Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Supplementary Memorandum submitted by the Chief Executive, National Forest Company

  Thank you for your letter to our Chairman, Viv Astling, dated 5 December. He has asked me to reply and to say how much we welcomed the opportunity to give evidence to the Committee.

  On the specific issue of capital grants received from Government, covered in Note 5, on page 32 of our Annual Report 2001, I hope that the following details are helpful.

  The figure of (£189,143) against Government grants—capital, comprises £85,143 depreciation chargeable in the current year against capital items acquired in earlier years and a further £104,000 charge against capital ie write-off upon revaluation of land purchased and subsequently disposed of, in part. It is this latter item that I believe was of particular concern to the Committee.

  In the specific case in the Accounts in question, a 27 hectare site, in two discrete parts, had been bought by the National Forest Company (NFC) for the sum of £140,000 in September 1999. Subsequently, the 15 hectare part of the site, now converted to woodland, was sold on for community purposes, for the sum of £20,000. The loss on the disposal of this part of the site was £57,778 (£3,851 per hectare). The remainder of the site had then to be re-valued to a figure of £16,000, incurring a further loss of £46,222. These "losses" total the £104,000 charge against capital included in the overall figure of (£189,143).

  The majority of land conversion to Forest uses is achieved through the Tender Scheme, land restoration following mineral extraction, partnership activity and through planting associated with new built development. Land acquisition whether by partner bodies, by means of grant from The National Forest Company (NFC), or by the Company itself plays a relatively minor role. It is not the intention that the NFC should become either a major landowner in the area or a long-term holder of land. Under the terms of the Company's agreed Land Acquisition Policy, it is obliged to specify an exit strategy for such acquisitions as it does undertake.

  Unless it is achieved through planning obligations, land conversion to Forest uses incurs a cost to the Company. This can, in part, often be offset by external funding, whether that be from other public, challenge fund, sources, from Landfill Tax Credits or from private sponsorship or donation.

  It is not within the Company's remit or powers to be opportunistic, in commercial development terms, in its acquisitions. The change of use to forest purposes, whether that is for tree-planting or nature conservation, usually incurs a devaluation in the capital value of the land. Such devaluation can be almost immediate, if the land in question is sold on, or it can be written off over a period. An example of the latter instance is the arrangement with Forest Enterprise (FE) whereby the Company, with FE assistance, purchases land with a leasehold offered to FE for a given period with the sale of the freehold to FE, at a nominal sum, following in a specified number of years.

  I hope that this explanation answers the questions raised but should any further information or background be required, please do not hesitate to contact me.

12 December 2001

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