FUNDING OF BRITISH WATERWAYS
5. As a public corporation, BW operates as "a
self-financing trading entity acting at significant arm's length
from Government".[7]
This means it is required to run its affairs on a commercial basis,
consistent with its statutory obligations, powers and objectives
agreed with Government.[8]
BW therefore earns revenue from boat licence and mooring fees,
utility sales, joint venture projects with the private sector
and property development on the land it owns adjacent to its waterways.
Since its creation, BW has also received substantial levels of
Government grant funding. Sponsorship of BW is a devolved matter
in Scotland so, since 2000, BW has received grants from both the
Department for Environment, Food and Rural Affairs (Defra) and
the Scottish Executive Enterprise, Transport and Lifelong Learning
Department.[9]
6. In recent years, BW has experienced considerable
success with its commercial activities. Earned commercial income
grew by 91% between 2002 and 2006. Commercial income as a percentage
of total income grew from 39% to 60% over the same period.[10]
Earned commercial revenue is now BW's main source of income (see
Figure 1), and BW believes it is likely to remain so in the future.[11]
Figure 2 shows the levels of BW's commercial income and Government
grant since 1987-88; it clearly shows the dramatic increase in
commercial income over the past decade.
Figure 1: BW's sources of income in 2005-06—total
revenue £190.5 million
Source: British Waterways, Annual Report & Accounts
2005-06, p 1
Figure 2: Government grant to British
Waterways over the past twenty years compared with BW's direct
income
Source: Ev 199, Annex A [Defra]
7. There are some constraints on BW's commercial
freedoms because of its status as a public corporation. For example,
BW is only allowed to operate commercially on those waterways
it owns or manages. It is also subject to constraints on its ability
to borrow. We examine these issues later in our Report.
Our inquiry
8. In November 2006, we agreed to inquire into the
work of British Waterways (BW). Our terms of reference were to
examine how BW was working towards its ambition of creating "an
expanded, vibrant, largely self-sufficient waterway network",
in the context of the policies set out by the Government in the
2001 document, Waterways for Tomorrow, the 2004-05 policy
review of British Waterways, and recent changes in Defra's budget.
In particular, we would consider:
- current users of the waterway
network and their relationships with British Waterways;
- the financial framework of British Waterways
and the impact of changes in Defra's budget;
- recent developments in the stewardship work and
commercial activities of British Waterways, including its property
portfolio;
- potential for growth in leisure and freight use
of the waterways network; and
- relationships between British Waterways and central
Government departments, Regional Development Agencies and local
authorities.
9. We appointed a Sub-Committee, under the chairmanship
of Mr David Drew MP, to carry out the inquiry. It received written
memoranda from 101 interested parties. From February to May 2006,
we took oral evidence at Westminster from a number of interested
and affected parties. As part of the inquiry, we also visited
Stroud in April 2007, where we were shown around the site where
restoration work on the Cotswold Canal was planned to begin. We
then travelled by boat on the River Severn to the National Waterways
Museum in Gloucester, where we took further oral evidence from
various individuals with an interest in British Waterways work,
and were able to witness the major redevelopment taking place
in the docks. In June 2007, we visited the future Olympic site
by boat where we observed the recently-started work on the new
lock and water control structure on Prescott Channel in Bow. We
are grateful to all those who gave evidence or otherwise assisted
with our inquiry. We are particularly grateful to the Waterways
Trust and National Waterways Museum staff, the Cotswold Canal
Partnership and the staff at Stonehouse Town Council offices for
making our visit to Gloucestershire such a success. We are also
grateful to BW staff who facilitated our informative visit to
the future Olympic site and the inland waterways of London.
1 Ev 194, para 6 Back
2
Ev 68, para 2.2 Back
3
Ev 199, Annex A; Q 485. Back
4
BW's original target, set in 2002, was to have only 10% of its
principal asset arrears remain in condition D and E by 2012. This
target had recently been changed to 15% of principal asset arrears
remain in condition D & E by 2016. See Ev 210, Annex C. Back
5
Ev 75, para 4.2 Back
6
British Waterways, Strategic Options Review, May 2007,
para 4.1 Back
7
Ev 69, para 4.1.1 Back
8
Ev 194, para 6 Back
9
Defra is responsible for sponsorship of BW in England and Wales.
The Department says it works closely with the Welsh Assembly Government.
See Ev 195, para 8. Back
10
Ev 67, para 1.2.3 Back
11
Ev 69, para 4.1.3 Back
