Select Committee on Delegated Powers and Regulatory Reform Fifteenth Report



This is a "first-stage" proposal laid before Parliament on 13 January 2003. The proposal is intended to enable a public-private partnership ("PPP") by which the British Waterways Board ("the Board") would, through a joint venture company (Water Grid Ltd), carry out an increased range of water-related activities.

The Board was established by the Transport Act 1962 ("the 1962 Act"). It is a public corporation responsible for the management and maintenance of about 3,000 kilometres of inland waterways in England, Wales and Scotland. The functions and activities of the Board are governed principally by the 1962 Act and the Transport Act 1968 ("the 1968 Act"). On 19 November 1999, the Board announced the setting up of Water Grid Ltd, a joint venture between the Board, Partnership (UK), Anglian Water and Bristol Water. The background to the proposal is described in more detail in paragraphs 1 to 12 and Annex B of the Statement ("the Statement") from the Department for Environment, Food and Rural Affairs (DEFRA).

The proposal aims to do two things:

increase the range of activities which the Board is empowered to carry on (by amending section 10(3) of the 1962 Act) (Proposal 1);

remove any possibility that the current legislation can be construed so that the borrowing of a company formed by the Board (but which is not its subsidiary) counts towards the Board's overall borrowing limit (by amending section 50 of the 1968 Act) (Proposal 2).

The current legislation applies throughout Great Britain. However, there is no power to make a Regulatory Reform Order so as to alter the law contained in a provision in its application to Scotland, in an area of devolved competence. Accordingly the proposed order does not have effect in Scotland. Any equivalent changes for Scotland would be the subject of legislation by the Scottish Parliament. The proposal will extend to Wales, and the National Assembly for Wales has been consulted.


Proposal 1

The first burden (lack of power to sell treated water etc.) is explained at paragraphs 14 to 17 of the Statement. Section 2(1)(b) of the Regulatory Reform Act 2001 ("the 2001 Act") provides expressly that any limit on the statutory powers of any person is a "burden" for the purposes of that Act. Accordingly, the Committee accepts that, in respect of Proposal 1, there is a burden, in particular because—

section 10(3)(d) of the 1962 Act has the effect of limiting the power to abstract water to abstraction from inland waterways;

it also has the effect of limiting the powers to abstract and to sell water to untreated water.

The Committee further accepts that the effect of Proposal 1 is to remove that burden.

Proposal 2

Paragraphs 18 to 24 of the Statement deal with the second burden. Section 19 of the 1968 Act subjects the Board to a statutory limit on borrowing (currently £35 million). On normal accounting principles, borrowing of a non-subsidiary company in which the Board holds securities would not count as borrowing by the Board. It was not clear from the Statement why DEFRA took the view that, on this occasion, borrowing by the joint venture company would count as borrowing by the Board for the purposes of the section 19 limit. We therefore requested further information which DEFRA provided in a letter to the Clerk to this Committee dated 14 February 2003. The letter is printed in Annex 1 to this Report. We note that DEFRA was advised by Leading Counsel that there was a risk that borrowing by the proposed joint venture company could be held to count toward the overall borrowing limit of the Board of £35 million, creating sufficient doubt to deter lending institutions. The Committee accepts that Proposal 2 removes a burden, namely the uncertainty as to the statutory limitation on the borrowing of a joint venture company in which the Board has a minority interest and which is not a subsidiary of the Board.


Proposal 1

This is dealt with at paragraphs 27 to 31 of the Statement. We invited DEFRA to provide further information about the implication of the proposal on the duty of the Board to maintain the waterways in a navigable condition. DEFRA's response is contained in the letter printed in Annex 1 to this Report. It explains that the primary statutory obligations on the Board are contained in sections 104 to 106 of the 1968 Act; section 105(1), in particular, requires the Board "to maintain the commercial waterways in a suitable condition for use by commercial freight-carrying vessels" and "to maintain the cruising waterways in a suitable condition for use by cruising craft". Paragraph 30 of the Statement states that the contractual arrangements with the joint venture company ensure that the Board will "retain ultimate control of the waterways so as not to compromise it statutory duties". The Committee accepts that on this issue no necessary protection is lost.

The Committee also accepts that the financial risks are covered by normal procedures, as described in paragraph 31 of the Statement. As regards environmental risks and the necessary environmental protection, paragraph 28 of the Statement states that Proposal 1 would merely permit the Board to carry on activities that any non-statutory body could carry on and would afford the Board no special status in relation to those activities. And in response to a comment made on consultation by English Nature, DEFRA states (in Annex E to the Statement) that the Board would continue to be subject to existing statutory and other obligations in respect of nature conservation, heritage and public amenity, and that each new water supply project would be subject to an environmental impact assessment. We are aware that the House of Commons Committee has explored these matters more fully and that English Nature has given evidence to that Committee to the effect that it has no objections to the proposal.[4]

The Committee is satisfied that no necessary protection would be lost under Proposal 1.

Proposal 2

This is dealt with in paragraph 32 of the Statement. The limits on borrowing are primarily to ensure proper limits on public sector borrowing and proper financial and Parliamentary control. In our view, Article 3 of the proposed draft order simply clarifies what was generally assumed to be the case in any event. Accordingly, the Committee accepts that no necessary protection is being lost by the clarification.


It would be reasonable for those currently using the waterways for navigation or recreational purposes to be able to continue to do so in much the same way as now. The Committee is of the view that the reasonable expectation test under section 3(1)(b) of the 2001 Act is satisfied.


The consultation process is described in paragraph 6 of the Statement and a list of those consulted is in Annex D to the Statement. The consultation period lasted from 15 May to 16 August 2002, a period slightly over the 12 weeks recommended by the Cabinet Office. Ninety-two individuals and organisations were consulted, including water companies, recreational and environmental organisations, development agencies, business organisations and trades unions. Representations were received from 44 respondents. The Committee takes the view that the consultation was satisfactory.


The Committee concludes that the proposal is an appropriate use of the 2001 Act and meets its requirements.

4   Minutes of Evidence taken before the House of Commons Regulatory Reform Committee, 11 March 2003, HC 521-i, available at: Back

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