Baaaad management (On the surface at least). I ask the full council the following question...
"If we didn't lease the land free to this family then where would they graze their animals?"
I would imagine if they don't have their own land then they would have to look for alternative arrangement privately that would likely result in them having to pay rent. The land is a valuable asset and to be given away free in this type of example is a poor use of council/public asset.
I do not agree that this arrangement is in the publics best interests at all. Should the land be leased for free then it should at the very least be on a 'rolling repair' tenancy whereby the tenant is responsible for all upkeeping and maintenance.
I am surprised that your auditors are not more influential in changing this.
Village Hall committees quite often look to the council for support and not the other way around so in itself that is quite questionable. I sincerely hope they have refused the request. If the Cllr who is on both parties doesn't declare his interests then that is a seperate legal matter to look in to.
Yikes, good look with this one!!