Report on the Financial Memorandum of the Crofting Reform (Scotland) Bill

Remit and membership

Remit:

1. The remit of the Finance Committee is to consider and report on-

(a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them;

(b) any report made by a committee setting out proposals concerning public expenditure;

(c) Budget Bills; and

(d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund.

2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business.

3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue.

(Standing Orders of the Scottish Parliament, Rule 6.6)

Membership:

Derek Brownlee
Malcolm Chisholm
Linda Fabiani
Joe Fitzpatrick
Tom McCabe (Deputy Convener)
Jeremy Purvis
Andrew Welsh (Convener)
David Whitton

Committee Clerking Team:

Clerk to the Committee
Jim Johnston

Senior Assistant Clerk
Terry Shevlin

Assistant Clerk
Allan Campbell

Report on the Financial Memorandum of the Crofting Reform (Scotland) Bill

The Committee reports to the Rural Affairs and Environment Committee as follows—

Introduction

1. The Crofting Reform (Scotland) Bill (“the Bill”) was introduced in the Parliament on 9 December 2009. The Rural Affairs and Environment Committee has been designated as the lead committee on the Bill at Stage 1.

2. Under Standing Orders Rule 9.6, the lead committee at Stage 1 is required, amongst other things, to consider and report on the Bill’s Financial Memorandum. In doing so, it is required to consider any views submitted to it by the Finance Committee (“the Committee”).

3. At its meeting on 15 December 2009, the Committee agreed to adopt level two scrutiny in relation to the Bill.¹ The Committee took oral evidence from Scottish Government and Registers of Scotland officials at its meeting on 2 February 2010. The Official Report of this meeting can be found on the Parliament’s website.²

4. In addition, the Committee received written evidence from—

• Argyll and Bute Council;
• Crofters Commission;
• Registers of Scotland;
• Scottish Land Court;
• Scottish Legal Aid Board; and
• Scottish Rural Property and Business Association Ltd.

5. This written evidence is published as the Annexe to this report.

BAckground

The Bill

6. According to the Bill’s Policy Memorandum, its objectives are to create a regulatory and governance framework that will reverse the decline of crofting and contribute to sustainable economic growth in remote, rural communities. Some of the main provisions of the Bill are concerned with:

• the creation of a new crofting register, which will clearly define the extent of, and interests in, a croft and other land held in crofting tenure;
• allowing for directly elected members of the Crofters Commission;
• creating a new process for addressing absenteeism and neglect on croft land; and
• tackling speculation on the development value of croft land.

Summary of main costs outlined in the Financial Memorandum

7. The Financial Memorandum sets out in detail the costs that the Scottish Government considers are associated with the Bill and this report does not seek to replicate this information. Rather, it provides background on some of the more significant costs that were commented on in the evidence received by the Committee.

Crofting Register

8. The Scottish Government will meet the capital costs (estimated to be in a range between £1.05 million and £1.6 million) and set-up project costs (estimated at £243,285) of establishing a new Crofting Register.

9. The annual running costs of the Register are estimated as between £110,000 and £164,000. The Register will be run on a full cost-recovery basis. The cost will depend on the level of automation and the service charge of the contractor. Initial registration fees are estimated to be between £80 and £130, with the fee for subsequent registrations between £40 and £65. Depending on the scheme adopted, the Financial Memorandum envisages possible economies of scale – for example, reduced fees if all crofts in a township are registered as part of one application. The Memorandum states that the regulatory trigger points which would require registration may only occur once in a generation. It is estimated that there may be around 1,300 registration applications per annum. Crofters would incur individual costs associated with registering their croft on the Crofting Register.

10. The registration requirement is triggered by the transfer of ownership of any land on which a croft is situated. Cost for landowners would, therefore, be similar to those for a crofter – which may be significant for an estate which comprises a large number of crofts.

11. Crofters may be able to access legal aid to pay for the cost of any boundary dispute arising from the establishment of the Crofting Register. The Financial Memorandum states that it is particularly difficult to provide accurate estimates of costs with regard to legal aid, which depends on factors such as the number and nature of appeals brought and the eligibility of individuals. The Memorandum states that the average legal aid cost of a case at the Land Court is £5,655, and provides an illustrative gross cost of £113,000 per annum if 2% if all registration applications were appealed.

12. The Scottish Land Court could incur some additional costs as a result of the proposal to enable persons with an interest to appeal against a provisional registration on the Register. Currently, the Court hears on average six croft boundary appeals per annum a year, at an average cost of £3,000. Based on the assumption that there will be 1,300 registration applications a year, the Memorandum provides an illustrative example of 2% of these applications being appealed, resulting in 26 cases per annum, meaning court costs of £78,000.

Action to address absenteeism and neglect.

13. The Bill envisages that there may be a more proactive approach by the Crofting Commission to enforcing crofting regulation, which could increase the number of appeals heard by the Scottish Land Court against the Commission. The Financial Memorandum does not predict these costs to the Commission given the various factors involved. It does refer, however, to the costs associated with court action outlined previously.

14. In the event of contacts being made to crofters in relation to absenteeism and neglect, legal aid would again be available to them. If there were an increase in appeals against regulatory decisions this could also result in a potential increase in the administrative costs for the Land Court of an average of £3,000 per appeal.

Summary of evidence

Issues raised in written evidence

15. Written evidence from the Scottish Rural Property and Business Association Limited set out a series of criticisms of paragraphs 140 and 141 of the Financial Memorandum, which are concerned with the costs to landowners of the new crofters register. For example, the SRPBA considered that:

• the financial implications of registration were not fully recognised;
• it was unreasonable that the acquirer of an estate should be expected to meet the costs of registration of each croft;
• there was an incorrect assumption that the costs of registering crofts at the estate owner’s expense could be met from rental income from the crofts.

16. The Crofters Commission considered that many aspects of the Bill could have resource implications, in terms of workloads and staff time, which would depend on a number of currently unknown factors. For example, the level of demand in terms of various types of applications; decisions on charges for applications; the way that the new Commission chose to structure its staff; and, in particular, the contents of the Commission’s Plan.

17. Specific issues raised in the submission related to, for example, the provision to allows absent crofters or owner-occupiers to apply for consent to be absent from the croft. The Commission must make a decision on such applications within 28 days and was concerned that this could lead to a significant one-off pressure on the Commission, leading to “workload management pressure” (although it acknowledged that this could be mitigated).

18. A further new duty on the Commission relates to the fact that where there is neglect and misuse, it will have to give the relevant person written notice informing them that the Commission considers that a duty is not being complied with. Again, the Commission says that it is difficult to estimate the number of cases that would arise and again makes the point that without a significant allocation of resources, progress would risk being slow.

19. In general, the Commission considered that the proposed changes would be manageable within existing resources but only if work could be phased or deferred; if there were a high initial demand with the Commission being required to act within a statutory time limit, then the Commission may be “struggling” in the short term.

20. Written evidence provided by other bodies was generally content with the information provided in the Financial Memorandum with some relatively minor exceptions. The Scottish Land Court suggested that the costs for crofters of advertising a first public notice of registration to the Crofting Register had not been properly reflected, while both the Court and the Registers of Scotland questioned the possible cost to crofters of having to obtain adequate plans of their holdings.

Issues raised in oral evidence

21. In oral evidence, the Committee questioned whether the Financial Memorandum accurately reflected all the costs that could fall on crofters as a result of the Bill, in particular the requirement to register crofts on the crofting register. Scottish Government officials explained that suggested additional costs would not materialise, for example, there would be no obligation on crofters to employ surveyors to map the area of their croft (although they could decide to do so).³

22. The Committee also questioned whether all the possible costs for the Crofters Commission had been accurately described. Members sought clarification on whether the Commission would have to undertake additional work to combat the problem of absentee crofters and whether it would have to go to the Land Court in the event of a dispute about who owned a croft. On the latter point, Scottish Government officials explained that whoever raised the objection would go to the Land Court, rather than that responsibility falling to the Commission. Officials also explained that the Scottish Government had already provided £100,000 of additional resource to begin to tackle absenteeism.⁴

23. It was recognised that there would be some additional costs for the Commission in relation to the register – for example, notifying people with land adjacent to a croft that it had been registered – but that these would be met through existing provision. On the crofting register, the Committee was interested to note the Scottish Government’s intention that the set-up costs would be met from the sale of unused land outside Inverness. This intended approach was not clear from the Financial Memorandum.

Appeals to the Scottish Land Court

24. The Financial Memorandum notes that the Scottish Land Court could incur additional costs because those with an interest could appeal against a provisional registration on the Crofting Register. Up to 1,300 registration applications a year to the Crofting Register are predicted in the first two years. While the memorandum stressed the difficulty in projecting the number of appeals to the Scottish Land Court, it provided an illustration showing that a 2% appeal rate would cost the Court £78,000.

25. In written evidence, the Scottish Land Court acknowledged the difficulty in predicting a figure, but questioned why the 2% figure had been chosen and said it had no way of knowing whether this was an accurate prediction. By illustration, the Court said that if the appeal rate turned out to be 5%, this would give it a projected additional cost of £225,000

26. In oral evidence, the bill team acknowledged that it was not possible to state accurately how many crofters had boundary disputes that were lying dormant and said that the 2 per cent “illustration” could have as easily been 1 or 3 per cent.⁵

conclusions

27. The Committee notes that some of the bodies that provided written evidence questioned the accuracy of some figures outlined in the Financial Memorandum and also highlighted a degree of uncertainty around some costs.

28. While some of the costs in question may be relatively minor, the Committee considers that more detailed information on the costs falling, in particular, to the Crofters Commission and individual crofters could have been provided. The Committee recommends that these matters are pursued by the Rural Affairs and Environment Committee when it takes oral evidence from the Scottish Government.

Annexe: written evidence

This annexe contains written evidence received from the following organisations—

• Argyll and Bute Council;
• Crofting Commission;
• Registers of Scotland;
• Scottish Land Court;
• Scottish Legal Aid Board and;
• Scottish Rural Property and Business Association Ltd

SUBMISSION FROM ARGYLL AND BUTE COUNCIL

Consultation

1. Did you take part in the Scottish Government’s consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Submitted a formal response to the draft Bill consultation raising concerns as to the financial implications to the LA. No specific financial figures were quoted in the response.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Key areas of concern relative to impact on LA resources, both staff and financial, have been removed. The remaining relevant element relates to the elections to the reformed CC.

3. Did you have sufficient time to contribute to the Scottish Government’s consultation exercise?

Always difficult to calculate the actual financial costs to something that you have not yet undertaken especially where you are not involved in the details of the process

Costs

4. If the Bill has any financial implications for your organisation or people your organisation represents, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

Bill highlights area where there will be a financial implication for the LA.

5. Are you content that your organisation, or people your organisation represents, can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?
The Financial memorandum associated with the Bill stated that the Government will reimburse local authorities for the costs incurred of holding the elections. Providing this is the case the LA should not incur costs for which they do not have resources. If the later is not the case then this would be unacceptable.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?
Without further information not possible to say .

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?
No comment to offer re this.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?
Not sufficiently informed on the matter of subordinate legislation to be able to comment however if elections details are to be covered by subordinate legislation then there may be addition al costs that are uncovered.

Submission from The Crofters Commission

Consultation

1. Did you take part in the Scottish Government’s consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

In preparing the financial memorandum the Bill team approached the Crofters Commission on a number of occasions for information to assist them in this task. We did comment that additional workloads might arise from some of the proposals, but that the impacts would depend on a number of unknowns.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

The Financial Memorandum takes an overview, but please see the comments below. We were provided with additional resources at the start of this year from Scottish Government to develop our policy and implementation on absentee action. Also staff formerly employed on CCAGS management and Rural Direct/ HICES have been re-assigned within the Commission. These additional staff resources have now all been deployed, principally in the new Strengthening Crofting team, which is undertaking a new initiative on croft absenteeism and occupancy and on the Commission’s new duties as a planning key agency. It is assumed that future budgets will continue this level of resourcing.

3. Did you have sufficient time to contribute to the Scottish Government’s consultation exercise?

The Crofters Commission chose not to formally respond to the consultation but supplied information as and when requested.

Costs

4. If the Bill has any financial implications for your organisation or people your organisation represents, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

5. Are you content that your organisation, or people your organisation represents, can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

In answer to the above 3 questions, please see Annex A to this reply, which describes those provisions which may have resource implications;

Wider Issues
7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

The Commission is currently considering how it might seek to measure the wider policy contributions of its actions – for example how promoting occupancy of crofts can contribute to economic sustainability, social cohesion etc. It would be difficult to see how the Financial Memorandum could make much inroad into such important but difficult issues without research and measurement over a reasonable stretch of time.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

This has been touched on in the Annex A below.

ANNEX A
ESTIMATED POSSIBLE FINANCIAL IMPACTS OF BILL PROPOSALS
ON THE CROFTING COMMISSION

INTRODUCTION

1. We have attempted to assess which aspects of the Bill might have resource implications. However, it is clear that many of these will depend on a number of factors which at this stage remain unknown. These factors include the level of “demand” – in terms of the various types of applications - at any time; decisions on such matters as charges for applications; the way that the new Commission chooses to structure its staff and to revise its processes and procedures;. And perhaps most significantly, the contents of the Commission’s Plan, as agreed with Scottish Ministers. Any significant impacts would be in terms of workloads/staff time.

2. Much of the work of the proposed Crofting Commission will be similar to that currently carried out by the Crofters Commission. As noted above, it will of course be open to the new Commission to change its structure, its procedures, its priorities and its policies, all of which could have impacts on costs.

3. The Committee should note that in some cases, the key issue for the Commission might be capacity at any one time rather than overall cost. Some provisions require the Commission to take action in certain circumstances If the Commission is able to phase or defer this area of work then this should be manageable within existing resources. But if there is a high initial demand, and the Commission is required to act within a statutory time limit, then in the short term at least the Commission might be struggling.

4. In trying to assess the workload impacts of the Bill, we have worked on the basis of existing experience within current legislation and processes. However, the work involved in many kinds of regulatory casework can vary enormously. A simple straightforward case, with no objections, can be dealt with quickly and cheaply; another case might require considerable correspondence, on-the-ground inspection, site visit by Commissioners, a public hearing, and potentially an appeal to the Land Court. The enactment of a new Bill, the policies and priorities of the new Crofting Commission’s plans, and a host of other factors not directly related to the Bill, could influence what crofters, landlords and others decide to do, and this in turn will have a direct influence on the nature, volume and complexity of the Commission’s workload. The Commission’s key asset – and cost – is its highly–trained and specialised staff: effective and efficient deployment of these resources will be a critical component of any plan made by the proposed new Commission.

5. We note that Schedule 1, paragraph 2 (2) (d), would allow the Commission to charge in respect of functions prescribed by Scottish Ministers. We have not made any assumptions here about whether or how that provision might be used.

6. In our assessment, the following provisions of the Bill need to be considered as potentially having resource implications – listed in the order in which they appear in the Bill.

PART 1

Section 1: The Crofting Commission

7. A change of name will require some one-off expenditure, in terms of changes to documentation, signage, forms etc. This is unlikely to be a significant cost.

Section 2B: Annual Report

8. The scope of the report is wider than that currently required, in that it would require the Commission to assess crofting issues and also the contribution made to sustainable development; and also to consult each relevant local authority and HIE.

9. There would be a relatively minor staff time cost for the consultation (it is likely that Commissioners would also wish to be involved in that aspect). The impact would only be potentially more significant if the Commission was expected to conduct research or survey work in order objectively to assess or quantify contribution to sustainable development. The Commission itself would be unlikely to have the necessary staff resource or expertise to that .

Section 2C: Commission Plan

10. The duty to produce a Plan in some ways mirrors the current practice of producing Corporate and Operational plans. The main additional task is the requirement to consult. As with the Annual Report, this would require some additional staff (and Commissioner) time. However, since the Commission currently would look to consult on significant policy proposals, the net additional cost is unlikely to be significant.

PART 2

The Crofting Register

11. The key issue for the Commission arising from this Part of the Bill is the extent to which it would introduce tasks over and above those which are already undertaken as part of our existing regulatory and register of crofts work.

12. Section 6 of the Bill appears to require amendment to the existing processes currently undertaken when a regulatory application is received. At present the register is consulted on receipt of a regulatory application and the relevant details of the registration would be checked at that time. The proposed process will add some additional work on receipt of an application, but we would need to clarify in particular the precise nature and scope of the “consistency check”, and of any fee-handling work.

13. One area of additional work is the requirement under Section 11 of the Bill for the Commission to notify persons mentioned in subsection (3) of that section. The amount of work involved in this process will vary with each case, and whilst the applicant will be required to provide the details of neighbouring tenants and the landowner, the Commission will need to confirm these details to ensure all necessary persons are notified. The new Commission will need to devise an efficient but reliable method to ascertain this information, as some cases could risk generating a considerable amount of investigative work.

14. In a relatively small proportion of cases, the Commission, having checked the applicants details with the existing Register of Crofts (ROC) may find a discrepancy. In these circumstances the Commission will need to check the history associated with the croft to ensure that the ROC is accurate. This would involve some additional research.

15. We are assuming that no significant investment will be needed in Information Technology in order to achieve compatibility with the Registers of Scotland systems. It is further assumed that the Keeper will retain all of any fee charged for registration; and that the Commission will not normally be charged a fee for accessing information on the new Register of Crofts.

PART 3

Consent to be Absent

16. Section 22 of the Bill allows absent crofters or owner-occupiers to apply for consent to be absent from the croft. Subsection (5) requires the Commission to make a decision on such an application within 28 days.

17. The main concern here is one of capacity to deal with a large “pulse” of applications. There could be significant one off pressure on the Commission associated with this duty. Currently the Commission is resourced, through the new Strengthening Crofting team, to taking absentee action on about 150 cases per year, and the Commission has control over the workload management. Under the new proposals the flow of work into the Commission could become reactive as a result of absentee tenants requesting consent from the Commission to be absent. In these circumstance the Commission would, under the Bill proposals, have a duty to take action in 3 steps with each step being allocated tight statutory time limits. As a result the Commission may face workload management pressure (which it might to a certain extent mitigate through employing and training additional staff on a short term basis.)

18. There are currently 1462 tenants known to be in this category and the work load pulse will depend on the percentage that apply for consent at any one time. In the event of an initial pulse arising, the workload would likely thereafter settle to a relatively steady rate.

19. One key unknown here is how the new Commission’s Plan might propose to deal with applications for consent to be absent, in terms of the policies and considerations which would inform the Commission’s decisions on when and on what conditions to grant consent.

Misuse And Neglect (Breaches Of The Statutory Conditions)

20. Section 26 provides details on the Enforcement of Duties of Crofters and Owner Occupiers while 26 B sets out the process for dealing with Suspected Breaches of Duty. These relate to the statutory conditions of tenure defined in Section 5 of the Bill.

21. The Bill significantly changes the Commission’s role in terms of neglect and misuse from the current situation as provided in the 2007 Act. At present the Commission only acts when a complaint is received, and the decision making body is the Scottish Land Court. The Bill introduces a new duty on the Commission, that it must, unless they consider that there is good reason not to, give the relevant person written notice informing the person that the Commission consider that a duty is not being complied with.

22. It is extremely difficult to estimate the number of cases we could expect to deal with in any one year. Furthermore, it is unclear how the Commission would identify potential cases of neglect and misuse. As a guide it is estimated that of the 18,000 registered crofts, 14,000 are occupied and some 8-10,000 worked. . Currently the Commission has not allocated any definite resources to this type of work; so any concerted programme of action to tackle neglect and misuse would require to be accommodated within, say, whatever succeeds the Strengthening Crofting team. It does appear that the new Commission would be able to choose the pace at which it addressed this work, but without significant resources allocated to it progress would risk being slow. In a number of cases absenteeism and neglect may be linked.

PART 4

Enlargement of Crofts

23. Section 30 of the Bill provides that an owner and crofter may apply jointly to the Commission for a direction to enlarge a croft. At present this can be done by agreement without the Commission being required to make a direction. However, we do not expect this new duty to be onerous.

Obtaining Commission approval or consent

24. Section 31 introduces changes to the special and general conditions on notification of applications to the Commission under Section 58A of the 1993 Act. Whilst special conditions have been removed, two additional general conditions have been added which are: the residency/use of land requirement and any plan of the Commission under section 2C. The net impact of these changes is not predictable, but the new Commission will need to address these changes in its Plan, with a view to achieving efficient decision making processes in respect of regulatory applications. .

25. PART 5

Additional Provisions

26. Section 34 provides for incidental, supplementary or consequential provisions to be introduced by order. Any cost implications of such orders would naturally need to be assessed at the time.

SCHEDULE 1

Elections

27. Paragraph 7 envisages the election of members of the Commission. Provision of £25,000 has been made to enable the Commission to compile an electoral roll and this seems sufficient to cover any costs to the Commission.

Staff and employees

28. Paragraph 10 of Schedule 1 would allow the new Commission, in addition to being serviced by Scottish Government staff as at present, employ its own staff as the Commission consider appropriate. However, this power is limited by Ministerial direction.

29. It is not possible to predict how (if at all) the new Commission might choose to make use of that power. However, it is worth noting that at present the Commission’s staff come within the ambit of Scottish Government payroll, human resources and related services provided centrally and this would continue for Scottish Government staff provided to the Commission.. However, should the new Commission employ some of its staff directly, they would presumably need to make arrangements for such services as payroll management, human resources and pay negotiations. This would be done in accordance with the principles of efficient government which encourages shared services.

SCHEDULE 2

Requirement to determine all assignations

30. Schedule 2, paragraph 3 (7) (2) of the Bill repeals subsection (2) of section 8 the Crofters (Scotland) Act 1993. One effect of this is that the Commission would need to determine all types of assignation. This is likely to lead to some additional casework, although it is difficult to estimate the impact of this, especially since it would be open to the new Commission, as part of its Plan, to adopt certain policies for some types of assignations which could lead to those being on average faster to process than others. There is no discretion in terms of timing: if an application is received the Commission must determine it.

FINANCIAL MEMORANDUM: UNIT COSTS

31. The Memorandum includes some estimated Unit Costs for various types of regulatory applications (page 25, paragraph 120 of Financial Memorandum). These figures were taken from the Crofters Commission Annual Report. They represent rough estimates based on best information at the time, and they all include an allocation on a percentage basis of fixed, administration and other costs. Since then, the Commission has introduced a new time recording system which will allow more accurate and detailed task-based data. The Commission is also well down the road of reviewing all of its processes and procedures, which should among other benefits contribute to reducing unit costs on at least some types of regulatory work. The Commission is also due by the end of February 2010 to co-locate with Scottish Natural Heritage and others to Great Glen House, which will lead to year on year savings on rental expenditure as well as providing new opportunities for shared services.

N Reiter
Chief Executive
Crofters Commission
28 January 2010

SUBMISSION FROM REGISTERS OF SCOTLAND

Consultation

1. Did you take part in the Scottish Government’s consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

No. (Registers of Scotland previously provided financial estimates to the SG Future of Crofts Team on anticipated capital and running costs of the proposed Crofting Register and the potential level of registration fee required to cover those costs. Those estimates were referenced in the consultation exercise run by SG.)

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Yes.

3. Did you have sufficient time to contribute to the Scottish Government’s consultation exercise?

Yes.

Costs

4. If the Bill has any financial implications for your organisation or people your organisation represents, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

Yes.

5. Are you content that your organisation, or people your organisation represents, can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

The Bill proposes that the capital and set up costs for the Crofting Register will be met by Scottish Government and that the annual running costs for the register be covered by registration fees payable by parties applying for a registration. We are content with those proposals.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

Yes.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

Registers of Scotland's interest is limited to the provisions regarding a new Crofting Register. We are content the associated costs are accurately reflected.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

An application to register a croft in the Crofting Register for the first time will require to be accompanied by a plan depicting the boundaries of the croft. Registers of Scotland will provide guidance on the criteria such a plan must meet. The Bill does not prescribe how crofters obtain such a plan and there is no requirement that the plan be drawn up by a surveyor or other land professional. We would intend to offer to supply to crofters an extract of the Ordnance Survey map on which the croft boundaries could be depicted. The cost to the crofter should they wish to purchase such a map from Registers of Scotland would be in the region of £15.

Based on the Bill as it presently stands and our discussions with SG we do not envisage any further additional costs relating to the Crofting Register, other than those documented in the Financial Memorandum. We are not in a position to comment on the other matters covered by the Bill.

SHEENAGH ADAMS
Keeper of the Registers of Scotland

11 January 2010

SUBMISSION FROM SCOTTISH LAND COURT

Consultation

1. Did you take part in the Scottish Government’s consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Yes

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

To an extent, but the comments made during the consultation exercise were in very general terms. We have given further thought to the financial implications now that the Bill and its accompanying documents have been published and this is reflected in our comments below.

3. Did you have sufficient time to contribute to the Scottish Government’s consultation exercise?

Yes

Costs

4. If the Bill has any financial implications for your organisation or people your organisation represents, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The financial implications of the Bill for the Scottish Land Court are entirely dependent on the number of applications to the Court which the legislation generates. This is very difficult to predict and this is acknowledged in paragraphs 136, 142, 149 and 158 of the Financial Memorandum.

In relation to part 2 of the Bill, the Court’s experience is that there is a good deal of uncertainty about the precise boundaries of many crofts. The requirement for registration will bring to light cases where neighbouring crofters are not in fact agreed as to their boundaries, but where, for one reason or another, the dispute is dormant. The number of appeals will depend on a variety of factors including the personal circumstances and attitudes of the people involved and the perceived value of the land in question.

The Court does have some concern that the figures given in paragraph 142 of the Memorandum may underestimate the possible number of registration applications and accordingly the possible number of appeals to the Court, at least in the first few of years of operation of the Crofting Register. In 2009, for example, the Court received 224 and disposed of 235 applications. Of the latter, 155 were for resumption of a croft or part of a croft (including resumptions from common grazings) and another 48 were applications of various types relating to crofts. This suggests there could be another 200 or so events per year triggering first registration resulting from applications to the Court, in addition to those triggered by applications to the Crofters Commission.

The figures in paragraph 142 are also based on the “normal” situation. However the various events specified in the Bill that will trigger first registration include the transfer of ownership of the land on which the croft is situated, an event which at present does not automatically generate an application to the Crofters Commission or the Land Court. The change of ownership of an estate which has a large number of crofts could potentially result in a large number of applications for first registration requiring to be dealt with at the same time. If a significant proportion of these were appealed to the Court it would obviously be an additional pressure on the Court’s resources, which would be difficult to plan for in advance.

The Financial Memorandum estimates that perhaps 2% of registration applications may be appealed to the Land Court. It does not explain why the figure of 2% has been chosen and the Court has no way of knowing whether or not this is an accurate prediction.

It should however be noted that, if there are 1500 registration applications, a 2% appeal rate would result in around 30 additional cases for the Court. If the appeal rate turned out to be 5%, this would represent 75 additional cases per year, which would increase the Court’s total workload by about a third. Using the average figure of £3000 per appeal given in the Memorandum, this would give a projected additional cost to the Court of £225,000, assuming that all go to a hearing. A proportion of appeals to the Court do settle prior to a hearing, but these still involve the Court in considerable administrative work.

In relation to part 3 of the Bill, the majority of appeals mentioned in paragraph 149 could probably be heard in Edinburgh. This would result in some saving in terms of travel and subsistence costs for members and staff of the Court, as compared with boundary disputes, where the Court would normally travel to inspect the site and hold the hearing in a local venue. There would however still be administrative costs associated with processing the appeal and additional demands on the judicial resources of the Court.

5. Are you content that your organisation, or people your organisation represents, can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

Although the Court would be able, other things being equal, to absorb a small increase in its current workload, it seems likely that in the first few years of operation of the Crofting Register there would be additional demands on the Court which would require some extra judicial and administrative resources to be provided. If the 75 additional cases a year mentioned above proved to be an accurate prediction this might translate into a requirement for an additional clerk and another member of the Court to be appointed. The longer term cost implications of the Bill are hard to predict.

The financial costs of the Court are currently met by the Scottish Government from the Justice vote, partly off set by the fees charged for applications to the Court. Additional costs would require to be met either by the Scottish Government or from an increase in fees.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

See comments above.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

We are not sure that the Memorandum properly reflects the possible costs to crofters of preparing adequate plans of their holdings. It is noted that the Registers of Scotland are to provide a map but it is not clear whether this will be sufficiently detailed for all circumstances, particularly where there is disagreement.

The costs of advertising as required by section 11(6)(a) do not seem to have been included in the calculation of the costs to applicants for registration.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

The exercise by Scottish Ministers of the power to specify other steps which trigger registration could have the result of increasing the number of applications to the Court. At this stage it is not possible to quantify what additional costs that might generate.

SUBMISSION FROM SCOTTISH LEGAL AID BOARD

Consultation

1. Did you take part in the Scottish Government’s consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

The Scottish Legal Aid Board (“the Board”) was not consulted and did not take part in the Scottish Government’s consultation exercise on the Bill. When formulating the Financial Memorandum, the Scottish Government consulted with the Board.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

The advice provided by the Board to the Scottish Government has been included in the Financial Memorandum.

3. Did you have sufficient time to contribute to the Scottish Government’s consultation exercise?

Not applicable.

Costs

4. If the Bill has any financial implications for your organisation or people your organisation represents, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The estimated costs of the Bill have been accurately reflected in the Financial Memorandum. The actual costs to the Legal Aid Fund are dependant on the number of applications for legal assistance.

5. Are you content that your organisation, or people your organisation represents, can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

As the Legal Aid Fund is not cash limited, any increase in legal aid costs will be met by the Scottish Government. There will be no additional administrative costs for the Board arising from the additional civil legal aid or advice and assistance applications.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

The effect on the Legal Aid Fund is dependent on the number of applications. The estimates used are reasonable.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

Not applicable.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

Not known.

11 January 2010

SUBMISSION FROM SCOTTISH RURAL PROPERTY AND BUSINESS ASSOCIATION LTD

Response from the Scottish Rural Property and Business Association Limited (SRPBA) to the Questionnaire issued by the Finance Committee of The Scottish Parliament concerning the Financial Memorandum produced to accompany the Crofting Reform (Scotland) Bill.

Introduction

The SRPBA is a membership organisation, uniquely representing the interests of landowners and land managers in Scotland. As such, its membership includes those with crofting interests, including professionals who advise both crofting landlords and crofters. Accordingly, the SRPBA’s interest in responding to this Consultation is on behalf of members who will be affected by the provisions contained within the Crofting Reform Bill.

CONSULTATION

1 Q. Did you take part in the Scottish Government’s consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?
A. Yes

2 Q. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?
A. No (see below)

3 Q. Did you have sufficient time to contribute to the Scottish Government’s consultation exercise?
A. Yes

COSTS

4 Q. If the Bill has any financial implications for your organisation, or people your organisation represents, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.
A. With regard to the issue of registration, the SRPPBA submits that the process is unduly cumbersome and that the financial implications are not fully recognised. It is unreasonable that the acquirer of an estate should be expected to meet the costs of registration of each croft. This would mean long delays which would not be in the interests of good estate management. Further detail in relation to this issue is provided in the response to Question 8 (4) below.

These costs have been likened by certain members of the SRPBA to an additional tax on a new estate owner. There is concern that not only may the perceived additional costs be deducted from the price a purchaser is willing to pay, therefore leading to a reduction in value of the estate to the seller, but also that the additional administration and uncertainty may detract from a willingness to enter into negotiations for purchase.

5 Q. Are you content that your organisation, or people your organisation represents, can meet the financial costs associated with the Bill? If not, how do you think they should be met?
A. There is concern within the membership of this organisation that on transfer of ownership of the estate, there will be a requirement to register all crofts at the acquirer’s expense. Written evidence will be given to the Rural Affairs Committee concerning this issue, but it is relevant to point out that it is not fair and equitable that the acquirer of the estate (whether or not for value) should have to meet costs associated with matters outwith his/her control, namely potential disputes between crofters as to boundaries. These costs should be met by the individual crofters concerned.

6 Q. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?
A. No, the SRPBA does not believe that the Financial Memorandum accurately reflects the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise. It is submitted that insufficient detail has been given and reference is made to the answer to Question 8 below.

WIDER ISSUES

7. Q. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?
A. See answer to 8 (1) below

8. Q. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?
A.

1) The legislation concerned with Crofting is already cumbersome and extremely difficult to follow, even for professionals and those familiar with the legislation. If this Bill is enacted, another layer of legislation will be introduced. It is reasonable to assume that it will be necessary to consolidate all the legislation in due course, which will involve considerable additional expense in the consultation and wider parliamentary process, the costs of which cannot be quantified by this organisation. Indeed, it is considered that the sums already expended from the public purse in connection with the preparations for this Bill, along with the proposed costs for the increase in costs associated with the Crofting Commission, the election process and the capital costs in connection with the proposed Crofting Register are disproportionate to the extent of reforms being proposed in this Bill.

2) It is submitted that the costs estimated in connection with the elections (para 118) have been underestimated. The Memorandum states that one letter will be sent to every registered crofter. No mention is made of the likely requirement for follow up letters and general chasing up to enable an accurate electoral roll to be established, all of which will increase staff time and associated administrative costs. This submission is based on previous experience of the Crofters Commission by our members.

3) The removal of crofting grants to the Rural Payments and Inspection Directorate and Crofting Community development to HIE will split crofting overview and support, and is likely to increase costs and reduce efficiency.

4) It is submitted that the costs estimated in connection with the registration process (paras 140-141) have been underestimated and, indeed, appear to be lacking in accurate detail:

I. It is stated that “Where an estate comprises a large number of crofts, this may represent a significant amount. However, it is considered that the landowner will know the extent of the croft for which they receive rent and may benefit from reduced fees where they register all crofts in an estate in one transaction.” This statement is vague and uncertain; there is nothing more than a possibility that there will be reduced fees. This should be made clear in the Bill and debated.

II. This statement is flawed in that many landowners may not know the extent of all the crofts on the estate. Any requirement on an acquirer following a transfer of the ownership of the estate to attend to the registration will normally necessitate considerable investigation, discussions with the crofters involved (which may lead to disputes in which the acquirer has no formal interest) all of which will lead to considerable additional professional costs. A purchaser of a whole estate may not have access to sufficient information to enable him to make the registration properly, especially if changes to management occur at the time of the transfer. This has not been considered in the Memorandum.

III. The SRPBA is concerned that, as the proposed Register is to be a Crofting Register, it is truly a register of tenants’ interests. The estate owners are obliged, on change of ownership, to ensure registration in either the Register of Sasines or the Land Register and pay an appropriate fee, based on value. It is inequitable to require the owners to meet the costs, which cannot be quantified, in resolving disputes between individual crofters. Indeed, SRPBA has concerns that the Government has stated that it is an opportunity to have a number of crofts registered at the estate owner’s expense. There appears to be a fundamental misapprehension that these costs can be met out of rental income from the crofts. In an indicative analysis of five crofting estates, rents averaged between £12 and £30 per croft, compared with a proposed fee for registration in the Crofting Register of between £80 and £130, plus the necessary professional costs as mentioned above.

IV. At a fee of between £80 and £130, an estate comprising 100 crofts will require a payment of between £8000 and £13000 by way of fees, in addition to the professional costs as mentioned and also in addition to the registration fee for the entry in the Register of Sasines or Land Register and Stamp Duty Land Tax as appropriate.

V. It is submitted that paras 143-146 have failed to address specific costs. It is further submitted that para 146 is flawed in that, in the event that the Bill is enacted, it is likely that there will be an increase in objections and a consequent implication for resources.

Submitted by the SRPBA 21 January 2010

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