We have known for quite a while that the right to collect gricultural land subsidies can be sold off separately to the land, in the same way as production quotas can be sold off and traded separately, but it's nice to see the BBC explain how it works first hand:
Basically, farmers can sell the right to claim subsidies to anyone they like. And we found speculators who had bought that right as an investment.
They rent empty land and, as long as it's maintained in good condition, they don't have to produce any food. Or farm in any way. In fact if they rent hill ground - of which there is a plentiful supply in Scotland - they can just leave it alone. They get paid every year in the form of a subsidy cheque from the government, and the farmer they bought it from gets a lump sum up front. It's a classic secondary market.
I decided to get a piece of the action. All that meant was a little form filling and then buying a small subsidy entitlement at auction. I didn't even have to leave the comfort of my own home, instead logging onto a live auction website. A few clicks, a couple of bids and there you go - I'm a farmer.
Now, I only dipped my toe in the water, but some investors have sunk millions into entitlements and we've been told they could see an annual return of up to 30%... if you want to follow my example, you had better get your skates on. The European Commissioner for Agriculture and the Scottish Cabinet Secretary for Agriculture both told me they're determined to close the loophole when the whole subsidy system is reformed in 2014.
Close the loophole? The subsidies themselves are the loophole, so just stop 'em, problem solved at huge saving to the taxpayer.
What Has 'Common Sense' Got To Do With It, Liam?
14 minutes ago
4 comments:
Sinking millions in?
Bit risky. Once the subsidy stops all you own is a hill in the middle of nowhere.
If you recall the solar panel lobby assured people that they would earn from having solar panels installed.
Any question of hmg cutting subsidy was strenuously rebutted. It's a 20 year contract,they said.
Start your own solar panel firm and earn millions as everyone will need them installed by 2050.
And it was. Right up until the time hmg decided it wasn't anymore.
BQ, exactly, see also: the suckers who paid money to be trained as Home Information Pack providers.
The BBC reporter is broadly correct, but missing one or two crucial facts. Yes you can buy entitlements (as they are called) and then rent some land, and do nothing and collect your subsidy cheque.
BUT.
First you have to find someone who has what they term 'naked acres' ie someone who has land, but no subsidy entitlement to go with it. In England that's virtually impossible - most land is intensively farmed, and someone has the entitlements that go with the land, and the rents reflect that. Paying a commercial rent would cancel out the subsidy received and make the who thing pointless. So Scotland is the place this happens because there are massive areas of hill land that never had claims for subsidy before, and are owned by people not really farming them (absentee landlords etc). So they are happy to get a small rent (better than nothing), and the entitlement holder gets some land to claim his subsidy on.
Secondly there is a requirement to keep all land that you are claiming subsidy on in Good Agricultural and Environmental Condition (or GAEC). In the lowlands this means that even if you are not farming it, you need to keep the weeds down, and look after the hedges, etc etc. Which costs money. I assume that the GAEC rules for hill land are less onerous (as it is by and large wilderness) and therefore there is little one could do anyway in the way of maintenance.
Thus this problem is pretty much entirely focussed on Scotland, due to the convergence of the two issues mentioned above. I have never heard of this happening in England, as the price of agricultural produce is such at the moment that if you have productive land you'd have to be mad not to be actively farming it (or renting it to someone to actively farm it).
S, sure, that's why she explains you have to buy hillside in Scotland, and of course, like any tax/rent/subsidy arbitrage, the margin is quite narrow and the risks are high, hence the price is bid down to a value which gives you a 30% return.
Th real kicker here would be to buy English farmland with all ag sub's and farming quotas attached, sell off the ag sub's and quotas and then get residential planning, that was you win three times over!
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