From IWA Head Office Bulletin,
September 2006

Grant-in-Aid cuts - British Waterways

British Waterways has now made public that it has been told that its grant-in-aid for the financial year April 2006 to March 2007 has been cut by a further 7.5% (£4.5 million) in addition to the 5% (approximately £3.1 million) cut that was made in March 2006 and that there is the possibility of a yet further cut of 2.5% (£1.5 million) to be applied this autumn. In total, this would mean a loss of over £9 million to BW in the year, with 15% of its grant-in-aid lost.

BW’s grant comes from both the Department for Environment Food & Rural Affairs and the Scottish Executive. This year, BW was originally advised that it should plan to receive £73.5 million grant-in-aid. Of this, £62.5 million was to come from the Department and £10.9 million from the Scottish Executive. The remainder is earned by BW or comes in the form of specific project funding from local authorities, lottery funders etc. The grants from both the Department and the Scottish Executive were agreed in 2005. The Scottish Executive still intends to pay its grant to BW in full in 2006/07.

Owing to apparent calamitous mismanagement within the Department for Environment Food & Rural Affairs, it has been unable to meet its obligations. This was first realised during March 2006, when the first cut to BW’s budget was made. Since then, the Department’s financial position has worsened. The department must pay a large fine to the European Union for its failure to make prompt payments to farmers via the Rural Payments Agency. The Department has also incurred substantial overspends in correcting the systems that makes payments to farmers and on some other projects. No further funding is available from Treasury so the Department has decided to cut further the budgets of its responsibilities other than those related to payments to farmers.

The Department is now briefing BW (and the Environment Agency and the Broads Authority) about the next Comprehensive Spending Review. This is a process beginning now by which departmental spending for the years April 2008 to March 2011 will be decided. It has advised BW that its grant will be required to decrease still further from the level to which it has now been cut in this financial year. The consequence of this is that BW is likely to lose planned funding of £60 million over the five years from 2006/07 to 2010/11.

BW has begun to assess the implications of the likely need to make savings of between £10 million and £12 million per annum over the next five years and has indicated that it may need to delay or abandon some waterway restoration programmes, close some waterways, shed considerable numbers of employees and increase boat licence fees, possibly by 30% initially.

IWA is deeply concerned by the implications of such a substantial loss of funding and the weakening of British Waterways at a time when it is making attempts to become more financially secure as a matter of its own agenda. At its September meeting, the Association’s Council intends to discuss a possible reallocation of IWA’s resources to enable it to mount an appropriate campaign, and is likely to need the considerable support of members and other volunteers to help to make ministers and other decision makers aware of the consequences of the mismanagement with the Department and the need to review its funding decision-making process.

There are two key decision points in government in the near future, where the impact of public opinion could make a difference. Department for Environment Food & Rural Affairs ministers are due to make financial settlements for the next few years with the Treasury during the next few months. This will probably not happen until early 2007, but the weight of public opinion will need to be conveyed to ministers during the period September 2006 to Christmas so that they understand that cutting grant allocation to the navigation authorities would be very unpopular. The second decision point is when the Department’s ministers apportion the budget that it gets from the Treasury. This is likely to happen in spring 2007 and further lobbying will be required in the run up to it.

Grant-in-Aid cuts - Environment Agency

The Environment Agency also faces dramatic cuts to its budgets similar to British Waterways. Fortunately, the impact on the navigation function with the Agency has been absorbed for the current financial year, but other parts of the Agency’s work, particularly flood defence, have been extremely hard-hit, and this in turn is likely to have adverse implications for navigation in due course. The Agency’s proposed increase in boat licence fees of nearly 50% over three years looks very likely to go ahead, despite complete opposition by inland waterways interests.

The sweetener to the proposed large licence increase was that they were being more than matched by funding from central government for capital repairs over the next few years. Waterway user groups had, however, been sceptical of this – pointing out that the proceeds of substantial increases levied on the Thames about 15 years ago for lock enlargement had not been applied for their intended purposes owing to budget cuts at the time. The same scenario could now repeat itself, with the licence increases being forced through, and the promised capital works in future years now falling under threat because of the mismanagement within the Department for Environment Food & Rural Affairs.

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