British Waterways should not be expected to bear most of the financial risk for the restoration of canals, the Environment, Food and Rural Affairs Select Committee has concluded.

In a report published yesterday, the Committee says that canal restoration can produce knock-on benefits such as more jobs and visitor income. But the risks have to be spread more widely among the public sector instead of just British Waterways, (BW) which often gets little immediate direct benefit from such work.

The Committee also followed up some of the issues raised in its report on BW last year. The Committee welcomes the clear improvement since then in relations between BW and its sponsoring Department, and the greater clarity about Defra’s priorities for the canal network and BW’s autonomy to manage itself.

According to the Committee, the Government needs to develop a mechanism to score and prioritise public investment in canal restoration according to the external benefits created, and decide how the financial risks of such projects should be borne. The Committee inquiry was prompted by BW's decision in February this year to withdraw from the partnership to restore the Cotswold Canals because of the financial risk involved.

“We are very pleased that the Department and British Waterways have clarified their roles and mended their relationship.  This has allowed BW to receive a grant settlement that was as good as it could have expected in the circumstances,” said the Chairman of the Committee, the Rt Hon Michael Jack MP. 

“But British Waterways is still having to bear most of the risk of restoration schemes which are of greater short term benefit to others than to itself.  At the same time the Government is asking BW to concentrate on maintaining its existing network. If the public sector wants to obtain the benefits of canal restoration work, it needs to share the risk among the public bodies whose purposes the restoration serves. Government also needs to prioritise the schemes according to the public benefits they provide.”

The Committee also followed up some of the issues raised in its report on BW last year. The Committee has concluded that while the grant settlement from the Department for Environment, Food and Rural Affairs (Defra) up to 2011 is acceptable, that Defra and BW need to decide how to keep the canal network in good condition when BW's property income is likely to fall.

On the Cotswold Canals restoration, the Committee concludes BW should have consulted its partners about its withdrawal earlier, so that they could have had a chance to see if alternative funding was available.  It also believes that BW should not be spending up to £600,000 on consultants to advise on its future structure when it is so obviously short of money.