Woodlands Management: Incentives (Hansard, 3 May 1994)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley)
My Lords, there are no plans to introduce such tax incentives. Since commercial woodlands were wholly removed from taxation in 1988, it would not be appropriate to introduce such incentives in isolation.

§ Lord Astor of Hever
My Lords, I thank my noble friend for that reply. Is he aware of the CLA survey which shows that 40 per cent. of woodland faces reduced management or complete abandonment since the 1988 tax changes? Can he confirm that the forestry review group has recommended tax incentives, with appropriate safeguards against abuse, to encourage woodland management?

§ Lord Henley
My Lords, I am aware of the CLA report. It showed that some 63 per cent. of the woodland surveyed was in active management, some 16 per cent. was unmanaged and, therefore, presumably some 21 per cent. was partially managed. Obviously, if those figures are correct they are somewhat worrying. That is why we set up the forestry review, which Ministers are now considering, to look at, among other things, current incentives for forestry. I should stress that there are already grants for management of forestry, but the forestry review will look at whether the grant regime provides appropriate incentives. Its remit does not include reviewing the tax position.

§ Lord Rees
My Lords, will my noble friend admit that forestry is not entirely removed from taxation as certain forestry operations are subject to VAT? Against 1004 that background will he explain why, of all commercial operations in this country, forestry should have inflicted on it a tax regime which denies any relief fin losses?

§ Lord Henley
My Lords, my noble friend is right to mention VAT. Forestry was removed from mainstream taxation in 1988. I can inform the House that that is the only time that abolishing a tax has produced a net saving for the Treasury—a saving of some £10 million. The previous tax regime produced anomalies. Forestry was seen as something of a tax haven. That is why it was taken out of the tax net. I can inform my noble friend that there are no plans to introduce tax incentives. We believe that grants are a better way of providing the relief: they are available to everyone, irrespective of income.

§ Lord Eatwell
My Lords, how do the Government believe that the level of investment in forestry should be determined? Would they rather it was left to the market? Do they have any view at all? If left to the market, should that investment be entirely free of artificial incentives and subsidies?

§ Lord Henley
My Lords, we believe in encouraging forestry. We have a system of grants to encourage forestry, which is not so very different from other investments, because of the very long-term nature of investment in forestry. As I tried to make clear, we do not believe that tax incentives are the right way forward; we believe that grants probably are. That is also why we are reviewing the current regime of grants. That is one purpose of the forestry review.

§ Viscount Mountgarret
My Lords, is my noble friend aware that the system of grants is entirely arbitrary and that some forests are considerably more expensive to plant and nurture than others? Is he aware that a good deal of anxiety was expressed about the: subject in 1988? Does he agree that those in the forestry business would much prefer to see it back in the tax bracket?

§ Lord Henley
My Lords, the point I am trying to make is that we believe that tax incentives are much blunter instruments than grants. My noble friend implies that grants are also too blunt an instrument. I stress to my noble friend that there are different levels of grant according to the type of wood being planted and the size of the individual wood.

§ Lord Barnett
My Lords, is the Minister saying that the Government are opposed to tax incentives generally?

§ Lord Henley
My Lords, it would be wrong for me to deal with the question of tax incentives generally. I am saying that in this particular case they had a distorting effect and that it was therefore right to remove them.

§ Lord Gisborough
My Lords, is my noble friend satisfied that there will be adequate grants during the later stages of the growing of forestry, in particular hardwoods? Is he aware that without management those hardwoods are useless?

§ Lord Henley
My Lords, I can inform my noble friend that there are different levels of grant according to whether the wood being planted is coniferous or broad-leaved. There are also management grants. Those management grants differ according to whether it is a coniferous or broad-leaved plantation. The grants for broad-leaved plantations are considerably higher than those for coniferous plantations.

§ Lady Saltoun of Abernethy
My Lords, will the Minister say what percentage of our timber requirements we import at present? What are the prospects of our being able to continue to import that percentage at a price we can afford?

§ Lord Henley
My Lords, I cannot give the noble Lady exact details of the amount of timber we import. However, I can assure her that we import a great deal. That is one of the reasons why we should like to see a great deal more timber planted. It is one of the reasons why we provide grants to the private sector, and some £95 million to the Forestry Commission to encourage planting.

Lord Bruce of Donington
My Lords, if the Government have it in mind to give grants, aid or tax relief to such projects, are they aware that there are many more deserving millions in the country who do not own forests and thousands who have never even seen one?

§ Lord Henley
My Lords, forests are open for everyone to see. We provide some £95 million to the Forestry Commission to encourage planting. I believe that most people will agree that there is much to be said for planting trees, and for planting a great many more trees.

§ Lord Mackie of Benshie
My Lords, will the Minister assure the House that some consistency will enter into the policy for forestry? Is he aware that the Government's changes of policy have destroyed millions of young trees and created a complete mess? From now on perhaps forestry growers and would-be forestry growers may know exactly what is to happen.

§ Lord Henley
My Lords, I was not aware of any inconsistency in our policies. I am seeking to make clear that the forestry review group has now reported to Ministers. Ministers will consider its views and come to conclusions in due course. There will obviously be considerable consultation with parties concerned before they come to any conclusions.

§ Lord Moore of Wolvercote
My Lords, does the Minister agree that there are still considerable areas of woodland in south-east England which are badly in need of clearance six and a half years after the hurricane of 1987? It would be helpful if some assistance could be given to landowners, particularly of small areas, to achieve that badly needed clearance.

§ Lord Henley
My Lords, I cannot deal with the precise point that the noble Lord raises. I can say that 1006 there are grants both for new planting and for restocking. There are also grants available for the management of existing woodland.