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.
(1) The matrix files for 2012 and 2013 in Microsoft Excel format
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.
Thank you for this, Andy. As far as I can see, an absolutely sound analysis of the perverse system of farm subsidies. There is one easy answer – abolish the lot. But, unfortunately, that won’t happen before 2120.
for once, Reiner, you and I are in agreement
If we vote yes and the eu wont have us, we can abolish them forthwith.
I think in this instance Adam Smith’s comment about the effect of fisheries’ subsidies in the 18th century could be applied to farming – ‘The bounty to the white-herring fishery is a tonnage bounty; and is proportioned to the burden of the ship, not to her diligence or success in the fishery; and it has, I am afraid, been too common for vessels to fit out for the sole purpose of catching, not the fish, but the bounty’ (The Wealth Of Nations, Book IV, Chapter V, p. 520, para 32). Some landowners fit out their land to catch EU subsidies, not to produce food.
The Scottish government must start proper land reform where huge areas of Scotland can not be owned by companies registered in tax havens.
More must be done soon I can we the daily mail land grab headlines already
Young Scots who want to go into farming should get land from overseas owners who only want to claim the huge subsidies while putting nothing back
So who will farm without subsidy?(apart from those who don’t get any now)If they owe rent or mortgage then they are stuffed.
That’s the problem. Subsidies have been capitalised into land values on which security has been granted for loans. Answer is to de-leverage by a mixture of fiscal measures and subsidy adjustments to get land prices down to their productive potential where farmers can undertake farming without reliance on (inefficient) public support.
Exactly. And this is coming from a landowner representative with a large mortgage. I don’t see any other way.
Rents must fall, so must the inflated price of land.
There is plenty of stats to show that no rent should be paid for farms with no sfp, yet the new entrants insist on donating their capital to their new lairds, and then complain to the press about it
The new entrants have been used by the lairds to good effect .
Agree that the best form of level playing field is one with no subsidies at all. Having mounted our employee/community buyout of Comrie Croft (100 ha) in 2006, we missed out on the 2000 – 2002 registration years. It still astounds me that from 2015 we may be eligible for subsidy on things that we are already doing (or are planning to do) anyway. Can anyone remind me what is the point of these subsidies?
The main value on land is created by capital gains roll over relief/inheritance relief etc,so no subsidy would drop values some but only by the value of subsidy.If the public paid a little more then in theory you would not need subsidy as farmers could make a living in a proper market,and in theory the public would not need that bit of tax taken off to pay for the subsidy.
The balance between subsidies and tax reliefs is not clear to me but they both matter. You might be interested in the recent House of Commons Scottish Affairs Committee report which begins to explore such matters.
You say “it is not likely to be difficult to hire a shepherd and run a few sheep over the hills and qualify for subsidy” but under the SG’s proposals the qualifying number of sheep for Smech Properties’ estate would be around 7,000. How many shepherds do you need to look after that?
Another point is that, for your quoted properties, you say £X “per year for the next six years” but that presupposes Scotland moves to straight area basis on Day 1 which is highly unlikely.
Instead of that 2 years out of date Andrew Arbuckle article, people should read the SG’s consultation on the subject – http://www.scotland.gov.uk/Publications/2013/12/5922/291508
That’s on the basis of the ScotGov consultation. Stocking density now out of the window cos of WTO objections. See Richard Lochhead at Col 3476 26 March 2014 and NFUS Press Release 28 Janaury
It’s a ridiculous oversimplification to say that stocking density is now “out of the window”.
Richard Lochhead said to the RACCE Committee in the session you linked to:-
“We will use clauses in the regulations to do two things that the [EU] Commissioner told us that we can do when we met him a few weeks ago, one of which is to provide for activity on the land through the establishment of livestock units.”
I hold no brief for the SNP but I will give them credit for being pretty consistent on the wish to eradicate slipper farming. Hence “the Scottish Clause”. It’s the EU and powers even bigger than that (WTO) preventing them.
I note you don’t dispute that Scotland won’t be moving to straight area payments on day one so your assertion that Smech (et al) could be eligible for £X “every year until 2020” is almost certainly false.
Of course Lochhead wants to eradicate slipper farming but he could have done that at in 2007 as the EU confirmed. Quite why he didn’t is an interesting story that I am following up. He faces a choice now on what priority to give to that ambition. As for moving straight to BFS – that is one of the options (Q6a in your link). As I say, the jury is out. No idea what the decision is going to be. So the idea that Sheik Mohammed may get £x until 2020 is not false.
Do you think the 2003 MTR Euro regs gave the SG the flexibility to impose minimum stocking densities?
As for the transition to area basis, it would be irresponsibly disingenuous to state the matter any more firmly than “It would be theoretically possible – though extremely unlikely given that it’s the preferred option of neither the SG nor the farming industry – that Smech Properties [et al] could be eligible for £[20-25€ x their hectarage] every year until 2020.”
This policy shift to area payments from historic is the new scottish clearances, with tenants getting evicted left right and centre so lairdy can cash in.
Thanks for this blog Andy. It is valuable to have a light shone on this process. Support provided to farmers through the CAP is public money and that fact sometimes recedes into the background when the detail of CAP reform is being discussed and so it is entirely right that the systems we put in place to deliver farm support are subject to rigorous scrutiny.
I’ve offered some thoughts on the Scottish Land & Estates blog.
Key points: Scottish Land & Estates does not want to see the emergence of a new ‘slipper farmer’ issue which brings the whole system into disrepute. Our members tell us that they don’t want to see large amounts of money that is meant to support farming going to people who are not farming. Consequently, Scottish Land & Estates is fully supportive of efforts to ensure that the support goes to active farmers.
Slipper farming was a lifeline to many evicted tenant farmers who had no other means of support. It was only just that they should claim the subsidy on naked acres rather than it fall back to the gold and silver lined slippers of the laird.
The landed lobby of course were apoplectic with rage that a tenant could walk off with the “lairds” sfp money, so have moved heaven and earth to end the historic system.
And what dividends now await them? A large unstocked estate will now be cashed up to the tune of £100k per year, while intensive upland farmers will lose half their payment and have to pay staff off.
You couldnt make it up.
If we had followed the irish lead we might have got a rebased historic system, which would have shut out the non farmers and lairds for good.
In debating which is the best subsidy system perhaps we lose sight of the fact that they are all flawed and do great harm to rural economies, communities and environments.
At least Sheikh Mohammed bin Rashid Al Maktoum employs five stockmen, produces sheep and cattle for export and allegedly approves a budget of £1m pa on running his Scottish properties, all of which is spent north of Glasgow. Which other businesses spend that sort of sum on the West Coast apart from Norwegian salmon farms?
Where do you get this information from? My understanding is that there are no farm emoployees, no cattle and certainly no £1 million per year. Can you verify this claim?
This link suggests Smech are pretty active with Highland Cattle at Inverinate – http://www.basco.org/beef/breedersearch/details/id/101031#
Perhaps others more knowledgeable than I can interpret the data presented there to get an estimate of likely headage, employees and budgets etc.
I see that dunecht estates claim to have spent £1.5 million on new buildings since 2009.
How much of that was replacing buildings flattened by snow which should have been insured?
Always take spending claims with a pinch of salt.
I find this a fascinating conversation with a good range of views. Hector I would be interested in hearing more about the Irish reforms and how they could work in Scotland.
Andy I particularly agree with the comment you made about land pricing in relation to agricultural activities and a more realistic price. A bit of historic ‘agricultural’ land in North Edinburgh is priced at £800,000. It is only 0.7Ha in size. Valuation in this case is based on planning permission for a luxury housing development.
City farmland may be needed in a future with less oil and hopefully more self sufficiency. Lots of wee parcels of land could be used and larger areas within the city boundaries. Currently new farmers on this type of land would receive no financial help through rural subsidies or agricultural development grants.
Kirsty, Irish tenants were given perpetual leases in 1873 by the british govt.
They also got rent control, as they were being forced to pay higher rents for peat bog than the best land in lincolnshire.
Soon after, they were given the right to aquire the freehold of the land they had drained and improved, and the houses they had built. The price was 25 years rent in most cases.
These reforms should be implemented now in scotland, only 140years behind.
There are hundreds of acres of derelict land less than 6 miles from princes street.
Ahah, I thought you meant something recent. Would the Irish reforms you speak of be similar to the crofting acts in Scotland with protected tenancies, realistic rental prices and very reasonable prices for those that choose to buy these days?
My grandfather inherited the tenancy of a crofthouse and couple of ‘fields’ from family in the late 1800’s in Caithness. My sister still has the tenancy and lives there.
Maybe the rest of Scotland’s agricultural system could learn from crofting law?
Agreed there is very good quality derelict land within and around Edinburgh, in fact very close to where I live in North Edinburgh right now. Council developers would rather gain planning permission for housing and really overinflate the prices beyond agricultural use.
Commerce rules I am afraid, unless we say no or do I mean YES! 😉
Yes, the same as the crofting act which was supposed to cover all of scotland till the house of lords got involved and limited it to the north and west.
A croft was designated as a farm with a rent less than £50. In 1886, £50 was an annual salary for a labourer, so if the act was updated, anyone today with a rent under £20,000 could apply for croft status.
Sounds like an amazing idea to me, land courts are needed to protect tenants rights, free legal advice, decent rents.
Currently myself and other urban food growers are questioning Edinburgh City Council about its land valuation/rental charges for agricultural use within city boundaries.
They seem to be really overinflating prices beyond food growing, or community ownership, with a mind to lucrative property development instead.
Anyone with as grain of sense knows that agricultural or greenbelt land with permission to build houses is much more valuable for sale.
Under LRV collection, the increase in site rental value with planning going from ‘agricultural’ to ‘housing’ would be returned to public revenue to REPLACE taxation, and not to a non developing ‘developer sitting on his/her bahookie, so land hoarding would become very expensive. Of course that does not change the debate about what land use priorities are about, but the problem of urban gap sites would disappear.
sorry Ron dykslexic, LRV? There needs to be a totally new discussion on land tax for owners, not leasers to my mind. Close the legal loophole for avoiders and re-evaluate subsidies and their purpose.
a classic case of the rip off of societally created Land Rental Value by sectional vested interests. Only the collection of LRV can prevent this sort of hijacking of should-be public revenue.
Could this radical shakeup be possible in an independent Scotland? Radical thinkers have always been a speciality of our culture. Georgism? Land ownership tax? 1911 People’s budget and inheritance tax?
Time to make few changes methinks. Sharper minds than mine needed who understand the current laws and loopholes, seemingly simple to abuse by the megawealthy individuals and corporations who dominate our land and resources.
The term ‘tax’ is so desperately unfortunate and Henry George’s use of it to describe the collection of land RENTAL value has bedieviled and cursed anotherwise very sound concept for well over 100 years. It still curses it today as can be seen from this otherwise very interesting paper.
The concept is especially pertinent in Scotland where we have about 9% of the UK population, but 30% of the terrestrial land area, 50% of the continental shelf( land) and 70% of the coastline, giving us one of the most favourable ratios of resource base: population anywhere in western Europe.
Considering 60% of British households are owner-occupied, how can she talk of a “tiny percentage of the population capable of the privilege of ownership.”?
60% may be the british figure, but what is the scottish non urban percentage?
i would wager it is well under 50%
She wasn’t talking about Scottish non-urban but even let us suppose (as a pure guess based on your wager) that the figure is – say – 30%. That’s not a “tiny percentage”, is it? But you can drill down to ever smaller samples to prove whatever you like with dubious statistics. At the top of the Cairngorms, the percentages are all 100% or 0% depending on what you think looks more journalistically eye-catching!
My understanding is likely a gross oversimplification; only the estate/landowners/corporations would pay any tax. I would link this to their lands productivity rating used by the Macauley Land Research Institute and acreage . ie less fertile land less tax, more land more tax.
Tenants would pay no tax, Georgism?
Ownership of land is rather different from ownership of a house site.
Land can earn you a living, unlike a house.
and here am I fighting one of those landowners who are cap doffed whenever she tip toes north of the border. I’m asking Historic Scotland to take back a section of public roadway with the an ancient site, schedule it, but they won’t upset her lordship, so I’m forced to take my voice into public petitions for support. If local gossips can be believed she and her colleagues lift their hands and Scottish money is thrown at them. Why shouldn’t landowners who control vast areas of Scotland be means tested?
How much do they need to provide a living estate with tenant farmers, etc? if any are in dire need then give them a few bob, if not tell them to get on with running the place properly and let the money go where it is needed most.
If people want to discuss the content of a blog written by someone else and published on another site, could they please do so on that site. Thank you.
One of the most interesting blogs I have read in a long time with what appears to be some very knowledgeable responses, which for me having very little knowledge of CAP, confirms one thing, that a radical reform of the system is required and regretfully what is proposed does not appear to fit that bill.
I am no supporter of Sheik Mohammed, or any other large landowner, but if I were in his position as an already wealthy businessman I would also take advantage of the generous subsidies being offered by a government. No immoral tax avoidance issues in that, simply taking what is legally on offer and which he is entitled to.
I live in Easter Ross and with my knowledge of the climatically favourable farming industry in this area I was interested to note the level of subsidies received by local farmers. I am dumbfounded, this is not a marginal farming area, it is a very productive and apparently wealthy area and from the speed with which any farm on the market is sold, it appears to be very desirable. Is that anything to do with the subsidies?
My simple understanding was that subsidies arose from the post war effort to feed the nation but that principal is long gone and seems to have drifted between subsidies for production or headage to subsidies for simply owning land which may or may not be capable of producing something, anything even grazing a cow or two.
What is clear is that the subject is complex, is in need of radical reform, is probably being manipulated by large land owners but will this blog change anything. I dont think so. we are not the voices that are being listened to. If it were in my gift to decide I would remove the subsidies completely and let them sink or swim as I know of no other industry which receives this level of support. Wait a minute now, what about wind power generation?
Remember too that this blanket statement removing all subsidies would also affect smaller tenant farmers to whom this is a vital source of income as their rents factor these payments in.
I do agree with you however that total removal would force the market to pay a price that would keep production going . The bean counters that all our buyers have would reccommend that when they removed the subsidy part of our income in their calculations otherwise there would be no produce for their employers to buy.
For this to happen there would be a very financially painful period of adjustment for all farmers and owner occupiers with few commitments(eg rent) would be most able to stand it
Great post what more can I say
I think you will find most subsidised farms would be insolvent fast without subsidy.As I have said just a little increase per kilo or per tonne would make most of these farms viable without subsidy but the public will not support having to run their lives as if in the 70s with no abroad holidays and one old car.If subsidies stopped the UK I guess would buy cheap produce from abroad until the cost of home rent and land had come down enough to be viable again as happened in NZ but with a lot of bankruptcies.Risky for a country to have no home food,as they say “2 missed meals from revolution”.
Average pasture land value in NZ was £6,500 per acre in 2013
And your point is?
A comment above suggests that land falls in value without subsidies. It doesn’t.
If subsidies were removed from scotland, land prices would fall by about 30%.
They may even fall further, as the sfp cheque is the only thing that keeps the banks from pulling the plug on many businesses.
We saw this effect around 1986 when subsidies were cut on grain, and the “barley tax” was imposed on grain growers. Combined with 2 bad seasons and high interest rates, land fell by 50%.
Should the SFP only apply to landholdings of a certain size?
This way smaller businesses could till benefit while the large corporations and wealthy individuals owning vast tracts of land would stop draining funds?
Tenants and Union warn of “land grab” threat Scotsman 14 May 2014