March 8, 2022
Refocus on building community wealth
A trend in government that’s become increasingly commonplace is the assumption that incentives to attract private investment must be baked into the design of any new areas of policy development. For instance, there’s already significant unease at the role of the Big Four accountancy firms in the early scoping of the National Care Service. A very different area of policy – creating a market for carbon offsetting – has raised similar but different concerns about the (presumably) unintended consequence of the tax breaks and subsidies exacerbating inequalities in rural areas. Community Woodland Association’s Jon Hollingdale has been investigating.
Full report by Jon Hollingdale commissioned by Community Land Scotland
A drive by wealthy companies to plant forests in the Scottish Highlands to offset their carbon emissions risks creating even greater inequalities in rural areas, a major report has warned.
The analysis says a surge of Highland estate sales to major corporations and cash-rich investors, such as Aviva, Standard Life and BrewDog, has driven up land prices sharply and increased the elitism and exclusivity of land ownership, while they aim to limit climate heating.
John Hollingdale, a community ownership expert, argues that much stricter rules on land ownership, tax breaks and forestry subsidies are needed to ensure the rush to meet government forestry and net zero targets has the widest public benefit.
The Scottish and UK governments have targets to plant 30,000 hectares (75,000 acres) of new woods and forests across Britain a year. Scottish Forestry, a government agency, is midway through a three-year programme worth £217m to plant 46,500 hectares (115,000 acres) of new woodland by April 2025, roughly equivalent to 93m trees.
In a report for Community Land Scotland, a land reform body, Hollingdale said those investments were further subsidised by exemptions from inheritance tax, business property tax relief, and income and corporation tax on profits for commercial woodland, as well as non-domestic rates exemptions.
Calum MacLeod, policy director for Community Land Scotland, said: “The paper’s detailed analysis and recommendations shows that green finance mechanisms need to be fit for purpose in terms of a just transition by making land use sustainable in ways that significantly benefit local communities.”
Standard Life Investments, Aviva and BrewDog are the best-known examples of companies that have spent tens of millions of pounds in the last year buying land for forestry, peatland restoration and woodland creation to offset their carbon emissions or sell climate-focused investments to their clients.
Known as natural capital or green finance investments, corporations have come under intense pressure to absorb or offset their carbon emissions to hit the Paris climate accord goal of limiting global heating to 1.5C by 2050.
To the alarm of land reform campaigners and the National Farmers’ Union, that has led to land prices more than doubling in some areas of Scotland, as the competition for upland estates and farmland intensifies.
Purchases by big companies such as the beer company BrewDog remain relatively rare but they reinforce another more subtle trend, Hollingdale argues. Increased funding for forestry and its tax advantages means existing owners can increase the value of their land and businesses by moving into woodland creation. While that has environmental benefits, it can make owners less likely to sell, pushing up land values by increasing scarcity.
Hollingdale’s report warns this trend also prices out local communities hoping to buy their land to increase local employment, tourism, ecological management and micro-businesses.
In 2020, the Scottish Land Fund, which funds community buyouts, stopped taking applications after five months because its £10m budget was oversubscribed. That has since been doubled to £20m, but surging land prices may soon swallow up that increased funding.
Hollingdale recommends green financing projects are regulated to ensure they support genuine carbon offsetting; that ministers remove tax exemptions which distort land prices, and increase sales taxes on agricultural buildings; and that land owners are required to produce management plans and introduce public interest tests for large estates.
Hamish Trench, the chief executive of the Scottish Land Commission, an official body focused on reforming highly concentrated patterns of land ownership, believes there is a “real risk” green finance investments will further concentrate the ownership of land and its benefits.
In 2019, the commission said, just 87 owners – made up of private owners, charities and state-run bodies – controlled 1.7m hectares of rural Scotland. Trench said it was essential the financing was used in the public interest. “How do we harness this new finance coming in so it actively supports the mixed and community ownership model? We see an opportunity to do that,” he said.
Sarah Jane Laing, the chief executive of Scottish Land and Estates, which represents many large landowners, said this trend was still in its infancy but had tremendous economic potential. There were still numerous opportunities for community groups and social enterprises to buy land, often with public or private support.
“Significant funds could flow into Scotland – benefiting nature, people and jobs,” she said. “Green investment has the potential to provide landowners of all types with revenue streams and community owners and farmers may well benefit from these emerging opportunities. However, these are very early days for all landowners.”