In its long-term vision paper, 2020,[1] British Waterways identifies the opportunity provided by its potential transition into the third sector. In previous posts we have discussed the role that communities can play within this process and their importance to satisfying BW’s overall vision.
But one must not ignore the financial realities of BWs position, having agreed a funding settlement with government that will see it’s yearly funding fall by 19% to around £39 million per year until 2022/23.[2] The imposition of such cuts brings into sharp focus the need for BW to rethink how it monetises its operations.
Today BW has an income of £255 million and an asset base of £379 million. This will make the new organisation the 13th largest charity in the UK.[3] In its long-term strategy paper, Setting a new course: Britain’s Waterways in the Third Sector, BW recognises the need to access new sources of funding. They argue that the new charities size and status will provide access to funds previously off-limits.
But this fundamentally undermines the scale of the opportunity. The Waterways Project aims to demonstrate that by adopting new and innovative managerial structures, BW will create new opportunities for revenue generation and cost savings, whilst opening the door to myriad new funding mechanisms.
A Community Right to Manage:
This would allow BW to devolve management responsibility for sections of waterway to the local community. The community group or social enterprise would need to be able to demonstrate that it had the skills and capacity to meet all relevant legal requirements as well as standards for management set out by the asset holder.
Furthermore it would have to show that it was able to effectively manage and enhance the asset whilst delivering social, economic and environmental benefits to the local community. These negotiations would form the basis for a ‘licence to manage’ with a formal agreement leasing the assets over a number of years.
Such an arrangement would provide significant cost savings to the new charity as the community group takes over the day-to-day management and general maintenance of that part of the asset, whilst the new charity retains control of the overall maintenance and structural stability.
There would also be an expectation that where significant financial benefits would arise from the lease e.g. from trading activity, energy generation etc., the new charity would benefit through the negotiation of a revenue sharing arrangement with the community.
When considered in isolation neither approach will significantly alter the organisations financial prospects, but if considered on a network wide basis the figures become significant.
Taking such an approach will ensure the organisations long-term financial sustainability, by fostering a sense of common ownership and responsibility, broadening the revenue base and minimising the new organisations liabilities.
The Funding Environment:
But how are such projects to be financed in the short term, when government is reducing its contribution and the funding environment is so restricted?
BW should not look at themselves as donors in a traditional top-down relationship. Agreements reached under A Community Right to Manage take the form of partnerships in which the responsibility for fundraising is shared if not taken on by the community organisation.
This would necessitate the new charity maintaining an organisational capacity to negotiate such arrangements, requiring a certain amount of capital input, but BW’s prime responsibility would be to provide the framework in which community groups can gain access to the asset.
BW’s commitment to third sector transition is built on two assumptions: That voluntary activity will generate significant additional income, and that charitable status will provide access to significant new funding mechanisms.
It is generally assumed that voluntary contributions will generate in the region of £10m in additional income within 10 years.[4] Although significant, this does not come close to tackling the deficit that existed prior to cuts in central government funding.
Traditional routes to donor finance are also increasingly competitive. It would be wrong to suggest that there is less money available. Public Spending has in fact risen over the last three years (although not in real terms). The point is that funding stasis, combined with rising inflation and greater demand for charitable services, is forcing organisations to make do with a much smaller piece of the pie.
Charitable status alone will not solve BW’s funding dilemma. Increased competition means that organisations have to find new and innovative ways to differentiate themselves and the services they provide. Although money is tight, it is not completely inaccessible.
Current trends in policy and finance suggest a shift towards organisations that facilitate and encourage localism and sustainable development. By adopting A Community Right to Manage and opening the asset up to community usage BW position themselves at the forefront of both agendas.
Adopting such approaches will also open them up to new funding mechanisms including the Big Society Bank and the Green Investment Bank.
In practice BW will position themselves at the head of a rapidly inclining curve, providing organisational learning for others in the environmental infrastructure sector as well as public service organisations in general.
Community is not a moral imperative; it is a financial necessity in both the long and the short terms. The Waterways Project is not asking for a monetary commitment, it is asking for a shift in attitudes and a willingness to try something new. The opportunity is now.
[1]http://www.britishwaterways.co.uk/media/documents/BW_2020_A_Vision_for_the_Future.pdf
[2]http://www.waterways.org.uk/campaigns/news/campaign_news/defra_funding_settlement_for_bw_
[3] http://www.britishwaterways.co.uk/media/documents/BW-Setting-a-new-course-Compass-Brochure.pdf
[4] http://www.mondaq.com/article.asp?articleid=115788
