PROPOSAL FOR THE DRAFT REGULATORY REFORM
(BRITISH WATERWAYS BOARD) ORDER 2003|
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.
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
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.
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.
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.
The Committee is satisfied that no necessary protection
would be lost under Proposal 1.
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: http://www.publications.parliament.uk/pa/cm/cmdereg.htm Back