Memorandum submitted by the Department
for Environment, Food and Rural Affairs (BW 47)
1. In response to the Committee's decision
to hold an inquiry into how British Waterways is working towards
its ambition of creating "an expanded, vibrant, largely self-sufficient
network", in the context of the policies set out by Government
in "Waterways for Tomorrow", the most recent policy
review of British Waterways and recent changes in Defra's budget,
the Department for Environment, Food and Rural Affairs (Defra)
has the following comments:
INTRODUCTION
2. The Government's policy for the inland
waterways is set out in Waterways for Tomorrow[2].
This document promotes the inland waterways, encouraging a modern,
integrated and sustainable approach to their use and is aimed
at navigation authorities, local authorities and other organisations
associated with the inland waterways. In particular the Government
looks to them to protect and conserve the waterways while at the
same time encouraging their best and innovative use, maximising
the opportunities they offer for leisure and recreation; as a
catalyst for urban and rural regeneration; for education and for
freight transport. It also notes that the challenge faced by navigation
authorities is to sustain their navigation activities which are
fundamental to the viability of the waterways while, at the same
time, maximising all the opportunities offered by other waterway
users, some of whom may present different and potentially conflicting
requirements. The challenge will not always be the same because
the emphasis will vary from one waterway to another. Government
looks to all navigation authorities to manage their waterways
effectively to achieve a balance between uses to ensure that the
waterways have a sustainable future and deliver all the benefits
of which they are capable.
3. The Inland Waterways Amenity Advisory
Council (IWAAC), the Government's statutory advisory body (see
below), is currently assessing the extent to which the policies
as set out in Waterways for Tomorrow have been put into practice
and is due to report to Government later this year.
4. About half (2,615 km) of the navigable
inland waterways system is managed by British Waterways, and a
further quarter by the Environment Agency (875 km) or the Broads
Authority (160 km). The remainder is the responsibility of about
30 other navigation authorities drawn from the public, private
and voluntary sectors. This memorandum relates to British Waterways'
waterways in England and Wales only. The comments do not necessarily
apply to waterways in the care of other navigation authorities.
BRITISH WATERWAYS
5. British Waterways' inland waterways include
both canals and navigable rivers. British Waterways was established
in its present form by the Transport Acts of 1962 and 1968 when
the waterways were still regarded primarily as a freight system.
However the role of most of British Waterways' waterways has changed
radically over the last forty years. These waterways are now used
chiefly for leisure and amenity and as a powerful catalyst for
inner city and rural regeneration as well as serving a number
of other important purposes ranging from leisure to drainage.
They are an important part of the country's heritage and make
a valuable contribution to the environment.
6. British Waterways is a public corporation
with the main purpose of managing, maintaining and developing
its network of waterways and docks for the wider public benefit.
It is required to run its affairs on a commercial basis, consistent
with its statutory obligations, powers and objectives agreed with
Government.
7. The key policy objectives for British
Waterways are set out in the Policy Review of British Waterways[3]
(the Review) as being:
— Objective 1. To ensure the structural
integrity of the operational asset base and to deliver safe, efficient
and effective operation for leisure and commercial users on a
"use and prospects of use" basis;
— Objective 2. As custodian of
publicly owned inland waterways to make them accessible and attractive
to the wider public;
— Objective 3. As a public corporation
to operate the business in a commercial, cost effective and open
manner having proper regard for public policy and corporate social
responsibility and the need to make an appropriate return on assets;
and
— Objective 4. British Waterways
must be open and accountable with regard to its strategic plans
and operational activity. They must engage with a wide range of
stakeholders with particular attention to those who have a special
interest in the inland waterways.
8. Sponsorship of British Waterways is a
devolved matter. Defra sponsors British Waterways in England and
Wales; in Scotland this responsibility lies with the Scottish
Executive Enterprise, Transport and Lifelong Learning Department.
Responsibility for British Waterways in Wales has not been transferred
to the Welsh Assembly Government but Defra works closely with
the latter.
(i) Current users of the waterway network
and their relationship with British Waterways
9. As set out in the Review, the Government
looks to British Waterways to operate its business in a commercial,
cost effective and open manner having proper regard to public
policy and corporate social responsibility. In particular, as
both steward of the network and owner of growing commercial businesses
utilising this network, the Government expects British Waterways
to act and be seen to act in accordance with fair trading principles
and to be able to demonstrate compliance with competition law.
Also, as a visitor attraction, attracting 300 million visits per
year Government looks to British Waterways to address the needs
of its customers across the wide spectrum and to have an openness
and accountability framework with a comprehensive system of redress.
(ii) The financial framework for British Waterways
and the impact of changes in Defra's budget
10. The Review concluded that the net cost
of running the core network is to be funded through the return
delivered on British Waterways' commercial activities and through
grant in aid (deficit funding) from Government. It supports British
Waterways' ambition of becoming largely self-sufficient, including
that British Waterways should strive both to maximise the financial
contribution from its commercial activities and to minimise the
cost of running and maintaining the core network to specified
standards. Indeed, British Waterways has been making very good
progress in growing its commercial income and has increased its
income by over 200% and tripled its trading income in the six
years since the publication of Waterways for Tomorrow. Nevertheless,
the Review recognised that Government funding would continue to
be necessary for the medium term at least. British Waterways is
not intended to make an overall profit, and any surpluses of income
over expenditure are reinvested in the network, improving facilities,
maintaining canals, and carrying out large-scale capital expenditure.
11. In relation to 2005-06 (the last set
of published accounts) British Waterways' total revenue was £190.5
million of which £62.6 million was Defra grant and £12
million from the Scottish Executive. British Waterways' business
activities accounted for £115 million of its revenue in 2005-06.
12. For 2006-07 Government funding was originally
set at £59.4 (plus £640k as a contribution towards reducing
the burden on outstanding National Loans Fund loans). The Government
recognises that this was £3.2 lower than anticipated at the
time of the SR04 settlement. This was subsequently further reduced
by an in year cut of £3.9 millon and this has recently attracted
Parliamentary attention. However, this must be seen in the context
of very substantial increases in Government funding for British
Waterways over the last 10 years, which were specifically designed
to address previous under-investment. In particular, British Waterways
has received substantial funding in that time, including £42
million to help reduce the safety backlog and £30 million
between 2001-02 and 2003-04 for infrastructure improvements to
bring the network up to sufficiently reliable standard to attract
new businesses and opportunities for waterways. In total it has
received some £524 million since 2000 of which £452
million relates to England and Wales. As a result British Waterways
has been able to eliminate its health and safety arrears and reduce
its maintenance arrears to £97 million by end 2006-07. Government
has recently announced that 2006-07 funding will be rolled forward
to 2007-08, plus £2.048 million contribution to repaying
National Loan Fund loans. In relation to the impact British Waterways
has said that the impact has been primarily absorbed by delaying
major engineering works to a value of £5.6 million. The table
of historic funding is attached as Annex A.
(iii) Recent developments in stewardship work
and commercial activities of British Waterways including its commercial
portfolio
13. British Waterways has a strong track
record of delivering a wide range of broader public benefits (including
leisure, heritage, regeneration, transport and environmental)
and of using its waterways as a catalyst for regeneration which
has far-reaching benefits for local environs, the region and the
wider water leisure industry generally. As set out above, it operates
within a clearly defined policy and commercial frameworks. The
Government looks to the Board to make informed decisions regarding
priorities and resource allocation between its core statutory
obligations and its wider remit.
14. In relation to stewardship of the network,
Government is proud of the progress British Waterways has be able
to make in addressing the need for infrastructure investment (as
above) and the support it has given to the restoration of derelict
canals and other waterways. In particular, British Waterways has
been a major contributor to waterway restoration in recent years
with its expertise and advice and has facilitated the restoration
of some 200 miles of disused waterways to full navigation. These
waterways contribute to opportunities for leisure, recreation
and tourism. IWAAC is currently reviewing the success of restoration
projects in recent years.
15. More generally, as part of its commercial
remit, British Waterways forms partnerships with property companies
to develop stretches of canal and adjoining land, leading to the
regeneration of predominantly urban stretches of the network.
In doing so, British Waterways forms an integral part of regeneration
initiatives creating jobs and generating income from tourists
and other visitors. Its presence (and financial commitment) in
these projects is often the critical catalyst for levering in
significant private sector capital, (for example the proposed
restoration of the Bradford canal includes 70% private sector
money), as well as ensuring that key policy requirements are delivered,
including improved infrastructure and affordable housing.
16. The Government has been pleased with
British Waterways' performance both in relation to stewardship
of the canals and increasing its commercial portfolio and is looking
to British Waterways to provide its own evidence to the Committee
on its achievements in recent years.
(iv) Potential for growth in leisure and freight
use of the waterways network
Freight
17. The Government is keen to encourage
greater use of inland waterways for carrying freight, where practical
and economic and it offers freight grants where the transfer of
freight from roads to water (and rail) is cost effective in terms
of securing environmental benefits. The Freight Study Group reported
its findings on the scope for increasing freight traffic on the
inland waterways of England and Wales in 2002. They concluded
that most of the inland waterways are too small to carry much
freight and that although the historic narrow and broad canals
were unsuited to carrying large volumes of freight they could
provide opportunities for niche markets. In a constrained funding
regime British Waterways will have to balance the environmental
benefits of waterborne freight against other priorities.
18. There is scope for increasing water
freight on some major rivers and commercial canals where there
is spare capacity and where opportunity exists in particular for
niche markets. However major infrastructure projects would be
required to realise any increased potential on the majority of
the historic network.
19. As an example, the Olympic Games provide
an opportunity for the movement of freight by water during both
the construction and legacy phases using the Bow Back Rivers.
Government working with British Waterways, the navigation authority
for the rivers, the Environment Agency and the Olympics Delivery
Authority is actively pursuing a number of options for the maximisation
of the use of these waterways and for the construction of a lock
to enable waterborne freight to reach into the heart of the Olympics
site and to ensure the Games reinvigorate the waterways in the
Lower Lea Valley, including for leisure purposes.
Leisure
20. British Waterways' activities to maintain
and, where necessary, improve the network have significantly increased
the general amenity value of the canals, leading to increased
commercial operators of vessels working in the leisure industry,
tourism and other leisure activities. It thus contributes to Government's
strategic priorities to enhance access to culture and sport for
children, improve the places where people live and maximise the
contribution of the tourism and leisure industries to the economy.
Funding from the Department for Culture Media and Sport is distributed
through several sponsored bodies, which in turn deliver funding
across a number of activities and institutions.
21. Most of British Waterways' waterways
are now predominantly used for leisure and recreation. This includes
boating of all kinds, angling, sport, and informal activities
such as walking, cycling and exploring the waterways' built and
natural environment. Government recognises that a well-maintained
water network acts as an encouragement to tourists in both urban
and rural areas, brings benefits to local businesses and improves
local environs for the benefit of the local community. It welcomes
the contribution British Waterways has made to improving its network
for the benefit of recreation and leisure in the light of competing
demands for available resources. It notes that there is potential
for further growth.
22. Government also expects British Waterways
and English Heritage to work in partnership in relation to British
Waterways' historic and environmental structures (including bridges).
The Heritage Lottery Fund has contributed a total of £52
million towards 19 projects since 1994, either directly to British
Waterways or to their partners in projects with British Waterways,
to conserve and interpret the waterways network, including £400,000
for an online website of canal archives in 15 locations.
(v) Relationships between British Waterways
and central Government departments, Regional Development Agencies
and local authorities
Governance
23. The Review of British Waterways considered
the relationship between British Waterways and central Government,
particularly with Defra as the sponsoring Department. In particular,
the Review proposed a new governance architecture for the relationship
between Government and British Waterways including new policy
and accountability frameworks to give clarity and transparency
of objectives; measurement of performance and exploitation of
its commercial business; setting of key performance indicators;
long-term funding on a contractual basis and wider investment
powers to allow investment near to other waterways.
24. The Government is aided in its dealings
with British Waterways by the Shareholder Executive. The Shareholder
Executive has a mission to professionalise the Government's shareholder
role across its portfolio of businesses, by implementing private
sector best-practice within a public sector context and making
delivery of Government public policy objectives more effective.
25. The Government, working with the Shareholder
Executive and British Waterways is implementing recommendations
of the Review. It has set out its key priorities for the British
Waterways board in a letter to the Chairman. These include a move
towards a longer term funding agreement, clarity around a financial
framework and the need to be seen as being properly accountable
and trading fairly. The Government has also introduced a set of
Corporate Governance Principles explaining how the relationship
between British Waterways and Government (as shareholder) should
work so as to maximise the success of the business consistent
with British Waterways underlying statutory provisions. It is
currently discussing a longer term funding and accountability
framework.
26. In particular, Government assesses British
Waterways' performance through an accountability framework based
on a shareholder model. This ensures that British Waterways' governance
is compliant with the principles of the Combined Code and fits
the needs of the shareholder and business; sets overall objectives
for the business and agreement to their delivery; makes appropriate
appointments to the Board; and monitors and assesses performance
through Quarterly Shareholding Meetings. A Financial Memorandum
(currently being revised) sets out the standing arrangements governing
such matters as authority to invest, cash constraints, borrowing
and other financial issues.
Policy
27. Defra as well as a number of other Government
Departments look to British Waterways to contribute to the implementation
of their policies: Defra for waterways policy (as set out in Waterways
for Tomorrow), as well as flood defence (including land drainage),
fisheries, water based recreation and conservation; Department
for Culture, Media, and Sport (DCMS) for heritage, tourism and
sports; Department for Transport for freight and implementation
of water safety policies; and Department for Culture and Local
Government for urban and rural regeneration. British Waterways
also contributes to other Government Departments' policies. Defra
as sponsor department takes the lead in setting strategic policy
for British Waterways but works with other Government departments
on strategic issues affecting their policies.
28. The Inland Waterways Amenity Advisory
Council (IWAAC) advises Government in its dealings with British
Waterways. IWAAC was created in 1968 to advise Government and
British Waterways on the use of the latter's waterways for amenity
and recreation. IWAAC's remit will change when The Natural Environment
and Rural Communities Act 2006 is brought into force. This will
sever IWAAC's administrative connections with British Waterways
and replace the Council's existing statutory advisory functions
with wider terms of reference enabling it to advise Government,
navigation authorities and interested persons about the inland
waterways generally. The Council will be renamed the Inland Waterways
Advisory Council to reflect its new role.
29. Government expects British Waterways
to work directly with relevant departments and their delivery
bodies on local and regional issues affecting their priorities
and policies. This is of course true for bodies in the Defra family,
like the Environment Agency, which works with British Waterways
on a range of issues. Beyond Defra, British Waterways works directly
with Maritime and Coastguard Agency (MCA) on developing a range
of new standards and codes for inland waterway vessels and operators,
and acts as a model of best practice as an operator of vessels.
In 2004 it signed a Memorandum of Understanding with the MCA,
setting out the terms of its working relationship. It works closely
with Department for Transport on freight matters and its sponsored
body "Sea and Water".
30. Similarly, British Waterways have an
ongoing relationship with English Partnerships, particularly as
strategic partners in regeneration schemes and as recipient of
grant and dowries. Various transfers of assets have taken place
over the last 10 years between the two bodies. Currently, British
Waterways is involved in major long term regeneration projects
at Trent Basin and Gloucester Quays both of which are being grant
aided by English Partnerships.
31. Specifically in relation to Regional
Development Agencies (RDAs) the Government also expects British
Waterways to work in partnership to ensure regional needs are
addressed, and to make best use of funding available. This includes
support for proposals for the improvement, development and restoration
of the waterways in the region, and the opportunities they offer
for wider regeneration initiatives, where appropriate.
Local authorities
32. British Waterways works with local authorities
to promote understanding of waterways related issues and opportunities
with an aim of raising the profile of waterways, highlight policy
issues and lobby for positive waterway related policies within
Local Development Frameworks. In particular, Government has issued
guidance to local authorities to protect the lines of disused
waterways proposed for restoration and to ensure that navigable
crossings are provided when new roads are built across these waterways.
Government also contributes to a number of waterways related publications
by IWAAC and The Association of Inland Navigation Authorities
(AINA) aimed at local authorities. Planning guidance also encourages
LA's to consider the need of waterways—in particular PPG17,
Planning for Open Space, Sport and Recreation. Under such guidance,
British Waterways is a statutory consultee for planning applications
affecting the structural integrity of the waterway, safety of
users or neighbours, water resourcing and management, land drainage
and flood alleviation, heritage, natural environment public access
to and recreation use of inland canals.
CONCLUSION
33. In summary, Government is satisfied
that British Waterways has made excellent progress in creating
"an expanded, vibrant, largely self-sufficient network".
Looking forward, Government will continue to expect British Waterways
to safeguard the longer-term sustainability by investing appropriately
in the network within the available funding envelope while accelerating
moves towards self-sufficiency.
Department for Environment, Food and Rural Affairs
January 2007
2 Waterways for Tomorrow, DETR published June 2000. Back
3
Policy Review of British Waterways, the InHouse Policy Consultancy,
published 24 March 2005. Back
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