Estimating the Impact on Public Benefits from Changes in Investment in the Environment Agency Waterways Final Report

5 June 2014

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Impact on Benefits from Changes in Investment in EA Waterways Final Report

A report submitted by ICF GHK in association with Aberystwyth University Date: 5 June 2014 Job Number 30259703

Matt Rayment ICF GHK 2nd Floor, Clerkenwell House 67 Clerkenwell Road London EC1R 5BL T +44 (0)20 7611 1100 F +44 (0)20 3368 6960 www.ghkint.com

Impact on Benefits from Changes in Investment in EA Waterways Final Report

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Document Title Estimating the Impact on Public Benefits from Changes in Investment in the Environment Agency Waterways

Job number 30259703

Prepared by Matt Rayment, Mavourneen Conway, Svetlana Batrakova, David McNeil, Mike Christie and Kyriaki Remoundou

Checked by Matt Rayment

Date 5 June 2014

ICF GHK is the brand name of GHK Consulting Ltd and the other subsidiaries of GHK Holdings Ltd. In February 2012 GHK Holdings and its subsidiaries were acquired by ICF International.

The authors would like to thank the Steering Group for their contributions and comments on the work. The Steering Group members included: Margaret Read, Colin Smith, Arif Al-Mahmood, David Foot and Liz Sheppard (Defra); Tony Kirstein and Angela Quayle (Environment Agency) and Brian MacAulay and Tony Harvey (Canal & River Trust). Professor Nick Hanley acted as an independent peer reviewer and provided helpful comments on the method and results.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Contents

Executive Summary ...... 1 1 Introduction ...... 5 1.1 Policy context ...... 5 1.2 Aim of the study ...... 5 1.3 Methods ...... 5 1.4 This Report ...... 6 2 Introduction to the EA Waterways ...... 7 2.1 The EA Waterways ...... 7 2.2 EA Aims and Objectives for the Waterways ...... 9 3 The Benefits of the EA Waterways ...... 10 3.1 Waterways and Ecosystem Services ...... 10 3.2 Valuing the Benefits of Inland Waterways ...... 10 3.3 Existing Evidence of the Value of UK Inland Waterways...... 11 3.4 Benefits of Waterways Investments ...... 11 4 Waterways Assets and Investment Needs ...... 13 4.1 Waterways Assets ...... 13 4.2 Types of Expenditure ...... 14 4.3 Purpose of Assets and Investments in them...... 14 4.4 Grouping of Assets ...... 16 4.5 Types and number of waterways assets ...... 18 4.6 Asset Condition ...... 18 4.7 Location of waterways assets ...... 19 4.8 Asset Lifespans ...... 19 5 Understanding the Benefits of Potential Changes in Expenditure in the EA Waterways ...... 22 5.1 Introduction ...... 22 5.2 Logical framework ...... 22 6 Valuation survey and methodology ...... 27 6.1 Introduction ...... 27 6.2 The survey instrument ...... 27 6.3 Survey administration and sampling strategy ...... 32 6.4 Survey response ...... 32 7 Results of the Valuation Survey ...... 35 7.1 Introduction ...... 35 7.2 Summary of choice experiment results ...... 35 7.3 Willingness to pay for changes in asset condition ...... 36 7.4 Results: Count travel cost and Contingent behaviour ...... 38 8 Aggregation of benefit estimates to the entire EA navigable rivers network ...... 39 8.1 Introduction ...... 39 8.2 Estimating Waterway Users ...... 39 8.3 Estimating WTP for protecting and improving waterways ...... 40 8.4 Estimates of per visit and per km WTP for improvements to river assets ...... 42 9 Benefit cost analysis of investing in the waterways assets ...... 44 9.1 Methodology ...... 44 9.2 Definition of Expenditure Scenarios ...... 44 9.3 Modelling Changes in Asset Condition ...... 45 9.4 Costs of the modelled expenditure scenarios ...... 49 9.5 Benefits of the modelled scenarios ...... 53 9.6 Comparison of costs and benefits ...... 58 iii

Impact on Benefits from Changes in Investment in EA Waterways Final Report

10 Conclusions ...... 65 Annex 1 Report of the Valuation Study by Aberystwyth University ...... 67

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Executive Summary

This report estimates the benefits of investments in the waterways managed by the Environment Agency in England and Wales The Environment Agency (EA) is one of the major navigation authorities in charge of inland rivers, estuaries and harbours in England and Wales, managing approximately 1000km of Britain's rivers, including the Thames, Wye, Medway, Nene and Ouse. In order to assess the costs and benefits of potential management scenarios, Defra commissioned ICF GHK and Aberystwyth University to estimate the value of the benefits of investments in these waterways and to assess how changes in investment will affect the value of these benefits.

Waterways provide a range of benefits to people and the economy, but previous studies have not examined the marginal benefits of investments in waterways assets Studies demonstrate that waterways deliver a range of ecosystem services, including provisioning services (such as the supply of freshwater), regulating services (such as protection from flooding) and cultural services (such as recreation, tourism and people’s appreciation of their contribution to landscape, wildlife and cultural heritage). Based on recreation and residential amenity values only, a recent study estimated these values at between £109,000 and £730,000 per km per year for a range of canal and river waterways, with typical values for EA managed river waterways of between £109,000 and £129,000 per km per year. However, until now, there has been no firm evidence of how these values are influenced by investments in the waterways.

Maintaining these benefits depends on continued maintenance and investment in waterways assets The EA has a responsibility to maintain its navigation assets which keep its waterways open to navigation. In some cases, there is the power to set, and then manage water levels. It has a general duty to promote recreation on and around inland waters as far as it sees fit. Its navigation responsibilities include maintenance to ensure safe workplaces for staff and safe passage for customers, provision of some facilities for the public and the operation of weirs, locks, sluices and other structures. Expenditures in the waterways comprise capital investments in the provision, restoration and replacement of assets, and annual expenditures in the maintenance and operation of assets and facilities. The EA has developed an Assets Inventory, which currently lists 2900 individual assets and records their condition, as well as the cost of maintaining and eventually replacing them. For the purposes of the benefits assessment, the many different types of waterways assets can be grouped by function, in providing or maintaining: ■ Navigability of the river – e.g. locks, weirs, breakwaters, gaugeboards, signage; ■ Access to the water – e.g. boat rollers, moorings, slipways; ■ Facilities for boats – e.g. power and water points, refuse and sanitary facilities; ■ Access to river bank – e.g. access routes, bridges and car parks; ■ Facilities for bankside visitors – e.g. toilets, campsites and picnic areas. While these assets primarily support recreation, they may also support other functions such as water supply and flood management. The ability of the waterways assets to fulfil their intended purpose depends on them being maintained in workable condition, and periodically replaced when they reach the end of their working life. The EA Assets Inventory assigns a condition score to each asset, on a scale of 1 to 5, where a score of 1 indicates that a particular asset is in very good condition, while a score of 5 suggests that it is in poor condition. Without continued expenditures on maintenance, and periodic investments to renew them, assets would decline in condition until they were eventually unfit or unsafe to use, eventually preventing

Impact on Benefits from Changes in Investment in EA Waterways Final Report

navigation and bankside recreation. Some facilities that require continuous management, such as refuse points, toilets and sanitary facilities, would close immediately.

The study used a choice experiment survey to value the benefits of investment in waterways assets 759 visitors (234 boaters and 525 other recreationists) were interviewed at 14 sites on 4 rivers (the Ancholme, Great Ouse, Medway and Thames) in summer 2013. Each respondent was asked to express a preference between three scenarios – an improvement scenario, a maintenance scenario and a deterioration scenario. Each scenario involved different levels of delivery of different functions (navigability of the river, access to water, facilities for boaters, access to the riverbank and facilities for visitors), as well as a different cost to the respondent’s annual household budget.

The survey results were used to estimate the willingness to pay to maintain and improve waterways assets The choice experiment survey found that: ■ River users attain greater benefits from protecting river assets against a deterioration in condition than improving assets to their best possible condition; ■ Boaters tended to be willing to pay more to maintain and improve assets on navigable rivers than riverbank users. ■ Boaters tended to most highly value assets that support “Navigability of the river” (e.g. locks, weirs) and “Boat facilities” (e.g. water points and sanitation systems), while riverbank users tended to value assets that support “Access to the riverbank” (such as footpaths and car parks).

The total benefits of investments in the waterways were estimated by aggregating the WTP estimates across the estimated population of boating and other recreational users The number of annual visitors was estimated at between 5,000 on the Ancholme and 289,000 on the Thames. Riverbank users comprised an estimated 84% of the overall total and boaters an estimated 16%. As a result, the aggregate willingness to pay of riverbank users was found to be higher than for boaters. It was estimated that: ■ The overall annual willingness to pay to improve assets on the four rivers totals £0.7 million on the Ancholme, £6 million on the Medway, £34 million on the Great Ouse and £96 million on the Thames ■ The overall annual willingness to pay to prevent a deterioration of assets on the four rivers totals £1.4 million on the Ancholme, £19 million on the Medway, £37 million on the Great Ouse and £114 million on the Thames ■ The highest willingness to pay was for maintenance and improvement of access to the river bank, followed by bankside facilities, the navigability of the river, boat facilities and access to the water. These overall estimates of willingness to pay were used to estimate the benefits of a unit improvement or decline in the condition of each group of waterways assets on each river.

The overall benefits and costs of potential changes in investments in the EA managed waterways were assessed The benefit cost analysis involved five stages: 1. Four scenarios were defined, each involving a different level of expenditure in waterways assets; 2. The effects of each of these expenditure scenarios on asset condition were modelled, using a set of simple assumptions; 3. The costs (maintenance and capital costs) of each scenario were estimated; 4. The benefits of each scenario were estimated, using the survey results for WTP for unit changes in the condition of different assets; and 2

Impact on Benefits from Changes in Investment in EA Waterways Final Report

5. Estimates of the costs and benefits of each scenario were brought together and compared. The four scenarios examined were: ■ Scenario 1 – Zero expenditure – resulting in deterioration in condition of all assets until they are no longer fit for purpose. ■ Scenario 2 – Maintenance only - assets are maintained, but not replaced. They deteriorate gradually in condition over the course of their lives, until they are eventually unfit for purpose, but this decline takes longer than under Scenario 1. ■ Scenario 3 – Moderate investment - assets are maintained and replaced before they reach poor condition (when a condition score of 4 is reached). ■ Scenario 4 – High investment – assets are maintained and replaced at an earlier stage than under scenario 3 (when a condition score of 3 is reached).

The condition of each asset in the EA Assets Inventory was modelled under each scenario, using a set of simple assumptions EA estimates of the expected lifespan of each type of asset, with and without maintenance, were used to estimate an expected annual increment in asset condition under each scenario, assuming straight line depreciation. For Scenarios 3 and 4, the model assumed that all assets were replaced when they reached the threshold condition score, returning their condition score to 1. These assumptions were considered to be reasonable and necessary. While the estimated asset scores are approximate, and subject to some caveats, they are considered to provide the best possible measure of overall changes in asset condition given the available information. The result of the four scenarios is a rapid deterioration in average asset condition scores in Scenario 1, a more gradual decline in Scenario 2, a fluctuation around a gradual upward trend in Scenario 3 and a steep improvement in Scenario 4.

Capital and annual maintenance costs were estimated for each scenario The EA Assets Inventory includes estimates of the replacement cost and annual maintenance cost of each individual asset. The total annual maintenance cost of all assets in the inventory is estimated at £6.4 million, while the cost of replacing all of these assets is estimated to amount to £1,320 million. This indicates the very high cost of capital investments compared to annual expenditures, and means that Scenarios 3 and 4 have much higher cost than Scenario 2. Assets that support navigability of the river (including locks, weirs, channels and other major infrastructural assets) account for a very high proportion of overall costs – 90% of maintenance costs and 85% of replacement costs. The model was used to estimate capital and maintenance expenditures under each scenario. Under Scenario 2, costs decline to less than £1 million annually by 2040 as assets gradually reach the end of their lives and are not replaced. Under Scenarios 3 and 4, the levels of expenditure are much higher, and fluctuate considerably, as the model predicts that significant groups of assets need to be replaced simultaneously.

The overall benefits increase with higher levels of investment The benefits of each scenario were estimated by multiplying changes in the condition score of each group of assets on each river by the estimated willingness to pay for incremental changes in asset condition. Taking the current estimate of benefits of the EA managed waterways as the starting point, the assessment found a rapid decline in benefits in Scenario 1, a more gradual decline in Scenario 2, a fluctuation in Scenario 3 (in line with fluctuations in average asset condition) and a sharp increase (followed by future fluctuations) in Scenario 4.

The benefits of each expenditure scenario exceed the costs, and overall net benefits increase with higher levels of investment The net benefits of each scenario over time were estimated, and a 3.5% discount rate was applied, in order to assess their net present value. The analysis found that Scenarios 2, 3 and 4 all have a positive NPV compared to Scenario 1 – i.e. that expenditures on waterways assets deliver net 3

Impact on Benefits from Changes in Investment in EA Waterways Final Report

benefits. Moreover, for most rivers the NPV was estimated to increase with higher levels of investment. For example, for the Thames, the overall NPV was estimated at £0.9 billion for Scenario 2, £1.6 billion for Scenario 3 and £2.4 billion for Scenario 4. Investment in most types of assets was found to yield net benefits. However, a negative NPV was found for investments in assets to support the navigability of the rivers Thames and Ancholme under Scenarios 3 and 4. This suggests that our estimates of the willingness to pay of users of these rivers to maintain and enhance navigation assets are less than the overall costs of investment. These costs are large because of the high cost of replacement of navigation infrastructure such as locks and weirs. The estimates for our four case study rivers were up-scaled to estimate the overall net present value of each scenario across the whole EA waterways network. Benefits estimates were up-scaled using estimated numbers of boating and recreational users, and compared to the overall costs as estimated in the EA Assets Inventory. This increased the overall estimated NPVs to £1.9 billion for Scenario 2, £3.7 billion for Scenario 3 and £5.3 billion for Scenario 4.

We can conclude that investments in the EA waterways deliver positive net returns overall, but that the balance of costs and benefits varies for different types of assets The waterways deliver substantial recreational benefits. These are dependent on ongoing investments in the maintenance and replacement of waterways assets. This incurs significant maintenance costs, and high capital costs in the periodic replacement of assets. If no such expenditures are made, assets will deteriorate rapidly and benefits will be lost. The cost benefit modelling suggests that investment in waterways assets delivers positive net returns. The returns from investment vary by asset type and river. By far the highest costs relate to investments in navigational assets (such as locks, weirs and channels) which are relatively capital intensive. However, the greatest benefits on most rivers are secured from bankside facilities, because of larger numbers of recreational users. As a result, the most favourable benefit-cost ratios were found to relate to investments in bankside access and facilities. In comparison, the costs of some investments in navigational assets were found to exceed the benefits estimates based on the willingness to pay of users. The benefit cost analysis focused on recreation only, as this is the primary objective of investment in the relevant assets. Nevertheless, it is important to recognise that the rivers on which the EA manages waterways deliver a range of ecosystem services, some of which may be influenced by waterways management. For instance, some waterways assets also provide co-benefits for flood management and water supply. While the overall value of such functions on the rivers managed by the EA is significant, responses to changes in investment in waterways assets are difficult to assess. It is likely that inclusion of these benefits would enhance the estimated returns from investment in navigational assets such as locks and weirs, which have high capital costs. The modelling approach applied to this study provides a means of assessing the rates of return on waterways investments. A number of caveats need to be applied, because of the uncertainties related to stated preference valuation surveys, the simplicity of the asset condition modelling and the approximate nature of the cost estimates included. Nevertheless, it is hoped that the assessment will help to inform future assessments of the benefits and costs of waterways expenditure. In the context of the transition of the waterways network from public to civil society-based management, the tool can support identification of beneficiary groups and priority rivers for investment, which can be beneficial for identifying new funding streams.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

1 Introduction

1.1 Policy context The Environment Agency (EA) is one of the major navigation authorities in charge of inland rivers, estuaries and harbours in England and Wales, managing approximately 1000km of Britain's rivers, including the Thames, Wye, Medway, Nene and Ouse. The Agency is responsible for maintaining these waterways and, in some cases, neighbouring land for boaters and other users. Waterways provide many benefits and services to people and the economy. They are a hugely important recreational resource, both for boaters and bankside visitors. Some 32,000 boats are registered on the EA waterways. Approximately 12 million people live within 15 km of the Thames, Ouse, Nene, Medway, Wye and a number of other smaller rivers the Agency manages1. Studies have shown that waterways deliver a range of ecosystem services, and provide a variety of benefits to society. Many of these benefits have public good characteristics and therefore justify public intervention and funding. Securing and enhancing the benefits of the waterways depends on investment in waterways infrastructure and in on-going management and maintenance activities. This requires significant levels of resources, and the Government has recognised that public sector ownership may not be the most effective means of diversifying the funding streams available, or of engaging people in waterways management2. The Government transferred the waterways managed by British Waterways (most of which are canals) to a new charity, the Canal and River Trust (CRT) in 2012, and has announced that it plans to transfer responsibility for the Environment Agency's river navigations to the CRT at a later date , subject to affordability and the agreement of the charity's trustees. Whether or not there are changes in responsibilities for management of the inland waterways, the levels and types of investments that are made in them will influence the benefits that they deliver to society. In order to assess the costs and benefits of potential management scenarios, Defra wishes to understand how changes in investment will affect the value of these benefits.

1.2 Aim of the study This is the final report of a study by ICF GHK and Aberystwyth University to assess the benefits of investments in the Environment Agency Waterways. The main aim of the project was to develop new fit-for-purpose estimates of the extent to which changes in investment in inland Environment Agency (EA) waterways (whether arising from changes in public funding or in other sources of income) can increase or avert the loss of public benefits.

1.3 Methods The project involved: 1. Mapping different types of waterway assets against an ecosystem services and benefits typology; 2. Developing a logical framework describing how different kinds of changes in spending on the EA waterway network affect uses and benefits and how these changes might be valued;

1 Environment Agency - Response to Defra consultation: Waterways for Everyone’: The Government’s Strategy for the Inland Waterways of England and Wales 2 Defra (2011) Impact Assessment for moving inland waterways into a new charity in England and Wales. March 2011. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/82261/NWC-IA-FINAL.pdf; Defra (2012) Moving the British Waterways network in England and Wales into civil society. Final Impact Assessment. http://www.legislation.gov.uk/ukia/2012/13/pdfs/ukia_20120013.pdf 5

Impact on Benefits from Changes in Investment in EA Waterways Final Report

3. Undertaking a public valuation survey at selected sites on four case study rivers (Ancholme, Great Ouse, Medway and Thames) to elicit estimates of how willingness to pay of users would vary with differences in the quality and condition of the waterways and their assets 4. Providing quantitative estimates of how changes in maintenance and investment in the EA waterways might affect the benefits of the waterways, taking account of numbers of direct users, unit welfare values and other benefits where relevant; and 5. Developing a MS Office™ Excel-based tool to estimate the effects of different scenarios around cuts or additions to maintenance and investment spending.

1.4 This Report This Final Report presents the findings and draft conclusions of the study, for discussion with Defra and partners. It is structured as follows: ■ Section 2 provides an introduction to the waterways managed by the Environment Agency; ■ Section 3 introduces the benefits that waterways provide, and summarises previous attempts to value these benefits; ■ Section 4 describes the assets that maintain the functionality of the waterways, and the need for investment in these assets; ■ Section 5 introduces a logical framework that assesses the likely benefits from changes in investment in these assets; ■ Section 6 introduces the valuation survey used in this study to assess the value of benefits that the waterways deliver; ■ Section 7 summarises the results of the valuation survey; ■ Section 8 presents aggregate estimates of the benefits of investing in the EA waterways network; ■ Section 9 compares the costs and benefits of alternative investment scenarios; and ■ Section 10 presents our overall conclusions from the study. A more detailed account of the method and results from the valuation survey is given in Annex 1.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

2 Introduction to the EA Waterways

2.1 The EA Waterways The EA manages waterways spanning approximately 1000km of Britain's rivers, with the majority of this length accounted for by the Fens and Anglian Waterways (568 km), followed by the River Thames (202 km) and River Wye (112 km). The EA also manages the non-tidal River Medway and a number of smaller navigations, and is the Harbour Authority for Rye. 3. A map of the waterways managed by the Agency is given in Figure 2.1. This illustrates the location of the four case study rivers (Ancholme, Great Ouse, Thames and Medway) on which the valuation work for the study focused (see Section 6.3), as well as the other navigable rivers managed by the EA, the navigable canal network and other non-navigable rivers. The map demonstrates that the EA managed rivers account for a small proportion of the overall length of rivers in England, and tend to be concentrated in the east of the country, with the Fens and Anglian Waterways and River Thames accounting for a large proportion of the total.

Figure 2.1: Map of the EA Managed Waterways

CASE STUDY RIVERS Ancholme Great Ouse Thames Medway

OTHER WATERWAYS Other navigable river Navigable canal Non-navigable river

3 Sources: Websites of Environment Agency (http://www.environment- agency.gov.uk/homeandleisure/recreation/129916.aspx) and Inland Waterways Association (https://www.waterways.org.uk/waterways/); EA State of the Environment Report - Anglian 7

Impact on Benefits from Changes in Investment in EA Waterways Final Report

A full list of the waterways of Great Britain, with details of their length and status, and the responsible Navigation Authority, is given on the website of the Inland Waterways Association. Details of the EA managed waterways are given in Table 2.1. Table 2.1: Waterways managed by the Environment Agency4

Waterway Length (km) Ancholme (Humber to Harlam Hill Lock) 26.6 Ancholme (Harlam Hill Lock to Bishopbridge) 4.0 Ancholme (Brigg Loop) 2.9 Black Sluice Navigation 33.8 Burwell Lode 4.8 River Cam - lower section 11.2 River Dee - tidal section 35.4 Forty Foot River - Sixteen Foot River to Counter Wash Drain 4.0 River Glen 18.5 Great Ouse - The Wash to Barford Lock 99.9 Great Ouse - Barford Lock to Bedford 20.9 River Kennet (Reading Section) 1.6 River Lark - River Ouse to Judes Ferry 20.9 Little Ouse - Great Ouse to Brandon 23.3 Lydney Canal 1.6 River Medway - non-tidal section 27.4 River Nene - Beavis Hall to Northampton 124.0 River Nene - Westbridge Arm 1.6 New Bedford River 32.2 Old Bedford River 19.3 Reach Lode 4.8 River Stour (Essex and Suffolk) 40.3 Swaffham Bulbeck Lode 5.6 River Thames - Teddington to Inglesham 202.1 River Welland - Fosdyke Bridge to Folly River 33.0 Westport Canal 3.2 Wicken Lode 2.4 River Wissey 19.3 Wye 111.9

Source: Inland Waterways Association https://www.waterways.org.uk/waterways/waterways_a

4 Several rivers and waterways are managed by the Environmental Agency byelaws. We do not include them in this table. 8

Impact on Benefits from Changes in Investment in EA Waterways Final Report

2.2 EA Aims and Objectives for the Waterways The EA has a responsibility to maintain its navigation assets which keep its waterways open to navigation. In some cases, there is the power to set, and then manage water levels. It has a general duty to promote recreation on and around inland waters as far as it sees fit. Its navigation responsibilities include maintenance to ensure safe workplaces for staff and safe passage for customers, provision of some facilities for the public and the operation of weirs, locks, sluices and other structures. The EA’s aims and objectives for the management of the waterways for which it is responsible are set out in one of ten supporting strategies for the Agency’s Corporate Strategy. The strategy for Angling, Navigation and Recreation5 has two aims: ■ More people, from all backgrounds, enjoy and benefit more from improved local environments through angling, navigation, sport and other recreation; and ■ Environment Agency sites and services create more and better opportunities for people to fish, boat and take part in other water related sport and recreation. To achieve the second aim the Strategy states that the Agency will: ■ Make the land and water we own and manage accessible for public recreation and angling where we can. ■ Ensure the navigation assets we are responsible for are in a safe working order. ■ Grow the funding needed to maintain the condition of the navigable waterways we manage. ■ Invest the money raised from anglers and boaters to provide improved services. The Strategy also specifies a series of indicators of success, which include: ■ More people, from all backgrounds, take part in water-related sport and recreation. ■ There are more and better opportunities for people to enjoy the environment. ■ Angling, navigation and water-related recreation brings more economic benefits. ■ The number of craft registered on the waterways we manage increases. ■ More of our sites are available for people to enjoy water and nearby land. ■ Our navigation assets are maintained in target condition. ■ Surveys show that our customers are happy with our services. Thus while the EA’s overall responsibility for the waterways relates to their role in navigation, in managing them the Agency also seeks to promote angling and other forms of public recreation. Other supporting strategies deal with agriculture and land management, biodiversity, climate change and energy, flood and coastal risk management, improving the EA’s own environmental performance, regulated business, sustainable places, waste and resource management and water. However, none of these strategies makes specific mention of the waterways. The Strategy for Angling, Navigation and Recreation makes it clear that funding is required for investments in navigational and recreational assets, in order to deliver services and benefits for boaters, anglers and other recreational users. The following section reviews evidence of the services and benefits that the waterways provide, while Section 4 describes the assets that need to be maintained to support these benefits and services, and the investments required to maintain and refurbish them.

5 Environment Agency - Creating a better place 2010–2015. Supporting strategies for our corporate Strategy. http://a0768b4a8a31e106d8b0- 50dc802554eb38a24458b98ff72d550b.r19.cf3.rackcdn.com/geho1109bqxg-e-e.pdf 9

Impact on Benefits from Changes in Investment in EA Waterways Final Report

3 The Benefits of the EA Waterways

3.1 Waterways and Ecosystem Services Waterways in the UK provide a range of services and benefits to people and the economy, and these have been assessed by a number of different national and local studies. Evidence of the value of these benefits is summarised in two recent studies for Defra by Jacobs (2010, 2011)6, which summarised and categorised them using an ecosystem services framework. The range of services includes: ■ Provisioning services – e.g. supply of freshwater; ■ Regulating services – e.g. protection from flooding; and ■ Cultural services – e.g. recreation, tourism and people’s appreciation of their contribution to landscape, wildlife and cultural heritage.

3.2 Valuing the Benefits of Inland Waterways People and the economy benefit in different ways from the different services that the waterways provide. Most of these services are not directly traded in markets, because they have the characteristics of public goods, and are enjoyed by society as a whole. Because of this, a range of different valuation methods need to be applied to assess the full range of benefits that waterways provide: ■ Market prices may be used to assess the value of a minority of services which have direct market value, such as the provision of fresh water. ■ Avoided costs can be used for those services provided by the waterways which reduce costs elsewhere in the economy. Examples might include reduced costs of flooding or alternative flood management expenditures, and reductions in health costs caused by increased outdoor recreation. ■ Revealed preferences can be used where the values that people derive from waterways services are revealed by their behaviour. For example, the recreational benefits of waterways have been assessed using the travel cost method (which assesses the value of recreational visits based on the time and money people spend on visiting waterways), while residential amenity values have been assessed using the hedonic pricing method (using evidence of house price premia to measure how much people are willing to pay for properties close to waterways). ■ Stated preference methods use surveys to ask people directly about their willingness to pay for the services that waterways deliver. Examples include contingent valuation and choice experiments. These methods are most versatile as they are capable of capturing a range of values, including non-use values (e.g. the value people place on the existence and protection of the waterways even if they do not visit them), but require dedicated and resource intensive surveys. They also have the advantage of providing the flexibility to assess the benefits of future scenarios, as through the choice experiment survey conducted for this study. Value transfer methods are often used to estimate the value of these benefits – by using estimates of the value of benefits at one site and applying these to another. Value transfer saves time and costs by reducing the need for new and resource intensive valuation work. It can provide reliable estimates providing the value of benefits is similar between sites – for example where it can be assumed that the benefit of a recreational visit to one waterway is similar to that of another.

6 Jacobs (2010) The Benefits of Inland Waterways – Second edition; Jacobs (2011) The Value of Inland Waterways in England and Wales 10

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Because there have been only a few original valuation studies focusing on waterways, many of the studies valuing the benefits of waterways have used a value transfer approach. The Jacobs (2010) report identified values that can be applied to a range of the services delivered by the waterways, for use in subsequent assessments. Transferable values were identified for a range of different types of recreation, as well as for property premia, heritage and habitat values, water supply, flood management, transport and energy generation. It was acknowledged that some of these values were based on very old studies (such as a study on recreational values by Willis and Garrod, 1981). For the waterways network as a whole, evidence suggests that recreation is the most valuable of these benefits.

3.3 Existing Evidence of the Value of UK Inland Waterways The Jacobs (2011) report on the Value of Inland Waterways in England and Wales used a value transfer approach to estimate the overall value of the benefits delivered by canal and river waterways nationally and to consider how these might change in response to changes in waterways funding. The study assessed the benefits of a range of canal and river waterways and estimated that the current value of these benefits ranges from between £109k per kilometre per year to over £730k per kilometre per year on the case study waterways examined. These estimates are based on recreational values and residential amenity (as measured through property price premia). In general, canals were found to deliver benefits of higher value than rivers, and benefits were found to be higher in urban than in rural stretches of waterway. The case studies included some EA managed waterways such as the Ancholme (estimated benefits of £129k per km), Great Ouse (£118k per km), and Medway (£109-113k per km). The case study results were generalised to estimate the benefits per kilometre of rural canals, urban canals, rural rivers and urban rivers, according to the density of boat usage. These estimates were used to consider the possible effect on benefits of changes in investment in the waterways. The analysis defined two broad scenarios, one involving a reduction in waterways funding and a second involving an increase in funding. Based on a number of broad assumptions, it was estimated that reduced funding might reduce annual benefits by between £250 million and £790 million, while increased funding could increase them by between £186 million and £677 million annually across the whole waterways network (including canals and rivers). 80% of the estimated change in benefits related to towpath recreation. Assessing the benefits of waterways investments requires us to consider how the benefits delivered by the EA managed waterways are likely to respond to changes in investment in waterways assets.

3.4 Benefits of Waterways Investments As a result of these studies there is significant evidence of the overall benefits of our waterways. However, in order to compare the costs and benefits of expenditures in the waterways network it is necessary to understand not only the gross benefits that waterways provide but also how the value of benefits changes as expenditures change. There is a shortage of evidence of the marginal changes brought about by expenditures in our waterways, which limits our ability to make assessments of the costs and benefits of different options and spending programmes. While some analyses have considered the potential effects of different expenditure scenarios, these are limited by a lack of specific data on the value of marginal changes. For example the Jacobs (2011) report estimated changes in recreational and property values for canals and rivers due to changes in maintenance expenditure. However, a lack of evidence about the effects of specific types of investments meant that it was necessary to apply general and hypothetical scenarios, based on somewhat speculative projections about possible changes in numbers of visits as well as the value per visit. Furthermore, Jacobs’ analysis of recreational benefits could be criticised by not clearly distinguishing actual expenditures by waterways users from consumer surplus values. 11

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Defra’s impact assessment on the proposed transfer of the waterways applied a more rigorous approach to assess the recreational benefits of waterways investments. It used the Department’s Value Transfer Guidelines to estimate the monetary values for the recreational benefits of the waterways at between £0.78 and £1.10 per visit. By examining evidence of the effect of investments on the functionality of the waterways, it estimated that a £10 million investment would result in a 6% increase in numbers of recreational visitors and an 8% increase in willingness to pay per visit. However, the impact assessment noted that while evaluation and survey evidence demonstrate that waterway condition has a bearing on both use and public benefit, it was not possible convincingly to link levels of expenditure to public benefit in a precise or robust way. Overall, however, while a number of studies have assessed and documented the value of the benefits that the waterways deliver, there is limited evidence of the economic benefits resulting from different types and levels of investment. In order to assess the benefits of changes in waterways investment, it is necessary to examine the types of investments that the waterways require, how these investments affect the condition and function of waterways assets, and how this affects the services that waterways provide to people, as well as the value of these services. The following section introduces the types of assets in the EA waterways, examines the investments required to maintain these assets, and considers how this contributes to the services that the waterways provide to people. Section 5 then specifies a logical framework to guide the valuation of the benefits of waterways investments.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

4 Waterways Assets and Investment Needs

4.1 Waterways Assets Much of the Environment Agency’s current expenditure on the management of its waterways is concerned with the maintenance and refurbishment of built infrastructure which enables navigation, as well as contributing to other functions such as wider recreation, flood management and water resources. The Environment Agency’s Asset Inventory7 is the main reference source. The Inventory is in Excel spread sheet format, and is continually under development, and the data used from it are the latest available at the time of the study. The October 2013 update identifies some 2900 assets across 7 groups of waterways8 and gives details of their characteristics, condition and maintenance and investment requirements. It also identifies a further 5030 “assets under consideration” whose basic purpose is identified but for which no further data are available9. The asset inventory identifies the following asset types: ■ Access facilities such as cycleways and vehicular access tracks and bridges; ■ Boat-rollers; ■ Boats, including dinghies and punts; ■ Breakwaters; ■ Bridges – pedestrian and vehicular; ■ Buildings such as offices, houses, pump houses and visitor centres; ■ Channels; ■ Channel Banks; ■ Facilities such as car parks, picnic areas, power points, sanitary stations, toilets and water points; ■ Fish and canoe passes; ■ Jetties and quays; ■ Laybys and Landings include canoe portage; ■ Lock islands; ■ Locks; ■ Moorings; ■ Navigation aids such as gauge-boards, warning flags; ■ Penstocks; ■ Slipways; ■ Sluices; and ■ Weirs. The Asset Inventory identifies three principal functions of these assets as: navigation, general recreation and flood and coastal risk management (FCRM). The inventory begins to identify assets as contributing to one of the following groups of functions:

7 EA/Arcadis Asset Inventory dated 15.10.13 8 Thames, Medway, Ancholme, Glen, Great Ouse, Nene, South Forty Foot, Stour, Welland and Glen 9 These include assets in other rivers such as the Wye, Kennett and Rother as well as those above 13

Impact on Benefits from Changes in Investment in EA Waterways Final Report

■ Navigation only – e.g. moorings, laybys and landings, navigation aids, slipways, canoe portages ■ Navigation and FCRM – e.g. locks with flood controls/ relief channels ■ FCRM only – e.g. pump houses ■ Navigation and general recreation – e.g. cafes, car parks, footbridges, information centres and picnic sites. The Asset Inventory identifies Environment Agency owned or potentially owned assets. These mostly comprise built infrastructure, property and associated recreational or green space (e.g. lock islands) rather than general semi-natural waterway assets such as landscape features and habitats since the EA is not directly responsible for these. However, the Environment Agency has a duty to consider and enhance the latter in any of its activities and many improvements are integrated into asset management. In addition, biodiversity improvement projects are supported where possible. The Inventory reflects the current profile of waterways investments for the waterways in their current form. It does not include future assets that are either planned or may occur as part of new investments or partnership projects. However, it is conceivable that future scenarios could consider a wider range of investments to enhance additional semi-natural assets, although resource constraints mean that these are likely to be limited.

4.2 Types of Expenditure Expenditures in the waterways potentially comprise: ■ Capital investments – Provision of new assets; – Renovation/restoration of existing assets. ■ Annual expenditures – Routine or cyclic maintenance/management of assets; – Staffing and operation of facilities. Potentially these expenditures could involve: ■ Built assets and related environmental assets – as listed above; ■ Green infrastructure – such as waterside habitats, bankside vegetation, green corridors, woodlands etc. either integrated into Environment Agency projects or as potential partnership activities. However, discussions with the Environment Agency confirm that most existing expenditures focus on the refurbishment and maintenance of existing built infrastructure, and that current funding allows very little investment in new assets or in green infrastructure unless integrated with these.

4.3 Purpose of Assets and Investments in them Table 4.1 summarises the different waterways assets, the main purpose of these assets, and the numbers of each (as listed in the EA Assets Inventory). It should be noted that the EA Assets Inventory is work in progress and that the data are incomplete. However, they are indicative of the overall number, distribution, condition and expenditure requirements of the various types of waterways assets. The table shows that some asset types are numerous and widespread (e.g. bridges, buildings, channels, user facilities, laybys and landings, locks, moorings, sluices and weirs) whereas others are much less numerous and more localised (e.g. breakwaters, boat-rollers, jetties and quays, penstocks). The estimated expenditures required to refurbish and maintain these assets is also very variable, with by far the largest expenditures required for locks and weirs, which together account for 75% of the estimated total. 14

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 4.1: Summary of number and purpose of waterways assets

Asset Summary Purpose of asset Number of assets listed in EA assets inventory* Access facilities such as Can provide general access 94 in total – 83 on the Thames; cycleways and vehicular access hubs to the riverbank and to 5 on Nene; 2 on Medway; 2 on tracks, car parks and footpaths riverside paths. Great Ouse; 1 on South Forty- Foot; 1 Welland Boat-rollers Provide access to the water to 6 in total – 5 on Thames; 1 enable boaters to board and Great Ouse disembark their vessels Boats, including dinghies and Operational and navigational 67 in total – 65 on Thames; 2 punts activities supporting the on Medway waterway Breakwaters Reduce the intensity of wave 5 in total – 4 Thames; 1 action thereby protecting river Medway banks from erosion Bridges – pedestrian and Provide either an access to lock 210 in total – 149 Thames; 37 vehicular sites or across a lock or weir Nene; 15 Great Ouse; 7 channel for either pedestrians Medway; 1 Ancholme; 1 or vehicles Welland; Buildings such as offices, Dependent on the specific 163 total – 135 Thames; 14 houses, pump houses and building – could provide a range Medway; 5 Nene; 4 Great visitor centres of general support functions or Ouse; 3 South Forty-foot; 1 serve a cultural purpose Wye; 1 Ancholme Channels Navigation channels that 225 total – 209 Nene; 6 Great maintain water depth, levels Ouse; 5 Welland; 3 Ancholme; and flows and therefore 2 Stour maintain the navigability of the river and in some cases provide flood relief. Channel Banks Raised channel banks that are 103 total – 80 Thames; 16 either associated with lock/weir Medway; 6 Nene; 1 Welland sites, flood risk management or raise the channel above surrounding land Facilities such as car parks, Provide general access to the 253 total – 206 Thames; 15 picnic areas, power points, riverbank and amenities for Great Ouse; 11 Medway; 9 sanitary stations, toilets and river users Nene; 6 South Forty-foot; 3 water points Ancholme; 2 Welland; 1 Glen; Fish and canoe passes Combined fish and canoe 28 total – 17 Thames; 7 passes to allow fish and canoes Medway; 3 Wye; 1 Nene to pass through weirs Jetties and quays Provide access to the water to 14 total – 4 Thames; 4 Great- enable boaters to board and Ouse; 4 Nene; 1 Ancholme; 1 disembark their vessels South Forty-foot Laybys and Landings include Provide access to the water to 430 total – 164 Thames; 138 canoe portage enable boaters to board and Nene; 59 Great Ouse; 32 Stour; disembark their vessels 27 Medway; 5 Ancholme; 2 South Forty-foot; 1 Glen; 1 Welland; 1 Wye Lock islands Associated with locks. Provide 51 total – 47 Thames; 3 egress for navigation users and Medway; Nene in some cases public access for informal recreation. Some are also used for camping. 15

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Asset Summary Purpose of asset Number of assets listed in EA assets inventory* Locks Raise and lower boats between 134 total – 50 Thames; 44 stretches of water with different Nene; 23 Great Ouse; 11 levels; assist in discharging Medway; 2 Ancholme; 2 Stour; flood flows in the Anglian 1 South Forty-foot; 1 Welland Region. Moorings A permanent formalised 181 total – 74 Thames; 43 structure to which a boat can be Great Ouse; 32 Nene; 12 secured Ancholme; 11 Medway; 4 South Forty-foot; 3 Glen; 2 Welland; Navigation aids such as gauge- Facilitate navigation 35 total – 13 Ancholme; 9 South boards, warning flags Forty-foot; 7 Nene; 3 Great Ouse; 3 Thames; Penstocks Manage water levels and flows 5 total – 2 Nene; 1 Medway; 1 in order to facilitate navigation, Glen; 1 Welland flood management and/or water resource management Slipways Provide access to the water to 17 total – 5 Thames; 3 Great enable boaters to board and Ouse; 2 Medway; 2 Ancholme; disembark their vessels 2 Nene; 2 Welland; 1 Glen Sluices Manage water levels and flows 193 total – 56 Great Ouse; 51 in order to facilitate navigation, Nene; 25 Stour; 24 Welland; 19 flood management and/or water Thames; 11 Medway; 6 Glen; 1 resource management South Forty-foot Weirs Manage water levels and flows 419 total – 221 Thames; 83 in order to facilitate navigation, Nene; 44 Great Ouse; 31 Stour; flood management and/or water 25 Welland; 10 Medway; 4 resource management Glen; 1 Ancholme

Note* - Data taken from EA assets inventory, version 25.01.13. This is work in progress and figures are incomplete. However, they illustrate the relative number and distribution of different assets.

4.4 Grouping of Assets Given the large number of types of assets, many of which support similar functions, it is helpful to group these assets in order to consider their purpose and benefits. Table 4.2 provides a grouping of the main recreational assets. To simplify our analysis, we categorise the functions supported by the waterway assets into five broad categories: Navigability of the river, Access to water, Facilities for boats, Access to the river bank, and Facilities for bankside users.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 4.2: Classification of functions that groups of river asset support

Classification of Description of function Asset Type (variant as per EA Asset functions Inventory) supported by river assets Maintain water depth, levels and flows and therefore maintain the navigability of the river in current form and associated Boat; Breakwater; Building; Channel bank; landscape/heritage setting, while helping Facility (Dredging Tip); Lock; Lock island; to preserve some water level dependent Sluice; Weir Navigability of ecology/ archaeology. May also allow flood the river management and/or water resource management.

Provide information that allows safe and Navigation aids: Gauge-boards, warning flags, effective navigation signage and information boards

Provide access to the water to enable Boat roller; Fish canoe pass; Jetty quay; boaters to board, disembark and moor Access to water Layby landing; Mooring; Slipway their vessels

Facility (Power point); Facility (Rubbish Facilities for Provide facilities for boaters compound); Facility (sanitary station); Facility boats (sewage system); Facility (water point)

Access to river Provide general access to the riverbank Access; Bridge; Facility (car park) bank

Facilities for Provide facilities to enhance the Facility (Public toilet); Facility (Camping site); bankside visitors experience/ comfort of visitors Facility (Picnic area)

It is also important to note that, while most of the assets primarily support recreation, some of them also support other functions (Table 4.3). Table 4.3: Assets that support other, non-recreational functions

Flood management Assets primarily concerned with flood management Pump houses May contribute to flood management as well as Locks, weirs, channels, raised channels, navigation and/or water resource management breakwaters, penstocks, sluices, tidal gates, channel banks Water resources May contribute to water resource management as well Weirs, penstocks, sluices as navigation and/or flood management Conservation/Heritage Allow fish (and in some cases eels) to pass weirs or Fish and eel passes other obstacles Maintain built heritage Buildings, locks, lock gates, weirs, sluices etc. General Supporting the above functions Buildings – including offices and lock houses, boats

Impact on Benefits from Changes in Investment in EA Waterways Final Report

4.5 Types and number of waterways assets Table 4.4 summarises the numbers of assets that are categorised according to the five recreational functions above. Almost half of the assets support Navigability of the river and a third Access to water. Across the entire network, the Asset Inventory currently identifies only 46 facilities for bankside recreation. Table 4.4 also reports the number of assets found at our four case study rivers. Most assets were found on the Thames (1163 assets), with 333 assets on the Great Ouse, 131 assets on the Medway and 50 assets on the Ancholme. The Thames in particular has a large number of assets that support Navigability of the river (593), while the inventory currently identifies no assets on the Ancholme that we categorise as supporting Access to bank or Bank facilities. Table 4.4: Type and number of assets (categorised by function) at each of the case study rivers

All NAVIGABLE FUNCTION SUPPORTED BY ASSET THAMES G. OUSE MEDWAY ANCHOLME RIVERS

Navigability of the river 593 133 64 4 1353

Access to water 252 172 48 43 924

Boat facilities 147 18 7 3 184

Access to bank 140 8 11 0 393

Bank facilities 31 2 1 0 46

All assets 1163 333 131 50 2900

Source: EA Asset Inventory

4.6 Asset Condition The ability of the waterways assets to fulfil their intended purpose depends on them being maintained in workable condition, and periodically replaced when they reach the end of their working life. The EA Assets Inventory assigns a condition score to each asset, on a scale of 1 to 5, where a score of 1 indicates that a particular asset is in very good condition, while a score of 5 suggests that it is in poor condition. The asset condition scores are based on assessments made periodically by Environment Agency engineers. Table 4.5 provides a summary of the mean condition score of waterways assets at our case study rivers and for the entire navigable rivers network. Across all navigable rivers, the mean condition score of assets was 2.66 (indicating an average condition roughly half way between very good and poor). Assets found on the Medway (average condition score = 2.04) and Ancholme (2.09) were in significantly better condition than the mean across all rivers. The condition of assets on the Great Ouse was very close to the mean score, while those on the Thames were of poorest quality (2.76). In terms of the condition of assets that support different functions, assets that support “Access to water”, “Boat facilities” and “Bank facilities” were generally in better condition than assets that support “Navigability of the river” and “Access to bank”. The Environment Agency’s (2011) response10 to the consultation ‘Waterways for Everyone: The Government’s Strategy for the Inland Waterways of England and Wales” stated that the

10 EA (2011) - Response to Defra Consultation ‘Waterways For Everyone’: The Government’s Strategy for the Inland Waterways of England And Wales 18

Impact on Benefits from Changes in Investment in EA Waterways Final Report

condition of the Environment Agency waterways had improved greatly over the previous five years, due to the additional capital investment made to address a long term maintenance backlog. It estimated that 6% of the assets associated with navigation were currently below their target condition (i.e. liable to fail within two years without major investment, posing significant risks to public safety and the integrity of its navigable rivers). This proportion had been reduced from 23% in 2004, and was on course to fall to 3% by April 2011. However, during the 10 year period a further 13% of navigation assets had fallen temporarily below their target condition. This demonstrates the need for continued maintenance investment to prevent a new backlog developing. The consultation response further stressed the need for ongoing maintenance of the waterways and their functions. The estimated annual cost of maintaining the infrastructure to keep Environment Agency waterways open and safe to the public was put at approximately £14 million compared to income through craft registrations of only £5.1 million. Table 4.5 summarises the current condition of waterways assets, based on the assets inventory. Table 4.5: Mean condition of waterway assets

ALL NAVIGABLE FUNCTION SUPPORTED BY ASSET THAMES G. OUSE MEDWAY ANCHOLME RIVERS

Navigability of the river 2.97 2.58 2.67 3.00 2.94

Access to water 2.54 2.54 1.28 2.04 2.38

Boat facilities 2.63 2.93 1.75 1.67 2.61

Access to bank 2.89 3.00 2.20 . 2.83

Bank facilities 2.68 5.00 1.00 . 2.62

All assets 2.77 2.61 2.04 2.09 2.66

4.7 Location of waterways assets We also assessed the extent to which navigable rivers are located in rural or urban areas. Data for this assessment was attained from EA data that classified each site along a river as rural or urban. Table 4.6 provides a summary of the proportion of sites located in rural areas. Across the entire navigable river network, 64% of river sites are located in rural areas. The Thames has the lowest proportion of sites in rural areas (56% of sites), while on the Ancholme all sites were classified as rural locations. Table 4.6: Proportion of river sites located in rural areas

ALL NAVIGABLE FUNCTION SUPPORTED BY ASSET THAMES G. OUSE MEDWAY ANCHOLME RIVERS

Proportion of river sites classified as rural 56% 60% 69% 100% 64%

4.8 Asset Lifespans The Environment Agency has provided estimates of the expected lifespan of different types of waterways assets (Table 4.7). The table estimates the overall estimated lifespan of each asset type (if maintained correctly). The EA has also provided estimates of how long it would take for each asset to fail, if no maintenance of that asset took place. 19

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 4.7: Estimated Lifecycle of Waterways Assets

Classification of EA’s classification of Est. time to first failure Est. lifecycle functions supported by asset type (variant) without maintenance (years) river assets (years)

Boat 5 25

Boat roller 10 25

Breakwater 50 50

Building 10 25

Navigability of the river Channel bank 50 50

Lock 5 25

Lock island 50 70

Sluice 5 70

Weir 5 25

Fish canoe pass 15 70

Jetty quay 15 70

Layby landing 15 70 Access to water Mooring 15 70

Navigation aid 1 30

Slipway 50 70

Power point 1 15

Rubbish compound 5 20

Facilities for boats Sanitary station 1 25

Sewage system 1 25

Water point 1 15

Access 1 15

Access to river bank Bridge 5 70

Car park 5 15

Public toilets 1 25

Bankside facilities Camping site 2 25

Picnic area 2 25

Source: Environment Agency estimates 20

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Note: Figures are averages - some assets will last much longer and some will fail more quickly. Figures are a general guide and should be treated with caution, rather than being regarded as definitive. For example, a boat could be expected to last for 25 years, but would fail to be operational after 5 years if not maintained. The EA stresses that health and safety is its over-riding concern and would cause the asset to be closed or quarantined if maintenance was not to occur. Another example is that weirs and locks support navigation and these have sub- components that would affect operation earlier if not maintained. The time to first failure attempts to cover this, but failure could potentially occur sooner. The next section develops a logical framework to guide the assessment of the benefits of investing in EA waterways assets.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

5 Understanding the Benefits of Potential Changes in Expenditure in the EA Waterways

5.1 Introduction This section sets out the different types of current and potential expenditures in the management of the EA waterways, and identifies how changes in these expenditures could potentially influence changes in the use of the waterways and the services they deliver. It builds on work carried out by the Environment Agency and also proposes how these changes in services can be quantified and valued.

5.2 Logical framework Figure 5.1 defines a logical framework that groups the main types of investments in the waterways, identifies their benefits, and considers how these might be valued. It includes the range of potential benefits that waterways assets deliver, not just the recreational benefits that are the focus of this study. Figure 5.1 provides a diagrammatic overview for one of the objectives – to maintain the navigability of the EA waterways. Figure 5.1 Overview of the logical framework for the objective “Maintain the navigability of the EA waterways”

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 5.1: Logical framework for investment in Waterways Assets

Objective Assets Type of Direct effect of expenditure Effect of counterfactual Benefits from Benefits remaining in Valuation of benefits expenditure (no expenditure) continued counterfactual expenditure Maintain the Locks, weirs, Annual maintenance Ensures that navigation Deterioration of Continuation of Some assets, such as Willingness to pay of navigability of the channels, and operating assets remain useable, fit for navigational infrastructure, boating on EA locks, form part of the boating and non- EA waterways breakwaters, expenditures purpose and safe, helping to eventually rendering waterways footpaths / access boating visitors to penstocks, sluices, maintain the navigability of waterways unfit/unsafe for Presence of boats across waterways and maintain navigability of navigational aids the EA rivers navigation. Loss of may provide could still deliver river. continuous length of benefits for non- recreational benefits navigation. Increased risk boating users Estimate number of Capital investment - Replaces assets at the end of of flooding boating and other refurbishment their operational life Deterioration of the setting visitors and WTP per / aesthetic value of the site visitor using choice experiment valuation survey. Facilitate boating Access to the water: Annual maintenance Ensures that navigation Deterioration of Maintaining current Some recreational Willingness to pay of by providing Moorings, jetties, expenditures assets remain useable, fit for navigational infrastructure, usage of the benefits may remain, boating visitors to supporting quays, landings purpose and safe, facilitating eventually rendering these waterways and the but the setting / maintain access to the infrastructure for: the activities of boaters and assets unfit/unsafe for experience of users aesthetic value of the water and condition of (a) access to the Facilities for boaters: maintaining the boating use. This will restrict the site may deteriorate facilities. water; and (b) sanitation, water experience opportunities for boaters facilities for points etc. and detract from their Estimate number of boaters Capital investment – Replaces assets at the end of experience boating visitors and refurbishment their operational life WTP per visitor using choice experiment Capital investment - New facilities further facilitate No growth in recreational Growth in boating valuation survey. new assets boating, increase opportunities and/or enhanced opportunities, enable growth recreational and enhance recreational experience of experience existing users Enable access to Access roads, car Annual maintenance Ensures that access Deterioration of access Maintaining access Access may continue Willingness to pay of the waterway for parks, paths, expenditures infrastructure remains infrastructure, eventually to the waterways to to be possible even if visitors for access to recreational users, bridges, cycleways useable, fit for purpose and rendering it unfit/unsafe general recreational infrastructure riverbank and including boaters safe, enabling continued for use and restricting users and boaters deteriorates maintenance of access to range of users access. Increased assets. refurbishment/replacement Capital investment – Replace and update access costs. Estimate number of refurbishment infrastructure visitors and WTP per visitor using choice Capital investment - New facilities may increase No growth in access or Increased number No additional benefits experiment valuation new assets accessibility of waterways to movement of recreational survey.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Objective Assets Type of Direct effect of expenditure Effect of counterfactual Benefits from Benefits remaining in Valuation of benefits expenditure (no expenditure) continued counterfactual expenditure a larger range of recreational users and users and facilitate enhanced movement experience of existing users

Enhance the Visitor centres, Capital investment - Ensures that visitor facilities Deterioration of visitor Maintaining Recreational use will Willingness to pay of recreational toilets, information refurbishment remain useable, fit for infrastructure, eventually recreational continue to be possible visitors for facilities experience/ boards purpose and safe, enabling rendering it unfit/unsafe facilities and comfort of users continued use by range of for use and restricting experience provided. (including boaters) users access by providing Estimate number of Annual maintenance Ongoing expenditures on Closure of facilities that appropriate visitors and WTP per and operating maintenance/staffing/cleaning require ongoing facilities for visitor using choice visitors expenditures are needed to keep open expenditure visitor centres and toilets experiment valuation survey. Capital investment - New facilities enhance No increase in recreational Attracting additional No additional benefits new assets experience of recreational opportunities/ experience visitors and users enhancing the recreational experience of existing users Maintain built Buildings and other Annual maintenance Ensures that buildings Deterioration of buildings, Maintaining Buildings may remain Functional value is heritage structures and operating remain presentable, useable, eventually rendering them functionality of in place though captured through other expenditures fit for purpose and safe, unfit/unsafe for use and buildings and usability may decline benefits (navigation, enabling continued usage affecting appearance and maintaining built recreation, flood and Capital investment – visual amenity heritage for benefit water management) refurbishment of all visitors Maybe additional values for maintenance of built heritage Conservation Fish passes Annual maintenance Ensures that the fish passes Fish passes may become Healthy rivers and Some fish passes may WTP of anglers (use remain operational blocked or damaged fish/eel stocks are a continue to function values) and general rendering them ineffective. WFD requirement without maintenance public (non-use This may have a negative values) impact on biodiversity Capital investment - refurbishment

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Water resources Weirs, penstocks, Annual maintenance Ensures that these structures Deterioration of assets Continued provision Some assets may Averted cost of new sluices continue to contribute to reduces ability to support of water resources continue to support water resource water resource management, water abstraction, water resource infrastructure where applicable potentially requiring new management even if investments in condition deteriorates Capital investment – infrastructure refurbishment

Impact on Benefits from Changes in Investment in EA Waterways Final Report

5.2.2 Defining the Counterfactual In order to assess the benefits of expenditures on waterways assets it is necessary to consider how these expenditures contribute to the functionality of the waterways and the services they deliver, compared to a counterfactual in which no expenditure occurs. This enables an assessment of the net benefits and costs of waterways investments, and forms the basis of the cost benefit appraisal in Section 9. As noted in the logical framework, expenditures on refurbishment and maintenance of assets help to maintain their condition and function. If these expenditures were not made, we can expect deterioration in the condition of these assets until at some point they are not fit for purpose or cannot be used safely or at acceptable levels of risk. However, some of the benefits that the assets deliver may continue to be enjoyed, at least for a period of time and possibly at reduced levels. For example, navigational and access facilities may continue to be used for a period of time, at least until they break down or become unsafe to use.

5.2.3 Benefits of Waterways expenditures Recreational benefits The principal benefits of investments in the EA waterways relate to the recreational benefits to boaters, anglers and other bankside visitors from maintaining and improving infrastructure and facilities for boating and recreational access. To assess the value of these benefits, it was necessary to survey recreational users of the waterways to examine their preferences for the different services delivered by waterways assets, and to examine their willingness to pay for the functions supported by waterways investments. The main element of the study therefore involved a stated preference survey of waterways users. Other benefits A minority of waterways assets also provide co-benefits for water resources and flood management. These functions are addressed through separate EA budgets. However, it is important to note that variations in investment in navigational assets (such as locks and weirs) may affect these other functions and hence the overall benefits that the waterways deliver. These potential benefits are described in the logical framework. Assessing changes in these co-benefits would be problematic, because they are site specific in their nature. The valuation study therefore focused on the effect of changes in waterways investment on the core recreational benefits that waterways assets deliver, whilst recognising that these changes may also have effects on other functions of the rivers. Maintaining fish passes delivers additional conservation benefits as well as supporting angling, but involves low levels of expenditure and is a requirement under the Water Framework Directive. Investing in waterways assets brings further potential benefits in maintaining and enhancing the built heritage. While a large proportion of these benefits will be enjoyed by recreational users, there may also be some non-use benefits in the sense that the population as a whole benefits from maintenance of the waterways heritage. Assessing the benefits of expenditures The following sections introduce the valuation survey and the methodology employed (Section 6), present the survey results (Section 7) and estimate the aggregate value of recreational benefits across the EA waterways (Section 8). Section 9 compares the costs and benefits of waterways investments.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

6 Valuation survey and methodology

6.1 Introduction The principal research task involved a valuation survey to elicit the willingness to pay of boaters and bankside recreationists for the benefits delivered by investments in the EA waterways network. The aim of the valuation exercise was to estimate values for the benefits associated with changes to investments in waterways assets, in order to inform an overall assessment of the benefits of investments in the entire EA waterways network. The valuation survey focused on the value of the principal outcomes from investment in waterways assets, which relate to the following functions: ■ Navigability of the river; ■ Access to the water; ■ Facilities for boaters; ■ Access to the riverbank; and ■ Facilities for visitors The value of these outcomes was examined under three different benefits scenarios: ■ An improvement scenario – where increased investment in assets enhances the benefits they deliver; ■ A maintenance scenario – where investment is maintained at a sufficient level to maintain existing levels of functions and benefits; and ■ A deterioration scenario – where investment ceases and the functionality of the waterways for boating and other recreational uses declines over time, and benefits are eroded. Data were collected through face-to-face interviews, as the recommended format for stated preference studies. The survey was administered on-site to two groups of river users: ■ General river recreationists and ■ Boat-users. Interviews were conducted across four different rivers (Ancholme, Thames, Great Ouse and Medway). Rivers were carefully selected, following consultation with EA waterways staff, to ensure that they represented a range of waterways functions, a balance between rural and urban settings, different types of recreational use and different types of river assets. The survey instrument was pilot tested on the River Thames, as well as being reviewed by the study steering group and key stakeholders. A copy of the final survey instrument used is given in Annex 1, and a brief overview is given below. Details of the case study rivers are also provided.

6.2 The survey instrument The economic benefits that members of the public derive from investments in the waterways assets were assessed using the Choice experiment (CE) method. Choice experiments are a survey-based approach that requires respondents to complete a series of ‘choice tasks’ that describe alternative future scenarios for the environmental good under investigation. In CE, the scenarios are described in terms

Impact on Benefits from Changes in Investment in EA Waterways Final Report

of different attributes of the environmental good, alongside a cost attribute. The survey instrument was split into 6 sections, which are described below. A full description of the survey methodology, and a copy of the survey instruments used, are presented in Annex 1. Section A: Your use of the river Following a short introduction to the study, this first section aimed to collect basic information on respondent’s current trip to the river, including: type of trip (e.g. day trip, holiday) and where they have travelled from that day to get to the river. Section B: Recreational activities undertaken that day In this section respondents were asked to identify which activities they planned to undertake during their trip to the river on the day of interview, as well as information on how often they took part in these activities. These questions were included to allow us to identify different types of river users, which subsequently were used as a basis for the aggregation of our results. Section C: Facilities used Here we asked river users to identify which river facilities / infrastructure they used during their trip to the river and how satisfied they were with the condition of those facilities. This information at the individual site level could then be compared to the values that visitors expressed for improving assets to test to see if the presence and condition of assets impact people’s values. Section D: Your views on the future management of the river This section focused on the choice experiment, which was used to estimate the benefits derived from alternative investment scenarios in the EA waterways network. In the survey, respondents were first presented with a verbal and written ‘information set’ relating to possible future changes in the investment in the waterways network. The information presented included: ■ an overview and map of all navigable rivers in England; ■ information on the section of river under investigation (including a map, details of river assets and types of recreational use); ■ a description of the ‘hypothetical’ scenarios that describe the future options for investing in river assets. Each of these scenarios was described in terms of the future condition of river infrastructure/ facilities; where the condition may be improved, maintained or deteriorated. ■ an example of a typical choice task and instructions on how to complete the task. Respondents were also made aware of a list of standard issues (such as budget constraints and ‘cheap talk’) that they need to consider when making their choices. An example of this information set can be found in Section D of the Show Cards appended to Annex 1. It should be noted that the information presented in the Show Cards was tailored for each river and also varied depending whether the respondent was a boater or a riverbank visitor. Once the respondent had received the information set, they were asked to complete the six choice tasks. In each task, respondents were required to select their preferred ‘scenario’ from a series of three scenarios: Scenario 1, Scenario 2 and a ‘Deterioration scenario’ (see Figure 6.1 below for an example of a choice task). Each scenario was described in terms of a series of ‘Benefits from use of river’ attributes that linked directly to the condition of river infrastructure and facilities,

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along with a payment attribute (annual cost to your household over the next 5 years). The benefit attributes that users were asked to consider varied as follows: ■ Respondents who were identified as ‘boaters’ were presented with five benefit attributes in the choice experiment: Navigability of river; Access to water; Facilities for boaters; Access to the riverbank; and Facilities for visitors. ■ Non-boating, riverbank visitors were only presented with three benefit attributes: Navigability of river; Access to the riverbank; and Facilities for visitors. Feedback from developmental focus groups indicated riverbank visitors were likely to be less concerned about the detail of the condition of assets that allow navigation, but more concerned about whether or not they would see boats on the river. Thus, for the riverbank visitors the Navigability of river, Access to water and Facilities for boaters were combined into a single ‘Navigability of river’ category Figure 6.1 Example of a choice task used in the Boater’s survey

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As noted above, the benefit attributes presented in the choice tasks could take one of three levels of provision, based on three possible future investment plans: ■ Increased investment to improve facilities / infrastructure; ■ Maintenance of current investment levels, safeguarding access to facilities / infrastructure; and ■ No-investment, resulting in a deterioration of facilities / infrastructure. Figure 6.2 provides a summary of the description of each of these levels of the five benefit attributes. Each scenario also included a ‘Cost’ attribute, which could take values of: £25, £50, £75, £100, £125 or £150 per annum. Under the ‘Deterioration’ scenario, all of the benefit attributes were set to the ‘deteriorate’ level, with no additional cost to the household. The inclusion of the baseline scenario allowed all choice tasks to be directly compared in the analysis. Figure 6.2 Card explaining the attributes and their levels for the boaters’ survey

Following completion of the choice tasks, respondents were asked to indicate how they made their choices. This information was used to identify (and subsequently remove) protest and poorly considered bids. We also collected information on

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whether the respondents ‘attended’ (i.e. considered) the various benefit attributes when they made their choices, and excluded from our analysis those that did not attend the cost attribute.

Section E: How changes in the river infrastructure and facilities might affect your visits to this section of river This section of the survey centred on the ‘count’ travel cost method and the contingent behaviour method, which are alternative approaches to measure the benefits of investing in waterways assets. The travel cost method is a revealed preference method in which the value derived from a resource is observable in the behaviour of consumers in related surrogate markets – in this case the costs people incur when travelling to use the waterways. We utilised the ‘count model’ variant of the travel cost method. Count models require data on visitors’ costs of travel to a site, along with the frequency of visits to that site. Using Poisson analysis, it is possible to estimate consumer surplus values associated with trips to a site. Although count models per se do not measure marginal changes to the quality of a resource (they are limited to estimating the value of current use), they can be extended to become contingent behaviour models. Contingent behaviour (CB) models are essentially the combination of a count travel cost model and a stated preference, contingent valuation model. CB modelling involves first establishing visitors’ current use patterns of a site (i.e. the count model) and then asking them how their frequency of trips to the site might change if the quality and condition of that site changed, i.e. different options for investing in assets. This combined approach has several advantages. First, values are grounded in actual behaviour (travel to the site), thus overcoming some of the criticism of stated preference methods that are based on hypothetical scenarios. Second, CB allows valuations to extend beyond current levels of provision thus producing greater insights into how user benefits might change if the attributes of the site were modified. In our study, we utilised CB models to provide a platform on which to estimate both changes in visitor numbers and per trip consumer surplus values associated with changes to the quality and condition of assets at the case study waterways. To help reduce the impact of displacement effects, respondents were made aware of all substitute sites. Section E of our survey instrument collated data for the ‘Count’ travel cost model and the Contingent behaviour model. First, we asked respondents to state how many trips they had made to the section of river over the past year. This question, combined with the distance travelled to the river (from Section A) was used as the basis of the Count travel cost analysis. Next, respondents were provided with details of one of two possible scenarios for the future management of river infrastructure: an improvement and a deterioration scenario. Note that the descriptions of these change scenarios are slightly different for the boaters and recreationists, reflecting how they use the river infrastructure. Further details of the count travel cost model and contingent behaviour questions can be found in Annex 1.

Section F: Socio-economic characteristics The final section of the survey collected details of the respondent’s socio-economic characteristics, including gender, age, marital status, family size, ethnic group, education achievement, employment status, income and membership of sport and environmental groups. This information was incorporated into our analysis to profile the mean river user and assess the representativeness of our sample and also help

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understand how respondent’s characteristics affect their values for river improvements.

6.3 Survey administration and sampling strategy Four case study rivers were selected for the survey work: the rivers Thames, Great Ouse, Ancholme and Medway. These rivers were selected to be representative of the EA’s navigable rivers in terms of: rural / urban mix; river infrastructure; and recreational use. Figure 2.1 (in Section 2 above) illustrates the location of these rivers relative to other navigable waterways and non-navigable rivers in England. At each river, interviews were undertaken at between two and four sites (depending on the length of the river). These sites were selected in consultation with the EA representatives and tended to be sites that had significant infrastructure (e.g. locks) and were likely to attract a reasonable number of visitors. Table 6.1: Case study rivers and survey sites

River Sites Thames Abingdon Hurley Penton Hook Teddington Great Ouse Denver Ely Bedford Houghton Medway Allington Tonbridge Hampstead Ancholme Brigg South Ferriby

6.4 Survey response A total of 71.5 days interviewing were undertaken across the four rivers. 759 interviews were completed, comprising 525 interviews with general recreationists and 234 interviews with boaters. Table 6.2 below provides a summary of these by river and by type of user. Table 6.2: Summary of interviews

Thames Ancholme Great Ouse Medway Total Days of 27.5 14 14 16 71.5 interviews Boaters 74 29 46 85 234 Recreationists 156 115 148 106 525 Total 230 144 194 191 759

Figure 6.3 shows that the breakdown of interviews between boaters and recreationists varied by river, with boaters accounting for the smallest share of responses on the Ancholme and the largest on the Medway.

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Figure 6.3 More recreationists were surveyed across the different case study sites than boating users

The socio-economic characteristics of boaters varied slightly from those of riverbank users. Boaters were more likely to be older males, who are married and live in households with two people. Boaters were also more likely to have managerial jobs or be retired. Riverbank users, on the other hand, were more likely to be single or have children. They were often more qualified than boaters and more likely to be in full time employment. However, no significant differences were found for the highest levels of education achievement or income. Further detail of the socio-economic characteristics of our samples can be found in Annex 1.

6.4.2 Levels of satisfaction with waterways infrastructure and facilities Table 6.1 provides a summary of river users’ levels of satisfaction with river infrastructure and facilities. The figures provide the context for the valuation survey, and are not used directly in the subsequent analysis. More than 85% of boaters were either very satisfied or satisfied with the infrastructure for navigation and for access to water. Levels of satisfaction were slightly lower for facilities for boaters (72% were either very satisfied or satisfied). Around 85% of boaters were very satisfied or satisfied with the infrastructure to access river banks, but there were lower levels of satisfaction for facilities for bankside recreation (64% were satisfied or very satisfied). Riverbank users were also very satisfied with bankside infrastructure (93% very satisfied or satisfied) and facilities (80% satisfied or very satisfied). Overall, it is clear that both boaters and riverbank users are satisfied with river infrastructure, but that levels of satisfaction were lower for facilities for bankside recreation, particularly among boating users.

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Table 6.1 Satisfaction with river infrastructure and facilities

Riverbank users Boaters Very Satisfied Dissatisfied Very Satisfied Dissatisfied satisfied satisfied Infrastructure n/a n/a n/a 55.8 34.1 10.1 for navigation Infrastructure n/a n/a n/a 42.1 43.6 14.3 to access water Facilities for n/a n/a n/a 31.3 40.9 27.8 boaters Infrastructure 52.2 41.0 6.8 39.4 45.4 15.1 to access riverbank for recreation Facilities for 41.4 38.4 20.2 26.7 37.1 36.2 bankside recreation

The next section presents the valuation results.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

7 Results of the Valuation Survey

7.1 Introduction The results of the choice experiment were used to estimate the willingness to pay of users to achieve the scenarios related to different levels of waterways investment and functionality. Before analysing the choice experiment, it was first necessary to clean the data to remove ‘bad’ responses. In particular, we removed responses where the respondents did not consider (attend to) the cost attribute when completing the choice tasks. Overall, around one-third of our respondents stated that they ‘never considered’ the cost attribute when they made their choices in the choice experiment. Generally, there was no real difference in the levels of non-attendance across user groups, but non-attendance was generally higher at the rivers Medway (41%) and Ancholme (38%) than the other two rivers. Although these levels of non-attendance appear high, they are not uncommon in CE studies (see Colombo et al, 2013 for an overview). However, non-attendance of cost does cause problems for welfare estimation if it results in the cost attribute becoming insignificant in the choice model. Indeed this was the case in our study. To address this issue and allow us to develop choice models in which the cost attribute is significant,, we excluded respondents that did not attend cost. Although this ‘cleaning’ exercise does allow us to develop choice models that can be used to estimate WTP values, removing non-attenders did mean that our models were based on a reduced number of observations, which meant that we were unable to run models at the river site level. Further details of the analytical methodology are given in Annex 1.

7.2 Summary of choice experiment results Once the data were cleaned, the results of the choice experiment could be analysed in order to assess the willingness to pay of users to maintain or improve the condition of waterways assets. The findings of the choice models conformed to expectations, in that respondents expressed a preference for options which involved higher levels of benefits and lower levels of tax. The results were used to estimate the levels of benefits that users derived from improvements in each of the waterways attributes. The benefits estimates were found to be statistically significant across the sample as a whole. However, analysing the results by river reduced the sample size and weakened the statistical significance of the findings. Key findings from the choice experiment include: ■ River users attain greater benefits from protecting river assets against a deterioration in condition than improving assets to their best possible condition; ■ Boaters tended to be willing to pay more to maintain and improve assets on navigable rivers than riverbank users. Boaters tended to most highly value assets that support “Navigability of the river” (e.g. locks, weirs) and “Boat facilities” (water points, sanitation systems etc), while Riverbank users tended to value assets that support “Access to the riverbank” (footpaths, car parks). Further details of the choice experiment results are given in Annex 1.

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7.3 Willingness to pay for changes in asset condition The choice models allowed estimates to be made of the changes in benefits to waterways users resulting from unit changes in the condition of waterways assets. These results were then combined with estimates of the current condition of waterways assets on the four case study rivers, and used to assess river users’ values for two benefits scenarios: (i) A scenario in which the condition of assets improves such that all are in very good condition, and (ii) A scenario which maintains the current condition of assets and avoids a deterioration such that all assets decline to a poor condition. This was modelled by examining potential changes in asset condition scores as recorded in the EA Assets Inventory. The Assets Inventory rates all assets on a scale from 1 (very good condition) to 5 (poor condition). Estimates of willingness to pay per unit of asset condition were used to estimate the benefits of moving from the current average asset condition score to a score of 1 (where all assets are rated as being in very good condition), and the benefits of preventing a decline to a score of 5 (where all assets are rated as being in poor condition). For each river, the estimated change in average asset condition associated with improvement or deterioration scenario was multiplied by the estimated willingness to pay of river users for unit changes in condition, in order to estimate the overall willingness to pay of bankside recreationists and boaters for the two investment scenarios. The results are presented in Tables 7.1 and 7.2. It was estimated that: ■ Riverbank users were willing to pay an average of between £52 and £299 each annually to improve all river assets to their best condition. Generally, highest values were attained for improving access to bank infrastructure. Values to protect against a deterioration of facilities ranged from £141 to £518. The fact that there are higher WTP values to protect against a deterioration compared to an improvement is a common finding in valuation studies in that it reflects the fact that people tend to have higher utility from maintaining what they already have compared to attaining additional benefits. It is also interesting to note that visitors to the Medway and Ancholme tended to have much higher WTP to protect against a deterioration relative to improvements than the other two rivers. A possible explanation of this is the assets found on the Medway and Ancholme are currently in much better condition than at the other rivers. ■ Boaters were willing to pay significantly higher amounts to both improve and protect assets than riverbank users. This is to be expected since boaters are much more reliant on the assets for their activities and have fewer substitute sites. Similar to the riverbank users, boaters have a higher value for protecting assets in the Medway and Ancholme than the other rivers.

Table 7.1 Riverbank users' mean annual WTP for policy relevant changes to river assets

Attribute Thames G Ouse Medway Ancholme

Improvement from current to very good condition

Navigability of river £86 £77 £51 £53

Access to bank £151 £160 £96

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Attribute Thames G Ouse Medway Ancholme

Bank facilities £63

All assets £300 £237 £147 £53

Protect against deterioration to poor condition

Navigability of river £109 £117 £144 £141

Access to bank £169 £160 £224

Bank facilities £87 £150

All assets £365 £277 £518 £141

Table 7.2 Boaters' mean WTP for policy relevant changes to river assets

Attribute Thames G Ouse Medway Ancholme Improvement from current to very good condition

Navigability of river £222 £178 £188 £225

Access to water £69 £69 £13 £46

Boat facilities £126 £150 £58 £52

Access to bank £91 £97 £58

Bank facilities £54 £128

All assets £558 £507 £328 £344

Protect against deterioration to poor condition

Navigability of river £229 £273 £263 £225

Access to water £110 £110 £166 £132

Boat facilities £184 £160 £252 £258

Access to bank £102 £97 £135

Bank facilities £74 £128

All assets £703 £753 £933 £917

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7.4 Results: Count travel cost and Contingent behaviour A count travel cost model was utilised to estimate the consumer surplus value of trips to the rivers. Unfortunately, the models did not perform well at individual river level, so the analysis below is based on data pooled across all rivers. Thus, based on the travel cost count analysis, it was estimated that on average visitors valued trips to the rivers at £338 per annum. The contingent behaviour (CB) model was then used to estimate potential changes in the numbers of users that would result from improvements in waterways assets as well as the value of this change. The contingent behaviour dummy variable was found to be significant and positive, indicating that hypothetical improvements to the condition of river assets (on average) increase the number of planned trips. To estimate the predicted change in the number of trips following the improvement, we estimated the predicted number of trips per user under both current condition and the hypothetical improved conditions, before using these estimates to calculate the change in predicted trips. The analysis estimated that river users would make an average increase of 1.99% in their annual number of trips to the rivers, following an improvement. Since the coefficient of the travel distance was significant in the contingent behaviour model, this allowed an estimate of the value of improvements to the condition of river assets. This analysis indicates that visitors on average were willing to pay £6.72 per trip to improve river assets. Further details of both the travel cost models and contingent behaviour models can be found in Annex 1.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

8 Aggregation of benefit estimates to the entire EA navigable rivers network

8.1 Introduction The analysis above assessed river users’ values for improving and protecting assets at the four case study rivers. The next stage of the analysis aggregated these individual user benefits to all users of the four rivers. For this aggregation exercise we multiplied the mean WTP for the policy relevant improvements to river assets for our two user groups with estimates of the number of people using the river each year. Below, we present the analysis on the number of river users, the aggregate benefit estimates, and an assessment of values per visit and per km.

8.2 Estimating Waterway Users Data on the total annual number of visits to each river was attained from the Environment Agency. However, to aggregate the WTP data, we required an estimate of the number of visitors each year. To convert the EA visits data to visitor data we used data from our study on the respondents’ annual number of visits to the river. Table 8.1 summarises the approach used in this calculation. To illustrate this, let us take the example of riverbank user on the Thames. Based on the EA data there were 8.479 million visits to the Thames. Data from our study suggest that on average riverbank users made 32 trips per year, giving a total of 262,500 visitors to the Thames per year. These figures suggest that there are large numbers of repeat visits to the waterways, especially by local users. In our aggregation, we use the current number of visitors reported in Table 8.1 to represent the number of people affected by a deterioration in the condition of rivers. To estimate the predicted number of people affected by improvements, we also factor in the predicted 1.99% increase in visitor numbers as derived from the contingent behaviour study (see Section 7.4) Table 8.1: Annual number of river users (‘000) at our case study rivers

Thames G Ouse Medway Ancholme

Riverbank users

Annual no of 8479 1338 240 109 visits (‘000)1

Av annual no. of visits per visitor2 32 20 13 38

Current no. of 262.5 65.3 18.7 2.9 visitors (’000)

Predicted visitors 267.8 66.6 19.1 2.9 (improved scenario)

Boaters

Annual no of 597 610 260 62 visits (‘000)1

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Av annual no. of visits per visitor2 22 21 27 37

Current no of 26.7 28.9 9.5 1.7 visitors (’000)

Predicted visitors 27.3 29.4 9.7 1.7 (improved scenario)

All river users

Visits (’000) 9076 1948 500 170.5

Visitors (’000) 289 94 28 4.6

Source: EA unpublished data and Aberystwyth University2

8.3 Estimating WTP for protecting and improving waterways Tables 8.2 and 8.3 report the aggregation of WTP for improvements and protection from deterioration to river assets across our four case study rivers. These values were estimated by multiplying the mean WTP values per visitor (Tables 7.1 and 7.2) by the annual number of visitors (Table 8.1). The highest value for improvements was found in the Thames, where improvement of assets to their best possible condition was valued at £95.6 million per annum. The majority of this aggregate value (£80.3 million) is based on the benefits to the riverbank users of the Thames, while boaters on the Thames were estimated to derive benefits of £15 million annually. The improvements to assets that riverbank users most valued included access to bank (£40.5 million), with navigability of river being valued at £22.9 million. Boaters on the Thames most highly valued navigability of the river (£6.1 million). Improvements to assets on the Great Ouse were valued at £34 million per annum, with the benefits being equally divided between riverbank users and boaters. It is interesting to note that the benefits that the boaters derived from improvements on the Great Ouse (£18.3 million) were higher than the benefits from improvements on the Thames, reflecting in part the higher number of boaters on the Great Ouse. Similar to the Thames, riverbank users on the Great Ouse most highly valued improvements to access to bank assets, while boaters most highly valued navigability of river assets and boat facilities. The aggregate benefits attained from improvements on the Medway (£5.9 million) and Ancholme (£0.7 million) were significantly lower than the other two rivers, reflecting the lower number of users of these rivers as well as lower mean values. Interestingly, for these two rivers, the benefits derived by boaters were found to be greater than for bankside users. Table 8.2: Aggregate annual WTP for improvements to assets at the four rivers (£m)

Attribute Thames G Ouse Medway Ancholme

Bankside users

Navigability 22.9 5.15 0.96 0.16 of river1

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Access to 40.50 10.65 1.83 0 bank

Bank 16.89 0 0 0 facilities

All assets 80.29 15.80 2.79 0.16

Boaters

Navigability of river 6.07 5.24 1.82 0.39

Access to water 1.88 2.02 0.12 0.08

Boat facilities 3.45 4.40 0.56 0.09

Access to bank 2.50 2.85 0.56 -

Bank facilities 1.47 3.77 - -

All assets 15.36 18.28 3.07 0.55

All river users

All assets 95.64 34.08 5.86 0.71

1In the Bankside users sample, the ‘Navigability of river’ attribute also includes the benefits associated with ‘Access to water’ and ‘Boat facilities’ which are separately estimated for Boaters. Table 8.3 reports the annual aggregate WTP to prevent deterioration in river assets. At all case study rivers, users were willing to pay more to protect against deterioration in facilities compared to an improvement in facilities. Again, highest aggregate values were attained for the Thames (£114 million), with most of these benefits being generated for riverbank users (£96 million). Aggregate values for the Great Ouse, Medway and Ancholme were £35.6 million, £18.7 million and £1.4 million respectively. Similar to the improvement scenario, riverbank users were found to derive most benefits on the Thames and Great Ouse, while boaters would derive most benefits on the Medway and Ancholme. Table 8.3: Aggregate annual WTP to prevent deterioration in condition of assets (£m)

Attribute Thames G Ouse Medway Ancholme

Bankside users

Navigability 28.58 7.65 2.69 0.41 of river1

Access to 44.33 10.45 4.19 0 bank

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Bank 22.87 0 2.81 0 facilities

All assets 95.78 18.10 9.68 0.41

Boaters

Navigability of river 6.13 7.87 2.50 0.38

Access to water 2.94 3.17 1.58 0.22

Boat facilities 4.92 4.63 2.39 0.43

Access to bank 2.73 2.79 1.29 0

Bank facilities 1.99 0 1.22 0

All assets 18.71 18.46 8.97 1.03

All river users 114.48 36.56 18.65 1.44

8.4 Estimates of per visit and per km WTP for improvements to river assets In this section of the analysis we estimate mean WTP values for river improvements per visit and per km of river. Such values are important in terms of allowing our results to be used to assess the value of other rivers through the use of value transfer techniques. Estimates of the mean WTP per visit (Table 8.4) were made by dividing the aggregate WTP values (Tables 8.2 and 8.3) with the annual number of visits to each river (Table 8.1). These results indicate that the mean WTP per trip for improvements to river assets was between £17.50 (Great Ouse) and £4.16 (Ancholme). Similarly, WTP per trip to protect against a deterioration in river assets was between £37.30 (Medway) and £8.43 (Ancholme). Estimates of mean WTP per km of river were made by dividing the aggregate WTP values (Tables 8.2 and 8.3) by the length of the non-tidal, navigable sections of the rivers (225km, 112km, 31km and 27km respectively for the Thames, G Ouse, Medway and Ancholme). The highest value of improvements per km of river was found on the Thames (£425,085 per km), and the lowest value at the Ancholme (£26,244 per km). The highest per km values to protect against a deterioration were on the Medway (£601,637 per km), with the Ancholme again being lowest (£53,260 per km).

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 8.4: WTP per visit and WTP km for improvements to the condition of river assets

Attribute Thames G Ouse Medway Ancholme

WTP per visit

Improvements to condition of river assets £10.54 £17.50 £11.73 £4.16

Protect from a deterioration in condition of river assets £12.61 £18.77 £37.30 £8.43

WTP per km

Improvements to condition of river assets £425,085 £304,329 £189,171 £26,244

Protect from a deterioration in condition of river assets £508,810 £326,427 £601,637 £53,260

Impact on Benefits from Changes in Investment in EA Waterways Final Report

9 Benefit cost analysis of investing in the waterways assets

9.1 Methodology This section compares our estimates of the benefits derived from investments to protect waterway assets at our four case study rivers with the EA’s predicted costs of maintaining and replacing assets on these rivers. In order to compare these costs and benefits, the following steps were taken: 1. Four scenarios were defined, each involving a different level of expenditure in waterways assets; 2. The effects of each of these expenditure scenarios on asset condition (see Section 4.6) were modelled, using a set of simple assumptions; 3. The costs (maintenance and capital costs) of each scenario were estimated; 4. The benefits of each scenario were estimated, using the survey results for WTP for unit changes in the condition of different assets; and 5. Estimates of the costs and benefits of each scenario were brought together and compared. An Excel spreadsheet model was developed to assess changes in asset condition, costs and benefits under the four scenarios. The different steps used to build the model are described in turn.

9.2 Definition of Expenditure Scenarios Four different expenditure scenarios were assessed, as follows: ■ Scenario 1 – Zero expenditure. This scenario assumes that no expenditure is made on either the maintenance or replacement of waterways assets. As a result, all assets deteriorate in condition until they are no longer fit for purpose. ■ Scenario 2 – Maintenance only. This scenario assumes that money is spent on maintaining assets only, but that assets are not replaced at the end of their lifetime. As a result, all assets deteriorate gradually in condition over the course of their lives, until they are eventually unfit for purpose, but this decline takes longer than under Scenario 1. ■ Scenario 3 – Moderate investment. Under this scenario, all assets are maintained and they are replaced before they reach poor condition. The analysis assumes that all assets which reach a condition score of 4 or more are replaced. The result is that the condition of all assets declines gradually as they age, until they reach a condition score of 4 and are then renewed. ■ Scenario 4 – High investment. This scenario involves an enhanced level of investment, such that assets are maintained and replaced at an earlier stage than under scenario 3. This is taken to be when they reach a condition score of 3 or more. The result is that the condition of all assets declines gradually as they age, until they reach a condition score of 4 and are then renewed. The effect of these scenarios on asset condition, the capital and maintenance costs of these assets, and the benefits they deliver, were assessed over the period 2013 to 2040. The choice of time period for the analysis reflects the long term nature of investments in waterways assets.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

9.3 Modelling Changes in Asset Condition

9.3.1 Method For each of the four scenarios, a simple spreadsheet model was used to estimate changes in asset condition that would result under alternative investment scenarios. The model assumes that, over the course of its life, each asset gradually declines in condition until it is no longer fit for purpose. The condition of each asset is assessed using the condition scores of 1 to 5 in the EA Assets inventory (see Section 4.6), where a score of 1 indicates very good (new) condition and a condition of 5 indicates poor (no longer fit for purpose) condition. Our model makes the following simple assumptions to model asset condition: 1. Over the course of its life, if maintained, an asset will gradually decline from a condition score of 1 (very good) to a condition score of 5 (poor); 2. If not maintained, the asset will decline more rapidly and will reach a condition score of 5 (poor) over a shorter lifespan. This shorter lifespan is taken as the “number of years to first failure without maintenance” as estimated by the EA for each asset type. 3. A condition score of 5 (poor) is taken to mean that the asset becomes unusable, because it is no longer functional or safe to use. 4. A steady, incremental decline in condition is assumed to take place under each scenario. This is modelled by assuming a constant absolute increment in condition score over the asset’s life. Each asset is assumed to decline at a constant annual rate from a condition score of 1 to a score of 5 over the course of its lifespan. This represents a change in condition score of 4 points over its life of n years – the annual increment in condition score is therefore assumed to be 4/n. This assumption is broadly in line with the (limited) available evidence from the Environment Agency regarding patterns of asset deterioration. 5. The estimated absolute annual increment in condition score is assumed to be constant over the asset’s life. Therefore a new asset and an old asset are both assumed to decline in condition at an annual rate of 4/n. Thus the rates of deterioration of assets are assumed to be similar whether or not they are replaced – replacement of an asset is assumed to take the condition score of that asset back to 1, and will therefore lower the overall average asset condition score, but is not assumed to affect the ongoing rate of change of that score. 6. The annual increments are applied to the current condition score of each asset, as set out in the inventory, to model its decline from current condition over time. As an example, an asset has an estimated lifespan of 40 years, if maintained, but will fail after 10 years if not maintained. This is modelled by assuming that the condition score of the asset will increase from 1 to 5 (a change of 4 points) over 40 years if the asset is maintained. The annual increment in condition score is therefore assumed to a constant 0.1 points per year over the lifespan of the asset. Under the zero expenditure (no maintenance) scenario, the asset condition score increases by 4 points over 10 years, an annual increment of 0.4 points per year. The assumed annual increments in condition for each asset type are given in Table 9.1.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 9.1: Assumed changes in asset condition scores

Asset Type Lifespan from new Estimated annual Time to first failure Estimated annual (if maintained) increment in (if not maintained) increment in condition (if condition (if not maintained) maintained)

Boat 25 0.2 5 0.8

Boat roller 25 0.2 10 0.4

Breakwater 50 0.1 50 0.1

Building 25 0.2 10 0.4

Channel bank 50 0.1 50 0.1

Lock 25 0.2 5 0.8

Lock island 70 0.1 50 0.1

Sluice 70 0.1 5 0.8

Weir 25 0.2 5 0.8

Fish canoe pass 70 0.1 15 0.3

Jetty quay 70 0.1 20 0.2

Layby landing 70 0.1 25 0.2

Mooring 70 0.1 25 0.2

Navigation aid 30 0.1 25 0.2

Slipway 70 0.1 15 0.3

Power point 15 0.3 1 4.0

Rubbish compound 20 0.2 5 0.8

Sanitary station 25 0.2 1 4.0

Sewage system 25 0.2 1 4.0

Water point 15 0.3 1 4.0

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Access 15 0.3 1 4.0

Bridge 70 0.1 5 0.8

Car park 15 0.3 5 0.8

Public toilet 25 0.2 1 4.0

Camping site 25 0.2 2 2.0

Picnic area 25 0.2 2 2.0

Source: EA estimates of asset lifespan and time to first failure; ICF GHK estimates of annual increment in condition score, based on assumed constant annual change in condition over lifespan from condition score 1 to 5 This approach employs a number of significant assumptions, and is subject to a number of caveats: ■ The estimated asset lifespans and time to first failure are rough estimates only, and intended to be taken as a guide for the average asset of each type. They are therefore unlikely to provide accurate estimates of the life of individual assets. The model is therefore a simplification of reality and intended to provide a broad overall assessment of how asset condition might change over time, rather than a tool that can be used to inform decisions about the maintenance or replacement of specific assets. ■ The EA uses whole numbers (1,2,3,4,5) to assess asset condition, while our modelling of condition assumes small incremental changes in condition scores on a continuous scale between 1 and 5. While gradual changes might be expected on a year to year basis, it means that modelled condition scores will diverge from the EA’s estimates. ■ The assumed constant absolute incremental change in condition is likely to be a simplification of reality. For example, rather than declining gradually in condition, some assets may remain in good condition for several years before declining more rapidly. The application of constant annual increments does, however, greatly simplify the analysis and is intended to provide a reasonable estimate of cumulative changes in asset condition over time, rather than an accurate assessment of the condition of a specific asset. ■ The modelling of the decline of assets that are not maintained, using the “estimated time to first failure”, effectively assumes that asset life is reduced by the lack of maintenance. In reality, though assets may fail over such a time period, this may not mean that they become useless and cannot be fixed. Instead, such assets may be reparable in order to bring them back to life. For example, a boat that is damaged because it has not been maintained for 5 years may be in better condition than one which has reached the end of its 25 year life. However, under the “zero expenditure” scenario, where no maintenance activity takes place, it is assumed that assets are effectively unusable after their first failure.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

■ The modelling of expected condition over time is necessary in order to examine the benefits of waterways expenditure, which are linked to asset condition and function. Because of the assumptions and caveats above, the model is intended only as a means of assessing future changes in the value of the overall benefits and costs that the waterways deliver, not as a tool for informing choices about investments in individual assets. The Assets Inventory was not designed to inform financial decision making. However, since the model indicates differences in the benefits and costs of investing in different groups of assets, it may help to inform overall choices about future investment scenarios.

9.3.2 Estimated changes in asset condition Based on the model, the estimated changes in asset condition under the four expenditure scenarios, relative to current condition, are as follows. ■ Scenario 1 – Zero expenditure. Under this counterfactual scenario, all expenditures on the maintenance and replacement of assets ceases. Most assets swiftly decline, with most assets becoming unusable by 2030, and all becoming unusable just after the end of the modelled period (2040).

■ Scenario 2 – Maintenance only. All assets will decline, until eventually becoming unusable. Nonetheless, this process takes place more gradually than in Scenario 1. Moreover, a number of assets with a longer lifespan (when maintained) remain in use in 2040. Benefits to users can be expected to decline substantially in line with asset condition.

■ Scenario 3 – Moderate investment. Assets with a condition score of 4 or above are replaced immediately. This results in a sustained improvement in asset condition over the investment cycle. Although these improvements are

Impact on Benefits from Changes in Investment in EA Waterways Final Report

depicted here as ‘spikes’ in asset condition, this can be attributed to the nature of the modelling approach where many assets need to be replaced simultaneously and the discrete number of asset scores used. In reality, a more gradual investment profile could be expected.

■ Scenario 4 – High investment. All assets are replaced when their condition score reaches 3 or more. This yields a more pronounced initial improvement in the condition of all assets, and associated benefits, and ongoing investments occur more frequently than under Scenario 3, resulting in higher costs and higher benefits to users.

9.4 Costs of the modelled expenditure scenarios

9.4.1 Method The next stage was to estimate changes in asset expenditures under the four scenarios. In each case, maintenance and capital costs of each waterways asset were estimated under each scenario. For each individual asset, the EA assets inventory gives estimates of: ■ The annual maintenance costs of each asset; and ■ The cost of replacement of that asset.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Where cost data were missing for a particular asset, an average capital and/or maintenance cost for that particular asset type was applied. Expenditures were estimated as follows: ■ The annual maintenance cost for each individual asset was assumed to be incurred in each year, providing the asset remained operational (i.e. it had a condition score of less than 5), for Scenarios 2, 3 and 4 (maintenance, moderate investment and high investment scenarios); ■ The cost of replacement was assumed to be incurred in the year of replacement of assets in Scenarios 3 and 4. In Scenario 3, assets were assumed to be replaced if they reached a condition score of 4 or more in the preceding year. In Scenario 4, assets were assumed to be replaced if they reached a condition score of 3 or more in the previous year. Tables 9.2 and 9.3 give an overview of the overall value of the replacement costs and annual maintenance costs for total portfolio of waterway assets, as listed in the EA Asset Inventory. Table 9.2 Total replacement costs by asset function, river (£m)

Function Thames G Ouse Medway Ancholme All rivers

All assets 752.4 147.9 66.6 12.7 1,319.8

Navigation 677.0 136.8 58.5 11.5 1,127.5

Access to 78.8 46.1 8.7 5.9 1.1 water

Facilities 5.1 2.2 0.2 1.0 6.9 for boats

Access to 23.9 0.2 2.0 0.0 27.5 river bank

Facilities for 1.4 0.1 0.0 - 1.5 bankside visitors

Table 9.3: Total maintenance costs by asset function, river (£m)

Function Thames G Ouse Medway Ancholme All rivers

All 3.76 0.74 0.33 0.06 6.36

Navigation 3.48 0.68 0.29 0.06 5.72

Access to 0.23 0.04 0.03 0.00 0.40 water

Facilities 0.03 0.01 0.01 0.00 0.03 for boats

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Access to 0.19 0.00 0.01 0.00 0.14 river bank

Facilities for 0.01 0.00 0.00 - 0.70 bankside visitors

The figures indicate that it would cost over £1.3 billion to replace all of the assets in the inventory. Navigational assets represent 90% of all replacement costs and maintenance costs, and the total annual cost of asset maintenance is £6.4 million. The figures indicate that the annual cost of maintenance is relatively small compared to the capital cost of replacement. Annual maintenance costs thus account for less than 1% of the total replacement value of assets- while assets have varying lifespans of between 10 and 70 years (if maintained). The implication is that scenarios which involve replacement of assets – rather than mere maintenance – have much higher levels of costs. The costs of Scenarios 3 and 4 are therefore much higher than Scenario 2. The Assets Inventory includes information about the purpose of the assets listed, some of which have multiple purposes and contribute to functions other than navigation or recreation. To avoid overestimating the costs of investment in navigational and recreational assets, the cost assessment applied a scaling factor based on the information available. A factor of 100%, 75%, 25% or 0% of costs per asset was applied, depending on the functionality identified within the Inventory (Table 9.4). Applying these scaling factors had the effect of reducing the estimated costs slightly, in order to make them more comparable to the benefits estimates, which focus on navigation and recreational benefits. Table 9.4: Scaling factors applied in cost assessment

Purpose of asset Scaling factor applied to costs

Navigation/recreation Only 100%

Other Assets Primary Navigation 100%

Dual Benefit - FCRM Assets Primary Navigation 75%

Dual Benefit - FCRM Assets Primary Other 25%

FCRM only 0%

9.4.2 Estimated changes in expenditure Expenditures under the four scenarios are estimated as follows ■ Scenario 1- No investment. Net expenditure is zero under this zero-base scenario. ■ Scenario 2- Maintenance only. Under this scenario, there are relatively low levels of expenditure as assets are maintained only, and not replaced. There is a sharp decline in expenditures over time, as many assets reach the end of their life around the 2020s and are not then replaced.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

■ Scenario 3- Moderate Investment. When a moderate investment scenario is introduced, we see periods of pronounced spikes in expenditure as many assets are restored to high condition. This is particularly noticeable for navigation assets. Overall expenditures are much higher than under Scenario 2. The spikes in expenditure are a result of the assumptions used in the model and the discrete value of the asset scores used in the inventory. In reality, we would expect capital expenditures to be smoothed over time, rather than incurring spikes as assets are replaced simultaneously, although this would not substantially affect the overall scale of benefits and costs.

■ Scenario 4- High investment. Under the high investment scenario, changes in expenditure are more pronounced than under the moderate investment scenario, and occur with greater frequency. Overall expenditures are greatly increased over Scenario 3.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

9.5 Benefits of the modelled scenarios

9.5.1 Method Estimates of willingness to pay for protection of assets against deterioration (to a level of 5), or improvements to assets to a high condition (1), provided the basis of benefit estimation for the model. Whilst costs estimates are available for each asset within the Environment Agency Asset Inventory, benefits were estimated at the river level through the choice experiment survey. The willingness to pay results were used to estimate the benefits per unit change in condition score for each category of assets and for each river. In each case the estimated willingness to pay to avoid a one unit deterioration in asset condition, and to secure a one unit improvement in asset condition, were estimated. These estimates of benefits per unit change in condition were combined with the estimated changes in asset condition scores under the different scenarios to estimate changes in benefits over time. For example, taking the case of navigation assets on the Thames, the results from the choice experiment survey indicate a current willingness to pay of £18.7 million per year in 2013 to maintain assets at their current condition (average condition score 2.97) rather than allowing them to decline to poor condition (an asset score of 5). Each unit of deterioration of navigational assets on the Thames therefore leads to a loss of £9.2 million of benefits. The willingness to pay to improve navigation assets to very good condition (asset score =1) is £18.3 million. Therefore each unit of improvement in asset condition leads to an additional benefit of £9.3 million to users. These estimates of the benefits of a unit change in asset condition were then used to assess the changes in benefits resulting from the changes in asset condition resulting from the four expenditure scenarios.

9.5.2 Estimated changes in benefits Comparison of changes in benefits across the four case study rivers demonstrates the divergence in value to users that occurs under the different scenarios: ■ Scenario 1: No investment. With no investment, the benefits derived from all assets decline rapidly, in line with the condition and function of waterways assets. For example, the current benefits of access to the riverbank are estimated at £71 million annually for all users of the four rivers. With no expenditure on maintenance or refurbishment of the assets to support access,

Impact on Benefits from Changes in Investment in EA Waterways Final Report

however, they decline rapidly in condition and the value of benefits is estimated to fall to £17 million in 2015 and zero in 2020, as the condition of assets declines to such a point that they are no longer usable.

■ Scenario 2: Maintenance only. With maintenance only, the benefits of waterway assets are retained for a much longer period, but nonetheless significantly reduced over time. For example, the benefits of access to the riverbank decline more gradually from £71 million in 2013 to £18 million in 2040, at which point some assets are still usable, albeit in poorer condition.

■ Scenario 3: Moderate investment. With moderate investment, far greater benefits are secured over the period. There are substantial spikes in the estimated value of benefits following the replacement of assets. For example, the value of benefits delivered by assets allowing access to the riverbank varies between £67 million and £118 million annually over the period.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

■ Scenario 4: High investment. Under this scenario, changes to user benefits occur more uniformly than under moderate investment, ensuring a more consistent provision of benefits to users. With a sharp initial increase in asset condition, far greater benefits are realised than under moderate investment. For example, the value of benefits delivered by assets allowing access to the riverbank rises sharply to £154 million before fluctuating thereafter.

9.5.3 Estimated changes in user numbers The estimated current annual user numbers across the four study rivers are as follows (Table 9.5). Table 9.5: Estimated annual users (‘000)

Type of use Annual users (‘000)

General recreation - informal 5,505

General recreation - day visits 1,456

General recreation - overnight 145 visits

Angling 1,433

Boating – powered 1,166

Boating – unpowered 363

Birdwatching 169

Events and festivals 623

Source: Environment Agency data Investment in waterways assets can be expected to influence the numbers of waterways users as well as the benefits per user, since: ■ Investment in the maintenance of waterways assets is necessary to ensure they remain safe and useable, and therefore to maintain current levels of usage;

Impact on Benefits from Changes in Investment in EA Waterways Final Report

■ Investment in new assets, or in the improvement of existing assets, may have an effect on overall visitor numbers, either by encouraging existing users to make more frequent use of the waterways, or by attracting new users. Previous investments in some waterways, particularly canals, have been shown to lead to significant increases in visitor numbers. These increases have resulted from significant investments in waterways regeneration schemes, significant improvements in towpaths and access, and/or the provision of new visitor facilities. For example, GHK (2007)11 reported the effects on visitor numbers of a range of waterways regeneration schemes, and Defra (2012)12 noted that a visitor monitoring programme at sites in the West Midlands (Stourbridge and Walsall) in the late 1990s demonstrated that towpath visitors increased by 110% as a result of towpath and environmental improvements, although the increase may not be fully attributable to those improvements. In the case of the waterways managed by the Environment Agency, the types of investments being considered largely relate to the maintenance and replacement of existing facilities rather than the provision of new ones. Indeed, the EA reports that historical evidence generally shows overall that visitor numbers do not increase on a river scale in response to investments, and are more likely to respond to economic factors. User numbers would only increase with significant new assets at particular “honey-pots” such as cafes, marinas and nature reserves. The Asset Inventory, which forms the basis for the EA’s investment decisions, includes only current assets, not future assets, projects or partnerships. The contingent behaviour survey conducted by Aberystwyth University as part of this study supports this assertion, suggesting that waterways users would be expected to increase their usage of the EA waterways only marginally (by approximately 2%), even in response to major improvements in the condition of waterways assets. The main effect on visitor numbers of investments in waterways assets will therefore be to maintain existing use of the waterways by boaters and other recreational users, and to prevent a decline in user numbers. The effect of the investment scenarios on visitor numbers would be expected to be as follows: ■ Scenario 1 – involving zero expenditure – leads to a rapid decline in the condition of assets for navigation and recreational access. This would quickly make these assets unusable or unsafe to use, leading to a rapid decline in user numbers; ■ Scenario 2, involving maintenance expenditure only, would result in a more gradual decline in asset condition. User numbers would decline over a longer time period; ■ Scenarios 3 and 4, by maintaining the usability of all navigational and recreational assets, would maintain numbers of users of the waterways. The contingent behaviour questions found that user numbers would increase by 2% if all assets were improved to best possible condition. A different effect on rates of boating and bankside usage might be expected if waterways assets were to decline. We might expect bankside usage to respond to

11 GHK (2007) The Economic Impact of Waterway Development Schemes. Report for British Waterways 12 Defra (2012) Moving the British Waterways network in England and Wales into civil society. Final Impact Assessment. http://www.legislation.gov.uk/ukia/2012/13/pdfs/ukia_20120013.pdf

Impact on Benefits from Changes in Investment in EA Waterways Final Report

the condition of specific recreational assets, especially access facilities such as car paths and towpaths. Because walkers, anglers, casual visitors and other recreationists often use relatively small stretches of the waterway at a time, the usability of particular assets may be more important than the cumulative state of those assets. However, boating usage would be expected to respond differently, since the connectivity of longer stretches of the waterway is important to ensure the viability of boating. If a single lock or channel is no longer navigable, this will affect the usability of longer stretches of the waterways network, having a disproportionate effect on visitor numbers. The possible effects on user numbers can be considered by examining the number of assets in poor condition under the different scenarios (Table 9.6). Table 9.6: Assets in poor condition under different scenarios (asset score=5), all rivers (%)

Navigability of river Bankside access

2020 Scenario 1 72% 100% Scenario 2 6% 3% Scenario 3 and 4 0% 0% 2030 Scenario 1 78% 100% Scenario 2 52% 31% Scenario 3 and 4 0% 0% 2040 Scenario 1 97% 100% Scenario 2 81% 38% Scenario 3 and 4 0% 0%

The table shows that, by 2020, a large proportion of navigational assets are already in poor condition, rendering them potentially unusable, if there is no expenditure on their maintenance (Scenario 1). The navigability of the EA waterways would therefore be severely compromised, resulting in the loss of most boating users over this period. All bankside access facilities are estimated to be in poor condition at this point in the absence of regular maintenance. Under Scenario 2, a far greater proportion of assets are maintained at good or neutral status in 2020, although this subsequently declines rapidly and a majority of navigational assets are expected to be in poor condition or unusable by 2030. A sharp decline in users could be expected over this period as a result. Under scenarios 3 and 4, all assets are replaced before they are unusable. No significant change in visitor numbers would be expected under these scenarios. These figures highlight how the different lifespans of assets can influence the provision of benefits over time, pointing to the need for a breakdown of how benefits and asset condition interact with changes in investment over time. A maintenance- only scenario, as we can see, is insufficient to ensure maintenance of existing visitor numbers over the long term. These declines in user numbers are reflected in declines in the benefits estimates in the cost benefit analysis, as assets which reach poor condition (condition score = 5) and are rendered unusable provide zero benefits.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

9.6 Comparison of costs and benefits

9.6.1 Method The above sections present estimates of the costs and benefits of each investment scenario between 2013 and 2040. These estimates were combined to calculate the net benefit in each year. Because the value of £1 today is higher than its value in 2040, it is necessary to discount the value of future flows of costs and benefits to assess their present value. The present value of the estimated flow of net benefits was calculated using a discount rate of 3.5%, which is the standard discount rate for public sector investments as specified in the HM Treasury Green Book. This enabled the flow of net benefits over time to be summed, to calculate their Net Present Value (NPV).

9.6.2 Estimated net benefits of the investment scenarios As the ‘no maintenance’ scenario constitutes a baseline level of benefit in the absence of costs, NPV was calculated by summing additional benefits realised under each investment scenario, minus associated costs. All three of the expenditure scenarios (2, 3, 4) were found to deliver net benefits compared to the zero expenditure scenario – i.e. delivering a positive net present value over the 2013 to 2040 period compared to the zero expenditure scenario. The estimated NPV of the three scenarios is presented in Table 9.7. A profile of costs and benefits for the Thames is given in Box 1.

Box 1 Profile of costs and benefits over time – River Thames Navigation and recreation on the Thames is supported by a wide range of navigational and recreational assets. The EA Assets Inventory estimates that these have a combined maintenance cost of £3.4 million and a combined replacement value of £676 million. The costs of expenditure vary between the four scenarios. Scenario 1 involves no expenditure and has zero cost. Scenario 2 involves maintenance expenditures only. These start at £3.4 million per annum but decline over time as assets deteriorate in condition and are gradually retired. Scenarios 3 and 4 involve ongoing maintenance of all assets and their replacement when they reach condition score 4 (Scenario 3) or condition score 4 (Scenario 3). Scenarios 3 and 4 therefore both involve substantial levels of investment, which fluctuate depending on the current condition of assets, each involving large peaks and troughs. Applying a discount rate to calculate the present value of costs gives a PV of 0 for Scenario 1, £42 million for Scenario 2, rising sharply to £601 million for Scenario 3 and £1012 million for Scenario 4. The choice experiment survey estimated that users of the Thames are willing to pay £133 million per year to maintain navigational and recreational assets on the river in their current condition (i.e. to prevent deterioration) and £96 million per year to improve these assets to their best possible condition. Based on the current condition of each type of asset, these estimates were used to estimate the marginal benefits of unit changes in asset condition scores. These benefit estimates were used to model changes in the levels of benefits resulting from changes in the condition of each asset under each scenario. Under Scenario 1, the value of benefits declines rapidly from the current level to reach £0.5 million per year by 2014. Under Scenario 2, there is a more gradual decline, giving a present value of benefits of £989 million over the period compared to Scenario 1. This increases to £2164 million in Scenario 2 and £3405 million in Scenario 4.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

The net present value of benefits derived from each scenario is calculated by subtracting the PV of the costs from the PV of the benefits. The NPV is estimated at £947 million under Scenario 2, £1562 million under Scenario 3 and £2392 million under Scenario 4. The benefit cost ratios are calculated by dividing the PV of benefits by the PV of costs, giving estimates of 23.4 under Scenario 2, 3.6 under Scenario 3 and 3.4 under Scenario 4.

Table 9.7 indicates that the overall sum of net benefits over the 2013 to 2014 period is highest under Scenario 4 for all four rivers. Table 9.7: Estimated Net Present Values under different scenarios, all asset groups

Thames G Ouse Medway Ancholme

Net Present Value (£m) of investments, 2013-2040

Scenario 2: Maintenance 947 427 190 8 only

Scenario 3: Moderate 1,562 579 194 14 investment

Scenario 4: High 2,392 908 241 17 investment

Tables 9.8 to 9.10 decompose the net present value of benefits for each scenario from Table 9.7 into the different asset groups. The figures indicate that the highest net benefits are derived from expenditure on access to the river bank.

Table 9.8: Estimated Net Present Values (Scenario 2 - Maintenance only)

Thames G Ouse Medway Ancholme

Net Present Value (£m) of investments, 2013-2040

Navigation 61 87 21 1

Access to 74 58 23 4 water

Facilities 85 29 22 3 for boats

Access to 549 253 98 -1.4 river bank

Facilities for 178 0 26 0 bankside visitors

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 9.9: Estimated Net Present Values (Scenario 3 - Moderate investment)

Thames G Ouse Medway Ancholme

Net Present Value (£m) of investments, 2013-2040

Navigation -207 102 15 0

Access to 92 56 14 7 water

Facilities 271 157 43 7 for boats

Access to 944 265 81 -0 river bank

Facilities for 462 -0 41 0 bankside visitors

Table 9.10: Estimated Net Present Values (High investment)

Thames G Ouse Medway Ancholme

Net Present Value (£m) of investments, 2013-2040

Navigation -365 183 18 -4

Access to 176 91 15 12 water

Facilities for 397 210 61 9 boats

Access to river 1515 424 98 -0 bank

Facilities for bankside 670 -0 49 0 visitors

The estimates also indicate that expenditures on all types of assets deliver positive net benefits, with the exception of navigation assets, where the costs exceed the benefits under the moderate and high investment scenarios. This is particularly the case for the Thames, where the NPV is estimated at -£207 million in Scenario 3 and -£365 million in Scenario 4. This can be attributed to the very high replacement costs of navigational assets, which account for over 90% of all investment and maintenance costs, and exceed the willingness to pay of users for investments. It is possible, however, that fully accounting for the potential wider benefits of these

Impact on Benefits from Changes in Investment in EA Waterways Final Report

assets, such as the benefits of locks, weirs and channels in contributing to flood management and water supply, might affect this equation. In contrast, the significant increases in NPV under Scenarios 3 and 4 indicate that there are higher returns on investment from improvements to recreational assets utilised by bankside users. This is to be expected because of the generally low cost of these assets, the relatively short lifespans and therefore importance of periodic investment, and larger numbers of bankside users. Overall, the net positive benefits of improvements to non-navigational assets are sufficient to outweigh the negative returns from investments in navigation, meaning that each scenario delivers positive returns overall. However, the results indicate that the investments in navigational assets deliver inferior returns to those for bankside recreation, even though the analysis takes account of the benefits that bankside users obtain from being able to see boats on the river.

9.6.3 Net Present Values across the EA waterways network The analysis was extended from the four case study rivers to the entire portfolio of assets listed in the EA Asset Inventory. Maintenance and replacement costs for all EA assets in all rivers were sourced from the EA Asset Inventory. The corresponding benefits were estimated by up-scaling our estimates for the four case study rivers to the EA rivers listed in the inventory, on the basis of annual visitor numbers (i.e. assuming that investments in other rivers will yield similar benefits per visit to the four case study rivers). Estimates of benefits to bankside users were up-scaled by 27% and estimates of benefits were up-scaled by 46%, based on available data for numbers of users of the EA waterways network relative to the four case study rivers. This increased the benefit estimates and produced an estimated NPV across the waterways network of £1.9 billion in Scenario 2, £3.7 billion in Scenario 3 and £5.3 billion in Scenario 4 (Table 9.11). Table 9.11: Estimated Net Present Values, all river assets (£m)

Scenario 2: Maintenance Scenario 3: Scenario 4: High only Moderate investment investment

Navigation 293 97 60

Access to water 266 375 545

Facilities for 172 690 959 boats

Access to river 921 1827 2792 bank

Facilities for 235 690 969 bankside visitors

Benefit-cost 28.8 4.84 4.35 ratios

All benefits 1,886 3,677 5,325

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Upscaling the estimated costs and benefits in this way increases the estimated net returns from each scenario. However, there are negative returns from investment in navigation assets under both Scenarios 3 and 4. Benefit-cost ratios for the scenarios are presented in Tables 9.12 to 9.16. Overall, each expenditure scenario delivers a benefit cost ratio of greater than 1, relative to the zero expenditure scenario, if aggregate estimates are included for all asset groups. The highest benefit cost ratios are recorded under the maintenance only scenario, as a result of the modest levels of expenditure incurred and high marginal return on investment. The lower benefit cost ratios under the investment scenarios 3 and 4 reflect diminishing marginal returns to investment. Table 9.12: Benefit-cost ratios of investment scenarios

Thames G Ouse Medway Ancholme

Benefit-cost ratio of investments, 2013-2040

Scenario 2: Maintenance only 23.4 49.4 41.8 11.2

Scenario 3: Moderate investment 3.6 7.1 5.5 2.4

Scenario 4: High investment 3.4 6.3 4.6 1.8

When we consider scenario 2 (i.e. a maintenance only scenario) as a baseline, the cost-benefit ratios for scenarios 3 and 4 are lower than those calculated relative to Scenario 1, but remain greater than 1, for all rivers. Table 9.13: Benefit-cost ratios of investment scenarios (maintenance only baseline)

Thames G Ouse Medway Ancholme

Benefit-cost ratio of investments, 2013-2040

Scenario 3: Moderate investment 4.0 4.1 2.7 2.6

Scenario 4: High investment 3.0 4.9 8.0 1.5

Tables 9.14 to 9.16 show the benefit cost ratios for expenditures on individual asset types. They indicate that all investments, except those in navigational assets on the Thames and Ancholme, generate benefit cost ratios of more than 1. High benefit cost ratios are achieved for maintenance and investment in assets for bankside recreation and access.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Table 9.14: Benefit-cost ratios of maintenance only scenario

Thames G Ouse Medway Ancholme

Benefit-cost ratio of investments, 2013-2040

Navigation 2.7 12.1 6.3 2.4

Access to 19.2 64.7 43.1 38.3 water

Facilities 275 3758 1321 135.5 for boats

Access to 275 9698 579 0 river bank

Facilities for 2,039 0 33,901 0 bankside visitors

Table 9.15: Benefit-cost ratios of moderate investment scenario

Thames G Ouse Medway Ancholme

Benefit-cost ratio of investments, 2013-2040

Navigation 0.6 2.1 1.4 1.0

Access to 4.6 13.4 17.0 14.3 water

Facilities 58.1 911.7 227.6 29.8 for boats

Access to 63.1 944.8 189.5 0 river bank

Facilities for 411.4 0 5,765.3 0 bankside visitors

Table 9.16: Benefit-cost ratios of high investment scenario

Thames G Ouse Medway Ancholme

Benefit-cost ratio of investments, 2013-2040

Navigation 0.6 2.1 1.3 0.8

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Access to 5.0 12.4 11.2 13.7 water

Facilities 49.3 801.8 173.1 22.8 for boats

Access to 59.1 1021 126.0 0 river bank

Facilities for 318.2 0 3759.9 0 bankside visitors

The model was used to test the sensitivity of user benefits to changes in the condition of different assets, and the impact of different improvement thresholds. Table 9.17 demonstrates how the estimated returns from investment are affected by changing the thresholds for asset condition under the moderate and high investment scenarios from 4 and 3 to 4.5 and 3.5, respectively. This lowers the costs of asset replacement, but also reduces the benefits by resulting in lower levels of asset condition in each scenario. The results are mixed. Table 9.17: Changes in Net Present Value/BCR under alternative investment thresholds

Thames G Ouse Medway Ancholme

Change in Net Present Value of investments, 2013-2040

Moderate -21% -22% -8% -23% investment

High investment -21% -21% -12% -15%

Benefit-cost ratio

Moderate -3% +1% +20% -7% investment

High -3% 0 -+9% 0% investment

The model can therefore be used to assess changes in the return on investments in different rivers and asset classes, helping to inform the choice of potential investment scenarios.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

10 Conclusions

The public valuation survey and quantitative estimates presented in this study provide an assessment of the public benefits associated with investments in the Environment Agency inland waterways network, focusing on the navigational and recreational benefits supported by expenditures by the Agency. Although previous studies (e.g. Jacobs, 2011) have indicated that recreational benefits associated with inland waterways may be considerable, these studies did not assess the marginal returns from investment, and could also be criticized by not clearly distinguishing actual spending on recreation with consumer surplus from use of waterways. The stated preference survey undertaken here has enabled estimates to be made of the net benefits to boaters and bankside users of investments in the waterways, despite some methodological challenges (such as the issue of non-attendance of cost attributes). Combined with EA data on asset condition and cost, this has enabled the costs and benefits of alternative expenditure scenarios to be assessed. The waterways deliver substantial recreational benefits, which are currently estimated at £190 million annually across the four case study rivers. When expressed on a per km basis, these estimates are of a similar order of magnitude to those of previous studies, though it should be noted that the benefits are specified differently and significant variations by river are apparent. However, these are dependent on ongoing investments in the maintenance and replacement of waterways assets. This incurs significant maintenance costs, and high capital costs in the periodic replacement of assets. If no such expenditures are made, assets will deteriorate rapidly and benefits will be lost. The cost benefit modelling suggests that investment in waterways assets delivers positive net returns. Findings suggest that expenditure scenarios involving higher levels of investment, and leading to enhancement in the condition of assets over time, yielded the highest net benefits - from 74% to 152% above the net benefits that would be obtained from merely maintaining assets. However, the returns from investment vary by asset type and river. By far the highest costs relate to investments in navigational assets (such as locks, weirs and channels) which are relatively capital intensive. However, the greatest benefits on most rivers are secured from bankside facilities, because of larger numbers of recreational users. As a result, the most favourable benefit-cost ratios tend to relate to investments in bankside access and facilities. In comparison, the costs of some investments in navigational assets were found to exceed the benefits estimates based on the willingness to pay of users. In the case of the Thames, for example, the estimated willingness to pay for navigational assets was found to be less than the large costs of investment required to renew them over time. The benefit cost analysis focused on recreation only, as this is the primary objective of investment in the relevant assets. Nevertheless, it is important to recognise that the rivers on which the EA manages waterways deliver a range of ecosystem services, some of which may be influenced by waterways management. For instance, some waterways assets also provide co-benefits for flood management and water supply. While the overall value of such functions on the rivers managed by the EA is significant, responses to changes in investment in waterways assets are difficult to assess. It is likely that inclusion of these benefits would enhance the estimated returns from investment in navigational assets such as locks and weirs, which have high capital costs.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

The valuation tool developed for this study provides a means of assessing the rates of return on waterways investments. A number of caveats need to be applied, because of the uncertainties related to stated preference valuation surveys, the simplicity of the asset condition modelling and the approximate nature of the cost estimates included. Nevertheless, it is hoped that the model will help to inform future assessments of the benefits and costs of waterways expenditure. In the context of the transition of the waterways network from public to civil society-based management, the tool can support identification of beneficiary groups and priority rivers for conservation, which may be beneficial for identifying new funding streams.

Impact on Benefits from Changes in Investment in EA Waterways Final Report

Annex 1 Report of the Valuation Study by Aberystwyth University