Government response
Introduction
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
DEFRA'S PRIORITIES FOR BW
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)
GOVERNMENT RESPONSE
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.
INTERDEPARTMENTAL WORKING GROUP
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)
GOVERNMENT RESPONSE
Jonathan Shaw's letter of 17 July to Michael Jack
refers.
BRITISH WATERWAYS' BUDGET FOR 2008-09
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)
GOVERNMENT RESPONSE
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.
BRITISH WATERWAYS STATUS OPTIONS REVIEW
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)
GOVERNMENT RESPONSE
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.
OUR (EFRA COMMITTEE) VIEWS
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 RESPONSE
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)
GOVERNMENT RESPONSE
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.
BW'S DECISION TO WITHDRAW FROM THE COTSWOLD CANALS
PARTNERSHIP
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)
GOVERNMENT RESPONSE
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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