Land Reform Policy Group: Identifying the Problems (February 1998)

3. Land ownership

3.1 The pattern of land ownership in Scotland remains dominated by a small number of large (often very large) estates. The majority of the land consists of under 1,500 private estates. About 12% of all land in Scotland is in public ownership.

3.2 The existence in many parts of the country of what are in effect local monopolies may on occasion stifle local development. But so long as the land is used so as to foster thriving communities, then it may be that the public interest is satisfied, whether or not land ownership changes. Concerns about the way in which land is used could in the first instance be addressed by public intervention to amend land use. But in some circumstances it may prove necessary to address the ownership issue. What specific examples should the Group bear in mind; and what would be suitable remedies?

3.3 Some commentators have argued that land ownership by trusts and companies is inherently undesirable as impersonal and contrary to direct accountability. They suggest either that all companies should be prohibited from land ownership, or at least that companies whose prime objective is not the occupation and use of land should be prohibited from owning land. Any such prohibition would be massively complex to devise and administer (given the range of necessary exceptions eg for company premises, executry trusts etc); would constitute a major interference with individual rights and choices; would affect companies legislation (which is a reserved matter and therefore not for the Scottish Parliament); and if applied to existing as well as future land holdings would in all likelihood be contrary to the European Convention on Human Rights. Is there a strong enough case to justify pursuing any such prohibition?

3.4 Other commentators feel strongly about the extent to which land in Scotland is owned by individuals or companies from outwith the United Kingdom (or indeed outwith Scotland). Some of the most controversial cases which have attracted media attention over recent years have involved foreign owners, and this has led some commentators to call for Scotland to introduce restrictions on non-native ownership of land. But is foreign ownership in itself the problem? A non-Scot may be as good (or as bad) a manager of the land he owns as a Scot.

3.5 A further way of looking at this is to see the problem in terms of absentee owners. Again, there have certainly been some highly publicised cases of absentee landlords whose activity (or inactivity) has been regarded as damaging to the land or to their tenants. But equally there are estates well-run on behalf of absentee landlords by their factors. So is it the absence of the landlord that is the problem?

3.6 There is also the question of whether more land already in public ownership should be given up. The position of the Secretary of State’s crofting estates is discussed separately; but public bodies including local authorities, the Forestry Commission, Scottish Natural Heritage (SNH) and the Ministry of Defence also have considerable land holdings throughout rural Scotland. Should these public bodies reduce their landholdings and, if so, on what basis?

3.7 The Crown Estate Commission (CEC) is a key player where land is concerned. This is a UK body charged with managing the Crown Estate, with a general duty to maintain and enhance its value and the return obtained from it, but with due regard to the requirements of good management. This financial obligation clearly has the potential for limiting land development. Under the terms of the White Paper "Scotland’s Parliament" and the Scotland Bill, issues to do with the Crown Estate and CEC will be reserved matters dealt with by the Westminster Parliament. Should the Scottish Executive press for change in the CEC remit so as to strike a better balance between income generation and development?

3.8 CEC is amongst other things responsible for the territorial sea bed and for most of the foreshore between high and low water mark; and thus leases out areas of the sea bed to fish farms. Some criticise the principle of rents charged by CEC on the basis that rent represents resources withdrawn from the remote areas concerned. Some criticise the level of rents charged as unrealistic in current market conditions and as inhibiting local development. CEC has responded to this but the perception adds weight to the proposition that the Scottish Executive should consider pressing for CEC’s remit to be amended. Current authorisation arrangements are also seen by many as insufficiently open, insensitive to wider environmental and other considerations and, in particular, lacking in local accountability, and potentially hindering (or at least not helping) local rural development. Scottish Office Ministers therefore intend to transfer responsibility for the planning control of marine fish farms to local authorities (and to undertake centrally the regulation of marine dredged materials).

3.9 In recent years, there has been a significant increase in ownership by environmental non-Governmental organisations (NGOs), particularly in areas such as the Cairngorms. Some commentators are concerned about the role of such landowners in Scotland, which include the Royal Society for the Protection of Birds, the John Muir Trust and the National Trust for Scotland. While the number of jobs involved in managing land primarily to safeguard the natural heritage can often be greater than provided by more traditional land uses, there is sometimes criticism that relatively little of the employment opportunities generated on the estates go to local people, that these may be unnecessarily limited, and that local accountability is lacking. How can such NGOs best contribute to rural development?

3.10 Community ownership is clearly not appropriate in all situations, but it is an option to be considered where current ownership or management arrangements are causing problems. Involvement of local people in the management of land can increase the local skills base and lead to increased local community confidence, stronger community identity and population retention. The Group welcomes the way in which Highlands and Islands Enterprise’s Community Land Unit is promoting the community ownership and management of land. The main barriers to community ownership/management which the Unit has identified are lack of management experience and/or lack of access to capital markets. These may justify intervention in the form of technical advice, training and financial assistance. Are new powers needed to tackle these problems?

3.11 The price of land influences the opportunities for many types of development in rural areas. In theory, the price of land should reflect the discounted value of the expected future net earnings that can be generated by economic activity from the land and buildings. These earnings will be influenced by factors such as site location, land quality, planning constraints, and sporting rights. Expected earnings will also clearly be affected by the existence of a wide range of public subsidies which may be capitalised through higher land values. In addition non-financial factors such as recreation or amenity value may contribute to an owner’s overall level of satisfaction and hence can also influence the price a potential buyer is willing to pay for an area of land.

3.12 In addition to these factors there are aspects of the taxation system which may be seen by some commentators to influence land prices. These can include capital, income or local taxation and any associated reliefs. Many of the taxes and reliefs relevant to land management, such as inheritance tax and capital gains tax are reserved matters under the terms of the White Paper "Scotland’s Parliament" and the Scotland Bill. Some are or have been the subject of reviews within Government. And others, such as the exemption of sporting rights from non-domestic rates, have only recently been introduced. How do current tax policies affect the market for land and thus the objectives of achieving sustainable development in rural areas?

3.13 In purely agricultural terms, there is no problem of land shortage: the proliferation of smallholdings would limit the opportunity for economies of scale. But the availability of small units of land in rural areas combining housing with a base for development purposes is crucial to the retention and wherever possible the expansion of local rural populations. Also, throughout the Highlands and Islands there seem to be recurrent difficulties in local communities acquiring small pockets of land which are conveniently placed for housing or other development/community use, for example as sites for workshops, sheltered housing or a community hall. It appears to the Group that such developments are often crucial to the maintenance of local communities, and that barriers to the acquisition of the necessary land need to be removed. What are these barriers?

3.14 Local authorities and other public agencies have wide powers to acquire land either by compulsory purchase or agreement to enable the development or use of land. But because compulsory acquisition interferes with individuals’ property rights, legislation provides for it to be used only in specific circumstances, that is, where the public body concerned has a positive alternative use in mind which will benefit the wider public interest and usually where all other means of securing the land by agreement have been exhausted. The Group notes that existing compulsory purchase powers are rarely if ever used. To what extent are existing powers defective and in need of amendment or replacement?

3.15 A landowner can dispose of his property as and when he chooses, and to whom he chooses. Some commentators have argued for some mechanism to allow intervention in the land market in the public interest, for example an arbiter body on the Monopolies and Mergers Commission model which could intervene to block sales which it judged were not in the public interest; and/or a public right of pre-emption along the lines of what happens over the granting of export licences for major art sales going overseas. At present, interventions in the public interest are ad hoc and chancy: they depend on the public sector becoming aware of a prospective sale, being able in the time available to consider and reach a decision on the merits of intervention in a particular case, putting together an alternative business plan and the necessary resources quickly enough, and then successfully making a counter-bid. Is there a case for saying that the present arrangements do not sufficiently allow for the measured and consistent assessment of the public interest in major sales, and that means of ensuring that the public interest is suitably taken into account in future should be pursued?

3.16 How should such major sales be defined? The simplest approach would be in terms of size, with a special procedure for all properties above a given size. An alternative would be to identify in advance which properties are of strategic importance.