“it was rubbished the day before it was published”

19. May 2015 · 6 comments · Categories: Democracy, Fiscal Policy, Land Values, Politics

Image: Commission on Local Tax Reform. Oral Evidence Session 2

Today, the Commission on Local Tax Reform held its second oral evidence session. I am  member of the Commission representing the Scottish Green Party. The event was streamed live and you can view the whole proceedings here together with the slides used by Stuart Adam of the Institute for Fiscal Studies. In addition to Stuart’s evidence, we heard from Professor John Baillie – a member of the Local Government Finance Review Committee (chaired by Sir Peter Burt), and  the immediate past Chair of the Audit Commission and of Audit Scotland. We also heard evidence from Ken McKay who was Head of Local Government Finance in the Scottish Office between 1989 and 1997 and was the advisor to the Burt Committee.

The Committee was established in 2004. Its remit was:

“To review the different forms of local taxation, including reform of the Council Tax, against criteria set by the Executive, to identify the pros and cons of implementing any changes to the local taxation system in Scotland, including the practicalities and the implications for the rest of the local government finance system and any wider economic impact, and to make recommendations.”

The Committee published its final report on 9 November 2006 (news report here).

The current Commission is keen to learn from the experience of Sir Peter Burt’s Committee and so invited Professor Baillie and Ken Mackay. You can watch the whole session and download the slide presentation here.

I relate the following exchange in order to highlight the potential political difficulties that might lie ahead and to alert interested parties to the vital need to achieve a degree of political consensus on the findings of the Commission. The exchange speaks for itself as to the challenges of making progress in this area of public policy.

After the Chair had opened question of the witnesses , I asked why Burt had died a death before it was even published. Here is the exchange at 52 minutes and 10 seconds into the session.

Andy Wightman

“I’ve got quite a few questions on the technical detail of all of this  but first of all, Ken and John, perhaps on the politics of all of this because this appears to be where Burt stumbled and where possibly the biggest challenges facing this Commission are. Why did Burt die a death before it was even published?”

John Baillie

“We submitted our report and we actually gave an advance copy as you would expect out of courtesy to the First Minister among others. And we heard the day before we were publishing and having our press conference that it had been dismissed. I to this day do not know why and I think the easiest way to find out the justification for that wholesale rejection is possibly to invite those who rejected it. I can speculate but it’s worthless.”

Ken Mackay

“I have no …. I was inside the Scottish Office at one time and I have no idea .. and I have tried .. I have seen Jack McConnell on the golf course and I’ve often wanted to ask him .. because the Burt Committee  .. well I’d better be .. I better bite my tongue a bit because there’s politics in this especially now but they were treated appallingly. They did a very, very good piece of work and it was rubbished the day before it was published.”

The Commission is currently undertaking a public consultation. Further details here.

The Only Anti-Austerity Plan in Town

20. February 2015 · 73 comments · Categories: Fiscal Policy, Land Values, Politics

Guest Blog by Fred Harrison, Land Research Trust.

Austerity has caused deep anguish for people across Europe. They did not cause the depression that followed the financial crisis of 2008, but they are paying the price. Scotland’s government has announced its determination to cushion the austerity effect by spending more money on low-income people. But where is the money to come from?

Governments from Ireland to Greece think that, by selectively raising some taxes, they can increase welfare spending. In reality, that strategy compounds the trauma. Tax increases, whether on high-end properties or top incomes, inflict yet more costs on everyone. Those governments claim to be democratic. And yet, when it comes to taxation, they ignore the principles of transparency and accountability. They refuse to disclose the scale of the damage they inflict on people at large.

That damage can be audited. Taxes on wages, and on the profits of enterprises, destroy jobs and reduce national income. Governments try to disguise these effects by spreading the burden widely, hoping that people do not notice. But people are not stupid, which is why distortions have measurable effects on the economy.

In the US, for example, Prof. Martin Feldstein at Harvard estimated what would happen if marginal taxes were raised by 10%. Government would receive extra revenue of $21 billion, but the loss to society as a whole would amount to $43 billion. A bad trade-off! (1)

But there is an anti-austerity strategy that can fund itself. That is the outcome from switching to raising the same amount of revenue with a different composition of revenue-raisers. By raising the revenue from pure economic rent, which is the value of the services provided by nature and by society.

The net gain to national income stem from the “better than neutral” effect, in the phrase of Nicolaus Tideman, an American professor of economics. By reducing revenue from taxes on wages and/or profits, the damage done by these taxes is reduced. And by replacing that revenue with income from rent, no distortions are imposed on the economy.

Tideman and his colleagues calculated this effect for the US. They wanted to know what would happen if government raised $1 from land taxes instead of the same dollar from existing taxes on wages and business profits. The  extra gains from that switch ranged from about $1.25 (substituting land taxes for Social Security taxes) to about $2.25 (substituting land taxes for property taxes levied on the value of buildings). (2)

So it turns out that we can have our cake and eat it! We can run a revenue-neutral budget while expanding the aggregate income available to be shared between the public and private sectors. In Scotland, that would result in more jobs while providing government with extra resources to help the vulnerable sectors of society.

How to construct such a strategy will be explored at a conference in Glasgow next Wednesday, which is open to the public. Evidence from two professors of economics – one from Strathclyde, the other from California – will reveal the enormous gains that the people of Scotland would enjoy if Holyrood embarked on a real anti-austerity programme. In fact, it’s the only anti-austerity plan in town.

 NOTES

(1) Martin Feldstein (1995), “The effects of Marginal tax Rates on Taxable Income: a panel study of the 1986 Tax Reform Act,” Journal of Political Economy 103 (3).

(2) Nicolaus Tideman et al (2002), “The Avoidable Excess Burden of Broad-Based U.S. Taxes,” Public Finance Review 30 (5).

Commission on Local Tax Reform

20. February 2015 · 28 comments · Categories: Announcements, Democracy, Fiscal Policy, Land Reform, Land Values, Urban

The Scottish Government has announced the remit and membership of the Commission on Local Tax reform. I am very pleased to have been nominated as a member of the Commission on Local Tax Reform and look forward to meeting the other Commissioners on Monday at our first meeting.

The Commission will be co-chaired by Local Government Minister Marco Biagi and President of COSLA Councillor David O’Neill. The Commission will meet for first time on February 23 and will report to the Scottish Government and COSLA in the autumn.

Marco Biagi said:

“The Scottish Government believes the current council tax system is unfair and we are acting on our manifesto commitment, and the recommendations of the Local Government and Regeneration Committee, to look at alternative approaches to local taxation.

“The Commission on Local Tax Reform will consider progressive, workable and fair systems, taking into account domestic and international evidence on tax powers and wealth distribution, the autonomy and accountability of local government and the impact on individuals who pay the tax.

“The members bring a broad range of expertise and experience and I look forward to starting this important work.”

David O’Neill said: “A great deal of work lies ahead, but this Commission is a chance to take a step back and think about the best way to pay for the local services that communities rely on every day.

“Across Scotland people are looking for the debate to break new ground, and that’s why I am determined that this Commission will be listening to people and organisations from all parts of the country, and setting out what it would take to give our local communities a real say about what matters most to them, and the best way to pay for it.”

The Commission’s Remit is:

“To identify and examine alternative systems of local taxation that would deliver a fairer system of local taxation to support the funding of services delivered by local government. In doing so, the Commission will consider:

  • The impacts on individuals, households and inequalities in income and wealth;
  • The wider macro-economic, demographic and fiscal impacts, including housing market and land use;
  • The administrative and collection arrangements that apply, including the costs of transition and subsequent operation;
  • Potential timetables for transition, with due regard to the 2017 Local Government elections.
  • The impacts on supporting local democracy, including on the financial accountability and autonomy of Local Government;
  • The revenue raising capacity of the alternatives at both local authority and national levels.

In conducting its work, the Commission will engage with communities across Scotland to assess public perceptions of the emerging findings and to reflect this evidence in its final analysis and recommendations.

The Commission will be supported by an independent secretariat comprising staff seconded from COSLA and the Scottish Government.

The membership is as follows (the Scottish Conservative Party has declined to take part).

  • Councillor Susan Aitken, SNP Local Government Convenor and Leader of SNP Group, Glasgow City Council;
  • Councillor Catriona Bhatia, Leader of Liberal Democrat Group and Deputy Leader, Scottish Borders Council;
  • Marco Biagi MSP, Minister for Local Government and Community Empowerment (Co-Chair);
  • Councillor Angus Campbell, Leader of Comhairle nan Eilean Siar and Leader of the Independent Group at COSLA;
  • Councillor Rhondda Geekie, Leader Of East Dunbartonshire Council and Leader of Labour Group at COSLA;
  • Dr Angela O’Hagan, Research Fellow in the Institute for Society and Social Justice Research and Convenor of the Scottish Women’s Budget Group;
  • Isobel d’Inverno, Convenor of the Tax Committee of the Law Society of Scotland and Director of Corporate Tax at Brodies LLP;
  • Mary Kinnonmonth, Manager of Dundee Citizens Advice Bureau and Member of Citizens Advice Scotland Board of Directors;
  • Dr Jim McCormick, Scotland Advisor, Joseph Rowntree Foundation;
  • Councillor David O’Neill, President of COSLA (Co-Chair);
  • Don Peebles, Head of CIPFA Scotland;
  • Alex Rowley, MSP for Cowdenbeath and Shadow Minister for Local Government and Community Empowerment;
  • Andy Wightman, Writer and Researcher, representing the Scottish Green Party.

 

I will be using this blog to explore in an open manner some of the issues to be resolved in devising an enduring and robust system of local taxation. The focus is very much on what to replace the Council Tax with but of course that replacement could involve not just a better system of domestic property taxation but the repatriation of non-domestic rating, sales taxes, local income taxes and other sources of local finance.

I am very clear that we need a new system of local government finance. Any new property tax should be designed in such a way as to endure over the long-term. It should be more reflective of land and/or property values, more transparent and be capable of contributing a greater proportion of autonomous local finance than is currently the case. Local finance and taxation is a vital part of rebuilding and strengthening local democracy.

Finally, this job is unpaid. On the face of it, this means that I will have to inevitably devote less time some of my other unpaid work on, for example, land reform. However, I plan to launch a crowd-funding appeal soon that will allow me to continue (and indeed increase) the time I can devote to that topic in what is a vital year ahead.

Later this afternoon I will publish a link to the Commission’s website. Meanwhile I welcome all views on the challenge that lies ahead.

Will Nicola Sturgeon pass her own tests?

15. February 2015 · 341 comments · Categories: Fiscal Policy, Land Reform, Land Values, Politics

Guest Blog by Fred Harrison, Land Research Trust.

Scotland’s First Minister has created an awkward rod for her political back. Her attack on the Coalition Government’s “austerity” policies renders the SNP vulnerable to its enemies in Westminster. Speaking in London on Wednesday (video above, text here), Nicola Sturgeon trashed the UK Government’s policies on three counts. She condemned the economic policies pursued by David Cameron for failing to deliver long-term growth, increased productivity and fairness. Her own government in Holyrood will now be judged on those tests.

Fortunately for the SNP, the new powers on taxation that are being devolved to Scotland will enable her to undertake reforms that can shift Scotland in the direction of an alternative economic path. But this will require a major change to the way Scotland funds its public services. The taxes employed by the London government certainly fail the first test: long-term growth. Tax policies are rigged against people who earn their incomes by working and saving. The revenue system is biased to favour land as an investment asset. And the pages of history leave us in no doubt that those fiscal policies drive the boom/bust business cycle that terminates long-term growth.

The productivity test is an awkward one. How inefficient is the current tax regime? I will explore that issue at a public conference in Glasgow on 25th February. But there is no doubt that performance of the Scottish economy could be dramatically enhanced if the Sturgeon government decides to rebalance the tax regime. It will need to shift the emphasis away from Income Tax and onto a re-based property tax.

There is no ambiguity about the third test: fairness. At present, the tax regime discriminates against families that rent their homes, and favours the owners of residential property. So the SNP’s commitment to land reform will challenge Ms Sturgeon to find a way of shifting the structure of taxation so that people are treated as equals.

In her London speech, Ms Sturgeon pointed out that the austerity programme was being forcefully opposed throughout Europe. But she is now in a unique position. Unlike the newly elected Greek government, the SNP administration does not have to secure the permission of others to change course. It has the political mandate to launch the reforms that would shift Scotland onto the high productivity growth path. Those reforms would be fair to everyone willing to work by adding to the sum total of Scotland’s wealth and welfare.

Ironically, the SNP government’s enemies within Scotland will not invoke Nicola’s three tests. Already, the opponents of land reform are mobilising their ammunition to try and defend the status quo. The last thing they want is a shift in the direction of efficiency and fairness! The tax regime, after all, was created by those who sought privileged treatment, and to hell with the unfair impact on others. So it will be up to Nicola’s friends to hold her to account, by invoking the three tests to measure the performance of the SNP government.

The £60bn Route to Scotland’s Economic Independence

22. January 2015 · 90 comments · Categories: Announcements, Fiscal Policy, Land Values

The following Media Release was issued by the Scottish Land Revenue Group today

The £60bn Route to Scotland’s Economic Independence

Devolution of new financial powers to Holyrood could lay the foundations for an independent Scottish economy within the UK, according to a new Glasgow-based think-tank.

The Scottish Land Revenue Group (SLRG) estimates that Scotland’s government could expand the economy by £59.8bn over the 5 years up to the Holyrood election in 2021 if, as expected, it is given control of the Income Tax.

The forecast assumes that the government would use its powers to rebalance the tax system. The process would begin by zero-rating the Income Tax, scrapping the existing property taxes and replacing the revenue with a new charge on location rents.

The Income Tax now yields £11.5 bn. Studies commissioned by the SLRG show that replacing Income Tax with one charge on land rents would boost employment by 55,000 jobs.

According to Dr Roger Sandilands, emeritus professor of economics at Strathclyde University: “This is not a revenue-neutral policy. By switching the way revenue is raised, the losses caused by the Income Tax are turned into financial gains.

“This is an anti-austerity strategy,” Dr Sandilands stresses. “The tax shift means that government does not have to cut public services. Tax cuts would be self-funding. Under current policies, when taxes are cut, the money does not stay in people’s pockets. Ultimately, it flows into the land market. People have to pay more to buy or rent homes or commercial properties. By collecting that revenue in the form of location rents, government can maintain current spending on services like the NHS.

“So why switch the way revenue is raised? There are two benefits. First, without reducing people’s take-home pay, it becomes cheaper to hire people. Scotland would become a magnet for investors wanting to create enterprises within the UK. This reverses the drift to London and the South-east.

“Secondly, the so-called ‘deadweight losses’ caused by bad taxes would be reduced. There is a net gain to the economy. We estimate that, if Holyrood exercised its power to zero-rate the income tax, the Scottish economy would expand faster than the UK average. GDP would increase in a virtuous cycle of growth. The boom/bust property cycle would be damped down in Scotland, and our economy would leave the rest of the UK behind.”

These themes will be explored at an SLRG conference at The National Piping Centre in Glasgow on February 25. Speakers will discuss how communities can be rebuilt, trust restored in the institutions of governance, and investment in the economy can be increased without incurring government debt.

Conference Programme

Contact SLRG to book a place

Rewards from Eliminating Deadweight Taxes: The hidden potential of Scotland’s land and natural resource rents
by Professor Roger Sandilands.

Scottish Conservatives propose increased costs for home-buyers

18. December 2014 · 15 comments · Categories: Finance & Money, Fiscal Policy, Housing, Land Reform, Land Values

Image: Chart from OBR Economic & Fiscal Outlook December 2014. Click for larger image.

Following the changes to stamp duty announced by George Osborne in the Autumn Statement, the Scottish Conservative Party has published proposals to change the proposed Scottish replacement – Land and Buildings Transaction Tax – due to be introduced in April 2015. The topic was raised at First Ministers Questions today (col. 14)

The Tory proposals include halving the rate between purchases of between £250,000 and £500,000 from 10% to 5%. The party claims that its proposals “would mean 97 per cent of transactions, including all those below £500,000, will leave house-buyers better off.”

This claim (and similar claims by the Scottish Government) that cuts in stamp duty rates represent a saving to housebuyers is misleading and wrong. It is a symptom of widespread illiteracy around the fiscal dimensions of land and property.

In broad terms, people have a fixed budget when they buy a house. They can, perhaps afford £150,000 made up of a loan and capital of their own. This sum has to cover the costs of acquisition (fees and stamp duty) and the sum paid to the seller for the house. If stamp duty rates are reduced it follows that more money is available for the other costs (fees and the price paid). Assuming that fees remain fixed (such as land registration fees) and others (survey fees and conveyancing costs) remain unchanged (either as a fixed sum or as a percentage of purchase price), the money saved in stamp duty will be available to bid up prices.(1)

This is a straightforward economic principle that was the subject of this useful analysis by Shelter and is noted by the Office of Budget responsibility in its Economic and Fiscal Outlook December 2014 on page 126 as follows.

The OBR analysis makes clear that the cuts proposed by George Osborne and the Scottish Conservatives will be more than offset by higher house prices. Those higher prices will, in many cases be financed by loans, the interest on which will be higher over many decades. A small saving in a one-off transaction tax will not simply be more than offset by higher house prices but by ongoing, compounded and volatile interest payments to financial corporations.

The best solution (and the one I advocated two years ago and is recommended by one of the Scottish Government’s own economic advisers – Sir James Mirrlees) is to abolish this transaction tax in its entirety and replace the volatile yield with a better-designed system of recurrent taxation of land and property. The Mirrlees Review (Chapter 16 pg 404) noted that,

If the Scottish Conservative (and indeed other parties) want to be truly radical, they would be well-advised to stop tinkering with rates (that will not have the claimed effects), abolish stamp duty and its associated bureaucracy, and agree to far more fundamental reform in fiscal policy relating to land and property.

(1) Of course, buyers are often sellers and will receive higher bids for the property that they are selling. But given that most buyers who are sellers are trading up, this merely exacerbates the inflation in prices.

Griff Rhys Jones to flee the country

03. November 2014 · 70 comments · Categories: Finance & Money, Fiscal Policy, Housing, Land Values, Urban

The comedian and TV presenter Griff Rhys Jones is reported today to be ready to quit the UK in protest at plans by the Labour Party to introduce a mansion tax if it wins the 2015 General Election. As the Telegraph reports,

He himself lives in a “gigantic” house in a part of central London that was, when he bought it 15 years ago, a “slum”. He has a track record of buying large, run-down properties and turning them into homes for himself and his wife, Jo. His Fitzrovia house has appreciated so significantly that he is contemplating moving overseas if Labour win the election and introduce a mansion tax.

“It would mean I’d be paying the most colossal tax, which is obviously aimed at foreigners who have apparently come in and bought up all the property in London,” he says. “That sounds about as fatuous an idea as that immigrants are stealing all the jobs. I’d probably go and live abroad because I could get some massive palace which I could restore there.”

There has been a lot of nonsense talked about the mansion tax. This, from the Chief Executive of Legal & General, is typical.

“People who choose to prioritise buying a home have typically made sacrifices to do so: fewer foreign holidays, meals out or other luxuries. Through no fault of their own, their prudence would be punished by a Mansion Tax.” (Telegraph 27 October 2014).

The idea that folk who own houses worth in the millions have made sacrifices, saved hard or been prudent may well be true (at least for some). But that sacrifice, saving and prudence is not what has been responsible for their homes being worth so much money. The inflated price of houses in many parts of the UK is a consequence of scarcity and a lax fiscal regime. The financial gains made by homeowners are only in very small part due to their own efforts (for example, insulating or other improvements). The vast majority of the gains are as a consequence of rising land values.

Labour has yet to spell out the details of its plans but they involve a levy on properties worth over £2 million. Ed Balls announced the policy in an article in the Evening Standard on 20 October 2014. The Financial Times calculated that on average, the owners of properties worth over £3 million would pay an average of £19,000 per year.

Griff Rhys Jones and his partner Joanna own 2 Fitzroy Square (shaded red above) in the London borough of Camden. They bought the property for £1,450,000 in 1998 after Camden Council granted planning consent for a change of use from offices to a residential home (see Land register title). The couple then undertook the renovations and the property is now a domestic dwelling with 7 bedrooms, 3 bathrooms and 4 reception rooms.

Image: Extract from Title Plan for 2 Fitzroy Square.

According to Zoopla, the property is currently worth £7,012.156 and has risen in value by £3,015,251 over the past 5 years. The rental value is estimated at £16,167 per month (£194,004 per year). Rhys Jones currently pays £2640.96 in Council Tax to Camden Council.

Assuming that £1 million was spent undertaking renovations, the Rhys Joneses have seen their property rise in value by around £4.5 million. That sum is unearned increment (economic rent in economic theory) and, since principal residential properties are exempt from capital gains tax, the gain is entirely tax-free. This tax relief is worth an estimated £10.4 billion per year to homeowners according to the National Audit Office.(1)

Successive governments have put in place a fiscal regime for domestic property that allows Rhys Jones to make a £4.5 million tax-free capital gain without any effort on his part.

A sensible system of recurrent taxation would be designed to curtail such asset inflation by socialising this rent rather than allowing it to be appropriated tax-free by private interests. The mansion tax is a badly designed tax. As the Institute of Fiscal Studies commented in February 2013,

“Rather than adding a mansion tax on top of an unreformed and deficient council tax, it would be better to reform council tax itself to make it proportional to current property values.”

If property taxation was properly proportional and the Rhys Joneses paid the percentage rate (1.85%) that a mid-point English Band D property is liable for, then they would be paying £129,724 per year. The Mansion tax is liable to be about a tenth of that.

That kind of liability would deter most buyers who, as a consequence would offer less for the property so as to pay less in annual holding costs – which is precisely what a well-designed system of recurrent property taxation would do. Lower property prices means less indebtedness and more resources invested in the productive economy. But that is not the kind of economy that either Labour or the Tories appear to be interested in.

In the meantime perhaps Rhys Jones should be grateful.

NOTES

(1) See Figure 6 in Tax Reliefs.

 

Land Value Taxation in Northern Ireland

28. October 2014 · 4 comments · Categories: Finance & Money, Fiscal Policy, Land Values, Politics

Following the publication of our report A Land Value Tax for Northern Ireland (1), Dr Ronan Lyons, myself and the Chief Executive of NICVA, Seamus McAlaevey were delighted to have been asked to give evidence to the Finance and Personnel Committee of the Northern Ireland Assembly on 22 October 2014.

The evidence session covers many questions relating to LVT and land taxation more widely. It begins at 9 minutes and ends at 1:01:30.

NOTE

(1) This report was commissioned by NICVA’s Centre for Economic Empowerment. A copy of the report can be downloaded from NICVA website (together with infographic) or from my own page of LVT resources here.

The Taxing Question of Land

25. September 2013 · 32 comments · Categories: Finance & Money, Fiscal Policy, Land Values, Politics

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 (allegedly)

23. August 2013 · 20 comments · Categories: Farming, Finance & Money, Land Values, Media

“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?

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