Memorandum by Ms Jane Green on behalf
of Coventry Friends of the Earth (FOE) and CRACIN (Campaign for
Recycling and Against Coventry Incinerator)
1. I am making this submission as a Coventry
resident and on behalf of Coventry Friends of the Earth and CRACIN,
Campaign for Recycling and Against Coventry Incinerator.
PFI: COSTS AND
2. I became aware of the social and environmental
costs of PFI procedures when our PFI "Super Hospital"
was procured 10 years ago. The cost of refurbishing the then present
hospital, which was only 30 years old, was to be £30 million.
This was not possible as the Government informed the council that
PFI "was the only game in town". PFI funding was only
available on projects worth over £60 million so a complete
rebuild was decided upon.
3. The debate then became centred on where
the hospital should be sited: with strong social and environmental
reasons for a central site. These included improved transport
links and inner-city regeneration and avoiding building on a green-field
site. A council run consultation revealed 85% in favour of the
city site. The costs were equal for both "inner" and
"out-of-town" sites but the out of town site was chosen
because the officers in charge said that their "best guess"
was that it would be preferred by the European PFI bidders.
4. My developing interest in PFI, its extra
costs and inability to take into account social and environmental
values, led me to take a degree in "Economics and Administration"
as a mature student.
5. The consensus even amongst the orthodox
economists at Warwick University is that PFI is often a very expensive
way to fund public infrastructure and is certainly completely
inappropriate for any procurement which involves changes to the
6. All the various factors which Coventry
City Council Officers have predicted to be constant for the next
30 years (ie max 50% recycling) are subject to rapid change: what
can be recycled, new green technologies, housing and jobs growth,
legislation for carbon taxes etc.
7. Because PFI is a contract to operate
as well as build infrastructure, the council will promise to pay
£92 per tonne regardless of whether the waste exists until
beyond 2040. This is likely to mean future Council Tax being wasted
on fines for not providing the promised waste.
8. For example the Treasury has just announced
that it wants to introduce a tax on incinerator ash going to landfill.
(Much to DEFRA's dismay -it is reported.) Any development such
as this would leave councils which had already signed up to a
PFI incinerator with the same inescapable extra costs that council's
with landfill sites now face.
9. Waste tonnages and its calorific value
(ie set proportions of plastics) are contracted to be burnt for
30 years, so the incentive is to avoid too much recycling.
10. This is illustrated by an entry on Coventry
and Solihull Waste Partnerships' website, `A certain amount of
plastic is needed in the rubbish sent to be incinerated to ensure
the waste burns well. This is especially important, as there is
little paper in the rubbish left to burndue to our residents
being keen paper recyclers!' (Now removed from siteauthenticated
11. Many assets are classed as "risk"
for PFI purposes in order to tip the balance of risk to the Private
Partner (PP). This allows a case to be made for the project being
"hire-purchase" and therefore off balance books.
12. This is the case with the car-park of
our PFI hospital. There is great resentment amongst residents
at having to pay high parking fees to contribute to the £2,700,000
profitsnone of which can be used for the NHS. (Wales is
about to abolish all hospital car-parking fees in its publically
13. The proposed Coventry waste PFI would
give away the value of the recyclate even though prices of nearly
all recyclate is now well above trend prices, having quickly recovered
from a dip in October 2008. The Outline Business Case (OBC) states
that there is now an established market for the metal retrieved
during the incineration process yet it will promise to pay the
PP £92 tonne and the PP keeps its market value as well.
14. There is now a pilot project in London
to weigh recyclate collected from residents and return the monetary
value. So far the amounts being paid to residents are around £300+
per year. This would massively incentivise recycling and could
be part of neighbourhood schemes which could choose how to spend
the income for community facilities. PFI would rule this out as
the recyclate becomes the property of the private investor.
PFI encourages over-large infrastructure and obsolete
15. Decisions about procurement, of both
the Coventry PFI hospital and now the proposed £1 billion
PFI waste facility were subject to the urgent threat of losing
government subsidies or losing the facility to another authority.
16. The head of the Health Authority regularly
stated that the hospital must be out of town because of the urgency
of appealing to international finance. We were also treated to
the unedifying spectacle of council officers urging an immediate
decision on their residents "or Birmingham will get it".
The question of which city might most need a new hospital on the
grounds of health needs was not mentioned.
17. DEFRA is distributing £2 billion
pot as incentives to councils to enter a PFI waste contract before
PFI may cease post-2011. This urgency creates a backward logic
which leads to the choice of "tried and tested" technology.
18. This urgency has been further increased
by the uncertainty of the legality of PFI post April 2011. The
legality of the accounting procedures which allow the proposed
PFI scheme to be kept as an "off-balance" sheet debt
seems of major concern to the council. Its request to the independent
auditor received this reply.
"In terms of IFRS, GT noted the government's
intention to move towards applying International Financial Reporting
Standards in the public sector (from 2010-11). However, no guidance
has yet been published as to the implications for accounting for
UK PFI transactions, and `as such the accounting opinion and any
accounting guidance that is given by Grant Thornton remains caveated
subject to these developments.' At the point where public sector
financial statements are prepared under IFRS (from 2010-11), my
views may also have to be reconsidered."
19. The need for "financial close is
March 2011" (OBC) I would suggest, might be linked to this
uncertainty. This raises the possibility of future surcharges
on the council for poor stewardship of public funds. The Sunday
times recently included the comment, "local tax payers faced
with surcharges will want to see the authors of this follyformer
councillors and officialsin court". (Sunday Times
12 July 2009.)
20. This urgency to attract private bidders
has led to a disproportional weighting being given to "tried
and tested" technology. In the OBC this is given twice the
weight given to social and environmental factors combined. This
bias towards outdated technology is compounded by the need to
attract PPs which again has a weighting of twice that of social
and environmental factors.
21. The OBC states that PPs will not invest
in technologies that have not been operational for 24 months.
This rules out many rapidly developing greener technologies including
the government's flagship "closed-loop" plastic recycling
plants and Anaerobic Digesters capable of producing renewable
fuel from waste.
22. The recent "credit crunch"
has meant that the government now owns the larger part of the
banks that provide finance for PFIs. The rates of interest remain
much higher than public borrowing. This tax-payers money should
be used to promote green technology and jobs. Public procurement
is seen as having an increasing importance in supporting new green
technologies and discouraging the "sweating" of old
technologies such as incineration.
Under PFI political judgement is being passed
to market mechanisms and unelected officers. This is resulting
in an increase in secrecy and anti-democratic procedures.
23. The decision on the type of PFI waste
facility procured is being portrayed as a purely technical decision
which can be taken by the private market mechanism. In fact officers
are deciding on the "evaluation criteria" to be given
to bidders on the basis of unprecedented political judgement (or
24. They must consider whether they think
there might be carbon taxes in the future, whether the population
will go up or down, whether the financial system will lead to
more or less employment over the next 30 year period etc.
25. What they cannot do, according to the
director of Coventry's PFI residual project, is stipulate a flexible
and modular system capable of responding to change in waste flows
and comparative costs of waste treatment. This we have been told
will prevent the private bidders from participating.
26. Secrecy and lack of democratic accountability
are key results of the PFI system which guards even the simplest
requests for information as "commercially confidential".
In contrast, under public procurement it was seen as a vital safeguard
for the public to be given full and detailed access to council
27. Those officers appointed to manage the
PFI process have begun a new regime of secrecy. A FOI request
for the amount spent on a new chimney for the present incinerator
was fought for several months by officers who have so far been
28. In previous years the annual right to
view and copy all details of Coventry Council spending, under
the Audit Commission Act, (dating back to the Poor Law Acts!)
has been granted. This year they have been denied and it is not
even possible to know the relative costs associated with different
waste treatments being used by the council.
29. In Nottingham the PP has taken the council
partner to the High Court to try to enforce a re-interpretation
of this ancient right in favour of secrecy. If Veolia is successful
all democratic accountability will be further obstructed.
30. The head of the PFI waste project has
told the local media, Mr Daly said: "The public don't get
to have a say [on the choice of technology]. That's not a public
decision." (Coventry Telegraph 10 September 2009)
This is greatly resented by residents.
31. hope to have drawn attention to ways
in which PFI procurement interacts with financial, social and
32. I became aware of this House of Lords
Inquiry, "Private Finance Projects and off-balance sheet
debt Inquiry", only on the last day for submissions.
33. I would very much welcome the opportunity
to contribute further, either in writing or person to this Inquiry.