

Other Expenditure

-Total Other Expenditure -----

496 TOTAL 1,481 490 991 1,011 (20)

Note: In addition to direct expenditure, the share of administration costs allocated to the Rural Affairs and the Environment Portfolio is £82m (2006-07: £67m). This gives total net expenditure of £1,073m (2006-07: £563m).

The Scottish Government Rural Affairs and the Environment Portfolio Capital Outturn Statement for the Year Ended 31 March 2008

Restated Expenditure Disposals & Total Budget Variance 2006-07 £m Repayments £m £m £m Outturn £m £m (12) 14 (4) 10 15 (5)

Forestry Commission (Scotland) Resource Outturn Statement for the Year Ended 31 March 2008

Restated Gross Income Outturn Budget Variance 2006-07 Expenditure Applied £m £m £m Outturn £m £m £m 80 91 0 91 93 (2)

Forestry Commission (Scotland) Capital Outturn Statement for the Year Ended 31 March 2008

Restated Expenditure Disposals & Total Budget Variance 2006-07 £m Repayments £m £m £m Outturn £m £m 9 13 (8) 6 6 0

ANNEXE E

Analysis of Draft Budget (Level 3) in terms of Resource, Capital and Non-Cash spend:

EU Support and Draft Resource NDPB Direct Indirect Non- Related Services Budget Capital Capital Capital Cash £’000 Plan

Single Farm Payment Scheme 433,562 433,562 Scottish Beef Calf Scheme 21,000 21,000 Energy Crop Scheme 150 150 Protein Crop Premium 257 257 Business Development 33,400 3,000 30,400 Less Favoured Area Support Scheme 61,000 61,000 Agri Environment Measures 58,300 50,874 7,426 Forestry 5,529 5,529 Rural Enterprise 8,700 8,700 Rural Communities 18,200 18,200 LEADER 5,800 5,800 Technical Assistance 300 300 Legacy Development Grants 35 35 Rural Payments and Inspections Directorate Administration Costs 39,343 34,838 2,145 2,360 EU Income -519,676 433,562 Animal Licences 1 1 TOTAL 165,901 123,535 0 2,145 37,861 2,360

Research, Analysis Draft Resource NDPB Direct Indirect Non- and Other Services Budget Capital Capital Capital Cash £’000 Plan

Programmes Of Research 71,001 68,239 2,762 Scottish Agricultural College Education 5,600 5,600 Royal Botanic Garden Edinburgh 12,049 9,156 700 2,193 Contract Research Fund 8,400 8,400 Economic And Other Surveys 1,713 1,713 EU Income -100 -100 Animal Licences 70 70 TOTAL 98,733 87,478 700 0 8,362 2,193

Marine and Draft Resource NDPB Direct Indirect Non- Fisheries Budget Capital Capital Capital Cash £’000 Plan

Fisheries Research Services 33,730 21,250 7,930 4,550 Scottish Fisheries Protection Agency 24,700 19,765 300 4,635 EU Fisheries Grants 9,750 9,750 Fisheries Harbour Grants 420 420 Aquaculture And Freshwater Fisheries 366 366 Sea Fisheries 634 634 Food Industry Support 1,220 1,220 Marine Management 7,900 7,900 EU Income -6,500 -500 -6,000 Animal Licences 5 5 TOTAL 72,225 50,640 0 8,230 4,170 9,185

Natural Heritage Draft Resource NDPB Direct Indirect Non- and Rural Services Budget Capital Capital Capital Cash £’000 Plan

Scottish Natural 69,704 63,845 2,080 3,779 Heritage National Parks 12,696 11,354 100 1,242 Deer Commission for 1,814 1,702 38 74 Scotland Crofting Assistance 5,645 4,542 109 800 194 Business Advice and Skills 1,800 1,800 Public Good Advice 3,400 3,400 Veterinary Surveillance 5,230 5,230 Animal Health 1,534 1,534 Commodities and Plant Health 302 302 Rural Cohesion 950 950 Minor Agricultural Services 234 234 TOTAL 103,309 94,893 2,218 109 800 5,289

Environmental Draft Resource NDPB Direct Indirect Non- Protection, Budget Capital Capital Capital Cash Sustainable Plan Development and Climate Change £’000

Scottish Environment 35,165 30,314 2,700 2,151 Protection Agency Zero Waste 53,118 48,968 4,150 Flood Prevention and 1,647 1,647 Coast Protection Water Environment 788 788 Noise and air quality 4,400 3,400 1,000 action Sustainable 15,122 15,122 Development and Climate Change TOTAL 110,240 100,239 2,700 0 5,150 2,151

Water Quality Draft Resource NDPB Direct Indirect Non- £’000 Budget Capital Capital Capital Cash Plan Private Water 8,200 8,200 Drinking Water 430 430 Quality Regulator TOTAL 8,630 8,630 0 0 0 0

Forestry Draft Resource NDPB Direct Indirect Non- Commission Budget Capital Capital Capital Cash Scotland Plan £’000

Woodland Grants 27,000 27,0000 Policy, Regulation 8,800 8,800 and Administration Programme Costs 19,200 19,200 Capital Expenditure 18,500 18,500 Cost of Capital 15,100 15,100 Charge and Depreciation Sale of Land -15,000 -15,000 EU Income -6,000 -6,000 TOTAL 67,600 49,000 0 3,500 0 15,100

Forest Enterprise Draft Resource NDPB Direct Indirect Non- Scotland Budget Capital Capital Capital Cash £’000 Plan

Operating Costs 21,700 21,700 Net Capital 1,300 1,300 Expenditure Cost of Capital 3,200 3,200 Charge and Depreciation TOTAL 26,200 21,700 0 1,300 0 3,200

Details of NDPB and Direct Capital Expenditure:

Direct Capital Expenditure £m EU Support and Related RPID Admin Costs – Development of IT Systems 2.145 Services

Research, Analysis and RBG – Equipment and minor works 0.700 Other Services

Marine and Fisheries FRS – Construction of a Fish Veterinary Aquarium 7.930 Facility Marine and Fisheries SFPA – HQ Inspectorate Development of Surveillance Systems and purchase vessels and 0.300 aircraft equipment Natural Heritage and Rural SNH - Equipment and minor works 2.080 Services Natural Heritage and Rural NPs - Equipment and minor works 0.100 Services Natural Heritage and Rural DC - Equipment and minor works 0.038 Services Natural Heritage and Rural Crofting Assistance – Investment in Stud farm, 0.109 Services Crofters Commission capital and Crofters improvement Environmental Protection, SEPA – Laboratory equipment, flood warning 2.700 Sustainable Development system, water environment protection works and Climate Change

Forestry Commission Woodland creation 18.000 Scotland

Forest Enterprise Scotland Equipment and minor works 1.300

ANNEXE F

INFORMATION ON THE NATIONAL PERFORMANCE FRAMEWORK

Tables 1 and 2 summarise the RAE portfolio contributions to the national performance framework.

In attempting to relate budget lines to outcomes, indicators/targets, it is worth noting the following points:

• Each budget line impacts on a number of the outcomes and indicators and therefore the relationship between budget lines and the outcomes and indicators/targets is not ‘one to one’ rather it is “one to many”. An individual budget line will therefore contribute to more than one outcome and more than one indicator/target. Furthermore, some of the budget lines in the RAE portfolio will contribute to outcomes and indicators/targets in other portfolios.

• Where a budget line contributes to achievement of an outcome or indicator/target, it will contribute to varying degrees. For example, for some budget lines it may be primarily related to delivery of one outcome or one indicator/target. By contrast other budget lines may make a small contribution to many outcomes, indicators/targets.

• As a result, it is difficult to attribute outcomes and indicators/targets to individual budget lines and consequently it is not possible to estimate precisely how much is spent on individual outcomes, indicators/targets.

Note that since the Rural Development budget is dependent on the EU CAP support for farmers budget (through modulation of the EU CAP budget), the two budget lines contribute to the same outcomes, indicators/targets.

Table 1: National Outcomes and How the RAE portfolio Contributes

National Outcome How the RAE Portfolio contributes We live in a Scotland that is • Investing in waste management, climate change the most attractive place for and sustainable development (Environment doing business in Europe Protection budget) We realise our full economic • Providing employment opportunities and potential with more and better supporting local economies through agriculture employment opportunities for (EU CAP budget) and fisheries (Marine budget) our people • Supporting diversification to other forms of employment (Rural Development budget) and investing in natural heritage and landscapes to develop economic potential (Natural Heritage and Forestry budgets) • Maintaining and creating jobs at SABRIs, RBGE and SAC and elsewhere through knowledge transfer and spin-off companies (Research & Analysis budget). We are better educated, • Developing research and innovation through more skilled and more investment in SABRIs, RBGE and SAC successful, renowned for our (Research & Analysis budget) and Fisheries research and innovation Research services (Marine budget) Our young people are • Enhancing education through the investment in successful learners, confident SABRIs, RBGE and SAC (Research & Analysis individuals, effective budget) contributors and responsible • Supporting learning and capacity building citizens projects on sustainable development and climate change (Environment Protection budget) Our children have the best • Not applicable start in life and are ready to succeed We live longer, healthier lives • Investing in research into dietary and environmental impacts on human health (Research & Analysis budget) • Investing in National Parks and path networks to provide recreational opportunities (Natural Heritage budget) • Investing in improved water quality for human health (Water quality budget) • Investing in forestry to provide access and recreational opportunities (Forestry budget) • Maintaining clean air quality (Environment Protection budget) We have tackled the • Investing in environmental improvements to significant inequalities in reduce environmental inequalities (Environment Scottish society Protection budget and Water Quality budget) • Investing in tackling rural poverty (Rural Development budget)

We have improved the life • Not applicable chances for children, young people and families at risk We live our lives safe from • Investing in flood awareness mechanisms crime, disorder and danger (Environment Protection budget) We live in well-designed, • Investing in services in rural areas (EU CAP and sustainable places where we rural development budgets) and in fisheries areas are able to access the (Marine budget) amenities and services we • Investing in research with communities on their need priorities for sustainable places (Research and Analysis Budget) • Improving access to the countryside (Natural Heritage budget and Forestry budget) • Investing in waste management, climate change and sustainable development (Environment Protection budget and Water Quality budget) We have strong, resilient and • Investing in strong rural communities through supportive communities capacity building (EU CAP budget and Rural where people take Development budget) responsibility for their own • Commissioning research on enhanced actions and how they affect methodology for engaging the public in others community working (Research and Analysis Budget) • Investing in sustainable places (Environmental Protection budget) We value and enjoy our built • Delivering rural development contracts (EU CAP and natural environment and budget and Rural Development budget) protect it and enhance it for • Implementing the Scottish Biodiversity Strategy future generations (Rural Development budget and Natural Heritage budge, Environment Protection budget) • Investing in waste management and water quality improvements (Environment Protection budget and Water Quality budget) • Commissioning research on enhanced methodology for engaging the public in community working (Research and Analysis Budget) • Managing and protecting our marine environment (Marine budget) • Maintaining clean air and reducing the problems caused by noise and other nuisance (Environment Protection budget) We take pride in a strong, fair • Working with communities and funding events to and inclusive national identity support our cultural identity (Environmental Protection budget) We reduce the local and • Contributing to climate change mitigation (Rural global environmental impact Development budget, Environment Protection of our consumption and budget, Forestry budget) production • Commissioning research from SABRIs, RBGE

and SAC on land use, climate change, the environment, rural sustainability and biodiversity (Research & Analysis budget). • Supporting actions to reduce consumption through the zero waste fund (Environment Protection budget) • Managing our natural resources (Natural Heritage budget, Marine budget, Water Quality budget) • Maintaining clean air (Environment Protection budget) Our public services are high • Encouraging SABRIs and SAC to foster their own quality, continually improving, sustainability through diversification and merger efficient and responsive to (Research & Analysis budget). local people’s needs • Improving efficiency of service delivery through SEARS (Rural Development and Natural Heritage budget) and actions under Marine budget, Environment Protection and Water Quality budgets

Table 2: National Indicators/Targets and how the RAE Portfolio Contributes

NATIONAL INDICATORS AND How the RAE Portfolio contributes TARGETS At least halve the gap in total • Maintaining investment in research at SABRIs, research and development RBGE and SAC and enabling them thereby to spending compared with EU leverage funding from outside Scotland average by 2011 (Research & Analysis budget) and Fisheries Research Services (Marine Budget). Increase the business start-up • Financial support for micro-enterprises (EU rate CAP budget and Rural Development budget) • Research in SABRIs and SAC encouraged to lead to the setting up of spin-out companies (Research and Analysis budget) Grow exports at a faster • Financial support for food and fish processing average rate than GDP businesses to add value and develop new markets (EU CAP budget, Rural Development budget and Marine Budget) Improve public sector efficiency • Efficiency savings being required from rural through the generation of 2% public bodies (Rural Development, Natural cash releasing efficiency Heritage budget and Forestry budget) savings per annum • Level cash research budgets at SABRIs and SAC are encouraging efficiency and income diversification (Research & Analysis budget). • Efficiency savings being required from environment and marine public bodies (Environment Protection budget, Water Quality budget and Marine budget) Improve people’s perceptions • SEARS project delivering more joined up of the quality of public services service to public (Rural Development and delivered Natural Heritage budgets) • Improving environmental management services and water services (Environment Protection budget and Water Quality budget) Reduce the number of Scottish • Rural bodies being considered along with other public bodies by 25% by 2011 bodies (Rural Development budget, Natural Heritage budget, Environment Protection budget, Marine budget) • Rowett Research Institute planning to merge with University of Aberdeen; and possible merger of the Macaulay Institute with the Scottish Crop Research Institute (Research & Analysis budget). Reduce the proportion of driver • Not applicable journeys delayed due to traffic congestion Increase the percentage of • Employment opportunities in science

Scottish domiciled graduates maintained in SABRIs, SAC and RGBE from Scottish Higher Education (Research and Analysis budget) Institutions in positive destinations Improve knowledge transfer • Research commissioned from universities out from research activity in of the Contract Research Fund emphasises universities the need for KT (Research & Analysis budget). • High quality science from Fisheries Research Services leads to KT in fisheries and marine management (Marine budget) Increase the proportion of • Not applicable school leavers (from Scottish publicly funded schools) in positive and sustained destinations (FE, HE, employment or training) Increase the proportion of • Not applicable schools receiving positive inspection reports Reduce number of working age • Not applicable people with severe literacy and numeracy problems Increase the overall proportion • Not applicable of area child protection committees receiving positive inspection reports Decrease the proportion of • Investing in tackling rural poverty (Rural individuals living in poverty Development budget) and commissioning research to understand rural community disadvantage (Research and Analysis budget) 60% of school children in • Not applicable primary 1 will have no signs of dental disease by 2010 Improve the quality of • Not applicable healthcare experience Increase the proportion of pre- • Not applicable school centres receiving positive inspection reports Increase the social economy • Investing in rural development contracts and turnover LEADER programmes to increase capacity building (Rural development budget) Reduce the rate of increase in • Investing in research into dietary and the proportion of children with environmental impacts on human health their Body Mass Index outwith (Research & Analysis budget) a healthy range by 2018 Increase the average score of • Research on how green spaces contribute to adults on the Warwick- mental health wellbeing (Research and Edinburgh Mental Wellbeing Analysis budget) Scale by 2011

Increase healthy life • Investing in research into dietary and expectancy at birth in the most environmental impacts on human health deprived areas (Research & Analysis budget) • Delivery of high quality public drinking water supplies (Water Quality budget)

Reduce the percentage of the • Not applicable adult population who smoke to 22% by 2010 Reduce alcohol related hospital • Not applicable admissions by 2011 Achieve annual milestones for • Not applicable reducing inpatient or day case waiting times culminating in delivery of an 18 week referral to treatment time from December 2011 Reduce the proportion of • Not applicable people aged 65 and over admitted as emergency inpatients two or more times in a single year Reduce mortality from coronary • Investing in research into dietary and heart disease among the under environmental impacts on human health 75s in deprived areas (Research & Analysis budget)

Increase the percentage of • Not applicable people aged 65 and over with high levels of care needs who are cared for at home All unintentionally homeless • Not applicable households will be entitled to settled accommodation by 2012 Reduce overall reconviction • Not applicable rates by 2 percentage points by 2011 Reduce overall crime • Not applicable victimisation rates by 2 percentage points by 2011 Increase the percentage of • Not applicable criminal cases dealt with within 26 weeks by 3 percentage points by 2011 Increase the rate of new house • Support for Croft House Grant scheme (EU building CAP budget and Rural Development budget) Increase the percentage of • Investing in services in rural areas (EU CAP adults who rate their budget and rural development budget) and in neighbourhood as a good place fisheries areas (Marine budget) to live • Investing in research with communities on their

priorities for sustainable places (Research and Analysis Budget) • Improving access to the countryside (Natural Heritage budget and Forestry budget)) • Investing in waste management, climate change and sustainable development and sustainable places (Environment Protection budget and Water Quality budget) Decrease the estimated • Not applicable number of problem drug users in Scotland by 2011 Increase positive public • Not applicable perception of the general crime rate in the local area Reduce overall ecological • Contributing to climate change mitigation footprint (Rural Development budget, Environment Protection budget, Forestry budget) • Commissioning research from SABRIs, RBGE and SAC on land use, climate change, the environment, rural sustainability and biodiversity (Research & Analysis budget). • Supporting actions to reduce consumption through the zero waste fund (Environment Protection budget) • Managing our natural resources (Natural Heritage budget, Marine budget, Water Quality budget) Increase to 95% the proportion • Delivering rural development contracts (EU of protected nature sites in CAP budget and Rural Development budget) favourable condition • Implementing the Scottish Biodiversity Strategy (EU CAP budget and Rural Development budget and Natural Heritage budget, Environment Protection budget) Improve the state of Scotland’s • Protecting historic buildings through rural Historic Buildings, monuments development contracts (Rural Development and environment budget) Biodiversity: increase the index • Delivering rural development contracts (EU of abundance of terrestrial CAP budget and Rural Development budget) breeding birds • Implementing the Scottish Biodiversity Strategy (EU CAP budget and Rural Development budget and Natural Heritage budget, Environment Protection budget) Increase the proportion of • Investing in sustainable places (Environment journeys to work made by Protection budget) public or active transport Increase the proportion of • Investing in National Parks and path networks adults making one or more to provide recreational opportunities (Natural visits to the outdoors per week Heritage budget and Rural Development budget)

• Investing in forestry to provide access and recreational opportunities 50% of electricity generated in • Investing in renewable energy projects under Scotland to come from rural development contracts (EU CAP and renewable sources by 2020 Rural Development budgets) (interim target of 31% by 2011) • Research to compare options for meeting this target through, wind, wave and tidal (Research and Analysis budget and Marine budget) Reduce to 1.32 million tonnes • Investing in waste management through the of waste sent to landfill by 2010 zero waste fund (Environment Protection budget) Increase to 70% key • Investing in conservation of the marine commercial fish stocks at full environment (Marine budget) reproductive capacity and • Research to explore sustainability of marine harvested sustainably by 2015 environment (Marine budget) Improve people’s perceptions, • Investing in a strong cultural identity attitudes and awareness of (Environmental protection budget) Scotland’s reputation

28 Budget Process 2009-10

Guidance for Subject Committees

Introduction

1. As committees will be aware, the Finance Committee is currently conducting a review of the Budget Process. As that review has not yet concluded, then scrutiny of the Draft Budget 2009-10 will take the same form and use the timetable as would normally be expected. This means that subject committees will be asked to scrutinise the expenditure of the portfolio(s) within their remit and report to the Finance Committee by mid- November. The Finance Committee will then publish its own report and lead a debate on the report in December.

2. The Draft Budget 2009-10 was published on 16 September 2008. Both The Finance Committee’s adviser, Professor David Bell and SPICe have drafted analyses of the Draft Budget and these can be accessed via the following links: http://www.scottish.parliament.uk/s3/committees/finance/budget/documents/2 009-10_adviserPaper1.pdf http://www.scottish.parliament.uk/business/research/briefings-08/SB08-49.pdf

3. As this is a non-Spending Review year, then the figures shown in the Draft Budget are an update of those contained in Draft Budget 2008-09. Where there have been changes to the figures in Draft Budget 2008-09, these are detailed after the appropriate Level 2 and Level 3 figures in a paragraph entitled “Budget Changes”.

Issues for consideration

4. As last year, the Committee recognises that some subject committees may be scrutinising sections of the budget rather than the entire portfolio budget. The following suggestions made by the Finance Committee for areas subject committees should address can be answered in the context of the entire portfolio within the committee’s remit or of the particular part of the portfolio on which the committee is concentrating.

General approach 5. As this is not a Spending Review year, committees are invited to focus on any changes made to budget of the portfolio that they effectively shadow. As set out above, where changes have been made to individual budgets, there should be a narrative at the end of the appropriate section in the Draft Budget showing what those changes are.

6. Committees are invited to comment on any of the changes made to budgets within their remit.

7. In giving evidence to the Finance Committee’s review of the Budget Process, the Cabinet Secretary for Finance and Sustainable Growth indicated that he thought it would be useful for explanations to be given on outturn expenditure. Table 4 in the Annex to the Draft Budget shows estimated outturn expenditure for 2007-08, however actual outturn figures will be shown in the Scottish Government’s annual accounts. It is anticipated that these will be published at the end of September. The Finance Committee is taking evidence from the Cabinet Secretary on both outturn expenditure and “Scotland Performs” so it can assess how money has been spent in the past year and subject committees may also find it useful to adopt this approach.

Budgetary information

8. In its report of the Draft Budget 2008-09, the Finance Committee made a number of recommendations to improve the information in the Draft Budget. As a result, the following changes have been made to the presentation of figures in this year’s Draft Budget:

• Level 2 figures have been provided on both a cash and real terms basis • Estimates of capital spending by the private sector and estimated payments under PPP contracts have been provided • Level 2 figures have been split into capital and revenue • Local Government Revenue Expenditure Plans have been included as has information on Specific Grant Funding to Local Government • Spending plans for individual territorial health boards and special health boards have been shown

9. The Scottish Government’s response to the Finance Committee’s report on Draft Budget 2008-09 is attached which details all of the recommendations made in the report and the response given to each recommendation.

10. The Finance Committee appreciates that some committees have previously asked for Level 4 information to be shown in budget documents. As you will see from the Finance Committee’s report and the Scottish Government’s response, it was thought that including Level 4 information in the Draft Budget might be unwieldy, but that the relevant Scottish Government directorate should provide any Level 4 information required by subject committees. Therefore, committees should direct any such requests to the relevant directorate as soon as possible.

11. Committees are invited to comment on the presentation of information in the Draft Budget particularly in light of the changes that have been made to this year’s Draft Budget.

Efficiency Savings 12. The Spending Review/Draft Budget 2008-09 set a target of 2% cash- releasing efficiency savings to release £1.6b over the period of the Spending

2 Review. In May 2008, the “Efficiency Delivery Plans 2008-11” were published which showed a target for efficiency savings in 2008-09 of £534 with identified savings of £601m. The document also presented targets of £1068m and £1603m for savings in 2009-10 and 2010-11 respectively. Local authorities will be able to retain and reinvest any efficiency savings which they make. With regard to other budgets, the Finance Secretary, in evidence to the Finance Committee on 17 May 2008 stated that “some parts of the efficiency savings have been deducted at source”, which implies that some other savings can be reinvested either within the same organisation/directorate or within the general budget. Any savings above 2% can be retained by the relevant organisation/directorate.

13. Committees may wish to seek further information on efficiency savings within the appropriate portfolio and the Finance Committee would be interested in any views or comments.

Equal Opportunities 14. The Scottish Government has stated that “the principles of equality underpin the Government's investment and work across all strategic objectives”. It has also made clear that the individual policies that the budget funds will be equality impact assessed.

15. Given that, subject committees may wish to question their Minister on:

• how the Draft Budget demonstrates the Scottish Government’s commitment to equality; and

• how the process of equality impact assessment has influenced the spending decisions made in the Draft Budget.

Alternative Spending Proposals 16. As set out in the Written Agreement between the Finance Committee and the Scottish Government, the Finance Committee can propose alternative spending plans. Whilst the Finance Committee will consider its own position and possible recommendations, it must also consider any proposals put forward by subject committees and will set out whether it agrees or disagrees with any such proposals in its report on the Draft Budget.

17. Committees are asked to consider whether they wish to make any alternative spending proposals within the appropriate portfolio. It should be borne in mind that any changes must keep within the overall spending limit set by the Draft Budget and therefore, any proposed increases must be offset by proposals for decreases elsewhere. The Finance Committee would expect that subject committees would propose additional spend within their remit and that they would take money from another budget line within their remit, since they will have built up an evidence base for this during their scrutiny of the Draft Budget.

3 Andrew Welsh Convener Finance Committee Scottish Parliament Edinburgh EH99 1SP __ 29 January 2008

Dear Andrew,

I enclose, at Annex A, the Scottish Government’s response to the Finance Committee’s report on the 2008-2009 Draft Budget. Given the truncated scrutiny process caused by the delay in the UK Comprehensive Spending Review, I am impressed with the quality and scope of the Report and appreciate what a difficult task it must have been to produce it.

If you have any further questions about the response or require any additional information you are welcome to contact me. I look forward to working with you over the coming months to consider improvements on the budget process

JOHN SWINNEY

4 ANNEX A FINANCE COMMITTEE 1ST REPORT, 2008 (SESSION 3)

STAGE 2 OF THE 2008-09 BUDGET PROCESS

RESPONSE TO CONCLUSIONS AND RECOMMENDATIONS

National Performance Framework

The Committee believes the Scottish Government should where practicable, further elaborate how the Strategic Objectives which support the delivery of the Scottish Government’s purpose are related and what weight will be attached to each. The Scottish Government should also make clear the order of priority given to its objectives and the basis on which this order has been decided (paragraph 37).

The Scottish Government described its priorities in Chapter 8 of the Scottish Budget Spending Review 2007 document. In particular figure 8.01 illustrates the framework, showing the structure with the Purpose as the key priority, supported by the Strategic Objectives and National Outcomes. The Strategic Objectives inform the Purpose and all of the Strategic Objectives are equally important in delivering the Purpose. There is no order of priority. The 5 strategic priorities set out in the Government’s Economic Strategy will drive delivery of the Purpose across the Strategic Objectives.

Performance Monitoring

The Committee believes that the new National Performance Framework is a step in the right direction but recognises there is still limited evidence linking expenditure to outcomes and this leaves open the question of whether there should be hard, fixed targets or “direction of travel” targets. This is echoed by many subject committees. Regardless of the debate over fixed or direction of travel targets, the Committee recommends that baseline information should be published for all SMART targets. The Committee welcomes the fact that there will be annual reporting on progress against targets. It appreciates the practical difficulties involved, but believes that such progress reports should be published earlier than 2009 if possible. The Committee signals its intention to scrutinise this issue on an on-going basis (paragraph 45).

Available baseline information was published in the technical notes for the 2007 Spending Review on 30 November.

The Scottish Government recognised the need for a range of targets, and that is why there are 15 specific targets and 30 direction of travel targets in the set of national indicators, as well as 2 short term and 7 longer term targets relating to the Purpose.

5 We intend to report on progress on an ongoing basis and are taking work forward through the development of Virginia-style1 performance reporting which we plan should be in place before 2009.

REPORTS FROM SUBJECT COMMITTEES

General

The system of all subject committees appointing their own advisers and working with this Committee’s budget adviser appears to have worked well and the Committee recommends this approach be adopted and developed in future years (paragraph 47).

National Performance Framework and Spending Priorities

The Finance Committee believes that, without more information and a firm commitment from the Government and councils regarding continuing investment in RTPs, there is a level of uncertainty now surrounding the future of RTPs. The Finance Committee recommends that the Scottish Government facilitates further discussions with local government to address these concerns (paragraph 54).

The Scottish Government will be providing local government in Scotland with record levels of funding over the spending review period. The vast majority of the funding, including the capital resources for RTPs, will be provided as part of the local authority settlement. Regional transport funding priorities will be determined locally by the RTPs in consultation with their constituent councils. RTP revenue support will continue to take the form of direct grant from the Scottish Government, with some match-funding by constituent councils. In the case of SPT, the £25 million capital funding will be ring-fenced given their particular role in the delivery of projects and services such as the Glasgow Subway.

Following the meeting, on 8 January, I wrote to the 7 RTP Chairs encouraged by the value they, and CoSLA, felt they could offer under the new Concordat and within the new budgetary arrangements. I requested that the RTPs amend their Regional Transport Strategies to become high level, strategic documents for resubmission to Ministers for approval, with specific interventions moved to become part of locally agreed and funded delivery plans.

The Finance Committee draws attention to the concerns raised by the Education, Lifelong Learning and Culture Committee in relation to both the overall three year funding and within that, the year-to-year funding for higher education (paragraph 55).

The Universities Scotland's bid was, in total, an additional £526 milion over 3 years not £168 million. Working within the constraints of the tightest ever settlement since

1 Model of public reporting using a website named ‘Virginia performs’

6 devolution the Scottish Government have delivered an additional £263m showing the strength of our our commitment to higher education.

The Government has stated that £10 million will be removed from the college capital lines in the budget and given to universities but there is no reference to this in any budget documentation. The Education, Lifelong Learning and Culture Committee also recommended that the Government clarify this point. The Finance Committee accepts the need for clarification (paragraph 56).

Given the profile of capital programmes in 2007-08, the most effective allocation of additional capital was a 60/40 split between colleges and universities. However the Scottish Government has always made it clear that over the spending review period we would transfer £10 million from the college capital line into the HEI capital line to ensure a 50/50 split between sectors.

It would not be appropriate to factor into the Budget Bill a timetable for this money transferring from colleges to universities, because it is difficult to be precise on the timing of capital funding. In this respect, the Scottish Government rightly give Scottish Further and Higher Education Funding Council flexibility to vire capital spend between colleges and universities on an annual basis to optimise the efficient flow of funds.

The Committee would draw attention to the relevant sections of the Rural Affairs and Environment Committee’s report regarding waste management.

There were a number of issues that need to be addressed and specific recommendations for the Scottish Government to consider, namely that future budget documents include:

♦ an assessment of progress towards meeting national and EU waste targets; and ♦ a detailed breakdown of how the Zero Waste budget has been allocated to specific initiatives (paragraph 57).

This level of detail would be inappropriate and unmanageable in the Spending Review and Draft Budget Documents and the Scottish Government do not plan to provide this level of information in future budget documents. However, the Scottish Government would be happy to supply further information on targets and budgetary information to the Finance and Subject committees as required.

The Rural Affairs and Environment Committee recommended that a significant proportion of the Marine Management budget line should be set aside in the first year of the Spending Review to support the fishing industry and the Committee recommends that the Scottish Government should give full consideration to this proposal (paragraph 58).

The Scottish Government fully agrees with the Committee and will seek to take on board the Committee’s recommendation. The Marine Management budget will be focused on measures to prepare for the eventual introduction and implementation of

7 new marine legislation. A key aspect of that will be to provide support to implement the commitments to sustainable fisheries which the industry has made.

A number of the subject committees raised concerns about the adequacy of national targets and indicators (paragraphs 52 to 63) and the Committee intends to scrutinise these issues on an ongoing basis and in doing so, will explore the issues raised by subject committees (paragraph 63).

The indicators were selected following careful consideration across the Scottish Government to find those which best show progress toward the achievement of the Purpose, Strategic Objectives and outcomes. We were influenced by what was measurable and what would support more than one objective or outcome.

Specific targets are only useful when they are well defined, where the impact of policy can be assessed in that way and where a specific target would encourage appropriate activity. Specific targets have therefore been used sparingly and have only been introduced where they genuinely support and can measure progress.

Timetable for budget scrutiny

Committees have raised concerns about the timetable available for scrutiny of the budget process. Following a resolution of the Parliament, there will be a review of the entire budget process and, given its pivotal role in the process and the Written Agreement between the Finance Committee and the Scottish Government, the Committee would intend to take a leading role and a range of issues, including the timetable for budget scrutiny, will undoubtedly form part of any such review. The Committee recognises this will be a fluid process but hopes that significant progress can be made in time for next year’s budget (paragraph 68).

The Scottish Government is committed to an open and transparent budget process which ensures maximum opportunity for scrutiny and follows the protocols established in previous years. The scrutiny undertaken by both finance and subject committees is a key element of the budget process. We agree that the time available for scrutiny should be maximised within the constraints of the Budget Bill process. The recently agreed review of the budget process will provide an excellent opportunity to consider the concerns about scrutiny and in particular the problems around the timetable. We share the ‘hopes’ of the committee that the results of review will have an impact on next year’s budget process.

For the immediate future to counteract the timetabling difficulties, the Committee recommends that subject committees give some thought to incorporating specific financial scrutiny into any inquiry work undertaken during the year. In that way, it might then be possible to focus on particular areas of spending and to take evidence prior to the Draft Budget being published. Such evidence-based work could then feed into committee consideration of the Draft Budget (paragraph 70).

8 This is a matter for the Parliament.

Budgetary Information

General The Committee sought further budgetary information from the Scottish Government which it received. The Committee considers that the Scottish Government should have attached the subsequently produced table of changes as an Annexe to the Draft Budget and recommends that for future years, any such presentational changes should be stated clearly, either in an Annexe or by way of a footnote in the Draft Budget. While the Committee appreciates that the Budget documents had to be put together quickly this year, it also recommends that, having regard to the principle of co-operation and agreement inherent in the Written Agreement between the Finance Committee and the Scottish Government, in future significant changes in presentation should be agreed with the Finance Committee (paragraph 78).

This was a unique year in terms of presentational changes as we sought to reflect, as transparently as possible, both the structural changes introduced by the new Scottish Government and the historic agreement with local government. The Spending Review document set out at levels 1, 2 and 3 the volume of information that the Government would normally be expected to set out took into account the Finance Committee's legacy paper on improving the presentation of the budget. The Scottish Government accept that should significant changes in presentation be proposed in future that we will consult the Finance Committee as appropriate.

Block allocations and further information on funding levels In his response to the Finance Committee, the Cabinet Secretary stated that he would be happy to explore improvements to the presentation of health board allocations which would meet and support the Committee’s needs and the Committee intends to pursue this with the Scottish Government (paragraph 80).

The Health and Sport Committee made a number of recommendations for improvements which, although they are primarily an issue for that Committee, could be worthy of consideration. The recommendations are that:

♦ the division of the budget between the territorial health boards as a group and the special health boards as a group be included in the draft budget; • the calculation of the Arbuthnott Formula be brought forward to the summer so that individual territorial health board allocations can be published in the Draft Budget; ♦ the publication of the blue book be brought forward to September so that recent expenditure and activity trends for health boards can inform the Health and Sport Committee's budget scrutiny, and • that individual health board spending plans be incorporated in the Draft Budget (paragraph 81).

The Scottish Government note that the Finance Committee intends to pursue potential improvements in the presentation of Health Board allocations with the Scottish Government, and can confirm that we will offer as much support as possible

9 to facilitate this. We would reiterate that the Scottish Government is happy to explore and discuss any potential improvements (including those recommendations made by the Health & Sport Committee) in order to assist the Finance Committee's scrutiny of the budget process and to enhance future draft budget documents.

The Finance Committee believes that Level 3 budget lines should be split into capital and revenue. On the issue of having a further spending breakdown, the Committee appreciates the difficulties faced by subject committees but if all information required by subject committees beneath Level 4 were provided, then the Draft Budget would become unwieldy. However, where any committee requests such supplementary information, the Finance Committee would expect that the relevant directorate in the Scottish Government should supply it. The Committee will ensure that this issue is covered in future guidance to subject committees (paragraph 91).

The Committee recognises the concerns expressed by all subject committees as a consequence of the changes in the presentation of information in the Draft Budget (paragraphs 82 to 90), particularly: ♦ Level 3 budget lines now rolled up into the local government settlement; ♦ GAE totals; ♦ the distribution of capital grants; ♦ the splitting of Level 3 budget lines into capital and revenue.

Adhering to the principles in the Written Agreement of co-operation and agreement to allow effective scrutiny, the Committee invites the Cabinet Secretary to jointly review the presentation of information and to agree with the Committee a way forward for future years, with particular reference to: ♦ the presentation of level 3 budget lines; ♦ the identification of relevant local authority GAE totals; ♦ the relationship between expenditure and Single Outcome Agreements; ♦ transitional arrangements to allow comparison to be made between past and future years; and ♦ ensuring transparent tracking on expenditure patterns at all levels (paragraph 92).

The level 3 budget lines have never before been split into capital and revenue in the draft budget document, as this analysis is provided in the supporting document to the budget bill. However, we will explore how this level of analysis could be best incorporated in the draft budget document in future years. I agree that to provide budget details below level 3 in what is primarily intended to be a corporate document would make it unnecessarily unwieldy. I also support the view that should individual subject committees require more detailed information below this level the relevant directorate in the Scottish Government should supply it. We are aware that information of this sort was provided in this and previous budget rounds.

As my letter of 26 November to the Finance Committee made clear, GAEs are not budgets but only a means of calculating the distribution of the Government’s overall support to local authorities. Any interpretation that they are budgets or spending targets would be wholly misleading. On any particular GAE assessment local

10 authorities might spend more on the service than the GAE assessment implies while on another they might spend less. Also, in some cases there is no direct correlation to how local authorities manage their budgets or account for their expenditure and the items included on the list of GAE assessments which have evolved over a number of years and are now somewhat out of date.

That is why under the terms of the joint Concordat agreed with COSLA the position has moved on and while GAE assessments have still been used in the distribution methodology that underpins the allocations, the additional revenue resources from Spending Review 2007 for local government have not been allocated to the previous individual GAE service assessments but only distributed on the basis of the overall shares. The individual GAE assessments do not exist for 2008-09 and beyond; there is only a block allocation.

Under the Single Outcome Agreements approach, the monitoring arrangements will focus on the outcomes that are being delivered within the overall level of resources being provided, but not what individual local authorities are spending on individual services per se. All of this requires a major shift in the mind-set of past relationships and we must step back for micro-managing local government and allow them to decide locally how best to allocate resources to deliver the necessary outcomes. This Government has risen to that challenge and substantially reduced the level of ring-fencing.

Capital Spend The Committee recommends that an estimate of capital spending by the private sector and estimated payments under PPP contracts should be provided in the Draft Budget in future years (paragraph 93)

Information on the estimate of capital spending by the private sector and estimated payments under PPP contracts will be provided in future Draft Budgets. These tables had been in previous Draft Budgets but were taken out due to the tight publishing deadlines this year.

OTHER ISSUES RAISED BY SUBJECT COMMITTEES

The Committee notes the concerns about using a GDP deflator to forecast growth and notes that the Atkinson review looked at measuring prices in the public sector and that the Scottish Government is continuing to undertake work in this area. The Committee will monitor developments (paragraph 94).

Initial work around the Atkinson review, looking at measuring prices in the public sector, reached fruition in October when new measures of public sector outputs were incorporated into the Scottish Government's quarterly measure of GDP. These series are still under development in Scotland and for the UK. The Government will continue to share our findings in order for the Committee to monitor developments.

The Committee agrees with the Economy, Energy and Tourism Committee that allocations should be provided on a cash and real terms basis in future budgets (paragraph 95).

Real terms figures for level 1 were provided in annex c to the draft budget document and level 2 figures were subsequently provided separately. This was intended to keep the published document within a manageable length but I am happy to explore the reinstatement of these tables in future documents.

The Committee appreciates that the enterprise network reform is in a transitional phase at the moment but would expect that the relevant budgetary information and figures will be published as soon as this transitional period comes to an end and included in future budget documents (paragraph 96).

The Scottish Government has not taken any final decisions on the enterprise network reforms. The details of those transfer amounts will be made public once an agreement has been reached.

The Committee recommends that opportunities for enhanced integration between commercial bus services, and between those services provided by other public sector providers, such as health boards and education authorities, be explored as fully as possible. The arrangements for Community Planning will play a critical role in facilitating this improved integration and efficiency in service provision. The Committee notes that improvements to service provision will help meet the objective of improving the accessibility of public transport to all sections of the community.

The Scottish Government, as part of the implementation of the Bus Action Plan, will produce guidance for local transport authorities regarding the potential role for Bus Planning Forums which will comprise of key stakeholders including bus operators. The forum will encourage the consideration of an audit of all bus services provided in the area to consider possible efficiencies and enhanced integration between all commercial and public sector providers to improve local bus networks.

The Committee is persuaded that investment in small transport interventions, such as a modest bus priority schemes, is an essential part of a genuinely integrated approach to transport investment.

The Scottish Government agrees that well targeted bus priority measures can be effective as part of a wider approach to local transport planning. We will encourage the use of Quality Partnerships as part of enhanced partnership working. This offers local transport authorities enhanced value to their infrastructure investment through agreements with bus operators to improvements to vehicles or services in return for the use of infrastructure and this can provide a stable environment which will encourage operators to invest in services. . LOCAL GOVERNMENT FUNDING

Ring-fencing The Committee notes the arguments both for and against the reduction in ring- fencing of funds and considers that the key to addressing any remaining

12 concerns lies in the structure and monitoring of Single Outcome Agreements (paragraph 118).

See response in Single Outcome Agreement Section.

Single Outcome Agreements The Committee is supportive of Single Outcome Agreements (SOAs) in principle. However, it is crucial that their format and the monitoring arrangements are fit for purpose to ensure they can work on a practical level. The Committee recommends that the Cabinet Secretary clarifies the potential format of SOAs, including the issues to be captured by them and the level of detail they will be expected to provide (paragraph 121).

There is a High-level Implementation group made up of senior representatives from COSLA, SOLACE, Improvement Service, Audit Scotland and the Scottish Government who are currently discussing the fine detail of the format and content of a SOA. SOAs will complement existing monitoring arrangements in the form of National Statistical returns, Best Value and Community Planning Audits and reports by external inspection bodies, and will be tailored to reflect the local requirements and priorities while ensuring that there is the right amount of impetus and direction to deliver right across the suite of Government priorities.

The Committee seeks clarification on whether there would be any circumstances in which ring-fencing might be reintroduced where a local authority was not meeting the performance targets associated with its Single Outcome Agreement and what those circumstances would be (paragraph 126).

The Scottish Government will pursue measures aimed at resolving problems associated with under-performance before considering instigating financial controls. These measures and mechanisms will be determined by the group overseeing the process towards implementation of the Single Outcome Agreements.

Reinstating ring-fencing would be a very last resort only if the partnership was failing to deliver. We have no reason to anticipate that will happen.

The Committee recommends that the Cabinet Secretary provides full detail on the proposed reporting and review process for SOAs). In anticipation of the review process, the Committee makes the following recommendations in relation to the tracking of spend and the monitoring process to ensure that proper scrutiny can take place. (paragraph 129

As part of its annual reporting process, local authorities should be required to produce a statement explaining any significant changes in expenditure patterns – this would apply to the entire budget and not just to those monies which were previously ring-fenced;

We do not consider this type of reporting to be appropriate and feel it is more important that our focus remains on securing better outcomes for people.

Baseline information should be provided for the indicators and targets as they will be applied to local authorities so that progress can be monitored.

The Scottish Government recognises that performance in year 1 can only be monitored in a meaningful way if baseline information is available. These issues are part of the detailed discussions with local authorities in how to determine monitoring arrangements at a national level and at a local level. We are also in discussion with COSLA with a view to identifying robust baseline data.

Local authorities should provide any other information that they see as relevant to monitoring their SOA.

This detail is very much part of the discussions that the Scottish Government is having with COSLA. It will be the responsibility of local authorities to present such information which supports their achievement of the commitments set out in their SOA.

To this end, given that local authorities are currently subject to Best Value Reviews conducted by the Accounts Commission and that the new National Performance Framework and SOAs may change current scrutiny arrangements, the Scottish Government should arrange urgent discussions with the Accounts Commission, the Auditor General for Scotland and COSLA to consider how the monitoring and reporting of targets will be carried out under these new arrangements (paragraph 130).

Audit Scotland has provided helpful advice on the development of the new approach, and the Deputy Auditor General is a member of the High Level Group which is overseeing implementation of the new arrangements. This involvement in the high level implementation steering group will ensure performance monitoring and Best Value audits support and compliment the move towards an outcome based approach. Audit Scotland/Audit Commission will continue to have a role in monitoring local government performance.

Council tax freeze The Committee requests clarification on whether the overall figure of £70m to be distributed to local authorities would be adjusted if not all councils agree to the freeze (paragraph 135).

The Committee notes the statements by both the Cabinet Secretary and COSLA over the level of funding provided to fund the council tax freeze and while these apparent disagreements can be viewed as an integral part of any negotiation, it is clear that this will be an ongoing issue (paragraph 139).

The provisional allocation of the £70 million was calculated on the basis if all councils were to freeze their council tax rates. A share of the £70 million will only be distributed to those councils which freeze their council tax rate. The Scottish Government is clear that we have signed a Concordat covering the full Spending Review Period with COSLA. I stated at Committee that there is adequate resource

14 for each of the three years for councils to freeze their tax at 2007-08 rates. However, it is up to councils each year when setting their council tax rates as to whether they decide to freeze them.

Non-Domestic Rate Income (Business Rates)

The Committee appreciates the reasons why research has so far not been carried out on the impact that a reduction in business rates would have on economic growth. However, it signals that it will take an interest in any research which may be carried out in the future (paragraph 146). Lower business taxation is part of a broader package of measures that have a track record internationally of creating a supportive business environment and of increasing sustainable economic growth. Once the Small Business Bonus Scheme is fully implemented, we will be in a position to evaluate its impact, including how it interacts with other rates relief schemes, and to ensure that rates relief is targeted at those businesses which need it most.

Alternative Spending Proposals

The Committee recommends that the Scottish Government bring forward proposals setting out how, over the period covered by the spending review, the level of police recruitment can be increased beyond that currently planned, and what changes will be required to the 2008-09 Budget as a result (paragraph 149).

The Scottish Government is giving its full consideration to this suggestion, but we must emphasise that any increases in police funding would have to be matched by making the difficult decision to produce similar reductions elsewhere in the budget.

The Committee recommends that the Scottish Government considers whether there is scope to increase the reductions in business rates applying in 2008-09 beyond those stated in the Spending Review as the first stage of the acceleration of the reductions, and what changes will be required to the 2008-09 Budget as a result3 (paragraph 151). The Scottish Government is already committed to accelerating reductions in business rates if additional resources become available, but we are giving our full consideration to the suggestion to accelerate reductions further. However as I mentioned in my previous response, any suggested increases in funding would have to be matched by reductions elsewhere in the budget.

Efficiency Savings

The Committee seeks clarification of what proportion of efficiency savings will be deducted at source and from where, and what will be redistributed.

The commitment to deliver 2% cash-releasing efficiencies each year will allow £1.6 billion to be redirected over the next three years. Decisions on the allocation of the

15 cash released will be made within portfolios on the basis of how best to deliver the Scottish Government’s priorities.

Under the Concordat, signed with the Convention of Scottish Local Authorities on 14 November 2007, local authorities, for the first time, will be allowed to retain all of their efficiency savings to redeploy and meet ongoing and new pressures.

The Scottish Government will publish our detailed plans by the end of March 2008.

The Committee also seeks clarification on whether there are contingency plans should the 2% efficiency savings not be achieved (paragraph 154).

This challenging but achievable commitment that will ensure that we make the best use of the limited resources available. It will help make continuous improvement a core behaviour at the heart of culture within the public sector.

Ongoing monitoring of the efficiency target will allow ealy warning of any under performance which will allow remedial measures, including support where necessary, to be put into place.

The Committee echoes the concerns of the previous Finance Committee and Audit Scotland that it is vital that robust baseline information is provided and recommends that the Scottish Government collaborates with the relevant public sector bodies to produce such information (paragraph 161).

The Scottish Government agree that robust baseline information is essential and are using 2007-08 DEL as baseline. We will ensure that rigorous reporting data is available to show efficiency gains and will continue to work with public sector bodies to produce robust evidence without creating needless bureacracy.

The Committee also signals its intention to scrutinise on an on-going basis the Scottish Government’s efficiency initiative by examining the first report to be published in March 2008 and any reports made by Audit Scotland (paragraph 162).

The Scottish Government welcomes the Finance Committee’s stated intention to examine the Efficiency Delivery Plans which are to publish by the end of March this year. I have asked my officials to ensure that on publication they send a copy of the Efficiency Delivery Plans – and any other Scottish Government publication on Efficient Government - to every Finance Committee member to facilitate this process.

Sustainability With regard to embedding sustainability in policy-making and helping to improve the linkage between strategic objectives, targets and indicators and between them and budget decisions, the Committee will assess and forward to the Scottish Government any suggestions from its witnesses on sustainability. The Committee would recommend that the Scottish Government examines

16 these, together with the relevant Official Report and submissions as part of its work on carbon accounting (paragraph 171).

All Scottish Government Bills are required to have a sustainable development statement. A new checklist tool which is currently being piloted will help teams to assess Bills for their contribution to sustainable development and aid them in developing a sustainable development statement to accompany the Bill.

Officials are working with the Sustainable Development Commission in looking at parliamentary scrutiny of sustainable development, this checklist is likely to form the basis of Parliamentary Committees’ questioning on sustainable development concerns.

The Scottish Government commitment in the Scottish Budget 2007 will introduce a system of cross compliance to ensure that spending decisions use available techniques and information to assess the carbon impact of policy options during the appraisal process refers to measuring the impact on future emissions of a project or policy.

In this context, we will review the Finance Committee report and associated evidence with a view to informing development of Scottish Government guidance on assessing the future carbon impact of policies for use during the next budgetary period. We will also take account of any submissions received subsequently in development of the guidance, or in subsequent reviews of the guidance

Equalities The Committee recognises that the National Performance Framework has just been established and that the Draft Budget reflects this, but would ask the Scottish Government to consider whether, in future years, information and spending allocations with regard to equalities issues can be made more specific in the context of this new framework (paragraph 175).

The Scottish Government recognises the importance of equality to the delivery of its strategic objectives and its national outcomes. This is reflected in the national performance framework and stated in the budget.

The Scottish Government also endeavours through its work with the Equality Proofing the Budget and Policy Advisory Group, to ensure the reflection of equalities in policy development and implementation as well as in the budget process. We will continue to do so in the coming period.

The Committee concurs with the Equal Opportunities Committee’s recommendation that its membership should be extended to include senior representation from the Finance and Sustainable Growth directorate (paragraph 176).

The Scottish Government is currently looking at the membership of the Equality Proofing the Budget and Policy Advisory Group and will invite representation from within Finance and Sustainable Growth.

The Committee is pleased to note that the Equal Opportunities Committee believed that the section on equalities in the final guidance to subject committees was helpful and will take on board its comments for its guidance in future years (paragraph 177).

This is a matter for the Parliament.

The Committee notes the Equal Opportunities Committee’s recommendation that the extent to which any subject committee advisers could be asked to brief committees on equal opportunities issues should be considered (paragraph 178).

This is a matter for the Parliament.

Scottish Parliamentary Corporate Body

The Committee encourages the SCPB to continue its rigorous approach in relation to the scrutiny of commissioners and ombudsman spending plans, particularly in light of the variations in approaches to certain costs that are apparent between the relevant office-holders (paragraph 195).

Audit Scotland

The Committee notes the Scottish Commission for Public Audit (SCPA) recommendation that Audit Scotland’s budget proposal be approved (paragraph 200).

SPICe DRAFT BUDGET 2009-10 briefing

ROSS BURNSIDE, JIM DEWAR & SCHERIE NICOL 18 September 2008

This briefing summarises broad trends in the Scottish Government Draft 08/49 Budget 2009-10.

More detailed presentation of the budget numbers can be found in the following spreadsheets. Levels 1 and 2 refer to ‘higher’ level figures. Level 3 is the most detailed published breakdown of the Government’s figures.

Levels 1 and 2 Cash and Real terms:

Draft Budget 2009-10 Level 1 and Level 2 cash and real.xls

Level 3 Cash terms:

Draft Budget 2009-10 Level 3 cash.xls

Level 3 Real terms:

Draft Budget 2009-10 Level 3 real.xls

This briefing highlights differences between this year’s draft budget and last year’s which are individually over £10m. A spreadsheet containing all the changes in this year’s Budget document can be found via the following link:

Comparison of Spending Review 2007 with Draft Budget 2009-10.xls

Scottish Parliament Information Centre (SPICe) Briefings are compiled for the benefit of the Members of the Parliament and their personal staff. Authors are available to discuss the contents of these papers with MSPs and their staff who should contact Ross Burnside on extension 86231 or email [email protected]. Members of the public or external organisations may comment on this briefing by emailing us at [email protected]. However, researchers are unable to enter into personal discussion in relation to SPICe Briefing Papers. If you have any general questions about the work of the Parliament you can email the Parliament’s Public Information Service at [email protected].

Every effort is made to ensure that the information contained in SPICe briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes. www.scottish.parliament.uk

1 CONTENTS

KEY POINTS ...... 3

INTRODUCTION ...... 4

OVERALL TRENDS IN PLANNED SPENDING...... 4

DEPARTMENTAL EXPENDITURE LIMIT...... 5 ANNUALLY MANAGED EXPENDITURE ...... 8 CAPITAL AND RESOURCE EXPENDITURE ...... 9

CHANGES FROM LAST YEAR’S SPENDING REVIEW PLANS...... 12

LARGEST REAL TERMS INCREASES AND DECREASES...... 14

EFFICIENCY SAVINGS ...... 15

END YEAR FLEXIBILITY...... 16

SOURCES ...... 17

providing research and information services to the Scottish Parliament 2

KEY POINTS

• Total Managed Expenditure (TME) is planned to increase in real terms by 1.5% (+£516.0m) in 2009-10 and by 0.6% (£209.4m) in 2010-11 (tables 1-3) • Departmental Expenditure Limit (DEL) is planned to increase in real terms by 1.8% (£491.7m) in 2009-10 on the previous year and by 1.3% (£371.0m) in 2010-11 (tables 4 and 5) • Annually Managed Expenditure (AME) is forecast to increase by 0.5% in real terms in 2009-10 and decrease by 3.0% in 2010-11 (tables 7 and 8) • The Health and Wellbeing portfolio and Local Government portfolio together account for 72.6% of the total Scottish Government DEL (table 6) • Of the £491.7m real increase in DEL in 2009-10, £242.9m is allocated to Health and Wellbeing, £124m is allocated to Local Government and £119m is allocated to Finance & Sustainable Growth (Figure 2) • DEL Capital is set to increase by 7.0% in real terms in 2009-10 and fall by 0.1% in real terms in 2010-11 (tables 9 and 10) • DEL Capital’s share of total DEL is 11.4% in the current financial year (2008-09) and is planned to be 12.0% in 2009-10 and 11.9% 2010-11 • DEL Resource is set to increase in real terms by 1.1% in 2009-10 and by 1.5% in 2010- 11 (table 11 and 12) • There are a number of changes to the spending plans for 2009-10 compared with the plans presented by the Scottish Government in last year’s Draft Budget. Some are due to reclassifications and transfers of responsibility, others are substantive (see table 13 for explanations provided) • The largest absolute increases in real terms for 2009-10 on 2008-09 occur in the Local Government (+£188.9m) and Health (+£120.2m) budget lines, with Housing and Regeneration (+£116.7m) and Motorways and Trunk Roads (£105.6m) budgets also benefiting (table 14) • The largest absolute decreases in real terms for 2009-10 on 2008-09 occur in the Scottish Public Pensions Agency (-£73.7m), Rail Services in Scotland (-£34.3m) and Enterprise, Energy and Tourism (-£30.2m) (table 15) • Draft Budget 2009-10 reiterates the Scottish Government’s intention to deliver 2% efficiency savings • As agreed previously with the Treasury, the Scottish Government intends drawing down £400m in 2009-10 in EYF monies held by the UK Treasury

providing research and information services to the Scottish Parliament 3

INTRODUCTION

Draft Budget 2009-10 (Scottish Government 2008a) was published on 16 September 2008 and sets out the Scottish Government’s spending plans for 2009-10 and 2010-11. It updates the spending plans issued by the Scottish Government in the Spending Review 2007 document (Scottish Government 2007).

OVERALL TRENDS IN PLANNED SPENDING

Total Managed Expenditure (TME) comprises Annually Managed Expenditure (AME) and the Departmental Expenditure Limit (DEL).

AME covers expenditure which is difficult to predict precisely but where there is a commitment to spend or to pay a charge. Examples include teachers and NHS staff pensions and motorway and trunk road interest charges. The budget lines for these items are in effect a forecast of the cost of meeting these commitments rather than the consequence of recent decisions, although the distinction is not precise and spending has in the past been switched between AME and DEL.

DEL covers the balance of the TME. Departments are expected to limit expenditure excluding AME to the amounts set out in the budget bill. Any increase over these amounts requires the further agreement of parliament. The DEL is divided into DEL Capital and DEL Resource. DEL Resource is equivalent to the in year cost of providing services but also includes capital grants given to other organisations such as NDPBs, local authorities and health boards. Under Treasury rules money can be transferred from DEL Resource to DEL Capital but not vice versa.

Tables 1 and 2 below show TME in cash and real terms and how this is allocated to DEL, AME and TME. Relative to 2008-09 the deflators used by the Scottish Government are 2.75% in 2009-10 and 5.5% in 2010-11 (ie the 2.75% annual deflator has been increased using simple interest rather than compound interest).

Table 1: Allocation of TME to AME and DEL: Cash Terms

£ millions 2008-09 Budget 2009-10 Budget 2010-11 Plans Total DEL of which: 28,022.1 29,297.9 30,473.5 DEL Resource 24,818.4 25,775.0 26,860.8 DEL Capital 3,203.7 3,522.9 3,612.7 AME 5,292.1 5,462.6 5,438.3 Total Managed Expenditure 33,314.2 34,760.5 35,911.8

Table 2: Allocation of TME to AME and DEL: Real Terms

£ millions 2008-09 Budget 2009-10 Budget 2010-11 Plans Total DEL of which: 28,022.1 28,513.8 28.884.8 DEL Resource 24,818.4 25,085.2 25,460.5 DEL Capital 3,203.7 3,428.6 3,424.4 AME 5,292.1 5,316.4 5,154.8 Total Managed Expenditure 33,314.2 33,830.2 34,039.6

providing research and information services to the Scottish Parliament 4

TME is set to increase by 1.5% (£516.0m) in real terms in 2009-10 on 2008-09 and by 0.6% (£209.4m) in 2010-11 on 2009-10 (table 3).

Table 3: Annual Percentage increase in DEL in Real terms

% 2009-10 Budget 2010-11 Plans Total DEL of which: 1.8% 1.3% DEL Resource 1.1% 1.5% DEL Capital 7.0% -0.1% AME 0.5% -3.0% Total Managed Expenditure 1.5 0.6

DEPARTMENTAL EXPENDITURE LIMIT

Table 4 sets out the DEL by portfolio in cash terms, with 2008-09 included as the base year. Table 5 shows DEL in real terms (2008-09 prices).

Table 4: Departmental Expenditure Limit by portfolio 2008-11 (£m and % increase on previous year): Cash Terms

DEL CASH 2008-09 2009-10 2010-11 2009-10 2010-11 Budget Draft Plans increase on increase on £m Budget £m 08-09 % 09-10 % £m Office of the First 279.2 292.1 303.8 4.6% 4.0% Minister Finance & Sustainable 2,640.3 2,835.2 2,929.5 7.4% 3.3% Growth Health and Wellbeing 11,202.9 11,760.6 12,095.8 5.0% 2.9% Education and Lifelong 2,572.3 2,627.8 2,751.8 2.2% 4.7% Learning Justice 1,050.6 1,090.1 1,138.6 3.8% 4.4% Rural Affairs & the 635.7 652.7 674.1 2.7% 3.3% Environment Administration 265.9 273.1 278.8 2.7% 2.1% Crown Office & 110.2 118.7 120.5 7.7% 1.5% Procurator Fiscal Local Government 9,155.0 9,534.2 10,064.0 4.1% 5.6% Scottish Parliament and 110.0 113.4 116.6 3.1% 2.8% Audit Scotland Total 28,022.1 29,297.9 30,473.5 4.6% 4.0%

providing research and information services to the Scottish Parliament 5

Table 5: Departmental Expenditure Limit by portfolio 2008-11 (£m and % increase on previous year): Real Terms (2008-09 prices) DEL REAL 2008-09 2009-10 2010-11 2009-10 2010-11 Budget Draft Plans increase on increase on £m Budget £m 08-09 % 09-10 % £m Office of the First 279.2 284.3 288.0 1.8% 1.3% Minister Finance & Sustainable 2,640.3 2,759.3 2,776.8 4.5% 0.6% Growth Health and Wellbeing 11,202.9 11,445.8 11,465.2 2.2% 0.2% Education and Lifelong 2,572.3 2,557.5 2,608.3 -0.6% 2.0% Learning Justice 1,050.6 1,060.9 1,079.2 1.0% 1.7% Rural Affairs & the 635.7 635.2 639.0 -0.1% 0.6% Environment Administration 265.9 265.8 264.3 0.0% -0.6% Crown Office & 110.2 115.5 114.2 4.8% -1.1% Procurator Fiscal Local Government 9,155.0 9,279.0 9,539.3 1.4% 2.8% Scottish Parliament and 110 110.4 110.5 0.3% 0.1% Audit Scotland Total 28,022.1 28,513.8 28,884.8 1.8% 1.3%

Points to note on the DEL plans for 2009-10 and 2010-11 are as follows:

• DEL is planned to increase by 1.8% (£491.7m) in real terms in 2009-10 and by 1.3% (£371.0m) in real terms in 2010-11 • The biggest real percentage increase in 2009-10 will be received by Crown Office and Procurator Fiscal (+4.8%) before declining in 2010-11 by 1.1% • Finance and Sustainable Growth will increase by 4.5% in real terms in 2009-10 and by 0.6% in 2010-11 • No portfolios fall in real terms in both years: Education & Lifelong Learning will fall by 0.6% in 2009-10 and increase by 2.0% in 2010-11; Rural Affairs and the Environment falls by 0.1% in 2009-10 and increases by 0.6% in 2010-11 • The Scottish Government administration budget stands still in 2009-10 and falls by 0.6% in 2010-11

Table 6: Portfolios as a share of Scottish Government DEL Portfolio 2008-09 % share of 2009-10 % share 2010-11 % share of DEL of DEL DEL Office of the First Minister 1.0 1.0 1.0 Finance & Sustainable Growth 9.4 9.7 9.6 Health and Wellbeing 40.0 40.1 39.7 Education and Lifelong Learning 9.2 9.0 9.0 Justice 3.7 3.7 3.7 Rural Affairs & the Environment 2.3 2.2 2.2 Administration 0.9 0.9 0.9 Crown Office & Procurator Fiscal 0.4 0.4 0.4 Local Government 32.7 32.5 33.0 Scottish Parliament and Audit Scotland 0.4 0.4 0.4

providing research and information services to the Scottish Parliament 6

Table 6 shows each portfolio as a percentage of the total Scottish Government DEL and how their share is planned to change between 2008-09 and 2010-11. Finance and Sustainable Growth will increase over the period from 9.4% of the total DEL to 9.6% in 2010-11. Local Government will move down from 32.7% this year to 32.5% of the DEL in 2009-10 before increasing to 33.0% of the DEL in 2010-11. Health and Wellbeing increases slightly in 2009-10 before declining the following year to 39.7% in 2010-11, Education and Lifelong Learning will fall from 9.2% to 9.0%, and Rural Affairs and the Environment will also fall from 2.3% to 2.2% this year and next.

Figure 1 provides a visual depiction of the absolute real terms budgets by portfolio and reveals the relative scale of the two largest budgets of Health and Wellbeing and Local Government, which together account for approximately two-thirds of the Scottish budget.

Figure 1: Absolute real terms budgets by portfolio (2008-11)

14000

12000

10000 2008-09 2009-10 8000 2010-11

£ million 6000

4000

2000

0 Office of the First Sustainable Health and Lifelong Learning Justice the Environment Administration Procurator Fiscal Government Parliament and Audit Scotland Wellbeing Finance & Rural Affairs & Affairs Rural Crown Office & Education and Growth Local Scottish Minister

Portfolio

Figure 2 depicts the absolute real terms changes by portfolio in 2009-10 showing how the Government has opted to allocate its incremental spend. It shows that Local Government and Health and Wellbeing have been allocated the largest absolute real terms increases in 2009-10.

providing research and information services to the Scottish Parliament 7

Figure 2: Real terms (£m) DEL changes by portfolio in 2009-10 on 2008-09

Scottish Parliament and 0.4 Audit Scotland

Local Government 124

Crown Office & 5.3 Procurator Fiscal

Administration -0.1

Rural Affairs & the -0.5 Environment

Justice 10.3

Education and Lifelong Learning -14.8

Health and Wellbeing 242.9

Finance & Sustainable 119 Growth Office of the First 5.1 Minister

-50 0 50 100 150 200 250 300 £ million

ANNUALLY MANAGED EXPENDITURE

AME accounts for approximately 15% of TME. It is currently confined to three portfolios and the relevant figures are summarised in table 7 (cash terms) and table 8 (real terms).

Table 7: Annually Managed Expenditure by portfolio 2008-11 (£m and % increase on previous year): Cash Terms

AME CASH 2008-09 2009-10 2010-11 2009-10 2010-11 Budget Draft Plans Draft Budget Plans £m Budget £m Cash Cash £m increase on increase on 08-09 % 09-10 % Finance & Sustainable 3,189.0 3,238.0 3,291.6 Growth 1.5% 1.7% Education & Lifelong 124.3 124.7 124.7 Learning 0.3% 0.0% Local Government 1,978.8 2,099.9 2,022.0 6.1% -3.7% Total 5,292.1 5,462.6 5,438.3 3.2% -0.4%

providing research and information services to the Scottish Parliament 8

Table 8: Annually Managed Expenditure by portfolio 2008-11 (£m and % increase on previous year): Real Terms

AME REAL 2008-09 2009-10 2010-11 2009-10 2010-11 Budget Draft Plans Draft Budget Plans £m Budget £m Real Real £m increase on increase on 08-09 % 09-10 % Finance & Sustainable 3,189.0 3,151.3 3,120.0 Growth -1.2% -1.0% Education and 124.3 121.4 118.2 Lifelong Learning -2.4% -2.6% Local Government 1,978.8 2,043.7 1,916.6 3.3% -6.2% Total 5,292.1 5,316.4 5,154.8 0.5% -3.0%

The amount allocated to AME will increase in real terms in 2009-10 by 0.5% (£24.3m), with the amount allocated in 2010-11 planned to fall by 3.0% (-£161.6m). However, AME is demand led and actual expenditure may be more or less than the budget figures.

CAPITAL AND RESOURCE EXPENDITURE

The budget document provides information on the allocation of the DEL between capital and resource expenditure by portfolio until 2011 (Scottish Government 2008a, Annex table 3).

Table 9 shows DEL capital in cash terms and table 10 DEL capital in real terms and includes the percentage change planned in the next two financial years.

Table 9: DEL Capital by Portfolio 2008-2011 (£m and % increase on previous year): Cash Terms

DEL Capital Cash 2008-09 2009-10 2010-11 2009-10 2010-11 Terms £m £m £m increase on increase on 08-09 % 09-10 % Office of the First 23.2 26.4 28.3 13.8% 7.2% Minister Finance & Sustainable 964.9 1,098.5 1,115.6 13.8% 1.6% Growth Health and Wellbeing 844.1 998.4 928.5 18.3% -7.0% Education and Lifelong 184.4 183.2 221.5 -0.7% 20.9% Learning Justice 149.9 156.2 191.0 4.2% 22.3% Rural Affairs & the 64.3 68.8 74.7 7.0% 8.6% Environment Administration 8.7 8.3 8.4 -4.6% 1.2% Crown Office & 5.9 6.7 7.2 13.6% 7.5% Procurator Fiscal Local Government 955.0 973.0 1,034.0 1.9% 6.3% Scottish Parliament and 3.3 3.4 3.5 3.0% 2.9% Audit Scotland Total 3,203.7 3,522.9 3,612.7 10.0% 2.5%

providing research and information services to the Scottish Parliament 9

Table 10: DEL Capital by Portfolio 2008-2011 (£m and % increase on previous year): Real Terms

DEL Capital Real 2008-09 2009-10 2010-11 2009-10 2010-11 Terms £m £m £m increase on increase on 08-09 % 09-10 % Office of the First 23.2 25.7 26.8 10.8% 4.3% Minister Finance & Sustainable 964.9 1,069.1 1,057.4 10.8% -1.1% Growth Health and Wellbeing 844.1 971.7 880.1 15.1% -9.4% Education and Lifelong 184.4 178.3 210.0 -3.3% 17.8% Learning Justice 149.9 152.0 181.0 1.4% 19.1% Rural Affairs & the 64.3 67.0 70.8 4.2% 5.7% Environment Administration 8.7 8.1 8.0 -6.9% -1.2% Crown Office & 5.9 6.5 6.8 10.2% 4.6% Procurator Fiscal Local Government 955.0 947.0 980.1 -0.8% 3.5% Scottish Parliament and 3.3 3.3 3.3 0.0% 0.0% Audit Scotland Total 3,203.7 3,428.6 3,424.4 7.0% -0.1%

The proposed real terms increase in DEL capital in 2009-10 is 7% on the previous year, with a 0.1% reduction in 2010-11. The largest portfolio increases in 2009-10 occur in Health and Wellbeing (+15.1%), Finance and Sustainable Growth (+10.8%), Office of the First Minister (10.8%) and Crown Office and Procurator Fiscal (+10.2%). In 2009-10 DEL capital is planned to fall in Scottish Government Administration (-6.9%), Education & Lifelong Learning (-3.3%) and Local Government (-0.8%).

In 2010-11, the Scottish Government plans significant real percentage increases in DEL capital in Justice (+19.1%) and Education & Lifelong Learning (+17.8%), with reductions in Health and Wellbeing (-9.4%), Scottish Government Administration (-1.2%) and Finance and Sustainable Growth (-1.1%). It is in the nature of capital spending that it can be subject to large changes from year to year as projects begin and end. It is therefore difficult to read too much into changes in any one year.

DEL capitals share of the total DEL will be 12.0% in 2009-10 and 11.9% in 2010-11 up from 11.4% in the current financial year.

Table 11 sets out the DEL Resource in cash terms and table 12 the DEL Resource in real terms and includes the percentage change planned in the next two financial years.

providing research and information services to the Scottish Parliament 10

Table 11: DEL Resource by Portfolio 2008-2011 (£m and % increase on previous year): Cash Terms

DEL Resource Cash 2008-09 2009-10 2010-11 2009-10 2010-11 Terms £m £m £m increase on increase on 08-09 % 09-10 % Office of the First 256.0 265.7 275.5 3.8% 3.7% Minister Finance & Sustainable 1,675.4 1,736.7 1,813.9 3.7% 4.4% Growth Health and Wellbeing 10,358.8 10,762.2 11,167.3 3.9% 3.8% Education and Lifelong 2,387.9 2,444.6 2,530.3 2.4% 3.5% Learning Justice 900.7 933.9 947.6 3.7% 1.5% Rural Affairs & the 571.4 583.9 599.4 2.2% 2.7% Environment Administration 257.2 264.8 270.4 3.0% 2.1% Crown Office & 104.3 112.0 113.3 7.4% 1.2% Procurator Fiscal Local Government 8,200.0 8,561.2 9,030.0 4.4% 5.5% Scottish Parliament and 106.7 110.0 113.1 3.1% 2.8% Audit Scotland Total 24,818.4 25,775.0 26,860.8 3.9% 4.2%

Table 12: DEL Resource by Portfolio 2008-2011 (£m and % increase on previous year): Real Terms

DEL Resource Real 2008-09 2009-10 2010-11 2009-10 2010-11 Terms £m £m £m increase on increase on 08-09 % 09-10 % Office of the First 256.0 258.6 261.1 1.0% 1.0% Minister Finance & Sustainable 1,675.4 1,690.2 1,719.3 0.9% 1.7% Growth Health and Wellbeing 10,358.8 10,474.2 10,585.1 1.1% 1.1% Education and Lifelong 2,387.9 2,379.2 2,398.4 -0.4% 0.8% Learning Justice 900.7 908.9 898.2 0.9% -1.2% Rural Affairs & the 571.4 568.3 568.2 -0.5% 0.0% Environment Administration 257.2 257.7 256.3 0.2% -0.5% Crown Office & 104.3 109.0 107.4 4.5% -1.5% Procurator Fiscal Local Government 8,200.0 8,332.1 8,559.2 1.6% 2.7% Scottish Parliament and 106.7 107.1 107.2 0.4% 0.1% Audit Scotland Total 24,818.4 25,085.2 25,460.5 1.1% 1.5%

The planned real terms increase in DEL Resource in 2009-10 is 1.1% on the previous year, with a 1.5% increase proposed for 2010-11. The largest percentage real terms increases in 2009-10 occur in the Crown Office and Procurator Fiscal (+4.5%) and Local Government (+1.6%)

providing research and information services to the Scottish Parliament 11 portfolios. There are reductions planned in 2009-10 in the Rural Affairs & the Environment (- 0.5%) and Education & Lifelong Learning (-0.4%) portfolios.

In 2010-11, there are planned real terms increases for Local Government (+2.7%), Finance & Sustainable Growth (+1.7%) and Health and Wellbeing (+1.1%). Crown Office & Procurator Fiscal (-1.5%), Justice (-1.2%) and Scottish Government Administration (-0.5%) are all projected to have real terms reductions in 2010-11 on the previous year.

CHANGES FROM LAST YEAR’S SPENDING REVIEW PLANS

Draft Budget 2009-10 shows a number of changes to planned expenditure compared with last year’s Spending Review document. SPICe has created a spreadsheet outlining every budgetary change which is available via the following link: Comparison of Spending Review 2007 with Draft Budget 2009-10.xls

The following table presents the main changes to spending plans in 2009-10 compared with the figures presented in last year’s Spending Review (Scottish Government 2007). We have only included changes over £10m.

Table 13: Proposed Changes in 2009-10 compared with last year’s Spending Plans

Portfolio Proposed Changes in 2009-10 Finance & Sustainable • “Committees, Commissions and Other Expenditure” net decrease Growth of £16.4m “due to transfers of responsibility to other portfolios and additional income in 2008-09 (£4.3m) from the repayment of public dividend capital by Registers of Scotland, as announced at Stage 3 of the Budget Bill in February 2008.” • “Enterprise, Energy and Tourism” net decrease of £157.8m “due to transfer of training and skills funding to Education and Lifelong Learning for Skills Development Scotland.” • “Scottish Teachers Pension Scheme” net increase of £34.6m and “NHS in Scotland Pension Scheme” reduction of £40m due to the most recent actuarial estimates of expenditure. • “Scottish Water” increase of £40m for “cost of capital charges, based on the most recent assessment using the updated formula…..Additional budget cover has been provided by the UK Treasury, so these increase do not require offsetting adjustments to other areas of the Scottish Budget.” Health and Wellbeing • “NHS and Special Health Boards” increase of £10.2m “in respect of NHS Boards specific issues and pressures.” • “Capital Investment” reduction of £11m – no explanation given in the document, however, 2010-11 Capital Investment plans adjusted upward. • “General Opthalmic Services” increase of £31.9m from “Miscellaneous Other Services” as part of new three year deal and including the phased introduction of free eye tests. • “Affordable Housing Investment Programme” increase of £68.3m for the “delivery of affordable homes across Scotland” brought forward from 2010-11 as originally planned • “Scottish Housing Regulator Running Costs” decrease of £20.4m “following the abolition of Communities Scotland and the establishment of the Scottish Housing Regulator.” • “Promoting Social Inclusion” decrease of £13m transferred to providing research and information services to the Scottish Parliament 12

Local Government for Fairer Scotland Fund and loan repayment programmes and to regeneration programmes. Education & Lifelong • “Scottish Further & Higher Education Funding Council” decrease Learning of £13m as part of £20m transfer to “Health and Wellbeing portfolio to be repaid in 2010-11 in respect of the acceleration of the Affordable Housing Investment Programme adopted as part of a package of Scottish government actions to strengthen the Scottish economy.” • “Other Lifelong Learning” increase of £159.5m partly to fund the set up of Skills Development Scotland and comprising transfers from Scottish Enterprise and Highlands and Islands Enterprise. Justice • “Police Central Government” increase of £13m to support additional police recruitment. • “Scottish Prisons Service” decrease of £10m from prisons capital to the Health and Wellbeing portfolio to be repaid in 2010-11 in respect of the acceleration of the Affordable Housing Investment Programme. Rural Affairs & Environment • “EU Support and Related Services” increase of £23.5m due to a “transfer from Administration following the re-classification of the delivery arrangements for agricultural regulation and rural development grants administration” Administration A number of transfers to and from other portfolios but no change in the net total. Transfers include: • £16m from “Finance and Sustainable Growth” for continued roll out of the Public Procurement Reform Programme • £23m from “Health and Wellbeing” for the “administration costs of Communities Scotland Agency…. The functions of Communities Scotland were brought in to the core Scottish Government as part of the simplification of the public sector landscape.” • £20m to “Health and Wellbeing” in respect of the acceleration of the Affordable Housing Investment Programme • £23.5m to “Rural Affairs and the Environment” “due to re- classification of the delivery arrangements for agricultural regulation and rural development grants administration” Local Government The Draft Budget identifies the following changes in the Local Government portfolio (although these cannot be compared with last year’s document): • “Free Personal Care” increase of £40m • “Community Regeneration Loans Charges” increase of £2.6m • “Strategic Waste Fund” increase of £1.3m • “Fairer Scotland Fund” increase of £8.7m • “Gaelic Specific Grant” increase of £1m

providing research and information services to the Scottish Parliament 13

LARGEST REAL TERMS INCREASES AND DECREASES

Table 14 shows the ten level 2 budget lines with the largest absolute real terms increases in 2009-10 on 2008-09.

Table 14: Level 2 budget lines ranked by Absolute Real terms increases 2008-09 to 2009- 10: £m in 2008-09 prices

Budget line Portfolio 2008-09 2009-10 Real terms % share of Budget £m Draft increase real terms Budget £m 09-10 on increase 08-09 £m Total Scottish 33,204.2 33,719.9 515.7 100.0% Government Budget1 Support for Local Local Government 11,133.8 11,322.7 188.9 36.6% Authorities Health Health and 10,642.0 10,762.2 120.2 23.3% Wellbeing Housing and Health and 478.6 595.3 116.7 22.6% Regeneration Wellbeing Motorways and Trunk Finance & 929.6 1,035.2 105.6 20.5% Roads Sustainable Growth Other Transport Agency Finance & 180.9 279.4 98.5 19.1% Programmes Sustainable Growth Police Central Justice 148.5 170.9 22.4 4.3% Government

Scottish Further & Education & 1,677.50 1,695.50 18.0 3.5% Higher Education Lifelong Learning Funding Council

Ferry Services in Finance & 91.4 103.6 12.2 2.4% Scotland Sustainable Growth Scottish Water & Finance & 331.8 342.4 10.6 2.1% Climate Change Sustainable Growth Culture and Gaelic Office of the First 186.7 196.5 9.8 1.9% Minister

The largest absolute increase in real terms occurs in the Local Government and Health budget lines. These two budget lines together account for almost two thirds of the budget and have been allocated 60% of the total real terms increase. Other significant beneficiaries of extra funding are Housing and Regeneration (+£116.7m), Motorways and Trunk Roads (+£105.6m) and Other Transport Agency Programmes (+£98.5m). In addition to Local Government (which is a separate line in the budget but comes under the remit of the Cabinet Secretary for Finance and Sustainable Growth), four of the top ten increases are in the Finance and Sustainable Growth portfolio; two are in Health and Wellbeing; with one each in Justice, Education and Lifelong Learning and the First Minister’s Office.

1 “Total Scottish Government Budget” comprises TME minus the Scottish Parliament and Audit Scotland budget. providing research and information services to the Scottish Parliament 14

Table 15: Level 2 budget lines ranked by Absolute Real terms reductions 2008-09 to 2009- 10: £m in 2008-09 prices

Budget line Portfolio 2008-09 2009-10 Draft Real terms Budget £m Budget £m decrease 09- 10 on 08-09 £m Scottish Public Pensions Agency Finance & 2,656.40 2,582.70 -73.7 Sustainable Growth Rail Services in Scotland Finance & 689.2 654.9 -34.3 Sustainable Growth Enterprise, Energy and Tourism Finance & 525.7 495.5 -30.2 Sustainable Growth Scottish Resilience Justice 47.1 22.9 -24.2

Other Lifelong Learning Education & 276.1 256.8 -19.3 Lifelong Learning Student Awards Agency for Education & 506.1 491.2 -14.9 Scotland (SAAS) Lifelong Learning Other Transport Directorate Finance & 76.6 63.8 -12.8 Programmes Sustainable Growth Planning Finance & 11.9 5.0 -6.9 Sustainable Growth EU Support and Related Services Rural Affairs 166.2 161.5 -4.7 & Environment Historic Scotland Office of the 51.7 48 -3.7 First Minister

The largest single reductions are in the Scottish Public Pensions Agency (-£73.7m), Rail Services in Scotland (-£34.3m) and Enterprise, Energy and Tourism (-£30.2m). Five of the ten largest reductions occur in the portfolio of Finance and Sustainable Growth, two occur in the Education and Lifelong Learning portfolio, with one each in Justice, Rural Affairs and the Environment and the First Minister’s Office.

EFFICIENCY SAVINGS

Draft Budget 2009-10 reiterates the Scottish Government’s intention to deliver 2% cash releasing savings in each year of the Spending Review. The Government states that this will mean the re-targeting of £1.6bn “to support programmes and policies which are delivering against our five strategic objectives”. There is no information in the document regarding how the £1.6bn will be re-targeted.

providing research and information services to the Scottish Parliament 15

At a Finance Committee meeting on 13 May 2008 the Cabinet Secretary (Scottish Parliament Finance Committee 2008) was asked if all portfolios will be allowed to retain their efficiencies and decide how they are re-deployed. He responded:

“John Swinney: As I have made clear on a number of occasions, within the arrangements that we have arrived at, local government is being allowed to retain all its efficiency savings. In terms of the overall financial calculations that I have made about the budgets that are relevant and required for individual areas, certain elements of efficiency savings will be deducted at source. Efficiency savings beyond 2 per cent should be retained by the organisations concerned. Obviously, that has an element of the incentivisation that the convener and Mr Brownlee were looking for…..

“Some parts of the efficiency savings have been deducted at source as part of the overall calculations of budgets, but we have taken the view that local authorities should retain their efficiency savings. Any performance in excess of 2 per cent should certainly be retained by the organisations concerned.”

END YEAR FLEXIBILITY

End Year Flexibility (EYF) is a financial system that allows the Government to carry forward any unspent resources from one year to the next. Because there has in the past been a bias towards underspending, the Scottish Government made an over-allocation of £100m in 2008-09 and has made provision for a similar over-allocation of £100m in the 2009-10 budget.

In financial year 2007-08 the Scottish Government had an underspend of £42m (Scottish Government 2008b). EYF monies are held at the UK Treasury on behalf of the Scottish Government. The latest UK Public Expenditure Provisional Outcome figures show that as at 31 March 2008, Scotland has £952m in EYF held at the Treasury (Treasury 2008).

Last year’s spending review document stated the Government’s intention to draw down £300m in 2008-09, £400m in 2009-10 and £174m in 2010-11 in Scotland’s EYF monies held at UK Treasury (Scottish Government 2007).

providing research and information services to the Scottish Parliament 16

SOURCES

Scottish Government. (2007) Spending Review 2007. Edinburgh: Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2007/11/13092240/0

Scottish Government. (2008a) Scottish Budget: Draft Budget 2009-10. Edinburgh: Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2008/09/12140641/16

Scottish Government. (2008b) Scottish Government Spending Figures. [Online] Press release 19 June 2008. Available at: http://www.scotland.gov.uk/News/Releases/2008/06/19095030 [Accessed 17 September 2008]

Scottish Parliament Finance Committee. (2008) Official Report 13th meeting 2008, Session 3, 13 May 2008. Col 495. Edinburgh: Scottish Parliament. Available at: http://www.scottish.parliament.uk/s3/committees/finance/or-08/fi08-1302.htm#Col491

Treasury. (2008) Public Expenditure 2007-08 Provisional Outturn. London: Treasury. Available at: http://www.hm-treasury.gov.uk/media/4/D/peowp_150708.pdf

providing research and information services to the Scottish Parliament 17 RAE/S3/08/18/7 Agenda Item 1 RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

BUDGET PROCESS 2009-10

EXTRACT FROM REPORT TO THE FINANCE COMMITTEE ON STAGE 2 OF THE 2008-09 BUDGET PROCESS:

SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

Measuring performance

70. The Committee is concerned that the national targets and indicators are not sufficient to give precise measures on which to be able to rely to ensure services meet national priorities.

71. The Committee recommends that future budget documents should show closer links between spending plans and the National Performance Framework. This might in particular include clear indications of where any failure to meet a particular national indicator or target (or inadequate progress towards meeting such a target) has prompted adjustments to particular budgetary allocations.

Budget presentation

72. The Committee recommends that future budget documents include a breakdown between capital and resources from the outset, together with more detailed explanations of significant technical changes for each relevant budget line.

73. The Committee recommends that, in future years, where the actual rural affairs and environment budget total for the current or subsequent budget year is known to be significantly different from the figures used in the budget documents, the actual budget figures are identified clearly and prominently in the budget documents.

Portfolio analysis

74. The Rural Development budget line will be a significant loser with Scottish Government expenditure between 2007-08 and 2010-11 falling by over £9m (6.5%) in real terms. Over the same period, funding for this budget from European Union modulated funds and from other EU match-funding receipts is forecast to increase by £31m (103%) in real terms. Taken together, the net effect is to increase the rural affairs and environment budget by 12.6%.

75. On waste management, the Scottish Government’s approach (involving substantial reallocation to local government), taken together with the removal of ring-fencing for local authorities, is difficult to reconcile with the conclusions reached by Audit Scotland in its recent report on sustainable waste management. The Cabinet Secretary’s responses did not reassure the Committee that he was fully appreciative of the consequences that the

1 RAE/S3/08/18/7 Agenda Item 1 change in policy might have and the potential implications for contributing to a failure to meet Scottish and/or EU targets. Further, the Committee is concerned about whether the new proposals for distributing funding take sufficient account of past practice in the distribution of funding, whereby some local authorities have been able to make significant progress while others have yet to benefit from significant investment, and where their practices lag markedly behind the practices of the best performing.

76. To enable us to monitor progress in later years, we recommend that future Budget documents include:

• an assessment of progress towards meeting national and EU waste targets; and • a detailed breakdown of how the Zero Waste budget has been allocated to specific initiatives.

77. In relation to flood prevention and coast protection, the Committee is unclear about how the reallocation of funding to local government will be calculated given the very uneven distribution of spending need across local authorities, and some members of the committee are concerned that a calculation that will meet this need may not be achievable. Flood management schemes can be extremely expensive and individual authorities’ annual shares of a national budget allocation might not be sufficient to fund the schemes needed in their areas. The Committee has considerable concerns about how large-scale strategic flood management schemes will be funded under these arrangements.

78. On the basis of our concerns and in the light of the major inquiry into flooding the Committee has instituted, the forthcoming introduction of a bill on flooding and coast protection policy and administration and the recent publication of the Pitt Report, the Committee invites the Scottish Government to reconsider making such a fundamental change in funding policy at this time.

79. The Committee recommends that in future budget documents, the Rural Development Contracts budget line is accompanied by forecasts of the spending breakdown between individual programmes. By comparing this in later years with actual spending patterns, it should be possible to assess the validity of forecasting methods, and adjust future spending plans accordingly. This should also make it clearer how budget allocations are expected to be tied to national targets and indicators.

80. The Committee recommends that a significant proportion of the £7m Marine Management budget-line (some members of the Committee suggested around £3m) should be set aside in the first year of the spending review to support the fishing industry in taking forward its commitment to sustainable fisheries by, for example, adopting the best available gear to reduce by-catch and discards.

2 RAE/S3/08/18/7 Agenda Item 1 81. The Committee would welcome clarification of the criteria for the sale of Forestry Commission land. The Committee believes that it is important that the long term targets for increasing forest cover are met.

3 RAE/S3/08/18/9 Agenda item 2 RURAL AFFAIRS AND ENVIRONEMNT COMMITTEE

Rural Housing Inquiry

SUBMISSION FROM SHELTER

Key points

• The Rural Housing Inquiry should support the case for a programme of Rural Housing Enablers in Scotland. This would have an immediate impact within this parliamentary term.

• As well as important issues of housing supply and development, the importance of sustaining households within their homes is equally worthy of attention.

• Scotland’s flagship commitments on homelessness form an important backdrop to the Inquiry. However, some concerns are not well-evidenced and the evidence which is available tends to affirm the importance of addressing the housing shortage.

• The planning system has much greater potential to deliver affordable housing than is currently the case; for the immediate period Shelter believes the focus should be on enhancing capacity and skills rather than necessarily seeking further high-level change.

• The Inquiry should press the Scottish Government to make clearer its intentions in funding affordable housing if and when council tax is replaced.

• Proposed reforms to exempt new build homes from Right to Buy should be extended to give a general discretion to determine the scale and rate of sales dependent on market circumstances.

• Shelter has detailed specific proposals to facilitate a separate sub-sector of private landlords, operating at the boundary between social renting and commercial letting.

Shelter would welcome the opportunity for further dialogue with the Committee.

Introduction

Shelter welcomes the opportunity to contribute to the Scottish Parliament’s inquiry on rural housing. We would be delighted to give further evidence or assist the Committee in other ways in this timely and important exercise.

From discussions with Committee members and staff we understand that the specific questions posed by the call for evidence paper are not intended to constrain the scope of responses. This flexibility is welcome as we think there are important issues around social support and housing allocation which do

1 RAE/S3/08/18/9 Agenda item 2 not fit easily within the core questions on planning, finance and development posed by the inquiry. While we attempt to address some of the latter, we are also keen to highlight some of our experience in what might be called “softer” areas of policy which are equally vital to making housing “work” in rural areas.

Finally, a running thread of our submission is on the theme of Rural Housing Enablers, drawn partly from our own experience of direct service provision but also from a longstanding policy commitment to this form of working. We elaborate more fully below.

Shelter and Rural Scotland

Around 80% of Shelter’s work is direct service provision to people in housing need. Both these services and our policy, campaigning and training work are available to people throughout Scotland. Indeed, we have added resources specifically to our telephone-based and web-based advice (Advice Online) to ensure that these are accessible throughout Scotland.

However, Shelter has also recognised over many years the need to have a distinctive presence in parts of rural Scotland. Over twenty years ago, we were pioneering empty homes initiatives in the rural Highlands and, until the mid 1990s ran a specialist rural housing initiative which is one of the fore- runners of the present Rural Housing Service charity.

Around ten years ago we collaborated with the Rural Housing Service (then located within Rural Forum) to publish “Scotland’s Rural Housing: at the heart of communities”, a publication which was able to set an agenda for the new government and subsequently the early years of the Scottish Parliament. Among our recommendations was an expanded programme of Rural Housing Enablers and in 2000, running until 2007, Shelter operated its own Rural Housing Enabler service in the rural south west of Scotland.

That project has now come to an end, with a successor in the Dumfries and Galloway Small Communities Housing Trust, which Shelter, in partnership with community representatives, was instrumental in setting up. However, Shelter’s commitment to direct service provision in rural Scotland continues with a housing support service for vulnerable families and single people in rural Dumfries and Galloway. We also employ a worker in Argyll and Bute whose role is to identify the potential needs of homeless households and work with other service providers to address those needs more effectively (this includes measures like referrals, assessment processes and training).

Rural Housing Enablers

Attached as an appendix to this paper is our earlier submission to the Committee on the case for a programme of Rural Housing Enablers which we would ask to be considered fully as part of our evidence. The Committee may also have seen a similar proposal from the Rural Housing Service. Although the two proposals differ in some details, these are largely the product of a continuing process of refinement rather than any differences in substance.

2 RAE/S3/08/18/9 Agenda item 2 Shelter and the Rural Housing Service share the same aims for such a programme.

The appendix details the case for a programme more fully and in other parts of this paper we refer to instances where a Rural Housing Enabler initiative could help address the Committee’s core concerns. In brief the case rests on:

• Convergence with larger policy directions such as: greater community engagement in the planning system; unlocking barriers to housing supply; and more sensitive analysis of housing needs.

• Substantial and expert testimony as to the value of such a scheme elsewhere in the UK, which means that it carries low risk as a form of innovation.

• Very modest costs in relation to benefit.

Of some interest to the Committee, we believe, is the fact that a programme could be easily set up and be operational well within this parliamentary term. Although the Committee will rightly want to make some long-term and fundamental suggestions as to the direction of policy, a programme which can have a fairly immediate impact has a lot to recommend it as well.

The Rural Housing Problem

Shelter believes that affordable housing is the highest priority in many rural areas. This echoes the conclusions of the recent OECD review of rural policy in Scotland.

For Scotland’s rural communities to be sustainable and thrive, it is crucial that people in those areas can access good quality housing at a level that they can afford. This applies to newly forming households in rural areas and for people wishing to relocate to those areas. For this to occur, and for the full potential of Scotland’s rural communities to be realised will involve increasing the number of new build homes for affordable renting. Of course, new developments have to be sensitive to their environmental impact and enhance the community that they are built in. As part of this they have to carefully sited, in areas where people actually want to live; where there is a clear need for additional housing, based on a robust assessment of existing and emerging housing need in communities.

Of some interest to the Committee is the extent to which housing problems in rural areas are specific and distinctive or whether they are more or less amplified versions of the problems that are found throughout Scotland. This is important in considering whether a specific set of policies is needed in response.

Rural and rural housing specialists will tend, quite understandably, to emphasise the distinctive nature of rural housing problems. From our perspective, many concerns that arise in our rural work are equally echoed in urban areas.

3 RAE/S3/08/18/9 Agenda item 2 To take an example: Scotland has an internationally-regarded tradition of community-based housing associations. Rural Scotland came late to this model and it was not until the mid 1980s that the first community-based housing associations were set up in rural areas. Over the next ten years the number of such associations gradually increased. However, in our 1997 report we noted that coverage was still far from widespread and called for a further programme of expansion. However, since then there have been no new rural housing associations; indeed, the direction of travel has been mostly the other way, towards merger. The proposals in “Firm Foundations” for new forms of funding and development of RSLs, while not in themselves leading towards loss of small associations, have certainly raised fears of a further contraction. So this is an example of a longstanding policy in Scotland as a whole which has been imperfectly applied in rural Scotland.

In a number of other areas the emphasis is also in degree rather than kind. Housing shortages, loss of homes through right to buy, high house prices, constipated planning processes are common to many parts of Scotland. In rural areas these problems may simply be greater and in some cases accentuated by geography or lack of services.

However, some issues are characteristically rural: second and holiday homes; local land monopolies; access to utilities - these are all either absent in urban areas or substantially different. And, for some problems, the difference in degree is so significant that it is effectively a difference in kind: for example, the economies of scale in providing housing support or temporary accommodation for homeless people require a different response in remote rural areas.

This means that a distinctive policy response in rural Scotland is merited. We turn now to look at some specific policy areas and responses.

Tackling homelessness and housing allocations

Although this theme is not directly addressed in the call for evidence, it did come up as an issue in the Committee away day in Aviemore in December 2007.

One of the major targets for government over this parliamentary term is ensuring that all homeless people have the right to permanent accommodation. Although set as a target back in 2002 and enshrined in law in 2003, the target has been enthusiastically endorsed by the Scottish Government, placing Scotland, as it does, in the vanguard of programmes to deliver social justice.

As part of the progress of moving towards 2012 local authorities have been increasing the number of allocations going to homeless people (currently standing at around 35-40%). This has given rise, in some quarters, to suggestions that too many allocations are going to homeless people and that this is counter to measures to build stronger, more sustainable communities. This last argument is heard frequently in a rural context.

4 RAE/S3/08/18/9 Agenda item 2 Shelter is aware of these concerns and not at all dismissive of them. But much of the discussion can be poorly-evidenced and an area in which myths flourish. This can be seen in a number of ways.

Some landlords are concerned that moves to abolish the “local connection” requirement in homelessness law will mean that high pressure areas will increasingly be under further pressure to house homeless people from throughout Scotland. However, the number of homeless people moving across boundaries is only a tiny percentage of overall numbers and is as likely to be in the direction of urban areas (where services are more fully available) than rural areas. Further, the local connection rule applies only to the council area as a whole not to any individual part. If a person applies as homeless in a particular community, the legal obligation is to provide accommodation within the council area rather than necessarily in that community.

Secondly, there is a misconception that the only response to homelessness is provision of a council house. Some authorities have given high priority to prevention of homelessness and to new assessment processes which allow the council to explore with homeless applicants a full range of options open to them. Indeed, it is this kind of approach which has allowed Angus Council to be the first to aim to meet the 2012 target 4 years ahead of schedule.

Thirdly, the concern about allocations to homeless people in rural communities seems partly to stem from views that homeless people are different from other parts of the population. The Scottish Social Attitudes Survey shows that stereotypes of homeless people still abound. In fact, homeless people are pretty much the same as anyone else in need of housing; just that their housing need has become more pressing.

Analysis by Shelter casts some doubt on whether there is uniquely rural pressure to deliver on the 2012 target. Based on the 2006-07 homelessness data we have looked at local authority progress towards that target1. From that we found that there was no consistent rural-urban divide. Some of the areas with furthest to go were rural, certainly, but two of Scotland’s largest cities were in the same category. There is also good representation of rural areas in the group of councils making most progress.

We also looked ahead at possible policy interventions which could help achieve the 2012 target. Once they had been taken into account, a similar pattern emerged. Both rural and urban councils are represented in high and low pressure cohorts.

So it is too simplistic to say that there is a uniquely rural dimension to the delivery of the 2012 target and its impact on housing allocations.

Of course, Shelter agrees that to meet the target we need many more affordable homes. Tackling homelessness effectively is fundamentally about providing more decent affordable homes. It is also about effective prevention

1 We actually looked at progress towards an interim target set for 2009, which is a staging post for 2012.

5 RAE/S3/08/18/9 Agenda item 2 of homelessness and ensuring people can sustain housing. We look at the latter first before turning attention to the supply of housing (which more directly relates to the questions posed by the Committee).

Housing support in rural areas

One of the issues which the Committee has not raised is sustaining housing in rural areas. This is quite understandable giving the glaring evidence of overall housing shortage and the need to look at funding and development to address that. Nevertheless, part of what makes housing work in rural areas are services to ensure that vulnerable people can access support to remain in their homes. Further, housing arrangements that repeatedly break down simply fuel repeat homelessness and adds pressure to housing allocations.

As above, given our direct service experience in Dumfries and Galloway and Argyll and Bute, Shelter would be happy to provide further evidence on the particular issues for support provision in rural settings:

• The difficulty of providing specialist services from a single base where there are no economies of scale and where needs are intermittent.

• The challenge in meeting duties to provide temporary accommodation for all applicants who present as homeless, especially those in remote locations where it is not viable to provide accommodation directly.

• The impact on the number of clients who can engage with home-based “floating” support as a result of travel times.

• The greater need to maximise use of existing generic services and staff roles and the way they work together.

• Developing community-based capacity such as mentoring, befriending and informal support.

A number of organisations providing support have raised concerns about the pace with which the former Supporting People funding stream has been abolished and whether services in rural areas with quite high unit costs will suffer with greater competition for funds. It is too early to judge this but we urge the Committee to press the Scottish Government to have robust mechanisms to assess the impact of changing funding regimes.

The Role of the Planning System

The Committee asks if changes are required to planning legislation or guidance to make the planning system more effective in rural areas.

At a time when the major Planning (Scotland) Act 2006 is being implemented and SPP3 – Land for Housing is being revised, we do not think that the immediate priority should be further fundamental change. We believe that there is already scope within the planning system as it is emerging to make it more effective.

6 RAE/S3/08/18/9 Agenda item 2 Recent research by Newhaven Consulting (“All Pain, No Gain”) is fairly critical of the centrepiece of planning and affordable housing: the use of site-by-site quotas, delivered through section 75 agreements. While Shelter agrees that progress so far has been disappointing, we consider the quota policy system to be single best mechanism for securing additional affordable housing. One constraint in relation to rural areas is that there tends to be a unit threshold applied: typically, the requirement that around 25% of homes be affordable will kick in only in developments of 20 homes or more, thus excluding smaller- scale rural schemes. However, at least one council does not have a unit threshold and requires a developer contribution no matter the size of development. In very small schemes this could take the form of a commuted sum, allocated into a central pot to fund affordable housing off-site. Argyll and Bute Council has set up a strategic housing fund for just this purpose and we commend this model elsewhere.

To the extent that unit thresholds are a problem we also think that it is legitimate for councils to allocate specific sites for affordable housing. In an urban context this runs the risk of residential segregation, but there is very little risk of this in truly rural schemes.

Much of what we see as needing done in the planning system is about delivery rather than overall policy. As a discipline, planning has developed quite separately from housing. Planners often seem more comfortable with the fair and consistent application of rules which, in such a politically-charged policy area, is quite understandable. Nevertheless, as an approach it does not sit easily with the negotiation, compromise and even brinkmanship that is often needed to secure the best deals from new development. We have been impressed with the Aberdeenshire Council model of Planning Gain Co- ordinator, which seems much more geared up for this new environment.

The Committee also asks how effective is the implementation of local authority policy and decision making, in conjunction with other relevant organisations, in addressing rural housing need.

The question of rural housing needs is central here. In our submission to both “Firm Foundations” and draft SPP3 Shelter has queried the headlong rush towards strategic planning on a wider geographical scale. Much of this is based on search patterns in the owner-occupied market, none of which might reflect more localised needs for people lower down the income scale or otherwise disadvantaged. We have also drawn attention to the crucial role that Rural Housing Enablers can play in charting need at a community level and using that as a reality-check on housing market-wide assessments.

Funding Considerations

The Committee asks how can public funds most effectively be deployed in rural areas to increase the supply and quality of affordable housing?

In our appendix we show that a Rural Housing Enablers programme could be set up for a very modest cost but that this would help to unlock potential additional sources of supply: for example, from private landowners.

7 RAE/S3/08/18/9 Agenda item 2 We think it would also be useful for the Committee to emphasise the importance of the additional funding that is earmarked for affordable housing from local taxation. Under a discretionary scheme, introduced in 2005, all councils have the power to raise council tax on second homes from 50% to 90%, with all that additional revenue being earmarked for affordable housing. This amounts to around £17 million a year but, of course, its distribution is very skewed towards rural areas like Argyll and Bute and Highland. Indeed, in Argyll and Bute, the £2 million additional revenue makes up a significant part of the budget for new affordable homes. In its consultation on local income tax (“A Fairer Local Tax for Scotland”) the Scottish Government has acknowledged the value of this funding source and has pledged to ensure that around the same amount is raised from any replacement. In fact, it also raises the possibility of greater market flexibility in the replacement levy, which would be welcome.

However, the consultation paper makes clear that a great deal of detail is needed before the agreement in principle can translate into a workable form of tax. The Committee might usefully press for such detail. Further, the consultation paper declines to give an assurance that the additional revenue would be earmarked solely for affordable housing. It is important that this is clarified.

Affordability

The Committee ask what does affordable mean in the context of rural housing, given the differential incomes available (and applicable) in communities across Scotland.

Shelter agrees that Scotland requires a more meaningful definition of the phrase “affordable housing” than that which is currently used.

Within a rural context, however, where wages are often lower and employment may be more seasonal than in other areas other mechanisms, which subsidise the accommodation rather than the individual’s income, should also be considered. An example of this is in Ireland where social housing (that which is provided by public organisations for rent) is completely different to affordable housing which is available for sale but with some form of subsidy in place to ensure that it can be accessed by people on incomes that mean that market owner occupation is outwith their reach. To keep this housing in the affordable bracket clawback systems are in operation for defined periods after the house has been bought should the property be resold.

The Committee further asks what factors prevent the housing that is available in particular local communities being affordable for the people who need it most.

The sale of homes through the Right to Buy has seriously diminished the stock of social housing available and this has been particularly pronounced in some rural areas where virtually all of the local authority housing has been sold. As new development of affordable rented housing through RSLs has

8 RAE/S3/08/18/9 Agenda item 2 not kept pace, coupled with the difficulties with developments in some rural areas, there are now communities in rural Scotland where affordable rented housing is at best scarce, and at worst non-existent.

The impact of second/ holiday homes can also have an impact on affordability. Above we have highlighted the need for a replacement to council tax to continue to tax second home use effectively. In the past we have also called for the power to levy the tax to be set at rates higher than the 90% currently allowed. We have also suggested that second and holiday home use should be considered a change in use in the planning system.

Finally, the Committee asks what are the most effective ways of ensuring that housing that is affordable when first put on the market (for rent or for sale) remains affordable in the longer-term.

Perhaps the most effective way of ensuring that housing remains in the affordable sector is for it to be available for rent and for it to remain within that sector.

The Scottish Government’s intention to end Right to Buy for new build property is welcome but would have no impact on the rate of sale of existing property. Shelter believes that the current powers to apply for suspension of Right to Buy should be enhanced so that local authorities and other social landlords have a general power to determine whether and at what pace and under what terms Right to Buy should continue to operate in their areas.

This could involve exempting particular property types or geographical areas being exempted from the Right to Buy where there is particular pressure on affordable housing. Shelter believes that these decisions should be made at a local level without the necessity of recourse to Scottish Ministers for decisions on this. Rural Housing Enablers can be a vital part of assembling the evidence and winning support from communities for locally-generated responses.

Where properties are made available with subsidy for sale there are further methods that can be applied to ensure that they remain within the affordable sector. Clawback periods can be included within the title conditions ensuring that an appropriate portion of any subsidy is reimbursed at the point that the property is resold and mechanisms put in place to ensure that this can be reapplied as a subsidy either to another property replacing that which has been sold or incorporated within that sale to ensure that it is available to the purchaser.

Rural housing burdens, established through the Title Conditions (Scotland) Act 2003 can also be used to ensure that rural housing organisations have a right of pre-emption in buying back properties that they have sold using subsidy to make them affordable.

9 RAE/S3/08/18/9 Agenda item 2 An enhanced role for the private sector

In our submission to Firm Foundations Shelter sets out a detailed proposal for an enhanced role to be played by private landlords in housing people who otherwise only have recourse to social housing. There is a particularly rural dimension to this, as in many remote rural areas, private landlords are the majority providers of rented housing. Indeed, some private owners (including, in this context, community land ownership initiatives) can already claim to be playing a semi-social role.

Such is the shortage of affordable housing that Shelter believes that this direction of travel should be accelerated. We have proposed a new sub- sector of private landlords, letting on longer-term tenancies, meeting enhanced management standards and accessing financial support in order to keep rents affordable. We would be delighted to explore this further with the Committee.

Conclusion

Shelter is encouraged that the Committee has given such high priority to the pressing need for affordable housing and looks forward to further dialogue.

APPENDIX: The case for a Scottish rural housing enablers programme

Summary

• Over the last ten years, rural housing enablers have shown themselves to be effective catalysts for the assessment of housing need, overcoming barriers to development, and engaging communities in new housing supply.

• However, in comparison to other parts of the UK, the work of rural enablers in Scotland is fragmented: patchy in coverage; inconsistently funded; and lacking any central support.

• New initiatives by the Scottish Government on housing supply and policy provide a unique opportunity for rural housing enablers to help deliver on the Government’s agenda.

• A programme supported by the Scottish Government, in partnership with local authorities, could be implemented at very modest cost.

Rural housing enablers

“Rural housing enablers” is a term used to describe work which engages with rural communities in order to better chart their housing needs and to bring forward solutions to meeting those needs. Enablers are seen as local brokers of housing solutions, bringing together communities with expressed housing needs and potential providers of solutions such as landowners, housing

10 RAE/S3/08/18/9 Agenda item 2 associations and public bodies. This briefing sets out a case for their work to be put on a firmer footing in Scotland.

Rural housing enabling work has been around in Scotland for at least twenty years, but has only become more prominent in the last ten. The recent housing discussion paper, “Firm Foundations” recognises, “In remote areas, price increases can have a magnified effect due to sparse supply in those locations”. Typically, these areas have very little social housing, either because, historically, none was built or because it has been sold through Right to Buy. As a result people in housing need tend to be displaced to other areas – nearby towns, for example. In addition, in these smallest communities it is often more difficult for local councils and housing associations to have an active presence, so people are unaware of what housing options might be open to them, whether in the form of social housing, private housing or grants that might help with home ownership.

Rural housing enablers help to demonstrate hidden housing needs and also to bridge the gap between those needs and possible solutions. A project may carry out some or all of the following functions:

• Community-based surveys, in tandem with community groups, to assess local housing needs.

• Identifying sources of housing supply: in particular, identification of sites or empty properties.

• Providing information and advice to individuals: for example, on access to grants.

• Building community capacity to develop housing solutions for themselves.

• Feeding into wider area housing strategy or needs assessment.

To date, the first of those tasks – carrying out community-based needs assessment2 – has loomed largest. However, the role of any one enabler can be adjusted to focus more fully on other tasks: most obviously, the practical task of identifying land for housing, which is a major theme of the Housing Supply Task Force.

Shelter has run one such project – Shelter Housing Action with Rural Communities (SHARC) – in the south west of Scotland, between 2000 and 2007. Over the period it carried out 24 community surveys and was instrumental in setting up Dumfries and Galloway Small Communities Housing Trust, only the second trust of its kind in Scotland. SHARC also acted as a signpost for common queries like planning and access to grants.

2 Highland Small Communities Housing Trust has recently decided to develop another form of community engagement: locally-based surgeries. These are anticipated to add more qualitative information to supplement the quantitative information gathered from community surveys.

11 RAE/S3/08/18/9 Agenda item 2 The Rural Housing Service is a national service which provides advice and support on housing issues, free of charge, to rural communities and helps deliver new housing opportunities for local people. As well as offering a national service the RHS has developed two area-based Rural Housing Enabler projects. These projects in the Argyll Islands and in Aberdeenshire have demonstrated the crucial role that local housing enablers can play in increasing affordable housing opportunities. They have utilised a toolbag of housing options to meet the need for affordable housing; such as Rural Home Ownership Grants, Rural Empty Property Grants, community housing initiatives as well as housing association development. The funding for the projects has come from a number of different sources: Aberdeenshire is funded by a partnership between statutory bodies and voluntary funds. Argyll was funded by a one-off grant from the Nationwide Foundation as a pilot.

There are a few other instances of this kind of work – Highland Small Communities Housing Trust, for example – but most parts of rural Scotland do not have access to a locally-based service.

Rural housing enablers elsewhere in the UK

The fragmented pattern of provision in Scotland is in contrast to that in England where the Department of Environment, Food and Rural Affairs (DEFRA) supports a rural housing enabler programme. This includes core funding for posts, training, information exchange and development of shared tools such as survey forms and software. There are over 40 Rural Housing Enabler posts in England.

The influential “Affordable Rural Housing Commission” report in 2006, said “We have been particularly impressed by the commitment and enthusiasm of RHEs” and recommended their expansion. In this it echoed the Joseph Rowntree Foundation’s Rural Housing Policy Forum, also in 2006, which described rural housing enablers as “the essential requisite” for all of its other policy recommendations. A recent review of land and planning policies for the Scottish Executive concluded that rural housing enablers could be relevant in parts of rural Scotland3.

A recent report from the Scottish Consumer Council, “Rural Advocacy in Scotland”, documented current weaknesses in capacity building at community level in rural areas, particularly outside the Highlands and Islands. In the study, housing issues were a major concern for younger age groups. We believe that rural housing enablers can help to address those concerns.

Rural housing supply

The Scottish Government’s new Housing Supply Task Force re-inforces the value of the work that rural housing enablers carry out. The Task Force has already identified tension within communities as one potential barrier to

3 “Allocation of Land for Affordable Housing through the Planning System”, Scottish Executive Social Research 2006.

12 RAE/S3/08/18/9 Agenda item 2 increased housing supply. Because enablers work with communities to identify housing needs for themselves, they are essential to the process of building support for new development and heading off opposition. Further, by working at community level, enablers are often able to secure land that otherwise would not be on the market4. Finally, the very locally-specific nature of the housing surveys that enablers carry out complements wider market information to ensure that housing is built exactly where it is needed.

The Task Force has identified rural housing shortages as one of its main themes. A rural housing enablers programme could be a very cost-effective way of unlocking new housing supply and making effective use of mechanisms such as Rural Empty Properties Grant, Rural Home Ownership Grants and shared equity.

An important point in relation to the Housing Supply Task Force’s remit is that housing enablers are as relevant to home ownership and private rented initiatives as they are to provision of social housing. Indeed, in some areas, these private sector initiatives may be most important.

Developing a Scottish model

Shelter believes that there is a strong case for rural housing enabling to put be put on a firmer footing in Scotland. We recognise that this case needs to be developed more fully, if and when, support in principle is secured. One of the consequences of the weak funding framework in Scotland is that no formal evaluation of rural housing enablers has taken place to date. As we outline below, it would be important to address this as a more co-ordinated programme takes off.

Central Government could play a key role in establishing rural housing enablers as a priority. “Firm Foundations” offers positive signals in this respect, saying: “We feel that more can and needs to be done to assist delivery, to encourage innovation and to address obstacles that currently exist. There are lessons to be learned from the good practice that is being promoted elsewhere e…”

Central Government should:

• Set a series of core objectives5

4 This is very important in rural areas, where the focus is on allocation of small sites, either through “exceptions policies” or identifying sites specifically for affordable housing.

5 The initiative as it initially evolved in England has had 7 core objectives: a) To raise awareness of the need for affordable housing in rural areas; b) To enable the provision of affordable housing in a geographical area; c) To influence regional and local housing strategies; d) To provide information to address national policy issues on affordable housing; e) To work with local authorities to provide information and advice; f) To address particular issues of local concern (eg empty homes; supported housing) g) To undertake research to contribute to local solutions.

13 RAE/S3/08/18/9 Agenda item 2 • Identify a funding stream to cover set up and core costs. See implementation below.

• Develop a support infrastructure – either directly or through a contract with a third party – which would pool some of the development and delivery mechanisms.

• Set a monitoring and evaluation framework.

Local government is the lynchpin to the programme delivery on the ground. A good working partnership with local authorities across a range of functions – housing, planning, estates and corporate services, for example – is essential for the potential of enablers to be realised in full. For this reason we think that it is important that the local authority has a direct stake in the programme delivery in its area. We suggest that this should include a financial stake, with the local authority providing, say, 25% of core costs, from sources such as additional council tax revenue from second homes or developer contributions from commuted sums in planning policies.6

The question as to whether rural enablers are or should be employed by local authorities arises frequently. In our view, there are significant advantages in enablers being independent of local authorities or, indeed, any major housing provider. If one of the aims of the initiative is to build community support for development, then that is much more readily achieved when the enabler can be seen to be working with the community and detached from direct interest in the funding, planning or delivery of homes. Further, we recognise that, in hard-pressed local authorities and housing associations, it is easy for enabling posts to get pulled away from specific objectives into more immediate development needs7.

In our view, the optimal arrangement is for rural enablers to be independent of local authorities and the main housing providers but to forge strong working relationships with both. A variety of models might be adopted. For example, a rural housing enabler post could be employed and managed by a local body such as a trust, while drawing on central support services from a national body. Alternatively, a single agency could act as employer for all or most of the local posts, with these in turn being guided by local advisory boards. In

These core objectives need not be replicated in Scotland; nor should it be assumed that they are all of equal priority. In relation to the current context in Scotland, we suggest that something along the lines of objectives b) and c) are particularly relevant.

6 The recently announced “Strategic Housing Fund” in Argyll and Bute, which pools second homes income and developer contributions, among other sources of income, provides one example of a local funding source.

7 An additional issue is whether it is right to have enablers focused specifically on rural housing. Other programmes, such as “Initiative at the Edge” have supported generic local development workers. While it is certainly true that, in practice, rural housing enablers do pick up views on other aspects of development, it is important to send a strong signal on the importance of housing. Since a housing enablers work in any area is always community-led there is little prospect of inappropriate priorities being pursued.

14 RAE/S3/08/18/9 Agenda item 2 either of these models, we recommend that advisory boards draw from the range of other organisations active locally: for example, local authorities, RSLs, community councils (and other community bodies) and landowners. There may also be a role for economic development agencies and major employers.

Implementing the programme

Provisionally, we estimate the cost of such a programme to be around £500,000-£600,000 per year8. Some of these project costs at a local level could be shared with local authorities. This level of funding would allow for a number of “field” posts to be created or sustained as well as developing a contract for central provision of services to support the programme as a coherent whole. We recommend that the programme is placed on a three year footing.

The programme could be overseen by the Housing and Regeneration Directorate and/or the Rural Directorate within the Scottish Government. The programme could either invite local organisations or partnerships to bid for core funding from a central pot, or seek tenders to run a core programme as managing agent. In line with our recommendation on the key role of the local authority, we suggest that, typically, central funding should cover 75% of costs, with the remainder being sourced locally. The Scottish Government could also set up a separate contract with a third party to provide the central services, either separate from or linked to the role of managing agent.

Shelter Scotland 11 April 2008

8 These costs would support around 6-8 local projects as well central overheads such as management fee; training and events; website development; standard materials.

15 RAE/S3/08/18/10 Agenda item 3 RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

CROWN ESTATE AND CROWN ESTATE COMMISSIONERS

Note by the Clerk

1. Highlands and Islands Local Authorities Conveners’ Group established the Crown Estate Review Working Group with a remit to report on— • the property rights which make up the Crown Estate in Scotland, including their nature, ownership, use and management; and • ways in which these rights could be managed to deliver greater public benefits and accountability in Scotland.

2. The Committee took evidence from the working group (which disbanded after completion of the report) on 3 October 2007. On 24 October, the Committee heard from Scottish representatives of the Crown Estate Commissioners. They informed members that they proposed to report more comprehensively in future on the management of Crown Estate property in Scotland by way of annual Scottish reports. They also committed to setting up a Scottish Liaison Group, in order to secure greater engagement with Scottish stakeholders.

3. The Committee subsequently agreed, amongst other things, to consider the Crown Estate Commissioners’ first Scottish report following its publication, but not to take further spoken evidence at this stage. On 1 October, the Committee considered legal advice on the Crown Estate.

4. In response to an invitation from the clerk, Highland Council has submitted a letter on behalf of the CERWG partners setting out its response to the Commissioners’ Scottish report. The Convener has also authorised the circulation of two submissions from correspondents expressing concern at the management of particular Estate assets.

5. Attached are: • Annexe A (page 2): 25 September cover letter and update report from Ian Grant, Chairman, Crown Estate Commissioners; • Annexe B (page 12): First annual Scottish report of the Crown Estate Commissioners; • Annexe C (page 13): Minute of first meeting of Commissioners’ Scottish Liaison Group (NB, the group met again in September but minutes of that meeting have not been provided.) • Annexe D (page 16): letter from Michael Foxley, Leader of Highland Council, on behalf of the CERWG partners. • Annexe E (page 20): cover letter and enclosures from Mr I Macintyre, former Chairman of Tarbert (Argyll) Harbour Authority; • Annexe F (page 28): letter from Mr H Whitelaw Kings Park, Stirling.

6. Members are invited to note the attachments and decide what further action to take in relation to the Crown Estate Commissioners.

1 RAE/S3/08/18/10 Agenda item 3

ANNEXE A: CORRESPONDENCE FROM IAN GRANT, CROWN ESTATE COMMISSIONERS As you will recall we promised to keep you updated on our work in Scotland following our appearance at the Committee on 7 November last year. As you have ‘Correspondence with The Crown Estate’ on your agenda for 1 October, I thought it might be helpful to provide a short report on our work in Scotland over the last year, particularly in terms of these subjects raised by the Committee. As you will see from the report we have fulfilled our promises to set up a Scottish Liaison Group, to strengthen communication with Scottish Stakeholders, and to produce a separate Scottish report on our activities. Last year has seen a very significant level of partnership working with the Scottish Government, local authorities and a range of other public, voluntary and private sector stakeholders. As you can see from the report we have been able to play a very active role in policy areas ranging from renewable energy to affordable housing. We would be very happy to provide further information to the Committee about our work. We would also be keen to assist you, where we can, in your wider discussions on issues that come before the Committee where we have an interest or experience. Ian Grant Chairman and Scottish Commissioner Crown Estate 25 September 2008

Rural Affairs and Environment Committee Update Report

Introduction

Following The Crown Estate’s appearance at the Rural Affairs and Environment Committee on 7 November, 2007, the Committee agreed to The Crown Estate’s offer to appear again this year. This report is designed to assist the Committee by summarising The Crown Estate’s activities in Scotland since November 2007, particularly in terms of the areas of interest raised by the Committee. We believe we have pursued all the points we indicated to the Committee we would follow up.

We are pleased to confirm that we have fulfilled our promise to the Committee that it would set up a liaison group to engage with interested parties across Scotland and also produce a separate Scottish Report covering the financial year 2007/8. Both actions have been well received across Scotland.

We recognise that our work in Scotland, particularly in the remote areas, requires us to be responsive to local needs and interests. As the list of activities shows, The Crown Estate’s Edinburgh office has been very active in engaging with Scottish stakeholders including MSPs, councils and a wide range of local and national interest groups. The Crown Estate is strongly

2 RAE/S3/08/18/10 Agenda item 3 committed to working in partnership with the Scottish Government to support its strategic objectives and we believe that we are uniquely placed to help Scottish Ministers achieve a range of targets that support sustainable economic development.

We have grouped the information under three headings which broadly correspond to the areas of interest addressed by the Committee:

A. Communication and engagement with Scottish stakeholders B. Contribution to research, policy initiatives and innovation C. Investment in Scotland

A. Communication and engagement with Scottish stakeholders

The Crown Estate has undertaken a comprehensive and wide ranging programme of work to ensure that Scottish stakeholders are informed and consulted about its work in Scotland. This has included:

The Crown Estate Scottish Liaison Group was set up to improve communication with Scottish stakeholders. Its purpose is to:

• Explain the work of The Crown Estate in Scotland and seek the views of stakeholders on its priorities and overall approach • Explore potential areas of co-operation by securing a better understanding of the policies, plans and programmes of a range of relevant stakeholder groups • Explore potential areas of joint working that offer mutual benefits, support the objectives of the Scottish Government and contribute to Scotland’s economic success

Representatives of 23 organisations representing a broad range of marine, rural and environmental interests in Scotland make up the group, which had its first meeting on June 12 this year. A second meeting on 18 September considered issues identified by participants including cooperation between bodies involved in fish farm agreements, The Crown Estate's role in energy and new entrants to agriculture. The next meeting is scheduled for 19 February, 2009.

The Scottish Report on the work of The Crown Estate was published in July 2008 and provides an overview of activity across the entire Estate, with separate Scottish financial information for the year ending 31 March, 2008. A copy was sent direct to all our stakeholders and tenants across Scotland. A copy of our 2008 Scotland Report is available at: www.thecrownestate.co.uk/scotland_report_2008.pdf.

In addition, The Crown Estate has continued to produce a twice yearly Scottish Bulletin for stakeholders providing information on programmes and activities across all areas of work. A separate Highlands and Islands Bulletin is produced to particularly focus on The Crown Estate’s work in that area. An e-zine has also been developed to ensure that stakeholders are

3 RAE/S3/08/18/10 Agenda item 3 quickly informed of important announcements such as the recent calls for interest in the development of offshore wind energy.

Engagement programme

The Crown Estate has regularly participated in a wide range of partnerships, meetings and committee involving a very wide range of stakeholders.

At a Scotland-wide level this has included participation by our Chairman and by our Director of the Marine Estate in the Sustainable Seas Task Force and associated workshops set up by Richard Lochhead, Cabinet Secretary for the Environment. The Crown Estate is keen to offer the Scottish Government and the Scottish Parliament any support and expertise which may inform deliberations on the Scottish Marine Bill, and will be submitting our views as part of the current consultation process.

Additionally, The Crown Estate has also made submissions to the Rural Affairs and Environment Committee’s Inquiry into affordable housing, participated in the workshops of the Tenant Farming Forum (TFF) and responded to the Energy Inquiry being carried out by the Economy, Energy and Tourism committee. In early 2008 we also contributed our views on the Strategic Framework for Freshwater Fisheries, the Strategy for Wild Deer in Scotland and the proposed designation of new areas for crofting.

The Crown Estate has also continued with one-to-one meetings with ministers and civil servants including Michael Russell MSP, Minister for Environment and Richard Wakeford, Director-General Environment and other Scottish Government officials. This has included discussion of how The Crown Estate can help achieve renewable energy targets along with other strategic projects such as the proposed Orkney transhipment terminal. The Crown Estate has requested possible dates to meet Jim Mather MSP, Minister for Enterprise, Energy and Tourism.

The Crown Estate has also held meetings or arranged site visits to discuss local investment with Richard Lochhead, Liam McArthur, Tavish Scott, Mary Scanlon and Jim Hume in their capacity as members of the Scottish Parliament and has continued to offer these briefings and estate visits to other members with local interests in The Crown Estate. We are also planning to hold a further Scottish Parliament reception with exhibition, following up the one we held last autumn.

Meetings have also been held with members or officials from the following local authorities: Highland, Orkney, Argyll and Bute, Moray and Shetland Councils. Our Managing Agents continue to maintain regular contact with a wide variety of local authorities, stakeholders and statutory bodies involved across the entire portfolio.

The Crown Estate has also participated in a wide range of regular forums and meetings, a selection of which are listed below. A summary of other meetings and visits arranged with stakeholders is attached as an appendix.

4 RAE/S3/08/18/10 Agenda item 3

Regular forums and meetings

Highland Biodoversity Forum Provides guidance and support to local bio-diversity groups Tomintoul and Kirkmichael Glenlivet Estate Community Liaison Community Association and Glenlivet Meeting. To assist communication with the and Inveravon Community Association, 2 community associations on the Glenlivet Moray Council, CNPA Board member estate, local councillors and the CNPA local board member. District Marine Safety Committee Scottish aquaculture Board Member Estate Visit Programme Formal Estate visit by Board Members – Fochabers. with tenants and stakeholders dinner. Native Oyster Steering Group Discussions to halt population decline and promote best practice Tenants group, Glenlivet & Fochabers Investigation of Added Value markets for Estates red meat sector. Scottish Coastal Forum Steering Group. Some meetings hosted at our offices in Edinburgh. Solway Firth Partnership AGM, conference and advisory group meetings SRPBA Environmental Resource Working group discussing resource management Group (ERM) implications across the rural sector. Forth Estuary Forum Working group participation Coast Hebrides Outer Hebrides coastal partnership participation Cairngorms National Park Authority To provide input into the development of (CNPA)Staff an interpretation advisory document for the CNP SNH Regular liaison meetings. SEPA national advisory group WFD progress. Both Rural & Marine. SRPBA Local and national liaison regarding current issues. River Tweed Commissioners Board meetings Forth District Fishery Board Board meetings Clyde River Foundation Board meetings SSMEI National Steering Group Overseeing the work of four SSMEI projects in Scotland: Shetland, Sound of Mull, Firth of Clyde and Eyemouth

At a local level The Crown Estate has actively continued its programme of personal meetings with as many of its business partners as possible.

B. Contribution to Research, Policy and Innovation

The Crown Estate is closely involved with a number of research and investment programmes which are aligned with the objectives of the Scottish Government and reflect the priorities outlined by all parties in the Scottish Parliament. These broadly reflect a number of key themes including:

5 RAE/S3/08/18/10 Agenda item 3

• Expanding the potential for Renewable Energy • Improving port and harbour facilities, including the development of the West of Scotland as a destination for sailing • Supporting environmental sustainability in aquaculture and on our rural estates • Investing in sustainable rural communities, for example, through affordable housing • Where possible encouraging new entrants to farming

Renewable energy

A comprehensive response to the Energy Inquiry held by the Economy, Energy and Tourism Committee was submitted in August and summarises many of our activities across the entire portfolio: www.scottish.parliament.uk/s3/committees/eet/inquiries/energyFuture/74Crow nEstate-(The).pdf;

Research commissioned by The Crown Estate earlier this year demonstrated the feasibility of a sub-sea interconnector along the East coast. This would allow the transmission of electricity generated in the North of Scotland to other parts of Scotland, England and other markets. A further study will consider options for connecting offshore windfarms to the interconnector

The Crown Estate has been working with The Scottish Government, HIE, Highland Council and the NDA on the Pentland Firth Tidal Energy Project which will potentially play a key role in meeting renewable energy targets. Duncan Mackay was recruited as a Wave & Tidal Development manager, based in Caithness, to help drive this project forward.

The Crown Estate has also worked with the Scottish Government to invite suppliers to bid for leases for offshore wind projects in Scottish territorial waters. Site allocations are due to be made by the end of December 2008.

Alongside this, The Crown Estate has also invited bids for leases outside territorial waters (Round 3), with two potential areas being identified off the coast of Scotland. In these cases we have said that we will co-invest with developers pooling the expertise of The Crown Estate and developers. As part of the Round 3 process, The Crown Estate will be consulting with Scottish stakeholders on the programme to deliver 25 GW of offshore wind power and briefing the supply chain (including ports) on the commercial opportunities that this could present.

The Crown Estate has been increasing the use of renewable energy on its rural estates including an energy from waste project with Moray Council and ground source heat pumps and other microgeneration schemes in our properties.

The Crown Estate is also carrying out pioneering research on the use of biomass in Scotland involving farmed algae/seaweeds. This can be

6 RAE/S3/08/18/10 Agenda item 3 anaerobically digested to produce methane for electricity heat or transport. Additionally, we are exploring the use of biomass with our tenant farmers, including supplying local power plants and micro generation on the estates themselves.

Improving ports and harbours Ports and harbours have been a key focus for us over the past year where we have built on strong local partnerships to help expand the marine leisure sector. On the west coast we have sailing conditions which compare favourably with the best in the world, and the marine leisure market has been growing by 11% each year, a growth rate matched only by the south-west of England. The Crown Estate is prioritising investment in ports, harbour and marinas to help local communities capitalise on these opportunities.

We are working with local authorities, the RYA and other partners to expand sailing tourism and events. Sailing has the potential to rival golf in its contribution to the Scottish economy.

We continue to meet with our partners operating ports and harbours and are currently pursuing a number of initiatives to support a range of business and community objectives.

We are in the process of agreeing a memorandum of understanding with Orkney Islands Council and Highlands and Island Enterprise to commence a feasibility study on the transhipment terminal involving a contribution of £169,000.

Supporting environmental sustainability

Through our Marine Stewardship Fund we have worked in partnership with local groups to conserve Scotland’s natural heritage while protecting commercial opportunities for local people. For example, we fund a programme where 100 fishing boats collect litter at sea for disposal at shore and support a wide range of conservation and education initiatives around Scotland’s coast including ranger services.

We continue to provide in-kind support for the Scottish Government’s Tripartite Working Group which seeks to improve the sustainable co-existence of healthy wild and farmed salmon stocks. We also provide information to the Government’s Expert Panel on aquaculture site location

At our Glenlivet and Applegirth estates we are carrying forward an approach which balances the need to protect vulnerable environments with the need to encourage access from walkers, cyclists and other leisure users.

Investing in sustainable rural communities

We are aware of the fragile economies of many Scottish rural and coastal towns and villages. We have invested in, or transferred land for local facilities to strengthen communities. Over 50% of the housing on our estates is

7 RAE/S3/08/18/10 Agenda item 3 affordable, as previously defined by Communities Scotland, and we are looking to work with the Government to extend our work on this further.

Encouraging new entrants to Farming

We encourage new entrants to farming. We were one of the first landlords to adopt new short limited duration tenancy agreements. In the last two years we have let units to new entrants on both our Glenlivet and Applegirth estates and have been impressed with their success. We have also been able to provide land on the edge of a unit to allow a retiring tenant to build a house and remain in the locality, potentially freeing up land for a new entrant. We are keen to explore these and other options further and are looking at how we can further advance the work of the Tenant Farming Forum.

More broadly, we are working with Cairngorm National Park and a range of organisations to increase the range of visitor attractions to contribute to local economies.

C. Investment in Scotland

As will be seen from our Scottish Annual Report 2008, The Crown Estate has made important investments in its Scottish marine, rural and urban Estate. We invested £213.9 million through a partnership arrangement in the Fort Kinnaird retail park in East Edinburgh. The Scottish report shows that in the 2007/08 financial year £2.5m was directly invested across the Estate. Further to the figures reported to the Committee last November we have now invested in excess of £285m into Scotland since devolution.

Marine Estate

In the Marine Estate, the principal investments have included £160,000 towards the development of the Pentland Firth Tidal Energy Project along with investment in the research for the sub-sea interconnector.

We also invested significantly in research that would benefit the aquaculture industry in Scotland. In financial terms our commitment to aquaculture has been £200,000 each year. We have listed the projects that we support below.

Programme supported Investment

Scottish Aquaculture Research Forum £50,000 (grant funding) for projects (SARF) Core funding including work on the relationship between aquaculture and tourism SSPO Aquaculture Demonstration £40,000 (grant funding) Initiative – DEPOMOD Project Shetland salmon aquaculture feed trials £8,400 new funding in April 2008: in addition to the original £33,000 in October 2006 (grant funding) SARF International Conference - 2009 Committed £10,000 for financial year

8 RAE/S3/08/18/10 Agenda item 3 2008/09 (grant funding) Harmful algal bloom – Karenia project New Phase 2 commitment of £39,500; in addition to original commitment of £57,000 in 2006/07 (grant funding) Acoustic Deterrent Devices (ADD’s) £10,000 (grant funding) Rivers & Fisheries Trusts Scotland £75,000 over 3 years 2008-2011 (grant (RAFTS) funding) ASSG Shellfish Conference – October £4,490 grant funding 2008

There were also a number of major commitments to invest in harbours and ports including:

Rhu Marina: Purchase of marina operation with plans to double it in size with enhanced facilities: £4,000,000 Tobermory: Invested £320,000 in pontoons for marine leisure Tarbert: Agreement to invest £700,000 in new pontoons, currently being installed, to attract more marine leisure visitors. Wick Harbour: Investing 50% in cost of pontoons in the harbour.

In addition there were a large number of smaller grants to support local improvements and activities in the Marine Estate including:

Programme supported Investment

Firth of Clyde Forum – Project officer costs £3,000 (grant funding) Fishing for litter Scotland £10,000 (grant funding) Largs slipway and navigation marks – Scottish £10,000 (grant funding) Sailing Institute Mull SSMEI project implementation £5,000 (grant funding) Orkney submerged landscape research £4,000 (grant funding) Scottish archaeology project officer costs £7,000 (grant funding) Shetland SSMEI project £5,000 (grant funding) St Abbs & Eyemouth Marine and Coastal £5,000 (grant funding) Ranger service Tony Wilks memorial lecture £500 (grant funding) Torridon Nephrops implementation £1,000 (grant funding) management plan CoastHebrides coastal management £5,885 (grant funding) Craighouse Harbour Project (Jura £8,750 (grant funding) Development Trust) Spey Bay Reserve and Wildlife Centre Ranger £7,000 (grant funding) project officer costs Orkney Marine Education Initiative £1,000 (grant funding) Tarbert Harbour Environmental £12,500 (grant funding) separate from Improvement Scheme pontoon investment Welcoming Anchorages (British Marine £5,000 (grant funding) Federation) Fortrose Bay Trout Moorings (Chanonry £10,000 (grant funding) Sailing club)

9 RAE/S3/08/18/10 Agenda item 3 Preparing the way for sustainable maritime £9000 (grant funding) leisure, recreation and tourism development' (Moray Firth Partnership) Port of Ness Harbour interpretation boards £3000 (grant funding) Tern Conservation in Tayside £2000 (grant funding) Gairloch Harbour Study £7,000 (grant funding) Fort William Waterfront Study £3,000 to £5,000 (grant funding)

Rural Estate

Across the Rural Estate we have continued our programme of investment in fixed equipment and improving our housing stock. Projects this year have included:

• Investment in new buildings and house renovations to allow tenants to restructure their business for future generations, including new build property to replace redundant housing.

• Investment into new, modern, farm buildings and pollution control to ensure farm units are viable for the future and fit within the requirements of modern agriculture. • Footpath and bridge improvement works across the Rural Estate, to encourage locals and visitors to safely enjoy the recreation benefits of our assets. • Residential improvements, both on farm holdings and directly let properties, including renewable energy systems.

Project Investment (approx)

New buildings £550,000 Residential Improvements, including £775,000 renewable energy and efficiency improvements Footpath and bridge improvements £50,000 Flood bank, fencing drainage improvements £100,000

In addition, we spent £250,000 on our regular programme or repair works to protect the homes and businesses of our tenants and ensure that our estate stock is maintained properly.

Urban Estate

As outlined in our Scotland Report, the our Urban Estate in Edinburgh represents over 40% of the value of The Crown Estate in Scotland and, of the three estates, is the most significant contributor to revenues.

10 RAE/S3/08/18/10 Agenda item 3

Conclusion

We have presented this report to demonstrate our continuing commitment to facilitating economic development combined with community and social contributions for the general benefit of Scotland. The activities we outline above demonstrate how the application of The Crown Estate’s values of Commercialism, Integrity and Stewardship are applied across all aspects of our work in Scotland. We can provide more detailed information on any of the areas listed in the report and we would be happy to meet with members of the Committee to discuss any of the issues raised further.

11 RAE/S3/08/18/10 Agenda item 3

ANNEXE B: First Annual Scottish report of the Crown Estate Commissioners The Crown Estate has also published its Scottish supplement to its annual report. The 2008 Scotland report and associated press release is available online at: http://www.thecrownestate.co.uk/newscontent/92-2008-scotland-report.htm

12 RAE/S3/08/18/10 Agenda item 3

ANNEXE C: Minute of first meeting of Commissioners’ Scottish Liaison Group

The Crown Estate Scottish Liaison Group As you will recall when we appeared at Rural Affairs and Environment Committee in October last year we indicated that we would be setting up a Scottish Liaison Group to strengthen communication with our Scottish stakeholders. I am pleased to report that this group first met on 12 June 2008 and I enclose some notes of the meeting, which includes a list of participants. We are pleased with the spread of representation and believe that the group will play an important role in further improving co-operation and exploring opportunities for joint working. A second meeting will take place on 18 September 2008. I hope that you find these notes helpful. If you have any questions or would like further information, please do not hesitate to contact me. Dalhousie Castle, June 12 2008 Introduction: Ian Grant welcomed all attendees and thanked them for agreeing to join the group before outlining how the group had been brought about, following engagement with the Rural Affairs and Environment Committee, and the objectives going forward. It was agreed that at this initial point the group were establishing how The Crown Estate impacted on the areas of the business that they were involved in and work areas would continue to be developed throughout the life of the group. Three meetings per year to look at the strategic work of the Estate were proposed and, where practicable, a site -visit should be included on one of the meeting dates. The group were given an outline of The Crown Estate and its work across Scotland, Alasdair Rankin and Alan Laidlaw presented details of the Scottish Estate assets and the work carried out in the three principle areas Marine, Urban and Rural and how they are managed under the three core values of The Crown Estate: commercialism, integrity and stewardship within the bounds of The Crown Estate Act 1961. The structure of the Scottish team and the Bells Brae office was outlined as well as the role of managing agent firms. Each participant outlined their role and then went on, through informal discussion, to input any points that they saw relevant to The Crown Estate in Scotland and that they wished to see covered by the group in the future.

Marine: Cooperation of bodies relating to fish farming licensing, increased communication and standardisation of referencing was suggested; Renewable energy, role of The Crown Estate as facilitator and possible investor; The Crown Estate to increase engagement with communities and local groups; Marine research & development; Update on Marine Stewardship Fund investments;

13 RAE/S3/08/18/10 Agenda item 3 The Crown Estate role in renewable energy targets; Marine bio fuel is an area that should be considered by The Crown Estate; On offshore wind development, it is important for The Crown Estate to manage the issues and concerns of vested marine interests; Planning regimes of devolved and reserved Governments need to work better together;

Rural: New entrants, work undertaken to assist new entrants, while balancing the needs of existing tenants; Possible provision of starter units and the issues with gaining vacant possession to allow releting. Tenant Farming Forum outcomes; Environmental work programmes and influencing tenants The promotion of salmon river fishing should be increased and The Crown Estate could assist with exploring ideas to improve access to river fisheries; Community involvement and engagement 2003 Agricultural Holdings Act. Local food and food security. Urban: Scale of interests and 50% of Scottish income produced. General: Improved communication to stakeholders. Annual Reporting Explanation of the role of The Crown Estate and restrictions on what the organisation is able to do within The Crown Estate Act 1961. Working with the Scottish Government, Five key objectives and their delivery.

Whitehill: A tour of the Whitehill estate, around Rosewell Midlothian was provided, looking at the variety of land use issues that are currently evident on the estate at present. This included, succession planning with tenant farmers, residential development, community engagement, woodland management and open cast coal extraction and restoration

Date of Next meeting: 18 September 2008. Central Edinburgh (venue tbc) Topics to be covered in detail: • Cooperation between bodies involved in fish farm agreements. • The Crown Estate role in the energy debate. • New entrants to agriculture, including Tenant Farming Forum outcomes. A web accessed portal for future management papers is being created at present. This will be available for the September meeting. Expenses: Forms to be submitted to Alan Laidlaw. Attendees:

14 RAE/S3/08/18/10 Agenda item 3 Ian Grant, Chairman and Scottish Commissioner Alan Laidlaw, Head of Edinburgh Office Alasdair Rankin, Head of Marine Business Development Alex Adrian, Offshore operations Manager, Scotland. Kathy Cameron, Cosla Cllr Drew Hendry Jim Mclaren, NFUS President Angus McCall, STFA Hugh Donaldson, Scottish Crofters Foundation Andrew Wallace, RAFTS Steve Hunt, FWAG Scotland Bertie Armstrong, Fishermans Federation Phil Thomas, SSPO Walter Spiers, Shellfish growers Capt Nigel Mills, BPA Emund Brookes, Chamber of Shipping Capt Jim Simpson, SCF Mike Balmforth, British Marine Federation & RYA Ron Picken, Anglers Association Richard Slaski, Scot Aquaculture Producers David Cameron, Scottish Renewables Dr Ken Jones, SAMS Drew McFarlane Slack, SRPBA Mike Neilson, Scottish Government (observer)

The Crown Estate 19 August 2008

The Crown Estate has also published its Scottish supplement to its annual report. The 2008 Scotland report and associated press release is available online at: http://www.thecrownestate.co.uk/newscontent/92-2008-scotland-report.htm

15 RAE/S3/08/18/10 Agenda item 3

ANNEXE D: CORRESPONDENCE FROM MICHAEL FOXLEY, LEADER OF HIGHLAND COUNCIL ON BEHALF OF THE CERWG PARTNERS

The Crown Estate Review Working Group Partners are very pleased to have the opportunity to comment further to the Committee on the Crown Estate in Scotland. You will recall that these partners consist of the six local authorities that cover the Highlands and Islands and Highlands and Island Enterprise.

The management of the property rights and interests that make up the Crown Estate in Scotland remains a major issue for the CERWG Partners and they continue to promote the findings of the CERWG Report to try and secure more appropriate levels of accountability and benefits in Scotland.

In the year since CERWG representatives appeared before the Committee on this topic, they have had encouraging meetings about the Report with Ministers in the Scotland Office and Scottish Government. They have also raised the issues in a number of other contexts, including individual partners seeking local improvements in their own contact with representatives of the Crown Estate Commissioners (CEC).

The continuing importance of this issue to Highland Council, for example, is reflected in the Council’s Declaration about the CERWG Report which was endorsed by the full Membership this summer. Other H&I local authorities are expected to make similar declarations shortly. This political consensus on the need for improvements is also demonstrated by Highland Council’s Cross Party Group that is responsible for the topic.

The CERWG Partners have been extremely grateful for the interest that the Rural Affairs and Environment Committee (RAEC) has taken in the CERWG Report and its findings. As a direct result of that interest there have been, for example: − significant improvements in accountability with the CEC committing itself to reporting annually to the Scottish Parliament, establishing a Scottish Liaison Group and producing their first Scotland Report; − some increases in local benefits with the CEC starting to invest in harbours and being more willing to discuss changes to leasing arrangements.

Each of those issues was raised in the CERWG Report, but the actual changes only resulted from the Committee taking an interest in the Report. The CERWG Partners urge the Committee to maintain its interest “in the main points raised by the CERWG Report” and note the follow points on the three aspects of the topic currently being considered by the Committee

16 RAE/S3/08/18/10 Agenda item 3 1. Legal Advice

The CERWG Partners would be very interested to see the Legal Advice that the Committee has received given their detailed interest and the confusion that often exists on this topic. The CERWG obtained their own legal advice when producing the Report and both Governments have confirmed to CERWG Partners that they accept the accuracy of the Report.

2. Annual Report

The CERWG Partners firmly believe that the RAEC can continue to make a very valuable contribution to improving the level of accountability in Scotland over the management of the property rights and interest that make up the Crown Estate in Scotland.

CERWG Partners hope that the Committee will see the CEC Scotland Annual Report that it now considers within the context of changes over recent years in the CEC’s annual reporting on its operations in Scotland. The Committee may recall from the CERWG Report that the CEC reported separately on Scotland in each of its Annual Reports from their first one in 1956 to 2001. The CEC then stopped reporting on Scotland when the CEC ended its management of the Crown Estate in Scotland as a distinct unit of the UK wide Estate in 2002. The changes since have been:

2002/03 no report 2003/04 no report 2004/05 Scotland - Financial Highlights (2 sides) 2005/06 Scotland - Financial Highlights (2 sides) 2006/07 Scottish Supplement (13 pages) 2007/08 Scotland Report (25 pages)

The re-introduction of some reporting on Scotland in 2004/05 was the direct result of the intervention of the CERWG at the time of its establishment (Report page79, para.14). The CERWG Partners have welcomed each improvement since then, including the doubling of the length of the 2006/07 Supplement into this year’s first free standing annual report on the CEC’s operations in Scotland.

The CERWG Partners strongly believe this progressive trend should continue with improvements to the contents of the CEC’s Scotland Report next year.

CERWG Partners would be pleased to provide the RAEC with a list of the improvements that they consider would be helpful. In this letter at short notice, CERWG Partners just give three simple examples:

(a) Table of Property Rights and Interests An important contribution by the CERWG Report was to clarify for the first time the property rights and interests managed by the CEC in Scotland. The accuracy of the list in Table 1 of the Report was confirmed by the

17 RAE/S3/08/18/10 Agenda item 3 CEC in its written submissions to the Committee last December. CERWG believe that public understanding and accountability would benefits from the CEC including a list in its Scotland Report each year of the property rights and interests that the CEC manages in Scotland.

(b) Report on Each Type of Property Interest The CERWG Partners also believe that its would be very helpful if the CEC’s annual Scotland Report reported on each of the types of property interests that the CEC are responsible for in Scotland. An example of an important topic not covered in this year’s Report is the Crown’s freshwater salmon fishing rights. This is an important resource involving over 60 rivers and well over 100 leased beats, including over a third of them to public angling associations (CERWG Report Annex 13). This is a sector of the CEC’s activities in Scotland that is of public interest and which could be appropriately reported on in the CEC’s Reports.

(c) Marine Statistics The CERWG Partners have a particular interest in the CEC’s marine management, given the very high proportion of Scotland’s marine resources that are associated with the Highlands and Islands. The CERWG Partners believe that the information in the CEC’s Scotland Report next year and subsequently should included significantly greater detail on their marine operations. They would be pleased to indicate the types of information that would be helpful. However, an example at this stage is that the level of detail for Scotland in the CEC’s Scotland Report could be brought up to the more detailed breakdown of the CEC’s marine activities and associated income and expenditure at a UK level that is already provided in the CEC’s UK Annual Reports.

The CERWG Partners hope that when the RAEC considers the CEC’s Report on 8th October, the Committee will recognise that useful improvements could be made to the CEC’s Scotland Report and will invite the CERWG Partners to list more fully points that might be covered.

The CEC has shown itself willing to make improvements as illustrated by the two bullet points near the start of this letter. Now that the CEC is reporting annually to the Scottish Parliament through the RAEC, CERWG Partners believe that the RAEC is a vital channel for proposals such as those above to be put to the CEC.

3. The Next Stage

The recent email from the RAEC Clerk that provided CERWG with the opportunity to make this submission, noted that the Committee will also be deciding on the 8th October “what further work to take in relation to its scrutiny of the management of the Crown Estate in Scotland.”.

In asking the RAEC to maintain and follow up its existing interest in the topic, CERWG Partners hope the Committee:-

18 RAE/S3/08/18/10 Agenda item 3 − will recall the status of the CERWG Partners as a group of public bodies that represents a significant constituency of interests and which continues to work together at the highest level because of the importance they attach to issues over the Crown Estate in Scotland.. − will recognise the improvements in the situation that have resulted over the last year from the RAEC’s decision to investigate the main points raised by the CERWG Report; − will note that these improvements so far are all points raised in the CERWG Report (e.g. the CEC reporting to the Scottish Parliament, producing a separate annual report, establishing an advisory group, starting to invest in harbour improvements).

CERWG Partners have a number of other points from the CERWG Report that they would be grateful to make to the RAEC in the hope that the Committee might raise them with the CEC whether by correspondence or in session.

CERWG would be pleased to send a submission on these points. They principally relate to: − further issues to do with the level of accountability, including matters about the remit, authority and future of the CEC’s Scottish Commissioner and Scottish Committee; − matters about the CEC’s marine operations, including topics connected to the Scottish Marine Bill, marine renewables, community benefits, harbours and the CEC’s offer to the RAEC last year of a review of their marine management arrangements in Scotland.

These matters are all topics where CERWG partners believe interest from the RAEC could produce improvements. The Committee may recall that the CERWG Report set out the three levels at which the accountability and benefits could be improved in Scotland (within the current arrangements, partial or full devolution). Both Governments have informed the CERWG Partners that they are watching to see how the CEC improves its performance within the current arrangements and CERWG Partners believe the RAEC can play a very valuable role in that context.

CERWG Partners hope that, while RAEC has many topics to consider, the Committee will at least maintain its existing level of interest and thus, for example, repeat its approach over the last year – taking a round of evidence and enabling a situation where the CEC might make further improvements before it reports again next year.

Please do not hesitate to contact me now or later if CERWG Partners might be able provide further information to the Committee.

Councillor Michael Foxley Leader of the Administration 3 October 2008

19 RAE/S3/08/18/10 Agenda item 3

ANNEXE E: CORRESPONDENCE FROM MR I MACINTYRE

Report by the Crown Estate Review Group Dear Sir or Madam, The report submitted by the Crown Estate Review Group to the Scottish Government, recommends that Statutory Harbour Authorities be granted title to the sea, bed within their respective harbour limits. During the years which I served as a Trustee and Chairman of Tarbert Harbour Authority, the Crown Commissioners made several claims and rental demands for use of foreshore and seabed. This was despite the Harbour title map clearly showing foreshore to be in the ownership of the Authority. Considerable legal research had to be undertaken to establish sufficient evidence to satisfy the Crown officials. I am aware that offers of investment have recently been received by several Harbour Authorities. Tarbert Harbour Trustees have accepted an offer for the installation of additional pontoon facilities. The terms for the repayment of the loan have not been discussed with the Harbour Consultation Group on which I am the Community Council representative. In my opinion the present change of attitude is merely designed to deflect the criticisms of their past activities. The enclosed “catalogue” formed my submission to the Crown Estate Review Group whilst I was Chairman of Tarbert Harbour Authority. I would draw your attention in particular to the claim by the Crown in the draft summons of November 1999, that Tarbert Harbour Authority had “no right, title, interest or power, to occupy seabed or sea over it” This is a total contradiction of the Tarbert (Loch Fyne) Harbour Act of 1912. The summons was issued subsequent to prolonged correspondence with Commissioner Ian Grant. As a result of my experience in dealings with the Crown Estate, I fully endorse the C.E.R.Gp. recommendation that Harbour Authorities be granted title to seabed within their respective areas. Should you wish any clarification or further information on these issues I will be pleased to assist.

Mr I MacIntyre 23 July 2008

TARBERT (Loch Fyne) HARBOUR AUTHORITY This collection of comments and extracts from legal cases and other documents was compiled on behalf of Tarbert Harbour Authority, by Ian Y. Macintyre. From the book “Tarbert Past and Present”- Dugald Mitchell 1886, In 1864 “There was no adequate jetty at Tarbert.” Passengers from the P.S. lona were put ashore by ferry. It was probably shortly after this that the “concrete” pier was built along with Glendarroch as a pier house for the harbourmaster. This pier was washed away in a storm before it came into use.

20 RAE/S3/08/18/10 Agenda item 3 An article in the Argyllshire Advertiser August 6 1908 headed “The Pier (TARBERT)” records Mr. Winston Churchill as reporting in the House of Commons on information received by the President of the Board of Trade, from the Scottish Office. “The pier in question has been let for a considerable time past by the Campbell of Stonefield. The lease expired in May last when the property was again advertised and the offer of the former lessee accepted. Owing however to a difficulty which arose between Mr. Campbell and his tenant the former decided to make the Pier free to the Public, and he is carrying out certain repairs.” The pier in question was probably the East (steamer) pier This was constructed after 1864 and stands partly on sea bed as do the ruins of the earlier “concrete” pier. The above article indicates that the pier was built by Campbell of Stonefield as landowner (under the authority of the 1708 Harbour Act). Inference can be drawn from this that the landowner also had the right to make use of the sea bed In March 1998 Jim Wallace as M. P. at Westminster for Orkney & Shetland sought leave to bring in a “Bill” to require the Crown Estate Commissioners to exercise their functions with due regard to the non commercial interests of local communities. Mr. Wallace referred to a legal challenge based on Udal Law, regarding the Crown Estate legal title to the sea bed. The Court of Session failed to support the claim. Mr. Wallace also referred to the additional costs inflicted on Community Marinas who had to compete with Commercial Marinas which in some cases were not required to pay Crown charges. Fragile Ferry services often have to bear Crown rental charges for slipways and terminals. George Lyon M. S. P. for Argyll & Bute stated in July 2001 that “It is unfortunate that the power of the Crown Estate remains at Westminster, rather than being devolved to The Scottish Parliament”. He criticised the fact that “The Commissioners impose a “rental charge” on Tarbert Harbour Authority for the use of “their” sea bed, within its own harbour area”.

Question of Seabed Ownership Chapter 15 of Rankine on Land Ownership refers to the very high authority of Lord Chief Justice Cockbum who said that “below low- water mark the bed of the sea might be said to be unappropriated and if capable of being appropriated would become the property of the first occupier.”

Lord Cockburn in the case of Magistrates of Campbeltown V Galbreath (1884) gave the opinion that “ as at present advised, I think that, under the Charter it is competent for the Pursuers to erect harbours wherever they please upon their own ground within the lake.”

Lord Medwyn in the same case, referring to the grant of free port to the Magistrates of Campbeltown by the Crown, states “if there be any ambiguity in its terms, or doubt about its extent, this can be explained by possession of the grantee, and aquiescence on the part of the public That such grants may be construed by possession is unquestionable and is well illustrated.”

21 RAE/S3/08/18/10 Agenda item 3

Counsel for the C.E.C. in the “Fairlie” case, clearly made this point when he argued that whilst “a town charter of 1601 granted a right of harbour to Robert Fairlie, there were no averments that a port ever existed at Fairlie. The charter neither defined the physical area nor imposed dues - an essential ingredient of a port. Where the terms of a grant were ambiguous possession could define its limits. The defenders had not sufficiently averred usage of the port by lieges and travellers however.”

Lord Cameron commented “In particular what is meant by the words ‘Fairlie Road’. From the averments made it is impossible to discern what use if any was ever made of the benefits conferred by the charter far less what are identifiable today as the limits of the grant of 1601. He continued to report “Harbour authorities no doubt may and do lay such (fixed) moorings and according to such powers as they may possess by statute or otherwise permit (and charge for) their use by the owners of ships or vessels.” Quoting from Craig: Jus Feudale 1.15 3 Lord Cameron notes that “seaports are handed over to Burghs and corporate bodies with power to improve, build, clean, equip, and provide them with conveniences for shipping.” A fixed mooring may well be regarded as a “convenience for shipping.”

Lord Dunpark commented “As the Crown may convey parts of the foreshore to individuals, I see no good reason why the Crown’s right to the solum of the seabed should not encompass the right to convey or lease the solum to an individual if it is thought fit.” He refers to numerous other judgements, which do not contradict the suggestion that the right of port and harbour includes seabed title. Lord President (Emslie) commented “The seabed underlying territorial waters is like the foreshore vested in the Crown and the rights of the Crown therein are patrimonial rights i.e. rights of property. It follows that the Crown may alienate its rights by grant to a subject. Fairlie Yacht Slip Ltd. did not produce the 1601 charter itself but an extract therefrom -. From that extract and from the defenders averments all that can be said of the physical extent of the grant is that it was a port called “Fairlie Roads”. In such circumstances there is clearly doubt as to the boundaries of the grant. This doubt could be dispelled by proof of possession by the grantee and of acquiescence. He further referred to “the many examples of Crown grants in seabed and foreshore ----- including grants of harbour”. M/s S. Harvey in a letter of 5th March’98 asserted that the case of C.E.C. V Fairlie Yacht Slip Co. Ltd. confirmed the right of the Crown to charge for moorings fixed to the seabed. The Fairlie Co. argued that a mooring was required as an act of navigation, and were unable to substantiate a claim to a right of Port and Harbour. The situation found in Tarbert Harbour is not comparable to that of Fairlie. Extract of an Instrument of Sasine in favour of The Provost, Baillie and others of the Burgh of Inveraray dated 18 Nov. 1648. “Having a precept of Sasine from the Chancellary of our Sovereign, Lord King Charles giving and conferring heritable sasine to his sheriff and baillies of

22 RAE/S3/08/18/10 Agenda item 3 Argyll, all and whole the Burgh of Inveraray, with all and singular liberties, privileges, jurisdictions and others underwritten. With power of carrying on trade within our kingdom--of exporting and importing, of having ships, barks, and boats with sailors and regulating coquettes. We have given and disponed to the said provost, baillies council and community of our said burgh, and theft successors the whole minor customs of our fairs and markets, with the dues of anchorages and tolls of roads and harbours for ships for theft own use to be applied for the good and benefit of our said burgh. It is understood that the Isle of Whithorn used the following document successfully to counter the G.E.C. attempt to impose charges.

Extract from the Records of the Scottish Parliament, anent Confirmation of the charters of the Burgh of Whithorn 1663. At Edinburgh the nynth of October the year of God, Ane thousand sex hundreth thrie score three zeires, our sovereign Lord --- approves and confirmed --- all and sundry chartoures acts Ratificationes, and uther rights made and granted by whatsoever kings or queens of Scotland - speciallie without prejudice to the charter of confirmation grantit be h. mjt. King James the fourth at Edinburgh first day of May ane thousand five hundred and eleven zeires Together also with the ratifications of the same made and granted be h. mgt. King James the Fith of blessed memorie, twentie seventh day of July Fajv eighteen Zeires, the said Charter of confirmatioune of now erected and created the said burgh of Quhithorne, with all lands tenements --- and outsets built --- theirin, together with the shoar or seaport of the sameyn called the Isle of Quhithorne which they have possest beyond all memory of man in ane frie burgh royall, Me harboure and shoar within all the bounds used and wont. And hes givene, granted and disponed to the Provost baillies and counsell of the said burgh and their successors for ever all and sundry lands tenements crofts --etc-- which pertained to the said burgh of Quhithorne ---Together with all and sundrie pettie customis of the said port shoar of Quhithome and with the anchorages and dockmaill and uther casualities belonging to the said frie port.

Lord Irvine of Lairg Q.C. (whilst in private practice) has viewed the 1708 and 1912 Acts governing the erection and maintenance of Tarbert (Loch Fyne) Harbour. He makes the following comment----”the question arises whether the Trustees or their predecessors have nevertheless by their long use and occupation of the harbour gained title to the seabed i.e. aquisition of title by prescription. That there has been long use and occupation of Tarbert Harbour by the Trustees and their predecessors is indisputable. From time immemorial Tarbert ‘s harbour has been used for the safe anchoring of ships, the landing of fish and the transport of goods. Tarbert is accepted as having been a Royal Burgh as early as 1328. At that time the Exchequer Roll of Scotland shows a charge of seven shillings and eightpence for the “making a coket for the Burgh of Tarbert” to be used in connection with a custom levy on goods exported through the port of Tarbert.

23 RAE/S3/08/18/10 Agenda item 3 The Queen Anne Act of 1708 Confirms long use and states, “Whereas there may be a nessary and convenient harbour or key at East Tarbett in the shire of Argyle for ships hoys vessells barkes or boats useing the fishing trade and other vessells and boats to anchor, in be it enacted by the Queen’s most excellent Majesty ------that it shall and may be lawful to and for Archibald MackAlaster Esquire (proprietor of the soyle of East Tarbett aforesaid) his heirs and assignes to erect and make or cause to be erected or made a Harbour or Key in East Tarbett aforesaid to extend from the point of Garvall on the North to the Okenhead to the South and such wharfes and buildings as shall be thought necessary----- to be always one for the anchoring of all Ships Vessels Barkes Hoyes and Boates which shall come into the same, and for the laying any fish or other goods and merchandizes ------AND BE IT FURTHER ENACTED that for the makeing and keeping in good and sufficient repair the said harbour and key and wharfes thereunto belonging it shall and may be lawfull for the said Archibald MackAlaster his heirs and assignes ------to ask demand take and receive of and from all and every person, persons, Master or Masters of any Shipp ---etc.--- which shall come into and anchor within the extent of the sayd Harbour or Key the respective sume or sumes of money hereinafter mentioned. Tarbert (Loch Fyne) Harbour Order 1912. For incorporating Trustees for the Harbour of Tarbert (Loch Fyne) in the County of Argyll and vesting the Harbour in them and for the maintenance and regulation of the Harbour. Section 18 The limits within which the Trustees shall have authority and within which the powers of the harbour master and the power to levy rates may be exercised shall comprise the loch called East Loch Tarbert from the point of Garvall on the north to the Okenhead or Rudha Loisgste point on the south. Section 48 The revenue received by the Trustees from rates and dues --- shall be applied by the Trustees in the improvement of the harbour and the works. (See Counsel for C.E.C. in Fairlie case) The above Act also contains the following provisions, Section 15(1) All rights powers and authorities conferred by the Act of 1708 and at the date of transfer vested in the proprietor shall be transferred to and vested in the Trustees. (see opinion of Lord Irvine) Section 19(1) Subject to the provisions of this order the Trustees may maintain and from time to time with the consent of the Board of Trade, construct, alter, improve, enlarge and extend the works and may in connection with the Harbour construct maintain alter improve and enlarge embankments, landing places pier quays jetties slips wharves beaches for hauling boats buoys moorings and other works and conveniences which may be found necessary for the accommodation of vessels and traffic .(see Lord Cameron)

24 RAE/S3/08/18/10 Agenda item 3 Section 21(1) The Trustees may deepen dredge scour and excavate any portion of the foreshore and bed of the sea to the extent necessary to secure a sufficient waterway within the limits of this Order to the works for vessels using the same. (2) All sand and mud and other materials dredged up or removed shall be the property of the Trustees, and they may sell or otherwise dispose of or remove or deposit the same as they think fit (3) All monies arising from any sale or other disposition of sand and other materials under this section after payment of expenses connected therewith shall be applied in the same manner as the revenue received from rates under this order is to be applied.(see Lords Dunpark and Emslie) In August 1995 Duncan M. Clark (then Solicitor for C.E.C.) in a letter to Tarbert Harbour Authority claimed that the Crown Savings Clause 61 in the 1912 Act, overrides the terms of Clause 21, so that if the Harbour Authority sold or otherwise beneficially used dredged material, the Crown Estate could charge a royalty. In February 1997, Mr. J.E. Drummond Young Q.C. (whose opinion has been accepted by the C.E.C. on other matters) stated that “Section 21 gives the Trustees power to dredge - no doubt dredging involves interference with the seabed and hence the Crown’s rights but it is specifically authorised by the Act and thus must be permissible.” The Trustees “do not require permission for dredging operations.” In 1998 the Crown Estate Office (without any reference to Tarbert Harbour Trustees ) entered into an agreement with a non-statutory body, “Tarbert (Loch Fyne) Mooring and Berth-Holders Association”, purporting to give them rights to allocate space within Tarbert Harbour. This group has at no time been prepared to divulge details of membership numbers to the Harbour Authority. A spokesperson for the Crown Estate claimed that the aim was to have the use of Crown Estate property appropriately regulated. In May of that year Christopher Howes (Chief Exec. And Second Commissioner of the Crown Estate) wrote in a letter to Mrs. Ray Michie “The Crown Estate has indeed granted licences to third parties in respect of moorings laid in Tarbert Harbour. These licences relate solely to occupation or use of the seabed within the Harbour, which is the property of the Crown Estate under the management of the Commissioners-”

In the draft summons issued in November 1999 in the Court of Session, against Tarbert Harbour Authority the C.E.C. claimed the sole and exclusive right to permit the laying of fixed moorings - the sole and exclusive right to permit the positioning, moving or erection of any floating pontoon, berthing structure over any part of the seabed area and further that the Tarbert Harbour Trustees have no right, title, interest, or power to occupy those subjects of seabed and sea over it.

This is a clear contradiction of the powers granted to the Trustees by the 1708 and 1912 Harbour Acts. These Acts placer a statutory duty on the Trustees to regulate and maintain the Harbour. Through their appointed

25 RAE/S3/08/18/10 Agenda item 3 Harbourmaster they are responsible for the control and safety of all shipping within the harbour limits. In the case of Ipswich Borough Council v Moore and Duke, the Hon. Mr. Justice Lloyd, comments that “it would be inconsistent with the authority conferred on Ipswich port Authority, if Ipswich Borough Council were to have a separate power to grant or withhold consent to the laying of moorings generally. This “Minute of Agreement” was regarded as a serious infringement of Trustees’ rights as the regulators of the Harbour at East Loch Tarbert. The 1912 Harbour Act clearly places the responsibility for the management and regulation of moorings and other harbour operations with the T.H.A. Trustees. The 1708 and 1912 Harbour Acts specify that the Harbour Authority may “provide such conveniences for ships as are considered necessary”. The Trustees have promoted the introduction of pontoons and additional facilities to Tarbert Harbour for the benefit of all Harbour users. All of the Harbour income is dedicated (as stipulated in the 1708 & 1912 Acts) to investment in the maintenance and improvement of the Harbour. Neither of the Acts make provision that the Authority requires to make any payment to the Crown for use of the seabed. Use of seabed (including the provision of moorings) has been exercised for centuries by this Authority and its predecessors. We are advised by counsel that title to the seabed may thus have been acquired by prescription. Counsel has further advised that were the Authority obliged to negotiate a rent, their position as the exclusive regulator of navigation and mooring make them a “monopoly purchaser”. Harbour Authority Minutes 23 October 1992 Confirmation was received from Solicitors acting for Argyll Estates that in the mid- 1800s the lands of Tarbert comprised a Barony. In 1885 a Disposition by the Commissioners of Woods to C. G. Campbell (of salmon fishing in Loch Fyne) together with the 1893 Disposition to C.G P. Campbell, was capable of carrying a title to the whole of the foreshore round East Loch Tarbert. It also established that the two quays shown on the plan annexed to the 1885 Disposition by the Commissioners of Woods on the South side of East Loch Tarbert were built so far as they are on foreshore without the consent of any of the Crown Estate Commissioners statutory predecessors. These piers would also of necessity be constructed partly on sea bed. The Scottish Law Commission in 2003, following a consultation process, issued a report on the Law of the foreshore and sea bed. With respect to harbours views had been invited on whether it would be usefbl to clarify that “in the absence of an express statement to the contrary, the grant of a right of port and harbour does not include a conveyance of the sea bed of the harbour.” The report states “There was a mixed response to this question. Many consultees, mainly representing port and harbour authorities, opposed our proposed statement because they were opposed to the policy behind the existing law. It was suggested to us that clarifying the legal position would not

26 RAE/S3/08/18/10 Agenda item 3 help ports that fd the current relationship with the Crown as owner of the sea bed inflexible and potentially detrimental to their development. There is a general view that it is anomalous that a port authority has no absolute right of control over the sea bed and moorings within the area for which it is administratively responsible.” The report continued “the commercial policies applied in the management of the foreshore and sea bed fall outwith the scope of our remit. We do not wish to make any changes to the present law.” The above comments and document extracts would suggest that Statutory Harbour Authorities do have the right to unhindered use the sea bed within their areas of responsibility. The Crown Estate Commissioners have over a number of years insinuated their claim to make charges against these authorities, often employing the tactic of “might is right.”

Regrettably, The Scottish Law Commission did not take the opportunity to rectify this anomalous situation, as part of its recent review.

The Crown Estate Review Working Group, comprises representatives of several Local Authorities, and seeks to transfer the control of sea bed round Scotland to the Scottish Executive. This provides an opportunity for Harbour Authorities to lobby their respective M.S.P’s to have their current unsatisfactory situation resolved.

27 RAE/S3/08/18/10 Agenda item 3

ANNEXE F: CORRESPONDENCE FROM MR H WHITELAW: KINGS PARK COMMUNITY COUNCIL

Kings Park, Stirling

I write in my capacity as Chair of Kings Park Community Council in Stirling. We understand that in early October you will be considering matters relating to the Crown Estate in Scotland

In recent years we have become increasingly concerned over proposals to sell parts of the Kings Park, an ancient Royal park which is of enormous historical and cultural importance at local and national level. The story of this Park is related in some detail in the Crown Estate Review Working Group’s 2006 report, The Crown Estate in Scotland, New Opportunities for Public Benefit.

Following earlier attempts by the Crown Estate to sell off a large portion of the Park into private hands, we still remain somewhat in the dark about its future. Stirling Council and the Crown Estate Commission have jointly developed proposals for a transfer of land but there has been no meaningful public consultation about these plans. We continue to have concerns about the fragmentation and disposal of the Nationally important part of Scotland’s heritage.

Rather surprisingly, none of this is mentioned in the Crown Estate’s Scotland 2008 working report which was published earlier this year.

Perhaps the Committee might consider whether, as it continues to examine the work of Crown Estate in Scotland, it might take a look at this issue and whether or not the Crown Estate are behaving in the open and accountable manner which they claim in their report.

Mr H.M Whitelaw Chair, Kings Park Community Council 29 September 2008

28 RAE/S3/08/18/11 Agenda Item 4 RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

PETITION PE749 – SPREADING OF SEWAGE SLUDGE

Note by the Clerk

Introduction 1. This petition was lodged on 9 June 2004 by Geoffrey Kolbe on behalf of Newcastleton and District Community Council. In November 2005 Brian Stenhouse was co-opted onto the council to oversee the petition.

2. The petition calls on the Scottish Parliament to seek a moratorium on the spreading of sewage sludge pending a full inquiry into its safety by a parliamentary committee and, depending on the outcome of that inquiry, to as a minimum, initiate legislation at the earliest opportunity to discontinue the current exemptions of spreading sewage sludge and to ensure that it is subject to planning control, including a public local enquiry.

Consideration to date 3. The petition was initially considered by the Public Petitions Committee (PPC) between June 2004 and October 2005. This included written evidence being invited from SEPA, Scottish Water and the Scottish Executive, and responses being invited from the petitioner. Copies of all of this correspondence are available from the clerks on request.

4. In October 2005, the petition was referred to the Environment and Rural Development (ERD) and Communities Committees. The Communities Committee decided to take no further action on the petition in December 2005 on the basis that it would take the issues raised in the petition into account within its consideration of the Planning (Scotland) Bill. The Communities Committee did not choose to include any recommendation in its Stage 1 report to introduce provisions for planning consent as requested by the petitioner, and Members did not lodge amendments to this end to the Bill.

5. On 16 November 2005 the ERD Committee agreed to defer detailed consideration of the petition until Scottish Water had published its sewage sludge disposal strategy, a draft of which was being consulted on. Correspondence from Scottish Water at that time indicated that the Strategy was due for publication in 2006.

6. In the absence of the Strategy by the end of the second session, the petition was referred back to the PPC for re-allocation in the third session. The Rural Affairs and Environment (RAE) Committee considered the petition on 19 September 2007, and agreed to await publication of Scottish Water’s National Sludge Strategy and to write to Scottish Water flagging up its concerns over the long lead-in time for the Strategy’s publication.

7. The Strategy was published on 13 May 2008 and a copy of the Executive Summary and also the Summary and Outcomes section of the Strategic

RAE/S3/08/18/11 Agenda Item 4 Environmental Assessment (SEA) of the Strategy is at Annexe A, pages 5 to 16, with the SEA extract being on pages 17 to 32. The Strategy and SEA are available in full in hard copy from the clerks on request and some of the key points from the strategy are summarised later in this paper.

Concerns raised by the petitioner 8. The petitioner is concerned that a contractor (Portcullis Ltd) has spread sewage sludge from Scottish Water facilities on a forestry site at Hewisbridge, 8km from the village of Newcastleton in the Borders, for the purpose of land improvement and restocking. Lorries containing the sludge passed through Newcastleton. The petitioner states that local residents had no warning of, and were not consulted about, this activity. In the course of consideration of the petition, similar concerns have been raised by other local communities. Concerns raised by the petitioner in the course of correspondence and spoken evidence appear to centre around the following themes:

• the sludge may not be sufficiently treated to remove any health danger from bacteria, and groundwater sources may be contaminated; • if the activity was subject to planning controls there would be a formal requirement for the local community to be informed and consulted; and • monitoring of the activities by SEPA may not be sufficiently robust.

9. A copy of the National Sludge Strategy and the accompanying Strategic Environmental Assessment were sent to the petitioner on 28 July 2008. The petitioner responded stating that the Community Council ‘cannot see anything in it that changes our views on the subject’ and referring the Committee back to the Council’s summary position submitted in December 2007 (attached at Annexe B, page 33).

10. The December submission conveys the petitioner’s opinion that application to non-agricultural land such as forestry is not without risk to human health and the environment and should therefore be subject to planning consent so that adequate consultation can take place and any risk assessments submitted can be peer reviewed.

11. The petitioner’s response also questioned why Scottish Water and their contractors should be in a position to self regulate, quoting an instance where a contractor of Scottish Water was fined £7,500 after pleading guilty to disposing of untreated waste between May and October 2004.

12. The petitioner does not agree with Scottish Water’s assurances on the safety of sewage sludge and believes that an independent risk assessment should be carried out, detailing the risks for the various treatments levels of sludge.

RAE/S3/08/18/11 Agenda Item 4 Previous Parliamentary scrutiny on waste spread on land 13. During session 1 the PPC and the Transport and the Environment (T&E) Committee considered a petition from the Blairingone and Saline Action Group between 2001 and 2003. This called for legislation to be “revised to ensure that public health and the environment are not at risk from the current practice of spreading sewage sludge and other non-agriculturally derived waste on land in Scotland”. The T&E Committee reported in this issue in 2002 and the report was formally debated in October that year. The report concluded that “the current regulatory framework is inadequate. Maintaining the status quo is not acceptable.” In 2003 the PPC reported on the health issues raised by the petition. The PPC Committee then produced a report on the health issues raised by the petition in 2003.

14. In part as a result of Parliamentary scrutiny of this petition, the Waste Management Licensing Amendment (Scotland) Regulations 2003 tightened up safeguards for the use of sludge on agricultural land and in land restoration. The Waste Management Licensing Amendment (Scotland) Regulations 2004 did the same for the use of organic wastes, including sewage sludge, on non-agricultural crops such as forestry.

Existing legislation and the Safe Sludge Matrix 15. A 2006 SPICe briefing on Sludge from Wastewater Works details the legislative basis for the Scottish policy framework intended to provide safeguards in relation to the spreading of sewage sludge. This includes information on relevant EU directives, Scottish legislation and also the Code of Practice and the UK-wide voluntary agreement called the Safe Sludge Matrix which goes beyond the requirements of the Sewage Sludge Directive. A relevant extract of the briefing is attached at Annexe C, page 35.

Scottish Water National Sludge Strategy 16. Scottish Water’s National Sludge Strategy identifies the organisation’s long term strategy for the management of sludge in Scotland. This will form a framework within which Scottish Water’s investment and operational and planning decisions will be made.

17. The Strategy’s main objectives for sludge are:

• to manage Scotland’s sludge without endangering human health or harming the environment by ensuring that all regulatory and legislative controls are met; • to ensure that Scotland’s sludge is managed on behalf of customers in a cost-effective and efficient manner, ensuring potential for nuisance of transport and odour is minimised; • to establish long term, secure and sustainable outlets; • to give due regard to non-statutory Codes of Practice and industry guidance; and • to continue to use the latest available Research and Development information in formulating and implementing strategy.

RAE/S3/08/18/11 Agenda Item 4

18. Scottish Water’s strategy document explains that sludge is classed as a non-hazardous waste under European law and states that when appropriately managed it does not present a risk to the environment or human health. It goes on to say that, when treated, it can be recycled to provide a benefit to the environment with little or no odour problems.

19. The Strategy acknowledges that transport is a significant financial and environmental cost of sludge management, that the high water content represents a significant bulk to be transported, and that there is a need to strike a balance between investment in additional dewatering and optimising sludge movements. The Strategy states that “Scottish Water will continue to work extensively on the optimisation of tanker movements to reduce road mileage and associated transport emissions. This will in turn reduce potential nuisance associated with traffic movement.”

Option for action 20. Given the Committee is about to begin consideration of the Flood Risk Management (Scotland) Bill, most likely followed by a marine bill and possibly a crofting bill, there would not appear to be sufficient scope in its workload to undertake an inquiry into the petition and then instigate a committee bill in this session, as requested by the petitioner.

21. It would also need to be clarified that a Bill to change planning legislation in relation to an environmental concern would be within the remit of this Committee rather than the Local Government and Communities Committee.

22. Members may therefore wish to consider writing to the petitioner noting the previous Parliamentary scrutiny of this issue and the resulting tightening of the regulatory regime, noting that other legislative commitments mean that the Committee is not in a position to hold an inquiry and then legislate on the issues the petitioner raised. The Committee may also wish to consider whether it wishes to write to Scottish Water seeking clarification in relation to particular aspects of the strategy. If so, it is suggested that the petition be kept open until correspondence is concluded. Otherwise the Committee may wish to agree to conclude consideration of the petition.

RAE/S3/08/18/11 Agenda Item 4 ANNEXE A

Scottish Water National Sludge Strategy: Executive Summary

Background

Scottish Water is the principal water and sewerage provider for Scotland with a responsibility to supply clean, safe drinking water and to collect, treat and safely return to the environment society’s wastewater. Scottish Water is a publicly owned business with a duty to deliver all of its activities in compliance with all relevant regulations and at a cost that delivers value to the Scottish customer.

Whilst Scottish Water is the principal service provider in Scotland, several of its schemes are part of the Private Finance Initiative, with Scottish Water delivering wastewater treatment and sludge management operations, particularly for some large conurbations, through private sector partnerships. PFI sludge is considered within this document and PFI companies have been consulted throughout the production of the strategy.

Wastewater Sludge - introduction

The bulk of Scotland’s sewers are combined surface water and foul water sewerage systems, taking dirty water from domestic, trade and commercial customers and also runoff from road and roof. Collection and treatment of these wastewaters is regulated through the Urban Wastewater Treatment Directive and associated Scottish Regulations. These legislative instruments have driven extensive investment in wastewater treatment in recent years to ensure that appropriate treatment of wastewaters is delivered for the vast majority of Scotland’s population, with the remainder being small individual settlements with private septic tank arrangements.

In addition to this, trade inputs to the wastewater system have been subject to increasingly stringent, rigidly enforced trade effluent discharge consents in order to protect both the quality of the water discharged from wastewater treatment works and to maintain the quality of the residual sludge. Sewage sludge is an unavoidable by-product of the wastewater treatment process.

While the drive to improve wastewater treatment standards has led to a significant improvement in the quality of Scotland’s streams, rivers and coasts this has in turn resulted in Scotland producing more sludge. As this drive for improvement is continuing, we therefore expect Scotland’s sludge quantities to continue to increase for the foreseeable future.

Sludge is primarily the organic by-product of the biological treatment of wastewater, formed by the settlement of the breakdown products of the treatment process. Wastewater treatment works are “living systems” and sludge is the natural product of this process. It is worth stressing that sludge is not untreated faecal matter, nor is it an ‘industrial waste’. It is in fact classed as a non-hazardous waste under European law and when

RAE/S3/08/18/11 Agenda Item 4 appropriately managed does not present a risk to the environment or human health. When treated, it can be recycled to provide a benefit to the environment with little or no odour problems.

Sludge quantities are measured in tonnes dry solids - this is a theoretical measure of the quantity of sludge in the absence of water. Typically Scottish Water will manage liquid sludge at between 1% and 5% dry solids, caked sludge at 25% dry solids, and dried granules at 98% dry solids.

Scottish Water receives and treats approximately one billion litres of wastewater per day, resulting in a daily sludge production of over 40 million litres of liquid sludge at 1% dry solids.

Water Sludge - introduction

Within the water treatment processes, coagulants are added to the untreated water which assists the very fine particles of silt and peat in the untreated water to settle out. The resulting thin sludge is thickened to around 2-3% DS and then dewatered to a 20-25% DS cake by pressing or centrifuging.

Purpose of The Sludge Strategy

This National Sludge Strategy identifies Scottish Water’s long-term strategy for the management of sludge in Scotland. This will form a framework within which Scottish Water’s investment, operational and planning decisions will be made.

The strategy considers the quantities of sludge which will be produced by Scottish Water and its PFI concessionaires as a consequence of wastewater treatment and water treatment processes up to a planning horizon of 2025.

The quantities of sludge have increased in recent years through the commissioning of additional treatment works and will continue to increase in future as result of investment in further treatment facilities required by European and Scottish environmental regulatory drivers to continue to improve the quality of Scotland’s water bodies.

Scotland’s sludge production over the life of this strategy is estimated as follows:

Tonnes Dry Solids per 2005 2025 year (prior to treatment)

Wastewater Sludge 151,277 175,059

Water Treatment Sludge 31,499 39,457

RAE/S3/08/18/11 Agenda Item 4 Sludge Management Options

Wastewater sludge has a number of potential outlets and applications. These include longstanding outlets practised over many decades such as recycling as a fertiliser and soil improver to agricultural or non-agricultural land and more recent approaches such as using as a fuel in energy production. There are also disposal options such as landfill and incineration.

There are few options in Scotland for the re-use or recycling of water treatment sludge, and management options have traditionally centred on treatment within wastewater works or disposal to landfill.

In early 2005, the key outlets used for Wastewater Sludge in Scotland were: • recycling to agricultural land (approximately 23%), • land reclamation (40%) • Energy from Waste/power generation (35%) • Other (2%)

The key outlets used for water treatment sludge were:

• landfill (approximately 64%) • treatment at wastewater treatment works (36%).

Treating Wastewater Sludge

Following the wastewater process, sludge is initially abstracted as a liquid containing between 1-3% Dry Solids (DS) and is then thickened to typically 4- 5% DS for efficiency of treatment and transported to one of 34 sludge treatment centres (STC’s). Here the sludge is then further treated via mechanical, biological, chemical or thermal processes prior to recycling, as a cake or a dried product.

As a dewatered cake product, sludge can be applied to non agricultural land (land reclamation/forestry) without further treatment, provided applications are carried out according to the Waste Management Licensing regulations that protect the environment and human health. This is regulated by the Scottish Environment Protection Agency (SEPA), and SEPA require expert evidence that the application will result in ecological benefit without causing harm prior to the activity being approved.

The principal focus of regulatory standards in land application of sludge is the metal content of the sludge. The 1986 European sludge directive, transposed by the 1989 Sludge (Use in Agriculture) Regulations, sets metal limits designed to protect the quality of the soil. There are rigorous protocols that must be followed to calculate sludge application rates to ensure the continued protection of Scotland’s soils. This is of course subject to independent audit by SEPA.

RAE/S3/08/18/11 Agenda Item 4 However, applying sludge to agricultural land requires further adherence to codes of practice that prescribe minimum treatment standards for sludge. This focuses on reducing the microbiological content of sludge and establishes guidelines for safe cropping, published in the Safe Sludge Matrix. Whilst there have never been any cases of ill health associated with agricultural recycling of sludge, the water industry in the UK has developed the Safe Sludge Matrix and additional treatment standards in tandem with the food industry and farming bodies. This has ensured that risks from this practice are negligible and has served to ensure confidence in the process. The provisions of the Safe Sludge Matrix and treatment standards are expected to be made statutory during 2006, though Scottish Water and its predecessor bodies have been adhering to the standards since 1998.

Two levels of sludge treatment are defined in order to allow the recycling of sludge to agricultural land:

• Conventional treated sludge Conventional treatment is a term used to describe treatment processes which are capable of reducing the bacteria present in the original sludge and must demonstrate a 99% reduction in microbiological content. The most common form of treatment is anaerobic digestion, where sludge is digested at a temperature of 35 degrees Celsius for a minimum of 12 days, followed by a further period of maturation.

• Enhanced treated sludge Enhanced treatment is a term used to describe treatment processes which are capable of virtually eliminating any bacteria which may be present in the original sludge, and must demonstrate a 99.9999% reduction in microbiological content and that the sludge is free from Salmonella spp. These are much more energy intensive treatment processes such as drying the sludge to 98% DS, lime pasteurisation or digestion followed by heat treatment.

Enhanced treatment is generally more energy and chemical intensive (i.e. lime) process although does permit more flexibility in the terms of the cropping regime to which sludge can be recycled.

Restrictions on Sludge Outlets

A number of significant issues have arisen in recent years which have affected current outlets for sludges. These include restrictions on granting permission for the use of wastewater sludge for land reclamation projects, the ruling that the combustion of wastewater sludge at Longannet Power Station must comply with the Waste Incineration Directive and concerns about the public and market perception associated with the use of wastewater sludge on agricultural land. All of these factors are taken into account within this strategy.

RAE/S3/08/18/11 Agenda Item 4 Odour and Transport Nuisance

Scottish Water recognises that untreated wastewater sludge has a significant potential to cause odour nuisance. Sludge treatment can reduce the potential for noxious odours and stabilises the product into a cake (20-25% DS) or pellet (98% DS) form which is easier to manage. The sludge treatment processes breaks down the malodorous components of the sludge through either a biological process like digestion, or a chemical or heat treatment process like lime pasteurisation or thermal drying.

Transport is a significant financial and environmental cost of sludge management. The high water content represents a significant bulk to be transported, and there is a need to strike a balance between investment in additional dewatering and optimising sludge movements. Scottish Water will continue to work extensively on the optimisation of tanker movements to reduce road mileage and associated transport emissions. This will in turn reduce potential nuisance associated with traffic movement.

Scottish Water’s Sludge Objectives

This document presents a strategy which takes account of future sludge quantities and the current and anticipated future constraints affecting potential outlets.

Scottish Water’s strategic objectives for sludge are:

• Scottish Water will manage Scotland’s sludge without endangering human health or harming the environment by ensuring that all regulatory and legislative controls are met. • Scottish Water will ensure that Scotland’s sludge is managed on behalf of customers in a cost effective and efficient manner, ensuring potential for nuisance of transport and odour is minimised. • Scottish Water will establish long term, secure and sustainable outlets. • Scottish Water will give due regard to non statutory Codes of Practice and industry guidance. • Scottish Water will continue to use the latest available Research & Development information in formulating and implementing strategy. Review of Recycling and other Outlets for Wastewater Sludge

A range of potential outlets which have a proven track record in Scotland, the UK and Europe have been identified for consideration within this strategy.

Potential outlets have been assessed with respect to their ability to meet the criteria of providing a secure, sustainable, cost-effective solution over the life of the strategy taking into account current and anticipated legislative and operational constraints. These outlets fall under several categories from recycling through to disposal:

RAE/S3/08/18/11 Agenda Item 4

• Recycling outlet options include recycling sludge to agricultural land or non-agricultural land.

• Recovery options include recovery of the energy content of sludge in outlets such as Energy from Waste or gasification, use as a fuel in power generation or industrial manufacturing processes.

• Disposal outlets comprise principally landfill routes.

A full analysis of all the key influencing factors and implications for the National Sludge Strategy relating to the main potential outlet options are shown in chapter 3.

Based on these key influencing factors and the resulting implications for the strategy, the likelihood of each potential outlet providing a secure, sustainable, cost-effective solution has been assessed for defined operational areas within Scottish Water. The assessment areas have been selected to take into account the significant differences in geography, topography, population distribution, operational practices and contractual arrangements which exist across Scotland. The assessment Areas are shown in Fig S.1. below

Recycling of Sludge to Agricultural Land

In developing a strategy with a requirement for long term security and sustainability, it was essential to undertake an extensive assessment of the available agricultural and non-agricultural landbank in Scotland. To that end, The Scottish Agricultural College (SAC) were approached to undertake a full landbank assessment of all of Scotland, with the objective of determining both the potential landbank for sludge recycling and also to assess the likelihood that a long term recycling landbank could be recruited.

The potential for sludge application varies according to type of cropping taking place, as this will dictate both the type of sludge (e.g. conventional or enhanced treated) that could be used and also the timescales over which it could be applied (owing to cropping windows, harvest intervals etc). SAC were therefore able to determine whether a sufficient landbank existed for sludge in Scotland.

The next stage was to use SAC’s expert knowledge and prior work on farmer attitudes to sludge, to advise on the likely proportion of secure farmland in Scotland that would be available as a sludge recycling landbank. This led to the most comprehensive understanding of the long term viability of the agricultural recycling route in Scotland that has ever been developed.

RAE/S3/08/18/11 Agenda Item 4

Figure S1 – Geographical Areas

Nitrate and Phosphate Restrictions

In addition to cropping, sludge treatment and farmer acceptability, the landbank was assessed according to nutrient restrictions. Current restrictions from Nitrate Vulnerable Zone regulations limit sludge application to crop needs of between 170 and 250 Kg Nitrogen per hectare in designated areas, and recommend these limits in other land. This places restrictions on available land, as farmers will choose to apply their own manures and slurries up to the NVZ limits and this is logged in their fertiliser and manure plans.

The Scottish Executive is presently reviewing its NVZ action plan in line with the aims outlined in the Water Environment and Water Services (Scotland) Act 2003, that enacts the Water Framework Directive. This will further restrict nitrogen application.

It is accepted that further restrictions will apply to land in Scotland through additional limits placed on phosphate addition, and again much of this is

RAE/S3/08/18/11 Agenda Item 4 driven by the Water Framework directive and the need to protect surface waters from excess nutrient input. The landbank assessment has taken full account of the expected future restrictions on phosphate addition, taking as its basic figure a value of 70kg phosphate per hectare (sludge has 35kg per dry tonne), which represents the annual phosphate requirements of a crop. This restriction will impact the land availability in vulnerable areas within the next 5 years.

The result of these regulatory drivers is that there is a limited landbank for sludge in the Scottish central belt, where much of Scotland’s sludge is generated, and where there is concern over the quality of water bodies with respect to nutrient addition.

In consequence, there will not be enough land in the future to support reliance on agricultural recycling in the central belt, and there is a significant risk that without an alternative outlet (e.g. energy from waste), there will be significant competition for sludge recycling outlets both within the central belt, and by exporting central belt sludge to other areas (with attendant additional transport costs, emissions and nuisance).

Recycling of Sludge to Non-Agricultural Land

In addition to the agricultural landbank, the potential non agricultural land recycling route was extensively analysed. This required assessment of potential brownfield recycling areas, land reclamation activities, and forestry sites. Again, the aim was to examine the potential for these routes to provide a long term sustainable outlet for sludge. The land area, and likely application rates were analysed, and additional factors such as acceptability and future changes in application rates were calculated in order to ascertain the future of this outlet.

Energy From Waste

With the recent decisions on the energy from sludge practice at Longannet, it was imperative to fully understand the potential role this outlet could play in the future. Thermal destruction of sludge with accompanying energy recovery offers perhaps the most secure long term outlet for sludge. In addition, there are benefits such as a net energy return that can be exported to the National Grid with associated renewable obligation certificates (ROCs) that represent a further monetary return.

A range of energy outlets is considered in this strategy, and recommendations are made on the basis of balancing the potential land recycling outlets with the security of thermal destruction.

Landfill

The role that landfill can play in sludge management is considered as a contingency rather than as a primary route for wastewater sludge as it is clear that the cost (landfill tax plus gate fees), availability and acceptability of

RAE/S3/08/18/11 Agenda Item 4 disposing of what can effectively become a valuable resource, in this way is not preferable.

As discussed earlier, disposal to landfill and discharge for treatment at a wastewater treatment works are the two principal outlets for water sludge. The option of recycling for beneficial use is practiced in England and Wales under an exemption from Waste Management Licensing, but no such exemption exists in Scotland. The strategy considers the future options for water treatment sludge focussing on ensuring that opportunities to optimise the use of each outlet are taken.

Key Strategic Conclusions

Having undertaken these assessments, a series of conclusions are able to be drawn:

Wastewater Sludge

• There is not sufficient agricultural landbank to support the recycling of all sludge produced in Scotland, although there is sufficient in certain geographical assessment areas.

• There is a need for an energy from waste solution as a secure outlet in a number of predominately central areas where there is not sufficient agricultural landbank .

• The landbank for conventional sludge is diminishing owing to acceptability and farming practice and all but one of regions will certainly require enhanced treatment in order to provide a secure agricultural outlet.

• There is a continued role for recycling to non-agricultural land, although the potential is unclear and agricultural treatment and application standards are likely to apply.

• For water sludges there are currently no viable alternatives to either treatment at a wastewater treatment works, or disposal at landfill.

As a result of this assessment the following strategy has emerged:

Strategy for Wastewater Sludge

Scottish Water will adopt a long-term strategy of recycling to agricultural land where the risk of a suitable landbank not being available is acceptable and where it is cost-effective;

RAE/S3/08/18/11 Agenda Item 4 Scottish Water will adopt a long-term strategy of Energy from Waste where the risk of a suitable landbank not being available is significant or where Energy from Waste is most cost-effective;

Based on the area assessments of long-term strategy in this document, Scottish Water expect between 47.4 and 51.3% of wastewater sludge to be used in agricultural land recycling, and between 48.7 and 52.6% to be used in Energy from Waste outlets. For four assessment areas, the proposed strategy is still under development, pending further assessment of outlet options, risks and cost.

Strategy for Water Sludge

Scottish Water will adopt a long-term strategy of discharge to sewer and treatment via Wastewater Treatment Works where access to suitable sewerage and wastewater treatment is available and cost effective;

Scottish Water will adopt a long-term strategy of landfill for water treatment sludges where access to suitable sewerage and wastewater treatment is not available and cost-effective;

Scottish Water will continue to consider opportunities for beneficial use of water treatment sludges.

Based on the area assessments of long-term strategy in this document, Scottish Water currently expect approximately 57% of water treatment sludge to go to landfill, and 43% to be treated via wastewater treatment works;

The geographical distribution of the proposed strategy for wastewater sludge outlets is shown below:

RAE/S3/08/18/11 Agenda Item 4

Figure S2 Assessment Area for Strategy Development

Cost of the Strategy

Costs have been derived from strategic and area based option appraisal of each of the 18 geographical areas, covering Scotland.

All cost models utilised are drawn from industry standard (OFWAT) models for wastewater and sludge investment in the UK, while option appraisal has been carried out in accordance with HM Treasury Green Book, Appraisal and evaluation in central government.

RAE/S3/08/18/11 Agenda Item 4 While the costs are subject to ongoing refinement and optimisation the additional cost of implementing the recommended sludge strategy is estimated as follows:

• Capital Investment: £44m - £63m • Operational Cost: £2m - £3m

A Sludge Investment Report will be prepared to document the detailed financial methodology, analysis and output of the strategic and area based option appraisal work, carried out during the preparation of the National Sludge Strategy.

The report will document the range of capital, operational and net present costs of Scottish Water and potential 3rd party suppliers, financing a range of potential treatment options.

It is likely that certain elements of this report will be unavailable for general distribution to ensure that there is no contravention of a proper procurement process.

The planning assumptions for Q&Slll were based on a continuation of past practice. There is therefore no funding for the implementation of the emerging strategy. It is vital, however, to have the strategy in place, with the approval of stakeholders, in order to prepare plans for the next regulatory period or to be ready to respond to earlier changes in circumstances.

Procurement Strategy

Scottish Water have commenced an open Invitation to Tender Procurement process inviting expressions of interest to provide proposals to provide a secure sludge disposal outlet from 2010 to 2035. This will help validate Scottish Waters Sludge Strategy and ensure fair and equal opportunity to all potential service providers

RAE/S3/08/18/11 Agenda Item 4

EXTRACT FROM THE STRATEGIC ENVIRONMENTAL ASSESSMENT OF THE NATIONAL SLUDGE STRATEGY PRODUCED BY SCOTTISH WATER

SUMMARY AND OUTCOMES

SUMMARY The following summarises the findings of the Strategic Environmental Assessment (SEA) of the National Sludge Strategy produced by Scottish Water.

National Sludge Strategy Scottish Water has completed the National Sludge Strategy which provides the long-term overall strategy for the management of sludge in Scotland. It seeks to establish a framework for investment and operational planning decisions with the objective to ensure that sludge is managed in a cost effective and efficient manner without endangering human health or harming the environment. The Strategy considers the quantities of sludge which could be produced as a consequence of the wastewater treatment and water treatment processes which Scottish Water is responsible for up to 2025. The quantities of sludge have increased in recent years as additional treatment facilities have been commissioned, and will continue to increase in the future as a result of investment in further facilities. Between 2005 and 2025, it is estimated that the quantity of water and wastewater sludge will increase by 17.4%. Based on an assessment of a range of potential outlets, the Strategy proposes appropriate secure, sustainable and cost-effective long-term outlets across Scotland consistent with a national hierarchy of options. The Strategy can be found at http://www.scottishwater.co.uk/publications and has been issued along with this revised Environmental Report. This follows a three month consultation period which ended on the 18th April 2006 on the Draft Strategy and Environmental Report.

Strategic Environmental Assessment The Environmental Assessment of Plans and Programmes (Scotland) Regulations 2004 requires a Strategic Environmental Assessment (SEA) of plans and programmes prepared at a national, regional or local level by public bodies. Part 2, Regulation 9 of the SEA Regulations, states that SEA is mandatory for any plan or programme that: (a) (i) Is prepared for agriculture, forestry, fisheries, energy, industry, transport, waste management, water management, telecommunications, tourism, town and country planning or land use; and (ii) Sets the framework for future development consent of projects listed in Annex I and Annex II of the EIA Directive. Sections 9 and 10 of Annex I of the EIA Directive include waste disposal installations for the incineration, or chemical treatment of landfill of hazardous

RAE/S3/08/18/11 Agenda Item 4 waste and non-hazardous waste. Section 11 of Annex II of the EIA Directive includes: • Installations for the disposal of waste (projects not included in Annex I); • Waste-water treatment plants (projects not included in Annex I); and • Sludge-deposition sites. The National Sludge Strategy could be captured under these criteria. However, now that the Environmental Assessment (Scotland) Act 2005 has come into force, SEA will apply to all new and amended strategies as well as plans and programmes and, as such, will apply to subsequent iterations of the Strategy. In consequence, both as a precautionary measure and to ensure that the Strategy development was consistent with best practice, Scottish Water determined to apply the SEA process to the preparation of the Strategy.

Scope of the SEA Following discussions between Entec, Scottish Water and the SEA Gateway (which acts to support the SEA consultation process by serving as a gateway to the Statutory Consultees 1) during the scoping stage of the SEA, it was agreed that the SEA should address the following: • A high level national assessment for the overall strategic sludge outlets categorised as: - Recycling to land, to consist of - Recycling to agricultural land; and - Recycling to non- agricultural land, including land reclamation; - Energy from waste; - Co-incineration; - Gasification and pyrolysis; - Co-firing, to consist of - Co-firing in a power station; and - Co-firing in a cement kiln; - Use as construction material; and - Landfill.

1 The SEA Regulations define the statutory consultees for the SEA process as the Scottish Ministers (through Historic Scotland), the Scottish Environment Protection Agency and Scottish Natural Heritage. Scottish Water also considers the Scottish Executive as a key consultee.

RAE/S3/08/18/11 Agenda Item 4 • An assessment of the preferred sludge outlets for regional catchments. The catchments reflect the need to ensure appropriate sludge management solutions given the variations in population distribution, topography, geography and Scottish Water operations. The Environmental Assessment Act, the SEA Regulations (and the parent EC Directive 2001/42/EC) aim to provide a high level of protection of the environment and to contribute towards the integration of environmental considerations into the preparation and adoption of the plans and programmes in order to promote sustainable development. In consequence, this SEA considers the effects of the national and regional outlets contained in the National Sludge Strategy on a number of environmental protection objectives. In addition, a social and economic objective has also been included within the assessment framework to ensure the broad scope of sustainability issues has also been assessed. Where those impacts on the environment are considered likely to be significant, mitigation measures have been proposed. These measures were then presented as proposed amendments to the Draft Strategy, which have then been incorporated into the revised Strategy following consultation. To ensure that the process was independent, objective and rigorous, Scottish Water commissioned Entec UK Ltd to complete this draft Environmental Report.

STATEMENT ON THE DIFFERENCE THE PROCESS HAS MADE The Environmental Report has been an integral part of the process of the preparation and development of the National Sludge Strategy. Following the assessment of the environmental effects, the Environmental Report highlighted specific amendments to the Draft Strategy that were required to mitigate specific significant adverse environmental effects. In addition, and where appropriate, recommendations have also been made regarding the evidence base used to support the preferred approach outlined in the Draft Strategy. These changes to the Draft Strategy and Environmental Report have also been supplemented by addressing the responses from the consultation process. Recommendations that were made from the assessment of the Draft Strategy are presented in Table S.1. The specific elements of the Draft Strategy for the national outlets are taken from the Strategy proposals contained within the shaded boxes of Section 3 and summarised in section 6 of the Strategy.

RAE/S3/08/18/11 Agenda Item 4

Table S.1 Draft Strategy Assessment Recommendations

No Recommendations Scottish Water’s Response 1. General The Draft Strategy could be Throughout the strategy it is strengthened by the inclusion of a recognised that there are a section addressing monitoring, number of factors which would implementation and review. This could trigger a review i.e. legislative include specific performance change, risk, cost sustainability measures, targets, and key criteria that of outlet these are continually could trigger a review, and a formal under review. timeframe committing Scottish Water to a review. Such a section could also include the processes for review, details of how Scottish Water’s stakeholders could be involved and how the findings of the review (and any subsequent changes to the Strategy) would be publicly reported.

This will ensure that the Strategy is kept up to date in terms of new and emerging legislation, changes to existing and planned outlet options, and any changes within the individual catchment areas.

2. General The Draft Strategy could be Noted- Scottish water is strengthened through greater investigating further the scope clarification on proposals associated for optimisation of sludge with sludge movements, particularly to transport, including sludge outlets where a central plant could be thickening and options for proposed. The assessment could be more efficient tinkering to enhanced during the implementation at reduce road mileage, at local the catchment level through the and national levels. This will be addition of information regarding the implemented in the current number and frequency of sludge investment period to reduce movements, the quantities involved transport costs and emissions and the preferred routes to be taken.

3. General The Draft Strategy could benefit from Scottish Water has included an presenting the quantification of assessment of the relative atmospheric discharges from the atmospheric discharges from differing outlets to demonstrate how differing outlets in the final outlets perform in regard to version of the Environmental greenhouse gas emissions and other Report – see Section 4.4.2. emissions to air. Increased levels of sludge Whilst the Draft Strategy considers the treatment as proposed will implications in terms of discharges to significantly reduce the amount land and water, the relative impacts of of noxious odour from the the different outlets in terms of air sludge product. This will emissions, including odour nuisance, reduce the risk of noxious could be enhanced. odours during transport and handling of the sludge at the final outlet.

4. General The Draft Strategy could be enhanced Scottish Water has provided through the provision of additional additional information information concerning any proposals regarding the commitment to or procedures Scottish Water may ensure that, where applicable employ to ensure that the emissions to to its sludge management air and odour meet the requirements of activities it undertakes, it the various regulations, codes of complies with appropriate practice and Scottish Executive regulatory controls for air commitments. emissions. In particular, the commitment references the

RAE/S3/08/18/11 Agenda Item 4

No Recommendations Scottish Water’s Response need to ensure adequate processes and procedures are in place to ensure contractors are operating to the requirements of regulations and codes of practice. This is included in section 1.2.3 of the Sludge strategy.

5. General The Draft Strategy could be enhanced Noted – Scottish Water has through the provision of information worked closely with the PFI concerning how Scottish Water will concessionaires during the communicate and promote the development of this draft strategic intent of the sludge strategy. It is stated within the management strategy to those outlets strategy that the PFI schemes managed under PFI schemes. were integral to the production of the strategy and PFI schemes have an important role in engagement will continue managing 77% of wastewater sludge throughout the life of the and 33% of water treatment sludge strategy. arising in 2005.

6. Strategy – The Draft Strategy could be Noted – Scottish Water has Agricultural strengthened if reference was given to provided reference to the Land the actions that would be taken if this actions that would be taken if outlet became unavailable, for this outlet became unavailable. example following a further outbreak Foot and Mouth Disease. Any alternative outlet that would be The waste management proposed would need to have regard hierarchy that promotes to the waste management hierarchy. recovery and re-use over disposal will be regarded along with a number of other criteria such as outlet availability, regulatory and legislative restrictions during the assessment.

7. Strategy – The Draft Strategy refers to “significant Noted – the principle mitigation Agricultural risk in the long term of inadequate step is that Scottish Water Land landbank availability in the central belt work with agricultural and food if all sludges from accessible areas industry stakeholders to compete for the available landbank secure long term acceptance and will take steps to mitigate this risk”. of sludge recycling. This is the This could be strengthened by subject of additional work providing details of the mitigation being carried out by supply measures that are proposed. chain experts. The strategy has been amended to stress the levels of quality control that are in place in order to demonstrate the bridge between sludge quality control and food crop quality control. (see section 3.5)

8. Strategy – The Draft Strategy states that “in the Noted – a further definition of Agricultural long-term an enhanced quality product enhanced treatment process Land will be required in most areas to was provided in section 1 of ensure an adequate landbank exists”. the strategy but this is very Summary details on the enhanced generali as processes are treatment process are provided in necessarily site specific and section 3.5.1. However, consideration the environmental implications could be given to providing further of future enhanced treatment details of how the sludge is enhanced processes at site level will be treated to ensure that the method of captured through the planning treatment (and any environmental process. implications) is fully understood.

RAE/S3/08/18/11 Agenda Item 4

No Recommendations Scottish Water’s Response 9. Strategy – No reference to the Prevention of Reference to PEPFAA code Agricultural Environmental Pollution from has been provided. Land Agricultural Activities (PEPFAA) code is provided within the shaded box summarising the strategy approach to this outlet. The Draft strategy could be strengthened by providing reference to this code in order to encourage a responsible and comprehensive approach to management.

10. Strategy No information is provided about how Noted – In order to deal with Non- Scottish Water will deal with the odour noxious odour concerns from Agricultural concerns from this outlet. this outlet, Scottish Water has Land Consideration could be given to the set out its intention to stop inclusion of mitigating measures that recycling untreated sludge to will minimise the adverse nuisance non-agricultural land. impacts on receiving communities arising from odour in the shaded Scottish Water intends to Strategy summary box or move to conventional accompanying text. treatment of sludges as a minimum for this outlet. Conventional treatment ensures a significant reduction in noxious odours during transport, handling and use of sludge.

Site Management during recycling is the responsibility of the contractor, however Scottish Water will commit to ensuring that odour management measures are considered and agreed during the process of contract agreements.

11. Strategy – The Draft Strategy refers to a potential Noted – As stated above, Non- landbank for digested cake and Scottish Water will move to a Agricultural thermally dried product in the higher treated product to Outlets reclamation and ongoing maintenance reduce odour nuisance of opencast and derelict land and associated with this outlet. amenity outlets. However it is However, even with such a recognised that the viability of these product, the strategy potential landbanks relies on a change establishes that non- of public acceptability. The strategy agricultural land has a limited could be enhanced by the inclusion of viability primarily because of details as to how this will be achieved. the economic costs of the outlet.

Scottish Water has included a commitment in the strategy to ensure that contractors acting on its behalf operate appropriately, to ensure that nuisance etc is appropriately managed

12. Strategy – The Draft Strategy could be Noted – Details of how this Co- strengthened by indicating how this outlet will be managed in Incineration outlet will be managed in order to respect to impacts on the with Other reduce adverse impacts on the community will not be covered Wastes community. in the revised strategy, as these issues will be managed at a site specific level through both the planning process and compliance with any planning

RAE/S3/08/18/11 Agenda Item 4

No Recommendations Scottish Water’s Response conditions set down. This will be reflected by the site specific EIA .

13. Strategy - The Draft Strategy could be Noted – PPC is a very minor Landfill strengthened by the inclusion of an element of the strategy, and outline explanation of what PPC the commitment in the strategy permits are and how they can support is to ensure that all sludge is commitments towards minimising the managed in accordance with adverse effects of any pollution. This the appropriate regulatory could also be achieved through cross controls. However, a very brief referencing this outlet to the relevant statement has been made in legislation section in the Strategy. Table 3.1 that references PPC’s role in controlling pollution by focussing on all This is to provide additional clarity to a emissions from a qualifying non-technical audience. waste management/disposal installation.

14. Area The area appraisals could be Noted – Details of landscape Appraisals strengthened during subsequent and environmental implementation by ensuring that designations will be specific details of landscape and considered at a local site level environmental designations are – not a regional level. considered and assessed within each area. The Draft Strategy could be strengthened by including comment in a section on implementation regarding how site specific environmental issues (such as designations) will be subsequently addressed.

This information can be obtained from the relevant Development Plans and would allow for environmental constraints in a particular area to be taken into consideration when assessing the impacts of the site specific outlets.

15. Area In these areas, the Draft Strategy Noted. provides a number of potential outlets Appraisal (land recycling to agricultural land and Girvan, energy from waste). Where the Troqueer, outcome of assessment is the same in Oban and all other regards, Scottish Water Lochgilphead should give consideration to the and Cumnock preferential use of land recycling to agricultural land consistent with the waste management hierarchy and landbank availability.

16. Area The Draft Strategy proposed to use Noted. landfill in these catchments in either Appraisal – the short or medium term. Scottish Lerwick; Water could give consideration to the Oban and development and use of environmental Lochgilphead performance criteria as part of any landfill selection process where a number of potential landfill outlets are available in an area. The Strategy could be enhanced by reference to these criteria.

RAE/S3/08/18/11 Agenda Item 4 Summary of Effects of the National Sludge Strategy The management of sludge through any of the proposed outlets will have some adverse environmental consequences; however, judgement is required on the relative significance of the different environmental impacts. The quantitative nature of this assessment has been limited by the strategic level of consideration; however, the assessment does provide the framework for further consideration of catchment outlets as the Strategy is subsequently implemented. The preferred approach at the national level has been more qualitative, based upon expert judgement and a consensus derived from the views of the statutory consultees and the Scottish Executive. As the Strategy progresses and more site specific proposals come forward, these are likely to be subject to the requirements of the Environmental Impact Assessment Regulations and will present more detailed quantitative impact information.

Table S.2 and S.3 summarise the potential impacts of the Strategy associated with the national and regional outlets on the environmental receptors set out in the SEA Regulations (Schedule 2, part 6). Further details on these impacts can be found in the main body of the report and in the appendices.

Table S.2 Summary of the Potential Environmental Impacts of the Sludge Strategy at a National Level

Environmental Summary of the Potential Impacts at a National Level receptor

Air Some of the national outlets have the potential to have an impact on air quality and those outlets that could require significant transfers of sludge by road may also increase the level of noise, vibration and odour nuisance experienced by roadside communities. Combustion of the sludge (either as a fuel substitute, in a dedicated energy from waste facility or as co-incineration with coal) could result in emissions such as NOx, CO2 and SOx. However, there is potential, depending on the nature of the combustion process, to ensure NOx abatement, flue gas desulphurisation and potentially carbon capture. The disposal of sludge to landfill could lead to an increase in methane generated, which if uncontrolled could lead to an increase in the emissions of this greenhouse gas. However, if controlled and captured at landfill, it could be used to generate energy and following combustion could lead to the emission of CO2 (a gas with a lower global warming potential than methane). Land recycling and land reclamation outlets could also result in the emission of uncontrolled methane gas arising from the decomposition of the sludge. The disposal of sludge has the potential to cause odour nuisance particularly in relation to the recycling to agricultural land outlet and the land reclamation outlet. Other odour nuisance may also result from the transfer and disposal at landfill sites. Water The landfill outlet could potentially have a negative impact on the quality of ground and surface water due to the high organic content of the sludge along with the potential for it to contain potentially toxic elements (PTE). The mobility of these elements following precipitation could adversely affect the quality of leachate arising from landfill; however, control measures (such as impermeable barriers) mean that such leachate should be captured and treated. Potential significant impacts on water quality may only occur, where there is a failure in such control systems and where pathways lead to receiving water bodies. The land reclamation outlet does have the potential, if not managed correctly, to affect ground and surface water quality by nitrate and phosphate pollution

RAE/S3/08/18/11 Agenda Item 4

Environmental Summary of the Potential Impacts at a National Level receptor

caused by runoff and mobilisation of the sludge. A similar argument applies to the land recycling to agricultural land outlet. However, the Sludge (use in Agricultural) Regulations set controls to protect drinking water sources. Other measures to be considered include following the Prevention of Environmental Pollution from Agricultural Activity (PEPFAA) code. The PEPFAA code is a “do and don’t” guide on how to prevent pollution from agricultural activities. This includes reduced application rates in mores sensitive areas, exclusion distances (10m) from a water body, modifying application practices during different seasons and depending on the condition of the receiving soil (whether waterlogged or frozen). Use of sludge as a soil enhancer and as part of a programme of slope revegetation in upper reaches of a catchment could minimise the extent to which particulate runoff occurs. This could reduce the adverse impact of uncontrolled sediment loading on water bodies. Landscape and The landfill outlet could cause negative impacts in relation to landform and soil Soil quality. This is because the potentially semi-solid nature of sludge means that a solid mass can return to a more mobile state which can cause slope stability problems with the landform. The sludge can also produce leachate which, if uncontrolled, could have a negative impact on soil quality. Applying sludge to land in an uncontrolled manner could also result in the long term build up of potentially toxic elements in the soil which could inhibit the soil ecology. However, soil will be protected by the Sludge Directive which sets limits on the concentration of potentially toxic elements (PTEs) and specifically the use of the PEPFAA code which specifies precautionary levels of sludge application that will minimise a range of adverse soil and crop effects. Land reclamation could make a positive contribution to improving landscapes and return previously derelict or disused sites to possible use and amenity. The land reclamation outlet could provide organic matter to impoverished or thin soils which will help with improving the soil quality, assuming that this is a desired goal. It should be noted that such soil improvement effects maybe have a detrimental impact where such impoverished sites are also recognised for their conservation value. However, the process of regulating the application of sludge to such beneficial use will consider these issues and set appropriate recycling rates. The land recycling to agricultural land outlet can have a number of benefits to enhancing the soil quality such as:- • Improving the soil conditioning; • Providing additional nutrients; and • Increasing organic matter This outlet has the potential to reduce the use of inorganic fertilisers. Biodiversity For the majority of outlets considered at the national level, there is no (Fauna & relationship with the objectives which relate to biodiversity (fauna & flora) as Flora) these need to be assessed on a site by site basis and as such would be considered in a comprehensive manner during any subsequent Environmental Impact Assessment (EIA) process. The natural habitats are protected through the PEPFAA code. However, the land recycling to agricultural land and the land reclamation outlet could potentially have a positive impact on the natural environment depending on the nature of the site, the planting regimes proposed and the habitats created. As noted above, reclamation of an important conservation site that is considered to have a low biodiversity would clearly be undesirable. Climactic Wastewater sludge is classified as a source of renewable energy under the Factors Renewables Obligation (Scotland) Order. Any outlet that requires pre-treatment will require energy and it will depend upon the nature of the energy generation and its intensity of use as to whether the pre-treatment results in the emissions of greenhouse gases. Any outlet where significant quantities of sludge will need transportation by road could also lead to increases in road vehicle related greenhouse gas emissions. Any outlet close to the sites of sludge generation will perform relatively better with regard to associated road vehicle emissions. The combustion of sludge (either from co-gasification with coal, incineration, or use as a fuel substitute) will lead to the emission of CO2, one of the

RAE/S3/08/18/11 Agenda Item 4

Environmental Summary of the Potential Impacts at a National Level receptor

greenhouse gases. The disposal of sludge to landfill could lead to an increase in the emissions of methane generated, which if uncontrolled could lead to an increase in the emission of this greenhouse gas. However, if controlled and captured at landfill, it could be used to generate energy and following combustion could lead to the emission of CO2. Land recycling and land reclamation outlets could result in the emission of uncontrolled methane gas. However, it is not clear what emissions currently arise for other fertiliser materials in order to make a comparison. Cultural At both national and catchment level it has been difficult to assess the impacts Heritage on the historic environment, which incorporates not only listed buildings and including conversation areas, but the historic environment such as: scheduled ancient architectural monuments; designated gardens and historic landscapes. and The impacts on the historic environment will need to be assessed on a site by archaeological site basis and as such should be considered in a comprehensive manner heritage during any subsequent Environmental Impact Assessment (EIA) process. Human Health Some outlets including recycling to agriculture have the potential to have a negative impact on human health through the introduction of PTEs into the foodchain; however, regulations (Sludge use in Agriculture Regulations), sector agreements (the Safe Sludge Matrix and HACCP) and enforcement by the regulators (SEPA) ensure that sludge is disposed of, or recycled, in a manner that ensures the protection of human health. There is also the potential to impact human health in non-agricultural outlets such as land reclamation and forestry through direct contact with sludge products. These risks are mitigated through the Waste Management Licensing Regulations that set conditions for application to ensure the protection of human health However, it is where regulations are breached that such outlets may pose a potentially uncontrolled risk to human health. Perceptions of such risks and associated concerns may also cause adverse health effects through increasing levels of stress. Material Assets The energy based outlets where sludge is used to replace existing non- renewable fossil fuels such as coal, peat and wood could reduce the rate of depletion of such resources. However, through the replacement of such fuels, in the short and medium term, it is anticipated that the capital and operating costs could be higher than if replacement did not take place. The land reclamation outlet will have a positive impact on material assets as it will result in the reclamation of previously developed land, derelict land and quarries being reclaimed and being brought back into potentially economically productive use. Population Some of the centralised outlets may have an impact on the population because there will be an increase in the transportation of the sludge which may cause noise and odour nuisance to local communities. The land reclamation and the agricultural land outlet will be enhanced or conventionally treated to minimise any odour nuisance.

Table S.3 Summary of the Potential Environmental Impacts of the National Sludge Strategy at a Regional Level

Environmental Summary of the Potential Impacts at a Regional Level receptor

Air Catchments where energy from waste or co-incineration (Lerwick) may become the preferred outlet are likely to increase absolute emissions to air (relative to other outlet options such as land recycling). Emissions to air could include NOx, CO2 and SOx. However, there is potential, depending on the nature of the combustion process, to ensure NOx abatement, flue gas desulphurisation and potentially carbon capture. In addition, any such

RAE/S3/08/18/11 Agenda Item 4

Environmental Summary of the Potential Impacts at a Regional Level receptor

emissions will be subject to regulatory controls to ensure such emissions remain within permissible levels. Water The recycling to agricultural land outlet is proposed in twelve catchments. There is the potential, through soil improvement and improved slope stability associated with re-vegetation, to reduce particulate runoff from soil erosion, which in turn could reduce sediment loading in water bodies. However, such benefits are usually recognised more in non-agricultural land recycling where soil improvement occurs in conjunction with re-vegetation of denuded slopes. Landscape & The recycling to agricultural land outlet offers a number of benefits to soil and Soil the quality of soil. Sludge applied to agricultural land can reduce the use of inorganic fertilisers, provide nutrients to the soil, and improve soil conditioning. The land reclamation outlet which is being proposed in the short to medium term in Troqueer, Girvan and Cumnock can also offer benefits to soil by improving thin or impoverished soil where desired. However, applying sludge to land in an uncontrolled manner could result in the long term build up of potentially toxic elements in the soil which could inhibit soil ecology. However, soil will be protected by the Sludge Directive which sets limits on the concentration of potentially toxic elements (PTEs) and specifically the use of the PEPFAA code which specifies precautionary levels of sludge application that will minimise a range of adverse soil and crop effects. Biodiversity The land reclamation outlet being proposed for the short to medium term in (Fauna & Troqueer, Girvan and Cumnock could have a positive impact on biodiversity Flora) (fauna & flora) by restoring derelict land or disused land which could provide an opportunity to create (or reinstate) habitats and enhance the biodiversity of the area. Cultural The outlet which is likely to have an impact on cultural heritage is the land Heritage reclamation outlet which is being proposed for the Troqueer, Girvan and (including Cumnock catchments. Land reclamation may have a positive impact on architectural cultural heritage because reclamation of vacant or derelict land can potentially and present the opportunity to enhance or improve the setting of a historic archaeological environment. In addition. there may be some short term noise and odour heritage nuisance from the reclamation outlets experienced by those seeking to enjoy the heritage site. The proposed use of Energy from Waste may have effects on cultural heritage depending on location and associated site specific issues, if and when such a plant was implemented which would be addressed through the Environmental Impact Assessment process. Human Health None of the outlets for the catchments should have an adverse impact on human health as they are all operated in accordance with relevant legislation and codes of practice. However, some outlets, such as being sent to landfill and recycling to agricultural land have the potential to have a negative impact on human health through the introduction of PTEs into the foodchain. It is when regulations are breached that such outlets may pose a potentially uncontrolled risk to human health. Perceptions of such risks and associated (unsubstantiated) concerns may also cause concern. As it is proposed that recycling to agricultural land is used for twelve of the catchments, there is the potential, if such regulations and controls were breached, that there could be a possible negative impacts on human health; however, the likelihood of such an event is considered extremely low. Material Assets The catchments such as Daldowie and Central which could be using the energy from waste outlet may have a positive impact on material assets because the energy from waste will use sludge to generate energy in preference to the use of non-renewable fossil fuels. Catchments such as Girvan and Cumnock which could be using the land reclamation outlet should have a positive impact on material assets as they will bring back into use previously developed, derelict or vacant land. This contributes to a more sustainable pattern of land use. Population Catchments such as Lerwick, Oban and Lochgilphead which are proposing to use the landfill outlet at some point may have a negative impact on local communities as the sludge movement, handling and disposal can cause odour nuisance to the local communities in these areas. The catchments using the land recycling outlets such as agriculture and land reclamation should not cause any odour nuisance as the sludge being applied

RAE/S3/08/18/11 Agenda Item 4

Environmental Summary of the Potential Impacts at a Regional Level receptor

will be at least conventionally treated. Where sludge could be transported across catchments, the additional vehicle movements of sludge could result in an increase in odour and noise nuisance experienced by communities living on, or adjacent to, the proposed transport routes. Climatic The catchments such as Daldowie and Central where the Energy from Waste Factors outlet is proposed may have a positive impact on the quantity of carbon dioxide (a greenhouse gas) emitted (relative to electricity generated from coal). Transport by road to any of the outlets will result in vehicle emissions, some of which are greenhouse gases. Transport distances, and associated emissions are likely to increase where more centralised outlets are preferred which will lead to a relative increase in such emissions.

Conclusions on the Performance of the National Sludge Strategy Some of the outlets at the national level such as recycling to land can:- • Improve and enhance soil quality; • Reduce the need for fertilisers; • Encourage use of previously developed or vacant land; and • Re-use the sludge. As a result of this, the recycling to land outlet performs well when appraised. Other outlets such as Energy from Waste and co-incineration have a more mixed appraisal. The Energy from Waste outlet performs well against some appraisal objectives (such as limiting the effects of climate change) as sludge is classified as biomass and is a source of renewable energy under the Renewable Obligation (Scotland) Order. Any power generated will receive Renewables Obligation Certificates (ROCs). Therefore, this outlet has the potential to reduce the amount of non-renewable fossil fuels being used and supports the aim of meeting the Scottish renewable energy target. The area where the outlet does not perform so well concerns the prevention of emissions to the air. Sludge combustion could increase the total amount of atmospheric pollutants (NOx, SOx and CO2) in comparison to other outlets such as recycling to land or landfill. However, there is potential, depending on the nature of the combustion process, to use NOx abatement, flue gas desulphurisation and potentially carbon capture which could minimise any additional emissions.

Similar to Energy from Waste, the co-incineration outlet performs well against some of the objectives. However, there is some uncertainty surrounding the impact that this outlet may have on receiving communities as the outlet does have the potential to cause noise and odour nuisance from transfer of the sludge to the co-incineration plant. The significance of any adverse impact on air quality will depend upon the extent and efficiency of any abatement techniques used, as well as existing air quality and the nature of receptors.

RAE/S3/08/18/11 Agenda Item 4 The landfill outlet does not perform well when appraised against the objectives for a number of reasons: • Disposal of sludge to this outlet is considered relative costly due to the landfill tax and the transportation costs of taking the sludge to the landfill site; • Potential for odour during transportation, waiting, and offloading at the landfill sites can be a concern and can cause nuisance to local communities; • Due to the physical nature of sludge it can cause stability problems with a landform; and • Sludge contains potentially mobile organic components as well as PTEs which can impact on the ground and/or surface water quality. At a regional level the majority of the outlets perform well as it is proposed that recycling to agricultural land is the preferred outlet. This outlet can offer a number of benefits to the soil and can reduce the amount of inorganic fertiliser being used. However, there are some uncertainties surrounding this outlet in terms of odour nuisance. There will be a need to ensure that this outlet is managed carefully to ensure that the sludge is stored, transported and spread in a manner which prevents nuisance to any local communities.

The regional outlets which do not perform as well as recycling to land reflect those outlets that performed similarly at the national level, namely, energy from waste and co-incineration. The Energy from Waste outlet is being considered at Daldowie and Central. In the case of Troqueer, Girvan and Cumnock, it is proposed that these regions move away from using land reclamation to either recycling to agricultural land or Energy from Waste outlet, although at this stage recycling to agricultural land will be dependent on landbank assessments and costs. In the case of Oban and Lochgilphead, the outlet is moving away from using landfill in the short to medium term to using Energy from Waste in the long term. This is viewed positively as the outlet is moving up the waste management hierarchy away from the least preferably environmental option.

Daldowie is already using the Energy from Waste outlet. The Strategy indicates that in the medium to long term, Energy from Waste continues to be the preferred outlet for this area. The appraisal of this catchment outlet is mixed. The outlet does have the potential to qualify for renewable energy obligations and will assist in reducing the amount of non-renewable forms of energy being used. However, the outlet will still result is emissions of NOx, SOx and CO2, although the emission are slightly lower than that from non- renewable fossil fuels. Recycling sludge to agricultural land is not considered a viable outlet in this catchment because there is an insufficient landbank.

Lerwick is proposing to use co-incineration at an existing municipal waste plant in the medium to long term. This preferred outlet does not perform as well against the appraisal objectives as other outlets and there are potential

RAE/S3/08/18/11 Agenda Item 4 effects associated with the emissions to air, as well as the transportation of the sludge to the plant. In the case of Lerwick, the recycling to agricultural land outlet is not considered to be viable because the soil is wet and acidic which makes it unsuitable. In addition, sludge recycling to agricultural land has never been used in this area before which means that it may be difficult to gain farmers’ acceptance.

STATEMENT OF COMPLIANCE Table S.4 below assesses the compatibility of this Environmental Report against the Schedule 2 of the SEA Regulations. Further information on the compliance of this report is given in Section 1.3.2 and 3.

RAE/S3/07/18/.. Agenda Item ..

Table S. 4 Compliance of the National Sludge Strategy Environmental Report with Schedule 2 of the SEA Regulations

Environmental Information Included Requirements of Schedule 2 of the SEA Regulations Report Sections

Summary of Non-technical summary of A non-technical summary of the information provided under paragraphs 1 to 9. of Schedule 2 Outcomes the difference that the process has made, how to comment on the report and proposed mitigation Section 2: National Purpose of the Report, Schedule 2(1) requires an outline of the contents and main objectives of the plan or Sludge Strategy Strategy Objectives, programme, and of its relationship with other relevant plans and programmes. compliance Section 3: Appraisal Appraisal Method, links Schedule 2 (2) requires an outline of the relevant aspects of the current state of the Methodology, with other plans, environment and the likely evolution thereof without implementation of the plan or objectives, baseline programmes and programmes. and context strategies, description of Schedule 2 (3) requires information about the environmental characteristics of areas likely to the baseline and trend be significantly affected. information, any difficulties encountered Schedule 2 (4) requires information on any existing environmental problems which are relevant to the plan or programme including, in particular, those relating to any areas of particular environmental importance, such as areas designated pursuant to Council Directive 79/409/EEC on the conservation of wild birds (a) and the Habitats Directive Schedule 2(5) requires consideration of the environmental protection objectives, established at International, Community or Member State level, which are relevant to the plan or programme and the way those objectives and any environmental consideration have been taken into account during its preparation. Section 4 & Section 5 Summary of the significant Schedule 2 (6) requires assessment of the likely significant effects on the environment, Results of Appraisal of environmental effects of the including short, medium and long-term effects, permanent and temporary effects, positive and national and regional national outlets, how they negative effects and secondary, cumulative and synergistic effects, on issues such as:- outlets were considered and (a) biodiversity proposed mitigation (b) population (c) human health (d) fauna (e) flora

RAE/S3/07/18/.. Agenda Item ..

Environmental Information Included Requirements of Schedule 2 of the SEA Regulations Report Sections

(f) soil (g) water (h) air (i) climatic factors (j) material assets (k) cultural heritage, including architectural and archaeological heritage; (l) landscape; and (m) the inter-relationship between the issues referred to in sub-paragraphs (a) to (l). Schedule 2 (7) requires the measures envisaged to prevent, reduce and as fully as possible offset any significant adverse effects on the environment of implementing the plan or programme. Schedule 2 (8) requires an outline of the reasons for selecting the alternatives dealt with, and a description of how the assessment was undertaken including any difficulties (such as technical deficiencies or lack of know-how) encountered in compiling the required information. Section 6: Monitoring Links to other plans and Schedule 2 (9) requires a description of the measures envisaged concerning monitoring in Framework and programmes and proposals accordance with regulations Implementation for monitoring

RAE/S3/07/18/.. Agenda Item .. ANNEXE B

17th December 2007

Ref. Petition PE749 – Spreading of Sewage Sludge

Response to letter dated 13th December from Andrew Mylne re Scottish Water response dated 12th December.

Dear Mr Mylne

Thank you for your letter dated 13th December 2007 together with the response from Scottish Water dated 12th December 2007.

Whilst the Scottish Water response is commendable, this does not alter the fact that application to non agricultural land such as forestry is not without risk to both human health and the environment and therefore, as our petition requests, should be subject to planning consent so that adequate consultation can take place, and any risk assessments submitted can be pier reviewed. Conditions will vary from site to site and many may be unsuitable for such operations.

Unfortunately, it has been shown that Scottish Water, and contractors (in particular DIGIT Site Services), cannot be relied upon to be self regulating. Digit Site Services Ltd was fined £7500 after they pled guilty to disposing of untreated waste between May and October 2004. The company had a waste management licence, issued by SEPA, for the treatment of waste, but this did not allow the disposal of untreated material. Buried untreated sewage sludge and abattoir waste could have caused long-term chronic pollution and generated greenhouse gases at Auchlin, near Skares in Ayrshire.DIGIT.

I draw your attention to a recent situation concerning an application to store and apply sewage sludge for ‘ecological improvement’ to forestry at Stonechest near Penton. This site is some 15 miles from Newcastleton on the English side of the Scottish Border.

As with the Hewisbridge, Newcastleton application which gave rise to our petition, the contractor was Digit Site Services, the forestry management company was Scottish Woodlands and the sludge was to be from Scottish Water from the Dumfries area.

Briefly, the sequence of events was :-

1. Local residents noticed unusual activity in the forest area (the digging of a very large trench which cut across a public footpath. When asked what this was for, the contractor gave several different explanations.

2. The local Community Council made enquiries and discovered that an application had been made to the Environment Agency on 1st

RAE/S3/07/18/.. Agenda Item .. October 2007 to store and spread sewage sludge at the rate of 500 tons per hectare. This rate was subsequently reduced to 250 tons per hectare. Please note that the guidelines from the Forestry Commission is 50 tons per hectare for fertilisation of forestry.

3. The County Council was contacted and they had no knowledge of the application nor the granting of the license.

4. An urgent Public Meeting was convened and representatives from the Environment Agency attended. Unfortunately (though predictable), both Digit Site Services and Scottish Woodlands refused to attend. The meeting was constructive and the Environment Agency agreed to investigate the concerns expressed by the community. This was a sloping site in a high rainfall area and was frequently water logged. It had a large number of water courses, some supplying private water supplies. The ‘holding trench’ was being dug adjacent to a surface water course. In addition, it was felt that the roads and access were unsuitable for the increase in wagons.

5. The Environment Agency then met with DIGIT Site Services on site to discuss the concerns raised. The Environment Agency also enlisted the help of a hydrologist to advise re the water courses.

6. DIGIT Site Services were unable to convince the Environment Agency that they could manage the operation without risk to the environment and in particular to the water courses.

7. The Environment Agency withdrew the license and the operation has been halted.

This example shows that, neither Scottish Water, or the contractor, DIGIT Site Services should be in a position to ‘self regulate’. They have shown no regard for human health or the environment and it was only due to the diligence of the community that potential environmental damage was avoided.

We feel that to ensure the continued safety of the general public and protection of the environment, an application to spread sewage sludge should undergo planning consent procedures at the very least.

Despite assurances from Scottish Water as to the safety of sewage sludge, this view is not shared by many other respected bodies around the world. An independent risk assessment of the operation should be carried out, detailing the risks for the various treatment levels of sludge.

We urge the committee to uphold our petition and to take action to progress this request.

Brian A. Stenhouse On behalf of Newcastleton Community Council

RAE/S3/07/18/.. Agenda Item .. ANNEXE C

EXTRACT FROM SPICe BRIEFING 06/56: SLUDGE FROM WASTEWATER WORKS

LEGAL FRAMEWORK Legislation affects all areas of sludge management in Scotland – including the strategic aspects of the management approach, treatment requirements which affect the quantity and characteristics of the sludge produced and specific legislation covering individual treatment processes and/or outlet routes. (Scottish Water 2006a)

Scottish Water (2006a) cites over 20 pieces of Scottish and European legislation with relevance to sludge management. This section provides an overview of significant European Directives, and the Scottish regulatory framework that affects sludge disposal options.

Significant relevant European Directives in force are the Sewage Sludge Directive (86/278/EEC), Nitrates Directive (91/676/EC), Waste Incineration Directive (2000/76/EC) and the Framework Directive on Waste (75/442/EEC as amended).

SEWAGE SLUDGE DIRECTIVE (86/278/EEC) The Sewage Sludge Directive is implemented by the Sludge (Use in Agriculture) Regulations 1989 (as amended), which are described below. The Sludge Regulations applied where sludge is used in agriculture in Great Britain, are more stringent than the Directive.

The European Commission (2005b) has proposed to revise this Directive in 2007 with a view to tightening the quality standards under which sludge is allowed to be used in agriculture.

NITRATES DIRECTIVE (91/676/EC) The Nitrates Directive (91/676/EC) has the objective of reducing water pollution caused by nitrates from agricultural sources, and preventing further pollution. As sludge is a source of nitrates, its use is controlled by this Directive and its implementing legislation. It is intended both to safeguard groundwater and to prevent wider ecological damage to freshwater and marine waters. The Directive is primarily implemented by the Protection of Water against Agricultural Nitrate Pollution (Scotland) Regulations 1996. These place a duty on the Scottish Executive to designate Nitrate Vulnerable Zones (NVZs), and to establish action programmes in designated NVZs with the aim of reducing water pollution caused by nitrates from agricultural sources.

Other relevant legislation includes the Designation of Nitrate Vulnerable Zones (Scotland) Regulations 2002, and the Designation of Nitrate Vulnerable

RAE/S3/07/18/.. Agenda Item .. Zones (Scotland) (No 2) Regulations and the Action Programme for Nitrate Vulnerable Zones (Scotland) Regulations 2003.

FRAMEWORK DIRECTIVE ON WASTE (75/442/EEC) (AS AMENDED) The Framework Directive on Waste (75/442/EEC) (as amended) is implemented by numerous Regulations on waste management; however the main ones in this instance are the Waste Management Licensing Regulations 1994, as amended, in particular by the Waste Management Licensing Amendment (Scotland) Regulations 2003 and the Waste Management Licensing Amendment (Scotland) Regulations 2004. These relate to the use of organic wastes, including sewage sludge, in agriculture, on non-agricultural crops, such as forestry, and in land restoration. These methods are considered in more detail below.

WASTE INCINERATION DIRECTIVE The Waste Incineration Directive (2000/76/EC) (WID) has introduced stringent operating conditions and sets minimum technical requirements and emissions for waste incineration and co-incineration plants. The aim of the Directive is to prevent and limit negative environmental effects from incineration and co- incineration of waste to protect human health. This is to be achieved by stringent operational conditions, technical requirements and emission limit values. The Directive applies to new plants from 28 December 2002 and to existing facilities from 28 December 2005.

The WID was transposed into Scottish law by the Waste Incineration (Scotland) Regulations 2003. These were recently amended by the Pollution Prevention and Control (Scotland) Amendment Regulations 2005. The Scottish Executive (2005a) recently issued guidance on these Regulations.

CURRENT SITUATION IN SCOTLAND

In 2005, Scottish Water recycled treated sludge through the following methods (Scottish Water 2006a):

• land reclamation – (40%; 57,000 tDS) • energy from power generation & incineration – (35%; 50,620 tDS) • recycling to agricultural land – (23%; 33,773 tDS)

LAND RECLAMATION Many former industrial sites cannot be landscaped without remediation and restoration. Sludge has been used to reclaim and restore derelict land where there is insufficient, or inadequate topsoil to support plant growth, or where coal shales and spoil cause problems such as low pH, salinity, low nutrient availability and conditions not compatible with plant root growth. Examples of Scottish colliery sites where the use of sewage sludge has aided successful site restoration include Drumbow, North Lanarkshire, and Skares

RAE/S3/07/18/.. Agenda Item .. in East Ayrshire (Scottish Water 2004). The Central Scotland Forest Trust (2006) note:

“Only a few years ago, Drumbow was one of the most derelict sites in North Lanarkshire with over 12 hectares of abandoned coal workings, including a substantial void, blighting the landscape of the Limerigg to Caldercruix Road.

After a major reclamation project, which included adding biosolids to create a fertile soil and a landscaping scheme, it is now a lush landscape with an emerging woodland. Footpaths offer walks which link to adjacent land and into the wider countryside.”

Figure 1. Drumbow, North Lanarkshire (Central Scotland Forest Trust 2006) (Reproduced by kind permission of the Central Scotland Forest Trust)

Similarly, Skares “won the brownfield category ‘Award for Wildlife Champions’ … in December 2003 for the ‘innovative approach to reclaiming a derelict brownfield site, to create a community woodland’”. (Scottish Water 2004)

The use of sludge in land reclamation is not expected to continue at the same rate as in 2005 due to reduced application rates leading to a lower demand for sludge as a remediation material and increased cost for taking sludge to the outlet (Scottish Water 2006a). This is considered below.

RAE/S3/07/18/.. Agenda Item .. ENERGY FROM POWER GENERATION AND INCINERATION Creating energy from waste in the form of Waste Derived Fuel (WDF) is a significant outlet for European wastewater sludges. WDF is classed as biomass, a source of renewable energy under the Renewable Obligation (Scotland) Order 2005, which guarantees licensed suppliers to provide increasing proportions of their electricity from renewable sources. This has the effect of guaranteeing a market for electricity generated from renewable sources (Cook and Dewar 2003). However there is currently no dedicated Biomass to Energy Plant (BTEP) in Scotland. At present, WDF in the form of dried pellets is co-fired with coal at the Scottish Power Longannet Station in Fife, at approximately 2% of the total fuel mass (Scottish Power 2006 and Jacobs Babtie 2005).

However, the EU Waste Incineration Directive (2000/76/EC) (WID) requires power stations to comply with strict emission and monitoring requirements. In a judgment issued in December 2004, the Court of Session held that the burning of sludge involved the burning of waste. This led SEPA to remove permission to co-fire sludge pellets at Longannet from 28 December 2005 onwards (Scottish Environment Protection Agency 2006a).

The judgment issued in 2004 is being appealed by Scottish Power. In spite of the judgement that it is illegal, co-firing of WDF at Longannet is ongoing (Scottish Environment Protection Agency 2006a). Scottish Power considered their options, and identified this (Jacobs Babtie 2005) as the short term BPEO currently available to ensure protection of the environment and human health based on waste management hierarchy decision making criteria.

Nevertheless, as Scottish Power is currently in breach of its authorisation, SEPA served an Enforcement Notice on Scottish Power requiring them to submit proposals for ceasing the burning of the sewage sludge pellets in the current non-WID-compliant facility as soon as possible (Scottish Environment Protection Agency 2006a).

The response to the Enforcement Notice was received on the 15 May 2006 and this confirms that Scottish Power propose to construct a dedicated BTEP to burn future sludge arisings. These proposals are currently being considered by SEPA (Scottish Environment Protection Agency 2006a).

The issue was recently raised at Question Time (Scottish Parliament 2006):

Mark Ballard (Lothians) (Green): To ask the Scottish Executive what its view is on the continuing burning of sewage sludge at Longannet power station, in light of the legal ruling that the practice should end in December 2005. (S2O-8747)

The Minister for Environment and Rural Development (Ross Finnie): The ruling by Lord Reed in the Court of Session was to refuse to grant declarator as sought by ScottishPower either that sludge

RAE/S3/07/18/.. Agenda Item .. pellets were not waste, or that the Scottish Environment Protection Agency's variation notice erred in law.

It is for SEPA to decide how to enforce the Waste Incineration (Scotland) Regulations 2003 (SSI 2003/170) in individual cases and I understand that SEPA is serving an enforcement notice requiring ScottishPower to come forward with proposals that would allow it to provide an alternative to burning the pellets in Longannet power station.

Mark Ballard: The minister will recognise the gravity of the situation, given the fact that 50 per cent of Scotland's sewage sludge, including sewage sludge from my region, the Lothians, is currently burned at Longannet. First, when the Greens previously raised the issue with the environment department, what action did the minister and Rhona Brankin take to discuss it with ScottishPower? Secondly, what information does the minister have from SEPA about when the situation at Longannet will be cleared up and Longannet brought in line with the legal ruling?

Ross Finnie: Right from the moment at which SEPA issued the enforcement notice we were fully apprised of the implications of how sewage sludge is dealt with in Scotland. Immediately upon Lord Reed's ruling we were even more apprised of that. As I said in answer to the first question, SEPA is seeking to enforce the notice in such a way that, with ScottishPower, it finds a solution that would provide an alternative means of disposing of sewage and that would comply with the regulations. That would be a practical and pragmatic step. I share the concern of Mr Ballard, and every other member, about the real difficulties of achieving that solution but, as the alternative is simply taking all that sewage to landfill, SEPA is right to seek a practical and pragmatic solution, without breaking the law. That seems sensible; I hope that members agree with me and SEPA.

RECYCLING TO AGRICULTURAL LAND “Sludge recycling to land requires a high degree of strategic planning from the outset, as there are a number of legislative, environmental, agricultural, economic and social factors to consider. These factors often interact with each other.” (Towers et al 2001)

The high nutrient and organic matter content of sludge, when applied to agricultural land in suitable concentrations, is known to improve soil structure, drainage and available water capacity (Davis et al 1999), and has been carried out across the world for over 40 years (Water UK 2006). Scottish Water (2004) describes the practice as “Perhaps the most intensively regulated and researched area of any recycling management activity. ...in recent years much attention has focussed on the regulatory controls and management procedures to ensure safety and confidence in the activity”.

RAE/S3/07/18/.. Agenda Item .. The current regulatory regime is supported and surpassed by a non-statutory agreement, entered into under contract between the farmer and water industry sludge supplier. Called the Safe Sludge Matrix, it consists of a table of crop types, cross referenced with guidance on the quality of sludge that can be used, and harvest intervals that should be respected. It is the farmer, rather than the sludge producer who is ultimately responsible for complying with the regulations in terms of crop planting and harvesting following sludge application (Water UK 2006).

In spite of these procedures and controls, and numerous studies (Water UK 2006) which conclude that the activity represents the best practicable environmental and economic option, it has engendered considerable “faecal aversion – an unease associated with the consumption of foodstuffs that at some point in the production chain have been exposed to land fertilised with biosolids” (Water UK 2006). Spreading sewage sludge on agricultural land is recognised as the BPEO, and is supported by the Scottish Executive, SEPA, European Commission, Royal Society for the Protection of Birds (RSPB), the Soil Association, and Surfers Against Sewage (Water UK 2006).

As noted by Towers et al (2001), and Scottish Water (2006a) the policy framework for sludge management is intricate and overlapping. It is therefore considered in more detail in the following section.

SLUDGE RECYCLING TO NON-AGRICULTURAL CROPS Sewage sludge can provide a significant proportion of the fertiliser requirements for industrial crops such as willow, and industrial oilseed rape (ADAS 2001a). Additionally, Scotland is well suited to growing the preferred crop source for biodiesel in Europe, oilseed rape. As yet, there is no biodiesel crushing plant in Scotland or the North of England, and Scottish Water (2006a) recognises that the associated environmental impact and costs of haulage are likely to be significant. Therefore, using sludge to fertilise oilseed rape could “offer potentially significant local outlets for wastewater sludge products in the future” (Scottish Water 2006a).

In June 2006, the Scottish Executive (2006a) announced a green fuels initiative whereby biosolids are used in place of chemical fertilisers to grow wheat, barley, or oilseed rape at farms in East Lothian, before being transported by sea to Europe for conversion into biofuel. It is estimated that up to five million litres of biofuels will be produced each year.

THE USE OF SLUDGE ON LAND As previously noted, the use of sludge in agriculture has attracted much public attention; therefore the industry has invested significantly in research into management procedures “to insure safety and confidence in the activity” (Scottish Water 2004 and 2006a). It is also important to differentiate between sludge recycled to agricultural land, and sludge recycled to non-agricultural land e.g. land reclamation and forestry.

RAE/S3/07/18/.. Agenda Item ..

SEPA published a Strategic Review of Organic Waste Spread on Land in 1998 (Scottish Environment Protection Agency 1998), this concluded that:

The current approach to the regulation and management of organic waste spread on land is inadequate and inconsistent, leading to practices which pose a risk to the environment and pose potential public, animal and plant health risks.

In 1998 the UK Government announced its intention of revising the regulations to provide further safeguards against the transfer of pathogens from sewage sludge to the food chain (Scottish Executive 2002). The Scottish Executive and DEFRA consulted (Scottish Executive 2002) on changes to the regulation of the use of sludge in agriculture in 2002. Regulations have not been made as yet, partly because the consultation showed that the voluntary agreement was being respected (Scottish Executive 2006b). In the meantime, the matrix is being observed voluntarily. Scottish Water (2006a) is in favour of strengthening the statutory requirements, however SEPA would require enforcement costs and SW is unable to pay under the current regulatory funding mechanism. Consideration of these issues and discussions between all parties are ongoing (Scottish Executive 2006b & Scottish Water 2006c).

Parliamentary Scrutiny The Scottish Parliament Public Petitions Committee and the Transport and the Environment Committee considered Petition PE 327 from the Blairingone and Saline Action Group between 2001 and 2003. This called for legislation to be “revised to ensure that public health and the environment are not at risk from the current practice of spreading sewage sludge and other non- agriculturally derived waste on land in Scotland”. Scottish Water (2006c) report that “other non-agriculturally derived wastes” includes animal entrails. The Scottish Parliament Transport and the Environment Committee (2002) reported on the broad issues relating to regulation in 2002, this report was debated (Scottish Parliament 2002) in October of that year. In 2003 the Public Petitions Committee reported on the health issues raised by the petition. The Transport and Environment Committee’s report stated that (2002):

The Committee believes the current regulatory framework… is inadequate. Maintaining the status quo is not acceptable.

Furthermore:

The Committee supports SEPA in its objective of strengthening the guidance relating to the storage and spreading of sewage sludge.

Petition PE 749 is also still under consideration. This is on behalf of the Newcastleton and District Community Council, calling for the Scottish Parliament to “seek a moratorium on the spreading of sewage sludge pending a full inquiry into its safety by a parliamentary committee and depending on

RAE/S3/07/18/.. Agenda Item .. the outcome of that inquiry, to as a minimum, initiate legislation at the earliest opportunity to discontinue the current exemptions for spreading sewage sludge and to ensure that it is subject to planning control, including a public local enquiry”. This has already been considered by the Public Petitions Committee, and the Communities Committee. It will be considered by the Environment and Rural Development Committee following the publication of Scottish Water’s National Sludge Strategy (the draft strategy is considered in the following section).

Recent Amendments to Regulations Action taken by the Executive and Parliament to date has addressed organic wastes as a whole, in such a way as to include sewage sludge. The Waste Management Licensing Amendment (Scotland) Regulations 2003 tightened up the use of sludge on agricultural land and in land restoration. The Waste Management Licensing Amendment (Scotland) Regulations 2004 relate to the use of organic wastes, including sewage sludge, on non-agricultural crops such as forestry. They amend the Waste Management Licensing Regulations 1994 and the Environment Act 1995, and came into force on 12 January 2005.

SEPA has used its powers under the 2003 and 2004 regulations to restrict the tonnage of sewage sludge allowed to be spread on non-agricultural crops (primarily forestry), or for land restoration to an ordinary maximum application rate of about 400 tonnes per hectare. This figure represents a considerable reduction on volumes which, in the past, may have been thousands of tonnes per hectare.

The rationalised regulatory framework requires an applicant to demonstrate to SEPA's satisfaction, in advance and according to statutory procedures, that any proposed use of sewage sludge will not pose risks to human health or the environment, and will provide agricultural crop growth benefit and/or ecological improvement. This is designed to ensure that exemptions are given only for benign activities. SEPA's powers of enforcement have also been increased to allow the modification of the register of exemptions. Unsatisfactory operators can now be removed from the register, and the spreading of certain types of waste can be banned, if they are shown not to be benign.

Most sewage sludge spread to land is spread under a so-called "exemption" rather than a full waste management licence. This does not mean that the process is unregulated, rather that a number of conditions are agreed before the activity commences. These conditions ensure that “the types and quantities of waste submitted to the exempt activity and the methods of disposal or recovery must not endanger human health and must not use processes or methods which could harm the environment by; presenting a risk to water, air, soil, plants or animals; causing nuisance through noise or odours; or adversely affecting the countryside or places of special interest.” (Scottish Environment Protection Agency 2003)

Supporting controls

RAE/S3/07/18/.. Agenda Item .. The application of sewage sludge to agricultural land in Scotland is regulated by the Code of Practice for Agricultural Use of Sewage Sludge (Scottish Executive 2005b), which complements the Sludge (Use in Agriculture) Regulations 1989 (as amended).

These require producers of sludge to test it for certain hazardous chemicals, and also specify limits on the concentrations of these chemicals in the soil. They require soil to which sludge is intended to be applied to be tested prior to the application of sludge, and this information can be used in conjunction with the information about the concentration of trace elements in the sludge to help ensure the maximums specified are not exceeded. Once soil has been tested it has to be tested again at 20 year intervals. These tests would be done by the sludge producer i.e. Scottish Water.

The Code of Practice also sets time limits between the application of the sludge and the agricultural use of the land for different purposes. These are shown below (Scottish Executive 2005b):

Agricultural use Minimum time period before application of treated sludge Application to growing crops Cereals, Oilseed rape Three weeks before grazing or harvesting or Grass Turf 3 months before harvest Fruit trees 10 months Applied before crops are growing Cereals, grass, sugar Three weeks before grazing or harvesting beet, oilseed rape etc. Fruit trees, Soft fruit 10 months before harvest Vegetables, Potatoes 10 months before harvest if crops are in contact with soil and can be eaten raw; not to be applied to land that includes seed potatoes

Safe Sludge Matrix As noted above, the UK Government announced its intention of revising the regulations to increase safeguards against the transfer of pathogens from sludge to the food chain in 1988 (Scottish Executive 2002). These proposed changes have already been reflected in the Safe Sludge Matrix (ADAS 2001b), a UK-wide voluntary agreement reached in 1999, drawn up by Water UK (representing the water companies and the Scottish water authorities) and the British Retail Consortium, with the involvement of the Scottish Agricultural College.

In short, the matrix (Scottish Water 2006a):

• introduces a ban on the use of untreated sludge on food production land, and on industrial crops grown on agricultural land • extends the time period between application and harvest over and above that recommended in the Code of Practice (sets specific post

RAE/S3/07/18/.. Agenda Item .. application cropping/grazing intervals according to the type of food crop grown) • defines treatment standards and controls for both conventionally and enhanced treated sludge • improves crop type definition

In these ways the matrix goes beyond the requirements of the Sewage Sludge Directive.

RAE/S3/08/18/13 For information

RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

RECENT DEVELOPMENTS WITHIN THE COMMITTEE’S REMIT

Note by the Clerk: Each time an agenda and papers for a meeting are circulated to members, a short paper like this one will also be included as a means of alerting members to relevant documents of general interest which they can follow up through the links included.

Rural housing

Homes for Scotland have provided information on the effect the current economic downturn is expected to have on future house building. This can be viewed at: Developing Better Housing in Scotland : Homes for Scotland : Sustainable Homes

At the Committee meeting on 24 September, Susan Torrance of Highland Housing Association referred to a paper from the Joseph Rowntree Foundation entitled “Housing market recessions and sustainable home-ownership”. The paper can be viewed online at: http://www.jrf.org.uk/knowledge/findings/housing/2254.asp

SPICe Briefing

SPICe have provided information on the Croft Housing Grant Schemes. This note provides further information on the points raised by the Scottish Crofting Foundation in relation to the Crofting House Grant Scheme and the scheme that preceded that – the Crofter Building Grants and Loans Scheme. The note is reproduced at Annexe A below.

Brussels Bulletin

The fortnightly Brussels Bulletin produced by the Parliament’s European Officer is available online at: http://www.scottish.parliament.uk/s3/committees/europe/documents/BrusselsBulleti n.htm

RAE/S3/08/18/13 For information

ANNEXE A – SPICEe BRIEFING CROFT HOUSING GRANT SCHEMES

Introduction

This note provides further information on the points raised by the Scottish Crofting Foundation in relation to the Crofting House Grant Scheme and the scheme that preceded that – the Crofter Building Grants and Loans Scheme.

In their submission, the Scottish Crofting Foundation argued that:

• “Government support for crofter housing through the Crofter Building Grants and Loans Scheme (CBGLS) and its successor the Croft House Grant Scheme (CHGS) has not increased in cash terms since 1986, when it covered 82% of average total building costs. It now covers 14% of average costs. RHOGS [the Rural Home Ownership Grants], which gives a higher level of means tested support, is not available to crofters.

• The removal of the loan element from crofter housing support is now generally acknowledged to have been misguided.

• The Crofter Building Grants and Loans Scheme was regarded as being the best value for public money in rural housing provision.”

Background

The Crofter Building Grants and Loans Scheme (CBLS) dates back to 1911 and was implemented in its most recent form through the Crofters (Scotland) Act 1993. Its purpose was to assist crofters for both building new houses and the improvement and extension of existing houses.

In 2003 it was reported that spending on the scheme has been in the region of £2.3m to £2.7m per annum for the preceding years out of an annual budget of £3.4m.1

Applicants could make use of both the grant and loan element of the scheme. The grant and loan limits were revised in 1990 and remained the same until the schemes ended in 2004. The limits were:

1 http://www.communitiesscotland.gov.uk/stellent/groups/public/documents/webpage s/cs_006246.hcsp RAE/S3/08/18/13 For information

To build a new house To improve the existing croft house Grant £11,500 £2,000 Loan £17,500 For eligible work, up to a maximum loan of £10,500

In 2003 the Scottish Executive consulted on changes to the CBLGS2. The consultation argued that, “Ending new loans would enable the £1.2m a year currently lent to be channelled into increased grants. Ending loans would also simplify administration arrangements”. It was also argued that:

“Private loans (or mortgages) are now more readily available, enabling new housing projects assisted under the CBGLS to combine government assistance with private borrowing. This is borne out by a random selection of schemes chosen from the last few years. These showed 50% of new housing projects made use of a private loan. In essence, ending loans would substitute a private lender for the Department for the entire loan element of the project. (For house improvements, the Government loan is the principal element, and only 8% of a sample of recent improvement schemes had an additional private loan.)”

The key arguments for and against the removal of the loan were summarised as:

FOR AGAINST

Allow grants to increase May disadvantage low-income applicants (and to guarantee could Allow more projects to proceed be costly)

Increase efficiency of administration Lower leverage of funding

Simplify the scheme Loss of income to the Department as current rates offer a good return Encourage independent action

Cheaper loans currently commercially available

The scheme would be easier to administer locally

Ross Finne MSP announced in August 2004 that changes would be made to CBGLS, including the removal of the loan element, and that a new scheme would be introduced from 2005.

http://www.communitiesscotland.gov.uk/stellent/groups/public/documents/webpages/cs_006246.hcsp

RAE/S3/08/18/13 For information The Croft House Grant Scheme (CHGS)

The CHGS was introduced from 1 January 2005. The scheme is based entirely on grants and is geographically targeted. Grant levels are determined by priority areas with the highest grant maxima available in the more remote and fragile communities.

The grant rates for a new house are:

Geographic Priority Area

High Standard Low

New House grant £22,000 £17,000 £11,500

The rates for rebuilding and improvement grants are

Geographic Priority Area

High Standard Low

Rebuilding and 40% of costs up to a 30% of costs up to a 20% of costs up to a Improvement maximum grant of maximum grant of maximum grant of grant £22,000 £17,000 £11,500

Loans already made under the CLGS scheme were not be affected by the changes.

The Crofting Foundation suggested changes to the current CHGS. The Committee of Inquiry on Crofting also argued that there should be an enhanced CHGS.

The Scottish Government’s response to the Committee of Inquiry on Crofting3 was published on 1 October 2008. The response included the following points:

“28. The Government proposes to take forward an immediate review of the Croft House Grant Scheme ( CHGS) alongside two other rural housing grant schemes (the Rural Home Ownership Grant and the Rural Empty Property Grant). The review will consider the recommendations made by the Committee of Inquiry on Crofting, including the level and conditions for support. 29. In order to keep land in crofting tenure, the Government shares the Committee of Inquiry's view that specific crofting support arrangements should be limited to houses built on croft land. However, this is crucially dependent on crofters being able to access loans for house building without decrofting. Therefore, it will not be possible to reach a conclusion on this until it is known whether or not lending institutions will be prepared to lend using a crofting tenancy as security; or whether alternative means of securing loans, such as a Government guarantee, need to be explored. 30. The Government is not attracted to the proposal to reintroduce the loan element of the Croft House Grant Scheme since it considers the private sector

3 http://www.scotland.gov.uk/Publications/2008/09/25154550 RAE/S3/08/18/13 For information to be better equipped to act where a person defaults in the repayment of a loan. It would prefer in principle to proceed by way of shared equity arrangements enabling the public sector to acquire a share in the value of any housing constructed. However the Scottish Government will continue to investigate loan guarantee schemes which operate in other areas of rural life to see if any of these might provide a workable model for croft housing provision. This will be done as part of the review of rural housing.”

Kate Berry SPICe 2 October 2008