In summer 2007 we reported on British Waterways (BW). We urged the Department for Environment, Food and Rural Affairs (Defra) to ensure adequate funding of the waterways network under the Comprehensive Spending Review. We also expressed concern at the poor relations that existed at the time between Defra and BW.
We were prompted to examine this subject again by BW's decision in February 2008 to withdraw from the partnership to restore the Cotswold Canals so as to be able to fund urgent repairs to the Monmouthshire and Brecon Canal. We decided to focus on BW's regeneration and restoration work, but we have also received evidence on how Defra and BW are working together.
We are encouraged by the work BW and Defra have done since summer 2007 to improve and clarify their relationship. The strategic guidance to the BW Board from the Department reflects the importance the Government attaches to BW maintaining the existing network. They have undertaken to communicate effectively with each other, and have agreed how they will work together. These are important steps forward. We welcome too the establishment of a group within Whitehall to bring together all the government departments with an interest in BW's work.
BW received slightly more financial support from Defra than it expected from the Comprehensive Spending Review. While not enough to avoid underspending on its major works programme, in the present climate the settlement is acceptable.
BW's property development work produces a substantial proportion of its commercial income. But restoration of canals produces little if any direct benefit to BW, and BW has often carried all the financial risk in such projects. Canal restoration schemes can be of great value to the areas where the canals are restored, producing knock-on benefits such as more jobs and visitor income. What BW's decision on the Cotswold Canals demonstrates is that it is not reasonable to expect a BW Board charged primarily with maintaining the existing waterways network to take on substantial risk from such projects, especially in present economic conditions. If the public sector wishes to obtain external benefits from canal restoration schemes, the bodies responsible for obtaining those benefits should bear the risk. Defra, with British Waterways and other interested government departments and public bodies, should develop a mechanism to score and prioritise public investment in canal restoration according to the external benefits that would be created, and should agree how the financial risks of such projects should be borne.