That 'rumour' would conveniently fit with the theory that both sides are telling some form of truth. This is pure speculation on my part but this scenario would explain why neither side seems to be doing anything:
Farage's son was legitimately employed by UKIP/Graham Booth in the SW while at university in Exeter (just down the road from head office). The ST 'insider' got his facts slightly wrong or wilfully misrepresented them to have a go at Farage. The paper contacted Farage, who apparently bizarrely refused to deny the allegation or provide any corrections, thus encouraging the paper to go to print. Once the story appeared and the ST realised it was factually inaccurate, they couldn't print anything else for fear of opening themselves up to libel action. Farage in turn is stuck because while he hasn't directly employed his son, family connections meant that his son was employed. Combine that with his wife on a full time salary, and Farage will be forever labelled a nepotist as well as being shown to be deliberately dishonest about whether his son was employed or not (He only ever said that he didn't emplyhis son).
If this speculative scenario is close to the truth, we can expect no action from either side. It would certainly explain why Farage hasn't taken legal action in what is very clearly an open and shut case if he hasn't employed his son.
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