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Lorne Street tenants protesting at City Chambers, Edinburgh November 2015

The American land and tax reformer, Henry George, observed in his book, Progress and Poverty, that “thirty thousand people have legal power to expel the whole population from five-sixths of the British Islands. The vast majority of the British people have no right whatsoever to their native land, except to walk the streets.”

The history of much of the world is a history of property, of the appropriation of territory and the framing of laws designed to protect the novel concept of private property. Those frozen out of this process – the poor and the landless – had to make do with belated concessions to protecting their rights – concessions that came too late for many as James Hunters’s new book on the Sutherland clearance, Set Adrift Upon the World, makes painfully clear. In the year of the Strathnaver Clearances in 1814, Sir John Sinclair, Caithness landowner and author of the first Statistical Account of Scotland ,observed that, “in no country in Europe are the rights or proprietors so well defined and so carefully protected.”

To be a landowner was to be endowed with economic, legal, social and economic power. On the basis that the primary responsibility of government was to defend the country, those who owned the country presumed to be best placed to monopolise the electoral franchise and undertake that task.

During the 18th and 19th century, fortunes were made through the ownership of urban land in particular. As cities expanded, demand for land enriched those fortunate enough to hold the title deeds to the fields and meadows that were acquired to build the houses, factories and infrastructure necessary to support a modern urban economy.

In Edinburgh, the street names reveal this history in Buccleuch Street, Hopetoun Crescent Roxburgh Terrace, and Moray Crescent. One of the beneficiaries of this legal dispensation was George Heriot, the Edinburgh jeweller, whose death in 1624 established the Heriot Trust which was run by the Provost, Baillies and Councillors of the City together with the Ministers of the town. It rapidly established a virtual monopoly on land around Edinburgh

An exclusion zone was imposed upon Edinburgh by the activities of the Heriot Trust’s acquisitions” wrote urban historian, Professor Richard Roger. “Scarcely an acre in the neighbourhood came into the market which they did not instantly acquire for the benefit in perpetuity of Heriot’s Hospital”. By the end of the 19th century, the Trust owned over 1700 acres of land around the City. Much of this comprised land between Edinburgh and Leith.

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Samuel Hunter’s timber yard in Leith, 1852. Lorne Street was built along the south.

One of those who held a feu from the Heriot Trust was Samuel Hunter, a stonemason and builder who owned a yard on Leith Walk at Smith Place. He ran a successful business as a property developer and builder and in 1879, was granted a further feu by the Heriot Trust to erect blocks of tenements at the western end of what is now Lorne Street.

When he died in 1893, his daughter Agnes Hunter inherited a substantial property portfolio including her own elegant house on Dalrymple Crescent in the Grange. Upon her death in 1954, her executors established the Agnes Hunter Trust which continues to own over 90 tenement flats in Lorne Street occupied by over 200 residents. The Trust is a charity and provides grants to health and social welfare projects.

The Trust established a reputation as a landlord that provided long-term secure tenancies. “We were promised a tenancy for life”, said one tenant. “Stay as long as you like”’, another was told. The Agnes Hunter tenants comprised a close-knit community of all ages. The oldest resident has lived there for 74 years, having moved in aged 2 years old. The younger children all attend Lorne Primary School adjacent to most of the tenement blocks.

But whilst tenants felt secure, their homes suffered from poor maintenance. Damp persisted for years in flats, waste water rose through bath and kitchen pipes, window frames rotted and repairs were ignored. Many tenants undertook work themselves, installing bathroom sinks and even a heating system. Some tenants began leaving and others were evicted. In July 2015 all 200 of the Trust’s tenants were informed by letter that “retention of The Agnes Hunter Trust’s property portfolio was no longer in the interests of the Trust” and all households were to be evicted by the end of the year.

A determined campaign by residents was launched and the Lorne Community Association secured a stay of execution until the end of January 2016. Following a petition to Edinburgh Council, this was extended to July 2016 in order to allow time to try and establish a housing co-operative or similar solution.

To the wider world, evictions on this scale came as something of a shock. Few knew anything about the Agnes Hunter Trust. I had some vague recollections of my own from 7 years spent living in a flat on Lorne Street but I forgot all about it until the story appeared in the newspapers.

At a time when the Scottish Parliament is, at long last, considering a Bill – the Private Sector (Tenancies) (Scotland) Bill – to modernise tenants rights and provide greater security of tenure, it is worth reflecting on what a shocking state of affairs these evictions represent. Most tenants are on Short assured tenancies. Despite the assurances of lifetime security, most tenants in law were never more than 2 months from eviction.

The short-assured tenancy was introduced in the 1988 Housing Act. The idea was that these tenancies would provide a landlord-friendly tenure for the private sector, allowing it to grow at the same time as Housing Associations were given the freedom to access private finance. The result has been the growth of one of the most unregulated, liberal and (from a tenant’s perspective) insecure rental markets in Europe. Britain’s obsession with homeownership has led to eye-watering levels of private debt, house prices outstripping earnings, a speculative volume housebuilding industry that profits from land value appreciation and consumers spending growing proportions of their income on housing costs.

Sometimes it takes a case like Lorne Street to focus minds on long-standing policy failures. The private rented sector has grown in a haphazard manner driven by buy-to-let landlords and little in the way of a strategic plan. A system where 200 tenants can be evicted on a whim reveals serious flaws in Scotland’s housing tenure. One of the most glaring question (which has, as yet, not been addressed) is quite simple.

Why should 100 families have to be evicted merely because the landlord wishes to sell their homes?

The short answer is, of course, because the law allows it. But this situation would never arise in, for example Germany. The fact that a pension fund might wish to sell its portfolio of flats in Hamburg to another investor does not mean that all the tenants have to be evicted. To the Germans such an idea would be ridiculous. Owning rental property is perfectly legitimate but if you sell it, tenants stay put in their homes. Tenants enjoy security of tenure and the landlord a regular return on their investment.

The complacency in addressing such fundamental questions was evident when the Chair of the Agnes Hunter Trust, Walter Thomson, spoke at the City of Edinburgh Council Petitions Committee on 5 November. In a statement that had tenants draw breath for its audacity and cold logic, he claimed that,

The Trust is not in existence to provide housing.The properties are an asset which enables the Trust to make funding available for charitable causes. Miss Hunter’s trust has never been a social landlord.”

In other words, we have no responsibility to families we have housed for over 60 years. They are merely an asset to generate a revenue stream – this from the Chair of a Scottish charity which, among other things, funds homelessness projects.

Such attitudes are an indictment of 15 years of devolution. The Scottish Government’s Private Housing (Tenancies) (Scotland) Bill will have its final reading next Thursday 17 March. It introduces welcome changes to the private rented sector including a new tenancy that affords greater security for tenants. But, crucially, the wish to sell a tenanted property remains a lawful reason to evict a tenant. Whilst such a provision has a role in a transitional period, it will do nothing to contribute to the kind of long term security enjoyed by tenants in Germany.

Whilst crofting tenants, agricultural tenants and commercial tenants are lawfully entitled to remain in occupation of their crofts, farms and offices when the property is sold, people whose tenancy is their home are rendered homeless on the arbitrary whim of the owner. It is an antiquated state of affairs that has no place in a modern democracy.

As Tony Cain, the Policy Manager for the Association of Local Authority Chief Housing Officers observed recently,

The unstated, and unquestioned, view that underlies these provisions is that eviction and homelessness are appropriate management tools to address business failure or change.

These provisions ensure that private landlords or lenders can remove tenants when thing go wrong with the business or they want to disinvest. And most importantly, the value of the asset is protected by ensuring that it is linked directly the property values in owner occupation.  It also means they can borrow more to invest and make bigger returns on capital values.

Equally importantly what they also do is transfer the cost (aside from the personal trauma and disruption to the tenant) on to the public sector.

By protecting the value of private rented houses in this way and transferring the risk and costs of business failure on to the tenant and local authorities, landlord and investors can be confident that they can sell out relatively quickly and at very little cost to them. 

The Lorne Street tenants have been given until July 2016 to see whether they can devise a solution whereby they form a co-operative to take over ownership of perhaps persuade a housing association to step in. They deserve all the support we can provide.

Meanwhile MSPs should question whether it is right that folk who have lived in their homes for decades deserve to be treated as little more than collateral damage in pursuit of the owner’s short term interests. In particular, they should examine critically Schedule 3, Part 1 1(1) of the Private Housing (Tenancies) (Scotland) Bill – namely, “It is an eviction ground that the landlord intends to sell the let property”. If tenants are to feel secure in their homes, this provision should be removed.

Patrick Harvie MSP has tabled an amendment to remove this ground for eviction.

Scotland needs investment in a sustainable, high-quality, affordable rented sector. It needs to learn from successful countries such as Sweden and Germany. Above all, it needs to ensure that never again is a community treated with the contempt and arrogance faced by the families of Lorne Street.

This Wednesday the Rural Affairs, Climate Change and Environment Committee (RACCE) holds it first meeting to consider amendments to the Land Reform (Scotland) Bill at Stage 2. Once the Committee has completed Stage, its amended Bill will go forward to Stage 3 to be debated and further amended by a sitting of the whole Parliament.

This blog is a brief update on where we are with the one provision that has been the subject of much debate and where the RACCE themselves want the bill strengthened – namely the Part 3 provisions on transparency over who controls corporate entities that own land.

BRIEF HISTORY

Proposals to make it incompetent for non-EU companies to own land and to make declarations of beneficial ownership of companies mandatory in the Land Register were tabled during the passage of the Land Registration (Scotland) Act 2012 but were rejected by the Scottish Government.

– The Land Reform Review Group recommended that such a measure be adopted to improve transparency in the ownership of land.

– The Land Reform Bill consultation in December 2014 sought views on the proposal and it was widely endorsed by consultees.

– The Land Reform Bill was published in June 2015 but did not contain provision for such a bar. Instead, it contained a mechanism whereby questions could be asked about the beneficial ownership of companies in tax havens and elsewhere but there is no obligation on such jurisdictions to co-operate.

– The RACCE Committee took evidence on the Bill and, in its Stage One report, recommended that the original proposal be introduced to the Bill.

– Scottish Ministers responded to the Stage One report by, once again, rejecting the non-EU proposal on the grounds (they argue) that it is outwith the competence of the Scottish Parliament.

– Scottish Ministers then last week announced that they would be tabling an amendment at Stage 3 [link to letter] that would create a public register of person who exert control of companies that one land. The amendment would merely be a regulation making power with the details of how such a register would operate being left to the next Parliament to draft and enact.

AMENDMENTS

We now have three distinct proposals for the way ahead with regard to transparency – two amendments to be considered this Wednesday (see full text here) and one amendment to be tabled at Stage 3.

Graeme Dey (SNP) Amendments 29, 30 and 36

The first is a series of amendments in the name of Graeme Dey MSP (numbers. 29, 30 and 36) to the Bill that would require the beneficial owner or “controlling interest” in any corporate entity (not just non-EU ones) to declare their identity in a new section of the Land Register (Amendments 29 and 36 merely remove existing Sections 35 and 36. Amendment 30 is the substantive amendment). This is not a bar to non-EU entities but is a disclosure provision to be incorporated in the Land Register. Verification of the identity of the beneficial owner will still be tricky but appropriate penalties can act as a deterrent. This amendment has ben developed following considerable effort by Megan McInnes of Global Witness and Peter Peacock of Community land Scotland.

Patrick Harvie MSP (Scottish Green Party) Amendments 105 and 106

Patrick Harvie has tabled an amendment (Nos. 105 & 106) that reinstate the bar to non-EU corporate entities and fulfils the original recommendations of the Land Reform Review Group,  the December 2014 consultation paper and the  RACCE Stage one Report. Whilst some EU disclosure requirements are not fully transparent, bringing corporate entities “onshore” exposes them to the ongoing work across the EU to improve transparency through a variety of processes such as the requirements of the Fourth Anti-Money Laundering Directive that requires member states to establish registers of beneficial ownership of companies.

The Scottish Government Amendment

The Scottish Ministers will table an amendment at Stage 3 to replace Sections 35 and 36 and introduce a new regulation making power for Ministers to establish a “Register of Controlling Interests in Land”. The details of this register, what it would contain, how it would operate and how compliance would be enforced would then be the subject of secondary legislation to be introduced in the next Parliament. It is thus hard to know what is involved with this proposal and there will be no time for any debate as it will be introduced at Stage 3. Critically, it is not clear whether Ministers are proposing yet another Register or whether they are open to the idea within Graeme Dey’s amendments to make such disclosure part of the Land Register and thus visible on the title to ownership of the land.

I hope that RACCE will support both Graeme Dey and Patrick Harvie’s amendments. They provide a “double lock” arrangement whereby tax havens are outlawed as jurisdictions within which land and property in Scotland can be owned AND those entities registered within the EU are obliged to publish details of the controlling interests on the face of Land Register titles.

If you wish to support these amendments, contact any member(s) of RACCE and tell them you support amendments 29, 30, 30, 105 and 106. Contact details are here.

Sunlight or shadows – will the Government’s new public register of land ownership be effective in improving transparency?

by Megan MacInnes, Land Adviser with Global Witness

Yesterday the Scottish Government announced that their solution to the problem of not knowing who is behind the opaque corporate structures owning Scotland’s land was to create a public register of those who control land, (media release here and letter to RACCE here) as part of the Land Reform (Scotland) Bill currently passing through parliament. This step should be broadly welcomed and is a significant step forward from the previous proposals in the Bill to improve transparency of Scottish land ownership.

On paper this announcement appears close to the improvements to transparency of land ownership which I blogged about two weeks ago, but is it really as good as it sounds?

No-one disputes that not knowing who is really behind major swathes of land in Scotland is a problem. It prevents local communities living on or affected by land from contacting the true owner if they have a problem (rather than an anonymous shell company), it prevents law enforcement agencies from investigating crimes and it’s ironic that having won the right to roam, Scotland’s citizens don’t have the right to know who truly controls and makes decisions about the land they are walking on.

In a letter accompanying the Government’s announcement, Minister for Environment, Climate Change and Land Reform, Aileen McLeod MSP, describes their intention to “requir[e] the public disclosure of information about persons who make decisions about the use of land in Scotland and have a controlling interest in land”.

However, the devil is certainly in the detail and there are many ways in which this commitment may not provide us with what we really need to know about who truly owns Scotland’s land. The potential for loopholes and exemptions which would render this register meaningless are substantial.

Most importantly (and let’s get the boring technical stuff out of the way first) this register needs to consist of the “person(s) of significant control” of the legal entities owning land in Scotland. This term is the technical definition of what’s more commonly known as “beneficial ownership” and means that what is registered are the names of the individual people who either own or control land in Scotland. This term already applies in Scotland through a UK-wide register of company beneficial ownership which was introduced in 2015. Adopting this technical definition is the only way to ensure the register will include what we need it to.

This register has the potential to finally shine a light on some of Scotland’s most shadowy corporate entities, for example Scottish Limited Partnerships and the shell company structures used to hide land ownership in Scotland in overseas tax havens and secrecy jurisdictions. Therefore, it’s essential that there are no loopholes or exemptions which these kinds of corporate vehicles can exploit.

The register should of course be free and fully publicly accessible.

We also have questions about process. What the Government’s proposal does is push the more difficult discussions into the next Parliament. So it’s important that the Bill describes the register in robust enough language that it cannot be later watered down, as well as introducing a firm duty and deadline by which the regulations providing for this register have to be adopted.

One major question remains however – why the Government has proposed this register to be separate from the Land Register? My earlier guest blog outlined the reasons why expanding the Land Register requirements to include beneficial ownership appears to be the simplest and most administratively straightforward route to achieving this goal.

But still – what a difference a week makes. This announcement has completely changed the terms of the debate about transparency in land ownership in Scotland and this can only be good. What we need now though are tough ideas and quick thinking to close potential loopholes and ensure this commitment once and for all brings Scottish land ownership out of the shadows.

Transparency in the Land Reform Bill: the only effective solution is disclosing the human being, the ‘beneficial owner’, behind companies owning land

by Megan MacInnes, Land Advisor with Global Witness

The Scottish Government has responded to the Rural Affairs, Climate Change and Environment Committee’s Stage One Report on the Land Reform (Scotland) Bill and rejected its recommendation that companies that wish to own land in Scotland should be retired within an EU member state. I will be publishing a wider commentary on this in the next few days. In this Guest Blog, Megan MacInnes, Land Advisor with Global Witness, explores this issue and recommends an alternative solution.

As the new year brings us to the next stage in the debate over the Land Reform (Scotland) Bill, one issue continues to be controversial – whether we shall get to learn who really owns Scotland’s land?

This controversy relates to the fact that large areas of Scotland are owned by companies registered in secrecy jurisdictions known for providing anonymity from the prying eyes of the State and public scrutiny. The Government has made repeated commitments that this Bill will improve transparency of land ownership, but the measures proposed so far have been widely criticised. In their Stage 1 report on the Bill, the members of the Rural Affairs, Climate Change and Environment (RACCE) Committee concluded that “people in Scotland have a right to know who owns, controls and benefits from the land” but that currently the relevant sections of the Bill would “not achieve the policy objectives of improving transparency of land ownership”.

So if the Bill’s current proposals are not enough, what more can be done? Most of the discussions so far have focused on the proposal (originally made by the Land Reform Review Group) to require anyone who wants to buy land in Scotland via a company, to have to have incorporated that company within the EU. But a simpler and more direct solution exists with the potential to be much for effective in letting us really know who owns Scotland’s land – the requirement that when you register a land title with the Land Register under the name of a company, you also have to provide the names of the human beings who own or control that company. Technically, this means the registration of the ‘beneficial owner(s)’ of the company.

The RACCE Committee recommended both requirements be introduced to the Bill. In its response the Government ruled out the EU company registration requirement entirely but with regard to the requirement to register the names of the people owning or controlling those companies, the Government stated that there are “many complex legal and practical issues” being considered and that they will respond in more detail in due course.

The Bill’s current provisions for transparency, under what it calls the “right of access to information on persons in control of land” in fact provide no ‘rights’ at all. Section 35 enables only those who can prove they are directly affected by a landowner to submit a request about who owns or controls that land to a so-far unidentified “request authority”, who would then attempt to obtain that information. Section 36 enables the Keeper of the Registers of Scotland to also make such requests. Applications for such information are first made to the landowner, but if there’s no response then it is expected (but not specified in the Bill) that the request will be passed on to the authorities of the jurisdiction where the company owning the land is registered.

Not only are these ‘rights’ to request such information limited, they will not even work in practice. Neither provision require the landowner to hand such details over, but more importantly, these powers are meaningless in the secrecy jurisdictions where many companies owning land in Scotland are registered. This is because the reputations and economies of these jurisdictions (including Overseas Territories and Crown Dependencies of the UK) depend on providing safe haven and anonymity from prying eyes. These jurisdictions either are only able to share such information with tax authorities (for example, Jersey and the Cayman Islands, where the 71,000 acre Glanavon and Braulen Estate is registered), or are where the relevant authorities don’t maintain company ownership details in official records (for example, Panama, where the 56,000 acre Loch Ericht Estate is registered). Consequently any requests made by either the Keeper or request authority for information on who actually owns either estate will almost certainly be turned down.

The most comprehensive solution to knowing who owns Scotland’s land lies instead in publicly disclosing the names of those who ultimately own or benefit from the company which is buying the land, as the title is being registered. In doing so, the Scottish Government brings these transparency requirements directly within its own purview, rather than relying on the regulations of other countries. It also includes such requirements within existing administrative procedures, rather than burdening the Keeper and request authority with the task of trying to identify who is behind endless structures of shell companies expertly hidden away. If based on the model of the Crofting Register, then we’d not only learn about those behind newly owned parcels of land as they are registered, but this information would also be updated every time the smaller details of the title changed, so-called trigger or update events.

Ironically, despite the RACCE committee’s recognition of the right of people in Scotland to know who owns land in their Stage 1 report on the Bill, much greater consideration so far has been paid to how such transparency provisions would impact on the rights of landowners to privacy and property. Under the European Convention of Human Rights article eight protects an individual’s right to privacy and article one of protocol one protects the right to property. But, neither is absolute; States are allowed to interfere with both, as long as it is in the public interest and such action is proportionate – by which they mean that what is proposed will achieve the desired objective and is deemed to be reasonably necessary.

The public interest arguments for this disclosure are clear and supported widely across Scotland, including associations representing land owners. A number of existing laws and policies (not least the Community Empowerment (Scotland) Act 2015 and other sections of the Land Reform (Scotland) Bill) are likely to be compromised unless we have full knowledge of the ownership of land. But more broadly, land use and its management impacts on all of Scotland’s citizens and therefore there’s a legitimate reason for why everyone should have access to such information. For example, our participation in public consultations, such as the current one underway on Scotland’s 2016-2021 Land Use Strategy, are hindered by not knowing who owns land or the land-use decisions they are making.

Would such a change in the registration requirement also be proportionate? Asking those who ultimately own or benefit from land in Scotland to disclose their names to the Land Register is the most straight forward way to access that information. Critically, it is the only measure available which the Scottish Government can itself enforce.

So it appears that we shall not learn if we are ever to find out who owns Scotland’s land until the Government tables its amendments to the Bill on the 13th January. It’s hard to imagine how the continued anonymity behind such large areas of our land and heritage can continue to be justified. But until the human beings behind anonymous shell companies used to own land are required to disclose themselves, we may be left within nothing in this Bill but empty promises.

The Rural Affairs, Climate Change and Environment Committee (RACCE) of the Scottish Parliament published its Stage One Report on the general principles of the Land Reform (Scotland) Bill on 4th December. The plenary Stage One debate will take place in the Scottish Parliament on Wednesday 16th December.

The Report is thoughtful and considered. I don’t agree with all its conclusions but it provides might food for thought during the Stage 2 deliberations when the Bill is scrutinised in detail and amendments considered.

With the steadily growing interest in land reform, it is important at the outset to make clear that this Bill is not the sum total of land reform and cannot be expected of itself to deliver the kind of radical change that many are seeking. Further reform in land taxation, inheritance law, housing tenure and compulsory purchase are all being progressed separately. In addition, the demand to make the Bill more radical is constrained. Generally speaking, it is difficult to add a lot of new provisions to a bill as it is going through parliament.

Having said that by way of preamble, what of the Committee’s report? In this blog I highlight some of the points that strike me as interesting and explain why, in one part of the Bill, the Committee has come to very mis-informed conclusions.

As more and more people and organisations engage with the fundamentals of land reform (changing the legal, fiscal and governance framework for how land rights are defined, distributed and exercised), a range of refreshing perspectives is emerging. Two of these relate to inequalities and human rights.

NHS Scotland submitted valuable evidence on health inequalities and how land reform can both help to overcome some of these but can also be exacerbated if existing patterns or inequality are not confronted. Similar observations were made by Professor Annette Hastings during the passage of the Community Empowerment (Scotland) Act. The Committee makes important recommendations (90-93) on this topic which will help to ensure that equalities become a core part of land reform in the decades ahead.

Human rights is also an area that has received significantly more attention in relation to land rights in recent years. Community Land Scotland provided valuable focus on this in its Bunchrew Declaration from 2014 which highlighted the range of human rights issues associated with land reform. These go far beyond the traditional and rather narrow concerns of the protection of property rights in Article 1 of Protocol 1 of the European Convention on Human Rights (ECHR) which is embedded in the Scotland Act 1998. This paper by Megan McInnes and Kirsteen Shields elaborates this point.

It is often overlooked that the observance and implementation of all international human rights instruments (indeed all international treaty obligations) that relate to devolved matters are within the competence of the Scottish Parliament (1).

Recommendations 121 and 122 helpfully address this important point.

Parts 1 and 2 of the Bill deal with the Land Rights and Responsibilities Statement and the Scottish Land Commission. Here, RACCE make some sensible recommendations that will clarify and improve the proposals in the Bill.

Part 3 deals with transparency of information about who owns land and, in particular the proposal originally contained in the December 2014 consultation that any owner of land in Scotland that was a legal vehicle such as a company or a trust should be registered in a member state of the EU. This proposal would end the ownership of land registered in tax havens such as Grand Cayman and Panama.

The Scottish Government has been very resistant (see here) to proceeding with this reform but the Committee recommends that it be looked at again and that it be applied retrospectively (thus existing non-EU entities would have to comply within a defined period of time). This is very welcome and should open up this important issue to further scrutiny.

Parts 4 and 5 on engagement with communities and the right to buy land for sustainable development. Again, the Committee’s recommendations are measured and helpful in improving the  detail of how these provisions will will work in practice.

Part 6 is one of the simplest and straightforward reforms in the Bill – the removal of the 1994 exemption from non-domestic rates (NDR) granted to shootings and deer forests. Here, the Committee has expressed strong criticism of the proposal to end this exemption and made a number of recommendations. In broad terms, it is not convinced of the case for removing the exemption because of the potential impacts this might have. In coming to this conclusion, however, the Committee appears to have been seriously misinformed by the special pleading of those who stand to be affected by the proposal and to have relied solely on assertions made in evidence from landowners, shooting interests and gamekeepers, all of whom predicted impacts on rural jobs, economic and communities if the exemption was removed.

A key error in the Committee’s conclusions is to view NDR as a tax on businesses. A number of opponents of the proposal were keen to persuade the Committee of this. Scottish Land and Estates, for example, in its written evidence to RACCE claimed that,

“The proposal completely fails to recognise that sporting rights per se are not in fact a business”

“We believe that there would be a negative impact on rural jobs, tourism and land management”

“For all subjects where the sporting rights are not exercised as a business, this produces the entirely illogical and potentially unlawful situation whereby business rates are being levied on subjects which are not in fact businesses.”

Non-domestic rates are not a tax on businesses. They are a property tax – a tax on the occupation of land and property and based upon the rental value of of land and property. Many businesses of course occupy land and property but NDR is not a tax on their business (newspaper shop or factory). It is the capture of part of the rental value of the land and property they occupy. NDR is paid by many occupiers that are not businesses such as cricket clubs and secondary schools. Even the Scottish Parliament pays NDR.

Paragraph 310 of the report states that –

The Committee seeks a thorough, robust and evidence-based analysis of the potential impacts of ending the sporting rates exemption (including what impact imposing the exemption had in 1995).

There is little need for such an assessment for the simple reason that the impact of any reform of property taxation is well understood. By definition it has no impact on environmental matters (it is not an environmental tax) and no impact on social matters (it is not a welfare or employment tax). Of course, no-one likes have to pay tax especially if it is a tax that someone had gained an exemption from. But the special pleading made by landed interests is little more than a veiled threat that if the exemption is ended, those responsible for paying it will choose to do things that might have negative effects (reduce environmental management inputs or reduce employment). The tax itself has no such impacts and the potential impacts are straightforward to determine.

The impact is succinctly described in the Mirrlees Report as follows (this is in relation to land value taxation but the impact is exactly the same for any tax on the occupation of land or property).

“The economic case for taxing land itself is very strong and there is a long history of arguments in favour of it. Taxing land ownership is equivalent to taxing an economic rent—to do so does not discourage any desirable activity. Land is not a produced input; its supply is fixed and cannot be affected by the introduction of a tax. With the same amount of land available, people would not be willing to pay any more for it than before, so (the present value of) a land value tax (LVT) would be reflected one-for-one in a lower price of land: the classic example of tax capitalisation. Owners of land on the day such a tax is announced would suffer a windfall loss as the value of their asset was reduced. But this windfall loss is the only effect of the tax: the incentive to buy, develop, or use land would not change. Economic activity that was previously worthwhile remains worthwhile.” (2)

When rates on shootings and deer forests were abolished in 1995, the impact then was straightforward. It resulted in a windfall gain for landowners either because their land rose in value as a consequence of the removal of the recurrent liability or they could extract more rent since the occupier (who paid the tax) was relieved of the liability and thus able to afford a higher rent whilst being no worse overall (the new rent equalled the previous rent plus rates).

Given that the Committee is not routinely involved in fiscal policy, it perhaps not surprising that it has swallowed the assertions of those whose evidence was based on a flawed understanding of property taxes.

Over the past 20 years, the owners of shootings and deer forests have been granted an exemption from tax that has had to be paid for by increasing the burden on other non-domestic ratepayers. Over the course of two decades they have profited from this tax break. It is entirely reasonable when public finances are tight that such exemptions (which exist for no good reason) should be removed.

The re-establishment of a local tax liability on land devoted to shooting and deer forests ends the indefensible abolition of this element of non-domestic rating by the Conservative Government in 1994. To most people, it might seem odd that, whilst the hair salon, village shop, pub and garage are subject to rating, deer forests and shootings pay nothing. To take one example, the Killilan deer forest near Kyle of Lochalsh is owned by Smech Properties Ltd., a company registered in Guernsey which, in turn, is owned by Sheik Mohammed bin Rashid al Maktoum, the King of Dubai and Prime Minister of the United Arab Emirates.

Killeen was included on the valuation roll in 1994 at a rateable value of £3500. By comparison, the local caravan site had a rateable value of £3100. Today, the caravan site has a rateable value of £26,250 and pays £12,127 per year in rates whilst one of the worldʼs richest men, whose land is held in a tax haven has (unlike the local caravan site) paid no local rates for twenty years on the land he uses for shooting.

Why should caravan sites, pubs and local shops subsidise those who occupy shootings and deer forests? Non-domestic rates contribute to the revenue of local authorities used to pay for schools, roads, refuse collection, care homes, environmental and leisure provision and social care.

Back in the early 1990s, the abolition of the rates on shootings and deer-forests attracted considerable criticism at the time from opposition parties and by the then Chairs of Scotland’s Rating Valuation Tribunals who, in a memorandum to the Secretary of State for Scotland, wrote,

Sporting estates like to describe themselves, when it suits them as being part of a sporting industry. In fact they are part of an inefficient trade which pays inadequate attention to marketing their product, largely because profit is not the prime objective. 

These sporting estates change hands for capital sums which far exceed their letting value and which are of no benefit to the area, and are often bought because there are tax advantages to the purchaser, not necessarily in the UK.”

Dismissing the argument that sporting estates provide employment and should therefore be freed of the rates burden, the chairmen’s report points out that,

“..local staff are poorly paid, their wages bearing no relation to the capital invested in the purchase price, and it is not unusual to find a man responsible for an investment in millions being paid a basic agricultural wage. Many of the estates use short-term labour during the sporting season, leaving the taxpayer to pay their staff from the dole for the rest of the year. Estates can in many cases be deliberately run at a loss, thereby reducing their owner’s tax liability to central funds elsewhere in the UK.

Finally, the Committee is recommending analysing the impact of the exemption in 1995. Again, this is straightforward – the removal of the liability was capitalised into land values and resulted in windfall gains for existing owners. This was well understood at the time by landowners themselves.

In a letter written to members of the Scottish Landowners Federation in April 1995, the President, informed them that abolition make a “great success” for the Federation “culminating many years of negotiation”. “Many members will be relieved of substantial expense”, he observed and then went on to appeal to members to donate some of the windfall gains to the Federation to contribute to a contingency reserve that would be used, among other things to fight new environmental constraints “being imposed on certain classes of land” which, as a result “must lose some of its capital value”.

Members who were being “spared Sporting Rates” were invited to donate one third of their first year’s savings to the Federation. By June 1995, over £54,000 had been donated. It is not known if further appeals were launched.

Therefore, as far as the impact of the exemption is concerned, the windfall gains ended up in landowners pockets and some of it was used to fund lobbying activity.

Conclusions

The challenge for the Stage 1 debate is to address the observations made by RACCE and to clarify what further progress can be made to address them within this Bill. In addition, it is an opportunity to explore what outstanding issues (and there are many) might be addressed in the manifestos of the political parties for the 2016 Holyrood elections when Parliament will have a five year term to push ahead with further reform.

NOTES

(1) Schedule 5 Part I 7(2)(a) of the Scotland Act 1998

(2) See Chapter 16 of Mirrlees Report.

On Thursday evening last week, Channel 4 news broadcast the above 11 minute film on land reform in Scotland. It’s worth a watch. It highlights, among other things, how grassroots members of the SNP are campaigning for a more vigorous approach to land reform.

The film was broadcast on the first day of the SNP conference where I was a speaker at a fringe meeting hosted by the League Against Cruel Sports as one of the co-authors of a report on the intensification of grouse moor management. I was also scheduled to speak at an unofficial fringe meeting on land reform on Friday evening.

I noticed that there was a debate at the conference on a motion which congratulated the Scottish Government on its land reform and community empowerment bills. (1) I had heard that amendments had been submitted to the conference organising committee but that they had not been accepted for debate. I knew that some delegates were frustrated. So, when the security guard was gazing out the window, I sneaked past and into the main hall to listen to the debate. It lasted 42 minutes and if you click on the video above it will play from the beginning at 1:15:25.

I knew something was up when a young man called Nicky Lowden MacCrimmon took to the stage (at 1:25:45) to propose that the motion be remitted back for further consideration. Coming after workable contributions from two Ministers, Aileen McLeod and Marco Biagi, Nicky made it very clear that the grassroots membership were not satisfied with the ambitions of the party leadership. Here’s a flavour of his contribution.

“This motion talks about a road to radical land reform and I don’t think as a party we can say we’re being as radical as we can be, as we should be and as we have the powers to be right now.

I cannot support the motion wholly as I and many other grassroots members of the SNP believe that our vision for land reform is not radical enough and that we’ve not had an opportunity to debate that as a party and think where are we going to go with land reform.”

[Claps from audience]

“Does radical land reform leave 750,000, three-quarters of a million acres of Scotland, in the hands of unaccountable, nameless corporations based in tax havens across the globe? No, it doesn’t and we have the power to change that now.”

[More claps and whoops]

Does radical land reform leave tenant farmers with no right to buy, no security of tenure – farmers who have invested in that land, worked that land for generations, who have kids in the local school, who contribute to local economies being told your tenancy’s up, find somewhere else to live, work, raise a family. No it doesn’t and we have the power to change that now.

[Claps]

At the end of the debate, the delegates voted to remit the motion back by 570 votes to 440.

Nicky had watched the Channel 4 broadcast and later told broadcaster, Lesley Riddoch,

Seeing Andrew Stoddart on TV and the stories from Islay just made me think someone has to say something. It was one of those, ‘if not me then who, and if not now, then 
when?’ ” moments. I take it very personally when the SNP is characterised as feart or bottling it on radical land reform. I know this isn’t how people feel in my branch or on social media. What I stood up and said was what other members have been saying to me.”

Jen Stout (here) and Calum McLeod (here) both blog about the aftermath of this debate whilst Lesley Riddoch discusses it and the unofficial fringe we held in Aberdeen with tenant farmer Andrew Stoddart in her podcast here.

I will publish a blog on the offshore tax havens issue tomorrow. See here.

NOTE

(1) See motion here.

Image: Land Reform Minister, Aileen McLeod at launch of Land Reform Bill with Carluke Development Trust. Photo by Scottish Government.

UPDATE 13 August 2015 My Written Evidence to the Rural Affairs Committee

The Land Reform (Scotland) Bill was published by the Scottish Parliament on 22 June 2014. The Rural Affairs, Environment and Climate Change Committee has issued a call for evidence on the general principles of the Bill at its Stage 1 scrutiny in Parliament. The call for evidence closes at 1700hrs on Friday 14 August 2015.

I have prepared a Briefing on the Bill designed to provide a non-exhaustive analysis and to help those wishing to submit evidence.

The Bill forms part of a much wider programme of land reform. Other ongoing work by government includes reform to succession law, council tax, private rented housing, land registration and compulsory purchase law. The Bill should thus be seen as part of a wider programme and not the sum total of land reform measures. It should also be stressed that, as the first two parts of the Bill make clear, land reform is a process that will necessarily not be concluded by the end of this Parliament. Indeed it will probably take a generation before Scotland’s land governance is set on anything like a modern footing.

The Bill itself contains welcome measures and these are analysed in the briefing. The most worrying aspect of the Bill as it stands is the abandonment of proposals made in the December 2014 Consultation to bar companies in offshore tax havens from holding title to land and property in Scotland. This would have been a progressive move and one in which Scotland could have been taking the lead in a UK context. Instead, the Bill proposes a meaningless right to request information.

Last month, Private Eye revealed that over 750,000 acres of land in Scotland – an area larger than Ayrshire – was held in tax havens. It applauded Nicola Sturgeon for taking a lead in tackling the problem. Their enthusiasm was premature.

Prime Minister David Cameron has announced plans to publish details of offshore corporate ownership in the English and Welsh Land Registry and pressure from NGOs like Transparency International to clamp down on the use of offshore shell companies is proving effective in westminster. The Scottish Government, however, now finds itself being outflanked by the Tories in efforts to crack down on secrecy and tax evasion. The Scottish Parliament has an important role in scrutinising exactly why this has happened.

Other parts of the Bill are broadly welcome though important matters remain to be debated further as the Bill proceeds through Parliament.

 

The provisions in the Scotland Bill for the devolution of the management of the Crown Estate in Scotland are complex and unclear (see previous blog for background).

Last week, the Scottish Parliament’s Rural Affairs, Climate Change and Environment Committee (RACCE) heard evidence from representatives of the Crown Estate Commissioners (CEC) and some significant points came up. (1) Here are my latest thoughts on why Clause 31 of the Scotland Bill fails to implement the Smith Agreement on this topic.

In 1999, Crown property rights were devolved under the Scotland Act 1998. However, the management and revenues were reserved and remained under the control of the CEC. The Smith Agreement is to devolve the management and the revenues. To achieve this is straightforward. The two reservations (of management and of revenues) in Schedule 5 of the 1998 Act need to be removed.

Once these removals take effect, the responsibility for the management and revenues of the Scottish Crown property, rights and interests that currently make up the Crown Estate in Scotland would fall by default to the Scottish Parliament and Scottish Government. While Scottish Ministers would need to put in place the necessary administrative arrangements to deal with these new responsibilities, there is no need for any further legislation. Once this has happened, the Scottish Parliament can begin the process of decentralisation (to which all political parties are committed) and some of which will require legislation to put into effect.

In contrast with that approach, the Scotland Bill provides for a “transfer scheme” whereby functions of the CEC may be transferred to a transferee in Scotland and continue to be governed by a modified Crown Estate Act 1961, until such time as the Scottish Parliament determines otherwise. One of those giving evidence to RACCE was Rob Booth, the Head of Legal at the CEC. He said, in response to a question that,

The position after the transfer date will be that the Crown Estate Act 1961 will be applied as a fallback, to fill a potential vacuum. At the transfer date, if no Scottish legislation has been brought forward to set up the structure to take on the new role, a modified version of the 1961 act will be applied as an interim measure until Scotland has had an opportunity to pass that legislation. 

In my reading of the Scotland Bill, it is not anticipated that there will be an on-going application of those 1961 act principles to management in Scotland. After the transfer date, as things stand, the 1961 act will apply only to the Crown estate in the rest of the UK, so Scotland will have freedom as far that particular aspect is concerned.” (2)

In other words, the Scotland Bill would remove the Schedule 5 reservation on management (we will deal with revenues shortly) but rather than keeping things straightforward as outlined above, Clause 31 would put in place a Treasury transfer scheme which binds nominated transferees into a legal framework governed by the Crown Estate Act and which needs to be undone by the Scottish Parliament if and when it wishes to do so in relation to the various Crown property rights and interests involved.

It remains unclear why this added complexity is necessary. Four other aspects remain unclear.

The first is the question of the revenues. It is now clear that the Scotland Bill will not devolve the revenues. Instead, it amends the Civil List Act to the effect that all revenues will be paid to the Scottish Consolidated Fund. The reservation in Schedule 5 remains in place, however, and so it will be incompetent for the Scottish Parliament to make any change to this arrangement. This, in effect, makes decentralisation very problematic. The promise that the First Minister, Nicola Sturgeon made in Orkney two weeks ago, that “coastal and island councils will benefit from 100 per cent of the net revenue generated in their area from activities within 12 miles of the shore” is made rather difficult if all of the revenue has, by law, to flow to the Scottish Consolidated Fund. (3)

The second matter relates to the idea that, after devolution, the CEC will continue to be able to acquire land in Scotland. This is legally incompetent. The CEC does not acquire land or property interest in its own behalf but does so on behalf of the Crown. Constitutionally and legally, the Crown is a distinct entity in Scotland from the rest of the UK. Were the CEC to acquire, say a shopping centre in Scotland in 5 years time, it would be owned by the Crown in Scots law but acquired from revenue derived from the English Crown. Constitutional experts will be better placed to address this question than I but I do not think this is constitutionally possible.

Thirdly, the Scotland Bill at Clause 31(10) stipulates that any management of Crown property in Scotland shall maintain the property, rights and interests as “an estate in land”. Rob Booth described this as “a fundamental founding principle of the Crown Estate”. (4) But after devolution there will be no Crown Estate in Scotland (the term will only apply outside Scotland). Crown property rights have been devolved since 1999 and this constraint represents a reversal of the current competence of the Scottish Parliament for no good reason.

Finally, the Fort Kinnaird retail park in the east of Edinburgh will not be included in the devolved settlement. Rob Booth explained this in the following terms.

As a lawyer reading the Smith proposals, I can see that Smith talked about Crown Estate economic assets in Scotland being devolved to Scottish ministers. There is a statutory definition in section 1(1) of the Crown Estate Act 1961 of what the Crown estate is, which is those assets that are managed by the Crown Estate Commissioners. Fort Kinnaird undoubtedly is an economic asset in Scotland, but we do not manage it. The underlying asset is not owned by the Crown; therefore, to my mind as a lawyer, it does not fit the definition of a Crown Estate economic asset in Scotland as described by the Smith report.” (5)

Fort Kinnaird is owned by a partnership – The Gibraltar Limited Partnership. In Scots law a partnership is a legal entity and may own property in its own right. The Gibraltar Partnership, however, is governed by English law, specifically the Limited Partnership Act of 1907. Such partnerships are not legal entities and it is the partners that are the legal owners of the property. There are two partners in the Partnership – the CEC on behalf of the Crown and the Hercules Unit Trust. Since Fort Kinnaird is in Scotland, the interest that the CEC has is an interest owned by the Scottish Crown. (6)

Rob Booth’s explanation is unconvincing, disingenuous and wrong. The underlying asset (the interest) is owned by the Crown, the CEC manages that interest, and it does therefore form part of the Crown Estate.

To conclude, the Scotland Bill does not implement the Smith Agreement. Instead it creates a complex and incoherent muddle where there should, instead, be clarity and simplicity. The Scotland Bill is about devolving further powers to the Scottish Parliament. That is achieved by removing the two key reservations. That’s all, in essence, that it needs to do (although there are minor consequential amendments) and it doesn’t even achieve that. In the Committee stage of the Bill on 29 June 2015, MPs should ensure that it does.

NOTES

(1) Official Report here
(2) Official Report Cols 12-13
(3) See Shetland Times, 21 June 2015
(4) Official Report Col 14
(5) Official Report Col 6
(6) See here for Companies House filing history on the Partnership

Introduction

One of the Smith Commission agreements was that responsibility for the management and revenues of the Crown Estate in Scotland should be devolved to the Scottish Parliament. (1)

This Agreement reflected the widespread consensus in Scotland that the management of  the Crown Estate should be devolved. There have been several inquiries into this topic over the last ten years, from the Crown Estate Review Working Group (2007) to Westminster’s Scottish Affairs Committee (2012), which also recommended the devolution of the Crown Estate in Scotland. (2)

The Smith Commission also agreed, like the Scottish Affairs Committee before it, that devolution should be followed by further decentralisation to local authorities, communities and others, of responsibilities for the various Crown property, rights and interests that make up the Crown Estate in Scotland. Both the Scottish Affairs Committee and the Smith Commission were clear, however, that this decentralisation was to take place after the devolution of the management of the Crown Estate to the Scottish Parliament. (3)

The Scotland Bill was published on the 28th May by the UK Government and is now on its hurried passage through the UK Parliament. (4) It is intended to implement the Smith Commission agreements.  Clause 31 of the Bill that deals with the Crown Estate, however, completely fails to do this and needs to be re-drafted.

But, first, some background.

The Crown Estate

The Crown Estate is the name given in the Crown Estate Act 1961 to the various Crown property, rights and interests that are managed by the Crown Estate Commissioners (CEC).  The CEC is a statutory corporation first constituted by the Crown Estate Act 1956 and now operating under the 1961 Act.  The CEC transfers its net surplus revenue or ‘profit’ each year to the UK Government’s Consolidated Fund for use in public expenditure. (5)

The CEC is thus the manager of property rights that belong to the Crown. However, there can often be confusion between the manager and the property, because the CEC has branded itself for its corporate identity as ‘The Crown Estate’.  The Treasury Committee also felt it necessary to emphasise in its report on the Crown Estate, that “the CEC are a public body charged with managing public resources for public benefit”. (6)

The Crown property, rights and interests that make up the Crown Estate in Scotland are legally and constitutionally distinct from those in the rest of the UK, because they are owned by the Crown in Scotland and defined in Scots law.  Scotland’s Crown property rights are of ancient origin and continued to be administered with their revenues in Scotland following the Union of Crowns in 1603 and the Treaty of Union in 1707.  Some of these Crown rights continue to be managed in Scotland by the Scottish Government and Crown Office. However, the administration and revenues of many of Scotland’s Crown property rights were transferred from Edinburgh to a government department in London in the 1830s.  That department and its successors, were the predecessors of the current CEC.

The Crown property rights managed by the CEC in Scotland include Scotland’s territorial seabed and Crown rights over the Scotland’s continental shelf zone (see map above), around half of Scotland’s foreshore, the right to mine gold, salmon fishings, four rural estates and two urban properties.  The Crown Estate in Scotland only accounts for around 3-4% of the value attributed to the UK wide Crown Estate and revenue produced by it. The CEC’s annual ‘profit’ from its operations in Scotland, has been around £5m in recent years. (7)

The Scotland Act 1998 devolved legislative competence over Scots property law, including Crown property rights, to the Scottish Parliament.  The first Scottish Parliament, for example, used this legislative authority to abolish the Crown’s ultimate ownership of land in Scotland under feudal tenure.  However, the reservation of the management of the Crown Estate in the Scotland Act, precludes the Scottish Parliament from being able to legislate over the rights managed by the CEC and also means that the CEC is not accountable to either the Scottish Parliament and Government for its operations in Scotland. Implementing the Smith Agreement would complete the devolution process started in 1999 and bring the rights and the management together under the legislative competence of the Scottish Parliament.

The Scotland Bill

The Smith Agreement to devolve the management and revenues of the Crown’s property rights should be straightforward to implement in legislation.

The two main requirements are to amend the Scotland Act 1998, Schedule 5 Part 1 by;

1. removing clause 2(3) that reserves the management of the Crown Estate in Scotland and,

2. removing clause 3(3)(a) that reserves the revenue from the Crown Estate in Scotland.

Removing these two reservations would mean that responsibility for managing the Crown property rights that currently make up the Crown Estate in Scotland, automatically falls to the Scottish Parliament.

Appropriate legislation also needs to cover some consequential amendments to other legislation, in particular to the Crown Estate Act 1961 to reflect that it would no longer apply in Scotland.  In addition, the legislation requires some procedural provisions dealing with the transfer date and process.

Unfortunately, clause 31 in the Scotland Bill manifestly does not implement the Smith Agreement.  The clause does not devolve the responsibility for the management of the Crown Estate in Scotland to the Scottish Parliament. Instead, the clause delegates existing functions of the CEC as a statutory corporation to Scottish Ministers or others transferees through a Treasury ‘scheme’.

The current clause 31 attempts to enable the CEC to continue to operate in Scotland and to bind those to whom functions are transferred to the restrictive terms of the Crown Estate Act 1961 under which the CEC operates.  The clause’s provisions to try to achieve this are, as others have commented, complex and unclear. (8) They are a recipe for confusion and legal anomalies.  They do not devolve legislative responsibility over the Crown property rights and revenues involved in Scotland to the Scottish Parliament and will frustrate the widespread consensus for the further decentralisation of these within Scotland. (9)

Re-framing Clause 31

The Smith Agreement to devolve responsibility over the Crown Estate in Scotland reflects the longstanding agreement in Scotland over this matter and it should be straightforward to implement through the Scotland Bill.  Why then does the existing clause 31 fail to do this?

This blog argues that this current state of affairs has arisen because of the degree of influence that the CEC has had on the nature of clause 31. The sequence of Committee inquiries and reports into the operations of the CEC show how CEC corporate policies have been aimed at maintaining it as a UK organisation.  IN 1998, the CEC declined to participate in the devolution process in the way that the Forestry Commissioners did (and have continued to do).  The starkest example, however, was in 2001/02 when, against the flow of devolution, the CEC ended its management of the Crown Estate in Scotland as a separate management unit with its own manager and financial accounts, so that the CEC could assimilate its operations in Scotland into those in the rest of the UK. (10) The current clause 31 with its stretching and twisting of the Crown Estate Act 1961, can be seen as the CEC’s latest move to try to retain the Crown Estate as a UK wide estate.

Furthermore, it is distressing to note the continuing mis-understanding of what exactly the Smith Commission agreed. For example, a briefing issued by the Scottish Parliament, claims that it is the “powers of the Crown Estate Commissioners [which are set out in the 1961 Act] which would be transferred to Scottish Ministers.” (11)

This is wrong.

The Smith Agreement patently does not say this. It says that responsibility for management will be devolved to the Scottish Parliament. That is an entirely different matter from a mere delegation of functions to be exercised within the framework of continuing reserved powers.

The Scottish Government’s initial response to the Scotland Bill recognises the need to re-frame clause 31, so that the clause removes the reservations in the Scotland Act 1998 over the management and revenues of the Crown property rights in Scotland forming part of the Crown Estate. (12) The terms of the Scottish Government’s proposed alternative clause 31 still suffers from some other weaknesses. However, it is to be hoped that all the parties involved in the Smith Commission will recognise that the issues over clause 31 are not party political.

Solving this problem is a simple matter of re-framing the clause in a competent was so as to implement the Smith Agreement in as straightforward a manner as possible.

  1. Smith Commission page 16
  2. See Crown Estate Review Working Group Report and Scottish Affairs Committee Report.
  3. See, for example, Lord Smith’s evidence to Scottish Affairs Committee 3 December 2014. Q137-Q140
  4. Scotland Bill
  5. Section 1(2) Civil List Act 1952
  6. House of Commons Treasury Committee Report, 2010 para 10
  7. Scottish Affairs Committee Report para 39
  8. See Devolution (Further Powers) Committee report
  9. For example, the Bill amends the Civil List Act 1952 to obligate the payment of all Crown revenues to the Scottish Consolidated Fund. Decentralisation to, for example, to harbour trusts will be constrained by a continuing legal constraint to hand over all revenues to the Scottish Government.
  10. Scottish Affairs Committee Report para 21
  11. See SPICE/Clerks/Legal Briefing page 15 “Provision has been made to amend the Crown Estate Act 1961 to reflect the new role for Scottish Ministers (SMs), but to retain the requirement to manage and improve etc the property, rights and interests being transferred subject to the remaining provisions of the Crown Estate Act 1961. This reflects the Smith Commission recommendation that it would be the powers of the Crown Estate Commissioners [which are set out in the 1961 Act] which would be transferred to Scottish Ministers.”
  12. See Scottish Government alternative clause, pages 12-13 and 43

OTHER DOCUMENTS

House of Commons Library Briefing on Scotland Bill

 

This blog is long overdue (as indeed are many) but I understand that the City of Edinburgh Council’s Audit Committee will shortly be considering a report into the Parliament House fiasco. It is therefore appropriate to publish this second update on the affair. The original story is here and Update 1 is here).

In summary, Parliament Hall forms part of the common good of the City of Edinburgh but, through a series of apparent blunders, title was granted to Scottish Ministers in 2005 (see the original story for full background). In 2010, Fergus Ewing, Minister for Business, Energy and Tourism signed the Transfer of Property etc. (Scottish Court Service) Order which vests the property in the hands of the Scottish Courts Service.

On 19 February 2015, four days after the story broke, Alison Johnstone MSP asked the First Minister whether the Scottish Government would co-operate in resolving the matter (see above video clip and Official report pg 16 here). Alison Johnstone then wrote to the Scottish Government and received a reply. At the same time a Freedom of Information request revealed other elements of the story. These are outlined in what follows.

Alex Neil Letter

On 9 March, Cabinet Secretary Alex Neil wrote to Alison Johnstone and outlined how, in the view of the Scottish Ministers, Parliament House (or Parliament Hall as it is called in the letter) came to be regarded as being in their ownership. It appears that Scottish Ministers are relying on the Commissioners of Works Act 1852 which, in Section 4, vested all the courts and buildings of the Courts of Session and Justiciary in the ownership of the Commissioners of Works. Since Scottish Ministers are the statutory successors to the Commissioners, the argument goes, so Scottish Ministers were entitled to seek to obtain a Land Register title from the Keeper of the Registers of Scotland.

I do not find this a credible explanation. Acts of this sort are passed by Parliament to transfer the ownership of property from one public body to another. The 2010 Order mentioned above is a contemporary example of such legislation. Such Acts cannot lawfully transfer land or property owned by third parties (which includes land owned by local authorities such as the Royal Burgh and Corporation of Edinburgh.

As noted in the original blog, Parliament House is a building about which much is known. The City accounts of 1875-76 place on record the Council’s ownership of the building. A comprehensive report of 1895 on the Municipal Buildings of the City does the same. And the comprehensive asset survey by the Town Clerk and City Chamberlain in 1905 (Report of the Common Good of the City of Edinburgh by Hunter & Paton) re-iterates the Council’s ownership.

It is inconceivable that theses officers of the Corporation could be recording the ownership of this building in 1875, 1905 and 1925 if, as argued by Scottish Ministers today, ownership of the property had been transferred by an Act of Parliament in 1852. Had the 1852 Act transferred ownership, the Council would know all about it. But the Act did not do this because such Acts cannot ( in the absence of a court order or other legal means of acquisition) transfer the ownership of property that is not already in the ownership of a public body accountable to Parliament.

Scottish Government Correspondence

In information released as part of a Freedom of Information request to Scottish Ministers (6,2Mb pdf here), it is evident that the Council had made contact with Scottish Ministers as far back as February 2014. Further internal correspondence relates to media enquiries made in February 2015 by Gina Davidson from the Evening News who worked on the story with me.

City of Edinburgh Council

The Council appears to have made contact with Scottish Ministers as far back as 6 June 2014 in a letter outlining its concerns (see here).

The fatal letter that was written on 9 May 2006 by the City of Edinburgh Council to the Scottish Government declaiming any interest in Parliament Hall has also come to light – extract below (full pdf here)

 Faculty of Advocates

Finally, I have obtained a fax from the Faculty of Advocates dated 19 June 1997 that claims that the Laigh Hall (which used to store the Maiden, the gallows and the City lamps) had come into the ownership of the Faculty from the Town in exchange for properties to the north of the Signet Library. There is no evidence that this claim has any foundation in fact.

To Conclude

Whether the City of Edinburgh Council will be able to recover ownership of Parliament Hall is yet to be determined. The most interesting revelation from the above is the assertion by Scottish Ministers that the 1852 Act was the basis upon which they proceeded to assert their title. I think this view is flawed.

The City of Edinburgh Council’s Audit Committee meets on 18 June.