Net value of CaRT assets plummet

Published: Monday, 23 October 2023

THE Canal & River Trust's commercial failure looked at its poor commercial performance in its 2021/22 financial year.

Allan Richards article found that its commercial performance was 'a staggering £14.2m (or 30%) down on where it should be'.

The article finished by telling: '... and it is understood that the unpublished 2022/23 Annual Report will hide even worse results'.

With the latest Annual Report published, Allan takes another look at CaRT's commercial performance (poor) and also visits charitable giving (still a disaster area). Finally, Allan takes a look at boating income with a surprising outcome.

Commercial Performance

In a year that saw 10% inflation, one would have hoped that CaRT's net commercial income would rise significantly. Instead, it fell 3% from the previous year. This was, in part, due to making a £7m provision for future costs. The Annual Report explains (page 53):

'Losses were experienced in the year due to the requirement for the Waterside Places Joint Venture to make provisions for future costs of building repairs under the Building Safety Act on previously completed developments'.

The Building Safety Act 2022 was introduced in the wake of safety concerns for occupants of high-rise buildings after the 2017 Grenfell Tower tragedy. The provision was made because CaRT is liable for part of repair costs of sub-standard housing it built in association with a third party.

Hopefully, the £11m allocated will not rise over time like the works at Toddbrook reservoir which have risen from an early estimate of £10m to £40m....

CaRT's commercial performance is now down 33.5% on where it should be.

Net assets fall

More worryingly, well hidden in CaRT's Annual Report is that the value of (non-operational) net assets has fallen. The report reveals that the total value of CaRT's net assets fell by £167.1m (16%) over a 12 month period.

On page 64 of the report, CaRT explains the reduction as follows:

'The total reserves [i.e. net assets] of the trust have reduced from £1,042.3m at 31st March 2022 to £875.2m at 31st March 2023. This is principally due to the deficit for the year of £22.8m, losses on investments of £61.9m and actuarial losses on the defined benefit pension scheme of £82.4m'.

It is understood that CaRT's pension trustees are now concerned that the trust may become insolvent and have asked government to extend a backstop arrangement. The arrangement, made in 2012 and expiring in 2031, commits government to pay up to £125m into CRT's pension fund should it become insolvent and unable to meet its debts.

Not true!

In attempting recently to justify above inflation licence fee rises, CaRT claims:

'Alongside the changes to boat licensing, we continue to grow income from property and non-property endowment ...'.

Fairly obviously that is a false claim ...

Number of Friends down

When it started, CaRT used to brag that within ten years (i.e. by 2022) it would have 10m regular donors (known as Friends) producing £10m net per year.

So what is the position now? The Annual Report tells us that the number of Friends is still in decline having fallen yet again. At year end, it was less than 26,000 having fallen from over 30,000 a few years ago.

CaRT set itself a target for 31,500 for the year and employed more 'chuggers' to achieve it. Instead of an increase, the number of Friends fell.

And more losses

The Friends Fund received income of £2.8m, down on the previous year. However, expenditure on raising that income was £3.4m resulting in a loss of £600,000.

It is estimated that CaRT has lost somewhere between £5m and £6m over eleven years trying to raise charitable income.

Again, in trying to justify above inflation licence fee rises, CaRT claims:

'We are targeting a step-change in income generation from towpath users and other supporters, with fundraising income projected to grow by 10% each year'.

... are we to assume that CaRT actually mean that they will reduce the loss of £600,000 by 10% each year?

Income from boating rises

Whilst income from CaRT's commercial income streams has fallen and charitable giving continues to lose money, income from boating has increased.

Net income from boating has risen almost 7% from £32.3m (2021/22) to £34.5m demonstrating how easy it is for CaRT to increase income from this stream by putting up licence and mooring fees. The rise would have been more but was held back by an increase in unlicenced boats.

Net income from boating (£34.5m) now exceeds CaRT's commercial income (£32.6m)

... yet CaRT tries to belittle boaters by suggesting they don't contribute enough.

The last word

The last word will be left to Mark Tizard, former Vice President of the National Association of Boat Owners (NABO), who posted on Facebook:

"What I find galling is that there’s no humility no honesty in recognising their own failings. The government hasn’t reduced their loan or restricted and the last five years it has honoured the grant agreement in full over the last 15 years.

"It is CRT that have failed to uphold their undertaking to raise funds through other waterways users, friends, commercial partnerships etc etc that has meant that the government has had to offer a new grant. Instead they attempt as usual to shift the blame away from themselves onto government’ and no doubt boaters (remember the stoppages it’s your fault that the infrastructure fails not the lack of maintenance and the current wait until it breaks policy). If they at least acknowledged that their previously over-ambitious plans of raising money had failed we might at least think they had a slight chance of raising additional funds from new boaters in the future."

Our grateful thanks to Allan for the considerable effort he took trailing through the many documents to be able to formulate this most involved article, for we are sure it will be most appreciated by boaters to learn the reality.