SEVENTH SPECIAL REPORT
The Agriculture Committee has agreed to the following Special Report:
The Committee has received the following memorandum from the Ministry of Agriculture, Fisheries and Food, constituting the Government's Reply to the Fifth Report from the Committee of the 2000-01 Session, The Work of the Forestry Commission, made to the House on 7 February 2001.
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1. The Government welcomes the Committee's report on the work of the Forestry Commission. In particular, it welcomes the Committee's endorsement of the way the Forestry Commission has responded to devolution and developed the England Forestry Strategy, working closely with its partners. Since the report was written, rural communities throughout Britain have of course suffered the impact of the foot and mouth outbreak. This has underlined the importance of developing sustainable and robust rural economies and the role of woodlands in these economies, particularly as a resource for tourism. The Forestry Commission will play its part in ensuring that forestry, as a sustainable land use producing natural and renewable goods and services, contributes in full to the process of recovery.
2. The Government's response to the specific observations made by the Committee is set out below. For ease of reference the Committee's observations are reproduced as published.
Funding the Forestry Commission
3. These failures [in pursuing the Public Service Agreement performance targets set in 1998] illustrate how important it is for the Treasury to work with departments and other Government bodies to devise meaningful and practical targets, rather than simply imposing them first and examining their practicality later. Although the Treasury is right to set challenging targets, the appropriateness of the targets, and certainly their legality, must be fully considered before they are agreed.
4. The Government welcomes the Committee's concern about the Forestry Commission's financial problems stemming from low timber prices on the international market. In the face of these problems, it has been important to ensure that the Forestry Commission operates in a cost-effective way. To that end, benchmarking the performance of its estate against private sector forests, and pursuing the sale of cutting rights as a possible new way of marketing timber, were included as targets in the 1998 Public Service Agreement.
5. The Forestry Commission has pursued both of these targets. The first was the subject of an ad hoc report; the second will be reported shortly as part of the quinquennial review of Forest Enterprise. As the Commission informed the Committee, its investigations have shown that there are difficulties in a complete comparison with private sector forests (because of the differences between the objectives of the Commission and private sector timber growers) and that the sale of cutting rights should not proceed at present. But the pursuit of both targets has been part of the Commission's wider efforts to achieve best value for money from the forests in its care. In that sense, the Government does not share the Committee's view that the targets are "failures". In the light of the Forestry Commission's work, however, no equivalent targets were included in the July 2000 Service Delivery Agreement for the 3 years from April 2001.
6. However, a mechanism must be found which would allow the Forestry Commission to be financed to deliver quantifiable environmental, recreational and heritage benefits, in a way that was not dependent on the income of the timber enterprise. Separate targets would need to be set for timber production which, we believe, should be based on forest management needs rather than income goals, with provision for prudent activity to protect future income flows. It makes no sense to force the Commission to sell at the bottom of the market to achieve an income target. We therefore recommend that the Forestry Commission and the Treasury consider a multi-annual volume target alongside annual efficiency targets for timber production, with net income being returned to the Treasury. We recommend the separate funding of recreation, conservation and heritage programmes, independent of the income generated from timber sales. It is essential that decisions are taken as soon as possible so that the Forestry Commission can plan ahead and is not kept in ignorance of its future structure or how it is to be funded. We recommend that the Government publish a timetable for decisions on funding arrangements for the Forestry Commission and for the completion of the quinquennial review of Forest Enterprise and ensure that the timetable is adhered to.
7. The Government agrees on the need to reduce the dependence of the Forestry Commission's environmental, recreation and heritage benefits on the income of the timber enterprise. As part of the current quinquennial review of Forest Enterprise, a mechanism is (as the Committee recommended) being sought to achieve this. The intention is that Forest Enterprise's social and environmental work in England should be funded directly and specifically by the Forestry Commission, under a formal funding agreement with defined outputs. This will increase the transparency of the funding and link it more closely to benefits. It will not of course exempt the Commission's environmental and social work from possible future savings and re-prioritisation in the light of timber income shortfalls or for other reasons.
8. The Commission aims, however, to reduce the risk of timber income shortfalls by the use of the Treasury's end year flexibility scheme. Any surpluses from its forestry business, including timber sales and other sources of income, would be carried forward from one year to another to form a reserve, intended to meet deficits during the low points of the timber cycle. This should ensure that the Forestry Commission's important social and environmental programmes in England - and its GB roles, such as the part it plays in international forums working for sustainable forestry worldwide - can be maintained and developed without being vulnerable to the vagaries of the international timber market.
9. Forest Enterprise's timber production forecasts are already based on forest management needs (to ensure, for example, that timber is felled before it is windblown and that only a sustainable volume is felled). A multi-annual volume forecast, within which annual targets are set, is therefore already in place.
10. The Government agrees that it is important to find financial arrangements which allow the Forestry Commission to plan ahead and that decisions should be taken as soon as possible. The quinquennial review, which was delayed in order to allow better arrangements to be identified, is almost complete. A further note will be put to the Committee when the work is concluded.
The Forestry Acts 1967 and 1979
11. We commend this approach and expect MAFF to look favourably on any proposals the Commission brings forward to amend the Forestry Act so as to allow it to pursue opportunities which assist it in meeting its objectives and targets. Consultation on any such proposals would be necessary but we would expect MAFF to bring forward the appropriate legislation in the following parliamentary session.
12. The Forestry Commission is actively reviewing the Forestry Act 1967 to identify the extent to which it constrains the pursuit of policy objectives. Any proposals, including primary legislation, would of course be for the Forestry Commission, rather than MAFF, to pursue with Forestry Ministers and Parliament.
England Forestry Strategy and Partnership
13. We recommend that MAFF and the Forestry Commission examine methods to align the administration of and payment for the two schemes and review the ease with which landowners and others are able to access advice and support on schemes furthering the Forestry Strategy.
14. Since 1 April 1997 there has been a single Woodland Grant Scheme (WGS) and Farm Woodland Premium Scheme (FWPS) application form submitted to the Forestry Commission. The Commission and MAFF process that application in parallel and a single approval is issued by the Commission. Where relevant, there are also joint WGS/FWPS claim forms, submitted in the first instance to the Commission. The Commission and MAFF work closely together in the administration and delivery of the WGS/FWPS on agricultural land.
15. Further opportunities for greater integration and simplification of procedures are being kept under review. For example, the Commission and MAFF will be conducting a joint economic and environmental evaluation and review of the WGS/FWPS measures contained in the England Rural Development Programme (ERDP) in the run up to the mid term evaluation of their Programmes and provide a report to the European Commission by December 2003. Co-ordinating the review of the WGS/FWPS measures will enable a joined-up approach to be taken in relation to the delivery of the objectives and priorities set out in the ERDP, including delivery of the England Forestry Strategy.
16. The Forestry Commission and MAFF will take account of the Committee's recommendations when undertaking the review. They will also take account of a separate review that is currently being undertaken by the Commission to improve the administration of the WGS including opportunities for electronic delivery of its schemes and services.
Ministry of Agriculture, Fisheries and Food