HC Deb 23 June 1977 vol 933 cc1908-20

Motion made, and Question proposed, That this House do now adjourn.—[Mr. James Hamilton.]

11.45 p.m.

Mr. Nigel Spearing (Newham, South)

I wish to raise the matter of capital provision for waterways. My criticism of the Government is not of our present Government alone but of successive Governments. I hope that the Minister will understand my use of the phrase "Whitehall thinking". My criticism is that Whitehall thinking, knowledge, understanding and vision of waterways has been sadly deficient. I hope that in this Government's attitude to integrated transport that attitude will change.

I think of Whitehall thinking in its entirety but Ministers are responsible. Although the Minister may be personally new to this matter, I hope that he will press upon his right hon. Friends that the reputations of past Ministers have not been high in this matter. I hope that that will change in time.

Our thinking on this subject has sometimes been wrong. Whitehall often thinks of waterways in terms of the British Waterways Board alone. That is wrong. Our estuaries and rivers and extensions to them are just as much waterways, albeit extensions of ports, as the waterways run by the BWB. The Manchester Ship Canal is perhaps the biggest and most important waterway in this country. It is said that what Manchester does today the nation does tomorrow. Alas, that was not so in the case of Sheffield, Leeds and Birmingham, but it shows that, surrounding the coast of this country, we have a natural waterway—the sea—and that access to the sea can be made available for craft or some seagoing vessels by relatively small improvements to the important estuaries and rivers which drain to our coast.

Perhaps we have been too well provided with the waterway around our coast to realise that. On the Continent of Europe conditions are different, but because they are not so well placed with the immediate sea coast they think differently. I do not want my Government to be forced by the EEC to harmonise capital provision for waterways as they may be for roads.

I hope that the Government will adopt some of the systems already in existence on the Continent, especially in Germany, because of their merits. The German method of investment in waterways is comparable to ours in roads. The capital sum is made available, there may be some calculation of return, but there is no interest cost and there is no test such as I understand our Government make on investment in new waterways, which is comparable to the 10 per cent, test for industry. That is the big difference. I do not wish that change to come by being forced on the Government; I hope that they will adopt it of their own volition.

There is a long history of discussion of this matter in the House. On 3rd March 1972 I initiated a debate on the matter, when I quoted a reply from the Minister, written on 16th February 1972, to the effect that matters of waterways were under continual study. That was in reply to a claim that studies had shown that developments of waterways would not be economic. It is shown throughout the history of this matter. This has been the sort of reply that we have had all along. The Environment Sub-Committee of the Select Committee on Public Expenditure 1974 noted that expenditure on canals was not eligible for the transport supplementary grant and recommended that the exclusion should be reconsidered.

Alas, the Government response to this recommendation was that since there was plenty of subsidy given to the British Waterways Board they did not consider that inclusion of this expenditure in the TSG system would serve any useful purpose. The Government were responding to the belief that the Board was concerned solely with waterways, and in doing so they showed ignorance of the situation as it exists.

But it is not just a matter of the TSG. Section 8 of the last Transport Act gives grants for new railway sidings and extensions of railways. Why not give them for extensions of waterways? The principle is the same. I hope that the Minister will bear that point in mind.

In the debate on the Select Committee report in May 1975 there was no proper reply from the Minister. Unfortunately, we have to accept that sort of thing frequently. On 7th May I received the same sort of unsatisfactory answer when I asked what was the difference between the railways and waterways, and why they were dealt with differently. The then Minister replied: Canal users do not pay equivalent taxes, but they can and do contribute directly, in tolls, to the cost of the facilities they use."—[Official Report, 7th May 1975; Vol. 891, c. 454.] The Government are falling back on the idea that the waterways are like the old toll roads, and should be financed as such. For a Government in 1977, looking forward to an integrated transport system, that is an attitude that is backward-looking to an extraordinary degree.

The present Government criteria are spelled out in two Orange Papers published earlier this year. Paragraph 11.18, one of the few sections on waterways says: The Government are at present considering the British Waterways Board's proposal to improve the Sheffield and South Yorkshire Naviation at a cost of about £5 million. The most important thing about the transport consultative paper is the appendix in Volume 2, which sets out in detail the assessment of the return on capital of the infrastructure. The calculations are made for the cost-benefit analysis in roads. Roads are dealt with separately—there is a once-for-all grant. The cost-benefit analysis, through the COBA system, was used. The most extraordinary words are used on Page 99: Time savings are valued at the cost to the employer of employing the traveller. In other words, if someone goes to work quicker in a car, it will calculate the cost of his time. That is extraordinary. If one applied that sort of cost-benefit analysis to the waterways there would be no time-saving, but there might be a saving of the environment and many other benefits that are not calculable by the same criteria applied to the roads.

Unfortunately the Government do not apply cost-benefit of any sort to the waterways, so it cannot be used anyway. If there were such a procedure it would need to be adjusted to take account of the value of the waterways as such.

Following the imaginative document produced by the Inland Waterways Association, called "Barges or Juggernauts" the then Transport Minister published a Press notice which said: In particular places and for particular kinds of traffic waterways are the right transport mode, and I hope that wherever these conditions exist they will be identified and pursued". The then Minister for Transport said in a letter to the then Secretary of the Inland Waterways Association: I entirely agree that some waterways may be able to play a significant local role and the possibilities should be thoroughly investigated. He concluded by saying: I look forward to seeing the results of these studies. And you will be pleased to know that the Department itself is proposing to commission some general research into the prospects of greater use of waterways for transport purposes. Hurrah! At last something is to happen.

The Inland Waterways Association put forward some proposals to the Minister, and I believe that the Board suggested a particular research remit and said that certain transport authorities in the Netherlands would be able to help. But, alas, nothing came of it.

I had tabled a Question on this matter for answer yesterday. In response to it, the Minister has written to me as follows: The proposal put forward by the British Waterways Board in December 1974 was for associating the United Kingdom with research being undertaken in the Netherlands and my officials told the Board that the work in question seemed inappropriate to the circumstances of water traffic in this country. My first comment is to ask why an official took this decision, although the Minister, through letter and Press statement, had said that studies were to continue. I hope that my hon. Friend the Minister will say what studies were continued and why the discontinuance or refusal of this effort—an imaginative one —was refused by officials and apparently not by Ministers.

The second point about this strange incident was that it was left to the judgment of officials, and apparently they decided that the work was inappropriate. I understand that some of the work was an assessment of traffic likely to be available on waterways. I would have thought that the Dutch were pretty good at that work. I would not have thought that the mathematical technique of network analysis was inappropriate to a fairly wide section across the international frontiers. Although the Dutch experience may be different, I do not think that the formula used would have been inappropriate to certain parts of this country. I put it to the Minister that, the Government having said that they would do something, officials—not the Minister—took it into their hands to refuse the offer without any reference to ministerial level—something which, I suggest, should not be tolerated.

I have tried to make the case that Government or Whitehall thinking has not taken proper cognisance of the possibilities of improving the waterways—not necessarily in linear miles but in particular areas. The Sheffield and South Yorkshire Navigation project has not been agreed to because, although the cost would be relatively small, the interest on the depreciation would be added to total cost. That is an inappropriate form for this matter, although even that navigation showed a pretty reasonable return.

We are expecting a re-examination of transport in the Government's White Paper, though I doubt whether it includes a waterways section. It is high time that the Department of the Environment reassessed its attitude to waterways. Waterways are a track not to be compared with others. They are a track-plus—because they cater not just for commercial navigation but for recreational and sporting activities, including sailing, canoeing, and fishing. Waterways can also give a raw water supply for industry and others requiring it. they can fulfil drainage functions, they have flood control functions, and possibly pumped storage functions, too.

Conventional methods are inappropriate. It is still less appropriate to try to calculate commercial return on the same basis as that of the nationalised industries, because the whole situation is different. I look forward to the Minister's saying that the matter of capital for waterways is covered by the White Paper on transport—I suspect that it is not— and that his Department will undertake a deep and searching examination of these matters. If it will not, I suspect that a Select Committee of the House will have some severe remarks to make. I understand that it is already engaged on a study of this matter. I hope that the Minister will ensure that his Department does better in future.

I hope that my remarks have not been too personal, but I also hope that Whitehall thinking will now take a turn and I look to the Minister to see that it does.

12.1 a.m.

The Under-Secretary of State for the Environment (Mr. Kenneth Marks)

I congratulate my hon. Friend the Member for Newham, South (Mr. Spearing) on obtaining this debate. I know that he has a long-standing interest in British waterways and a detailed knowledge of the subject. There are some hon. Members who think that my hon. Friend's only interest is his anti-Common Market stance, but I, as an Environment Minister, know better.

I am grateful to my hon. Friend for advance information on some of the points that he raised and I shall try to be as helpful as possible in answering them. He reminded me that British waterways are not the concern merely of the British Waterways Board. As a Manchester Member I am well aware of that. As a child I always thought that the seven wonders of the world were the Halle Orchestra, the Manchester Ship Canal, the Manchester Guardian—as it was then —Manchester Waterworks, Manchester United, Manchester City and Manchester's education. I recently inspected the full length of the Avon Navigation, which is also not part of the British Waterways Board's responsibility. There has been a splendid improvement of a canal that had been neglected.

My hon. Friend mentioned a number of points in connection with the White Paper on transport but as this is to be published on Monday I am sure that my hon. Friend would not expect me to anticipate the contents. I seem to have spent a great deal of time replying to debates recently saying that the White Paper on transport will be published next week and that the White Paper on the water industry will be coming out shortly, so my style of reply is rather cramped, because I must not anticipate what is in those White Papers.

First, I shall try to put my hon. Friend's particular points in context.

The Transport Act 1962 provides powers for the Board to borrow money for capital purposes, and on a temporary basis for other purposes. The Transport Act 1968 limits the total borrowings which may be outstanding at any time, and also provides for the Secretary of State to make grants from time to time to the Board.

As a statutory body dependent on public financial support, the Board's requirements for investment on capital account are considered and settled by the Department in consultation with the Treasury—normally as an annual exercise—within the framework of the Government's policies for public sector spending. The present position is set out in the Government's published public expenditure plans, which show the actual capital investment by the Board sanctioned since 1971 and the agreed projections up to 1981. The provision for the current year is £2 million, and similar provision, at 1976 survey prices, is proposed for each of the next three years.

In January each year the Board submits to the Secretary of State a five-year investment review in the context of the annual survey of public expenditure, listing any proposals for expenditure on the Board's fixed assets—land, buildings, waterways, docks, craft, plant, and so on —which is prima facie eligible for advances from the National Loans Fund.

The programme as a whole is discussed with the Department and on completion the Board is given a provisional investment ceiling for two years ahead and confirmation of ceilings previously set for the current year and the following year.

The Board's report for 1976, which was laid in the House on 15th June, shows that total expenditure last year under its investment programme was £1.725 million. Actual total borrowing has now reached £11.9 million, against a current limit of £12 million. The Transport (Financial Provisions) Bill, to which the House gave a Third Reading on 14th June, provides for the raising of this limit to £20 million. Any proposals of a revenue-carrying nature would, if sanctioned, have to be financed from this provision and to comply with the procedure outlined.

In the case of projects costing over £250,000 the Department would make its own detailed appraisal, as was done for the Sheffield and South Yorkshire Navigation scheme. In fact, that is the only project costing over £100,000 that has been submitted by the Board in recent years.

My hon. Friend mentioned the Select Committee's report, in which it drew attention to the Board's view that major new investment is needed and recommended that outstanding matters should be brought to the attention of Ministers. Perhaps I should remind my hon. Friend that the Select Committee said: In particular we would draw attention to the view expressed by the Board that major new investment is needed both in craft and in route improvements and that unless some positive lead is given or action taken by the Government, the industry will die. We recommend that matters still outstanding between the Board and the Department of the Environment should be brought to Ministerial notice for urgent review". Of course that was done, and Ministers are well aware of the position.

As I have said, however, the only major investment proposal before us in recent years has been the Sheffield and South Yorkshire scheme. I know that my hon. Friend is a strong supporter of that scheme and I am aware of his concern about the basis on which the Government declined to make finance available for it. I can only repeat the assurance given to him my my right hon. Friend the Minister of State in the debate of 25th May last year, when he refuted the allegation that we applied differing standards of assessment as between waterways and road projects—that although the techniques of assessment must differ the same principle of cost-benefit analysis is applied to both categories.

The techniques differ, because for one thing, in the case of a canal project the expected benefits can be related to market-based direct charges for the service and much of the evaluation can be made in terms of a direct financial return. This is not so with roads, and the return on road investment therefore has to be assessed indirectly through cost-benefit evaluation. The salient point is that there are always more desirable road schemes than the funds available will accommodate at any time and the assessed return on such schemes typically exceed the figure of 15 per cent., which is the minimum acceptable return for a high-risk project.

I have discussed this with the Board and I know that it is unhappy with this criterion, and claims that the Department has underestimated the likely increase in traffic to be expected as a result of the scheme. There is inevitably, in a case such as this, room for disagreement about forecasts—when I dealt with transport matters, I spent some time on the COBA scheme to which my hon. Friend referred—but the Department has gone into the matter very thoroughly and is satisfied that, even on the basis of the most favourable assumptions that we feel it would be prudent to make, a return of as much as 15 per cent, cannot be confidently foreseen for the SSYN project. Some of the traffic forecasts that we were using then have turned out to be far too high.

For example, we included in our calculations an estimate for 400,000 tons of steel and we think now that a more accurate estimate would have been 30,000 tons.

Mr. Spearing

Does the 15 per cent, return include a cost-benefit analysis of the benefits to people other than British Waterways in terms of cash as well as the reduction in road wear by lorries and other benefits? Unless this is done, there will be a difference in the assessment.

Mr. Marks

With roads and canals we attempt to make an assessment of the environmental advantages of the proposed work. It is difficult to make such assessment and calculate the effect of an improvement in, say, the Sheffield and South Yorkshire Navigation on something else many miles away. However, we do try to make these assessments.

My hon. Friend has mentioned the environmental or side benefits of such a scheme. He may think that they have been accorded insufficient weight; the benefits to towns bypassed by new motor ways or bypasses may be great but they are difficult to assess in pounds and pence.

There is benefit not only in environmental terms but to the general economy and amenities of that area, but in neither case is it possible to quantify these benefits accurately. I suspect that my hon. Friend and I would argue for a long time about the importance or priority which should be given to them. However, they can certainly be taken into account —I believe that "qualitative weighting" is the technical term—in taking decisions on particular schemes, but they are most unlikely ever to be of more than marginal significance.

In the case of road projects, the un-quantifiable items would usually provide a net positive balance, but as I have said, any such projects which are acceptable invariably meet the financial criterion of a percentage return on investment.

The BWB has indicated its wish to seek alternative sources of finance for the SSYN, such as a partnership with local authorities, industry or commerce, or the EEC, if I may use such an expression in my hon. Friend's presence. However, the crux of the matter is the viability of the scheme itself. If it were possible to find partners who would be prepared to bear a sufficient element of the risk to make the Board's own investment viable by our criteria, of course we would be willing, as we have already indicated, to look at the scheme again. My hon. Friend has drawn attention to the different methods of financing canals in other countries, particularly in Western Germany. I am sure that he will recognise the totally different scale of operation there, with waterways like the Rhine or the Scheldt. My hon. Friend mentioned the prospective research in co-operation with Dutch experts, about which he had tabled two Questions for answer on Wednesday 22nd June. Unfortunately, as far as this House is concerned, 22nd June did not exist. I have, however, written to my hon. Friend, as he mentioned, answering his points.

The problem was that the project was geared so much to Continental conditions that, as he would expect, there is a great deal of difference, and I undertake to examine that further. It is difficult to get information on this, but I shall seek information, from both German and Dutch contacts and see what can be done.

I must refer to the Board's general financial position and prospects, so as to present a balanced picture. The Transport Act 1968 placed certain obligations upon the Board, particularly for the maintenance of the existing waterways system. With the passage of time and the continued decline of its commercial operations as well as changes in the financial climate, the extent to which the Board has been able to finance its essential expenditure from revenue has declined, from 74 per cent, in 1970 to less than 50 per cent this year. The grant aid from the Government has correspondingly increased, and now stands at £12 million. Given the increasingly adverse ratio of revenue to expenditure and the small scope for increasing revenue, the Board's capacity for funding borrowing for capital investment is clearly very restricted. Nor is this the whole story.

The House is well aware that, following the Board's submission in 1970 of a programme designed to bring standards of maintenance up to the requirements of the Transport Act 1968, the Government commisioned a comprehensive study by consultants and that this report—the Fraenkel Report—was handed in last year. It confirms that the Board has indeed been unable to meet the obligations placed on it by that Act and makes recommendations for a very substantial programme of deferred maintenance.

As my right hon. Friend the Minister of State said in the debate of 25th May 1976, we can see no prospect of obtaining finance of the order of magnitude required for this programme through the normal Treasury channels. This was a prime consideration in proposing, in the Green Paper of March 1976, that the waterways should be brought within the scope of the water industry. We received a wide range of comment on that proposal, and the results of the Government's further consideration of the future of the waterways and the BWB will be set out in the White Paper on the water industry which is due to be published shortly. It is proposed to release the Fraenkel Report at about the same time.

My hon. Friend referred to the importance of the canals for water supply and their potential contribution as channels for moving water between regions. Already nearly half the Board's total revenue from the waterways comes from those water charges—far more than from tolls and licences, and so on. I know that the regional water authorities are very conscious of the importance of the canals.

The Question having been proposed after Ten o'clock on Thursday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at fifteen minutes past Twelve o'clock.