Divestment of the English Forestry Estate: An economically sound choice?

This paper evaluates if the proposed divestment of the English Forestry Commission Estate in 2010 was economically rational. The analysis is composed of two parts. First, an amenity value threshold for continued public access to the Estate was estimated. Based on a stated value of the Estate (i.e. £700 million) and assuming a discount rate of 3.5% the Estate should never have been considered for sale. However, assuming a discount rate of 5% then the associated critical amenity value was estimated to be approximately £5 million. Second, travel cost methods were employed to value public access to the Forest of Dean as a proxy for the Estate. An on-site survey was conducted that yielded estimates of consumer surplus that exceed the critical amenity value of the Estate by two orders of magnitude even when we employ a discount rate above that typically used in public policy decision making. Therefore, we conclude that the policy to divest the Estate for £700 million was not 'a good deal' and as such the resulting policy reversal was an economically sensible decision.

► Use estimates of amenity value and travel cost estimates to assess the decision not to change ownership of the English forest estate. ► Critical amenity value is estimated using the option value method (Conrad, 1997). ► Travel cost estimates derived from a new data set using a flexible econometric specification. ► Combination of methods and results provides strong evidence supporting the decision not to sell the forest Estate.