HL Deb 14 March 2000 vol 610 cc1526-30

8.10 p.m.

Baroness Hayman rose to move, That the draft order laid before the House on 22nd February be approved [12th Report from the Joint Committee].

The noble Baroness said: My Lords, the order is designed to correct a technical point that has arisen on the funding of forestry in England and Wales. The background lies in the devolution legislation for forestry. The forestry commissioners have been designated a cross-border public authority and will continue to exercise their functions throughout Great Britain. However, since forestry is devolved, the commissioners are now subject to separate direction by Scottish Ministers, the National Assembly for Wales and the Minister of Agriculture, Fisheries and Food. In making the necessary legislation to implement the settlement, we unwittingly created difficulties in respect of finances for England and Wales.

In June last year, Parliament agreed an order adapting the functions of cross-border public authorities. Among other things, the Scotland Act 1998 (Cross Border Public Authorities) (Adaptation of Functions etc) Order 1999 amended certain functions relevant to the forestry commissioners to ensure that, for their activities as regards Scotland, they were accountable to Scottish Ministers and therefore to the Scottish Parliament while remaining accountable to this Parliament for their activities as regards England.

The 1999 order also abolished the forestry fund, which had been made redundant by more modern accounting legislation. In doing so, it replicated those funding and accounting arrangements for public bodies whereby receipts are paid into the Consolidated Fund. In other words, the funding provision was for a gross regime. That was an oversight running counter to the agreed intention that the commission should continue to be net funded. Provision therefore needs to be made for net funding.

In Scotland, that will be done in 1999–2000 by reference to the Scotland Act 1998 (Transitory and Transitional Provisions) (Finance) Order 1999 and thereafter under each year's Budget Act. That is reflected in Article 3 of the present order and in the new subsection (10) of Section 41 of the Forestry Act 1967 as inserted by paragraph 5(5) of the schedule to the present order. For England and Wales, the net funding regime is set out in the present order.

The key provision is paragraph 5(5) which introduces to the Forestry Act 1967 a new subsection (6) of Section 41 allowing commissioners to retain timber and other receipts for the purposes of defraying forestry expenditure. New subsection (8) of Section 41 allows Ministers, with the approval of the Treasury, to direct that some or all of those receipts should go direct to the Consolidated Fund. While it is our intention to continue at present with a net regime, the latter subsection would allow for the possibility at a later stage of funding on a gross basis.

The devolution settlement on forestry provided for the commissioners' activities as regards England, Scotland and Wales to be funded respectively by Westminster, the Scottish Parliament and the National Assembly—with provision for some activities to be funded on a Great Britain-wide basis by Westminster. In most areas, it is clear how expenditure should be allocated between the different sources of funding. In areas where it is less clear, the order provides a mechanism for forestry Ministers to reach agreement on the appropriate split. I expect the split to be set out in a forestry concordat. We hope to be able to publish soon the text of that concordat, which we shall of course make available to the House.

The principal changes in this order are to the Forestry Act 1967. There are, however, a number of other Acts under which commissioners have powers. The order therefore makes consequential changes to those Acts.

The order, which has been approved by the Scottish Parliament, will allow us to put right an anomaly in the devolution legislation and I commend it to the House. I beg to move.

8.15 p.m.

Lord Mackay of Ardbrecknish

My Lords, I am grateful to the Minister for her clear explanation of a complicated issue. When I heard the words from her lips that the Government had "unwittingly created difficulties", I chortled inwardly—maybe even outwardly. A number of us expressed concern about the division of the Forestry Commission, which many of us believe has an important role in the countryside—increasingly so, given the problems in agriculture.

I look forward to the concordat that is to be published soon. The commission will be a difficult operation to split. Timber often moves across borders, being produced in one country and used in another—one of the severe difficulties we have. The noble Baroness may be able to confirm that the Government have set their face against further conifer planting in England. We hope that plants in England that require conifers will still be able to produce their products and provide employment. If my understanding of government policy in England is correct, in next to no time the industries requiring conifer timber will become more and more dependent on Scottish production. Scotland also has industries using conifers. I hope that that will not be a problem in future, arising from the convergent policies of the Forestry Commission—forced on it by the Westminster Government and the Scottish Executive, albeit that the latter are pursuing a much wiser policy.

I am not entirely sure what the Government are doing in Wales. While the Forestry Commission is to be responsible to the Welsh Assembly, there is not much mention of the English-Welsh split in the order. Perhaps I am missing something.

Have there been any difficulties to date, apart from that highlighted in the order, as a consequence of splitting the Forestry Commission between the three component parts of the United Kingdom? The proposed subsection (10)(a) of Section 41 of the 1967 Act states: Subject to any provision made by or under an Act of the Scottish Parliament for the disposal of or accounting for sums received, there shall be paid into the Scottish Consolidated Fund". and so on. I have no problem with that. It largely replicates a measure that already exists. But what is envisaged by giving the Scottish Parliament the power to do it any other way? What other way would there be? Is there some intention that it might go like that? Or are those the words in the principal Act under which the Forestry Commission operated before devolution?

In general, anything that can help the Forestry Commission to operate effectively and efficiently in its role as an industry and as a grant-giving body is to be welcomed.

Baroness Linklater of Butterstone

My Lords, we on these Benches welcome the order and have no particular points to make. We look forward to the detail of the concordat but we are happy with what is a technical measure in this case.

Lord Hylton

My Lords, this is one of the rare occasions when I find myself in agreement with the noble Lord, Lord Mackay of Ardbrecknish—particularly in respect of his remarks about conifers in England. I invite the Minister, when she has time, to visit Thetford Chase on the Suffolk-Norfolk border, or upland areas in the hills and mountains of England and Wales, which are only capable of growing species such as lodgepole pine because they are the only ones that will grow and yield a return. The reason is that those are very exposed areas.

The order provides that the Minister may direct that money from timber sales shall be paid not for forestry purposes but directly into the Consolidated Fund. Does that mean that the Treasury has identified a new source of earnings? Can the Minister confirm or deny that the Treasury has set a figure on the amount of cash that it expects to receive each year from Forest Enterprise in England, Wales and Scotland? Will the Minister tell your Lordships whether such financial targets or expectations have the effect of making Forest Enterprise a weak seller of large volumes of roundwood, notably small softwood thinnings?

Here I declare a direct financial interest as the owner of a small woodland in Somerset, containing Norway spruce. My approved plan requires annual thinnings of spruce. In the past two years I have been unable to sell such standing crops at remunerative prices, contrary to what used to be possible. I have corresponded on the matter with the director of Forest Enterprise. I was assured that the nation's forests are managed on the best cultural principles and that thinnings are carried out to avoid wind-blow and to maximise the total return from the crop. I do not doubt that that is the general theory. However, in deciding an acceptable price for forest output, what consideration is given to the impact of a given price level on private forest owners, none of whom can compete with the Forestry Commission in size or volumes available? What thought is given to the strength of the pound, which allows industrial users of timber to buy from abroad at very favourable prices?

It is common knowledge that the Baltic states, and perhaps Russia also, are very short of foreign currency. Their understandable reaction is to cut their forests and export as much as they possibly can. I therefore ask: is it not the duty of the Forestry Commission to reduce its production when it knows that imports are flooding into this country? Will Forest Enterprise reconsider its sales and price policies and consistently act as a responsible market leader, considering the needs of all UK forest producers?

I gave notice to the Minister that I should raise these points and I shall be grateful, therefore, for an answer tonight.

Baroness Hayman

My Lords, I shall do my best to answer the questions raised by noble Lords. Perhaps I may reassure the noble Lord, Lord Hylton, that he does not need to invite me to Thetford Chase. I was walking there on Sunday, and enjoyed it very much. I do so as often as I can, when I can get away from here.

I appreciate his point about conifers. We have not set our face against conifer planting. We have said that we would not expect to see any forests that were entirely conifer, but some broad-leaved trees in every forest. Conifers are clearly important for revenue earning in rural areas, as the noble Lord suggested.

I deal, first, with the issues raised by the noble Lord, Lord Hylton. I am grateful to him for having given notice of them. He raised the wider issue of the strength of sterling, and the impact that that has on many of our industries, and in particular imports. The order will not in any way resolve all the sector's financial difficulties. We are considering separately how to respond to the serious fall in timber prices. The order will tidy up a loose end making it clear that income generated by the Forestry Commission can be reinvested in the delivery of public benefits in the forests of England and Wales.

The noble Lord asked whether the order allows transfers to the Consolidated Fund. Yes, it will. Paragraph 5(8) of the schedule provides for such transfers if Ministers so direct, and similar provisions will be made for the Scottish Consolidated Fund, about which the noble Lord, Lord Mackay of Ardbrecknish, asked.

As regards there being too much pressure by the Treasury to generate funds, we believe that it is right that the Forestry Commission should be charged with ensuring that taxpayers receive a good return on their investment in public forests. It is also charged with delivering other benefits, such as encouraging wildlife and providing recreation for the public. We believe that it has the balance right; and, perhaps more importantly, independent auditors have just certified all the Forestry Commission's forests as complying with the highest standards of sustainable management. That feeds into the thinning issue, to which the noble Lord referred. It is standard silva cultural practice, designed not only to benefit from the important small roundwood market such as paper but also to ensure good quality mature trees in years to come. It is entirely proper that Forest Enterprise should continue with this practice. Indeed, it would be failing in its duty if it did not. I reiterate what the noble Lord was told. All our forests are certified as sustainably managed. That gives them a marketing advantage although, of course, that advantage takes place currently in the context of an international market which is in some ways disadvantaged.

Those were the main issues raised. The noble Lord, Lord Mackay of Ardbrecknish, asked whether payments into the Scottish Consolidated Fund mirrored provisions in the Forestry Act. With the noble Lord's agreement, I prefer to write to him on that point.

On the basis of those answers, and with thanks for its general welcome, I commend the order to the House.

On Question, Motion agreed to.