House of Commons - The National Forest - Environment, Food and Rural Affairs Committee

The National Forest - Environment, Food and Rural Affairs Committee Contents

2 Growing The National Forest

The origins of The National Forest

5. The concept of a National Forest was first developed by the Countryside Commission in 1987. Its aim was to develop some 40,000 hectares (over 150 square miles) in the English Midlands in order to provide a "recreational and tourism resource, a means of reducing over-supply of agricultural land, enhancing landscape and wildlife interests and, in due course, contributing to the national timber supply".[2] The area finally selected (see map 1 below) was chosen from a short-list of locations which included the Forest of Arden, Rockingham Forest, Sherwood Forest and the Wyre Forest/Severn Valley. Each area was assessed against a range of criteria including existing woodland distribution; opportunities for public access to the countryside; as well as its potential and actual economic activity.[3] The Needwood—Charnwood area was chosen as, not only was there widespread local support, but, in the Countryside Commission's view, it also offered the greatest opportunity for environmental improvement. In addition the area was characterised by significant economic and social hardship and was readily accessible to a large population.[4]Map 1 - The National Forest

Source: The National Forest Company Annual Report and Accounts 2008-09, HC 797, July 2009, pp 20-21

6. To deliver The National Forest project, in April 1995 Defra established the National Forest Company (NFC) as a Non Departmental Public Body and a company limited by guarantee.[5] The NFC's role has been described as that of "catalyst and enabler" for the implementation of the National Forest's strategy.[6] The rationale for adopting this unique model for delivering forestry objectives was that no public or private body at the time was considered to have the necessary remit or powers to embrace the project's wide range of functions and interests.[7]

Progress in new forest creation

7. Currently around 9% of England has woodland cover, equal to 1 million hectares, containing approximately 1.3 billion trees,[8] (see graph 1 below). Graph 1: The woodland resource in the UK

Source: UK trees and forests, POSTnote 275, Parliamentary Office of Science and Technology, January 2007.

8. In comparison, at The National Forest's inception in 1995, only some 6% of its area was wooded. A key objective for the forest was ultimately to increase woodland cover to around a third of its area. Over the past 15 years tree coverage has been trebled to 18%.[9] The project, while covering just 1% of land in England, has delivered 10% of the nation's new woodland creation over that period.[10] The National Forest's expansion has been achieved through a combination of direct acquisition of land by the NFC for tree planting, and the provision of grant schemes to incentivise landowners to plant trees on their own land.

9. The rate of new forest creation has levelled off in recent years, from a peak of 413 hectares in 2005-06 to only 121 hectares in 2008-09.[11] The Forestry Commission told us that while there had been a "slowing of the trajectory" the project was nonetheless still "making progress".[12] The strategy for The National Forest 2004-14 assumed new forest would be created at a rate of 400-500 hectares a year.[13] In 2009 the NFC halved this target to 200-250 hectares per year—equivalent to increasing woodland within the forest by 0.5% annually.[14] At that pace, it will take around a further quarter of a century to reach The National Forest's target of around a third woodland coverage.

10. The NFC considered forest creation to have been "the single most challenging aspect" of its operations in 2008-09,[15] and it was therefore now seeking to balance "opportunistic" forest creation with a more "selective focus",[16] concentrating on connecting woodland areas and providing green infrastructure alongside new housing areas.[17] NFC board member, Robin Pellew, said that the "hiatus" in creation had been partly due to economic factors, including high agricultural land and commodity prices, and partly due to the bedding down of the new grant scheme—the Changing Landscapes Scheme (CLS). We describe this scheme in the next section. However, he considered that forest creation would regain momentum to around 200-250 hectares a year.[18] Huw Irranca-Davies MP, Parliamentary Under-Secretary of State, Marine and Natural Environment, said that the project's long-term focus would enable it to over-ride fluctuations in land and agricultural prices over time.[19]

11. The NFC told us that it recognised that, at 18% woodland cover, there was still a long way to go to achieve a "coherent, forested landscape and maximise its benefits", and that continued government funding would be "essential" to enable it to reach its 200-250 hectare target for new forest creation each year.[20]

12. Despite recent challenges and the consequent relatively slow pace of planting, steady progress is being made in creating new woodland within The National Forest. It is essential that Defra continues to give the project sufficient financial support to enable the creation of at least 200 hectares a year of new woodland so that progress towards the target of around a third woodland cover is maintained and woodland corridors linking different sections of the Forest can be developed.

Incentivising tree planting

GRANT SCHEMES

13. Nearly two-thirds of new forest creation to date has been achieved by providing incentives for land owners to plant trees.[21] Currently the main grant schemes supporting new forest creation within The National Forest are the Changing Landscapes Scheme (CLS),[22] for areas greater than 1 hectare, and Freewoods, a scheme for parcels of land which are smaller than 1 hectare.[23] These schemes provide a higher level of support than that provided under forestry schemes elsewhere in England. Natural England told us that The National Forest's achievements have been helped by "greater rates of support for woodland creation than exist elsewhere".[24]The Forestry Commission considered the CLS to be much more expensive than the average grant scheme in England but noted that it was comparable to schemes for areas of a similar complexity.[25]

Under the CLS the average cost of new forest was £12,365 per hectare in 2008-09. This compares to only £2,800 per hectare,[26] under the English Woodland Grant Scheme applicable to broadleaf tree planting projects outside The National Forest,[27] and £3,150 per hectare rate payable under Natural England's Higher Level Stewardship for new woodland created outside less favoured areas.[28] The NFC explained that its scheme paid a higher rate because it covered 100% of the costs of woodland creation and subsequent management for a ten year period, in order to reflect the fact that the new afforested areas provided wider public and environmental benefits.[29] The Minister considered that the CLS provided "high value, high quality interventions", but he recognised that by paying the full costs of forest creation the scheme had the drawback of spreading the money available less widely.[30] The NFC stated that the CLS had proved to be an "attractive option" with landowners.[31] However, the 57.7 hectares of land included in the first full year is just below the lower end of the target range,[32] and the CLS budget was under-spent by around a third.[33]

15. The Changing Landscapes Scheme plays a central role in new forest creation so it is important that the incentives it provides are attractive to landowners. However, grant levels must be set so as to deliver value for public money and schemes should not aim to deliver extra hectares at any cost. It is important therefore that the success of forest creation is measured over the medium to long term, when any short-term impact on the uptake of grants caused by market fluctuations in land and commodities prices will have been evened out.

INHERITANCE TAX REGIME

16. A member of the public expressed concern during our evidence session in The National Forest that the tax framework provided a disincentive to the development and retention of woodland, since woodland assets were less favourably treated for inheritance tax (IHT) purposes than agricultural assets.[34] Defra told us that IHT is payable on the value of woodland assets, both land and trees, but that there are a number of reliefs available. These include 100% relief for transfers of woodland on death provided the deceased owned the woods for five years, and 100% Business Property Relief for commercial woodland after two years ownership.[35] The details of the inheritance tax regime pertaining to woodland are set out in the memorandum from HM Revenue and Customs published with this report.[36]

17. The complexity of the inheritance tax regime could deter those wishing to take up grants to plant woodland. It might also lead some landowners to remove trees as a precaution against their assets becoming liable to inheritance tax. We therefore recommend that HM Revenue and Customs, in liaison with Defra, publishes a clear and comprehensive guide on the inheritance tax relief available for woodland for dissemination within The National Forest and beyond. Although beyond the scope of this inquiry, we further recommend that Defra examines with HM Revenue and Customs whether the existing inheritance tax regime deters individuals from taking up or continuing woodland schemes or other long-term, environmentally-beneficial government schemes.

Land acquisition

18. Forest cover in England has been extended by some 30,000-35,000 hectares over the past decade, with direct land acquisition by the Forestry Commission accounting for around a tenth of this (some 3,500 hectares).[37] Direct land acquisition by the NFC accounts for a similar proportion (14%) of the extension of forest cover within The National Forest—a balance which the NFC considers to be "about right for now".[38] However, the NFC told us that in the past year it had been hard to acquire land at a price which represented "responsible use" of taxpayers' money. It had acquired only 14 hectares of land for new woodlands in 2008-09, compared to some 66.5 hectares on average for each of the previous ten years.[39]

19. Under the Financial Memorandum agreed with Defra, the NFC has a limit on the amount of land it may hold at any one time.[40] This limit is currently 300 hectares—a figure which Defra told us was set to reflect the average yearly acquisitions by the NFC.[41] The company normally passes land acquired to partners, including the Forestry Commission and the Woodland Trust, for ongoing management. Sophie Churchill, Chief Executive of the NFC, told us that land availability had made it hard for the company to plant their own schemes and that "a little more flexibility about holding a land bank", both in terms of numbers of hectares and the purposes for which it could be held, would enable it to respond more readily to opportunities for leasing or co-development with organisations wishing to make a carbon investment.[42] Defra told us that the NFC could seek approval to hold more than 300 hectares, as well as asking for the limit set out in the Financial Memorandum to be adjusted when it was next periodically reviewed.[43]

20. We recognise that the National Forest Company's role is not to build up a significant land-holding on its own. However we consider the current 300 hectare limit on the amount of land it may hold at any one time to be unecessarily restrictive. We recommend that Defra's next review of the National Forest Company's Financial Memorandum should include consideration of a higher limit for land holdings, as well as the provision of more flexibility over the purposes for which the company may acquire land.

2 The Countryside Commission, Proposals for the creation of a lowland forest in the English Midlands, April 1989. Back

3 Ibid Back

4 The Countryside Commission, The National Forest: A proposal to Ministers, November 1992. Back

5 Minutes of Evidence taken before the Environment, Food and Rural Affairs Committee, 5 December 2001, HC (2001-02) 432, Ev 21 Back

6 The National Forest Company, Concise Strategy + Delivering the Strategy 2004-14, p 1. Back

7 Minutes of Evidence taken before the Environment, Food and Rural Affairs Committee, 5 December 2001, HC (2001-02) 432, Ev 21 Back

8 UK trees and forests, POSTnote 275, Parliamentary Office of Science and Technology, January 2007. The Forestry Commission owns some 202,000 hectares of England's 1 million hectares of woodland, as well as 56,000 hectares of non-wooded habitats. Across the UK, 11.6% of land (2.8 million hectares) is wooded. Back

9 The National Forest Company, Annual Report and Accounts 2008-09, HC 797, July 2009, p 4. Back

10 Q 125 Back

11 The National Forest Company, Annual Report and Accounts 2008-09, HC 797, July 2009, p 40. Back

12 Q 150 Back

13 The National Forest Company, The National Forest Delivery Plan 2009-14, March 2009, p 7. Back