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Lord McIntosh of Haringey: My Lords, I am grateful for the enthusiastic support of the noble Lord, Lord Goodhart, and the acceptance of the noble Earl, Lord Northesk. I make that distinction.

The noble Lord, Lord Goodhart has a valid point: when one starts to collect £2 a week on a statutory basis, the cost of collection will inevitably be rather high as compared to the returns. I can only acknowledge that fact. It is a relatively expensive thing to do. But the reason for keeping some figure is that Class 2 contributions secure entitlement to benefit, as Steve Webb recognised in the Commons. Those with lower profits can pay Class 2 national insurance contributions and protect their entitlement, but abolishing Class 2 altogether would prevent this. The low rate means that there is not the same entry charge as previously, which was such an anomaly. If we replace Class 2 with a single Class 4 charge without addressing the entitlement to benefit issue, we should be depriving the self-employed of benefit rights. Even the Taylor report recognised that to abolish the Class 2 charge would mean inventing a new benefit entitlement test or a minimum Class 4 payment for contributory benefits. It is for that reason that we have

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decided that, despite the relatively high cost of collection, it would not be possible to abolish Class 2 altogether.

The noble Earl also accused me of redistribution. I do not know whether it is an accusation or a plaudit, and I do not know whether I am allowed to accept the accusation or the plaudit. But I certainly do not deny that these changes to national insurance contributions are significantly redistributive. They make many poorer people significantly better off, and they do so at the expense to some extent of the better-off. If anyone wants to criticise me for that, I accept the criticism with some pleasure.

The noble Earl went on to say that this is in some way discrimination against the self-employed. The self-employed under-pay about £3 million for their benefits compared to Class 1 contributors. They get a lot for their contributions. They get the same benefits as employed and employers for a significantly lower figure.

The noble Earl asked also, "How many and how much?" Around 16 million people will pay less in national insurance contributions because of the structural changes. Introducing the primary threshold will reduce contributions by about £0.9 billion in 2001 and £1.8 billion in 2001-2002. That is how many and how much. It is well worth doing.

On Question, Motion agreed to.

Scotland Act 1998 (Cross-Border Public Authorities) (Forestry Commissioners) Order 2000

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

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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

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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

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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.

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