Private Finance Projects and off-balance sheet debt - Economic Affairs Committee Contents


Memorandum by Mr Shlomo Dowen on behalf of People Against Incineration (PAIN) and the United Kingdom Without Incineration Network (UKWIN)

  1.  My name is Shlomo Dowen, and I am a resident of Mansfield, Nottinghamshire.

  2.  People Against Incineration (PAIN) is a Nottinghamshire-based group of citizens who are opposing proposals, funded through a Waste PFI, for a Sherwood Forest incinerator (currently the focus of a public inquiry). I am a Co-Chair of PAIN's Legal and Research Team. This submission is made on behalf of PAIN.

  3.  I am also the National Coordinator of the United Kingdom Without Incineration Network (UKWIN). Founded in March 2007, UKWIN's role is to help local groups develop the case against incineration, and in doing so create a UK-wide movement in favour of more sustainable approaches to waste management. UKWIN currently has more than 100 members. This submission is also made on behalf of UKWIN.

  4.  Although I am aware of both specific and underlying systemic problems relating to numerous Waste PFI contracts, I have chosen to limit the scope of my current evidence primarily to the situation in Nottinghamshire as it relates to the first four questions posed in the Economic Affairs Committee's Call for Evidence.

  5.  Nottinghamshire's 27-year, £850 million Waste PFI contract was signed in June 2006, without first reaching the broad consensus that was supposed to have been an evaluation criterion used to assess the suitability of PFI credits.

  6.  For further details of the lack of broad consensus, etc please see accompanying relevant excerpts from PAIN's Proofs of Evidence submitted to the public inquiry into the proposed Sherwood Forest incinerator (PINS ref. 2102006).

  7.  According to Nottinghamshire County Council (NCC) Group Manager for Waste Management: "... while the project began as a PPP (Public Private Partnership)... it was later changed to a PFI. We [at NCC] had PFI credits thrust upon us".[23]

  8.  The original PPP entailed four separate contracts for different aspects of waste management. It seems reasonable to speculate that this approach would have resulted in quicker progress towards equipping the county with appropriate waste infrastructure, whilst offering the best opportunity for local small to medium sized enterprises to win one or more of those relatively smaller contracts.

  9.  Instead, the PFI route resulted in a single provider, in our case Veolia, winning the whole contract. This in turn has resulted in Veolia being in a position to dictate the technology, overriding Nottinghamshire's existing waste strategy.

  10.  Your attention is called to NCC's Waste PFI Final Business Case (FBC),[24] where we read that the original project objectives included the following, based on the Nottingham and Nottinghamshire Joint Waste Strategy: "Given the presence of an existing Energy from Waste (EfW) facility at Eastcroft, it is considered that no significant additional EfW capacity will be required through this PFI project."

  11.  It appears from the FBC that there was a significant change in emphasis away from Mechanical and Biological Treatment (MBT) towards incineration. This appears to have been largely because Veolia: "have been unswerving in their proposal that Energy Recovery by Incineration is the only technical solution that can provide guaranteed diversion at a known risk and financial profile".

  12.  This enthusiasm seems to have over-ridden the assessments of the OBC and of the detailed Best Practicable Environmental Option assessment for NCC carried out by Enviros and published in August 2004 which concluded that whilst the options reviewed "perform consistently well across the range of environmental criteria" they found "Option 5 performing better than all other options". Option 5 was based on MBT. Whilst the report indicated that the incineration based option performed well against "policy and socio-economic criteria" it should be noted that the assessment preceded the reduction in emphasis on energy from waste options and the favouring of anaerobic digestion in Waste Strategy 2007.

  13.  This is but one example of the inflexibility of the PFI process that appears to have enshrined an outdated approach, committing the County to build waste management facilities that are no longer required and that were based on outdated and highly exaggerated projections of waste arisings and that pre-dated the 2007 Waste Strategy and that is purported to supplant the emerging Nottingham and Nottinghamshire Waste Core Strategy. For some years the contract recycling targets are below the current Regional recycling targets.

  14.  Further details are included in the accompanying excerpts from PAIN's Proofs of Evidence submitted to the public inquiry into the proposed Sherwood Forest incinerator (PINS ref 2102006). The complete Proofs are available from http://www.nottinghamshire.gov.uk/home/environment/planningmatters/homepage-newpage/efrcoredocuments.htm

  15.  Disturbingly, at 5.25 of the Planning Supporting Statement that accompanied Veolia's planning application for their proposed Sherwood Forest incinerator we read: "The Municipal Waste Management Strategy for Nottinghamshire was approved in 2001. This has effectively however been replaced by the provisions of the PFI contract for waste management services" [emphasis mine].

  16.  Thus the Waste PFI contract appears to bypass the democratic process, replacing the waste strategy and its associated community involvement and legal requirement for an examination in public.

  17.  Due to poor management, "inevitable slippage", the lack of agreement amongst stakeholders (such as the relevant Waste Collecting Authorities), and the community's perception of anti-democratic high-handedness on the part of both Veolia and NCC, the PFI-driven rush to build an incinerator has been considerably delayed and may never come to fruition, whilst the community's mistrust will require a great effort to address.

  18.  It should further be noted that important details of the Waste PFI itself have yet to be released in full to the citizens on whose behalf the contract was signed. Whatever the financial costs of Nottinghamshire's Waste PFI, the cost to democracy, transparency and accountability are unacceptable to local residents.

  19.  The Economic Affairs Committee asks: "Is enough information disclosed on Private Finance projects fully to assess whether the taxpayer is getting value-for-money?" This begs the question: to whom should information be disclosed?

  20.  There is not sufficient space in this brief submission to outline in detail the numerous information requests made by the community in our attempts to secure the release of our Waste PFI contract. Suffice it to say that, whilst details can be provided upon request, the Committee should be aware that the matter is the subject of an active investigation by the Information Commissioner's Office and also the subject of a High Court case (Veolia v Nottinghamshire County Council, heard on 25 and 26 August 2009 by Mr Justice Cranston at the High Court of Justice, Queen's Bench Division, Administrative Court, London).

  21.  The situation was covered by numerous local and regional radio and television stations, and by a national publication. The article, entitled PFI: Burning question (excerpts below) in Private Eye highlights some of the public's concerns:

    The private finance initiative (PFI) may gobble up public money, but It can't stand public scrutiny. That seems to be the message from the French-owned waste firm Veolia Environmental, which took out an injunction to stop its partner council revealing details of an £800 million waste and Incinerator deal.

    Veolia signed a 27-year PFI contract to run waste services for Nottinghamshire county council. The latter's website says Veolia is known for its "expertise, excellence in service, and for working in partnership with clients" but makes no mention of injunctions.

    As part of its general audit, the council makes its accounts and bills available to voters. But when local resident Shlomo Dowen, coordinator for People Against Incineration (PAIN), asked to see Veolia's invoices to gauge how good a deal the council had negotiated, Veolia won an emergency injunction to keep the books closed—even though the council was only following Audit Commission guidelines.

    Is Veolia reluctant to open the books because, as campaigners say, the PFI deal is, ahem, somewhat less than perfect? Central to it is a huge incinerator in the middle of Sherwood Forest, contrary to the business plan which proposed the incinerator should be on a brownfield site. Instead it is being built among the trees at a former mine that is meant to be reclaimed as greenfield land, not turned into a big burning plant.

    Veolia's case for the incinerator seems to be based on assumptions that "the quantity of waste produced has the potential to double over the next 20 years." But annual waste in the area is stable at around 400,000 tonnes, suggesting Nottinghamshire might have bought hundreds of millions of pounds worth of waste disposal it doesn't need. The scheme has already been called in for an independent inquiry, and critics say Veolia is also being obstructive about providing figures to the inspector.

    If the deal has wasted public money, there could be national implications. The government's semi-privatised PFI lobby organisation Partnerships UK, along with Defra, both helped draw up the scheme.

  22.  It should be further noted that in discussions with senior Defra officials it emerged that Defra takes no responsibility for Local Authorities "cutting a bad PFI deal with waste operators".

  23.  The extreme secrecy surrounding Waste PFIs runs contrary to the advice of Defra, who advocate the reaching of a broad consensus before the start of procurement, noting:[25] "Gaining planning permission for new waste treatment facilities is a challenge for local authorities. There is often concern by residents about the nature of the facilities being proposed, resulting in objections which can cause substantial delays to the Department's programme. The Department should encourage local authorities to consult early with residents to identify issues which residents are likely to raise."

  24.  The various legal actions and delays, including the current Public Inquiry into Veolia's planning application, cost taxpayers considerable sums of money, and constitute poor performance (relating to cost, delivery dates and service quality).

  25.  Although we are currently debarred from knowing exactly how much of our money this has cost us to date, we do know that the Waste PFI includes a provision for NCC (and therefore taxpayers) to pay not only 100% of the County's legal expenses, but additionally some 90% of Veolia's (above a redacted sum).[26]

  26.  Another aspect of this situation worthy of consideration is the benefits to be derived from making all modelling assumptions (eg source data, formulae, etc) readily available to the public so as to allow meaningful critique and continuous improvement. This is not currently the case in Nottinghamshire. Had the underlying assumptions been made available for scrutiny the outcomes would have been improved and the community might feel a sense of ownership.

  27.  The Committee raises the issue of risk. PAIN notes that:

  27.1  Veolia's threats regarding their Newhaven incinerator[27] is linked to a statement made in the Audit Commission in their Well Disposed report of September 2008 that "Some WDAs [Waste Disposal Authorities] have found that they continued to bear risks they thought they had allocated to a contractor. Such risks include planning delays and technology failures—contractors were able to ensure the WDA bore the risk by threatening to walk away from the contract, leaving the WDA without waste disposal infrastructure".

  27.2  It is increasingly well established that some incinerator bottom ash is likely to be hazardous waste.[28] Veolia accepts that at least 40% of their ash would exceed the threshold based on the metals analysis for total lead and total zinc alone.[29] This is not a new issue and concerns have been reported in the literature for at least a decade.[30] The possible impacts on the economics and environmental acceptability of incineration are profound yet a response to a request to the WIDP has confirmed that "There are no WIDP discussion documents, minutes or memos in which consideration has been given to whether IBA is, or may be, hazardous waste".[31] This is an alarming admission when millions of pounds of public money are at risk.

  27.3  NCC's FBC states: "The ERF however should have an operational life of at least 50 years, with only regular overhaul and maintenance required, except for unexpected failures and/or regulatory upgrades. This latter issue is a council risk even during the contract period."

  27.4  After 25 years the incinerator (described as an asset) would revert to NCC ownership—but as this would be at or close to the end of the design life and the site would require expensive decontamination and demolition it would be more of a liability than an asset.

  28.  As the Audit Commission's Well Disposed report[32] states: "WDAs might buy too much disposal infrastructure if they overestimate future volumes of waste arising (including other authorities' waste or trade waste). They may also achieve a worse environmental solution if, by building large disposal facilities, they reduce their own financial incentive to pursue waste reduction or recycling initiatives (pp 77-78) ...If WDAs overestimate the amount of waste they will need to process, both the overall cost and the cost per tonne of waste processed are likely to be higher than they would have been had estimates proved accurate..." (p 80).

  29.  This is echoed in the testimony of the Environment Agency's Head of Waste delivered to the Environment, Food And Rural Affairs Committee: Waste Strategy For England 2007 on 15 October 2008:[33] "...Defra's advice on the Waste Strategy is very clear, that local authorities need to avoid being locked into long term contracts or plant that is too big. They need to be responsive to future, technological changes."

  30.  The Chief Executive of Local Partnerships acknowledges that "local authority contract management skills are not as strong as they might be" and says that "the most important part of our role is to help local authorities be an intelligent client" and that they aim to "make sense of the options, and show them how to get the most out of any arrangement they enter into".[34]

  31.  Citizens are expected both to fund the PFI and to play a crucial role in its delivery.[35] As these PFI deals are entered into on our behalf it makes sense that we too should have a role in formulating and reviewing the PFI both in the name of democratic accountability and to ensure that it delivers best value for money.

  32.  For example, the level of payment due to Veolia is based on Key Performance Indicators (KPIs), including a KPI related to the number of valid complaints. NCC is failing to ensure best value by not requiring a widely-advertised complaints procedure with mechanisms to accurately record the number of valid complaints.

  33.  With regard to the Committee's sixth question, the issue is not primarily where the accounts are published, but that the full costs of PFIs do not remain secret.

  34.  I would be happy to give oral evidence if this would helpful for your inquiry.

20 September 2009














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23   Waste PFI contract signed between Notts CC and Veolia Environmental Services, 29 June 2006 http://www.recyclingwasteworld.co.uk/cgibin/go.pl/article/article.html?uid=36657 Back

24   Available from http://www.nottinghamshire.gov.uk/finalbusinesscase.pdf, p 17. Back

25   http://www.official-documents.gov.uk/document/hc0809/hc00/0066/0066.pdf Back

26   Planning risk on the ERF will be shared between the Council and Veolia in accordance with the recommendations in the 4P's waste toolkitBack

27   When the risk is that costs could increase Veolia offloads the risk onto the Council-see Back

28   ENDS (2009). "Confusion over status of incinerator bottom ash." Environmental Data Services (ENDS) 410: 23-24. Back

29   Veolia Environmental Services (2007). Response to the Environment Agency Consultation on the Hazardous Waste-Technical Guidance WM2-Appendix C14 (Ecotoxic) 11 October 2007. Back

30   Ferrari, B, C M Radetski, et al, (1999). Ecotoxicological assessment of solid wastes: A combined liquid- and solid-phase testing approach using a battery of bioassays and biomarkers. Environmental Toxicology and Chemistry 18(6): 1195-1202. Back

31   Letter from Mr John Enright Head of Project Development Waste Infrastructure Delivery Programme to Mr Alan Watson of Public Interest Consultants 5 May 2009, Ref: RFI2626. Back

32   http://www.audit-commission.gov.uk/reports/NATIONAL-REPORT.asp?CategoryID=ENGLISH-576-SUBJECT-397&ProdID=C0CDCBFE-24E0-494d-824D-F053A576661E Back

33   From Uncorrected Transcript of Oral Evidence To be published as HC 1100-i. http://www.publications.parliament.uk/pa/cm200708/cmselect/cmenvfru/uc1100-i/uc110002.htm Back

34   http://www.publicfinance.co.uk/news/2009/08/the-4ps-is-dead-long-live-local-partnerships/ Back

35   Please also see the points made in paragraph 169 of the Excerpts from PAIN Proof for submission to PFI Inquiry document that accompanies this submission. Back


 
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