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Publication - Research Publication

Impact of diversity of ownership scale on social, economic and environmental outcomes

Published: 29 Jul 2016
Part of:
Research
ISBN:
9781786520920

Report on the impact of diversity of ownership on the socioeconomic outcomes for rural areas.

119 page PDF

3.7MB

119 page PDF

3.7MB

Contents
Impact of diversity of ownership scale on social, economic and environmental outcomes
Policy and Project Background

119 page PDF

3.7MB

Policy and Project Background

Land use across much of Scotland takes place within a complex pattern of land ownership and tenure, with size, climate, land capability, distance to markets, traditions, management objectives, support policies, fiscal policies, exchanges rates, etc. all playing important roles.

The owners of private estates and large farms represent sources of local power that historically have had significant impacts on the socio-economic conditions across rural Scotland, with such owners having significant control over the availability of housing, employment opportunities and development opportunities (Bird, 1982; McKee, 2013). McGregor (1993) acknowledged the influence landowners have in many areas of rural Scotland, suggesting: " large landowners play a crucial role in local development: they are the rural planners". Whilst there is growing acceptance that some large privately owned estates are " amongst the most dynamic and innovative of owners" (Munton, 2009), questions have been raised with regard to the extent to which the motivations and personal choices of private landowners are compatible with sustainable land management (Macmillan et al., 2010).

General Policy Influence on Land Ownership

Land use in rural Scotland falls within a number of overlapping policy spheres (e.g. agriculture, forestry, energy) and is subject to a range of policy instruments (e.g. subsidies, taxes, regulation), some of which are determined at European level, some at a UK level and some within Scotland. However, relatively few policy measures are concerned explicitly with types of owner or scale of ownership per se. For example, in contrast to some other countries, there are no specific policy targets or controls in relation to who can own land or how much land can be owned by one individual in Scotland.

Hence, although particular types of owner (e.g. crofter, public sector) or ownership structures (e.g. community) are explicitly favoured in some cases by financial or regulatory measures, policy generally influences ownership only indirectly via how land may be used and the rewards accruing to it. In particular, agricultural, forestry and wild game policies and taxation policy affect both income and capital values, and hence influence individuals' and institutions' incentives to buy, keep or sell rural land. However, motivations for owning land vary (e.g. income, recreation, privacy), and responsiveness to such incentives also vary across different types of owner and land holdings (e.g. farming vs. game management vs. housing).

Excluding crofting and community land ownership legislation and policy, that were outwith the remit of this project, there has been considerable change in policies that have influenced rural (mainly agricultural) land ownership in Scotland over the past 100 years or so. Appendix 1 contains a review of key changes in these policy factors that have influenced land ownership since 1900 that includes: taxation of land transfers by inheritance through estate duties/inheritance tax; capital gains tax; agricultural relief for both inheritance tax and capital gains tax; state intervention in agriculture during the World Wars; agricultural support policies (including the Common Agricultural Policy); security of agricultural tenure since the 1940s; state forestry investment, fiscal relief for forestry investment, etc. Moreover, macro-economic policy, such as the setting of interest and exchange rates, also has an influence on land ownership. [2]

Contemporary Land Reform Policy in Scotland

The Land Reform Policy Group ( LRPG) was established by the Scottish Office in 1997 under the chairmanship of Lord Sewel, " to identify and assess proposals for land reform in rural Scotland, taking account of their cost, legislative and administrative implications and their likely impact on the social and economic development of rural communities and on the natural heritage" ( LRPG, 1998). In the 1998 John McEwen Memorial Lecture Dewar (1998) hinted at the post devolution direction of travel towards contemporary land reform in Scotland, emphasising the need to " sweep away outdated land laws, properly securing the public interest in land use and land ownership, increasing local involvement and accountability."

The first key step in the contemporary land reform process was the Abolition of Feudal Tenure etc. (Scotland) Act 2000 which removed the centuries-old system of land ownership whereby 'vassals' could be restricted in activities on their land through feudal burdens. This Act simplified titles to land, and the Title Conditions (Scotland) Act 2003 modernised the types of interests and legitimate burdens that can be attached to titles to land.

The Land Reform (Scotland) Act 2003 introduced measures aimed at addressing greater diversity in ownership through the community (pre-emptive [3] ) right to buy (Part 2) and the crofting community (absolute [4] ) right to buy (Part 3) and statutory non-motorised access rights over most land (and inland water) for all (Part 1). Additionally, the Agricultural Holdings (Scotland) Act 2003 sought to reinvigorate the tenanted farming sector with Part 2 introducing the tenant farmers' (pre-emptive) right to buy their holding [5] .

More recently, the creation of the Land Reform review Group ( LRRG) by the Scottish Government in July 2012, the House of Commons Scottish Affairs Committee's Inquiry into Land Reform in Scotland, [6] the Community Empowerment Act (Scotland) 2015 [7] , and the introduction of the Land Reform (Scotland) Bill [8] in 2015 have highlighted the continued political interest in the subject and a political appetite for further progressive reform. All aspects of land ownership and the potential for reform to create greater diversity of ownership across Scotland are therefore currently being scrutinised.

In Scotland land is treated differently to other property with regards to laws of succession (inheritance) and primogeniture in relation to land was only abolished in the 1960s. However, succession law in Scotland continues to protect land holdings from being broken-up upon inheritance, as it is still permissible to omit family members from bequeaths, meaning land holdings can be held in their entirety inter-generationally and in perpetuity ( LRRG, 2014). These factors have been identified as the principal cause of Scotland having the most concentrated pattern of land ownership in Europe (Warren, 2009; Hunter et al., 2014). The LRRG (2014) recommended that " the Scottish Government in the interests of social justice, develop proposals in consultation with the Scottish Law Commission for legislation to end the distinction between immoveable and moveable property in Scotland's laws of succession". The Scottish Government subsequently published a consultation seeking views on proposals by the Scottish Law Commission to modernise succession law, including removing the distinction between heritable and movable property (Scottish Government, 2015).

The LRRG (2014) note that " in terms of addressing rural housing need, there are three issues which need to be considered: patterns of tenure and ownership, providing sufficient land for housing development (at the right price) and the most effective use of existing property. The concentration of land ownership in rural Scotland means that all three of these areas are still dependent to a large extent, on the attitudes and decisions of a relatively small number of people and the asset policies of a relatively few public sector agencies." As such they recommended a National Housing Land Corporation be established charged with the acquisition and development of land, and to have an extended remit in small rural communities where there is market failure in the land market.

The LRRG (2014) stated that " the concentration of private ownership in rural Scotland can often stifle entrepreneurial ambition, local aspirations and the ability to address identified community need … The Group considers that a less concentrated pattern of land ownership would open up increased economic and social opportunities in many parts of rural Scotland, helping create stronger and more resilient rural communities". They acknowledged that some owners are concerned in the well-being of communities but recommended that there should be an upper limit set for the amount of land held by a single private owner or beneficial interest.

The Community Empowerment (Scotland) Act 2015 [9] introduced a community right to buy land if the land is abandoned or neglected (and there is a new Register of Community Interests in Abandoned or Neglected Land). Unlike the existing community rights to buy land this new right to buy is not pre-emptive but is rather absolute, whereby Scottish Ministers can compel the owner to sell the land to the community.

The Land Reform (Scotland) Bill [10] was introduced to the Scottish Parliament on the 22 June 2015 and contains provisions that aim to:

  • ensure the development of an effective system of land governance and on-going commitment to land reform in Scotland;
  • address barriers to furthering sustainable development in relation to land and improve the transparency and accountability of land ownership; and
  • demonstrate commitment to effectively manage land and rights in land for the common good, through modernising and improving specific aspects of land ownership and rights over land.

Diversity of Ownership in Scottish Policy

The LRPG (1998) concluded that the existing system of landownership in Scotland was inhibiting development in rural communities and causing degradation of the natural heritage as a result of poor land management ( LRPG, 1998). This conclusion ultimately led to the adoption of the main objective of Scottish land reform policy, which remains relevant today [11] : " to remove the land-based barriers to the sustainable development of rural communities" ( LRPG, 1999) that could " only" be achieved through:

  • Increasing diversity in land ownership - between private, public, partnership, not-for-profit and community sectors.
  • Increasing community involvement in local decision-making about how land is owned and managed.

After nearly a decade since the Land Reform (Scotland) Act 2003, the Scottish Government's Rural and Environment Science and Analytical Services ( RESAS, 2012) suggested that there was a " lack of clarity over the rationale and remit of Land Reform" surrounding the land based barriers to the sustainable development of communities: " it is not clear what form this sustainable development should take, or what features should be prioritised". They questioned whether the land-based barriers mentioned in the policy rhetoric related to ownership or stewardship, since both are likely to be important for sustainable development, with different measures required for each (i.e. potential benefits are unlikely to be accrued through changing ownership alone). They further suggested that in certain circumstances other approaches (e.g. land leasing, changes to land and asset management) may indeed be at least as effective as Land Reform policy in achieving sustainable development in rural communities.

In the most recent round of the land reform debate there has been considerable reference to diversity of land ownership in the policy rhetoric, including: the independent LRRG; ministerial statements; official consultations, and; the Land Reform (Scotland) Bill (2015). These are summarised in Table 1.

Table 1 Reference to diversity of land ownership in key land reform documentation

Source Referral to scale / diversity of land ownership
Land Reform Review Group - remit set by Scottish Government [12] Identify how land reform could " enable more people in rural and urban Scotland to have a stake in the ownership, governance, management and use of land, which will lead to a greater diversity of land ownership, and ownership types, in Scotland"
Final report of the Land Reform Review Group (2014) " The concentrated ownership of private land in rural communities places considerable power in the hands of relatively few individuals, which can in turn have a huge impact on the lives of local people and jars with the idea of Scotland being a modern democracy. The Group considers that a less concentrated pattern of land ownership would open-up increased economic and social opportunities in many parts of rural Scotland, helping create stronger and more resilient rural communities".
Scottish Government ministerial statement (2014) Aim for " a fairer, or wider and more equitable, distribution of land in Scotland where communities and individuals have access to land" [13] . Aim to " build a society with greater diversity of land ownership" [14]
Scottish Government consultation paper: The Future of Land Reform in Scotland [15] Consulted on: " addressing barriers to sustainable development and beginning to diversify patterns of land ownership". The rationale provided for this to be included in the Land Reform Bill was that: " in some instances the scale or pattern of land ownership, and the decisions of landowners, can be a barrier to sustainable development in an area. Providing mechanisms to address such situations could allow for potential barriers to sustainable local economic and social development to be overcome".
The Land Reform (Scotland) Bill [16] (2015) Part 5 of the Bill aims to introduce a community right to buy land to further sustainable development provided certain conditions are met. The associated Policy Memorandum [17] states that land reform: " has the potential to empower greater numbers of people and, over time, to change patterns of ownership in Scotland to ensure a greater diversity of ownership, greater diversity of investment and greater sustainable development".

Whilst there have been a few studies that have examined the Scottish estate sector, estate owners' motivations and the social, economic and environmental impacts of estates (MacGregor, 1988; MacGregor and Stockdale, 1994; Higgins et al., 2002; Warren and McKee 2011; Hindle et al., 2014 and Glass et al., 2013), there have to date been no studies that examine the counterfactual scenario of what such impacts would be if different land ownership structures existed.

It is against this backdrop that the Rural and Environment Science and Analytical Services ( RESAS) Division of the Scottish Government commissioned a study to provide evidence based conclusions to address the hypothesis that " diverse (scale of) land ownership [18] leads to better social, economic and environmental outcomes".

This research project provides some insights into the local impacts of differing forms and scales of land ownership, amongst other factors, thereby informing both the ongoing development of Scotland's land reform policy and current deliberations over the Land Reform (Scotland) Bill.

The specific aim of the project is to build an evidence base demonstrating the relationship of different patterns of ownership scale to social, economic and environmental outcomes. The specific objectives of the project were to:

  • Identify a brief high-level overview of patterns of change in land ownership in Scotland from 1900 to 2014;
  • Establish a framework to identify case study estates/areas, ranging if possible across peri-urban, rural and remote rural areas of Scotland;
  • Establish a framework of social, economic and environmental outcomes to be evaluated when considering mechanisms to encourage diversity of scale of land ownership;
  • Identify a framework of broad factors in addition to ownership that could influence social, economic and environmental outcomes;
  • Identify case studies of estates that have been broken up and estates that have not;
  • Examine published data and government data on social, economic and environmental outcomes in the local area over time;
  • Undertake qualitative research in the case study local area to assess impact of ownership patterns on social, economic and environmental outcomes; and
  • Evaluate changes in outcomes related to changes in ownership and other factors.

Contact

Email: Graeme Beale, socialresearch@gov.scot