Annex A
Extract of Email Between DEFRA and British
Waterways—20 April 2007
We have had a number of discussions over the
last few days about the Minister requiring details of the assumptions
lying behind BW's target of 2012 for elimination of the maintenance
backlog and achievement of "steady state" as well as
transparency over financial projections (income broken down between
various elements/expenditure—including line on maintenance
arrears). You are also aware that Tony Hales is having separate
discussions with Martin Hurst.
Unfortunately the information you have supplied
is not what was required. The Minister still requires in-depth
information so that he can see clearly how that date was arrived
at and why it will not now be met.
As I explained MPs and the public perception
is that BW will not meet its target date solely because of grant
cuts. We do not believe this to be the case and that there are
a number of other functions which played a part. For example commercial
income coming on stream later than envisaged, and that the cost
of maintenance (including ongoing) and the number assets falling
into the backlog had been underestimated. You explained at our
meeting the other day that you have changed your policy on clearing
the backlog, but we still need the detailed information as to
why the date of 2012 is no longer applicable.
With that in mind, the Minister would like the
following information. Please note that as far as we can tell
the 2002-03 Plan for the Future was the first public document
to use this date for steady state. If this is wrong please advise
when you first went public with it.
— Figures behind the projections for
each year leading up to 2012 and clarity on the reasons why you
will not meet this deadline—ie:
What was the backlog figure at that time. Show
reduction each year. Did they allow for inflation, if so by how
much. Confirm that the calculations confirmed the ongoing cost
of maintaining those assets repaired.
On individual assets—% of cost base that
was about right, % over and under. Reasons why different.
— Grant. What was the starting figure
and what were your assumptions on grant going forward. Did you
then expect a cut off point for the grant and if not what assumptions
did you make on continual requirement for grant.
— Commercial income—what JV's/PPPs
were expected to contribute towards reducing backlog, show projected
amount each year and actual.
What other income was included. Again show individual
elements yearly assumptions and actual.
INCOME AND
EXPENDITURE
Need more transparency on income and expenditure.
The table you emailed does not give nearly enough detail and for
example trying to add back in the expected spend on arrears did
not reconcile with the table.
Mark Turner was able to explain some of the
background to the figures at the back of Tony Hales letter of
11 April [commercial in confidence]. However the Minister would
be grateful for further clarification of table 1 in particular:
— What relation are these figures to
the maintenance backlog figure of £97 million (as at 31 March
2007). I believe the £97 million is based on 2004 prices,
so are the ones now being quoted on a like for like basis.
— How is £35 million "steady
state" arrived at, what are the assumptions. When will you
achieve "steady state", how will that affect any grant
given at the time.
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