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Councils apply for judicial review after Defra withdraws PFI credits

Two of the three council partnerships affected by a Defra’s withdrawal of Private Finance Initiative (PFI) credits for waste projects are seeking a judicial review on the department’s decision.

North Yorkshire and City of York councils and Bradford and Calderdale councils have applied to the High Court on 20 and 21 May, respectively, seeking leave to bring a judicial review (JR) on Defra’s decision to withdraw PFI funding.

Bradford and Calderdale councils had £62.1m of PFI support removed from their waste treatment plant project in Bradford, while North Yorkshire and City of York councils had £65m in PFI credits removed, which were allocated towards a waste park and incinerator at Allerton, North Yorkshire.

The third project affected by the cancellation of the PFI funding, Merseyside Recycling and Waste Authority and Halton, which had some £90m of credits withdrawn, said it will not proceed with legal action.

‘No prior consultation’

The two JR applicants said Defra’s decision came with no prior consultation or notice.

In a statement, Bradford council summarised the elements on which its application for JR is based:

  • whether Defra had the authority to withdraw the credits and whether the decision to withdraw the credits was lawful and taken for proper reasons
  • whether the councils should have been advised by Defra that it was reviewing its support for the project back in November 2012, and
  • whether Defra should have consulted with the councils about its assessment of the Bradford and Calderdale project before arriving at its decision

Commenting on its decision to pursue a judicial review, North Yorkshire council also noted it had received no communication of a possible funding withdrawal despite a Defra’s assessment of the council’s project was carried out in November.

Richard Flinton, chief executive of North Yorkshire County Council said: “At no point, during a lengthy five-year procurement process, had the Government indicated that PFI funding would not be available.”

Financial viability

Bradford council said that without Government support their waste treatment plant project in Bradford was no longer financially viable. The plant, planned in partnership with Skanska-led consortium Pennine Resource, had £62.1m of PFI credits withdrawn.

It said: “The loss of Government funded PFI credits would make it far too expensive or expose both councils to an unacceptable financial risk.”

North Yorkshire County Council said that while waiting for the outcome of the review they will keep working with their partner AmeyCespa to finalise the details of their long-term waste management project.

Flinton said the PFI waste project had been predicted to save up to £320m of the council’s waste management budget by significantly reducing the amount of waste going to landfill and reducing the amount of landfill tax the councils have to pay. He added: “At a time when public services are under extreme financial pressure, this saving will be an important contribution to avoiding cuts in other areas.”

Lack of stability

The Chartered Institution of Wastes Management (CIWM) deputy chief executive Chris Murphy told MRW the CIWM was surprised by the withdrawal of the Defra PFI funding, and “equally surprised by Defra’s reasoning that the projects were not needed on the grounds that there is already sufficient infrastructure available to reach targets.”

Matthew Farrow director of policy for industry trade body Environmental Services Association told MRW: “When Defra Ministers met waste management companies and investors this week, one of the clear messages they were given was that policy stability is vital to give investors confidence. The sudden withdrawal of PFI credits in schemes like this is a good example of how not to encourage investors, and it’s not surprising that that the councils have decided to take this step.”

But a Defra spokeswoman said the department is investing £3.6bn in 29 waste infrastructure projects, and the department expects to have sufficient infrastructure in England to enable the UK to meet the EU target of reducing waste sent to landfill. “Consequently the decision has been taken not to fund Bradford and Calderdale and the other two remaining projects,” said the Defra spokeswoman.

She continued: “This does not necessarily mean the three projects will stop, that will be a decision for the local authorities concerned. The Merseyside and Halton project is continuing with its procurement and have recently appointed its preferred bidder.  We will continue to provide commercial and technical advice to those projects that continue with their procurement process.”

Proceeding with procurement

Merseyside Recycling and Waste Authority said it will not seek a JR as its project with Halton council was now affordable without PFI credits. The project recently selected its preferred bidder, Sita UK, to build a waste transfer station in Merseyside and Energy from Waste plant in Teeside.

Joe DeAsha, chairperson of the Merseyside Recycling and Waste Authority, added: “Elected members and officers considered the option of seeking Judicial Review but have at this stage opted to proceed with the procurement to avoid further delay in the delivery of a sustainable waste solution for the taxpayers of Merseyside and Halton.”

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