The Department for Environment, Food and Rural Affairs has announced the withdrawal of funding for three PFI waste projects, throwing the future of the infrastructure scheme into doubt.
The department said withdrawing provisional funding from the residual treatment projects would reduce the likelihood of meeting 2020 land fill diversion targets by just 2%.
In a statement Defra said it expects to have sufficient capacity to meet the 2020 targets so was cutting funds to those projects yet to reach financial close.
The projects affected are: Bradford and Calderdale; Merseyside Recycling and Waste Authority and Halton; and North Yorkshire and City of York.
Defra’s assessment rated North Yorkshire and York as “red” and unlikely to reach close by 2020, and the other two projects “amber red”.
The withdrawal of funding – typically 30% of the PFI charges – would not necessarily mean the projects would stop, the department said in a statement: “That will be a decision for the local authorities concerned. We will continue to provide commercial and technical advice to those projects that continue with their procurement process.”
But leader of Calderdale Council, Tim Swift, told the local press the withdrawal of £62.1m from its planned treatment project placed “serious doubts” over its future.
He said: “This puts at risk a major investment that would have created jobs and provided a sustainable solution to dealing with the waste from both authorities.
“It was a robust environmentally sustainable solution which would virtually eliminate the use of landfill.
“This is a disastrous decision by the Government minister. They are already failing in their promises to invest in the infrastructure.
“Now they are damaging vital schemes that are ready to go ahead.
“I don’t know what they’re thinking, if it doesn’t go ahead who will be liable for the huge costs?”
The leader of North Yorkshire County Council John Weighell told Minster FM the withdrawal of funding for the Allerton Waste incinerator had come as a “complete surprise”.
He said: “We have been repeatedly assured throughout the procurement process of Defra’s commitment to PFI credits. To be informed now, after the granting of planning consent and the decision of the Government not to call in the planning application for a public inquiry, that the funding commitment is being withdrawn is frankly baffling and disappointing.
“We have undergone a lengthy procurement process of more than five years, and Defra has been closely involved in that process – even to the extent of providing a permanent liaison officer at senior level. At no stage in that period, during which there have been continuing assessments to ensure that the scheme remains viable, value for money, and necessary, has any issue been raised by the Government. There have been repeated indications from Government throughout this period that the scheme will be funded through PFI .
“To make this unexpected announcement, without consulting with us and without warning, is extremely disappointing.”
Director of policy at the Environmental Services Association, Matthew Farrow called the decision “deeply disapointing”.
“Removing credits at such a late stage in the procurement process has potentially wasted millions of pounds’ worth of time and money, both for the local authorities involved, and also for the bidders participating in complex PFI processes. ESA’s firm view is that this decision will have the knock-on effect of undermining private sector confidence in public procurements and will raise the political risk associated with these types of project.
“Even if Defra is able to meet national targets without the contribution of these projects, the local authorities involved will still be faced with rising waste management costs as a result of the continuing landfill tax escalator. This means that they must still find an alternative solution to landfill, but will now have to do so without previously promised central government support.”