Select Committee on Agriculture Appendices to the Minutes of Evidence



APPENDIX 7

Supplementary memorandum submitted by the Forestry Commission (K 10)

  David Bills has asked me to say that he greatly appreciated the opportunity to set out for the Committee the Commission's priorities and plans. These are, in many ways, unsettling times for the Commission. We, and the rest of the three GB administrations, are having to adjust to what it means in practice to have a cross-border public authority, particularly in relation to finance. This transition has coincided with the sharp fall in timber prices (principally as a result of the strength of the pound) and the review of Forest Enterprise, which may well have profound consequences for the Commission as a whole.

  The paradox is that we are making excellent progress on what we actually deliver. We hope that we have shown the Committee that there is an unprecedented consensus of support behind our programmes. This gives us confidence that, provided there is an early resolution of our financial difficulties, we can provide more and more of the services that the parliaments and the public are looking to us to deliver.

  If the Committee would find it helpful to see for themselves what benefits modern forestry can provide, we would be delighted to host a visit, which could quite easily be arranged in woodlands reasonably close to London.

QUESTION 26: LEGISLATIVE CONSTRAINTS

  1.  The Forestry Act 1967 defines the powers, duties and objectives of the Forestry Commissioners; these powers have been extended by subsequent legislation, notably the Countryside Act 1968, the Countryside (Scotland) Act 1967 and the Wildlife and Countryside (Amendment) Act 1985. In particular, the Commissioners have specific powers to "manage, plant and otherwise use . . . any land placed at their disposal by Ministers".

  2.  One area where this has caused difficulties is in entering into partnerships to manage land jointly with other organisations. For example, the Commission discussed the possibility of entering into a partnership with Scottish Natural Heritage and others to purchase a major highland estate, which would have been managed for multiple objectives, including forestry, conservation and deer control.

  3.  Counsel's advice was that if the Commission wished to enter into such a partnership, two key criteria would have to be fulfilled. First, the Forestry Commission must retain management control of its land. (Other organisation could carry out the work, but the Commission must be in control.) Second, any partnership must have aims and objectives that are consistent with the duties of the Forestry Commissioners as defined in the Forestry Act.

  4.  The proposed partnership failed on both counts. The Commission would have acquired land without retaining management control, and the partnership would have had objectives that went beyond the Commissioners' powers. Whilst the Commission did ultimately find a means by which this problem was solved, with the Commission acting as a managing agent, the process added uncertainty and delay which were not helpful in securing the purchase.

  5.  The Forestry Act could be changed to overcome these problems, by allowing others to manage Forestry Commission land and by giving the Commissioners wider powers to manage land for other purposes. However, this would represent a major change to the Commissioners' powers under the Forestry Act.

  6.  A second area where we have encountered difficulties is in entering into more commercial partnerships, such as joint venture companies. For example, we would have liked to establish a joint venture company to run our Forest Holiday Cabins. The Commission has four cabin sites with a total of 166 cabins, which were built in the 1970s and 1980s, and which make a healthy profit and a good return on capital. The cabins are in urgent need of modernisation and refurbishment, which will entail significant capital investment. This project was ideally suited to the Government's Private Finance Initiative (PFI) or Public and Private Partnerships (PPP) initiative.

  7.  The most suitable vehicle to deliver this would have been a joint venture company. However, Counsel advised that the Commissioners did not have the necessary powers to participate in a joint venture company. The Commission had to find an alternative, less satisfactory, legal vehicle, although for other reasons it has not yet been possible to take even this forward.

  8.  In summary, the Forestry Act provides the Commissioners with adequate powers for nearly all the activities that they would like to pursue, including a range of productive partnerships. The Act does, however, restrict their ability to use companies, joint ventures and some types of partnerships to deliver their objectives when the sharing of assets is involved. This has restricted our success in achieving some of our objectives and in working closely with our partners.

QUESTION 51: CUTTING RIGHTS

  9.  In 1998, following the Comprehensive Spending Review, the Government asked the Commission to sell a package of timber cutting rights to raise £10 million in 2000-01. This would have involved a forward sale of the right to harvest and sell timber from a defined area of forest. This first sale was to be a trial, to investigate the potential for raising much larger sums this way in the future. The intention was to raise capital from the estate, while leaving the land in public ownership with free access on foot. Cutting rights have been sold in other countries such as New Zealand, but not in the UK.

  10.  The proposal raised several questions, particularly in relation to saleability, value for money and legality. A working group chaired by the Chief Executive of Forest Enterprise, with representatives from Treasury, was set up to examine the issue. The group employed an external consultant, who had been involved in a similar sale in New Zealand.

  11.  In considering how cutting rights could be sold in Britain, the working group considered the following key issues.

Legality

  12.  The duties and powers of the Forestry Commissioners are set out in legislation, as mentioned in the first paragraph of this memorandum. The Commissioners' powers are limited, so the group considered carefully whether the Commissioners had the power to sell cutting rights.

Value for Money

  13.  The timber market is notoriously cyclical, which might lead purchasers to discount heavily, especially if they had to borrow money to purchase the rights. There would also be additional costs to the Commission, for example through redundancy for existing staff.

Practicalities

  14.  All the public forests in Britain are managed to produce a range of commercial, social and environmental outputs. This is entirely different from the situation in New Zealand, where certain forests are managed for timber production alone and are therefore of greater interest to potential buyers of cutting rights.

Potential Purchasers

  15.  The market for forests and for round timber in Britain is not large and a sale of £10 million worth of cutting rights would be likely to overload the market.

Conclusions of Working Group

  16.  The working group concluded that:

    (a)  The Forestry Commissioners do not have the powers to dispose of their interest in the estate in this way. While they have been specifically given the power to sell land and forests outright, Counsel's opinion is that the sale of cutting rights would be ultra vires the Forestry Act 1967.

    (b)  Selling cutting rights would be unlikely to deliver value for money because:

      —  there would be heavy discounting by purchasers to reflect commercial borrowing rates, the risks of timber price movements, and the risks of fire and windblow;

      —  this would be a particularly bad time to sell cutting rights because timber prices are at an all time low and confidence is not high;

      —  in essence, the Government would simply be borrowing money from the private sector at a high rate of interest.

    (c)  There would be practical difficulties in selling cutting rights on a large scale.

  17.  In agreement with the Treasury, the Commission has therefore not proceeded with the sale of cutting rights at present, and a Supplementary Estimate has been provided to make good the planned income.

QUESTION 51: RELATIONSHIP BETWEEN FORESTRY COMMISSION AND TREASURY

  18.  For its work in England and GB-wide, the Forestry Commission's relationship with Treasury is the same as that of any other UK Government department. All departmental expenditure must be approved by Treasury—both in the form of forward spending plans (such as those announced at the conclusion of the Spending Review 2000 in July) and in the form of Estimates and Supplementary Estimates relating to a particular financial year.

  19.  In the case of the Forestry Commission, unusually among Government departments, Treasury approves the net expenditure rather than the gross totals of expenditure and income—an arrangement which reflects the business-oriented nature of the Commission's work and which reduces the need for Treasury involvement. Treasury also has an important role in approving departmental outputs—in the form, for example, of the Public Service Agreements published in July 1998 and the Service Delivery Agreements published in November 2000. More generally, the Commission must operate its financial affairs in accordance with rules set by Treasury for all Government departments, for instance in Government Accounting.

  20.  For its work in Scotland (and, once funding responsibility is transferred to the National Assembly, for its Work in Wales), the Forestry Commission has no direct relationship with Treasury. It draws its funding from the Scottish Executive, and prospectively from the National Assembly for Wales. It is for these bodies to decide on the allocation of funds to the Forestry Commission, within their expenditure block which is set by the UK Government in accordance with Funding the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly: A Statement of Funding Policy, published by Treasury in March 1999.

  21.  In practice, the Forestry Commission's relationship with Treasury, and with the Scottish Executive and National Assembly for Wales, has been greatly complicated by the shortfall in the Commission's receipts created by the drop in timber prices. This has necessitated protracted negotiations over supplementary estimates and prompted Ministers to ask the Treasury to undertake a review of the Commission's funding arrangements, the conclusions of which fed into the outcome of the Spending Review 2000.

  22.  Because of their funding responsibilities, the Treasury, Scottish Executive and National Assembly for Wales are involved in the current Quinquennial Review of Forest Enterprise. Given that a key issue is Forest Enterprise's need for greater financial flexibility, it is important that the Forestry Commission continues to have a close working relationship with Treasury and the devolved administrations. In normal times, when supplementary estimates are not required, the Forestry Commission would expect to have much less contact with Treasury.

QUESTION 80: ENGLAND FORESTRY STRATEGY

  23.  The England Forestry Strategy describes the Government's priorities and programmes for delivering sustainable forestry in England. The Strategy is based around four inter-related programmes: Rural Development; Economic Regeneration; Recreation, Access and Tourism; and Environment and Conservation. Each of the four programmes includes a range of actions that the Government plans to take over the next five to 10 years. Details of the four programmes, the priorities and the intended actions, as published in the England Forestry Strategy in December 1998, are set out in the annex. The intended actions will be taken forward not only by the Commission but also by several other Government departments and agencies, reflecting the cost-cutting nature of the Strategy.

  24.  The Forestry Commission's role in delivering the Strategy has been set out most recently in its Service Delivery Agreement with Treasury, which was finalised as part of the Spending Review 2000 settlement and which has been sent to the Committee.

  25.  The relationship between the Strategy and the Commission's work will also be described explicitly in the Commission's next three year Corporate Plan, which will be published in spring 2001. The Corporate Plan will include both the quantitative targets covered by the Service Delivery Agreement and the qualitative work that the Commission will be implementing over the next three years. Progress with both the targets and other work related to the Strategy will be reported in the Commission's Annual Reports to Parliament.

  26.  The Commission has already made several changes to its administrative structures, advisory bodies and grant schemes to ensure that its work and programmes are closely aligned to the priorities set out in the Strategy.

Administration

  27.  On 1 April 2000, we realigned the work of our Conservancies who undertake grants and licensing administration, to correspond with the boundaries of the eight Government Office Regions. This change reflects the recommendation of the Cabinet Office Performance and Innovation Unit Report Reaching Out and will enable the Strategy to be firmly rooted in responding to both national and regional needs.

Advisory Bodies

  28.  For the purpose of advising the Commissioners on the performance of their statutory duties, the Commission maintains, amongst others, Regional Advisory Committees. On 1 December 2000 these Committees were increased from three to eight to reflect the revised Conservancies in the Government Office Regions. These Committees will have a particular role in advising Conservators on regional issues and helping them to achieve a balance between programmes which best responds to regional needs.

Grant Schemes

  29.  The Commission has progressively introduced new arrangements under the Woodland Grant Scheme to align its work to the Strategy priorities:

    (a)  a discretionary approach has been introduced to the Woodland Grant Scheme whereby applications are scored according to their contribution to the Strategy objectives, eg economic regeneration, native woodland, rural development, community forests and larger schemes. The first year of this approach has had strong support by landowners and farmers. The area of applications has stayed around 5,000 hectares but there has been a 33 per cent increase in average scheme size (to four hectares) and a much stronger alignment to the priorities of the Strategy;

    (b)  new Challenge Funds are being introduced to target particular priorities. This year the Commission launched the "Jigsaw" challenge which is designed to join-up vulnerable small ancient semi-natural woodlands and help protect England's rarest woodland habitats for generations to come.

  30.  In 2001 the Commission will be conducting a review of the effectiveness of these measures (grants, advice, regulation, market development etc) in supporting the sustainable management of existing woodlands in England in line with the Strategy priorities and the UK Forestry Standard.

QUESTION 93: GRANT PROCESSING TIMES

  31.  There are two distinct stages in processing applications for grant under the Woodland Grant Scheme. In the first stage, the applicant applies for approval for the work that he or she proposes to carry out. This stage ends when the Forestry Commission approves the proposal. Some time later, the applicant carries out the work and submits a claim for the grant. This is the second stage.

  32.  For the first stage, the Commission calculates the processing time from the point at which a valid application was received until the point at which it is approved, ie when the Commission sends a formal offer of grant to the applicant. This time therefore includes the time taken for local authorities and others consulted by the Commission to assess and respond to the proposals.

  33.  Each application is different in terms of scale, complexity and sensitivity in relation to other interests. All applications require careful consideration of the proposals for woodland management, while some applications also require work to resolve potential conflicts with sensitivities such as landscape, archaeology, nature conservation and local community interests.

  34.  The Forestry Commission operates a Woodland Grant Scheme Applicants' Charter, which sets an 11 week standard for processing applications through to an offer of grant. In the last financial year, 69 per cent of the applications were processed within this time. The Commission is currently undertaking a major review of its administration of the Woodland Grant Scheme, involving a team of outside consultants, to see if it can make best use of information technology to speed up processing. On this basis, the Commission has included a target in its Service Level Agreement of processing 85 per cent of applications within 11 weeks by 2003-04.

  35.  For the second stage, ie paying claims for grant, the Commission aims to pay all claims within 28 days of receiving a valid claim. Last year, 98.3 per cent of payments met this target.

13 December 2000


 
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