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CHAPTER THREE: FISHERMEN AT THE HEART OF QUOTA MANAGEMENT
Issues
We are committed to retaining fishing rights in Scottish fishing communities for the benefit of current and future generations, encouraging quota to be held by those with the means to fish it and discouraging the emergence of fishing quota as a speculative asset. We also want to provide stability and favourable circumstances for business growth in the Scottish fishing fleet and those investing in its future.
We are particularly concerned about the lack of transparency of FQA unit holding ( i.e. accurate records of who actually holds fishing access rights). This ambiguity means that we do not have a complete picture of holdings, especially in respect of "dummy" or holding licences. It is also very difficult to monitor and prevent "beneficial holding" of FQA units. That is where a holder of a fishing vessel licence or "dummy licence" enters into an agreement with a third party to hold FQA units on that party's behalf. For this reason, our record of holdings currently only identifies the registered holder - that person may, or may not, be the person who acquired the FQA units.
We are also concerned about any movement of FQA units away from the active fishing industry. Although originally allocated to fishermen, a number of other interests have since acquired FQAs, primarily those arising from licences surrendered following vessel decommissioning in 2001 and 2003. We are concerned that eroding the link between FQA units and the fishing industry will result in FQAs being held further away from active fishermen, resulting in a range of interests holding FQA units, opening the way to speculation in fishing quotas to the detriment of those active in the industry, concentration of holding, and migration of quota, none of which we consider desirable.
We are mindful that a step change in the allocation of quota (such as "rebasing" - i.e. calling in all FQA units and re-distributing them on the basis of a more recent reference period) would be a possible way to resolve the issue of quota held outwith the active industry. We have given this consideration, but we wish to avoid creating uncertainty and possibly destabilising the current management arrangements, much of which is based on confidence that quota holdings will not be subject to this kind of review. Instead, we propose a series of management measures designed to create incentives that will make quota more accessible to the active industry.
We are also concerned to ensure that in the utilisation of quota, costs to the active industry are kept as low as possible through optimising quota uptake, taking into account environmental economic and other factors.
Proposals
Maintaining the link between FQAs and vessel licences
We propose to keep the link between FQAs and vessel licences by continuing to allocate quotas on the basis of the number of FQA units held on licences. We have taken into consideration the fact that the present allocation system is well established and understood by most in the industry.
Holding Mechanisms: POs and Vessel Agents
We propose to retain a holding mechanism for POs to hold FQA units in certain circumstances, in addition to FQAs held on active licences. For example, in the case of community quota schemes, or where a PO wishes to hold quota in common for its membership. However, this requires to be subject to safeguards given our aim is for quota to be held as close to producers as possible.
We therefore propose to limit the use of a holding (dummy) licences to quota units acquired for community quota schemes, or by the PO itself for the benefit of its members and or the wider community. Providing quota is being held for these purposes we do not propose to limit the amount that can be held in this way, although only one holding licence would be permitted. To ensure that this is the case an annual audit would be conducted, and details would be made public.
In addition to the arrangement for the holding of quota by community quota schemes and by the PO itself, we recognise the important role that vessel agents/fishsalesmen play in the Scottish fishing industry, their significant contribution to the economic stability and success of the industry, and also how their role with respect to investment in quota holding and vessels has developed. We wish to explore options to enable these businesses to hold quota, without diminishing the integrity of the management arrangements designed to ensure that quota is held as close to the producer as possible. There is, for example, a risk that in providing such a holding facility, a means will be created for other organisations with no direct link to the Scottish fishing industry also to be able to hold quota.
Options include:
- preventing vessel agents/salesmen from having a facility to hold FQAs and associated quota on PO holding (Dummy) licences, which would require them to come to an arrangement to hold FQA units on member vessels' licences or
- creating a quota holding permit for vessel agents/salesmen to hold FQAs/quota on a PO holding licence, with the permit given to those business which could demonstrate a direct link to the industry through ownership of at least five vessels. This could be further subject to:
- no restriction on the amount of FQA/quota that could be held by these businesses or
- a cap on the amount of FQAs vessel agents/fish salesmen could hold on PO holding licences set at, for example, 10% of the total FQA holdings of their member vessels.
Q2. Do you agree with our proposals for PO holding licences?
Holding FQA
We propose that FQA units will not be permitted to be held outside the active fishing industry. Where these units are held outside the active industry ( e.g. by owners of vessels decommissioned under the 2001 and 2003 schemes), such holders will have 6 months from the establishment of a Scottish system to relinquish all their FQA unit holdings to a third party in the active industry.
Maintaining the link with the active industry
As part of our aim of encouraging quota to be held as close to the producer as possible, to discouraging speculation in quota and reducing costs for the active Scottish fleet. We propose to require Scottish quota/licence holders to demonstrate that, over a 3-year period, at least 70% of their business income is derived from catching and marketing fish. To accommodate part time fishermen/crofters, this requirement could exclude vessels 10 metre and under or vessels with turnover less than £100k per annum. We propose that a vessels business income should also include non-fishing related income such as guard ship duty. Following a proper consultation and appeals process, if a quota holder fails to meet this criteria, then, a period of time would be allowed for the licence holder to divest his/her licence of FQAs units.
Q3. Do you agree with our proposals to ensure that those holding quota have as close a link as possible with the active industry in Scotland, including any particular views on the proposals set out?
Improve access to reduce quota costs - Quota Incentive Scheme
In order to improve the accessibility of quota to those who can fish it, we propose to introduce quota incentive arrangements for some key quota stocks whereby POs which can demonstrate their ability to use quota will be rewarded through access to additional quota drawn from those POs which have failed to utilise their allocation. It is proposed to limit this arrangement to key quota stocks landed by the Scottish fleet.
Under this management arrangement, a Scottish PO would need to use quota broadly to a similar level as other Scottish POs holding this stock, taking into account any economic and environmental factors which could affect uptake. A tolerance would also be applied. However where a PO was markedly out of step with it peers, quota will be called in and redistributed to those that can fish it. This would most likely be on a temporary basis either in year or at the start of a quota year. Where this fails to address the issue, then permanent redistribution will be considered. An example of how such arrangements might work in practice is provided in Annexes A and D.
Q4. Do you agree that a quota incentive scheme would provide a safeguard to ensure as far as possible that quota uptake can be optimised and costs for the active industry reduced, while taking particular circumstances which may have affected uptake into account?
More flexibility to match quota to fishing patterns
The present restriction does not allow FQA units to be transferred from an active licence. This creates a lack of transparency and increased costs for the industry in the form of legal agreements and associated costs, reduces the ability of the industry efficiently to match quota to fishing patterns, and hence encourages unnecessary market activity.
We therefore propose to remove this restriction and allow FQA units to be transferred, without requiring a complementary licence transfer from an active Scottish licence, i.e. regardless of the timing of licence transfers. We believe that this would now be beneficial and low risk given the other management arrangement envisaged.
Q5. Do you agree with our proposal to enhance quota holder flexibility by permitting FQA transfers from an "active" licence?
Implement a new internet-based system for transfers
To facilitate FQA and in-year quota transactions, the Scottish Government proposes to establish an internet-based management system for transfers from January 2010. This would essentially be a development of the current paper based arrangements, with the primary aim being to reduce bureaucracy in processing transfers and provide industry with greater transparency, improved scope to utilise quota and hence lower costs. The format and provision of data in the current (weekly) monitoring spreadsheets will also be reviewed.
It is envisaged that this system would be internet-based, with secure access to Producer Organisations and quota holders. All units associated with Scottish fishing licences and Scottish recognised POs would be listed, and clearly designated and identified (through a set of serial numbers unique to each unit) as "Scottish" to ensure the Scottish Government has the ability to track them. Those units associated with "Scottish" licences would be established and serialised. Such units would retain their Scottish identity irrespective of where in the UK they are subsequently transferred.
Q6. Do you agree that we should modernise the current arrangements for quota administration and exchange through an internet-based management system?
Interchange with the UK
The Scottish Government proposes to continue to permit in-year quota transactions/leasing and FQA transfers between Scotland and other areas in the UK.
It is sensible that the new Scottish system should be capable of interacting with other arrangements in the UK. We therefore intend that where necessary Scottish quota will continue to be exchanged with POs and vessel owners elsewhere in the UK. In-year quota transactions provide benefits for fishermen throughout the UK, for example, in transferring from a larger quota pool. Scottish FQA units would continue to be identified as Scottish following transfer to non-Scottish groups, and it would be necessary for any business which acquired Scottish FQAs to be able to demonstrate a genuine economic link which provides direct benefit to Scotland (see Chapter 5, and Annex C).
Q7. Do you agree that Scottish POs and quota holders should continue to exchange in-year quota and FQAs with POs/vessel owners elsewhere in the UK?
Changes to International Quota Swaps ( IQS) and in-year changes in UK quota
IQSs are currently dealt with on a UK basis. The arrangements are set out in Annex D of the 2008 QM rules http://www.scotland.gov.uk/Topics/Fisheries/Sea-Fisheries.
Where, for example, an unsolicited IQS proposal to the UK is received (initially by the Marine and Fisheries Agency) from another Member State, we propose that this would be treated under the current arrangements ( i.e. all UK groups invited to bid). Broadly speaking, this arrangement would continue to apply under a Scottish system but would be enshrined in a set of Scottish Quota Management Rules which will be discussed with Scottish stakeholders. We propose:
- where an IQS is "brokered" by a Scottish PO (whether as a "package" or not), only Scottish POs would be invited to bid
- only in-year increases in UK quota would initially be divided into a "Scottish" and "Rest of the UK" ( RUK) quota on the basis of the "Scottish" FQA share of the stock in question. Thereafter, the "Scottish" quota would normally be distributed to POs on the basis of their FQA share of the "Scottish" quota. In-year reductions in UK quota would be treated similarly
- where an IQS is over-subscribed under a Scottish system, there may be circumstances where consideration of bids and, by implication, distribution of the incoming stock could be made on a basis other than, as at present, groups' final allocation of the incoming stock.
Looking forward, one of the key principles in dealing with IQSs is that all Scottish groups should have the opportunity to bid. The Scottish Government will consider whether, under a Scottish system, and mindful of the proposed change above, it would be appropriate to continue with IQS "packages". This matter will be the subject of further detailed consultation later this year when Scottish quota management rules are being considered.
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