Despite marine fisheries constituting a relatively small economic sector in Scotland (0.2% GVA), the costs of managing Scottish fisheries are substantial. From enforcement to port infrastructure, fisheries science to tax exemptions, the costs of fisheries management are highly diverse and challenging for governments in Holyrood, Westminster, and Brussels.
These management costs are paid for through general taxation but the financial benefits of fisheries management is limited to those within the fishing industry and to a lesser extent ancillary industries and consumers in the UK and abroad. The ‘resource rent’ generated from the commercial harvest of fish stocks in Scotland is further limited by the fact that commercial licensing in Scottish fisheries is limited. A cap on commercial fishing licenses prevents new entry into the fishing industry and generates economic benefits for those fishers holding licences by limiting access to the fishing industry. Despite acknowledgement that fish stocks are a public resource, this limiting licensing is deemed a crucial protection for the sustainability of the resource.
Both these aspects of fisheries management – significant public costs and limited private benefits – have led to calls for ‘cost recovery’ in fisheries management. Iceland, the Faroe Islands, Australia, New Zealand and regions of the US have all responded to this call by implementing auctions, levies, and other mechanisms to raise revenue from the fishing industry to pay for management costs. While these mechanisms for cost recovery are relatively new in fisheries management, they have a long, established history in other natural resource industries where private users derive economic benefits from a public resource. This approach includes natural resource sectors operating in Scotland such as oil and gas extraction, aggregate extraction, and water abstraction. The ‘public money public goods’ principle that has come to define the discussion over future agricultural subsidies is simply the inverse of this approach for private benefits.
There is growing appreciation in the fishing industry that high quality fisheries management can yield economic benefits and that high quality has a price tag attached. One clear example of the benefits of funding management would be a greater number of – and more detailed – stock assessments that may indicate a greater biomass of fish populations and thus larger allowable fish catches in the Scottish fishing industry. Under these conditions, sharing the costs of fisheries management could be in the economic interest of the fishing industry as well as society.
Furthermore, whereas for decades the Scottish fishing industry suffered from low profitability, it is now the case that profit margins in the industry are extremely healthy (30% gross, 25% net) and much higher than in fish processing, retail, or indeed most other sectors of the economy. This profitability is not uniform across fishing fleets, however cost recovery can be differentiated to reflect these differences.
Improved economic performance in Scottish fisheries stems from both the sustainable recovery of fish stocks (which increases fishing opportunities and improves catch per unit effort) and vessel decommissioning (where a downsizing of the industry translates into a larger share of the resource and higher profits for the smaller number of vessels that remain active). In other industries, the existence of profits would induce new entry, but for the fishing industry limited licensing sustains these profits for the current fishing fleet.
Brexit, despite delays in implementation, remains on the horizon and is likely to increase fisheries management costs for the Scottish Government if fisheries management functions formerly taking place at the EU level are devolved to Scotland (the exact functions are still being decided). Total fisheries management costs may also increase as control and enforcement, exporting requirements, and other aspects of fisheries management are likely to increase in scale and complexity. Post-Brexit fisheries management will also bring new fisheries legislation in the UK and devolved administrations. The challenge of increased management costs for Marine Scotland is therefore accompanied by the necessity for new legislation on cost recovery.
Whether looking to other countries, other industries, or changes with Scottish fisheries management itself, the unavoidable conclusion is that cost recovery for Scottish fisheries management is an idea whose time has come. With several different cost recovery mechanisms available and an even greater number of design features, it is now time to work with fisheries stakeholders to determine the best way forward to implement a cost recovery programme.
This briefing was originally published by the New Economics Foundation here.