Farm subsidy loophole costs millions

A BBC Scotland investigation has revealed how millions of pounds is being paid out in an abuse of the agricultural subsidy system.

BBC Scotland Investigates: The Money Farmers reports the money is being paid to individuals and companies who are not doing any farming.

The payments are made on inactive agricultural land.

Concerns were raised over investors outside the farming sector buying the right to claim agricultural subsidies.

The programme found that farmers receive financial support in the form of a government subsidy for every hectare of land they have.

They can then sell on the right - or entitlement - to claim that subsidy.

In such a deal the farmer receives a lump from the purchaser of the entitlement - who can then rent land and go on to claim the government subsidy.

The investigation has discovered that investors who buy these entitlements and then claim the subsidy can make profits of up to 30% a year.

One person who has taken advantage of the loophole is Paul Millan - a property developer in Edinburgh. His normal business is renovating high-value properties in the capital.

He told the programme he bought a subsidy entitlement in 2006 and has so far been paid £250,000 public money.

He said: "I own a farming subsidy which I bought in 2006 and on an annual basis claim that farming subsidy, so although it seems a little odd, officially I'm legally a farmer as well. I'm clearly not rural in any way and don't even own a pair of wellies.

"With the benefit of hindsight I would have sold everything I owned, including my own house, to invest in this type of return - it's over 30% a year."

Andy Wightman, a land reform campaigner, told the programme: "It's a system that's broken, a system that's corrupt, a system that's been abused, and public money that's going to people who frankly don't need it."

Agriculture Commissioner

To test the system, reporter Samantha Poling registered as a farmer and bought the right to claim subsidy.

Rural Affairs Secretary Richard Lochhead told the programme he was lobbying to have the loophole closed.

He said: "We are trying to change the legislation. This is exactly how it can be abused and this is why I've put so much effort into trying to persuade Europe to change the legislation - with some success because we're actually going to get into the new Common Agricultural Policy what's called the Scottish clause, which means that we will not allow people to take advantage of this loophole."

Dacian Ciolos, the European Agriculture Commissioner, explained that member states were given the power to close the loophole in 2010.

He said: "The Scottish government have the possibility to have a definition of active farmer and to eliminate from this right of payments of this entitlement people who have the land but who do nothing with the land, so this is why the responsibility is split between the commission and the local government."

Asked if Scotland can change the system, he replied: "Yes, of course they can change this system if they want and anyway we will try to have a clear decision for the next period starting with 2014 to be sure that the system will change and will become more transparent and more clear and more targeted also."

BBC Scotland Investigates: The Money Farmers is shown on BBC One Scotland at 20:30 on Monday 5 March.