Forestry Industry

– in the House of Commons at 12:00 am on 31st March 1977.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Tinn.]

9.50 p.m.

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

With an Adjournment debate on an important subject such as forestry, I would normally have expected a great attendance in the House to hear it. I have just listened, however, to what was once considered to be an important part of the Budget debate, the winding-up speeches. This time, however, the only Labour Members present were the Chancellor and his ministerial colleagues. One Back Bencher came in for 10 minutes during the last hour and a half. In view of that, I can hardly expect to have many Members present to listen to my Adjournment debate.

I sought permission for this debate because I was anxious to obtain from the Minister an answer which he refused to give me in reply to a recent Question. That Question sought to discover whether he was satisfied with the level of planting in the private sector of the forestry industry. I was amazed to find a Written Answer today to another hon. Member containing what was obviously part of the reply to his debate.

That Question for Written Answer was tabled by a Parliamentary Private Secretary to a Cabinet Minister. It was the hon. Member for Brecon and Radnor (Mr. Roderick), who happens to have a number of forests in his constituency. If anyone believes that all that was a coincidence, he will believe anything. I was disappointed that the Minister who has been good enough to come to reply to the debate did not display his usual courtesy in advising me of what he had done, which was to attempt to answer part of the debate.

This whole incident shows the value to Back Benchers of the privilege of raising matters on the motion for the Adjournment. It is quite evident from the Written Answer that the Minister has now done his homework. It is obvious that he is so ashamed of what the Government have done by way of depreciating future forestry that he could not face up to this debate until he had replied to a Question for Written Answer inquiring about grants.

In that Written Answer, the hon. Gentleman has the audacity to refer to a statement which was made on 5th July 1974, a date which is not unfamiliar to me since it is my birthday. That statement was contained in a Written Answer to the hon. Member for Don Valley (Mr. Kelley), and it included some fantistic statements about what was to happen to the forestry industry. Since then it has deteriorated.

The traditions of the House require me to declare an interest. I own a private woodland in Sussex. Since this is within your constituency, Mr. Deputy Speaker, it may not be unfamiliar to you. If I am able to persuade the Minister to go a little further than he has gone in today's Written Answer, that would not benefit me. It would affect my interest in that woodland, which happens to be fully planted and is beginning to be productive. On the other hand, if I fail to impress upon the Minister what a mess he has made of the forestry industry, that could lead to scarcity and my forestry interests would appreciate because of the shortage. I suppose, therefore, that I I ought to declare a negative interest.

I have a constituency interest also to declare, for at Lyminge we have one of the most attractive forestry areas in South-East England. Not only does it add to the local amenities but it gives much-needed help in solving unemployment, which stands now at the high level of 8 per cent. in Folkestone.

It will help the House to appreciate the problem if I explain—perhaps for the Minister's benefit too—why I as an individual first took an interest in forestry and why, some 25 years ago, I decided to invest in it. When I first looked into the matter and examined the figures showing viability, it was apparent to me that there was no financial advantage to be gained in my lifetime from such a venture. Equally well, however, I realised that it would give some tangible means for me to leave to my children—nay, possibly my grandchildren—something by which they might remember me.

At that time, it was clear that the then Conservative Government appreciated the long-term nature of such investment, and for that reason they made special pro- vision for forestry in the estate duty. My first question to the Minister—I hope that he will give me a direct answer—is this. There was no direct reference to capital transfer tax in his Written Answer today. Will he come clean with the House on this matter? We understand that there have been meetings on this subject in various committees. A package deal was put forward. Will he tell us frankly what was said about capital transfer tax? Will he make some concession, or does he intend that concessions will be taken away?

I think it only right that I should add that, when I embarked on my forestry project 25 or 26 years ago, the land was pure waste land, full of rubbish. The old woodland had been completely felled because the trees were needed for timber supply in the last war. You will know, Mr. Deputy Speaker, from your constituency knowledge that, as a result of what I have done—I am not trying to be pompous—that land has been turned into an area of outstanding beauty, an area now visited by local residents and visitors from quite long distances.

It can thus be seen that two or three factors are involved in the encouragement of forestry. Much-needed long-term investment gives the community employment as well as social and amenity advantages. It is ridiculous that we should have complaints from Socialist Members—when they turn up from time to time—to the effect that private industry fails to make sufficient capital investment. Cannot they appreciate that our taxation system is so oriented that it prevents funds from being made available for such investment? Will they never realise that one can shear a sheep once a year but if it is skinned it is lost for ever? The truth is that our taxation system tends to skin it.

The present system of taxation and estate duty is bad enough. What alarms me further is pressure from the Left wing of the Labour Party calling for a wealth tax. A wealth tax would make the prospect of any future investment in forestry quite unrealistic, because of an asset which cannot be realised for 50 years is to be taxed year on year how can one possibly expect such projects to be financed? To expect woodlands to bear an annual tax under a wealth tax is as stupid as to expect a farmer to pay a weekly tax on the increased value of his growing corn.

The Forestry Committee of Great Britain, which represents the Timber Growers Association, and the Royal Institute of Chartered Surveyors—

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Tinn.]

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

I was referring to the fact that there are three associations that are closely connected with the woodlands industry and the agriculture industry. They have given invaluable evidence to the Government, which gives a clear picture of the problem and the possible solutions. Their evidence shows that the average annual planting over the seven years ending in 1974 was 45,000 hectares. I cannot get hectares sorted out from acres, but that seems to be the modern term. I think that a hectare is 2·7 acres. They indicate that the private sector should contribute half the total of 45,000 hectares. It is clear that we are well below that figure for 1975–76.

The figures on grants paid are the most reliable method of finding out how much has been planted. Only 12,241 hectares was planted last year, and that is half of what the committee wanted. The extraordinary thing is that, of that amount, 9,241 hectares was in Scotland, while in Wales only 520 hectares was planted. I expected that there would be some support from the Welsh nationalists on this matter. I at least expected that the hon. Gentleman who put down a Question on planting would be here to find out what the Minister had to add, but he is not here. The significance of the Welsh situation is that the grants have decreased by 62 per cent.

The forestry committee indicates that the main reason for declining investment is the absence of a consistent long-term policy for private forestry. The committee also says that the application of capital transfer tax to growing crops without adequate provision for the exceptional long-term nature of the investment does not seem sensible. I expect the Minister to say something about this in particular. The committee indicates that grants have not been altered to take account of increased costs, although as a result of today's debate the Minister has come forward with an increased grant. Socialists always think that they have only to pay more of the taxpayers' money and everything will be all right. Long-term confidence is needed in a project that will take 50 years to materialise. It is obvious that not only annual grants are wanted.

It is important to get the matter into perspective. Ninety per cent. of our timber requirements is imported from countries outside the EEC. It needs little imagination to see the resultant heavy drain on our sterling balances. Only 8 per cent. of home-grown timber is used, and that is much too little. We seldom have debates on forestry in the House, so it is worth putting on record the contribution that home-produced timber could have on industrial production. I wonder how many hon. Members realise that a log that is worth £1 when lying on the forest floor is worth £5·50 once it has gone through a sawmill and £19 when it has gone through a factory producing building boards. Believe it or not, it is worth £27 when it is turned into paper. Think of the possibilities of employment there.

I wonder how many people realise when they read our newspapers every morning and take them for granted that if everybody in China read newspapers in the same way as we do in this country the whole world supply of timber would dry up in less than a generation. That is the timber situation. We are used to believing that the natural assets of the world are available for all time. How many people appreciate that 14 acres of tropical forest is destroyed for development every minute?

I wonder how many people realise that to meet the demands of this country for timber we need to plant a forest of the acreage of Wales ever year, and that we are planting an acreage of only about half the size of the Isle of Wight. That is the sort of problem we are facing in the timber industry.

There is much to be done. The industry welcomes the Minister's announcement in a Written Answer this morning, even though that was a funny way of doing it, but the industry has my support in pressing for more than cash grants. We need long-term confidence and assurance that the Government will not play hanky-panky over taxation.

The Government must get the Treasury to accept that this is a long-term industry which could help to deal with the unemployment problem. At one time it was thought that forestry competed with hill sheep farming, but there has been research into this claim, particularly in Wales, and it has been proved that the two industries can exist side by side.

If the Minister fails to give the necessary assurances to provide confidence for the planting industry, this country will be paying very much more than is necessary for timber imports in 50 years' time. I hope that, as I have raised this debate, I may be relieved of the responsibility for that state of affairs, but the Minister will have a lot to answer for.

10.6 p.m.

Photo of Gavin Strang Gavin Strang , Edinburgh East

I should like to congratulate the hon. Member for Folkestone and Hythe (Mr. Costain) on the timely nature of this Adjournment debate, following as it does so soon after the statement made yesterday by my hon. Friend the Minister of State, Treasury, about the changes we intend to introduce in the light of the report of the interdepartmental working party on forestry.

I hope the hon. Gentleman will agree that it made sense to make the announcement before rather than after this debate and I am sure that, with his vast parliamentary experience, he will agree that there is nothing unusual about Ministers making such announcements in the period between the Chancellor's opening Budget Statement and the enactment of the Finance Act.

However, it appears that no one took the trouble to inform the hon. Gentleman personally about the Written Answer, and I am sorry about that. I was in Brussels for the first part of the week and in Edinburgh yesterday. If I had been here I would have told the hon. Gentleman personally, but I accept full responsibility for the fact that he was given no warning. I unreservedly apologise to him.

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

I know the hon. Gentleman well and I fully accept what he says.

Photo of Gavin Strang Gavin Strang , Edinburgh East

I thank the hon. Gentleman. It is not at all pompous for him to draw attention to his own efforts in this area, and I pay tribute to the constructive work that he has done. Turning any area of derelict land into a growing area of timber is something of which any hon. Member has a right to be proud.

I think the point needs to be made from the start that the recent interdepartmental review was in no way an overall review of forestry policy. Current forestry policy is founded broadly on the 1972 consultative document called "Forestry Policy", which stemmed from the first major review of the industry since the Second World War. That document was widely studied by everyone who had an interest in forestry, and after a lengthy period of consultation the previous Administration set out clear guidelines which were endorsed by my right hon. Friend the Lord Privy Seal, who was then Minister of Agriculture, on 5th July 1974.

That still represents our policy. For the private sector it is centred upon the basis III dedication scheme introduced in October 1974, under which grants are given at the time of planting in return for owners accepting a continuing obligation to manage their woodlands in accordance with specific social and environmental considerations.

Timber production to feed our wood-processing industries continues to be recognised as the ultimate goal for woodlands managed under the scheme, as under the previous dedication schemes; but in pursuing this important end objective woodland owners are called upon to temper their management practices so that private forestry develops in full harmony with agricultural and amenity requirements.

The overall level of planting achieved under this new scheme and the old dedication schemes, which remained open to existing participants, has continued to fall from the peak of 24,000 hectares five years ago to about half that level in the 1974–75 planting season. It was because of their concern about this trend and its effect on the environment that the Government set up the interdepartmental review group last July to look into the whole question of how forestry is affected by Government policies on taxation, grants and amenities. Wide interest was expressed in the work of the group and 45 individuals and organisations responded to the invitation to submit written evidence. Eighteen of them subsequently gave oral evidence to the group.

As regards the tax aspects, I should like to say a word or two about the decision to break the link between the dedication schemes and the special relief for woodlands under Schedule 9 to the Finance Act 1975. We would not have done this if we had had any doubts about the effects on agriculture and the environment. The other benefits of dedication are so great that we do not expect more than a tiny fraction of new planting to take place outside dedication. On the contrary, this relief will become available for the substantial area of existing woodlands, many of them of high amenity value, which for one reason or another is not at present dedicated. The Government have concluded that the greatest scope for raising the present low planting levels in the private sector lies in broadening and improving the grants structure, and the new measures will take effect from 1st October next.

The first of those measures relates to the basis II grants. The rise in planting grants from about £57 to £75 a hectare represents an increase of about 31 per cent. The annual management grants will be increased pro rata, and as usual the Forestry Commission will discuss with the Forestry Committee of Great Britain how this should be done. Since the triennial review of basis II grants due to take place in October last year has in effect been overtaken by this review, the next review will be in October 1980.

In raising basis III planting grants from £45 to £100 a hectare, the Government bore in mind the additional commitments into which woodland owners must enter to meet the land use and environmental objectives of that scheme. Approved broad leaved planting will qualify for a grant of £225 a hectare, thus maintaining the present differential. This rate is aimed not only at additional planting and replanting in broadleaved woodlands but at improving some of the existing 285,000 or so hectares of unproductive woodlands that are predominantly broad-leaved scrub.

The value of establishing a timber crop by rehabilitating such sites through selective planting and natural regeneration, without detracting from their visual amenity, justifies assistance of that order to meet the initial extra cost. The new management grant under basis III gives practical recognition to the fact that for a considerable time after planting the owner continues to incur significant costs in managing the woodlands before he receives his first returns by way of thinnings. The new grant will be payable upon approval by the Forestry Commission of the work done under the previous plan of operations, at the five-yearly renewal of the plan, thus reducing administrative costs. These new basis III grants will also be reviewed in October 1980.

One of the difficulties that has beset forestry grant reviews in the past has been the absence of any agreed method for assessing the movement in net costs against which the effectiveness of the grants is measured. The interdepartmental review group gave consideration to this and has recommended a formula which, it is hoped, will provide adequate assurances for the industry that grants will be maintained at effective levels while at the same time protecting the interests of the taxpayer as the forests, through regular felling and planting, become more balanced and the industry more self-sufficient. We have asked the Forestry Commission to discuss this formula with the Forestry Committee of Great Britain with the intention that it should be used for the net basis II and III grant review in 1980.

The Government share the concern expressed about the loss of small woods whose importance lies not only in their aesthetic, nature conservation and amenity value but also in the significant contribution they make towards the country's timber resources, a contribution capable of being enhanced through effective management. As my right hon. Friend announced yesterday, we have therefore decided to reintroduce a small woods planting scheme which will give particular emphasis to the planting of broadleaved trees in the lowlands. The rates of grant announced recognise that many small woods will be broadleaved, particularly in those areas of the country where broadleaves clearly predominate, as well as the need for a margin over the basis III broadleaved grant to meet the higher costs, particularly of fencing, which arise in small scale planting.

With this small woods scheme and the Countryside Commission's grant-aid scheme for small amenity plantings, we shall thus have a comprehensive system for encouraging the establishment of the small woods, copses and spinneys on which the beauty of our lowland scene so much depends.

I do not have much knowledge of the hon. Gentleman's interests in forestry, but I hope he will agree that this is quite useful.

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

I think that it is most useful. It will encourage more people to carry on. However, will the Minister give a direct answer? What worries people in forestry is the fact that never during their lifetime can they realise it. Will he give some assurance about the question of capital transfer tax or death duties and an assurance that he will make some concession, realising that this is a 50-year asset? That is much more important than even the grants that he is offering.

Photo of Gavin Strang Gavin Strang , Edinburgh East

I would not dispute that. Certainly the tax concessions, which I am sure the hon. Gentleman would not confine to capital transfer tax but would extend to income tax arrangements as well, almost certainly motivate the private sector much more than any of the grants, even at the enhanced levels announced. However, I was only making the point that if the hon. Gentleman's own woodland—perhaps I did not follow him too closely—is not very large, he may particularly appreciate this type of scheme.

I know that the new Chairman of the Forestry Commission is particularly interested in the question of integrating forestry with agriculture. The hon. Gentleman will know about some of the rather interesting work that has been done in various parts of the country, particularly in Wales, showing how agricultural output can be increased where there is a proper integration between afforestation and the agricultural needs of hill farms in particular. It may well be—of course, we are here talking about a lowland scheme—that further inducements to this type of development are contained in the overall package that the Government have announced.

With the reintroduction of a small woods scheme, basis III will be closed to the entry of areas of less than 10 hectares. It is expected that owners already in basis III with woodlands below this minimum will want to transfer to the small woods scheme with its simpler arrangements and higher planting grants. Any who wish to continue in dedication may do so, however, with the benefit of the revised planting grants, but they will not be eligible for the new management grant.

The final element in this package of grant changes relates specifically to Scotland. In its own habitat the native Caledonian Pine is as significant, both as a timber producer and in environmental terms, as are broadleaves in lowland Britain, and we have decided that approved planting of Caledonian Pine of local origin in special areas to be agreed with the Nature Conservancy Council should in future attract the same planting and management grants as broadleaves under basis III.

The Government have often declared their wish to see private forestry making its full contribution alongside the Forestry Commission, not least as the provider of a valuable renewable resource of importance to the economy. We hope that the new measures will lead to an increase in planting levels in the private sector.

It is our belief that the interlocking needs of forestry and agriculture, the provision of employment in rural areas and the environmental considerations on which our modern society places great importance can and, indeed, must b2 reconciled. Indeed, I would support the hon. Gentleman in the general tenor of much of his observations—not in relation to the private sector alone, I trust, but in relation to forestry as a whole.

I am glad that the hon. Gentleman cited the figures showing how for forestry the value added leaps up enormously as soon as a tree has been felled. I have occasionally cited not too dissimilar figures in the past. It still surprises many people just how little value a tree has after all its years of growing compared to the value that it acquires as soon as it gets to the sawmill.

The measures we have announced are aimed at providing a financial framework which will reconcile these needs within the overall objective of establishing and maintaining a reasonable level of home timber production. It is our hope that these measures will restore confidence in the industry generally and provide a sound basis on which the forestry industry can operate for many years to come.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes past Ten o'clock.