Memorandum submitted by British Waterways
(DAR 08)
BACKGROUND
The attached questions are designed to provide
more detail about issues covered in the Committee's inquiry into
Defra's Departmental Report 2006 and Defra's 2006-07 budget. British
Waterways' response will be circulated to Members in advance of
the Committee's evidence session with Defra officials in early
December.
EFFECT OF
BUDGET CUTS
ON BRITISH
WATERWAYS' WORK
Defra has announced cuts in British Waterways'
2006-07 resource budget of £3.934 million. This represents
a 7% cut in British Waterways' expected resource budget for that
year.
1. Could British Waterways provide a detailed
breakdown of which programmes and projects are affected by the
£3.934 million reduction in its resource budget? Within these
programmes and projects, what specific services have been, or
will be, affected, delayed or stopped altogether? The Committee
would like as much information about this as possible.
The overall reduction in grant from 2005-06
to 2006-07 has been £7.1 million (£62.6 million to £55.5
million).
The grant was arrived at as followsAs
part of Spending Review 2004, British Waterways was given an indicative
budget allocation for 2006-07 of £62.589 million (subject
to a caveat of not committing more than 90%). We were formally
notified of our allocation for 2006-07 in March 2006. The allocation
was £59.429 million. There was subsequently an in year review
of Defra's budgets and the grant was reduced by a further £3,932
million in July 2006 to £55.497 million.
In 2006-07, given the relatively short notice
of grant cuts (see below) the impact has been primarily absorbed
by delaying major engineering works to a value of £5.6 million.
A list of engineering works delayed is attached
as Appendix 1.
2. To what extent will the budget cuts affect
the delivery of British Waterways' various programmes and projects?
Which programmes and projects are more at risk than others?
See list attached as Appendix 1
3. How has British Waterways attempted, or
how does it intend, to mitigate the effects of the budget cuts
on the various programmes and projects affected?
The list has been prioritised through our risk
assessment procedures to maximise potential saving whilst minimising
impact on structural condition.
4. How much discretion was British Waterways
given to determine which programmes and projects would be affected
by the cuts?
Absolute discretion.
5. How many job losses are expected within
British Waterways as a result of its budget cuts?
British Waterways is committed to improving
efficiency and was already planning to reduce numbers as part
of a programme to improve efficiency. However, the cuts already
made and, perhaps more importantly, the probable public funding
constraints, for 2007-08 and for the CST period 2008-09 to 2010-11
have caused us to accelerate our cost reduction programme. We
are consulting with trade unions on a plan to remove about 180
posts from our business. We currently employ about 1,900 people.
EFFECT OF
BUDGET CUTS
ON NON-GOVERNMENTAL
ORGANISATIONS AND
SPONSOR ORGANISATIONS
AFFILIATED WITH
BRITISH WATERWAYS
6. Which Non-Governmental Organisations, and
other smaller bodies and companies affiliated with British Waterways,
will experience cuts in their respective budgets owing to British
Waterways' resource budget cuts, and to what extent?
The main such dependencies on British Waterways
are The Waterways Trust and voluntary sector partners in waterway
restoration. There is unlikely to be any major effect on these
bodies in 2006-07.
7. To what extent has British Waterways, or
Defra, provided advice to those bodies affected about their situation?
What measures have been taken to assist such bodies in coping
with cuts in their budgets?
See answer to Question 6.
BUDGET CERTAINTY
FOR 2006-07
In evidence to the Committee on 25 May 2006,
Defra's Permanent Secretary said that the Department had "failed
in our aim to give our delivery agencies enough warning"
about the cuts in the 2006-07 budgets.
8. Was British Waterways given enough certainty
at an early stage about the extent of its 2006-07 resource budget
cuts? If not, what impact did this lack of certainty have on the
British Waterways' work and plans?
The first 5% cut in our grant was advised a
couple of months before the start of the financial year and British
Waterways was therefore able to incorporate it into our business
plans. This was late but acceptable notice.
The second 7.5% cut was formally notified on
the 27 July. British Waterways had undertaken in May not to spend
more than 95% of its budget and had been briefed during the previous
four to six weeks to expect a cut of around 7.5% . The impact
was that we immediately reduced our programme of major works and
repairs as this was the only area of expenditure of significant
value that could be cut at this stage. This inevitably meant that
some time and resource was wasted as many schemes were quite well
advanced. However, a lot of the design work will still be valid
if we are able to afford to reinstate the works.
9. British Waterways provide an approximate
time-line to set out what Defra told British Waterways about the
extent of its budget cuts between the first warning that cuts
would be made and its latest position on the budget? What was
the impact of these messages on British Waterways, in terms of
planning and delivering its 2006-07 work programme?
See answer to Question 8.
10. Were there any discussions about the causes
of the cuts?
We have regular meetings with officials and
they advise us on what they know the causes of the cuts to be.
Inevitably in the early stages this was less clear but as time
went on the headings of RPA, Accounting Rules and Avian Flu became
more established. There were also meetings between Ministers and
Chief Executives/Chairmen on the matter.
Although the causes have been identified there
was very little discussion about thembut that is not necessarily
a problem as it was by that time a reality and discussion wouldn't
have changed anything.
BUDGET CERTAINTY
FOR FUTURE
YEARS
11. Has British Waterways been told by the
Department about the likelihood of further cuts in its budget
in 2007-08, and beyond? What are the current estimations about
the size of British Waterways' budget next year, and beyond
We have had no formal notification of our grant
for 2007-08. However, discussions with the Department indicate
that we will be notified in December of our grant for that financial
year and it is likely to be around this year's reduced figure.
Discussions are ongoing about grant for the
CSR period. It is clear that severe pressures on the Defra budget
will remain and there will be a strong likelihood that grant will
reduce further over the CSR period.
12. If further cuts are expected in 2007-08
and beyond, which programmes and projects are likely to be affected?
What would be the impact of further significant cuts to British
Waterways' budget next year?
British Waterways has already put in hand plans
for efficiency improvementssee question 5 above. We estimate
these will save £5.0 million pa from 2007-08 onwards.
If funding constraints continue throughout the
CSR period, as seems probable, then there is still potentially
some £10.0 million additional annual savings or income to
be found. Plans are being made to increase boat licences by 30%
in real terms phased over three years from 2008-09 onwards. This
will yield c£3.0 million pa once complete. Other commercial
income is being reviewed, but British Waterways already has challenging
targets with a realistic assessment of risk in them. It is likely
therefore that a further £7.0 million of efficiencies will
need to be found.
In the short term further cuts will result in
an underspend on our major works programmes of repair, replacement
and renewal. There will also be a noticeable continuing reduction
in our spend and engagement on non-core activities.
Cuts may affect British Waterways' ability to
commit to restoration schemes and thus the nature of our relationship
with diverse voluntary sector bodies.
If reduced funding persists, government may
not meet all its aspirations under its policy for waterways published
in 2000"Waterways for Tomorrow".
The strategic risk is twofold.
Firstly, prolonged underfunding and "stop
go" investment will reduce the structural integrity of the
waterways. We manage 2,200 miles of 200 year old waterways. We
are the third largest owner of listed buildings and structures
in the UK. We need to maintain an effective programme of repair,
replacement and renewal if the waterways are to continue to remain
a living, vibrant network. We eliminated our safety backlog in
2004 and we must never allow it to re-emerge.
Secondly, confidence, both public and commercial,
may reduce causing a reversal in the remarkable waterway renaissance
of the past 10 years. As we have improved and expanded the network,
we have acted as a remarkable catalyst for urban and rural regeneration,
spawning new homes, new businesses and new opportunities. All
of this is predicated on confidence that we will continue our
investment in the waterways to make them safer, more attractive
and more accessible.
British Waterways
November 2006
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