Examination of Witnesses (Questions 280
- 299)
MONDAY 12 MARCH 2007
MR ROBIN
EVANS, MR
TONY HALES
AND MR
JIM STIRLING
Q280 Mr Jack: But into property or
maintenance?
Mr Hales: They are recycled into
property to generate better returns to improve the maintenance
going forward. It is absolutely fundamental that we have a set
of assets that we believe it is right and the board believes it
is right that the management work hard, not just financially but
in terms of demonstrating—
Q281 Mr Jack: Am I right in saying
that apart from the loans you got from the National Loans Fund
you are not allowed to lever these assets?
Mr Hales: Correct.
Q282 Mr Jack: Is that something that
is a real constraint?
Mr Hales: We would like to be
able to borrow against them, sure.
Q283 Mr Jack: Why do people say you
cannot? Is that simply because of the corporate structure you
have?
Mr Hales: Yes.
Mr Evans: It is all about borrowing
in the public sector and it counts against the public sector borrowing
limits.
Q284 Mr Jack: Why not get rid of
all these wretched loans here, because they are all somewhat expensive?
Mr Evans: We are. As they end
we pay them off.
Q285 Mr Jack: You are not allowed
to pay them off quicker? Because you have free cash in the balance
sheet.
Mr Evans: We are funded to pay
those loans, so as they come up we are paid. That is a sort of
separate part of our grant.
Q286 Chairman: Who do you mainly
borrow from?
Mr Evans: We can only borrow from
Government.
Q287 Chairman: So these are all internal.
I am sure government would be only too pleased.
Mr Evans: No because if we borrowed
more money, it would be like asking for more grant; it comes—
Chairman: No. What I am saying is would
Government not be keen for you, if you could find a way, to pay
those loans off more quickly, as Michael is suggesting?
Q288 Mr Jack: It is only £10.5
million. In terms of the size of your business it seems a bit
odd. In terms of the rate of interest on £10.5 million worth
it runs from as low as five up to ten and a quarter per cent,
and it just seems to be a waste of money.
Mr Evans: We are funded separately
for that. Government made a commitment to us some years ago that
they would fund and terminate those loans as and when they come
up, and that they do, so those are not really costing us at the
moment.
Q289 Mr Jack: So it is the Government
who is giving you money, but it still comes out of the Treasury
pot?
Mr Evans: It does.
Q290 Mr Jack: In other words, if
you are looking to get money on the side of the balance sheet
you want it on, if Government could accelerate this process it
would be to your advantage?
Mr Evans: They are own loans so
they are paying themselves to pay their ten per cent interest.
Q291 Mr Jack: But at the end of the
day it comes out of the big pot called "government expenditure";
that was the point I was making. On Regional Development Agencies,
how much of a strategic arrangement do you have with them? They
have their redevelopment programmes and their investment programmes
for different parts of the country; you have some very attractive
waterway sites; how much in terms of long-term strategic co-operation
can you have when you are under quite a lot of short-term pressure
to realise profit from your property portfolio?
Mr Evans: We try and have a lot
of strategic engagement. Whenever we have a board meeting we always
try and have a tour the day before with a dinner in the evening
and invite local business connections to that dinner, and always
invariably the chairman or chief executive of the regional development
agency is at that dinner. Our local business units have relationships
with those local regional development agencies, and we are looking
at where they are going strategically to try and match our strategic
aspirations as well. Where the points of discussion are between
ourselves and the regional development agencies is that the regional
development agencies are funded to enable regeneration. The mere
fact it happens is good business for them. We require to get a
return from our investment because we are in the business of getting
money back into the waterways. So if an RDA puts £10 million
into a scheme and something happens, they are happy, but if we
put £10 million into a scheme we must get a good, commercial
return on that because what we want is not the regeneration—which
we love, but if that happens we get no return on our investment;
we just have less money to invest in the waterways.
Q292 Mr Jack: So there is a potential
conflict of interest which might mean that a waterside asset that
you would like to develop cannot be because, from your standpoint,
the rate of return is not right but there is a friction because
the regional development agencies say: "We want that piece
of area redeveloped"?
Mr Evans: I do not think there
is a conflict; I think there is a difference between exactly the
nature of ourselves—that they would like us to be more public
sector in their thinking and do public good without worrying about
the returns. We need the returns.
Q293 Mr Jack: So is it more a question
that they, perhaps from the DTI point of view, have to look at
the way that they use their funds in a different way, recognising
the commercial requirements you have?
Mr Evans: We work very closely
with them and we almost always come up with the right solution,
so EPE and the regional development agency are funding a lot of
infrastructure works for our Gloucester Quays redevelopment. We
could not do that. The scheme would not have got off the ground,
we would not have attracted a commercial partner, we would not
have proceeded if we had to pay for a new bridge and a new road
and some other major infrastructure works, and that is now being
funded.
Q294 Mr Jack: Just going back to
your relationship with Defra, on a continuing basis who do you
deal with at Defra?
Mr Evans: I personally deal with
a senior civil servant and her boss, a director.
Q295 Mr Jack: Could you give some
names?
Mr Evans: Sabina Mosner is my
day-to-day contact, and her boss has been someone called Robert
Lowson, but he has just left.
Q296 Chairman: Who was with Barry
Gardiner?
Mr Evans: There is a director-general
above them, and then—yes.
Q297 Mr Jack: So how often do you
meet with Defra? Quarterly? Or what?
Mr Evans: I am probably on the
phone to them most days. I probably have meetings with them at
the moment once a week. Maybe more than that.
Q298 Mr Jack: So what goes on at
these meetings? That is a high level of contact. What are you
telling them about?
Mr Evans: There are two streams
of discussion; one is about future funding and that is an issue
where we have been trying, I hope successfully, to explain what
the figures mean, what our needs are and what our fears are, and
that is one strong stream of discussion; the other stream of discussion
is how to go about monitoring the performance of British Waterways.
They put £60 million plus into us each year; they are entitled,
quite rightly, to ensure they get value, and they want to quiz
us and want our reports on what we are doing, and see how we are
progressing.
Q299 Mr Jack: So they are deeply
knowledgeable about this, are they, and always ask the right question
and probe you in the right way? Are you perfectly satisfied with
the relationship you have with the people you have these almost
daily conversations with? Is it sweetness and light? Is everything
good?
Mr Evans: More recently they have
been assisted by the shareholder executive in their dealings with
us, because Defra acknowledge that a lot of what we do is alien
to their day-to-day business.
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