Council stands by under fire incinerator

HEREFORDSHIRE Council is standing by the incinerator plan pitched as the future for the county’s waste despite double blows against the project this week – as reported by the Hereford Times.

Support for the incinerator for reiterated at a meeting of the council this morning in responses to two questions from councillors.

MPs have already turned the heat on the incinerator, criticising the near  £90 million paid to the PFI project so far  without the facility being built.

The Commons public accounts committee questioned the basis of  government grant funding for the incinerator and its future in a sector where technology is continually evolving.

A report from the council’s external auditors Grant Thornton found that cabinet members did not get the detail  of why officers – rather than consultants – saw an incinerator as the future with a relevant appraisal recommending cabinet support lacking detail and clarity.  .

Grant Thornton has said it cannot now conclude its 2013-14 audit of the council or issue the council with its audit certificate until it has “completed consideration”  of specific issues raised around the incinerator plan.
The energy from waste incinerator at Hartlebury, Worcestershire, is integral to a joint 25 year waste disposal contract with West Mercia Waste signed by Herefordshire Council and Worcestershire County Council.

An initial capital cost for the project is reported to be more than £160 million, but opponents claim ongoing maintenance will at least double this over the 25 years  while the cost using PFI funding could triple.

In February, Herefordshire Council passed a 2014-15 budget committing the council to paying £40m for the  incinerator at Hartlebury, Worcestershire, over three years.

A budget strategy estimated council borrowing as increasing by £50.8 million over 2014/15, pushing the overall debt up to £218.2 million, including £11 million borrowed over the year for the incinerator.

At full council this morning, Cllr Glenda Powell asked for “assurance to members and taxpayers” as to the plant’s future effectiveness.

Cllr Harry Bramer, cabinet member for contracts and assets, stood by a financial and options appraisal put to Cabinet in December last year supporting EfW) as the most “cost effective and viable solution” for the county’s waste over 25 years

Cllr Liz Harvey referenced her questioning “confidence” in capital borrowing for the incinerator at the council’s budget setting meeting in February.

Then, Cllr Bramer said confidence in capital borrowing as a best value option came from analysis and appraisals  in both the joint waste management strategy and a cabinet report completed in accordance with relevant government guidance.

This morning, Cllr Harvey raised the findings of the public accounts committee , specifically the conclusion that the Department for environment, food and rural affairs made decisions on waste projects focused on the need to meet EU targets without regard to the impact on local authorities.

Cllr Bramer said the council “does not disagree” with the findings quoted but cited the findings as focused on DEFRA’s oversight of PFI contracts.

It was, said Cllr Bramer, a matter for DEFRA to respond to the committee’s findings rather than either of the two councils.

The committee found PFI contracts of  25-30 years are “inappropriate” for the waste sector where technology is continually evolving with the amount of waste in  hard to predict.

Funding agreements for early PFI waste deals were “poorly drafted”  by the then Department for Environment, Transport and the Regions (DETR)  and “too lax” in requiring payments for key assets that had not been built.

As such, the committee found that the funding agreement signed with Herefordshire and Worcestershire councils highlighted the “shortcomings” of early PFI projects, with payments to the council aligned with payment made by the councils to the contractor.

Grant payments started as soon as the councils started to pay the contractor, with the government, through either the DETR or its successor the Department for Environment, Food and Rural Affairs (DEFRA),  legally committed to making grant payments ever since.

In December 1998, the DETR signed a funding agreement with Herefordshire Council and Worcestershire County Council for £143 million and the payment of related grants started shortly after.

The terms of the original funding agreements did not allow central government to stop payment or alter the payment terms in the event that key capital assets were not delivered.

Since its creation in 2001, DEFRA  has had responsibility for overseeing these grants and did not review the agreements until 2011.

Terms with Herefordshire and Worcestershire councils were not successfully renegotiated until 2013, resulting in a £30 million cut in total funding.

The process of renegotiation was time-consuming. In the case, of the Herefordshire and Worcestershire DEFRA confirmed to the committee that it took them six months to approve the new funding approach the councils were proposing.

With contractor apparently unwilling to fund the incinerator, the councils were left considering using the rate income generated from the populations of both counties to cover the cost of the contract.

At the end of the 2013-14 financial year, both councils had received nearly £90 million for an incinerator plant that had still to be built


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