Land and nature

Land Reform for a Democratic, Sustainable and Just Scotland

Land is Scotland’s most important economic asset. It’s time to start treating it as such

Land Reform for a Democratic, Sustainable and Just Scotland

By Laurie Macfarlane

30 December 2023

Land reform has been one of the most significant achievements of the Scottish Parliament. The abolition of feudal tenure, the introduction of Community Right to Buy, and the establishment of the ‘right to roam’ are just a few of the many accomplishments to date. But as Lord Sewell put it in 1999, land reform should be viewed as a process, not an event. 

The need for ongoing land reform, in spite of multiple waves of land reform legislation, can be attributed to Scotland’s archaic starting point. While most democracies escaped the shackles of land oligopoly many centuries ago, Scotland’s democratic revolution never quite came to pass. As a result, the archaic patterns of land ownership and governance that were swept aside by revolution and revolt elsewhere survive in Scotland to this day, relatively intact. 

Perhaps the most obvious expression of this relates to Scotland’s highly concentrated pattern of land ownership. With an estimated 67% of Scotland’s private rural land owned by just 0.025% of the population, Scotland’s concentration of land ownership is almost unique among advanced economies. Not only is this at odds with Scotland’s ambition to be a modern, progressive democracy – it stifles entrepreneurial ambition and prevents rural communities from fulfilling their potential.

But the need for land reform extends far beyond the need to diversify Scotland’s land ownership. Land plays a central role in all economies, but this role is often overlooked or misunderstood. Alongside capital and labour, land is one of three economic factors of production that all economic activity requires to take place. Farms require land to produce food; factories require land to produce goods; developers require land to build houses; and governments require land to build public infrastructure. Even with the rise of the internet and the digital platforms, land remains the most valuable asset in the UK economy. 

Land is best understood not as the soil under our feet, but as the physical space within which all economic activity takes place. How land is owned, managed and used plays a fundamental role shaping Scotland’s economic, social, environmental and cultural landscapes. Land’s unique properties – scarcity, permanence, irreproducibility, immobility – mean that the land market does not function particularly well, and is replete with market failures. The supply of land cannot easily be increased or expanded to meet greater demand, and market price signals cannot always be relied on to efficiently guide decisions over what land should be used for. Even many of the world’s most market-oriented states implicitly recognise this, and impose non-market regulatory controls on land use.

Today however, Scotland’s rural land market remains largely unregulated. Anyone in the world can buy large amounts of land with relatively little scrutiny, and transactions can take place ‘off-market’, in relative secrecy. Without any restrictions on who can own land, or how much they can own, policymakers are unable to act to ensure that the way that land is bought and sold serves the public interest. Information on land ownership also remains incomplete and fragmented, and accessing the data that does exist can be prohibitively expensive. 

These long standing issues are now being compounded by modern challenges. How Scotland’s land is owned, used and managed will play a key role in determining whether Scotland delivers a just transition to net zero. However, the emerging value associated with Scotland’s ‘natural capital’ potential has also opened up new opportunities for ‘greenwashing’ and value extraction. The rise of carbon offsetting risks exacerbating existing inequalities while undermining efforts to directly reduce emissions. Meanwhile, recent attempts to lure private finance into nature restoration risks socialising risks while privatising rewards, replicating the mistakes made with private finance initiative (PFI) infrastructure projects. Land reform is therefore essential to ensure that land in Scotland is being managed sustainably, and that the financial rewards from Scotland’s natural assets are fairly shared.

But land reform is not just an imperative for rural communities – it’s equally important for urban Scotland too. Throughout much of the twentieth century large scale-public house building programmes, together with the ability to acquire land at low cost, was effective at keeping supply up and housing costs affordable. But ever since the state retreated from playing a proactive role in the land market, Scotland has relied on speculative private developers to meet housing need. In pursuit of the greatest returns, these developers prioritise high-value market segments, acquire strategic land banks, and ‘drip feed’ new homes onto the market to keep house prices high. Delivering the affordable homes that Scotland needs, in the places that need it, therefore requires a bold new public-led approach to development. 

The land market also plays a crucial macroeconomic role, and has a significant bearing on the distribution of income and wealth. The question of who captures the benefit from rising land values, and how this is used, has been at the centre of land reform debate for centuries. As the value of land is not determined by the efforts of the landowner, but by collective investment, there is a strong argument that this value should be captured to benefit society as a whole. In recent decades however, the UK’s economic model has become increasingly reliant upon a financialised land market to generate private wealth. Today land accounts for 59% of all net wealth in the UK, and rising land values have accounted for around two thirds of all wealth accumulated since 1995. But the ballooning wealth of property owners has been mirrored by growing deprivation among tenants, creating a widening gap between those who own property and those who do not. Not only is Sotland’s financialised land market not fair, it is also not efficient. The ability to extract economic rents from existing land and property assets has diverted investment from more productive areas, harming productivity and output and increasing financial fragility. 

As such, land reform is not just about tackling Scotland’s archaic patterns of land ownership and governance, important though that is. It is also needed to help move towards a more democratic, sustainable and just economic model. As such, land should be viewed not as an issue that is marginal to Scotland’s economic prosperity. Instead, it should be viewed as Scotland’s most important economic asset that is central to the Scottish Government’s vision for delivering a Wellbeing Economy. 

The Scottish Government has pledged to bring forward a new Land Reform Bill during this parliament, and consulted on proposals in 2022. The new Bill presents an opportunity to transform how land is owned, managed and used, and bring the governance of Scotland’s land market into the 21st century. It is crucial that this opportunity is not missed. 

In our new report, ‘Land Reform for a Democratic, Sustainable and Just Scotland’, we explore the key challenges that the forthcoming Land Reform Bill should seek to overcome, expanding on the issues outlined above. We then outline an ambitious agenda for land reform that aims to create a more democratic, sustainable and just Scotland. Our recommendations include bold but credible proposals to transform land market governance, diversify land ownership, develop land in the public interest, restore nature for a just transition, tax land more efficiently, and enhance market transparency. Our recommendations can all be implemented by the Scottish Government using existing devolved powers, meaning there is no excuse for delay.  

Land is Scotland’s most important economic asset. It’s time to start treating it as such.

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