Submission to the House of Lords Select Committee investigating the rural economy: the difficulties faced by these areas and actions that might help stimulate these economies.

Difficulties faced by rural economies in Scotland and what action is required.

Dr Alan Jones, PhD. CEng, FIET.

1 Introduction

1.1 While this evidence to the Select Committee is submitted in an individual capacity it is informed from a number of sources: living and working in both an employed and self-employed capacity within a rural environment for over 20 years; recently completing a PhD that examined rural small-firm business owner behaviour; chairing a successful campaign group to persuade Scottish Power Energy Networks against plans to erect a new 400kV overhead pylon route across south west Scotland that would have undermined the natural assets of the region leading to further degradation of a rural economy.  

2 Background

2.1 The social and economic challenges facing rural areas and their respective communities is well documented, with, in relative terms, the lack of inward investment, falling employment prospects, low wages, poor productivity, low educational attainment, limited levels of entrepreneurship, lack of apprenticeships, tendency for outward migration – especially from young people, ageing population and subsequent demands on the health service, remoteness from principal towns and large villages making long-distance commuting essential for employment and social activity, absence or poor availability of public transport making private transport an essential prerequisite are all some of the issues that emerge with regularity.

2.2 Poor transport links, remoteness from suppliers and customers together with the lack of a sufficiently skilled and educated workforce are cited as some of the reasons for the relatively low numbers of large and medium-sized firms locating to rural areas.   Instead, rural areas tend to depend on micro and small enterprises, many falling into the category of ‘life-style’ businesses, for employment opportunity.  Relative to urban areas, rural areas tend to depend on the primary industries more heavily, but with the prospects of agriculture activity falling this sector is no longer as economically viable as it once was in generating employment and economic value.

2.3 Faced with these economic disadvantages, as well as the changing face of rural demographics, it is not surprising that rural areas look towards exploiting their natural, cultural and historic assets as a means by which to stimulate tourism as a form of economic enterprise and employment.  Dumfries & Galloway, the area in which I live, is a prime example of such activity.  Here, in recent times, the gross value added (GVA) from tourism has exceeded £300m/annum by attracting over 2 million visitors to the region.  However, while this sector supports over 7000 full-time equivalent (FTE) direct and indirect jobs, such jobs are largely unskilled and hence low-paid, and in the main are seasonal and part-time. 

3 Implications

3.1 Against this background it is not surprising that many young people living in rural areas perceive a future lacking in prospect and personal satisfaction, and hence feel disenfranchised.  The ambitious and more able will be attracted to leave the area.

3.2 The relative dearth of highly paid, highly skilled jobs in rural areas replaced, where such work exists, by low paid, low skilled seasonal and part-time work helps engender a feeling of helplessness and apathy that can result, over time, in some areas becoming classed as ‘socially deprived.’

3.3 By contrast, however, rural communities can also possess a strong sense of place or identity and in such communities there can be an overwhelming community spirit that stimulates neighbourly care and pride.  Communities such as this can be extremely effective in maintaining standards by planning events and controlling activities within their boundary. 

3.4 On the other hand, some rural communities may not be so adept and effective at responding to proposed changes to the external environment, particularly where such proposals may impact on the broader environs of the community.  In such instances, it may be that the presence of in-comers (those who may have chosen to live, work or retire within the region) may bring with them professional skills and knowledge to be better able to articulate the concerns of their community. 

3.5 Successful rural communities, and areas of the type described in 3.4, tend to be attractive propositions for further incomers - thereby reinforcing the desirability of living within such communities.  Unfortunately, such desirability of location can have the negative effect of forcing up rural house prices and making it more difficult for young, local people to purchase a home within their community, especially where social housing is confined to urban areas.

4 Conclusions

4.1 The rural economy presently plays a minor role in the overall wealth generating capability of the UK.  Many of the reasons why this is so is well documented in academic literature as well as in government and other reports.  The fact that the rural economy could play a larger role, to date at least, appears to elude capture.  Without a change in direction and pace the rural economy will trundle along as it has done for generations – making do with what it has.

5 Constraints and Focus of Evidence

5.1 As an individual contributor (paragraph 1.1), and as someone living in Scotland (paragraph 2.3), the guidance provided by the House of Lords Select Committee in their ‘Call for Evidence’ on the rural economy presents difficulty in providing evidence of worth and usefulness because, in the main, the examples given where evidence is required is already devolved to the Scottish Government.   Examples here include, education, planning, health and social welfare, housing, local transport, roads, skills and training, and business enterprise.

5.2 Given that any report issued by the House of Lords covering devolved matters is unlikely to influence the Scottish Government this contribution, herein, focuses on only one area that is of interest to the rural economy and which is neither included in the guidance nor a devolved matter, and that is energy and energy pricing.  

6 Energy and Energy Pricing

6.1 Energy, and the cost of energy, play an important role in the domestic, commercial and industrial sectors, and more so in rural environments.  Yet, the implications of this role and the effect on rural households and businesses remain off-the radar as far as policy making goes. 

6.2 Domestic households in rural communities, unlike their urban counterparts, largely depend on off-grid energy for heating.  Furthermore, many properties are old, inadequately maintained and thus less energy efficient.  Over the period Q2 2017 – Q2 2018 gas increased, in real terms, by 2.0% while liquid fuels (on which many/most rural household depend – especially in Scotland) experienced a 33% increase.  It is little wonder why ‘fuel poverty’ is so prevalent in rural communities and particularly amongst those in Scotland.

6.3 Given the need for private transport for work and for social use coupled with the longer than average commutes in rural areas the cost of transport fuel is disproportionate with those living in urban areas, together with the fact that forecourt fuel prices tend to be higher in rural areas.  These factors combine to constrain some individuals who would otherwise seek work or take part in social activities to maintain a healthy lifestyle.

6.4 Rural businesses, both commercial and industrial, tend to make use of electricity and liquid fuels, although many public sector buildings have moved to renewable sources of energy.  Energy for private rural business comprise, on average, between 5 – 10% of total costs and as such the price of energy, while perhaps not the first priority, is an important consideration in overall profitability and may impact investment decision making.  

6.5 Much of the renewable electricity generated from on-shore wind farms in Scotland is situated in rural (and remote rural) locations with the energy exported from the region to load centres of industry in urban parts of Scotland and the UK.  So, while communities and business in rural communities facilitate the production of renewable energy by accommodating large man-made structures within the natural surroundings – and at the same time diminishing the quality of the natural assets, they gain no benefit other than an annual premium paid to Community Councils for their acquiescence to the development.

7 Future Prospects for the Rural Economy

7.1 Several suggestions are made in relation to energy and energy price that could both aid and stimulate the rural economy.

7.2 Ofgem regulate the gas and electricity markets, and is effective in doing so (paragraph 6.2).  However, it ignores other sources of energy such as liquid fuels on the assumption that supply – demand market forces will prevail to provide semi steady-state equilibrium.  The largely off-grid rural economy, from households to business, suffer because of the present lack of oversight and regulation leading to higher energy prices for such fuels.  It is recommended that Ofgem’s role be extended to include liquid fuels, and possibly other fuels used in off-grid environments.

7.3 Forecourt fuel price duty should be reduced in rural areas to provide a ‘level playing field’ for domestic and business transport users in relation to their urban counterparts.

7.4 Electricity prices should be reduced in rural areas, based on the extent of local renewable generation, to provide assistance to households and incentive to business, both to remain and to relocate to such areas.