House of Commons - Environment, Transport and Regional Affairs

Select Committee on Environment, Transport and Regional Affairs Memoranda

MEMORANDUM BY THE GUARDIAN (DSW 11)

LANDFILL TAX AND THE LANDFILL TAX CREDIT SCHEME

INTRODUCTION

Around January 1999 The Guardian became aware of widespread concern as to the functioning of the Landfill Tax Credit Scheme. Although much of the "evidence" at this stage appeared to be anecdotal it became clear that certain issues were of major concern. We have identified these as:

1. The competence of ENTRUST as highlighted by:

1.1 The enrolment of the Environmental Bodies and the approval of projects that appear to be in conflict with the Landfill Tax Regulations.

1.2 The role of Board Members and their activities in relation to the Waste Industry, Environmental Bodies and various consultancies associated with the work of ENTRUST.

1.3 A lack of available funding to environmental initiatives compared with Tax Credits allocated and approved by ENTRUST.

1.4 A culture of secrecy with a lack of transparency and accountability.

1.5 The domination of ENTRUST by the waste industry and too close a relationship between ENTRUST and certain elements within the industry.

2. The inappropriate role of companies and trade associations within the waste industry as epitomised by:

2.1 The setting up of Environmental Bodies under the influence or control of individual companies, an alliance of two or three companies, or trade associations such as the Environmental Services Association and the Energy from Waste Association.

2.2 The use of Landfill Tax Credits to influence planning decisions, the formulation of waste strategy policy or the awarding of contracts by Local Authorities.

2.3 The use of Landfill Tax Credits for the direct benefit of the donor company.

2.4 Undue influence over the work of ENTRUST.

3. The policy and practice of Local Authorities in relation to:

3.1 The use of Landfill Tax Credits to replace Local Authority expenditure commitments.

3.2 The payment of "third party" contributions in a manner aimed at influencing the allocation of Landfill Tax Credits.

3.3 The awarding of contracts containing obligations as to the use of Landfill Tax Credits.

3.4 The setting up of Environmental Bodies under the influence and control of a Local Authority or a group of Local Authorities.

4. The use of public money, Landfill Tax Credits, to advance the interests of individual companies, Quangos, Agencies, and other organisations outside the influence of democratic control. Whilst recognising that the Treasury does not define Landfill Tax Credits as public money, preferring to describe it as "tax foregone"[38], we see Tax Credits as public funds in that they need to be subject to the same scrutiny as expenditure of any other tax collected by government. Concern in this area is highlighted by:

4.1 The setting up of an Environmental Body as a department within a company.

4.2 The provision of "third party" funding by public or semi-public bodies.

4.3 The accessing of Landfill Tax Credits by government funded agencies and Quangos on a major scale.

5. The apparent unawareness of Ministers of significant areas of concern with regard to the Landfill Tax Credit Scheme and the perceived inability of senior civil servants to challenge the entrenched influence of the waste industry in relation to matters associated with the Scheme. The attention of the Minister of State and the Select Committee is drawn to:

5.1 The Government's response to the Committee's report on The Operation of the Landfill Tax[39].

5.2 The statement by the Under Secretary of State for the Environment that 10 per cent of money awarded to Environmental Bodies was a voluntary contribution from landfill operators[40].

5.3 The inability of the Economic Secretary to the Treasury to provide answers to Parliamentary Questions without asking ENTRUST to provide information direct to the MP posing the questions and, in particular, the assumption made by the Treasury that landfill operators pay the 10 per cent contribution to Environmental Bodies required by the Landfill Tax Regulations[41].

The Guardian therefore instigated an investigation into the working of the Landfill Tax Credit Scheme. This has drawn upon the knowledge and experience of individuals, companies and organisations involved in the waste industry as well as environmentalists, technical experts in the field of sustainable development, MPs, councillors and Local Government officers.

The investigation, although initially concerned with the Landfill Tax Credit Scheme, was extended to include non-payment of Landfill Tax, distortions to the Government's waste strategy caused by the improper use of Landfill Tax Credits, the ineffective application of statutory responsibilities by the Environment Agency and inadequate measures taken by the Courts even when legal action is successful.

The Guardian investigation was aided enormously by the information contained in the Thirteenth Report of the Environment, Transport and Regional Affairs Select Committee (HC150). However, we have concluded that a number of witnesses, particularly ENTRUST, provided far less information to the Committee than was necessary for a comprehensive examination of the operation of the Landfill Tax. The inappropriate approach of ENTRUST to the Select Committee is highlighted by the statement that:

The same document proceeds to argue that landfill operators should help to shape regional policy but that it was necessary to ensure that:

"Landfill Operators control of their Landfill Tax Credits is not compromised."

We therefore urge the Select Committee to re-open its investigation of the operation of the Landfill Tax. It is hoped that, in the event of a resumption of the Select Committee Inquiry, technical expertise will be made available to the Committee from sources independent of ENTRUST and the Environmental Services Association.

In presenting this information to the Minister of State and the Select Committee we wish to emphasise our belief in the principles that lay behind the introduction of the Landfill Tax and the Landfill Tax Credit Scheme. There are many excellent initiatives funded by the Scheme. The potential for its future is extremely positive but The Guardian investigation leads us to believe that such a future is dependent upon urgent action being taken by Government and HM Customs and Excise.

This dossier is presented to the Minister of State for the Environment and the Environment, Transport and Regional Affairs, Environment Sub-Committee for urgent consideration.

Copies of this submission have also been forwarded to HM Customs and Excise, the National Audit Office and the Audit Commission.

Recommendations throughout this submission are directed towards the Select Committee, HM Customs and Excise, the National Audit Office and the Audit Commission. However, we would welcome action being taken by the Minister of State for the Environment that, in certain instances, would subsume action requested from the statutory bodies noted above.

EXECUTIVE SUMMARY

The Guardian investigation leads us to recommend the following immediate action:

— A comprehensive inquiry into the competence and propriety of ENTRUST by HM Customs and Excise and the National Audit Office with the suspension of ENTRUST pending the results of the inquiry. The attention of the Minister of State and the Select Committee is particularly drawn to:

— Environmental Bodies that are representative of the worst practices;

— The role of Board members and their activities outside of ENTRUST. Particular attention is drawn to:

— Board Chairman, The Earl of Cranbrook

— "Independent Consultant" and Board Member, Dr Marion Carter

— Board member, Roger Hewitt

— The inability or unwillingness of ENTRUST to carry out its regulatory responsibilities, to implement its funding obligations, or to maintain its independence from vested interests in the waste industry.

The Guardian

— An investigation by the Audit Commission into those Local Authorities identified as using Landfill Tax Credits to replace LA expenditure, having imposed contractual obligations upon landfill operators and others in the waste industry related to the use of Tax Credits, having provided "third party" funding to influence or control Landfill Tax Credit allocation, and those involved in the setting up of Environmental Bodies under their control. The attention of the Minister of State and the Select Committee is drawn to a number of Local Authorities that are representative of those involved in the manipulation of the Landfill Tax Regulations:

— Devon County Council

— Essex County Council

— Merton London Borough Council

— The London Borough Councils of Wandsworth, Kensington and Chelsea, Lambeth and Hammersmith and Fulham

— The County Borough Council of Neath Port Talbot

— Peterborough City Council

— Swansea County Council

— The setting up of a Task Force to tackle non-payment of Landfill Tax. The Task Force needs to include HM Customs and Excise, the Environment Agency and, above all, Local Government Environmental Health and Planning officers. Particular attention needs to be paid to the present inadequacy of the legal system to prevent non-payment of tax and subsequent dumping of waste at unlicensed sites. The attention of the Minister of State and the Select Committee is drawn to:

— Lynemouth Bay, Northumberland

— Brickett Wood, Hertfordshire

— Valley View Farm, Hertfordshire

— Dumplington, Manchester

— 32,000 unlicensed sites identified by Ecotec for the Environment Agency

— An urgent review by the DETR of planning consents granted for landfill sites or their extension and approvals of contracts or planning consents for incineration schemes. Such a review requires particular attention to be paid to the use of Landfill Tax Credits in order to achieve support for such schemes at a community and Local Authority level. The attention of the Minister of State and the Select Committee is drawn to:

— Hampshire

— Somerset

— An investigation by the National Audit Office into the role of Quangos, Government Agencies, and Government funded bodies that have accessed, or enabled access to, Landfill Tax Credits through provision of "third party" funding from the public purse in an inappropriate manner. The attention of the Minister of State and the Select Committee is drawn, in particular, to:

— London Waste Action

— The Environment Agency

— An Inquiry by the Environment, Transport and Regional Affairs Committee Environment Sub-Committee into the relationship between landfill operators and Local Government. The attention of the Minister of State and the Select Committee is drawn to:

— A & J Bull Limited

— Onyx Environmental Group

— Viridor Waste Management

— Shanks Group Plc

— W H White Plc

— William Tracey Limited

— An Inquiry by the Environment, Transport and Regional Affairs Committee Environment Sub-Committee into the use of Landfill Tax Credits by Quangos, Government Agencies, Government funded bodies and companies other than landfill operators. The attention of the Minister of State and the Select Committee is drawn to:

— British Waterways Plc

— The Environment Agency

— The Building Research Establishment

— Groundwork

— Going for Green and The Tidy Britain Group

— English Partnerships

— English Heritage

— WRc Waste Research Limited

— CORDAH Research (member of the BMT Group of companies)

— The National Trust

EVIDENCE

The Guardian investigation is presented below.

In all instances The Guardian is prepared to provide further evidence where this is available but it must be emphasised that, in certain cases, confidentiality has been guaranteed to those providing information. No payment has been made to any source.

In addition to this dossier and the information published in The Guardian as of 5 April 2000, Dispatches broadcast evidence on 6 April 2000. This material is available for the consideration of the Minister of State and the Select Committee if this is felt appropriate.

The examples of manipulation of the Landfill Tax Credit Scheme and the cases of Landfill Tax non-payment are presented as examples of much wider abuse throughout the UK. The specific cases identified are symptomatic of a much wider problem.

From Yorkshire to East Sussex, from Cheshire to East Anglia, we have encountered abuse of the present system. We have been inundated with information that has been impossible to include in this submission. We have not commented on the situation in Scotland, other than the use of Tax Credits to build an access road to a landfill site, although major concerns have been brought to our attention in relation to the use of Landfill Tax Credits north of the border.

We must also highlight the worries expressed by many involved in practical, community based initiatives that association with our investigation could lead to the withdrawal of much needed funds. Some evidence, therefore, has been provided to us on the understanding that, at least for the present, sources remain confidential.

We also draw the attention of the Minister and the Select Committee to fear within some local communities, subject to local illegal dumping. The involvement of serious criminal elements in this practice must not be underestimated and we have interviewed people who are extremely concerned that their names, addresses, or photographs may be published.

ENTRUST

Environmental Bodies

At the beginning of 2000 there were nearly 1,900 Environmental Bodies (EBs) enrolled with ENTRUST. Less than 800 had received Landfill Tax Credits. As of December 1999, despite £230 million having been "contributed by landfill operators"[43], only £90 million (less than 40 per cent of monies allocated) had been spent on projects.

The Guardian investigation identified five different types of EB as determined by their history and the control exerted over their decision making process:

— Well established national organisations already working in the area of sustainability and having objectives compatible with the Landfill Tax Regulations. These organisations have benefited from the Landfill Tax Credit Scheme and, in certain cases, work with major landfill operators to run schemes providing funds for other Environmental Bodies.

— Environmental Bodies established under the control or influence of landfill operators and/or Local Authorities with the sole aim of accessing Landfill Tax Credits.

— Environmental Bodies established by landfill operators and/or Local Authorities, in partnership with the voluntary, community and business sectors, aimed at accessing Landfill Tax Credits to tackle issues covered by the approved objects laid down by the Landfill Tax Regulations.

— Environmental Bodies established by "third parties" ranging from a Plc to Government funded agencies.

In providing details of specific Environmental Bodies it becomes evident that this history and structure primarily determines access to Tax Credits.

We suggest it would be appropriate for the Select Committee to investigate the precise allocation of Landfill Tax Credits as per different type of Environmental Body together with the reasons why such large sums of money are being held in a limited number of EB accounts.

We urge HM Customs and Excise to investigate the control of well funded Environmental Bodies by landfill operators, the reasons for less than 40 per cent of Landfill Tax Credits having been spent, and why more than 60 per cent of enrolled Environmental Bodies have not received funding.

We recommend the National Audit Office, within the context of a comprehensive investigation into ENTRUST and Environmental Bodies, specifically examines the reasons for less than 40 per cent of allocated Landfill Tax Credits having been provided to approved projects.

Global Wildlife Trust

This is one of four EBs to have ENTRUST enrolment revoked and is currently subject to a criminal investigation.

On 24 March 1999 Tony Colman MP asked the Secretary of State for the Environment, Transport and the Regions for information as to how much had been awarded to Global Wildlife Trust under the Landfill Tax Credit Scheme. This written question was referred to ENTRUST for reply by Patricia Hewitt MP, Economic Secretary to the Treasury. This Environmental Body had received approval from ENTRUST for 91 projects and had been awarded £3,101,540. ENTRUST replied to Tony Colman MP in a letter dated 23 April 1999 stating that enrolment had been revoked on 14 April 1999.

On 1 October 1999 seven people were arrested in connection with an alleged fraud centred on Global Wildlife Trust.

Whilst recognising that the present investigation being carried out by the Serious Fraud Office requires that certain matters are sub judice we would post the following questions as worthy of inquiry by the Minister of State and the Select Committee:

Why was enrolment of Global Wildlife Trust revoked on 14 April 1999 and was the timing in any way related to the PQ asked by Tony Colman MP?

What did the Grant Thornton Chartered Accountants report say about the activities of Global Wildlife Trust to the ENTRUST Board on 25 November 1998? Was this report connected to the decision to revoke enrolment of Global Wildlife Trust?

ENTRUST was involved in the transfer of projects operated by Global Wildlife Trust to "Environmental Preservation Initiatives", another one of the four Environmental Bodies to have enrolment revoked in 1999? Why was the need to revoke the enrolment of Environmental Preservation Initiatives not identified earlier than September 1999?

Landfill Tax Credits from 41 landfill operators had been approved by ENTRUST as early as spring 1998.

What safeguards did ENTRUST put in place to justify the awarding of such large sums of money to a private company, limited by guarantee without share capital, that was only incorporated in July 1997? Although established to access Landfill Tax Credits, it is as described as a general commercial company.

To what extent did ENTRUST check the nature of the various relationships with such reputable bodies as the RSPCA, WWF, Countryside Commission, the Royal Botanic Gardens at Kew and the Zoological Society (claimed by Global Wildlife Trust as "in association with").

It is normal practice for an Environmental Body to automatically take 10 per cent off all Landfill Tax Credit contributions to cover administration costs?

The then Chairperson of the Education Select Committee, Margaret Hodge MP, launched Global Wildlife Trust's "Environmental Education Agency Programme" (EEAP) in December 1997. The project had been approved by ENTRUST in March 1997.

In addition to £800,000 from Cleanaway Ltd, for the Environmental Education Agency programme, we are aware of £400,000 being donated to Global Wildlife Trust via Viridor Waste Management. Although we are aware of 41 landfill operators providing Landfill Tax Credits to Global Wildlife Trust, it has been impossible to assess the level of funding from each operator due to the refusal of ENTRUST to make such information public.

We recommend that the Select Committee investigate the history of Global Wildlife Trust with particular reference to its relationship with ENTRUST.

We urge HM Customs and Excise to widen the current investigation into Global Wildlife Trust to encompass the role of ENTRUST and the report on the Trust by Grant Thornton Chartered Accountants.

EB enrolment revocation

In addition to Global Wildlife Trust, ENTRUST has revoked the enrolment of three Environmental Bodies for what the regulatory body describes as "the bodies' failure to meet their obligations under the scheme." [45] These are; Stanmer House Preservation Trust, Hove, East Sussex (31 August 1999); Environmental Preservation Initiatives Ltd, Northwich, Cheshire (30 September 1999); Business Environmental Association (BEA), Holbrook, Derbyshire (date unknown).

We are unaware of the total funding received by these EBs but an indication of the Tax Credits involved can be assuaged by the following:

Environmental Preservation Initiatives received £1,269,200 from Viridor Waste Management[46].

Stanmer House Preservation Trust received £50,000 from Viridor Waste Management[47].

BEA received £380,000 from Biffaward[48]

We have not investigated these Environmental Bodies although we are aware that Environmental Preservation Initiatives took responsibility for those projects previously run by Global Wildlife Trust.

We consider it may be of value for the Select Committee to obtain information on these bodies, particularly Environmental Preservation Initiatives.

We believe HM Customs and Excise should investigate the allocation of Landfill Tax Credits to those Bodies having had their enrolment revoked and the extent to which the Tax Credits have been spent in a manner outside of the Landfill Tax Regulations.

Canford Environmental Ltd

This Environmental Body, described by Companies House as a "general commercial company", was incorporated in December 1996.

The business address for the EB is Whites Landfill Site, Arrowsmith Road, Wimborne, Dorset.

Canford Environmental Ltd receives major funding from two landfill operators, W H White Plc and William Tracey Ltd. We are also aware of £20,000 received from Biffaward[49] and understand that Woods Waste, Blackpool provides funding.

There are 10 directors of the EB:

Richard Douglas Watts (Company Secretary). Mr Watts is Company Secretary of W H White Plc.

William Edward Riddle. Mr Riddle is one of the three directors of W H White Plc and the sole shareholder.

Jonathan Walter Pursall Fryett. Mr Fryett is a director of W H White Plc.

Richard Christopher Harding. Mr Harding is a director of Estates Resources & Management Ltd. The one other director of this company is W E Riddle. Mr Riddle, Mr Harding and Woodlands Manor Estates Ltd own all the shares in Estates Resources & Management Ltd. R D Watts is Company Secretary.

Woodlands Manor Estates Ltd has two shareholders—R D Watts and W E Riddle. Two of the three directors are W E Riddle and J W P Fryett. R D Watts is the Company Secretary.

Mr Harding is also a director of Canford Magna Golf Ltd, a subsidiary of Estate Resources & Management Ltd.

A further directorship held by Mr Harding is Lulworth Enterprises Ltd. The only other director of this company is, again, W E Riddle and the Company Secretary is R D Watts. This company is a subsidiary of Estate Resources & Management Ltd.

Martin Edward Ross. Mr Ross is a director of Tower Property Management Ltd, a subsidiary of W H White Plc. Company House information as of March 2000 still registers this company as a subsidiary of W H White Plc and a company of which W E Riddle is a director but it is also recorded as having been dissolved in 1993.

Initial investigation of the relationship of Mr Ross to Mr Riddle appeared to end with Tower Property Management Ltd being dissolved. However, Mr Ross is a director of one further company, Minchella (Sea Fry) Ltd. Upon investigation it transpires that the freehold property owned by the company was sold to the W H White Retirement Benefit Scheme, that Mr R D Watts is the Company Secretary and that the only other director is a Mr Daniel Riddle of the same address as Mr W E Riddle. This company is not identified via other company searches or directorship searches associated with W H White Plc or Mr W E Riddle.

Michael Tracey. Mr Tracey is the major shareholder and one of three directors of William Tracey Ltd.

Doctor D W Telford. Dr Telford is Managing Director of the Factor Ten Company.

Professor T W Tanton. Professor Tanton is a university professor from Southampton and, as far as we know, has no links, beyond his EB directorship, with the "donor" companies.

A C Sampsom. Mr Sampson is a solicitor from Newmilns in East Ayrshire. We are unaware of any links he may have with either of the "donor" companies.

Adrian S Gunner. Mr Gunner is the General Manager of Canford Environmental and a former officer of Bournemouth Borough Council.

The composition of the Board of Canford Environmental Ltd has been approved by ENTRUST and would therefore appear to be within the Landfill Tax Regulations. However, the DETR, when launching the scheme, stated that in relation to Environmental Bodies,

"They would be separate legal entities at arms length from the landfill operators who contribute to them and controls would be such that contributing landfill operators would not be able to achieve any exclusive commercial advantage from their activities."

HM Customs and Excise say that the Landfill Tax Regulations[51] prohibit control of an EB by one or more landfill operators.

As of February 2000 Canford Environmental Ltd had received ENTRUST approval for 20 projects. The attention of the Minister of State and the Select Committee is drawn to two:

The design, construction and monitoring of the operation of a rural road which is the access road to Barkip Landfill Site, Ayrshire.

The road, 700 metres in length, was funded by Landfill Tax Credits made available through Canford Environmental. The donor company was William Tracey Ltd and the landfill site for which the road provides access is a William Tracey site. William Tracey Ltd constructed the road in conjunction with North Ayrshire Council Roads Department. The "waste" from the road that required reconstruction as a result of damage caused by excessive lorry movements to and from the Barkip landfill site was deposited at the site. William Tracey Ltd provided the recycled/reclaimed aggregates used in the road construction. Although William Tracey Ltd claims the road to be a public highway, it is accepted that use is exceptionally rare other than HGV's entering and leaving the landfill site.

The company responsible for monitoring the performance of the new road carried out the transport survey on the basis of data from landfill site records—an average of 104 movements per day. One of the aims of the monitoring exercise was to,

The company responsible for "bringing the project together"[53] was "Factor Ten".

The project was approved by ENTRUST under Landfill Tax Regulation 33 (2)(c)

It is our understanding that the use of recycled/reclaimed aggregates cannot be described as research and development or even as innovatory.

The use of Landfill Tax Credits benefited a landfill operator, William Tracey Ltd, and a resource management company, Factor Ten. Both companies are represented on the Board of Canford Environmental Ltd.

We have been unable to identify the sums of money involved in the "road project" or the Canford Park Arena although it appears that the materials for the road cost £88,900[55] with a saving of £32,380 compared with the use of virgin materials.

We also find that CORDAH Research (environmental management consultants), the body responsible for the monitoring and operational experience of the road, is also an Environmental Body.

No criticism is made of WS Atkins (Project Managers), as we understand the company was employed on a purely commercial basis.

We urge the Select Committee to investigate Canford Environmental Ltd, the role of W H White Plc, the links between Canford Environmental Ltd and ENTRUST, and the direct benefit accrued by William Tracey Ltd through use of Landfill Tax Credits.

We recommend that HM Customs and Excise carry out an investigation into Canford Environmental Ltd with particular reference to W H White Plc and William Tracey Ltd.

We suggest it may be appropriate for the Audit Commission to examine the relationship between Canford Environmental Ltd and North Ayrshire Council.

Canford Park Arena, a new sports and country park facility, Dorset

This is a major development that will provide sporting, country park and events facilities. The partnership responsible for the development consists of Canford Park Sports Ltd, Woodlands Manor Estates Ltd, the Borough of Poole, Bournemouth Borough Council, and Canford Environmental Ltd.

Facilities include; five full size football pitches, two junior pitches, two mini soccer pitches, one cricket pitch, a jogging track and "fitness stations", adequate resources and space for concerts, music festivals, circuses, exhibitions etc and "ample car parking".

Canford Environmental Ltd produces publicity material and the General Manager is given as the contact for further queries.

ENTRUST have approved a Canford Environmental Ltd project entitled "Canford Park Sports Pitch Development—development of new multi-sports arena."

Canford Environmental Ltd is involved with the Borough of Poole and Bournemouth Borough Council in relation to other ENTRUST approved projects.

The Canford Park Arena partnership consists of two companies closely associated with W H White Plc or its directors and two local authorities. It would appear that Landfill Tax Credits have been accessed for mainly commercial purposes.

Following an examination of records[56] held at HM Land Registry, details of which are available for perusal by the Minister and the Select Committee, the land being proposed for this major development is identified as being owned, in the main, by W H White Plc, Estate Resources & Management Ltd and Woodland Manor Estates Ltd. The exceptions to Title Absolute being held by either W H White Plc or Estate Resources & Management Ltd are one site, part of which is to be transferred from W H White Plc to Poole Borough Council (notified to HM Land Registry, 9.11.99) and a second part of a site, that is currently owned by the Borough Council of Poole and the Borough Council of Bournemouth, to be transferred to Woodlands Manor Estates Ltd (noted 21.12.99).

This "approved project" is likely to result in major financial returns to those involved, and benefit W H White Plc, Estate Resource & Management Ltd and Woodlands Manor Estates Ltd. The project benefits those that control Canford Environmental Ltd and appears to be outside the Landfill Tax Regulations.

We urge the Select Committee, HM Customs and Excise and the Audit Commission to investigate the relationship between interested parties associated with the Canford Park Arena development, in particular the benefits likely to be accrued by W H White Plc and/or directors of this company as a result of exploitation of the Landfill Tax Credit Scheme. We would further suggest that the role of Canford Environmental be examined as the "post-box" for Ebco, the ENTRUST appointed body to "represent" Environmental Bodies.

Cheshire Environmental Services Ltd

In defining responsibilities of Environmental Bodies in relation to contracts ENTRUST is quite clear,

ENTRUST further state,

Despite statements by, and guidance from, ENTRUST, the absence of a strong regulatory body, combined with the lack of clarity in the Landfill Tax Regulations creates enormous difficulties in determining what is and what is not permissible, particularly in relation to benefits accrued.

This EB, a private company, has a nominal share capital of 1,000 shares of £1 each. As of 7 March 2000, 100 shares had been issued with the shareholders being: Peter Jack Barsby (25), Norman John Brown (25), Joe Frizell (25) and Trevor William Frizell (25). The Company Secretary is Mrs A K Frizell and the four directors are the shareholders.

The contact for Cheshire Environmental Services is given as N J Brown[59] but at the address identified by Companies House as that of Joe Frizell. Mr Barsby is the representative of 3C Waste.

Frizell Tipping Ltd is a private company owned by Trevor William Frizell and Mrs A K Frizell. The directors are Trevor William Frizell and Joe Frizell. The Company Secretary is Mrs A K Frizell.

We understand that Cheshire Environmental Services Ltd was set up with Landfill Tax Credits made available through 3C Waste. This company has now been taken over by Waste Recycling Group but Tax Credits from the Former 3C operations are believed to continue to go to Cheshire Environmental Services as a result of agreements reached prior to the takeover.

Cheshire Environmental Services Ltd is responsible for 12 projects approved by ENTRUST. These include the extension of a school car park, the repair of a football group stands, and a number of "land reclamation" schemes. One of these schemes is described as "Land reclamation, Sandiway, Cheshire"[60]

It transpires that this reclamation project relates to a site consisting of a B and L Transport depot and associated land. The site is to be redeveloped with 137 residential dwellings, as approved by Vale Royal Borough Council. "The site includes an area, formerly a sandpit, which has been infilled and levelled. As part of the development it is proposed that the existing landfill be removed off site and replaced by imported engineered materials"[61]

"P E Jones (Contractors) Limited are the site owners, Cheshire Environmental Services Limited are the Employer. The Principal Constructor is McAlpine Civil Engineering and the Resident Engineer is ENSR."[62] Cheshire Environmental Services Limited is also described as "The Main Contractor for all site operation"[63].

3C Waste is the company removing the waste from the site to one of their landfill sites. We are informed that this contract was won through a tender process and that ENTRUST were informed of the procedures adopted.

As of November 1999 a total of 167,000 tonnes of waste had been removed from the site with a completion date anticipated as May 2000[64].

We have been unable to obtain adequate information on this Environmental Body due to the lack of public records made available by ENTRUST.

It is worth noting that "To date, less than 5 per cent of the projects approved have been within the category of reclamation, remediation or reuse of land. Nonetheless, they represent approximately £50m in approved projects"[65].

We recommend that the Select Committee and HM Customs and Excise investigate the use of Landfill Tax Credits in relation to brownfield land remediation.

We call upon the National Audit Office to carry out an inquiry into the funding of Environmental Bodies and the expenditure by such Bodies.

THE ENTRUST BOARD

Roger Hewitt, Board Secretary[66]

Mr Hewitt is the Managing Partner of Michael Hewitt Associates, the company that provided management consultancy and commercial services to Global Wildlife Trust. We understand this company was paid a fee of £25,000 but are unable to confirm this payment. It may be that Mr Hewitt declared this payment to the ENTRUST Board. Mr Hewitt is one of four Members of the Board, including the Chairman, with direct pecuniary interests in the waste industry over and above any financial benefits arising from the Landfill Tax Credit Scheme. Mr Roger Hewitt is a former Group Chief Executive of Shanks & McEwan.

The ENTRUST Chief Executive, in a telephone conversation with The Guardian, said that Mr Hewitt had resigned as Board Secretary in mid 1998. He also confirmed that Global Wildlife Trust had paid a fee of approximately £25,000 to Michael Hewitt Associates.

Dr Marion Carter

Dr Carter is described as an independent consultant[67] and is a Board member of the Environmental Services Association, the trade association for the waste industry. M J Carter Associates is also represented on the Board of the Environmental Services Association Research Trust (ESART), a well funded Environmental Body. M J Carter Associates conducted the initial scoping study for the first £3.5 million of Landfill Tax Credit funded research to be financed by ESART. M J Carter Associates acted as technical advisors to the Environment, Transport and Regional Affairs Committee Environment Sub-committee inquiry into the operation of the Landfill Tax. The Chief Executive[68] of the ESA, in commenting upon unprecedented volumes of legislative activity, states that, "particular note should be made of the outstanding contribution made by Dr Marion Carter".

Earl of Cranbrook, Chairman

The Earl of Cranbrook is employed as the Chairman of the Environmental Advisory Board of the Shanks Group. His association with the waste industry was highlighted by the fact that he chaired the ESA 1999 Annual Conference in his capacity as Chairman of ENTRUST.

Concern was expressed by Friends of the Earth as long ago as September 1996[69] in relation to domination of the ENTRUST Board by those with interests in the waste disposal industry and associated fields. Of particular concern in 1996 was the Earl of Cranbrook's then remuneration of £7,000 a year from Shanks & McEwan and £21,000 from Anglian Water, the role of Roger Hewitt as a past Chief Executive of Shanks & McEwan and treasurer of the Institute of Waste Management, and the position of Peter Neill as Chief Executive of the ESA.

The domination of the waste industry has been strengthened since 1996 with the appointment of Marion Carter in October of the same year. Of the nine Board members of ENTRUST two were Board members of ESART as of April 1999 including the then Chief Executive of the ESA, Peter Neill. Two further Board members are closely associated with, in one instance still employed by, a leading waste management company that provides the Chairman and Treasurer of the ESA Board.

It was announced that Peter Neill had stepped down as Chief Executive of the ESA in April 1999[70]. Mr Neill is now Chief Executive of Lancashire Waste Services.

Even with regard to public documents published by ENTRUST, the interests of the waste industry appear to be foremost.

In response to the question, what are the incentives for Landfill Operators to make contributions? [The assumption is made that the Tax Credits belong to the operator and not the taxpayer] ENTRUST replies,

In response to the question, Why should landfill operators contribute? ENTRUST has been even more forthcoming in their recognition of the waste industry's interests,

"If the scheme is made involuntary, operators will lose the freedom to direct or influence where the money is spent".

"Many landfill operators already donate quite large sums into the localities in which they work which cannot be off-set against Corporation or other Taxes. Much of this money is for purposes covered by the Landfill Tax Regulations and they can, in principle, also get Corporation Tax relief as an off-set on their out-of-pocket part of the contribution (ie the 10 per cent)."

Whilst welcoming ENTRUST's publication of a Register of Director's Interests we are concerned as to the difficulty in obtaining the Register and the specification by ENTRUST that "inspection is open to bona fide enquirers"[73].

In the interests of transparency, particularly in relation to actual or potential conflicts of interest, it would seem appropriate for pecuniary interests of Board Members, in relation to ENTRUST, Environmental Bodies, the waste industry and consultancies associated with the waste industry, to be registered.

Although it is known that ENTRUST pays £120 per day to Ebco members when they are on Ebco business, there appears to be no record as to the level of payments to ENTRUST Board Members or even when and if it was decided to provide remuneration to the Board.

It is generally recognised that the participation of an ENTRUST Board member in an Environmental Body could be of benefit to the working of ENTRUST as well as to the EB. However, if such a combination of interests' results in pecuniary gain to a Board member or unfair advantage to the EB, such interests must be seen as of a conflicting nature.

We draw the attention to the Minister of State and the Select Committee to the following Environmental Bodies:

Environmental Services Association Research Trust Ltd (ESART)

This EB was established by ESA with the majority of the Board (9) consisting of landfill operators (4) plus the trade association (ESA) representative.

M J Carter Associates was also represented on the Board of the EB. Peter Neill was a member of the ESART Board as of August 1999.

The relationship between ENTRUST and ESART is epitomised by the ESA announcement[74] that it had established a working group, with the ENTRUST Chief Executive as a member, to develop a best practice code for landfill operators making a donation to Environmental Bodies. This contrasts sharply with the response of ENTRUST to a project approval application from a well established national voluntary sector EB, with the support of a major landfill operator, to carry out a scoping study to establish a database covering environmental project funding. In this instance the applicant was informed that a meeting is to be held to examine the possibility of creating a directory of projects and therefore ENTRUST are unable to approve the project. We understand that the proposed meeting was at the behest of ESA.

Environmental Services Training and Education Trust Ltd (ESTET)

This EB was established by ESA. Peter Neill was a member of the ESTET Board as of August 1999.

Anglian Water Environmental Partnership

Anglian Water Plc established this Environmental Body as "an independent company set up in September 1997 under the Landfill Tax Regulations 1996."[75] The information contained in the annual review and summary financial statement of Anglian Water for 1999 makes little distinction between the work of the EB and the work of the company. The note that "the partnership gave more than £50,000 to projects in the Anglian Water region" is an integral part of the Managing Director's report on environment and community.

Lord Cranbrook was a Director of Anglian Water until 22 July 1998. No information is provided in the reports for 1998 or 1999 as to how independent the EB is from the company.

The Prince's Trust—Bro

This EB had received £403,186 in contributions and £93,420 in transfers from EBs as of April 1999[76]. At that time Board Member, Dr Neil Caldwell was Director and Company Secretary of the EB.

Landtrust

This EB had received £1,131,295 in contributions and £23,799 in transfers from another EB (Biffaward) as of April 1999[77]. Board Member, Donald Reid is a member of the Technical Advisory Panel to Landtrust.

Global Environmental Community Trust

This Environmental Body has 54 approved projects[78]. Councillor Martin Doughty is a Board Member.

Derbyshire Environmental Trust

This Environmental Body has 90 approved projects[79]. Councillor Martin Doughty is Chairman of the Board.

Derbyshire County Council (The Leader being Councillor Martin Doughty) received £66,000 from the Onyx Environmental Trust[80].

Landfill Tax Credit allocation—£250 million, where did it go?

By the beginning of 1999, 20 Environmental Bodies[81] had been visited in order to verify expenditure. A further 200[82] "verification" visits were made between April 1999 and publication of the ENTRUST "Achievements Report" for 1999.

Reference has already been made to the fact that less than 40 per cent of Tax Credits allocated have actually been made available for approved projects to spend. Of the available money Environmental Bodies having had their enrolment revoked have spent at least £5,530,000.

Of further concern is a lack of knowledge within ENTRUST of the source of certain funds or the EB having received the Tax Credits.

We are aware of a community based Environmental Body that registered with ENTRUST but was unable to obtain Landfill Tax Credits. In November 1999 the EB received a phone call from Lodge Service Management Ltd, the company contracted by ENTRUST to audit EB accounts. The company wished to look at the EB accounts on the basis that the organisation had received £65,000 in September 1998. It is understood that the request for a visit only arose because Lodge Services were already visiting other Environmental Bodies in the area. The phone call was the first indication of £65,000 being available.

The funds had not been applied for and had not been received.

Upon contacting ENTRUST for clarification, the EB was informed that it was unusual to audit such a simple transaction, that the funds may have gone to an EB with a similar enrolment number as a result of "digital error" (as this had occurred before), and that "you may never know what has happened due to confidentiality clauses."

Not only were ENTRUST unaware of which Environmental Body had received the £65,000 but also had no idea as to from where the money had originated.

We recommend that the Select Committee carry out an investigation into the competence of ENTRUST.

We recommend, in the interests of transparency and accountability, that a Register of payments be kept covering Members of the ENTRUST Board and Members of Ebco. This Register to include payments from ENTRUST, Environmental Bodies, the waste industry and consultancies associated with the waste industry. We recommend a similar register for any successor body to ENTRUST.

We call for an inquiry into all aspects of ENTRUST finance, in particular its management, allocation and control of Landfill Tax Credits, to be carried out by the National Audit Office and the suspension of the ENTRUST Board pending this inquiry.

THIRD PARTY FUNDING

It is accepted by ENTRUST[83] that third party funding (payment of funds by a body other than the landfill operator) to release Tax Credits was not brought within the Landfill Tax Regulations until 1 January 2000.

ENTRUST, as of January 2000, state "A third party must be independent of EBs. It cannot be another environmental body or an organisation corporately associated with an EB."[84]

HM Customs and Excise, in commenting upon third party funding, have stated,

It is of concern that third party funding was allowed to become common practice during the period prior to 1 January 2000 without the practice being covered by Landfill Tax Regulations.

Examples of third party contributors benefiting from their donation are provided in other sections of this submission, particularly local authorities. Unfortunately we are unable to identify most third party contributors and ENTRUST are unwilling to publish any details of payments.

The Landfill Tax Return[86] submitted by landfill operators to HM Customs and Excise does not identify whether the operator or a third party has paid the 10 per cent.

The assumption is made that the operator makes a donation and then claims 90 per cent rebate of Landfill Tax from HM Customs and Excise. This assumption arises from the original aim of the Landfill Tax Credit Scheme that, in return for various benefits, the 10 per cent was to be paid by the landfill operator without any thought of funds being obtained from a third party.

One assumes that third party funding can only be identified within the accounts of the landfill operator and there are concerns that third party funding could result in financial gain to the operator or, in certain circumstances, double tax relief on one donation.

In taking a notional donation of £100,000 from a landfill operator to an Environmental Body, with the company paying the 10 per cent, the following is likely to apply:

— Donation £00,000

— 90 per cent tax rebate —£90,000

— Net cost to the company £10,000

— Corporation Tax relief under gift aid £3,100

— Total cost to the company £6,900

If a third party contributes the 10 per cent, the landfill operator still claims tax relief on the 10 per cent "donation". The assumption is made, therefore, that tax is paid on the third party funding to the landfill operator. We are unable to clarify if this is always the case and would welcome the observations of the Minister of State and the Select Committee on this issue.

We are particularly concerned in relation to situations where the third party donation has already been subject to tax relief. An example would be where the 10 per cent is provided by a Charitable Trust, a Charitable Foundation established by a company or where the money paid to the landfill operator had been covenanted under Gift Aid to the third party.

We are aware, for example, of third party payments made by WWF, the Coca-Cola Youth Foundation and Friends of the Earth. Each of these organisations has paid money in order that Tax Credits were released to excellent projects that without "third party" support would have been unable to obtain Landfill Tax Credits.

In some cases the organisation providing third party support already has a funding relationship with the Environmental Body applying for the Tax Credits. This funding has had to be stopped and the payment made to the landfill operator instead. We are concerned that such a relationship between the third party and the Environmental Body could accurately be described as "corporate" and therefore put such payment outside of the regulations.

A question arising time after time is why should landfill operators have a dominant role within the Landfill Tax Credit Scheme if they are contributing nothing to the projects being funded by Landfill Tax Credits?

It needs to be noted that even Ebco, a body appointed by the ENTRUST Board recognises that,

In terms of the 10 per cent leverage required to release the Tax Credits, much more is found from bodies, including the private sector, external to the waste industry than from the waste industry itself.

We recommend the Select Committee to examine way in which maximum leverage is obtained through the release of Landfill Tax Credits without allowing control to remain in the hands of the waste industry. We would also suggest that the Committee investigate ways in which Landfill Tax Credits could be made available to projects on the basis of need even when 10 per cent funding may not be available.

It is further suggested that the Committee investigate how "third party" funding was introduced by ENTRUST without such funding scheme being covered by the Landfill Tax Regulations.

We urge HM Customs and Excise, in conjunction with the Inland Revenue to introduce procedures to ensure that "third party" funding does not allow landfill operators to benefit from Corporation Tax Relief without declaring that a 10 per cent donation has come from an organisation external to the landfill operator itself and has included this "donation" in the revenue account of the company. We hope that, in the event of third party funding continuing, a public register be available of all those involved.

We call upon the National Audit Office to investigate "third party" funding and the benefits that have accrued to those providing this funding.

THE WASTE INDUSTRY

It is made quite clear by ENTRUST that "the aim of the legislation is to ensure independence of Environmental Bodies" ENTRUST goes on to state that "The Board will examine carefully all cases in which a controlling majority could be comprised of Local Authorities or Landfill Operators."[88]

Companies

To quote Janet Manning-Shaw, the then Head of Public Affairs, Environmental Services Association,

On the issue of contracts ENTRUST states:

Yanley and North Somerset Environmental Company (YANSEC)

This EB, based in North Somerset, received funds totalling at least £421,900[91] from Viridor Waste Management. North Somerset Council opposed a planning application for an extension to a landfill site and an Inquiry was held. The Planning Inspector received the following letter:

"I am writing to you on behalf of the Board of Yansec in support of the proposed extension to the Yanley Landfill site.

The Directors of this Company would like you to be aware that Yansec is an environmental body set up jointly by North Somerset Council and Haul Waste in order to distribute Landfill Tax Credits in the local community.

Since its inception in 1997 over £400,000 of this money has been committed to about 60 projects in the North Somerset area. This is money that would otherwise not have been spent on the local environment and is a valuable contribution to these projects. Many would not have progressed without landfill tax funding.

We understand that without an extension to the landfill site the life-span on the existing operation would be just a few years and in order to maintain its viability less waste, on a daily basis, will be deposited that at present.

It is therefore for these reasons that this environmental company supports the extension to Yanley Landfill site."[92]

The letter is signed by Neill Pollard, Company Secretary.

Viridor Waste Management was formerly Haul Waste Ltd, Terry Adams Ltd, and Greenhills.

A further letter was sent to the Planning Inspector by a local Trust that had received £28,000 from YANSEC. The appeal for an extension of landfill was unsuccessful. We draw the YANSEC intervention to the attention of the Minister and the Select Committee as an unsophisticated attempt at using the provision of Landfill Tax Credits as a means of gathering support for policies which would otherwise be opposed. Most other examples are not as crude or overt.

Viridor Waste Management

As with most companies, there is no doubt that a large number of exceptionally worthwhile community based initiatives have been supported through Viridor's use of Landfill Tax Credits. However, this must not distract from funding that also provides commercial benefits.

Viridor have provided a total of £10.5 million[93] to Environmental Bodies.

Viridor gave £705,000 to the Pilsworth Environmental Company. This Environmental Body has its registered office in Bristol with the Company Secretary being the South West England Environmental Trust (SWEET). Its business address is c/o Bury MBC and this is the contact address provided by ENTRUST. SWEET has received £643,011 from Viridor. We are not aware of the interests or employers of the six members of the Pilsworth Board other than Robert James Woodland who is a director of Viridor and also a director of Ugbrooke Environmental Ltd (another Environmental Body funded by Viridor).

The Department of Trade and Industry[94], reporting on examples of current practice in the waste industry, highlights a 20-year disposal contract between Haul Waste and Suffolk County Council. As a result of trials that commenced in May 1998 there was an additional unsegregated MRF initiative for an initial contract period of four years. The Dti report states that Haul Waste has provided Suffolk CC Education Department with £200,000 towards a teacher training programme. It is not clear if this is Haul Waste funding or Landfill Tax Credits. However, Viridor do refer[95] to a number of Landfill Tax funded initiatives in Suffolk including £8,427 to Mid Suffolk District Council, £30,000 for the Suffolk home composting scheme and £10,000 to the Suffolk Partnership.

In a memorandum submitted to the Select Committee it was stated, "SWEET is a wholly independent (no landfill companies or local authority directors) environmental body, established in December 1996"[96]

According to record held by Devon County Council[97] SWEET was established on the proposal of Messrs Lyons Davidson, solicitors of Bristol. The proposal was to have a Board appointed by the solicitors with a "secondary tier of management committees reporting to and advising the Board."

It is unclear who sits on these committees and where decisions are taken. We suggest that the practical implementation of transparency and accountability demands a change in such procedures.

The first project to be funded by SWEET, with £34,000 made available through Hemmings Group Holdings Limited, enabled "Bristol City Council to buy an eight acre inner city wildlife site and community garden"[98]

Shanks Group Plc

The close relationship between Shanks and ENTRUST is shown by the fact that the Chairman of ENTRUST is an employee of the company, that the ENTRUST Board Secretary is a former Shanks Group Chief Executive and Mr Steven Hargreaves, the Shanks Environmental Body Organiser is on the Ebco Committee.

Mr Hargreaves although described as the secretary or contact person for these independent Environmental Bodies, was, until February 2000, an employee of Shanks. At one public ENTRUST event we are informed that the Chairman of ENTRUST, himself an employee of Shanks, asked Mr Hargreaves "which hat are you wearing, Shanks or one of your EBs?"

The relationship between directors of ENTRUST and the ESA is shown by the fact that Marion Carter sits on the Board of both organisations and that Peter Neill was, until recently Chief Executive of the ESA as well as being an ENTRUST Board member. However the strong association between Shanks and the ESA also requires noting. The ESA Chairman, its Treasurer and two Committee/Working Group Chairmen are representatives of Shanks. All in all, Shanks Group plc is rather visible within the whole sphere of activity relating to the Landfill Tax Credit Scheme.

Shanks established seven Environmental Bodies, all based at the same address with the same contact person. In responding to requests for funding for projects already approved by ENTRUST these Environmental Bodies, that are supposed to be independent of landfill operators, state that; "agreements are subject to a final decision by Shanks."[99]

A further concern, brought to our attention by a community based EB, is that EB Nationwide provide agreed funding on an arrears basis[100]. This results in the project having to obtain overdraft facilities that have to be paid for. This means that Tax Credits are contributing to Bank profits rather than environmental initiatives despite a surfeit of available cash in the bank accounts of a small number of Environmental Bodies under the influence of landfill operators.

EB Nationwide is now insisting that all equipment purchased, using Landfill Tax Credits, must be given to EB Nationwide upon completion of the project even though such a stipulation is not included in the contract between the independent EB receiving funding and EB Nationwide.

It is claimed by the Shanks' EB that this is a condition stipulated by ENTRUST. In a statement to The Guardian, the Chief Executive of ENTRUST said he regarded this as a reasonable interpretation of ENTRUST regulations.

Shanks have a contract with Peterborough City Council covering waste disposal to include recycling. We are unaware of the nature of the contract, as it is not listed in the 1999 edition of the Contracts Handbook. The 1990 Environmental Protection Act, under which waste disposal contracts are let, does not oblige councils to disclose this information although the vast majority do.

A "cell recycling project" for Peterborough, organised as a "partnership" of Shanks, Valpak and local authorities in the area, was launched even though the Peterborough/Shanks contract was in operation.

"The funding to purchase the boxes and necessary vehicles to ensure the project worked totalled approximately £500,000 and was provided through an ENTRUST approved project of EB Cambridgeshire Ltd using donations via the landfill tax credit system from Shanks."[101]

The most recent Shanks Group accounts are able to report that "the losses in recycling have been reduced"[102]

Peterborough City Council, responding to The Guardian, said that the "cell recycling project" is a new initiative funded totally by EB Cambridgeshire. It is separate from the 10 year contract between Peterborough and Shanks but does use the facilities that are part of the earlier contract.

Onyx Environmental Group Plc

The Onyx Environmental Group is part of the world-wide Vivendi group of companies. Onyx Municipal is "The UK's leading provider of municipal environmental services, with the experience of serving some 40 local authorities"[103]

The Onyx Environmental Trust was established in August 1997 as an Environmental Body. The Board consists of five Directors including the Chief Executive and the Financial Director of Onyx Environmental Group. A third Director is Professor Andrew Porteous, probably the leading exponent of incineration in the UK.

As with most Environmental Bodies established by the waste industry, the Trust has supported many excellent projects in the broad area of sustainability as covered by the Landfill Tax Regulations. The 1999 Annual Report states that Onyx Environmental Group Plc provides the full 10 per cent of donations to Environmental Bodies and that this has totalled over £500,000 with Tax Credits of over £4.5 million.

We would, however, draw the attention of the Committee to expenditure in certain areas that appears to have benefited the long-term commercial objectives of the company. We have also been made aware of concerns expressed in one London Borough—Wandsworth—about the direct relationship between waste management and disposal practices and the availability of Landfill Tax Credits.

Wandsworth

In drawing attention to the relationship between Onyx Environmental Group Plc and Wandsworth Borough Council we emphasise that this is only with regard to the Landfill Tax Credit Scheme and implementation of the refuse collection contract. Certain aspects of the refuse collection services in this borough deserve to be seen as examples of good practice worthy of replication elsewhere. We refer, in particular, to the recycling collection service.

Prior to the commissioning of the Western Riverside Waste Transfer Station in the Borough, the GLC categorised waste methodically (at a site adjacent to the new transfer station site) with codes for domestic, clinical, construction, trade waste etc. Following removal of GLC responsibility in 1986, through to 1999, there was a failure to effectively categorise or identify trade waste as opposed to domestic waste. Refuse vehicles entering the Waste Transfer Station were regarded as containing domestic/household waste mixed with commercial waste.

In 1997, when Onyx obtained the refuse collection contract, this situation was formalised,

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A formula was laid down in the contract under which the Council determined the amount of commercial waste mixed with the household waste. However, it is clear by examining the experience of weighbridge operators that such a system is virtually unworkable. It was clear that an increase of four to five tonnes weight for the same volume of waste in a vehicle indicated an excessive amount of trade or commercial waste that could not be assessed accurately under the agreed formula.

To agree such a system appears questionable as the tender document had stated,

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Prior to Onyx winning the 1997 contract they held the street cleaning contract. In September and October 1995 the company was subject to a special investigation by Internal Audit Services and by the Fraud Squad. This was prior to the Landfill Tax but is mentioned as an indication of steps taken by a reputable waste industry company to maximise profits.

The Investigation by the Internal Audit Services[106] found that Onyx UK Ltd had used resources dedicated to the WBC contract for private gain. Essentially, trade waste was being hidden within domestic waste thereby incurring no cost to the company but additional payments made by the local authority under the contract with the Waste Authority. One of the most damning pieces of evidence made available to the investigation was an internal Onyx UK memorandum,

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The investigation report is available for perusal by the Minister and the Select Committee.

Money was repaid to the Council. The Special Investigation Report estimated that, if Wandsworth Borough Council resources had continued to be used for private gain over the life of the contract, Onyx would have illegally obtained in the region of £100,000.

When Onyx UK Ltd commenced a seven year contract covering refuse collection on 28 September 1997, the contract included Onyx paying Wandsworth Borough Council for their commercial waste portfolio on the basis of 40 per cent of profit.[108]

In January 1999 the Council recognised that "the issue of unregulated commercial/industrial waste must be addressed."[109]

This recognition arose largely as a consequence of a 1997-98 survey carried out by the Western Riverside Waste Authority that had identified an overestimation of household waste by Wandsworth Borough Council in the region of 16,000 tonnes per annum.[110]

One of the results of decisions relating to the disposal of commercial waste being hidden within domestic waste was the repayment of £30,100 by Onyx UK to the Council "to cover historic disposal costs"[111]

The report from which the above information is taken also noted that "Onyx are now revising their bulk bin collections so that separate vehicles will collect household waste from those collecting commercial/industrial waste which will mean that over 90 per cent of commercial/industrial waste tonnages will be directly weighed."

It was not until September 1999 that the Council was able to report that Onyx "segregate domestic bulk bin collections from commercial."[112]

There is no doubt that the difficulties encountered by the London Borough of Wandsworth are likely to be experienced by local authorities throughout the country. Our concerns are centred upon a scenario where large sums of public money are at stake within a situation in which infringements of contractual obligations are ignored thereby commercially benefiting waste operators. If the Council officers responsible for negotiating or monitoring contracts are the same as those attempting to obtain Landfill Tax Credits from the companies, whose contracts they are overseeing, there is an understandable perception from people external to the local authority that deals could be done to the detriment of democratic control and transparency.

In response to a request from an Environmental Body, based in Wandsworth, Onyx Environmental trust say it is impossible to offer support as the Board is

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We have been informed that the lead officer from the Council involved in discussions with Onyx over access to Landfill Tax Credits, Peter Brennan, Assistant Director Leisure and Amenity Services, is the same person who negotiated the "refuse Collection, household recycling and associated duties contract" with Onyx. There is no suggestion of wrongdoing.

However, a situation such as that in Wandsworth highlights the potential conflicts of interest encouraged by the manner in which the Landfill Tax Regulations are currently implemented and the allocation of responsibilities to officers that result in the same person dealing with waste contracts and Environmental Bodies.

John Kutner, Deputy Chief Executive of Onyx Group and a Board Member of the Onyx Environmental Trust, in a telephone conversation with The Guardian, said,

"Onyx Environmental Trust has only two directors from the company on it. We always check that when local authorities put up projects that the public will benefit—if they do not it is thrown out immediately."

"We also do have a policy of supporting projects in the local areas where we operate as a waste disposal company and landfill operator. Waste companies are not popular but are necessary and we think it is good that money is put into the local communities—for village halls and ponds—and people to appreciate this."

"As for our contracts I do not think for a minute people like Lord Gregson or Professor Porteous (on the Onyx Environmental Trust) would countenance any deals that would be seen to benefit our business."

On Wandsworth, Mr Kutner confirmed that the company had paid back some £30,000 over their refuse collection contract to cover commercial waste that had been mixed with domestic waste. He said the situation they had inherited from Wandsworth meant that unlike other authorities the same vehicles were used for both commercial and domestic waste—which made it difficult for the company.

Hampshire

"One of the largest awards that the Onyx Environmental Trust has made is for a grant of £1.5 million to the Portsmouth Gateway Project."[114] Phased over a three-year period, the grant will be used to improve the entrance to the local motorway and projects supported include the construction of a bridge and a causeway.

Further provisions of Landfill Tax Credits via Onyx Environmental Trust include £156,652 to Hampshire County Council, £58,400 to Southampton City Council and £90,200 to the Hampshire Wildlife Trust."[115]

The Onyx Environmental Group is the leading partner in "Hampshire Waste Services" which has a 25-year contract at a cost of £28 million per annum for waste disposal.[116] We understand that this long term contract, agreed by Hampshire County Council in breach of a national protocol governing the handover of responsibilities to other authorities, includes three incinerators. This incineration programme was established in the face of strong opposition from both a community and local authority level but was supported by Hampshire County Council and Onyx Environmental Group. Hampshire County Council signed the contract within three weeks prior to the handover of responsibilities to the Unitary Authorities of Portsmouth and Southampton.

We identify below other local authorities having received Landfill Tax Credits from the Onyx Environmental Trust. We do not link the payment of such credits with the obtaining of contract or obligations contained in contracts but the perception of such links is allowed credibility by the present situation. Such payments are made despite the ENTRUST statement in response to the question, "Can Environmental Bodies contribute to Local Authority projects?"

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Royal Borough of Windsor and Maidenhead

"£50,000 was presented to Councillor George Mair, Chairman of the Leisure and Cultural Services Board at the Royal Borough."[118] The funding was for an Ecobus exhibition centre.

The Cleansing and Transport Services Division of Windsor and Maidenhead had been externalised to Onyx in March 1995. The refuse and street cleaning contract is worth £4.2 million per annum to Onyx.[119]

The Onyx Environmental Trust has also enabled Tax Credits to be paid to a number of other Local Authorities[120]:

— Three Rivers District Council—£51,000. Onyx has contracts worth £1,353,560 per annum with this Council.

— Rugby Borough Council—£118,150

— Telford and Wrekin UA—£72,000

— Derbyshire County Council—£66,000

— Buckinghamshire County Council—£40,000

Two further companies that have established a number of Environmental Bodies with an emphasis on close co-operation with local authorities are Cory Environmental Limited and Cleanaway Ltd.

Both companies have made Landfill Tax Credits available for a number of extremely valuable initiatives at a community level. However, there appears to be the opportunity for a correlation between funds expended and contracts or planning consents that require support. We have no evidence that this has happened but feel the Select Committee should examine their activities within the context of a review of Environmental Bodies as a whole.

We understand that the payment of funds to a "consultant" to advise on the setting up of an Environmental Body, or even payments between EBs in the same building, is seen as a well established "scam" with the current rate for exchange of telexes being around £30. Payment to consultancies, we are informed, is up to £1,000 per day. We believe this, if shown to be true, is an inappropriate use of public funds and should be prevented by an effective regulatory body.

We urge the Select Committee to investigate the allocation of Landfill Tax Credits to Local Authorities, the relationship between the awarding of contracts and the availability of Tax Credits, and the control or influence over allocation of Landfill Tax Credits by waste companies.

We believe the Committee would be justified in reviewing the interrelationship between local authorities, landfill operators, and Environmental Bodies set up under the influence or control of landfill operators and/or local authorities.

We call upon the Audit Commission to investigate the relationship of landfill operators to local authorities.

We recommend the DETR to carry out a review of planning consents and waste disposal contracts.

We suggest that the National Audit Office examine the expenditure of Landfill Tax Credits on consultancy payments and "inter Environmental Body" costs.

TRADE ASSOCIATIONS

Environmental Services Association (ESA)

Concerns in relation to the ESA fall into two areas. First, its influence over ENTRUST and its role in the formulation of the Landfill Tax Regulations. Second the actions of Environmental Bodies under its control.

The attitude of the ESA to the Landfill Tax Credit Scheme is highlighted by the statement that:

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The Environmental Services Association Research Trust (ESART) was established, as an ENTRUST approved Environmental Body, in October 1998.

ESART was launched with a budget of £1 million[122] and by November 1999 was tackling projects to the value of £3.5 million. One ENTRUST approved project is "research into public confidence in the management of waste" which is described as "conducting new research needed to fill information gaps and developing a best practice PR guide for waste management operators"[123]. The ESART Action Plan for 2000-01 estimates Landfill Tax Credit expenditure of about £2 million. ESART announced a major study to look into ways of increasing public confidence in the waste management industry in February 2000. This £75,000 project will run for six months[124]

It is recognised that research projects concerned with the diversion of waste from landfill, that may also be of benefit to the waste industry, are valid projects to be funded by Environmental Bodies. However, we would question the appropriateness of projects such as the following ESART "research" projects[125] being funded by Landfill Tax Credits. We are convinced that such research falls within the responsibility of the waste industry and not within the objectives of the Landfill Tax Credit Scheme.

— Control of birds on landfill sites (£200,000-£300,000)

— Controlling smells (£20,000-£30,000)

— A central database of information useful to the waste management industry (£250,000-£500,000 + £30,000-£75,000 per annum)

— Responding to public concerns about landfill including a response to a Friends of the Earth publication on planning (£25,000)

— A three month study of waste management conferences and seminars (£10,000)

— Development of an information strategy including possible production of a newsletter for the national press (£10,000-£30,000)

— On-going funding to encourage attendance of representatives of the UK waste industry at various European Committees (£30,000-£50,000 per annum)

There are nine Board members[126] of which four represent landfill operators, one is the Chief Executive of the ESA and a further member represents M J Carter Associates, a consultancy represented on the Board of the ESA.

The other Members are Professor William Powrie of the University of Southampton, Tom Huntingdon of the Natural Environmental Research Council, and the Chairman, Professor The Lord Lewis of Newnham. William Powrie, as well as being Professor of Geotechnical Engineering at the University of Southampton, is Chairman of the University Environmental Body, SUNRISE.

Funding of ESART includes Tax Credits from Viridor Waste Management (£150,000) and Biffaward (£199,756). We are unable to report further details of funding provided to ESART as ENTRUST refuses to disclose such information.

It is worth repeating the point made by ENTRUST that "the aim of the legislation is to ensure independence of Environmental Bodies" and that "The Board will examine carefully all cases in which a controlling majority could be comprised of Local Authorities or Landfill Operators."[127]

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The ESA established a further EB in November 1999, the Environmental Services Training and Education Trust (ESTET) which "is expected to be the principal funding vehicle for the industry's National Training Organisation". "ESTET's funding was launched with an initial donation from Shanks"[129].

We are not aware of the sums involved or if the "donation from Shanks" is actually Landfill Tax Credits from the public purse.

The ESA is to establish the Waste Industry National Training Organisation (WINTO) with 80 per cent of costs being provided by ESTET. A previous attempt to access Landfill Tax Credits for a "scheme that would have helped waste management firms claim back the cost of training their employees"[130] was approved by ENTRUST but halted by HM Customs and Excise. The former scheme was organised by Enventure EB.

Under the profound headline "ESART's first study says landfills must achieve sustainability within 30 years"[131] the ESA announced the publication of the first study funded by ESART's "early start" programme of research projects. This project was jointly funded by the Norlands Foundation, another Environmental Body associated with Thames Water.

General waste policies pursued by this trade association can be judged by the fact that in the same publication ESA argued against co-disposal at landfill sites being ended by 2004 and committed itself to future co-operation with the Chemical Industries Association on this issue.

Energy From Waste Association

The Energy from Waste Association established the Energy From Waste Foundation as an Environmental Body enrolled by ENTRUST.

The Foundation, in its first Report and Accounts (1997-98), shows an identity almost subsumed by the Energy From Waste Association.

The accounts (June 1997-November 1998) disclose income of £359,444 from three landfill operators; Cory, Grundon and Global Environmental. There was £5,261 income from interest. There were set up costs of £23,994 and management charges of £31,078. Set up costs consisted of legal fees (£5,875), graphic design (£7,760) and further management charges of £10,359.

All management charges were paid to the Energy from Waste Association.

Since closure of the accounting period " a further £30,000 has been received from the Environmental Trust operated by S.I.T.A." and "discussions are taking place with other potential donors, at least one of whom is a local authority."[132]

There are nine directors. The Managing Director is also the Executive Director of the Energy from Waste Association. Four of the directors, including the Chairman, are members of the Energy from Waste Association's Executive.

The ENTRUST approved projects funded by the Foundation to the tune of £215,640 appear to be a mixture of public relations exercises and industry responsibilities. These include:

— A report on "Practical Effects of UK and North American Recycling Programmes" [a sophisticated attack on recycling]

— Leaflets on energy from waste [standard publications supporting the incineration industry]

— An "Audit protocol for EfW plant operators"

— "Bottom ash chemistry—a review"

In examining the 21 approved projects currently listed by ENTRUST[133] we were surprised to identify, "London's Waste Strategy—Project to produce sustainable waste management information for the incoming Mayor" and "Practical effects of recycling programmes—production of report for distribution to local authorities in the UK."

Our perception of the relationship between the Energy from Waste Association and the Energy from Waste Foundation is reinforced by the Association's submission of evidence[134] to the DETR consultation paper, "A way with waste".

In this submission, the report, "Practical Effects of UK and North American Recycling programmes" is presented as independent with no reference to the Foundation and the EWA.

This report, according to experts consulted by The Guardian researchers, should not be described as independent and is not a comprehensive assessment of recycling schemes in the UK and North America. Recycling and composting are seen as separate with an attempt to define recycling as only to do with dry recyclates. The report claims that,

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Internationally respected data, gathered by independent researchers, such as that published in the Franklin Associates Reports for the US EPA, show such statements to lack credibility. The seven US States chosen as the sample for the research were not, unfortunately, representative or even a cross section of the waste management strategies employed in the United States.

Our investigation has not sought to enter the debate of the Government Waste Strategy but we feel it inappropriate for Landfill Tax Credits to be used in a manner that attempts to popularise one minority industry sector view at the expense of the Government's strategy.

"Information services", noted in evidence to the DETR, include Energy from Waste Foundation material as sources of information available free to local authorities. We would suggest that the source of such material and the nature of the funding for its production should be made clear to Local Authorities and other bodies at which the material is aimed.

The Chief Executive of ENTRUST, in a telephone conversation with The Guardian, said that the Boards of Environmental Bodies set up by trade associations have a majority of independent members.

We recommend the Select Committee to investigate the influence exercised by waste industry trade associations, particularly the ESA and the Energy from Waste Association, over the formulation of the Landfill Tax Regulations and the practical implementation of the Landfill Tax Credit Scheme.

We urge HM Customs and Excise to investigate the control and subsequent expenditure of Landfill Tax Credits by the ESA/ESART and the Energy from Waste Association/Foundation.

We call upon the National Audit Office to investigate the control and expenditure of Landfill Tax Credits by trade associations within the waste industry.

LOCAL AUTHORITIES

In many respects our investigation has shown the truth of a comment made by Chris Bisland, Corporate Director, Somerset County Council, when referring to outcomes of the Landfill Tax Credit Scheme, that

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It is made quite clear by ENTRUST that "the aim of the legislation is to ensure independence of Environmental Bodies"[137] ENTRUST goes on to state that "The Board will examine carefully all cases in which a controlling majority could be comprised of Local Authorities or Landfill Operators."

However, it is worth quoting a letter from ENTRUST when requested to intervene in a situation where a local authority was controlling and allocating Landfill Tax Credits,

"A fundamental requirement for the contributor is that it does not benefit from the use to which the money is put or, if it does, then the benefit is shared; as a general guide, if the County Councillors (who I understand from the description are able to control the activities of the waste disposer and its landfill sites) get a benefit as Councillors then that would be illegal but if they only benefit as members of the community then that would be allowed." The letter from ENTRUST goes on to say,

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ENTRUST also state that Environmental Bodies are prohibited from contributing to Local Authority projects except where they are contracted to supply particular goods or services.

There is no doubt that many of the projects funded through Landfill Tax Credits, as a result of Local Authority influence, are admirable initiatives. The major issues associated with Local Authority influence and control over Landfill Tax Credit expenditure are transparency, accountability, and activity in direct conflict with the Landfill Tax Regulations.

We draw the attention of the Minister of State and the Select Committee to:

Devon County Council

The situation in relation to Devon County Council is best introduced by quoting from Mr David Andrew, Assistant Director (Development and Environment Initiatives),

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This explanation refers to County Council control of Landfill Tax Credits that has resulted in:

— The use of Tax Credits to replace County Council expenditure

— An increase in revenue to the County Council directly from Landfill Tax Credit allocation

— The provision of the 10 per cent contribution from Council budgets that resulted in the Council directly benefiting from Tax Credits

— Landfill Tax Credits provided to projects as a result of established Council priorities

— The setting up of Environmental Bodies under the influence or control of the County Council

We draw the attention of the Minister and the Select Committee to "Green House Visitors Centre Ltd" in order to highlight manipulation of the Landfill Tax Regulations by Devon County Council.

The process adopted by the County Council to reduce committed expenditure and increase income through access to Landfill Tax Credits began in January 1996.

The Council resolved that a contribution of £29,000 from its Waste Disposal Revenue Budget be approved towards the running costs of the Centre and that

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This decision led to the proposal "that an investigation should be made into the feasibility of establishing an Environmental Body by Devon Waste Management to include the Visitor Centre as its principle aim" and that as "the Green House Visitor Centre is currently funded by contributions from the Waste Disposal and Recycling Committee and DWM" that "it might be possible to enhance its facilities and operations at a reduced net cost to the County Council."[141] This proposal was agreed by the County Council.

By February 1997 it was agreed to establish an EB as a company limited by guarantee with charitable status. The Visitors Centre operations were transferred from the County Council to the EB thereby saving the County Council £62,000 per annum (this being the total cost of the Centre at that time to the CC). It was agreed that staff be transferred from the Council to this new EB, Green House Visitors Centre Ltd, and that the premises and contents of the Centre would be leased to the EB at full market rent, initially for a three-year term.

It was also agree that "a contribution of £100,000 in 1997-98 be made to the Green House Visitors Centre Limited, 90 per cent of which to be received from the County Council's Liability to Customs and Excise for Landfill tax as budgeted by the Devon Waste Disposal and Recycling Committee with the balance of 10 per cent to be funded by Devon Waste Management from a budget already made for the purpose for the 1997-98 financial year."[142]

We are in possession of numerous Council papers documenting the decision making process that resulted in this "privatisation" of a County Council resource in order to use Tax Credits in an inappropriate manner.

By January 1998 the Council had "allocated £250,000" in "County Council derived Landfill Tax Credits"[143] to the Green House Visitors Centre. Although ENTRUST was informed of the role of the County Council early in 1998 it refused to accept that there had been any breach of the Regulations.

The overall aims of the Council can be judged by perusal of two conflicting statements:

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The Visitors Centre highlights, in a crude manner, benefit to the Council by its provision of 10 per cent funding and its control of Tax Credits. However, there are further pre-Landfill Tax commitments that were then funded by Landfill Tax Credits controlled by the Council.

We urge the Select Committee to investigate the role of the County Council in its allocation of "£881,850 towards environmental projects; representing 98 per cent of the County Council's Landfill Tax Credits available in the period October 1996 to March 1998, together with £97,950 of required supporting contributions, largely provided by this Committee [Devon CC Environment Committee]."[146]

The conflict of interests and responsibilities, left unresolved by County Council Officers and Councillors, is highlighted by support offered by the Council to enter an appeal against refusal of planning permission to Devon Waste Management for a landfill site[147]. This decision was taken as the "principal shareholder of the company and not as the local planning authority".[148]

In noting the role of the County Council with regard to accessing Landfill Tax Credits, we refer to a decision taken as early as November 1996 that a report be made "setting out in more detail the potential for landfill tax credit contributions paid to Environmental Trust to be utilised by the County Council".[149]

Once the County Council lost direct control of Landfill Tax Credits in the County action was taken to ensure maximum influence through the continued provision of 10 per cent funding. It was noted that:

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It was further agreed to:

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At the same meeting it was also agreed to accept "£5,000 from Cornwall and Devon Environmental Trust Ltd [An Environmental Body] towards works on the Grand Western Canal." This implies the payment of Landfill Tax Credits from an Environmental Body to the County Council "with similar sums being potentially forthcoming in future years."

The Press Department of Devon County Council, in response to a request for comments from The Guardian, said that "it [The Green House Visitor Centre] is no longer our responsibility."

Essex County Council

It was reported as long ago as 1997 that,

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ENTRUST Chief Executive Richard Sills was quoted as saying,

"I would not like to see such clauses in contracts. Whether bidders for landfill contracts have contributed to the local area or promise to do so in the future is inevitably going to be an element in a panel's assessment of the bids put before it"

It is our understanding that not only is this practice now well established in Essex but that it has spread to a number of other local authorities including the County Councils of Oxfordshire and Lincolnshire and the Metropolitan District Council of Kirklees.

The Essex Environment Trust has a Board that is independent of the County Council. Of the eight Members, one is a County Councillor, one is an employee of the council (the Secretary) and one Member is the Development Director of Cory Environmental who sits on the boards of a number of EBs. Two unusual conditions imposed on applicants to the Trust, and not included in the landfill Tax Regulations, are that certain projects "must have local financial support to at least 25 per cent of the total cost of the project" and that,

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Neath-Port Talbot

NPT Environ Aid Limited is the Environmental Body established under the influence of the local authority.

A meeting was held, organised by ENTRUST to publicise various Landfill Tax funded projects in Wales. Neil Caldwell, a Board Member of ENTRUST, was present to discuss the issues involved, including the allocation of funding to carry out work already committed to by the local authority. Someone who took a contemporary note informs us that Mr Caldwell said "it is at the margins of legality but as it is not public money there is no need to act in the public interest."

NPT Environ Aid Limited had five Directors but currently has four with the resignation of Mr Stuart Penny on 2 May 1997.[154]

The Company Secretary, appointed on 11 February 1997 is Mr Stuart Penny, Mr Penny is a former Chief Executive of the County Borough Council of Neath-Port Talbot. Since 2 March 1998 he has been Company Secretary of Neath Port Talbot Waste Management Co. Ltd.[155] The Environmental Body is based at the landfill site run by this landfill operator. As already noted, Mr Penny is a former director of the EB, serving from 11 February 1997 until 2 May 1997 when he became Company Secretary.

Mr Gwilym Richard Evans, a director of NPT Environ Aid since 11 February 1997, is also a director of Neath Port Talbot Waste Management Co. Ltd.

Frederick John Kingdom CBE JP, a director of NPT Environ Aid since 11 February 1997, is an ex-councillor.

Mr Kenneth Chapple, appointed as a director on 2 May 1997, is also an ex-councillor.

We are unaware of any responsibilities of the fourth director, John Desmond Davies KSG, in relation to the local authority or the waste industry.

Swansea County Council

Yet another example of Council expenditure being replaced by the use of Landfill Tax Credits.

As with most instances in this area of manipulation of the regulations, the use to which the Tax Credits are put is positive. The County Council claimed it was unable to continue its kerbside recycling scheme. It was then instrumental in providing Tax Credits for the Wales Environment Centre, which then ran the scheme. We understand that Landfill Tax Credits made available for this service amounted to £130,000 per annum.

Detailed investigations have not been carried out into the situations pertaining at Swansea and Neath-Port Talbot or the precise nature of the contractual obligations insisted upon by Essex County Council and others. However, we believe the Audit Commission should mount a comprehensive investigation. We understand that ENTRUST do not consider such actions to be in breach of the regulations.

Merton LBC

This London Council has a 15 year contract[156], that commenced in 1993, with A&J Bull for waste transfer and disposal.

On 27 November 1997 a DEED was signed between Merton LBC, A&J Bull (Southern) Ltd and Groundwork Merton, an Environmental Body.

The Council was already committed to paying a grant of £46,000 per annum to Groundwork Merton as core funding until March 2001.

Under the DEED Merton LBC covenants "to pay A&J Bull by way of reimbursement 10 per cent of any landfill tax contribution which it has paid to Groundwork Merton, up to the maximum of £46,000 grant to which Groundwork Merton is entitled or such higher sum as the Council shall agree, and to indemnify A&J Bull". It was also agreed that if the payments to A&J Bull were less than £46,000 that the balance would be paid to another landfill operator in order to access Tax Credits. If this third party contribution was less than £46,000 in any one year then the balance is to be paid to Groundwork Merton.

"Additionally the Council will seek further sources of funding and such may be used for the purposes of the unrelieved 10 per cent of a contribution made to Groundwork Merton, either by A&J Bull or by any other landfill tax payer with which the council enters into any subsequent arrangements". A&J Bull agreed to pay up to 20 per cent of its total landfill tax liability in respect of any contribution year to Groundwork Merton. Groundwork Merton agreed to spend the Landfill Tax Credits within the area of the London Borough of Merton. The DEED is valid unitl 31 March 2001.

In 1997-98 £357,280 (including the 10 per cent) was paid to Groundwork Merton and in 1998-99 £387,747.

Merton Council and Groundwork Merton have a relationship that goes beyond the provision of funding by the local authority to Groundwork. It is our understanding that there is a corporate relationship between the two as Groundwork carries out work for the local authority on a regular basis.

We draw the attention of the Minister of State and the Select Committee to the statement by ENTRUST,

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Western Riverside Environmental Fund

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The Fund is managed by Groundwork on behalf of the Authority. There is no doubt that monies from the Fund have been, and will be, used for projects that make a valuable contribution to communities in the four Boroughs making up the Authority.

However, the Western Riverside Environmental Fund highlights the issue of transparency and control together with the refusal of ENTRUST to accept there is a breach of the Landfill Tax Regulations wherever such alleged breaches impinge upon the influence and control of Landfill Tax Credit expenditure by local authorities or landfill operators.

Essentially, the Fund is controlled by a Steering Group composed of four Councillors (one from each of the Councils involved in the Waste Authority), a representative of each of the landfill operators—Cory Environmental and Cleanaway Ltd, the General Manager of the Western Riverside Waste Authority and the Groundwork Regional Director.

There is an "independent" Chair of the Group, a solicitor.

We recommend the Select Committee investigate the use of Landfill Tax Credits by Local Authorities and the control exerted by Local Authorities over Environmental Bodies.

We further suggest that the Committee examine ways in which Local Authorities can be fully involved in the Landfill Tax Credit Scheme but in a transparent and accountable manner.

We urge the Audit Commission to investigate the role of Local Authorities in relation to landfill operators, the legality of imposing contractual obligations on waste operators in relation to the availability of Landfill Tax Credits, and the replacement of committed expenditure by Landfill Tax Credits.

We call upon HM Customs and Excise to investigate the actions of ENTRUST in approving Local Authority involvement in the Landfill Tax Credit Scheme in a manner conflicting with the Landfill Tax Regulations.

THE USE OF LANDFILL TAX CREDITS OR PROVISION OF "THIRD PARTY FUNDING" BY QUANGOS, GOVERNMENT AGENCIES, GOVERNMENT FUNDED BODIES, AND COMPANIES EXTERNAL TO THE WASTE INDUSTRY

Environment Agency

Based upon our understanding of the Environment Agency as the regulatory body for the waste industry, we expected to find it working at arms length with landfill operators, particularly in relation to funding issues such as the Landfill Tax Credit Scheme. It was therefore with an element of surprise that we discovered this not to be the case.

The Agency, in co-operation with ESART, jointly funded an ENTRUST approved project to the value of £200,000[159].

It is recognised that the nature of the project is of value—a pilot trial of the UK waste classification system.

The Select Committee is aware of controversy surrounding the life-cycle assessment tool—Wisard—developed by the Agency. Recommendations concerning this computer software were made in June 1998[160].

We were therefore rather surprised to find that an Environmental Body, CORDAH Research (part of a commercial company) had been provided with Landfill Tax Credits, approved by ENTRUST, to carry out an evaluation of Wisard.[161] This means that a landfill operator made Tax Credits available to evaluate the work of the regulatory body responsible for the waste industry in the UK.

We draw the attention of the Minister and the Select Committee to the later section on London Waste Action and the role of the Environment Agency in making funds available to this EB.

The Agency also sits on the Boards of a number of Environmental Bodies established by landfill operators, one example being the Cleanaway Havering Riverside Trust[162].

The Select Committee is invited to consider the potential implications of Landfill Tax Credits being used by the Agency responsible for the regulation of the waste industry and the participation of the Environment Agency in Environmental Bodies established by landfill operators.

We also suggest to the Select Committee that the use of Landfill Tax Credits, made available by the waste industry, to evaluate the work of the Environmental Agency creates potential conflicts of interest that are unable to be reconciled under the present Landfill Tax Credit Scheme.

British Waterways Plc.

This company, totally government owned, had received £1,664,225 in contributions and £70,120 in transfers from EBs as of April 1999[163].

The company had completed, or was implementing, 50 "Landfill Tax projects" by Autumn 1999[164].

In January 1998 ENTRUST had approved 64 British Waterways Projects[165].

We are aware of Tax Credits having been made available by Biffaward (£10,060),[166] WREN (£10,000), ICI Chlor Chemicals (£36,000), Smiths & Sons (Bletchington) Ltd (£18,000), Tarmac (£100,000), Biffaward (a further £60,000), Rugby Cement (£23,000), and Hemmings (£40,000)[167].

According to "Landfill Credit That!" British Waterways has a "Landfill Funding Team" of eight people.

Mr Brian Donohoe MP raised the issue of British Waterways during the proceedings of the Select Committee Inquiry into the Operation of the Landfill Tax.[168]

It is worth noting the comments by Lord Cranbrook in response to questions as to why public money should be given to a private company that will profit from it,

"The environmental body account had to be a not for profit making account and all the money that goes into an environmental body account in such a way as British Waterways, which is an enrolled environmental body, has to be scrutinised by us, has to be absolutely separate and has to be self-contained within that."

Are the eight British Waterways staff employed by the Environmental Body or are they subject to employment contracts of British Waterways?

Does an independent Board or the company determine the policies of the EB?

Is money spent on projects that were already determined by British Waterways or new initiatives determined by the Environmental Body?

Is it our belief that such Bodies were not envisaged under the original regulations.

British Waterways is expected to receive £59 million from the DETR during the present financial year[169].

In a telephone conversation with The Guardian British Waterways Plc explained that their team of eight people are employees of the company with the responsibility for fundraising from a variety of sources. It was also stated that the Environmental Body was the same as any other department of British Waterways other than the fact that funds raised were not used for statutory responsibilities.

London Waste Action (LWA).

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LWA was founded by London First and the Association of London Government with the support of the Government Office for London. London Waste Action is an Environmental body. It has a Board of six directors—Councillor Lord Harris (Chair), the Association of London Government (Councillor Len Duvall), London First (Lord Sheppard and Stephen O'Brien), Cleanaway (Paul Smith replaced Lord Sheppard on 21 December 1998), the Environment Agency (Simon Read), and Wastewatch (Ray Georgeson)[171]

An informal meeting was held with Colin Roberts, Chief Executive of LWA, on 22 June 1999. The reason for the discussion was primarily to discuss LWA work on the development of a waste strategy for London but questions were also raised as to our awareness (based upon common knowledge) that LWA had approached a number of landfill operators for Landfill Tax Credits but was having difficulty in obtaining the "10 per cent" contribution from either a third party or the donor company.

LWA had received Landfill Tax Credits from Shanks and the company had paid the 10 per cent. Colin Roberts explained that an application had been made to Cleanaway for £120,000 but the company insisted upon the 10 per cent from a third party. A request had been put to the Environment Agency for the third party donation but the DETR had ruled against such a payment. Discussions then took place with the Managing Director of Cleanaway. Money, originating from the Environment Agency but already in the LWA coffers, was used by "laundering" (Colin Robert's words) it through London First to Cleanaway. During a second discussion the LWA Chief Executive denied his original words.

In a statement to The Guardian London Waste Action Chief Executive, Colin Roberts, expressed support for public funds being used to provide the 10 per cent third party funding and said he saw nothing improper in using such funds.

Our concerns, drawn to the attention of the Select Committee, are centred upon the "laundering" of public funds to provide third party funding. We would also urge the Committee to consider the implications of one or two companies, to the exclusion of others, being centrally involved in the formulation of a waste strategy with major contractual implications for the future Mayor of London and the GLA. We also highlight the actions of the Environment Agency, the regulatory body for the waste industry, as being in conflict with its statutory responsibilities.

We recommend HM Customs and Excise and the National Audit Office to investigate the use of Landfill Tax Credits and, particularly, the source and use of third party funding.

We draw the attention of the Minister and the Select Committee to a number of companies that have accessed Landfill Tax Credits. They have done so within the Landfill Tax Regulations and there is no suggestion whatsoever that the companies have been involved in any improper behaviour in relation to the Landfill Tax Credit Scheme. We do suggest that the provision of such funding is not within the intended spirit of the first "Green Tax" in the UK.

The Building Research Establishment (BRE)

This organisation, an organisation with 300 research staff[172], established an Environmental Body—BRE Waste and Environment. It has at least 21 approved projects with funding of £93,330 from Biffaward[173] (We are unaware of amounts, or sources, of other Landfill Tax Credits). BRE was transferred to the private sector in 1997.

English Heritage

This government funded body has established its own Environmental Body under the name, "Historic Buildings and Monuments Commission for England."

As of March 2000[174] English Heritage had seven approved projects, all of which appeared to fall within the organisation's mainstream work.

English Partnerships

English Partnerships (EP) is a Non-Departmental Public Body—the Urban Regeneration Agency for England.

EP set up a separate charitable company, the English Environmental Fund (EEF) established to access Landfill Tax Credits.

We understand that English Partnerships was prevented from providing 10 per cent third party funding to other Environmental Bodies by the DETR and therefore set up its own EB. The Fund is a partnership between English Partnerships, Groundwork, Sustrans, RSNC, the National Urban Forestry Unit and the Institute of Waste Management. We understand civil servants agreed that £2 million of public money could be used for the "10 per cent" but this has not been drawn upon due to failures in accessing Landfill Tax Credits.

This NDPB has taken out insurance against the misuse of Landfill Tax Credits. It states,

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Is this an appropriate area of expenditure for public funds?

The Guide goes on to state,

"The 10 per cent reimbursement transaction will always be enacted outside the Fund, to ensure that the fund is working within the Regulations for EBs."

English Partnerships received approximately £225.5 million during the financial year 1999-2000.[176]

WRc Plc

WRc Waste Research Limited is the Environmental Body established by WRc Plc. This company undertakes a wide range of applied waste management research and consultancy work for industry and government. The company has offices in Spain, Hungary, Belgium and the USA. It is a well-established commercial operation.

Papers circulated by WRc Waste Research Ltd, with the added bonus of a freepost reply envelope, state that,

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The Environmental Body, enrolled by ENTRUST is,

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CORDAH Environmental Management Consultants

This company is a member of the BMT Group of companies. Its corporate profile states,

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CORDAH Environmental Management Consultants set up their own Environmental Body, CORDAH Research, enrolled by ENTRUST. As of March 2000, this EB had 15 approved projects[180] including an assessment of "Wisard" and the monitoring of the Canford Environmental Ltd access road.

Going for Green and the Tidy Britain Group

The Tidy Britain Group is primarily funded by government, receiving £2.5 million under the DETR Single Grant Programme[181] (1997-98). The organisation and the DETR were criticised in 1999 for funding activities "outside the statutory authority under which the grant had been paid."[182]

The Tidy Britain Group spends more on fundraising than any other charity in Britain, defined by fundraising costs as a percentage of donated income—98 per cent.[183]

Total income for the year ended 31 March 1997[184] was £4,464,000 which includes £2,767,000 from the DETR. The Group also have a trading company, ERCU Ltd, that gives its profits to the Tidy Britain Group—£56,000 in 1997.

In 1998 the Group had an income of £7,625,333[185] which includes £2,567,000 from the DETR and £171,178 from ERCU.

A company, Environmental Campaigns Limited (ENCAMS) was established in January 1998 through which DETR funds are received for both Tidy Britain Group and Going for Green.

The accounts make no specific reference to Landfill Tax Credits and it is impossible to identify to what extent this private company and registered charity benefited through the Landfill Tax Credit Scheme. The Annual Report for 1997-98 noted that,

"Funding for Eco-Schools came this year through the Landfill Tax rebate scheme. Sita Environmental Trust has provided its generous support, with the Coca-Cola Youth Foundation acting as the third party sponsor." Cleanaway is also noted in the Report as a "Partner" as is Onyx.

Professor Graham Ashworth, Chairman and Chief Executive of Going for Green, stated,

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However, in studying the detailed accounts of Going for Green total income is given as £4,764,337 of which £3,002,225 is "benefits in Kind" and £1,500,000 a grant from the DETR[187]. There is no record of the £1 million from Landfill Tax Credits.

We do not in any way question the probity of Going for Green but are perplexed at the impossibility of establishing an audit trail for the expenditure of such a large sum of money from the public purse. ENTRUST refuse to provide information on funding from landfill operators to Environmental Bodies that in any way identifies the donor or the recipient. It is therefore necessary to study many landfill operators' reports and annual reports of Environmental Bodies to obtain any accurate and detailed information on the finances of bodies such as Going for Green and Tidy Britain Group arising from the Landfill Tax Credit Scheme.

Groundwork

Groundwork receives around £6.6 million per annum from the DETR[188] but in April 1999, as a result of a report from the Comptroller and Auditor General, the DETR had decided to bring forward a financial management and policy review of the organisation.

The Chairman of Groundwork states that, "The introduction of Landfill Tax offers significant potential as a means of adding value to Groundwork by ways of partnerships with landfill operators and Local Authorities. An example is the partnership with UK Waste which will bring in £2 million of new funding to our regeneration work."[189]

The accounts for 1996-97 show an income of £11,270,437 of which £7,272,164 is from the DETR, £517,843 from "London/SRB" and £32,000 from MAFF. As with Going for Green and the Tidy Britain Group, details of Landfill Tax Credit revenue are not identified.

In the Annual Report for the year ended 31 March 1998 the Chairman reported that,

"In July the Deputy Prime Minister announced that Groundwork's grant will increase by more than £3 million over the next three years."

The Director's report for the year ended 31 March 1998 identifies £6,336,041 as grant income from the DETR and a total of £6,675,000 secured for 1998-99. The report states,

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The total income for Groundwork for the year ended 31 March 1998 was £14,311,861 of which £6,336,041 was from the DETR and £2,102,168 from "London/SRB" but, again, Landfill Tax Credit income is not specifically identified.

As with Going for Green and Tidy Britain Group we are in no way questioning the probity of Groundwork but with such potentially large sums of public money involved we feel it appropriate for sources to be identified and the provision of an audit trail easily followed.

On the basis of studying Biffaward reports we identified £27,500 paid to the Groundwork National office in 1997-98 and a total of £262,310 paid to various regional offices[191]. These are payments made available by just one landfill operator.

We recommend that the Select Committee investigate Landfill Tax Credits benefiting well established commercial companies, government agencies and bodies primarily dependent upon government funding for their activities.

We urge the National Audit Office to investigate the use of Landfill Tax Credits by commercial companies.

We emphasise that it is perfectly legal and in no way outside of the regulations to provide Landfill Tax Credits to a well funded charity but we felt that it appropriate to note the position of the National Trust:

The National Trust

The National Trust is the wealthiest voluntary organisation in the UK with an annual income of £166.2 million.[192]

The National Trust is an Environmental Body. We are unaware of the total funds received by the Trust but it has obtained £33,600 from Biffaward[193] and has a total of 93 approved projects[194] together with a further three run by the National Trust for Scotland.

AWARENESS OF MINISTERS AND THE ROLE OF CIVIL SERVANTS—A CAUSE FOR CONCERN

In examining the response of the Government to the Committee's Report into the Operation of the Landfill Tax we were particularly surprised to read the following:

"In relation to Waste Management Licensing exemptions and planning controls on developments involving landfilling and landscaping that;

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We draw the attention of the Select Committee to our evidence related to Hertfordshire, Northumberland and Manchester. We particularly emphasise the lack of support received by local authorities from various national agencies having responsibility in the area of licensing exemptions and planning control.

In response to recommendations from the Select Committee concerning transparency and accountability together with the need to avoid potential abuse of the Landfill Tax Credit Scheme that;

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We concur with the Government response but, in agreeing with the recommendations of the Select Committee, we would highlight the domination of ENTRUST by sections of the waste industry.

In response to the proposal that there be a public register of third party contributions that;

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In the interests of transparency and accountability and to ensure that third party funding is provided in an appropriate manner, we would strongly support the proposal from the Select Committee that there be a public register.

In response to the Committee's suggestion as to the need for a clear definition of "benefit" within the context of landfill operators gaining benefit from the Landfill Tax Credit Scheme that;

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We hope that our submission clearly identifies the benefits currently being enjoyed by sections of the waste industry. ENTRUST are aware of these benefits.

We agree with the Select Committee that a clear definition of benefit is required but, more importantly, a regulatory body that ensures benefits are not in excess of those allowed by the Landfill Tax Regulations.

During wide ranging discussions with those involved in attempting to use Landfill Tax Credits to make a positive contribution to the Government's strategy on sustainability, we have identified a commonly held view that, despite the commitment of Ministers, the relationship between civil servants and the waste industry thwarts the implementation of effective policy initiatives.

Landfill Tax and the Landfill Tax Credit Scheme provide a wonderful opportunity to reduce landfill and expand reduction, re-use and recycling of waste but those presently responsible for implementation of policy in both the DETR and the private sector are, in the main, lacking in either ability or commitment to achieve such ends.

There is a perception, whether valid or not is a matter for the Minister of State and the Select Committee, that the Landfill Tax Credit Scheme has been distorted by civil servants and the waste industry despite the genuine commitment of Ministers to the excellent principles behind the scheme.

LANDFILL TAX EVASION

Bricket Wood, Hertfordshire

Bricket Wood "Golf Course" is a 23.5 hectare site at the junction of the M25, A405 and Lye Lane in Hertfordshire. The site is within the Green Belt.

The use of this site has led to evasion of Landfill Tax and environmental degradation. The history of the site, far from being unique, appears to mirror similar "developments" elsewhere in the UK and highlights the inability of statutory bodies and local government—Environment Agency, HM Customs & Excise, local planning authorities and Environmental Health Officers—to act in a co-ordinated manner. It further highlights the apparent refusal of the Courts to take effective action in support of a planning authority, Hertfordshire County Council, despite the commitment of substantial resources and energy to prevent illegal activity.

In February 1995 the owners of the site, Burston Nurseries Ltd, obtained planning permission (on appeal) for a nine-hole golf course. This was a District Council responsibility.

Planning permission (on a second appeal) had been granted for the use of 41,250 cubic metres of inert waste for bunding to shield the golf course from the M25 in January 1994. This was a County Council responsibility.

The site was sold, for what is understood to be around £400,000, in 1997. The new owner, Intrasales Ltd, contracted Ironside Leisure Developments to carry out work on the site. Mr Harvey Gibson, an undischarged bankrupt[199] owns Ironside Leisure Developments.

Mr Michael Hancock, owner of Intrasales, and Mr Harvey Gibson work together. The co-operation between the two is shown by the fact that "Michael Hancock admitted in an affidavit dated 18 January 1999 that Intrasales have been receiving £20 per lorry load of waste."[200]

In October 1997 work commenced on the transfer of inert waste to the site. By January 1998 the Council was aware of excess waste being dumped and in June 1998 a survey identified 132,700 cubic metres as opposed to the 41,250 allowed under planning consent.

The level of illegal activity can be judged by the fact that in one hour on 12 November 1997 20 HGVs were observed entering the site.[201]

In July 1998 the County Council served two Enforcement Notices on Intrasales Ltd, Ironside Leisure Developments, and the mortgagee, NatWest Bank. Intrasales Ltd appealed and a public inquiry was held in January 1999. In March 1999 it was decided that all excess material must be removed from the site within six months. The amount of waste deposited at the site had risen to 223,000 cubic metres as of December 1998.

During the period from the serving of Enforcement Notices, despite the obtaining of a High Court Injunction by the County Council in September 1998, the import of waste to the site continued.

During observation of the site in September 1998, a person claiming to be the site owner threatened one of the investigators and told him "it would not be healthy for him to come back"[202]. On this day alone 70 lorry movements were noted between 7.30am and 4pm.[203]

The nature of some of the waste dumped can be identified from a report received by the County Council from a haulier that had been tipping at Bricket Wood.

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The County Council returned to the High Court in January 1999 and, following a number of adjournments, Harvey Gibson was found guilty of contempt of Court in March 1998. He received a sentence of 28 days, suspended for two years.

Ironside Leisure Developments went into liquidation. For two/three months no further waste was imported but the excess was not removed. Boreholes were dug in order to identify minerals for extraction.

Extraction of hoggin, sand and topsoil started in March 1999. The County Council served further Enforcement Notices to prevent this extraction in June 1999 on Mr Gibson, Intrasales Ltd and Ironside Haulage, the company that appears to have taken over the work of Ironside Leisure Developments.

Surveillance reports for periods between January and November 1999 expose extensive movement of waste on to the site and the export of minerals. Typical activity includes 56 vehicles on 5 February and 35 on 17 August with one tipper truck making 12 journeys. On 12 and 16 November minerals were extracted form the Bricket Wood site and deposited at the Royal Ordinance site at Waltham Abbey, Essex[205]. During the surveillance operation in November 1999, five vehicles were identified as depositing material at the Royal Ordinance site at Waltham Abbey.

The County Council returned to the High Court in October 1999 and despite Harvey Gibson's suspended sentence he was only fined £1,000 for further contempt of Court.

On 15 October 1999 St Albans District Council were informed by solicitors acting for Intrasales that "they intend to import approximately 200 loads of as dug topsoil" as "a previously employed contractor exported a substantial quantity of top soil from the site without our clients consent or approval" [206]

Within 10 days the Council were informed the soil was not available and in November Mr Hancock stated he was selling the site to Harvey Gibson for a nominal sum with the new owner being Millennium Home and Developments Ltd[207].

The County Council served further High Court Injunctions on Ironside Haulage, Intrasales, Messrs Gibson and Hancock on 20 and 21 December 1999. A High Court Hearing was held on 12 January 2000.

Mr Harvey Gibson claims he is losing £26,000 profit per week[208] as a result of the Injunctions preventing him from transferring topsoil from the Bricket Wood site to the Royal Ordinance site at Waltham Abbey. The overall profits from this blatant operation are estimated at well in excess of £1 million.

St Stephen Parish Council raised evasion of Landfill Tax by those tipping on the site as a concern in February 1998[209], Hertfordshire County Council has pursued Michael Hancock and Harvey Gibson with vigour for more than two years, injunctions have been served and ignored. The evasion of Landfill Tax, the environmental damage, and the disruption of a local community continues.

In a discussion with The Guardian, Planning and Enforcement Officers from Hertfordshire County Council welcomed our investigation and explained that further injunctions have been successfully served on Mr Hancock and Mr Gibson to require them to remove waste from the Brickett Wood site and negotiations are in hand to ensure compliance.

A statement to The Guardian, issued on behalf of Mr Gibson said,

"The material deposited on to the land was excavated earth and aggregate imported on to the site for construction purposes. As far as Mr Gibson is aware, the council did not carry out a survey on the land at the commencement of the development and therefore cannot be in a position to quantify the amount that was deposited."

Golf courses galore!

Brickett Wood is only one example of the ever increasing number of golf courses that require the import of waste for "landscaping". Our enquiries have uncovered a number of cases that we suggest would be worthy of investigation by the Select Committee, with urgent appropriate action by the Environment Agency and HM Customs & Excise. These include:

— Hincksey Heights, Oxfordshire

— Kilworth Springs, Leicestershire

— Lofthouse Hill, Wakefield

— Woodhall Hills, Leeds

— Bootle, Sefton

— Mollington, Cheshire

— Capenhurst, Cheshire

— Calverley Lane, Leeds

— Dick Lane, Leeds

— Hulme Walfield, Cheshire

— Municipal Course (now privatised), Sunderland

— Hankerlow, Crewe

— Waterstock, Oxfordshire

— Potters Crouch, St Albans, Hertfordshire

We have also come across sites not described as "golf courses" but used in a similar manner:

— Finningley go-kart circuit, Doncaster

— Motor Industry Research association, Leicestershire

— Widmore Fen clay pigeon shooting, Lincolnshire

— A private reservoir for a farming company, Lincolnshire

— Banbury Cricket Club, Oxfordshire

— Sywell Gun Club, Northamptonshire

We have also been made aware of the dumping of inert waste on agricultural land throughout the country. Examples include:

— Three sites in Barnstaple, North Devon

— Alvanley, Cheshire

— Alderley Edge, Cheshire

— Up to 120 suspected illegal sites in Cornwall.

We find it surprising that, although the leisure industry accepts there was over expansion of leisure centre and golf course development in the early 1990s, an examination of local authority planning applications is likely to show an upsurge in proposals for golf courses and similar developments since 1997.

It is believed that "3 million tonnes of material which would otherwise have come to properly controlled and regulated landfill sites have been disposed of as bunding or land raising material at golf courses, retail development parks, sports facilities and even private residential developments"[210]

Such a major diversion of material has serious financial consequences for those sections of the waste industry capable of dealing with waste in a properly regulated manner.

We have been informed by the Environment Agency[211] that they are currently studying an Agency commissioned report, produced by Ecotec, that identifies 32,000 "exempt" sites in the UK.

Valley View Farm, South Oxley, Hertfordshire

Early in 1999 a tenant farmer with a grazing licence leased land at Valley View Farm. The events following the crude practices employed by the "farmer" to evade payment of Landfill Tax include the intended prosecution of 240 hauliers by the Environment Agency and the arrest of the "farmer" after being found hiding under a bed by the police.

Valley View Farm was leased to a Dennis Boggins in March 1999. By April, lorries were arriving at the site to deposit waste and remove topsoil. The land was not being used for grazing purposes and "topsoil had been stripped from an area of the site and waste, in the form of inert soils containing rubble, was being imported and deposited."[212]

"Stop Notices" were served but during a visit by Hertfordshire County Council Officers in June it was found that "Site Notices previously attached to the land, informing that a Stop Notice was in effect on the land, had been removed" and imported waste included "a large amount of tipped material on site, including builders' waste comprising metals, plastics, paper and rubble."[213]

It is estimated that 30,000 tonnes of waste has been dumped on the site, in places 30 or 49 feet deep. Waste identified includes hospital waste, asbestos and even artificial limbs. The local watercourse is likely to be polluted and there is a build up of methane that could eventually pose a danger to local houses.[214]

The County Council obtained an injunction in June 1999 but this had to be followed by successful Contempt of Court proceedings in July.

Dumplington, Trafford Park, Manchester

In November 1997 analysis of soils to be removed from the Great Northern Warehouse site in Manchester showed contamination at a level requiring removal to a licensed landfill site.[215]

The analysis results are available for scrutiny by the Minister and the Select Committee. Although there are various guidance documents on acceptable levels of contamination (GLC/Kelly, ICRCL, Dutch Guideline Values), the levels of contamination, in this instance, are as determined by the Environment Agency: Interim Guidance on the Disposal of "contaminated Soils."

Biffa Waste Services Ltd, a reputable landfill operator with a licensed site in the Manchester area, placed a bid for the contract to remove the contaminated waste.

The site, in the centre of Manchester, had accumulated contaminated waste over many years and the analysis of the waste confirmed what was already common knowledge. The removal and containment of such waste requires specialist facilities, adequate resources, and proper health and safety controls. Biffa, as a leading company in this sphere of work, were surprised not to win the contract but were even more surprised that none of their major competitors did either.

Biffa therefore determined to identify the company that had obtained the contract. In the words of Peter Jones, a Biffa Director,

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It was found that a local company, known in the vernacular as a "muckshifter", by the name of Manchester Tippers Ltd was removing this contaminated waste. The contaminated waste was being taken to Trafford Park at a site, adjacent to the Trafford Centre, where a golf driving range is under construction. The driving range is also next to a watercourse. It is understood that the contract was agreed at a cost 80 per cent lower than the costs estimated as valid by Biffa.

Biffa informed the Environment Agency and wrote, placing on record the levels of contamination.[217]

A reply from the Agency stated,

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During the period between the information being passed to the Agency and their response, at least 9,902 cubic metres[219] of contaminated waste was moved from the Great Northern Warehouse site to Dumplington.

It should be noted that the documents, Controlled Waste Transfer Notes, from which we obtained information as to the minimum level of contaminated waste deposited at Dumplington, are intended to provide evidence to the Environment Agency as to from where and to where contaminated waste travels. At a charge of £18 per Note the Agency is provided with an income of approximately £20 million per year so that waste can be traced and controlled.

The Environment Agency, despite being informed of the nature of the waste prior to its removal from the Great Northern Warehouse Site, responded to questions about knowledge of the dumping at Trafford Park as follows.[220]

Q: Did you know that this was going into the ground at Trafford Park?

A: Not until later.

Q: Why not?

A: We don't really police those sites, we've got no money to do it.

Q: But contaminated waste went into that site and you didn't know.

A: We knew later and we investigated it.

Q: But for a month, this material, which exceeded your own limits, went into the ground at Trafford Park and you had no idea. That can't be right.

A: That's true.

Q: They could have put anything in there. It could have been pure arsenic and you wouldn't have had any idea to this day.

A: That's true.

In a further description of circumstances surrounding the transfer of this waste, the Environment Agency stated,

"You asked about waste being deposited on the site of construction of a golf driving range at the Trafford Centre. In this case, Playgolf Holdings Ltd notified the Agency of its intention to deposit waste on the driving range site under Schedule 3, paragraph 19 of the regulations which essentially relates to the re-use of construction material in other construction work" and further that,

"Information on the source location of waste is not required by the Agency (except in the specific regime which applies to movements/disposal of "Special" waste)" with the further comment,

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In a statement to Dispatches on 7 March 2000, Manchester Tippers Ltd said they were not available for further comment but in a telephone conversation with The Guardian Mr John Walsh, representing the company, claimed that the waste dumped at the site adjacent to the Trafford Centre was not contaminated. He based his claim on waste analysis commissioned by Playgolf (Holdings) Ltd, the developers of the site at which the waste was deposited.

Morrison's, the company demolishing the site, and Playgolf, the company developing the range, said they acted properly when the waste was moved.

"When it reached Trafford, we carried out twice weekly tests, which suggested contamination below the Agency limits. We are satisfied we acted properly."

We urge the Select Committee to consider a situation whereby the emphasis of an "explanation" from the Environment Agency, as to whether contaminated waste was dumped on a site next to the Trafford Centre, centres on reasons why important tasks cannot be carried out rather than how effective action could be implemented.

We particularly draw the attention of the Committee to comments by the Environment Agency that their inability to carry out their statutory responsibilities arises from lack of funds. The income to the Agency from Controlled Waste Transfer Notes alone is more than £20 million per annum and it is our understanding, as well as many people we have spoken to in the waste industry, that funding is not the issue. It is a matter of expertise, technical ability and political will.

Lynemouth Bay, Northumberland

The Northumberland Coast is an area of high environmental value for both recreation and conservation. Lynemouth Bay is situated approximately 3.5 kilometres north east of Ashington. It is south of the Cresswell SSSI and north of Beacon Point, which forms part of the Newbiggin Shore SSSI.

A local haulage contractor, Victor Thompson, has a licence, granted by the Crown Estate Commissioners to collect "sea coal" from the beach and an agreement, that originated with British Coal but carried on with RJB Mining, to collect colliery washings from a flume taking coal materials from the local pit to the sea. The company owning the land upon which this activity takes place is also a company belonging to Mr Victor Thompson—Mouldshaugh Farm Ltd.

"In recent years significant illegal activities have taken place at the site which have effected both the amenity value of the area and caused pollution. Considerable quantities of materials comprising of househole, commercial and industrial waste have been deposited illegally at the location. Many of the incidents reported to the Environment Agency have involved wastes which could not be traced to any original source.[222]

To facilitate the movement of vehicles, Victor Thompson has imported a considerable amount of demolition rubble to the site. 25 to 30 wagons of waste per day are often deposited in the Bay[223], hundreds of tonnes per week.

Mr Thompson insists he is building a road to ensure his coal slurry business can survive. In April 1998 the Courts agreed that he had the right to do this and accepted Mr Thompson's argument that he did not dump waste on the site.

Professor John Knapton, an expert on road construction, examined the site.

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Although Mr Thompson has been building his road for a number of years, most of it is washed away to sea each evening thereby requiring more waste to be dumped, free of Landfill Tax, the following day.

In response to a petition of 500 letters sent to the DETR, about the dumping of waste, in December 1997, local people were told,

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The Environment Agency tried to justify their inaction by writing,

"Certain activities involving controlled waste are exempt from Waste Management Licensing under Regulation 17. In particular Paragraph 19(1) of Schedule 3 states:—

The storage on a site of waste which arises from demolition or construction work or tunnelling or other excavations or which consist of ash, slag, clinker, rock, wood or gypsum, if

(a) the waste in question is suitable for use for the purpose of relevant work which will be carried on at the site; and

(b) in the case of waste, which is not produced on the site, it is not stored therefore longer than three months before relevant work starts.

Sub section (4) states:—

In this paragraph, "relevant work" means construction work, including the deposit of waste on land in connection with—

(a) the provision of recreational facilities on that land; or

(b) the construction, maintenance or improvement of a building, highway, railway, airport, dock or other transport facility on that land"

The letter goes on to say that,

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The Agency wrote again saying,

"I can confirm that demolition wastes deposited at the site for the purposes of construction, repair or maintenance of roadways or other transport facilities (with or without planning permission) is permitted under the above legislation [EPA 1990 Waste Management Licensing Regulations 1994]. This does not preclude any other regulatory body taking enforcement action under their relevant legislation."

In relation to mining waste, the letter goes on,

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Local people continue to be faced with numerous excuses (with appropriate back up of quotes from regulations) as to why action cannot be taken. The Courts refuse to act and co-ordination of multi-agency activity appears to be non-existent. The environmental degradation continues and Northumberland County Council will now be using up to £2 million of European and English Partnership funds to purchase the land and carry out decontamination of the site.

The irony of this situation is that it may be Landfill Tax Credits that are used by English Partnerships to fund the remediation of the site.

We recommend that a Task Force be established to investigate avoidance of Landfill Tax and that the Minister of State and the Select Committee consider ways in which this could be implemented.

It is our understanding that sufficient powers exist for non-payment of Landfill Tax and the associated environmental degradation to be reduced if not eliminated but that effective co-operation needs to be established between the statutory bodies involved.

We highlight, in particular, the need for HM Customs and Excise to work with the Environment Agency, local government Planning Officers and local Environmental Health Officers for action to be meaningful.

We must also note a concern, made clear to our investigation on numerous occasions, that the Environment Agency appears to be lacking in technical expertise and commitment, rather than financial resources, when dealing with the waste industry.

DISTORTIONS TO THE GOVERNMENT WASTE STRATEGY

It has been made clear on numerous occasions that the Government identifies increased recycling and composting as central to its waste strategy. Obviously this is within the context of the waste hierarchy with the greatest emphasis being on reduction and re-use as part of an integrated approach to waste management.

"A way with waste, a draft waste strategy for England and Wales" is quite clear in stating, "The Government reiterates its support for the waste hierarchy, within which recycling and composting should be considered before recovery of energy from waste"[228].

It is not within the scope of our submission to the Minister and the Select Committee to comment upon the fierce debate concerning incineration but we understand that this aspect of waste management is below the options of reduction, re-use and recycling within the waste hierarchy.

An indication of the contribution required to be made by the Landfill Tax Credit Scheme to the Government's waste strategy was highlighted by Chris Mullin MP, Under Secretary of State for the Environment,

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We would add the simple fact that for the first two years of the present Government, during which time the draft waste strategy for the UK was being discussed, the USA increased its national recycling/composting industry by an extra 26.3 million tonnes.[230] This is an amount equal to the entire UK national household wastestream. It should also be noted that in the USA less waste was sent to landfill and incineration in 1996 than in 1984.

Despite changes to the regulations now being in force, ENTRUST has not added a further category to those objectives required to be covered in an Environmental Body's constitution. No encouragement is provided to those Bodies seeking approval for recycling projects and such activity is required by ENTRUST to fall under Category (c) of the regulations dealing with research and development.

Whilst supporting the "maintenance, repair or restoration of a building or other structure which is a place of religious worship[231] we are rather surprised to find such an objective specified within the Landfill Tax Credit Scheme when recycling, for example, is not.

By allowing the waste industry, particularly trade associations, such a dominant role in the formulation and implementation of the Landfill Tax Regulations, the potential expenditure of £100 million per annum is doing little to contribute to government objectives.

The dangers posed to the Government's waste strategy is highlighted by the use of Landfill Tax Credits to popularise incineration or to develop a best practice public relations guide for waste management operators whilst allowing the bulk of £250 million of Tax Credits to remain unspent. This compares with the statement by the Community Recycling Network that,

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In many respects the Landfill Tax Credit Scheme, although successful in relation to a limited number of sustainable development projects, has channelled funds to companies and projects with a vested interest in the production of waste. We specifically refer to the Environmental Services Association and the Energy from Waste Association.

Whilst recognising that Landfill Tax Credits are not, and should not be, solely aimed at projects working to achieve government policy, there is no doubt that overall government strategy should be enriched by the implementation of such a scheme. If this is to be achieved, control of the Scheme must be taken away from the waste industry.

We recognise that the Treasury is committed to the Scheme, but only as long as it is external to the public spending programme. This was highlighted by Ms Patricia Hewitt MP, Economic Secretary to HM Treasury,

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However, as implemented at the present time, the Scheme is being used by local government and government funded agencies to thwart the regulations as they apply to public versus private expenditure and by important sectors of the waste industry to thwart government policy in relation to the development and implementation of an effective waste strategy.

In the interests of "joined-up government" and effective implementation of policy we would suggest a radical re-think involving DETR and the Treasury, as to how the Scheme is taken forward. Such a re-think, has obvious implications for future "green taxes" as well as the Landfill Tax.

Despite uncovering, what appears to us, a horrific situation in relation to certain aspects of the United Kingdom's first "green tax", we also came across examples of good practice and practical initiatives, within the commercial and voluntary sector, that give rise to optimism.

We would appreciate the Minister of State and the Select Committee examining these as well as the examples of abuse referred to earlier in this submission.

INTEGRATED WASTE MANAGEMENT—AN ISLAND OF HOPE!

Our investigation took us to many parts of the UK where we came across many examples of good practice in relation to waste management. One such scheme is the Isle of Wight, the first county to initiate a fully integrated waste management contract. The contract, covering recycling, collection and disposal, is between the Council and Island Waste Services, a wholly owned subsidiary of Biffa Waste Services Ltd.

There are 61,000 households on the Isle of Wight, generating 36,000 tonnes of waste every year. It is estimated that a quarter of this is organic waste, capable of being composted.

Probably the most remarkable element of the Integrated Waste Management Scheme is the compost plant. It is the first of its kind outside of North America and has the potential for handling 60 tonnes a day. Waste buckets have been provided to households and these are collected as part of the normal domestic refuse collection. Organic waste taken to the Civic Amenity Sites is also fed into the compost plant. Organic waste is transformed into compost within 14 days.

In addition to the composting, there is a kerbside newspaper and magazine collection service (to be expanded to include glass and textiles), a glass collection service covering public recycling sites as well as commercial outlets such as pubs and restaurants, a "confidential waste collection", and a programme of education to win people over to the principles of sustainability. There is, obviously, a long way to go but the objective of the scheme is encompassed by "reduce, reuse, recycle."

41 per cent of domestic refuse is already recycled although this does include a small-scale energy from waste plant that is being converted to include maximum resource recovery facilities prior to incineration. This plant provides sufficient power for 500 homes on the island. One of the major achievements of the project is a substantive increase in recycling of materials deposited at Civic Amenity Sites. The aim is to achieve an overall recycling rate of 50 percent by 2001.

The expected lifespan of landfill capacity on the Island has been increased from 12 to 15 years with the aim of zero landfill thereafter.

The major issue of direct concern to our investigation arises from the monitoring of this scheme, the assessment of lessons to be learnt for application elsewhere, and the dissemination of information from any monitoring or assessment exercise.

The Landfill Tax Credit Scheme provides a wonderful opportunity to assess such a scheme as that implemented on the Isle of Wight. But for such an assessment to be valid it must be, and be seen to be, independent of the parties involved. In reality, the funding for the monitoring/assessment of the scheme had to be provided by Biffaward, the scheme organised by the RSNC but funded by Biffa. The Isle of Wight County Council provided the 10 per cent third party funding.

No matter how independent or thorough the assessment of the integrated waste management scheme is, it cannot have the authority of an independently funded assessment. No other landfill operator would fund such a monitoring exercise as if it was seen to be successful there would be a negative commercial effect on the company providing the funding and if the assessment was less than positive it would be seen as bringing commercial benefits to the company involved in making Tax Credits available.

The Landfill Tax Regulations as they presently stand prevent their use in effectively monitoring an integrated waste management scheme such as that on the Isle of Wight.

Although there is room for improvement we also welcome the methodology employed in relation to the use of Landfill Tax allocation in that the body primarily responsible for distribution is the RSNC. It would appear that those projects receiving Landfill Tax Credits are also those envisaged as appropriate in the regulations—The Ventnor Botanic Gardens and the red squirrel.

TRANSPARENT AND ACCOUNTABLE ALLOCATION OF LANDFILL TAX CREDITS— A POSITIVE CONTRIBUTION TO SUSTAINABILITY

Although this submission has, primarily, highlighted manipulation of the Landfill Tax Credit Scheme, and inappropriate work of ENTRUST, we have encountered many examples of good practice in relation to the allocation of funds actually distributed.

One positive contribution to the Landfill Tax Credit Scheme is that of Biffaward, which is run by the RSNC. Although we identify this scheme as positive and an example of good practice, there are certain criticisms we would make, primarily arising from the Landfill Tax Regulations and their interpretation by ENTRUST.

The main reason we were drawn to look at the Biffaward scheme was the transparency of where money is being allocated, the sums actually distributed and the methodology employed in deciding between competing applicants. We are also pleased to see, that although the landfill company does not always provide the 10 per cent funding required to release the Landfill Tax Credits, the percentage and total amount of third party funding is identified in the publicly circulated report on the scheme. It appears that, in most instances, Biffaward also identify 10 per cent contributors. It would be a further positive step forward if all third party funders were identified as a matter of normal procedure.

It is not within the scope of our submission to comment on the merits or deficiencies of particularl projects funded through the Biffaward scheme. In fact certain criticisms made earlier in this submission relate to organisations and projects supported by Biffaward but we are also able to identify projects that capture the essence of the principles behind the Landfill Tax and the Landfill Tax Credit Scheme from the material published by the RSNC and Biffa.

RSNC have provided a selection of material covering a wide range of funded projects that is available for perusal by the Committee if so desired. Rather than look at individual projects, whilst recognising and welcoming the central feature of a number of projects we have examined as being diversion of waste from landfill, we would highlight the following positive aspects of Biffaward:

— A statement by Biffaward that,

"We are seeking to reserve a significant proportion of our funding flows for applications which focus on the sectoral opportunities for sustainable waste management: and that a core assumption is,

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— The use of external assessors to evaluate project applications.

— A standard evaluation procedure drawing upon the experience of DETR grant schemes

— Project progress reports for funded initiatives

— Publication and wide distribution of an annual review of the scheme.

In an interview with The Guardian investigation Michael Singh, Director of Operations at the RSNC, said,

"The legislation which introduced the scheme didn't anticipate the possibility of project duplication nor did it offer guidance with regard to achieving value for money. It assumed an extensive knowledge of grant giving and an understanding of sustainable development issues, which was clearly not apparent in most cases. This doesn't mean that the scheme is no good, but it does mean than that the system is flawed, which is frightening for such a valuable source of funding directed at achieving environmental improvement.

To overcome these deficiencies RSNC and Biffa have worked closely to develop a strategic framework to allocate landfill tax credits. This is reflected in our grant giving criteria which aims to attract projects that contribute directly to achieving the sustainable development indicators identified by the Government as central to achieving a healthier environment."[235]

We recognise the commitment to transparency and accountability as shown by the use of external assessors for a number of applications and the publication of information identifying the projects funded. However, for a scheme to be seen as open, we believe the 50/50 balance of the Board between RSNC and Biffa Waste Services still provides too great an influence for the waste company involved. We would suggest that one representative from the company making the Landfill Tax Credits available is more than adequate for any funding scheme.

A FINAL COMMENT

"The aim of the Trusts initiative is to promote sustainable waste management practices for the future and remedy the consequences of unsustainable practices in the past, Trusts would be non-profit distributing bodies within the private sector. They would be funded from contributions from landfill operators, who would receive a 90 per cent rebate on their contribution from the landfill tax, up to a maximum of 20 per cent of their landfill liability. They would be separate legal entities at arms length from the landfill operators who contribute to them, and controls would be such that contributing landfill operators would not be able to achieve any exclusive commercial advantage from their activities."[236]

If the Landfill Tax Credit Scheme can be brought back to the essence of the principles contained in this statement from the DETR, the changes would mark a significant step forward.

We believe the potential exists to take a much greater step forward and transform the Landfill Tax Credit Scheme into a transparent and accountable funding regime capable of making a major contribution to sustainable waste management in the United Kingdom.

In conclusion we offer a number of suggestions, drawn from comments made to us from people throughout the UK, as to possible changes to the Landfill Tax Credit Scheme that could bring about a new effective regulatory body and a procedure for distributing Tax Credits that contributes to sustainable development, reinforces other government initiatives, offers value for money, and is both transparent and accountable.

We would suggest that the uses to which Landfill Tax Credits are put be limited to:

— Practical projects covering reduction, re-use and recycling

— Educational and training initiatives in relation to sustainable development with an emphasis on waste issues

— Initiatives contributing to the creation of new and stable markets for recyclates

— Remediation of brownfield sites where such remediation does not contribute to an increase in land value benefiting an individual or a private company

— The creation of jobs through the establishment of recycling and re-use initiatives within a perspective of social and economic regeneration at a regional and local level.

An agency dealing with the regulation and distribution of Landfill Tax Credits would have specific objectives with regard to recycling rates, diversion of waste from landfill and the creation of jobs.

The new body responsible for regulation and distribution of Tax Credits, perhaps even based upon the structure developed by ENTRUST, requires the participation of different Divisions from the DETR, the Dti, the Social Exclusion Unit and government departments dealing with regeneration and the New Deal. This does not mean a new bureaucratic labyrinth but it does mean the practical application of joined-up government. There is obviously the need to include, in a central role, the voluntary and community sector and local government together with a process whereby the Scottish Parliament and the Welsh Assembly determine how Tax Credits are accessed in Scotland and Wales.

We suggest that the 10 per cent contribution be abolished but that priority is given to achieving maximum leverage with the flexibility for 100 per cent funding where appropriate.

There would appear to be no difficulty in an independent body dealing with these responsibilities providing that appropriate structures are in place to guarantee adequate financial controls, value for money and transparent and accountable distribution procedures.

A basic structure would consist of a Board of Directors with a series of advisory panels representing parties with an interest in achieving the objectives as outlined above. In the interests of accountability, a formal link with the DETR would be advisable.

Professional auditing at a local, regional and national level linked with effective monitoring and evaluation of funded projects would assist in avoiding the chaos of the present situation. Elementary procedures would include a standardised application for funds, progress reports on funded projects, the availability of information covering decision making and allocation of funds. There is the need to use technical experts to assess the validity and potential of all projects.

An efficient and effective agency demands the collection and dissemination of accurate data on the nature of projects supported, details of recycling rates, landfill use, waste arisings, etc.

A priority of a revamped regulatory and distribution agency, assuming Environmental Bodies were maintained in some form, would be to abolish those EBs currently under the control of vested interests whether they be landfill operators, local authorities or private companies outside of the waste industry.

These final comments are intended as the basis for a wide ranging but urgent discussion and are in no way intended to be prescriptive. They are a collection of principles that have been a dominant feature of pleas for action by those we have consulted during the past twelve months of our investigation.

David Hencke and Steve Parry
The Guardian

Jon Spargo, Head of Landfill Tax Policy Team, HM Customs and Excise, "A Landfill Tax That Works?", 1 December 1999.

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39 Cm 4461. Back

40 Answer to Parliamentary Question 84,214, 18 May 1999. Back

41 Answers to Parliamentary Questions 78,582, 78,555 and 78,556, 30 March 1999. Back

42 Letter from ENTRUST to landfill operators and others, 19 July 1999. Back

43 Richard Sills, Chief Executive ENTRUST, "Bearing Fruit" January 2000. Back

44 Part VII 33. (2). Back

45 ENTRUST "Medial Release", 30.9.99 and 1.10.99. Back

46 Viridor Waste Management Landfill Tax Credit Scheme Review. Back

47 Viridor Waste Management Landfill Tax Credit Scheme Review. Back