Newscast Issue 8

NEWSCAST SMITHS GORE IN SCOTLAND THE LAND ISSUE

issue 8 Winter 2014/15

2

Evolution or Revolution?

Toby Metcalfe t: 0131 344 0888 e: toby.metcalfe@smithsgore.co.uk Is it hyperbole to suggest that the events of 2014 in Scotland, and increasingly the UK, have moved beyond the usual evolutionary change that characterises all that is British?

I don’t believe so. 18 September was, by any measure, an historic date - and what was so exhilaratingly apparent, whatever answer to the question you supported, was that the overwhelming majority of the people of Scotland recognised this and made their mark on the ballot paper in numbers never seen before. The result was clear and democratic.

It would be foolish to suggest that what took place should never have happened, and that good would not come out of such a momentous day. The problem however is that such ‘revolutionary’ events invariably lead to the unforeseen, winners and losers and, most damaging of all, uncertainty and division.

For many there was utter dismay at the rhetoric being used by some, and unease at what was not being said but was clearly intended. We all now have an enormous responsibility to try to build a shared feeling of unity and pride in our country. Our politicians cannot be under any illusion of the grave task that falls to them as elected representatives to lead on this, and failure to understand and respond to this will be very damaging for everyone.

The Referendum proved that people will engage in politics when it really means something to them. There are many drivers behind why the Nationalist party in Scotland has made such progress in the last few decades and why a Referendum took place. Clearly one reason is the distance people feel has built up between their lives and the actions of our politicians.

Another is the disgracefully wide divide between rich and poor.

Greater powers for Holyrood may have the potential to keep the people of Scotland closer to their politicians - but success is not dependent on the location of the building but the actions of those who work within it.

Moving from the big picture to the specific, there is significant debate about a possible new Land Value Tax and I wonder whether an issue associated with this has been considered?

It is beyond debate that the receipt of Single Farm Payment in Scotland is vital for many farming businesses to achieve profitability. A Land Value Tax would presumably be levied on farmers so we potentially face the absurd prospect of the government effectively clawing back monies received from the Single Farm Payment in the form of the new land tax.

Can this make any sense at all? The issue that needs to be debated is not what new land tax should be levied but why is the underlying profitability of farming so poor.

Perhaps the events of the last year will have a positive impact on the political process to deliver what is now best for Scotland.

The focus has over the last few months been on what choice the people of Scotland would make. Now it is firmly back on our elected representatives - their actions in working together to bring Scotland together, and vitally their delivery of policies that will enable Scotland to grow economically, will be scrutinised more closely now than since the creation of the Scottish Parliament. Political interest has been awoken in many as a result of the Independence vote and there is an expectation of change for the better that our politicians must deliver, elected as they are to represent their constituencies and not themselves.

3

Scotland’s place in the world Dr Jason Beedell t: 01733 567231 e: jason.beedell@smithsgore.co.uk A reason for the Scottish Government’s radical vision and agenda is its view that Scotland should be one of the best places in the world to live and work. So how does it compare?

Any attempt to compare countries is fraught but that does not mean it should not be tried. The OECD has selected nine broad indicators – on jobs, income, education, health, civic

Scotland

engagement, safety, access to services, environment and housing - to compare what it is like to live in different places in the world. It provides a common framework for measuring wellbeing in countries and regions, that policy makers can use to focus their efforts.

So now you know that broadband access is better than Australia’s, similar to Germany’s but not a patch on Korea’s!

11

15

11

32

28

8

23

3

18

United Kingdom

16

14

9

16

17

14

Australia

26

7

4

14

5

3

24

9

14

1

15

3

United States

10

21

1

34

27

13

21

20

2

Austria

14

6

6

6

16

26

13

13

19

Belgium

22

25

12

25

21

30

3

14

4

Canada

5

13

5

22

9

9

27

11

1

Chile

23

22

35

31

22

7

6

34

28

Czech Republic

1

18

28

21

29

28

28

29

24

Denmark

25

11

23

8

26

16

4

5

5

Estonia

4

23

33

33

31

11

26

18

27

Finland

12

17

19

5

20

6

19

6

16

France

24

26

10

18

6

18

8

15

17

Germany

9

8

8

4

18

21

15

10

6

Greece

29

35

20

19

24

23

16

32

29

Hungary

8

30

32

20

35

33

25

24

31

Iceland

30

4

21

3

7

2

18

2

22

Ireland

20

31

13

24

19

5

17

26

8

Israel

6

16

31

27

8

34

22

21

32

Italy

31

28

16

11

3

27

12

31

25

Japan

17

3

14

7

1

19

29

19

12

Korea

20

12

25

29

11

35

10

1

26

Luxembourg

19

19

2

17

15

20

2

23

10

Mexico

34

20

34

35

33

17

34

35

35

Netherlands

27

5

17

10

14

22

11

6

9

New Zealand

28

9

22

13

13

1

14

15

7

Norway

17

2

7

2

12

4

9

6

11

Poland

3

29

30

26

30

31

32

26

33

Portugal

33

27

26

15

23

12

31

30

13

Slovak Republic

2

32

29

23

34

29

30

26

30

Slovenia

7

24

24

28

25

25

35

22

23

Spain

32

34

18

9

4

15

19

25

15

Sweden

15

10

15

12

10

10

7

4

20

Switzerland

13

1

3

1

2

24

33

12

21

Turkey

35

33

27

30

32

32

5

33

34

Top

Bottom

Countries ranked in order from 1 (top) to 35 (bottom) Education

Labour force with at least secondary education

Jobs

Employment rate; Unemployment rate

Income

Household disposable income per capita

Safety

Number of homicides per 100,000 people

Health

Life expectancy at birth

Environment

Air quality (level of fine particles in the air (PM2.5))

Civic Engagement Voter turnout percentage

Accessibility to services

Percentage of households with broadband access

Housing

Number of rooms per person

4

An appetite for change Toby Metcalfe met new Chairman of Scottish Land & Estates David Johnstone to discuss some of the issues affecting his organisation’s membership, the rural sector in general, and life after the Referendum.

Toby Metcalfe: We are in a period of great change in Scotland. How is your organisation and membership facing up to this?

David Johnstone: These are challenging times. There is an increased focus and scrutiny on our sector through three major reviews – fisheries, land reform and agricultural holdings – as well as the Community Empowerment Bill, proposed changes to residential tenancies, climate charge targets and a plethora of other policies, strategies and regulation that will affect our membership. So we really must embrace what modern landownership means, engage with the public and present ourselves as a part of the solution and not part of the problem.

TM: Do you think the Scottish public actually has an appetite for land reform?

DJ: You would think there was a groundswell of opinion seeking reform about land ownership. Some years ago we conducted thorough research and established there wasn’t huge knowledge about land ownership – in fact almost apathy towards it. But a small, vocal minority would like to see radical reform within the sector.

There’s a danger that the land reform debate loses touch with what we have to do in the countryside - farming for example. Global farming is going through major change and it’s become harder to make farming viable. Farms need to cost effectively produce food and meet new environmental measures like ‘greening’.

We are facing a diminishing CAP for the

next 5 years and need structural reform.

I don’t think there’s actually recognition of how fragile the rural economy is.

TM: Are your members responding to calls for greater community engagement, the public interest and so on?

DJ: They have been doing this for some time – many provide land for a new hall, or for affordable housing, and landowners deliver all manner of community and public benefits.

We’ve recently launched a charter, a ‘Landowner’s Commitment’, setting out the principles that we believe our members should aspire to and achieve including community engagement.

TM: What are your views on the Reports from the Scottish Affairs Committee and the Land Reform Review Group published earlier this year?

DJ: The Scottish Affairs Committee at Westminster scrutinised land issues in Scotland even though these are essentially devolved to the Scottish Parliament. The Committee was looking at them from a tax perspective, with questions such as covert ownership, offshore companies, tax breaks and so on. They produced some challenging recommendations but placing these solely in a Scottish context is difficult.

The Land Reform Review Group process has been going on for some time - a Scottish Government commissioned review from an ‘independent’ body. It delivered a reasonable Interim Report, then went away and produced a final report with 62 recommendations that

would, if implemented, have a major impact on the businesses we represent.

Some of these recommendations are fine, such as registration of land. That’s sensible, but we have concerns that 10 years for its delivery is not achievable.

Likewise, the cost – and while Land Registry fees may be capped, the actual cost of professional advice will be very substantial.

Regarding unworkable proposals, the proposed restriction on the amount of land that anyone can own is one, but with no detail on how much land and whether ‘how much’ is in terms of acres or value.

For instance 500 acres of grade 1 land in East Lothian is worth, say, £5 million, but 64,000 acres in the north of Scotland sells to a community for £4.5 million.

TM: Land reform also now embraces an urban context so the Community Land Fund will disappear very quickly....

DJ: Community ownership can be a positive move, whether in Thurso or Glasgow. But community ownership and private ownership are not at opposite ends of a spectrum and both have their part to play in a successful Scotland. It’s no problem where there is a willing seller and willing buyer, but when you get into the realms of compulsory purchase then we have concerns.

On land reform we have to engage, and not simply say ‘there is no need for change'. If we simply say ‘no’ we are just part of the problem – conversely we have a unique opportunity to provide many of the solutions.

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Toby Metcalfe talks to Chairman of Scottish Land & Estates David Johnstone TM: Were you disappointed that sporting estates are on the CAP negative list?

DJ: We think it’s wrong. If you are farming properly, then you should receive entitlement regardless of other diversified activity such as shooting.

We think the way to stop claims for ‘naked acres’ is better addressed by greater proof of farming activity to merit the support. Genuine farmers will be penalised and will have to go through the process of getting their subsidy back, and that is not what was intended.

TM: Foreign ownership is a recurring theme with which you are challenged.

How do you respond?

DJ: Absentee and foreign ownership, foreign nationals buying large tracts of Scotland, these are emotive topics but there is no link between absenteeism and bad practice. The overriding principle is how the land is managed and run locally, and that also features in our charter. Where an owner lives away from the property then clear lines of communication are vital to get in contact when that needs to happen.

TM: And the concept of Land Value Tax has once again emerged. Would it work?

DJ: LVT is complex and has to be looked at in the round alongside other taxes. If it was a replacement tax then perhaps it could work but I suspect if it was introduced it would be an extra tax with a specific purpose. All land in

Scotland would need to be registered first also.

TM: We talk a lot about how we need a vibrant tenanted farming sector, but how do we revitalise it?

DJ: Too often we hear this is all about big estates - and it isn’t. There are around 6000 secure agricultural tenancies in Scotland, with big estates accounting for around just 1000, and lots of farm businesses having one or two each. This current review is a necessary part of industry restructuring and becoming more competitive, and there are a number of ways to do this - through contract farming, tenancies, or taking land in hand. Also, the drivers behind letting land have changed since, historically, farming in hand provided a greater income than letting but had greater risk, so tenancies produced a lower yet steady income and spread the risk. Now however letting is perceived as being more risky so there’s a ‘catch 22’ of accepting a lower income and a greater risk – that’s not an attractive proposition.

We must put certain aspects to bed for good if we are to revive the sector, and this current review must do that – for example the right to buy has already become land reform driven rather than seen in its true context.

We need fair ‘waygo compensation’ – many improvements by tenants don’t have the correct paperwork and we think there should be an amnesty to allow registration of genuine improvements so that when a tenant retires from farming

they get compensation that is fair for these. The whole process is about respecting the rights of both tenants and owners, and if that happens I think progress is possible.

TM: And now the Referendum has passed is the pressure off?

DJ: Far from it – work goes on. There’s now the Smith Commission and the prospect of additional devolved powers.

There is 18 months to work with the current administration and thereafter we will be working with the next Government no matter what colour it is.

The pressure is never off.

TM: So do you have an appetite for change?

DJ: There would be huge danger if we didn’t recognise this. But change must be evolutionary - a continuing process.

If it stops, pressure builds until it bursts and then you get the radical ideas.

Importantly, our members are rural businesses, enablers of rural activity and success. We should approach the future on that basis. I’m not unduly pessimistic – the most radical ideas are based on proposals that financially cannot work, and we have proven that private landowners are an important and relevant part of modern Scotland.

Our main focus must be a sustainable rural economy - that is the main driver for the future.

This interview took place prior to the announcement of the Scottish Government's latest proposals for land reform in November/December 2014.

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Land Reform firmly on the agenda

Mark Fogden t: 01387 263066 e: mark.fogden@smithsgore.co.uk The Land Reform Review Group published its final report in May 2014. Understandably in the interim a great deal of political output has been geared to the independence Referendum, but now that that has concluded, some degree of normal life can resume. All the transactions, valuations and deals that were put on hold in the face of pre 18 September uncertainty are now back in process - and that means that we can also expect the land reform programme to start to gain some momentum.

The 263 page Land Reform Review Group report contained 62 recommendations, some of which are radical, many of which are controversial, with the overall focus on land ownership, land use and the ‘public interest’.

From its 62 recommendations, the following are, in our view, of most importance to landowners: • The completion as soon as possible of a comprehensive, map based register of land ownership to establish ‘who owns Scotland’.

• The placing of an upper limit on the total amount of land in Scotland held by a private land owner, or a single beneficial interest, with potential owners being asked to prove their suitability to own a large estate against criteria laid down by the Scottish Government.

• The modernisation and streamlining of compulsory purchase legislation.

• Amending the community right to buy so it is not just pre-emptive, is extended to 10 years, and applies to urban as well as rural property. It should also be less onerous to register and implement. The Scottish Government ‘headline’ is to have one million acres in community ownership by 2020.

• Registration should not be a pre-requisite for 1991 Act agricultural tenants exercising a pre-emptive right to buy.

However, the question of whether or not there should be an absolute right to buy has been left to the Agricultural Holdings Legislation Review Group.

• A phased introduction of non-domestic rates for rural / agricultural land-based businesses and serious consideration also given to a Land Value Tax.

• A review of sporting rates, specific to the species involved, and also a review of the current exemptions.

• The abolition of the separation of salmon fishing rights from adjoining land.

These as well as the other proposals in the report are far-reaching and, if implemented, would seriously affect many aspects of land ownership and land tenure. However, it should be stressed that unless taken forward by the Scottish Government they remain only as recommendations. Many of the proposed changes to property law and taxation would take considerable time to amend and some, following proper scrutiny, may never see the light of day.

In response to the report, the Scottish Government has announced that it will bring forward a Land Reform Bill before the end of this Parliament to build on the measures within its Community Empowerment Bill, and that all land should be registered with the Land Register within 10 years.

So we are once more in a situation where the very ethos of land ownership is under scrutiny (has it ever been different?) and it is vital that owners and related businesses are ‘best in class’.

Much is already in process before the Land Reform Bill is even considered – for example the Agricultural Holdings Review Group, the Community Empowerment (Scotland) Bill, regulations in relation to empty properties, Council tax, smoke and CO detectors, property factors registration for common parts, and so on.

We are facing up to a period of change, and all landowners should assess and review their landholdings in the light of these developments. This could involve adopting a risk rating that allows you to identify the parts of your property and business that are most vulnerable, but also where you can influence change, whether that be through community engagement, land tenure, or deployment of capital.

The message is one of being active, engaged, and doing what can be done to influence outcomes. In our view there is a future if you are ‘best in class’.

Green means go – but watch the blind spots!

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Douglas Ogilvie t: 01738 479180 e: douglas.ogilvie@smithsgore.co.uk Under the reformed Scottish Common Agricultural Policy (CAP) proposals, farm businesses will be paid “for agricultural practises beneficial for the climate and environment”. These mandatory ‘greening’ payments, representing 30% of all direct payments, are regional, area-based and, where applicable, farmers will need to meet three default measures: 1. Permanent Grassland Permanent grassland is defined as grassland that has not had an arable or catch break crop in the last 5 years. Reseeding does not break this 5 year rule and organic farmers are exempt. For Scotland, permanent grassland must not decrease by more than 5% compared with the total agricultural area, and farmers must not convert or improve environmentally sensitive grassland areas or unimproved semi-natural grassland areas at farm level without prior permission.

Crop Diversification The crop diversification requirement is designed to ensure a wider range of crops is grown, to limit monoculture cropping and to improve soil quality. It applies only to farmers with at least 10ha of arable land. Organic farmers, and farmers with less than 30ha of arable land and more than 75% of the eligible agricultural area in permanent grassland, or farm businesses where more than 50% of the arable land was not declared the previous year and is sown to a different crop than the previous year, are exempt. In brief: • If a farm business has between 10 and 30ha of arable land it must grow at least two crops with no one crop accounting for more than 75% of the arable land.

• Farm businesses with over 30ha of arable land must grow 3 crops, with the main crop not exceeding 75% of the arable land, and the two main crops together not exceeding 95% of the arable area.

Care should be taken with different crops as spring and winter barley are two distinct crops, but different species of the Brassica genus, such as oilseed rape and swedes, are considered one crop.

Ecological Focus Area (EFA) The EFA requirement is the element of Greening that has the greatest potential to deliver environmental benefits in Scotland and elsewhere. Designed to benefit farmland biodiversity, farmers with more than 15ha of arable land must ensure that at least 5% of that arable area is an EFA. Exemptions to this include: organic land; businesses with less than 15ha of arable land; businesses where more than 75% of the eligible agricultural area is used to grow a combination of temporary crops/leguminous crops or fallow, and the remaining arable land does not exceed 30ha; businesses where more than 75% of the eligible agricultural area is in permanent grassland providing the remaining arable land does not exceed 30ha.

There are 5 defined EFAs: • Fallow land between 15 January and 15 July with a weighting factor of x1, ie 1ha fallow = 1ha EFA commitment.

• Nitrogen-fixing crops such as alfalfa, beans, peas, chickpeas, lupins etc which must be surrounded by a field margin and not harvested before 1 August. Having at least two different nitrogen-fixing crops with the main crop not exceeding 75% of the total area only applies from 2016. These crops have a weighting factor of x0.7, ie 1ha = 0.7ha EFA commitment.

• Buffer strips along water courses between 2m and 20m wide with no agricultural production although cutting is permitted.

Weighting factor of x1.5 • Field margins between 1m and 20m wide with no agricultural production. Weighting factor of x1.5 • Catch crops established between 1 March and 1 October.

Spring cereal crops undersown with grass count as a catch crop. Weighting factor of x0.3 The rules are complex and will probably change each year.

It has already been intimated that the EFA percentage will probably rise in 2017, and some of the finer details are still awaited. Whilst some businesses will be exempt from crop diversification they may not be exempt from EFAs. Combined with new Good Agricultural and Environmental Condition (GAEC) requirements, farm businesses should make sure they see all the latest information so calculations are right. Getting it wrong will result in penalties being applied.

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Agricultural Holdings Review Faye Gonzalez t: 01343 823000 e: faye.gonzalez@smithsgore.co.uk The value of let land to the agricultural sector has long been recognised. By allowing a sector of society access to land, it enables the separation of working capital, and for this capital to be focused on the business, rather than on the costs of acquiring land.

The percentage of let land has been declining steadily. In 1982 the tenanted sector represented 40.5% of agricultural area, but this had fallen to 24% in 2013 suggesting a need to consider whether agricultural and fiscal policy were driving this reluctance to let land.

The Scottish Government’s vision is for a dynamic Scottish tenant farming sector – one that provides opportunities for new entrants and encourages the best from the land and those farming it. The Agricultural Holdings Review Group was formed, amongst other objectives, to review the agricultural holdings legislation, led by the Cabinet Secretary for Rural Affairs and the Environment, Richard Lochhead.

Agricultural holdings and the relationships between landlords and tenants have been regulated by a series of Acts of Parliament since the 19th century.

The Review Group has undertaken research over the year including engagement with stakeholders across Scotland.

Its interim report was published in June 2014, with the final report anticipated in December, shortly after the publication of this article.

The interim report highlights the complexity of the issues, and it is clear that there is no easy fix. It is encouraging to note however that the report also found many examples of strong and positive landlord/tenant working relationships; something many of us witness in our day to day business.

Whilst the final report and recommendations are awaited, what is clear already is that the issues are complex and, as with many matters involving land, it is an emotive subject with a wide range of opinions and sensitivities.

Although engagement is ongoing and it is therefore impossible to predict what form the final recommendations will take, it is likely that there will be changes to the methodology of calculating agricultural rent levels. The right to buy or to assign secure tenancies has been heavily debated and is likely to feature in some form along with clarity or changes to the means of compensating tenants for their improvements at waygo. Recommendations might also include further industry codes of practice and fiscal policy changes to encourage the letting of land.

Until December we can continue to speculate as to the likely policy changes ahead, but what is clear is that the industry desperately needs stability following a period of uncertainty and review. Landlords need confidence to encourage them to let land and tenants need confidence to invest in land.

Our wider rural economy and farming sector need a tenanted sector - and sensible, measured and sustainable means to revitalise the industry as an outcome of the Review will be welcome by all.

9

Possible changes to Woodland Creation Grants under SRDP 2 Tom Black t: 01620 828978 e: tom.black@smithsgore.co.uk Change is on the horizon, and slowly a picture is developing of what support may be available for new woodland planting under the new SRDP. However, it is fair to say that the situation remains uncertain through the current transition period to early 2015, and woodland owners will be unable to access woodland creation grants under the new SRDP 2 rates for the coming planting season.

So what do we know? As was the case in SRDP 1, the amount and allocation of CAP funding for forestry is different for Scotland, England and Wales. In Scotland, the responsibility for the scoping and consultation of the process lies with Forestry Commission Scotland (FCS). The total Scottish forestry budget for SRDP 2 has been set at £36m per annum for the next seven years, with £30 million (or 83% of this) allocated to woodland creation to help the Scottish Government meet its climate change targets.

We are currently in the transition period from SRDP 1 to 2 and the protracted uncertainty has inevitably stifled activity in the sector. However, in 2013, the EU agreed changes to the transitional arrangements of the Rural Development Regulation (RDR). This has allowed FCS to continue approving new grants, including some woodland creation options, throughout 2014 at SRDP 1 rates.

All final rates are subject to confirmation by the Scottish Government and the EU but Confor, the industry’s representative body, has been lobbying FCS throughout the process, and we now have a clearer idea as to what to expect.

Woodland Creation Grants will be paid in much the same way under the new scheme as the old, but with some changes. There will still be an initial capital payment, followed by annual maintenance payments for five years

post-planting. Fencing capital costs will, as usual, be funded separately but will now be joined by tree shelter costs (previously included within the initial payment). This development also partly explains the lower than expected broadleaved rates. The funding of bracken control, not included in SRDP 1, is also under consideration.

Location will continue to play a large role, with increased rates being offered for certain parts of the country as well as agricultural Less Favoured Areas (LFAs).

For example, the preferential rate for the Central Scotland Green Network is expected to carry forward into SRDP 2.

One of the larger proposed changes is the removal of the Farmland Premium (FP) payment. The initial impression of this move is that overall woodland creation income will increase significantly for non-farmers but only marginally for farmers. This impression is largely true but should be tempered by recalling that, unlike other grant income, the FP payment was taxable and was also spread over 10 – 15 years, leaving the effect less marked than it first appears.

SRDP 2 will also likely see the introduction of a funding cap on certain large-scale woodland creation options.

The current proposal would only affect schemes over 200ha and would take the form of a 25 per cent reduction in the rate paid for all additional hectares above the 200ha mark. This cap would have applied to 6 per cent of the woodland creation area funded under SRDP 1 and would have reduced these schemes revenue, on average, by 7.5 per cent.

As the above proposals are debated, we all wait to see the final shape of the new scheme when it is finalised in early 2015.

However, it seems clear that woodland creation will continue to be a well-funded and viable option for landowners in the coming years.

10

Peatland restoration Tom Richmond t: 01343 823000 e: tom.richmond@smithsgore.co.uk When it comes to peatland, Scottish landowners are custodians of some of the most important soils and internationally important habitats in the UK. Nearly one quarter of Scotland is covered by peat and boggy areas that support a diverse range of wildlife and also absorb and store carbon dioxide.

Why then should areas that have been grazed for years, drained, planted with trees or cut for fuel be restored?

It is estimated by Scottish Natural Heritage (SNH) that Scottish peat soils hold around 180 years of greenhouse gases that otherwise could have contributed to climate change. Peatland acts as a carbon sink, but when it is allowed to degrade the carbon it holds is released back into the atmosphere. In addition, peatland provides a home for a range of endangered species and fauna which could be placed at risk if work is not carried out to protect their habitat. The creation of new peat bogs is also considered beneficial in minimizing the risk of flash flooding meaning benefits that stretch further than just the moor.

A £1.7 million fund was allocated to SNH in 2012 for peat restoration projects across Scotland, with the project subsequently renamed Peatland Action and given a further £5 million for 2014/15. While the deadline has now closed for projects to bid for funds from this ‘pot’ it is anticipated that further funding will be made available in the future through the Scottish Rural Development Programme (SRDP) for more restoration projects.

The funds are being used by SNH to work with landowners and land managers to formulate plans to combat the decline of peatlands by employing tactics such as blocking of drains

and replanting of heather and moss across peat hags to protect them from future erosion.

There have been questions raised about the impact of peatland restoration on certain farming enterprises, and on sporting interests such as grouse and deer, and a number of trial projects in receipt of funding support will be used to assess any negative impacts that remedial work may have. Similar projects in the north of England saw increases in insect populations and increased water storage – however a rising of water table levels may affect heather growth and consequently habitat for grouse and other moorland birds.

Scottish landowners are custodians of some of the most important soils and internationally important habitats in the UK. Smiths Gore is involved on behalf of several clients with the scoping and applications to the Peatland Action Fund.

One such project is due to commence on The Crown Estate’s Glenlivet Estate in November. The target area covers 200ha of moorland and the Game and Wildlife Conservation Trust will monitor the project area to assist in the understanding of peatland restoration and sporting management.

It should be remembered however that Scotland’s peatland areas have been formed over thousands of years, and any immediate change or reversal in fortune will not be immediately evident - but it is hoped that by taking steps to address the issue of peatland restoration now that these special areas will be protected for generations to come, with consequent far-reaching benefits.

Shoot benchmarking

11

– the questions every shoot owner or manager should be asking Thomas Florey t: 01387 263066 e: thomas.florey@smithsgore.co.uk Much interest has been shown in the Smiths Gore statistical shoot benchmarking survey where landowners, land managers and shoot managers supply income and expenditure for their shoot and this is then compared, free of charge, against the average, the top 25 per cent and the bottom 25 per cent.

bothered having tripped over briars, and with boots full of water (no-one told you that there was a bridge across the burn just round the next bend)?

This factual analysis however does not really tell much about how your shoot is viewed and what guns, paying or otherwise, think of what should be an enjoyable day out. So below are a few pointers that might just make your shoot the one that gets everyone excited when the invitation drops through the letterbox.

How do you issue your invitations? By email at the last minute as you thought that Mr X who shares the shoot with you was inviting three guns tomorrow and he thought you were doing the same? Or do you plan ahead, sending ‘proper’ post cards giving arrival and start times as well as the date, plus, of course, where everyone is to meet and whether coffee will be provided?

Does everyone - guns, beaters, pickers up and most importantly the keepers - have a really enjoyable day, smiling faces, and good ‘craic’?

How do your lunch and lunch surroundings compare with the other shoots you visit? No-one expects gourmet food, but is there somewhere to take off your sodden coat and wellies, hot water to wash hands, a good roaring fire, comfort food and a modicum of alcohol to erase the memory of those last three cleanly missed birds?

Are the birds challenging and yet shootable, and are they spread fairly along the line - or is peg 7 on the corner of the wood getting all the shooting?

Has thought been given as to where guns are to stand in terms of level ground (footwork is everything); have empty cartridges been tidied away from the last day; are proper paths cut between pegs so that you do not arrive at your peg all hot and

Do the guns know that this is the main day of the season and that a full bag of cartridges may be expended on the first drive?

Cartridges can be very expensive when you run out and the drive has not yet finished!

Is dress code specified? Dress code for a ‘ratch round’ is different from a formal day, with ‘camo’ fine for the former but definitely not the latter.

Are dogs welcome, or will pickers up deliberately hoover up around you as the drive progresses “so nothing is missed”, so that your excellent dog has to be given a run along the drive as you head home? As my accuracy with the gun diminishes, and my young dog improves, I expect the day will come when my dog is welcome but not me.

So, communication and a little thought when inviting guests can go a long way. We all like to be invited to other shoots but we should all consider how we present our own shoot with reference perhaps to these ‘home truth’ benchmarks. Maybe, just maybe, the answer to the lack of invites we experience lies not with our small talk over lunch but in the quality of the day that is given back.

12

Food prices and farmland values – closely linked over the last 10 years Gerald Fitzgerald t: 020 7409 9492 e: gerald.fitzgerald@smithsgore.co.uk Although a number of factors have undoubtedly contributed to the rise in the price of farmland over the last decade, one of the main drivers has been an increase in global commodity prices.

During the last 10 years food prices jumped by 27 per cent in 2007 and 24.6 percent in 2008, falling back to just under 21 percent in 2009. The upward trend however continued in 2010 and 2011, and whilst it has eased in the last two years the general direction remains on the up.

One reason for this rise in food prices has been the expansion of biofuels.

This new surge has created increased pressure on farmland to produce large volumes of crops for energy markets consequently taking agricultural land for food out of production. But the rise cannot be attributed to the emergence of biofuels alone. At the start of the decade institutional investors were also active in the market taking much longer positions over a range of commodities in greater quantities. This may have distorted the market at the outset but as they have returned to more traditional investments then commodity prices have also moderated.

China and India could also have had some impact on food prices, but this has probably been overstated since, for most commodities, these countries are self sufficient and are net exporters, not importers, the one exception being soya where China has imported large amounts. There may also have been an impact on the futures market when speculators cited growing Chinese demand as a reason for investing in agriculture – even if this was incorrect.

But there are a number of other drivers that have pushed up the price for food and consequently farmland – the gradual rising demand for food generally, an increasing demand for meat, and falling dollar exchange rates.

Low food prices themselves may also

be a cause since, although we all want low food prices, if they persist the world becomes susceptible to demand shortages and price spikes. Higher food prices are needed to sustain a vibrant agricultural industry.

Other factors include low interest rates, and higher subsidy levels which have risen due to favourable exchange rates, that in turn have increased profits and boosted land values.

In the RICS Survey (2013) many agents reported that a lack of supply in itself was increasing competition and therefore driving up farmland prices, but it is debatable if a falling supply of land being marketed has driven up farmland values. A more likely reason is owners setting a reserve price on their land below which they will not sell, as well as steadily rising prices encouraging owners to retain land for longer than they might otherwise have done.

One further factor is inheritance tax - a very important consideration for some landowners, especially since other tax savings routes have been closed.

Indeed, for some, land is more attractive on the basis of the IHT savings it delivers compared with other assets.

So, in the last decade farmland values have risen in response to an increase in global food prices driven by demand shortages, and abetted by cropping for biofuels. Good old supply and demand economics have led to the perception of a tangible benefit from farming land because of rising food prices. What is now happening is that where previously land prices had not kept pace with inflation and food prices had fallen in real terms, the current rise reflects land values making up lost ground.

As the world becomes wealthier and the need to feed a greater number of people increases, there will be continued pressure on agriculture, and therefore on agricultural land. This is maybe why we are now seeing a growing correlation between agricultural land values and world GDP.

Scottish property market – reasons to be cheerful?

13

Lessudden, St Boswells, Scottish Borders

Allerly, Melrose, Scottish Borders John Coleman t: 0131 344 0888 e: john.coleman@smithsgore.co.uk It has been a period of unrest for the Scottish property market. At the time of writing this we were celebrating that the restraints were off. What had been holding back the market in Scotland for the last couple of years was no longer a cause for concern, and people could now get on with the process of buying and selling their properties with a degree of certainty. The phones were ringing again.

The Scottish Referendum has unsurprisingly caused a great deal of uncertainty in the housing market. The whole market, from cottages to castles and flats to farms, has been adversely affected by the anxiety and concern over how the country would vote. No matter what the outcome was going to be independence or not - it seemed that most wanted to wait until after the result before making major decisions regarding their biggest transaction. For some buyers it was fear of the uncertain currency issue and for others it was the threat of a heavier tax burden. Some lenders appeared reluctant to lend on Scottish properties when they were already skittish about property in general. Some offers were even made subject to the right to resile should the result not go their way. Sellers were scared to put their houses and estates on the market in case they couldn't sell. Some people were even threatening to leave Scotland if it achieved independence. Potential inward investors were waiting on the sidelines to observe the state of play before committing to anything. Everyone was speculating about whether prices would go up or down. No wonder the market nearly ground to a halt.

Now there appears to be a degree of assurance about the future and, with that, the return of confidence in the property market. The hesitancy and scepticism of the past few months are drifting away and there is no longer any need to procrastinate. Here at Smiths Gore we are starting to experience an energised and positive response, boding well for a healthy and lively property market with previously inactive properties achieving their asking prices.

Certainly there's a lot going for property in Scotland at this time. The baseline for values has been reset by the recession and heightened activity is rebalancing the equation between buyers and sellers, which will start to push prices up, albeit slowly. So with a likely surge in property values from a relatively low base, the potential positive return on investment

makes Scottish property a very attractive proposition. This boon should affect all real estate across the board, including rural land and estates, farms and cottages, as well as urban properties.

Just as we were beginning to see reasons to be cheerful, the Scottish Government flexed its fiscal muscles and dropped Stamp Duty in favour of a new and progressive Land and Buildings Transaction Tax (LBTT). It is aimed to benefit the lower end of the market where the tax payable by the purchaser will be less for their new home; however it does mean that everyone buying property valued at more than £325,000 will pay more. With every penny between £250,000 and £1,000,000 being taxed at 10%, and everything over £1,000,000 at 12% moving up the property ladder in Scotland will become considerably more expensive.

The hesitancy and scepticism of the past few months are drifting away and there is no longer any need to procrastinate.

In spite of this though, Scottish country houses and prime properties in Edinburgh, will undoubtedly appeal to buyers from London, the south east of England and overseas. You can get significantly more property for your money than London by comparison and maybe even avoid paying the proposed mansion tax. A house worth say £4m within commuting distance of London would probably cost less that £2m for its Edinburgh equivalent. On top of the obvious difference in price, the saving in mansion tax alone could be in excess of £20,000 per annum. Scotland, and especially Edinburgh, is often praised for the quality of life that it offers, its excellent schools, the comparative lack of traffic, the ease of access to its stunning land and seascapes, and there are good jobs too. The pace of life may be somewhat slower in Scotland but it is hard to argue that the quality of life is not better.

There is inevitably more change on the way, but there is a return of confidence that will hopefully allow our market to move freely once again. With so much still going for it, the Scottish property market should thrive and Smiths Gore will be here to provide all the support our clients need.

Scottish rural housing policies kicked into the long grass?

Debbie Mackay t: 0131 344 0888 e: debbie.mackay@smithsgore.co.uk In Scotland, rural planning practitioners have for some years enjoyed one of the most positive rural planning regimes in the UK. Since the advent of Scottish Planning Policy 15 Planning for Rural Development in 2005, Planning Authorities have been required to introduce policies that not only support rural development but also recognise the link between thriving rural communities and housing.

The rural housing policies in SPP15 survived into the new 2010 all-embracing Scottish Planning Policy (SPP) document largely intact. These respected the specific circumstances of Scottish rural areas producing a new type of planning which broke away from the urban-centric thinking which had previously dictated an overly protectionist approach to rural areas. We have had a much more Scottish-centric rural planning policy over the last decade thanks to SPP15 and the first SPP. But not so with the new 2014 version. The new SPP moves away from strong positive statements and specific examples of acceptable types of development in the countryside. Nor does it specifically mention any of the examples used in the first SPP (except those in remote rural areas) including: • • • • •

additions to existing housing clusters new clusters plots on which to build individually designed houses holiday homes new build or conversion housing.

Useful statements previously contained like “modernisation and steading conversion should not be constrained within the original footprint or height limit unless there are compelling design or conservation reasons for doing so” have disappeared.

Rather, the new SPP has much weaker statements and leaves a great deal up to the Planning Authority to determine without any solid guidance.

Another retrograde step is the inclusion of paragraph 82 stating: “in most pressured areas, the designation of green

belts may be appropriate.” This is clearly out of step with modern thinking on the unsustainability of green belt policy and its frequently deadening effect on rural development.

That said, there is however much that is good in the SPP: • The policy on prime agricultural land that specifically allows renewable energy developments is a positive move forward, particularly given that many renewable technologies have a limited lifespan and are compatible with prime agricultural land - ground mounted solar PV farms being one such example.

• Inclusion of a ‘rural exceptions’ policy which could allow planning permission for affordable housing on small sites outwith built-up areas and which would not normally be used for housing.

• A new policy on huts, correctly applied, could help to fill a policy gap between housing in the countryside and leisure accommodation.

We were also pleased to see the use of occupancy conditions being eliminated but there is a danger that we are now left with gaps in policy and lack of clarity regarding when housing in the countryside will be acceptable and the types of housing envisaged particularly in accessible rural areas.

But it is in relation to rural housing and its contribution to rural economic development that the new SPP appears to have regressed. This is all the more surprising given the freeing up of rural housing policies in England and Wales after many years of Scotland leading the field on this matter.

On the bright side, a large number of local authorities have more positive rural policies in their more recently adopted Local Development Plans which should remain for several more years before they are revised and the impact of SPP 2014 changes take effect. This would suggest that rural development opportunities should be pursued enthusiastically in the interim while this window of opportunity exists.

The Pulse

15

We asked a select panel to answer a topical question of interest to our readership in 75 words or less.

How do we mend the fences after 18 September?

Sarah Speirs, Director, RICS Scotland:

John Swinney MSP, Perthshire North:

I would say ‘is the fence broken’? I don’t think it is.

The great thing about the Referendum is that it got us all talking about the issues that affect us as a nation and as individuals. We need to continue to harness that enthusiasm and passion for debate and push for change where change is needed. Constructive discussion and collaborative working are enablers of progress and we should focus on the opportunities that this will bring.

The Referendum on Scottish Independence was a democratic triumph. 97% registered to vote, 85% took part in the ballot. It was a robust but good natured contest of which we should all be proud and the result must be respected. I accept that voters wanted a Scottish Parliament with substantive new powers within the United Kingdom. I am working with others across the political spectrum to achieve just that.

Clare Slipper, Parliamentary Officer, NFU Scotland:

Sarah Butler, Chief Executive, Scone Palace:

There is little time for navel gazing as the roadmap post Referendum is already well mapped out. Round-the-table meetings and a wider consultation with members will shape the evidence we give to the Smith Commission ahead of its White Paper being published on 30 November.

Pre Referendum debates held by NFUS saw a number of issues regularly raised – EU representation, energy, business incentives – and we are encouraged by the positive engagement with members on what impacts further changes of governance will have on farming and the wider rural community.

Do we want the fences mended? The fences have created strong political and emotional differences. If Lord Smith of Kelvin is to achieve in his unenviable task then the fences need to stay down to allow cohesion and unity.

The uncertainty of the past two years has succeeded in creating this political divide. Now that the question mark has gone should we not be concentrating on jointly laying the foundations for a stronger Scotland?

Geva Blackett, SNP Councillor, Aberdeenshire Council:

Daye Tucker, Carbeth Home Farm; Director, Scottish Land & Estates; Stakeholder, Farming 4 Yes: Broken fences are not my perception. Excluding social media, I've yet to experience any post vote awkwardness, we all moved seamlessly back to work the morning after and indeed, since. The First Minister's well timed call to focus on ensuring the Vow was delivered meant minds were quickly refocussed into articulating those stolen ‘devo max’ hopes and aspirations by the Yes and No majority.

The tight timescale imposed on the Smith Commission ensures maximum concentration.

The Scottish Referendum’s re-engagement of people has made politics interesting again. We need a willingness to devolve power and a readiness from politicians of all parties to listen. Commonsense dictates: communities need ‘bottom-up solutions’, fewer ‘top-down’ decisions – one cap does not fit all. With the prospect of constitutional reform across the UK, an in/out referendum on Europe, and next year’s UK general election on the horizon, finding what Scotland's 'settled will' is remains itself an item of unfinished business.

THE Scottish NETWORK Berwick office 8 Castlegate Berwick-upon-Tweed TD15 1JS t: 01289 333030 e: berwick@ smithsgore.co.uk

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