Examination of Witnesses (Questions 102-119)
JONATHAN SHAW
MP, MR ROBIN
MORTIMER AND
MS SARAH
NASON
19 MARCH 2008
Q102 Chairman: Do you feel you are
achieving the right degree of transparency in terms particularly
of the information flows between your Department and British Waterways,
in other words that you as the minister responsible know what
is going on?
Jonathan Shaw: I have no reason
to believe that I do not and I make that judgment on the relationship
and the advice that I receive from officials and the relationships
between officials and those of British Waterways, and I compare
that to other delivery bodies that I am responsible for in my
portfolio.
Q103 Chairman: What role did you
take in helping to draft and input the deal document? I notice
that it is signed in fact by Sarah Nason on behalf of the Department,
but were you involved in the discussions about agreeing the text?
Jonathan Shaw: Yes I would have
received a submission to outline the type of arrangements that
officials and British Waterways felt were appropriate to move
forward.
Q104 Chairman: Let me just move to
the strategy. I think you as a Department have given BW what you
term as a "Strategic Steer", and one of the elements
of that is to help secure "an immediate and long-term reduction
in taxpayer support for on-going operations." Could you flesh
out a little bit more what you mean by that because there are
two parts—immediate and long term—and yesterday we
learned from British Waterways that they felt that they had come
to a stable position as far as their funding arrangements were
concerned with Defra, so I would be interested to know what you
actually mean by immediate and long-term reduction in taxpayer
support?
Jonathan Shaw: In the immediate
term we want to see that British Waterways maximise the potential
for partnership funding. We want to ensure that in the future
as part of the review that they are able to borrow whereas at
the moment there are constraints upon that. They have also got
their investment portfolio and in the long term we hope that that
is able to provide investment into the network.
Q105 Chairman: You have given me
a general statement the content of which does not surprise me
but, in writing those words, there must be some numbers that sit
underneath them. In other words, what do you hope will be the
result from the immediate and long-term reduction? Is that an
aspiration or have you done some work to indicate to BW how the
shift of financial responsibility will go during the period of
the current CSR?
Jonathan Shaw: They have got their
settlement and we have provided them with flat cash and I expect
that to remain the same throughout the CSR because I do not anticipate
a change on that. In the third year, things are tight for the
Department but I am reasonably sure that we will be able to ensure
that there is flat cash across that period. During this time and
looking to the future, you will be aware that we have the review
as to their future funding, realising their investments as I said,
and also to see what their status is, and obviously we anticipate
receiving their status report as to what type of future organisation
the BW might be, different from that which it is at the moment,
to allow it to borrow and receive funds elsewhere. I cannot give
you figures in the CSR period saying, "We are reducing this
much and this much has got to come from elsewhere," no, I
do not have that for you, Chairman.
Q106 Chairman: I can understand that
if you are publicly going to say that you have agreed over the
period what the funding position is but what this implies is a
direction of financial travel?
Jonathan Shaw: The direction of
travel is known as to what we are hoping to achieve, but obviously
that is work between ourselves and the organisation at this stage.
I am not able to give you the detailed numbers because we are
working together on that.
Q107 Chairman: All right. In your
Strategic Steer document you also have the terminology "achieving
the shared Government/BW longer term vision of moving toward greater
self sufficiency through the growth of commercial business."
What is longer term, what time-frame are we talking about?
Jonathan Shaw: I have not got
a date, I have not got a time-frame that I am able to provide
you with.
Q108 Chairman: You have said a longer
term vision. Are we talking about the next five years or ten years?
Jonathan Shaw: That all rather
depends, does it not, for example on some of the investments that
BW have. For example, take Wood Wharf, which is a massive investment,
in terms of when they realise that investment will be a judgment
for them and the market and what they are able to yield from that,
so what it might be like in five or ten years' time the market
will determine when they perhaps realise those assets and use
those for other means within the waterways.
Q109 Chairman: I would have thought
you would have had some idea of the overall time-frame you are
looking at here because one of the things again that we discussed
yesterday is the state of the property market. Commercial property
is not exactly selling like hot cakes at the present time and
the ability of BW in the future, notwithstanding the deal flow
that they have currently got, to generate more of their own resources
could be constrained by virtue of what happens in the market,
so I am merely asking what you actually mean. When one talks about
"longer term vision" you could have said it is the period
of the next CSR after this one or it is somewhere within the next
five years or ten years, but all you have told me is you do not
have a number.
Jonathan Shaw: No, I do not have
a number.
Q110 Chairman: What does "longer
term" mean?
Jonathan Shaw: I do not know.
As you say, with regard to the volatility of the property market,
it would be a matter for BW, with advice from their representatives
and their investors, as to when to realise those assets, but,
importantly, BW have not got all their eggs in one basket, and
so they have spread their investments and again they have done
that, I am advised, wisely to ensure that if there is a significant
downturn in their portfolio that it does not go one way, so that
is very important for them going forward to ensure that there
is confidence, there is a level of funding, but I cannot provide
you with a date, Chairman, as to when that should happen because
I think there are so many variables.
Q111 Chairman: I did not ask you
for a date.
Jonathan Shaw: You are asking
me for a time-frame.
Q112 Chairman: I am trying to understand
what this term "longer term vision" means because it
must mean something; you approved it.
Jonathan Shaw: I approved it.
Q113 Chairman: So what did you think
you had agreed to?
Jonathan Shaw: What I knew I had
agreed to is within the context of BW's investment and within
the context of the status review, it has been our intention, and
I think that this was my predecessor's policy as well, that we
want to see BW get to a point where they are able to be less reliant
on the public purse than they are today. That is the longer term
vision. I have not got a time-frame for you, Chairman, I have
not got a date for you; that is something that we work on with
the organisation and as things progress we will obviously be keeping
yourselves and the House and other interested parties advised.
Q114 Chairman: All this is a bit
aspirational, is it not?
Jonathan Shaw: There is nothing
wrong with aspiration, is there Chairman? Our document Waterways
for Tomorrow was aspirational. We did not put fixed dates
on that but it realised huge investment, more investment than
the waterways have ever seen. I think the track record for aspiration
is a good one.
Q115 Chairman: Let me probe you on
another aspect of this document. First of all, let me just ask
you a specific question, BW are preparing their Corporate Plan;
when do you think you are going to see it?
Jonathan Shaw: I do not know.
Q116 Chairman: I just want to hear
what you have to say because I see that the first part of the
deal is that it will promote greater understanding between Defra
and BW.
Jonathan Shaw: "I do not
know" does not mean to say that I have not been advised,
I cannot remember, but in terms of the information flow from BW
and my relationship with BW and that of officials, I am satisfied
with that, and I am sure I will receive it at an appropriate time.
Q117 Chairman: I thought this Corporate
Plan was supposed to be on a three-year rolling basis. Perhaps
Ms Nason can help us?
Ms Nason: We are in discussion
at the moment with BW on their Corporate Plan. BW are putting
their preliminary ideas, having discussed it preliminarily with
us, to their board, and when their board has thought a bit further
and produced a more fulsome document they will be putting it to
us for agreement. We have been in on-going dialogue with them
for some months on it. Normally we would hope to agree it at the
start of the CSR period but clearly they have not yet got their
allocations from us for years two and three for example, and there
are a lot of things to think about, so we are under discussion
with them and we hope that the BW board will finally agree it
in May, after which Jonathan will agree it, but in the run-up
to that May time we will be putting a submission up to the Minister
about what it says, issues around a few things, and what we think
about them.
Q118 Chairman: So May-ish/June time?
Ms Nason: We hope that we will
finalise it. Yes, it is a rolling plan so it will be reviewed
again for the next year.
Q119 Chairman: Coming back to my
original line of questioning on the balance of funding, whereas
the Minister quite rightly said they know what they have got and
we have confirmed it for the first year, there is potential flexibility
as to how much money they are going to get in years two and three
of the CSR.
Jonathan Shaw: We are working
towards flat cash. I said that in advance of this year's settlement
and we are working towards that for years two and three.
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