The Canal and River Trust has missed out on more than £23m due to the “failure” of its government grant funding to keep pace with inflation, according to its latest accounts.

The charity has received grant funding from the Department for Environment, Food and Rural Affairs since it was set up to take over the English and Welsh aspects of the former quango British Waterways in 2012. The government committed £800m of funding over the next 15 years to the charity at the time.

The Canal and River Trust received £52.6m from Defra, according to its accounts for the year to the end of March 2024.

This figure represented 22.2 per cent of the charity’s total income compared with 23.4 per cent in 2022/23.

“Government support through our Defra grant agreement is declining in real terms since the previous inflation-linking ended in 2021/22,” the accounts said.

“The failure of the trust’s Defra grant funding to even keep pace with inflation (as measured by the Consumer Price Index) has cost the trust over £23m so far, and had the grant been subject to inflation it would have been £63.7m in the year ended 31 March 2024, rather than the £52.6m the trust received.

“This gap will continue to grow each year that inflation is positive, with the gap accelerating post-2027 under the proposed new arrangements announced in July 2023.”

The charity’s income increased to £237.3m in 2023/24 from £225.1m in 2022/23, with the rise mainly attributed to a £10.6m increase in income from trading activities to £97.1m.

“Boating income has increased in line with inflationary increases applied at the start of the year, with commercial income increasing above inflation as a result of some one-off project income recognised in the year,” the accounts said.

The charity’s total expenditure increased to £252.4m, compared with £247.9m, and its charitable expenditure was at a record high of £208.6m, against £199.5m in 2022/23.

“It is pleasing to see that the trend over a 10-year period is that we are sustainably increasing our charitable expenditure over the long term, albeit that due to the age of the network and the ongoing impacts of climate change, more and more of this expenditure is going on our reservoirs and other critical assets,” the charity said.

The charity cut its full-year deficit to £15.1m in 2023/24 compared with £22.8m in 2022/23.

The deficit is made up of the charity’s net expenditure before losses on investments and its share of expenditure from joint ventures.

A Defra spokesperson said: “We recognise the wide range of benefits that our inland waterways bring, and we are currently providing the Canal and River Trust with an annual grant of £52.6m to support that. 

“We have agreed to provide substantial new grant funding for the trust of £401m over 10 years from 2027, reflecting the continued value that we place on our inland waterways.”