Chair of the Public Accounts Committee Margaret Hodge MP said it was “appalling” that “lax, poorly drafted PFI funding agreements” to support the building of local authority waste facilities have led to “£213.5 million in grants having been paid to the councils over the last 15 years with none of the main waste assets to show for it.”
She also said it was “scandalous” that Norfolk county council now faced a potential compensation bill of more than £30 million after its PFI waste deal with Cory Wheelabrator collapsed, which followed Defra’s withdrawal of funding for the project.
In addition, Defra has been “unacceptably slow to intervene in projects that are struggling to deliver the required waste management infrastructure leading to delays and incurring extra costs”, the Committee concluded.
The comments came as the Committee today published its 14th Report of the Session, which examines Defra’s oversight of and support for three PFI waste projects: Norfolk county council’s abandoned contract with Cory Wheelabrator; Surrey county council’s contract with SITA UK; and a joint project managed by Herefordshire county council and Worcestershire county council as part of a deal with Mercia Waste Management.
All three of the projects experienced delays, stemming from a range of problems including difficulties obtaining planning permission, uncertainty over technology and local opposition.
Flexibility
PFI contracts typically last for 25-30 years and this does not offer the “necessary flexibility to respond to rapidly changing technology and changing policy requirements for waste disposal”, according to the Committee.
Although Defra claims that its funding arrangements are now more robust, Committee chair Margaret Hodge said that Defra has “more work to do to improve local authorities’ contracting capability, especially for PFI projects, and ensure that they only pay for what is delivered in future without getting locked into long, inflexible contracts”.
And, she added: “It should act with far greater urgency when it has concerns about a project’s progress and support local authorities to negotiate PFI contracts that are better value for money for local taxpayers. The Department should balance the need to meet the EU target at minimum cost with making sure that its decisions serve taxpayers’ interests as a whole.”
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The Committee’s report is based on evidence provided in June 2014 by Dr Colin Church (director for resource, atmosphere and sustainability at Defra and senior responsible owner for the Waste Infrastructure Delivery Programme) and Defra permanent secretary Bronwyn Hill CBE (see letsrecycle.com story).
A National Audit Office report in June claimed there was a lack of clarity from Defra over the facts and figures relating to the three projects (see letsrecycle.com story).
Norfolk
The strongest criticism in the Committee’s report regards the handling of Norfolk’s £500 million contract with consortium Cory Wheelabrator, which was agreed in 2012 but cancelled earlier this year after Defra withdrew £169 million funding for the project in 2013 (see letsrecycle.com story).
The cancellation of the contract means Norfolk county council is now liable to pay the contractor more than £30 million in compensation, and the Committee today described Defra’s handling of the deal as “particularly poor”.
The Committee said that Defra was “fully aware of the likely compensation costs that would be incurred when it decided to withdraw funding” after it judged the Willows plant was no longer needed to meet the 2020 EU landfill target.
As such, the report states that the Department should “place more weight in its decision-making” on the cost to the public when it considers withdrawing support to individual projects.
Defra has allocated £1.7 billion of PFI credits to 28 local authorities since it established the Waste Infrastructure Delivery Programme in 2006 to encourage the development of local authority waste facilities by providing support, guidance and funding.
Responding to the report, a Defra spokesperson said: “Defra’s responsibility is to ensure public money is used appropriately and we were very clear in the advice we provided to these PFI projects as the NAO has previously recognised.
“Due to factors at local level these projects could not proceed as planned. Wecontinue to support the delivery of infrastructure to divert waste from landfill and are on track to meet these targets.”
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