Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Memorandum by Shire Cruisers (IW 44)


  I am a director of a small company which operates 15 hire boats, about 60 private moorings, and a full-service boatyard in Yorkshire. I have been doing this for over 20 years. The site is leased from British Waterways.

  I have tried to indicate by headings which of your topics I have covered. I can speak only about BW. I have not commented on the particular problems of my own site.

  I was disappointed that the Government did not undertake more radical reforms for the waterways. Many aspects of BW's work have improved out of all recognition in recent years, thanks to dedicated, professional staff, but the decision to leave things essentially as they were means that the tensions at BW's heart have not been resolved. Whereas tension can be healthy, in BW's case it too often leads not to creativity but to disarray and inefficiency, made worse by chronic abuse of its monopoly.


  First, two positive examples. BW has over many years supported the hire trade with marketing initiatives of many kinds, offering imagination, enthusiasm and significant funding. BW recognises that hire fleets are powerful introducers of first-time boaters, and therefore shares the trade's desire to find more new customers. This equality of need makes the relationship very productive.

  Another recent example of co-operation is a project to evaluate and improve the information and training given to boat hirers by hire companies. The improvements which flow from this will help both BW and the hire fleets to fulfil their duties towards the health and safety of boaters, who are of course shared customers.

  There are many other areas where joint action with BW benefits BW, the trade and, I hope, customers. Relationships with many of BW's staff are cordial and productive.

  But the relationship between the trade and the Commercial Department could not be more different. Much of this paper concerns this other, darker, side of BW.


  BW is required by Government to conserve its heritage, and to provide facilities for public enjoyment. But Government has set as its priority the maximisation of income so as to minimise the public cost of providing the resource. It has therefore never been possible for BW wholeheartedly to embrace conservation. BW has no means of resolving the deep contradictions between these objectives.

  English Heritage, regeneration agencies and local authorities have less difficulty than BW with the basic idea that one building's regeneration can benefit owners of other buildings without any kind of payment by those owners to the originator. The whole concept of regeneration relies on the assumption that public good can result from it; but the necessary combination of altruism and self-interest eludes BW. Since BW is one of the largest owners of heritage buildings able to act as a catalyst for regeneration, this is unfortunate. Has the Government set BW the right objectives?

Is Funding for development adequate?

  My company is about to benefit from the restoration of two canals, the Huddersfield Narrow and the Rochdale. The gestation of these projects was very protracted and difficult, which must in the end have been wasteful. Therefore the steps now being taken to improve the decision-making process for allocation of funds to restoration are very welcome, though one should not underestimate the difficulties and risks of a more centralised and planned approach. It was actually the freedom given to Local Authorities which enabled both these projects to build up to critical mass; BW and direct Government involvement were crucial, but came later on.

  One of the best sources of restoration funding, the Heritage Lottery Fund, may in future be able to give much smaller sums, and the RDAs may have similar difficulties. This would pose a significant challenge for the next generation of schemes.

  Once restoration is complete, funding of maintenance becomes a real problem. Even though waterways generally are not self-sufficient, any which have been restored have to recover their full running costs, from Local Authorities for example.

  On the other hand, anyone who doubts the value of restoring canals need only be shown a recently restored urban canal, with all its multiplicity of uses and the regeneration it has brought about. Then a simple photo-montage showing the derelict canal as it used to be, superimposed on the vibrant new landscape, will do the trick.

Is Funding for stabilisation adequate?

  The Government appears now to have accepted that the grant in aid is not subsidy for trading loss, but a fee paid to BW for public services which cannot be charged to individual users—towpath walkers being the obvious example. Yet the Government's drive to generate still higher income from all paying sources goes well beyond a proper concern for efficiency, and seems to be aimed at further reducing grant in aid.

Comments on funding sources of which I have personal experience

  Licence numbers for boats are growing only slowly, which suggests that fees are near the upper limit of affordability.

  Rents paid by boatyards are significantly higher than if BW had not been able to exert monopoly pressure on tenants. BW is scathing about the low profitability of boat companies, but prefers to attribute this to their "cottage industry mentality" than to its own milking of the golden goose, so to speak. Tenants too often find BW oppressive.

  Property management is another story. Why is it a good thing for BW to have all its money tied up in waterside property, of such mixed quality? A property company which specialised in secondary and tertiary sites, united only by water, would excite more suspicion than enthusiasm from the brokers. The National Trust, which holds a great deal of land having both heritage and commercial value, is careful to keep a lot of its capital tied up in boring old stocks and shares. Should not BW diversify?

  The widespread criticism of BW's management of its estate is to some extent unfair, since it is supposed to meet so many hopelessly conflicting objectives: cash generation, provision of facilities for users, conservation. However, it is far from obvious that BW's track record justifies the grand expansion now under way. Partnership with developers (W for T 4.7) may allow greater commercial skill to be applied, though BW can be an uncomfortable bed-fellow.

  Charges to neighbours provide BW with the great future earning possibility, though one BW might prefer you not to consider. This relates to BW's success in using its canals as a 2,000 mile ransom strip, charging owners of land beside the canal for land drainage, erection of bridges, construction of marinas and anything else which one neighbour can prevent another from doing unless enough cash changes hands. The only problem with this is that it may not always be lawful.

  These days, when monopolies are privatised, they are subjected to regulation, to protect the interests of their customers. This idea is not new; Parliament first had it over 200 years ago, when the canals were conceived. Parliament recognised that it was granting the canal owners a monopoly, so it created a system of controls. These balanced the need of the canal companies to earn a return on their investment, against the regulation of tolls for boat owners and the protection of owners of land along the canal. This was intended to encourage them to invest in facilities and thus increase the public benefit from use of the canal.

  When the canals were nationalised, that monopoly became a public one. Perhaps Parliament doubted that a publicly-owned monopoly would always be exercised in the public interest, because it did not repeal those protections for riparian landowners. However, it is uncertain what the law means today. The Court held in 1995 that these rights were not obsolete, yet BW aggressively denies that they may still be used. From time to time BW makes voluntary statements pledging self-control, often under the influence of exposure to the public eye through enquiries such as your own. At other times both it and the Government threaten that if the law were finally shown to be valid, then it would be changed by Act of Parliament—though this has not been done.

  Ironically, freehold boatyard owners generally acknowledge and respect BW's need for income, but there ought to be a balance between this, and riparian owners' needs for security and profit; and there is no means of striking one.

BW's monopoly of moorings

  Boats on BW waters are required by law to have a permanent mooring (unless they are continuously cruising). Permanent moorings are provided by

    —  BW in basins inherited from the canal companies;

    —  BW along the towpath;

    —  BW in modern marinas purchased from private owners;

    —  independent commercial operators in freehold marinas;

    —  independent commercial operators on sites leased from BW;

    —  farmers on the edge of fields; and

    —  householders at the end of their gardens.

  From each of these categories, BW draws an income. For moorings under its direct control, it receives the whole of the mooring charge. For moorings operated by a third party, BW requires a proportion of the income. For moorings at the ends of gardens, BW requires a proportion of a notional equivalent BW rate. In every case, the proportion taken by BW is set by BW. Market forces do not apply, as the operator has no one else from whom to buy the service; to refuse BW's terms is to cease trading. BW is by far the largest operator of moorings, so it would dominate the market even without taking a share of the mooring charges of every other boat on the system. This is indeed a monopoly. (I cannot give figures for the number of boats, or BW's income, in each category, because BW will not release them.)

  BW also enjoys cost advantages not available to private operators. It can disguise many of its operating costs in general Waterway expenses; is effectively exempt from business rates and planning control on its linear moorings; and does not have to pay a great slice of its earnings to the waterway owner.

  Any commercial operator unhappy with the charges demanded by BW has very limited means of appeal. The Waterways Ombudsman may not examine commercial matters. IWAAC has discussed this matter from time to time, but has no power. In some cases arbitration is an option, but this is expensive—and risky because there are few experts with knowledge of the field not already retained by BW.

  The Transport Acts place no limits on BW's ability to exert its monopoly. The Competition Act will not apply if BW's services are designated as of "General Economic Interest". Instead, BW is empowered to make such charges as it wishes for such services as it chooses to provide (S43 of the 1962 Act). Its actions are perfectly logical, even inevitable: but are they in the public interest?

  The difficulty the trade faces from BW's monopoly is growing, because of the significant and rapid expansion of BW's own market share. In the North-east Region, BW has over a period of years invested in many new marinas, which it operates itself. This is in apparent contravention of an Undertaking given by BW to the British Marine Industries Federation at the time of the 1995 Act. More recently, this trend has spread across the country, with some high-profile examples of which I don't doubt others have informed you. Each time BW acquires a new marina, it repeats that the circumstances were special and that it will have no further territorial demands.

  This will of course lead to tears. There is no way BW can perform profitably, with its excessive management structure and wage levels, and its limited working hours. Few of its managers have experience of dealing with customers who can take their business away if not satisfied, in the new fields of brokerage, chandlery and boatyard services. This policy will do nothing to help run the waterways more efficiently.

  These factors provide a strong disincentive to the private sector creation of waterside facilities for boats. There is a pressing need to devise a new framework for the relationship between BW and the trade, to the profit of both. This must include external regulation of its charges, agreements and anti-competitive practices.


  The other side of this coin—whether funding is adequate—is cost control. It is very much in the interests of waterway users for BW to reduce its costs. The most efficient way of achieving this is by putting work out to contract. The Government proposed (Future Status: Facts and Analysis etc., DETR, 18-2-99 paragraph 16) that BW enter into long term partnerships with the private sector for maintenance. I suggest that much more of the work of running the waterways could be performed either more effectively, or cheaper, or both, by contractors.


  The fundamental protection for users of the waterways is that BW has a statutory duty to maintain them. However, the 1968 Act theoretically obliged BW to maintain some stretches of waterway in better condition than it actually did, or could afford, so very sensibly the Government has for some years instructed BW to maintain instead according to a concept known as "use and prospects of use" (Framework Document 6.1). Better still, the new Waterway Standards are open for all users to see and comment on (both as to what the standards should be, and as to whether BW is achieving them).

  But the Government funked carrying out the necessary procedure to make the new standards enforceable (public enquiry followed by Orders under Section 105(3) of the 1968 Act). So now, if things went wrong, anyone who sought the legal enforcement of BW's duty would have to prove a case under the old standards, not the new. This would be very difficult, since BW effectively has the only copy of the arcane reference data required by the Act. BW has thus neatly escaped all realistic possibility of challenge, which may explain the dismissive attitude to users shown by some managers.


  Although the Government has decided not to change the status of BW, it is hard to see how the present structure can provide long-term security for the waterways, so that their enjoyment by one generation will not prejudice their understanding by the next.

  Working within the present structure, resolution of some of the contradictions within BW's view of the world could help it more efficiently to serve the public. Greater determination to cut costs by out-sourcing could help reduce dependence on government funding. The concentration on raising income from a poor property portfolio, indifferently managed, breeds inefficiency and hinders good management both of conservation and of recreation; it should be diversified. Much greater public accountability for BW's monopoly activities, and withdrawal from areas more appropriately served by the private sector, would encourage greater private investment in recreational facilities. Other organisations in the public sector have been much more successful at learning that partnership is a two-way process.

  Those members of BW's staff who try to serve the public are following a fine tradition. But the proposition that the day-to-day management of the waterways should be almost wholly carried out by a "public sector corporation" using direct employees is an anachronism. There is scope for radical change.

  When a satisfactory format has been achieved, it might be appropriate to add waterways presently under the control of other organisations.


  BW at its best is imaginative, constructive and forward-looking, but at its still too frequent worst can be arrogant and oppressive.

  In its commercial dealings with the boating industry it shows little sign of appreciating that a bargain should benefit both sides, and reaches too readily for the intimidating abuse of its monopoly.

  The boating industry works in fruitful partnership with BW on many issues. This partnership should be extended to commercial relationships, but can only be so if BW accepts more effective public accountability.

NFS Stevens

28 September 2000

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