Isra-Mart srl:Forest sell-off expected to make loss, government study shows

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The coalition is expected to lose money selling off hundreds of thousands of acres of English woodland, government documents show.

A joint Department for Environment Farming and Rural Affairs (Defra) and Forestry Commission study shows that government can expect the disposal of the land to cost £679m over 20 years but the benefits will only be £655m.

The cost-benefit study says the government should expect to lose substantial income from the sale of timber and recreation licenses, and that it will have to pay millions of pounds in compensation and redundancies. In addition, charities and other groups taking on the management of woodland will have to be given financial incentives.

The study is particularly embarrassing for government coming only hours before a Commons debate on the sell-off plans. The debate will have no direct bearing on the public bodies bill which, if passed, will allow government to sell off 100 per cent of its English forest estate, but it is expected to indicate the strength of feeling among MPs, and could lead to amendments before formal debates in the House of Lords and Commons in the next few weeks.

According to the report, the proposal to transfer the "heritage" forests - including the New Forest in Hampshire and the Forest of Dean in Gloucestershire - to one or more conservation charities could cost £507.9m but would earn government £495.9m. While heritage woodlands should earn over £220m if put on the market, the report says the majority were "unsellable at a political and practical level".

Leasing the large-scale commercial woodlands like Kielder Forest in Northumberland would cost between £579.1m and £748.7m but would yield between £573.1m and £737.8m, the report says. Woodland earmarked to be offered to communities would involve costs of £234.1m and bring in an estimated £231.9m, it said.

The report also warns of other hidden costs in the sell-off. Buyers may be unwilling to continue "favourable" contract terms with local timber processors and the rural economy could be hit via redundancies.

Government sources insisted that the study was only a first attempt to assess the costs and benefits. "The figures are the costs and benefits to everyone involved, including government and buyers, and the benefits. A fuller assessment will be made after the consultation is complete," Defra said in a statement.