REPORT ON THE GUARDIAN DOSSIER ALLEGATIONS
BY RICHARD SILLS, CHIEF EXECUTIVE, ENTRUST
1. The Guardian dossier, published
on 5 May 2000, made a range of observations and allegations about
possible abuse of the Landfill Tax Credit Scheme. ENTRUST submitted
an immediate commentary to HM Customs & Excise, giving details
of those items that
(i) could be refuted directly, and
(ii) needed to be investigated further before
any definitive statements could be made.
2. This paper draws together all ENTRUST's
investigative activities and summarises the findings from that
work. This paper also itemises those allegations that ENTRUST
lacks authority to investigate or to comment upon.
3. ENTRUST has investigated the allegations
as far as it has authority to do so under the landfill tax regulations.
ENTRUST is empowered to access EB documentation only. Where relevant
documentation was held by other organisations, ENTRUST was reliant
on the goodwill and probity of these organisations. During these
investigations, ENTRUST relied on expert advice from appropriately
qualified organisations and individuals on specific topics.
4. While ENTRUST has specifically examined
all of the EBs named in The Guardian dossier, it continues
to monitor all enrolled environmental bodies as a normal part
of its regulatory activities. Scrutiny of the named EBs and all
others will continue.
Canford Environmental Ltd (CEL)
"The Rural Road Trial"Guardian
5. Following thorough review of the project
details provided by CEL, discussions with the local authority,
the consulting engineers involved in the research project and
a site inspection, it has been established that:
(i) The road was until recently a main road,
but has now been by-passed.
(ii) Several other residents and businesses
are located on this road, including farms and a naval munitions
(iii) The experimental section of the road
is less than .5 mile, out of a total length of about four miles.
(iv) The local authority is responsible for
road maintenance, not the contributing landfill operator (LO),
who has no obligation to maintain it.
(v) There is no evidence of an improper relationship
between Canford Environmental Ltd and North Ayrshire Council.
(vi) It is not true that the data sought
from this experiment are already well known and that the work
is merely duplicative.
6. ENTRUST is satisfied that the project
is a valid research exercise which will provide information relevant
to aggregate recycling. An already-published interim report has
provided valuable data about the relative performance of virgin
and recycled aggregates. A 700 metre stretch of road has been
widened as a result of the trial and we accept that this gives
rise to some benefit to users of the road, including the LO, William
Tracey. However, the benefit in terms of reduced journey times
is very small and is shared by all users of this public road.
"Canford Park Sports Pitch" DevelopmentGuardian
7. Also following thorough review of the
project details, including the original and subsequent documentation,
a site inspection and an independent report from the Valuation
Office Agency (VOA), it has been established that:
(i) There are two separate but adjacent developments,
a private one (Canford Park Arena) on land owned by the contributing
LO and a public one (Canford Park Sports Pitch) owned by Poole
(ii) Both developments relate to leisure
facilities (which could be a cause of confusion to The Guardian).
(iii) The funds from Canford Environmental
Ltd have been exclusively applied to the public leisure facilities,
which is on land owned by Poole Council.
(iv) The VOA report makes it clear that ENTRUST's
recommended project management procedure (open, competitive tendering,
etc) was not implemented in fully by Canford Environmental Ltd.
(v) The VOA report confirms that the project
has, despite the absence of tenders, obtained acceptable value-for-money
and that the project documentation is correct in respect of the
ownership of the property.
(vi) There was an infringement of the Construction,
Design and Management Regulations 1994, due to the absence of
a mandatory project health and safety plan.
(vii) There are interlocking directorships
between Canford Environmental Ltd and the private facility development
organisation (which, again, is a possible source of confusion).
8. ENTRUST is satisfied that Canford Environmental
Ltd funds, contributed by the LO, WH White, have been spent exclusively
on a project which is compliant with the Landfill Tax Regulations.
Hence, neither the contributor nor any associated company has
received any benefit from the expenditure of the contribution,
and the facility will, when complete, be available to the public,
as required by the regulations. ENTRUST is disappointed that its
project management advice was not implemented in full but accepts
the expert advice from the Valuation Office Agency that satisfactory
value-for-money was, nevertheless, obtained for the credit scheme.
Cheshire Environmental Services LimitedLand
Reclamation at SandiwayGuardian MemorandumPags 237
9. The implications by The Guardian
is that this environmental body by having share capital is operating
for profit. ENTRUST has examined all records including those held
at Companies House and can confirm that this is a NOT FOR PROFIT
organisation and is compliant with the regulations.
10. This major project, which is approaching
completion, will make seriously contaminated land available for
housing use. The arrangements made between the environmental body
and the landowner, concerning the enhanced value of the remediated
land, comply fully with the agreed interpretation of the regulations.
These arrangements will ensure that the increase in the value
of the site due to the remediation will be paid back into the
scheme and applied to approved objects.
11. The arrangements for open tendering
required by the agreed interpretation of the regulations have
also been met in full by this project. The contracts for haulage
and landfill of the contaminated material removed from the site
were awarded through an open tender process, which was managed
at arms length from the environmental body, by the main contractor
for the works.
12. This project was the first very large
value project and as such underwent extensive and detailed discussion
of the agreements with landowners and remediation contractors,
to assure complete compliance with the regulations and the principles
of the credit scheme. We have reviewed these arrangements again
since publication of The Guardian dossier, and we remain
satisfied that they comply with the regulations.
Viridor Waste ManagementGuardian MemorandumPage
13. The Guardian made no specific
allegation, although its statements could be interpreted as implying
that Viridor has exercised some control over one or more environmental
bodies, to which it has made credit scheme contributions. ENTRUST
has investigated EBs which have received funds from Viridor (and
its predecessor, Haul Waste), and found no evidence of any activities
that infringe the regulations.
Shanks Group & Peterborough City CouncilGuardian
14. The dossier alleges that Shanks obtained
benefit from a "cell recycling" project, which had been
organised by a partnership between Shanks, Valpak and local authorities.
ENTRUST has found no evidence that indicates any infringment of
15. However, it is worth noting that experimental
work, such as this project must comply with rules laid down by
the Environmental Agency, which, inter alia, require such work
to be carried out on a suitably licensed site. It is inevitable,
therefore, that a contributor must host the experiment and in
equity, ought to be compensated for resulting costsat standard
industry rates, less profit. It has been established that Shanks
did not benefit and in fact exceeded their obligations by not
charging for the facilities provided for the project when they
could have done so.
Onyx plc (LO) & Onyx Environmental Trust (EB)Guardian
MemorandumPages 245 and 270
16. The allegation appeared to be that Onyx
Environmental Trust (Onyx ET) had given money to various LAs or
implemented projects that benefited local authorities (Wandsworth,
Hampshire, Windsor, Maidenhead, Three Rivers, Rugby, Telford and
Wrekin, Derbyshire and Buckinghamshire) in areas where either
Onyx plc already operated or it was/would be bidding for waste
management contracts. None of the "projects" nominated
by The Guardian has any identifiable connection with projects
registered or funded by Onyx ET under the credit scheme. Neither
has ENTRUST managed to identify any other registered, funded Onyx
ET project which has any apparent connection with the allegations.
Energy From Waste AssociationGuardian MemorandumPage
17. The allegation was that the environmental
body (the Energy from Waste Foundation) is virtually indistinguishable
from the Association and that the funds supplied from the Foundation
were used for PR or on industry responsibilities.
18. The Energy from Waste Foundation is
a properly constituted and enrolled environmental body. Energy
from waste is a legitimate aspect of sustainable waste management,
indeed it is very positively advocated in the EU documentation.
The argument as to whether or not a report should be described
as "independent" or not, does not invalidate it as a
19. The project relating to the "Practical
effects of North American Recycling" is clearly of interest
to everyone involved in recycling and waste minimisation, whether
or not it is pro- or anti-recycling.
20. The "Practical effects of recycling"
as briefing material for councils and others is a legitimate project.
Devon County Council (DCC)Guardian MemorandumPage
21. The allegation relates to the control
of an EB, the Green House Visitors' Centre, by the DCC and benefits
obtained by the Council which is also a contributor through its
waste disposal service. There are two parts to the response to
(i) ENTRUST has established that there is
no council majority on the board of the EB, although former council
employees and members sit on the board.
(ii) It has also been established that any
benefit obtained by DCC is shared amongst all of the ratepayers
and other constituents of the council, and is not confined to
either the members or direct employees of the council.
22. There is neither a requirement in the
regulations nor power granted to the regulator to preclude former
councillors or council employees being members of an EB board.
The membership of the Green House Visitors' Centre is, therefore,
completely compliant with the regulations.
23. The £62,000 in question has been
spent by the EB on an item which is, arguably, a statutory duty
of the councilhence the alleged benefit to the council.
Although ENTRUST has consistently advocated that EBs avoid spending
their funds in such areas, there is nothing in the regulations
which precludes the use of the money in this way. Hence, the regulations
have not been infringed.
Essex County Council (ECC)Guardian MemorandumPage
24. The allegation is that ECC is using
its power, in new waste disposal bid documents and contractual
arrangements, to require LOs to make their contributions to a
specific, nominated EB (the Essex Environment TrustEET).
The Guardian says that:
"Essex has inserted a special clause in
the 10 year contract it will award to a landfill operator to dispose
of its municipal waste. It requires the operator to make donations
only to the specific environmental body named and set up by the
25. This EB is, therefore, implied to be
under the control of the council and will implement projects at
its behest. Again, there are two elements to the response:
(i) There is nothing in the regulations about
arrangementscontractual or otherwisethat may be
made between councils and landfill operators, and therefore ENTRUST
has no powers to regulate such matters.
(ii) ENTRUST has reviewed the membership
of the board of the EET and it is not under the control of a majority
of council members and/or employees, although (as observed in
other cases), former councillors and council employees may be
members without infringing the regulations.
26. ENTRUST's findings are, therefore, that
it has no power to address or intervene in any Council/LO contractual
matters and that Essex County Council does not control the Essex
ET, within the meaning of the regulations.
Essex County Council/Essex Environment Trust (EET)Guardian
27. The Guardian alleges that EET
requires that certain projects "must have local financial
support to at least 25 per cent of the total cost of the project"
and that, "In respect of all applications for local amenities,
the Trust will look for a contribution to their provision from
the local parish or town council. A letter of support from the
parish or district council or other local body or organisation
can also assist an application."
28. The first requirement, ie that the project
supplies some of the money itself, is not unusual and many funding
sources require a similar or larger proportion to be used for
"matching". The second piece of advice, ie that the
local authority backs the project, may not actually contravene
the regulations but does, in ENTRUST's view, reveal too close
a relationship between council and EET. As a matter of policy,
in order to ensure that this EB does not contravene the regulations
by being controlled by an LA, ENTRUST's response is to raise the
assessment of potential risk of non-compliance presented by EET
and to increase the frequency and depth of scrutiny to which the
EB is subject.
29. Similarly The Guardian's accusations
against Oxfordshire CC, Lincolnshire CC and Kirklees DC appear
not to be contravening the regulations but ENTRUST has increased
its vigilance and frequency of scrutiny.
Neath-Port TalbotNPT Environ Aid LtdGuardian
30. The allegation here is similar to that
in the Essex case, ie that the council controls and uses EB funds
for work that should be performed by the council itself. ENTRUST
has examined the control of the EB and can find no evidence that
present council members or staff are in a majority on the board,
or control management decisions. Ex-councillors are not banned
from membership of EB boards. Similarly, EB funds being used for
(what The Guardian regards as) council work, is not precluded
by the regulations, although (as above) ENTRUST has always advised
EBs to avoid funding statutory duties.
Swansea City CouncilGuardian MemorandumPage
31. The Guardian allegation is the
same as abovethe EB funds are being used on projects that
should (according to The Guardian) be paid for by councils.
ENTRUST's investigation has not found any evidence that the regulations
are being infringed.
Merton LBCGuardian MemorandumPage
32. The Guardian states that:
33. "Merton LBC has a 15-year waste
disposal contract with AJ Bull (Southern) Ltd. 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 a 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."
34. The principal accusation appears to
be that the council is acting as the contributing third party
(CTP) for Bull's contributions to Groundwork Merton by paying
from the fund it had established to donate directly to Groundwork,
prior to the agreement with Bull. However, quite apart from the
apparent agreement to this arrangement by Groundwork (which is
a co-signatory, with the council and Bull), the regulations confer
no powers on ENTRUST to intervene in such matters, unless there
is a benefit accruing to any contributor. In this case, both the
council and Bull are contributors. Therefore, ENTRUST has inquired
into any benefits available to either party. ENTRUST can find
no evidence that either Merton Council or A J Bull Ltd has acquired
any unshared benefit from their contributions.
35. The secondary accusation implies that
The Guardian believes that the deed makes Groundwork dependent
on either or both the council and Bull. ENTRUST's agreed interpretation
of the regulations on CTPs is that the CTP must be independent
of the EB. It is ENTRUST's view that the deed in this case does
not infringe the independence of the EB, as it does not control
the activities of the EB in respect of its internal operations
Western Riverside Environmental Fund (WREF)Guardian
36. The Guardian alleges that WREF,
which was established by the Western Riverside Authority (itself
a joint venture by four councils) and managed by Groundwork, is
controlled by a group of four councillors (one from each of the
joint venture partner councils), two LO representatives, the Authority's
GM and the Groundwork Regional Director. There is an "independent"
chair of the group, a solicitor.
37. WREF is not an EB and it has never requested
enrolment. The relevant EB is Groundwork Federation (formerly
Groundwork Foundation) and WREF recommends projects to Groundwork
but has no control over the EB, as there are no WREF representatives
on the board of Groundwork Federation.
British Waterways plcGuardian MemorandumPage
38. The British Waterways Board environmental
body was properly constituted and enrolled. This organisation
provides many community services, a large proportion of which
are fully compliant with the regulations. British Waterways is
not a plc, (as incorrectly asserted by the Guardian, but corrected
in its supplementary memorandum) it is a statutory body set up
under the Transport Act 1962.
39. Brian Donohoe, MP raised this issue
at the Select Committee hearing into the operation of the tax
in 1999 and later retracted his statement.
London Waste ActionGuardian memorandumPage
40. The Guardian's accusation here
is that money from the Environment Agency (EA) was used as a CTP
payment, despite the DETR allegedly "ruling against such
a payment". ENTRUST has no mandate to intervene in funding
issues unless there is reason to believe that an improper benefit
has or might accrue to a contributorin this case either
the LO or the EA. There is no suggestion that an improper benefit
has been obtained and, hence, ENTRUST cannot intervene. Questions
about how funding decisions were reached, and how contributions
were made are internal matters, which can only be answered by
the parties involved, namely, LWA, the LO, the EA and DETR.
41. The Guardian acknowledges that
these funds were employed on a project compliant with the regulations.
The Building Research Establishment (BRE)Guardian
42. There is no specific allegation but
it is implied that BREWEB is not a legitimate EB. The EB has been
established and enrolled within the Regulations' criteria.
English HeritageGuardian MemorandumPage
43. Similarly, no specific allegations are
made. ENTRUST has reviewed English Heritage's projects and found
them to remain compliant.
English PartnershipGuardian MemorandumPage
44. The English Environment Fund was originally
set up with five partners (a sixth was added in 2000):
Sustrans (a charity and EB)
Groundwork Foundation (a charity
and EB, now the Groundwork Federation)
Royal Society for Nature Conservation
(a charity and EB and the agent for Biffaward
Institute of Wastes Management (the
professional institution for waste managers and also an EB)
Coalfields/Joint Venture (joined
45. Insurance cover is recommended by the
ESA and required by many LOs, in order to protect themselves against
repayment requirements by HM Customs and Excise in the event of
non-compliance by EBs.
46. EB funds are not publicthey are
the LOs private funds belonging to the LO and for which the LO
remains responsible to HM Customs & Excise.
WRc PlcGuardian Memorandum SubmissionPage
47. No specific allegations were made, although
the implication is that the WRc's EB is somehow, not legitimate.
48. The WRc environmental body was properly
constituted and enrolled within the LTRs' requirements. ENTRUST
checks that the environmental body remains not-for-profit and
continues to comply with all other criteria.
CORDAH Environmental Management ConsultantsGuardian
49. No specific allegations were made. However,
it seemed to be implied that the EB's enrolment was not legitimate.
50. Cordah Research environmental body was
properly constituted and enrolled. ENTRUST checks that the environmental
body remains not-for-profit and continues to comply with all other
Going for Green and the Tidy Britain GroupGuardian
51. No specific allegations were made.
52. Going for Green and the Tidy Britain
Group environmental body was properly constituted and enrolled.
ENTRUST checks that the environmental body remains not-for-profit
and continues to comply with all other criteria.
53. The existence of a transparent audit
trail for LTCS funds was questioned.
54. The Groundwork Foundation (now the Groundwork
Federation) is a Charitable Trust with connections to a series
of independent but interdependent local trusts throughout the
55. All Groundwork enrolments are properly
56. The Guardian views the landfill
tax credit scheme funds as public sector money, when the regulations
are clear that they are private contributions.
The National Trust (NT)Guardian MemorandumPage
57. The NT was included, apparently, because
it "is the wealthiest voluntary organisation in the UK".
58. ENTRUST has examined NT credit scheme
activities and has found no irregularities.
Devon Appliance Recycling Project (DARP) Guardian
Supplementary MemorandumPage 271/8
59. The implication is that DARP has been
unfairly excluded from receiving scheme funding because Landfill
Operators did not consider the work legitimate and/or of significant
60. ENTRUST cannot comment on the value,
or otherwise, of the proposed research work but the project is
clearly compliant with the regulations. ENTRUST has issued a project
registration letter to this effect. However, the scheme rules
are that it is Landfill Operators which make funding decisions.
Failure to spend contributed fundsGuardian
61. There are several possible reasons for
difference between contributions and expenditure:
(i) multi-year projects are being funded
in total; hence
funds may be awaiting matching finance
from other sources;
money may be being built-up for the
next phase of funding;
various consents may be awaited is
the result of multi-year projects being funded (or the money being
committed to them) in total; hence, money is held in reserve for
when the appropriate project phase is reached.
(ii) Whenever money is awaiting use, it is
in a bank earning interest and this interest will also be spent
on activities that are compliant with the landfill tax credit
(ii) All contributions are available for
EBs to spend on projects but, due to phasing, not all funds can
be spent immediately although they are committed to the projects.
It is also pertinent that ENTRUST has strongly recommended that
contributions must not remain uncommitted for more than two years
from the date of receipt.
Audit and Inspection ActivitiesGuardian
62. The number of inspection/audit visits
quoted was 20 by the beginning of 1999; the number as at 1 November
2000 was 715.
Absence of value-for-money mandateGuardian
63. This is being considered by a working
group of representatives from HM Customs & Excise, DETR, DTI
64. This is also being considered by a working
group of representatives from HM Customs & Excise, DETR, DTI
CTP payments & LO's funding discretionGuardian
65. A question posed by The Guardian
was if the 10 per cent balance of the contribution was being paid
by CTPs rather than LOs', why should the LOs continue to have
the benefit of discretion over which EBs and projects should receive
the funding? This is being considered by a working group of representatives
from HM Customs & Excise, DETR, DTI and ENTRUST.
Classification of CTP PaymentsGuardian
66. The issue here is whether, for instance,
local authority CTP payments can be classed as private sector
payments so as to preserve the private sector nature of the contribution.
The advantage is that private sector funds can be counted as matching
funding, whereas public monies can not. This is being considered
by a working group of representatives from HM Customs & Excise,
DETR, DTI and ENTRUST.
Landfill operator and/or local authority (LA)
control of EBsGuardian MemorandumPage 250
67. The majority of The Guardian's
allegations in this area appear to derive from a misunderstanding
about the difference between LO or LA board members' influence
in EB operations and their ability to control them. One of the
fundamental aims of the scheme was to encourage local partnerships.
Quite clearly, the influence this entails is different from a
majority of members from a LO or LA controlling the activities
of an EB, enabling them to direct the management of the body.
Fitness to regulateGuardian MemorandumPage
229 et seq
68. Customs & Excise monitors ENTRUST's
activities, its verification and audit systems to ensure ENTRST
meets its terms of approval.
Appointment of Directors
69. The ENTRUST board is considering the
structures of similar organisations, such as the FSA, and will
discuss any resulting proposals with HM Customs & Excise.
Lack of Transparency of Operations
70. The ENTRUST board is considering the
working rules of similar organisations, such as the FSA, and will
discuss any resulting proposals with HM Customs & Excise.
ENTRUST has already made great effort to be transparent, examples
of this are the content of its website; a list of enrolled environmental
bodies, active and completed projects, minutes of meeting, etc.
71. Sundry other issues, including the definitions
of direct benefit and public amenity, and the funding of statutory
obligations are being considered by a working group of representatives
from HM Customs & Excise, DETR, DTI and ENTRUST.