Back in March 2016, I published the preliminary results of research in to the offshore interests of the Buccleuch family. Due to my election as an MSP in May 2016, I have had no time to complete this work but thanks to the International Consortium of Investigative Journalists publication of the Paradise Papers, we now have one more piece of the jigsaw. The jigsaw being who is the beneficial owner of the shares of Bucleuch estates Ltd.)

Kirkhope Holdings Ltd. (larger version of the above image here) appears to be one strong candidate for the entity that holds the wealth of the Buccleuch family. It was incorporated in the Cayman Islands on 10 July 1987 and shares are owned by Buccleuch Estates Ltd. and members of the Buccleuch family.

Over to whoever wishes to follow this up further.

 

Following my previous blog on the offshore interests of the Scott/Buccleuch family, the Panama Papers have emerged. I look forward to interrogating the 2.6 terabytes of data once it is made available for public examination in early May.

Meanwhile, I thought I should publish information sent to me by the Chief Executive of Buccleuch Group on 16 March in response to my blog and coverage of the story by Commonspace and The National.

“In view of media reports and comment on regarding Pentland Ltd., a wholly-owned subsidiary of Buccleuch Estates Ltd., and the Stage 3 debate on the Land Reform (Scotland) Bill tomorrow, Buccleuch wishes to clarify the position of this company.

1. Pentland Ltd is a UK trading company which is subject to UK taxation. All tax that has been due from Pentland Ltd has been paid in the UK throughout the existence of the company.

2. All directors of Pentland Ltd are UK residents and UK taxpayers and are members of the Buccleuch family.

3. The ‘beneficial’ owners of Pentland have never been concealed and any land holdings owned by the company have been clearly identifiable as ‘Buccleuch’ land holdings.

4. Pentland was originally registered in the Cayman Islands in the 1970s, not for taxation purposes but to accommodate a range of international assets and investments.

5. Since the late 1990s, the assets of Pentland Ltd have been wound down and the company has traded exclusively in the UK. It is not permissible to re-register the company which currently owns a small property development in Canonbie, Dumfries and Galloway.”

This is a very interesting statement and reveals the sophistry at the heart of discussions about the use of secrecy jurisdictions.

Take the first sentence, for example.

Pentland Ltd. is a company registered at HSBC International Trustee Ltd., PO Box 484GT, Grand Cayman, Cayman Islands.

That is a fact.

This cannot be spun as “Pentland Ltd is a UK trading company”

Two other observations are worth making.

The statement suggests that Pentland Ltd. has had an association with the Buccleuch family since the 1970s and point 4 explicitly claims that Pentland Ltd. was originally registered in the Cayman Islands in the 1970s. In fact, Pentland Ltd. was not incorporated until 1990 as evidenced by its incorporation certificate here. So what was going on between the 1970s and 1990?

There is also some confusion about the relationship between Peatland Ltd. and Buccleuch. In this media statement from 2009, it is stated that “Pentland Ltd is a company under the ownership of the Buccleuch Group” when in fact it did not become a wholly owned subsidiary until 2013. Indeed in 2002, Anderson Strathern had written to the Keeper of the Registers of Scotland in plain terms that “Pentland Ltd is registered in the Cayman Islands and is not part of the Buccleuch Group.” From the statement above, it would appear tat it has always been part of the Buccleuch Group.

Finally..

We know nothing more about Hayes One Ltd., Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands.

And we still do not know who is the beneficial owner of of Buccleuch Estates Ltd.and how this is structured.

by Andy Wightman and Carole Ross

Buccleuch Estates Ltd.

Mr Richard Scott (sometimes referred to as the Duke of Buccleuch) is frequently cited as the owner of the largest extent of private land in the United Kingdom. Yet, this has never been entirely accurate. The 242,000 acres of land in Scotland is owned not by Mr Scott, but mainly by a company called Buccleuch Estates Ltd.

The shares in Buccleuch Estates Ltd. are not owned by Mr Scott and his family but by two companies – Anderson Strathern Nominees Ltd and MDS Estates Ltd.

Anderson Strathern Nominees Ltd. is a dormant company which is wholly owned by Anderson Strathern Asset Management Ltd. Anderson Strathern Asset Management Ltd. is wholly owned by Anderson Strathern LLP which, in turn is owned by the 53 partners in the law firm.

MS Estates Ltd. is wholly owned by Anderson Strathern Nominees Ltd. though the Directors include Mr Scott and other family members

Anderson Strathern Nominees Ltd. is ….. (but you know this).

So the ultimate owner of Buccluech Estates Ltd are 53 solicitors?

Well, not quite. Because what the Nominees do is to act on behalf of persons unknown on their behalf. These persons are likely to be members of the Scott family but we can’t know because the arrangements are not made public.

The first inkling I ever got that there was something odd about Buccleuch’s arrangements was 20 years ago in 1995. I was helping Philip Beresford compile the Sunday Times Rich List and he faxed me a copy of a letter he had received from Richard Scott’s father.

Dear Sir,

Much as I would like to be No. 33 in your chart of the richest 500, I fear I am there under false pretences.

As you rightly mention the calculation is based upon a hypothetical valuation of works of art. What you may not realise is that if I were to sell items in the collection, 80% of the proceeds would go straight to the Treasury. This is because 80% was the rate applicable to my father’s estate when he died in 1973. 

My worth on that score should therefore be reduced from £200m to £40m and as I own no shares in Buccleuch Estates Ltd., I might find myself level-pegging with Gordon Baxter and Sean Connery. 

Can you please take this into account next time? 

In recent years the top rate of inheritance tax was reduced to 40% but even this would affect the positioning of many others whose worth is based upon art collections. 

Yours faithfully 

Buccleuch

Two things stood out in this letter which would later become of interest. Buccleuch’s art works were the subject of a heritage tax exemption (meaning that the public could have access at certain times in exchange for a deferral of inheritance tax) and that Buccleuch, despite being regarded as the owner of Buccleuch Estates, admits that he owned no shares in the company.

A few years later and at his request, I had a private meeting with a senior adviser to Buccleuch. In exchange for some intelligence he wanted on the likely impact of land reform, I requested information on who really owns Buccleuch Estates. I was told that it was controlled “by the family”, that there were “firewalls” between different parts of the business and that there were “offshore interests”.

Madonna of the Yarnwinder

Some years passed and my file on the topic lay dormant until in 2003 when the Leonardo da Vinci painting, the Madonna of the Yarnwinder was stolen from Drumlanrig Castle. Given the 80% inheritance liability that was due, I wondered what would happen in the event that the painting was never recovered. In 2007, the painting was recovered and is now on loan to the National Galleries of Scotland.

One thing that did happen was that the ownership of the painting changed hands shortly after the theft and was transferred to a charity, The Buccleuch Heritage Trust by a Deed of Gift on 16 April 2004.

The Buccleuch Heritage Trust transferred a total of £12 million of assets to a new charity, The Buccleuch Living Heritage Trust in 2011. The charity’s membership and Board is appointed exclusively by Mr Scott. The assets included Dalkeith House (which was not included in the valuation of £12 million) and title to the Madonna of the Yarnwinder.

The accounts of the Buccleuch Heritage Trust are no longer in the public domain. I asked Anderson Strathern for copies of the 2004 accounts but they demanded a fee of £100 which I could not afford and which I refused to pay. In the 2011 accounts of The Buccleuch Living Heritage Trust (2Mb pdf), there is a loan noted in the accounts for £749,692 that had been assigned from the Buccleuch Heritage Trust to finance the purchase of the Leonardo da Vinci painting (page 17). To understand this loan, we need to go back to the original theft of the painting.

In August 2003 the stolen painting was insured by John Scott for a figure of slightly less than £4 million. This seems to have been because, as outlined in Buccleuch’s letter in 1995, there was an 80% tax liability on the painting and that part of the value was never insured. Following the robbery, the insurers settled an insurance claim by Mr Scott of approximately £3.8 million. That settlement gave the insurers a right of ownership in the stolen painting. Around the same time the insurance policy in respect of the stolen painting was varied to enable the Buccleuch family to buy back the insurers’ right of ownership in the stolen painting, in the event that it was ever recovered.

My understanding is that the £749,692 that was loaned to the Trust in around 2004 was to enable this buy back agreement. The loan was fully paid off in 2012.

Pentland Ltd.

The loan to the trust was from a company called Pentland Ltd and the 2011 accounts note that Richard Scott, who is a Trustee of the charity, is also a Director of Pentland Ltd.

And so to the substance of this blog. Who is Pentland Ltd.?

There is only one company called Pentland Ltd. registered in the UK and it is a wholly-owned subsidiary of Galliford Try, a UK construction company that has nothing to do with the Scott family.

The Pentland Ltd. that loaned £749,692 to acquire the da Vinci painting is a company registered in Grand Cayman, part of the Cayman Islands, a British Overseas Territory and notorious secrecy jurisdiction. Its registered office is ar HSBC International Trustee Ltd., PO Box 484GT, Grand Cayman, Cayman Islands.

Until recently, Pentland Ltd. had no direct links to the Buccleuch Group (the very complex network of companies controlled by Buccleuch Estates Ltd.). Instead it was part of a quite separate (and just as complex) network of companies controlled by the Scott family. Pentland was incorporated in Grand Cayman in 1990. By 2009, it had become a subsidiary of Dabton Investments Ltd. and in 2013, Dabton was acquired by Tarras Park Properties Ltd., a subsidiary of Buccleuch Estates Ltd.

Pentland Ltd. (Grand Cayman), Salters Land Ltd (British Virgin Islands) and Drumcork Ltd. (British Virgin Islands) are now all subsidiary undertakings, joint ventures and associates of Tarras Park Properties Ltd. which is wholly owned by Buccleuch Estates Ltd.

An investigation into the myriad companies associated with Pentland prior to 2013 reveals a series of loans from Pentland Ltd. to other companies in the Buccleuch Group. Some of these loans were repaid in full or in part and others were written off in full or part. Some details are provided in this  dossier.

Lending money to UK companies from companies registered in secrecy jurisdictions is one method of bringing offshore money onshore. Writing off such loans means that the money is never repaid.

Being 100% owned by the Buccleuch Group, loans and other related party transactions are now exempt from disclosure under Financial Reporting Standard 8 on Related Party Disclosures. It is thus no longer possible to identify the loans being made by Pentland Ltd. to other companies in the Buccleuch Group.

Given that Buccleuch Estate Ltd. is itself ultimately owned by a nominee company of solicitors, is Pentland Ltd. one of the offshore family trusts I was told about in the late 1990s?

Dalkeith Estate

Dalkeith Country Park is popularly assumed to be owned by Buccleuch Estates Ltd. But as we have already seen Dalkeith House and surrounding grounds are owned by The Buccleuch Living Heritage Trust.

The ownership of the majority of the rest of the Country Park and neighbouring land was revealed in correspondence entered into between Buccleuch Group, Anderson Strathern and the Registers of Scotland in relation to the registration of an agricultural tenant’s interest to buy their farm under Part 2 of the Agricultural Holdings (Scotland) Act 2003.

The eastern part of the Country Park is occupied by a tenant of the Home Farm and a further agricultural tenancy exists over Smeaton Farm on the Park’s eastern border, just outside the park

Half of Smeaton Farm was owned in the past by Pentland Ltd. but by 2012, it had transferred its ownership to a company called Hayes One Ltd., Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands.

In correspondence relating to the Home Farm and Smeaton Farm in 2007, Registers of Scotland asked Buccleuch whether Pentland Ltd and Buccleuch Estates Ltd. “were connected  in any way for example with the same beneficial share ownership and whether the tenant did receive notification of the change of ownership and when this took place.”

In reply, Anderson Strathern wrote to RoS to state that ownership of the Home Farm had transferred from Pentland Ltd to Buccleuch Estates Ltd. on 26 November 2002 and this information had not been intimated to the tenant. The letter said nothing about beneficial ownership, merely that “Pentland Ltd is registered in the Cayman Islands and is not part of the Buccleuch Group.”

A search in the Register of Sasines and Land Register for “Pentland Ltd.” in Midlothian returned no results.

In an article in the Sunday Times on 21 July 2013, John Glen, Chief Executive of Buccleuch Estates Ltd. said,

It’s my job to run the Buccleuch companies and I can assure anyone that Buccleuch businesses pay tax where they fall due. All trusts linked with Buccleuch are subject to UK tax and all other family-related trusts are resident in the UK and subject to UK tax.”

It is not clear whether this statement covers the activities of Pentland Ltd., Salters Land Ltd., Drumcork Ltd. and One Hayes Ltd.

In a statement issued yesterday, a spokesman for Buccleuch said:

Pentland Limited is a Cayman Islands incorporated vehicle which is wholly owned by The Buccleuch Estates Limited which is UK registered. The company has always been wholly owned by Buccleuch and members of the Buccleuch family, all of whom are UK resident taxpayers.

“All profits arising in Pentland Limited are subject to UK corporation tax. Pentland Limited has historically owned land in the UK and currently owns an area of land near Canonbie in Dumfries and Galloway.”

In the Land Reform (Scotland) Bill debate on Wednesday this week, Patrick Harvie MSP has tabled two amendments that would bar all legal entities registered in British Overseas Territories or Crown Dependencies from registering title to land in Scotland (Amendments 105 & 106 pages 11 & 12).

This is merely the latest in a long series of attempts in Parliament to crack down on offshore ownership. At First Minister’s Questions on 9 October 2003, Jack McConnell responded to a question from Stewart Stevenson MSP on the topic and concluded that “I am sure that the matter will be discussed in Parliament over a long period.

In 2012, in response to further attempts to amend the Land Registration (Scotland) Bill in 2012, Fergus Ewing MSP, responded to concerns raised by the Economy, Energy and Tourism Committee, by saying that nothing could or would be done. In a meeting with the Minister at the time, I specifically raised the question of the use of secrecy jurisdictions by landowners like Buccleuch. Barely able to disguise his contempt for me, he said that he had visited Buccleuch and that the company had created lots of jobs. On Wednesday, Parliament will once again debate the matter after months of pressure from campaigners for greater openness.

Meanwhile, despite what we have discovered here, we are no closer to being able to determine for sure the real owner of Buccleuch Estates Ltd.

See the story with further comment in The National by Commonspace journalist, Michael Gray and a summary of this blog here.

Highland Titles Ltd. is one of those websites that offers you a small plot of land as a souvenir purchase. Yesterday, on twitter, some merriment was had by challenging the claim that such plots conferred any ownership of the land. Highland Titles Ltd. claims that you will become a landowner in the absence of any recording of title in the Land Register. It backs up this assertion by reference to this legal advice from J&H Mitchell WS. But a series of lawyers on twitter challenged this. See this Storify by Malcolm Combe, his subsequent blog, and this lengthy legal explanation by @loveandgarbage.

So if these “plot-owners” don’t own the land, who does? The answer is Highland Titles Ltd. It owns two parcels of land – Keil Wood near Duror extending (originally) to 90.7ha (see map below) and Paitna Green Wood, near Invergarry (to west of A87 above Loch Loyne), extending to 75.1ha. Keil Wood was acquired in 2007 by a company called Lochaber Highland Estates (CI) Ltd. This company changed its name in February 2012 to Highland Titles Ltd. See here for a Scotsman Business video.

Keil Wood title here and plan here.

Paitna Green Wood title here and plan here.

Several half-acre plots have been sold at Keil Wood reducing the extent owned by Highland Titles Ltd. to approximately 75ha meaning that the company owns around 150ha of land which it is offering “for sale” in plots from 1 square foot to 1000 square feet in extent.

What makes this story that little bit more interesting is that Highland Titles Ltd. is a company registered in Alderney and, in a phone call today to the Greffier of the Court of Alderney, it was confirmed that Highland Titles is owned by Douglas Wilson and Helen McGregor as Trustees for The Highland Titles Charitable Trust for Scotland, a charity registered in Guernsey.

According to the five-year plan of Highland Titles Ltd., over 100,000 plots have been sold. Each plot costs anything from £29.99 to £499.99. The larger plots are all in Paitna Green (or BumbleBee Haven as Highland Titles calls it) which is little more than a high altitude sitka spruce plantation on the A87 from Invergarry over the hill to Cluanie (see below)

The revenue from over 100,000 plots is at least £2,999,000 and probably a good deal more. This revenue is paid into a company registered in Alderney but as no accounts are published, it is impossible to be sure. The sole share is held by Wilson and McGregor as Trustees for the Guernsey charity. Under the law of Guernsey, no charity is obliged to provide accounts for public inspection and it need only file accounts under certain circumstances.

Thus nobody knows if in fact the charity is in receipt of any funds whatsoever. As the sole shareholder it is not entitled to have any of the revenues of Highland Titles Ltd. transferred to it. These revenues may well be paid out by the Alderney company as management fees or any manner of other payments to third parties.

The 150ha owned by Highland Titles is enough to provide over 16 million square foot plots which, at £29,99 per plot is a potential gross revenue of over £479 million. And, because the “plot-owners” do not legally own their plots (their ownership is limited to a few bits of paper and perhaps a tartan teddy), these plots can, in theory be sold multiple times.

I find it odd that such an arrangement appears to be lawful in Scotland. Because the charity does not technically operate in Scotland, the Office of the Scottish Charity Regulator has no role (see ruling from May 2014). And, because the company that owns the land is registered in Alderney, it pays no taxes to HMRC.

In December 2014, another company by the same name – Highland Titles Ltd. – was registered in Scotland. it is unclear what role this company plays.

Finally, the Directors of this Scottish company are Peter Bevis and Helen McGregor who live at Tulloch Farm, Spean Bridge.

Tulloch Farm is owned by Quexus Ltd., a company registered at Trident Chambers, PO Box 146, Road Town, Tortola, British VIrgin Islands.

Which leaves an obvious question. Where is all the money going?

Image: Chart from OBR Economic & Fiscal Outlook December 2014. Click for larger image.

Following the changes to stamp duty announced by George Osborne in the Autumn Statement, the Scottish Conservative Party has published proposals to change the proposed Scottish replacement – Land and Buildings Transaction Tax – due to be introduced in April 2015. The topic was raised at First Ministers Questions today (col. 14)

The Tory proposals include halving the rate between purchases of between £250,000 and £500,000 from 10% to 5%. The party claims that its proposals “would mean 97 per cent of transactions, including all those below £500,000, will leave house-buyers better off.”

This claim (and similar claims by the Scottish Government) that cuts in stamp duty rates represent a saving to housebuyers is misleading and wrong. It is a symptom of widespread illiteracy around the fiscal dimensions of land and property.

In broad terms, people have a fixed budget when they buy a house. They can, perhaps afford £150,000 made up of a loan and capital of their own. This sum has to cover the costs of acquisition (fees and stamp duty) and the sum paid to the seller for the house. If stamp duty rates are reduced it follows that more money is available for the other costs (fees and the price paid). Assuming that fees remain fixed (such as land registration fees) and others (survey fees and conveyancing costs) remain unchanged (either as a fixed sum or as a percentage of purchase price), the money saved in stamp duty will be available to bid up prices.(1)

This is a straightforward economic principle that was the subject of this useful analysis by Shelter and is noted by the Office of Budget responsibility in its Economic and Fiscal Outlook December 2014 on page 126 as follows.

The OBR analysis makes clear that the cuts proposed by George Osborne and the Scottish Conservatives will be more than offset by higher house prices. Those higher prices will, in many cases be financed by loans, the interest on which will be higher over many decades. A small saving in a one-off transaction tax will not simply be more than offset by higher house prices but by ongoing, compounded and volatile interest payments to financial corporations.

The best solution (and the one I advocated two years ago and is recommended by one of the Scottish Government’s own economic advisers – Sir James Mirrlees) is to abolish this transaction tax in its entirety and replace the volatile yield with a better-designed system of recurrent taxation of land and property. The Mirrlees Review (Chapter 16 pg 404) noted that,

If the Scottish Conservative (and indeed other parties) want to be truly radical, they would be well-advised to stop tinkering with rates (that will not have the claimed effects), abolish stamp duty and its associated bureaucracy, and agree to far more fundamental reform in fiscal policy relating to land and property.

(1) Of course, buyers are often sellers and will receive higher bids for the property that they are selling. But given that most buyers who are sellers are trading up, this merely exacerbates the inflation in prices.

The comedian and TV presenter Griff Rhys Jones is reported today to be ready to quit the UK in protest at plans by the Labour Party to introduce a mansion tax if it wins the 2015 General Election. As the Telegraph reports,

He himself lives in a “gigantic” house in a part of central London that was, when he bought it 15 years ago, a “slum”. He has a track record of buying large, run-down properties and turning them into homes for himself and his wife, Jo. His Fitzrovia house has appreciated so significantly that he is contemplating moving overseas if Labour win the election and introduce a mansion tax.

“It would mean I’d be paying the most colossal tax, which is obviously aimed at foreigners who have apparently come in and bought up all the property in London,” he says. “That sounds about as fatuous an idea as that immigrants are stealing all the jobs. I’d probably go and live abroad because I could get some massive palace which I could restore there.”

There has been a lot of nonsense talked about the mansion tax. This, from the Chief Executive of Legal & General, is typical.

“People who choose to prioritise buying a home have typically made sacrifices to do so: fewer foreign holidays, meals out or other luxuries. Through no fault of their own, their prudence would be punished by a Mansion Tax.” (Telegraph 27 October 2014).

The idea that folk who own houses worth in the millions have made sacrifices, saved hard or been prudent may well be true (at least for some). But that sacrifice, saving and prudence is not what has been responsible for their homes being worth so much money. The inflated price of houses in many parts of the UK is a consequence of scarcity and a lax fiscal regime. The financial gains made by homeowners are only in very small part due to their own efforts (for example, insulating or other improvements). The vast majority of the gains are as a consequence of rising land values.

Labour has yet to spell out the details of its plans but they involve a levy on properties worth over £2 million. Ed Balls announced the policy in an article in the Evening Standard on 20 October 2014. The Financial Times calculated that on average, the owners of properties worth over £3 million would pay an average of £19,000 per year.

Griff Rhys Jones and his partner Joanna own 2 Fitzroy Square (shaded red above) in the London borough of Camden. They bought the property for £1,450,000 in 1998 after Camden Council granted planning consent for a change of use from offices to a residential home (see Land register title). The couple then undertook the renovations and the property is now a domestic dwelling with 7 bedrooms, 3 bathrooms and 4 reception rooms.

Image: Extract from Title Plan for 2 Fitzroy Square.

According to Zoopla, the property is currently worth £7,012.156 and has risen in value by £3,015,251 over the past 5 years. The rental value is estimated at £16,167 per month (£194,004 per year). Rhys Jones currently pays £2640.96 in Council Tax to Camden Council.

Assuming that £1 million was spent undertaking renovations, the Rhys Joneses have seen their property rise in value by around £4.5 million. That sum is unearned increment (economic rent in economic theory) and, since principal residential properties are exempt from capital gains tax, the gain is entirely tax-free. This tax relief is worth an estimated £10.4 billion per year to homeowners according to the National Audit Office.(1)

Successive governments have put in place a fiscal regime for domestic property that allows Rhys Jones to make a £4.5 million tax-free capital gain without any effort on his part.

A sensible system of recurrent taxation would be designed to curtail such asset inflation by socialising this rent rather than allowing it to be appropriated tax-free by private interests. The mansion tax is a badly designed tax. As the Institute of Fiscal Studies commented in February 2013,

Rather than adding a mansion tax on top of an unreformed and deficient council tax, it would be better to reform council tax itself to make it proportional to current property values.”

If property taxation was properly proportional and the Rhys Joneses paid the percentage rate (1.85%) that a mid-point English Band D property is liable for, then they would be paying £129,724 per year. The Mansion tax is liable to be about a tenth of that.

That kind of liability would deter most buyers who, as a consequence would offer less for the property so as to pay less in annual holding costs – which is precisely what a well-designed system of recurrent property taxation would do. Lower property prices means less indebtedness and more resources invested in the productive economy. But that is not the kind of economy that either Labour or the Tories appear to be interested in.

In the meantime perhaps Rhys Jones should be grateful.

NOTES

(1) See Figure 6 in Tax Reliefs.

 

Following the publication of our report A Land Value Tax for Northern Ireland (1), Dr Ronan Lyons, myself and the Chief Executive of NICVA, Seamus McAlaevey were delighted to have been asked to give evidence to the Finance and Personnel Committee of the Northern Ireland Assembly on 22 October 2014.

The evidence session covers many questions relating to LVT and land taxation more widely. It begins at 9 minutes and ends at 1:01:30.

NOTE

(1) This report was commissioned by NICVA’s Centre for Economic Empowerment. A copy of the report can be downloaded from NICVA website (together with infographic) or from my own page of LVT resources here.

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.

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.