The future of seven major local authority waste treatment projects has today (October 20) been thrown into doubt after Defra announced that it is withdrawing PFI funding from them as part of the government's Spending Review.
The announcement came as it was revealed that the department will have to reduce its spending by a higher-than-expected 29% by 2014/15, down from £2.3 billion in 2010/11 to £1.8 billion. Defra said it would achieve this by focusing its spending on “key priorities” and the proposals it revealed last week to reduce its number of arms-length bodies by 92 to 39.
Our strategic aim is to deliver on the Prime Minister's pledge that the Coalition will be the greenest Government ever, whilst playing our part in tackling the economic deficit that we have inherited
Caroline Spelman, environment secretary
The seven projects to have their PFI funding cut as part of the budget cuts include the North London Waste Authority's plans, which received the single largest award of waste PFI funding in March 2010 and the £1 billion Cheshire project, which was down to just two final bidders.
The full list of projects affected are:
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Cheshire West and Chester, and Cheshire East;
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Coventry, Solihull and Warwickshire (‘Project Transform');
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Gloucestershire;
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Leicestershire;
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Milton Keynes and Northamptonshire;
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North London Waste Authority; and
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South London Waste Partnership (consisting of the London Boroughs of Croydon, Kingston, Merton and Sutton).
Explaining its decision, the department said the projects, “on reasonable assumptions, will no longer be needed to meet landfill diversion targets set by the European Union”.
It added that the move would save it £3 million by the end of the Spending Review period in 2014/15, rising to £26 million a year from 2017/18.
The department stressed that the other 11 waste PFI projects currently in procurement would retain their provisional allocation of PFI money, adding that it was also “committed” to supporting the 21 other deals that had already been signed.
The 11 projects which have retained their allocation are:
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Barnsley, Doncaster and Rotherham;
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Bradford and Calderdale;
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Essex and Southend-on-Sea;
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Hertfordshire;
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Leeds;
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Merseyside Waste Disposal Authority and Halton;
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Norfolk;
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North Yorkshire and City of York;
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South Tyne and Wear Partnership (consisting of Gateshead, South Tyneside and Sunderland);
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South West Devon Waste Partnership (consisting of Devon, Plymouth and Torbay); and
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Wakefield city council.
In a statement on the department's spending plans, environment secretary Caroline Spelman said: “Our strategic aim is to deliver on the Prime Minister's pledge that the Coalition will be the greenest Government ever, whilst playing our part in tackling the economic deficit that we have inherited.
“This settlement reflects the need to make significant savings alongside meeting the priorities we have set and maintaining important frontline services in respect of flood defences, environmental protection and animal health monitoring.”
Green Investment Bank
However, there was positive news elsewhere for waste infrastructure projects in Chancellor George's Osborne's Spending Review announcement, with confirmation that the government will establish a Green Investment Bank to support green infrastructure development.
The bank will be funded by £1 billion in government money and what the Chancellor dubbed “additional significant proceeds from asset sales”.
He explained that the Bank would “aim to provide financial interventions to unlock significant new private investment in green infrastructure projects, such as offshore wind farms.”
Renewable Heat Incentive
There was also confirmation that the Renewable Heat Incentive subsidy, which is expected to be particularly significant for encouraging investment in anaerobic digestion and biomass projects, will be introduced in 2011/12, with £860 million of government funding.
In a statement, the department of energy and climate change said: “This will drive a more-than-tenfold increase of renewable heat over the coming decade, shifting renewable heat from a fringe industry firmly into the mainstream.
“The Government will not be taking forward the previous administration's plans of funding this scheme through an overly complex Renewable Heat levy,” it added. This means the incentive will be funded by the government rather than the market.
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