This above 30-minute has been commissioned by the Coalition for Economic Justice and was premiered at the RSA in London on 3 September 2013. A panel discussion followed the screening. On the panel were,

Rt Hon Vince Cable MP, Business Secretary of State and President of ALTER, who spoke about the ideals of LVT as a sensible tax shift and also as a driver for the economy;

Molly Scott-Cato, Finance Speaker for the Green Party and Professor of Green Economics at Roehampton University who discussed the value of community planning decisions and how LVT could support that model;

Director of the Tax Justice Network John Christensen who discussed the facts that most economists agree with LVT and;

Yoni Higgismith, the Director & Producer of the film.

You can hear the 30 minute panel discussion below.

[audio http://www.andywightman.com/audio/Roehampton_University_LVT_Discussion_September_2013.mp3]

See The Taxing Question of Land for further details.

“Price of farmland hits record high” scream the headlines today across all the media. The BBC, Scotsman, Herald, and local media from the Deeside Piper to the Kilmarnock Standard.

All these stories have two things in common. First, they are virtually identical. Journalists have simply reproduced a press release. Second, they are all inaccurate. What is going on? The answer is that vested interests are successfully capturing the news agenda. In this case it is the Royal Institute of Chartered Surveyors (RICS) and they are on a roll.

Ten days ago, RICS issued a media statement entitled “RICS July 2013 Residential Market Survey” which was widely reported in the press as a recovery in the housing market with rising prices and more buyers entering the market. In reality, the survey (copy here) was a “sentiment” survey based on asking RICS members for their opinion. This is analysed as a “net balance” – a figure between -100 and 100 where -100 means all members think that a variable will decrease and +100 means they all think it will increase. As the small print makes clear, “Net balance data is opinion based; it does not quantify actual changes in an underlying variable”

The vested interest is relevant here because of course members of RICS earn their living by charging fees. In the case of land and property transactions, they typically charge a percentage of the selling price. So the opinion of RICS members is not an objective opinion.

Nevertheless, their Residential Market Survey received massive coverage. So much, in fact that two days ago, the RICS proudly announced that it had generated “our greatest number of media hits ever in one day“. I am sure their members are delighted that their membership fees are buying such good coverage of their own opinions.

So to today’s reports in the media about farmland prices. The BBC report claims that,

“The price of farmland in Scotland hit a record high in the first half of 2013, according to research by surveyors.

“The Land Market Survey by the Royal Institution of Chartered Surveyors (RICS) indicated land values had trebled in less than a decade.

“It calculated the average price of land in Scotland was now £4,438 per acre.

“Surveyors reported the price was being supported by demand from farmers and investors.

“Their report predicted further price increases were likely, with the market “far from finding its level”.

The press release from RICS claims that,

“£7,440* per acre across the UK, hitting a record high for the eighth consecutive period. The cost of land is now more than three times that of the same period in 2004 when an acre cost just over £2,400.”

That asterisk is important. It was not there when I first looked at the press release but was added after I phoned the RICS press office to ask what the following footnote referred to. The footnote says,

* Opinion based measure, £ per acre (based on median surveyor estimates of bare land only containing no residential component, not subject to revision).

Looking at the Rural Market Survey report, itself (which is only available if you register as a RICS site user), things become clearer. The basis for the claim that “prices had trebled in less than a decade” is based upon “an opinions based measure (which is a hypothetical estimate by surveyors of the value of pure bare land).”

It is also a UK wide figure and thus says nothing about the farmland market in Scotland.

The “RICS spokesperson” states, in the RICS media release that,

“The growth in farmland prices in recent times has been nothing short of staggering. In less than ten years we’ve seen the cost of an acre of farmland grow to such an extent that investors – not just farmers – are entering the market. If the relatively tight supply and high demand continues,  we could experience the cost per acre going through the ten thousand pound barrier in the next two to three years.”

What she really means is that the cost of an acre of land according to the opinion of her members. And when she speculates that the cost per acre could go through the £10,000 barrier in the next two or three years – that too is simply the opinion of those with a vested interest in precisely that outcome.

And that trebling only relates to England and Wales, not to Scotland.

Oh, and finally, that £4438 per acre price that the BBC reports the RICS “calculated”?

That’s just an opinion too but reading the press reports today you would not know.

So why does the media give such prominence to the self-promotional opinions of vested interests?

In this Guest Blog, Bill Chisholm reveals the extraordinary story of how one former burgh in the Borders has outperformed all the rest in terms of its common good funds. That burgh is Berwick and it is now, of course, part of England.

Bill Chisholm was The Scotsman’s Borders correspondent from 1969 to 2005. He has taken a keen interest in the fate of the eight common good funds in the Borders burghs.

Scotland’s oldest and wealthiest burgh is thriving (in England)

Bill Chisholm 20 August 2013

Scotland has a very long history of community ownership of land and assets dating back to the founding of the Royal Burghs. The common good consisted originally of common land and grants of land by Royal Charter. Later in the 19th and 20th centuries additional land was acquired from neighbouring landowners and gifts of land were made by wealthy industrialists to form some of the famous parks in our towns and cities. In addition, a wide range of furnishings, paintings, regalia and other moveable property accumulated as part of the assets of the Common Good Fund.

The Common Good Act of 1491 remains on the statute book and states that the common good of all the Royal Burghs be observed and kept for the common good of the town and spent on the common and necessary things of the burgh.

Over hundreds of years, Scotland’s common good has been subject to poor management primarily due to the rampant municipal corruption and nepotism that prevailed as a consequence of town councils being responsible for electing their successors – a state of affairs that continued until the Burgh Reform Act of 1833. Genuine “local government” in Scotland was eventually abolished in Scotland in 1930 (parish councils) and 1975 (town councils) and responsibility for managing the common good passed first to District Councils in 1975 and then to the existing local authorities in 1996.

Scottish Borders Common Good Funds

Many people who take an interest in the status and performance of Scottish Borders Council Common Good Funds find it difficult to understand why an organisation with significant  land, investments and other assets consistently fails to achieve healthy annual profits. (1) This failure to secure a worthwhile financial return from the potentially lucrative commons means residents in the eight former burghs where the Common Good survives are missing out on their rightful inheritance. I thought it was perhaps a good time to take look at what has happened to these funds and as I did so, I made a remarkable discovery.

The unaudited accounts (1.3Mb pdf here) of the Council for 2012/13 reveal that the eight funds (Duns, Galashiels, Hawick, Jedburgh, Kelso, Lauder, Peebles and Selkirk) have combined net assets of £9.8 million and generated a collective deficit of £90,000. Of the eight, only Duns (£2000) and Lauder (£95,000) generated a positive return. By way of comparison, were the funds to generate a rate of return of 5%, this figure should be £490,000.

Burgh Income Expenditure Surplus/Deficit Net assets
Duns 2000 5000 -3000 30,000
Galashiels 2000 0  2000 26,000
Hawick 112,000 154,000 -42,000 3,032,000
Jedburgh 28,000 76,000 -48,000 1,371,000
Kelso 5000 35,000 -30,000 950,000
Lauder 269,000 174,000  95,000 1,031,000
Peebles 67,000 73,000 -6000 1,063,000
Selkirk 72,000 130,000 -58,000 2,336,000
TOTAL 557,000 647,000 -90,000 9,83,9000
No figures are reported by Scottish Borders Council for Coldstream, Eyemouth, Innerleithen and Melrose.
Income, Expenditure & Assets for 8 Border burghs
Source: Unaudited accounts 2012/13

It should be borne in mind that the sizeable areas of land held by the Borders Common Good Funds are, when taken together, equal in acreage to some of the larger privately owned estates in the region. Hawick has over 800 acres of farm land plus an unspecified acreage for the golf course and woodlands, Selkirk’s three farms alone cover 1300 acres while Lauder Common, one of the largest in Scotland, extends to some 1700 acres. The overall total possibly exceeds 5,000 acres.

Unfortunately, despite previous promises and pledges, there is still no sign of a public asset register clearly setting out everything that is included in the eight funds. However in February 2013 the council did, in response to a Freedom of Information request, provide details of the fixed assets (buildings and properties) and moveable assets (e.g. provost’s chains) in each of the funds. Perhaps the most striking aspect of this revelation was the fact that many of the items listed have been given no book value whatsoever, including Selkirk Town Clock, a number of common good open spaces, fishing rights on the Tweed at Peebles, and virtually all of the moveable assets.

Given the dearth of public information concerning millions of pounds worth of land holdings, investments and buildings, and the lack of detail of the charges levied on the funds by council officials, it is difficult to pinpoint what has gone wrong. But it would certainly seem elected councillors have played their part in allowing the Common Good estate to decline. It seems clear that the administration and development of Common Good assets is nowhere near the top of SBC’s list of priorities. That means the true potential of the multi-million pound operation will never be realised even at a time of austerity when every last penny is vital in sustaining local economies. Just this week, it was revealed that the £2 million cash balance was to be transferred to a “private firm of global fund managers.”

A similar regrettable pattern of Common Good neglect appears to have been developing right across Scotland ever since the abolition of town councils in 1975. A 2009 account of Common Good Funds in Scotland included some 1,600 assets in 144 separate funds with a reported value of £2.5 billion. Yet at national level too these huge assets failed to break even on the income and expenditure front. The Scottish Government’s official financial statistics for local government in 2011/12 showed gross expenditure on Common Good Funds to be £13,696,000 as against income totalling £11,540,000. That equates to an operating loss of £2,156,000.

Would these valuable assets have been better looked after had they remained in local control over the past 38 years? it is impossible to say for sure but it is fascinating to look at what has happened in one instance where that has happened.

Scotland’s first burghs four burghs – Roxburgh, Berwick, Stirling and Edinburgh – were established in 1125.

Roxburgh now lies in ruins.

Stirling and Edinburgh’s common good funds are, in the words of Thomas Johnston, “mere miserable starved caricatures of their former greatness.”

But Berwick is interesting and it is possible to compare the performance and fortunes of the region’s funds with a nearby charitable trust which administers the Common lands presented to this former Scottish burgh more than 600 years ago.

Berwick-upon-Tweed

The burgesses of Berwick-on-Tweed together with their contemporaries in Peebles, Hawick, Selkirk and the other Borders burghs received their Common lands from the Scottish king at around the same time. Today, the acreage under the control of the Berwick-upon-Tweed Freemen Trustees (Charity Commission No. 222154) is 2250 acres.

From the accounts (which can easily be downloaded from the Charity Commission’s website), we can see that the capital value of the investments at March 2011 stood at £4.896 million, and the total funds stood at £17,927,611. That’s almost double the £9.8 million valuation of the combined eight Borders Common Good funds.

Total income for 2010/11 was £437,448 (2009/10 £411,678). Rents yielded £280,853 while investments brought in £147,676. The Trustees generated a 2.4% return on capital

At the same time, the total income of the combined eight Scottish Borders funds in 2012/13 was £557,000 while expenditure totalled £647,000 – a deficit of £90,000.

As stated earlier, the common lands at Berwick-upon-Tweed were transferred to the burgesses and freemen of the then Scottish Royal Burgh at around the same time as the lands which now form part of the eight Borders common good funds.

The 3,280 acres of Common conveyed by a special Berwick Royal Charter of 1604 following the Union of the Crowns was vested with the freemen of the now English borough in perpetuity, although the acreage had gone down to 2,250 by the early years of the 20th century, thanks in part to the involvement of the town council which took control of the lands in 1843. The 1604 Charter had “granted to the burgesses the fee simple of certain lands over which the inhabitants had for centuries previously exercised rights of Common, grazing and other rights”.

But the introduction of statutory local government did nothing for the fortunes of the Berwick estate. The first elected town council melted down all of Berwick’s historic collection of silver, including the town mace…a sign of things to come.

During the 19th century the council often failed to pay the income from the estate to the freemen; financial accounts were not made available for public inspection; the town council attempted to alter some of the farm leases, and even leased farmland without advertising the leases.

By 1909 income was reduced and by now the local authority was spending all of the money it collected from the estate on council matters. The history of the estate also records that in 1916 the council wanted to lease the town’s ancient market rights to themselves at a rent of £5 per annum although the annual profit to the estate was £150. Such was the scale of council mismanagement that the estate fell into debt and by the 1950s the financial position was so dire one of the farms had to be sold for £9,000.

The local authority and the freemen were engaged in numerous legal disputes in the 20 years up to 1994 as the Borough Council attempted to plunder estate assets and proposed radical increases in annual administration fees from £5,000 to £18,000. Since 1994 the freemen Trustees and the Borough Council and Town Council have worked well together and as a result the estate has flourished. (2)

The retiring and new Town Mayor of Berwick-upon-Tweed. Note the “Scottish”purple ceremonial robes dating back to granting of Royal Charter by David I in contrast to English red robes.
© 
All rights reserved by Berwick-upon-Tweed Town Council

Map of Town Council of Berwick-upon-Tweed which includes the 2250 acres of land owned by the Freemen Trustees.

Concluding thoughts

What is fascinating about the above is the fact that one of Scotland’s oldest burghs survives today with a self-governing town council, £17 million of assets and an annual income of £437,000. At the same time, eight neighbouring burghs have half the assets and lost money last year.

The difference between this successful and relatively prosperous burgh (or borough) and the burghs of the Scottish Borders is that Berwick-upon-Tweed is in England. That simple fact raises all sorts of interesting questions about how local democracy and the commons have survived on both sides of the border.

So, perhaps as the Scottish Government holds one of its summer cabinets in Hawick, it might reflect on 900 years of Scottish history and ponder how to rebuild democracy in Scotland’s communities.

(1) All 8 Scottish Borders Common Good Funds are administered collectively as a charity No. SC031538

(2) Following the abolition of the Borough Council in 2009, a new Town Council was established.