to SOCIAL/ECONOMIC/POLITICAL Homepage
Who should run the countryside?
Rural Scotland 2006
SCA annual conference, Royal Highland Centre,
25th April 2006
Executive Director, The Policy Institute
Filed 15 May 06
Ladies and gentlemen, I believe that the
prospects for the rural economy in Scotland are fundamentally good,
At times in the post war period it seemed
as if the indigenous creation of wealth had all but ceased in rural
Scotland. The only lucrative careers appeared to be provided by
state-financed or regulated professional services - legal, medical,
or educational – to a declining population whose main activity,
farming, was itself increasingly dependent on state subsidy.
Things are still tough in many places. But
I believe that the broad economic trends in our society and further
afield are now very promising for rural Scotland.
Chief Executive, The Policy Institute
At home, growing prosperity is leading to
increasing demand for specialist food and drink which is well suited
to Scottish agriculture. This is against a background of overall
increases in global agricultural demand driven by the escape from
poverty of India and China. For example, demand for meat from the
latter is set to treble, if it follows trends in neighbouring Taiwan.
Meanwhile a revolution in communications
is making rural life much more practicable and accessible for people
from different walks of life. Better roads, air travel, phone systems
and the Internet make it easier for businesses to base themselves
at a distance from their customers, and for tourists to visit our
But the purpose of my talk is not to look
at trends in the rural economy of Scotland in detail.
Instead I want to examine one aspect of rural life which underpins
its economic performance, and that is the rules governing the use
I don’t need to tell this audience that
land use is the essence of rural life. If the inhabitants of rural
Scotland are to exploit the opportunities I describe to the full,
they’ll need the flexibility to change and develop land use
over the coming decades. It is a great irony, therefore, that this
aspect of the economy – land use planning – is utterly
dominated by Big Government.
The rights to change the use of land were
nationalized in 1947 by the Town & Country Planning Acts and
have remained under state control with only minor reforms ever since.
It is as if we had learnt the lessons of the failure of Communism,
but kept one industry in the Urals making left foot boots at the
behest not of market forces but of the guesswork of bureaucrats.
For similar problems occur with planning
rights as when the state controls and distributes other economically
valuable assets, goods or services. First there is an information
Government has no way of knowing where to
provide goods and services. The best it can do is rely on professional
estimates, and a four yearly voter verdict on their general performance.
It is equally futile for bureaucrats to guess how many left footed
boots we need as how parcels of land should be used.
Do the economic benefits of a power line
in terms of lower energy costs outweigh the visual beauty it impairs?
The planners have no idea.
Should we build a factory if it means draining
some wetland? - a bureaucrat can only guess.
Under the current arrangements, these vital
judgments are made as part of a process essentially of guesswork
subject to political pressures.
This brings me to the second main problem
with government control, and that is a lack of suitable incentives
for decision makers.
Managers in a state owned industry are not
rewarded financially by their customers, but by their political
bosses, who are in turn subject to political pressures. These come
only indirectly from voters as we have seen, and more directly from
So in the case of land use planning rights,
these are distributed with huge economic implications for those
affected with no reward for the planners in getting it right. These
problems are exacerbated by the nature of land use, which almost
always has external effects on other people apart from the titular
So a bureaucratic decision on granting land
use rights has net economic benefits for some people and net costs
for others. This intensifies the political lobbying process since
the outcome of the decision is an all-or-nothing affair for those
Those who are good at lobbying, or who can
afford to spend lots of money on it, have the advantage. This tends
to be the wealthy, powerful charitable and environmental groups,
the state itself, and industries which have managed to win the particular
backing of the state.
Of course, sometimes this process will get things
roughly right, and reforms over the years, including the current
Bill going through the Scottish Parliament, attempt to make the
process more accountable.
But these tinkerings are like glasnost to the
Soviet system, when what is needed is root and branch reform. The
truth is that many of the problems which beset the rural economy
in Scotland have at their root this perverse planning system.
The shortage and subsequent high cost
of rural homes;
Low quality and unsightly municipal buildings;
Overuse of certain roads;
Urban sprawl into attractive green spaces;
Underused wasteland in green belts;
Inappropriate industrial development, particularly in the field
Difficulties in adapting buildings or land for other commercial
We all have our bug-bears.
All these are the products of an immensely
complicated, inflexible and inefficient planning system which costs
the UK taxpayer some £1 billion every year to administer.
So what’s the answer?
Well, our essential problem is that we are
trying to compare apples with pears – to weigh measurable
economic factors of development against environmental considerations
that are thought of only emotionally and politically. It therefore
follows that the pricing of those environmental considerations has
to be at the centre of any solution.
This means that we must create a market
in planning rights, taking them out of the political process and
making them tradeable between individuals, businesses and communities.
For it is the market that provides us with
the discovery process that in turn gives us the knowledge to establish
the value of one thing compared to another – in this case
our love of our physical environment versus the need for material
So planning rights should be devolved away
from the state to private ownership by those in the locality. Once
they were handed over, these rights would be freely tradeable. So
a developer would need to buy the rights to develop if it affected
his neighbours, or act under covenants or rules set by them.
If the former, he would negotiate a price
with those neighbours based on the likely income stream of his development.
For their part, his neighbours would negotiate according to the
likely effect the development would have on their quality of their
environment, reflected for example in the impact on the value of
their own property.
Any payment made by the developer would
be a far more accurate reflection of the potential development value
of the site than any combination of planning gain tax, the cost
of lobbying, or the risks of the current planning process. While
the payment received by its neighbours would be an accurate compensation
for any environmental damage done, far better than any benefits
receivable under current arrangements by the local authority.
In many cases, of course, no agreement would be
reached. Here, the environmental amenity of the area would be worth
more than the benefits accruable from the development. The developer
would search out a less environmentally sensitive area, or else
design his plant in a less intrusive way.
In other words, correct incentives would induce
both developers and those who actually benefit from the environment
to find the right balance between growth and amenity. The artificial
divide between the economy and the environment would be bridged.
The planners, bureaucrats and lobbyists could pack their bags and
earn a living in a more productive way.
How should we implement these principles in practice?
How do we privatize these property rights in a way that makes them
easily tradeable so that we strike the right balance between development
and environmental amenity?
For let me be clear: I am not suggesting a planning
free-for-all of the kind that has blighted so many developing countries,
but a market in regulation, which would serve both the economy and
the environment better.
The answer being put forward by a number of economists
in this field lies in devolving planning rights away from central
government to small geographical units that cover natural communities
of environmental amenity.
On the whole current local authority areas, particularly
in Scotland, are much too big for this. There’s no way, for
example, that people in Caithness need have a say over local planning
matters in Lochaber, or people in Berwickshire over Liddesdale.
A more appropriate size for these units might
be some of the smaller islands, large villages, small towns, or
perhaps parish sized areas in more sparsely populated areas.
This would follow effective precedent in some
of our neighbouring countries such as France, Norway or the Faeroe
Islands, where significant planning powers are vested in quite small
communes whose size is based not on population but on communality
Or to look at our own history, urban development
in the Industrial Revolution was governed by rules, covenants and
easements set in quite small areas, resulting in such gems as the
Edinburgh New Town.
Such small units are liable to be much more accountable
and representative of individual interests. Indeed, government in
this scale tends towards behaviour akin to voluntary membership
organizations because social pressures, common interests and knowledge
of local issues press executives to take neighbourly interests into
But like membership organizations, we need to
go far beyond the norms of inadequate local government accountability.
The executives who represent our units should be subject to much
more regular election, and members should able to convene meetings
at need to bring them to account.
Let us call these entities Local Amenity Companies,
or LACs. To summarize, they would be controlled by their inhabitants
and have powers over the physical development of their areas, They
could therefore draw revenue from developers, including road and
rail operators, or indeed pay to attract development of certain
As with memberships clubs or companies, their
small size would expose them to competition which would discourage
the NIMBY instinct and promote innovation. For markets work not
only in goods and services, but also with institutions and sets
of rules. Developers would have plenty of choice of where to invest.
Residents themselves would have more power of exit than current
council tax payers.
A useful analogy is that of a shopping mall such
as the Gyle Centre in Edinburgh. The mall sets overall rules governing
security, access, infrastructure and so on. Its inhabitants, the
shops, go about their normal business within that framework of rules.
But both they and the customer can go elsewhere to a better run
site if need be.
Again like clubs or companies, their size need
not be fixed. LACs could amalgamate or secede as circumstances required.
Meanwhile larger, regional or national planning
concerns would be well served by this system, because it would be
flexible enough to ensure that big projects were designed to benefit
the greatest number of people.
For example, LACs could co-operate to attract
or manage certain projects of infrastructure such as roads or railways.
And they could influence each other to maintain environmental features
of regional or national importance. So urban ones might contribute
to the maintenance of national park rules in rural LACs which might
otherwise find them economically too burdensome. Likewise nearby
rural LACs could compensate urban ones to allow an airport in their
town, thus sharing the costs as well as the benefits of major development
among those actually affected by both.
But, above all, LACs would give local people control
over the physical land use side of economic development in their
area. All too often rural Scotland is held back by strict rules
imposed from above. Lobbied for by large, unaccountable quangoes
and special interest groups.
Remote and rural communities thrive in Scandinavia
and elsewhere when they are given the breathing space to experiment
and develop by setting their own rules. Its time to bring that freedom
to the Scottish countryside.
Now you may consider me an idealist in describing
a utopia which has little chance of being implemented in Scotland.
Apart from anything else, it is worthwhile to
encourage people to think the unthinkable in the hope and expectation
that public opinion and eventually the politicians will follow along.
But this is not just pie in the sky, and there
are some useful signs that things might just be starting to shift
in this direction.
The principle of compensation is now well established,
albeit with the state as an unsatisfactory middle man as with section
75 rules and the moves afoot to reintroduce a planning gain tax.
Meanwhile, the Executive has announced the creation of Business
Improvement Districts in its current planning bill, albeit again
in a rather half hearted way, with councils again taking all the
Finally, there are practical precedents of how
small rural communities can work in places like France and Norway.
Add these concepts together and you’re not
a million miles away from the ideas that I’ve been describing.
Perhaps one day we’ll persuade the Executive to give them
Thank you very much.
Further reading recommended by Land-Care
Tony (2006)." Who should run the countryside? Rural Scotland
4th Annual Conference, Royal Highland Centre, Ingliston, Edinburgh,
25th April 2006
See SOCIAL/ECONOMIC/POLITICAL Homepage, filed 04 May 06,
Here to View
Kate (2006). Chairman, Countryside Alliance. "Who should run
the countryside? Rural Scotland 2006."
4th Annual Conference, Royal Highland Centre, Ingliston, Edinburgh,
25th April 2006
See SOCIAL/ECONOMIC/POLITICAL Homepage, filed 08 May 06,
Here to View
Struan (2006). "Big government in the countryside". 4th
Annual Conference, Royal Highland Centre, Ingliston, Edinburgh,
25th April 2006: "Who should run the countryside? Rural Scotland
See SOCIAL/ECONOMIC/POLITICAL Homepage, filed 09 May 06,
Here to View
Acknowledgements and Disclaimer
Land-Care is grateful to Tony Andrews, CEO
Scottish Countryside Alliance, and to Dick Playfair of Playfair
Walker for the invitation to attend the conference in a media capacity,
the opportunity to participate in both formal and informal discussion,
and for their help in providing Land-Care with transcripts of the
No responsibility for errors or omissions
in the transcription process can be taken by SCA, Playfair Walker
Kimpton Graphics is a division of Land-Care.