Memorandum by Shire Cruisers (IW 44)
THE POTENTIAL OF INLAND WATERWAYS
I am a director of a small company which operates
15 hire boats, about 60 private moorings, and a full-service boatyard
in Yorkshire. I have been doing this for over 20 years. The site
is leased from British Waterways.
I have tried to indicate by headings which of
your topics I have covered. I can speak only about BW. I have
not commented on the particular problems of my own site.
I was disappointed that the Government did not
undertake more radical reforms for the waterways. Many aspects
of BW's work have improved out of all recognition in recent years,
thanks to dedicated, professional staff, but the decision to leave
things essentially as they were means that the tensions at BW's
heart have not been resolved. Whereas tension can be healthy,
in BW's case it too often leads not to creativity but to disarray
and inefficiency, made worse by chronic abuse of its monopoly.
First, two positive examples. BW has over many
years supported the hire trade with marketing initiatives of many
kinds, offering imagination, enthusiasm and significant funding.
BW recognises that hire fleets are powerful introducers of first-time
boaters, and therefore shares the trade's desire to find more
new customers. This equality of need makes the relationship very
Another recent example of co-operation is a
project to evaluate and improve the information and training given
to boat hirers by hire companies. The improvements which flow
from this will help both BW and the hire fleets to fulfil their
duties towards the health and safety of boaters, who are of course
There are many other areas where joint action
with BW benefits BW, the trade and, I hope, customers. Relationships
with many of BW's staff are cordial and productive.
But the relationship between the trade and the
Commercial Department could not be more different. Much of this
paper concerns this other, darker, side of BW.
BW is required by Government to conserve its
heritage, and to provide facilities for public enjoyment. But
Government has set as its priority the maximisation of income
so as to minimise the public cost of providing the resource. It
has therefore never been possible for BW wholeheartedly to embrace
conservation. BW has no means of resolving the deep contradictions
between these objectives.
English Heritage, regeneration agencies and
local authorities have less difficulty than BW with the basic
idea that one building's regeneration can benefit owners of other
buildings without any kind of payment by those owners to the originator.
The whole concept of regeneration relies on the assumption that
public good can result from it; but the necessary combination
of altruism and self-interest eludes BW. Since BW is one of the
largest owners of heritage buildings able to act as a catalyst
for regeneration, this is unfortunate. Has the Government set
BW the right objectives?
Is Funding for development adequate?
My company is about to benefit from the restoration
of two canals, the Huddersfield Narrow and the Rochdale. The gestation
of these projects was very protracted and difficult, which must
in the end have been wasteful. Therefore the steps now being taken
to improve the decision-making process for allocation of funds
to restoration are very welcome, though one should not underestimate
the difficulties and risks of a more centralised and planned approach.
It was actually the freedom given to Local Authorities which enabled
both these projects to build up to critical mass; BW and direct
Government involvement were crucial, but came later on.
One of the best sources of restoration funding,
the Heritage Lottery Fund, may in future be able to give much
smaller sums, and the RDAs may have similar difficulties. This
would pose a significant challenge for the next generation of
Once restoration is complete, funding of maintenance
becomes a real problem. Even though waterways generally are not
self-sufficient, any which have been restored have to recover
their full running costs, from Local Authorities for example.
On the other hand, anyone who doubts the value
of restoring canals need only be shown a recently restored urban
canal, with all its multiplicity of uses and the regeneration
it has brought about. Then a simple photo-montage showing the
derelict canal as it used to be, superimposed on the vibrant new
landscape, will do the trick.
Is Funding for stabilisation adequate?
The Government appears now to have accepted
that the grant in aid is not subsidy for trading loss, but a fee
paid to BW for public services which cannot be charged to individual
userstowpath walkers being the obvious example. Yet the
Government's drive to generate still higher income from all paying
sources goes well beyond a proper concern for efficiency, and
seems to be aimed at further reducing grant in aid.
Comments on funding sources of which I have personal
Licence numbers for boats are growing only slowly,
which suggests that fees are near the upper limit of affordability.
Rents paid by boatyards are significantly higher
than if BW had not been able to exert monopoly pressure on tenants.
BW is scathing about the low profitability of boat companies,
but prefers to attribute this to their "cottage industry
mentality" than to its own milking of the golden goose, so
to speak. Tenants too often find BW oppressive.
Property management is another story. Why is
it a good thing for BW to have all its money tied up in waterside
property, of such mixed quality? A property company which specialised
in secondary and tertiary sites, united only by water, would excite
more suspicion than enthusiasm from the brokers. The National
Trust, which holds a great deal of land having both heritage and
commercial value, is careful to keep a lot of its capital tied
up in boring old stocks and shares. Should not BW diversify?
The widespread criticism of BW's management
of its estate is to some extent unfair, since it is supposed to
meet so many hopelessly conflicting objectives: cash generation,
provision of facilities for users, conservation. However, it is
far from obvious that BW's track record justifies the grand expansion
now under way. Partnership with developers (W for T 4.7) may allow
greater commercial skill to be applied, though BW can be an uncomfortable
Charges to neighbours provide BW with the great
future earning possibility, though one BW might prefer you not
to consider. This relates to BW's success in using its canals
as a 2,000 mile ransom strip, charging owners of land beside the
canal for land drainage, erection of bridges, construction of
marinas and anything else which one neighbour can prevent another
from doing unless enough cash changes hands. The only problem
with this is that it may not always be lawful.
These days, when monopolies are privatised,
they are subjected to regulation, to protect the interests of
their customers. This idea is not new; Parliament first had it
over 200 years ago, when the canals were conceived. Parliament
recognised that it was granting the canal owners a monopoly, so
it created a system of controls. These balanced the need of the
canal companies to earn a return on their investment, against
the regulation of tolls for boat owners and the protection of
owners of land along the canal. This was intended to encourage
them to invest in facilities and thus increase the public benefit
from use of the canal.
When the canals were nationalised, that monopoly
became a public one. Perhaps Parliament doubted that a publicly-owned
monopoly would always be exercised in the public interest, because
it did not repeal those protections for riparian landowners. However,
it is uncertain what the law means today. The Court held in 1995
that these rights were not obsolete, yet BW aggressively denies
that they may still be used. From time to time BW makes voluntary
statements pledging self-control, often under the influence of
exposure to the public eye through enquiries such as your own.
At other times both it and the Government threaten that if the
law were finally shown to be valid, then it would be changed by
Act of Parliamentthough this has not been done.
Ironically, freehold boatyard owners generally
acknowledge and respect BW's need for income, but there ought
to be a balance between this, and riparian owners' needs for security
and profit; and there is no means of striking one.
BW's monopoly of moorings
Boats on BW waters are required by law to have
a permanent mooring (unless they are continuously cruising). Permanent
moorings are provided by
BW in basins inherited from the canal
BW in modern marinas purchased from
independent commercial operators
in freehold marinas;
independent commercial operators
on sites leased from BW;
farmers on the edge of fields; and
householders at the end of their
From each of these categories, BW draws an income.
For moorings under its direct control, it receives the whole of
the mooring charge. For moorings operated by a third party, BW
requires a proportion of the income. For moorings at the ends
of gardens, BW requires a proportion of a notional equivalent
BW rate. In every case, the proportion taken by BW is set by BW.
Market forces do not apply, as the operator has no one else from
whom to buy the service; to refuse BW's terms is to cease trading.
BW is by far the largest operator of moorings, so it would dominate
the market even without taking a share of the mooring charges
of every other boat on the system. This is indeed a monopoly.
(I cannot give figures for the number of boats, or BW's income,
in each category, because BW will not release them.)
BW also enjoys cost advantages not available
to private operators. It can disguise many of its operating costs
in general Waterway expenses; is effectively exempt from business
rates and planning control on its linear moorings; and does not
have to pay a great slice of its earnings to the waterway owner.
Any commercial operator unhappy with the charges
demanded by BW has very limited means of appeal. The Waterways
Ombudsman may not examine commercial matters. IWAAC has discussed
this matter from time to time, but has no power. In some cases
arbitration is an option, but this is expensiveand risky
because there are few experts with knowledge of the field not
already retained by BW.
The Transport Acts place no limits on BW's ability
to exert its monopoly. The Competition Act will not apply if BW's
services are designated as of "General Economic Interest".
Instead, BW is empowered to make such charges as it wishes for
such services as it chooses to provide (S43 of the 1962 Act).
Its actions are perfectly logical, even inevitable: but are they
in the public interest?
The difficulty the trade faces from BW's monopoly
is growing, because of the significant and rapid expansion of
BW's own market share. In the North-east Region, BW has over a
period of years invested in many new marinas, which it operates
itself. This is in apparent contravention of an Undertaking given
by BW to the British Marine Industries Federation at the time
of the 1995 Act. More recently, this trend has spread across the
country, with some high-profile examples of which I don't doubt
others have informed you. Each time BW acquires a new marina,
it repeats that the circumstances were special and that it will
have no further territorial demands.
This will of course lead to tears. There is
no way BW can perform profitably, with its excessive management
structure and wage levels, and its limited working hours. Few
of its managers have experience of dealing with customers who
can take their business away if not satisfied, in the new fields
of brokerage, chandlery and boatyard services. This policy will
do nothing to help run the waterways more efficiently.
These factors provide a strong disincentive
to the private sector creation of waterside facilities for boats.
There is a pressing need to devise a new framework for the relationship
between BW and the trade, to the profit of both. This must include
external regulation of its charges, agreements and anti-competitive
The other side of this coinwhether funding
is adequateis cost control. It is very much in the interests
of waterway users for BW to reduce its costs. The most efficient
way of achieving this is by putting work out to contract. The
Government proposed (Future Status: Facts and Analysis etc., DETR,
18-2-99 paragraph 16) that BW enter into long term partnerships
with the private sector for maintenance. I suggest that much more
of the work of running the waterways could be performed either
more effectively, or cheaper, or both, by contractors.
The fundamental protection for users of the
waterways is that BW has a statutory duty to maintain them. However,
the 1968 Act theoretically obliged BW to maintain some stretches
of waterway in better condition than it actually did, or could
afford, so very sensibly the Government has for some years instructed
BW to maintain instead according to a concept known as "use
and prospects of use" (Framework Document 6.1). Better still,
the new Waterway Standards are open for all users to see and comment
on (both as to what the standards should be, and as to whether
BW is achieving them).
But the Government funked carrying out the necessary
procedure to make the new standards enforceable (public enquiry
followed by Orders under Section 105(3) of the 1968 Act). So now,
if things went wrong, anyone who sought the legal enforcement
of BW's duty would have to prove a case under the old standards,
not the new. This would be very difficult, since BW effectively
has the only copy of the arcane reference data required by the
Act. BW has thus neatly escaped all realistic possibility of challenge,
which may explain the dismissive attitude to users shown by some
Although the Government has decided not to change
the status of BW, it is hard to see how the present structure
can provide long-term security for the waterways, so that their
enjoyment by one generation will not prejudice their understanding
by the next.
Working within the present structure, resolution
of some of the contradictions within BW's view of the world could
help it more efficiently to serve the public. Greater determination
to cut costs by out-sourcing could help reduce dependence on government
funding. The concentration on raising income from a poor property
portfolio, indifferently managed, breeds inefficiency and hinders
good management both of conservation and of recreation; it should
be diversified. Much greater public accountability for BW's monopoly
activities, and withdrawal from areas more appropriately served
by the private sector, would encourage greater private investment
in recreational facilities. Other organisations in the public
sector have been much more successful at learning that partnership
is a two-way process.
Those members of BW's staff who try to serve
the public are following a fine tradition. But the proposition
that the day-to-day management of the waterways should be almost
wholly carried out by a "public sector corporation"
using direct employees is an anachronism. There is scope for radical
When a satisfactory format has been achieved,
it might be appropriate to add waterways presently under the control
of other organisations.
BW at its best is imaginative, constructive
and forward-looking, but at its still too frequent worst can be
arrogant and oppressive.
In its commercial dealings with the boating
industry it shows little sign of appreciating that a bargain should
benefit both sides, and reaches too readily for the intimidating
abuse of its monopoly.
The boating industry works in fruitful partnership
with BW on many issues. This partnership should be extended to
commercial relationships, but can only be so if BW accepts more
effective public accountability.
28 September 2000