Supplementary memorandum submitted by
the Department for Environment, Food and Rural Affairs (BW2008
121a)
The Committee asked me to provide a note on
how British Waterways prioritises its investment in restoration
projects, with particular reference to the external benefits arising
from regeneration.
I attach a note produced by British Waterways
on their process, including the considerations they take into
account in seeking approval for investment from the BW Board.
I believe this should answer the Committee's questions.
I will update the Committee on the work of the
Inter-Departmental Group on the inland waterways in the summer—its
next meeting is planned for June.
Jonathan Shaw MP
Parliamentary Under-Secretary of State (Marine, Landscape
& Rural Affairs)
Department for Environment, Food and Rural Affairs
April 2008
PRIORITISING BRITISH
WATERWAYS RESTORATION
PROJECTS
British Waterways' overall strategy seeks to
expand the waterways network, although not at the expense of the
existing waterways in its care.
Therefore British Waterways uses its revenue
resources to maintain the existing canal network using its "Steady
State Model" as the basis for prioritisation/allocation of
expenditure. Its commercial capital is used to generate commercial
revenue that feeds into the overall BW resource mentioned above.
Commercial returns are made from a variety of different sources
but regeneration involving property development of brown field
sites adjacent to the water is an important one.
Canal restoration may sometimes create opportunities
for British Waterways to invest commercial capital on adjacent
land to create commercial returns. However, the actual canal restoration
is never commercially viable and has to be supported almost entirely
by public or volunteer funding. In many cases canal restoration
creates increased, albeit marginal, future maintenance costs for
BW.
British Waterways' policy is that it does not
in principle contribute capital or revenue to restoration projects.
That is because the main benefits, both financial and non-financial,
accrue to local organisations and people in the private, public
and voluntary sectors. It is therefore right that projects should
be driven by local enthusiasm and local priorities.
In practice, regional development agencies,
local authorities and other potential funders including canal
societies and lottery funders decide on prioritisation through
their willingness (or unwillingness) to provide funds.
In reality, it is rarely possible for major
projects to proceed without any funding input from British Waterways,
particularly as more detailed due diligence of schemes tends to
realise greater risks than were originally identified in outline
proposals. Most funders fix their contribution up front before
the full risk assessment is complete.
Consequently, British Waterways tends to act
as funder of "last resort" deciding how much to put
in on a practical assessment of a scheme's benefits to British
Waterways and to the wider community, its deliverability and the
likely risk (of cost overruns etc) involved. There is a three
stage formal approval process for making decisions to participate
in waterway restoration projects. This process was agreed by the
British Waterways Board in June 2005 and is attached as Appendix
A.
Currently British Waterways is having to contribute
funding to every restoration project in progress. These contributions
are not planned to exceed £2m for any project although the
risks involved may eventually require more input than this. This
£2 million figure is seen as an upper limit on expenditure
and reflects the Board's priorities and current appetite for risk.
The Board's appetite for risk will change from time to time reflecting
its assessment of external conditions. In this context, the Board's
willingness to commit up to £6 million to the Cotswold Canals
project reflected a strong commitment on British Waterways' part
to help the project go ahead if at all possible.
BW is currently involved in five waterway restoration
schemes, the Olympic-related Bow Back rivers, the Droitwich Canals,
the Manchester, Bolton & Bury, the Liverpool Link and the
Helix project in Scotland. As already stated in British Waterways'
submission to the Committee (in Appendix B),[3]
BW's potential contribution in the three restoration projects
currently being constructed is in excess of £7.3m (from a
total partnership investment of over £53m). In addition,
construction work on the £11.5m Droitwich Canals will commence
shortly adding a further £2m to BW's total investment.
This contribution to restoration projects over
a three to four year period is in the Board's judgement affordable
and justifiable, given the public benefits delivered through canal
restoration. This will be kept under review but further commitments
would be difficult to justify given current pressures on network
spend.
Appendix A
PRIORITISING BRITISH WATERWAYS RESTORATION
PROJECTS
1. INTRODUCTION
This process is to be introduced so that:
(i) Our commitment to expanding the network
is better understood.
(ii) To provide clarity, consistency, openness
and rigor so that we are seen to be effective and efficient.
(iii) British Waterways' commitments are
clearly understood internally and externally, and they are proportionate
to the scope and deliverability of the project.
1.1 This paper outlines the proposed process.
2. SCOPE
This process relates to long term, major canal
restoration and new build projects. It is not intended to cover
projects such as towpath improvement schemes funded by Local Authorities
and Regional Development Agencies.
It is particularly intended to cover projects
where BW could be required to accept new liabilities as it expands
the network.
3. LOCAL SUPPORT
3.1 General Managers (GMs) may contribute a
maximum of £50k (total—not per annum) to support local
initiatives to restore the canal network. There will be no separate
funding for this and the GM will need to justify this cost against
all other demands.
3.2 Operating Directors may approve a further
£50k expenditure at BU level (total £100k per restoration
project—not per annum). Again, no separate funding available.
3.3 All the above is BWs net contribution, to
be on a minimum basis of 25% BW, 75% other parties. For avoidance
of doubt, if BW contributes £25k, total project expenditure
would be £100k or more. These amounts to include staff time
as well as cash contribution.
4. STAGE 1 APPROVAL
4.1 For expenditure in excess of the above or
where BWs proportion is greater than 25%, Stage 1 approval is
needed.
4.2 This approval is from the Chief Executive
and Finance Director and one other Director, in accordance with
delegated authorities.
4.3 A detailed proposal will be required setting
out the proposal and reasons for BW support, a timetable and budget
funding.
4.4 Maximum authorisation under this procedure
is BWs expenditure of £250k in total over 5 years (including
funds already authorised under section 1 above).
5. STAGE 2 APPROVAL
5.1 If BW is to participate in a restoration
programme as partner or contractor, it will need Stage 2 approval
before any formal funding applications are made.
5.2 Stage 2 approval is from the Board. The
proposal will require:
1. Justification for BW involvement.
2. Benefits to BW and network—quantified
and quality.
3. Wider public benefits.
4. Anticipated project cost—construction
and work up costs.
5. Potential funding and contributions for
capital.
6. Analysis of potential self sufficiency
and alignment with BW ventures and growth.
8. BW contribution in cash and staff time,
both capital and future maintenance.
11. Letters of support in principle from
partners and funders.
12. Provisional list of conditions BW would
set for achieving Stage 3 approval.
5.3 Stage 2 approval only allows BW expenditure
to develop in detail the feasibility of the project both technically
and financially. It demonstrates in principle support but no commitment
to undertaking the project.
5.4 BW will set out clearly its requirements
for Stage 3 approval.
6. STAGE 3 APPROVAL
6.1 When the project team has 95% certainty
on the cost of delivery and commitments from all funders, as set
out in Stage 2, the project can be submitted for Stage 3 approval.
6.2 This will be from the Board.
6.3 Partners and the project team will need
to demonstrate that they have met the criteria set out at Stage
2 or give explanation as to why they have not or will not be met.
6.4 The report will be of similar content to
the Stage 2 report, but with committed figures, evidence of funding,
etc.
6.5 Stage 3 approval enables BW to participate
in the project to completion.
3 Ev 4. Back
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