Local Government and Transport Committee, 14 Nov 2006

Meeting date: Tuesday, November 14, 2006

Official Report 262KB pdf

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Petitions

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Common Good Assets (PE875)<br />Listed Buildings (Consultation on Disposal) (PE896)

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Common Good Land (PE961)

That brings us to agenda item 2. For members and our witness, Andy Wightman, I will go through a few points. The evidence that we will take by videolink will relate to the several petitions on common good funds. We will hear from supporters of the petitions later in the meeting. Andy Wightman is the co-author of a report entitled "Common Good Land in Scotland: A Review and Critique". As he is currently in Ethiopia, he will give evidence by videolink from the British embassy in Addis Ababa, which I thank for hosting the videoconference. We have the videoconference booked only until 2.45, so I ask members to ask concise questions to allow us to get through as much business as possible with Mr Wightman.

To ensure that the videoconference runs smoothly, I point out that, because of the technical aspects of the link, a delay will occur between members' finishing their questions and Mr Wightman hearing them and responding. Equally, there will be a delay the other way. Because we are using a videolink, it is important that no one tries to speak over anyone else. Therefore, members should speak only if I call them to do so and should not try to interrupt a colleague or the witness, as that would affect our ability to hear the answers.

I welcome Andy Wightman to the committee. I hope that we have a useful session. Before I ask him to make any introductory remarks, I will say which committee members are present. We have Paul Martin, Michael McMahon, Maureen Watt, Mike Rumbles, David McLetchie and Tommy Sheridan. When members ask questions, if I do not introduce you, please say who you are. I invite Andy Wightman to make any introductory remarks to the committee on common good funds.

I have only four brief points to make. First, this is not simply a problem that needs to be sorted out; common good funds also present a huge opportunity to stimulate social and economic regeneration in towns throughout Scotland. Secondly, I want to highlight the scale of the problem. Until 1975, Scotland had 196 burghs with town councils. In our survey in 2005, only 78—or 40 per cent—of those 196 burghs reported having common good funds. Therefore, 118 common good funds are missing. Another 220 burghs throughout Scotland did not have town councils, although many of them have assets. Further investigation is required to discover the fate of those assets.

Thirdly, there is a long history of the Scots Parliament and Westminster trying to root out corruption and improve the accountability of those who are charged with the stewardship of common good assets, dating back to the Common Good Act 1491, which is still on the statute book. Those attempts have largely failed. What the committee is doing today is part of a continuum of effort over the best part of six centuries.

Finally, some practical issues will have to be sorted out after the 2007 local government elections. For example, because of the move to multimember wards, the link between local councillors and the former burghs, and therefore the councillors' role in stewarding and chairing common good fund committees, will change. Practical considerations arise for local government about the stewardship of the existing common good funds.

I thank Andy Wightman for his verbal and written information. I have two basic questions. First, you call for new legislation on common good land in Scotland. What legislation do you think is necessary and what issues would it cover?

It is time for legislation because the stewardship of the assets throughout Scotland in the past 30 years has been pretty chaotic. My 2005 report, "Common Good Land in Scotland: A Review and Critique", outlines the sort of measures that I think are necessary. They include the introduction of a proper public register of common good assets and a clear accounting standard to be implemented by all councils. In the long term, we should give statutorily constituted bodies in the former burghs a statutory right to take back the assets if they so wish.

As I say in my written submission, that would contribute to a number of policy agendas, such as community regeneration, land reform, urban regeneration, economic development and civic renewal. We need a new act, broadly in two parts: first, to clarify in statute what common good is and how it should be stewarded and accounted for; and secondly, looking forward, to provide opportunities for communities to have greater say in how they are managed and in how resources and funds are used, and to give them the opportunity to take back title to those assets.

In answering my next question, I wonder if you could say a bit more about whether the legislation should be introduced in the form of a member's bill, a committee bill or an Executive bill. Which would you prefer? Given the obvious complications, it might be better to have an Executive bill, but I do not know whether the political will exists for that. Perhaps you could comment on that.

Your paper refers to common good assets amounting to £1 billion. Could you explain where that figure comes from and perhaps give some examples to flesh it out?

I do not have a view on whether any bill should be introduced as a member's bill or an Executive bill. That is a decision that would be made some way down the line.

The figure of £1 billion—£1.8 billion, in fact—arises because, when we did the survey in 2005, we could account for £180 million-worth of assets across Scotland, based on written records. Looking at councils, we saw that many of those assets were massively undervalued. My submission mentions the Waverley market in Edinburgh, which is worth £20 million or so, but the value of which is recorded in the books at £1. There are many cases like that across Scotland. Then, of course, there are the missing assets that were not recorded in the financial information. Taking all that together, I estimated that those assets were about 10 times undervalued and under-represented. We had a figure of £180 million from the reported accounts, but, taking account of the low valuations and the missing assets, I think that we are talking about a figure somewhere in the region of 10 times that—around £1.8 billion.

Thank you for that last answer. The figures and the evidence that we have create a picture of incompleteness and a lack of knowledge of what common good land or property exists and what does not exit. Can that list ever be comprehensive?

It can be. We are dealing with assets that were owned on 15 May 1975 by town councils across Scotland and which, on 16 May 1975, became vested in district councils. The records exist, by and large, although they are incomplete, and that incompleteness can be filled in by diligent investigation. We have property records in Scotland going back to the early 17th century and we have good archives from the burgh and town councils, so it should be possible to compile an inventory that is, if not 100 per cent complete, certainly in excess of 95 per cent complete.

Do you believe not only that the legislation is necessary to make that happen, but that it would benefit local authorities by letting them know exactly what their assets are?

Yes, indeed. There have been examples of local authorities not being clear about what their assets are. For example, Fife Council, which inherited about a dozen common good funds from places such as Auchtermuchty and St Andrews, has never got round to investigating what land corresponds to the descriptions in the old burgh records. It has tended not to need to investigate until it has been given a reason for doing so, such as someone coming along and wishing to put a gas pipeline through or to conduct some other kind of works. There has never been a motive for councils to investigate properly.

The extent of the mistakes that have been made—the assets that have been sold that should not have been sold and the money that has been received for assets but never credited—is such that it is imperative that a proper inventory is compiled.

Can you give us any examples of best practice in the management of common good funds in Scotland?

In my report, I was tempted to issue a scorecard on how well local authorities were stewarding common good assets, but I chose not to do so because it was a first survey and a number of councils were in the process of improving their records. The most impressive practice that I saw was that of Angus Council because it had highly complete and detailed large-scale maps, together with a pretty good set of accounts. The information was there, although I am not sure how wisely the council was stewarding its assets. At the other end of the scale were councils that said that they did not know what common good was and those that knew what it was, but said that they had none or felt that it would be too time consuming to locate it.

There are examples of best practice. Dumfries and Galloway Council is undertaking some useful work. Although Scottish Borders Council has been castigated for sloppiness in the past, it has been asked to improve matters and the situation is slowly getting better. I would like the local authorities that have little knowledge of the subject or that have poor records to seek advice from councils who have done a little bit better.

Thank you for that. I am sure that it will not have escaped people's notice that Angus Council is, of course, run by the Scottish National Party.

Do you think that any bill that was introduced should include guidelines on how common good funds should be managed or should that be left to local councils and councillors?

All political parties are culpable. I could cite other councils on which the SNP has a degree of control and in which the situation is less rosy. We are talking about a cross-party problem and it is important not to bring party politics into consideration of how to tackle it.

Legislation should introduce more than guidelines—it should embody specific measures that councils must take and standards that they must adopt and meet, particularly on record keeping, publication and accountability. It is interesting to look at the debates in the 1970s to do with the Wheatley commission and so on. Town councils jealously guarded their common good, to the extent that some did not want it to go to the district council. St Andrews golf course, which was part of St Andrews common good, was transferred to a trust and North Berwick transferred its common good to a trust. There was a great deal of distrust of the new authorities taking over.

Councils have always jealously guarded their independence of action when it comes to common good funds. There is no way in which ministers or Government—at Westminster or in Scotland—can tell local authorities what to do. That flavours the debate because it allows ministers to say that they cannot do anything on the grounds that the issue is nothing to do with them and they have no statutory powers to intervene, and it gives councils ammunition for saying that the funds are theirs or the burgh's and that they do not want anyone else to interfere.

My point is that we have reached a stage of such chaos, confusion and mismanagement that statutory guidelines must be followed. After all, we are dealing with billions of pounds-worth of assets that belong to people who live in towns in Scotland. If local government has spent 30 years failing to steward those assets properly, now that we have a Scottish Parliament it seems a statement of the obvious that the Parliament should pass a new bill to replace the 1491 act and bring the stewardship of the assets under statutorily enforceable management.

It would cost some councils quite a bit of money and time to look back in the records to find out what assets, if any, should be allocated to common good. If a bill were passed, should it be accompanied by the relevant finance from the Scottish Executive?

I do not know. You are right: the research would take resources. I have suggested that such research is interesting and is well capable of being done by local civic societies, local history societies and community councils—in fact, many such groups have done it. Given that, the finances that are needed to do such research might not be as significant as they would be if we made it a statutory obligation on councils and they had to fund it, with all the overheads that are associated with staff costs and so on. Undertaking the research would have financial implications, but I would like to think that it would not be too onerous and that it could be made part of a broader civic education exercise that gave people in towns the opportunity to discover for themselves some of their heritage.

The timescale can help. We should not expect local authorities to produce an asset register overnight; we could allow time for it to be pulled together. Since 1975, councils have been under a statutory duty to steward the assets, so the fact that they do not have a proper register is evidence of their failing. In many respects, they should pay for that, but that cost falls on the local tax payer.

I acknowledge that finance is an issue but I do not have definitive answers about how to solve it.

Will you explain a little more about the purposes of common good funds—what the moneys and assets are meant to be applied for—relative to the statutory powers and purposes for which local authorities are empowered under local government legislation? What is the significant and fundamental difference between the purposes for which common good funds can be applied and the purposes for which the general funds and assets of a local authority can be applied?

The fundamental difference is that the tax base of a local authority—the moneys that are raised through statute, council-levied taxes, grants from the Scottish Executive and various local government statutes that empower local authorities to charge for cleansing or whatever—is constrained and regulated. Such funds can be put to limited purposes.

Common good funds are a legacy of the first four or five centuries of local government, in which no statutory control was exerted over what local government did. A number of instances of corruption and nepotism, for example, led to court cases and attempts to rein in the worst excesses of municipal government. From that came the notion that the moneys that were levied through feu duties, tithes and various other means were to be used to the common good of the people of the burgh. That has been interpreted widely in various cases down the years, but it means that common good funds can be spent flexibly with nobody looking over local authorities' shoulder to tell them what they can and cannot do. That is part of the problem. The only people who can really take an action against a local authority if they feel that common good funds are being misused are local people; community councils also have title and interest to sue, but of course that is expensive and time consuming.

The fundamental difference is that common good funds are free of any statutory encumbrance, which makes them flexible. That is also a reason why a lot of the funds have disappeared. The kind of audit and statutory checks and balances that are in place have not been applied as effectively to common good funds as they have been to other council service funds.

Presumably, some councils would say that, given that they have the freedom and flexibility relative to their common good funds, what does it matter for what purpose they have been expended, whether to supplement a statutory power—or purpose for which they are constituted—or a discretionary power. The measure of control would be more operable if it applied the other way round, would it not?

That is a good point. I should have said that my understanding is that common good funds should not be used for statutory purposes. In other words, common good funds cannot be used for purposes for which there are statutes in place that empower councils to raise certain funds or make certain charges.

The other thing to bear in mind is that local authorities such as Scottish Borders Council, Fife Council, East Lothian Council and Aberdeenshire Council are responsible for a number of common good funds throughout their areas, which should not be spent for any purposes that are not to do with the inhabitants of the former burghs to which they apply. For example, the Banff common good fund should not be spent on things to do with Peterhead.

So, there is a geographical basis for the application of certain funds, such as funds for the former burgh regions in the Scottish Borders.

Yes, the funds are ring fenced and can be applied only for the common good of the people living in the former burghs to which they apply.

Is there any suggestion that common good funds or assets in Galashiels have been improperly expended on people living in Hawick or vice versa? Is that the case in any other two Borders towns that you might care to mention?

I have not found much evidence that common good funds are being used for other towns. The predominant problem is that the fund for any given town does not have the full range of assets allocated to it and therefore it does not have the potential for revenue generation that it should have. In many cases, the burghs themselves are losing out, because their own common good funds have been badly stewarded.

On the point that you made about common good funds not being used for a statutory purpose, is that your view of what the law is, or your view of what it should be in relation to the application of the funds?

That is my interpretation of what the law is, having looked at it and been helpfully informed by Andrew Ferguson, who is a solicitor with Fife Council and whose recent book on common good law I commend to the committee.

But is there not in the Local Government (Scotland) Act 1973 a general power of expenditure on the part of local authorities for purposes beneficial to the community? The statutory powers in the act have quite a lot of width to them anyway. I am thinking of the definition of the powers of the council. The council could be acting under that general statutory power, which is expressed in a wide context. Would that mean that the common good fund could not be spent on anything, because the wide discretionary power is also a statutory power?

I think that that would be taking things a little too far. A general power of expenditure on the part of local authorities would not be interpreted as a statutory power that would preclude the expenditure of any common good funds in the same way that other statutory powers that are much more tightly defined would.

You mentioned your concern about some of the valuations that had been reached, particularly in relation to the City of Edinburgh Council. Have you collated any information on what it would cost to carry out an independent evaluation of all the common good assets? Substantial sums would be involved in valuing properties in Glasgow, for example.

A number of local authorities regularly revalue their assets, including their common good assets, and several told me that the valuations that they provide on their balance sheets and accounts are of fairly recent origin.

There are a couple of problems. First, the historical cost convention is used in accounts. Basically, under that convention, assets are valued at their original cost, which can lead to some ridiculous figures. I know that there is an issue with capital borrowing consents for local government—I am straying into a field that I have little knowledge of or interest in—but the bottom line is that if common good funds were valued at their current valuation, it would increase the capital valuation of assets that councils held and would affect capital borrowing consents.

The second problem is that some assets are simply not in the common good accounts. I mentioned Waverley market, which is valued at £1 and is earning an income of 1p a year for a 206-year lease. Of all the significant value associated with that site—David Murray's company recently paid £40 million to acquire the shopping centre—none has found its way to the common good fund.

The missing assets are the problem. The use of the historical cost convention can be sorted out relatively easily. If we know what the asset is, valuation is not a big problem.

I want to continue on that important point about the process of valuing the different properties and assets. Do you accept that councils will be expected to do that on some occasions, or are you saying that on all occasions, for all properties and assets held in the common good fund, the process should be carried out objectively? Do you never expect councils to make those valuations?

Councils have a statutory duty to steward the common good funds, which involves proper valuation and record keeping of the assets, so I expect councils to have been doing that for the past 30 years. The problem is that, in many cases, they have not been doing that.

We need a common accounting standard, which I mentioned in response to Tommy Sheridan's question. It should be commonly accepted and legally binding, so that all communities across Scotland can have a proper knowledge of their assets and the income that they should be generating.

Do you know whether any freedom of information requests have been submitted to extract information on common good assets, and whether the requests have been processed and accepted?

Our 2005 survey used the Freedom of Information (Scotland) Act 2002 to ask councils what the common good assets were and whether they could provide the latest set of accounts. Most councils responded positively. As we outlined in our report, some councils said that they did not have the information or that it would be too time consuming to find it, while others simply provided what they had, which was all that they were required to do but was clearly deficient. Other councils made efforts to help, which was useful. Freedom of information is central. We would not have our picture of the situation today if it were not for the 2002 act.

You said that councils already have a statutory duty to steward their accounts and assets. The information that we have been given by the Scottish Parliament information centre is that, according to section 93 of the Local Government (Scotland) Act 1973, the

"assets in a common good fund must be held separately from a local authority's general fund account".

As the legislation to ensure that this issue is dealt with properly seems to be on the statute book already, I am at a loss as to why you are asking for new legislation.

As a supplementary, are our local councillors not the right people to be custodians of local assets for local communities?

The 1975 act says something about how common good assets should be accounted for, but the plain fact is that they are not being properly accounted for. I accept that there are various legal remedies such as judicial review, but it is very difficult for communities to get to grips with this issue or to take the local council to task on it. It might be possible to use existing legislation, but the scale of the problem is such that we need new, expanded and clearer legislative guidance on stewarding common good assets.

For example, the 1975 act and its 1994 successor say nothing about what happens if assets are removed from the common good fund, which has happened frequently. Indeed, millions of pounds have been lost that way. The 1975 act is very thin and, if you have read the Wheatley commission's report or are aware of the debates that took place in the 1970s, you will know that that is because the successor district councils did not want any interference in how they stewarded the assets, despite the fact that, at the time, many local people wanted to retain them. If you take our research and the evidence produced by the petitioners and others as evidence of how the 1975 act and its successor 1994 act have been implemented, it suggests that those pieces of legislation are deficient.

On your second question, councillors are, in many respects, the people who should steward these assets. However, since 1975, when, before reorganisation, a small burgh might have had 12 councillors, we have slowly lost real local democracy and control. In fact, the new electoral arrangements, which will come in next year, are a bit of a mish-mash, which is in itself an imperative for putting in place new governance mechanisms that give local people a meaningful and statutory say in decision making on the common good fund. I believe that the electoral changes mean that councillors are not in the best position to manage funds.

You keep referring to the 1975 act but, with regard to the common good fund being held separately from the local authority's general fund account, our SPICe paper mentions section 93 of the Local Government (Scotland) Act 1973.

I wonder whether you can expand on your intriguing comment that assets have been sold that should not have been sold and tell us more about your fear that local democracy will be lost. The fundamental point is that our democratically elected local councillors should be responsible for common good assets and, as long as they are discharging that duty within the existing law, I simply do not see why the committee should initiate new legislation. You seem to be saying that you do not agree with the way in which previous legislation has been implemented, but you have not really told us why we require new legislation on this matter.

I apologise for confusing matters. When I said "the 1975 act", I meant the Local Government (Scotland) Act 1973, which came into force on 16 May 1975.

The petitioners' evidence and our research suggest that the 1973 act is deficient, because it gives the people who own the property—in other words, the inhabitants of former burghs—far too little power and too little say in how it should be stewarded and gives far too much power and discretion to councillors and officials, who, over the past 30 years, have not used them wisely. The protection that the legislation affords to the beneficiaries of the funds is thin and there have been many abuses. In my written submission, I cite the Waverley market in Edinburgh, which is earning a penny a year for the common good fund. In Hamilton, £50 million of common good assets have been sold and the common good fund now stands at £3 million. The council there has told me, quite blithely, that the assets have been transferred to other parts of the council. It cannot do that.

The response to that could be a whole series of legal actions and campaigns by local people across Scotland. That would be perfectly feasible and preparations are in hand in a number of cases. However, the legislation is so thin, and the protection afforded to beneficiaries so scant, that we must have new legislation to clarify matters and to give statutory underpinning to the beneficiaries so that they can see clearly whether the funds are being stewarded properly.

You do not seem to think that people have any comeback when democratically elected local councillors make decisions. You say that those councillors make strange decisions, abuse the system and are not held to account. However, we have a system—called an election—whereby people can judge their councillors' decisions.

One could take that view of all the legislation passed by the Scottish Parliament to date. One could say, "If you don't like the way people are implementing existing legislation, just vote them out." However, the point of legislation is to clarify, in black and white, for the citizens of this country certain matters of public importance. The common good fund is not well served by existing legislation and that has allowed councils over the years to do the things that we have documented and against which the petitioners are arguing.

I accept that it is legitimate to say, "Just vote them out." However, local democracy—and local participation in decisions on the assets that are owned by the former burghs—is not strong or powerful or accountable enough. We have a fairly poor system of local democracy when it comes to the way in which people participate in decision making. That is why we have had the problems that we have had.

That brings us to the end of our questions. I thank Andy Wightman for his participation via video link from Addis Ababa; and I thank again the British embassy in Ethiopia for providing the link.

Thank you, committee.

I will suspend the meeting so that we can remove the video link equipment and bring in the next group of witnesses.

Meeting suspended.

On resuming—