Islands Bond: consultation responses analysis

8. Bond value, allowable expenditure, and conditions

8.1 The consultation paper provided 'high-level' information about the proposed Islands Bond scheme to give people (especially island residents) an opportunity to inform the further development and design of the scheme.

8.2 This chapter draws on material from across all the consultation questions and provides a summary of respondents' comments on the implementation of the Islands Bond scheme. This material was limited and focused on three main themes: (i) financial issues, including the value of individual bond awards, (ii) allowable expenditure, and (iii) the conditions that should govern the scheme. Each of these is discussed below. Note that other key operational issues for respondents related to eligibility and the decision-making processes for the awarding of individual bonds. These points are covered in Chapters 6, 7 and 9.

8.3 In addition, there was also a range of more general comments about operational aspects of the Islands Bond. In particular, some respondents said that any processes for administering the scheme needed to be (i) clear, robust and fair, and (ii) quick and easy for applicants, with speedy payment of any funds. However, others called for more information on operational aspects of the scheme, including how the award could be spent and the conditions that would govern any award – some respondents said this was needed in order to allow them to comment on the scheme.

Financial aspects of the bond, and the value of individual bonds

8.4 As discussed in Chapter 5 (in relation to overall views on the Islands Bond scheme), some respondents (both islanders and non-islanders) thought that the overall £5m 'pot' for the Islands Bond scheme was too little to have a significant impact on depopulation in Scotland's islands. In addition, some said that the (up to) £50k value of individual bonds was too little to make a difference to the attractiveness and feasibility of island life. They pointed to the high cost of living on the islands and the high cost of properties, as well as the predominantly low-wage economy. It was suggested the amount available may be enough for an individual but not a family, or it may be enough to assist with housing costs or business start-up costs, but not both. However, there were two less common views – that the amount proposed was appropriate and, indeed, could be a 'game changer' in enabling access to housing; and that the amount proposed was too high. This latter view was sometimes linked to the view that a greater number of lower value bonds would be more effective in addressing depopulation.

8.5 Two specific aspects related to the awarding of individual bonds attracted comments.

• Respondents were unclear if individual bonds were intended to be of a fixed value of £50k, or whether there would be a process for determining individual bond values up to that limit. Respondents sought clarity on this issue, and on how bond values would be determined.
• Respondents argued that the bond award process should involve a financial assessment of some type to ensure that money went to those in most need. There was a concern that bonds may be paid to those who already had the financial resources for an island move – for example, from the sale of another property.

8.6 Respondents also commented on a number of other more structural issues:

• There was some uncertainty amongst respondents about whether the scheme would offer grants or loans. Further, some respondents said that a loan scheme might be preferable and have less impact on house price inflation, while others were of the view that a repayable loan may deter some potential applicants.
• There were a number of suggestions for staggered or staged payments of bond awards over a number of years, or for recipients to get a second follow-up payment in addition to the initial bond payment to enhance the sustainability of their move (or decision to stay).
• There was a proposal that the scheme should offer two separate funding streams for housing and business purposes.

8.7 There were calls for more information and greater clarity on all these issues.

Allowable expenditure

8.8 The consultation paper indicated that the Bond scheme would provide funding for investment in housing and new businesses. Respondents commented on both these aspects of investment, as well as on some other areas of expenditure as discussed below.

Expenditure on housing

8.9 In relation to housing, respondents suggested that the Bond should be used to help recipients access affordable housing. There was support for the bonds to be used for all of the following types of housing expenditure:

• Buying houses and crofts (including buying land, especially in relation to crofts)
• Renovating existing homes
• Bringing disused, dilapidated and empty properties back into use
• Building new houses (and buying land to allow this – there was a recognition that this might require new legislation or regulation).

8.10 However, there was some variation in views, with some respondents expressing a preference for renovating existing properties rather than building new.

8.11 In addition to the capital expenditure above, respondents also said that people should receive assistance with other items associated with house purchases and renovation. These included:

• Legal advice and services, planning permission, and croft registration
• Arranging mortgages, etc., with some also suggesting bond recipients should have access to low-cost mortgages or other loan finance
• Installation of high-speed broadband.

8.12 It was not always clear if respondents thought such support should be restricted to bond holders or should be available more generally.

8.13 There was a broad consensus among respondents that Islands Bond awards should not be used for the purchase of second homes / holiday homes that would not be occupied on a permanent basis. Some also said that retirement properties or commercial holiday lets should be excluded from the scheme.

8.14 Respondents also put forward a range of suggestions relating to how house building or renovation and the provision of affordable homes on the islands more generally could be supported and stimulated. These included grants for landlords to bring properties back into use, investment in eco-housing, and ensuring that national housing policies were appropriate for island circumstances.

Expenditure on businesses

8.15 In relation to businesses, respondents suggested that expenditure on existing businesses as well as business start-ups should be funded. Specific areas of capital and non-capital business expenditure that respondents identified included:

• Business premises
• Equipment and machinery
• Support for ongoing administrative and operating costs
• Support for employee costs.

8.16 Respondents also suggested that other (complementary) funding or support should be available to those investing in businesses. This included:

• Low interest business loans or tax exemption / tax relief schemes
• Access to (shared / adaptable) workspaces, and to professional business services and advice (marketing, etc.) – note that it wasn't necessarily clear if respondents thought such items should be provided free or should be paid for out of bond awards
• Grants or other forms of support for particular types of industries or projects – e.g. local food production, sustainable farming, fabric making, whiskey production, etc.

8.17 It should be noted that respondents often commented on such matters in a general way, calling for improved island infrastructure, and improved support and investment for all island-based businesses, rather than focusing specifically on the needs of bond-recipients.

8.18 Two further points were made about the need for a holistic joined-up approach with regards to business support via the Islands Bond scheme, with respondents saying that bond funding should not duplicate existing schemes (e.g. the Rural Entrepreneur Fund programme), and should not be awarded to businesses that would compete with existing island businesses.

Other expenditure

8.19 Some respondents put forward suggestions about other areas of expenditure which they thought should be allowable under the Islands Bond scheme or should be covered by other means for bond-holders. The main suggestions related to (i) removal and initial relocation costs – e.g. short-term accommodation and basic living costs, and (ii) travel to and from the islands, particularly pre-move, and for family visits.

Conditions of bond awards

8.20 There was a widespread view that appropriate financial and other conditions were required. It was pointed out that this was taxpayers' money, and it was important that it was used appropriately and in line with the aims of the scheme. Respondents wished to see effective monitoring, auditing and accountability arrangements for the scheme.

8.21 In terms of financial conditions, respondents repeatedly expressed concerns that the bonds would be open to potential abuse, exploitation, or misuse (e.g. with recipients using the money to fund projects intended for resale), and said that ongoing monitoring and scrutiny would be required to prevent or detect this.

8.22 Respondents also noted that not all bond awards would be successful, with bond-holders choosing to (or having to) sell a bond-funded property (e.g. because they had not settled into island life, or because of a change in their personal circumstances) or bond-funded businesses failing for various reasons.

8.23 Respondents said that payback or clawback arrangements needed to be in place to respond to such eventualities and / or called for clarity on how such situations would be handled. With regard to resale, there was a broad consensus that bond-holders should not be able to benefit personally from any profit realised.

8.24 Respondents also repeatedly emphasised that the value and benefits of the bonds should remain within island communities for the long term. They suggested for example, that existing community members should be given first refusal on the resale of properties purchased with bond funds, or that provision should be made for community purchase for rental purposes. More generally, respondents said that any financial benefits accrued through the Islands Bond needed to be 'recycled back into the scheme'.

8.25 Common suggestions for other conditions were that bond-holders would have to:

• Make their investment within a set period of time and be required to commit to a minimum period of residency
• Learn Gaelic (if not already a Gaelic speaker).

8.26 Less common suggestions included the requirement for bond-holders to volunteer in the community for a certain number of hours, or to work for a local employer rather than work remotely for a company on the mainland.