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PART A
SCOTTISH EXECUTIVE CONSULTATION POLICY

The Scottish Executive Consultation Process

Consultation is an essential and important aspect of Scottish Executive working methods. Given the wide-ranging areas of work of the Scottish Executive, there are many varied types of consultation. However, in general Scottish Executive consultation exercises aim to provide opportunities for all those who wish to express their opinions on a proposed area of work to do so in ways which will inform and enhance that work.

While details of particular circumstances described in a response to a consultation exercise may usefully inform the policy process, consultation exercises cannot address individual concerns and comments, which should be directed to the relevant public body. Consultation exercises may involve seeking views in a number of different ways, such as public meetings, focus groups or questionnaire exercises.

Typically, Scottish Executive consultations involve a written paper inviting answers to specific questions or more general views about the material presented. Written papers are distributed to organisations and individuals with an interest in the area of consultation, and they are also placed on the Scottish Executive web site enabling a wider audience to access the paper and submit their responses ¹. Copies of all the responses received to consultation exercises (except those where the individual or organisation requested confidentiality) are placed in the Scottish Executive library at Saughton House, Edinburgh (K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3XD, telephone 0131 244 4552).

The views and suggestions detailed in consultation responses are analysed and used as part of the decision making process. Depending on the nature of the consultation exercise the responses received may:

• indicate the need for policy development or review
• inform the development of a particular policy
• help decisions to be made between alternative policy proposals
• be used to finalise legislation before it is implemented.

Access To Consultation Responses

We will make all responses available to the public in the Scottish Executive Library 21 days after the closing date of the consultation, unless confidentiality is requested. All responses not marked confidential will be checked for any potentially defamatory material before being logged in the library or placed on the website.

Seconsult - Your Guide To SE Consultation Activity

The Scottish Executive now has an email alert system for SE consultations ( SEconsult). This system allows stakeholder individuals and organisations to register and receive a weekly email containing details of all new SE consultations (including web links). SEconsult complements, but in no way replaces SE distribution lists, and is designed to allow stakeholders to keep up to date with all SE consultations activity, and therefore be alerted at the earliest opportunity to those of most interest. We would encourage you to register.

PART B
LIST OF CONSULTEES

All Scottish MSPs
All Scottish MPs
All Scottish Lords
All Scottish MEPs
Political Parties
Scottish Parliament

Local Authorities

Scottish Crofting Foundation
NFU Scotland
Scottish Rural Property and Business Association
RICS Scotland
Scottish Estates Business Group
SCVO
COSLA
Equal Opportunities Commission
Commission for Racial Equality
Disability Rights Campaign
Legal Deposit Libraries
NDPBs

PART C
CROFT HOUSE GRANT SCHEME: THE SCHEME

INTRODUCTION

Background

1.1 A crofter is expected to live on or within 16 km of his/her croft. Where there is no house on the croft, or the existing house is inadequate, the crofter usually has no alternative to building a new house or upgrading the existing house to comply with the requirements of crofting tenure. Although croft tenants have difficulty in obtaining finance from commercial lenders, they do have the option of buying and decrofting a house site which enables them to obtain commercial financing. However, particularly in remote crofting areas incomes are often low and the costs of construction can often exceed the market value of property on completion. There are therefore difficulties in financing new construction and upgrading of croft houses. This means that if crofting is to contribute to the Scottish Executive's policy of maintaining population in areas of the Highlands and Islands of Scotland, which suffer from disadvantages of scale, terrain, climate and remoteness, assistance has to be given to encourage the construction and upgrading of these houses.

Aims and Objectives

1.2 The purpose of the Scheme is to improve and maintain the standards of crofter housing with the aim of attracting and retaining people in the more remote areas of the Highlands and Islands.

Provisions of CHGS

1.3 Assistance is provided at the discretion of the Scottish Ministers and on the merits of each case. There is no automatic entitlement to assistance. Even if an applicant meets the basic eligibility criteria, other issues have to be considered before a final decision can be reached.

1.4CHGS grant is geographically targeted into priority areas; the tables below show the rates of assistance available for the construction of a new house and the rebuilding and improvement of an existing house.

New House

Rebuilding and Improvement

Areas of priority may be reviewed from time to time.

1.5 Assistance for a new house and rebuilding/improvement of an existing house will be payable in 3 instalments.

APPLICANTS

2.1 The applicant must be one of the following -

• a crofting tenant
• an owner occupier of a croft, which was acquired from the landlord within the last 7 years
• a cottar
• a Kyles crofter

And the applicant must be inadequately housed because -

• the present accommodation does not provide sufficient accommodation for his/her family; or
• the present accommodation does not meet an adequate standard; or
• the applicant currently lives with parents, is at least 21 years old, and can show he/she has worked the croft for at least 2 years

or in need of a house on the croft because -

• the applicant currently lives more than 16 kilometres away; or
• the type of agricultural activities requires the applicant's constant presence on the croft; or
• the needs of an existing business, require the applicant to live on the croft; or
• the applicant currently lives in a council house (or other tenancy)

2.2 Work must not start on the project until written approval to do so is received from the Scottish Executive Environment and Rural Affairs Department. The assisted house must become the applicant's main residence. The applicant must intend to work the croft.

INELIGIBLE

3.1 The scheme is not open to an applicant who -

• is the landlord of the croft or spouse/partner of the Landlord
• is adequately housed within working distance of the croft, unless there are special circumstances, which require the applicant to live on the croft.
• does not intend to work the croft.

3.2 The whole project is ineligible if work has started on any part of it, prior to approval or if the assisted house will not be the applicant's main residence. CHGSgrant is not available if grant is obtained from another public funding agency for the same project, or part thereof.

Notes

3.3 Assistance will normally be refused in the following circumstances -

• The croft is being used by a member of the applicant's family or the landlord is a member of the applicant's family.
• The applicant whose circumstances have previously been ineligible for assistance, but his/her circumstances have been drastically altered solely in order to meet the eligibility criteria.

The following examples illustrate the last point.

Example 1 An applicant who purchases, decrofts and sells the original croft house to a third party, thus creating a "bareland" croft for him or herself, is not eligible for assistance. Having benefited from the proceeds of a sale, it would be wrong to give the crofter additional public assistance to replace the house.

Example 2. In a situation where an applicant sells a house which was adequate for his/her family and which is within practical working distance of the croft, and subsequently applies for assistance for a new house on the croft, the application would be refused. On that basis, the Department concludes that the applicant gave up a house which was adequate for his/her needs and that there is no justification for support from public funds to build a new house.

New Houses

• Ownership was given up within the last 5 years, of an adequate house, which was within working distance of the croft.
• If a new house on the croft was assisted within the last 15 years, further new house assistance will be refused.

Rebuilding and Improvements

• The proposed improvement work is ineligible.
• If assistance was provided to improve the croft house in the last 10 years, further assistance will be refused.
• The cost of the project is less than £10,000.

NEW HOUSE GRANTS

Grant rates

4.1 The current rates of grant assistance for new houses are as set out in the table below.

Areas of priority may be reviewed from time to time.

Eligible work

4.2

• New houses should have at least 3 apartments (two bedrooms and one living area) in addition to the kitchen and bathroom.
• The maximum size of a new house should be related to the size of the household and the needs of the croft.

Ineligible work

4.3

The following are ineligible for assistance -

• mobile homes
• temporary structures
• house to be built away from the croft
• houses with less than 3 apartments (two bedrooms and one living area) in addition to the kitchen and bathroom.
• houses of greater size than meets the needs of the household and the croft.

Conditions

4.4 Conditions apply to the grant for a period of 15 years for a new house. The main grant conditions are set out in paragraph 9 of the attached draft SI.

4.5 Claims for payment of instalments for a new house are as set out in the table below. CHGS payments of the amounts set out below will be made as work progresses, on receipt of a certificate which verifies that work for which the applicant is claiming payment has been completed. The certificate must be signed by a surveyor, contractor or other suitably qualified person.

A fee is payable for the preparation of legal documents. £25 will be deducted from the total amount of grant for the preparation and recording of the Notice of Payment of Grant document.

GRANTS FOR HOUSE REBUILDING AND IMPROVEMENT

Grant rates

5.1 The current rates of assistance are as set out in the table below.

CHGS

Areas of priority may be reviewed from time to time.

5.2 The balance between the total cost and the grant must be met from the applicant's own resources.

Eligible work

5.3 The proposed work must bring the whole croft house up to an acceptable standard and provide satisfactory accommodation, incorporating all anticipated improvements, for a substantial period of time. Further applications, received within 10 years following the payment of CHGS assistance, for similar or other improvement work for the same house, are likely to be refused. Consequently it is in the applicant's interests to ensure that all necessary work is included in the one application.

5.4 The minimum value of investment for the rebuilding and improvement of a house (including crofter's contribution and CHGS contribution) is £10,000. Estimates should indicate that the cost of the work is at least £10,000. Applications for improvement work costing less than £10,000 will be rejected.

Ineligible work

5.5

• Maintenance work and minor repairs do not qualify for assistance unless they are clearly incidental to or associated with works of improvement which are being assisted e.g. plaster or joinery repairs following first time installation of new bathroom facilities.
• Projects where the total cost of materials and labour is less than £10,000.
• Garages.

5.6 Assistance is not available on improvements which the Scottish Executive Environment and Rural Affairs Department considers of a higher standard than is necessary, given that assistance comes from public funds.

5.7 Conditions apply to the grant for a period of 10 years for house improvements. The main grant conditions are summarised at 4.4 above.

5.8 Claims for rebuilding and improvement grants will be paid in 3 instalments.

A fee of £25 is payable for the preparation of legal documents.

GENERAL

6.1 Applicants are advised against selling a house before applying for CHGS assistance to build a new house. An applicant may regret selling an existing home prematurely if it turns out that he/she is ineligible for CHGS assistance. An application for CHGS assistance should be submitted as soon as possible after an applicant has decided on building plans and before any work is started on the project.

6.2 Depending on the merits of the case, and providing the normal criteria are met, assistance may be granted to a tenant of a "bareland" croft to build a new house. However, assistance should not be expected if the applicant has created the bareland croft, or if grant was paid within the last 15 years for a new house on the croft.

6.3CHGS assistance is not available for a second or holiday home, cottage for holiday rental or work space. The assisted house must be the applicant's main residence, and must be situated on the croft in order to work the croft. Assistance must be used for housing purposes only.

6.4 The croft house must be fully insured against damage and destruction by fire. The Department strongly advises that fully comprehensive index linked insurance policy is taken out to cover the full replacement value of the house.

PART D
COMMENTS AND QUESTIONS ON THE DRAFT STATUTORY INSTRUMENT

Introduction

The draft Croft House Grant (Scotland) Scheme 2005 is a draft Statutory Instrument ( SI) to create a legal framework for determining eligibility and grant rates. It updates the provisions in the statutory instruments which governed the operation of the Crofters Building Grants and Loans Scheme ( CBGLS). The sole reason for needing a new SI is to change the period for which grant conditions apply.

However we have taken the opportunity to set out the whole scheme in some detail. Reflecting the package of changes which Ministers announced in August 2004, it introduces changes to the existing provisions to set new geographically targeted grant rates, and specifies these rates. These were not set out in secondary legislation previously. The following sections of part A describe briefly the purpose of each paragraph of the draft SI, and discuss the changes from the previous scheme.

Paragraph 1

The name of the scheme has changed from the Crofters Building Grants and Loans Scheme ( CBGLS) to the Croft House Grant Scheme ( CHGS), as loans are no longer available, and to give the scheme a distinct identity.

Paragraph 2 consists of definitions which are self explanatory.

Priority areas are included and the areas covered will be reviewed from time to time.

Paragraph 3 explains that the grants are to build new houses and rebuild and improve existing croft houses for the crofter on the croft. As the overall objective of CHGS is to help retain and attract people to the Highlands and Islands, the scheme assists crofters to improve the quality of crofter housing and increase croft house stock numbers. In doing so the assistance enables crofters to live on their crofts and to work their crofts.

Paragraphs 4 and 5 set the amount of grant applicable in the high, standard and low priority areas, for new houses and for renovating and improving existing croft houses. Geographical targeting of the grant has been introduced to encourage applications from the more remote and disadvantaged areas.

Paragraph 6 (1) says that Ministers will decide on the form of application.

Paragraph 6 (2) says that Ministers can a) refuse an application, b) approve it in part, or c) approve the whole application, and that the grant is subject to certain conditions.

Having regard to the budget for the scheme, paragraphs 4, 5 and 6(2) are intended to allow Ministers to manage expenditure commitments if circumstances dictate that it is necessary to do so. The effect is that lesser amounts of grant may be awarded or that applications could be refused when the consequence of approving an application would lead to spending in excess of the scheme budget. In recent years the scheme spending has been well within budget, however these paragraphs give Ministers the power to control spending properly for the first time. These provisions are relevant only in a situation where demand for assistance is very high.

Paragraph 6 (3) explains that it is a discretionary scheme and that Ministers can vary or withdraw approval.

Q1: Do you agree that expenditure should be controlled using these methods when overall demand exceeds available resources?

Q2: If you do not, what suggestions do you have for controlling expenditure in these circumstances?

Paragraph 6 (4) explains that Ministers can set deadlines on the claiming of grant. The purpose of this is to ensure that the allocation of funding runs smoothly and that crofters are aware how long funds are available to them for specific projects. It enables Ministers to control and make best use of available funding.

Paragraph 6 (5) says that landlords will be made aware of grant applications, and have the opportunity to object.

Paragraph 6 (6) explains that Ministers will decide in the case of an objection, having considered arguments from both sides.

Paragraph 6 (7) explains that if Ministers approve, they may do so subject to modifications.

Paragraph 7 says Ministers decide how claims will be made, and will do what they consider necessary to ensure that conditions continue to be complied with.

Paragraph 8 (1) explains that grant payments will be recorded as at schedule 2 and entered in the Register of Sasines or the Land Register, as appropriate. In doing so prospective purchasers are made aware of the responsibilities they adopt in cases where grant conditions still apply.

Paragraph 8 (2) explains that payment will be made subject to completion of the work.

Paragraph 8 (3) explains that any instalments paid are subject to conditions.

Paragraph 8 (4) explains that instalments can be recovered if work is not completed or if any of the other conditions are broken.

Paragraph 8 (5) states that if maximum grant has been paid, no more grant will be paid.

Paragraph 8 (6) explains that rebuilding or improvement operations must cost at least £10,000.

Paragraph 9 (1) explains that the crofter or his family must live in the house, and that it must be insured against fire damage.

Paragraph 9 (2) explains that the applicant must inform Ministers if the tenancy is to change hands and let Minister know the name of the proposed new tenant.

Paragraph 9 (3) says applicants must let Ministers know if the croft or croft house site is to change hands.

Paragraph 9 (4) provides powers for Ministers' authorised inspectors to visit and enter the house.

Paragraph 9 (5) Applicants must provide Ministers with reassurance that conditions are complied with.

Paragraph 9 (6) The period for which grant conditions apply to new houses is reducing from 20 years to 15 years.

The period for which grant conditions apply to rebuilding and improvements is increasing from 5 years to 10 years in order to reflect the substantial increase in grant available for these operations in the new scheme.

Paragraph 10 (1) If a condition of grant is not complied with, Ministers may demand recovery.

Paragraph 10 (2) If the house is severely damaged or destroyed by fire Ministers may recover grant. Where a grant assisted house was destroyed and a replacement rebuilt, grant would not normally be recovered. Where a grant assisted house was destroyed but it was not rebuilt or replaced, then grant would normally be recovered. This is no different to the policy applied under CBGLS.

Paragraph 10 (3) Provides facilities for applicants who break grant conditions to repay the grant.

Paragraph 10 (4) sets out how the amount to be reclaimed is calculated.

Traditionally the amount to be repaid decreases in proportion to the period for which Conditions of Grant apply. As an example where grant conditions apply for 15 years, and were broken after 5 years, then ²/ ₃ of the grant would be repayable. We do not propose to change that element of the amount recoverable.

In addition the interest rate which applies in CBGLS is 12.5% per annum and was regarded by many as more punitive than was necessary.

The rate used in other support schemes run by SEERAD is the sterling three month London Inter Bank Offered Rate ( LIBOR)(currently 3.5% as at July 2005) plus 1%. However it needs to be sufficiently punitive to act as a deterrent to those who take the grant with the intention of selling the house after only a short time. An interest rate similar to the bank rate may not constitute a deterrent. Consequently the draft SI proposes a half way house and that the interest rate to be applied when recovering grant in the event that a beneficiary breaks grant conditions could be reduced to 10%.

Option A -maintain 12.5% same as CBGLS.
Option B -interest rate set at 10%, representing a relaxation of the current rate, but significantly above the bank rate.
Option C - LIBOR plus 1% similar to the interest rate which applies in other SEERAD schemes.

Q3. Are the calculation and interest rate chosen sufficient to provide a penalty and to discourage applicants from breaking grant conditions, and if not, please record you preference by selecting from the options above ?

Paragraph 10 (5) If there is a gap in the tenancy the assumption is that the grant condition obligations remain with the applicant till the house is re-occupied.

Paragraph 10 (6) states what a failure to comply with grant conditions means, which is in addition to that set out in paragraph 9.

Paragraph 10 (7) in the case of an eligible occupier, grant conditions are broken if the land on which the house is built, changes hands to a non-family member without the consent of Scottish Ministers.

Paragraph 11 (1) Provides powers to enable the Crofters Commission to be agents to administer grants under this scheme.

Paragraph 11 (2) explains that Ministers will decide the extent of the Crofters Commission duties in administering the scheme.

Paragraph 12 explains that the regulations in the 1990 SI are revoked.

Paragraph 13 (1) explains that applications received before 31 December 2004 will continue to be paid and have same conditions as under CBGLS.

Paragraph 13 (2) This provides for the transition between the old and new schemes where the period for which grant conditions apply, has been reduced from 20 years to 15 years. This subparagraph has the effect of lifting grant conditions from new houses completed more than 15 years ago i.e. if the 15-year period has expired, grant conditions no longer apply.

Q4. Do you agree that the benefit of reducing the period for which grant conditions apply to new houses should be extended to those who received CBGLS grant to build a new house more than 15 years ago?

Schedule 1 lists the eligible operations which can be included in rebuilding and improvement operations. Previously the items on which grant could be paid were not set out in the Regulations. Grants for the improvement of roads and water supplies, which were administered separately from the main CBGLS, are included in the list of eligible items. In addition the list has been expanded to reflect the new rebuilding provision.

Q5. Are there any other items which should be included in this list of eligible operations, or any which should be omitted from the list?

Schedule 2 shows the form of the Notice of Payment of a Grant and lists the grant conditions lifted from paragraph 8(1) of the draft SI.

Schedule 3 shows the form of the Notice of Cesser of Conditions of Grant, for use when the grant conditions are lifted in the event of repayment or recovery of grant.

Explanatory note summarises the changes being made by the draft SI.

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