Select Committee on Environment, Food and Rural Affairs Fourth Special Report

Government response


The Government welcomes the recognition in the report of the positive relations between Defra and British Waterways and the greater clarity about Defra's priorities and BW's autonomy to manage itself. We are pleased that the report acknowledges that in the circumstances the 2008/09 CSR settlement of £56.6 million was an acceptable one that reflects Defra's commitment to the waterways and recognition of the value of maintaining the integrity of the canal network for delivery of a wide range of public benefits.

Defra and BW are committed to developing and strengthening this partnership, working together to secure the continued and sustainable revival of the waterways and their contribution to the wealth, health and wellbeing of communities across the country. To this end, the following is a joint response on behalf of both the Government and BW to the Committee's report.

We will continue to progress points raised by the Committee through the Inter Departmental Working Group on Inland Waterways chaired by Jonathan Shaw.

Please also note that we have taken mention of waterways within this report to refer to those owned and operated by British Waterways in England and Wales.

Response to the Committee's conclusions and recommendations


1.  We welcome the improved relationship between Defra and British Waterways since our Report in 2007. Their commitment to improved communication is very helpful, as is the greater clarity about Defra's priorities for the network and the extent of BW's autonomy to manage itself. (Paragraph 22)


The Government and British Waterways are grateful for these comments which recognise the progress made since the last EFRA report on British Waterways. The Government welcomes acknowledgement of the usefulness of the Strategic Steer to BW.


2.  We welcome the formation of the Interdepartmental Working Group, and expect Defra to ensure that other Departments send appropriately high level representatives to its meetings. We look forward to receiving a report from Defra on its work and achievements before Parliament rises for the summer recess. (Paragraph 26)


Jonathan Shaw's letter of 17 July to Michael Jack refers.


3.  BW's grant under the CSR settlement is not enough to prevent continued underspending on its major works programme, but the CSR round was a tight one. In the circumstances a "flat cash" settlement for BW is acceptable. However, given the gains that have already been made in improving the condition of the canal network, Defra and BW should now jointly produce a strategy indicating how the improvements will be sustained against a background where current property market trends will make it more difficult for BW fully to realise its income potential from waterside developments. (Paragraph 34)


The Government is committed to continuing to work closely with BW to ensure the sustainability of our inland waterways. Later in 2008 BW will undertake a public consultation on its long term business strategy. Working with customers and stakeholders, the consultation will consider BW's priorities as well as alternative funding mechanisms. Officials will engage closely with the review and the strategy emerging will be subject to wide ranging consultation and agreement by Ministers.


4.  We are unconvinced by the need for BW to spend up to £600,000 on a report by consultants on its future structure when it is by its own admission short of money. We find it hard to believe that analytical capability does not exist within BW, Defra or other public sector organisations that could have conducted this study at lower cost to public funds. BW should now explain why it was necessary to spend money of this order at a time when it was facing significant pressure on its finances sufficient for it to withdraw its support for the Cotswold Canals project. (Paragraph 41)


BW, with the backing of Defra, commissioned an external review to see whether a change to its institutional status could provide a better long term financial framework for the waterways. BW commissioned the review (which cost £350,000 not £600,000) before the decision to withdraw from the Cotswolds Canal Project. At a time of potentially increasing costs and declining income it makes good sense to invest in researching opportunities for alternative structures which might better secure the financial sustainability of the waterways.


5.  Defra, in cooperation with British Waterways and other interested government departments and public bodies, should develop a transparent mechanism to score and prioritise public investment in canal restoration according to the external benefits that such spending would create, and should agree principles as to how the financial risks of such projects should be borne. (Paragraph 65)


Government does not agree with the first part of this recommendation. Decisions on restoration projects are best taken at a local/regional level, not least because funding has to be raised at the local/regional level. It is right that local organisations should be responsible for making such decisions and for putting in place the necessary partnership working arrangements to ensure the projects' success over what can be a very lengthy period. Involving central government and a potential new tier of bureaucracy to the process to achieve a national framework would not therefore be appropriate or practical. However we agree that further consideration should be given to how financial risks are borne and this will be discussed in the Interdepartmental Working Group.

BW investment in restoration projects is a matter for the BW Board because it is their job to manage risk and to balance their books. BW has provided the Committee with a report on how they prioritise their contribution to such projects and how financial risks are borne. Under the Defra Deal with BW, Defra has agreed not to seek to micromanage British Waterways and the British Waterways Board has agreed to manage risk and be accountable for its decisions.

We note that Stroud District Council has now stepped in as the lead partner for the Cotswolds Canal project given its importance to the local community, which in our view is entirely appropriate.

6.  BW should also reappraise the implications for its long term financial strategy of constraining its enthusiasm for restoration projects. Such ventures can provide BW with new income streams when canalside developments on BW land are associated with such projects. It is likely that BW will need increasingly to rely on income from canalside developments in the future. A reduction in restoration projects involving BW may therefore in the long term adversely affect BW's move towards achieving an even greater degree of financial self-sufficiency. (Paragraph 66)


Unlike regeneration projects adjacent to the existing network restoration projects rarely produce new income streams and usually impose additional costs on BW. Most of the regeneration activity in which BW is involved is on its existing network where it does own some land. The organisation rarely owns land adjacent to canal restoration projects and the regeneration benefits of these schemes tend, as the Committee points out, to go to local communities and councils not to BW. Nevertheless BW has not constrained its enthusiasm for restoration and remains committed and engaged in a number of projects across the country. BW will consider future restoration project proposals on a case by case basis balancing Defra's strategic priorities of maintaining the existing network, achieving greater self sufficiency and delivering additional public benefits. BW's strategic review referred to at 3 above will also consider how BW can move closer to financial self-sufficiency.


7.  BW should have consulted earlier with its partners to enable them to consider whether alternative funding could have been put in place before BW's withdrawal from the project was put into the public domain. (Paragraph 67)


BW notes the Committee's comments but feels that there was no single ideal way to break such difficult news to stakeholders, considering these included its own staff employed on the project whom it believed had to hear the news first. All the project partners were fully aware of the funding pressures on the project particularly following a partnership funding issues meeting in July 2007. BW had led the partnership in seeking alternative funding. There was no reason to believe at the time BW announced its withdrawal from the project that alternative funding might have been secured through further consultation.

Department for Environment, Food and Rural Affairs

July 2008

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