Image: The unassuming entrance to the HQ of the UK’s largest farm

The largest farm in the UK is popularly understood to be that owned by the Co-operative Group which extends to 17,808 acres across the country and is currently up for sale. However, figures released by the Scottish Government show that, in fact a north-east farmer, Frank A Smart is now far and away the largest farmer in the whole of the UK. In 2013, Mr Smart was farming 87,423 acres of land across Scotland – almost five times more than the Co-operative Group. For his efforts, he was paid £3,226,492 by the Scottish Government. His company’s accounts record a profit of £552,655 for the year ending 30 September 2012.

Mr Smart is the King of the Slipper Farmers. By buying “entitlements” to farm subsidies of thousands of pounds per hectare and claiming these on the basis of bogs and mountains rented at around £5 per acre – “naked acres”, he has abused the system of farm subsidies and become a millionaire.

According to the farming journalist Andrew Arbuckle, slipper farming has been responsible for between £50 – £100 million of payments each year – almost 20% of the total amount of subsidy paid to Scottish agriculture. Some of Scotland’s leading charities joined in the scam – here is the National Trust for Scotland trying to explain away its own involvement in buying entitlements and leasing naked acres.

The new system of farm subsidies to be introduced in 2015 is meant to bring an end to slipper-farming by ensuring that all farmers are “active”. The definition of this is yet to be finalised, however, and it is far from clear whether this will be effective in eliminating this abuse. Matters are further complicated by uncertainty over whether the new system will be introduced in 2015 as a fresh start or whether it will be phased in over a number of years. The latter approach may well allow slipper farmers like Frank Smart to continue receiving millions of pounds per year for doing probably very little at all. Moreover, it would be a slap in the face to those many farmers across Scotland for whom, because the current system was designed to benefit those farming in 2003, have been running their businesses with no subsidy whatsoever

Last week, the Rural Affairs, Climate Change and Environment Committee wrote to Richard Lochhead and argued that an immediate move to the new system may have a “negative impact on Scotland’s agriculture sector which could have serious and economic and social impacts.” It argues this position on the ludicrous proposition that “some businesses”, despite having known for years that this change was going to happen, “may not be prepared”. (page 6 of the letter & Committee Inquiry page).

Sorry – but if these businesses (and, coincidentally, they are ones that seem to dominate the concerns of the National Farmers Union of Scotland) are not prepared, then that’s tough. Why should public money be paid out to to anyone on the basis of what they were given a decade ago and who has failed to prepare for change?

Apart from Scotland’s specialised farming press and a programme on Panorama broadcast in March 2012, the mainstream media has not paid much attention to this issue. One recent exception, interestingly is the New York Times which carried a story titled “In Scotland, Working both the Land and a Loophole” by Stephen Castle on 31 March 2014.

Meanwhile, the concerns of the Committee and of the Scottish Government will be evidenced by whether Mr Smart continues to receive millions of pounds of public money that should, instead, be supporting Scotland’s far more deserving active and enterprising farm businesses.

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.

My previous blog on Common Agricultural Policy (CAP) farming subsidies attracted a bit of interest in The Herald today and a number of people have been in touch to ask what can be done to ensure a fair distribution of EU farming subsidies. This question of course is exercising Richard Lochhead as he finalises the details of the subsidy system that will kick in in 2015 and run until 2020. There are a number of competing interests to be squared and his task is unenviable.

I have blogged in the past about “capping the CAP” here, here and here. Capping involves placing a ceiling or cap on the amount of subsidy given to any one farming business. The European Parliament voted that capping be mandatory but the Council of Minsters took the view that it should be left to Member States to decide for themselves and that means, in the UK, that the devolved administrations have complete discretion as to if and how they apply such a measure.

During negotiations of the CAP, the UK and Scottish Governments were opposed to a cap but back in 2011, Richard Lochhead admitted thatthe public did not like the idea of very big payments going to individual farm businesses and many of the farmers he had spoken to across Scotland had acknowledged that.”

I argued in February 2013 that existing payments were very unevenly distributed. The graph below shows the total for 2011 (the distribution for 2013 is very similar).

If payments were capped at £100,000 per farm business, then this would, in 2011, have enabled the redistribution of £53.9 million paid to 813 farmers.

On the basis of the 2013 data, over two-thirds of the total direct payments went to 21% of the recipients (3962 farm businesses). A total of 642 farm businesses received payments of over £100,000 and capping the basic payments at this level would recover £66.2 million per year for redistribution.

No farm business needs a subsidy of more than £100,000 or, if it does, it does not deserve to be in business. I would, in fact place the cap much lower – at £50,000. The Scottish Government consultation noted (page 13) that,

If we wish we can decide that there should be a bigger reduction on Basic Payments than the 5% which is required by Europe, including a total cap on the size of future Basic Payments. Reducing the potential size of future payments in this way might also help tackle slipper farming where entitlements to high value SFPs have been transferred and are currently being claimed on rough grazing. Imposing higher levels of degressive reduction or even a total cap on the size of future Basic Payments could be one way to limit the future size of payments to slipper farmers who meet any minimum activity requirement. Without a tool such as this, these claimants could continue to claim a relatively large share of future support until payments become fully area-based. (my emphasis)

Consultees were invited to express a preference for one of four options but none included a total cap of less than €500,000.

Most people understand the concept of a cap and, whilst the the £26,000 per year benefits cap is controversial because it relates to some of the poorest members of society, the same cannot be said, generally speaking, of farmers. There are some poor farmers of course. There are many who work long hours for poor rewards. There may well be some who rely on benefits to feed their family. But this need does not extend to Sheik bin Rashid Al Maktoum, the Earl of Moray or Viscount Cowdray.(1)

There is no justification for paying any farm business, including (as the previous blog noted) large landowners, much more than twice the cap on benefits received by the poorest in society. Furthermore, the current system of subsidies is contributing to a growing concentration of ownership and occupancy of land when the Scottish Government’s land reform policy is to see more diversity and have many more people owning land. Excessive subsidy (indeed any subsidy) also pushes up the price of land. Subsidies, in general are a bad policy but we are stuck with them.

So.

£50,000 a year. What do you think?

NOTES

(1) See previous blog to download Excel file of 2013 recipients of farm subsidies.