Examination of Witnesses (Questions 500-
519)
TUESDAY 8 MAY 2007
MR ROBIN
EVANS, MR
TONY HALES
AND MR
JIM STIRLING
Q500 Mr Jack: So it was not a definitional
discussion, it was about numbers?
Mr Hales: Yes, and we also did
make it quite clear, as Robin has said, that a one-year cut, we
do not like it, but we will get on and manage within that.
Q501 Mr Jack: So, in the middle of
last year you roughly came to an accommodation: they understood
what the number was going to be and what the implications were.
Right, Mr Evans, take us forward about what happened thereafter?
Mr Evans: In November when we
met the Minister we were talking about the future. Of course,
we knew there was the Spending Review 2007 coming up and we were
talking about what the future was likely to be, because at that
stage we were still hoping the grant cuts would be restored. It
was a one-year cut, and the Minister wanted sight of figures going
beyond the SR 2007 period. He wanted to see them going up for
another 10 years. In my letter to Sabine Mosner, which you have,
those projections got to 2016-17, so we provided those. You asked
when the Minister became agitated. My understanding is that there
was a meeting between civil servants and the Minister some time
in February when they were discussing possible future funding
for BW, and the Minister then asked for some further analysis
of income and expenditure. Just as you say, I heard this but I
asked for that to be put in writing so I knew exactly what was
being asked of us, and I think in our evidence that came from
Martin Hurst, a senior civil servant to the Chairman, in March
and we responded to that in April—so a direct request. Then
there was a second time when on, I think, 20 April the Minister
asked for some very specific analysis matching the 2002 plan for
the future with our current projections, and that we answered
within six days, I think.
Q502 Mr Jack: The impression I am
gaining is that you provided the answers to the questions you
were asked and you were not getting any feedback from the civil
servants you dealt with that there were definitional problems
from the ministerial perspective in terms of understanding what
the information was that you were supplying?
Mr Evans: That is correct.
Q503 Mr Jack: Can you explain why
the Minister seemed still to be unclear when he came before us?
If there was that degree of clarity by the time you had replied,
particularly with your six-day letter in March, why the Minister
should come before this Committee giving the impression that there
had been barriers placed in the way of him finding out new, and
hitherto unrevealed, information about the state of your finances?
Mr Evans: The only explanation
I can give is what I have given previously. Certainly Sabine Mosner,
who was the person I dealt with primarily, I think had an excellent
grasp of what the issues were and she, unfortunately, or whatever,
has moved jobs and been taken away, and her immediate line manager
has also changed jobs, so I think the Minister was probably struggling
to find someone to interpret the wealth of information that we
had given within the Department. I cannot say that; that is my
assumption.
Q504 Mr Jack: You have said it now.
You cannot withdraw the fact.
Mr Evans: I am not withdrawing
it; I cannot say that for certain because I obviously was not
there.
Q505 David Lepper: When did that
change of personnel happen?
Mr Evans: Goodness. March, I think,
mid March, early March.
Q506 David Lepper: Thank you.
Mr Evans: I would certainly be
able to give you those dates.[5]
Mr Hales: I think one of the key
documents was the one on December 22, which set out in considerable
detail in the annexes the implications of different levels of
funding and, indeed, referred to the principal assets, the steady
state and so forth.[6]
I think one would recognise, if you come at these things very
quickly from a first pass, they are quite difficult to get hold
of, but there are many points in that document.
Q507 Mr Jack: One last question that
intrigues me is that the Minister gave the impression when he
put the numbers before us that suddenly additional income had
been discovered. Do you think that that was a proper representation
of the facts, bearing in mind, as you have subsequently reminded
this Committee, any additional income in any one year has to be
spent in order that your books be balanced?
Mr Evans: Can I correct the last
thing. I think we have probably got two, maybe at a stretch three
years to balance the books; it does not actually have to be done
in each year. I do not think that is a fair representation of
the information. Certainly from the period 2002 to 2006-07 we
had ended up with more income than we had planned to have in 2002,
and we had spent that money in the full knowledge, full understanding
and full approval of the Department. If they had instructed us
to spend it differently, we would have spent it differently. So,
we shared our corporate plans, we shared our annual budgets with
them and they were entirely happy. What is spent is spent, is
gone and everyone was happy. In fact, we were praised and everyone
seemed more than happy, up until now, about where our expenditure
was. Going forward, we have very considerably less money than
we had planned to have in 2002, and that is despite very considerable
increases in our commercial income. The reduction, or the potential
reduction in grant (because we have still not had our CSR settlement)
is considerably more than the increase in income, but that is
money that we have now got to decide how not to spend. So, I think
you could put the two together and say there is more money overall,
but that is not a fair analysis because half of the period the
money is spent, it has gone. We are talking about the future from
now on, where we have considerably less.
Q508 Chairman: Before I call in Peter,
can we be absolutely clear. Do you think that the Minister is
still under the apprehension that you have had more money than
he thought you had had and that is the basis of this current disagreement,
friendly as it may be?
Mr Hales: We actually agree on
the facts. The facts of the money are the same; there is an interpretation
issue. The Minister has particularly pointed out that over the
period 2002 to 2012 there is, in total, more income has gone into
the waterways and that has come from two sources: one is from
the extra commercial income and the other is from 8.9 million
of extra grant income, which is entirely from the Scottish Executive
and it has entirely got to be spent in Scotland to meet very specific
projects that they set in those years. The interpretation then
is about whether you look at the period from 2002 to 2012 as a
whole or whether you divide it into two parts. What Robin has
set out is the importance of dividing it into two parts. What
has been spent cannot be unspent, it has been spent with the agreement
of the Department, and then there is the future, where there is
a 40 million gap on the previous assumptions.
Q509 Sir Peter Soulsby: We have not
got it yet, but the Minister has promised to let us have a full
trail of correspondence and notes, where they exist, of telephone
conversations which should perhaps help us in judging what was
asked and what was supplied and, indeed, when, but, looking back
at his evidence to us, he repeatedly (and it obviously was not
a slip of the tongue because he did say it several times) accused
British Waterways of lacking transparency in dealing with the
Department. When we do get that correspondence are we going to
find that you were not transparent with them or are we going to
find something very different?
Mr Evans: I would hope that the
evidence that we have already submitted to the Committee in reply
to your last set of questions amply shows that we have been very
transparent with our figures for a considerable period of time.
We have been talking with the Department and we mention here correspondence,
and I think correspondence has been given to the Committee showing
that this is something that we talked about from June, July 2006;
so I am very confident that the Committee will see that we have
been transparent throughout.
Q510 Sir Peter Soulsby: What about
his evidence where he said that he had to apply "greater
and greater stridency" in his approach. Is that what we are
going to find when we look at the correspondence?
Mr Evans: Certainly not with British
Waterways, and not in correspondence to us.
Q511 Sir Peter Soulsby: Can I clarify
the numbers of meetings you have had with the Minister, because
obviously, if he had become as concerned as he has suggested,
he might have met with you on occasions. You said you met in November
and, prior to that—. He has been involved now for the best
part of a year, has he not?
Mr Hales: July 19, and Robin met
with the Minister on September 5 in Penkridge.
Q512 Chairman: Can we be clear. The
original date that everyone seems agree on where information was
requested was actually before this Minister was in post, if the
date of June 2006 means anything, or does it mean nothing?
Mr Evans: June 2006 was when we
first started to talk to the Department about the way we spend
our arrears and the mix between principal assets and non principal
assets.
Q513 Chairman: Who initiated that?
Was that ministerial or was that—
Mr Evans: That was the debate
and discussions and correspondence between myself and the Department
officials.
Q514 Chairman: But the Minister,
as an incoming member of the Government, would have been knowledgeable
of that surely? It is fairly important stuff.
Mr Evans: I do not think that
is, in my relationship with the Department, what happens within
departments.
Q515 Sir Peter Soulsby: Can we pursue
the relationship with officials. You mentioned a particular official.
Can I get it clear, that was your main point of contact with the
Department, and can you clarify at what level in the Department
that person was?
Mr Hales: Grade five. May I make
a comment on the transparency? I think the British Waterways Board
would strongly insist that we have acted in good faith. I think
if there is any lack of transparency it is because some of the
concepts are complex and need detailed investigation and time
spent on them.
Q516 David Taylor: I think this steady
state is some sort of Shangri La that is never going to be achieved.
Nevertheless, going back five years, in 2002 (and I know we have
talked around this and I am trying to clarify something in my
mind), you set a target date of ten years beyond that for the
arrears on principal assets to have been cleared. That is correct,
is it not? Why did you not include the 11,000 non principal assets
in the forward plan from that 2002 starting point.
Mr Evans: I think that is a fair
question. The Chairman asked me: "Where did it all go wrong?"
I said, looking back, I think our absolute concentration on the
principal assets, and that was still a huge task ahead of us at
the time. I cannot remember what the figure was in 2002 and what
we got it down to—probably 200 million or something—so
it was still a massive task ahead of us.
Q517 David Taylor: No-one denies
the huge progress that has been made.
Mr Evans: I am not talking about
the progress, I am saying I think our concentration was saying,
"That is enough to concentrate on at the moment"—that
is such a big task, to get £200 million invested into the
network. What goes beyond that, what happens next is some time
in the future, our concentration is on that 200 million, and I
think it is a very fair question to say, if we had started talking
in 2002, the understanding would have been much better. However,
I have to say that it is always easy to look back. If you had
begun to say there is 200 million, and then there is probably
another, whatever, and then there is probably another, I think
people would begin to worry whether there would ever be a viable
network.
Q518 David Taylor: The point I am
going to make may spring from the fact that the parallel you drew
with the structure of a house and its decoration and so on, principal
or non principal, is not a perfect one, but if I can continue
with that analogy, would you not accept that if you neglect non
principal assets within the house—the floor boards, decoration
and other aspects—at some point those things, which are
aesthetic and comfort and convenience driven, become structural
and safety issues? Is that not also true of non principal asset
work within the British Waterways network: some things which may
be marginal at the moment in terms of core responsibilities can,
if neglected for a long period, become part of the problem?
Mr Hales: I think your point is
entirely correct. Ideally, one would have had that information
and it would have been in the public realm and in front of the
Department in 2002. It was not because life moves on and we are
getting better all the time. I think one of the other reasons
would be that we have very much better information systems in
2007, with better computer systems and a more structured organisation
which is feeding information to the centre, than we had in 2002.
So it was the best figures put up in 2002, but they were not as
good as they would be now or perhaps could have been then.
Q519 David Taylor: Can I paraphrase
your answer to check that it is an accurate paraphrase. Five years
ago you were aware of the issues connected with arrears of maintenance
on non-principal assets, but you thought you had more than enough
on to obtain the resources to tackle the core concerns which you
and the public had; the assets would have to be left in the state
that they were at that time without any significant work happening
to them. Is that roughly right?
Mr Evans: That is fair. I became
Chief Executive in December 2002, so effectively 2003, and one
of the first things I said to our engineering department was:
"I must understand the condition of the non principal assets.
There is a vast amount of work on the principal assets. We must
begin to understand inside the house." Jim was appointed
some 18 months later, and the first task I gave Jim was to be
very clear about getting the non principal assets understood and
scheduled so we knew exactly. I was in the privileged position
of being able to do that because so much work had been done on
the principal assets to make me comfortable that the network was
not going to fall down, the network was operational, and we could
afford to divert some of our engineering thinking time, some of
our engineering inspection time to those other assets. Before
that it was all hands to the pump to tackle the vast backlog of
arrears on principal assets.
5 Sabine Mosner left Defra on 16 March 2007. Her replacement
started on 19 March. Back
6
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