Oral evidence: Land Reform in Scotland, HC 274Tuesday 8 July 2014

Oral evidence, 8 July 2014.

Witnesses

Alasdair Humphery, Chairman, Scottish Property Federation and Lead Director for Jones Lang Lasalle, and John Hamilton, Vice Chair, Scottish Property Federation and Development Director, SIGMA Capital, gave evidence.

Chair

Thank you for coming to see us here today. I am sorry for the slight delay in starting; our previous session overran. As you are aware, we are having an inquiry into land reform which follows on from our inquiries into the Crown Estate and a number of other issues. Today we are particularly focusing on the Land Reform Review Group, or is it the other way round? Anyway, you know the event I mean. We are particularly interested in looking at that. Could you introduce yourselves and tell us basically why we have asked you here? What is your involvement and remit, so that we have that on the record?

Alasdair Humphery

My name is Alasdair Humphery. I am the lead director for Jones Lang Lasalle in Scotland. Jones Lang Lasalle is an international property advisory company, which has 40,000 employees in 1,000 locations around the world. The two that are most important to me are the Scottish ones, Edinburgh and Glasgow. I am representing Jones Lang Lasalle, but today I am here in my second role, which is chair of the Scottish Property Federation. The Scottish Property Federation is an affiliate and part of the British Property Federation based here in London. It is a trade association dedicated to looking after the interests of its members—a breadth of corporate membership and professional advisers looking at the commercial and residential markets, institutions, and also lenders. We represent a kind of industry body. I have with me today John Hamilton, who is the vice chair of the SPF in Scotland. John is here as support for me, but also as a specialist in the residential side of the market, whereas my background is more in the commercial property market. We hope to be able to give you insight into the two sides of the property market going forward. That is the general background.

Chair

John, you did not say anything; we have been told who you are.

John Hamilton

Yes. There is not a lot to add to that, other than to say that my background is mainly in house building. I am a chartered surveyor. I now work for a capital investment company which manages large-scale regeneration projects. One of those projects is in West Lothian, close to Edinburgh, involving 3,500 houses. I am also an adviser to City of Edinburgh council on their 21st century homes programme, which is currently developing 1,500 houses in the city of Edinburgh and has plans to expand that programme to 16,000 houses over the next 10 years.

Sir James Paice

For clarity, when you say commercial, Mr Humphery, do you mean what I would call urban commercial? Neither of you has rural knowledge.

Alasdair Humphery

No; absolutely.

John Hamilton

That is correct.

Chair

First of all, what is your overall view of the Land Reform Review Group report?

Alasdair Humphery

The overall view is that it is a very large and far-reaching document searching into many areas of property issues. I suspect we have been watching and monitoring that situation through time as land reform in Scotland has taken place, but largely with a rural background to it. What we look at with interest in this report are the aspects that may affect commercial and residential development and investment businesses in the city centre. It is a very large document. It has a huge number of moving parts. I suspect each one needs a lot of time spent on it to investigate how it will work in practice. When we talk about commercial and residential, there are a huge number of variations even in those two topics themselves. My impression is that it is a very big and far-reaching document with a lot of moving parts.

Chair

But are you in favour of it?

Alasdair Humphery

We are in favour of reform. We have seen positive aspects to the earlier proposals and changes that came through the right to buy and things like that.

Chair

So you are generally supportive of the document, are you?

Alasdair Humphery

We are positive where it is in the interest of encouraging development, economic progress and investment, for sure. We have concerns over certain areas of it, but the general move is to modernise and progress. That is a positive aspect.

John Hamilton

There are areas of the review where it possibly overlaps areas of current legislation, such as in the planning process. Scotland had a new planning Act, introduced in 2006, which did not really become effective until 2008 or 2009. It has taken a while for that process to bed in, but it now seems to be working very well. We feel there are aspects in the review which are well covered in other areas of legislation, such as the planning process, in the way that community groups can be represented and can make representation through the planning process.

Chair

What would you say were the key issues for your members in relation to the legal and fiscal framework of land and property?

Alasdair Humphery

There are a number of areas where our membership would have issues and concerns. One is the empowerment of community bodies and defining what they would be in an urban context. In a rural context we have seen examples of communities coming together and making great progress in buying out, like the island of Eigg, which is a very definable entity. In a city or urban landscape it is quite hard to know how those definitions would sit and whether we would have competing interests in different sub-groups. That is one of the areas where we would look for further clarity. A positive aspect of this work is the creation and completion of a land register. We would see that as a very positive aspect. Giving clarity on ownership of land across the whole of Scotland is a positive thing for our membership, and I think they would be willing to co-operate and work to ensure that comes to pass. We have concerns over some of the recommendations. One in particular would be the limitation on ownership of land in Scotland. There seems to be a suggestion that maybe limiting it to organisations with an EU connection or body would be a kind of restriction. When we look at our ever-increasing global investment market, capital for property and for any investment is increasingly global. We fear that that would restrict Scotland and put Scotland at a disadvantage in terms of attracting inward investment from overseas owners of assets. Of course, that is not just in the classical property-holding sense; it might be through a corporate vehicle. A lot of work is being done with emerging markets like China to try to drive our commercial and business relationships, so putting restrictions on the ownerships of some of those companies over here, sometimes in joint venture form and the like, could be negative in terms of investment progress. Another point that has been raised, and that our members would focus on, is the idea of taxation of land. Their experience of late of taxes relating to property has been somewhat negative. As a trade body, we think the current commercial rates structure as it stands in Scotland is probably unsustainable going forward. We are looking for reform in that area. The thought of taxing bare land would need a lot of consideration before it could be made to work in practice.

John Hamilton

I partly reiterate what Alasdair has mentioned; this is in the urban context. The constitution of bodies is an area where we think there could be dangers in the proposals.

Chair

Could you clarify what you mean by dangers?

John Hamilton

In the urban environment, in terms of the development process, there is often a very complex process to achieve planning consent as well as technical approvals. The cost of infrastructure tends to be more expensive in brownfield development or in urban situations. There could be a perception that land is not being fully utilised quickly, but there may be valid planning or technical reasons for that not happening. We could see the potential for various other groups to register an interest in land where there may be, as I say, valid reasons for it not having been effectively delivered. The constitution of those bodies could cause some difficulty where there are any doubts about the constitution of a community group, or more than one community group.

Alasdair Humphery

A fear would be that they could be sponsored in the background by a third party with ulterior motive.

Chair

Rascals, basically.

Alasdair Humphery

It could be.

John Hamilton

Absolutely.

Chair

We understand that. On your point about there being valid reasons for delay, surely any reasonable system would pick that up. Can we come back to two points about ownership? There seem to be two issues in the review group’s report that have caused concern. One is the question of whether or not there should be an ultimate upper limit on ownership. Do you have a view on that?

Alasdair Humphery

Yes. We do not agree that there should be an upper limit.

Chair

You are against that. The second thing is the question of whether or not the ultimate owner should be identified. You are possibly conflating the issue about overseas ownership with the intention to make it clear who ultimately owns. There may very well be legitimate reasons for somebody in the Cayman Islands owning land in Scotland, but if it is a property development structure in the Cayman Islands which is being used to conceal somebody else’s identity I can see no reason why that should not be entirely open.

Alasdair Humphery

No; we understand what goes on in the avoidance of tax and all these issues. Our membership is clear that it wants openness and clarity on that. But there is a very diverse group of investors who are looking to invest in UK property, and Scotland is a part of that. They come through various vehicles, which can have various domiciles. It is very difficult to get right back sometimes, as it is in other ownerships, and we welcome the ability to be clear on that. I think the report talks about the EU, and it looks for registration in the EU. My question then is, what does that do to places like the Isle of Man, which are our near neighbours but not in the EU, and what does it do to our former Commonwealth countries and the like where there were strong trading connections and ownership issues in the past? These are people and organisations who are doing bona fide business and we would not want to dissuade them from coming to Scotland.

Chair

I just want to be clear. I recognise the distinction between rural and urban. It is much more difficult in many ways to look at urban. If you look at urban development as being the same as any other commercial development, you would not want inappropriate restrictions on ownership by geography in those circumstances. But you have no objection in principle to the ultimate ownership being publicly available, known and revealed and all the rest of it?

John Hamilton

No. There is no suggestion among any of our members that there is an objection to the identity of landowners being known as far as practicable. As you say, there may be reasons why a landowner would seek to conceal that offshore or whatever, but we are not suggesting that that is something our members are advocating at all.

Jim McGovern

Alasdair mentioned a couple of times the members you represent. Who are these members?

Alasdair Humphery

The membership of the SPF in Scotland is about 130 different organisations.

Jim McGovern

Not individuals.

Alasdair Humphery

It is organisations, but individuals within those organisations engage with us. We have a policy board which sets the direction and focus of what we look at as issues for the membership. That is done by consultation with the membership across the whole of Scotland. Within those organisations we have employees, colleagues from the policy board and members who are active on certain sub-committees. That could be in relation to planning issues, banking and finance issues, taxation issues, development and control, environment and energy—all those are sub-committees. We are dealing with property investment companies, development companies, property agencies and advisers on planning. There is a variety of different groups, but all have a core interest in the urban built environment, be it commercial or residential.

Jim McGovern

Why would organisations or individuals join your association?

John Hamilton

It is a trade association, in the way that any other trade may seek to have a collective membership which it represents as a body. It is a Scottish affiliate of the British Property Federation.

Jim McGovern

Is it a fee-paying thing?

Alasdair Humphery

Yes. Membership is charged based on the size of the organisation. We are there to serve the members’ interest and to try to inform Government. We have fantastic relations with the Government in Scotland. Holyrood is very accessible to us. We hosted a reception recently at Parliament, and the Planning Minister was very complimentary about what we do to engage with him and his Departments and all parties to ensure that we inform what is happening at grassroots level. The connections to politics and politicians in Scotland are very welcome; it is a very positive environment. The SPF is there to try to inform and help policy and good legislation.

Jim McGovern

I think you said “Prime Minister” but I am sure you meant the First Minister.

Alasdair Humphery

I probably did, yes.

Jim McGovern

And he is very welcoming and—

Alasdair Humphery

The Planning Minister, Derek Mackay.

Jim McGovern

The Planning Minister—sorry.

Pamela Nash

We are aware that the urban community right to buy is being looked at in the Community Empowerment Bill. Can I ask for your views on that, and if you think it would be a positive addition to Scotland?

John Hamilton

In order for a community to proceed with a right to buy, the issue which we touched on earlier—the constitution of that group—would have to be absolutely clear. Without wishing to repeat the point, there are dangers of commercial challenge or commercial motives being introduced, possibly through objection to development. The development process is not simple; it is a very complex process, especially in the urban environment. We can see potential for that type of process being used to prevent legitimate development from proceeding, but that is not to say that we have any objection to legitimate communities being involved in the planning process or the process of development through the Planning Act. I mentioned before that we think there are other areas of legislation that could be fine-tuned to accommodate the objectives of legitimate community groups. A lot of my day job involves consultation with community groups. I mentioned the development in West Lothian that we manage, which is for 3,500 houses. We have active involvement with the community, and that is a well-founded and well-represented community group recognised by the local authority. We meet them virtually monthly. That appears to work well—we do not see any pitfalls for anybody involved in that—without necessarily introducing a consultation process in urban development through this type of Bill.

Alasdair Humphery

The scale and complexity of commercial property is hard to get into one simple answer. Where properties have fallen into disuse and there is a good use within a community, if it is of the right scale, then I am sure that would be a matter that our members would be positive about. Nobody likes to see empty buildings and decay in the urban environment. It depends where you are on the spectrum of scale. Our concern is where small adjustments or interests could hamper much larger projects that take a long time to assemble and a huge amount of cost and money in investment up front to try and address issues, not just planning but all the other complexities that go with commercial property. Somewhere like Edinburgh you have the historic aspect as well as the roads, water and all the bits that come together. Our concern would be where a relatively small group, not representative of the whole, could in some way scupper or delay. The thing with commercial property—more than residential, which rolls forward generally year to year and has its ups and downs but moves forward—is that the commercial property market can be quite catastrophic in terms of what happens if you get the timing wrong.

Pamela Nash

I do not know if you have looked into it in this detail, but do you have an idea about what type of regulation there would need to be in order to make that as watertight as possible? You were talking about constitutions. Do you think there should be set criteria for the constitutions of these organisations?

John Hamilton

I think there would have to be set criteria. In the planning process there is not a requirement for ownership in order to proceed with a planning application, but the system does allow for recognition of the control of land. There are requirements to sign section 75 agreements or section 69 agreements in some instances where ownership of land is a requirement. Very often the cost of signing up to those planning gain agreements is very substantial. The issue of how a body takes forward its interest in that sort of scenario can be recognised under the planning process rather than through any sort of compulsion on purchase.

Alasdair Humphery

A fear I have from the bigger perspective is that with the major schemes you see in the urban city centre—things like Haymarket in Edinburgh, for example—the level of complexity and the amount of investment up front is absolutely huge, and the more issues we put in the way of that coming to fruition, the greater chance there will be for investors not to show the interest we look for.

Chair

I remember the publicity around the battling granny in the east end of Glasgow who held up the Commonwealth Games development for a period. If that is what you are discussing I understand that. We would not want to advocate anything that allowed such a manipulation of the system, but I cannot really believe that you are opposed to allowing a community to develop a semi-derelict building that is in the middle of the village. You are coming across as Mr Grumpies—as being entirely negative to this proposal.

John Hamilton

We are not opposing that at all. In fact, I have an instance where the community group that I mentioned earlier had an objective to go forward with a civic project to restore a gap site in the middle of the regeneration area we are involved in. There was a change of personnel in their membership—in fact, the secretary passed away last year—and we have taken it on through the process that already exists and through the relationship we have with that community. We would not stand in the way of that at all. We would welcome community involvement in that sort of scenario; even if it involved a derelict building, it would be the same objective and we would support that.

Chair

Maybe it is just a presentational issue. You were coming across initially as being opposed to anything that might impede your opportunity to railroad people, whereas now you sound as if you are much more positive. However, you would want to make sure that there were appropriate safeguards, which is a perfectly reasonable position to adopt.

Alasdair Humphery

A cautionary tone is probably right, in the sense that there are many moving parts. As I said before, the complexity of commercial property as we describe it is quite—

Chair

I understand that. You are not nearly as bad as you initially appeared; is that fair?

Alasdair Humphery

Hopefully not.

Pamela Nash

Can I return to the report from the Land Reform Review Group? The section on urban renewal mentions compulsory sale orders. What are your views on that? Do you think they will be helpful in bringing derelict property and land into use?

Alasdair Humphery

With the fear of being accused of being Mr Grumpy again, I think that is probably one where we would hold reservations. Compulsory sale orders seem to be a very direct way of enforcing people to sell, and that is unfair. People have often invested lots of money up front into holding property and ownership of that property. Therefore, we think there are better tools to achieve that. The CPO has always been around in my 30-year career. We would recognise that CPOs are not always the easiest and most efficient. I think the Scottish Law Commission is looking at them at the present time as well, to try to streamline them and make them better and more user-friendly. We think those are tools that are probably better suited for the circumstances you describe. But to force people to sell—there was a description about how that might best be achieved through auctions and the like—we have a lot of detailed comments about why that would probably be unfair on many of our members.

Pamela Nash

I can foresee situations where it might be unfair. I am afraid I do not know the detail about the order that is proposed. There is not much detail in the report. Could you not bring in rules that would protect them? You are saying there might be a lot of investment, for instance, in property. Could there be an amount of time placed on that and how long they could have a property without developing it further? Are there not rules and regulations you could put in to make this fair?

Alasdair Humphery

There probably could be, but realistic time scales to see a project come to fruition can be tens of years.

Pamela Nash

What about a project starting? You could put a time scale on that.

Alasdair Humphery

A planning consent would sit and lapse for a period of time and that is what has been mentioned in the report. Those time scales are not realistic for delivery of complex commercial projects. Again this comes back to the complexity of commercial property and urban property. In many senses they are the same; a city centre building in Edinburgh, London or wherever from conception to actually being completed is probably a three or four-year period at best. If you hit the wrong moment of time in the cycle and the investor is putting quite possibly tens of millions into a major project, it can put it into a 10 to 20-year cycle. Those are the kinds of time scales you may have to put in there.

Pamela Nash

I can understand that. I am not defending this; I am just trying to get my head round it. Three to four years is fine, but I am sure that I and my colleagues here have parts of our constituencies—maybe a building or a piece of land—that have been lying derelict for 10 or 20 years, maybe more. Why should the person who owns that be allowed to just sit on that property when it could be used for the community?

John Hamilton

The problem with compulsion is that there can’t be a guarantee on the outcome of that event taking place.

Jim McGovern

Did you say “can” or “can’t”?

John Hamilton

There is no guarantee on the commercial outcome of compulsory acquisition of a piece of land which may be in the midst of quite a complex development plan. We cannot see how the fact that there is compulsion in making a sale would lead to a guarantee—a satisfactory outcome—even for the community. There may be a position where the community might underestimate the complexity of what they are taking on. They may have a change of personnel. There may be challenges from other groups. It is an issue of the lack of a guarantee in the outcome when you are going through the process of compulsion.

Alasdair Humphery

I am not a lawyer, but things like human rights and ownership of property, as mentioned in the report, are very delicate matters when you are being forced to sell. When there is a compulsory purchase order around a plan that has come together through the local authority’s offices it is a slightly different approach. In the time scales I would see as being appropriate, I would like to think that CPO would work. It does work and we have seen it happening. It is there but that is not to say it should not be better and improved. That is what the Scottish Law Commission is looking at.

Pamela Nash

I understand that, but it has to be balanced with the rights of the people affected by the property.

John Hamilton

A local authority, generally speaking, would have a clearer vision of what it plans to do with a piece of land, or what the outcome of the compulsory purchase would be.

Chair

I can think of parts of my constituency where tenements have either collapsed or been taken down and there is a derelict site just sitting there. In some cases they cannot trace the owners of the sky—the flats that were there. Some sort of compulsory sale order that would allow the community to take over that bit of land and landscape it does not seem to be holding back any enormous development. In the spirit of positivity I cannot see why you don’t just say, “Well, we are in favour of that sort of thing. That sounds really good.” You are coming across again as being almost entirely negative.

John Hamilton

But the local authority would be able to be involved in that process. They could go forward with a CPO under current legislation.

Alasdair Humphery

In the scenario you have described I think our membership would be very supportive. If there is no clear ownership it should revert back to the state, and that seems perfectly reasonable.

Chair

But your argument was that there is no need for additional powers because the existing CPO powers would cover it?

John Hamilton

We are saying that there is greater certainty in the use of CPO powers by a local authority.

Chair

Sorry, that is not my understanding. Can I clarify what you mean by greater certainty? My understanding is that some of these issues are not being resolved in local communities because of difficulties about CPOs, and that the CSO proposal is seen to be a means of getting round that and moving forward the development of a derelict site or a semi-derelict building. Can you clarify for me why you don’t think a new mechanism is necessary?

John Hamilton

We are not talking about a simple situation—a gap site that may be landscaped. The situations we are talking about are development proposals.

Chair

We are talking about two different things.

John Hamilton

We are talking about issues that may involve Scottish Water, SEPA and building control, as well as the planning department. We are talking about relatively complex development proposals rather than just landscaping. There is no issue about landscaping small gap sites in the middle of tenements.

Chair

Would it be appropriate to look at a de minimis rule for some of these suggestions?

John Hamilton

Yes; we wouldn’t see a difficulty with that.

Sir James Paice

I am struggling to work out in my mind how you are going to answer this question, given that series of comments. It concerns the majority land assembly proposition, which is basically saying that, if the majority of owners of a designated area of land agree to sell their land, CPO can be used to force the others to sell. You seem to be supportive of CPO.

Alasdair Humphery

Yes, and also partnership of owners who can get their act together through negotiation and dealing—absolutely.

Sir James Paice

So you support the concept of a majority land assembly that the report suggests.

Alasdair Humphery

Not as clean cut as that. The example given in the report is urban land partnerships; examples are cited of places in Germany where they have been successful. I do not think we have any experience of that in this country, but we have lots of examples of partnership where the interested parties come together and through negotiation find a commercial solution to a scenario. The difficulty is where one party who is not part of that group or coming together has a different agenda, a different objective, a different time scale and a different view on how the thing should proceed; again, that is where a CPO could step in. I am not sure that it is necessarily always a workable solution but it is certainly one to be looked at.

John Hamilton

The Planning Act would allow the majority of those owners to proceed with development proposals through the local plan process, in the absence of a landowner on another part of the land. The interest in the land could still be promoted through the planning process, and, if there is public interest in the vacant landowner being substituted through a CPO, that can happen at present.

Sir James Paice

I am struggling to understand your apparent support for the use of CPOs and what appears largely to be your opposition to compulsory sale orders. At the end of the day surely it is the same thing. The owner of property is being required to relinquish ownership of it, in one case automatically by CPO and obviously to the state in some form. A compulsory sale order might not be to the state but, nevertheless, to pick up the human rights point, the fact is that a landowner is being forcibly required to cease possession of that property. I don’t quite understand why you should be, as it seems to me, opposing one and supporting the other.

Alasdair Humphery

On compulsory sale, we hold reservations over it. It is not one we would favour. We think reform of CPO, which is well understood across the whole of the UK as a mechanical process, is probably the preferred route to achieve the same goal. We would have concerns over the process of forcing someone to sell and the mechanics we talked about in terms of auctions. There is understanding of what going through a council-run process means, and it is a well-trodden path. Therefore, there is a comfort, and an understanding of that process.

John Hamilton

We did draw the distinction between the substantive nature of the interests of a council in promoting or proceeding with a CPO against what smaller groups, or a number of smaller groups, in one community could bring forward. We are not objecting to minor proposals for doing up or landscaping small gap sites.

Sir James Paice

You referred just now to the issue of partnerships. The report proposes urban partnership zones. Do I gather from your earlier answer that you think that is something well worth pursuing, and that you support the principle?

Alasdair Humphery

It would need further investigation. It has happened already to a certain extent, although it is not formalised. Collegelands in Glasgow would be a good example; the parties have come together and created a very viable and positive outcome. Our membership is increasingly open to the whole idea of partnerships, because the private and public sector working together is often the way things can be released. We are open to the discussion for sure. I do not have any experience of it. I know of issues in historical parts of Germany where there have been land assembly issues going back pre the second world war, so I can see why in that country these things have come into being. I have no objection in principle, but I think the detail needs to be looked at.

Pamela Nash

Returning to the report and looking at housing and how we improve new housing stock, it advocates a greater role for self-build. What do you think about that proposal?

Alasdair Humphery

I will pass to my residential expert.

John Hamilton

We would not have any objection to those sorts of proposals. They are unlikely to have a major impact on housing targets though. Most of our members would promote as wide a tenure and method of delivery of housing as possible, and that would include self-build.

Pamela Nash

Is it a worthwhile proposal? Even if it is small, do you think it could have any impact?

John Hamilton

I do not think the impact would be major. I am aware of local authorities promoting self-build projects back to the 1980s. Some local authorities in Scotland actively encouraged developers and large-scale housing developments to set aside a certain number of housing plots for self-build. That seems to have drifted away a wee bit; we do not really see it very much in the central belt now. I think it would probably be a good thing. The cost of self-build plots has grown out of all proportion because they are so scarce now, so there is not much supply for self-build. I have no objection to it featuring in the report. Again, planning policy can make provision for that as well.

Chair

I am glad we have found something that you are a bit cheerier about.

Jim McGovern

I’ll soon wipe that out. The report advocates the establishment of a publicly owned housing development corporation designed to acquire and develop new housing. As someone whose background is in the construction industry I must declare an interest here. Do you think this might provide a means of increasing the rate of new house building, not only for ownership but for social housing and providing jobs for construction workers?

John Hamilton

There is a danger of looking cheery here. The area that deals with partnership in the review is an area where we feel more comfortable. Partnership between the private and public sectors has to be encouraged; we believe it would help to increase housing numbers. I do not see any risks in terms of the involvement of both the public sector and the private sector in setting targets. It is more likely that those targets will be achieved where they are working in partnership, rather than with community groups who could, in some instances, be on the other side of the fence from a private developer.

Jim McGovern

You see a future there for social housing.

John Hamilton

Yes, absolutely. The work I do involves delivery of a large proportion of social rent housing in Edinburgh and elsewhere in the Lothians. Social housing has probably been at far too low a level in Scotland over the last 10 to 15 years. Overall housing numbers have to be brought up, and delivery of social housing has to be a feature of that.

Alasdair Humphery

It is right to say that the whole housing sector was undersupplied even through the prior cycle, and we can see the potential effects on house price rises going forward. The meeting we were at before this one was looking at the private rented sector, for instance. Within that there can be affordable elements, and we are trying to find, through the offices of SPF, a way to make that work. It works in London; the investment is global. It is very clearly working and you are building communities down here. What we find in the regions of the UK, including in the big cities of Scotland, is that we can’t quite get it off the ground in terms of a style of delivery. We think it is a really important part of the mix of housing going forward, so SPF is working positively with all the parties to try to get more housing, in whatever shape.

Jim McGovern

Just to digress slightly, do you have a view on the proposal to stop the right to buy scheme?

John Hamilton

Yes; we have made representations. We do not object to the proposal to stop right to buy. Our membership’s view is that the delivery of housing is more likely to be increased by concentrating investment in social rent housing, with local authorities working in partnership with the private house building sector.

Chair

Part of my understanding of the rationale behind the housing development corporation was that there had been a degree of market failure, and that you had simply taken the view that the private sector always leading in these sorts of developments was just going to potentially continue that market failure. Notwithstanding the support for partnerships, having something like the housing development corporation, which could act as the arm of the state to do these things, would move into a vacuum that your members, for understandable reasons, were neglecting. Does that not seem a fair rationale for developing an HDC?

John Hamilton

As I said, we are comfortable with the idea of partnership. As to whether or not that is formalised by way of a housing development corporation, we would probably stop short of supporting a requirement for that sort of formal body to be set up. It has fallen to the private sector, obviously for commercial and financial reasons, to deliver housing in large volumes over the last 10 to 15 years. The public sector has fallen behind in that, but we are supportive of more informal partnerships between the public and private sectors in which housing delivery can be increased on the social rent and mid-rent side.

Chair

But the mechanisms you are outlining have been in operation and have failed, have they not? Otherwise there would not be a need for a new agency.

John Hamilton

Alasdair mentioned the private rented sector. Our members support the increase in private rented supply in Scotland because it has been a tenure that, quite frankly, has been missing for two or three decades in Scotland. That has had some impact on the delivery of housing numbers. We think there should be encouragement to the private sector to deliver housing for private rent, alongside housing associations and ourselves.

Chair

That in a sense is what is meant by bulk development, so to speak. Most private sector rent in Scotland is in ones here and there.

John Hamilton

It has been piecemeal.

Chair

It is people buying up individual houses rather than developing for private rent.

John Hamilton

Yes, and standards have not been maintained in that form of housing. We can see volume housing for rent having a part to play in improving the quality of housing for rent in Scotland.

Chair

But the market has not delivered that, and, as far as I can see, there is no sign that it will. Surely that means therefore that there is a role—a gap for the housing development corporation to be established.

John Hamilton

There was overheating in the supply and sale of market housing. It did not lead to investors being encouraged to go forward with investment in private rented housing. Market conditions have changed, and I think there is now an awareness that there has to be a full range of tenures so that people can choose to either buy or rent. Renting should not only mean, in our view, renting from a housing association or an RSL.

Chair

I understand that. I just want to pursue this. I can understand why you as an organisation collectively see that it would be desirable if there were private developers coming forward to establish tranches of private houses for rent. But that does not happen as a result of action by yourselves collectively; it would have to be individual members of your body or of some other body. There is no sign that individual companies are coming forward to do that. I therefore cannot quite understand your objection to this.

Alasdair Humphery

I think the private rented sector is working in London, and what we are trying to do is replicate that in our markets north of the border. At the same time in cities like Manchester, Leeds, Liverpool and Birmingham the same things apply. It is a question of scale. The private rented sector in America is the second biggest REIT sector there is after offices as an investment medium, so it is a huge market in some parts of the world. It has not got anything like that kind of attraction in the UK, apart from in London and the south-east. There is interest from investors and from developers, but at the moment it is trying to join all these moving parts together to make a coherent plan: the land, the development, which is a risk in itself, and then the ongoing management and running of that investment for the benefit of the fund or whoever.

Chair

Right. That’s clearer.

Pamela Nash

Going back again to the report, it expresses the view that there is not really a public case any more for the exemption of agricultural and forestry land from tax. Is that something you would agree with?

Alasdair Humphery

In the rural context our members are not represented there so I do not think we have any feedback that would come to us from that membership. The thought of tax on rural land gives us concerns, in the sense that the experience we have had of the rating process has not been best received by occupiers, investors and developers. Empty rates have caused great concern and have stagnated some sectors of the market. An office developer who has land is very keen to move ahead but is struggling to do so because of a number of moving parts. Now a concern over vacant rates is a huge unknown which can go on for months and years if timings are wrong. The experience of tax in that kind of context, which is obviously on companies rather than individuals, is quite a heavy burden. It is increasing with inflation, and we think it is an unsustainable burden going forward. The reality of tax on land is on what basis would we do it? If it is on value, the value on land can be dramatically varied. The recession we have just lived through over the last five years has seen raw land values going from positive figures to absolute negative figures. What comfort will we have when things go negative? Will we get rebates, for instance? Land is the piece. If you go back to Ricardo theory, land and raw land value is the thing that takes the hit. In the last cycle we have been through, projects that were perfectly viable sites and were worth tens of millions of pounds have become virtually worthless in a cycle of six months. It is a very dangerous area of volatile valuation.

Chair

I do not think I have ever met a group that was in favour of its activities being taxed. Are you any different?

Alasdair Humphery

Do you mean in terms of rates?

Chair

You are just arguing that you should not pay tax. I have never found any activity that is enthusiastic about paying tax.

Alasdair Humphery

The thing about rates is that we feel it is unsustainable in the way it is going forward. Our membership and many people you will come across in daily life were very upset when the revaluation of property was put back and delayed. That is not about paying tax; it is about fairness in the whole community. Even our members from Aberdeen, where values have been increasing, would accept, around our tables, that they are right to be revalued and pay proportionately more. At the same time in the east end of Glasgow, which has seen rental values fall, they would feel it very unfair. We have examples—I cannot cite them here today—where sometimes rates are higher than the actual rental value of the property. That is where the system has gone wrong. We think that is why some of this is going to be unsustainable going forward. We have to find a way to make that revenue from other forms.

Chair

If we are discussing how best to raise the revenue, that is one thing. I just got the impression that you were against contributing any of it.

Alasdair Humphery

No; that is not the case. It is fairness.

Jim McGovern

Even in Aberdeen.

Chair

I do not think he said they were enthusiastic in Aberdeen, but that they recognised it. Possibly, to be fair, they were not Aberdonians.

Alasdair Humphery

They were.

Jim McGovern

It has been said that the LRRG proposals will not come without cost. Do you think the proposals are affordable?

Alasdair Humphery

I am not sure, to be honest. There are a lot of moving parts in what has been proposed, and a huge variation. Some of them may be revenue that will be made from things that will be more costly to legislate and create in the first place than the benefit. It may seem like social justice, in which case maybe it has fulfilled its purpose. We have to be very careful that we don’t create an ever more complex system that does not fulfil its original objective and costs a huge amount to get there. I do not know whether that answers the question, but it is hard to see all these things being practical and workable. For me, some of the key items are the ones where more work can be done to make them workable to try to fulfil a wider objective.

Jim McGovern

Unworkable as it is.

Alasdair Humphery

I think a lot more work is required. As I described earlier, the scope of commercial and residential in an urban context is quite varied. When your mind goes down one line of thinking on a derelict shop that has been empty for a long period of time, some of what has been suggested is probably very positive and can be made to work very quickly, but where you have a very complex situation over many years of assembly and negotiation with Network Rail and all the statutory bodies, it is a very complex situation. Some of the stuff proposed could scupper that and unnerve the investors who are putting money behind that speculative project.

John Hamilton

It is a slightly general point, but developers tend to deal with as much certainty as they can. Obviously cost is a major part of that. As soon as there is uncertainty on the costs of development, whether at project level, local authority level or national level, it is introducing a bit more uncertainty. We think that at the moment costs are an area where there is uncertainty and would give rise to some concerns.

Pamela Nash

Do you think it is a realistic prospect for all the land in Scotland to be included on a land register in the next 10 years?

Alasdair Humphery

Yes. It is a laudable goal. A lot of the information is probably held within local government and quangos and the like, so there is a starting point. Industry itself, as I said earlier, is not against that; we have no objection to openness and the like. Through the process of sale we see more and more properties being registered and more transparency. I think it is a laudable goal and we would support it.

Pamela Nash

Is it affordable?

Alasdair Humphery

It is a cost. In my firm, JLL, we look around the world at liquidity and transparency of markets. The UK this year is ranking highest. It is things like that which make it get on to that scale and be top of the pack. It gives confidence to investors. It provides clarity, with no hidden agendas. These are things which are hard to measure but are really important. That is why we very much support it. For progressive western economies which are looking to trade and interact globally that kind of information is very valid.

Jim McGovern

As regards community ownership, what do you think is the best way to give local people a say in what happens in the area in which they live?

John Hamilton

We have a view that maximum community consultation is a good thing. Our members certainly support involvement with the community on large-scale housing development and also on large-scale commercial development.

Jim McGovern

Do you actually promote community ownership?

John Hamilton

No, I do not think we would go so far as to say that we promote community ownership. As a body, the SPF represents a group who are actively involved in development. Many of our members are involved in development but not all of them; some of them are involved in property management.

Jim McGovern

Presumably ownership.

John Hamilton

Yes. For the members who are involved in development, ownership is certainly central to that.

Jim McGovern

I am surmising that they would not be in favour of community ownership because they would rather own it themselves.

John Hamilton

Where a development process is being taken forward, clarity in ownership is paramount. That is why we would support progress being made on the land registry. Getting titles wrong, or titles being challenged, is expensive, so we would certainly support clarity in land registration; but that does not go as far as community ownership.

Alasdair Humphery

I would pick up on that a little bit. I think it depends on context. Having the community involved in having ownership in a large mixed-use project can form part of the mix. Where you get into difficult territory is where that ownership is complicating clarity of ownership of the main project. If it was a major multi-use project in the middle of a city and a small part of it was held by the community, involved the community and the community was part of the whole picture, it would be very positive. I was in New York in February to see what was happening on the highline walk through New York. It seems that community involvement there has helped to regenerate part of the city. I think it would be part of the mix. The problem I would have, wearing my commercial hat advising investors from around the world, is that, if that community ownership was right in the middle of a very complex multi-use project, it would be a negative thing because investors would see it as potentially a problem to deal with. It may not be a problem in practice but it would be perceived as a problem. Investment would be deterred because of it.

Jim McGovern

Could you just enlarge on that? Why would it be perceived as a problem?

Alasdair Humphery

Because an investor is putting tens of millions of pounds into a mixed-use office/residential project in the city centre. They have control over the direction, the management, the reinvestment and the way the whole project moves forward into ownership and through its life. If in the middle of all that there is a separate ownership, it will be viewed as a kind of unknown. If that community ownership was all great on day one, maybe it would work fine. If you get to year five and the committees have changed and people do not have the same agenda and are not reinvesting in the same way as the rest of the environment, you could end up with a poor relation in the mix. As I say, it depends on the circumstance. If it is a major big site, having some community involvement would be good. Most developers these days realise that that is the way they have to go. Whether we like it or not, or smile or not, the process of planning and engagement is very positive. It is difficult though, because sometimes very small groups can be very anti and stop things happening. It is due process and it is democracy, but I think of situations like the Aberdeen relief road. People I speak to in Aberdeen are crying out for better facilities and they need that road, but it has been held up for many years through due process and the like. It has been a very slow democratic process, and Aberdeen could lose investment because of it. Companies and people could move elsewhere. It is a balance to play through. That was a bit of a circuitous answer but I hope it captured the question.

Jim McGovern

That is helpful and pretty clear.

Chair

I shall be trying to get your analogy about moving parts out of my head for the rest of today. While you are here let me just raise another issue with you. One of the other investigations the Committee has been looking at is in relation to blacklisting of construction workers. Your companies obviously have a major role in employing construction companies. Do you as a matter of course make any assessment of the employment practices of the construction firms that you are involved with, and whether or not they are doing things that are illegal and all the rest of it?

Alasdair Humphery

I could not answer that. I have been in post as chair since last November and I do not know that we do that as a representative organisation. I would say that the organisations we have as members are blue chip businesses such as Miller, a major Scottish house building and construction company. Therefore, I think we would probably rely on the standing and position of those organisations.

Chair

But your firms, who are developers, would themselves be hiring construction companies. Some of them were indeed blue chip companies but it turned out that their practices were indefensible. I am just trying to clarify whether or not this is an issue in which you have ever taken an interest, or whether you believe that maybe now you should.

John Hamilton

We are an association of private companies. We will certainly take a lead in terms of probing the practice of companies we employ. It is quite difficult for one private company to surmise the guilt or innocence of another private company until the guilt or innocence has been established. We would certainly take a very negative view of any member company associating with another business that was found to have been seriously guilty of that sort of malpractice, but we cannot actively prejudge the guilt or innocence of a company in that situation.

Chair

I understand that. There are two elements arising from that. One is whether or not you choose to have something like a code of practice that you expect your contractors to abide by. The second element is that we have now identified a number of major construction companies who admit to having blacklisted. There is an issue about whether or not they are going to be doing enough to, as the EU would see it, self-cleanse and therefore, as it were, purify themselves. The argument would then be that, if they don’t do enough to self-cleanse, they are admitting guilt but they have not purged their contempt, to mix my metaphors. Therefore, are these suitable to be the sort of people with whom you would want to work in the future?

John Hamilton

I think there has to be a standard set across the industry, and that standard has to be established both by the public and the private sector. There should be a line, but it is very difficult for individual private companies to surmise the practice of other companies.

Chair

That is right, but if it is put in front of you and you hear it as the officers of an association, it is often easier for the association to have a common line rather than leaving it to individual companies to determine what their policies should be.

Jim McGovern

If you don’t mind me interrupting, Chair, you mentioned blue chip companies: one of the guiltiest parties, and the company that set up the blacklisting organisation, was McAlpine, one of the largest construction companies in the UK. Because it is a large company does not necessarily mean they are clean.

Alasdair Humphery

I hope that company wouldn’t get away with it because they have just been used by the City of Edinburgh council on one of the biggest speculative projects north of London.

Jim McGovern

They are developing the waterfront in Dundee just now.

John Hamilton

They employ a lot of people. There is a fairness issue about the impact of the sanctions that can be taken against those companies. We would not pre-empt action against a company that was not supported by the public sector generally, or through the legislation and any penalties that are imposed. We would certainly support the consistent approach that has been taken across the public and the private sector.

Alasdair Humphery

We are a trade body representing investors, financiers and developers as opposed to contractors. That can sometimes be the same thing, so Miller will have a contracting arm as well as a development arm, but they are very separate parts of the business. I am not sure we are the best qualified to speak about the contracting business. I would probably just make that definition in answering the question. Wearing my day hat as JLL, I know there is a code of ethics that we provide when looking for work and when our building surveyors employ contractors. They will be looking for a high-quality result for the client, but they will also want to ensure that the companies are complying with all legislation. I am not sure how much depth we get into in terms of going into that unless there is an overt issue that is publicly demonstrated.

Jim McGovern

Would it be fair to say that you possibly came in here unaware of the practice of blacklisting, but now that the Chair has raised it you are aware of it and you will give it due consideration?

John Hamilton

I am fully aware of it. I am aware that it has been there for a number of years and it has been uncovered over the past 10 years or more.

Chair

Coming back to your use of the term “blue chip,” McAlpine is possibly the dirtiest of all the companies.

John Hamilton

I didn’t use the term “blue chip.”

Alasdair Humphery

I did.

Chair

It is clearly something that has been widespread. What I take from what you have said is that you would not unilaterally want to impose guidelines, but you would take account of guidelines that were perhaps introduced elsewhere.

John Hamilton

A lot of our members are chartered surveyors. Alasdair and I are both chartered surveyors. We sign up to a code of ethics through our membership of the RICS. That is reflected in our business practices and it would have to be applied. If we were aware of illegality taking place in a business in terms of a contractor, that would be taken into account.

Chair

To be fair, this is something you were unprepared for.

Alasdair Humphery

I do not think it is our area of speciality, if I am honest. As a trade body there is a line between the definition of developer and contractor. There are other people who could—

Chair

But developers employ contractors.

Alasdair Humphery

They employ them, and they can be the same thing.

Chair

That is right, but you do employ them. We have encountered this point before, with people saying, “It’s not me.” In fact, if you are paying the people who are doing these practices, in our view you are every bit as guilty, either by negligence or by endorsing what they are doing.

John Hamilton

There are other comparable examples in fair pay rates that have been brought through. The public sector often takes a lead in those and sometimes the private sector follows. This may be one of those instances, but the issue of it being clear that there have been breaches is one that we have to be careful of.

Chair

I understand that. As I indicated when I spoke to you informally before the meeting started, we wanted to give you the opportunity to raise any points that you think we have not raised. You can answer any questions that we have omitted to ask. Is there anything that you think we have overlooked? Our main emphasis, as I indicated at the beginning, has tended to be on rural land. Therefore, we were not focused as much as perhaps we should have been on the issues mainly concerning yourselves, but we thought it was worth while none the less to give you the opportunity to speak to us. Is there anything that you want to leave us with?

Alasdair Humphery

No. We welcome the opportunity of being in front of you and we thank you for that opportunity. We have not come here with the intention of being unduly negative, but we do come here with an expression of caution about some of these things, because the complexity of the urban environment, which is a huge part of the market, should not be ignored if the rural aspects are being rolled into our business environment. We hope that we can contribute through further engagement going forward. I have nothing further.

John Hamilton

No.

Chair

Thank you very much. Oral evidence: Land Reform in Scotland, HC 274 3