Examination of Witnesses (Questions 360
- 368)
MONDAY 16 APRIL 2007
MR STEVE
DAVIS, DR
PAUL WOOLLAM
AND SIR
ADRIAN STOTT
BT
Q360 Mr Jack: Can I just stop you
there when you say it cannot borrow. I come back to the words
that you use: "As a commercially-modelled arm's-length publicly-owned
corporation". Once you are into that area borrowing money
becomes very difficult. Do you think the governance, the status,
the stature of the organisation needs changing to enable it to
borrow because once you get into borrowing you get into more risk?
Sir Adrian Stott: Let me answer
the point about risk first. British Waterways is now enormously
exposed to risk, political risk. As we have seen this year it
had received what it thought was a secure income from its grant,
it had committed that income under contract in several cases,
having prioritised essential work and so forth, only to find that
money was whipped away from it. That is an enormous risk and one
which is not being dealt with at all. At the moment British Waterways
is not allowed to borrow. It has had opportunities to undertake
projects in other property which it has not been able to follow
up because of that, and I know that it has asked the Government
for the ability to borrow more and to be able to invest in a wider
range of properties. You ask is it necessary to have a review
of British Waterways' powers? Definitely, yes. They were set some
time ago and have not really been looked at comprehensively since.
Nonetheless, I think they have proved themselves to be surprisingly
effective in producing revenue from property and the comparison
is with the Environment Agency's navigation section, which does
not have this ability and is very much behind British Waterways
in achieving what it has for its own waters.
Q361 Mr Jack: Do Mr Davis and Dr
Woollam want to comment on that?
Mr Davis: I do not feel qualified
to talk about the property side because it is above my pay grade,
but what I would say is I feel very uncomfortable about the concept
of British Waterways trying to run the two in parallel. I think
if I was running that sort of an organisation, frankly my eyes
would be on the property prize at the expense of the boaters who
could be regarded as 29,000 whingers. I would be very, very uncomfortable
about going down that track. There is a very clear distinction
here between running the national park that I alluded to and maintaining
the heritage and, as you have rightly said, sweating the assets.
Where that boundary lies I really do not know. What I do see clear
evidence of, and we have seen it on this canal, is that British
Waterways are more focused on the property and the navigation
tends to get secondary attention, and I think that is fundamentally
wrong.
Dr Woollam: My views exactly accord
with Steve's. I think that BW is in the business of managing the
track, it is not in the business of property management. If it
can do property management to make some money to run the track,
that is fine, but that should be a secondary issue.
Sir Adrian Stott: Could I give
a supplementary answer to that. I would point out that the use
of an endowment as I suggested is very widespread. Perhaps the
foremost example globally is Harvard University, which has one
of the largest endowments in the world. Few people would say that
Harvard subordinates academic excellence to be a property manager.
Oxford University—closer to home—also has very substantial
property assets, the income from which goes towards supporting
the university. This model works.
Q362 Sir Peter Soulsby: As a former
Vice-Chairman of British Waterways, which I mention again for
the record, I would like to put a question which I think a Defra
minister might put to you were such a person to be with us today.
I think they would argue, as they have argued in the past, that
the reductions in BW's government grant are in fact comparatively
small, that they are a tiny fraction of BW's overall budget and
that the danger of reverting to the situation as it was some decades
ago is very much overstated. Are they wrong? If so, why?
Dr Woollam: If I may respond to
that. I think that is right. If you take £5 million, or whatever,
out of a specific year then clearly that is a small amount but
if that rolls up year after year after year then the eventual
impact becomes quite large. I am sure it is right that if maintenance
for one particular year is not done as effectively as it might
be the whole system is clearly not going to fall into disrepair
but over a long period of time it will, and I think that is inevitable.
If you look, for example, at Netherton Tunnel, which has got all
sorts of problems with its towpath, BW cannot repair that because
it does not have the money. It is a small step from that, I would
submit, to finding that Netherton Tunnel is closed to boats and
then the whole thing gets worse and worse and before you know
where you are you are into a £100 million repair job rather
than a few million pounds repair job.
Mr Davis: If I could just expand
on that. I strongly agree with what Adrian said, that the problem
is these grants can be taken away at any point in time. If I was
a budget holder and suddenly discovered £5 million was coming
out of my budget within that financial year I would be seriously
upset. It is the uncertainty that is one issue. The second issue
is if I was a finance director sitting in BW I would look at this
regeneration work on Stroudwater and other canals with absolute
horror because I am putting all sorts of money into bringing these
canals up to scratch and it is absolutely clear from what we see
at the moment that the canal network mile for mile does not pay
for itself in terms of boats. There are a huge number of indirect
benefits, as I have said, but I do not think the direct benefits
are there and that is really where the issue lies. Clearly there
is regeneration going on which is funding the Government's coffers
and I would just take a far higher view and say is it worth spending
£63 million to get £100 million back.
Sir Adrian Stott: To answer Sir
Peter's question, Defra is wrong and the reason is it follows
the typical approach. It looks at what you got last year and decides
what you ought to get this year, and preferably it ought to be
less. The problem is that what it got last year was not the right
number to start with. British Waterways has been doing an extensive
investigation into what it is calling "steady state maintenance",
that is the amount that is required to keep the waterways in their
current condition, and they concluded that they are at least £25
million a year short on that already. That means that the waterway
network is actually declining every year, so further cuts are
only going to make it decline faster. With the steady state calculation
that has been done there is a strong argument to review how much
British Waterways ought to be getting every year rather than what
it can be given based on last year's numbers. To come back to
what Sir Peter asked, Defra's whole approach in deciding what
British Waterways ought to have is misguided, it cannot produce
the right answer.
Q363 David Lepper: Mr Davis, Dr Woollam,
in your evidence you make an unfavourable comparison between the
amount of money per visitor that those visiting canals get from
Defra and English Heritage visitors get from DCMS. Could I ask
all three of you, do you believe that Defra is the right parent
department for British Waterways? Should it be somewhere else
or does it not matter which department it is with, there are other
fundamental issues that would still need to be tackled?
Mr Davis: I do not think it makes
any difference, frankly, which department it belongs to because
it does not matter where it sits within the organisation. I think
DCMS would be just as well because of the heritage thing and you
could argue because of the rural part it should be Defra. The
key issue for me is that the value of the waterways is properly
recognised and properly funded.
Dr Woollam: I totally agree with
that. I see no difference at all between it being funded by Defra
or DCMS.[5]
However, I would point out, for example, that the Waterways Museum
next door is in danger of being closed for lack of finance and
maybe that should be funded from DCMS in the same way that DCMS
funds other museums, but that is not the same as saying that DCMS
should fund the whole waterways system. I do not think it would
make any difference.
Sir Adrian Stott: I must disagree.
I think it is fundamentally the wrong place to be in Defra which
I, and I think many other people, see as fundamentally really
MAFF under a new label. DCMS might well be a better place to go.
It used to be in Transport but because it is no longer providing
transport facilities, except in specialist areas where freight
can run, I would not recommend going back to there. To be in an
organisation that is more associated with heritage and providing
regeneration type benefits would do British Waterways a lot of
good. There is another aspect of this too. British Waterways is
designed to be an arm's-length corporation with a good deal of
independent internal management. Defra is an organisation which
is uncomfortable with that as far as I can make out. It still
wants to micromanage within British Waterways, and I think that
is an attitude that is unlikely to change in the short-term certainly,
whereas with DCMS being a newer and perhaps more flexible organisation
it does not have a similar problem such as that in my view.
Q364 Mr Williams: Mr Davis, you compared
waterways or the canal system with a linear national park and
that is something that struck a chord with me. Like national parks
they are nationally important and locally significant but, of
course, national parks are funded entirely differently from British
Waterways. They are funded partly by central Government and partly
by local government. The thought did strike me that that might
be a way to fund British Waterways because the regeneration part
of it seems to me to be fundamentally local whereas the waterways
system is a national asset. Have you thought through your analogy
or is it just a one-off?
Mr Davis: I had not actually picked
up on that point. The reason that I came to that conclusion when
I started to think about it was no way are the national parks
ever going to make a profit and it was the point I made earlier
on, that if you try to really sweat the assets of the national
parks to get every last penny out of them you will come back and
destroy the very thing you are trying to preserve. The reason
that I came up with that analogy was just the humungous number
of people who visit the canals and the fact that it seems to me
the key to them is to keep them in as natural a state as possible.
That was why I came up with that analogy. Referring back to your
point, clearly there is huge benefit to Gloucester itself and,
in fact, I assume the regeneration company is putting some money
into the regeneration here. Whether it goes back into the canals
I very much doubt but, yes, I can see some very good benefit in
that because the benefit does come here.[6]
Q365 Chairman: If I could just conclude
by asking two disconnected but quite interesting questions. Firstly,
Steve and Paul, in your evidence you mention the Manchester, Bolton
and Bury Canal regenerations were under threat and you link that
with Stroudwater. Clearly that would be like Stroudwater, a local
partnership which has now got national support from BW. What is
your view on BW as a partnership organisation? Do I take that
to be an answer?
Mr Davis: I have really got no
view on this, to be honest, I am not close enough to it. I do
worry when I look at a number of these partnerships. The one that
always frightens me to death is the Montgomery, which I have seen
a little bit more of. I just wonder whether any of these partnership
organisations are actually ever going to succeed because there
are so many interests pulling in so many different directions.
I have often thought the worst job I could have is probably being
a project manager on the Montgomery Canal because the last time
I looked I think there were 12 partner organisations. I will just
confine myself to that.
Dr Woollam: My view is that a
criticism I would have of British Waterways is their communications
are not good. They are a long way behind the curve in stakeholder
engagement. They are much better than they were 40 years ago but
still nowhere near as good as they should be. Would I want to
partner with British Waterways if I was running Stroudwater Canal?
Frankly, no. On the other hand, at the end of the day BW is going
to have to run that canal so has a right to be there as part of
the regeneration. If BW were to get their act together with communication
and stakeholder engagement I think we would all be a lot better
off.
Sir Adrian Stott: For a while
I was on the management committee of the Foxton Inclined Plane
Trust and there is a partnership going on there with respect to
the eventual restoration of the Plane. It has been working extremely
well and work is now just being finished on a major phase of it.
British Waterways has to be involved, as has been said, because
it is going to be involved in the long-term running of the thing.
It has expertise that the local authorities never have, they simply
do not focus on waterways and they cannot answer the questions.
It seems to me that it does work. Yes, you have a lot of partner
bodies and they do reflect a lot of different interests but each
of those interests is important and deserves to be involved. I
know the project manager at Foxton and he seems quite happy with
the job.
Q366 Mr Jack: Mr Davis and Dr Woollam,
in your evidence you refer us to Scotland: "The Scottish
Executive takes a radically different view of waterways funding"
and you confirm that in paragraph 4.27 of your evidence. Why?
Mr Davis: I took that from the
last full years of accounts of British Waterways where buried
somewhere in the back in the Scottish bit, page 93 or something,
it makes the point that last year the Scottish Executive upped
the amount of grant.[7]
As I recall there was something in there that guaranteed they
would continue that level of funding and that was the reason we
made that comment.[8]
Q367 Chairman: Just a final one from
me. The evidence we have taken in terms of freight has been very
negative. I just wonder is everyone being a bit precious and in
reality there is some money to be made from another part of the
domain, although obviously leisure and tourism would dominate.
As representatives of the boating community in the widest sense,
is this something that we are in danger of being fobbed off with
and we should be looking at more accurately because nobody has
really wanted to see this as a way forward?
Sir Adrian Stott: The key statistic
to look at in freight is tonne kilometres per man hour and that
means that the smaller the waterway the less likely it can be
economic. As I said in my written submission, the French now are
finding that their 350 tonne network is too small to run commercially,
how then can Britain with its 100 tonne larger waterways and 25
tonne smaller ones ever expect to make money? There are some special
circumstances where freight makes a lot of sense, and the best
one lately is clearly the Olympics and the new works going on
on the Waterworks River and there is gravel running from West
London and other selected special traffics, particularly waste
traffic is now looking to be potentially useful, but I cannot
see it ever being a big money maker. British Waterways should
be encouraged to do it because it validates the waterways and
keeps the maintenance honest and lots of other things and it is
fascinating to watch, but it will only be here and there, the
main network never again will be a freight carrier to be dealt
with significantly.
Q368 Chairman: I take the assertion
from the other two gentlemen that you largely agree with that?
Mr Davis: I absolutely agree with
that. There are certainly niche areas, and this river and canal
is one of them. I have been very disappointed that we have not
had freight running down through the docks from Ripple and Rhydd.
Up on the Trent I am always dodging the gravel barges up there
fully loaded. I absolutely agree with Sir Adrian, there is no
way I could see that happening on, say, the Staffs & Worcester,
it just would not happen. On the big rivers, yes, I think it could,
there is a great deal more scope and it should be encouraged,
frankly, and I would love to see it.
Dr Woollam: I think that is exactly
right. There is no way we are ever going to get commercial freight
on the narrow waterways but we could do it, for example, on this
canal and the river, but it needs investment to BW to do it, to
keep the approaches to the locks dredged and, for example, to
keep the Partings dredged on the section here above Gloucester
Lock.
Chairman: Gentlemen, you have been very
generous and we thank you not just for the oral evidence but also
the written evidence. What has been said cannot be unsaid, it
is on the record and will appear shortly on the Select Committee
pages in the Hansard part of the parliamentary website.
There may, however, have been other things that you wish you had
said, although given you have given us a lot of written evidence
I suspect not, but if there is anything that you have as a burning
last thought after you have left the stage you might consider
sending that to us. I thank you for your evidence, it has got
us off to a very good start. If you would not mind exiting quickly
stage left we can get the next three witnesses in. Thank you.
5 Dr Woollam subsequently submitted an additional
memorandum [Ev 135] expaining that he had further considered this
matter and now considers that DCMS would be a more appropriate
sponsoring Department for British Waterways, primarily because
it has greater expertise in heritage management and maintenance
than does Defra. Back
6
Note by witness: My answer comes across as confused. What
I was trying to say is that as local authorities (in this case,
Gloucester) get tangible benefits from regeneration, there is
a case to be made for them funding the canals to some degree.
I have however, reconsidered this and have attached a separate
note to that effect (Ev 136) Back
7
Note by witness: It is actually on page 49 of the BW Accounts
for 2005/06. Back
8
In retrospect I wonder if I correctly understood Mr Jack's question.
If he was asking "Why do we think Scotland takes a different
approach", my answer would be that they increased their year
on year grant to the Scottish canals whilst Defra reduced its
grant to the English and Welsh canals. One can only assume that
Scotland is better funded with government money than England and
that the Scottish Parliament places
a higher value on their canals than
do Defra. Back
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