The government allocated private finance initiative (PFI) credits totalling £213.5m to councils for waste infrastructure that was never built, the public accounts committee has said.
It issued a report following a National Audit Office investigation in June, which found “a lack of clarity over both the facts and figures” relating to two projects, one involving Surrey CC and one involving Herefordshire Council and Worcestershire CC jointly.
Committee chair Margaret Hodge said: “It is appalling that lax, poorly drafted PFI funding agreements to support the building of local authority waste processing plants have led to hundreds of millions of pounds worth of grants being made to three councils even though the main waste assets – such as incinerators – have not yet been built.”
The report attributed this problem to the former Department for Environment, Transport & the Regions (DETR).
Ms Hodge said: “The supporting PFI contracts signed by the local authorities did not require all of the expected assets to be constructed, resulting in £213.5m in grants having been paid to the councils over the past 15 years with none of the main waste assets to show for it.”
The DETR’s successor, the Department for Environment, Food & Rural Affairs (Defra) “waited far too long before renegotiating its funding agreements with Surrey and with Herefordshire and Worcestershire councils”, though it eventually secured a £30m reduction in payments, the committee’s report said.
The 25-30 year contracts typically used for waste PFI infrastructure may now be inappropriate given the speed of technological change in the sector, the committee suggested.
Ms Hodge also attacked Defra for withdrawing funding for a PFI waste plant in Norfolk last October, saying it was “scandalous that taxpayers in Norfolk have been left in the lurch and landed with a bill of around £33.7m”.
Defra was “fully aware of the likely compensation costs that would be incurred when it decided to withdraw funding”, she added.
Norfolk has commissioned an independent report into the case, which is due to be published this autumn.
A Defra statement said: “Defra’s responsibility is to ensure public money is used appropriately and we were very clear in the advice we provided to these PFI projects as the NAO has previously recognised.
“Due to factors at local level these projects could not proceed as planned. We continue to support the delivery of infrastructure to divert waste from landfill and are on track to meet these targets.”