Economist Peter Bacon finds sale of Coillte harvesting rights “cannot be justified” on economic grounds

The economic rationale for the proposed sale of Coillte harvesting rights “no longer stands up and cannot be justified,” according to an analysis by economic consultants Peter Bacon and Associates.

The report, which was published today (Monday), finds that the State would remain liable for costs of €1.3 billion following a sale of harvesting rights. To cover these costs, Coillte would need to sell at €78 per cubic metre, which is “well above current or recent prices.”  The average recent price paid for Coillte supplies to saw mills has been just over €43 per cubic metre.

Assessment of the Consequences of the Proposed Sale of Coillte’s Timber Harvesting Rights concludes: “To generate a sale valued at €1.3 billion would require an average price of €78 per m3. This is well above current or recent prices and there is no basis in these prices for assuming that this would be achieved.”  This means that, rather than generating State income, a sale of Coillte harvesting rights would represent a substantial cost to the exchequer.

The report says the overall result of the Government’s proposal would effectively liquidate Coillte as a viable, commercial entity. “Given the non-commercial activities of Coillte and the residual land and forest that would need to be managed, it should be seen as a proposal to restructure Coillte as a National Parks Service that will depend on a state subsidy to carry out its obligations. However, no argument has been formulated to support such a move and, when viewed as such, the economic rationale for the sale disappears,” it finds.

Bacon estimates the costs of a sale of Coillte harvesting rights (or the right to fell and sell timber from Coillte forests) as:

Loss of funds from Coillte profit flow €565 million
Coillte deficit funding requirement €313 million
Economic cost of Coillte job losses €19 million
Coillte debt liability €172 million
Pension liability €130 million
Loss of amenity value €105 million
TOTAL €1,304 million

The report also outlines other economic risks associated with the proposals including the potential to disrupt the Irish timber processing sector, due to lack of certainty over future supply. It says job losses, which could arise in the processing industry if timber were exported without processing in Ireland, would add to future costs to the State.

“The proposal is an abrupt change in Irish forestry policy to the extent that it could greatly disrupt the sector and make the objectives that have been set unattainable. There are risks associated with this that go beyond the normal risks that can be associated with projections of timber prices. These include the potential to disrupt the processing sector, a possible cost factor that was not included in the assessment of costs. It is possible to envisage some options to minimise this potential, such as a piecemeal approach to the sale using a policy that could be soon reversed or a conditional sale, but it is unlikely that such options would have any real value in practice,” it finds.

The report was commissioned by the Coillte branch of IMPACT trade union. Speaking at the launch IMPACT assistant general secretary Johnny Fox said the report’s findings fundamentally undermined the only rationale the Government had put forward for the sale of Coillte harvesting rights.  “IMPACT and many other organisations have expressed concerns that the sale of Coillte harvesting rights would drastically limit public access to the countryside, undermine the quality and character of our woods, and damage our world-class forestry and environmental standards.  In response we were told that the policy is necessary on economic grounds. Peter Bacon’s report has now fundamentally undermined the only rationale the Government has put forward for this reckless and damaging policy,” he said.