The image above (click for larger version) shows the missing slide from the presentation on the Economic Contribution of Estates referred to in the Means and Medians blog from last week. (1) It is important because it shows the significant difference between the mean and the median. (2)

In particular it is important because the researchers who wrote the report stressed that in such a skewed sample, the mean should not be used.

It should, however, be stressed that the overall average values are very heavily influenced by the large and very large estates and the median figures for average income and investment are significantly lower.” (4.2.2 pg. 39)

In presenting the findings, the lead researcher, Rob Hindle stated that,

the mean average [is] significantly skewed by the bigger numbers at one end of the spectrum – so don’t do it – it’s not helpful. You need to start looking for the middle point but be aware even so that the middle point ..there are very big differences between the numbers at one end and the numbers at the other end so the middle point is again to be treated with caution

The means and medians are not published in the report for these very reasons. However, SLE issued a press release on 16 April entitled “New Research Reveals Significant Annual investment on Tenanted Land and Crofts by Estates” with an opening line that read,

Rural estate owners are investing an average of £69,000 per year on their tenanted farms and crofts“, new research has revealed.

The release went on to state that average income amounted to £101,422.

The more accurate figures are the medians and, as the graph shows (second set of columns from the left), the difference is startling.

Median revenue is around £22,000 (22% of the mean) and expenditure about £10,000 (14% of the mean) compared with £101,422 mean revenue and £69,145 mean expenditure

The differences for other categories – notably heritage and leisure are even more pronounced.

NOTES

(1) I should emphasise that the report is an excellent report and I plan to blog at greater length on its findings.

(2) The mean of a sample is the total of all the values divided by the number of values. The median is the middle value in a distribution of values. So, for example in a town with 100 houses where 99 were worth £100 each and one was worth £1 million, the mean would be £10,099 (1,009,900 divided by 100). But describing the average house price in town as being £10,999 is obviously misleading. In a skewed distribution, the median is more useful and in this case is £100 (the middle value when all values are lined up from smallest to largest) – in this case a far better representation of the average or typical price of a house.

Two weeks ago, on 23 April 2014, Scottish Land and Estates (the body that represents some of Scotland’s landowners) held its Spring conference at which it published a report on the economic contribution of estates in Scotland. (1) A week before that, on 16 April, it issued a Press Release headlined “New Research Reveals Significant Annual Investment on Tenanted Farms and Crofts by Estates”

It included the results from 143 estates surveyed that were involved in renting land for farming and stated that these had, on average, 11 tenants per estate covering, on average, 221 hectares. Total annual expenditure on agricultural and crofting tenancies amounted to £10.8 million, primarily on repairs and capital costs, equating to £26.58 per hectare and an average total annual expenditure per estate of £69,145. Average income amounted to £101,422.

Douglas McAdam, the Chief Executive of SLE said that,

The figures clearly demonstrate that there is significant investment by estates and our members are willing to invest further if we can create a stable climate that encourages investment. These are averages and investment does of course vary …. However, we are being told by members who do invest substantially that their continuing commitment is being jeopardised by the re-emergence of a potential absolute right to buy for tenants.”

It was clear that SLE wished to emphasise a) how much estates were investing and b) that possible land reform would jeopardise this in the future.

Fair comment.

So it was with some interest that when I came to read the relevant section of the Economic  Assessment report (4.2.2 pg. 39) and saw these figures, I also read a note of caution. The authors of the report write that, “It should, however, be stressed that the overall average values are very heavily influenced by the large and very large estates and the median figures for average income and investment are significantly lower.” (2)

Today, SLE published a series of videos of the various presentations given at its conference. Among them was one given by Rob Hindle (on YouTube here) who was the lead researcher for the economic study. (3) In a couple of slides (around 40min in) he describes the caveats on using economic figures including that the sample is “weighted towards larger estates”, that users should “be confident in the report but use with care” and that the “median is more representative of the sample”.

In particular, he warns that, ”the mean average [is] significantly skewed by the bigger numbers at one end of the spectrum – so don’t do it – it’s not helpful. You need to start looking for the middle point but be aware even so that the middle point ..there are very big differences between the numbers at one end and the numbers at the other end so the middle point is again to be treated with caution

So what are the median values?

They are not published in the report. But I spoke to someone who was at the conference who remembered seeing a slide that had shown the difference – the “significantly lower” figures – contrasted in blue and red as an example of why the “median is more representative of the sample”. So I looked for this slide in SLE’s video.

It’s not there.

Did my friend mis-remember? I phoned him up and asked. “No, definitely – it was there. The difference was very stark – not just for tenancy figures but other expenditures as well.”

How stark?”, I asked.

I don’t remember exactly – much lower though – less than a quarter – even less I think in some cases.”

In the video there is one slide (at around 40min) that shows the differences for some of the data. The median number of tenants is 3 compared with a mean of 11, for example. But there’s no information on expenditure and revenue figures.

So was this information in the presentation given at the conference? If it was, why does it not appear in the video presentation?

Maybe it doesn’t really matter. What is important is that SLE misrepresented the levels of investment in its press release by picking the “mean” figure when it knew that the median was more appropriate.

I  have contacted the researchers and asked if they could send me a copy of the presentation. They may, of course need to ask the permission of their client, SLE, who commissioned the report. I will keep folk posted on what transpires.

NOTES

(1) I should emphasise that the report is an excellent report and I plan to blog at greater length on its findings.

(2)  the mean of a sample is the total of all the values divided by the number of values. The median is the middle value in a distribution of values. So, for example in a town with 100 houses where 99 were worth £100 each and one was worth £1 million, the mean would be £10,099 (1,009,900 divided by 100). But describing the average house price in town as being £10,999 is obviously misleading. In a skewed distribution, the median is more useful and in this case is £100 (the middle value when all values are lined up from smallest to largest) – in this case a far better representation of the average or typical price of a house.

(3) I have downloaded a copy of the video for reference.

Image: Sheik Mohammed bin Rashid Al Maktoum wins the 2012 St James’ Palace Stakes, Royal Ascot

It’s hard to imagine the Government devising a new system of Jobseeker’s Allowance or Housing Benefit where the claimant is told they that their entitlement to such payments is just about to quadruple whether they like it or not. Indeed, with the total benefits cap set at £26,000 per year, the trend is in the opposite direction. It has long eluded me why, when the poorest in society suffer cuts and caps, some of the wealthiest (like the individual pictured above) not only appear to suffer no such pain, but are rewarded with largesse.

I met a tenant farmer recently who told me that under the existing system of farming subsidies he receives £18,000 per year. That’s a fairly generous allocation. But under current proposals for the new system (to be introduced in 2015) he will receive £80,000. “I don’t need it”, he told me. He is not particularly wealthy but he doesn’t need the money. So why does it look likely that he will get it?

The existing system of farm subsidies is coming to an end in December 2015 and the Scottish Government is currently finalising the details of the new system that will take its place and run until 2020. The existing (historic) system awarded subsidy (single farm payments – SFP) to farmers on the basis of what they received in 2000-2002. This is rather like paying tax this year on the basis of what you earned 14 years ago.

Some farmers “gamed” the system by increasing their farming activity in those years and thus have done very well out of it over the past decade. Others have bought “entitlements” to subsidy from farmers who, for example, retire from farming, and have “attached” those “entitlements” to poor quality land. They rent this land very cheaply and have thus been paid substantial sums of public money for doing nothing. They are the slipper farmers (so-called because they sit in front of the fire in their slippers being paid for doing nothing). Young farmers who entered farming over the past ten years have typically received no subsidy because the Scottish Executive back in 2003 conveniently omitted to make any allowance for them.

From next year, a new Basic Payments System (BPS) of farming subsidies will be introduced on the basis of a straightforward fixed payment per hectare of land farmed. The current proposal is that this payment should be made over two separate “regions” of land – €20-25 for rough grazing land and €200-€250 for better quality land. This means that the more land you own or rent, the more subsidy you will receive. This explains the pleasant dilemma faced by my farming friend above.

So, will the new system eliminate slipper farmers, support new entrants and direct subsidy where it is most needed? There will be support for new entrants although how much and how soon remains to be seen. But on the first and third points the jury is still out.

Scottish farmers do well out of the CAP – they receive the second highest average payments in the EU (€31,955). But that figure masks a few who do very well and the great majority who receive much less. In the latest data for 2013, the recipient of the largest payment was the King of the slipper farmers, Frank A Smart who was awarded the tidy sum of £3,226,492 for 35,379ha of land that he “farmed”. (1)

That’s right – over three million pounds.

The recipient of the least got £0.22.

Of the £439.8 million handed out in 2013, 45% (£198 million) went to the top 10% of farmers and the top third received over 81% of the total pot. This distribution is thanks to the system of historic payments and the scandal of slipper farming which, according to the farming journalist Andrew Arbuckle, has been responsible for between £50 – £100 million of payments each year – almost 20% of the total amount of subsidy paid to Scottish agriculture. His article is worth a read. So will the new system be any fairer? That depends on a number of factors including how much land is eligible for the BPS and how the new system is phased in. And this is where things get interesting.

Under the old scheme, some owners of very large tracts of land undertook very little farming and so have received relatively small payments. But under the new scheme their estates are all eligible for the basic payment. In 2013, there were 4,480,561 hectares against which subsidy claims were made. However, there are a total of 5,744,610 hectares  of land registered and eligible for subsidy – an additional 1,264,049 hectares. The Scottish Government intends, under EU rules, to restrict the land that can trigger payments by applying an “active farmer” test. It is unclear what this will mean in practice and in any event, it is not likely to be difficult to hire a shepherd and run a few sheep over the hills and qualify for subsidy.

Image: Extract from Scottish Government’s IACS Field Boundary dataset for Highland and Aberdeenshire

Smech Properties Ltd. for example, is a company registered in Guernsey and owned by Sheik Mohammed bin Rashid Al Maktoum, the King of Dubai and Prime Minister of the United Arab Emirates (pictured above). It owns the Killilan, Inverinate, West Benula and Glomach Estate in Wester Ross which has 21,424 ha of eligible land registered, received £26,406 in 2013 and could be eligible for £439,192 paid straight to a tax haven every year until 2020.

The Duke of Westminster owns 37,303 hectares of eligible land and could be eligible for £764,712 of public assistance for each of the next six years.

Braulen and Glenavon Estate, owned by a company in Grand Cayman (beneficial owner unknown) consists of 26,632 hectares of land potentially eligible for £545,956 of state handouts for doing next to nothing.

The Duke of Roxburgh received £204,374 in 2013 and his 4637 of claimed hectares would be eligible for £950,585 per year over the next six years

Letterewe Estate is owned by a company in the Dutch Antilles and could be eligible for £372,280 every year until 2020.

Even the Queen could claim over half a million pounds over the 25,000 hectares of Balmoral Estate.

In addition, there is a distinct possibility that, instead of the new system being introduced in 2015, it will be phased in over the next six years. And that would mean that Frank Smart (and the rest of Scotland’s slipper farmers) would continue to receive a substantial proportion of his £3,226,492 until 2020 for doing next to nothing.

The existing system of farm subsidies has been extensively abused. The new system must not be. And that is why I and others will be paying close attention to whether Sheik Mohammed is going to be allowed to pretend that he is a farmer and whether Frank Smart continues to get given millions of pounds for doing next to nothing.

NOTES

(1) The matrix files for 2012 and 2013 in Microsoft Excel format

WR1826_SFPS_2012_Natural_Person_Obfuscated_Town_Removed.xlsx

WR1826_SFPS_2013_Natural_Person_Obfuscated_Town_Removed.xlsx

The files provide the following information

Name of the claimant for legal persons only. Natural persons names are redacted. See here for details.

Postcode District where the claimant’s business is registered.

2013 SFPS Payment – the sum in Euros (all sums been converted to £ for this blog)

Ha Paid is hectares over which payment was claimed

Person Type – Natural or Legal

UPDATE 7 May

Figures in the original blog for 2013 payments were expressed in Pounds Sterling when they were in fact Euros (this includes payment made in 2013 to Frank A Smart). All now been corrected. This does not affect the projected sums which were converted already.