Axe hovers over forestry scheme

Press, 8 November 1984, Page 6

Axe hovers over forestry scheme

DERRICK ROONEY The forestry encouragement scheme which cost the taxpayer about $64 million in the last financial year was widely tipped in forestry circles yesterday as a likely casualty of tonight’s Budget. Some strength was added to the speculation when it was confirmed yesterday afternoon that the senior forestry extension officer in Canterbury, Mr Theo Russell, has been called to Wellington for a briefing today. The scheme, introduced in the 1982 Budget by the National Government and implemented from April 1 last year, replaced an earlier, limited subsidy scheme with cash grants which cover 45 per cent of the cost of planting and maintaining forests and woodlots. The scheme put all private forest growers on the same footing, and also replaced the former forestry loan schemes for local authorities, which are now eligible for the full 45 per cent establishment ,and maintenance grant on' all their new plantations. Under the previous scheme, the grants were available to individuals, and were limited to a total of $l5OO a hectare. There were restrictions on the costs which could be claimed.. The F.E.G. scheme extended the incentive payments to companies, and removed their eligibility for tax credits or deductions on forestry income. It is paid at a flat rate of 45 per cent on all qualifying costs in-

curred in establishing, tending, and maintaining forests. There is no upper limit on the size of the payment or on the total area planted. From Canterbury’s point of view, the F.E.G. scheme has given forestry a great boost in a time of timber shortages. Figures released by the Forest Service show that in a six-month period, last year grants amounting' to $500,000 were paid. Total tree planting in Canterbury by the private sector has been boosted from about 900 ha a year to about 2500 ha during the 18 months since the scheme came into effect. From the farmer’s point of view, the scheme' has also been a useful subsidy on new shelter. Though plantings made for soil-conserva-tion purposes are not eligible for the grants (but do attract a bigger subsidy administered by catchment boards), a liberal interpretation placed on the F.E.G. scheme by the Forest Service has meant that many new shelter belts have qualified as "woodlots” and thus have been eligible for the payment. The requirements that plantings must be economic and must comprise recognised timber species are also capable of broad interpretation.

Options open to the Minister of Finance, Mr Douglas, tonight include abolishing the scheme or reducing its size or scope, either to meet a smaller percentage of the costs or to limit the size or types of plantings. The latter option is favoured in forestry circles, because whereas farmers and companies would be able to recover their costs through tax deductions, local bodies and institutions such as churches and sports clubs, which pay no taxes, would be unable to do so. Local bodies likely to be affected by changes in the forestry grants system include most county councils and the Selwyn Plantation Board, which administers large areas of plantations on the central plains. The Christchurch City Council would not be affected immediately — it has no present projects for which grants are being paid. However, the council did intend to apply for grants for projects scheduled for next winter, said the head forester, Mr Chris Johns. Mr Russell declined to comment yesterday on the speculation that the grants might be axed. “I have been told nothing about what might be in the Budget,” said Mr Russell.