UK Politics

MPs criticise 'lax' schemes for waste incinerators

Landfill site in Essex
Image caption The UK and other EU states must reduce the amount of landfill waste by 2020

Grants worth £213.5m have been paid to councils for waste management projects since 1998 even though key facilities have yet to be built, MPs have found.

The Public Accounts Committee said "lax" contracts, agreed by the last Labour government with four local authorities, failed to deliver value.

MPs also criticised the coalition for not renegotiating the contracts sooner.

But officials said government advice had been "very clear" and projects had been hampered by "local factors".

In a report, the cross-party committee highlighted major "shortcomings" with the funding arrangements for new incinerators and plants designed to generate energy from municipal waste.

The contracts were signed in the late 1990s under the Private Finance Initiative, a method of financing originated by the Conservative government in the early 1990s and embraced by Labour for major public infrastructure projects.

'Inappropriate'

Under PFI, contractors stump up the capital costs of construction and maintenance, with the public sector repaying the money, in the form of fees, typically over a 25- or 30-year period.

The model was designed to ensure the private sector shouldered the bulk of the financial risk in the early, riskiest phase of a project.

But the committee suggested it was an "inappropriate" way of funding waste projects, given that changes in technology and consumer behaviour made it difficult to forecast long-term waste levels and the consequent revenue streams.

It said payments started to councils when contractors began delivering services, not when infrastructure was finished, and there was no scope to change this without the approval of councils.

As a result, it said £124m had been paid to Surrey County Council since 1999 although a new waste management facility is not due to be operational until 2016-17.

Herefordshire and Worcestershire councils received £84.5m although the contractor could not secure the necessary funding for a new recycling plant after it struggled to get planning permission. The councils ultimately decided to build and finance the project themselves, outside the scope of PFI.

Planning problems

While the current government had succeeded in reducing the taxpayer's exposure in both cases, it said its handling of a separate contract with Norfolk County Council in 2012 had been "particularly poor".

It said the government had offered £91m in PFI credits towards the building of new facilities, including a waste incinerator in King's Lynn, but this had been withdrawn after the council missed a deadline to secure planning permission in breach of the terms of the funding agreement.

After initially deciding to proceed without government funding, the council terminated the contract and, as a result, is now liable for about £33.7m in compensation to its commercial partner.

In evidence to the committee, the Department for the Environment said it had raised concerns with the council about the timetable but had been told the local authority was confident of getting planning permission and the project met the criteria for support.

'Left in lurch'

But Margaret Hodge, the Labour MP who chairs the committee, said it had left taxpayers in the county "in the lurch" and suggested the decision had been taken because ministers judged it would not be needed to help the UK meet a 1999 EU directive on reducing landfill waste.

She added: "It is appalling that lax, poorly drafted PFI funding agreements... have led to hundreds of millions of pounds' worth of grants being made to three councils even though the main waste assets - such as incinerators - have not yet been built."

The government, she added, "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".

A government spokesperson said: "Defra's responsibility is to ensure public money is used appropriately and we were very clear in the timely advice we provided to these PFI projects as the National Audit Office has previously recognised.

"Due to factors at local level these projects could not proceed as planned."

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