Memorandum submitted by British Waterways
(BW 11)
1. INTRODUCTION
1.1 In 2002 BW articulated its 10 year vision
as follows:
"Our ambition is that by 2012 we will have
created an expanded, vibrant, largely self-sufficient waterway
network used by twice as many people as in 2002. It will be regarded
as one of the nation's most important and valued national assets.
Visitors will be delighted with the quality of the experience
and as a consequence many will become active participants".
1.2 Since 2002 we have made good progress:
1.2.1 Expanded
— Our restoration programmes have increased
the size of our waterways by over 10% since 2000.
1.2.2 Vibrant
— The number of licensed craft has
grown consistently year on year. Last year it grew by a record
7% to 29,000 boats.
1.2.3 Largely self sufficient
— Earned income grew by 91% between
2002 and 2006.
— Commercial income as a percentage
of total income grew from 39% to 60% over the same period.
— This growth has been achieved through
greater commercial focus and imaginative use of joint ventures
with the private sector.
1.2.4 Used by twice as many people
— There were circa 300 million visits
to our waterways in 2006.
1.2.5 Valued national asset
— 95% of the population rate the inland
waterways as an important part of the nation's heritage.
— A narrowboat was recently voted as
one of Britain's top icons.
1.2.6 Visitors will be delighted
— On our five key measures of customer
satisfaction, in excess of 85% of customers rate us as satisfactory
or better.
1.3 BW has transformed itself from being
predominantly engineering and infrastructure based to a commercially
and customer focused organisation. We have proven to ourselves
to be effective and efficient deliverers of major restoration,
regeneration and commercial projects.
1.4 Our growing reputation attracts increasing
investment into the waterways from Lottery, RDAs, and the private
sector. The leverage we get from government grants is quite remarkable.
1.5 At a macro level £60 million of
grant has helped to create £6 billion of current waterside
regeneration, at a project specific level the Cotswolds Canal
project will require £3 million of BW funding to attract
£25 million of other public funding that will lead to £80
million of private sector investment into an area of deprivation.
Current users of the waterway network and their
relationships with British Waterways
2. BACKGROUND
2.1 British Waterways (BW) cares for and
manages some 2,200 miles of canals and rivers in Scotland, England
and Wales. A copy of the map is attached in pdf format (please
note this should be printed on A3).[5]
Some 200 miles of this total has been added by restoration or
new build in the last 10 years. About 300 million visits are made
to BW waterways each year Source: Inland Waterway Visits Survey)
compared, for example with the 42 million visits to "free
entry" museums and galleries. See table attached as Appendix
A.
2.2 Waterways are a valued and accessible
national asset. Some 95% of the population consistently rate them
as an important part of the nation's heritage and some 85% see
them as good places to visit (Source: Inland Waterway Visits
Survey). Because of their original purpose, BW's waterways
serve the centres of almost every large town or city. Approximately
half the UK population lives with in five miles of a BW canal
or river a fact reflected in the c240 members of Parliament who
have a waterway in their constituencies.
2.3 At the heart of the waterway experience
are the boating customers and their boats. There are some 29,000
boats on BW's network and there are about nine million visits
to the waterways each year by boaters (about 3% of total visits).
It is the passionate enthusiasm of our boating customers which
ensured the survival of the waterway network in its most difficult
times and in our experience and that of our commercial and public
sector partners, the public place great value on active waterways
used by a wide variety of boats. Boating customers currently make
a direct net contribution through payment of licence (and in some
cases mooring) fees of some £14.5 million per annum.
2.4 Over 100,000 people each year take holidays
on hireboats and start a process which leads many to boat ownership.
2.5 The waterway network is also enthusiastically
supported by coarse anglers who make almost five million visits
each year (about 1.5% of total visits). BW is probably the largest
single provider of coarse angling opportunity in the country.
2.6 For most people, their waterway is a
local recreational asset. Whilst about nine million day trip tourism
visits are made to BW waterways, a massive 280 million visits
are made for local reasons including safe traffic free routes
to work and school, dog walking, and jogging. The waterways are
a source of free recreation and an object of local pride for a
wide range of communities. The regeneration of the waterways and
the areas they serve has been enthusiastically backed by local
people throughout the country in the last 10 years.
2.7 Relationships between waterway users
and BW are generally good. BW conducts regular market research
to test the satisfaction of all types of waterway users and scores
are consistently good. The most proactive waterway users are represented
through formal groups whether wide ranging (eg Inland Waterways
Association), representing a particular activity, (eg National
Association of Boatowners) or as a society representing a particular
waterway (eg Birmingham Canal Navigation Society. BW has established
national and local consultative mechanisms through which the most
active waterway users are represented (see www.britishwaterways.co.uk/accountability)
2.8 Through its devolved management structure
(nine local waterway units each managed by a General Manager)
BW has strong local links with members of Parliament, local authorities,
parish councils and Regional Development Agencies as relevant
to meeting a wide and varied range of local needs.
2.9 Where things go wrong, BW has a published
formal complaints procedure and there is a Waterways Ombudsman
(established on BW's initiative) who makes binding rulings on
any issues which are brought to her once BW's own process has
been exhausted.
2.10 Notwithstanding generally good relations
and strong support for waterways, BW is ambitious to develop its
customer service and is currently part way through a programme
designed to further improve customer service and meet rising customer
expectations.
The financial framework of British Waterways and
the impact of changes in Defra's budget
3. CORPORATE
GOVERNANCE
3.1 British Waterways (BW) is a public corporation
established under the 1962 Transport Act.
3.2 Its Board is fully accountable to the
Secretary of State for Environment, Food and Rural Affairs in
England and Wales and the Deputy First Minister and Minister for
Enterprise and Lifelong Learning in Scotland for the effective
management of BW's inland waterway network.
4. FINANCIAL
FRAMEWORK
4.1 Background
4.1.1 The statutory framework for BW in
the Transport Act 1962 is that of a self-financing trading entity
acting at significant arms length from Government. Nevertheless
BW has since its creation required substantial levels of deficit
grant funding, although this has in proportional terms reduced
significantly in recent years.
4.1.2 A schedule showing commercial income
and grant receipts over the past 10 years is attached at Appendix
C.
4.1.3 BW is required to act commercially
and self generated income has become and is likely to remain the
largest source of its income.
4.2 Earned Income
4.2.1 BW has grown its earned income substantially
over the 10 year period. At £36 million it represented 40%
of turnover in 1996-97. At £92.7 million (a 153% increase)
it now represents 60% of turnover.
4.2.2 BW has significant property ventures
underway that will further increase its self generated revenues
thereby continuing to reduce the burden on the public purse.
4.2.3 BW has generated efficiencies in its
operations in recent years. The management structure has been
flattened by removing a tier of regional offices in 2003 and reducing
the workforce by 140. IT, Payroll and Pensions administration
have all been outsourced. A central shared service and procurement
centre has been established in Leeds. BW is currently undertaking
a further restructure within Business Units and Central Departments
and removing circa 180 posts (total workforce 1900).
4.3 Defra Grant
4.3.1 Government has supported a programme
of major repair and improvement to the network in recent years,
enabling the £90 million of safety related arrears to be
eliminated in 2004 and £200 million of maintenance arrears
to be reduced to £97 million by the end of 2006-07.
4.3.2 As 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. A positive adjustment to our capital
budget was made in September 2006 increasing the figure to £56.1
million.
4.3.3 These cuts resulted in BW reducing
its major works programme of infrastructure repairs in 2006-07
by £5 million.
4.3.4 In December 2006 Defra confirmed our
grant for 2007-08 will be £57.55 million. If the amount of
grant allocated to repayment of National Loan Fund loans (£2.048
million in 2007-08) is removed, the grants for 2006-07 and 2007-08
are identical.
4.3.5 The grant levels in 2006-07 and 2007-08
are less than planned and will result in circa £5-10 million
of major works not being undertaken. On the scale of our operation,
this underspend is not significant in the short term provided
that funds are available in the medium to long term to make up
for the lost investment.
4.3.6 If the cuts in our grant for 2006-07
and 2007-08 are not restored for the CSR period 2008-09—2010-11,
then underspend on major works will begin to build up.
4.3.7 Having said this, neither BW nor its
waterways is in crisis. The 200 year old network is operational
and will continue to be so for many years. However, as maintenance
is cut back, the risks increase.
Recent developments in the stewardship work and
commercial activities of British Waterways, including its property
portfolio
5. RECENT DEVELOPMENTS
5.1 Maintenance and Repair of the Network
5.1.1 BW manages 2,200 miles of inland navigation,
the vast majority of which is well over 200 years old. It is the
third largest owner of listed buildings and structures in the
UK.
5.1.2 To enable it to manage the repair
and maintenance of its infrastructure to meet 21st century standards
whilst retaining the historic fabric, British Waterways has developed
a world class asset management system. A recent survey of asset
management systems by a leading water company classified BW as
one of the best.
5.1.3 BW has 11,000 principal assets (bridges,
aqueducts, tunnels etc) and 12,000 other assets (embankments,
buildings, lock gates). There is a rigorous inspection regime
for all principal assets and their condition determines the maintenance
and repair programme.
5.1.4 For BW and its waterways to have a
secure and sustainable future it must have a fully funded planned
asset management programme. In other words it must have the funds
to repair and replace its 200 year old infrastructure in a planned
way. This will give best value for money.
5.1.5 Analysis shows that we need to spend
£35 million per annum (at 2004 prices) on major repairs and
renewals to have a sustainable asset management programme. Current
levels of Defra funding do not enable us to achieve this level
of investment.
5.1.6 Such under-investment increases the
risks within the business. If left unremedied, at some point this
underspend will manifest itself in a growing number of infrastructure
failures, leading to reduced confidence, reduced investment by
others and a gradual decline in customer service.
5.2 Waterway Restoration
5.2.1 Since 2000 BW has restored over 200
miles of previously derelict unused waterways. With funding from
Governments, Europe, Lottery, RDAs, Local Authorities and others,
we have restored the Forth & Clyde and Union Canals in Scotland,
the Huddersfield Narrow Canal, Rochdale Canal, Kennet & Avon
Canal and built the Ribble Link.
5.2.2 There are currently six further major
canal restoration and improvement schemes either underway or about
to start. These are the Droitwich Canal, Manchester Bolton &
Bury Phase 1, Liverpool Link, Cotswolds Canal Phase 1, Port Dundas
in Glasgow and the River Lee through the Olympics site.
5.2.3 The total cost of these schemes is
circa £70 million and they are primarily funded by Lottery,
RDA, European and Scottish Executive and other central Government
grants.
5.2.4 The public benefit by way of regeneration,
jobs, recreation, private sector investment and tourism is enormous.
Appendix B demonstrates the public benefit of canal restoration
by detailing the outputs from four of these schemes.
5.2.5 There are many, many more potential
restoration schemes being developed but their delivery will depend
entirely on Governments, Lottery and Europe's appetite to fund
them.
5.3 Commercial Activity
5.3.1 In 2006-07 gross earned income will
be circa £100 million. Net contribution will be circa £70
million.
5.3.2 BW's primary sources of net income
are:
|
| Property | £25 million
|
| Boat licences, moorings | £14 million
|
| Utility Sales | £16.6 million
|
| Joint Venture Profits | £3.5 million
|
| Wayleaves | £15 million
|
|
5.3.3 Joint venture profits will deliver the greatest
growth in income in future years.
5.3.4 BW has a number of significant property joint ventures
with the private sector and we plan for these to generate profits
to BW in excess of £100 million over the next 15+ years.
It also has an innovative partnership with Scottish & Newcastle
that aims to develop 100 waterside pubs over the next 10 years.
5.3.5 BW property portfolio includes operational, investment
and development properties. It manages its estate commercially
and has matched the accepted property industry performance index,
IPD, over the past five years. Property is a critical and integral
part of our business as it not only generates significant revenues,
it also enables delivery of regeneration and other wider public
benefits.
5.3.6 BW is currently only able to operate commercially
on or adjacent to waterways it owns or manages. This restricts
both its direct activities and those of its joint ventures. Defra
and the Cabinet Office are currently considering ways in which
this restriction could be removed.
5.3.7 BW constantly seeks new ways to expand commercial
activity and reduce dependence on government grant.
5.4 Public Benefit
5.4.1 Our network is an enormous linear public regeneration
and recreational resource.
5.4.2 BW is currently involved in circa £6 billion
of waterside regeneration. In almost every major town and city
on the network the waterways are acting as a catalyst and vital
ingredient in local regeneration plans.
5.4.3 A waterside location is now the place of preference
for people to work, live and play. Accordingly waterside property
commands a 20% price premium above similar property.
5.4.4 The public benefit created by BW through the regeneration
it enables is enormous both in scale and mix. Improved access
to towpaths, increased public realm and improved amenity, desirable
offices and homes, jobs, environmental and heritage protection
are just some of the benefits created by BW led waterside regeneration.
5.4.5 All of BW's waterways and towpaths are freely open
to the public. The vast majority of towpaths (and all in urban
areas) offer safe, easy walking and cycling for families and the
disabled. We put particular emphasis on improving and encouraging
access for the disabled.
5.4.6 Around 300 million visits per annum are made to
our waterways and towpaths. They are a vital resource for the
health and wellbeing of the public as an attractive accessible
linear waterside park.
5.4.7 BW is the third largest owner of historic buildings
and structures in the country. It also manages 65 Sites of Special
Scientific Interest.
5.4.8 The inland waterways provide a unique unbroken
wildlife corridor from urban and rural areas.
Potential for growth in leisure and freight use of the waterways
network
6. LEISURE USE
OF THE
WATERWAYS
6.1 The inland waterway network is now primarily a leisure
facility. 300 million visits are made to the waterways each year
by the public, mostly on the towpath.
6.2 BW has undertaken some comprehensive research over
the last year to establish the potential for growth in leisure
use. This research concluded that:
— There would be modest growth in boat ownership
and static or declining numbers of anglers. These two categories
of users are our most passionate and enthusiastic.
— There would be some growth in weekend/family visitors
to specific destinations on the waterways, eg flights of locks,
boat lifts, aqueducts.
— There is potential for quite dramatic growth amongst
functional users as canals are restored and large urban waterside
regeneration projects are completed. Functional users are, for
example, those who use the towpath to walk the dog, go to work
or as a short cut.
6.3 BW's marketing plan therefore concentrates on:
— Raising awareness, signposting of the canal in
towns and cities to encourage greater use.
— Creating a number of "destinations"
along the network for leisure seekers to visit. These will have
visitor facilities to encourage longer and repeat visits.
6.4 BW will continue to support and encourage the hireboat
trade and all other waterside businesses as we look to the private
sector to deliver the vast majority of services and facilities
for visitors.
6.5 The waterways can also help to increase the numbers
of UK residents holidaying in this country and not going abroad,
thereby helping both the economy and the fight against climate
change. Our canals are recognised as an important part of our
national heritage that attracts both foreign and home visitors.
7. FREIGHT
|
| Tonnes lifted
| Tonne—Kilometre
|
|
| 2003-04 | 2.1
| 26.7 |
| 2005-06 | 1.6
| 26.8 |
|
7.1 The greatest reduction in freight use in recent years
has been in the transport of coal to power stations. For example,
in 2002 the Ferrybridge Power Station stopped receiving 800k tonnes
per annum of coal by water.
7.2 There have been some new contracts, mostly aggregates.
7.3 The potential to increase freight traffic is centred
on bulk transfers of non time critical goods from point of source
to point of use. If there is double handling, it makes the economies
of waterborne freight very difficult.
7.4 Aggregates from gravel pits to city centre batching
plants or waste (both construction and domestic) from city centre
to incinerator/landfill are both potential growth areas.
7.5 We are very actively engaged trying to create non-tidal
waterways through the Olympic Zone to carry construction materials.
7.6 We are also working with Yorkshire Forward to develop
container traffic from Goole Port into Leeds.
7.7 Freight imposes costs on BW over and above our current
day to day operations. The channel depth has to be deeper requiring
additional dredging, locks have to be manned to allow speedier
transfer, and large vessels create more wear and tear. Freight
income is circa £700k per annum but our additional costs
are well in excess of £1 million per annum.
7.8 BW will continue to encourage freight on those waterways
most suited to it, but we shall only do so where it imposes no
additional cost burden onto us.
7.9 BW has recently engaged economic consultants Oxera
to undertake a review of the viability of inland waterway freight
to inform us as to what incentives are required to achieve significant
growth.
7.10 BW has a policy to protect existing wharves where
we believe there is existing or potential for freight use. However,
a large number of traditional wharves are located in areas where
freight use is no longer desirable (poor road network, near residential)
or where the demand is unlikely to materialise.
Relationships between British Waterways and central Government
departments, Regional Development Agencies and local authorities
8. RELATIONSHIPS
8.1 Central Government
8.1.1 Our sponsor department in England and Wales is
Defra and we have a good working relationship at official and
ministerial level. There is a good understanding of the issues
that we face and the potential of the network to deliver public
benefit.
8.1.2 Government has been very supportive of BW in recent
years providing increased grant to deal with a history of under
investment in our infrastructure as set out previously.
8.1.3 Waterways for Tomorrow, 2000 and Scottish
Canals—an asset for the future, 2002 remain the two
government documents that set policy and guide strategy for BW.
8.1.4 Recently the Shareholder Executive has begun to
advise Defra on the commercial aspects of our work and we have
found them to be very knowledgeable and experienced on business
issues. Their involvement has been extremely helpful and productive
for BW and we believe Defra.
8.1.5 We have some contact with DCLG who advise Defra
on strategic property issues. In particular, we work closely with
English Partnerships in two areas.
8.1.6 We have agreed to take over responsibility for
two major water related infrastructure assets, namely, the Tees
Barrage and Liverpool South Docks. In exchange we received a one
off financial dowry.
8.1.7 We also work with English Partnerships on major
area based regeneration projects where the canal acts as a core
catalyst for redevelopment. Current examples include Nottingham,
Gloucester, Northwich and Manchester.
8.2 Regional Development Authorities
8.2.1 We work closely with a number of RDAs where they
have extensive inland waterway networks within their areas. They
are enthusiastic supporters of the waterways and have provided
substantial funding in recent years for canal restoration, towpath
and tourism improvement projects.
8.3 Local Authorities
8.3.1 Waterways benefit local people and local economies
but not all local authorities recognise this. Some are hugely
enthusiastic and supportive and we work closely with them to optimise
opportunities. Others are less interested.
8.3.2 We try hard to engage local planning authorities
to support the waterways, particularly in respect of creating
much needed new marinas.
8.4 Lottery Funders
8.4.1 The waterways have benefited hugely from the support
of the Millennium Commission, Heritage Lottery Fund and now the
Big Lottery Fund.
8.4.2 The Heritage Lottery Fund in particular has been
enormously supportive of the canal network and they have funded
both large projects (Kennet & Avon, Droitwich and Cotswolds
Canals) as well as a number of smaller more site specific projects.
8.5 Environment Agency
8.5.1 The Environment Agency is the second largest navigation
authority in the country. We collaborate closely and successfully
with the Agency on issues such as boat licensing (including development
of a joint Gold Licence), boat safety (where we jointly contribute
to an "MOT style" Boat Safety Scheme) and through our
membership of the Association of Inland Navigation Authorities.
8.5.2 We have a close working relationship with the Environment
Agency at an operational level where we liaise on such issues
as flood control, water resource management and water quality.
8.6 Maritime and Coastguard Agency
8.6.1 BW has established a close relationship with the
MCA. Working in conjunction with the trade and user groups, we
develop non-statutory arrangements which enable BW to cost-effectively
regulate commercially and privately operated craft in accordance
with the principles of better regulation.
FURTHER INFORMATION:
Corporate issues: www.britishwaterways.co.uk
Waterway leisure: www.waterscape.com
British Waterways
January 2007
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