HC Deb 13 July 1976 vol 915 cc424-34

In Schedule 9 to the Finance Act 1975, in paragraph 6(2)(b) (expenses allowable under the Schedule to include those incurred in replanting within three years of a disposal) after the word "disposal" there shall be inserted the words "(or such longer time as the Board may allow)".—[Mr. Denzil Davies.]

Brought up, and read the First time.

Mr. Denzil Davies

I beg to move, That the clause be read a Second time.

The new clause gives a small relief in the case of woodlands. Perhaps I might first say something about forestry and capital transfer tax. We have not been able to meet some of the amendments tabled in Committee, and it is only fair to say something about why one or two of them are not down on Report.

In Committee, my right hon. Friend the Chief Secretary explained that he was involved in discussions on various amendments about whether relief from capital transfer tax should be restricted to woodlands that were under dedication schemes. My hon. Friend the Member for Aldridge-Brownhills (Mr. Edge) mentioned this point and my right hon. Friend said that he wanted to look at the problem of broad-leaf woodlands.

I think that there is general recognition that the arguments on dedication are finely balanced, given the legitimate differences of view which have been expressed. It has not therefore been possible to reach agreement about dedication in time to do anything in this year's Finance Bill. That is why there is no amendment down at this stage.

As well as the dedication point, some concern has been expressed—

Mr. Peter Rees (Dover and Deal)

There was considerable debate in Committee about whether small woodlands which were not eligible for dedication should rank for relief. Is the Minister now saying that he hopes at some time to bring forward a new clause affording relief to those woodlands?

Mr. Davies

Perhaps the hon. and learned Member will wait a few minutes, and I shall try to deal with these points generally.

Besides the dedication problem, especially the one that the hon. and learned Member has just mentioned, there has been some discussion over the last few years about the effect of taxation in general, and CTT in particular, on woodlands and woodland owners. Concern has been expressed in some quarters about the level of tree planting. There are considerable reliefs, grants and benefits for woodland owners, and it is by no means clear that the fall in planting which has taken place has been the result of fiscal legislation. There are many factors to be taken into account.

However, I recognise the concern and I have decided to set up an interdepartmental review of the whole question of how forestry is affected by Government policies on taxation, grants and amenities. The dedication issue would be among the matters covered. The point raised by the hon. and learned Member for Dover and Deal (Mr. Rees) will be covered in this review as well. The intention is that the review group will be able to report in time for any further tax measures, if necessary, to be implemented in next year's Finance Bill. It will be able to take evidence from organisations concerned with forestry, on both the employers' side and the 'employees' side.

I hope the House will recognise that we appreciate that the situation of woodlands has changed over the last few years. We wish to set up the group in good faith to see how forestry is affected by a whole range of Government policies —not only taxation in itself, although that will come into it.

The new clause amends Schedule 9 to the Finance Act 1975 so as to give the Board of Inland Revenue discretion to extend the period of three years in which the expenses of replanting can be set against the value at disposal of trees in respect of which there has been an election for deferment of CTT liability.

The Forestry Committee of Great Britain and the Forestry Commission have said that it can take up to seven years to get planning approval, for example, from a local authority for a replanting scheme. Under paragraph 6 of Schedule 7 to the 1975 Finance Act, expenses incurred more than three years after disposal would be allowed on the occasion of the next disposal, but that could involve a long wait for the owner who gets relief —for example, until the new trees come to maturity when woodlands have been felled.

In these circumstances, we think that we should extend the replanting expenses relief after three years in those cases in which there are circumstances outside the control of the planter which make it impossible for him to replant within three years—planning restrictions, for example.

I recommend the new clause to the House.

Mr. John Nott (St. Ives)

We are naturally grateful for this minor concession on planting relief. This is probably not the appropriate moment for a full debate on woodlands, so I shall say only that we welcome this concession as far as it goes.

However, we are in some difficulty when, entirely without warning—this is no criticism of the Minister of State—the hon. Gentleman makes a welcome statement on a vast and complicated subject. It would have helped if one of my hon. Friends had been advised that this statement would be made. We should then naturally have made some response to it.

Off the cuff, I would say that an inter. departmental review sounds a good idea, We welcome it, and I hope that I am not carping if I say that we do not understand why it comes only at this late stage. My hon. Friends debated the effect of capital transfer tax on woodlands at great length when the tax was introduced more than a year ago. I am unclear why the review was not set up before the tax was designed or, if that was not possible, why a review of the impact of taxation and other things on forestry could not have been conducted during the last year.

I recognise why the Government have to keep saying that CTT is not the villain which has caused the stopping of planting. We all know that planting has come to a stop largely because of uncertainties surrounding CTT. The woodlands interests have made this plain in endless representations to the Government over over the last two years.

Neverthless, we accept that this is a very complicated matter. I am glad that there is to be a review. We hope that out of it will come further assistance to woodlands. As was said in Committee, we very much agree with the hon. Member for Aldridge-Brownhills (Mr. Edge) in his comments on broad-leaf woodlands and hedgerows, the need to encourage small woodlands and their planting for amenity and other reasons. There is a completely bipartisan feeling on both sides of the House that anything we can do to encaurage the planting and preservation of hedgerows and trees is to be welcomed. We shall therefore look forward to the Government next year putting down firm proposals to encourage this side of the environment. We only regret that this has not been done sooner.

Mr. George Thompson (Galloway)

Before the Budget this year, I wrote to the Chancellor of the Exchequer on behalf of my constituents asking him to bear in mind the problems of agriculture and forestry in relation to capital transfer tax. I received a charming letter from the Minister of State assuring me that these things would be borne in mind. Since we were coming near to a Budget, I am quite sure he knew that there would be concessions on agriculture, but when the final announcements were made forestry had been left out.

I raised the question of the worry and concern over private forestry which was felt in Scotland during Question Time in the House on 30th June. I asked the Secretary of State: whether he will introduce measures to encourage the restoration of private sector tree planting to the level reached in 1973–74. The Under-Secretary of State for Scotland replied: The Government have noted the drop in private sector planting but are not convinced of the need for any new measures at present, although we are keeping a close watch on the situation."—[Official Report, 30th June 1976; Vol. 914, c. 371–2] I am glad to see from the new clause we are now discussing that the Government have decided that further measures are desirable, and the Minister has now announced the setting up of an interdepartmental group to review all the problems of forestry. I am glad to know that the Treasury has responded to the spirit of my Question, if rather belatedly, because the decline in planting in the private sector will not readily be made up until things are stabilised once more.

It is also very grudging, because the Minister himself has acknowledged that this is only a very small concession. Obviously, however, we must welcome any concessions at all. I am still convinced that the Treasury as a whole does not understand forestry—at least, forestry in the way we practise it in Scotland, where we regard it as a national form of land use and not simply as a pleasant background to our landscape or a place for recreation, as apparently is the case in the South of England.

Sometimes I wonder whether the Government as a whole do not care too little about forestry. We are still waiting for them to appoint a chairman to the Forestry Commission, although the previous chairman has now departed from office. That seems incredible for an organisation the size of the Forestry Commission. I do not know whether Treasury Ministers will have been authorised to make another statement on that subject, since it is apparently a Treasury Minister and not one of the Ministers responsible for forestry who has had to announce the setting up of the interdepartmental group.

I agree with the hon. Member for St. Ives (Mr. Nott) that this should have been done before capital transfer tax was applied to forestry in the way that it was rather than try to make the group act as an apologist for it, because it was a disgraceful tax in the sense that many who should have paid it never did. As a concept, capital transfer tax is a valuable improvement. I very much hope, however, that the interdepartmental group will review all these matters, and on behalf of my party I welcome the new clause.

6.15 p.m.

Mr. Norman Buchan (Renfrewshire, West)

I agree with the hon. Gentleman who suggested that this was not an opportunity for a general discussion on forestry, but some things should be said. /t is clear that the fall-back has been due to the change from the extremely beneficial tax rates which had prevailed before 1973. It was the shock of that change rather than any uncertainty about the capital transfer tax that caused the fall-back in private planting. I welcome this provision, though I have doubts about the future of private planting. I am glad that this concession has been made to apply for such longer period as the board allows.

May I question the criteria to be applied? It is an extremely open door, and it would be useful to know the criteria, the kind of problems, the timing, whether this is to be linked with planning permission delays, and so on. It would be useful to have that spelt out, because I would oppose a completely open door with regard to the time available for this tax. It will be useful to have that information in detail before the clause is accepted.

The hon. Member for Galloway (Mr. Thompson) has said he hoped that the interdepartmental group would explore all the aspects of forestry, but will it do so? I noted that my hon. Friend the Minister linked this subject precisely to taxation. If it is to go wider, I hope that there will be a cost-benefit analysis of public expenditure for public planting, because we require to see forestry as a future major industry, particularly in Scotland, and this can be carried out only by public expenditure and Forestry Commission planting. That should be the future approach rather than any tax changes to try to encourage the private forester.

In the past we have lost much good land which has been available to the private forester and also to the Forestry Commission. We can get infinitely better land use with a planned programme which requires public control and public expenditure under Forestry Commission supervision. if the points on cost-benefit analysis and the relationship with tax loss as opposed to public expenditure can be looked at, I welcome this proposal.

My hon. Friend the Minister spoke of evidence being produced by employers and employees, presumably by the private landlord, the private forester and workers in the industry, but the matter goes a good deal wider. A number of industries are involved, and I hope the review group will be dealing with aspects other than those narrowly concerned with the precise aspect of planting and the workers involved in it.

Mr. Hector Monro (Dumfries)

I wish to make one or two comments on the Minister's statement and particularly to urge upon him the importance of speed. I hope he realises—as I believe he will from debates we have had on capital transfer tax since it was introduced two years ago and the very critical reception that it had in the House—that it was extremely unpopular in the world of private woodland ownership. There is no doubt that the lack of confidence that prevailed with the introduction of capital transfer tax has continued, and the changes that may come from the inquiry which the Treasury has instigated can only be welcomed if there is further mitigation of the present taxation system.

In view of the fact that in the last two years plantings have dropped as dramatically as something of the order of 50 per cent., speed is the essence of the message I am now giving the Minister. If he can bring forward proposals by the time of the next Finance Bill, at least something will be salvaged from a very desperate situation. I hope he will ask those whom he appoints to inquire into the taxation system to report certainly by the end of the year and then to have consultations with forestry interests, so that the very best advice can be obtained.

I disagree with the hon. Member for Renfrewshire, West (Mr. Buchan) that all future financing should be towards a State forestry system. I make no criticism of the Forestry Commission. It is doing an excellent job, particularly in the sectors of recreation and tourism. For it to produce timber, however, to make any dramatic impact on our balance of payments at present or in 20, 30 or even 50 years' time is obviously impossible. We must have a combination of the private and public sectors in the timber industry for generations to come.

I welcome this modest concession and hope that the Minister will get his inquiry moving quickly.

Mr. Peter Rees

In rising to give a guarded welcome to the Minister of State's announcement, I should declare a small personal interest in that I plant trees, not in Scotland but in Wales.

The hon. Member for Renfrewshire, West (Mr. Buchan) seems to think that forestry can be undertaken solely by the Forestry Commission. I should counsel him to study the replies by representatives of the Forestry Commission to questions put to them by the Select Committee on a Wealth Tax. They made it clear that the commission was not equipped, ready or willing to undertake the whole range of forest planting which the country needs. Therefore, there is a definite place—I hope that there will continue to be a definite place—for private planting in the scheme of things in this country. On that basis, I give a guarded welcome to the Minister's announcement.

I hope that the Minister will not think me churlish in saying that it was a pity that the interdepartmental group was not set up before the introduction of capital transfer tax. I hope that the group's attention will be drawn to the recent article by Lord Taylor in The Times. It must be a matter of speculation why a person does not plant in any given year. However, it would be flying in the face of all the indications and evidence to suppose that capital transfer tax has not made some impact.

Forestry, by its nature, is an industry, if one must call it an industry, in which a person must take a long view. The chops and changes of Government policy are calculated to discourage people from committing their limited resources in this area. Therefore, I hope that the interdepartmental group will report quickly.

I associate myself with the remarks made by my hon. Friend the Member for Dumfries (Mr. Monro). Private forestry interests require a definite long-term commitment from the Government to the welfare of both public and private forestry. I hope that that is the sentiment that underlies the statement made by the Minister of State. This is another example of the Government having legislated first and thought afterwards. So be it. Let us hope that their second thoughts will provide some reassurance for forestry interests.

Mr. Robert Cooke (Bristol, West)

I am sure that we should do everything possible to restore the confidence of the private owner. We should do nothing to prevent private owners planting broad- leaf trees. I hope that the inquiry will have among its members representatives of the Historic Buildings Councils, because trees are of prime importance in relation to historic buildings.

No one has so far mentioned the felling of broad-leaf trees on a scale to pay taxes. Hard-pressed private owners are felling more than we would like them to fell. I hope that the Government will address themselves to that point. Excessive felling will leave scars on the landscape which will not be made good until long after members of the Government—and, for that matter, all of us—are dead.

Sir John Gilmour (Fife, East)

I should like to add to what some of my hon. Friends have said about the need for the inter-departmental group to speed up its work.

My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) mentioned that the evidence given by representatives of the Forestry Commission showed that the commission could not undertake the necessary amount of planting. One thing which is becoming certain is that the single biggest bill that we shall have to face over the next few years is for timber and timber products. Therefore, it is essential that we speed up the maximum potential rate of private planting. We cannot afford to allow planting not to take place in view of the extreme pressure on our balance of payments occasioned by the import of timber and timber products.

Mr. Denzil Davies

I should like to reply briefly to some of the points that have been made.

First, I apologise to the hon. Member for St. Ives (Mr. Nott) for not informing him about the setting up of the interdepartmental review. It is entirely my fault. However, I note that the hon. Gentleman welcomed the setting up of the review, albeit uncharacteristically churlishly coming from him. Despite that, however, I note that he welcomed the review.

My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) raised a number of matters. First, he asked whether there were any limits to the Inland Revenue's discretion. I assure him that there are limits if the circumstances are completely outside the control of the planter. The kind of example we are looking at is where planning permission has been delayed longer than three years. It is not meant to be an open-ended discretion. The circumstances must be outside the control of the person seeking the benefit of the exemption.

My hon. Friend asked whether the review would be confined to the taxation aspect. I tried to make clear in my opening remarks that it would not be confined to taxation. It will examine the whole range of Government policies relating to forestry. Taxation will be part of it. My hon. Friend will know better than I that the Government give considerable assistance in the tax system and otherwise to forestry. The Committee will consider the whole range of Government policies relating to forestry. I take the point that the review should be completed as quickly as possible. I do not want to prejudge the inquiry, but I take the point that we should try to complete it as soon as possible and that any recommendations should be incorporated in legislation without delay.

I think that I have dealt with most of the points that were made. This interdepartmental inquiry will be chaired by the Treasury. but other Departments are involved. The Department of the Environment will be involved and it will no doubt consult the Historic Buildings Council.

Mr. Robert Cooke

Will not the inquiry contain representatives of the Historic Buildings Council?

Mr. Davies

There will no doubt be consultation with the Hostoric Buildings Council. I was asked whether other organisations could be brought in. They will also be considered. This is an attempt by the Government to show that we are committed to forestry and that we consider it to be extremely important. We want to look at this matter again in the light of what has happened during the last few years. I hope that the House will accept the review as an earnest of our commitment.

Dr. Alan Glyn (Windsor and Maidenhead)

The Minister has explained about the review. Will he tell us whether it will include representatives of the Forestry Commission and of private ownership and what are the relative pro- portions of ownership between the two? Does he agree that there should be a good forestry industry and that there is a place within that industry for both private and public ownership?

Mr. Davies

The Government give considerable assistance to both the private and the public sectors of the forestry industry. The review will look at Government policies in both areas to see how they impinge upon them.

I have tried to answer all the points that were made. I hope that the House will now accept the new clause, which is a minor but important extension.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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