€7.5 billion forest premia bill
However, that is how economists view any business; they assume for the purposes of their calculations that profit and income are the sole motives for being involved.
If that were really so, few would be involved in farming in the Ireland of the Celtic Tiger.
However, economists look at businesses not just from the perspective of the worker (or farmer), or taxpayers who may be supporting a worker, but also from the perspectives of investors and Government.
In these contexts, Dr Peter Bacon has come up with very interesting findings in forestry, where, incidentally, he calculated the cost of delivering €100 of income to a farmer as €114.
That alone indicates that subsidising of forestry offers some value for the taxpayer.
But in forestry, or agriculture in general, value also comes from the contribution to the economy from the raw material produced by a farmer, whether it be beef, milk, grain or timber.
Dr Bacon warns that the forest industry will not make its full contribution to the economy, unless it achieves its longstanding but seldom achieved target of planting 20,000 hectares of trees per year.
An even more revealing finding in his very interesting report is the cost to the Exchequer of promoting forestry.
It’s not easy to surprise an economist of the stature of Dr Bacon. But surprised he is, describing as “staggeringly high” the cost of continuing to support annual premia in the medium to long term, resulting in Exchequer commitments of the order of €7.5 billion.
He has responded with appropriately radical recommendations, which have upset some in the forest industry. He says farmers’ 20 years of forest premia should be squeezed into 10 years. Farmers get the same money, but there is a 25% plus saving for the Exchequer over 40 years.
What has upset many landowners is his accompanying suggested recommendation for bringing greater certainty into the forestry income stream.
Dr Bacon says this is very difficult for landowners over the 40 year forest cycle, because (he quotes another famous economist) in the medium term, we are all dead.
What he recommends is that the Government enable planters of trees to sell to institutional investors who need a future income stream 40 years ahead, and can therefore afford to fully reward landowners for their plantations.
This has got a hostile reaction from the forestry sector, who see this proposed acquisition of afforested lands after 10 years as a type of compulsory purchase order. In response, Dr Bacon points out that there is nothing to prevent a farmer buying his neighbour’s timber after 10 years, or selling off his own small plot to a bigger grower next door. Either way, the value a farmer would receive over 40 years for planting and holding a tree will not change, but will arrive over a shorter period.
That would help the sector achieve the 20,000 hectares planting target which is needed to feed a strong saw-milling industry.
Along with supporting farmers and a strong timber industry, there is a return from investment in forestry in the form of amenity, leisure and recreation in woodlands, and the mitigation of greenhouse gases.
But the forestry sector also needs to reflect on its performance in this context.
It is baldly put to them by Dr Bacon that the public pays through taxes for our forests but is denied access to them (because, among other things, of landowners’ public liability worries) - which raises a question for taxpayers of whether forestry is worth supporting.
There are many questions for the forest sector, and the answers won’t come from Brussels.
As Dr Bacon points out, the thrust in Brussels will be much more to realise environmental benefits, over and above timber production.
No special case can be expected for Ireland, which has one of the lowest rates of afforestation of the 25 member states.
