Introduction

British Waterways is the custodian of 2,000 miles of the nation's historic network of canals and inland waterways, much of which is over 200 years old. Built to service the transport needs of the world's first industrial revolution, waterways transformed the social and economic life of communities all over Britain. In the new millennium, they can bring about a new renaissance. Today, the waterways are valued as a leisure and recreation resource for millions, are a part of our land drainage and water distribution systems whilst still providing an environmentally friendly means of transport for coal, aggregates and other materials. Where once derelict canals were an eyesore and target for vandals, they are now becoming a focus for regeneration and development schemes.

These canals are an important part of our nation's past and future. The Government is committed to ensuring that they are recognised as a valuable public asset, that their full potential is secured and that as many people as possible, from all walks of life, can enjoy and benefit from what they have to offer.

For too long British Waterways has been starved of the resources needed to care for this national asset. The Government is determined to provide a new framework for British Waterways that will unlock the potential and provide a network worthy of the new millennium.

Partnership

The inland waterways affect the lives and work of many millions of people. Much of British Waterways' progress to date has been based on partnership. The Government's new initiative to unlock British Waterways' potential uses partnership as the key to a modern solution which will realise a new sustainable future for British Waterways.

The initiative builds on progress made to date by expanding partnership opportunities in the public and private sectors, together with an entirely new suggested partnership with the people to engage their enthusiasm and support in caring for a unique piece of the nation's heritage.

Under the provisions of the Scotland Act 1998, responsibility for British Waterways' activities in Scotland will in due course transfer to the Scottish Executive. This paper does not cover any changes that the Scottish Executive may separately decide to introduce. As British Waterways' activities are limited in Wales, there are no plans to transfer them to the National Assembly for Wales.

Public Sector Status

British Waterways will remain in the public sector as a public corporation. The Government considers this to be the right place for an organisation charged with the care of a valuable part of the national heritage and dependent on public funds for a substantial proportion of its income. By retaining British Waterways in the public sector, the Government can ensure proper accountability and control over the public funds provided for British Waterways and the assets in its care.

The Government values public service and is proud of its public servants. The work that the staff of British Waterways have done to keep the waterways safe, to care for their heritage, environment and traditions, and to act as catalysts for urban regeneration is an example of the dedication and flair to be found in organisations which combine stewardship of a national asset with services to the public.

British Waterways' status as a nationalised industry, however, is no longer appropriate. For many years British Waterways' trading activities have been a small and declining part of its operations. Over the last ten years in particular its leisure, amenity and property activities have expanded rapidly. It has little in common with the trading organisations associated with nationalised industry status. Abandoning that status (from 1st April 1998) allows British Waterways to emphasise its role as the custodian of a valuable national asset with activities which are focused on leisure, tourism, heritage and regeneration.

Funding

British Waterways is required, under the Transport Act of 1968, to maintain its canals and rivers in a safe and satisfactory condition in accordance with standards defined in the Act. To help it achieve this, British Waterways receives grant from the Government. This is in addition to its income from boaters, property etc., which is not sufficient on its own to cover the costs of maintaining the waterways. British Waterways' success in expanding its external income has been offset by reductions in real terms in the annual grant it receives from Government. Total income has been insufficient to meet the needs of the canal network and a backlog of maintenance, currently estimated at £260 million has built up. Of this, some £90 million is for work that poses a serious public safety risk. The Government considers that this backlog of safety-related maintenance is unacceptable.

British Waterways had already started a programme of work to eliminate the backlog. But with the funds it had available, it would have taken 15 years to eliminate. Following the recent Comprehensive Spending Review, the Government has decided to allocate an additional £8 million per annum in grant to British Waterways. This is the full amount of additional grant that the British Waterways Board sought to enable it to eliminate the safety maintenance backlog over a more acceptable timescale of seven years. This additional grant demonstrates the Government's determination to reverse the years of inadequate funding, and its full support for the Board's aim of eliminating the backlog over seven years. It will enable British Waterways to halve the backlog by the end of the Comprehensive Spending Review period in 2002.

British Waterways has in the past taken out loans from the National Loans Fund to fund investment in its operational activities. Most of these debts date back to the 1970's and early 1980's and relate to uneconomic activities that British Waterways is no longer engaged in, such as freight carrying. The Government has decided to relieve British Waterways from the burden of refinancing this debt by undertaking to phase out most of British Waterways' outstanding loans as they mature. This will save British Waterways the ongoing cost of servicing the debt. The Government will, in addition, be providing greater flexibility for British Waterways in its cash flow management at the end of each financial year.

New Objectives for British Waterways

There has been no fundamental review of British Waterways' objectives since 1968. Since then the world in which the organisation operates has changed beyond recognition. We believe that it is vital to modernise the way in which British Waterways works. As part of this, the Government is publishing a Framework Document containing aims and objectives for British Waterways. It is the first time that British Waterways' objectives have been published in this way.

The Document also sets out British Waterways' relationship with Government and responsibilities of the Board and Chief Executive, as well as setting a framework for British Waterways' relations with users, the Waterways Ombudsman and the Inland Waterways Amenity Advisory Council.

The Framework Document will provide a clear basis for British Waterways to carry out its work.

A new set of standards for maintaining the waterways will be drawn up in conjunction with British Waterways and in consultation with users. The Government will develop challenging targets for British Waterways to ensure that the investment of public funds is used to best effect to modernise its infrastructure and maintain services to users.

Public/Private Partnerships

The Government's new objectives for British Waterways encourage it to take full advantage of the skills, expertise, innovation and funding opportunities that the private sector can bring. British Waterways will, therefore, pursue public/private partnerships (PPPs) wherever possible. It is already exploring PPPs in three important areas, in co-operation with the Treasury Taskforce on Private Finance.

Property
British Waterways has a widespread property estate, estimated to have a total market value of around £250 million. The property falls into two categories:

Operational: valued at £45 million, and made up of property needed to operate the system efficiently and safely. This category includes workshops, land required for access to operational sites etc.

Non-operational: valued at over £200 million, and made up of former warehouses, stores etc. Much of this property has been redeveloped and provides long term rental income to help meet British Waterways' maintenance obligations. Property income (currently £25 million per annum) has more than doubled in the last ten years.

Since 1989, the Government has allowed British Waterways to use income from sales of surplus property to reinvest in development and regeneration. The schemes have frequently been carried out in partnership with the private sector, in developments which are capable of generating further income. A number of joint ventures with public and private sector partners has successfully and strikingly regenerated formerly run-down locations in urban areas. Examples include the waterfront in Birmingham, Gloucester docks, Victoria Quays in Sheffield, and canal side areas in the centre of Leeds.

Whilst this flexibility has enabled British Waterways to enter into successful partnerships with the private sector, it has frequently been unable to take advantage of opportunities to enhance its estate. For example, lack of investment funds may delay preparation of sites for marketing or acquisition of land to complete an attractive site for partnership development. This prevents British Waterways from maximising the development potential and prospective public sector returns from canal side opportunities, and reduces the Government's investment in the financial and social capital of the waterways, adversely impacting on the return for public funds invested.

The proposed property PPP seeks to overcome this handicap by setting up a long-term partnership with a private sector institution such as a bank or insurance company. The private sector partner would be able to bring additional funds and expertise to take forward selected development opportunities. In turn, British Waterways would identify suitable land holdings and contribute their skills in the field of water-related development and regeneration.

Water Transfer
British Waterways already uses its network to move supplies of untreated water to serve individual water companies (e.g. Bristol Water via the Gloucester & Sharpness Canal). It has also successfully carried out water transfer for its own operational needs (e.g. extracting rising groundwater from disused mines under Birmingham to maintain water levels for navigation on the Oxford Canal which has historically suffered from poor water supply).

Studies by British Waterways and implementation of pilot schemes have shown that transfer on a wider scale is technically and environmentally feasible in many parts of the network.

British Waterways' network offers a ready made infrastructure with real potential to transfer water from places of surplus to places of shortage at a competitive cost compared to other solutions. Substantial investment would be required and the environmental impact of such schemes would need careful evaluation. Schemes may involve reversing the flow of water in parts of the canal network, the installation of backpumps at locks, the lowering of canal beds and the raising of canal banks to cope with an increase in the volume and flow of the water, and the installation of short lengths of pipeline to avoid excessive flows of water around and through restricted-width bridges etc. There would be indirect benefits to British Waterways and to canal users, in that improvements to the infrastructure would mean improved navigation depths and greater security of water flow, and a possible reduction in the backlog of safety maintenance. The PPP would entail a partnership with a private sector organisation to implement further development of the network for this purpose.

Maintenance

The waterway network includes 3,200 km of canals, 4,763 bridges, 397 aqueducts, 60 tunnels, 1,549 locks, 89 reservoirs, nearly 3,000 listed structures and ancient monuments and 66 Sites of Special Scientific Interest. Much of the network is over 200 years old. British Waterways has worked hard to ensure best value for money in maintaining these special assets. Most work is already put out to competitive tender and is often undertaken in partnering arrangements with contractors to improve value for money.

The Government continues to develop new, innovative forms of long term public/private partnership for the development and maintenance of engineering structures in the public sector. Such partnerships, modelled for example on those currently being explored by the Environment Agency for the Broadlands flood defence scheme in East Anglia, could also be suitable for improvement and maintenance of British Waterways' canals. British Waterways will be evaluating this approach.

Partnerships with the Public Sector

British Waterways has been progressively making agreements with local authorities and other public sector organisations under which funding for improvements to canal towpaths and other infrastructure has been secured for the benefit of the local area.

The Government welcomes this approach and is encouraging British Waterways to broaden it into long term partnerships, which will provide agreed environmental, economic and social benefits in each local area. Broader and more permanent partnerships with local authorities and other public bodies, including the National Assembly for Wales and new Regional Development Agencies, would enable the local and regional benefits of the waterway network to be tailored to local needs and maximised.

Partnership with the People

British Waterways' network is visited each year by 10 million people, of whom only a small proportion own boats or take holidays on the canals. The waterways are used extensively for walking, angling, cycling, wildlife pursuits and visiting heritage buildings and structures.

Many of these visitors have only limited contact with British Waterways, but they represent a potential pool of enthusiasm, support and even expertise which, if properly engaged in partnership, would bring major benefit to British Waterways itself and the public at large.

The Government is keen to see British Waterways develop a closer relationship with the millions of people who use and value its facilities. The Government is therefore asking British Waterways to consult on a membership scheme under which members would be offered a range of benefits in return for an annual subscription. Such a scheme would enable British Waterways to develop its relations with the widest section of the public who use, care for, or live near the waterways. Members' benefits might include opportunities to take part in events organised by British Waterways as well as financial benefits.

A membership scheme also offers an opportunity for identifying a candidate, from those who actually use its waterways, for the Board of British Waterways. The Government therefore proposes that, once the membership scheme had exceeded 100,000 members, it would invite members to elect one of their number to be nominated to the Government for a seat on the Board of British Waterways.

The membership scheme might be allied to a charitable trust which would be parallel to, but independent from, British Waterways. The trust's purpose might be related to the preservation and restoration of the canal heritage and environment and to the care of historical artefacts and archives. The Government has asked British Waterways to include this possibility in its consultation.

Improved Openness and Accountability

As a public corporation, British Waterways is required to present its annual accounts and report to Parliament. It is also required to submit a corporate plan to the Department of the Environment, Transport and the Regions each year. British Waterways has for many years, however, gone much further this, holding regular meetings with user groups at national and regional level and publishing a range of documents about its activities and policies.

In 1998, for the first time, British Waterways published a document ("Our Plan for the Future 1999-2003") containing proposals for its future activities. It held a public meeting to launch the document and to publish its annual accounts and report for 1997/1998. British Waterways intends to develop this approach and the new Framework Document formally sets out the requirement for British Waterways to publish a summary of its annual corporate plan and hold an annual public meeting. In line with open Government policies, British Waterways will be developing the range of information that it publishes about its activities, plans and finances.

Conclusion

British Waterways is the custodian of a unique part of our heritage. For too long, it has been denied the investment needed to care for and develop these assets properly. This Government is determined to start a new future for British Waterways which will see public and private skills and enthusiasm harnessed to unlock the full potential of British Waterways. This document sets out a way forward which:

• provides public funding to modernise the network;
• maximises the input that the private sector can make; and
• draws in and engages the millions who love our special national heritage.