great britain annual report and - gov.uk · sustainable forest management 8 cross gb regulation 10...

Great Britainand England

Annual Report and Accounts

2005 2006

FORESTRY COMMISSION

Annual Report and Accounts 2005-06 for Great Britain and England together with theComptroller and Auditor General’s Report on the Accounts.

Presented to Parliament in pursuance of Section 45 of the Forestry Act 1967and Section 5 of the Exchequer and Audit Departments Act 1921.

Ordered by the House of Commons to be printed25 July 2006

HC1540 Edinburgh: The Stationery Office

£19.70

0 10 293638 2

AIMS AND OBJECTIVES

The Forestry Commission’s aim is thesustainable management of our existingwoods and forests, and a steady expansion oftree cover to increase the many, diversebenefits that forests provide to meet theneeds of present and future generations.Through its powers and duties set out in thevarious Acts, the objective of the ForestryCommission for its Great Britain activities, is:

• on behalf of all three administrations, totake the lead in development andpromotion of sustainable forestmanagement and to support itsachievement nationally.

In England, it aims to implement theprogrammes of the England Forestry Strategywhose objectives are:

• to increase the contribution of forests andwoodlands to local economies and ruraldevelopment (Forestry for RuralDevelopment Programme);

• to expand the role of woodlands insupporting the economic regeneration offormer industrial land and disadvantagedcommunities (Forestry for EconomicRegeneration Programme);

• to promote public access to woods andforests and develop diverse recreationalopportunities (Forestry for Access,Recreation and Tourism Programme); and

• to conserve and improve the biodiversity,landscape and cultural heritage of ourforests and woodlands (Forestry for theEnvironment and Conservation Programme).

The Forestry Commission also aims to be aplace which values:

Teamwork - Working as teams withcolleagues and others to ensure that trees,woods and forests meet the needs of peoplein each part of Britain.

Professionalism - Enjoying and taking pride inour work, achieving high standards of quality,efficiency and sustainability.

Respect - Treating one another withconsideration and trust, recognising eachperson’s contribution.

Communication - Being open, honest andstraightforward with colleagues and others, aswilling to listen as to tell.

Learning - Always learning, from outside theForestry Commission as well as from within.

Creativity - Not being afraid to try new waysof doing things.

Contents

1Great Britain & England | Annual Report & Accounts | 2005 2006

Foreword by the Chairman 2

Introduction by the Director General 4

GREAT BRITAIN

The Forestry Commission in Great Britain 6

Forestry Standards and Certification 7

Expert Advice onSustainable Forest Management 8

Cross GB Regulation 10

European and International Forestry Policy 15

Forestry Research 19

Forestry Commission Organisation 24

Forestry Commission People 27

ENGLAND

Introduction by the Director England 30

General Review 32

Sustaining England’s Woodlands 34

Forestry for Rural Development 40

Forestry for Economic Regeneration 45

Forestry for Recreation,Access and Tourism 48

Forestry for Environmentand Conservation 52

Appendices 55

Tables 61

Financial Highlights 68

Financial Statements and Accounts

Forestry Commission Resource Accounts 69

Forest Enterprise in England Accounts 128

Forestry Commission National andConservancy Boundaries 176

Forest Enterprise Boundaries 177

Addresses of the Main Officesof the Forestry Commission 178

Photographs supplied by Forest Life Picture LibraryDesigned and produced by Almond • www.almondtds.com • 0131 553 5523

This Report deals with Forestry Commissionfunctions funded by Westminster – ouractivities in England, and those functions, suchas plant health, international policy andresearch, which are funded on a Great Britain

basis. The Forestry Commission also preparesformal Reports for the Scottish Parliament andthe National Assembly for Wales and ourForest Research Agency prepares a formalReport for Westminster.

Foreword by the Rt Hon Lord Clarkof Windermere, Chairman

At the end of my Foreword in last year’sAnnual Report, I indicated that there was‘more to come’ regarding how the ForestryCommission is promoting and developingwoodland activities and initiatives, and thishas indeed proved to be the case this year.

In August last year we celebrated thededication of the Forestry Commission’sfreehold estate for permanent public openaccess, allowing future generations to enjoythe healthy environment of its woodlandsand forests. Although we have permittedaccess to our woods for decades, thisdedication is a catalyst for the process ofencouraging even greater recreational use ofour woodland.

And then in September the ForestryCommission were proud to win a ‘greentransport’ award from Sustrans – asustainable transport charity – for its role inhelping to develop the National CycleNetwork. The award, in the category of

‘People – Supportive Landowners’, was inrecognition of providing many crucial links aswell as whole networks of local cyclingroutes over national forest land. Cycle trailsare one of the many benefits we provide innational forests. By doing so, not only do weprovide opportunities for folk to enjoy anenvironmentally friendly means of transport,but going for a regular bike ride in the freshair and peace and quiet of a woodland doeswonders for our health and well-being.Indeed, it is most appropriate that this awardhas been made to us in the year that welaunched our Active Woods campaign to getmore people off the couch and into theforest to get fitter and feel better!

Finally, a recent development I am excitedabout is the approval by WestminsterParliament to allow a Regulatory ReformOrder amending the powers of the ForestryCommission in a number of areas of activityin England and Wales. This Order provides uswith the flexibility to maximise our potential

2 Great Britain & England | Annual Report & Accounts | 2005 2006

contribution across many sectors, such ashealth, nature conservation and communitydevelopment, to improve people’s livesthrough the provision and management ofsustainable woods and forests. Particularlywelcome is the power to form formalpartnerships with appropriate private sectororganisations who can bring commercialexpertise and private capital to boost ourabilities to deliver, and I look forward to theyear ahead and the new opportunities andchallenges this presents.

In addition to my responsibilities as Chairmanof the Forestry Commission I also Chair ourNational Committee for England. This AnnualReport covers the work of the ForestryCommission at both the GB and Englandlevels reflecting their common source offunding from Westminster. In England as weembrace our new role as an expert deliverybody I have been delighted to see realprogress across a broad policy agenda. Onearea I would particularly like to single out isour work to conserve, protect and enhanceEngland’s ancient and semi-naturalwoodlands. Publication of our Keepers ofTime statement in June marked a stepchange for the Forestry Commission inEngland. These woodlands are the jewels inthe crown of English forestry and we haveplaced them at the heart of our work. I amconfident that future reports from the

Forestry Commission will show real progressbeing made. And I am confident that ourapproach will not only deliver the very bestfor these important woodlands it will alsoensure that people will increasinglyappreciate and enjoy them.

Foreword by the Rt Hon Lord Clarkof Windermere, Chairman


Introduction by Tim Rollinson, Director General


The environmental mantra ‘Think Global, ActLocal’ may be over 30 years old, but it rings astrue today as when it first appeared.

Unfortunately, the global loss of naturalresources – especially forests – remains aserious concern and shows that turning thisadvice into positive action has not proved to bean easy task. Indeed, Governmentpolicymakers around the world have found thatit is an enormous challenge. Yet, this is wherethe Forestry Commission has the greatestcontribution to make.

As well as providing policy advice, the ForestryCommission is Britain’s biggest land manager.Our science and expertise is internationallyrenowned. We are the country’s primaryproducer of wood. By offering many thousandsof walks, trails and other recreational pursuitswe provide more opportunities for outdooractivities than any other body and managesome of England’s, Scotland’s and Wales’most precious and beautiful landscapes.

As the country’s largest steward ofenvironmentally-protected areas we are usedto balancing the pressures of visitors with theneeds of the environment.

Seen individually, these superlatives say muchabout what we do. Taken together, they pointquite firmly to what we have to offer that mostother organisations cannot. That is, policydevelopment based on expert knowledgewhich is firmly grounded in practicalexperience.

Acting local means working with local peopleand communities, understanding their needs,and finding solutions that work for them asmuch as they do for us. The many hundreds oflocal and community projects we have kick-started, or become active in, give us an insightthat stems from first-hand knowledge – of thepeople as well as the land. You will find manyexamples in this report of innovative andimaginative solutions delivering Governmentpolicy at grassroots level.

Great Britain & England | Annual Report & Accounts | 2005 2006

Introduction by Tim Rollinson, Director General


The policy agenda that we are working to hasbeen transformed through the years. Thesingle objective of growing forests and woodsas a strategic timber reserve is well behind us.The big issues facing society today include realchallenges in the nation’s health, education,energy and the environment. Responding inpractical ways to climate change too isabsolutely vital. We can contribute to theseagendas in very practical ways through thesustainable management of our forests andwoodlands.

It is clear that the pace of change will notrelent – and we would not want it to. Inadapting to changing needs we have evolvedand matured as an organisation, aiming toensure that we are as capable of deliveringtoday’s agenda in England, Scotland andWales, as tomorrow’s. This is reflected insome of our recent and emerging priorities:

• using trees and woods to regeneratedegraded landscapes around our towns andcities, making an important and highlytangible contribution to urban, as well asenvironmental, regeneration;

• developing new markets for wood fuel tosubstitute for fossil fuels, providing marketincentives that support good woodlandmanagement;

• promoting wood as a vital, sustainableraw material that is renewable andrecyclable; and

• working with health authorities through ourActive Woods campaign to encourage useof forests and woods for healthy pursuits,both spiritually and physically.

As long as we use our particular strengths indelivery, I have no doubt that the ForestryCommission will continue to have clear andidentifiable value in all three countries. Inlooking forward we will ensure that we focusour resources on those areas where ourcontribution can make the biggest difference.

Great Britain & England | Annual Report & Accounts | 2005 2006 Great Britain & England | Annual Report & Accounts | 2005 2006

The Forestry Commission

in Great Britain


Ministers agreed that a number of the ForestryCommission’s functions would be fundeddirectly by Westminster and operated on across-GB basis by Corporate and ForestrySupport Division. In this GB role, we provideadvice and support to the UK Government andto the devolved administrations in Scotland andWales. We set the standards for sustainableforest management and encourage goodforestry practice. We conduct forestry research,provide information and we have statutoryduties for some regulations that, by agreementwith Ministers, are GB-wide.

Although Forestry is devolved the ForestryCommission operates across Great Britain as across-border public body. This allows England,Scotland and Wales to benefit from theeconomies of scale that a GB-wide body is ableto offer. This includes services on finance,human resource management, IT, forestryoperations, external communications andinternal audit which are organised centrally butpaid for by the countries.

Forestry Standards and Certification

FOREST GUIDELINES

The Forest Guidelines are supportingpublications to The UK Forest Standard.Following revision of the Standard itself during2004, we have been working during the yearon a major project to revise and update thesuite of supporting Guidelines. It was agreedthat the Guidelines should be UK (rather thanGB) documents and the Forest Service ofNorthern Ireland is participating in the revisionproject. The Guidelines expand upon theStandard by addressing the interactionbetween forests and a range of particulartopics. During the year working groups wereestablished for each topic and working draftswere produced. There will be new Guidelinesfor Forests and People and the Forest as aWorkplace and revisions of those coveringbiodiversity, soils, landscape and historicenvironment. This is a three-year project thatwill involve wide consultation and we expectthe final versions to be produced in 2007.

UKWAS

We have been working with other members ofthe UK Woodland Assurance Standard SteeringGroup to revise the forest certificationstandard. The UK Woodland AssuranceStandard (UKWAS) provides the basis forindependent certification in the UK and is used

for all forests managed by the ForestryCommission and an increasing percentage ofother woodlands. UKWAS is endorsed by bothmajor independent forest certification schemesoperating in Europe; the Forest StewardshipCouncil (FSC) and the Programme for theEndorsement of Forest Certification Schemes(PEFC). The revision was a complicatedprocess but the final version was produced inthe reporting year. It will be launched during2006.

CPET

We have contributed to the Department forEnvironment, Food and Rural Affairs (Defra)-ledCentral Point of Expertise on Timber. Thisproduces advice to public sector bodies ontimber procurement, including advice oncertification schemes that can be used toprovide evidence that timber is legally andsustainably produced.


Great Britain Expert Advice on Sustainable Forest Management

INDUSTRY DEVELOPMENT

Timber continues to compete with both steeland concrete in the construction sector andaims to increase its market share. To helpachieve this we continue to work with theBoard of the wood. for good timberpromotion programme. The programme aimsare to improve understanding in public andprofessional users about environmentalimpacts of forestry and to communicatetechnical information about getting the bestout of timber in use. Increasing emphasishas been placed on providing contractors,architects and specifiers with information ontimber properties and potential end uses inorder that they can make informed decisions.Interest from architects is increasing withgood attendance at a range of seminars heldacross the country.

We recognise that our ongoing commitmentto undertake research into timber propertiesis a key component in improving thecompetitiveness of UK-grown wood. Thework this year has included research withindustry partners to improve the quality andreduce the drying times of UK-grown sprucethrough the optimisation and acceleration ofconventional drying schedules. This bringsdual benefits to a more consistent productand a more energy efficient process. Wecontinue to investigate the potential for woodto be used through improving the longevity oftimber through the use of coatings and betterimpregnation with preservatives. Improvedutilisation through re-engineering timber isalso showing promise through the use ofnovel cutting and jointing techniques.

The Forestry Commission has increasedactivity on woodfuel and is working jointlywith the private sector on various strategiesand implementation plans to harvestsignificant additional volumes fromwoodlands. This volume will largely bederived from areas either currently not inmanagement or from ongoing operationswhilst ensuring continuity of existingmarkets. This approach coupled withincreasing research input and knowledgetransfer will facilitate gradual and sustainablemarket development.

THE TIMBER MARKET

The windblow early in the year, acrossScandinavia and Northern Europe, had thepotential to have an impact on trade during theyear, however, the effect on the homegrownmarket was minimal. The market trendsrealised during 2004 were continued into 2005with good demand, especially during the earlypart of the year.

We compiled timber statistics using datafrom sales of Forestry Commission timberand surveys carried out with the assistanceof industry representatives in theCommission’s Expert Group on Timber andTrade Statistics. The scope of the annualpublication, renamed the United KingdomTimber Statistics, was extended to includeNorthern Ireland using data compiled incollaboration with the Forest Service.

The closure of St Regis pulp and paper mill atSudbrooke will have serious short-termimplications for the management of


Great Britain Expert Advice on Sustainable Forest Management

9Great Britain & England | Annual Report & Accounts | 2005 2006Great Britain & England | Annual Report & Accounts | 2005 2006Great Britain & England | Annual Report & Accounts | 2005 2006

broadleaved woodland especially in southernEngland. An industry task force to ensure thelong-term future of the broadleavedharvesting infrastructure was set up toidentify and pursue other opportunities forhardwood timber. The most likely outlet islikely to be woodfuel. It is recognised thatinformation on potential biomass yield will beof particular value, work is ongoing toidentify and collate that data.

SUSTAINABLE MANAGEMENT OF

THE FORESTRY COMMISSION

‘Securing the Future' the UK SustainableDevelopment Strategy, asks Departments toprepare an action plan for the sustainablemanagement of the Government estate.

The sustainable management of the forestsmanaged by the Forestry Commission, onbehalf of the three country administrations, is independently certified under the UKWASscheme, already meeting the Government'sintentions. During the year we worked withAtkins Environmental to develop a plan forsustainable management in our buildings andin our corporate management activitiescovering waste management, water andenergy use, transport, human resources andthe development of formal data gatheringand reporting procedures. The draft actionplan was approved in December 2005 andwe will report on progress in implementingthe plan by the end of 2006.


Cross-GB Regulation

BETTER REGULATION

The Chancellor announced the Government’spolicies on Better Regulation in the 2005budget speech and implementation of thesepolicies began immediately. The BetterRegulation Executive (BRE) was formed toimplement the Government’s reformprogramme, which aims to deliver year on yearreductions in the total administrative burdensfaced by business.

As a first step BRE launched theAdministrative Burdens Project which for thefirst time will establish a baseline againstwhich targets can be set. The ForestryCommission is playing a full part in theinitiative by taking forward the forestry-relatedelements of the exercise. The results will bepublished in 2006.

The second major initiative of the betterregulation agenda is the introduction of annualDepartmental Simplification Plans. Our firstplan will be published in autumn 2006 and willset out how we propose to streamline rules,regulations and business practices and toreduce the amount of paperwork and timespent dealing with requests for information.

We estimate that our initial proposals willsave business some £6,700,000 over thenext five years.

GB RESPONSIBILITIES FOR PLANT HEALTH

AND FOREST REPRODUCTIVE MATERIAL

By agreement of Ministers in England,Scotland and Wales, the Forestry Commissionretains GB-level responsibility for Plant Health,as it relates to trees and timber, and for ForestReproductive Material. Plant Health covers asystem of checks on plants and plant products

to ensure they do not spread pests of concernto Britain, other Member States and thirdworld countries. Forest Reproductive Materialregulation concerns the marketing of seeds,cones, cuttings and planting stock of 46regulated species and the genus Populus toensure that planting stock is traceable to aregistered source and that those who buy thematerial have sufficient information about itsorigin. Both areas are subject to domestic andEuropean Union (EU) regulation.

FOREST REPRODUCTIVE MATERIAL

CONTROL SYSTEM

The Forest Reproductive Material (FRM)Regulations have now been in place for threeyears. A database has been built toadminister them and a system of controldeveloped. The number of registeredsuppliers of FRM reached 185.

The seed collection inspection system wasimproved to reduce the paperwork for bothsuppliers and Forestry Commission staff andto allow for more effective and efficientadministration. Training seminars on seedcollection inspections were provided forForestry Commission staff in the threecountries throughout the year. There are nowwoodland officers in each Conservancy withup-to-date knowledge of FRM and the newprocedures for seed collection inspections.

A series of training days was held for theTechnical Support Unit of Forest Research toprovide a group of ‘Basic Material’ inspectorsbased around the country. They will visit standsto assess whether they can be accepted ontothe Basic Material register and whether theyshould be given indigenous status.


A total of 715 Master Certificates were appliedfor and issued. 365 were for species coveredunder the Regulations and the rest werespecies covered under the Voluntary Schemefor Native Trees and Shrubs.

A nursery inspection programme for 35nurseries was started and will be completed in2006; no serious infringements have beenreported to date.

It was decided during the year to withdrawpublic funding for the seed testing serviceprovided by Forest Research. The Regulationsno longer require the provision of an OfficialSeed Testing Station and permit suppliers to testtheir own seed. A significant reduction in thenumbers of seed tests requested from ForestResearch since the introduction of the newRegulations led to a steep rise in unit costs.

Legislation

A number of meetings of the EU StandingCommittee on Seeds were held resulting in anumber of EU decisions being finalised. Oneallows suppliers to import seed from certaincountries outside the EU that have anequivalent system of control. Amendments tothe GB Regulations have been drafted to bringthe legislation up to date with these measures.

PLANT HEALTH

The primary aim of our plant health controls isto ensure the legitimate free flow of goods ofall kinds both into and out of the country. Oursuite of import controls is based on EUrequirements, set out in the main EU PlantHealth Directive (Council Directive 2000/29/EC)and various complementary instruments, andwe provide an export certification service tomeet the demands of our trading partners.

Legislation

The Plant Health (Forestry) Order 2005 waslaid before Parliament on 8 September andcame into force on 1 October. The Orderrevoked and consolidated the 1993 Orderand its amendments and implementedchanges that had been made to the EU PlantHealth Directive.

Import Inspections of Sawn Wood

Over the year, 932,000 m3 of sawn woodsubject to quarantine control were imported(2004-05: 1.2 million m3) and 4,568inspections were carried out (2004-05:4,400). Forty incidents of non-compliancewere detected in sawn timber consignments. The majority (38) of these incidents involveddocumentary infringements. As in previousyears, we achieved our Charter Standardtarget of inspecting consignments on the day of notification of landing, or the nextagain working day at the latest, in over 99per cent of cases.

The Forestry Commission physically inspectedall imports of wood of Oak (Quercus spp.),Oregon Maple (Acer macrophyllum), andTanbark Oak (Lithocarpus densiflorus)originating in the USA for the presence ofPhytophthora ramorum. No instances of thefungal pathogen were detected.

The Food and Veterinary Office of theEuropean Commission, which is responsiblefor overseeing the implementation by theMember States of the EU’s rules on PlantHealth, carried out a monitoring mission to GBin January 2006. While their final report hasyet to be published, there were no findings ofconcern noted and no recommendations forchange made in their draft report.

Cross-GB Regulation

11Great Britain & England | Annual Report & Accounts | 2005 2006Great Britain & England | Annual Report & Accounts | 2005 2006Great Britain & England | Annual Report & Accounts | 2005 2006Great Britain & England | Annual Report & Accounts | 2005 2006

Fees for Import Inspections

We have compiled a comprehensiveconsultation document to explain thecomplexities of changes to plant health importlegislation that require us to change the waywe calculate our inspection fees and changethe range of material inspected. Theconsultation will also explain the new rates wepropose to charge as a result of the lowervolume of timber inspected following EUenlargement. We will be consulting the timberimport trade on our proposals early in the newfinancial year, a little later than originallyintended. This will be the first time that wehave had to increase our fees since 1999 aswe have managed to make a number ofoperational savings over the years.

Wood Packaging Material (WPM)

We reported last year that we had identified anumber of options for collecting charges forinspections of wood packaging material anddunnage, and that we planned to introducefees by the end of December 2005. However,we have identified a number of difficulties inapplying wood packaging material inspectioncharges fairly to all imported consignments andhave concluded that we cannot yet proceedwith a consultation. Other EU Member Stateshave encountered similar problems and aEuropean Working Group was convened inFebruary to review inspections and inspectioncharges for wood packaging material.

Over the year we performed 4,700inspections on imports of goods of all kindsto check for the presence of wood packagingmaterial (WPM). In 1,550 (33 per cent) ofthese WPM was found to be present, ofwhich 735 (47 per cent) did not comply withlanding requirement although the material

was judged not to present a plant health risk.In four of the cases, however, live woodboring beetles and their larvae were foundand remedial action taken.

During the year more countries moved toimplement import requirements based on theInternational Standard for wood packagingmaterial, ISPM No. 15, notably NorthAmerican countries (in September 2005) andChina (in January 2006). China’simplementation meant the end of itsrequirement that all imports with woodpackaging material had to be accompanied bya phytosanitary certificate. This change saw a99 per cent reduction in the issue ofcertificates by the Forestry Commission – aconsiderable saving in the administrative andfinancial burden on British exporters.

As reported previously, the EU implemented itsnew import controls for WPM on 1 March2005. It had been originally planned to include arequirement that WPM (and dunnage) beproduced from debarked wood. However, thiselement was suspended until 1 March 2006 toenable further work to be carried out, both inthe UK and elsewhere, to determine theefficacy of certain treatments in reducing risk.This work failed to produce a definitiveconclusion and yet more research is needed.The European Commission and the MemberStates agreed to further delay a debarkingrequirement until 1 January 2009, to coincidewith a formal revision of ISPM No.15, and willreview its position in September 2007. TheForestry Commission played a full part in theEU debate on WPM and will continue tocontribute to the process.

Cross-GB Regulation


Phytophthora ramorum and P. kernoviae

In conjunction with Defra’s Plant Health &Seed Inspectorate we have continued tomonitor for outbreaks of these two pathogens.

As reported last year, the management of thecampaign against both P. ramorum and P.kernoviae is being overseen by theInterdepartmental Phytophthora ProgrammeBoard. In 2005 the Board agreed that theForestry Commission should undertake afive-year programme of re-survey work of thehigh and low risk sites in England and Walessurveyed in 2004 to ascertain if they werestill disease free. A total of 149 woodlandswere surveyed with no positives beingfound. There was no formal survey carriedout in Scotland as the Pest Risk Analysisindicated a lower level of risk. However,surveyors, in the course of their duties, wereasked to take samples from anyRhododendron ponticum which displayedpossible symptoms of Phytophthora. Nosamples were taken. A further 20 per cent ofthe 2004 sites in England and Wales will bere-surveyed in 2006.

Defra’s Plant Health & Seeds Inspectorate andthe Forestry Commission have continued tocarry out surveys in Cornwall to determine theincidence of P. kernoviae. Up to and includingDecember 2005 P. kernoviae had been foundat 22 locations in Cornwall. Further intensivesurveys in Cornwall and Devon for bothpathogens are planned for 2006.

In December 2005 we recommended toMinisters that we move from a strategy oferadication of P. kernoviae to one ofcontainment leading to eradication whereverpossible. A risk matrix was drawn up which

ranked the woodlands and heritage gardensinfected with P. kernoviae on the level ofinfection, the value of the woodlands, thedegree of public access and whether therewas plant movement. Prior to workcommencing, we held a meeting with thelandowners in the area to explain ourproposals. With joint funding from Defra, anumber of woodlands classified in thehighest risk category have either beenpartially or totally cleared of rhododendron ina programme which will continue for thenext two years and which will be kept underconstant review.

Infected rhododendron at five outbreak sites inSouth Wales were destroyed and the sites arebeing kept under surveillance.

In October 2005, on behalf of the European &Mediterranean Plant Protection Organisation,we organised a three-day conference inFalmouth, Cornwall on ‘Phytophthora ramorumand other forest pests’. Over 70 delegatesattended the conference, mainly from the UKand Europe but also from Canada, the USAand Australia.

Other Pests and Diseases

We have continued to work with Defra tocombat a small, but persistent, outbreak ofGypsy moth (Lymantria dispar) in the LondonBorough of Redbridge where it was firstfound in 1995. Although no moths weretrapped in 2004, our pheromone trapscaptured six moths in 2005 indicatingcontinued survival there. A new outbreakwas confirmed in Aylesbury,Buckinghamshire in July 2005, and 324moths were trapped in August. We willcontinue to monitor the situation using

Cross-GB Regulation


pheromone traps at both sites in 2006 andhave published information on the moth on alocal Aylesbury website. This will be followedup with an information leaflet and reportform distributed to over 2,000 households.

Following an outbreak of Red Band NeedleBlight (Scirrhia pini) on pines in the ForestryCommission’s nursery at Delamere,Cheshire, a Working Group has been set upto look at the threat posed by the disease. Itis already quite widely present in Englandand more locally elsewhere and is a cause ofserious concern as a defoliating disease ofCorsican pine.

The EU-wide emergency measures aimed ateradicating the outbreak of Pine WoodNematode (Bursaphelenchus xylophilus), first

found in the Setubal region of Portugal in1999, continued. As in previous years wecarried out a programme of surveys of trees,wood chips and imported wood to detect thenematode in GB. Over 100 samples wereanalysed and all were negative.

As in previous years, we placed around 200 pheromone traps at various ports aroundthe country to detect introductions of thedangerous European bark beetle Ipstypographus. We captured a total of threebeetles (2004-05: 19). This is far less than inthe previous years but the number of catchescan fluctuate, therefore, we will maintain ourport trapping programme as part of ourgeneral pest surveillance strategy.

Cross-GB Regulation


European and International Forestry Policy

MINISTERIAL CONFERENCE ON THE

PROTECTION OF FORESTS IN EUROPE

(MCPFE)

Throughout the year a number of workshopshave been organised to contribute to theimplementation of the MCPFE WorkProgramme. The issues addressed haveincluded: illegal harvesting and related trade inEurope; climate change and forest geneticdiversity; policies fostering investment andinnovation in support of rural development;competitive forest operations in Europe;cultural aspects of sustainable forestmanagement and cross-sectoral co-operation.The Forestry Commission continues to be anactive participant of the process and has beenrepresented by experts from across theorganisation in various working groups.

In preparation for the 5th MinisterialConference, countries have provided theLiaison Unit Warsaw with initial ideas on theissues to be addressed by Ministers at theirnext Conference, which has been provisionallyscheduled for autumn 2007 in Warsaw. Theseearly suggestions will be further discussed andelaborated at a Round Table Meeting of theprocess in late April 2006.

EUROPEAN UNION

UK Presidency-EU Forest Director Generals’

Meeting

As one of the events organised under the UK’sPresidency of the European Union, theDirector General invited the EU Forest DirectorGenerals and the European Commission toScotland, 12-14 September, to discuss theframework in which forestry currently operatesin Europe. The meeting aimed to identifyactions at the EU level that could assistMember States in delivering the sustainable

management of their forests. The DirectorGenerals met the Scottish Forestry Minister,Rhona Brankin, MSP and visited key sites inScotland to see at first hand the challengesand opportunities in delivering sustainableforest management in Scotland. The report ofthe meeting and outputs from the discussionsserved as a useful contribution to theEuropean Commission’s development of theEU Forest Action Plan on Forests.

The value of the meeting was recognised bythe European Commission and the otherMember States and to continue this high leveldialogue and information exchange, Austria willhold a similar meeting of EU Director Generalsduring their Presidency in Gmunden, June2006.

EU Forest Action Plan

In May 2005 following a review of the EUForestry Strategy the European Council gavethe European Commission the mandate todevelop an EU Forest Action Plan as aframework for the implementation of forest-related actions at Community and MemberStates level in Europe. The UK, with otherMember States, has been involved at keystages in contributing to the Plan’sdevelopment taking an active role in the‘experts’ working groups established by theEuropean Commission. The Action Plan isexpected to set out a number of core ‘Actions’at Community and Member States levelidentifying the key instruments that could beused to implement the proposed actions anddeliver the Plan. The European Commissionexpects to formally present the Action Plan ata meeting of the Standing Forestry Committeein June 2006.


LIFE+

In December 2005, agreement was reached ona new Financial Instrument for the Environment,LIFE+. The general objective of LIFE+ is tocontribute to the implementation anddevelopment of Community environmentalpolicy and legislation, including the integrationof the environment into other policies. In March,the European Commission produced guidanceon implementation of the LIFE+ Regulation atthe national level. The Forestry Commission hashad detailed discussions with Defra about theUK’s forest monitoring requirements under theRegulation and how we should proceed to buildthese into any UK National Level Programmebased on national needs as well as the UK’sinternational commitments.

UNITED NATIONS FORUM ON FORESTS

(UNFF)

The UNFF, established in 2000, provides animportant focus to promote sustainable forestmanagement globally and to implementexisting commitments. The work of the UNFFis supported by the Collaborative Partnershipon Forests, which facilitates co-operation andco-ordination amongst the key internationalinstitutions involved in forests. The ForestryCommission led the UK delegation at the fifthand sixth sessions in New York in May 2005and February 2006.

At the fifth session in 2005 (UNFF5), the mainobjective was to review the effectiveness of thecurrent international arrangement on forests andto consider future action on forest issues,including the institutional framework and how tostrengthen long-term political commitment.Wide differences between Member States,particularly on the issues of goals and finance,meant that despite two weeks of negotiations,

no conclusions could be reached and thesession closed without a resolution. DefraMinister Elliot Morley attended the high levelsegment during UNFF5 and highlightedopportunities offered by the upcoming UNMillennium Review Summit for further progresson sustainable development and forest issues.

The sixth session (UNFF6) met in February2006 to continue negotiations carried forwardfrom 2005 on the review and development ofthe international arrangement. Many of theforest-related issues that previously eludedconsensus resurfaced at UNFF6, includingreferences to environmental services, new andadditional financial resources, illegal loggingand the consideration of a legally-bindinginstrument.

UNFF6 renewed the mandate of the UNFFuntil 2015 and positive outcomes included theagreement on four global objectives:

• reversing the loss of forest cover andincreasing efforts to prevent forestdegradation;

• enhancing forest benefits and theircontribution to international developmentgoals;

• increasing the area of protected forests andareas of sustainably managed forests; and

• reversing the decline in officialdevelopment assistance for sustainableforest management, a stronger regionalcomponent of the internationalarrangement; and improved workingmodalities (meeting biennially rather thanannually after 2007, with a review in 2015).



UK FOREST PARTNERSHIP FOR ACTION

The UK Forest Partnership for Action wascreated in the run-up to the 2002 WorldSummit on Sustainable Development topromote sustainable development across theforest sector, and brought together keyplayers from Government, business andenvironmental groups. The ForestryCommission continued to provide support forthe Partnership, by providing the Secretariat.

In many regards, the Partnership hasachieved what it set out to do, both ingeneral terms and also in the priority areasfor action (forest certification, forestrestoration and protection, illegal logging,timber procurement) promoting sustainabledevelopment in the forest sector. ThePartnership has added value in that it hashelped to: develop links for joined-upworking, reach a shared understanding,remove barriers, facilitate dialogue, and share knowledge.

Important progress has been delivered on theissues of certification, illegal logging andtimber procurement, with work now beingdealt with very effectively elsewhere, ofteninvolving the partners. Work on forestrestoration and protection is continuing, withthe UK actively taking forward the GlobalPartnership on Forest Landscape Restorationwith a number of the other partners.

EUROPEAN FOREST INSTITUTE (EFI)

The EFI was established in 1993 to provide a forest research and information resource to meet the needs of a rapidly changingEurope and, with the signing of theConvention in August 2003, the EFI wasestablished as an international organisation.

As a signatory, the UK continued to workwith the Foreign and Commonwealth Officeto follow the necessary steps towardsratification of the Convention.

GLOBAL PARTNERSHIP ON FOREST

LANDSCAPE RESTORATION

The UK is a lead partner with WWF, theglobal conservation organisation; IUCN, theWorld Conservation Union; and a range ofGovernments and international organisationswho recognise the importance of restoringforest cover in parts of the world whereforests have been lost or heavily degraded and who want to be part of a co-ordinatedglobal effort.

The Partnership aims to catalyse andreinforce a diverse network of restorationprogrammes that deliver benefits to localcommunities and to nature and fulfilinternational commitments on forests.

The Partnership held a Global Workshop inApril 2005, hosted by the Government ofBrazil. The workshop considered outputsfrom national, sub-regional and regionalworkshops that had already taken place,developed recommendations for furtheraction, and stimulated increased momentumand investment in forest landscaperestoration programmes.

The Global Workshop marked the end of thefirst phase of the Partnership. The secondphase will now aim to broaden thePartnership and bring in new members,including Governments, who are able tocontribute to implementation.



In addition to broadening the partnership andbringing in new members, the foundingPartners are continuing to build support forforest landscape restoration, developing alearning network, and building a portfolio ofinitiatives to improve understanding and practicerelated to Forest Landscape Restoration.

17TH COMMONWEALTH FORESTRY

CONFERENCE

Following the 17th Commonwealth ForestryConference in Sri Lanka on 28 February to 5March 2005, the Forestry Commissionpublished the Conference Proceedings onbehalf of the Standing Committee onCommonwealth Forestry. With eradication ofpoverty and hunger at the top of the globalagenda, the Conference theme ‘Forestry’sContribution to Poverty Reduction’ could nothave been more relevant.



Forestry Research

In 2005/06 the Forestry Commission spent£11.5 million on research and scientific servicesto support sustainable forest management inGreat Britain. The research ranged from highlyapplied projects of direct relevance for forestmanagers to strategic development of conceptsand models to inform policy. The sciencebudget also covered analytical services,monitoring and the transfer of knowledge andtechnology to end-users. The bulk ofexpenditure (approximately £10.6 million) waswith the Forestry Commission’s own agency,Forest Research, which has presented aseparate, detailed report on its activities toParliament (ISBN 0 10 293637 4).

A SCIENCE AND INNOVATION STRATEGY

FOR BRITISH FORESTRY, 2005

The Strategy was approved by ForestryCommissioners and Ministers in 2005 andimplementation began under the direction ofthe Research Strategy Management Board1.The Board approved expenditure plans thatbrought forward the strategic researchpriorities of social and economic developmentand climate change. Expenditure also reflectedthe Strategy’s strong focus on thecommunication of research results and thetransfer of knowledge. Three Research LiaisonOfficers (one each for Scotland, Wales andEngland) were appointed by Forest Researchto provide a new communication pathwaybetween researchers and the users ofresearch. Empowerment and support for thesenew posts will be a key future element indelivering the Strategy.

Another strong emphasis in the Strategy is themeans to ensure country input to the detailedconsideration of programmes and projects tobe funded by the Forestry Commission. Four-country Programme Advisory Groups forpriority research areas have been proposed toserve this function. Progress has been slow ininstituting this mechanism due the heavydemands on the time of the key individualsrequired to give the Groups appropriateweight. Only one Group met (on Biodiversityand Habitat Restoration) in 2005-06; but fourmore are planned to meet in summer 2006.Progress in 2005-07 will be keenly watched bythe Research Strategy Management Board.

SCIENCE INTO POLICY – CLIMATE,

AIR, WATER AND SOIL

Climate change, water resources and soilmanagement were areas of active and cross-cutting research. For example, significantprogress was made in understanding theimportance of woodland type on the quantityand quality of groundwater recharge in areasof anticipated water shortage. Equally valuableadvances in hydrological research increasedthe understanding of the contributionwoodland, especially floodplain woodland, canmake in mitigating flood risk. However 2005-06 was most noteworthy for sustained input ofForest Research scientists into major policydevelopments across Britain. Hydrologistswere heavily involved in advising the ForestryCommission and other parts of Government onthe characterisation of water bodies, which isa key phase in the implementation of theWater Framework Directive. The samescientists have also contributed to the growing


1. The Board comprises: a representative of each of the three National Offices of the Forestry Commission; the Chief Executive of theNorthern Ireland Forest Service; the Chair, Dr Victoria Edwards OBE of Portsmouth University; the Research Director of Forest Research(advisor to the Board); and the Forestry Commission Research Purchasing Manager (secretary to the Board).

interest in land-use measures as a sustainableapproach to flood management – a majorconsideration because of the predictedincrease in flood risks under climate change.

Climate change research by the ForestryCommission and advice from our scientistswere an important part of the evidence basefor the land management aspects of thereviews of the UK Climate Change Programmeand the Scottish Climate Change Programme.The new Programmes covered mitigationmeasures such as use of woodfuel forrenewable energy and carbon sequestration byforests. Policies for mitigation of climatechange have been paralleled by developmentof adaptation policies by UK Government andthe Devolved Administrations. In the case ofwoodlands, Forestry Commission research andexperience has addressed how woodlandmanagement should adapt to protect not onlywoods but also other habitats.

Effects of climate change on soil are a growingconcern for policy makers and our soilscientists have been part of the debate at thescience-policy interface in the UK and Europe.They have reviewed the implications of climatechange for forest soils and established someimportant principles for affecting impactsthrough choice of tree species, woodlanddesign and operational practices.

There was also intense activity in monitoring,recognised throughout Europe as essential tothe development and effective delivery ofenvironmental policy. In addition to theongoing collection of environmental data,scientists have been reviewing existingmonitoring networks to meet the futurechallenges for better information on soil,

biodiversity and carbon stocks. ForestryCommission scientists have played a leadingrole in the pan-European debate that has beendriven by EU policy and wider internationalconventions to protect the environment.

PROTECTING FORESTS FROM PESTS

AND DISEASES

Work on controlling a well-known insect pest,Hylobius abietis, a weevil that attacks and killsyoung trees on replanted sites, was thesubject of continuing research. The objective isto develop integrated management systemsthat will minimise pesticide use. This majorand long-running programme is nearingcompletion and savings in resource were usedto begin new research into the impacts ofclimate change on pests and diseases. Thewealth of information we have on Hylobius willmake it an ideal model for the newprogramme, which will be developed in detailduring 2006-07. Initial work also began onanother new area of research, investigating theimplications for pest attacks of changes insilvicultural practice away from clear-fellsystems.

A collaborative European project led by ForestResearch has been modelling the relationshipsbetween environment, tree physiology andvulnerability to pests that attack through thebark. The ‘PHRAME’ model has focused onattacks by pine wood nematode and wassuccessfully presented at a number ofscientific meetings during the year.

FOREST PRODUCTS

Research on wood properties madeconsiderable advances during the year owingmuch to the interaction and collaborationbetween scientists and the growing and

Forestry Research


processing sectors of the British forestindustry. Methods have been developed toassess sawlog quality in standing trees inorder to provide improved information aboutthe quality of future timber supplies. The aimis to integrate this assessment into normalforest survey and production forecastingprocedures. Further refinements were made toa computer-based model that predicts conifertimber quality, and evaluates the potentialfinancial benefits, from silvicultural, site andstand characteristics and genetic quality ofplanting stock. Work has also been carried outto evaluate the practical implications ofincluding additional wood characteristics, suchas grain angle, microfibril angle and ‘stiffness’,in the conifer breeding programme.

Bio-energy has emerged as a priority researcharea. The considerable expertise within ForestResearch has been brought together in theWoodfuel Research Centre to co-ordinateresearch and advice to policy-makers, growersand users of woodfuel.

BIOLOGICAL DIVERSITY

An extremely varied programme of researchon forest wildlife was carried out. ‘Restoration’was a continuing focus of both research andscientific advice – this included restoration ofancient woodland sites planted with conifersas well as the restoration of non-woodlandhabitats, such as heaths and bogs, convertedto forest. The world-wide interest in thedevelopment of robust indicators of biologicaldiversity was reflected in projects on usingwoodland structure as an indicator and on ashort-cut measure using invertebrates foundon leaves. The expertise on indicators residentin Forest Research was demonstrated atseveral scientific meetings and conferences.

We participated through direct funding orcollaboration in numerous studies that havebrought new understanding of a wide range ofwoodland plants and animals. This body ofresearch has generated practical advice andguidance to improve the protection ofthreatened species. Examples includecapercaillie, cross-bills, dormice, pine martens,fungi, wood ants, butterflies, red squirrels,junipers, twinflower and bats.

Work started on two important pieces ofguidance: on the value of deadwood inwoodland and on the management of openhabitats within woodland.

SUSTAINABLE MANAGEMENT

About 60 per cent of British timber comesfrom forests certified under the UK WoodlandAssurance Scheme, which requires evidencethat a range of management options has beenconsidered before a particular course of actionis selected. A prototype decision supportsystem covering the establishment phase ofupland forests was tested by forest managers.The interactive system gives guidance on thetype of cultivation, species, plant typespecification, planting time and herbicidetreatment.

Rhododendron ponticum, although a colourfuladdition to our countryside, is unwelcome inmany situations because it an aggressive non-native invader. In woodland it prevents naturalregeneration and restricts biodiversity. In recentyears there has been an additional reason forefficient control because rhododendrons are ahost of the tree pathogens Phytophthoraramorum and P. kernoviae (page 13). ForestResearch has published a practice guide on themanagement and control of invasive

Forestry Research


Rhododendron ponticum synthesising theresults of research experiments conducted overthe past five to ten years. The work supportedour wider policy of undertaking research toinvestigate alternatives to chemical pesticides,to minimise use when there is no practicablealternative and to protect operator andenvironmental safety by developing bestpractice in the storage, dispensing andapplication of pesticides.

Updated guidance was produced on the use ofsewage sludge in woodlands and on the useof brash mats to protect soil during harvestingoperations.

PEOPLE AND FORESTS

We continued to collaborate with otherdepartments and agencies in commissioninghousehold recreation surveys. These surveysmonitor the number of trips to woodland andput them into the wider context of othercountryside recreation. The CountrysideAgency is leading a consortium for the EnglandDay Visits Survey 2005, to report in summer2006. We are supporting Scottish NaturalHeritage in commissioning the continuousScottish Recreation Survey, now in its thirdyear. A methodology review has beencompleted for a similar survey in Wales, to bepiloted in 2006.

The Forestry Commission has invested heavilyin recreation and forest access in recent years.Recognising the increasing diversity andsegmentation of the recreation market, wecompleted a substantial project quantifying thevalue of forest recreation activities.Concentrating on the local impact of theseactivities this study has shown the full spreadof their impact on local economies. Benefits

from forestry to physical and mental healthwere the subject of a scoping study looking athow to measure the effects of changes to theprovision of accessible greenspace. Thefindings from this study are being takenforward in 2006-07. Health was also the focusof a study commissioned jointly with EnglishNature into the potential economic contributionof countryside access for health. With theNew Economics Foundation we developed anevaluative approach to the use of woodlandsby children in the Forest School programme,where the outcomes were assessed in part bythe children themselves.

The commitments to social and economicresearch made in the Science & InnovationStrategy were taken forward by furtherexpansion of the Social Research Unit inForest Research. This allowed continuedsupport for several collaborative EU projectsand initiation of a major new project inScotland to capture hard evidence of all thebenefits that communities are getting fromactivity in forests. This covers a huge diversityof interests, ranging from sport in the forest tomushroom and berry picking, to theimportance of woodlands in the landscape andthe role of woodlands in health and learning.The study is intended to provide a model forfuture evaluations of complex initiativesdelivering both economic, social and policyoutcomes. The same researchers are alsoevaluating forestry in the Active Englandprogramme.

Forestry Research


We continued to explore how forestry cancontribute to the Government’s priority forgreater diversity in countryside access, withresearch related to racial equality, disability,perceptions of crime and risk, the culturalimportance of woodlands in the countrysideand landowners’ attitudes to access.

Tourism is an increasingly important part of therural economy. We completed and will shortlypublish a study into the part that forestry playsin supporting small to medium enterprises inrural tourism. Our research continues tohighlight the importance of woodlands indefining place and as a point of reference inpersonal and community identity. With thePeabody Trust in London our researchdemonstrated the value of the outdoor andwooded environment to the housing tenants.In the National Forest in England a six-monthethnographic study demonstrated the role ofthe forest in building new social capital in thearea. People, businesses, local authorities andorganisations of all kinds were shown to havea shared, common interest in the stewardshipof their local environment. The findings arevery relevant to rural development policy andalso show that a social dimension, especiallycommunication, is likely to be a significantfactor in the success of regeneration projects.

Social science became the flagship for theForestry Commission’s policy of funding, orhelping to fund, research studentships. Elevenwere supported in 2005-06 on a range oftopics including restorative landscapes, smalllandowners in the rural economy andvolunteers in forestry.

A study was initiated to describe the impact ofthe forest industries on the GB economy bycountry and sector in a consistent manner. It ishoped that this study will introduce a newbaseline for the continuing development of thewider forest industries. Putting this togetherwith our work on the ‘non-industry’ benefits,we are building up the clearest picture yet ofthe contribution forestry makes to theeconomy and people of Great Britain.

People who use forests include those forwhom the forest is a workplace. Research hascontinued to provide information and guidanceon protecting their health and safety at work.In 2005-06 this focused on compliance withthe European Directive on Physical Agents.The Directive covers many workplace hazardsof which those most relevant to forestry arewhole body vibration, hand-arm vibration andnoise exposure. An important output from theresearch, undertaken in partnership with theHealth and Safety Executive (HSE) has beenHSE guidance giving advice to managers andoperators on how to manage the risks fromexposure to whole body vibration.

Forestry Research


Forestry Commission Organisation

THE BOARD OF FORESTRY

COMMISSIONERS

The Board of Forestry Commissioners met inJune, September and December 2005, andMarch 2006. They discussed a wide range ofGB and international forestry issues, includingforest research, health and safety, theForestry Commission’s strategy and corporategovernance, Forest Holidays, communicationsand the Forestry Commission ‘brand’. Theyalso devoted part of the September meetingto looking at wide ranging strategic issues,such as communications, sustainability,funding and research.

At each meeting, the Board also discussed theDirector General’s report, and country reportsfrom the Forestry Commission’s Directors inEngland, Scotland and Wales. Papers for thesemeetings and further information on the Boardof Commissioners are available on our Internetsite: www.forestry.gov.uk.

THE EXECUTIVE BOARD

The main aim of the Executive Board (EB) is toassist the Director General and CountryDirectors in leading the Forestry Commissionby setting policy on corporate matters andensuring effective management.

The members are the ExecutiveCommissioners (Director General and thethree Country Directors), the Chief Executiveof Forest Research and the Heads of HumanResources, Finance and Corporate & Forestry Support. The EB met in April, June,August, October and December 2005 andFebruary 2006.

The EB addressed a wide range of issuesduring the year including the Forest Holidays

PPP, the Business Improvement Programmeand efficient delivery of shared services,procurement policy, governance issues,development of key systems including GLADE,Certification and Climate Change.

Further information on the Executive Board isavailable on our Internet site,www.forestry.gov.uk.

THE FORESTRY COMMISSIONERS’

ADVISORY PANEL (FCAP)

Under the Chairmanship of newly appointedBarrie Hudson, the Panel continued to adviseForestry Commissioners on a wide range ofissues throughout the year. They met twiceduring the year, with both meetings being heldoutwith Edinburgh to seek information on theground from practitioners.

In May, the Panel met with scientists at ForestResearch station in Roslin to discuss theinfluence of forest management on products,markets and income.

In September, the Panel visited Hainault Forestand Thames Chase on the theme of ‘Healthand Well Being’, with the Panel consideringthe question of how the Forestry Commissioncan support different woodland owners toenhance the role of woodlands in improvingthe life of their communities.

The Panel’s Annual Report was presented tothe December Forestry Commissioners’meeting, and can be viewed at the ForestryCommission’s website, www.forestry.gov.uk.

Membership of the Panel is noted inAppendix 3.


REGULATORY REFORM

A Regulatory Reform Order approved by theWestminster Parliament came into force on15 March 2006. The Order increased thepowers of the Forestry Commission in anumber of areas of activity in England andWales by amending the Forestry Act 1967 andthe Countryside Act 1968. The Order:

• allows the Forestry Commission to form orparticipate/invest in companies, to provideloans and establish Charitable Trusts;

• allows the Forestry Commission todelegate its power to charge in connectionwith the provision of facilities in the publicforest estate;

• gives the Forestry Commission the power tocommercially exploit forestry research; and

• allows the Forestry Commission to requirerestocking following unlawful felling withoutfirst obtaining a conviction and to enforcerestocking requirements against lessees andlicensees as well as against freeholders.

Although the Order only applies to Englandand Wales, we are currently involved in theprocess to facilitate identical changes inScotland by passing primary legislation throughthe Scottish Parliament.

However, the power to exploit forestryresearch applies across England, Wales andScotland. This is because intellectual propertylaw, unlike laws relating to forestry, is a matterreserved to the Westminster Parliament underthe Scotland Act 1998.

FOREST HOLIDAYS

The Forestry Commission continued to pursueits search for a partner to run its ForestHolidays business under the Government’sPublic Private Partnership and Wider marketsInitiatives. After a rigorous and very competitiveselection process the Camping andCaravanning Club were appointed PreferredBidder in December 2005 and negotiationscontinued during the remainder of the year tocomplete the deal which was expected to besigned during April or May 2006.

The Club’s offer and the deal envisages that allthe Forestry Commission’s 21 Campsites willbe modernised and brought up to currentstandards, a new forest cabin site will be builtand added to the current three sites, andpermanent units of accommodation will beintroduced to the campsites. The new JointVenture, owned on a 51 per cent/49 per centbasis, will manage the business and it isexpected that this long overdue modernisationwill successfully transform the businesstogether with the opportunity to developfurther sites throughout GB. The ForestryCommission will continue to take an activerole in the business through its 49 per centstake and membership of the Joint VentureManagement Committee.

AWARDS

Queen’s Honours List

The following Forestry Commission nomineeswere successful in The Queen’s Honours List.

Birthday 2005

• Peter James Oliver OBE, Lately Chairman,Woodland Trust. For services to wildlifeconservation;



• Glynn Duane Bullock MBE, Forest Warden,Forest of Dean. For services to forestry;and

• Michael Robert Henderson MBE,Raw Materials Manager, St RegisPaper Company. For services to theforest industry.

New Year 2006

• Martin Frank Gale CBE. Vice-President,International Forestry, UPM KymmeneCorporation and Forestry Commissioner.For services to forestry; and

• Eric Gordon Wright MBE. ForestCraftsman, Forestry Commission,North West England Forest District.For services to forestry.

Wood Awards for the

Best Use of British Timber

The Forestry Commission sponsors a specificcategory in the Wood Awards for the Best Useof British Timber. This year’s winner, ‘PiltonBarn’ in Somerset, was reconstructed fromEnglish Oak some thirty years after themedieval oak-frame roof was destroyed by fire.The judges described the barn ‘a superbexample of workmanship backed up bydetailed research ... it is an extremelyinteresting and effective use of Englishtimber'. The awards received very good presscoverage in both architectural and constructionmagazines. Events of this type continue toraise the profile of British timber.

Green Fleet Public Sector Innovation Award

The Mechanical Engineering Services (MES)Business Unit was runner-up in the GreenFleet Public Sector Innovation Award for 2005.MES worked with industry to identify sevenLPG installation sites north of the border, theForestry Commission has increased LPGusage across its fleet to a total of 155vehicles. Defensive driver training, known tohave a significant bearing on fuel consumption,is encouraged among vehicle users covering inexcess of 5,000 miles per year.



Photograph courtesy of The Wood Awards

Forestry Commission People

SENIOR STAFF

Andrew Raven OBE

On 5 October 2005 we were saddened to hearabout the death of Andrew Raven OBE, Non-executive Forestry Commissioner. Andrew wasalso Chairman of the Deer Commission Scotlandand was involved in many organisations acrossScotland. He had been Chairman of the NationalCommittee for Scotland since the establishmentof Forestry Commission Scotland.

Simon Hodgson was appointed ChiefExecutive Forest Enterprise England on 15September 2005.

Rod Leslie was promoted to Head ofProgrammes Forestry Commission England on15 September 2005.

Les Bryson was promoted to Head ofOperations Forest Enterprise Scotland on 30 September 2005.

Ian Forshaw was promoted to Director Waleson 15 December 2005.

Simon Hodge was promoted to Head ofPolicy and Economic Issues in ForestryCommission Scotland on 1 February 2006.

Martin Gale CBE, Non-executive ForestryCommissioner, was re-appointed for a three-year term from 1 April 2006.

Gareth Wardell, Non-executive ForestryCommissioner, term of office was extendedfrom 1 April 2006 to 17 January 2007.

Dr Olytayo Adebowale was appointed as aNon-executive Forestry Commissioner for athree-year term from 1 April 2006.

Dr Calum MacDonald was appointed as aNon-executive Forestry Commissioner for athree-year term from 1 April 2006.

Simon Hewitt, Director Forestry CommissionWales, retired on 31 May 2005.

Roger Herbert, Head of Country Services,retired on 30 June 2005.

Dr Victoria Edwards OBE, Non-executiveForestry Commissioner, term of office endedon 31 March 2006.

PEOPLE INITIATIVES

A number of key people initiatives havehappened through the year.

IiP

The second exercise to assess the impact ourcontinuing investment in the learning anddevelopment of employees has, through anInvestors in People review. The external Boardassessing the Forestry Commission was ableto conclude that the Commission has beensuccessful in maintaining the principles of theInvestors in People standard. Our accreditationunder IiP will continue for another three years.

Staff Survey

During the spring and autumn of 2005, staffwere interviewed to ascertain what their viewswere about working within ForestryCommission. The first was the internal biennialEmployee Opinion Survey and the second theexternal Investors in People accreditation. Bothexercises provided valuable information aboutemployee’s views.


More people responded to the 2005 OpinionSurvey than previously, just over 66 per cent.The key messages were that employees areproud to work for the Forestry Commission andcommitted to providing a high quality service tocustomers. The area in need of mostimprovement was communication, whereemployees relied more on the grapevine thanformal communication from their managers.This is something, which the ForestryCommission is taking seriously in 2006-2007.

Your Good Health

A new initiative which focuses on theWellbeing of our employees was introduced inJuly 2005, Your Good Health (Iechyd Da inWales). It focuses on raising people’sawareness about their health across a range ofphysical and mental issues. Through theinitiative we provide advice about what to lookout for, who to speak to concerning medicalissues and give people opportunities to look atways of improving diet and exercise ideas. Theprogramme has been a success with initiativesto help employees consider their lifestylechoices changing each month. The programmehas been recognised through the bronze awardfrom the Scottish Health at Work programme.

FORESTRY TRAINING SERVICES (FTS)

FTS Review

As part of the Business ImprovementProgramme (BIP) FTS has been undergoingsignificant organisational change resulting in:

• Forestry Training Services and the ChangeSupport team have been amalgamated toform ‘Learning and Development’;

• All course administration has beencentralised in Silvan House. They will be

joined by our Human Resource trainers andBusiness Development Manager.Reduction in staff has been achievedthrough local relocation and retirement;

• The Management Training Centre, Ae willclose in July 2006 with remaining trainingstaff consolidated in the Forest OperationsTraining Centre, Ae with one dedicatedadministrator for Forest Machine OperatorsCertification Scheme, NPTC, NVQ/SVQschemes and Modern Apprenticeships;

• Management Trainers and our BusinessDevelopment Manager will be based inSilvan House; and

• Two new trainers with fresh experiencehave been drawn from the ForestryCommission to replace those who havemoved on.

Modern Apprenticeships

There is a core of ten apprentices based inScotland and the South of England. Thisnumber looks likely to increase given the risein the ‘expressions of interest’ from ForestryCommission Managers elsewhere in GB eagerto find out more and become involved in theModern Apprentice scheme. A recentrecruitment exercise in Inverness attracted61 applications for two ModernApprenticeship posts.

Tailoring training specifically

to customer needs

FTS continue to work with their customers toensure staff receive the training they need,where and when they need it often cateringfor specific, local needs. The greater use ofAssociate Trainers from the private sector and



from inside the Forestry Commission willsupplement those courses already run by FTS.

SAFETY, HEALTH AND THE ENVIRONMENT

Policy

It is the policy of the Forestry Commission toensure the health and safety of all itsemployees, and to provide appropriately forthe health and safety of others, includingcontractors, visitors, neighbours and membersof the public who use our forests.

Programmes

During the year the Safety, Health &Environment team carried out a Health and Safety Recreation Audit in half of theManagement Units in Scotland, England and Wales. This completed the round started last year.

Next year we plan to carry out support visitsto help staff in the management of pesticidesin the forest.

Accidents

The following figures set out the incidence ofreportable accidents (those causing incapacityfor more than three days) for all staff in 2005-06 and the preceding years. The overall declinein accident rates is encouraging and can partlybe attributed to the higher profile afforded tohealth and safety in forest operations and inother parts of the Forestry Commission’sundertaking.

Year No of accidentsper 100 employees

2005-06 0.93

2004-05 0.94

2003-04 0.93

2002-03 1.01

2001-02 1.10



The Forestry Commission in EnglandIntroduction by Paul Hill-Tout, Director England

This year has seen a number of significantdevelopments in both the role and work ofthe Forestry Commission in England. Theseinclude our role as a Governmentdepartment; progress with our coreprogrammes; development of our deliverymechanisms and ensuring that we areeffectively organised to support and play ourpart in the forestry landscape.

At the start of the year we concluded a newConcordat2 with Defra. This takes forwardour part in the Government’s ModernisingRural Delivery Agenda and Rural Strategy.Defra is now responsible for strategicforestry policy and the Forestry Commissionin England now acts both as an expertadvisor to Government on forestry mattersand Government’s primary delivery body offorestry policy. This new relationship isunderpinned by the Natural Environment andRural Communities Act which paved the wayfor the establishment of Natural England andthe Commission for Rural Communities. Weare looking forward to working with thesetwo new bodies to play our part in deliveringthe vision of the Rural Strategy and forestrypolicy’s part in this.

Our work is guided by the England ForestryStrategy which was published in 1998 andour achievements are reported in thefollowing pages. As the commentary belowshows, forestry continues to play its part insupporting a very broad policy canvas withnotable progress in land regeneration, healthand well being, conservation and protectionof the environment. These policies are the

responsibility of a number of Governmentdepartments in addition to Defra, includingthe Department for Communities and LocalGovernment, the Department for Health andthe Department for Culture, Media and Sport.The breadth of opportunities available forforestry means that the time is right forDefra, with our expert support, to reassesspriorities and capture them in a refreshedEngland Forestry Strategy.

Although our work is directed by a widepolicy agenda that is focused on the deliveryof public benefits, these benefits requiresound forestry practices to ensure theeffective stewardship of existing woodlandsand the creation of new woodlands that bringtangible benefits for society. We havetherefore worked very closely during the yearwith the forestry sector. Implementation ofthe Sustaining England’s Woodlands Reviewand our collaborative work with the EnglandForest Industries Partnership, which arereported below, are two visible signs of this.

A major focus for us this year has been withthe development of the new EnglishWoodland Grant Scheme. This was openedin two phases and we supported theopenings with an unprecedented number ofseminars and workshops for woodlandowners, agents and other stakeholders. TheScheme now provides a range of grants,tailored to meet the needs of the RegionalForestry Frameworks, all within a nationalframework. For the first time, we publishedregional grant prospectuses in order toensure greater transparency for potential


2. http://www.defra.gov.uk/wildlife-countryside/rddteam/pdf/concordat-forestry.pdf

applicants. Our objectives for the Schemeinclude maximising public benefits in anenvironment where the potential demandsfor our grants exceed the available supply of resources. By the end of the year theinitial signs are that demand for our grantsremains high.

In the second half of the year we reviewedour organisational structures to ensure thatthey continue to be deployed effectively. Toenhance our expert role we regrouped anumber of our staff previously working onForestry Authority and Forest Enterprisefunctions into a single, multidisciplinarynational Programme Group. We have alsotaken the opportunity to strengthen our

Communications and Finance teams. Taken together, these changes will enable us to support Defra and other Governmentdepartments and ensure that opportunitiesfor forestry to play a prominent role in the delivery of the Government’s policies are maximised.

The Forestry Commission in EnglandIntroduction by Paul Hill-Tout, Director England


England, General Review

We have been working closely with Defra onthe ‘Modernising Rural Delivery’ Programme toimplement the recommendations of the RuralStrategy. The main areas of work have been:

Legislation – contributing to the NaturalEnvironment and Rural Communities Bill3

(NERC) which received Royal Assent on 30March 2006. The Act will, amongst otherthings, establish Natural England and supportmore flexible delivery arrangements (byallowing the delegation of functions betweendelivery bodies, including the ForestryCommission);

Rural Funding – preparation to rationalise thelarge number of separate rural funding streamsto a framework around three major funds. TheForestry Commission’s English Woodland GrantScheme (EWGS) would be part of one of thesefunds. Implementation of the first phase will becompleted by January 2007 when new fundingarrangements under the new RuralDevelopment Regulation4 are put in place; and

Natural England – preparation for closecollaborative working between the ForestryCommission in England and Natural England.Collaborative working will be achieved bybuilding on our current interactions with theorganisations that will form Natural England.Areas for closer collaboration that we areconsidering include the alignment of deliveryfunctions (and in the first instance grants andlicensing functions), seeking integratedapproaches to land management, theestablishment of ‘first stop shops’, and sharingoffices and specialist staff. In September the

Forestry Commission signed a Memorandumof Understanding5 with the Natural Englandpartners and the Environment Agency tosupport alignment with these agencies. Theappointment of Natural England’s ChiefExecutive Designate in February and thepassing of the NERC Act will provide thefoundations for closer collaborative workingbefore and after Natural England’s formalestablishment in October 2006.

ANCIENT AND NATIVE WOODLAND

POLICY LAUNCH ‘KEEPERS OF TIME’

Forestry Minister Jim Knight MP and theForestry Commission’s Chairman, Lord Clark,launched ‘Keepers of Time: a statement ofpolicy for England’s ancient and nativewoodland’6 at a press conference in Haslemereon 29 June. The new policy represents asubstantial shift in emphasis for forestry inEngland, placing ancient and native woodlandat the heart of forestry policy.

The delivery of the new policy includes aprogramme to encourage the restoration ofancient native woodlands converted toplantations in the last century. This will seeconifers and other non-native tree speciesgradually removed from the English landscapeover the next 20 years or so, to be replacedwith native species, such as oak, ash andbeech, which will be allowed to naturally seedand regenerate.

The policy aims to reverse the decline ofEngland’s ancient and native woodland andimprove its value for wildlife. Threats such asshading from planted conifers, overgrazing by


3. NERC Bill http://www.defra.gov.uk/rural/ruraldelivery/bill/4. Our work with the European Union http://www.forestry.gov.uk/forestry/INFD-6DFKLW5. http://www.forestry.gov.uk/forestry/INFD-6H2HYB6. The full policy document can be viewed on the Forestry Commission website at: www.forestry.gov.uk/keepersoftime.

deer and livestock, competition from non-nativespecies, pollution from agriculture, the effectsof climate change, loss to development, poormanagement and neglect will be addressed asa matter of priority and urgency.

England has a total area of woodland of 1.1million hectares, of which ancient woodlandcovers 340,000 hectares (30 per cent). Of this,140,000 hectares was converted to plantationsduring the twentieth century. The ForestryCommission, which has 53,000 hectares ofancient woodland on its estate, intends to leadthe way in implementing the new policy.

GREY SQUIRREL POLICY

Forestry Minister Jim Knight MP announced anew policy and action plan on grey squirrels7 ina statement to the House of Commons on 20January. The plan outlines ForestryCommission support for humane control ofgrey squirrels in England's woodlands focusingresources on where they are causing thegreatest threat to sustainable managementand associated public benefits, includingpriority red squirrel populations.

ENGLISH WOODLAND GRANT SCHEME

After two years of development the EnglishWoodland Grant Scheme (EWGS)8 wasintroduced in two phases in July and November2005. This was the first significant change toforestry grant schemes in England since theintroduction of the Woodland Grant Scheme

(WGS) in 1988. EWGS is a practical expressionof the devolution of forestry matters and willallow the Forestry Commission to betterrespond to the regional agendas in England.EWGS also incorporates annual payments tocompensate for agricultural income foregonewhen trees are planted on farmland, thisreplaces the previous Farm Woodland PremiumScheme operated by Defra.

FORMATION OF THE NATIONAL

PROGRAMME GROUP

The National Programme Group was formed inSeptember 2005 as a key part of our responseto Modernising Rural Delivery and broughttogether the Forestry Commission's policysupport capability and expert advisers inlandscape, ecology and heritage. The group isresponsible for:

• advising Government on forestry policy;

• formulating delivery plans for the ForestryAuthority and Forest Enterprise;

• providing expert advice to the deliverybodies; and

• leading on key policy areas, including therevision of the England Forestry Strategy,England Rural Development Programme(ERDP), and the Government's response tothe Biomass Task Force.

England, General Review


7. The policy and action document can be viewed on the Forestry Commission website at: www.forestry.gov.uk/forestry/INFD-6L4D378. EWGS http://www.forestry.gov.uk/forestry/INFD-6DCCEN

Sustaining England’s Woodlands

We are continuing to deliver on actions andcommitments identified in the SteeringGroup’s response to the Sustaining England’sWoodlands9 Review (2002) and those in thereport, published in March 200610:

• improving the evidence base;

• enhancing engagement with owners andmanagers;

• strengthening advocacy for woodlands andsustainable forest management;

• developing new and stronger partnerships;and

• using Forestry Commission resourcesmore effectively.

GRANT AID

The England Rural Development Programme(ERDP) sets out the Government’s support foragriculture, forestry and the rural economyover the period 2000-06. The EnglishWoodland Grant Scheme (EWGS) operated bythe Forestry Commission replaced theWoodland Grant Scheme (WGS) and FarmWoodland Premium Scheme (FWPS) during2005. These are part of the ERDP, whichprovides incentives for people to create newwoodlands and plan, manage and improveexisting woods. Tables 1, 2, and 3 show theareas of woodland on which establishment ormanagement grants were paid in 2004-05.Tables 2 and 3 also show trends over recentyears. Overall grants totalling £17.3 millionwere paid out in 2005-06, 40 per cent going

to new planting and 60 per cent to supportthe management of existing woodland. £1million of the total were paid as ‘transitional’grants to ease the change from WGS whichclosed in June 2004 and the opening ofEWGS in July 2005.

TRANSFER OF THE WOODLAND GRANT

SCHEME TO THE ENGLISH WOODLAND

GRANT SCHEME

As mentioned above, EWGS was opened forbusiness in July 2005. A series of elevenregional seminars in June preceded theopening and were attended by around 800applicants and stakeholders.

To coincide with the seminars we published,for the first time, prospectuses for theseminars detailing the amount of grantavailable both nationally and in each of theregions. The introduction of prospectusessignalled a general move to a position wheregrants are ‘offered’ in one financial year andthe resultant contracts have a first payment inthe following financial year.

The first five grants launched includedWoodland Creation Grant thereby ensuring thatthere was sufficient time to receive andprocess applications in time for the 2005-06planting season. The woodland creation scoringround closed at the end of September and wasoversubscribed by about 20 per cent of thevalue of the funds available. The level ofdemand for the grants was encouraging giventhe uncertainties in both the agricultural andforestry sectors arising from the introduction ofnew grant and support schemes. Other grants


9. http://www.forestry.gov.uk/england-sew10. Sustaining England’s Woodlands Review http://www.forestry.gov.uk/pdf/sustainreviewpart1and2.pdf/$FILE/sustainreviewpart1and2.pdf

opened in July were Woodland Planning Grant,Assessment Grant, Regeneration Grant andFarm Woodland Payments.

During the public consultation on our EWGSproposals 52 per cent of responses supportedthe purpose, operation and payment aspectsof the proposed Woodland Management Grant(WMG). In May 2005 we sought furtheradvice on our detailed proposals from ourApplicants’ Focus Group and from a broadercross-section of stakeholders in all regions.These informed our decisions for introducingWMG and Woodland Improvement Grant inNovember 2005.

A new computer system, Grants andLicences Online Services (GLOS), wasintroduced in stages to provide electronicadministrative support for the new grantscheme. By the end of March around 1,600applications had been received representingabout 80 per cent of the funds available forpayment of EWGS grants in 2006-07.

The final two grants Woodland Management(WMG) and Woodland Improvement (WIG)were launched in November. A further seriesof regional applicant seminars were attendedby nearly 1,000 people. Initial interest hasbeen strong in certain regional WIG funds.

WOODLAND HARVESTING, PROCESSING

AND MARKETING GRANT

A Woodland Harvesting, Processing andMarketing Grant was piloted in three regions.Thirteen applications were received, five wereapproved with a further one being successfulafter appeal. It is hoped the experience of thepilot, including a second round of applicationsin early 2006-07, can be used to help make the

case for a similar scheme to be mainstreamedunder the Rural Development Programme forEngland (RDPE) 2007-2013.

FARM WOODLAND AND FARM

WOODLAND PREMIUM SCHEMES

LEGACY TRANSFER PROJECT

Following agreement with Defra and theapproval of an outline business case in 2004 aproject was formally initiated with Defrafunding to transfer the legacy Farm WoodlandSchemes and Farm Woodland PremiumSchemes from the Rural Development Service(RDS) to the Forestry Commission. The aim isto bring the administration of all the mainwoodland schemes under management by asingle Government body. A Project Boardcomprising representatives from RDS, RuralPayments Agency, Defra Forestry Policy Unitand the Forestry Commission was set up,chaired by the Forestry Commission. Theproject’s original timescale of completing thetransfer of data by April 2006 was re-scheduled as it became clear that variousexternal factors impinging on the project wouldpose a significant risk to the 2006 paymentsshould the transfer be attempted prior toOctober. Work is now proceeding on the basisof the transfer taking place early in 2007, withRDS continuing to administer the schemesduring 2006 to ensure a successful paymentround.

Major preparatory work includes alignment of the schemes to Defra’s Rural LandRegister and development of GLOS toincorporate the schemes. Significantefficiencies and benefits should be realisedwith the schemes administered throughGLOS in due course and close linkageachieved with the new Farm Woodland



Payment of EWGS, all part of an improvedservice to customers under the ModernisingRural Delivery change programme.

FELLING REGULATIONS

We continue to exercise strict controls onfelling and issued 1,680 felling licences thatwere not linked to WGS or EWGS plans,compared with 1,438 last year. Theselicences covered 1,066,085 cubic metres; 51per cent of which related to unconditionalthinning and clear-felling operations. We alsoapproved 254 WGS plans during the year.Licences for thinning and felling operations on3,350 hectares of woodland were granted in191 of these approvals. These include 310hectares of clear felling, 54 hectares ofselective felling and 93 hectares of coppicing.No felling licences were issued under thenew EWGS in 2005/06.

We received 178 reports of illegal fellingfrom the public and, after checking ourrecord of approved felling, we investigated36 in more detail. This year we sought 17prosecutions and have 22 cases still to beresolved. In 15 less serious cases, we issuedformal warnings to those involved. Duringthe year 14 restocking notices were servedfollowing successful prosecutions.

The Regulatory Reform (Forestry) Order 2006which came into force in March and affectsEngland and Wales only. The Order providesus with a new power to issue RestockingNotices following unauthorised fellingwithout first having to secure a conviction.This will, in appropriate cases, simplify

matters by avoiding the burden of courtproceedings in order to secure restocking.

Our Conservators continued to receive ForestDesign Plans from Forest Enterprise whichinclude proposed thinning and fellingoperations. These plans are subject to externalconsultation on the same basis as privatesector grant aid and felling licence applications.We have now approved plans covering morethan 235,920 hectares, around 91 per cent ofthe Public Forest Estate in England.

ENVIRONMENTAL IMPACT ASSESSMENTS

During the year, we received two EnvironmentalStatements under the Environmental ImpactAssessment (Forestry) Regulations11 that hadbeen requested in previous years. Both werefor deforestation. One attracted over 700comments during public consultation and wasonly approved after discussions with theapplicant, English Nature and communityrepresentatives and with 18 conditions. Thesecond was refused on grounds ofunacceptable impact on fauna and water quality.This was the first refusal of a ForestryEnvironmental Statement (ES) in England. Werequested one further Environmental Statementfor an afforestation project and this wasundergoing consultation at the year-end. Afurther notable case was brought to ourattention during the year and is thought to bethe first example of a development that hasbeen granted planning permission,subsequently needing to be considered underEIA (Forestry) regulations.As a result of this case it is expected thatDepartment of Communities and Local



11. The Environmental Impact Assessment (Forestry) (England and Wales) Regulations 1999, SI No.2228 1999. The Stationary Office, London

Government (DCLG) will improve their guidanceto Local Planning Authorities in order to reducethe chances of this occurring in the future.

FOREST ENTERPRISE ENGLAND

Forest Enterprise England, an executiveagency of the Forestry Commission, managesthe public forest estate. Its activities are notedin the programmes of the England ForestryStrategy to which they apply. It has also beenset key performance targets and achievementagainst these is presented in Table 4.

All key performance indicators have been metor exceeded except the targets for the unitcost of timber production – target £13.55;achievement £13.56. This was due to anincrease in fuel prices.

ENGLAND FORESTRY

STRATEGY REVISION

Responsibility for the England ForestryStrategy (EFS) and support for the EnglandForestry Forum (EFF) transferred to Defra aspart of the wider move of policyresponsibilities. The Forum met in November12

to discuss the evidence base which iscontributing to the EFS13 revision. The meetingconsidered a number of topic papers preparedby the Defra Forestry Policy Unit, supported bythe Forestry Commission, looking at areasincluding climate change, land management atthe landscape scale, community engagement,forestry industry, natural resource protection,and urban greenspace. The evidence base andEFF discussion will form the basis of theconsultation document which is expected tobe published by May 2006. It is planned to

support the revised strategy with an ActionPlan that the Forestry Commission and NaturalEngland will prepare. This will set out prioritiesand plans for delivering the strategy. Therevised strategy provides and opportunity forraising the profile of woodlands and forestryand engage stakeholders in considering thefuture direction of forestry policy.

REGIONAL FORESTRY FRAMEWORKS14

During the year Yorkshire and The Humber,South West, East Midlands and North Westregions have published a Regional ForestryFramework (RFF) document so that allEnglish regions now have a published RFF. Ineach case this represents the first regionalstrategic expression of the EFS. Theseregional strategies will all eventually includedetailed action plans that the main regionalbodies have agreed in terms of initialpriorities for delivery.

We also commissioned independentconsultants, LTS International Ltd, to analyseand report on all nine RFF publications toassist in planning the Forestry Commission’snext steps involvement in the delivery phaseof implementing the RFF action plans.

The RFF analysis found that:

• the RFFs are all very different and cross-regional comparison is complex.Monitoring, evaluation and evidence oftarget benefits will prove challenging;

• RFFs tend to currently focus onadvocacy actions;



12. http://www.defra.gov.uk/wildlife-countryside/rddteam/forum/051124/index.htm13. http://www.forestry.gov.uk/pdf/fcefs.pdf/$FILE/fcefs.pdf14. Forestry Commission has provided web-based access to all RFF publications and supporting information at:

http://www.forestry.gov.uk/england-rff

• there are four principal methods of fundingdelivery actions, with the ForestryCommission estate delivery dominating sofar. An absence of secured, longer-termfunding is a major risk;

• there is a very high commitment to RFFgovernance to guide delivery; and

• the increasingly complex landscape ofregional strategies and policies raisessignificant co-ordination and support issues.

The Forestry Commission is continuing to playa central role in facilitating the RFF priorityactions in each region, including supportingRFF co-ordinator and delivery manager roles,and secretariat support for RFF SteeringGroups. In its operation of the EnglishWoodland Grant Scheme the ForestryCommission is aiming to increasingly use theRFF priorities to help inform its targeting ofgrant support. RFF priorities are also beingreflected in regional planning documents,demonstrating the value of preparing suchregional forestry strategies.

ENGLAND BIODIVERSITY STRATEGY

The England Biodiversity Strategy15, publishedby Defra in 2002, is being updated withpublication likely in 2006. It is not expectedthat this will involve wholesale revision, butmore on updating of work programmes toreflect programmes already achieved. As partof this we are looking at four key deliverablesof relevance to the Forestry Commission:

• full delivery of the Policy for Ancient &Native Woodland (Keepers of Time) 2005-2007 Action Plan by all relevant players,and publication of a follow-on 2008-10Action Plan to sustain this delivery;

• implementation of policy on therestoration of open habitats from forestrythrough a detailed Action Plan by allrelevant agencies and stakeholders, toinclude a ‘restoration strategy’ for thepublic forest estate;

• incorporation and integration of principlesof ecosystem and landscape scaleapproaches into all relevant policies,practices, delivery mechanisms and actionon the ground for the enhancement andadaptability of woodland biodiversity andother semi-natural habitats; and

• delivery of a programme of action, whichexemplifies best practice management forwoodlands and forests on all publiclyowned land.

CLIMATE CHANGE

Climate change is increasingly influencingforestry policy development and delivery. In contrast to the original EFS, climatechange will figure significantly in the EFSconsultation document; is embedded in theEngland Biodiversity Strategy and the WaterFramework Directive16 and is the principaldriver in the development of an EnglandWoodfuel Strategy. All RFFs consider climatechange, with distinct regional policies andactions expressing both adaptive responses



15. Working with the Grain of Nature: a biodiversity strategy for England http://www.defra.gov.uk/wildlife-countryside/biodiversity/biostrat/index.htm

16. http://www.defra.gov.uk/environment/water/wfd/index.htm

and the contribution that woodlands can playin mitigating the effects of climate change.

Climate Change Programme Review

The update to the UK Climate ChangeProgramme17 was published by Defra inMarch. It reports progress on meetingtargets set in the original (2000) Programmeand identifies further policy measures thatwill contribute to meeting those targets.There is an important commitment toexamine ‘the scope and feasibility of amarket based mechanism to facilitate tradingof greenhouse gas reductions fromagriculture, forestry and other landmanagement sectors’. The Climate ChangeProgramme review will shape how theForestry Commission contributes to reducinggreenhouse gas emissions and respond tothe threats posed by climate change.

The main forestry-related commitments forEngland are:

• the Government will continue to developthe woodfuel supply chain, increasing theoperationally available resources andfocusing on local capabilities though the RFFs;

• the Government will continue to promotethe role of wood as a renewable materialin sustainable development thoughschemes such as ‘Wood for Good’18 whichtransfers knowledge of timber systems tothe construction industry;

• the Government will continue to developadaptation strategies to make woodlandsmore resilient against the impacts ofclimate change; and

• the Government will ensure that thecurrent and future reviews of the EnglandForestry Strategy take full account of theopportunities and risks for forestry fromclimate change. These include forestry’srole in mitigation and its contribution toadaptation strategies to minimise theeffects of climate change.

The contribution to carbon savings from anincreased utilisation of woodfuel for energyand heat production is identified, primarily fromthe redirection of material from ongoingoperations under existing funding streams.The carbon benefits of further increasingwoodfuel utilisation through bringing currentlyunmanaged woodland into management arealso quantified. The contribution that increasedwoodland creation could make is alsodescribed, noting that planting now wouldbring only small savings by 2010 with mostaccruing beyond 2020.



17. http://www.defra.gov.uk/environment/climatechange/uk/ukccp/index.htm18. http://www.woodforgood.com/

England Forestry for Rural Development

Our Rural Development Programme coversforestry’s role in the wider countryside,including its contribution to the ruraleconomy. The programme focuses on therole of trees, woods and woodlandbusinesses in the sustainable development ofrural areas, and how both existing woodlandsand newly created woodland can be managedto deliver enhanced benefits to localeconomies. The potential role of biomass forenergy generation, including the use of wood,continues to increase in importance. Ourperformance against the Spending Review2002 Service Delivery Agreement targets isshown in Table 5.

Key achievements during the year aredescribed below:

ENGLAND FOREST INDUSTRIES

PARTNERSHIP

The England Forest Industries Partnership(EFIP) is a partnership between Governmentand private industry and aims to strengthenthe competitiveness of the forest sector inEngland and increase the sector’s contributionto sustainable development of the economy,environment and local communities.

In January EFIP facilitated a joint timberindustry stand at the ODPM SustainableCommunities Summit. Represented on thestand was Wood for Good, BritishWoodworking Federation, the sector’sNaturally Wood Strategy, the WoodlandInitiatives Network, the Timber Research andDevelopment Association, and the UK TimberFrame Association. The exercise was very

successful with good feed back from visitorsto the summit. EFIP is also taking forwardwork on e-business in the South West Regionand working on a sustainable procurementdatabase with our Conservancies andwoodland initiatives.

The Forestry Commission has commissionedJaakko Pöyry to map the woodlands andforest industries sector in England. This isgiving us a good understanding of the totalindustry supply chain in England, and wherethere may be opportunities for the sector andGovernment to work together to improve thecompetitiveness and sustainability of thesector. The mapping exercise will also look atthe connectivity between traditional forestmanagement, the timber supply chain,tourism and recreation businesses and thedelivery of public benefits from ourwoodlands in England. This work will formthe basis of the EFIP action plan, inform thereview of the England Forestry Strategy, thedevelopment of the Rural DevelopmentProgramme for England 2007-2013 and theaction plans emerging from the RFFs.

WOODFUEL AND BIO-ENERGY

There is intense activity on biomass forenergy at present. The Forestry Commissionis supporting Defra in the preparation of theGovernment’s response to the report of theBen Gill Biomass Task Force19 published inOctober 2005, taking particular responsibilityfor the area of supply chain. The challengeset for the task force was ‘to make proposalsto optimise the contribution of biomass to arange of targets and policies set by the


19. http://www.defra.gov.uk/farm/acu/energy/biomass-taskforce/

Government’. The key recommendation forthe Forestry Commission is number 30. ‘As a first step the Forestry Commissionshould urgently undertake and publish a fullassessment of, and set out a strategic planfor, the development and use of shortrotation forestry, forestry waste, farm andother woodlands, local authority trees andcommercial forestry. This should be deliveredby September 2006.’

Although the Government response to thereport is not expected until April 2006, theForestry Commission has already establisheda new core team in anticipation to take ourwork on biomass forward. We have alsoinvited representatives from the industry aspart of the core team. A key focus for theteam is the wood supply chain. Weorganised a stakeholder meeting20 in March2006 to seek the initial views of a wideranging group, including the industry,environmental sector and the regions, on thechallenges we will need to address if woodis adopted as an opportunity by Government.

The following examples illustrate theincreasing popularity of woodfuels:

Wilton Park Biomass Boiler

Wilton Park is a conference centre in WestSussex owned by the Foreign andCommonwealth Office (FCO) and isconsidered one of the world's leading centresfor the discussion of international issues. Themanagement at the Park is very enthusiasticabout the possibility of obtaining a biomassboiler. The FCO have agreed to let the

Forestry Commission use the centre as acase study in the response to Ben GillBiomass Task Force.

Woodfuel Unit at Rosliston

A wood fuel heating system was installedthis year in the National Forest at theRosliston Forestry Centre, Rosliston,Derbyshire. The partnership project betweenSouth Derbyshire District Council, NationalForest Company and the ForestryCommission received grant aid from theClear Skies programme. Established by theDepartment of Trade and Industry and theBuilding Research Establishment, Clear Skiesprovides funding for the delivery ofrenewable energy developments and helpedto support the new heating system at theVisitor Centre complex, including four luxuryholiday cabins. The newly establishedwoodland around the site is earmarked forsupply of wood chips for the boiler.

TIMBER HARVESTING FROM THE PUBLIC

FOREST ESTATE

A total of 1.51 million cubic metres of FSCcertified timber was harvested from thepublic forest estate in England compared withan initial target of 1.47 million cubic metres.Our timber production supports significantemployment and economic activity inharvesting, haulage and wood processingbusinesses throughout the country. A viableand efficient harvesting and marketing sectoris essential to undertake and fund thesustainable management of woodlands inpursuit of a wide range of objectives. Of thewood volume sold, 62 per cent was standing



20. http://www.forestry.gov.uk/pdf/fce-woodfuel-stakeholder-workshop-060326.pdf/$FILE/fce-woodfuel-stakeholder-workshop-060326.pdf

trees with the balance coming from ForestEnterprise’s own harvesting activity. Thinningoperations contributed 33 per cent of thevolume, demonstrating our continuingcommitment to improvement of both timberquality and the landscape and environmentalvalues of the nation’s woodlands. Timberharvesting through thinning is now a key partof our programme to restore AncientWoodlands on the Public Forest Estate.Clearance of the extensive storm damage inthe North of England was largely completedduring the year with the very clear early focusbeing given to ensuring public safety andreopening our woodlands for public access.

The timber market was buoyant throughoutthe year with good levels of demand and asteady increase in unit prices which led to atotal dispatched timber value of £18.6 millioncompared with an initial Business Plan targetof £17 million. The major storm damage inScandinavia did not have a significant impacton the homegrown timber market. Thesepositive factors are tempered, as we moveinto 2006/07 by the increased energy priceswhich began to impact the processing sectortowards the end of the year. This was a majorfactor in the announcement of the closure ofthe St Regis Company’s Paper Mill nearChepstow which has been the majorconsumer of hardwood timber from England’swoodlands for many years. The closureimpacts on woodland management but also,and most importantly, on the smallbusinesses forming the harvesting andhaulage infrastructure. Replacement of thismarket will be a very significant challenge.

Of the total timber production, over 90,000cubic metres were of hardwood, made up ofboth high quality timber for the bespokebuilding and furniture markets, and fromthinning of 2000 hectares of youngerwoodlands to promote timber quality andimprovement of biodiversity values. This wasa reduction on previous years anddemonstrates the early impact of the closureof the St Regis Mill. Some relief from thisimpact was achieved through the growth ofthe firewood market through the winter.Demand from the sawmilling sector for ourFSC-certified hardwood remained strong andwe had a very successful Hardwood Auctionin November that again also included anumber of lots of high quality, largedimension softwood timber.

Timber processors continue to commit tosignificant investment proposals. Theseinclude sawmillers, panelboard producers andthe energy sector. We have seen majorinvestment in the three sawmills in East Angliaand the rebuilding of the fire-damaged sawmillin the South of England. The announcement ofthe investment programme by Egger in theirchipboard line at Hexham is a very welcomeboost for the sector in the North of England.We have agreed a major contract to supply50,000 tonnes per year of timber to the newwood-fired power station development atTeesside. Our commitment to the market andour long-term contract arrangements are animportant element in bringing theseinvestments to fruition. However, asprocessing capacity increases, the supplycommitment from the private sector will be anincreasingly critical factor as the public estatenow has a stable production forecast.



UK WOODLAND ASSURANCE STANDARD

– ENGLAND COMPLIANCE

Certification of the Public Forest Estateagainst the UK Woodland AssuranceStandard was maintained. The annualindependent surveillance audit wascompleted at West Midlands and North WestEngland Forest Districts. Our timber andvenison will continue to carry the ForestStewardship Council (FSC) logo whichconfirms that the exacting requirements bothof UKWAS and the FSC are being met.

WOODLAND INITIATIVES

The Woodland Initiatives Network has beenhelping groups around the countrycommunicate and share best practice for thepast three years. The Network is supported bythe Small Woods Association and funded by theCountryside Agency and ourselves and thework of the Network’s members has beenshared widely through the production of anewsletter and facilitation of a LearningNetwork. An internet-based register ofInitiatives and projects detailing their diverseareas of work, has also been completed. Theachievements of the Initiatives who make upthe Network can be highlighted in a number ofareas including economic such as increasing thedemand for local timber; revitalising the coppicesector; providing training and business advice;encouraging the community to become involvedwith their woodlands for recreation and health.Wood fuel projects run by a number of theInitiatives have been highlighted to the BiomassTask Force. An evaluation of the Networks[undertaken on behalf of the CountrysideAgency and ourselves in November] concludedthat it was highly valued. Agreement has beenreached, in principle, to continue funding theNetwork for a further three years.

ENGLAND RURAL DEVELOPMENT

PROGRAMME 2000-06

The England Rural Development Programme(ERDP) 2000-06 contributes to a number ofGovernment objectives, including theStrategy for Sustainable Farming and Foodand Rural Strategy 2004. It is the frameworkfor delivering European funding for a widediversity of schemes, including those for agri-environment, woodlands, rural enterprise andless favoured areas. It is the source of co-financing for the Forestry Commission'sgrant schemes, but since state-fundedforestry organisations cannot be beneficiariesthere is no direct relevance to ForestEnterprise. The ERDP ends in December2006 and Defra is currently leading theproduction of the successor Programme.

SUCCESSOR ENGLAND RURAL

DEVELOPMENT PROGRAMME 2007-13

A new Rural Development Regulation wasagreed by the European Union in July 2005,and from January 2007 this will underpin allForestry Commission grant support. Forestryfeatures much more widely than in theprevious Regulation, and there are newopportunities to secure funding for micro-enterprises, training and heritage. TheForestry Commission represents woodlandinterests on Defra's Policy Advisory Group andis contributing to the drafting of the nextregulation programme, the Rural DevelopmentProgramme for England (RDPE).

The priorities for forestry and woodland wereset out in Defra's consultation document onthe next Rural Development Strategy forEngland which was published in February2006, and structured around three themes:



• enhancing the environment andcountryside;

• making agriculture and forestry morecompetitive and sustainable; and

• enhancing opportunities in rural areas forthe disadvantaged.

The final Strategy and the more detailedRural Development Programme for Englandwill be submitted to the EuropeanCommission during 2006, and, onceapproved, will come into effect in January2007. The England Woodland Grant Schemewill be part of 'Axis 2', which coversimprovement of the environment and the

countryside, and delivery will be led byNatural England and the ForestryCommission. This is closely allied to theGovernment's commitment to create a singleEnvironmental Land Management Fund andto develop closer alignment of the ForestryCommission with Natural England. Deliveryof the funds under the other axes relating tothe rural economy and quality of life, will beled by the Rural Development Agencies,working in partnership with Natural Englandand the Forestry Commission.



England Forestry for Economic Regeneration

Our Forestry for Economic RegenerationProgramme outlines a number of ways inwhich woodlands can contribute to strategicland-use planning. The Programme’s prioritiesinclude restoring former industrial land andcreating green and attractive settings in whichto encourage inward investment. In taking thisforward we continue to work with the Officeof the Deputy Prime Minister (ODPM), as wellas Defra. Our performance against theSpending Review 2002 Service DeliveryAgreement targets is shown in Table 5. Keyachievements during the year are describedbelow.

NEWLANDS

Developed by the North West DevelopmentAgency and the Forestry Commission,Newlands is a unique £23 million schemethat will reclaim large areas of derelict,underused and neglected land acrossEngland’s North West, home to a quarter ofEngland's derelict land, and transform theminto thriving, durable, community woodlands.The Newlands scheme will bring a new leaseof life to the North West's urban areas and,through a combination of environmentalimprovement, derelict land reclamation willdevelop new opportunities for leisure andrecreation. The scheme will also bring abouthuge physical change to a region, not leastthe creation of 435 hectares of newwoodland.

The first two Newlands sites, at Moston Valein East Manchester and Bidston at EllesmerePort, have now received approval from theNorth West Development Agency. TheDevelopment Agency have confirmed theirallocation of funding for 2006/07 at £2 million.

Moston Vale

Site works have progressed rapidly and havebenefited greatly from the very dry January.Soil importation is complete on the main partof the site and footpaths are being surfaced.Tree planting and wildflower seeding isimminent. Development work is on target forcompletion by the spring.

Bidston Moss

We have signed a 99 year lease with theMersey Waste Disposal Authority. Accessworks and complete cultivation ready for treeplanting has started and site works are due forcompletion by the spring. This is the ForestryCommission’s first ‘pie crust’ lease which is alegal mechanism that enables us to reduce ourliabilities on potentially contaminatedbrownfield sites by only leasing land to thedepth required for tree growth. Below thisdepth the liability remains the responsibility ofthe lessor.

The Landfill Tax Credit distributor, Biffaward,has agreed to award a grant of nearly£460,000 to the Newlands Merseybeltscheme. This will significantly support andenhance the impact and outcomes onNewlands sites. It adds to the matchedfunding 'pool' that this scheme has attracted,now over £1 million to date, for the ForestryCommission to use in conjunction with theNWDA grant which has provided the mainsource of funding for the scheme.

SOUTHERN GROWTH AREAS

In addition to our more traditional role insupporting wider regeneration initiatives wehave also been able to identify a key role insupporting the Government’s housing growthobjectives. New and existing woodland is


being recognised as having an important roleto play in the provision of high quality green-infrastructure.

As a consequence, we have been working tostrengthen the strategic context for ourengagement in supporting the role forwoodland as part of growth and developmentproposals through the planning process.

In the short term the aim is to develop:

• a revisable schedule of key opportunitieswhere the Forestry Commission caninfluence local planning decisions on greeninfrastructure within the specified area upto the end of 2008; and

• a planning ‘tool kit’ for Forestry Commissionstaff to engage and negotiate effectively withlocal planning authorities, landowners anddevelopers about the identified opportunities.This is a new and innovative area ofengagement for us and we are looking tosee how the benefits can be applied morewidely across the Forestry Commission.

The Forestry Commission was successful inhelping to attract Ministerial support and £2.7 million of ODPM funding to MarstonVale Community Forest. This has enabled atotal project spend of around £7 million andis leading to the creation of over 170hectares of new publicly accessible greenspace South of Bedford.

SALCEY TREE TOP WAY

Over the last couple of years nearly £1 millionworth of ODPM funding has been awarded tothe Forestry Commission for further recreationinfrastructure projects in Salcey Forest,

Northamptonshire to support the River NeneRegional Park. The River Nene Regional Park isa large-scale project to provide and enhance‘green-infrastructure’ in the Northamptonshirepart of the Milton Keynes – South MidlandsGrowth Area. Green-infrastructure provision isrecognised as a key deliverable to support theODPM’s Sustainable Communities Plan.

The most recent piece of funding facilitatedThe Tree Top Way which was opened to thepublic over the Christmas holiday and, despiteindifferent weather, attracted around 1,000visitors on its first day. Designed and built byour Forestry Civil Engineering Business Unit,the structure, which uses green oak as well asthe radio mast bridge technologies developedby Forestry Civil Engineering, rises to 20metres above the ancient woodland floor.Elsewhere within the park, the ForestryCommission is working in partnership with theCounty Council and other agencies to preparestrategic green-infrastructure plans.

THAMES GATEWAY

At the end of March 2005 the Deputy PrimeMinister announced that £5.8 million would beavailable to purchase and develop JeskynsFarm, 147 hectares of arable land in northKent. Situated within the Thames GatewayGrowth Area, Jeskyns Farm was identified bythe Forestry Commission as a suitable tract ofland on which to develop a communitywoodland. It is a key component of theGovernment’s programme for green space inThames Gateway. The site is now under themanagement of Forest Enterprise and aconsultation process and EnvironmentalImpact Assessment is underway.



At an operational level, over £6 million hasbeen allocated to the Forestry Commission byODPM within the Thames Gateway. Thisincludes £1 million awarded to improve therecreational infrastructure and communityengagement process on a former landfill site inthe Ingrebourne Valley.

THE SOUTH YORKSHIRE AND EAST

MIDLAND’S COALFIELDS

The Land Regeneration Trust (LRT), which wasestablished as a pilot project, is a partnershipbetween English Partnerships, Groundwork,the Environment Agency and the ForestryCommission and acts a trustee for derelict,under-used and neglected land. It worksthrough local organisations and partnerships torestore and create new ‘green amenities’ forthe benefit of local people. The Trust is nowtwo thirds of the way through its pilot phase(scheduled to be completed in April 2007).

The first three sites in South Yorkshire weretransferred over to the Trust following theirrestoration to community woodland. Thesesites will be managed by the ForestryCommission on behalf of the Trust, the costsof which will be paid out of dowries providedby English Partnerships. A further three siteswill be transferred over the next year giving atotal in excess of 500 hectares that has beenrestored for the public to use and enjoy. Thesesites will be managed in partnership with otherorganisations such as Groundwork, which willhelp to maximise delivery of uses that thesesites are capable of.

COMMUNITY FORESTS

The Forestry Commission has been a nationalpartner in the development and delivery ofEngland’s Community Forests since their

inception in the late 1980s. Governmentprovided core funding for the programme up to2005, following which Community Forests wereexpected to move towards a more regional andlocal support base, reflecting the benefits theyprovide to local communities. To facilitate thisadjustment, Government agreed an extra twoyears’ transition funding to March 2007.

Each Community Forest has prepared aSuccession Planning Framework, within thecontext of agreed national guidance, to identifythe actions necessary to establish a stable andsecure future. These Frameworks provide abasis for the allocation and management oftransition funding through Forestry CommissionConservancy-based grant agreements.

To mark the end of their pilot phase, TheCountryside Agency commissioned an externalevaluation of England’s Community Forests.This concluded that the programme hadperformed well against its originalenvironmental, social and economic objectives,represented good value for money and hadsignificant potential for further delivery againsta range of Government objectives and targets.Government has indicated its wish to see thelessons from England’s Community Forestsdisseminated and applied more widely acrossother community, regeneration andenvironmental programmes.

As part of transition, lead responsibility inGovernment for community forestry and thetwelve Community Forests was vested in theForestry Commission. Regional ForestryFrameworks will guide any future Governmentsupport for the twelve Community Forests.



England Forestry for Recreation, Access and Tourism

Our Forestry for Recreation, Access andTourism programme promotes more and betterquality public access to woodlands. It alsoincludes opportunities for ensuring that woodsand forests continue to be used for a widerange of recreational pursuits as well assupporting the tourism and leisure industries.The benefit of woodlands and woodlandrecreation to health and well-being is nowbeing more widely recognised. Ourperformance against the Spending Review2002 Service Delivery Agreement targets isshown in Table 5. Key achievements duringthe year are described below.

DEDICATION OF FORESTRY COMMISSION

FREEHOLD LAND FOR ACCESS

The Forestry Commission has completed thefirst phase of dedication of its estate in Englandfor permanent public open access, allowingfuture generations to enjoy the healthyenvironment of its woodlands and forests21.Over 140,000 hectares now have permanentaccess rights. A further 20,000 hectares will bededicated as existing third party rights, such assporting leases, come to an end.

In our statutory role as the Relevant Authorityfor Dedicated Woodlands, trained caseworkersin each Conservancy are processingapplications for restrictions and exclusions ofaccess made by Forest District staff.Applications are routed via the CountrysideAgency’s Open Access Call Centre in Belfast.We have entered into a five-year contract toparticipate in this system.

Until all of the Forestry Commission’sdedicated woodlands become subject to liveaccess rights, it is difficult to predict finalvolumes of casework arising from the need torestrict or exclude access. However, initialimpressions are that casework levels may belower than had originally been anticipated.

HAMSTERLEY FOREST

This project aims to make Hamsterley Forestin County Durham one of England’s premiermountain biking venues and aims to attractmountain bike enthusiasts of all abilities.Teesdale Marketing, a non-profit companywhich aims to promote and encourageeconomic prosperity in the area, is currentlyundertaking an economic impact study toassess the extent to which the local economy,notably in the tourism and leisure sector, willbenefit from the increased number of visitors.

A recently commissioned tourism surveyshowed that there is potential for thedevelopment of visitor facilities andattractions without diminishing the forest’sexisting special qualities. Forest staff haveplans for further improvements to themountain bike network and to eventually builda new visitor centre to complement it.However, this scheme will be costly and, untila time when sufficient funds are available,the efforts of the Forestry Commission andits partners will be concentrated ondeveloping the bike route network.

A parallel project to provide better facilities forhorse riders is currently underway.


21. http://www.forestry.gov.uk/forestry/INFD-69PJGH/

NATURALLY ACTIVE WEBSITE

The website – www.naturallyactive.org –is an interactive resource to enhancerecreational activities in rural areas with two main areas of interest: WoodlandCommercial Recreation and Rural Sport andRecreation. The site also directly givesinformation on useful contacts and otherresources. This website will help woodlandowners and managers looking to diversifytheir business and provide them with advice,guidance and ideas on activities that mightsuit their woodland.

The website was launched in January at ourHigh Lodge Visitor Centre, in Thetford ForestPark, Norfolk. The event was hosted by thesponsoring partners including the East ofEngland Development Agency, the East ofEngland Tourist Board, Sport England Eastand ourselves. The speakers at the launchwere joined by paralympic runner, DannyCrates, who led school children in ademonstration of some novel activities thatcould take place in rural areas, includingFrisbee golf and llama trekking.

NATURAL BENEFITS

The Countryside Agency, English Nature, theRural Development Service, in partnership withthe Institute for Health and Clinical Excellenceand ourselves, have produced ‘NaturalBenefits in the East of England’. NaturalBenefits shows how the work of thecountryside sector across the East of Englandcan contribute towards the Government’stargets for health. It combines evidence onwhat works to improve health, with many

examples of how this can be delivered throughpractical projects, many of which also addresswider countryside objectives.

ACTIVE WOODS

The plans for Active Woods 2006 are wellunderway. This year, many more healthy livingevents will be run across the country and willbuild on activities such as Tai Chi in the Woodsand Follow the Dog, which made 2005 sosuccessful. The campaign aims to get peoplemore aware of the opportunities afforded tothem locally to live a healthier life and somedia coverage is targeted at local press.

‘Nature’s Health Service’22 is a report producedby Forest Research, it pulls together all theoutcomes and evaluations from the healthdemonstration projects that have beendeveloped over the last couple of years and isa useful précis of our relevance andcontribution to the health agenda.

A leaflet has been produced by ForestResearch which promotes a number of ourActive Woods publications pulling together thedemonstration projects and their evaluations.This leaflet was placed in delegate packs forthe UK Public Health Association conference inTelford and the SportEX Major Moves inPhysical Activity Promotion conference inBirmingham.

A celebration of the first year's work of thePilot Health Project took place at ChopwellWood in June 2005. At the event the Projectreported achievements in its first year in termsof the contacts established, the number of GP



22. http://www.forestry.gov.uk/pdf/FR_twnhs_book.pdf/$FILE/FR_twnhs_book.pdf

referrals to woodland activities, particularlywalking and cycling, and the success of theHealthy Schools programme. Over 40 peopleattended the event from a wide range oforganisations such as Primary Care Trusts, theStrategic Health Authority, Gateshead Council,Age Concern and day care centres as well aslocal GPs and schoolteachers.

SUMMER CONCERTS – FOREST TOURS

Our 2005 summer concerts programme,marketed under our forest tours banner, againproved very successful with estimatedaudiences of over 100,000 visiting our foreststo see acts such as Beautiful South, JoolsHolland and his Rhythm & Blues Orchestra,Madness, Ian Brown and Daniel Beddingfield.

We now host concerts of various musicalstyles at Delamere Forest Park in Cheshire,Bedgebury Pinetum in Kent, WestonbirtArboretum in Gloucestershire, Sherwood PinesForest Park in Nottinghamshire, Dalby Forestin North Yorkshire and Thetford Forest Park inSuffolk. With total turnover approaching £2million this is now a major business but it hasalso become a major positive promotion forthe Forestry Commission.

TWO ACTIVE ENGLAND PROJECTS

Sport England awarded funding for twoadditional projects on our Estate alongsideRosliston Forestry Centre which was reportedon last year and the implementation of whichwas completed this year.

• the Bedgebury Forest and Pinetumreceived funding of £700,000 out of a totalproject cost of £1.6 million. The project hasdelivered a new all-timber visitor facilitiesbuilding which would use fuel heating. This

contains a classroom, small café, cycle hireand retail business, toilets and showers,friends room and office. In addition accessto the forest has been greatly increasedwith an innovative and exciting all abilitiesplaytrail, family walking and cycling routes,and a single track mountain bike route andskills area. The project was constructedwithin a very tight nine-month window andsuccessfully opened to an excited public ontime and to budget over the Easterweekend. The three year fundingprogramme for the project includes supportfor a Partnerships Officer, an OutreachWorker and a Marketing Manager; and

• the Haldon project received funding of£763,000 out of a total project cost of950,000.The project has delivered an all-ability play trail, family cycle trail, singletrack mountain bike route and skills area,toilets and showers. Again the project wasdelivered on time and to budget andopened to the public at the Easterweekend. The project has funded anOutreach Worker. In addition, at Haldon, aredundant building has been converted intoa gallery and workspace by a charity, theCentre for Contemporary Art in theEnvironment.

MAJOR FOREST CENTRE

INFRASTRUCTURE PLANNING PROJECTS.

The planning of a major refurbishment of theGrizedale Forest Centre which will delivergreatly improved facilities for visitors and awide range of business opportunitiesthroughout the valley has now beencompleted. Planning approval has now beenobtained. Decisions from principal funderswere awaited at the year end. A major new



single track mountain bike route wascompleted with sponsorship monies fromoutdoor clothing manufacturer North Face of£60,000.

At Fineshade in Northamptonshire, planningwas completed for a major new visitor centrewhich will convert a combination of the formeroffice accommodation and other redundantbuildings. The funding is now in place with£980,000 from ODPM. Completion is expectedearly in the visitor season of 2007.

The Forest Centre at Alice Holt Woodland Parkin South East England has undergone animportant makeover to keep pace with theever-increasing number of visitors to the area(264,000 in 2004). Turnover at the ForestCentre continues to rise steadily, approaching£140,000 for 2004-05, with visitor numbers onsome days in the school holidays last summerbeing near capacity. Significant increases ineducational facilities have continued to attracta range of young visitors.

FOREST EDUCATION INITIATIVE

The Forest Education Initiative (FEI), apartnership of nine organisations, is nowsupporting over 30 cluster groups acrossEngland. Over £40,000 was distributed inpartnership funds throughout 2005, supportinga variety of work including the development ofa story sack called ‘Harry’s Hazelnut’, thedevelopment of more Forest Schools and Seedto Saw projects. The FEI co-ordinator wasmade a permanent full-time employee of theForestry Commission, increasing the level ofsupport provided for the development of FEI inEngland. An England-wide FEI steering grouphas now been formed which will help to directactivity specifically relevant to England. Onbehalf of FEI, we have led the development ofa quality assurance framework to support thedevelopment of Forest School. A feasibilitystudy was undertaken in 2005 and consultationwith Forest School providers and trainers hasled to further piloting during 2006.



England Forestry for Environment and Conservation

The Forestry for Environment and Conservationprogramme embraces the role that trees andwoodland can play in conserving and enhancingthe character of our natural environment andcultural heritage. It also contributes todelivering the Government’s internationalcommitments on biodiversity and climatechange. Our performance against the SpendingReview 2002 Service Delivery Agreementtargets is shown in Table 5. Key achievementsduring the year are described below.

AREAS OF OUTSTANDING

NATURAL BEAUTY

Our joint project23 with Countryside Agencycontinues with additional posts or staff timebeing provided for woodlands in ten differentAreas of Outstanding Natural Beauty (AONB),from Kent to Northumberland. We helpedsupport work in the High Weald to update andimprove the Ancient Woodland Inventory andthis has identified many new small ancientwoods and produced an accurate digital map.

SITES OF SPECIAL SCIENTIFIC INTEREST

IMPROVEMENT PROGRAMME

Progress against the target for putting Sites ofSpecial Scientific Interest (SSSIs) into'favourable and recovering condition' on thePublic Forest Estate has now reached 81 percent, which puts us well ahead in achievingthe target of 85 per cent by the target date ofApril 2008. The condition of woodland SSSIsin other ownerships also continued toimprove, with 78 per cent meeting the target.A Woodland Improvement Grant specificallyfocused on woodland SSSIs was launched,along with support for other initiatives to

address causes of unfavourable conditions,particularly deer.

DEER INITIATIVE

The Deer Initiative (DI) has received re-endorsement from Ministers for its role inensuring the delivery of a sustainable wilddeer population in England. This endorsementhas been accompanied by a significantincrease in the core funding of the DI, withfunds now coming from Defra, English Natureand the Countryside Agency as well as theForestry Commission. Jane Rabagliati,recently retired Director of SustainableDevelopment and Rural Affairs in theGovernment Office for the East of England,has been appointed chair of the DI, takingover from Andrew Hoon. New Deer LiaisonOfficers have been appointed by the DI towork in South West England and East andWest Midlands.

WOODLAND MANAGEMENT FOR BATS

Bats and their roosts enjoy strict protectionunder the Countryside and Rights of Way Act(CRoW) and Habitat Regulations. Togetherwith colleagues in Wales we led an initiativeinvolving English Nature, the CountrysideCouncil for Wales, and the Bat ConservationTrust which launched a good practice guide24

in October in Exmoor at the first of fourregional outreach seminars rolling out theadvice. This fills an important guidance gapfor woodland managers. At a special ECmeeting considering amendment of theHabitats Directive, Defra put this guideforward as a good example of the pro-activeUK approach to conservation of European


23. http://www.forestry.gov.uk/pdf/aaonbe.pdf/$FILE/aaonbe.pdf24. http://www.forestry.gov.uk/forestry/INFD-6K3CXY

protected species.

WOODLAND MANAGEMENT FOR BIRDS

The joint RSPB/Forestry Commission England‘Woodland Management for Birds: a guide tomanaging for declining woodland birds inEngland’25 was launched at Tudeley, Kent inSeptember. The guide focuses on 27 woodlandand edge species in steady or steep declineand summarises advice on the practicalmanagement needs of each, based on currentecological knowledge.

The guide is part of a growing package ofresearch, survey, guidance and outreach workdeveloping through the Forestry CommissionEngland-led UK Woodland Bird Group(UKWBG) which co-ordinates action aimed atreversing woodland bird declines.

REPEAT WOODLAND BIRD SURVEY

On 20 March, the results of the mostcomprehensive survey of woodland birds forover 20 years were unveiled by BiodiversityMinister, Jim Knight, with some importantfindings. The Repeat Woodland Bird Survey26

was funded by Defra, the Forestry Commission,the Woodland Trust, English Nature, the RSPBand BTO, and was carried out and published bythe RSPB and BTO. The report highlights thewinners and losers of the bird population as aresult of our changing landscape and climate,and enables comparison with data from thesame surveys carried out over the last 40 years.

Nationally, eleven out of the 34 speciessurveyed showed large increases in numbers(greater than 25 per cent), whilst eight showed

large decreases (greater than 25 per cent).However, one of the most worrying trendswas the decline in long-distance migrants,confirmed for the first time in this survey.Birds such as the tree pipit and spottedflycatcher showed declines of up to 70 percent in some areas. Amongst residentpopulations and mid-distance migrants therewere some unexpected success stories, withcontinued growth in numbers of morecommon birds such as coal, blue and greattits. However, concern continues to grow fortheir rare cousin the willow tit, which showeda decline of over 70 per cent in some areas.

We acted as a facilitator to pull together thepartners, and provided necessary funding.Many of the findings of the survey will bediscussed further at the Woodland BirdConference in Leicester in April, and will beused as a basis for further research studiesplanned by the funding partners.

NATIONAL NIGHTJAR SURVEY

The results of last year’s nightjar survey havenow been published. They show that after acentury of decline, nightjar populations areincreasing due primarily to better heathlandmanagement and cyclical clear felling. OurNorth Yorkshire forests showed the greatestincrease, rising to over 200 pairs from only 50in the mid-1980s.



25. http://www.forestry.gov.uk/forestry/INFD-6JDHQV26. http://www.forestry.gov.uk/forestry/INFD-6MWL96

Nightjar and Woodlark, both closely connectedwith forestry in the last century, haveinfluenced the management of the nationalforest estate since the 1990s. Over 18,000hectares of Thetford Forest are designated asEuropean Union Special Protection Area andout of the 30 Species Action Plans for birdsthese are two of the very few to haveexceeded their biodiversity action plan target.

GREY SQUIRREL POLICY

Forestry Minister Jim Knight MP announcedthe new action plan in a statement to theHouse of Commons on 20 January. Thedocument, published in January, outlined theplan to humanely control grey squirrels inEngland, particularly in areas where they aredamaging woodland and threatening redsquirrel populations.

The action plan and the policy behind it havebeen developed jointly by Defra and ourselves,following consultation with partners andgroups representing countryside, woodlandand forestry interests, animal welfare andconservation groups. It balances the need tocontrol grey squirrel numbers in England inorder to allow native species – including redsquirrels, dormice and woodland birds – toflourish, with an acceptance that eradication ofthe grey squirrel is not a realistic option.

As a result there has been extensive nationaland local press interest, which seems to give abalanced account of the policy and what it willentail. The policy was also published on theForestry Commission website.

RED ALERT NORTH EAST

We have recently been involved in a bid forfunding from the Heritage Lottery Fund for amajor new initiative aimed at raisingawareness about the plight of native redsquirrels – we hope to hear if we have beensuccessful in April. The ‘Save Our Squirrels’project, costed at £1.1 million, will bemanaged and co-ordinated by NorthumberlandWildlife Trust on behalf of the Red Alert NorthEngland (RANEng) partnership and concentrateon the 16 priority sites in North England.

At a regional level, Defra have indicated adesire to support red squirrel conservation inthe buffer zones of all the reserves, applyingthe lessons learnt from the pilot project.Discussions have begun as to how this can betaken forward. There is now a sense thatDefra, Forestry Commission, English Nature,the Wildlife Trusts and other Red Alert partnersare all now pooling resources and workingtogether to deliver the Northern England redsquirrel conservation strategy.27



27. Contact Northern England development officer Richard Pow, [email protected], for further information.

AppendicesAppendix 1

THE ROLE AND STRUCTURE OF THE

FORESTRY COMMISSION

as at 31 March 2006

As the Government Department for forestry inBritain we have a statutory duty to promotethe interests of forestry, balancing the needsof timber production with those of landscapeand conservation. We are responsible for

effective implementation of forestry policiesand can only do this by working with others.We aim to be an effective, open andresponsive organisation, committed toproviding a first class service and striving toachieve continuous improvement. We have astructure designed to deliver Governmentpolicy in England, Scotland and Wales.


FORESTRY COMMISSIONERS AND SENIOR

STAFF AS AT 31 MARCH 2006

Board of Commissioners

Lord David Clark ChairmanTim Rollinson Deputy Chairman and

Director GeneralPaul Hill-Tout Director EnglandDr Bob McIntosh Director ScotlandIan Forshaw Director WalesAnthony Bosanquet Non-executive

Commissioner WalesTony Cooper Non-executive

Commissioner EnglandDr Victoria Edwards Non-executiveOBE Commissioner EnglandMartin Gale CBE Non-executive

Commissioner ScotlandGareth Wardell Non-executive

Commissioner WalesForestry Commission GB and Central

Services

Wilma Harper Secretary and Head ofCorporate and ForestrySupport

Kim Lardge Director HumanResources

Keith Gliddon Director FinanceAlan Mitchell Head of Business

Services

Forestry Commission England

Paul Hill-Tout Director EnglandSimon Hodgson Chief Executive Forest

EnterpriseForestry Commission Scotland

Dr Bob McIntosh Director ScotlandDr Hugh Insley Chief Executive Forest

EnterpriseForestry Commission Wales

Ian Forshaw Director WalesBusiness Units

Craig Heaney Director Business UnitsForest Research Agency

Professor Jim Lynch Chief ExecutiveDr Peter Freer-Smith Chief Research Officer



STATUTORY AND OTHER

COMMITTEES APPOINTED BY


Membership at 31 March 2006

National Committee

The Committee is appointed by the ForestryCommissioners under Section 2(3) of theForestry Act 1967, which states that:

“The Commissioners shall by order appointcommittees for England, Scotland and Walesrespectively, whose membership shall consistpartly of persons who are ForestryCommissioners or officers of the Commissionand partly of persons not exceeding three innumber, who are not Forestry Commissionersor officers of the Commissioners; and theCommissioners may delegate, subject to suchrestrictions or conditions as they see fit, and oftheir functions to a committee so appointed.”

England

Lord David Clark (Chair), Charlotte Cane, Tony Cooper, Gerald Dawe, Dr Victoria EdwardsOBE, Paul Hill-Tout, Simon Hodgson, Judith Webb, David Coleman [Defra Observer].Secretary to the Committee: Mark Pritchard. TheCommittee met in June, July, September andNovember 2005 and in January and March 2006.

Regional Advisory Committees

The Committees are appointed by the ForestryCommissioners under Sections 37 and 38 of theForestry Act 1967; their terms of reference are:

a. to advise the Forestry Commissioners onthe performance of the ForestryCommissioners’ functions under Section1(3) and Part II of the Forestry Act 1967; and

b. to advise the Forestry Commissioners onsuch other functions as the ForestryCommissioners may from time to timedetermine. These additional functionsinclude:

• conciliate in all disputed applications forgrant aid, felling licences or approval ofplans of operations under a closedgrant scheme where there is asustained objection by a statutory body;and advise the Forestry Commission on other applications when asked to doso by the Conservator;

• advise the Forestry Commission on theimplementation at regional level ofnational forest strategies andassociated policies, together with anyexpressions of these in regionalforestry frameworks;

• advise on a small number of specifictopics and issues whichCommissioners will select, focusing onregional issues or implications; and

• inform the Forestry Commission ofmatters of regional or local concern onwhich the RAC considers it necessaryto comment.

The Forestry Commissioners usually ask theRegional Advisory Committees for their viewson proposed changes to the Regional AdvisoryCommittee structure, composition or remit, orto the Forestry Commission’s grant schemesand felling licence procedures and associatedconsultation arrangements.



ENGLAND

North West England Conservancy

Professor John Handley (Chair), Martin D Clark,Neil Cumberlidge, Tom Ferguson, Martin Harker, Liz Newton, Martin P Reynolds, Karen Slater. Secretary to the Committee:Andrew Loynd. The Committee met in Juneand October 2005 and March 2006.

North East England Conservancy

Denise Caudle (Chair), Martyn Batchelor, Clive Davies, David Fruin, Neil Harrison, Lord Anthony Hill, Sian Thomas, Lorraine Weeks, Doug Wentworth. Secretary to the Committee: Isabel Farries.The Committee met in June, September and December 2005 and March 2006.

Yorkshire and The Humber Conservancy

Professor Carys Swanwick (Chair), David Clayden, Val Dilcock, Martin Glynn,Gordon Kingston, Alan Simson, Peter Townson, Richard Walker, David Wilmot Smith MBE. Secretary to theCommittee: Lesley Dyson. The Committeemet in June and October 2005 and March 2006.

West Midlands Conservancy

Stephen Potter (Chair), Mike Bradbury, Graham Hunt, Nerys Jones, Sara Roberts,Russell Rowley, Andrew Sharkey, Helen Woodman. Secretary to the Committee: Julia Hall. The Committee met in July andNovember 2005 and March 2006.

East Midlands Conservancy

Julian Purvis (Chair), Ian Biddulph, Steve Clifton,Richard Harvey, Assim Ishaque, Clive Keble,John Lockhart, J Geoff Machin OBE, Councillor Roy Mayhew. Secretary to theCommittee: Linda Gravells. The Committee metin June and October 2005 and February 2006.

East of England Conservancy

Dr Gerry Barnes (Chair), Michael Allen, Dr Robert Fuller, Steele Haughton, Julian Pitt,Richard Powell, Tony Talbot, Richard Tattersall,Stephen Westover. Secretary to theCommittee: Rose Proctor. The Committee metin July and October 2005 and February 2006.

South West England Conservancy

Sir Harry Studholme (Chair), Sue Blacker, Dr Richard Cresswell MBE, David Dixon,Richard Lloyd, John Rainger, Chris Roberts,David Sisson, Gwilym Wren. Secretary to theCommittee: Rachel Pearce. The Committee metin June and November 2005 and March 2006.

South East England Conservancy

Bridget Bloom OBE (Chair), Nigel Braden,Valerie Carter, Andrew Ingram, Duncan Mackay, Steve Rodrick, Derick Stickler,John Tucker, Dr Tony Whitbread. Secretary tothe Committee: Caroline Ewin. The Committeemet in June and October 2005 and March 2006.

London Conservancy

Marion Kerr (Chair), Paul Akers, Jane Carlsen,Mathew Frith, Jenny Scholfield, Graham Simmonds, David Wardle. Secretary tothe Committee: Rose Proctor. The Committeemet in July and October 2005 and March 2006.



Forestry Commissioners’ Advisory Panel

Barrie Hudson OBE (Chair), Dr Hilary Allison,Dr Peter Bonfield, David Crichton, Tony Hams,Chris Inglis, Professor Terry Marsden, John Meehan, Councillor Iain Ross, Adrian Whiteman, Peter Wilson, William Worsley. Secretary to the Committee:Linda McGinley. The Committee met in Mayand September 2005.

Advisory Committee on Forest Research

Professor David Read (Chairman), Dr Christine Cahalan, Professor Roland CliftOBE, Professor David Evans, Professor Peter Freer-Smith, Professor Chris Gilligan, Dr Steve Gregory,Professor Paul Jarvis, Dr Keith Kirby, Professor Jim Lynch, Professor CatherineWard-Thompson. Secretary to theCommittee: Claire Holmes. The Committeemet in April and November 2005.

Forestry Research Co-ordination

Committee

Wilma Harper (Chair), R Brand-Hardy, Malcolm Beatty, Kerry Broadfoot, JohnBrumwell, Professor John Grace, ProfessorBob Harris, Helen Jones, Dr Keith Kirby, Gerry Lawson, John Palmer, Clive Thomas, Dr David A Rook, Cedric Wilkins. Secretary tothe Committee: Professor Peter H Freer-Smith.The Committee met in November 2005.



PUBLICATIONS

The Forestry Commission published thefollowing titles during the year ending 31 March2006. Details of all publications can be found onour website at: www.forestry.gov.uk/publicationsand many titles can be viewed and downloadedfree of charge.

Forestry Statistics 2005 (web publication) www.forestry.gov.uk/statistics

Forestry Facts and Figures 2005 free

PRACTICE GUIDES/NOTES

FC Practice Note 13: Managing brash on conifer clearfell sites free

TECHNICAL GUIDES/NOTES

FC Technical Guide: Forest fencing £7.50

TECHNICAL NOTES

(ALL FREE OF CHARGE)

9. Small-scale systems for harvestingwoodfuel products

10. Extraction route trials on sensitive sites

11. Protecting the environment duringmechanised harvesting operations

INFORMATION NOTES (ALL FREE OF

CHARGE)

65. Water Use by Trees

66. Development of Multiple Leaders in SitkaSpruce and Japanese Larch FollowingOutplanting

67. Needle diseases of pine

68. Shoot diseases of pine

69. Climate change and British woodland

70. Utilisation of Lodgepole Pine

71. Golden Eagles and New Native Woodlandin Scotland

72. Birch Dieback in Scotland

73. Evaluating Biodiversity in FragmentedLandscapes: Principles

74. Woodland Owners' Attitudes to PublicAccess Provision in South-East England

75. Forest Condition 2004

76. Habitat Use by Red and Grey Squirrels:Results of Two Recent Studies andImplications for Management

77. Selecting the Right Provenance of Oak forPlanting in Britain

78. The Influence of Soils and Species on TreeRoot Depth

79. Use of Sewage Sludges and Composts inForestry

ORDERING PUBLICATIONS

To order copies of Forestry Commissionpublications, please contact:

Forestry Commission PublicationsPO Box 25Wetherby, Yorkshire LS23 7EW

Telephone: 0870 121 4180Fax: 0870 121 4181E-mail: [email protected]



TablesTable 1

AREA OF PLANTING BY PRIVATE WOODLAND OWNERS FOR WHICH GRANTS WERE PAID

IN THE YEAR ENDED 31 MARCH 2006

HectaresENGLAND WALES SCOTLAND GREAT BRITAIN

Woodland New Restocking Total New Restocking Total New Restocking Total New Restocking TotalGrant Planting Planting Planting PlantingScheme

Conifer 78 200 278 8 516 524 456 250 706 542 966 1,508Broadleaved 2,828 393 3,221 452 277 729 2,036 378 2,414 5,316 1,048 6,364Scottish

Forestry

Grant

Scheme

Conifer 528 2,786 3,314 528 2,786 3,314Broadleaved 841 423 1,264 841 423 1,264English

Forestry

Grant

Scheme

Conifer 4 - 4 4 - 4Broadleaved 44 - 44 44 - 44TOTAL 2,954 593 3,547 460 793 1,253 3,861 3,837 7,698 7,275 5,223 12,498

Notes:

1. The figures include new planting grant-aided in association with the Farm Woodland Premiumscheme administered by the Agriculture Departments.

2. The areas of new planting and restocking include those areas where the second instalment ofgrant for Natural Regeneration has been paid.

3. The GB area of new planting includes 36 hectares of Short Rotation Coppice which wasgrant aided.


AREA OF PLANTING BY PRIVATE WOODLAND OWNERS FOR WHICH GRANTS WERE PAID

IN THE 20 YEAR PERIOD 1 APRIL 1986 TO 31 MARCH 2006

Hectares

ENGLAND WALES SCOTLAND GREAT BRITAIN

Year ended New Restocking Total New Restocking Total New Restocking Total New Restocking Total31 March Planting Planting Planting Planting1987 1,219 2,644 3,863 708 280 988 17,220 1,547 18,767 19,147 4,471 23,618

1988 1,679 2,718 4,397 945 476 1,421 21,197 1,660 22,857 23,821 4,854 28,675

1989 1,752 2,330 4,082 923 256 1,179 22,433 2,248 24,681 25,108 4,834 29,942

1990 3,366 3,871 7,237 552 270 822 11,488 1,984 13,472 15,406 6,125 21,531

1991 4,363 3,970 8,333 510 296 806 10,563 2,840 13,403 15,436 7,106 22,542

1992 3,966 4,042 8,008 356 579 935 9,825 3,210 13,035 14,147 7,831 21,978

1993 5,052 3,811 8,863 429 654 1,083 9,814 3,609 13,423 15,295 8,074 23,369

1994 6,091 3,700 9,791 626 441 1,067 9,180 4,314 13,494 15,897 8,455 24,352

1995 4,997 2,475 7,472 554 626 1,180 12,577 3,068 15,645 18,128 6,169 24,297

1996 4,338 1,972 6,310 442 620 1,062 10,195 3,169 13,364 14,975 5,761 20,736

1997 4,348 2,027 6,375 411 814 1,225 11,212 3,692 14,904 15,971 6,533 22,504

1998 4,123 1,984 6,107 485 804 1,289 11,304 2,737 14,041 15,912 5,525 21,437

1999 4,875 1,726 6,601 629 802 1,431 10,410 2,958 13,368 15,914 5,486 21,400

2000 5,414 1,414 6,828 744 813 1,557 10,363 3,083 13,446 16,521 5,310 21,831

2001 5,365 1,708 7,073 447 759 1,206 11,627 3,561 15,188 17,439 6,028 23,467

2002 4,324 949 5,273 270 757 1,027 7,880 2,884 10,764 12,474 4,590 17,064

2003 4,592 965 5,557 329 713 1,042 6,634 3,489 10,123 11,555 5,167 16,722

2004 3,995 758 4,753 469 420 889 6,703 3,618 10,321 11,167 4,796 15,963

2005 4,659 840 5,499 534 270 804 5,647 4,193 9,840 10,840 5,303 16,143

2006 2,954 593 3,547 460 793 1,253 3,861 3,837 7,698 7,275 5,223 12,498

Notes:

1. This table includes planting grant-aided under the Woodland Grant Scheme in associationwith the Farm Woodland and the Farm Woodland Premium Schemes administered by theAgriculture Departments

TablesTable 2


AREA OF MANAGEMENT GRANT FOR WHICH GRANT WAS PAID IN THE YEAR ENDED

31 MARCH 2006


Standard MG 23 - - 23Special MG 15 - 4 19Annual MG 154,258 5,188 23,464 182,910Woodland Improvement Grant 8,859 9,616 19,142 37,617Livestock Exclusion Annual Premium 1,848 735 7,453 10,036TOTAL 165,003 15,539 50,063 230,605

TablesTable 3


AREA APPROVED FOR MANAGEMENT GRANT UNDER THE WOODLAND GRANT SCHEME


1996-97

Conifer 3,257 458 5,103 8,818Broadleaved 12,679 1,295 4,946 18,920Total 15,936 1,753 10,049 27,738

1997-98


1998-99


1999-00


2000-01


2001-02

Conifer 4,578 493 3,051 8,122Broadleaved 15,394 963 2,058 18,415Total 19,972 1,456 5,109 26,537

2002-03


2003-04


2004-05

Conifer 5,947 81 802 6,830Broadleaved 24,475 146 245 24,866Total 30,422 227 1,047 31,696

2005-06

Conifer 392 1 - 393Broadleaved 2,523 - - 2,523Total 2,915 1 - 2,916

TablesTable 3


FOREST ENTERPRISE ENGLAND SUMMARY OF KEY PERFORMANCE MEASURES 2005-2006

Sustainable Forest Management Target for 2004-05 Achieved

Percentage of forest estate certified as sustainably managed. 100% 100%Percentage of estate managed in accordance with approved 90% 91%Forest Design Plans. Social

Increase in area of forest estate with public access. 160 hectares 176 hectaresArea of new woodland created in priority areas for improving 80 hectares 158 hectares the environment of disadvantaged urban communities. Economic

Percentage of the annual timber increment which is harvested. 74%28 77%Income generated from sources other than timber production £21.0m £28.4m29

and sales of land and property. Environmental

Percentage of SSSIs in favourable or recovering condition. 75%30 81%Progress with implementing relevant UK Biodiversity Action Complete removal of CompletedPlan targets. plantations from 2,000

hectares of heathland sitesOperational

Cost per cubic metre of production. £13.55 £13.56Profit/(Loss) on timber operations. £6.1m £7.1mNumber of reportable accidents per hundred employees. 1.8 1.4Rate of return from capital invested in the ‘Forest Holidays’ business. 6.0%Percentage of customers and community partners “satisfied”. Key sites will achieve Met

an average satisfaction score >031

TablesTable 4


28. Defined as volume harvested/volume growth on FE estate as estimated by the national Inventory of Woodlands and Trees.29. Impact of additional 3rd party funding offsetting a mix of capital and revenue expenditure.30. Assessment of condition is carried out on a 6 year cycle by English Nature. We are aiming to have 95% in favourable condition by 2010

(dependent on funding).31. The customer satisfaction score ranges from –2 (much worse than expected) to +2 (much better than expected).

PERFORMANCE AGAINST THE SPENDING REVIEW 2002

SERVICE DELIVERY AGREEMENT TARGETS.

Target Description Expected Performance Outturn to 31 March 2006 and comments

1 April 2003 to

31 March 2006

Sustainable Forest Management Target for 2004-05 Achieved

Expressions of the England 9 Regional Forestry All RFF’s published. Work under way Forestry Strategy for each region. Frameworks by 2004 on implementation.Area of new woodlands created. 15,000 hectares 12,629 hectares. Approximately 2,400 hectares

planted this planting season will be paid andaccounted for in the next financial year.

Area of woodland certified against 350,000 hectares 333,000 hectares. Provisional figure at 09/05. the UK Woodland Assurance Standard. Final figure due 06/06Rural Development

Percentage of annual timber growth 38% 2005 to be published 08/06.harvested each year.Baseline study to establish the Baseline study and target for Survey of the Health and Viability of Forestconfidence of woodland and forestry improvement Industry Businesses has been published – work torelated businesses. set a target by end of 2005/06 for improvement to

be sought up to end 2007/08.Economic Regeneration

Area of new woodland created 2,700 hectares 2,335 hectares – achievement is not directly inpriority areas controlled by the Forestry Commission and relies

on partnerships which have been slower to deliverthan expected.

Recreation, Access and Tourism

Increase in area of woodlands with 10,000 hectares 13,648 hectarespublic access by in priority areas in relation to the 2003 baseline study.Increase the number of day visits To 350 million by 2006. Results from 2004 survey to be available in 2006. to woods and forests.

TablesTable 5


Conservation and Environment

Percentage of all SSSIs where the 95% by 2010 79% (public forest estate–81%, other–77%).Forestry Commission has statutory responsibilities in favourable condition.Implementation of the UK Biodiversity Delivery by 2015 Policy launched by Minister in June 2005. Habitat Action Plans for woodlands HAP targets have been reviewed, agreed andEngland led. in submitted to JNCC/Defra.Number of woodland birds as Long-term decline reversed Latest figures show no further decline but measuredannually against underlying trends by 2020 this single set of data may not represent long termusing the Woodland Birds Index. trends. Research on individual species nearing

completion and due for publication in April 2006.Guidance on managing woodland for declining birdspublished September 2005.

Value for money

Unit cost of administering grant aid. 16p/£ by 2006 19p. The target will not be delivered until GLADE isfully implemented.

Compliance with the FC Customer 85% 2003/04-86%, 2004/05-78%, 2005/06-90%Service Standard for the Woodland Grant Scheme.Percentage electronic service delivery 100% by 2006 The target will not be delivered until GLADE is capability for such payments. fully implemented.Unit cost of producing a cubic £13.55/m3 by2006 £13.65metre of timber on the Forestry Commission estate.

TablesTable 5


Financial Highlights

2005-06 2004-05£000 £000

INCOME

Forestry Commission

EU co-financing of woodland grants 3,746 4,907Funded project income 1,311 228Other income 2,480 1,994Recovery of GB support services costs 23,339 24,238

Forest Research

Forestry and tree related research 14,361 13,602Forest Enterprise

Sales of Timber 18,705 17,347Other forest income 6,281 5,008Recreation income 16,713 13,795

86,936 81,119

2005-06 2004-05£000 £000

EXPENDITURE

Forestry Commission

Grants and partnership funding 18,201 20,213Funded projects direct costs 1,270 161Policy, regulation and administration(England) 12,916 12,708International policy, plant health andGB support services 38,507 38,194

Forest Research

Forestry and tree related research 14,270 13,220Forest Enterprise

Planning, protecting and maintainingthe forest asset 16,585 14,748Social and environmental 30,208 24,922Timber harvesting and roads 13,291 12,259Managing the non-forest assets 5,899 4,983

151,147 141,408Net expenditure for the year (64,211) (60,289)

SUMMARY CASH FLOW STATEMENT FOR

THE YEAR ENDED 31 MARCH 2006

2005-06 2004-05£000 £000

Net expenditure for the year (64,211) (60,289)

Depreciation and other non-cash items 3,984 3,649Movement in working capital 846 (5,156)Movement in provision and liabilities (208) (1,383)Net cash flow from operating activities (59,589) (63,179)

Purchase of fixed assets (5,412) (5,049)Net proceeds from disposal of fixed assets 2,985 5,480Funding from UK Government (62,016) (62,748)

SUMMARY BALANCE SHEET AS AT

31 MARCH 2006

2005-06 2004-05£000 £000

Fixed assets 489,680 453,653Debtors falling due after more than one year 258 361Current assets 21,520 19,889Creditors:amounts falling due withinone year (20,271) (16,680)Net current assets 1,249 3,209Creditors:amounts falling due after morethan one year (2,119) (1,833)Provision for liabilities and charges (2,376) (1,967)Total assets less liabilities 486,692 453,423

Capital and reserves 486,692 453,423

SUMMARY INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2006


EU co-financing of woodland grants Other incomeRecovery of GB supportservices costsForestry and tree related researchSales of TimberFunded project incomeOther forest incomeRecreation income

Grants and partnership fundingPolicy, regulation andadministration (England)International policy, plant healthand GB support servicesFunded projects direct costsForestry and tree related researchPlanning, protecting and maintainingthe forest assetSocial and environmentalTimber harvesting and roadsManaging the non-forest assets

INCOME 2005 - 06 EXPENDITURE

2005 - 06

Great Britain & EnglandAnnual Report and Accounts 2005-06

Contents

Annual Report 70

Remuneration Report 85

Statement of Forestry Commissioners’ and Accounting Officer's Responsibilities 91

Statement on Internal Control 92

Certificate and Report of the Comptroller and Auditor General 97

Statement of Parliamentary Supply 99

Operating Cost Statement and Statement of Recognised Gains and Losses 100

Balance Sheets 101

Consolidated Cash Flow Statement 102

Consolidated Statement of Operating Costs by Departmental Aim and Objectives 103

Notes to the Resource Accounts 104

Accounts Direction given by the Treasury 127


INTRODUCTION AND BACKGROUND

BASIS OF ACCOUNTS

The Forestry Commission Great Britain/ EnglandResource Accounts are prepared in accordancewith a direction given by HM Treasury inpursuance of section 5(2) of the GovernmentResources and Accounts Act 2000.

DEPARTMENTAL ACCOUNTING

BOUNDARY

These accounts incorporate the followingentities within the departmental boundaryfunded by the Westminster Parliament:

• Forestry Commission England.

• Forestry Commission Great Britain.

• Forest Research Agency.

Forest Enterprise England, an executiveagency of Forestry Commission England, is apublic corporation for national accounting.Accordingly, it is outside the departmentalboundary for resource accounting with the netfunding reflected in these accounts. ForestryCommission Scotland and ForestryCommission Wales each produce their ownResource Accounts.

The Forestry Commission Main Estimate forWestminster is split into two Requests forResources (RfRs) to separate theresponsibilities of England and Great Britain.Forest Research is designated a Great Britainentity. The full descriptions of the RfRs are:

• RfR1 - To implement the programmes ofthe England Forestry Strategy

• RfR2 - To take the lead in the developmentand promotion of sustainable forestmanagement and to support itsachievement nationally.

NATURE OF THE BUSINESS, ITS

STRATEGY, AIMS AND OBJECTIVES

Status

The Forestry Commission is the governmentdepartment responsible for advising ForestryMinisters within the Westminster Parliament,Scottish Parliament and National Assembly forWales on forestry policy and for implementingthe three separate forestry policy strategiesacross England, Scotland and Wales. It has aChairman and Board of Commissioners. Thelegislative framework for forestry is principallythe Forestry Acts 1967, 1979 and 1981, thePlant Health Act 1967, the Countryside Act(Scotland) 1967 and the Countryside Act 1958.

The Government of Wales Act 1998, theScotland Act 1998, and the subsequentstatutory instruments, specified the ForestryCommission as a cross-border public authority.The legislation transferred the Ministers’responsibilities for forestry in Scotland andWales to the Scottish Ministers and theNational Assembly for Wales respectively. TheForestry Commission changed its structure on1 April 2003 to reflect a step change in co-operation with rural affairs departments inEngland, Scotland and Wales. This co-operation is underpinned by concordatsworked up individually between each ruralaffairs department and the relevant ForestryCommission National Office.

Forestry Commission England came into beingon 1 April 2003 and remains part of theForestry Commission. It serves as the forestry



department of the Westminster Parliament,advising on, and implementing forestrypolicies. Through the executive agency, ForestEnterprise England, it also manages the publicforest estate to deliver public benefits.

Strategy

Forestry Commission EnglandIn 1998 the Government published a ForestryStrategy for England. The strategy ‘A NewFocus for England’s Woodlands’ set out theGovernment’s strategic priorities andprogrammes for forestry in England. Thestrategy was founded on four guidingprinciples of quality, integration, partnershipand public support. At the time of publicationthe Government said it would review thestrategy within ten years and the Departmentfor Environment, Food and Rural Affairs (Defra)issued a consultation document in May 2006which will inform the development of a newForestry Strategy for England later in the year.The England Forestry Strategy and theconsultation document can be accessed viathe Forestry Commission England website at:www.forestry.gov.uk/england

Forestry Commission Great BritainIn the Great Britain role, the ForestryCommission provides advice and support tothe UK Government and to the devolvedadministrations in Scotland and Wales. We setthe standards for sustainable forestmanagement and encourage good forestrypractice. We conduct forestry research,provide information and we have statutoryduties for some regulations that, by agreementwith Ministers, are GB-wide. The ForestryCommission’s Science and Innovation Strategyfor British Forestry was approved by forestryministers in England, Scotland, Wales and

Northern Ireland in July 2005. The strategysets out how research programmes aredetermined and how they are linked to forestrystrategies and the wider policy objectives ofthe UK Government and the devolvedadministrations.

Aims and Objectives

Forestry Commission EnglandThe aims and objectives of ForestryCommission England flow from the EnglandForestry Strategy and from the widerobjectives of Ministers. The Strategy is basedon four key programmes which reflect widerpolicy objectives. The four programmes set outbelow are not mutually exclusive:

• to increase the contribution of forests andwoodlands to local economies and ruraldevelopment (Forestry for RuralDevelopment Programme);

• to expand the role of woodlands insupporting the economic regeneration offormer industrial land and disadvantagedcommunities (Forestry for EconomicRegeneration Programme);

• to promote public access to woods andforests and develop diverse recreationalopportunities (Forestry for Access,Recreation and Tourism Programme); and

• to conserve and improve the biodiversity,landscape and cultural heritage of ourforests and woodlands (Forestry for theEnvironment and ConservationProgramme).



Forestry Commission Great BritainThrough its powers and duties set out in thevarious Acts, the objective of the ForestryCommission for its Great Britain activities is“On behalf of all three administrations, to takethe lead in development and promotion ofsustainable forest management and to supportits achievement nationally”. A number of theForestry Commission’s functions are operatedby agreement on a Great Britain basis andfunded directly by the Westminster Parliament.These include:

• European and International Forestry Policy– Working with other departments, a teamformulates UK policy in internationalnegotiations, develops the UK’s nationalforest programme and advises onimplementation of international andEuropean obligations;

• Plant Health and Forest ReproductiveMaterials – The Plant Health Unit has thevital task of preventing entry of harmfulpests and diseases from overseas. It alsocontrols the marketing of forest seed,cones, cuttings and plants by approvingbasic material (e.g. stands, seed orchards),certifying reproductive material andinspecting the nursery trade;

• Setting and Monitoring Standards ofSustainable Forest Management –Developing the UK Forestry Standard settingout how the principles of sustainable forestmanagement will be delivered in practiceagainst internationally agreed criteria. Thework includes monitoring the state of theUK forestry sector against UK Indicators ofSustainable Forestry published in 2002 andsupporting the UK Woodland Assurance

Standard which provides for theindependent certification of forestmanagement in the UK.

The Forest Research Agency has its ownspecific aims and objectives drawn up in thecontext of the wider Forestry Commissionaims and objectives. They are set out in theAgency’s Framework Document published inSeptember 2003 and available on the ForestryCommission website at www.forestry.gov.uk.

The annual spending plans for the ForestryCommission’s activities in England and thosefunctions which it carries out on a GB-widebasis are published as part of the WestminsterMain Estimates. The Departmental Report2005 for Defra was published in June 2005and Chapter 5 includes the ForestryCommission Great Britain/England resourceplans for the period 2004-05 to 2007-08. Thelatest Corporate Plan for England and GreatBritain covers 2006-07 and is available on theForestry Commission website atwww.forestry.gov.uk.

MANAGEMENT COMMENTARY

Operating review

Forestry Commission EnglandThe England Rural Development Programme(ERDP) sets out the Government’s support foragriculture, forestry and the rural economyover the period 2000-06. Forestry CommissionEngland’s support to the forestry sectorincludes the English Woodland Grant Scheme(EWGS), which is part of the ERDP. After twoyears of development the EWGS wasintroduced in two phases in July andNovember 2005. EWGS provides incentivesfor people to create new woodlands and plan,manage and improve existing woodlands. This



was the first significant change to forestrygrant schemes in England since theintroduction of the Woodland Grant Scheme(WGS) in 1988. EWGS is a practical expressionof the devolution of forestry matters and willallow the Forestry Commission to betterrespond to the regional agendas in England.EWGS also incorporates annual payments tocompensate for agricultural income forgonewhen trees are planted on farmland; thisreplaces the previous Farm Woodland PremiumScheme operated by Defra.

In October 2005 the FC established a'Woodland ERDP Stakeholders’ Group' as ameans of obtaining advice from those whowould be most affected by the RuralDevelopment Programme. This comprisesaround 30 members, representing all the keyorganisations. The group has met severaltimes. Defra have attended all the meetingsand it therefore provides a direct two-waycommunication between woodlandstakeholders and Government.

We have been working closely with Defra onthe ‘Modernising Rural Delivery’ Programme toimplement the recommendations of the RuralStrategy. The main areas of work have been:

• Legislation - contributing to the NaturalEnvironment and Rural Communities Billwhich received Royal Assent on 30 March2006 and will, amongst other things,establish Natural England and enable Defraand its delivery bodies, including the ForestryCommission, to delegate their functions;

• Rural Funding - preparation to rationalise thelarge number of separate rural fundingstreams to a framework around three major

funds. The Forestry Commission’s EWGSwould be part of one of these funds.Implementation of the first phase will becompleted by January 2007 when newfunding arrangements under the newRural Development Regulation are put inplace; and

• Natural England - preparation for closecollaborative working between the ForestryCommission in England and NaturalEngland which is expected to be formallyestablished in October 2006. Collaborativeworking will be achieved by building on ourcurrent interactions with the organisationsthat will form Natural England. Areas forcloser collaboration being consideredinclude the alignment of delivery functions(and in the first instance grants andlicensing functions), seeking integratedapproaches to land management, theestablishment of ‘first stop shops’, andsharing specialist staff.

During the year, the final Regional ForestryFrameworks were published. Theseframeworks are regional expressions of theEngland Forestry Strategy and are preparedthrough an inclusive, Government led, regionalprocess in which Forestry Commission Englandplays a significant part. Their form satisfies theneeds of the regional agenda, Governmentbodies and other key stakeholders and each isdifferent and distinctive.

Non-timber income streams from gamemanagement, holiday accommodation andrecreational opportunities are becomingincreasingly important to woodland ownersand the local economy. Forestry CommissionEngland supports a wide range of regional and



local partnerships which aim to improvemarkets for wood, help woodland and forestrybased business, capitalise on the non-timbervalues, and provide opportunities to diversify.Examples include: the South West Forest inDevon, Cumbria Woodlands and theHeartwoods Initiative.

Forestry Commission England has continuedto work with the Office of the Deputy PrimeMinister (ODPM) to ensure its programmesassist in the delivery of the wider social,environmental and economic objectivescontained in the Sustainable CommunitiesPlan. This was the second full delivery year forthe £23 million Newlands 1 EconomicRegeneration Scheme, covering Merseyside,Greater Manchester and North Cheshire,funded by the North West DevelopmentAgency (NWDA). The scheme is beingdelivered in partnership with CommunityForests, Groundwork and others such as theBritish Trust for Conservation Volunteers. It willlead to the restoration of 435 hectares offormer industrial land by creating communitywoodlands and form attractive settings toattract and maintain economic investment. Thefirst site, at Moston Vale was formally openedon 10th April 2006.

The Countryside and Rights of Way Act 2000(CROW) made new provisions for dedicatingaccess rights to the countryside; amended thelaw relating to nature conservation and theprotection of wildlife, and made furtherprovision for Areas of Outstanding NaturalBeauty. The process of dedicating the ForestryCommission’s estate following the introductionof CROW commenced in September 2004. Bythe year end, 140,000 Ha had been dedicatedand further dedications will follow subject to

third party consents. The New Forest isalready mapped as access land under the Lawof Property Act.

Putting ancient woodland at the heart offorestry policy has required a range of actions.Forestry Minister Jim Knight MP and FCChairman Lord Clark launched “Keepers oftime: a statement of policy for England’sancient and native woodland ” at a pressconference in Haslemere on 29 June 2005.The new policy represents a radical change inemphasis for forestry in England, placingancient and native woodland at the heart offorestry policy. The delivery of the new policywill involve, amongst other initiatives, aprogramme to encourage the restoration ofancient native woodlands converted toplantations in the last century. The full policydocument can be viewed on the FC websiteat: www.forestry.gov.uk/keepersoftime.

Forestry Minister Jim Knight announced a newpolicy and action on grey squirrels in astatement to the House of Commons on 20January 2006. The plan outlines FC support forhumane control of grey squirrels in England'swoodlands focussing resources on where theyare causing the greatest threat to sustainablemanagement and associated public benefits,including priority red squirrel populations. Thepolicy and action document can be viewed onthe FC website at:www.forestry.gov.uk/forestry/INFD-6L4D37

Forestry Commission Great BritainThe objective for the department's activitiesacross Great Britain is to take the lead indevelopment and promotion of sustainableforest management. The United NationsForum on Forests (UNFF) provides an



important focus to promote sustainable forestmanagement globally and to implementexisting commitments. The ForestryCommission led the United Kingdomdelegation at the fifth and sixth sessions inNew York in May 2005 and February 2006.

The UK Forest Partnership for Action wascreated in the run-up to the 2002 WorldSummit on Sustainable Development topromote sustainable development across theforestry sector, and brought together keyplayers from government, business andenvironmental groups. The ForestryCommission continued to provide support forthe Partnership, by providing the Secretariat.The Partnership has achieved what it set outto do, both in general terms and also in thepriority areas for action (forest certification,forest restoration and protection, illegallogging, timber procurement) promotingsustainable development in the forest sector. Ithas added value in that it has helped to:develop links for joined-up working, reach ashared understanding, remove barriers,facilitate dialogue, and share knowledge.

The UK is a lead partner in the GlobalPartnership on Forest Landscape Restorationworking with WWF, IUCN and a range ofgovernments and international organisationswho recognise the importance of restoringforest cover in parts of the world whereforests have been lost or heavily degraded andwho want to be part of a co-ordinated globaleffort. The Partnership aims to catalyse andreinforces a diverse network of restorationprogrammes that deliver benefits to localcommunities and to nurture and fulfilinternational commitments on forests. ThePartnership held a global workshop in April

2005, hosted by the Government of Brazil. Theworkshop considered outputs from national,sub-regional and regional workshops that hadalready taken place, developedrecommendations for further action, andstimulated increased momentum andinvestment in forest landscape restorationprogrammes.

Over the year, 932,000 m3 of sawn wood thatis subject to quarantine control were importedand Plant Health Inspectors carried out 4,568inspections. Forty incidents of non-compliancewere detected in sawn timber consignments.The majority of these incidents involveddocumentary infringements where theconsignments were accompanied by invalidphytosanitary certificates. As in previous years,we again achieved our Charter Standard targetof inspecting consignments on the day ofnotification of landing, or the next again workingday at the latest, in over 99% of cases.

In conjunction with the Defra Plant Health &Seed Inspectorate the Forestry Commissionhas continued to monitor for outbreaks of thePhytophthora ramorum and P.kernoviaepathogens. The management of the campaignis being overseen by the InterdepartmentalPhytophthora Programme Board. Defra and theForestry Commission have continued to carryout surveys in Cornwall to determine theincidence of P. kernoviae. Up to and includingDecember 2005 P. kernoviae had been foundat 22 locations in Cornwall. In December 2005we recommended to Ministers that we movefrom a strategy of eradication of P. kernoviaeto one of containment leading to eradicationwherever possible. A risk matrix was drawn upwhich ranked the woodlands and heritagegardens infected with P. kernoviae on the level



of infection, the value of the woodlands, thedegree of public access and whether therewas plant movement.

During 2005-06 research commissioned by theForestry Commission ranged from highlyapplied projects of direct relevance for forestmanagers to strategic development ofconcepts and models to inform policy. Thescience budget also covered analyticalservices, monitoring and the transfer ofknowledge and technology to end-users. Thebulk of expenditure was with theCommission’s own agency, Forest Research,which presents a separate, detailed report onits activities to Parliament.

A Regulatory Reform Order approved by theWestminster Parliament came into force on 15March 2006. The Order increased the powersof the Commission in a number of areas ofactivity in England and Wales by amending theForestry Act 1967 and the Countryside Act1968. The Order allows the Commission to:

• form or participate/invest in companies, toprovide loans and establish Charitable Trusts;

• delegate its power to charge in connectionwith the provision of facilities in the publicforest estate;

• commercially exploit forestry research; and

• require restocking following unlawful fellingwithout first obtaining a conviction and toenforce restocking requirements againstlessees and licensees as well as againstfreeholders.

Although the Order only applies to Englandand Wales, we are currently involved in theprocess to facilitate identical changes inScotland by passing primary legislation throughthe Scottish Parliament. However, the powerto exploit forestry research applies acrossEngland, Wales and Scotland. This is becauseintellectual property law, unlike laws relating toforestry, is a matter reserved to theWestminster Parliament under the ScotlandAct 1998.

Financial Review

Cash funding for our activities in England andour GB functions comes from Westminster,from the European Union and from incomefrom the public forest estate managed byForest Enterprise England. Like the rest of thepublic sector, we now also make provision forresource costs which do not involvemovements of cash – mainly the cost ofcapital invested in the public forest estate anddepreciation charges for use of assets.

Westminster funding for the ForestryCommission was decided as part of theGovernment’s 2004 Spending Review. Theplanned sources of income and expenditure upto 2007-08 are shown in the latest ForestryCommission’s Corporate Plan for England andGreat Britain activities.

Resources in England are used to sustain andexpand woodlands, increase recreationopportunities and public access together withwoodland services in accordance with theEngland Forestry Strategy.



Timber sales represent the largest singlesource of income for Forest Enterprise and itsfinancial performance is closely linked to thestrength of the round timber market. Therelative strength of the currency world-wideand European demand trends, availability andcost of shipping, and the health of the UKconstruction sector have all contributed to thecontinuing improvement in the market forhome-grown timber. Nevertheless, timberincome remains below the level assumed inour 2004 settlement. Every attempt is beingmade to maximise income from other sourcessuch as recreation.

At the Great Britain level, our resourcessupport work that benefits all three countries.The largest component is research anddevelopment carried out by Forest Researchand by other providers. The remainingexpenditure is on protecting Britain’s treesfrom pests and diseases, representing Britishinterests on the international stage, and otherGreat Britain-wide work including the costs ofthe Board of Forestry Commissioners, thedevelopment of the timber market, and thedevelopment and promotion of standards forsustainable forest management.

Significant variances against estimateThe comparison of actual resource expenditureto Estimate is shown below:

£m Estimate Outturn DifferenceTotal resourceRfR1 64.5 63.4 1.1Total resourceRfR2 17.5 14.4 3.1Total resource GB/Eng 82.0 77.8 4.2Net cash requirement 62.0 60.5 1.5

For RfR1, the outturn reflects a lower ForestEnterprise cost of capital than included in theestimate due to a less than anticipatedincrease in asset valuations.

For RfR2, the estimate included some £2million revenue provision to cover thedevelopment of e-business systems aimed atimproving efficiency and effectiveness ofdelivery of services to customers. Inaccordance with accepted accounting practicesuch expenditure has been capitalised.Purchase of fixed assets showed an excess onestimate reflecting this adjustment. Thebalance of the underspend (£1.1 million)reflects the net effect of various measurestaken during the year to reduce administrationand programme costs whilst ensuring efficientservices continued to be delivered.

The Forestry Commission GreatBritain/England recorded an under spend of£1.5 million on actual cash expenditure overestimate that represents a 2.4% saving on thenet cash requirement of £62 million.



Future Events

Post-Balance Sheet EventThe Forestry Commission has undertaken achallenging and complex public privatepartnership (PPP) competitive process over thelast two years in order to find the most suitablejoint venture partner to develop and expand itsForest Holidays’ business. On 8 May 2006, theForestry Commission entered into a jointventure with the Camping and Caravanning Clubto take over management of Forest Holidays.The limited liability partnership (LLP) will providefunding for modernisation and expansion of thebusiness together with the necessary skills andvision to grow the business.

Until very recently, the Forestry Commissionhad no express power to hold shares in alimited company or to hold interest in a LLP.Therefore, in respect of the activities carriedon by the Forestry Commission in England andWales, the Forestry Commission undertook toseek an Order under the Regulatory ReformAct 2001 in order to permit the ForestryCommission to participate in the new entity.The Order was granted on 15 March 2006.However, as the Regulatory Reform Act doesnot apply to matters which are within thelegislative competence of the ScottishParliament the grant of the Order does notaffect the powers of the Forestry Commissionin or as regards Scotland. Therefore, theForestry Commission still does not have thenecessary powers to participate in anycompany or LLP which has Scottish assets, orwhich carries on business in Scotland. TheForestry Commission is seeking primarylegislation in the Scottish Parliament whichwould give the Forestry Commission thenecessary powers to enter into the jointventure in respect of the Scottish sites. In the

meantime, Scottish Ministers have approved aseparate LLP in Scotland in which ScottishMinisters will act as a member and hold thepublic sector interest, in place of the ForestryCommission, until the Forestry Commissionobtains the necessary powers.

Following the transfer of the Forest Holidays’business, there will be a significant change tothe way in which the Forestry Commission willaccount for its interest in Forest Holidays. Aslessors of the sites to the joint venture, ForestEnterprise England will show a long termdebtor balance on its balance sheet torepresent the net present value of the futurerental payments due by the joint venturecompanies. The Forestry Commission’s equityand loan stock investments in the joint venturewill be shown separately on the balance sheetof Forest Enterprise England, representing theircurrent value to the Forestry Commission.

Forest Enterprise England has transferred£577,000 of income received in advance forholidays commencing on or after 8 May 2006that belongs to the LLP. All Forest Holidays’operations will in future be undertaken by thejoint venture and Forest Enterprise Englandwill account for its share of the joint venture’sprofits and assets and liabilities in accordancewith Financial Reporting Standard 9.



Future WorkForestry Commission England’s key issues forthe coming year are:

• Timber MarketTimber prices have shown a moderate increasewith a strong demand, however it is likely thattimber income will remain only marginallybetter than the historically low levelsexperienced in recent years. Optimism hasbeen tempered with the announcement of theclosure of the Sudbrook Mill in Gwent whichwill affect the market for hardwood timber.Forest Enterprise England is continuing topursue alternative timber markets, includingshort-term export opportunities and longer termdevelopments for wood energy production.

• New ResponsibilitiesDuring 2006-07 we are managing the futuresuccession arrangements of the CommunityForests. We expect to take on responsibilityfor the Farm Woodland Premium and FarmWoodland Schemes including legacy paymentsfor the Schemes.

• New PowersThe Regulatory Reform Order to enable jointventures to take place has gained RoyalAssent. We are actively considering whatother opportunities for further businessimprovements these new powers will allow.

• GLADEWork continued throughout 2005 on theGrants and Licences Administration DeliveredElectronically (GLADE) project. A limitedversion is now in operation, which deliversmost of the basic functionality and refinementof the system will continue in 2006-07.

• England Rural Development Programme(ERDP)

The ERDP 2000-06 contributes to the deliveryof the Government's Strategy for SustainableFarming and Food. It is the framework fordelivering European funding for a widediversity of schemes, including those for agri-environment, woodlands, rural enterprise andless favoured areas. It is the source of co-financing for the Forestry Commission's grantschemes. The ERDP ends in December 2006and Defra is currently leading the production ofthe successor Programme, known as the RuralDevelopment Programme for England (RDPE)2007-13, on which negotiations are inprogress. Defra want to focus the resourcesavailable on action that will make a distinctiveand significant impact and have proposed a setof national priorities, structured around threethemes (enhancing the environment andcountryside; making agriculture and forestrymore competitive and sustainable; andenhancing opportunities in rural areas for thosewho are disadvantaged). In RDPE forestry hasa higher profile and also features under allmain themes rather than just under theenvironment measures. We are fully engagedin the development of the Environmental LandManagement Fund, which during the RDPEperiod will bring the Defra family landmanagement funding under one umbrella todeliver the simplification objectives of theRural Funding Review and Rural Strategy 2004.



Forestry Commission Great Britain’s key issuesfor the coming year are:

• UK Standards and certificationThe Forest Guidelines are supportingpublications to the UK Forest Standard.Following revision of the standard itself during2004, we have been working during the year torevise and update the suite of supportingguidelines. They expand upon the Standard byaddressing the interaction between forests anda range of particular topics. This is a 3-yearproject involving wide consultation and weexpect the final versions to be produced in 2007.

We have been working with other members ofthe UK Woodland Assurance Standard(UKWAS) Steering Group to revise the forestcertification standard. The UKWAS providesthe basis for independent certification in theUK and is used for all forests managed by theForestry Commission and an increasingpercentage of private woodlands. It isendorsed by both major independent forestcertification schemes operating in Europe; theForest Stewardship Council (FSC) and theProgramme for the Endorsement of ForestCertification Schemes (PEFC). The revision willbe formally launched during 2006.

• Plant HealthWe have compiled a comprehensiveconsultation document to explain thecomplexities of changes to plant health importlegislation that require us to change the waywe calculate our inspection fees and changethe range of material inspected. Theconsultation will also explain the new rates wepropose to charge as a result of the lowervolume of timber inspected following EUenlargement. We will be consulting the timber

import trade on our proposals early in the newfinancial year.

• A Science and Innovation Strategy forBritish Forestry

The strategy was approved by ForestryMinisters in 2005 and implementation willcontinue under the direction of the ResearchStrategy Management Board. The strategicresearch priorities are social and economicdevelopment and climate change.

• Climate ChangeBritain's woods and forests not only facechallenges from climate change, but they alsooffer solutions to many of the problems that itwill pose over the next century. With our rangeof knowledge, skills and practical experience,we are in a unique position to make a real andvaluable contribution, and climate changecontinues to rise on our policy agenda.Although policy might differ across countryboundaries, there is a clear recognition that wewill benefit greatly from a common approachto communicating the threats, opportunitiesand our role in delivering practical solutions forthe sector. A steering group has been formedto help in this. The group will guide the waywe communicate with our key audiencesabout how we are tackling the issues andchallenge of climate change and co-ordinateour various communications activity across theCommission. The group’s first priority was theproduction of a climate changecommunications strategy setting out keyaudiences, messages and general approach.



MANAGEMENT

Ministers

The Ministers who had responsibility for Forestry Commission Great Britain/England during theyear were:

Rt Hon Margaret Beckett MP Secretary of State, Department for Environment, Food andRural Affairs

Ben Bradshaw MP Parliamentary Under-Secretary (Commons), Department forEnvironment, Food and Rural Affairs (until 12 May 2005)

Jim Knight MP Parliamentary Under-Secretary (Commons), Department forEnvironment, Food and Rural Affairs (from 13 May 2005)

Forestry Commissioners and Permanent Head of the Department

The Board of Commissioners gives strategic direction to the Forestry Commission and takesdecisions on not-devolved or co-ordinated functions. It has a part time non-executive Chairman,Rt Hon Lord Clark of Windermere, and the Director General, Tim Rollinson, as Permanent Head ofthe Department, acts as Deputy Chairman. Commissioners who served during the year were:

Chairman

Rt. Hon Lord Clark of Windermere

Executive Forestry Commissioners

Tim Rollinson Director General and Deputy Chairman *Bob McIntosh Director, Forestry Commission Scotland *Simon Hewitt Director, Forestry Commission Wales (until 29 April 2005) *Ian Forshaw Director, Forestry Commission Wales

(from 15 December 2005) *Paul Hill-Tout Director, Forestry Commission England **Members of the Forestry Commission Executive Board

Non-executive Forestry Commissioners

Anthony Bosanquet Commissioner for WalesGareth Wardell Commissioner for WalesDr Victoria Edwards Commissioner for EnglandMartin Gale Commissioner for Scotland and the forestry industry Andrew Raven Commissioner for Scotland (until 5 October 2005)Tony Cooper Commissioner for Human Resources



National Committee for England

The Committee is appointed under Section 2(3) of the Forestry Act 1967 to, inter alia, undertakeany of the functions of the Forestry Commissioners that they may delegate, subject to anyrestrictions or conditions as they see fit. Members of the Committee were:

Rt Hon Lord Clark of Windermere Chair and Forestry Commission ChairmanDr Victoria Edwards Non-executive Commissioner for EnglandTony Cooper Non-executive Commissioner for England Judith Webb Non-executive memberGerald Dawe Non-executive memberPaul Hill-Tout Director, Forestry Commission England and

Executive CommissionerRod Leslie Acting Chief Executive, Forest Enterprise England

(until 14 September 2005) and Head of Programme Group,Forestry Commission England (from 15 September 2005)

Simon Hodgson Chief Executive, Forest Enterprise England (from 15 September 2005)

John Scotney Head of Corporate Services, Forestry Commission England(until 31 January 2006)

Charlotte Cane Finance Director, Forestry Commission England (from 31 January 2006)

England Executive Board

The England Executive Board was reconstituted on 17 January 2006. It was established tomanage the operations of the business of Forestry Commission England within the policyframework set by Ministers and the National Committee for England. Members who served onthe Board were:

Paul Hill-Tout Director, Forestry Commission England and Executive Commissioner

Simon Hodgson Chief Executive, Forest Enterprise EnglandRichard Britton Head of Forestry Authority and RegionsRod Leslie Head of Programme Group, Forestry Commission EnglandMark Pritchard Head of Communications and Secretariat,

Forestry Commission EnglandCharlotte Cane Finance Director, Forestry Commission England



OTHER DISCLOSURES

Employment Policies

The Forestry Commission values and respectsits staff by treating each member with respectand trust and in doing so recognises that eachperson is different and can make a uniquecontribution to the work. The purpose of theForestry Commission’s employment policy is todemonstrate that it is an equal opportunityemployer and the aim is to be fair to everybody.To do this the Forestry Commission ensures thatno eligible job applicant, or employee receivesless favourable treatment on the grounds oftheir gender, or gender re-assignment, ethnicorigin, disability, age, nationality, national origin,

sexual orientation, marital status, religion andreligious or philosophical belief, social class oroffending background.

All employees, whether part-time, full time ortemporary will be treated fairly and equally.Selection for employment, promotion or trainingor any other benefit will be on the basis ofaptitude and ability. All employees will behelped and encouraged to develop their fullpotential and the talents and resources of theworkforce will be fully utilised to maximise theefficiency of the organisation. No person shallbe disadvantaged by conditions or requirementswhich cannot be shown to be justifiable.



Other Forestry Commission Senior Staff Group

The Forestry Commission’s Senior Staff Group (SSG) operates by analogy with the Senior CivilService in the Home Civil Service. Members of the SSG, other than those who served on theBoard of Commissioners or National Committees, during the year were:

Professor Jim Lynch Chief Executive, Forest Research Agency *Kim Lardge Director Human Resources*Keith Gliddon Director Finance *Wilma Harper Secretary to Commissioners and Head of Corporate

and Forestry Support **Members of the Forestry Commission Executive Board

Peter Freer-Smith Research Director, Forest Research AgencyCraig Heaney Director, Forestry Commission Business UnitsAlan Mitchell Head of Business Services DivisionRoger Herbert Head of Country Services (until 30 June 2005)Mike Dudley Head of International Policy (from 4 July 2005)David Henderson-Howat Special ProjectsPeter Ranken Head of Recreation and Development,

Forest Enterprise EnglandDerek Gilfillan Head of Procurement (from 5 December 2005)A register of interests is maintained and can be accessed on the Forestry Commission website(www.forestry.gov.uk).

The Forestry Commission also follows goodemployer practices aimed at ensuring that allstaff work in an environment free from bothillegal and unfair discrimination andharassment. Consolidated statements of theCommission's obligations with regard toequality of opportunity and diversity are shownin the Staff Handbook. Full details of theseinitiatives arising from our policies are also setout in the Human Resources intranet site.

The Forestry Commission will monitor thesuccess of its policies by:-

• Collecting and analysing data as appropriate.

• Regularly reviewing procedures(recruitment, performance management,promotion and pay) to ensure that they arefree of unfair discrimination.

• Reporting the results of equality anddiversity monitoring to the HumanResources Management Sub-Committeeon an annual basis.

• Liaising closely with Cabinet Office andother Government Departments to ensurethat we are keeping abreast of all changesin legislation and other developments.

Further information on the employment ofpersons with disabilities, the provision ofinformation to, and consultation with, employees,and the promotion of equal opportunities isavailable on request from the Human Resourcesunit of the Forestry Commission.

Pensions

Information on pensions is contained in theRemuneration Report and accounting policynote 1.15.

Supplier Payment Policy

Forestry Commission Great Britain/Englandcomplies with the Government’s BetterPayment Practice Code. Unless otherwisestated in the contract, we aim to pay within 30days from the receipt of goods and services orthe presentation of a valid invoice, whichever isthe later. A sample analysis for 2005-06 indicatesthat 98.3% of invoices paid by the ForestryCommission Great Britain/England and 99.9% ofinvoices paid by Forest Research were paidwithin the due date. Arrangements for handlingcomplaints on payment performance are notifiedto suppliers on contracts.

No interest was paid under the Late Paymentof Commercial Debts (Interest) Act 1998.

Auditors

The accounts of Forestry Commission GreatBritain/England are audited by the Comptrollerand Auditor General under the GovernmentResources and Accounts Act 2000.

Disclosure of audit information

to the auditors

So far as the Accounting Officer is aware,there is no relevant audit information of whichthe Forestry Commission Great Britain/Englandauditors are unaware. The Accounting Officerhas taken all the steps that he ought to havetaken to make himself aware of any relevantaudit information and to establish that theForestry Commission Great Britain/Englandauditors are aware of that information.

T J D RollinsonAccounting Officer13 July 2006



Remuneration Report


REMUNERATION POLICY

Fees for non-executive Commissioners aredetermined in accordance with guidelinesprescribed by the Cabinet Office. The ForestryCommission’s Senior Pay Committeecomprises the Chairman, Director General,Director, Forestry Commission Scotland,Director, Forestry Commission England, andthree other non-executive Commissioners.The Chairman and non-executive membersdetermine the Director General’s pay. TheChairman, Director General and non-executiveCommissioners take decisions in respect ofCountry Directors. The entire committee takesdecisions on remaining senior staff posts inaccordance with guidelines prescribed by theCabinet Office.

In reaching its recommendations, the ForestryCommission’s Senior Pay Committee hasregard to the following considerations:

• The Senior Pay Committee take intoaccount the recommendations of theSenior Salaries Review Body (SSRB). SSRBis responsible for monitoring the operationof the Senior Civil Service pay system andfor making recommendations to theGovernment on the shape of the system,including the salary values for theminimum, progression target rate andmaximum of each of the senior pay bands,the range of percentage increases to basesalary and range of bonuses.

• Reporting Officers consider the relativeperformance of each of their senior staffand recommend an appropriateperformance tranche, whether a bonusshould be paid and if so whether low orhigh. The Senior Pay Committee consider

the recommendations, determine theallocation of senior staff to tranches, anddecide the percentage increase to salaryand any bonus to be awarded.

Remaining Committee and Board membersreceive annual salaries paid in accordance withthe standard Forestry Commission Staff Payagreement. Their performance is monitoredand reviewed through the PerformanceMonitoring System (PMS) of the ForestryCommission. Their increase in salary andperformance bonus, if awarded, are based ontheir manager’s assessment of theirperformance.

EMPLOYMENT CONTRACTS

Civil Service appointments are made inaccordance with the Civil ServiceCommissioners’ Recruitment code, whichrequires appointment to be on merit on thebasis of fair and open competition but alsoincludes the circumstances whenappointments may otherwise be made.

Unless otherwise stated below, the seniorstaff covered in this report hold appointmentswhich are open-ended until they reach thenormal retiring age. Early termination, otherthan for misconduct, would result in theindividual receiving compensation as set out inthe Civil Service Compensation Scheme.

Rt Hon Lord Clark of Windermere wasappointed on a six year contract commencingon 10 December 2001. Anthony Bosanquetwas appointed on a six year contractcommencing on 18 January 2001.Gareth Wardell was appointed on a six yearand 2 month contract commencing on 1November 1999.

Dr Victoria Edwards was appointed on a sixyear and four month contract commencing on1 November 1999.Martin Gale was appointed on a five year andeleven month contract commencing on 1 May2003.Tony Cooper was appointed on a three yearcontract commencing on 18 January 2004

Further information about the work of the CivilService Commissioners can be found atwww.civilservicecommissioners.gov.uk

2005-06 2004-05

Salary Benefits in kind Salary Benefits in kindTo the nearest To the nearest

£000 £100 £000 £100Rt Hon Lord Clark of Windermere 45-50 - 45-50 -Tim Rollinson 115-120 - 105-110 -Anthony Bosanquet 5-10 - 5-10 -Gareth Wardell 10-15 - 10-15 -Dr Victoria Edwards 5-10 - 5-10 -Martin Gale 5-10 - 5-10 -Andrew Raven (until 5 October 2005) 5-10

(10-15 fullyear equivalent) - 10-15 -

Tony Cooper 5-10 - 5-10 -Paul Hill-Tout 80-85 - 80-85 -Judith Webb 5-10 - 0-5 -Gerald Dawe 0-5 - 0-5 -John Scotney (until 31 January 2006) 35-40 - 40-45 -

(40-45 full year equivalent)

Mark Pritchard 50-55 1,400 50-55 900Charlotte Cane (from 1 December 2005) 15-20 - - -


Richard Britton 55-60 2,000 50-55 1,300Kim Lardge 80-85 - 35-40 -


Wilma Harper 55-60 - 55-60 -David Henderson-Howat 80-85 - 90-95 -Keith Gliddon 70-75 - 55-60 -

SALARY AND PENSION ENTITLEMENTS

The salary and pension entitlements of the Forestry Commissioners, members of the NationalCommittee for England, the England Executive Board and Great Britain senior staff were asfollows:

Remuneration Report


Craig Heaney 75-80 1,100 65-70 800Alan Mitchell 75-80 - 65-70 -Roger Herbert (until 30 June 2005) 15-20 - 65-70 -


Derek Gilfillan (from 5 December 2005) 15-20 - - -(full year

equivalent 50-55)Mike Dudley 50-55 - - -Jim Lynch 80-85 - 80-85 -

The salary and pension entitlements of BobMcIntosh, an Executive ForestryCommissioner, are borne and disclosed in theForestry Commission Scotland Annual Reportand Accounts 2005-06 as he is Director,Forestry Commission Scotland.

The salary and pension entitlements of SimonHewitt and Ian Forshaw, Executive ForestryCommissioners during the year, are borne anddisclosed in the Forestry Commission WalesAnnual Report and Accounts 2005-06. SimonHewitt retired as Director, ForestryCommission Wales on 29 April 2005 and IanForshaw was appointed Director, ForestryCommission Wales on 30 April 2005.

The salary and pension entitlements of RodLeslie and Simon Hodgson, members of theNational Committee for England during theyear are borne and disclosed in the ForestEnterprise England Annual Report andAccounts 2005-06. Simon Hodgson joined theNational Committee for England on 15September 2005.

The salary and pension entitlements of PeterRanken, a member of the Forestry CommissionSenior Staff Group and Head of Recreation andDevelopment during the year, are borne anddisclosed in the Forest Enterprise EnglandAnnual Report and Accounts 2005-06.

The salary and pension entitlements of PeterFreer-Smith, a member of the ForestryCommission Senior Staff Group during the yearare borne and disclosed in the Forest ResearchAnnual Report and Accounts 2005-06.

The salary and pension entitlements of themembers of the Forest Research ManagementBoard and Forest Enterprise EnglandManagement Board are shown in each of theagency’s Annual Report and Accounts 2005-06.

SALARY

‘Salary’ includes basic salary; performance payor bonus; overtime and any allowances subjectto UK taxation. This report is based onpayments made by Forestry CommissionGreat Britain/England and thus recorded inthese accounts.

BENEFITS IN KIND

The monetary value of benefits in kind coversany benefits provided by the employer andtreated by the Inland Revenue as taxableincome. Benefits in kind are given in the formof the private use of a car and housepurchase loans.

Remuneration Report


Remuneration Report


PENSION BENEFITS

Tim Rollinson

Paul Hill-Tout

John Scotney

Mark Pritchard

Charlotte Cane

Richard Britton

Kim Lardge

Wilma Harper

David Henderson-Howat

Keith Gliddon

Craig Heaney

Alan Mitchell

Derek Gilfillan

Mike Dudley

Jim Lynch

Accruedpension at age60 at 31 March

2006 andrelated lump

sum£000

40-45 plus LSof 120-125

25-30 plus LSof 75-80

15-20 plus LSof 50-55

15-20 plus LSof 45-50

5-10 plus LSof 25-30

15-20 plus LS of 35-40

0-5.0 plus LSof 0-5

20-25 plus LS0-5

20-25 plus LSof 70-75

25-30 plus LSof 85-90

30-35 plus LS of 100-105

35-40 plus LS of 105-110

0-5 plus LSof 0-5

15-20 plus LS of 55-60

0-5.0 plus LSof 0-5

Real increase inpension andrelated lump

sum at age 60

£000

2.5-5.0 plus LSof 7.5-10

0-2.5 plus LS of 2.5-5.0

0-2.5 plus LS of 2.5-5.0

0-2.5 plus LSof 0-2.5

0-2.5 plus LS of 0-2.5

0-2.5 plus LSof 0-2.5

0-2.5 plus LSof 0-2.5

0-2.5 plus LS0-2.5

0-2.5 plus LSof 2.5-5.0

5.0-7.5 plus LSof 15.0-17.5

0-2.5 plus LS of5.0-7.5

0-2.5 plus LS of5.0-7.5

0-2.5 plus LSof 0-2.5

0-2.5 plus LSof 0-2.5

0-2.5 plus LS of 0-2.5

CETV at31 March

2006

791

436

349

278

161

235

38

382

466

607

770

843

2

361

76

CETV at31 March

2005

588

323

264

211

141

164

10

292

355

395

600

656

-

275

42

Real increase inCETV

49

15

18

5

9

14

18

4

17

115

42

52

2

13

25

Employercontribution to

partnershippension account

Nearest £100

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

CIVIL SERVICE PENSIONS

Pension benefits are provided through theCivil Service Pension arrangements. From 1 October 2002, civil servants may be in oneof three statutory based ‘final salary’ definedbenefit schemes (classic, premium, and classicplus). The schemes are unfunded with thecost of benefits met by monies voted byParliament each year. Pensions payable underclassic, premium, and classic plus areincreased annually in line with changes in theRetail Prices Index. New entrants after1 October 2002 may choose betweenmembership of premium or joining a goodquality ‘money purchase’ stakeholderarrangement with a significant employercontribution (partnership pension account).

Employee contributions are set at the rate of1.5% of pensionable earnings for classic and3.5% for premium and classic plus. Benefits inclassic accrue at the rate of 1/80th ofpensionable salary for each year of service. Inaddition, a lump sum equivalent to three years’pension is payable on retirement. Forpremium, benefits accrue at the rate of 1/60thof final pensionable earnings for each year ofservice. Unlike classic, there is no automaticlump sum (but members may give up(commute) some of their pension to provide alump sum). Classic plus is essentially avariation of premium, but with benefits inrespect of service before 1 October 2002calculated broadly as per classic.

The partnership pension account is astakeholder pension arrangement. Theemployer makes a basic contribution ofbetween 3% and 12.5% (depending on theage of the member) into a stakeholder pensionproduct chosen by the employee from a

selection of approved products. The employeedoes not have to contribute but where they domake contributions, the employer will matchthese up to a limit of 3% of pensionable salary(in addition to the employer’s basiccontribution). Employers also contribute afurther 0.8% of pensionable salary to cover thecost of centrally-provided risk benefit cover(death in service and ill health retirement).

Further details about the Civil Service pensionarrangements can be found at the websitewww.civilservice-pensions.gov.uk

CASH EQUIVALENT TRANSFER VALUES

A Cash Equivalent Transfer Value (CETV) is theactuarially assessed capitalised value of thepension scheme benefits accrued by amember at a particular point in time. Thebenefits valued are the member’s accruedbenefits and any contingent spouse’s pensionpayable from the scheme. A CETV is apayment made by a pension scheme orarrangement to secure pension benefits inanother pension scheme or arrangement whenthe member leaves a scheme and chooses totransfer the benefits accrued in their formerscheme. The pension figures shown relate tothe benefits that the individual has accrued asa consequence of their total membership ofthe pension scheme, not just their service in asenior capacity to which disclosure applies.The CETV figures, and from 2003-04 the otherpension details, include the value of anypension benefit in another scheme orarrangement which the individual hastransferred to the Civil Service pensionarrangements and for which the CS Vote hasreceived a transfer payment commensuratewith the additional pension liabilities beingassumed. They also include any additional

Remuneration Report


pension benefit accrued to the member as aresult of their purchasing additional years ofpension service in the scheme at their owncost. CETVs are calculated within theguidelines and framework prescribed by theInstitute and Faculty of Actuaries.

Please note that the factors used to calculatethe CETV were revised on 1 April 2005 on theadvice of the Scheme Actuary. The CETVfigure for 31 March 2005 has been restatedusing the new factors so that it is calculatedon the same basis as the CETV figure for 31March 2006.

REAL INCREASE IN CETV

This reflects the increase in CETV effectivelyfunded by the employer. It takes account ofthe increase in accrued pension due toinflation, contributions paid by the employee(including the value of any benefits transferredfrom another pension scheme or arrangement)and uses common market valuation factors forthe start and end of the period.


Remuneration Report


Statement of Forestry Commissioners' andAccounting Officer's Responsibilities


1. Under section 5(2) of the GovernmentResources and Accounts Act 2000, theForestry Commissioners are required toprepare resource accounts for each financialyear, in conformity with a Treasury direction,detailing the resources acquired, held ordisposed of during the year and the use ofresources by the department during the year.

2. The resource accounts are prepared on anaccruals basis and must give a true and fairview of the state of affairs of thedepartment, the net resource outturn,resources applied to objectives, recognisedgains and losses and cash flows for thefinancial year.

3. HM Treasury has appointed the PermanentHead of Department as Principal AccountingOfficer of the department with overallresponsibility for ensuring that resourcesauthorised by Parliament and sums to be paidout of the Consolidated Fund, in respect of theForestry Commission, are used for thepurposes intended by Parliament. He mustensure that there is a high standard offinancial management, including a soundsystem of internal control; that financialsystems and procedures promote theefficient and economical conduct of businessand safeguard financial propriety andregularity; that financial considerations aretaken into account in decisions on policyproposals; and risk is considered in relation toassessing value for money.

4. In preparing the accounts the PrincipalAccounting Officer is required to complywith the Government Financial ReportingManual prepared by HM Treasury, and inparticular to:

• observe the Accounts Direction issuedby H M Treasury including relevantaccounting and disclosure requirements,and apply suitable accounting policies ona consistent basis;

• make judgements and estimates on areasonable basis;

• state whether applicable accountingstandards, as set out in theGovernment Financial ReportingManual, have been followed, anddisclose and explain any materialdepartures in the accounts ;

• prepare the accounts on the goingconcern basis.

5. As Principal Accounting Officer, the DirectorGeneral of the Forestry Commission hasdesignated Director, Forestry CommissionEngland and the Chief Executive of ForestResearch as Accounting Officers. Theresponsibilities of the Director General, asPrincipal Accounting Officer, includingresponsibility for the propriety and regularityof the public finances for which anAccounting Officer is answerable, forkeeping proper records and for safeguardingthe department’s assets, are set out in theAccounting Officers’ Memorandum, issuedby the Treasury and published inGovernment Accounting. Under theterms of the Accounting Officers’Memorandum, the relationship betweenthe department’s Principal AccountingOfficer and the other Accounting Officers,together with their respectiveresponsibilities, is set out in writing.

Statement on Internal Control


1. SCOPE OF RESPONSIBILITY

Forestry Commission

As Principal Accounting Officer, I haveresponsibility for maintaining a sound systemof internal control that supports theachievement of the Forestry Commission’spolicies, aims and objectives, whilstsafeguarding the public funds anddepartmental assets for which I am personallyresponsible, in accordance with theresponsibilities assigned to me in GovernmentAccounting.

The Forestry Commission is a Great Britaincross-border department responsible forforestry matters and which has a Board ofCommissioners with duties and powersprescribed by statute. Forestry is a devolvedmatter. The Secretary of State forEnvironment, Food and Rural Affairs hasresponsibility for forestry in England as well ascertain activities such as international affairs,plant health and forest research which remainreserved by Westminster. Scottish Ministersand the Welsh Assembly Government haveresponsibility for forestry in Scotland andWales respectively. The Forestry Commissionin each country works closely with therespective rural affairs departmentunderpinned by individual concordats.

The Secretary of State for Environment, Foodand Rural Affairs has overall responsibility forUK forestry interests within the EuropeanUnion and for international negotiations onforestry, including the formulation of UKpolicy. The Secretary of State consults withScottish Ministers, the National Assembly forWales and the Northern Ireland Assembly onUK-wide issues.

The Forestry Commissioners are statutorilyresponsible for the stewardship of the estateplaced at their disposal by Ministers. TheForestry Commissioners have delegated to thestatutory National Committee in each country,the normal exercise of their powers and dutiesin connection with the estate.

The Director General is the Deputy Chairmanof the Forestry Commissioners and the seniorofficial in the Forestry Commission. In additionto his role as a Commissioner, he is thePrincipal Accounting Officer, formallyresponsible to the Westminster Parliament forthe financial affairs of the ForestryCommission. The accountability arrangementsfor the Principal Accounting Officer of theForestry Commission are set out in theMemorandum at Annex 4.1 of GovernmentAccounting.

The Forest Research Agency, funded from theWestminster vote, is the principal organisationin Great Britain engaged in forestry and treerelated research and is the research agency ofthe Forestry Commission. The Chief Executiveis responsible, normally through the DirectorGeneral, to the Forestry Commissioners forthe management of the Agency. The ChiefExecutive has a right of direct access to theCommissioners, and to the relevant Minister,and will meet them at least once a year. TheChief Executive is a member of the ForestryCommission’s Executive Board.


The National Committee in England is chairedby a non-executive Forestry Commissioner andits members include a further two non-executive Commissioners, the Director,Forestry Commission England, the Agency

Chief Executive, a member from theDepartment for Environment, Food and RuralAffairs, Finance Director, Head of ProgrammeGroup and two non-executive members.

The Director, Forestry Commission England isthe executive Forestry Commissionerresponsible to the Forestry Minister and to theDirector General for the work of the ForestryCommission in England. From 1 April 2004, theTreasury appointed Director England asAccounting Officer for the new Request forResources 1 (RfR1) relating to theimplementation of the programmes of theEngland Forestry Strategy. The exactresponsibilities between the AdditionalAccounting Officer for RfR1 and the PrincipalAccounting Officer are set out in a separateLetter of Understanding. The Director Generalacts as the Accounting Officer for Request forResources 2 (RfR2) that covers the ForestryCommissions' lead role in the development andpromotion of sustainable forest managementand to support its achievement nationally.

The Chief Executive of the Forest EnterpriseEngland Agency is responsible, normallythrough the Director, Forestry CommissionEngland, to the National Committee for Englandfor the management of the Agency. The ChiefExecutive is a member of the NationalCommittee and is designated as AgencyAccounting Officer, responsible for the Agency’saccounts and financial procedures and for theproper, effective and efficient use of resourcesprovided to the Agency within the terms of theFramework Document and in pursuit of theagreed objectives and targets. The ChiefExecutive has a right of direct access to theCommissioners, and to the relevant Minister,and will meet them at least once a year.

Public Accounts Committee

The Director General, Director, ForestryCommission England and the Agency ChiefExecutives are liable to be summoned toappear before the Public Accounts Committeeto answer for their respective responsibilities.It will be for Ministers to decide who shouldrepresent them at other ParliamentaryCommittee hearings.

2. THE PURPOSE OF THE SYSTEM OF

INTERNAL CONTROL

The system of internal control is designed tomanage risk to a reasonable level rather thanto eliminate all risk of failure to achievepolicies, aims and objectives. It can thereforeonly provide reasonable and not absoluteassurance of effectiveness. The system ofinternal control is based on an ongoing processdesigned to identify and prioritise the risks tothe achievement of Forestry CommissionGreat Britain/England’s policies, aims andobjectives, to evaluate the likelihood of thoserisks being realised and the impact should theybe realised, and to manage them efficiently,effectively and economically. The system ofinternal control has been in place in ForestryCommission Great Britain/England for the yearended 31 March 2006 and up to the date ofapproval of the annual report and accounts,and accords with Treasury guidance.

3. CAPACITY TO HANDLE RISK

The Forestry Commission GreatBritain/England has taken a positive approachto risk that it feels is entirely appropriate to itsrole and remit. Risk management is theresponsibility of every member of staff inForestry Commission Great Britain/England.Everyone has a role to play in managing risksand therefore understands and accepts



responsibility for managing the risks withintheir own area of authority. Risk awarenessand responsibility lies in parallel with thestructure of the Forestry Commission’sobjectives in Great Britain/England and at everylevel of objective there is an equivalentdelegation of responsibility of associated risk.

The resources available for managing risk arefinite and so the aim is to achieve an optimumresponse to risk, prioritised in accordance withthe evaluation of risk. The system of internalcontrol incorporates risk management. Thesystem encompasses a number of elementsthat together facilitate an effective andefficient operation, enabling ForestryCommission Great Britain/England to respondto a variety of operational, financial andcommercial risks. These elements include:

• Implementing delivery policies set by theBoard of Commissioners, NationalCommittee for England, ForestryCommission Executive Board and otherExecutive/Management Boards. Writtenprocedures support the policies whereappropriate;

• Comprehensive regular reporting to theBoard of Commissioners, NationalCommittee and Executive/ManagementBoards designed to monitor key risks andtheir controls. Decisions to rectify problemsare made at their regular meetings; and

• Planning and budgeting system used to setobjectives, agree action plans and allocateresources. Progress towards meeting planobjectives is monitored regularly.

4. THE RISK AND CONTROL FRAMEWORK

Forestry Commission Great Britain/England iscommitted to a process of continuousdevelopment and improvement: developingsystems in response to any relevant reviewsand developments in best practice in this area.In particular, in the period covering the year to31 March 2006 and up to the signing of theaccounts Forestry Commission GreatBritain/England has:

• Worked with a private sector riskmanagement expert to develop a series ofworkshops. The purpose of the workshopsis to share experiences of handling risk atcountry and agency level, to reviewprogress on embedding risk managementand to ensure common standards whenassessing risks;

• Participated in the Forestry Commissionwide, Risk Management Group (RMG),whose purpose is to ensure continueddevelopment of risk management within,and the sharing of best practice across, theCommission. The RMG met on fouroccasions, in July, November andDecember 2005, and in March 2006;

• Implemented the revised ForestryCommission risk policy statementconsidered by both the ForestryCommission Executive Board and theForestry Commission Audit Committeebefore being approved by the Board ofCommissioners in September 2005;

• Updated existing risk registers to reflectnewly identified potential risks andappropriate control measures foragreement by management board



members. This has included the furtherenhancement of the Risk Registermethodology to clearly define inherent andresidual risk; and

• Supported the purchase and population of acommercial risk management softwarepackage. The software chosen integrateswith that used by Internal Audit forplanning and assignment management whohas worked with the RMG co-ordinatorduring the year on its configuration andimplementation. The system contains anumber of reports designed to assistmanagement in monitoring key risks.

The size and membership of the ForestryCommission Audit Committee is designed torepresent all parts of the Forestry Commission.The Committee met three times during theyear, in April, July and December 2005, toconsider a range of reports from management,and from internal and external audit.

The Audit Committee, in the main, deals withhigher level issues concerning control andgovernance. Country Directors and the AgencyChief Executives are provided with moredetailed advice on the work of Internal Audit inparticular, and control in general, via their localInternal Control Committee (ICC). The ICC’sobjectives are to:

• provide a forum for senior management todiscuss internal control and audit matters;

• promote understanding of the internal auditrole and objectives; and

• assist the Head of Internal Audit in definingthe scope of audit coverage and assessingpriorities.

The ICC in England met twice during the year,in September 2005 and March 2006 to receivereports on audit activity, risk management andfeedback on the work of the Audit Committee.The ICC for Forest Research met three timesduring the year, in April 2005, December 2005and March 2006.

During the year, Internal Audit concluded areview of the structure, interactions andfunctioning of the Board of Commissioners,the Forestry Commission Executive Board andthe National Committees. The Board ofCommissioners discussed the findingsalongside a paper covering some wider issuesarising from the requirements of the newCode on Corporate Governance forgovernment bodies. The Board agreed thatcountry based audit committees should be setup, to provide for a more effective review ofeach set of annual accounts in particular, butthe new arrangements were dependent on theBoard’s agreement of terms of reference forthe various decision-making bodies notedabove. The Board finally agreed theresponsibilities and relationships of the bodiesin June 2006. A decision on the future role andconduct of a Forestry Commission GreatBritain audit committee was deferred pendingfurther discussion with the current FCAC Chair.Interim one-off arrangements were put inplace to review the presentation of the 2005-06 accounts for Forestry Commission GreatBritain/England, Forest Enterprise England andForest Research and associated Internal Auditbusiness, utilising existing ICC members andexternal audit attendance. Proposed terms of



reference for the country audit committeeshave been drafted and will be finalised oncethe meeting with the FCAC Chair has takenplace in July 2006.

An Internal Audit review in 2004-05 identifiedthat the Forestry Commission, as a whole, didnot have fully developed contingency plans inplace to effectively manage failure in keybusiness systems. Since then, there has beensome progress and most importantly a changeof responsibility for business continuity planningwas agreed by the Forestry CommissionExecutive Board in December 2005. This workis now co-ordinated by Director Finance via theRMG. The change recognises the need for thebusiness areas to prepare contingency planswhich meet their needs and which clearly linkto business driven risk management. InternalAudit will monitor progress through theirinvolvement with the RMG and pursue moredetailed work later in 2006-07.

5. REVIEW OF EFFECTIVENESS

As Principal Accounting Officer, I haveresponsibility for reviewing the effectivenessof the system of internal control. My review ofthe effectiveness of the system of internalcontrol is informed by the work of the internalauditors, the Additional and AgencyAccounting Officers and the executivemanagers across the Forestry Commissionwho have responsibility for the developmentand maintenance of the internal controlframework, and comments made by theexternal auditors in their management letterand other reports. I have been advised on theimplications of the result of my review of theeffectiveness of the system of internal controlby the Executive Boards and the ForestryCommission Audit Committee. Plans to

address weaknesses and ensure continuousimprovement of the system are in place.

The Head of Internal Audit has prepared a suiteof annual reports and assurance statements toCountry Directors and Agency Chief Executivesin their capacities as Additional and AgencyAccounting Officers. The reports include anoverall assessment of the adequacy andeffectiveness of risk management, control andgovernance within each entity. As the PrincipalAccounting Officer, I have received a similarreport and assurance statement including anycomments specific to the Great Britain coreresponsibilities. The overall opinion is thatinternal control within the Forestry Commissioncontinues to provide substantial assurance thatmaterial risks to the achievement of objectivesare adequately managed.

6. SIGNIFICANT INTERNAL

CONTROL PROBLEMS

The significant problem involving delays incompletion of the monthly bank reconciliationsundertaken centrally was reported in last year’sstatement. The reconciliations were brought upto date during 2005-06 and Internal Auditundertook a verification check in November2005 to provide assurance that the process wasback under proper control for the 2005-06accounts. In February 2006 Internal Audit againconfirmed that the reconciliations werecontinuing to be performed on time and that anyoutstanding adjustments had been actioned.They reviewed improvements to the system andwere satisfied that sufficient work had beenundertaken by management to clear the itemfrom the Statement on Internal Control.




The Certificate and Report of the Comptrollerand Auditor General to the House of Commons


I certify that I have audited the financialstatements of Forestry Commission GreatBritain / England for the year ended 31 March2006 under the Government Resources andAccounts Act 2000. These comprise theStatement of Parliamentary Supply, theOperating Cost Statement and Statement ofRecognised Gains and Losses, the BalanceSheet, the Cashflow Statement and theStatement of Operating Costs byDepartmental Aim and Objectives and therelated notes. These financial statements havebeen prepared under the accounting policiesset out within them.

RESPECTIVE RESPONSIBILITIES OF THE

ACCOUNTING OFFICER AND AUDITOR

The Accounting Officer is responsible forpreparing the Annual Report and the financialstatements in accordance with theGovernment Resources and Accounts Act2000 and HM Treasury directions madethereunder and for ensuring the regularity offinancial transactions. These responsibilitiesare set out in the Statement of AccountingOfficer’s Responsibilities.

My responsibility is to audit the financialstatements in accordance with relevantlegal and regulatory requirements, and withInternational Standards on Auditing (UK and Ireland).

I report to you my opinion as to whether thefinancial statements give a true and fair viewand whether the part of the FinancialStatements and the Remuneration Report tobe audited have been properly prepared inaccordance with HM Treasury directionsissued under the Government Resources andAccounts Act 2000. I also report whether in all

material respects the expenditure and incomehave been applied to the purposes intended byParliament and the financial transactionsconform to the authorities which govern them.I also report to you if, in my opinion, theAnnual Report is not consistent with thefinancial statements, if the Department has notkept proper accounting records, if I have notreceived all the information and explanations Irequire for my audit, or if information specifiedby HM Treasury regarding remuneration andother transactions is not disclosed.

I review whether the statement on pages 92-96 reflects the Department’s compliance withHM Treasury’s guidance on the Statement onInternal Control, and I report if it does not. I amnot required to consider whether theAccounting Officer’s statements on internalcontrol cover all risks and controls, or to forman opinion on the effectiveness of theDepartment’s corporate governanceprocedures or its risk and control procedures.

I read the other information contained in theAnnual Report and consider whether it isconsistent with the audited financialstatements. This other information comprisesonly include the titles included in the AnnualReport, the unaudited part of the RemunerationReport, and the Management Commentary. Iconsider the implications for my report if Ibecome aware of any apparent misstatementsor material inconsistencies with the financialstatements. My responsibilities do not extendto any other information.

BASIS OF AUDIT OPINION

I conducted my audit in accordance withInternational Standards on Auditing (UK andIreland) issued by the Auditing Practices Board.

My audit includes examination, on a test basis,of evidence relevant to the amounts,disclosures and regularity of financialtransactions included in the financialstatements and the part of the RemunerationReport to be audited. It also includes anassessment of the significant estimates andjudgments made by the Accounting Officer inthe preparation of the financial statements,and of whether the accounting policies aremost appropriate to the Department'scircumstances, consistently applied andadequately disclosed.

I planned and performed my audit so as toobtain all the information and explanationswhich I considered necessary in order toprovide me with sufficient evidence to givereasonable assurance that the financialstatements and the part of the RemunerationReport to be audited are free from materialmisstatement, whether caused by fraud orerror and that in all material respects theexpenditure and income have been applied tothe purposes intended by Parliament and thefinancial transactions conform to theauthorities which govern them. In forming myopinion I also evaluated the overall adequacyof the presentation of information in thefinancial statements and the part of theRemuneration Report to be audited.

OPINIONS

In my opinion:

the financial statements give a true and fairview, in accordance with the GovernmentResources and Accounts Act 2000 anddirections made thereunder by HM Treasury,of the state of the Department’s affairs as at31 March 2006 and the net cash requirement,net resource outturn, resources applied toobjectives, recognised gains and losses andcashflows for the year then ended;

the financial statements and the part of theRemuneration Report to be audited have beenproperly prepared in accordance with HMTreasury directions issued under theGovernment Resources and Accounts Act2000; and

in all material respects the expenditure andincome have been applied to the purposesintended by Parliament and the financialtransactions conform to the authorities whichgovern them.

I have no observations to make on thesefinancial statements.

John BournComptroller and Auditor GeneralNational Audit Office157-197 Buckingham Palace RoadVictoriaLondon SW1W 9SP18 July 2006



Statement of Parliamentary Supply


SUMMARY OF RESOURCE 2005-06 Estimate Outturn 2005-06 2004-05

£000 £000Net total

outturncompared

withestimate:

Gross Net Gross Net saving/ NetNote expenditure A in A Total expenditure A in A Total (excess) Total

Request forresources 1 2 67,604 (3,112) 64,492 66,531 (3,112) 63,419 1,073 55,574Request for resources 2 2 17,457 - 17,457 14,370 - 14,370 3,087 12,891Total resources 3 85,061 (3,112) 81,949 80,901 (3,112) 77,789 4,160 68,465

Non-operatingcost A in A - - - - - - - - -

Note Estimate Outturn

2005-06

£000

Net total

outturn

compared with

Estimate:

saving/(excess)

2004-05

£000

Outturn

Net cash requirement 4 62,016 60,513 1,503 60,328

NET CASH REQUIREMENT 2005-06

Forecast

2005-06

£000

Outturn

2005-06

£000

Total - - - -

SUMMARY OF INCOME PAYABLE TO THE CONSOLIDATED FUND

Explanations of variances between Estimate and outturn are given in theManagement Commentary.

The notes on pages 104 to 126 form part of these accounts

OPERATING COST STATEMENT

for the year ended 31 March 2006

STATEMENT OF RECOGNISED GAINS AND LOSSES


2005-06 2004-05

£000 £000

Note Core Consolidated Core Consolidated

Net gain on revaluation of tangible fixed assets 18 94 838 46 450

Realised element in revaluation 18 7 46 - -

Recognised gains and losses for the financial year 101 884 46 450


Operating Cost Statement andStatement of Recognised Gains and Losses


Core

2005-06

£000

Consolidated Core

Restated

2004-05

£000

Consolidated

Note Staff

Costs

Other

Costs Income

Staff

Costs

Other

Costs Income

Administration

Costs:

Staff Costs 5 16,904 25,818 16,229 24,628

Other administrationcosts

6 30,633 21,291 31,587 22,490

Operating income 8 (21,243) (20,520) (22,625) (21,908)

Programme costs:

Request for

resources 1:

Programme costs 7 59,132 59,132 54,988 54,988

EU receipts 8 (3,746) (3,746) (4,907) (4,907)

Other income 8 (2,095) (2,095) (746) (746)

Request for

resources 2:

Programme costs 7 484 3,173 369 2,981

EU receipts 8 - (998) - (1,133)

Other income 8 (418) (2,054) (480) (1,951)

Totals 16,904 90,249 (27,502) 25,818 83,596 (29,413) 74,415 74,442

Net Operating Cost 79,651 80,001 74,415 74,442

BALANCE SHEETS

as at 31 March 2006



2005-06 2004-05

£000 £000


Fixed Assets:

Tangible assets 10 5,848 17,455 4,144 15,258Intangible Assets 11 1,453 1,560 1,301 1,351

Debtors falling due after more than one year 13 51 83 96 118

Current assets:

Stocks 12 1,024 2,310 1,061 1,523Debtors 13 4,647 5,365 4,989 6,373Cash at bank and in hand 14 1,276 1,503 1,872 2,420

6,947 9,178 7,922 10,316

Creditors (amounts falling due within one year) 15 (9,377) (9,820) (10,351) (10,960)

Net current liabilities (2,430) (642) (2,429) (644)

Total assets less current liabilities 4,922 18,456 3,112 16,083

Provisions for liabilities and charges 16 (1,025) (1,468) (1,328) (1,406)3,897 16,988 1,784 14,677

Taxpayers’ equity:

General fund 17 3,422 10,767 1,402 9,254Revaluation reserve 18 475 6,221 382 5,423

3,897 16,988 1,784 14,677

Balance Sheets


CONSOLIDATED CASH FLOW STATEMENT

for the Year Ended 31 March 2006


2005-06 2004-05

NoteNet cash outflow from operating activities 19(a) (57,548) (57,531)Capital expenditure and financial investment 19(b) (2,965) (2,797)Payments of amount due to Consolidated Fund 19(e) (2,420) (4,107)Surplus cash surrendered to Consolidated Fund 19(e) - (57)Financing 19(d) 62,016 62,748Increase/(decrease) in cash in the period 19(e) (917) (1,744)

Consolidated Cash Flow Statement


CONSOLIDATED STATEMENT OF

OPERATING COSTS BY DEPARTMENTAL

AIM AND OBJECTIVES


See note 20 for explanation of apportionments across objectives.


Restated

2005-06 2004-05

Gross Income Net Gross Income Net

England Objectives

Increase the contribution of forests and woodlands to local economies and rural development 36,531 (2,671) 33,860 36,756 (2,413) 34,343Expand the role of woodlands in supporting the economic regeneration of former industrial land and disadvantaged communities 2,420 (414) 2,006 3,647 (1,363) 2,284Promote public access to woods and forests and develop diverse recreational opportunities 15,271 (841) 14,430 12,404 (588) 11,816Conserve and improve biodiversity, landscape and cultural heritage of our forests and woodlands 17,737 (2,401) 15,336 14,721 (1,612) 13,109England Net Operating Costs 71,959 (6,327) 65,632 67,528 (5,976) 61,552

Great Britain Objective

To take the lead in development and promotion of sustainable forest management and to support its achievement nationally 37,455 (23,086) 14,369 37,559 (24,669) 12,890Great Britain Net Operating Costs 37,455 (23,086) 14,369 37,559 (24,669) 12,890

Great Britain/England Net Operating Costs 109,414 (29,413) 80,001 105,087 (30,645) 74,442

Consolidated Statement of OperatingCosts by Departmental Aim and Objectives


1. STATEMENT OF ACCOUNTING POLICIES

These financial statements have been preparedin accordance with the 2005-06 GovernmentFinancial Reporting Manual (FReM) issued byHM Treasury. The accounting policies containedin the FReM follow UK generally acceptedaccounting practice for companies (UK GAAP)to the extent that it is meaningful andappropriate to the public sector.

In addition to the primary statements preparedunder UK GAAP, the FReM also requiresForestry Commission Great Britain/England to prepare two additional primary statements.The Statement of Parliamentary Supply andsupporting notes show outturn against Estimatein terms of the net resource requirement andthe net cash requirement. The Statement ofOperating Cost by Departmental Aim andObjectives and supporting notes analyseForestry Commission Great Britain/England’sincome and expenditure by the objectivesagreed with Ministers.

Where the FReM permits a choice of accountingpolicy, the accounting policy which has beenjudged to be most appropriate to the particularcircumstances of Forestry Commission GreatBritain/England for the purpose of giving trueand fair view has been selected. ForestryCommission Great Britain/England’s accountingpolicies have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Accounting convention

These accounts have been prepared under thehistorical cost convention modified to accountfor the revaluation of fixed assets at their value to the business by reference to theircurrent costs.

1.2 Basis of preparation of accounts

These accounts reflect the assets, liabilitiesand results of the core-department ForestryCommission England and Forest Researchtogether with international matters and topicswhich, though devolved, are agreed to be bestdelivered for Great Britain as a whole. ForestEnterprise England, an executive agency, is apublic corporation for national accounting andas such is outside the boundary for resourceaccounting purposes. The Forest EnterpriseEngland accounts are published separately in the Forestry Commission annual report and accounts for Great Britain/England withthe net funding of Forest Enterprise Englandreflected in these accounts.

1.3 Tangible fixed assets

Legal ownership of all land and buildings isvested in the Secretary of State with legalownership of the timber, including uncut trees, vested in the Forestry Commissioners.Where Forest Enterprise England is the principalbeneficial user of the assets of the ForestryCommission estate they are treated as a fixed asset of the agency.

Legal ownership of other tangible fixed assets,primarily office equipment, is vested in theForestry Commissioners.

Land and buildings

Land and buildings were assessed as at 31 March 2002 in accordance with our policy of revaluing at three-yearly intervals by professionally qualified staff employed by the Forestry Commission following theprinciples set out in the RICS Red Book.Valuation was on the basis of Open MarketValue or Existing Use Value as appropriateunder the RICS guidance. From 1 April 2002,

Notes to the Resource Accounts


land and buildings has been restated to currentvalue annually using appropriate indices providedby the District Valuer.

Land and buildings were scheduled to be re-assessed as at 31 March 2005 in accordancewith the three-yearly interval stated in theprevious accounting policy. It has been decided,however, to bring the policy in line with UKGAAP and undertake a professional valuationof dwellings and other buildings on a five-yearly basis with a formal review in the thirdyear. The first five-yearly valuation will beundertaken at 31 March 2008 to coincide withthe next full revaluation of the Forest Estate.

In 2004-05, professionally qualified staffemployed by the Commission carried out a review into the use of the indices providedby the District Valuer. The review concludedthat use of the indices provided a reasonablerestatement of the current value of land andbuildings. The indices were therefore used to restate values as at 31 March 2006 and will be used in each year until the professionalvaluation at 31 March 2008.

The normal threshold for capitalisation ofbuildings is £2,000.

Plant and machinery

Forestry vehicles, machinery and equipmentare revalued every five years by professionallyqualified staff employed by the ForestryCommission. They are restated to currentvalue in the intervening years using valuationsprovided by internal professionally qualifiedstaff for specialist forestry machinery andindices provided by the Office for NationalStatistics for all other assets.

The normal threshold for capitalisation ofassets is £3,000.

Information technology (IT)

Information technology asset values are restatedto current value each year using indices providedby the Office for National Statistics. The normalthreshold for capitalisation of IT assets is £1,500.Items of IT, if treated singly would fall belowthe capitalisation threshold, but collectivelyrepresent a significant asset, are capitalised as a pooled asset.

Assets under construction

Assets under construction are carried at costand are transferred to the appropriate fixedasset category when completed and ready for use.

1.4 Depreciation

Freehold land is not depreciated.

Depreciation is provided at rates calculated to write off the valuation of freehold buildingsand other tangible fixed assets by equalinstalments over their estimated useful lives. Lives are in the following ranges:

Land and buildings - up to 80 yearsPlant and machinery - up to 20 yearsIT - 4 to 20 years

Impairments of fixed assets are charged to theoperating cost statement in the period inwhich they occur.

1.5 Intangible assets

Purchased software licences with an acquisitionvalue of £5,000 or more are recognised as anintangible fixed asset. Assets are amortisedover their expected useful economic life to



a maximum of seven years. Managementcarries out an annual review of software andexpected economic lives.

1.6 Stocks and work in progress

Stocks and work in progress are valued as follows:

• finished goods and goods for resale arevalued at cost or, where materially different,current replacement cost, and at netrealisable value only when they eithercannot or will not be used;

• work in progress is valued at the lower of cost, including appropriate overheads,and net realisable value;

• consumable materials and supplies held for continuing use are valued at cost or,where materially different, currentreplacement costs, and at net realisablevalue only when they either cannot or will not be used.

Work in progress on long term projectsundertaken by Forest Research is valued at the cost of staff time and other direct costsplus attributable overheads based on thenormal level of activity.

1.7 Provision for bad and doubtful debts

Specific provisions for bad and doubtful debtsare set aside on the basis of a review ofindividual debts at the end of the year.

1.8 Research and development

As one of its Great Britain functions, the department commissions research from its Forest Research agency and throughexternal contracts awarded by a variety

of means including open tender. The ForestryCommission’s research strategy, which is thesubject of consultation with other governmentdepartments and external stakeholders, is published on the Forestry Commissionwebsite. All research and developmentexpenditure is charged to the operating cost statement in the year.

1.9 Administrative and

programme expenditure

The operating cost statement is analysedbetween administration and programme costs. Administration costs reflect the costs of running Forestry Commission GreatBritain/England, together with associatedoperating income, and programme costsinclude payments of grants.

1.10 Grants payable

Grants payable to individuals and bodies byForestry Commission in accordance with itsstatutory powers and duties are accounted for as they are approved for payment. No provision is made in the financial statementsfor grant offers made but not yet approved for payment.

1.11 European Union (EU) funding

The Forestry Commission acts as an agent of the EU for third party grants paid fromObjective 1 and Woodland Grant Schemepayments made under the national EuropeanAgricultural Guarantee and Guidance Fund.Once grants become recognised, contributionsfrom the EU are claimed. If grants aresubsequently recovered because of failure to fulfil the conditions of the Woodland GrantScheme, the amount of co-financing may berepayable to the EU.



1.12 Capital charges

Charges, reflecting the cost of capital utilisedby the core department in England and Forest Research, have been included underAdministration costs in the Operating CostStatement. The charge is calculated at theGovernment’s standard rate of 3.5% in realterms on the average carrying amount of allassets less liabilities, except for cash balancesheld by the Office of the Paymaster Generaland amounts due to be surrendered to theWestminster Consolidated Fund.

1.13 Value Added Tax (VAT)

The Forestry Commission is registered for VAT.In order to comply with government accountingregulations and normal commercial practice,income and expenditure shown in the operatingcost statement is net of VAT. The ForestryCommission accounts for VAT on a GreatBritain basis with any VAT due to or from HM Revenue and Customs at the year-endincluded in the Forestry Commission GreatBritain/England accounts as a debtor or creditorin the balance sheet. Irrecoverable VAT ischarged to the operating cost statement in the year in which it is incurred.

1.14 Insurance

In accordance with normal governmentaccounting practice, the Forestry Commissioncarries its own insurance risks.

1.15 Pensions

Past and present employees are covered bythe provisions of the Principal Civil ServicePension Scheme (PCSPS). The defined benefitschemes are unfunded and are non-contributoryexcept in respect of dependants’ benefits.Forestry Commission Great Britain/Englandrecognises the expected cost of these

elements on a systematic and rational basisover the period during which it benefits fromemployees’ services by payment to the PCSPSof amounts calculated on an accruing basis.Liability for payment of future benefits is acharge on the PCSPS. In respect of the definedcontribution schemes, Forestry CommissionGreat Britain/England recognises thecontributions payable for the year.

Further information on pensions is contained in the Remuneration Report and note 5 to the accounts.

1.16 Provisions

Forestry Commission Great Britain/Englandprovides for legal or constructive obligationswhich are of uncertain timing or amount at the balance sheet date on the basis of thebest estimate of the expenditure required to settle the obligation. Where the effect of the time value of money is significant, the estimated risk-adjusted cashflows arediscounted using the real rate set by HMTreasury (currently 2.2%).

1.17 Operating leases

Costs in respect of operating leases are chargedon a straight-line basis over the lease term.

1.18 Contingent liabilities

In addition to contingent liabilities disclosed inaccordance with FRS 12, Forestry CommissionGreat Britain/England discloses for parliamentaryreporting and accountability purposes certainstatutory and non-statutory contingent liabilitieswhere the likelihood of economic benefit isremote, but which have been reported toParliament in accordance with the requirementsof Government Accounting.



Where the time value of money is material, contingent liabilities which are required to be disclosedunder FRS 12 are stated at discounted amounts and the amount reported to Parliament separatelynoted. Contingent liabilities that are not required to be disclosed by FRS 12 are stated at theamounts reported to Parliament.

2. ANALYSIS OF NET RESOURCE OUTTURN BY SECTION2005-06 2004-05

£000 £000

Outturn Estimate

Net TotalOutturn

Gross compared Prior-Other resource Net Net with year

Admin current Grants Expenditure A in A Total Total Estimate outturn

Request for resources 1

To implement the programmes of the England Forestry StrategyForestry Commission England DEL - 64,519 - 64,519 (3,112) 61,407 62,480 1,073 55,574Forestry Commission England non-budget - 2,012 - 2,012 - 2,012 2,012 - -Total - 66,531 - 66,531 (3,112) 63,419 64,492 1,073 55,574

Request for resources 2

To take the lead in development and promotion of sustainable forest management and to support its achievement nationallyForestry Commission Great Britain DEL - 13,427 943 14,370 - 14,370 17,457 3,087 12,891Total - 13,427 943 14,370 - 14,370 17,457 3,087 12,891

Resource Outturn - 79,958 943 80,901 (3,112) 77,789 81,949 4,160 68,465

Explanations of the variances are given in the Management Commentary.



3. RECONCILIATION OF OUTTURN TO NET OPERATING COST AND AGAINST

ADMINISTRATION BUDGET

3a. Reconciliation of net resource outturn to net operating cost

2005-06 2004-05

£000 £000

Outturn

compared

Supply with

Note Outturn Estimate Estimate Outturn

Net Resource Outturn 2 77,789 81,949 4,160 68,465

Forest Enterprise England depreciation 2,346 - (2,346) 2,253Forest Enterprise England net capital expenditure (134) - 134 3,724Prior Period Adjustment - - - -Non-supply income (CFERs) - - - -Non-supply Expenditure - - - -Net operating cost 80,001 81,949 1,948 74,442

3b.Outturn against final Administration Budget

2005-06 2004-05£000 £000

Budget Outturn OutturnGross Administration Budget - - -Income allowable against the Administration Budget - - -Net outturn against final Administration Budget - - -



4. RECONCILIATION OF RESOURCES TO CASH REQUIREMENTNet total outturn

compared with

Estimate:

Estimate Outturn saving/(excess)

Note £000 £000 £000

Resource Outturn 2 81,949 77,789 4,160

Capital:• Acquisition of fixed assets 10/11 790 2,967 (2,177)• Proceeds of fixed asset disposals - (2) 2• Investments - - -

Non-operating cost A in A:• Proceeds of fixed asset disposals - - -

Accruals adjustments:• Non-cash items 6 (1,070) (2,530) 1,460•Changes in working capital other than cash 933 (33) 966• Changes in creditors falling due after more than one year - - -• Use of provision 16 - 555 (555)• Timing between accrual and cash VAT - (1,044) 1,044• Non-cash inter-country transfers 11 (11)

Other adjustments:• Adjustment of FE net deficit to financing (20,586) (17,200) (3,386)

Net cash requirement 62,016 60,513 1,503



5. STAFF NUMBERS AND RELATED COSTS

5.1 Staff costs

Staff costs comprise:

2005-06 2004-05

£000 £000

Permanently

employed

Forestry Commission England Total staff Others Total

Wages and salaries 4,875 4,875 - 4,582Social security costs 392 392 - 369Other pension costs 898 898 - 615Agency staff 89 - 89 87Inward secondments 34 - 34 -Total net costs 6,288 6,165 123 5,653

Further staff were employed on a Great Britain basis, which includes Great Britain Silvan House, Shared Services and ForestResearch, to provide support to Forestry Commission activities in all three countries and to its agencies. The staff costs were:

Forestry Commission Great Britain

Wages and salaries 1,687 1,687 - 1,632Social security costs 145 145 - 141Other pension costs 313 313 - 213Agency staff 1 - 1 -Inward secondments 17 - 17 -Total net costs 2,163 2,145 18 1,986

Forestry Commission Central Shared Services

Wages and salaries 6,853 6,853 - 7,132Social security costs 540 540 - 559Other pension costs 1,259 1,259 - 941Agency staff 73 - 73 20Inward secondments - - - 40Capitalised costs (272) (272) - (102)Sub-total 8,453 8,380 73 8,590

Less recoveries in respect of outward secondments (94) (94) - (70)Total net costs 8,359 8,286 73 8,520

Forest Research

Wages and salaries 7,090 7,090 - 6,955Social security costs 547 547 - 539Other pension costs 1,277 1,277 - 904Agency staff - - - 1Total net costs 8,914 8,914 - 8,399

Forestry Commission Great Britain/England

Total costs per Operating Cost Statement 25,818 25,604 214 24,628Less recoveries in respect of outward secondments (94) (94) - (70)Total net costs 25,724 25,510 214 24,558



The Principal Civil Service Pension Scheme(PCSPS) is an unfunded multi-employer definedbenefit scheme but the Forestry Commissionis unable to identify its share of the underlyingassets and liabilities. A full actuarial valuation(by Hewitt Bacon Woodrow) was carried outas at 31 March 2003. You can find details inthe resource accounts of the Cabinet Office:Civil Superannuation(www.civilservice-pensions.gov.uk).

For 2005-06, employers’ contributions of£3,740,000 were payable to the PCSPS (2004-05 £2,663,000) at one of four rates in the range16.2% to 24.6% (2004-05 12% and 18.5%) of pensionable pay, based on salary bands. The scheme’s Actuary reviews employercontributions every four years following a fullscheme valuation. From 2006-07, the salarybands will be revised and the rates will be in a range between 17.1% and 25.5%. The contribution rates reflect benefits accruingduring 2005-06 to be paid when the member

retires, and not the benefits paid during thisperiod to existing pensioners.

Employees can opt to open a partnershippension account, a stakeholder pension withan employer contribution. Employers’contributions of £5,800 were paid to one ormore of a panel of three appointed stakeholderpension providers. Employer contributions areage-related and range from 3% to 12.5% ofpensionable pay. Employers also matchemployee contributions up to 3% ofpensionable pay. In addition, employercontributions of £730, 0.8% of pensionablepay, were payable to the PCSPS to cover thecost of the future provision of lump sumbenefits on death in service and ill healthretirement of these employees.

Contributions due to the partnership pensionproviders at the balance sheet date were £nil.Contributions prepaid at that date were £nil.

5.2 Average number of persons employed

Staff numbers have been apportioned pro rata to the net expenditure on each objective. The average number of whole-time equivalent persons employed during the year was as follows.

2005-06 2004-05Number Number

Objective Permanently-

employed

England Total staff Others Total

Increase the contribution of forests and woodlands to local economies and rural development 93 92 1 95Expand the role of woodlands in supporting the economic regeneration of former industrial land and disadvantaged communities 5 5 - 5Promote public access to woods and forests and develop diverse recreational opportunities 41 40 1 34Conserve and improve the biodiversity, landscape and cultural heritage of our forests and woodlands 44 43 1 36England Total 183 180 3 170

Great Britain

To take the lead in development and promotion of sustainable forest management and to support its achievement nationally 579 576 3 592



6. OTHER ADMINISTRATION COSTS

2005-06 2004-05

£000 £000


Rentals under operating leases:

Hire of plant and machines 568 568 328 328Other operating leases 2,010 2,010 2,024 2,024

Research and development expenditure 943 3,241 1,102 3,312

Non- cash items:

Cost of capital 116 557 21 430Notional audit fees – audit work 53 53 50 50Notional audit fees – non-audit work - - - -Depreciation 649 1,220 572 1,090Impairment 63 63 (1) (1)(Gains)/Losses on disposal of assets 4 14 7 7VME revaluation reserve write off 6 6 - -Provisions

Provided in year 16 179 558 444 444Provisions not required written back 16 (6) (6) (174) (174)Unwinding of discount 16 60 65 36 36

1,124 2,530 955 1,882

Other expenditure

Cost of shared services 16,753 5,026 13,285 4,894Computer costs 1,951 1,951 2,189 2,189Travel and subsistence 1,135 1,135 1,220 1,220Accommodation 1,899 1,899 1,904 1,904Telecommunication 1,279 1,279 989 989Premature retirement costs 292 292 521 521Postage 142 142 161 161Losses and compensation 115 115 113 113Other 2,422 1,103 6,796 2,953

Total 30,633 21,291 31,587 22,490

Other administration costs includes the cost of shared central services provided to ForestryCommission England. Six areas of work are identified as shared services:

• Finance and accounting services• Information and communications technology• Human Resources, including forestry training services• Communications• Grants and licences• Operational support services



For each of the shared services, a serviceboard composed of “intelligent buyers” fromthe countries, Forest Research and the serviceprovider have joint accountability for theoperation to ensure the needs of the customerand the wider organisation are met. Chargeswere made at regular intervals during the yearwith any non-material balances left with theservice provider.

Business units covering mechanical and civilengineering and nurseries charge for theirservices under service level agreementsagreed with their own service board.Expenditure is accounted for in each countryat the time it was incurred.

The Forest Research Agency undertook asignificant proportion of the ForestryCommission’s overall annual researchprogramme in the form of specificallycommissioned projects to deliver agreedoutputs. A separate annual charge was agreedfor each project based on full cost recovery.Costs established in one year are used todetermine project charges for future years.The Agency also provided research and surveyservices for Forest Enterprise England andother parts of the Forestry Commission on afull cost recovery basis.

2004-05 was the first year in the Newlands 1economic regeneration scheme, a schemeinvolving a number of partners with theobjective of restoring former industrial land bycreating community woodlands. Theaccounting of the scheme has been revised in2005-06 and the prior year figures adjusted toreflect the change in accounting. The impacton the 2004-05 net operating cost is nil butthere is a reduction in both programmeexpenditure and income of £873,000.

Forestry Commission Great Britain/Englandprogramme costs include Forest Enterprise

England‘s deficit of £39,517,000 (2004-05£34,485,000). After adjusting for non-cashtransactions of £19,412,000 (2004-05£17,713,000), Forest Enterprise received cashfunding of £20,105,000 (2004-05 £16,772,000).To reconcile resource outturn to the net cashrequirement in the Statement of ParliamentarySupply, the non-cash transactions are adjustedby Forest Enterprise England’s net capitalexpenditure and depreciation to calculate theadjustment of Forest Enterprise England deficitto financing of £17,200,000 (2004-05£11,736,000).

7. PROGRAMME COSTS2005-06 2004-05

£000 £000

Restated Restated

Core Consolidated Core Consolidated

Support for forestry and the rural economy, including grants paid to private woodland owners 14,056 14,056 15,093 15,093Grants paid to private woodland owners from EU receipts 3,746 3,746 4,907 4,907Other programme costs, including research and publications 2,297 4,986 872 3,484Sub-total 20,099 22,788 20,872 23,484

Forest Enterprise England funding 39,517 39,517 34,485 34,485

Total 59,616 62,305 55,357 57,969



2005-06 2004-45

£000 £000

Capital

Net capital (134) 3,724

Accruals adjustments

Cost of capital 15,905 14,690Non cash items 978 627Changes in working capital, including cash 2,316 (625)Changes in provision 347 (703)Total cash adjustments (note 19a) 19,412 17,713Adjust supply expenditure for Forest Enterprise net capital 134 (3,724)Adjust supply expenditure for Forest Enterprise depreciation (2,346) (2,253)Adjustment of FE deficit to financing (Statement of Parliamentary Supply) 17,200 11,736

8. INCOME

2005-06 2004-05

£000 £000

Restated

Total Total

Shared central service charges 19,242 20,915Other 1,278 993Operating income 20,520 21,908

RfR1 RfR2 Total Total

EU receipts 3,746 998 4,744 6,040Other Income 2,095 2,054 4,149 2,697Programme income 5,841 3,052 8,893 8,737

Total income - - 29,413 30,645



2004-05 was the first year in the Newlands 1economic regeneration scheme, a schemeinvolving a number of partners with the objectiveof restoring former industrial land by creatingcommunity woodlands. The accounting of thescheme has been revised in 2005-06 and theprior year figures adjusted to reflect the changein accounting. The impact on the 2004-05 netoperating cost is nil but there is a reduction in both programme income and expenditure of £873,000.

Operating income includes income received by shared central services from Scotland,Wales and Forest Enterprise England whereasthe income from Forestry CommissionEngland and Forest Research is excludedbecause these entities are inside the resource account boundary.

9. ANALYSIS OF NET OPERATING COST BY SPENDING BODY

2005-06 2004-05

£000 £000

Estimate Outturn Outturn

Forestry Commission Great Britain/England 81,949 80,001 74,442Net Operating Cost 81,949 80,001 74,442

10. TANGIBLE FIXED ASSETS

Payments on

Account &

Plant Assets

Land and and Under

Buildings Machinery IT Construction Total

£000 £000 £000 £000 £000

Cost or valuation:

At 1 April 2005 11,709 3,619 7,114 1,790 24,232Additions 70 199 586 1,593 2,448Transfers (117) 24 86 (56) (63)Disposals - (1,109) (698) - (1,807)Revaluation to current prices 919 7 (34) - 892Impairment - (122) (110) - (232)At 31 March 2006 12,581 2,618 6,944 3,327 25,470

Depreciation:

At 1 April 2005 1,009 2,403 5,562 - 8,974Provided during year 263 158 524 - 945Transfers (11) 17 4 - 10Disposals - (1,097) (694) - (1,791)Revaluation to current prices 54 5 (13) - 46Impairment - (122) (47) - (169)At 31 March 2006 1,315 1,364 5,336 - 8,015

Net Book Value at:

31 March 2006 11,266 1,254 1,608 3,327 17,455

1 April 2005 10,700 1,216 1,552 1,790 15,258

ANALYSIS OF TANGIBLE FIXED ASSETS

The net book value of tangible fixed assets comprises:

Core 2006 1,215 22 1,284 3,327 5,848

Agency 2006 10,051 1,232 324 - 11,607

Core 2005 1,166 17 1,171 1,790 4,144Agency 2005 9,534 1,199 381 - 11,114



Note 1 Accounting Policies sets out the basison which fixed assets are revalued.

Land and buildings were scheduled to be re-assessed as at 31 March 2005 in accordancewith the three-yearly interval stated in theprevious accounting policy. It has been decided,however, to bring the policy in line with UKGAAP and undertake a professional valuationof land and buildings on a five-yearly basis witha formal review in the third year. The first five-yearly valuation will be undertaken at 31 March2008 with annual updates in the interveningyears based on indices provided by the District Valuer.

Plant and machinery were subject to a triennial revaluation as at 31 March 2005 byprofessionally qualified staff employed by theForestry Commission. The next full revaluationis due as at 31 March 2008 with annual updatesin the intervening years based on valuationsprovided by internal professionally qualifiedstaff for specialist forestry machinery andindices provided by the Office for NationalStatistics for all other assets.

Information technology assets were restatedto current value as at 31 March 2006 using an index provided by the Office for National Statistics.

11. INTANGIBLE FIXED ASSETS

Intangible fixed assets comprises of software licences.2005-06 2004-05

£000 £000

Cost or valuation:

At 1 April 2005 1,599 1,023Additions 519 576Disposals - -Transfers (30) -Revaluation to current prices (8) -At 31 March 2006 2,080 1,599

Amortisation:

At 1 April 2005 248Provided during year 275 248Disposals - -Transfers (3) -Revaluation to current prices - -At 31 March 2006 520 248

Net Book Value at:

31 March 2006 1,560 1,351

1 April 2005 1,351 1,023

ANALYSIS OF INTANGIBLE FIXED ASSETS

The net book value of intangible fixed assets comprises:Core 2006 1,453

Agency 2006 107

Core 2005 1,301Agency 2005 50



12. STOCKS AND WORK IN PROGRESS2005-06 2004-05

£000 £000


Stocks 1,024 1,024 1,061 1,061Raw materials and work in progress - 1,286 - 462Total 1,024 2,310 1,061 1,523

13. DEBTORS

13(a). Analysis by type2005-06 2004-05

£000 £000


Amounts falling due within one year:

VAT 2,458 2,458 2,305 2,305Trade debtors 1,311 1,836 1,988 3,163Other debtors 52 75 84 92Prepayments 826 996 612 813

4,647 5,365 4,989 6,373

Amounts falling due after more than one year:

Other debtors 51 83 96 118Total 51 83 96 118

13(b).Intra-Government BalancesAmounts falling due Amounts falling due

within one year after more than one year

£000 £000

2005-06 2004-05 2005-06 2004-05

Balances with other central government bodies 3,054 2,657 - -Balances with local authorities 10 - - -Balances with NHS Trusts - - - -Balances with public corporations and trading funds - - - -Intra-government balances 3,064 2,657 - -

Balances with bodies external to government 2,301 3,716 83 118

Total debtors at 31 March 5,365 6,373 83 118



14. CASH AT BANK AND IN HAND2005-06 2004-05

£000 £000


Balance at 1 April 1,872 2,420 3,652 4,164Net change in cash balances (596) (917) (1,780) (1,744)Balance at 31 March 1,276 1,503 1,872 2,420

The following balances at 31 March are held at:Balance with Office of Paymaster General 1,276 1,276 1,872 1,872Cash at commercial banks and cash in hand - 227 - 548Balance at 31 March 1,276 1,503 1,872 2,420

Amounts issued from the consolidated fund for supply but not spent at the year end 1,276 1,503 1,872 2,420

15. CREDITORS

15(a). Analysis by type2005-06 2004-05

£000 £000



Other taxation and social security 1,955 1,955 2,050 2,050Trade creditors 3,922 4,304 3,566 3,877Other creditors 1,198 1,209 59 60Accruals and deferred income 799 799 2,256 2,256Payments received on account - 50 - 297Amounts issued from Westminster consolidated fund (supply) but not spent at year end 1,503 1,503 2,420 2,420Total 9,377 9,820 10,351 10,960

Forest Enterprise England acts as co-ordinatorfor the Interreg Project which is funded by theEuropean Union. The purpose of the Interreg Project is the promotion andguidance of recreation and conservation inforestry. The duties of co-ordinators includereceiving EU funds on behalf of partners foronward transmission once work programmeshave been approved. As third party assetsthese sums are not recorded on the face ofthese accounts. At 31 March 2006 the amount

held in Forestry Commission bank accounts onbehalf of partners was 106,000 Euros. This hassubsequently all been transferred to the partners concerned.

Amounts held in Forest Research bankaccounts on behalf of partners in EuropeanCommission projects at 31 March 2006 was£27,000. This has subsequently all beentransferred to the partners concerned.



15(b). Intra-Government BalancesAmounts falling due Amounts falling due

within one year after more than one year

£000 £000

2005-06 2004-05 2005-06 2004-05

Balances with other central government bodies 4,783 5,531 - -Balances with local authorities 299 - - -Balances with NHS Trusts - - - -Balances with public corporations and trading funds 15 - - -Intra-government balances 5,097 5,531 - -

Balances with bodies external to government 4,723 5,429 - -

Total creditors at 31 March 9,820 10,960 - -

16 PROVISION FOR LIABILITIES AND CHARGES

Core Consolidated

£000 £000

Balance at 1 April 2005 1,328 1,406Provided in the year 179 558Provisions not required written back (6) (6)Utilised in the year (536) (555)Unwinding of discount 60 65Balance at 31 March 2006 1,025 1,468



Early Departure costs

Early departure costs

Forestry Commission Great Britain/Englandmeets the additional costs of benefits beyondthe normal PCSPS benefits in respect ofemployees who retire early by paying therequired amounts annually to the PCSPS overthe period between early departure and normalretirement date. Forestry Commission Great

Britain/England provides for this in full whenthe early retirement programme becomesbinding by establishing a provision for theestimated payments discounted by theTreasury discount rate of 2.2% in real terms.

17. GENERAL FUND2005-06 2004-05

£000 £000


Balance at 1 April 1,402 9,254 (1,971) 4,955Net operating cost for the year (79,651) (80,001) (74,415) (74,442)Net Parliamentary funding 62,554 62,016 62,341 62,748Forest Enterprise England non-cash adjustments 19,412 19,412 17,713 17,713Notional cost of capital 116 557 21 430Transfer of fixed assets from/to other forestry bodies 6 (100) - 113Realised element of revaluation reserve 7 46 - -Timing between accrual and cash VAT 1,037 1,044 - -Non-cash inter-country services (11) (11) 83 107Notional audit fees 53 53 50 50Amounts issued from the Consolidated Fund for supply but not spent at year end (1,503) (1,503) (2,420) (2,420)Balance at 31 March 3,422 10,767 1,402 9,254

18. REVALUATION RESERVE2005-06 2004-05

£000 £000


Balance at 1 April 382 5,423 336 4,973Arising on revaluation during the year 94 838 46 450Realised element of revaluation reserve (7) (46) - -Write-off 6 6 - -Balance at 31 March 475 6,221 382 5,423

19. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

19(a). Reconciliation of operating cost to operating cash flows2005-06 2004-05

£000 £000

Note

Net operating cost 9 80,001 74,442

Adjustments for non cash transactions 6 (2,530) (1,882)Timing between accrual and cash VAT (1,044) -Non-cash inter-country services 11 (107)Forest Enterprise England non-cash adjustments (19,412) (17,713)Increase/(decrease) in stock 787 (40)Increase/(decrease) in debtors (1,043) (153)(Increase)/decrease in creditors 1,140 4,048less movements in creditors relating to items not passing through OCS (917) (1,744)Use of provisions 16 555 680Net cash outflow from operating activities 57,548 57,531



19(b). Analysis of capital expenditure and financial investment2005-06 2004-05

£000 £000

Note

Tangible fixed assets additions 10 2,448 2,221Intangible fixed assets additions 11 519 576Proceeds of disposal of fixed assets (2) -Loans to other bodies - -Repayment of loans to other bodies - -Net cash outflow from operating activities 2,965 2,797

19(c). Analysis of capital expenditure and financial investment by Request for Resources

Capital

expenditure Loans A in A Net Total

£000 £000 £000 £000

Request for resource 1 79 - - 79Request for resource 2 2,886 - - 2,886

Net movement in debtors/creditors - - - -

Total 2005-06 2,965 - - 2,965

Total 2004-05 2,797 - - 2,797

19(d). Analysis of financing2005-06 2004-05

£000 £000

Note

From the Consolidated Fund 17 62,016 62,748Net financing 62,016 62,748

19(e). Reconciliation of Net Cash Requirement to increase/ (decrease) in cash

2005-06 2004-05

£000 £000

NoteNet cash requirement (60,513) (60,328)From the Consolidated Fund (Supply) 19(d) 62,016 62,748Payment of amount due to Consolidated Fund (2,420) (4,107)Surplus cash surrendered to Consolidated Fund - (57)Increase/(decrease) in cash (917) (1,744)




20. NOTE TO THE CONSOLIDATED STATEMENT OF OPERATING COSTS BY

DEPARTMENTAL AIM AND OBJECTIVES

Expenditure in the schedule comprises the direct costs incurred by Forestry CommissionEngland’s national office and payments made for centrally provided services. An analysis wasundertaken to determine the costs attributable to each of the objectives for the core department.In a multi-benefit forestry strategy where many activities will contribute to more than one objective,the allocation of costs has been undertaken by senior staff in each area based on an informedjudgement of each activity.

21. CAPITAL COMMITMENTS

There were no contracted capital commitments at 31 March 2006.

22. COMMITMENTS UNDER OPERATING LEASES

Operating leases

Operating lease rentals are charged on a straight-line basis over the term of the lease.Commitments on operating leases for the next year are as follows:

2005-06 2004-05

£000 £000


Building leases expiring within:One year 42 42 63 63Two to five years 311 311 - -More than five years 1,650 1,650 1,961 1,961Total 2,003 2,003 2,024 2,024

Other leases expiring within:One year - - 93 93Two to five years 261 261 235 235More than five years 10 10 - -Total 271 271 328 328




23. OTHER FINANCIAL COMMITMENTS

Planting and replanting grants

Following approval of a management plan forplanting proposals Forestry CommissionEngland undertakes to pay planting grants intwo instalments. Replanting grants are payablein one instalment. At 31 March 2006, ForestryCommission England was committed underdraft and signed contracts to the payment offuture instalments of planting and replantinggrants amounting to £20 million (2004-05 -£12.3 million signed contracts).

Existing woodlands

Grants for the management of existingwoodlands are payable annually in arrears duringthe 5-year currency of an approved plan,provided specific objectives are met.

Grants, which support capital investment workto improve public benefits from woodlands,including planning grants, are usually payable inone instalment. Forestry Commission Englandwas committed under draft and signed contractsto the payment of future instalments of grantswhich support existing woodlands amountingto £11.9 million at 31 March 2006 (2004-05 -£18 million signed contracts).

24. CONTINGENT LIABILITIES

There were no contingent liabilities as at31 March 2006 (£nil at 31 March 2005).

26. RELATED PARTY TRANSACTIONS

Forestry Commission England’s executiveagency Forest Enterprise England is regardedas a related party. During the year, ForestryCommission England has had a significantnumber of material transactions with ForestEnterprise England.

In addition, Forestry Commission GreatBritain/England has had various materialtransactions with other governmentdepartments and other central governmentbodies. The main entities within government

with which the Forestry Commission has haddealings are H M Treasury, UK Co-ordinatingBody, the Paymaster General’s Office, HM Revenue and Customs, the Departmentfor the Environment, Food and Rural Affairs,the Office of the Deputy Prime Minister, the North West Development Agency andYorkshire Forward.

The husband of Judith Webb, a non-executivemember of the National Committee for England,received a Woodland Grant of £420.

25. LOSSES AND SPECIAL PAYMENTS 2005-06 2004-05

Number £000 Number £000

Losses total 75 196 22 44

Special payments total 25 23 23 25

In the year to 31 March 2006, ForestEnterprise England entered into materialtransactions involving Martin Gale, a non-executive Forestry Commissioner. At 31 March2006, Martin Gale was Chairman of TilhillForestry and Vice President, InternationalForestry, UPM-Kymmene Corporation. UPM-Kymmene is the parent company of ShottonPaper, Caledonian Paper and Tilhill ForestryLtd. Tilhill Forestry has an interest in BSWTimber plc.

The value of purchases from Forest EnterpriseEngland was:

BSW Timber plc £1,501,000Tilhill Forestry £1,089,000

Amounts owing to Forest Enterprise Englandat 31 March 2006 were:

BSW Timber plc £231,000Tilhill Forestry £36,000

Professor Jim Lynch, Chief Executive of ForestResearch, is distinguished Professor of LifeSciences at the University of Surrey. The valueof payments to the University for servicesprovided in the year to 31 March 2006 was£48,000. Sam Evans and Peter Freer-Smithhold visiting professorships at the Universitiesof Sheffield and Southampton respectively,with which £12,000 and £7,000 was spent on research services. Other members of staff hold professorships at UK and foreignuniversities but no financial transactions took place with these in 2005-06.

27. FINANCIAL INSTRUMENTS

FRS 13, Derivatives and Other FinancialInstruments, requires disclosure of the role

which financial instruments have had duringthe period in creating or changing the risks an entity faces in undertaking its activities.Because of the largely non-trading nature of its activities and the way in which governmentdepartments are financed, Forestry CommissionGreat Britain/England is not exposed to thedegree of financial risk faced by businessentities. Moreover, financial instruments play a much more limited role in creating orchanging risk than would be typical of thelisted companies to which FRS 13 mainlyapplies. The department has no powers toborrow or invest surplus funds and financialassets and liabilities are generated by day-to-day operational activities and are held not tochange the risks facing the department inundertaking its activities.

As permitted by FRS 13, debtors and creditorswhich mature and become payable within 12months from the balance sheet date havebeen omitted from the liquidity profile.

Liquidity riskThe UK Government makes provision for theuse of resources by Forestry CommissionGreat Britain/England, for revenue and capitalpurposes, in its budget for each financial year.Resources and accruing resources may beused only for the purposes specified and up to the amounts specified in the budget. The budget also specifies an overall cashauthorisation to operate for the financial year.Forestry Commission Great Britain/England is not, therefore, exposed to significantliquidity risks.

Interest-rate riskForestry Commission Great Britain/England is not exposed to interest-rate risk.



Foreign currency riskForestry Commission Great Britain/England is not exposed to foreign currency risk.

Fair ValuesThere is no difference between book value andfair value for the cash at bank shown in Note14. Fair value for the provisions shown in Note 16 is not significantly different from bookvalue since, in the calculation of book value,the expected cash flows have been discountedby the Treasury rate of 3.5% in real terms.

28. ENTITIES WITHIN THE

DEPARTMENTAL BOUNDARY

The entities within the boundary during 2005-06 were as follows:

a. Supply-financed agencies:

Forest Research Agency, which incurred anet deficit of £350,000.

b. Non-executive NDPBs:

None

c. Other entities:

None

The annual reports and accounts of the ForestResearch Agency are published separately.



Accounts Direction given by the Treasury inaccordance with Section 5(2) of the GovernmentResources and Accounts Act 2000

This direction applies to those governmentdepartments and pension schemes listed inthe attached appendix.*

These departments and pension schemes shall prepare resource accounts for the yearended 31 March 2006 in compliance with the accounting principles and disclosurerequirements of the edition of the Government Financial Reporting Manual issued by H M Treasury (ìthe FReMî) which is in force for 2005-06.

The accounts for government departmentsshall be prepared so as to:

give a true and fair view of the state ofaffairs at 31 March 2006 and of the netresource outturn, resources applied toobjectives, recognised gains and lossesand cash flows for the financial year thenended; and

provide disclosure of any materialexpenditure or income that has not beenapplied to the purposes intended byParliament or material transactions thathave not conformed to the authoritieswhich govern them.

The accounts for pension schemes shall beprepared so as to:

give a true and fair view of the state ofaffairs at 31 March 2006 and of the netresource outturn and cash flows for thefinancial year then ended; and

provide disclosure of any materialexpenditure or income that has not beenapplied to the purposes intended byParliament or material transactions thathave not conformed to the authoritieswhich govern them.

Compliance with the requirements of theFReM will, in all but exceptional circumstances,be necessary for the accounts to give a true andfair view. If, in these exceptional circumstances,compliance with the requirements of theFReM is inconsistent with the requirement togive a true and fair view, the requirements ofthe FReM should be departed from only to theextent necessary to give a true and fair view.In such cases, informed and unbiasedjudgement should be used to devise anappropriate alternative treatment which should be consistent with both the economiccharacteristics of the circumstances concernedand the spirit of the FReM. Any materialdeparture from the FReM should be discussed in the first instance with the Treasury.

David Cruden FCA

Head of Central Accountancy Team,

Her Majesty’s Treasury

13 January 2006

* The Forestry Commission was one of thedepartments listed in the appendix which isreferred to.

Accounts Direction

Given by the Treasury


Forest Enterprise England

Annual Report and Accounts 2005-06

Contents

Annual Report 129

Remuneration Report 139

Statement of Forestry Commission’s and Chief Executive’s Responsibilities 143

Statement on Internal Control 144

The Certificate and Report of the Comptroller and Auditor General 149

Income and Expenditure Account 151

Statement of Total Recognised Gains and Losses 152

Balance Sheet 153

Cash Flow Statement 154

Notes to the Accounts 155

Accounts Direction 173


INTRODUCTION AND BACKGROUND

BASIS OF ACCOUNTS

The Forest Enterprise England accounts havebeen prepared under a direction given by theTreasury in accordance with Section 7 of theGovernment Resources and Accounts Act2000. The direction is produced as an appendixto the accounts.

DEPARTMENTAL ACCOUNTING

BOUNDARY

Forest Enterprise England is designated as apublic corporation for national accountingpurposes, by the Office of National Statistics,in accordance with European System ofAccounts (ESA) 95. Accordingly, it is outsidethe departmental boundary for resourceaccounting purposes but with the net fundingreflected in the Forestry Commission GreatBritain/England resource accounts.

NATURE OF THE BUSINESS, ITS

STRATEGY, AIMS AND OBJECTIVES

Status

Forest Enterprise is part of ForestryCommission England which serves as theforestry department of the WestminsterParliament to advise on and implementforestry policies. Through the executiveAgency, it also manages the public forestestate to deliver public benefits. The Secretaryof State for Environment, Food and RuralAffairs is answerable to the WestminsterParliament for Forestry Commission GreatBritain/England’s overall policies andperformance. Further information on ForestryCommission Great Britain/England can befound in its Annual Report and Accounts.

Strategy

The overall purpose of the agency is tomanage the national forest estate, owned bythe Secretary of State for Environment, Foodand Rural Affairs, to deliver the economic,environmental and social objectives of theEngland Forestry Strategy.

Aims and Objectives

The aims and objectives of Forest EnterpriseEngland are described in the FrameworkDocument published in April 2003 andavailable on the Forestry Commission websiteat www.forestry.gov.uk. They are designed toassist Forestry Commission England toachieve its overall aim of protecting andexpanding England’s woodlands and increasingtheir value to society and the environment.The key objectives are:

• To manage the estate in accordance withthe principles of sustainable forestmanagement as set out in the UK ForestryStandard (Sustainable forest management);

• To increase the contribution of the estateto the rural economy (Economic);

• To conserve and enhance the biologicaldiversity, landscape and cultural heritage ofthe estate (Environmental);

• To promote public access to the estateand develop diverse recreationalopportunities (Social);

• To expand the role of the estate inimproving the environment of disadvantagedcommunities and bringing brown field landinto beneficial public use (Social).




MANAGEMENT COMMENTARY

Operating review

2005-06 was a successful year for the Agency.Events that impacted Forest EnterpriseEngland during the year included:

• The timber market was buoyant throughoutthe year with good levels of demand and asteady increase in unit prices whichlevelled off towards the end of the year asincreased energy prices began to impact.The volume target for dispatches wasexceeded at 1,510,000 cubic metresagainst a budgeted 1,470,000 cubicmetres. Income amounted to £18.7 millionagainst a planned £17.0 million.

• Mid 2004 saw the launch of the firstForestry Commission electronic timber salethrough its own electronic tender system.The package was well received bycustomers and is now our main method ofselling timber in Forest Enterprise England.

• Severe gales buffeted northern England inJanuary 2005 and a significant part of theyear’s harvesting programme in the LakeDistrict centred around the clearing ofwindblown timber. This task began withclearance of our key public access areasand progressed across affected woodlandsto completion in March 2006.

• The announcement of the closure of the StRegis Paper Mill in February 2006 had asevere and immediate impact on themanagement of broadleaved woodland. Formany years the plant had supported thethinning of these woodlands by providing amarket for small diameter and lower qualitymaterial. Our immediate task was to

support the fragile harvesting, marketingand haulage infrastructure and then tomove on to work with others to seek anddevelop new market opportunities.

• Countryside and Rights of Way Act(CRoW). The whole of the freehold estatewas scrutinised for Dedication under theCRoW Act and 140,000 hectares has beendedicated. Further dedications will followsubject to third party consents. The NewForest is already mapped as access landunder the Law of Property Act.

• Liability claims were a vastly reducedconcern this year compared to lastresulting in a total expenditure of £144,000.Out of this expenditure, £100,000 wasrecovered at the court’s direction from thesuccessful defence of a major cycling claimtogether with a further £95,000 recoveredfrom expenses incurred in 2004-05.

Significant projects taken forward duringthe year included:• The construction of a new £2.6 million

visitor centre at Dalby Forest in the NorthYork Moors, together with the £846,000redevelopment of Dalby Courtyard into amixture of offices, workshop units, shops,and community rooms. A new car park and55km of mixed ability cycle routes havealso been constructed at a cost of£671,000. The funding is from a mix ofYorkshire Forward, European RegionalDevelopment Fund (ERDF) and otherbodies, with some match funding fromForest Enterprise England. The site isexpected to be fully operational byDecember 2006.




• UK Woodland Assurance Standard(UKWAS) certification. The annualindependent surveillance audit wascompleted at West Midlands and NorthWest England forest districts. Our timberand venison will continue to carry theForest Stewardship Council (FSC) logowhich confirms that the exactingrequirements both of UKWAS and the FSCare being met.

• The construction of a new £808,000 visitorcentre at Bedgebury Pinetum in Kent withfunding from Sport England, Interreg andother bodies, with some match fundingfrom Forest Enterprise England. Theproject, with a total cost of £1.89 million,will also provide play and all-ability trails, afamily cycle trail, a single track mountainbike trail and a skills area and facilities forhorse riding, all within the forest. Totallength of new cycle trails is 27km. The sitewill be open from Easter 2006. The projecthas been taken forward as part of SportEngland’s Active England programme tomake the nation more active

• The construction of a new activity hub atHaldon Forest Park, near Exeter. Thisproject has been principally funded bySport England as part of their ActiveEngland programme. Total cost of theproject is £1.4 million. The project deliversan all-ability trail, a play trail, a family cyclingroute and a single track mountain bike trailand skills area. Total length of new trails is40km. In addition a redundant building atHaldon has been refurbished to become‘The Centre for Contemporary Art in theNatural Environment’. The Centre, aninnovative charity which has the support of

Arts Council England, has adapted anexisting building as a project space using itas a base for exhibitions, live events, artistresidencies and workshops. AtWistlandpound Reservoir in North Devon,we have created an innovative fitness trailthrough the forest in partnership with theCalvert Trust. This is the first of its kind inthe country, designed by a specialistcompany and caters for all levels ofphysical and mental disability. It has beenfunded by £100,000 from Sport England’sActive England programme.

• 2005-06 was the second full delivery yearof the £23 million Newlands 1 economicregeneration scheme, funded by the NorthWest Development Agency (NWDA) andcovering Merseyside, Greater Manchesterand North Cheshire. Managed by ForestryCommission England, the scheme is beingdelivered in partnership with theCommunity Forests, Groundwork andothers like BTCV. The scheme will lead tothe restoration of 435 hectares of formerindustrial land by creating communitywoodlands to form attractive settings toattract and maintain economic investment.Delivery moved ahead strongly during theyear with the completion of tree plantingand construction of the accessinfrastructure on the first two inner-citysites at Moston Vale in Manchester andBidston Moss at Birkenhead.

• The Agency continues to work closely withthe Office of the Deputy Prime Minister(ODPM) in delivery of their SustainableCommunities Plan with a key delivery rolemarked out in their Greening the GatewayImplementation Plan. A major step forward




was the purchase of Jeskyns Farm inMarch 2005 in partnership with ODPM.Jeskyns, a 147 hectares arable farm, is akey development in ODPM’s ‘GreeningThames Gateway’ programme and workhas continued through 2005-06 to convertthe site to community woodland.

• Salcey Forest, between Milton Keynes andNorthampton, has successfully attractedODPM funding for a large scale recreationand conservation project to refurbishexisting, and provide additional, recreationfacilities. This included an innovative treetop walk, which was completed in 2005-06at a cost of £750,000 as the southerngateway to the River Nene Regional Park.

• The first three sites in South Yorkshirewere transferred over to the LandRestoration Trust (LRT) following theirrestoration to community woodland. Thesites will be managed by the ForestryCommission, on behalf of the LRT, with thecosts being paid for out of the dowriessupplied by English Partnerships. A further3 sites will be transferred over the nextyear giving a total in excess of 500hectares that has been restored for thepublic to use and enjoy. These sites will bemanaged in partnership with otherorganisations such as Groundwork whichwill help to maximise the diversity of usesthat these sites are capable of.

• Following a Stage 1 pass from the HeritageLottery Fund (HLF) awarded in March 2005,we have employed a project manager andcompleted the detailed planning of theNeroche Scheme. Located in theBlackdown Hills in Somerset and covering

a total area of 20,000 hectares, ForestEnterprise England is the lead partner inthis groundbreaking landscape conservationscheme. A final decision on this £3 millionscheme is due from the HLF in August2006. The Neroche Scheme has broughttogether 16 partner organisations and thelocal community. If the HLF Stage 2application is successful, the scheme willdeliver major habitat restoration in thepublic forest with the introduction of nativecattle, expanded forest schools provision,extensive public access for all, ancientmonument restoration, the delivery of aforestry apprenticeship scheme, and acomprehensive interpretation andvolunteering programme. The innovativeapproach taken throughout the NerocheScheme has generated considerablenational interest from a wide variety ofconservation and land managementorganisations.

• Work has continued to set up the supplyarrangements for the Wilton 10 woodenergy project being developed at Teessideby Sembcorp Utilities. Forest EnterpriseEngland will be supplying 50,000 tonnes ofroundwood per annum from Kielder andNorth York Moors forest districts as part ofthe raw material requirement for theproject which will generate 30 megawattsof electricity.

• Active Woods is a Great Britain campaignto raise awareness of the value of outdooractivity in woodlands. A high percentage ofthe 1,000 events that forest districts runper annum within England have beenactively marketed as part of the ActiveWoods campaign.




• The Forest Tour 2005 featured Madnessand Beautiful South playing successivenights at six forest venues. In addition,Daniel Bedingfield and Ian Brown playedsecond weekends at Delamere andThetford. The concert tour played to justunder 100,000 people, many of whomwere visiting for the first time.

Financial review

Details of the financial performance targets setfor Forest Enterprise England by the ForestryCommission National Committee for Englandand achievement against those targets areshown in Note 24 to the accounts.

Forest Enterprise England incurred a deficit onits Income and Expenditure Account, beforecost of capital, of £23.6 million (2004-05 £19.8million). The operating deficit increased by £1.5million. The key factors are described below:

• We fully met our marketing and salesplans, dispatching 1,510,000 cubic metresof timber with a value of £18.7 million.

• £2.1 million was raised from property sales.This comprised £1.7 million from buildingdisposals, and £0.4 million from woodlandrationalisation sales.

• Acquisitions totalled 108 hectares. Theseincluded 25 hectares in the National Forest,79 hectares in the Newlands project, and 5hectares at Delamere. In addition 68hectares of leasehold in South EastEngland was converted to unrestrictedfreehold through acquisition.

• The net cost of recreation, conservationand heritage was £13.8 million. The

increase of £2.2 million reflected anincrease in partnership projects and anincrease in staff resource applied todelivering our important social andcommunity policies.

• The value of the forest estate and otherland increased by £27 million using indicesand there were additions of £3.1 million.Building assets were revalued upwards by£2.8 million using information provided bythe District Valuer and buildings underconstruction at the year end amounted to£3.6 million. The main projects being takenforward are the visitor centres at Dalby inthe North York Moors and Bedgebury inKent, capital works at Sherwood andNorthants district offices, and buildingworks at Westonbirt Arboretum. Theseprojects are being taken forward with theassistance of external funding.

After adjusting the total deficit for items notinvolving the movement in cash and for capitalexpenditure and receipts, the net cash fundingreceived from Forestry Commission Englandwas £20.1 million (2004-05 £16.8 million).

Future Events

Post-Balance Sheet EventThe Forestry Commission has undertaken achallenging and complex public privatepartnership (PPP) competitive process over thelast two years in order to find the most suitablejoint venture partner to develop and expand itsForest Holidays business. On 8 May 2006, theForestry Commission entered into a jointventure with the Camping and Caravanning Clubto take over management of Forest Holidays.The limited liability partnership (LLP) will providefunding for modernisation and expansion of the




business together with the necessary skills andvision to grow the business.

Until very recently, the Forestry Commissionhad no express power to hold shares in alimited company or to hold interest in a LLP.Therefore, in respect of the activities carriedon by the Forestry Commission in England andWales, the Forestry Commission undertook toseek an Order under the Regulatory ReformAct 2001 in order to permit the ForestryCommission to participate in the new entity.The Order was granted on 15 March 2006.However, as the Regulatory Reform Act doesnot apply to matters which are within thelegislative competence of the ScottishParliament the grant of the Order does notaffect the powers of the Forestry Commissionin or as regards Scotland. Therefore, theForestry Commission still does not have thenecessary powers to participate in anycompany or LLP which has Scottish assets, orwhich carries on business in Scotland. TheForestry Commission is seeking primarylegislation in the Scottish Parliament whichwould give the Forestry Commission thenecessary powers to enter into the jointventure in respect of the Scottish sites. In themeantime, Scottish Ministers have approved aseparate LLP in Scotland in which ScottishMinisters will act as a member and hold thepublic sector interest, in place of the ForestryCommission, until the Forestry Commissionobtains the necessary powers.

Following the transfer of the Forest Holidaysbusiness, there will be a significant change tothe way in which the Forestry Commission willaccount for its interest in Forest Holidays. Aslessors of the sites to the joint venture, ForestEnterprise England will show a long term

debtor balance on its balance sheet torepresent the net present value of the futurerental payments due by the joint venturecompanies. The Forestry Commission’s equityand loan stock investments in the joint venturewill be shown separately on the balance sheetof Forest Enterprise England, representingtheir current value to the ForestryCommission.

Forest Enterprise England will transfer about£536,000 of income received in advance forholidays commencing on or after 8 May 2006that belongs to the LLP. All Forest Holidays’operations will in future be undertaken by theJoint Venture and Forest Enterprise Englandwill account for its share of the Joint Venture’sprofits and assets and liabilities in accordancewith Financial Reporting Standard 9.

Future work

There are a number of events that are likely toimpact the work for Forest Enterprise Englandin 2006-07 and future years:

• Timber processors are facing a number ofpressures, particularly from increasedenergy costs but it is hoped that therecovery in timber prices can bemaintained. The closure of the St RegisPaper Mill will impact on our ability toundertake thinning of broadleavedwoodland but this will not impactsignificantly on overall income as values arelow. This activity does however have otherstrong links to biodiversity and amenityvalues and work on developing alternativemarkets will be a priority. Potential threatsto the overall income position are thepossible loss of one or more timberprocessors through business failure or fire




or impacts from the wider European orglobal timber market.

• There continues to be significantinvestment in the timber processing sectorand a number of significant wood energyprojects are now moving closer tocompletion. It is hoped that these willcontribute to a competitive market, but itwill remain important to work with all partsof the processing sector.

A number of major projects are planned fornext year and beyond:

• We will continue our work on theNewlands Project. This will involve takingfurther major sites through the acquisition,planning and consultation phase andbeginning their implementation. We willalso be working to ensure that the MostonVale and Bidston Moss sites are closelyconnected with their communities anddelivering a wide range of public benefits.

•The main aim of the work in the ThamesGateway will be to continue delivering theJeskyns greenspace project, with themajority of work taking place duringfinancial year 2006-07, and initiation anddelivery of the Ingrebourne Valley project.ODPM has offered in principal £1 million offunding towards the restoration ofIngrebourne Valley (Rainham, LondonBorough of Havering), a former privatelyoperated gravel extraction and morerecently land fill site. The success of theproject will depend on an agreement oncurrent negotiations between ForestEnterprise England and the operator overlong term ownership and liabilities.

• Forest Enterprise England will continue towork within the Thames Gateway and seekto be included within the relevant deliverypartnerships. Where opportunities arise,these will be brought to the attention ofODPM on the basis of seeking funding tofurther deliver against their SustainableCommunities Plan.

• We will commence a two year programmefor which an additional £1 million per yearof funding has been provided by DEFRA toimprove the condition of a wide range ofSSSIs on the Forestry Commission estateacross England.

• The Forestry Commission has participatedin a national bid to the Big Lottery Fundunder their Changing Spaces programme.The “Access to the Natural EnvironmentConsortium” brings together twelvenational statutory and voluntaryorganisations from the environment sectorto collectively pool their skills in a proposalto spend some £90 million split across allGovernment regions in England. Workingwith regional colleagues, the proposalsfocus on using an enhanced naturalenvironment to enrich people’s lives andengage with disadvantaged communities.

• The Forestry Commission in the Regionshas brought the combined skills ofconservancy offices, forest districts and thecommunity forests together to buildprojects, which emulate the ambition andstructure of the “Newlands” project.Generic regional business plans aim toprovide community outreach, site habitatand infrastructure enhancements andshared activities to specified urban fringe




areas adjacent to some of the country’smost deprived communities.

• Fineshade Woods, between Corby andPeterborough, has been awarded £950,000of ODPM funding for development of anew recreation and cultural heritage centrefor Rockingham Forest. The centre willprovide a new focus for the AncientWoodland Project and the Red Kites @Rockingham Project in partnership with theRSPB and the Rockingham Forest CraftGuild. The project will become the northerngateway to the River Nene Regional Park.

• Working in partnership with YorkshireForward and South Yorkshire ForestPartnership, a 55 ha farm is to be boughtand converted into Community woodland.This land, which is on the outskirts ofBarnsley, will be a significant contributionto South Yorkshire’s drive to improvebiodiversity and increase the amount ofland available for public access. This £2million project will be principally funded bythe Rural Development Agency as well asattracting European funding. The ForestryCommission will be the long term ownersand managers of this new communitywoodland.

Details of all other developments andcommitments are shown in the ForestryCommission England Corporate Plan availableon the internet at http://forestry.gov.uk/england.

MANAGEMENT

Management Board

The Agency Management Board givesstrategic direction and leadership to the forestdistricts within England. The membership for2005-06 was:

Simon Hodgson* Chief Executive(from 29 September 2005)

Rod Leslie* Head of Sustainability, andActing Chief Executive(until 14 September 2005)

Brian Mahony Head of SustainableForestry and LandManagement

Mark Thornycroft Head of EstatesJames Swabey Head of Recreation and

Public AffairsPeter Ranken Head of Recreation and

Development(until 31 July 2005)

Michael Seddon Deputy Surveyor NewForest (from 1 April 2005)

Ken Milsom Human ResourcesManager

Steve Meeks Finance ManagerJo O’Hara Planning Manager

*Member of the Forestry Commission NationalCommittee for England and/or the ForestryCommission England Management Board.

A register of interests is maintained and canbe accessed on the Forestry Commissionwebsite (www.forestry.gov.uk).




Forestry Commissioners and Permanent

Head of the Department

The Board of Commissioners gives strategicdirection to the Forestry Commission andtakes decisions on not-devolved or co-ordinated functions. It has a part time non-executive Chairman, Rt Hon Lord Clark ofWindermere, and the Director General, TimRollinson, as Permanent Head of theDepartment, acts as Deputy Chairman.Commissioners who served during the yearare available in the Great Britain/EnglandAnnual Report and Accounts.

OTHER DISCLOSURES

Research and Development

Forest Research, an executive agency of theForestry Commission, is responsible forcarrying out forest research and allied work.Forest Enterprise England commissionsresearch through the agency and throughexternal contracts awarded by a variety ofmeans including open tender. Althoughforestry is a devolved subject, Forest Researchcontinues to be funded from Westminster.

Pensions

Information on pensions is contained in theRemuneration Report and accounting policynote 1.13.

Supplier Payment Policy

Forest Enterprise England complies with theGovernment’s Better Payment Practice Code.Unless otherwise stated in the contract, weaim to pay within 30 days from the receipt ofgoods and services or the presentation of avalid invoice, whichever is the later. A sampleanalysis for 2005-06 indicates that 97.2% ofinvoices were paid within the due date.Arrangements for handling complaints on

payment performance are notified to supplierson contracts.

No interest was paid under the Late Paymentof Commercial Debts (Interest) Act 1998.

Employment Policies

The Forestry Commission values and respectsits staff by treating each member with respectand trust and in doing so recognises that eachperson is different and can make a uniquecontribution to the work. The purpose of theForestry Commission employment policy is todemonstrate that it is an equal opportunityemployer and the aim is to be fair to everybody.To do this the Forestry Commission ensures thatno eligible job applicant, or employee receivesless favourable treatment on the grounds oftheir gender, or gender re-assignment, ethnicorigin, disability, age, nationality, national origin,sexual orientation, marital status, religion andreligious or philosophical belief, social class oroffending background.

All employees, whether part-time, full time ortemporary will be treated fairly and equally.Selection for employment, promotion or trainingor any other benefit will be on the basis ofaptitude and ability. All employees will behelped and encouraged to develop their fullpotential and the talents and resources of theworkforce will be fully utilised to maximise theefficiency of the organisation. No person shallbe disadvantaged by conditions or requirementswhich cannot be shown to be justifiable.

The Forestry Commission also follows goodemployer practices aimed at ensuring that allstaff work in an environment free from bothillegal and unfair discrimination andharassment. Consolidated statements of the




Commission's obligations with regard toequality of opportunity and diversity are shownin the Staff Handbook. Full details of theseinitiatives arising from the policies are also setout in the Human Resources intranet site.

The Forestry Commission will monitor thesuccess of its policies by:-

• Collecting and analysing data as appropriate.

• Regularly reviewing procedures(recruitment, performance management,promotion and pay) to ensure that they arefree of unfair discrimination.

• Reporting the results of equality anddiversity monitoring to the HumanResources Management Sub-Committeeon an annual basis.

• Liaising closely with Cabinet Office andother government departments to ensurethat we are keeping abreast of all changesin legislation and other developments.

Further information on the employment ofpersons with disabilities, the provision ofinformation to, and consultation with,employees, and the promotion of equalopportunities is available on request fromthe Human Resources unit of theForestry Commission.

Auditors

These accounts are audited by the Comptrollerand Auditor General.

Disclosure of audit information

to the auditors

So far as the Accounting Officer is aware, thereis no relevant audit information of which theForest Enterprise England auditors areunaware. The Accounting Officer has taken allthe steps that he ought to have taken to makehim self aware of any relevant audit informationand to establish that the Forest EnterpriseEngland auditors are aware of that information.

Simon HodgsonAccounting Officer13 July 2006




REMUNERATION POLICY

The Chief Executive was appointed on a full-time permanent basis through a fair and openexternal recruitment exercise under the termsof the Civil Service CommissionersRecruitment Code. The Chief Executive’ssalary is determined by the ForestryCommission’s Senior Pay Committee whichcomprises the Chairman, Director General,Director Scotland, Director England, and threeother non-executive Commissioners.

In reaching its recommendations, the ForestryCommission’s Senior Pay Committee hasregard to the following considerations:

• The Senior Pay Committee take intoaccount the recommendations of theSenior Salaries Review Body (SSRB). SSRBis responsible for monitoring the operationof the Senior Civil Service pay system andfor making recommendations to theGovernment on the shape of the system,including the salary values for theminimum, progression target rate andmaximum of each of the senior pay bands,the range of percentage increases to basesalary and range of bonuses.

• Reporting Officers consider the relativeperformance of each of their senior staffand recommend an appropriateperformance tranche, whether a bonusshould be paid and if so whether low orhigh. The Senior Pay Committee considerthe recommendations, determine theallocation of senior staff to tranches, anddecide the percentage increase to salaryand any bonus to be awarded.

Remaining Board members receive annualsalaries paid in accordance with the standardForestry Commission Staff Pay agreement.Their performance is monitored and reviewedthrough the Performance Monitoring System(PMS) of the Forestry Commission. Theirincrease in salary and performance bonus, ifawarded, are based on their manager’sassessment of their performance.

EMPLOYMENT CONTRACTS

Civil Service appointments are made inaccordance with the Civil ServiceCommissioners’ Recruitment code, whichrequires appointment to be on merit on thebasis of fair and open competition but alsoincludes circumstances when appointmentsmay otherwise be made.

Unless otherwise stated below, the seniorstaff covered in this report hold appointments,which are open-ended until they reach thenormal retiring age. Early termination, otherthan for misconduct, would result in theindividual receiving compensation as set out inthe Civil Service Compensation Scheme.

Further information about the work of the CivilService Commissioners can be found atwww.civilservicecommissioners.gov.uk.

Remuneration Report


SALARY AND PENSION ENTITLEMENTS

The salary and pension entitlements of the members of the Forest Enterprise EnglandManagement Board were as follows:

2005-06 2004-05

Salary Benefits in kind Salary Benefits in kind£000 £100 £000 £100

Simon Hodgson 35-40(from 29 September 2005) (70-75 full year equivalent) - - -Rod Leslie 60-65 - 55-60 -Brian Mahony 55-60 - 55-60 -Mark Thornycroft 50-55 - 50-55 -James Swabey 45-50 - 40-45 -Peter Ranken (until 31 July 2005) 20-25 - 65-70 -

(65-70 full year equivalent)Michael Seddon 45-50 - 45-50 -Ken Milsom 45-50 - 50-55 -Steve Meeks 45-50 - 40-45 -Jo O’Hara 35-40 - 30-35 -

SALARY

‘Salary’ includes basic salary; performance payor bonus; overtime and any allowances subjectto UK taxation. This report is based onpayments made by Forest Enterprise Englandand thus recorded in these accounts.

BENEFITS IN KIND

The monetary value of benefits in kind coversany benefits provided by the employer andtreated by HM Revenue and Customs astaxable income. Benefits in kind are given inthe form of the private use of a car and housepurchase loans.

Remuneration Report


Remuneration Report


CIVIL SERVICE PENSIONS

Pension benefits are provided through the CivilService Pension arrangements. From 1October 2002, civil servants may be in one ofthree statutory based ‘final salary’ definedbenefit schemes (classic, premium, and classicplus). The schemes are unfunded with thecost of benefits met by monies voted byParliament each year. Pensions payable underclassic, premium, and classic plus areincreased annually in line with changes in theRetail Prices Index. New entrants after 1October 2002 may choose betweenmembership of premium or joining a goodquality ‘money purchase’ stakeholderarrangement with a significant employercontribution (partnership pension account).

Employee contributions are set at the rate of1.5% of pensionable earnings for classic and3.5% for premium and classic plus. Benefits inclassic accrue at the rate of 1/80th ofpensionable salary for each year of service. Inaddition, a lump sum equivalent to three years’pension is payable on retirement. Forpremium, benefits accrue at the rate of 1/60thof final pensionable earnings for each year ofservice. Unlike classic, there is no automaticlump sum (but members may give up(commute) some of their pension to provide alump sum). Classic plus is essentially avariation of premium, but with benefits inrespect of service before 1 October 2002calculated broadly as per classic.

PENSION BENEFITS

Simon Hodgson

Peter Ranken

Rod Leslie

Brian Mahony

Mark Thornycroft

Ken Milsom

Steve Meeks

Michael Seddon

James Swabey

Jo O’Hara

Accruedpension at age60 at 31 March

2006 andrelated lump

sum£000

10-15 plus LSof 30-35

30-35 plus LSof 90-95

20-25 plus LSof 65-70

15-20 plus LSof 45-50

10-15 plus LSof 40-45

20-25 plus LSof 65-70

10-15 plus LSof 40-45

5-10 plus LS of25-30

20-25 plus LS0-5

5-10 plus LS of20-25

Real increase inpension andrelated lump

sum at age 60

£0000-2.5 plus LS

of 2.5-5.00-2.5 plus LS of

2.5-5.00-2.5 plus LS of

2.5-5.00-2.5 plus LS of

0-2.50-2.5 plus LS of

2.5-5.00-2.5 plus LS of

0-2.50-2.5 plus LS of

0-2.50-2.5 plus LS of

0-2-50-2.5 plus LS of

0-2.50-2.5 plus LS of

0-2.5

CETV at31 March

2006

208

602

435

347

312

378

224

124

319

101

CETV at31 March

2005

143

463

321

257

237

280

159

80

232

65

Real increase inCETV

23

18

26

14

18

9

11

9

19

9

Employercontribution to

partnershippension account

Nearest £100-

-

-

-

-

-

-

-

-

-

The partnership pension account is astakeholder pension arrangement. Theemployer makes a basic contribution ofbetween 3% and 12.5% (depending on theage of the member) into a stakeholder pensionproduct chosen by the employee from aselection of approved products. The employeedoes not have to contribute but where they domake contributions, the employer will matchthese up to a limit of 3% of pensionable salary(in addition to the employer’s basiccontribution). Employers also contribute afurther 0.8% of pensionable salary to cover thecost of centrally-provided risk benefit cover(death in service and ill health retirement).

Further details about the Civil Service pensionarrangements can be found at the websitewww.civilservice-pensions.gov.uk

CASH EQUIVALENT TRANSFER VALUES

A Cash Equivalent Transfer Value (CETV) is theactuarially assessed capitalised value of thepension scheme benefits accrued by amember at a particular point in time. Thebenefits valued are the member’s accruedbenefits and any contingent spouse’s pensionpayable from the scheme. A CETV is apayment made by a pension scheme orarrangement to secure pension benefits inanother pension scheme or arrangement whenthe member leaves a scheme and chooses totransfer the benefits accrued in their formerscheme. The pension figures shown relate tothe benefits that the individual has accrued asa consequence of their total membership ofthe pension scheme, not just their service in asenior capacity to which disclosure applies.The CETV figures, and from 2003-04 the otherpension details, include the value of anypension benefit in another scheme or

arrangement which the individual hastransferred to the Civil Service pensionarrangements and for which the CS Vote hasreceived a transfer payment commensuratewith the additional pension liabilities beingassumed. They also include any additionalpension benefit accrued to the member as aresult of their purchasing additional years ofpension service in the scheme at their owncost. CETVs are calculated within theguidelines and framework prescribed by theInstitute and Faculty of Actuaries.

Please note that the factors used to calculatethe CETV were revised on 1 April 2005 on theadvice of the Scheme Actuary. The CETVfigure for 31 March 2005 has been restatedusing the new factors so that it is calculatedon the same basis as the CETV figure for31 March 2006.

REAL INCREASE IN CETV

This reflects the increase in CETV effectivelyfunded by the employer. It takes account ofthe increase in accrued pension due toinflation, contributions paid by the employee(including the value of any benefits transferredfrom another pension scheme or arrangement)and uses common market valuation factors forthe start and end of the period.

Simon HodgsonAccounting Officer13 July 2006

Remuneration Report


1. Under Section 7 of the GovernmentResources and Accounts Act 2000, theTreasury has directed the ForestryCommission to prepare a statement ofaccounts for Forest Enterprise England foreach financial year in the form and on thebasis set out in the accounts direction atAppendix 1 to these accounts. The accountsare prepared on an accruals basis and mustgive a true and fair view of the ForestEnterprise England state of affairs at theyear end and of its income and expenditureand cash flows for the financial year.

2. In preparing the accounts the ForestryCommission is required to:

• observe the Accounts Direction issuedby H M Treasury, including the relevantaccounting and disclosure requirements,and apply suitable accounting policieson a consistent basis;

• make judgements and estimates on areasonable basis;

• state whether applicable accountingstandards have been followed, anddisclose and explain any materialdepartures in the financial statements;

• prepare the financial statements on thegoing concern basis, unless it isinappropriate to assume that ForestEnterprise England will continue inoperation.

3. Director, Forestry Commission England asthe Additional Accounting Officer forForestry Commission England hasdesignated the Chief Executive as theAgency Accounting Officer. His relevantresponsibilities as Agency AccountingOfficer, including his responsibility for thepropriety and regularity for the publicfinances, for the keeping of proper recordsand for safeguarding Forest EnterpriseEngland’s assets, are set out in theAccounting Officers' Memorandum, issuedby the Treasury and published in"Government Accounting". Under theterms of the Accounting Officers’Memorandum, the relationship betweenDirector, Forestry Commission Englandand the Agency Accounting Officer,together with their respectiveresponsibilities, is set out in writing.

Statement of Forestry Commission’s andChief Executive’s Responsibilities


1. SCOPE OF RESPONSIBILITY

As Agency Accounting Officer, I haveresponsibility for maintaining a sound systemof internal control that supports theachievement of Forest Enterprise Englandpolicies, aims and objectives, whilstsafeguarding the public funds and departmentalassets for which I am personally responsible,in accordance with the responsibilities assignedto me in Government Accounting.

The Forestry Commission is a Great Britaincross-border department responsible forforestry matters and which has a Board ofCommissioners with duties and powersprescribed by statute. Forestry is a devolvedmatter. The Secretary of State forEnvironment, Food and Rural Affairs hasresponsibility for forestry in England as well ascertain activities such as international affairs,plant health and forest research which remainreserved by Westminster.

The Forestry Commissioners are statutorilyresponsible for the stewardship of the estateplaced at their disposal by Ministers. TheForestry Commissioners have delegated to thestatutory National Committee for England, thenormal exercise of their powers and duties inconnection with the estate. In turn, theNational Committee has delegatedmanagement of the estate to the Agency. TheNational Committee in England is chaired by anon-executive Forestry Commissioner and itsmembers include a further two non-executiveCommissioners, the Director England, theAgency Chief Executive, a member from theDepartment for Environment, Food and RuralAffairs, Finance Director, Head of ProgrammeGroup and two non-executive members.

The Director General is the Deputy Chairmanof the Forestry Commissioners and the seniorofficial in the Forestry Commission. In additionto his role as a Commissioner, he is thePrincipal Accounting Officer, formallyresponsible to the Westminster Parliament forthe financial affairs of the ForestryCommission, including the Agency. In practice,the Director General’s role in relation to theAgency is delegated to Director England asAdditional Accounting Officer.

Director England is the executive ForestryCommissioner responsible to the ForestryMinister and to the Director General for thework of the Forestry Commission in England.Director England is appointed AdditionalAccounting Officer and is a member of theNational Committee. He is responsible, onbehalf of the Forestry Commissioners, for theoversight of the Agency. In particular, DirectorEngland is responsible for advising the NationalCommittee and Ministers on the Agency’sCorporate Plan and performance targets andfor ensuring the Agency operates a propersystem of financial management. DirectorEngland also advises the National Committeeand Ministers on the strategic direction of theAgency, performance management and onensuring that the Agency has the resources,delegations and authorities necessary toeffectively deliver its remit.

The Chief Executive of the Agency isresponsible, normally through DirectorEngland, to the National Committee for themanagement of the estate, and of the Agencyand its staff. The Chief Executive has a right ofdirect access to the Commissioners and to theMinister, and will meet them at least once ayear. The Chief Executive is a member of the



National Committee and is designated asAgency Accounting Officer, responsible for theAgency’s accounts and financial proceduresand for the proper, effective and efficient useof resources provided to the Agency within theterms of the Framework Document and inpursuit of the agreed objectives and targets.In particular, the Agency Chief Executive isresponsible for:

• preparing the Agency’s Corporate Plans andfor achieving the targets set in them;

• appointment and organisation of theAgency’s staff, and deployment of otherresources to achieve the aims andobjectives;

• maintaining financial and managementinformation systems to assist in themonitoring and control of performance;

• preparing and submitting the Agency’sAnnual Report and Accounts;

• establishing and chairing an AgencyManagement Board comprising seniormanagers within the Agency.

The Director General, Director England andAgency Chief Executive are liable to besummoned to appear before the PublicAccounts Committee to answer for theirrespective responsibilities. It will be forMinisters to decide who should representthem at other Parliamentary Committeehearings. In practice, where a Committee’sinterest is confined to the day-to-dayoperations of the Agency, Ministers willnormally regard the Chief Executive as theperson best placed to appear on their behalf.

2. THE PURPOSE OF THE SYSTEM OF

INTERNAL CONTROL

The system of internal control is designed tomanage risk to a reasonable level rather thanto eliminate all risk of failure to achievepolicies, aims and objectives; it can thereforeonly provide reasonable and not absoluteassurance of effectiveness. The system ofinternal control is based on an ongoing processdesigned to identify and prioritise the risks tothe achievement of Forest Enterprise Englandpolicies, aims and objectives, to evaluate thelikelihood of those risks being realised and theimpact should they be realised, and to managethem efficiently, effectively and economically.The system of internal control has been inplace in Forest Enterprise England for the yearended 31 March 2006 and up to the date ofapproval of the annual report and accounts,and accords with Treasury guidance.

3. CAPACITY TO HANDLE RISK

Risk management is the responsibility of everymember of staff in Forest Enterprise England.Everyone has a role to play in managing risksand therefore understands and acceptsresponsibility for managing the risks withintheir own area of authority. Risk awarenessand responsibility lies in parallel with thestructure of Forest Enterprise England’sobjectives and at every level of objective thereis equivalent delegation of responsibility ofassociated risk.

The resources available for managing risk arefinite and so the aim is to achieve an optimumresponse to risk, prioritised in accordance withthe evaluation of risk. The system of internalcontrol incorporates risk management. Thesystem encompasses a number of elementsthat together facilitate an effective and



efficient operation, enabling Forest EnterpriseEngland to respond to a variety of operational,financial and commercial risks. Theseelements include:

• Implementing delivery policies set by theNational Committee for England, EnglandExecutive Board and Agency ManagementBoard. Written procedures support thepolicies where appropriate.

• Comprehensive regular reporting to theNational Committee andExecutive/Management Boards designed tomonitor key risks and their controls.Decisions to rectify problems are made attheir regular meetings.

• Planning and budgeting system used to setobjectives, agree action plans and allocateresources. Progress towards meeting planobjectives is monitored regularly.

4. THE RISK AND CONTROL FRAMEWORK

Forest Enterprise England is committed to aprocess of continuous development andimprovement: developing systems in responseto any relevant reviews and developments inbest practice in this area. In particular, in theperiod covering the year to 31 March 2006 andup to the signing of the accounts ForestEnterprise England has:

• Worked with a private sector riskmanagement expert to develop a series ofworkshops. The purpose of the workshopsis to share experiences of handling risk atcountry and agency level, to reviewprogress on embedding risk managementand to ensure common standards whenassessing risks;

• Participated in the Forestry Commissionwide, Risk Management Group (RMG),whose purpose is to ensure continueddevelopment of risk management within,and the sharing of best practice across, theCommission. The RMG met on fouroccasions, in July, November andDecember 2005, and in March 2006;

• Implemented the revised ForestryCommission risk policy statementconsidered by both the ForestryCommission Executive Board and theForestry Commission Audit Committeebefore being approved by the Board ofCommissioners in September 2005;

• Updated the existing Forest EnterpriseEngland risk register to reflect newlyidentified potential risks and appropriatecontrol measures for agreement bymanagement board members in March2006. This has included the furtherenhancement of the Risk Registermethodology to clearly define inherent andresidual risk; and

• Supported the purchase and population of acommercial risk management softwarepackage. The software chosen integrateswith that used by Internal Audit forplanning and assignment management whohas worked with the RMG co-ordinatorduring the year on its configuration andimplementation. The system contains anumber of reports designed to assistmanagement in monitoring key risks.

The size and membership of the ForestryCommission Audit Committee (FCAC) isdesigned to represent all parts of the Forestry



Commission. A non-executive Commissionerrepresents England and the Agency ChiefExecutive can attend meetings if there arespecific Forest Enterprise England issues. TheCommittee met three times during the year, inApril, September and December 2005, toconsider a range of reports from management,and from internal and external audit.

The Audit Committee, in the main, deals withhigher level issues concerning control andgovernance. Director England and the AgencyChief Executive are provided with moredetailed advice on the work of Internal Audit inparticular, and control in general, via their localInternal Control Committee (ICC). TheCommittee covers both Forestry CommissionEngland and Forest Enterprise Englandbusiness. The ICC’s objectives are to:

• provide a forum for senior management todiscuss internal control and audit matters;

• promote understanding of the internal auditrole and objectives;

• assist the Head of Internal Audit in definingthe scope of audit coverage and assessingpriorities.

The Committee met twice during the year, inOctober 2005 and March 2006 to receivereports on audit activity, risk management andfeedback on the work of the Audit Committee.

During the year, Internal Audit concluded areview of the structure, interactions andfunctioning of the Board of Commissioners,the Forestry Commission Executive Board andthe National Committees. The Board ofCommissioners discussed the findings

alongside a paper covering some wider issuesarising from the requirements of the newCode on Corporate Governance forgovernment bodies. The Board agreed thatcountry based audit committees should be setup, to provide for a more effective review ofeach set of annual accounts in particular, butthe new arrangements were dependent on theBoard’s agreement of terms of reference forthe various decision-making bodies notedabove. The Board finally agreed theresponsibilities and relationships of the bodiesin June 2006. A decision on the future roleand conduct of a Forestry Commission GreatBritain audit committee was deferred pendingfurther discussion with the current FCAC Chair.Interim one-off arrangements were put inplace to review the presentation of the 2005-06 accounts, and associated Internal Auditbusiness, utilising the existing ICC members,together with a non-executive chair andexternal audit attendance. Proposed terms ofreference for the country audit committeeshave been drafted and will be finalised oncethe meeting with the FCAC Chair has takenplace in July 2006.

An Internal Audit review in 2004-05 identifiedthat the Forestry Commission, as a whole, didnot have fully developed contingency plans inplace to effectively manage failure in keybusiness systems. Since then, there has beensome progress and most importantly a changeof responsibility for business continuityplanning was agreed by the ForestryCommission Executive Board in December2005. This work is now co-ordinated byDirector Finance via the RMG. The changerecognises the need for the business areas toprepare contingency plans which meet theirneeds and which clearly link to business driven



risk management. Internal Audit will monitorprogress through their involvement with theRMG and pursue more detailed work later in2006-07.

5. REVIEW OF EFFECTIVENESS

As Agency Accounting Officer, I haveresponsibility for reviewing the effectivenessof the system of internal control. My reviewof the effectiveness of the system of internalcontrol is informed by

• the executive managers within ForestEnterprise England who have responsibilityfor the development and maintenance ofthe internal control framework;

• the work of the internal auditors, whosubmit to the Audit Committee and ICC,regular reports which include the Head ofInternal Audit’s independent and objectiveopinion on the adequacy and effectivenessof the systems of internal control togetherwith recommendations for improvement;

• comments made by the external auditors intheir management letters and other reports.

The Head of Internal Audit has prepared anannual report and assurance statement to me asAgency Chief Executive and Accounting Officer.The report includes an overall assessment of theadequacy and effectiveness of riskmanagement, control and governance withinForestry Commission England and ForestEnterprise England. The Director General asPrincipal Accounting Officer has received asimilar report and assurance statement includingany comments specific to the Great Britain coreresponsibilities. The overall opinion is thatinternal control within Forestry Commission

England and Forest Enterprise Englandcontinues to provide substantial assurance thatmaterial risks to the achievement of objectivesare identified and adequately managed.

Opportunity was taken by Internal Audit in 2005-06 to follow up the audit undertaken in 2004 ofexternal funding and partnership in Englandwhich had highlighted a number of concerns.Since then substantial effort has been made totighten procedures and Internal Audit are nowfully satisfied that the original limited assurancegiven on the adequate management of thematerial risks to the achievement of the systemcan now be raised to substantial. Internal Auditwill undertake a follow-up review by December2006 to test and evaluate the implementationand effectiveness of the processes now in place.

6. SIGNIFICANT INTERNAL

CONTROL PROBLEMS

The significant problem involving delays incompletion of the monthly bank reconciliationsundertaken centrally was reported in last year’sstatement. The reconciliations were brought upto date during 2005-06 and Internal Auditundertook a verification check in November2005 to provide assurance that the process wasback under proper control for the 2005-06accounts. In February 2006 Internal Audit againconfirmed that the reconciliations werecontinuing to be performed on time and that anyoutstanding adjustments had been actioned.They reviewed improvements to the system andwere satisfied that sufficient work had beenundertaken by management to clear the itemfrom the Statement on Internal Control.

S HodgsonAccounting Officer13 July 2006




I certify that I have audited the financialstatements of Forest Enterprise England forthe year ended 31 March 2006 under theGovernment Resources and Accounts Act2000. These comprise the Income andExpenditure Account and Statement of TotalRecognised Gains and Losses, the BalanceSheet, the Cashflow Statement and the relatednotes. These financial statements have beenprepared under the accounting policies set outwithin them.

Respective responsibilities of the Agency, theChief Executive and auditor

Forest Enterprise England and the ChiefExecutive are responsible for preparing theAnnual Report and the financial statements inaccordance with the Government Resourcesand Accounts Act 2000 and HM Treasurydirections made thereunder and for ensuringthe regularity of financial transactions. Theseresponsibilities are set out in the Statement ofAccounting Officer’s Responsibilities.

My responsibility is to audit the financialstatements in accordance with relevant legal andregulatory requirements, and with InternationalStandards on Auditing (UK and Ireland).

I report to you my opinion as to whether thefinancial statements give a true and fair viewand whether the part of the FinancialStatements and the Remuneration Report to beaudited have been properly prepared inaccordance with HM Treasury directions issuedunder the Government Resources and AccountsAct 2000. I also report whether in all material

respects the expenditure and income have beenapplied to the purposes intended by Parliamentand the financial transactions conform to theauthorities which govern them. I also report toyou if, in my opinion, the Annual Report is notconsistent with the financial statements, ifForest Enterprise England has not kept properaccounting records, if I have not received all theinformation and explanations I require for myaudit, or if information specified by relevantauthorities regarding remuneration and othertransactions is not disclosed.

I review whether the statement on pages144-148 reflects Forest Enterprise England’scompliance with HM Treasury’s guidance onthe Statement on Internal Control, and I reportif it does not. I am not required to considerwhether the Accounting Officer’s statementson internal control cover all risks and controls,or to form an opinion on the effectiveness ofthe Agency’s corporate governance proceduresor its risk and control procedures.

I read the other information contained in theAnnual Report and consider whether it isconsistent with the audited financialstatements. This other information comprisesonly the Annual Report, the unaudited part ofthe Remuneration Report, and the ManagementCommentary. I consider the implications for myreport if I become aware of any apparentmisstatements or material inconsistencies withthe financial statements. My responsibilities donot extend to any other information.

BASIS OF AUDIT OPINION

I conducted my audit in accordance withInternational Standards on Auditing (UK andIreland) issued by the Auditing Practices Board.



My audit includes examination, on a test basis,of evidence relevant to the amounts,disclosures and regularity of financialtransactions included in the financialstatements and the part of the RemunerationReport to be audited. It also includes anassessment of the significant estimates andjudgments made by Forest Enterprise Englandand Chief Executive in the preparation of thefinancial statements, and of whether theaccounting policies are most appropriate toForest Enterprise England circumstances,consistently applied and adequately disclosed.

I planned and performed my audit so as toobtain all the information and explanationswhich I considered necessary in order toprovide me with sufficient evidence to givereasonable assurance that the financialstatements and the part of the RemunerationReport to be audited are free from materialmisstatement, whether caused by fraud orerror and that in all material respects theexpenditure and income have been applied tothe purposes intended by Parliament and thefinancial transactions conform to theauthorities which govern them. In forming myopinion I also evaluated the overall adequacyof the presentation of information in thefinancial statements and the part of theRemuneration Report to be audited.

OPINIONS

In my opinion:

• the financial statements give a true and fairview, in accordance with the GovernmentResources and Accounts Act 2000 anddirections made thereunder by HM Treasury,of the state of Forest Enterprise England’saffairs as at 31 March 2006 and of thedeficit, total recognised gains and losses andcashflows for the year then ended;

• the financial statements and the part of theRemuneration Report to be audited havebeen properly prepared in accordance withHM Treasury directions issued under theGovernment Resources and Accounts Act2000; and

• in all material respects the expenditure andincome have been applied to the purposesintended by Parliament and the financialtransactions conform to the authoritieswhich govern them.

I have no observations to make on thesefinancial statements.

John BournComptroller and Auditor GeneralNational Audit Office157-197 Buckingham Palace RoadVictoriaLondon SW1W 9SP18 July 2006




INCOME AND EXPENDITURE ACCOUNT


2005-06 2004-05

Note £000 £000

Operating Income

Sales of Timber 18,705 17,347Forest Protection and Maintenance 1,059 425Management and Development of Estate 2

Continuing operations 5,222 4,583Discontinued operations 3,724 4,057

28,710 26,412

Operating Expenditure

Forest Planning 3,173 2,454Harvesting and Haulage of Timber 10,760 10,061Forest Roads 2,531 2,198Forest Protection and Maintenance 13,412 12,294Management and Development of Estate 2

Continuing operations 5,899 4,983Discontinued operations 3,418 3,413

39,193 35,403

Operating Deficit (10,483) (8,991)

Recreation, Conservation & Heritage

Income 12,989 9,738Expenditure 26,790 21,509

(13,801) (11,771)

Operating Deficit Net of R,C & H (24,284) (20,762)

Surplus/(deficit) on sale of properties 4 672 967

Deficit (23,612) (19,795)

Notional cost of capital 5 (15,905) (14,690)

Net Deficit for the Year (39,517) (34,485)

Transferred to General Fund (39,517) (34,485)

There have been no acquisitions during the year


Income and Expenditure account



STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES


2005-06 2004-05Note £000 £000

Net deficit for the year (39,517) (34,485)

Realised revaluation surplus 12/13 691 3,342

Revaluation surplus/(deficit) for the year 13/14 31,020 41,644

Total recognised gains and losses for the year (7,806) 10,501


Statement of TotalRecognised Gains and Losses



BALANCE SHEET

as at 31 March 2006

2005-06 2004-05Note £000 £000

Fixed AssetsTangible assets 6 470,665 437,429

Debtors falling due after more than one year 8 175 243

Current AssetsStocks 7 3,430 3,280Debtors 8 8,893 6,197Cash at banks and in hand 9 19 21

12,342 9,498

Creditors (amounts falling due within one year) 10 (10,451) (5,645)

Net Current Assets 1,891 3,853

Total assets less current liabilities 472,731 441,525

Creditors (amounts falling due after more than one year) 10 (2,119) (1,833)

Provision for Liabilities and Charges 11 (908) (561)469,704 439,131

Capital and Reserves

General fund 12 346,412 349,480Revaluation reserve 13 119,625 89,326Donated Asset Reserve 14 486 325Government Grant Reserve 14 3,181 -

469,704 439,131


S HodgsonAccounting Officer13 July 2006

Balance Sheet



CASH FLOW STATEMENT

for the Year Ended 31 March 20062005-06 2004-05

Note £000 £000Net cash outflow from operating activities 15a (19,973) (20,488)Capital expenditure and financial investment 15b (3,452) 3,724Financing 15c 23,423 16,772Increase/(decrease) in cash 9 (2) 8


Cash Flow Statement


NOTE 1 ACCOUNTING POLICIES

These financial statements have beenprepared in accordance with the 2005-06Government Financial Reporting Manual(FReM) issued by HM Treasury. Theaccounting policies contained in the FReMfollow UK generally accepted accountingpractice for companies (UK GAAP) to theextent that it is meaningful and appropriate tothe public sector.

Where the FReM permits a choice ofaccounting policy, the accounting policy whichhas been judged to be most appropriate to theparticular circumstances of Forest EnterpriseEngland for the purpose of giving a true andfair view has been selected. Forest EnterpriseEngland’s accounting policies have beenapplied consistently in dealing with itemsconsidered material in relation to the accounts.

1.1 Accounting convention

These accounts have been prepared under thehistorical cost convention modified to accountfor the revaluation of fixed assets.

1.2 Tangible fixed assets

Legal ownership of all land and buildings isvested in the Secretary of State with legalownership of the timber, including uncut trees,vested in the Forestry Commissioners. Legalownership of other tangible fixed assets isvested in the Forestry Commissioners. Wherethe agency is the principal beneficial user ofassets owned by the Secretary of State orForestry Commissioners these are treated as afixed asset of the agency. See also “Leases”at 1.11. below.

Forest EstateBetween 1993 and 2002, the forest estatewas valued every five years on an open marketbasis (OMV) using regional valuation panelsconsisting of the Forestry Commission’s landagent and two private sector firms. It wasdone on a forest district basis taking accountof the species mix, age, yield class and otherrelevant factors. The valuation was carried outon the basis of the forest estate being sold inan orderly manner as between a willing sellerand a willing buyer in full accordance withpublic accountability and assuming its existinguse. It was further assumed that no restraintsexist, as they do in practice, from title, statuteand environmental considerations.

For the purpose of the valuation as at 31March 2003, the panels were re-organised intocountry panels comprising the ForestryCommission’s country land agent and twoexternal valuers under the direction of theDirector Estate Management. The panelsagreed that the valuation should be done onthe basis of existing use value (EUV) as thevaluation is carried out for the purposes ofcompany accounts and they are non-specialised assets occupied by the owners ofthe interest for the purposes of the business.The valuation was carried out in accordancewith the RICS Appraisal and ValuationStandards (the “Red Book”) and a valuationinstruction agreed with each panel. A valuationcertificate was issued by each panel whichconfirmed that there was no materialdifference between the EUV and OMVmethods of valuation.

In the absence of a relevant annual forestrybased index, the Forestry Commissionobtained an external professional opinion of

Notes to the accounts


the open market value in the intervening yearsbetween 1998 and 2003, which was outsidethe RICS Red Book Guidelines and madewithout reference to the valuation panelswhich undertook the 1998 five-yearrevaluation. This policy will continue to operateduring the period up to the next full revaluationas at 31 March 2008.

Non-Forest LandNon-forest land was assessed as at 31 March2002 in accordance with our policy ofrevaluing it at three-yearly intervals byprofessionally qualified staff employed by theForestry Commission following the principlesset out in the RICS Red Book. Valuation wason the basis of Open Market Value or ExistingUse Value as appropriate under the RICSguidance. From 1 April 2002, non-forest landhas been restated to current value annuallyusing an unequipped agricultural land indexprovided by the District Valuer.

Non-forest land was scheduled to be re-assessed as at 31 March 2005 in accordancewith the three-yearly interval stated in theprevious accounting policy. It has beendecided, however, to bring the policy in linewith UK GAAP and undertake a professionalvaluation of non-forest land on a five-yearlybasis with a formal review in the third year.The first five-yearly valuation will beundertaken at 31 March 2008 to coincide withthe next full revaluation of the Forest Estate.

In 2004-05, professionally qualified staffemployed by the Commission carried out areview into the use of the unequippedagricultural land indices provided by the DistrictValuer. The review concluded that use of theindices provided a reasonable restatement of

the current value of non-forest land. Theindices were therefore used to restate valuesas at 31 March 2006 and will be used in eachyear until the professional valuation at 31March 2008.

Dwellings and Other BuildingsDwellings and other buildings were assessedas at 31 March 2002 in accordance with ourpolicy of revaluing at three-yearly intervals byprofessionally qualified staff employed by theForestry Commission following the principlesset out in the RICS Red Book. Valuation wason the basis of Open Market Value or ExistingUse Value as appropriate under the RICSguidance. From 1 April 2002, dwellings andother buildings has been restated to currentvalue annually using appropriate indicesprovided by the District Valuer.

Dwellings and other buildings were scheduledto be re-assessed as at 31 March 2005 inaccordance with the three-yearly intervalstated in the previous accounting policy. It hasbeen decided, however, to bring the policy inline with UK GAAP and undertake aprofessional valuation of dwellings and otherbuildings on a five-yearly basis with a formalreview in the third year. The first five-yearlyvaluation will be undertaken at 31 March 2008to coincide with the next full revaluation of theforest estate.

In 2004-05, professionally qualified staffemployed by the Commission carried out areview into the use of the indices provided bythe District Valuer. The review concluded thatuse of the indices provided a reasonablerestatement of the current value of dwellingsand other buildings. The indices weretherefore used to restate values as at



31 March 2006 and will be used in eachyear until the professional valuation at31 March 2008.

The normal threshold for capitalisation ofbuildings is £2,000.

Expenditure on infrastructureTo maximise the environmental, social andeconomic benefits of the Forest Estate andOther Land, the Commission improves anddevelops access and services by adding to theinfrastructure on its sites. Infrastructureincludes new roads, bridges, culverts etc.Costs in respect of infrastructure works areexpensed as they occur. The Commissiontakes the view that the professional valuationsof the Forest Estate and Other Land properlyrecognise the contribution that infrastructureitems make to land values. It also considersthat the annual revaluation by indexationreflects improvements made through newinfrastructure.

Surplus propertiesFixed assets are reviewed regularly to ensurethey continue to contribute positively to policyand business objectives. Assets that nolonger provide the required level ofcontribution are considered for disposal bysenior management. Decisions to sell suchproperties take into account a number offactors including the social and environmentaleffects as well as marketability. Surplusproperties are retained in their fixed assetcategory and continue to be valued on theappropriate basis as set out in the precedingparagraphs. However, values may be materiallyaffected by development factors such as theaward of planning permissions. Where thisoccurs, assets are revalued to an Open Market

Value based on advice provided by the sellingagents and taking account of the circumstancesof the sales. Revaluation takes place in thequarter following the development event.

Forest Holidays Land and BuildingsForest Holidays land and buildings representcabin sites and campsites that are operated ona commercial basis. Each site is valuedannually using valuations provided by aprofessional firm of valuers who specialise inthe leisure industry. Values are undertaken onan Existing Use or Depreciated ReplacementCost basis following the principles set out inthe RICS Red Book and are based on eachsite’s commercial potential to possible buyers.

Forestry vehicles, machinery andequipment (VME)Forestry vehicles, machinery and equipment(VME) are revalued every five years byprofessionally qualified staff employed by theForestry Commission. They are restated tocurrent value in the intervening years usingvaluations provided by internal professionallyqualified staff for specialist forestry machineryand indices provided by the Office for NationalStatistics for all other assets.


Office machinery and equipment (OME)Office machinery and equipment (OME)values are restated to current value each yearusing indices provided by the Office forNational Statistics.




Assets under constructionAssets under construction are carried at costand are transferred to the appropriate fixed assetcategory when completed and ready for use.

1.3 Depreciation of tangible fixed assets

Land (forest estate, non-forest and ForestHolidays land) held under Freehold is notdepreciated.

Depreciation is provided on all other tangiblefixed, including donated, assets at ratescalculated to write off the valuation, lessestimated residual values, of each assetevenly over its expected useful life. Assetlives are as follows:

Land held under a finance lease- unexpired term of the lease

Lease premium- unexpired term of the lease

Freehold buildings- up to 60 years

Buildings held under a finance lease- lesser of unexpired term of lease

and 60 years

Forestry vehicles, machinery and equipment- over 3 to 16 years

Office equipment- over 4 to 20 years

1.4 Donations

Donations in respect of capital expenditure arecredited to a donated asset reserve.Subsequent revaluations are also taken to thisreserve. Each year, an amount equal to thedepreciation charge on the asset is releasedfrom the donated asset reserve to the Incomeand Expenditure account. Where the donorcontributes only part of the cost of the fixedasset, only that proportion is released from thedonated asset reserve.

1.5 Government grants

Government grants in respect of capitalexpenditure are credited to a governmentgrant reserve. Subsequent revaluations arealso taken to this reserve. Each year, anamount equal to the depreciation charge onthe asset is released from the governmentgrant reserve to the Income and Expenditureaccount. Where the grant contributes only partof the cost of the fixed asset, only thatproportion is released from the governmentgrant reserve. Grants of a revenue nature arecredited to income so as to match them withthe expenditure to which they relate.

1.6 Stocks

Finished goods and work in progress arevalued as follows:-

a. timber at the cost of production;b. seed at the lower of cost of collection or

net realisable value;c. plants and livestock at net realisable value;d. consumable materials and supplies held for

continuing use are valued at cost or, wherematerially different, current replacementcosts, and at net realisable value only whenthey either cannot or will not be used.



Cost of production and collection compriseslabour and attributable administrative expensesbased on the normal level of activity. Netrealisable value is based on estimated sellingprices, less further costs expected to beincurred to completion and disposal.

1.7 Provision for bad and doubtful debts

Specific provisions for bad and doubtful debtsare set aside based on an annual review.

1.8 Research and development

Expenditure on research and development istreated as an operating cost in the year inwhich it is incurred and taken to the incomeand expenditure account.

1.9 Capital charge

A notional charge, reflecting the cost of capitalused by Forest Enterprise England, is includedin the income and expenditure account. Thecharge is calculated at the government’sstandard rate of 3.5% in real terms on theaverage carrying amount of all assets lessliabilities except for cash balances held by theOffice of the Paymaster General.

1.10 Taxation

Forest Enterprise England is not subject tocorporation tax.

The Forestry Commission is registered forvalue added tax (VAT) and accounts for it on aGreat Britain basis, which includes any VATtransactions for Forest Enterprise England.Any VAT due to or from HM Revenue andCustoms at the year end is included in theForestry Commission Great Britain/Englandaccounts as a debtor or creditor in the balancesheet. Irrecoverable VAT is charged to theincome and expenditure account in the year inwhich it is incurred.

1.11 Leases

Where substantially all the risks and rewardsof ownership of a leased asset are borne bythe Forestry Commission (a Finance Lease),the right to use the asset is recorded as atangible fixed asset of the agency. Acorresponding debt is recorded to the lessorrepresented by the minimum lease paymentsdiscounted by the Treasury discount rate of3.5% in real terms. The interest element ofthe finance lease payment is charged to theIncome and Expenditure Account over theperiod of the lease at a constant rate inrelation to the balance outstanding. Costs inrespect of operating leases (any lease otherthan a Finance Lease) are charged on astraight-line basis to expenditure over thelease term.

Where land held under a lease give theForestry Commissioners a right to carry outforestry activities on the land, the value oftimber including uncut trees, is treated as afixed asset of the agency. These values areincluded in the valuation of the forest estate.

1.12 Insurance

In accordance with normal governmentaccounting practice, Forest Enterprise Englandcarries its own insurance risks.



1.13 Pensions

Past and present employees are covered bythe provisions of the Principal Civil ServicePension Scheme (PCSPS). The defined benefitschemes are unfunded and are non-contributory except in respect of dependants’benefits. Forest Enterprise England recognisesthe expected cost of these elements on asystematic and rational basis over the periodduring which it benefits from employees’services by payment to the PCSPS of amountscalculated on an accruing basis. Liability forpayment of future benefits is a charge on thePCSPS. In respect of the defined contributionschemes, Forest Enterprise England recognisesthe contributions payable for the year.

Further information on pensions is containedin the Remuneration Report and note 3 to theaccounts.

1.14 Third party assets

Third party assets are not recorded on the faceof these accounts. A disclosure is made in theaccounts of amounts owing to third parties atthe balance sheet date.

1.15 Contingent liabilities

In addition to contingent liabilities disclosed inaccordance with FRS 12, Forest EnterpriseEngland discloses for parliamentary reportingand accountability purposes certain statutoryand non-statutory contingent liabilities wherethe likelihood of economic benefit is remote,but which have been reported to theParliament in accordance with therequirements of Government Accounting.

Where the time value of money is material,contingent liabilities which are required to bedisclosed under FRS 12 are stated at

discounted amounts and the amount reportedto Parliament separately noted. Contingentliabilities that are not required to be disclosedby FRS 12 are stated at the amounts reportedto the Parliament.

1.6 Turnover

Turnover represents income receivable fromforestry and related activities and is stated netof value added tax.

NOTE 2 OPERATING DEFICIT

2.1 2004-05 was the first year in the Newlands1 economic regeneration scheme, a schemeinvolving a number of partners with theobjective of restoring former industrial land bycreating community woodlands. Theaccounting of the scheme has been revised in2005-06 and the prior year figures adjusted toreflect the change in accounting. The impacton the 2004-05 operating deficit is nil but thereare changes to individual income andexpenditure activities:

Management anddevelopment of estate income £146,000 decreaseForest protectionand maintenanceexpenditure £54,000 increaseManagement anddevelopment ofestate expenditure £421,000 decreaseRecreation,conservation and heritage income £206,000 decreaseRecreation,conservation and heritage expenditure £15,000 increase



2.2 The operating deficit net of recreation, conservation and heritage is

stated after charging:2005-06 2004-05

£000 £000Depreciation of fixed assets 2,346 2,253Hire of plant and equipment 761 858Operating lease rentals:

Land and buildings 129 128Plant and machinery 1,665 1,996

Auditors’ remuneration – audit work 55 49Auditors’ remuneration – non-audit work - -

Expenditure includes the cost of shared centralservices provided to Forest EnterpriseEngland. As part of the Forestry DevolutionReview, shared central services are defined asthose where a single provider is consideredthe best solution, in terms of practicality, costor the needs of stakeholders although primarydirection comes from the countries. Six areasof work are identified as shared services:

• Finance and accounting services

• Information andcommunications technology

• Human Resources, includingforestry training services

• Communications

• Grants and licences

• Operational support services

For each of the shared services, a serviceboard was formed composed of ‘intelligentbuyers’ from the countries and ForestResearch together with the service provider.The boards have joint accountability for theoperation of these services to ensure theneeds of the customer and the widerorganisation are met. Charges were made atregular intervals during the year with any non-material balances left with the service provider.

Business units covering mechanical and civilengineering and nurseries charge for theirservices under service level agreementsagreed with their service board. Expenditurewas accounted for in each country at the timeit was incurred.

The Forest Research Agency providesresearch development and survey services toForest Enterprise England through a servicelevel agreement and charges internal ForestEnterprise England customers in the year.The Forest Research Agency is charged forshared services and business unit costswhere appropriate.



2.3 Income and expenditure from management and development of the estate included

in the operating deficit are:Restated

2005-06 2004-05Income Expenditure Net Net

£000 £000 £000 £000Continuing operations

Estate Management 3,057 3,246 (189) (505)Reversal of impairment - - - 1Other 2,165 2,653 (488) 104

5,222 5,899 (677) (400)

Discontinued operations

Forest Holidays 3,724 3,418 306 644

Totals 8,946 9,317 (371) 244

On the 8 May 2006, the Forestry Commissionentered into a joint venture with the Campingand Caravanning Club to take overmanagement of its Forest Holidays business.The limited liability partnership (LLP) willprovide funding for modernisation andexpansion of the business together with thenecessary skills and vision to grow thebusiness. As part of the agreement, ForestHolidays cabin and campsite land and buildingshave been transferred to the joint venture inexchange for a lease and loan debtor.

Forest Enterprise England will transfer about£536,000 of income received in advance forholidays commencing on or after 8 May 2006that belongs to the LLP. All Forest Holidays’operations will in future be undertaken by theJoint Venture and Forest Enterprise Englandwill account for its share of the Joint Venture’sprofits and assets and liabilities in accordancewith Financial Reporting Standard 9.

For 2005-06, Forest Holidays remained aGB wide business, with a remit for all sites inEngland, Wales and Scotland. Formanagement purposes, Forest Holidays waspart of Forest Enterprise England’s recreationand development team but charges forScotland and Wales are separately accountedfor within each country. The income andexpenditure for 2005-06 resulting from ForestHolidays’ operations in England has beendisclosed within these financial statements asa discontinued operation under FinancialReporting Standard 3.

Estate Management reflects the net cost ofmanaging the non-forested estate whichcomprises houses, farms, agricultural land andall other lettings. It includes surplus assetswhich are disposed of wherever possible.

Other expenditure includes agency work carriedout on a full cost recovery basis, net incomeearned by Mechanical Engineering Servicesbusiness unit and sale of Christmas trees.



NOTE 3 STAFF COSTS AND NUMBERS

3.1 Employees and costs

The average number of whole time equivalent persons employed in Forest Enterprise England duringthe year was 960 (934 in 2004-05). In addition, the number of whole time equivalents employed asagency/temporary staff was 13 (14 in 2004-05). The aggregate payroll costs were as follows:

2005-06 2004-05£000 £000

Salaries 20,614 19,629Social Security Costs 1,488 1,422Other pension costs 3,309 2,285Agency/temporary staff 176 92

25,587 23,428Less recoveries in respect of outward secondments (96) -

25,491 23,428

The Principal Civil Service Pension Scheme(PCSPS) is an unfunded multi-employerdefined benefit scheme but the ForestryCommission is unable to identify its share ofthe underlying assets and liabilities. Thescheme actuary (Hewitt Bacon Woodrow)valued the scheme as at 31 March 2003. Youcan find details in the resource accounts of theCabinet Office: Civil Superannuation(www.civilservice-pensions.gov.uk).

For 2005-06, employers’ contributions of£3,295,000 were payable to the PCSPS (2004-05 £2,277,000) at one of four rates in therange 16.2% to 24.6% (2004-05 12% and18.5%) of pensionable pay, based on salarybands. The scheme Actuary reviews employercontributions every four years following a fullscheme valuation. From 2006-07, the salarybands will be revised and the rates will be in arange between 17.1% and 25.5%. Thecontribution rates are set to meet the cost ofthe benefits accruing during 2005-06 to bepaid when the member retires, and not thebenefits paid during this period to existingpensioners.

Employees can opt to open a partnershippension account, a stakeholder pension with anemployer contribution. Employers’contributions of £13,000 were paid to one ormore of a panel of three appointed stakeholderpension providers. Employer contributions areage-related and range from 3% to 12.5% ofpensionable pay. Employers also matchemployee contributions up to 3% ofpensionable pay. In addition, employercontributions of £930 (£430 for 2004-05), 0.8%of pensionable pay, were payable to the PCSPSto cover the cost of the future provision oflump sum benefits on death in service and illhealth retirement of these employees.

Contributions due to the partnership pensionproviders at the balance sheet date were £nil.Contributions prepaid at that date were £nil.



NOTE 5 NOTIONAL COST OF CAPITAL

Notional cost of capital based on 3.5% of average total assets less liabilities employed in 2005-06amounted to £15,905,000. (14,690,000 in 2004-05)

NOTE 4 SALE OF PROPERTIES

2005-06 2004-05£000 £000

Income 2,123 5,863Book value 1,095 4,400

1,028 1,463Disposal costs

External costs (83) (182)Administration expenses (273) (314)

(356) (496)

Surplus/(deficit) on sale of properties 672 967

NOTE 6 TANGIBLE FIXED ASSETS

Forest Dwellings Forest POA

Forest Holidays and Other Holidays &

Estate Land Land Buildings Buildings VME OME AUC Total

£000 £000 £000 £000 £000 £000 £000 £000 £000

Valuation:

At 1 April 2005 353,580 26,099 2,770 47,686 8,336 6,853 1,273 1,330 447,927Additions 966 158 - - - 138 77 1,106 2,445Donations/government grants - - - - - - - 3,318 3,318Transfers - 2,036 - 85 - (508) 3 (2,120) (504)Disposals (134) (20) - (1,017) - (748) (640) - (2,559)Write-off - - - - - - - (42) (42)Revaluation 26,772 235 - 3,803 472 6 - - 31,288Impairment - - - - - - (21) - (21)At 31 March 2006 381,184 28,508 2,770 50,557 8,808 5,741 692 3,592 481,852

Depreciation: - - -At 1 April 2005 - - - 3,892 790 4,768 1,048 - 10,498

Provided during year - - - 1,381 304 576 85 - 2,346Transfers - - - (1) 1 (576) (1) - (577)Disposals - - - (76) - (631) (634) - (1,341)Revaluation - - - 273 - (5) - - 268Impairment - - - - - - (7) - (7)At 31 March 2006 - - - 5,469 1,095 4,132 491 - 11,187

Net book value

at 31 March 2006 381,184 28,508 2,770 45,088 7,713 1,609 201 3,592 470,665

Net book value at 1 April 2005 353,580 26,099 2,770 43,794 7,546 2,085 225 1,330 437,429

Note 1 Accounting Policies sets out the basis on which fixed assets are revalued.



Additions to payments on account and assetsunder construction included £137,000 fundedby donations and £3,181,000 funded bygovernment grants. Government grantsinclude amounts of £2,012,000 from the Officeof the Deputy Prime Minister, £500,000 fromSport England and £294,000 from YorkshireForward. £264,000 was received from theEuropean Union.

The forest estate was subject to a fullprofessional revaluation on the basis ofexisting use value as at 31 March 2003 bycountry valuation panels comprising JohnClegg & Co. Chartered Surveyors, Raymond-Barker and Co. Chartered Surveyors andprofessionally qualified land agents employedby the Forestry Commission. The next fullrevaluation is due as at 31 March 2008 withannual updates in the intervening years basedon an external professional opinion. For 2005-06, valuations were updated using indexationinformation provided by John Clegg & Co.,Chartered Surveyors. The 2005-06 revaluationof the forest estate includes £10,600,000relating to areas of land omitted from the2004-05 revaluation.

Non-forest land and dwellings and otherbuildings were scheduled to be re-assessed asat 31 March 2005 in accordance with the three-yearly interval stated in the previous accountingpolicy. It has been decided, however, to bringthe policy in line with UK GAAP and undertake aprofessional valuation of non-forest land anddwellings and other buildings on a five-yearlybasis. The first five-yearly valuation will beundertaken at 31 March 2008, to coincide withthe next full revaluation of the Forest Estate,with annual updates in the intervening yearsbased on indices provided by the District Valuer.

In accordance with accounting policy 1.2, as at31 March 2006 management had taken thedecision to dispose of nine Dwellings andOther Buildings and thirty nine propertieswithin the Forest Estate and Other Land.These are at various stages of the disposalprocess from initial marketing through toacceptance of offers. The buildings areincluded in the financial statements at a netbook value of £1,201,000. The land assets areincluded at a value of £4,111,000. Thesevalues have been determined using an OpenMarket Valuation basis by internal,professionally qualified staff. Prior torevaluation the net book values were £449,200for buildings and £3,897,000 for land.

Forest Holidays land and buildings wererevalued by Barrs and Co. Chartered Surveyorsof Leeds as at 31 March 2006.

Forestry vehicles, machinery and equipment(VME) were subject to a full revaluation as at31 March 2005 by professionally qualified staffemployed by the Forestry Commission. Thenext full revaluation is due as at 31 March 2010with annual updates in the intervening yearsbased on valuations provided by internalprofessionally qualified staff for specialistforestry machinery and indices provided by theOffice for National Statistics for all other assets.

Office machinery and equipment (OME) wasrestated to current value as at 31 March 2006using an index provided by the Office forNational Statistics.

The forest estate and other land and buildings assets comprise both freehold andleasehold assets.



NOTE 7 STOCKS

2005-06 2004-05£000 £000

Timber 480 487Plants and seed 2,439 2,220Consumable materials, supplies and livestock 511 573

3,430 3,280

NOTE 8 DEBTORS

2005-06 2004-05£000 £000


Trade debtors 6,952 4,747Other debtors 173 245Prepayments and accrued income 1,768 1,205

8,893 6,197


Other debtors 175 2439,068 6,440

NOTE 9 CASH AT BANKS AND IN HAND

2005-06 2004-05£000 £000

Cash at commercial banks and in hand 19 2119 21

NOTE 10 CREDITORS

2005-06 2004-05£000 £000


Trade creditors 6,311 3,392Other creditors 89 129Accruals and deferred income 3,944 1,177Current part of finance leases 103 85Payments received on account 4 862

10,451 5,645


Finance leases 2,119 1,83312,570 7,478



Forest Enterprise England acts as co-ordinatorfor the Interreg Project which is funded by theEuropean Union. The purpose of the InterregProject is the promotion and guidance ofrecreation and conservation in forestry. Theduties of co-ordinators include receiving EUfunds on behalf of partners for onwardtransmission once work programmes have

been approved. As third party assets thesesums are not recorded on the face of theseaccounts. At 31 March 2006 the amount heldin Forestry Commission bank accounts onbehalf of partners was £152,200 (£309,360 in2004-05). This has subsequently all beentransferred to the partners concerned.

Forest Enterprise England provides for legal orconstructive obligations which are of uncertaintiming or amount at the balance sheet date onthe basis of the best estimate of theexpenditure required to settle the obligation.Where the effect of the time value of moneyis significant, the estimated risk-adjustedcashflows are discounted using the real rateset by HM Treasury (currently 2.2 per cent).

Provisions for liabilities and charges includeprovisions for:

• Early departure costs.

• Legal claims from the public for personalinjury or damage caused to property.

• Compensation for injury to employees.

Note 11 Provision for liabilities and charge

Early Public Other

departure legal legal

costs claims claims Total

£000 £000 £000 £000Balance at 1 April 2005 334 99 128 561Provided in the year 248 181 236 665Provisions not required written back - (68) (26) (94)Provisions utilised in the year (141) - (85) (226)Unwinding of discount 2 - - 2Balance at 31 March 2006 443 212 253 908



NOTE 12 GENERAL FUND

2005-06 2004-05£000 £000

Balance at 1 April 349,480 349,231Movement in year:

Net deficit for the year (39,517) (34,485)Notional cost of capital 15,905 14,690Cash deficit funded by Forestry Commission 20,105 16,772Transfers of fixed assets from/to other Forestry Bodies 71 107Transferred to general fund (realised element of revaluation reserve) 691 3,342Timing between accrual and cash VAT (497) -Non-cash inter-country transfers 174 (177)

(3,068) 249

Balance at 31 March 346,412 349,480

NOTE 13 REVALUATION RESERVE2005-06 2004-05

£000 £000Balance at 1 April 89,326 51,024

Arising on revaluation during the year:Forest Estate 26,772 28,697Land 235 7,962Forest Holidays land - 575Forest Holidays buildings 472 290Dwellings and other buildings 3,500 4,193VME 11 (73)

30,990 41,644

Transferred to general fund (realised element of revaluation reserve) (691) (3,342)

Balance at 31 March 119,625 89,326

The following realised revaluation surpluses were transferred to the General Fund:2005-06 2004-05

£000 £000Forest estate - -Other land - (3,260)Buildings (676) (76)VME (15) (6)

(691) (3,342)



NOTE 14 RESERVES

Note 14 (a) Donated asset reserve2005-06 2004-05

£000 £000Balance at 1 April 325 67Additions during the year 137 255Revaluations 30 4Release to I&E (6) (1)Balance at 31 March 486 325

Note 14 (b) Government grant reserveUK EU 2005-06 2004-05

£000 £000 £000 £000Balance at 1 April - - - -Additions during the year 2,917 264 3,181 -Revaluations - - - -Release to I&E - - - -Balance at 31 March 2,917 264 3,181 -

NOTE 15 NOTES TO THE CASH FLOW STATEMENT

15a Reconciliation of net deficit to operating cash flows

2005-06 2004-05£000 £000

Net deficit for the year (39,517) (34,485)Notional cost of capital 15,905 14,690Depreciation charges 2,346 2,253Donated asset reserve released (6) (1)(Profit)/loss on sale of properties (1,030) (1,463)Tangible fixed asset write-off 42 26Impairment of tangible fixed assets 14 (1)(Profit)/loss on sale of other tangible fixed assets (65) (10)Timing between accrual and cash VAT (497) -Non-cash inter-country transfers 174 (177)(Increase)/decrease in stocks (150) (35)(Increase)/decrease in debtors (2,628) (396)Increase/(decrease) in creditors 5,092 (186)Increase/(decrease) in provisions 347 (703)Net cash outflow from operating activities (19,973) (20,488)



15b Analysis of capital expenditure and financial investment

2005-06 2004-05£000 £000

Payments to acquire tangible fixed assets (5,763) (2,252)Receipts from sale of properties 2,123 5,863Receipts from sale of other tangible fixed assets 188 113Net cash outflow from investing activities (3,452) 3,724

15c Analysis of financing2005-06 2004-05

£000 £000Deficit funded by Forestry Commission 20,105 16,772Donations toward capital expenditure 137 -Government grants towards capital expenditure 3,181 -Net financing 23,423 16,772

NOTE 16 CAPITAL COMMITMENTS

Amounts contracted for but not provided in the accounts amounted to £1,802,000 (£442,000 for2004-05), £1,779,000 relating to the construction of a visitor centre at Dalby Forest in North YorkMoors and the remainder being the purchase of plant and machinery.

NOTE 17 COMMITMENTS UNDER LEASES

Operating leases

Commitments on operating lease rentals for the next year are as follows:

2005-06 2004-05£000 £000

Land and building leases expiring within:One year - -Two to five years 13 13More than five years 116 115

129 128

Plant and machinery leases expiring within:One year - 287Two to five years 1,459 1,709More than five years 206 -

1,665 1,996



NOTE 18 OTHER FINANCIAL

COMMITMENTS

Forest Enterprise England has entered intonon-cancellable contracts for artist fees andstage rental for the ‘Forest Concert Tour2006’ at various venues in England of£1,800,000 and a financial commitmentpertaining to the Festival Of Woods of£5,000. (£1,230,000 for 2004-05).

NOTE 19 CONTINGENT LIABILITIES

There were no contingent liabilities.

NOTE 20 POST BALANCE SHEET EVENTS

On the 8 May 2006, the Forestry Commissionentered into a joint venture with the Campingand Caravanning Club to take overmanagement of its Forest Holidays business.More information can be found in the AnnualReport and note note 2.3 to these accounts.

NOTE 21 RELATED PARTY TRANSACTIONS

The Forestry Commission is regarded as arelated party. During the year, ForestEnterprise England has had a significantnumber of material transactions with theForestry Commission.

In addition, Forest Enterprise England hashad various material transactions with othergovernment departments and other central

government bodies. The main entities withingovernment with which the ForestryCommission has had dealings are H MTreasury, UK Co-ordinating Body, thePaymaster General’s Office, HM Revenue andCustoms, the Department for the Environment,Food and Rural Affairs, the Office of theDeputy Prime Minister, the North WestDevelopment Agency and Yorkshire Forward.

In the year to 31 March 2006, the ForestryCommission entered into the following materialtransactions involving the non-executiveCommissioners of the Forestry Commission:-

Martin Gale, a non-executive ForestryCommissioner was, at 31 March 2006,Chairman of Tilhill Forestry and Vice President,International Forestry, UPM-KymmeneCorporation. UPM-Kymmene is the parentcompany of Shotton Paper, Caledonian Paperand Tilhill Forestry Ltd. Tilhill Forestry has aninterest in BSW Timber plc

The value of purchases from Forest EnterpriseEngland was:

BSW Timber plc £1,501,000Tilhill Forestry £1,089,000

Finance leases

Obligations under finance leases fall due as follows:

2005-06 2004-05£000 £000

Rentals due in one year or less 103 85Rentals due in more than one year but not more than two years 100 86Rentals due in more than two years but not more than five years 280 256Rentals due in more than five years 1,739 1,491

2,222 1,918



Amounts owing to Forest Enterprise Englandat 31 March 2006 were:

BSW Timber plc £231,000Tilhill Forestry £36,000

NOTE 22 LOSSES STATEMENT

Losses totalled £51,000 from 38 cases(£29,000 from 48 cases in 2004-05).

Special payments totalled £104,000 from 40cases (£92,000 from 29 cases in 2004-05).

NOTE 23 FINANCIAL INSTRUMENTS

FRS 13, Derivatives and Other FinancialInstruments, requires disclosure of the rolewhich financial instruments have had during theperiod in creating or changing the risks an entityfaces in undertaking its activities. Because ofthe largely non-trading nature of its activitiesand the way in which government departmentsare financed, Forest Enterprise England is notexposed to the degree of financial risk faced bybusiness entities. Moreover, financialinstruments play a much more limited role increating or changing risk than would be typicalof the listed companies to which FRS 13 mainlyapplies. The department has no powers toborrow or invest surplus funds and financialassets and liabilities are generated by day-to-dayoperational activities and are held not to changethe risks facing the department in undertakingits activities.

As permitted by FRS 13, debtors and creditorswhich mature and become payable within 12months from the balance sheet date havebeen omitted from the liquidity profile.

Liquidity riskThe UK Government makes provision for the

use of resources by Forest Enterprise England,for revenue and capital purposes, in its budgetfor each financial year. Resources and accruingresources may be used only for the purposesspecified and up to the amounts specified inthe budget. The budget also specifies anoverall cash authorisation to operate for thefinancial year. Forest Enterprise England is nottherefore exposed to significant liquidity risks.

Interest-rate riskForest Enterprise England is not exposed tointerest-rate risk.

Foreign currency riskForest Enterprise England is not exposed toforeign currency risk.

Fair ValuesThere is no difference between book value andfair value for the cash at bank shown in Note9. Fair value for the provisions shown in Note11 is not significantly different from book valuesince, in the calculation of book value, theexpected cash flows have been discounted bythe Treasury rate of 3.5% in real terms.

NOTE 24 FINANCIAL PERFORMANCE

MEASURES

The financial performance measures set by theNational Committee for England for 2005-06and the actual outturns achieved were:

Achieved Target£000 £000

Operating deficit 39,517 37,848Cash deficit 19,973 21,865Gross receipts from sale of properties 2,123 2,000



ACCOUNTS DIRECTION GIVEN BY THE

TREASURY IN ACCORDANCE WITH

SECTION 7 OF THE GOVERNMENT

RESOURCES AND ACCOUNTS ACT 2000

1. The Forestry Commission shall prepareaccounts for Forest Enterprise of itsactivities in England for the financial yearended 31 March 2006 and subsequentyears, comprising:

(a) an annual report;

(b) a statement of Accounting Officer’sresponsibilities;

(c) a statement on internal control;

(d) an income and expenditure account;

(e) a statement of total recognised gainsand losses;

(f) a balance sheet; and

(g) a cash flow statement,

including such notes as may be necessary forthe purposes referred to in the followingparagraphs.

2. The accounts shall give a true and fair viewof the income and expenditure, and cashflows for the financial year, and the state ofaffairs as at the end of the financial year.

3. Subject to this requirement, the accountsshall be prepared in accordance with:

(a) generally accepted accounting practice inthe United Kingdom (UK GAAP) havingregard for the requirements of theGovernment Financial Reporting Manual;

(b) the disclosure and accountingrequirements contained in The Fees andCharges Guide (in particular those relatingto the need for segmental information forservices or forms of service provided) andin any other guidance which HM Treasurymay issue from time to time in respect ofaccounts which are required to give atrue and fair view;

(c) the accounting and disclosurerequirements of GovernmentAccounting, as amended or augmentedfrom time to time,

insofar as these are appropriate to ForestEnterprise and are in force for the financialyear for which the accounts are to beprepared.

4. Additional requirements are set out inSchedule 1 attached.

5. Clarification of the application of theaccounting and disclosure requirements ofthe Companies Act and accountingstandards is given in Schedule 2 attached.

6. The income and expenditure account andbalance sheet shall be prepared under thehistorical cost convention modified by theinclusion of:

a. the forest estate at its existing use value;

b. land and buildings at their existing usevalue where a market exists, otherwiseat depreciated replacement cost;

c. machinery, plant and equipment atcurrent replacement cost;

Accounts Direction Given By The Treasury


d. commercial recreation assets at theirexisting use value; and

e. stocks of seed at the lower of cost ornet realisable value, stocks of plants andlivestock at net realisable value andstocks of consumable materials atcurrent replacement cost.

7. This direction shall be reproduced as anappendix to the accounts and supersedesthat dated 21 May 2002.

IAN CARRUTHERSDirector, Government Reporting, HM Treasury27 February 2006

Accounts Direction Given By The Treasury


SCHEDULE 1

ADDITIONAL REQUIREMENTS

Annual Report

1. The Annual Report shall be prepared inaccordance with the provisions of theGovernment Financial Reporting Manual.

Income and Expenditure Account

2. The income and expenditure account shallbe in a form which discloses the informationdescribed below, as the recommendedformats described in Schedule 4 to theCompanies Act are not appropriate forForest Enterprise:

a. under “operating income”:• sales of timber• other forest sales• other activities

b. under “operating expenditure (by activity)”:• harvesting and haulage of timber• restocking after felling• forest roads• forest maintenance and protection• other activities

c. the resulting operating surplus/deficitshall be shown as a separate heading

d. under “recreation, conservation and heritage”:• income• expenditure

e. giving operating surplus/deficit net ofrecreation, conservation and heritage

f. the surplus/deficit arising from thesale of properties and the notional costof capital

g. the “net surplus/deficit for the year”which shall be transferred to thegeneral fund.

3. Minor changes may be made to theheadings in the accounts without theapproval of HM Treasury.

Notes to the Accounts

4. The notes to the accounts shall include,inter alia, details of the total income,expenditure and operating result for eachof the operations shown within “otheractivities”, together with explanatory notesof the financial objectives set andperformance achieved

SCHEDULE 2

APPLICATION OF THE ACCOUNTING AND

DISCLOSURE REQUIREMENTS OF THE

COMPANIES ACT AND ACCOUNTING

STANDARDS

Companies Act

1. The disclosure exemptions permitted by theCompanies Act shall not apply to ForestEnterprise unless specifically approved byHM Treasury.

2. Forest Enterprise is not required to providethe historical cost information described inparagraph 33(3) of Schedule 4 to theCompanies Act.

Accounting standards

3. Forest Enterprise is not required to includea note showing historical cost profits andlosses as described in FRS 3.

Schedules


Boundaries and Contacts

FORESTRY COMMISSION NATIONAL AND CONSERVANCY BOUNDARIES



FOREST ENTERPRISE BOUNDARIES


177

ADDRESSES OF THE MAIN OFFICES OF


GB & CENTRAL SERVICES

Forestry Commission

Silvan House, 231 Corstorphine Road,Edinburgh, EH12 7ATTel 0131 334 0303Fax 0131 334 3047e-mail [email protected] www.forestry.gov.uk

ENGLAND


Great Eastern House, Tenison Road,Cambridge, CB1 2DUTel 01223 314546Fax 01223 460699e-mail [email protected]


340 Bristol Business Park, Coldharbour Lane,Bristol, BS16 1EJTel 0117 906 6000Fax 0117 931 2859e-mail [email protected]

SCOTLAND

Forestry Commission Scotland

Silvan House, 231 Corstorphine Road,Edinburgh, EH12 7ATTel 0131 314 6156Fax 0131 314 6152e-mail [email protected]

Forest Enterprise Scotland

1 Highlander Way, Inverness Business Park,Inverness IV2 7GBTel 01463 232811Fax 01463 243846e-mail [email protected]

WALES

Forestry Commission Wales

Victoria Terrace, Aberystwyth, Ceredigion,SY23 2DQTel 01970 625866Fax 01970 626177e-mail [email protected]

FOREST RESEARCH

Alice Holt Lodge

Wrecclesham, Farnham, Surrey, GU10 4LHTel 01420 22255Fax 01420 23653e-mail [email protected]

Northern Research Station

Roslin, Midlothian, EH25 9SYTel 0131 445 2176Fax 0131 445 5124e-mail [email protected]



Printed in the UK for The Stationery OfficeLimited on behalf of the Controller ofHer Majesty's Stationery Office

07/06

PUBLISHED BY TSO (THE STATIONERY OFFICE)

and available from:

TSO

(Mail, telephone and fax orders only)PO Box 29, Norwich NR3 1GNGeneral enquiries 0870 600 5522Order through the Parliamentary Hotline Lo-call 0845 7 023474Fax orders 0870 600 5533Email: [email protected]/bookshop

TSO SHOPS

71 Lothian Road, Edinburgh EH3 9AZ0870 606 5566 Fax 0870 60655 88

123 Kingsway, London WC2B 6PQ020 7242 6393 Fax 020 7242 6394

68-69 Bull Street, Birmingham B4 6AD0121 236 9696 Fax 0121 236 9699

9-21 Princess Street, Manchester M60 8AS0161 834 7201 Fax 0161 833 0634

16 Arthur Street, Belfast BT1 4GD028 9023 8451 Fax 028 9023 5401

The Stationery Office Oriel Bookshop18-19 High Street, Cardiff CF1 2BZ029 2039 5548 Fax 029 2038 4347

THE PARLIAMENTARY BOOKSHOP

12 Bridge Street, Parliament Square, London SW1A 2JXTelephone orders 020 7219 3890General enquiries 020 7219 3890Fax orders 020 7219 3866

ACCREDITED AGENTS

(See Yellow Pages)and through good booksellers

£19.70 9 780102 936384

ISBN 0-10-293638-2

great britain annual report and - gov.uk · sustainable forest management 8 cross gb regulation 10...

Documents