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PFI deals ‘restricting local authority recycling rates’

The London Borough of Newham has said its “expensive and inflexible” PFI deal is preventing it from improving its household recycling rate, currently the lowest in England.

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Newham is part of the East London Waste Authority (ELWA), which has a 25-year PFI contract with Renewi – formerly Shanks – to collect and dispose of around 121,000 tonnes a year of waste.

Newham’s household recycling rate is just 14.1% and the council has abandoned recycling targets.

In a letter to resources minister Therese Coffey, Newham mayor Robin Wales blamed the PFI contract and “ongoing Government funding cuts” for the authority being unable to boost its rate.

The letter, dated 30 August 2017, was released under a Freedom of Information request from MRW. It was issued in response to Coffey’s request for information on why the council’s recycling rate was so low.

Wales wrote: “… the contract presents a major obstacle when it comes to recycling performance due to restrictions on what materials can be collected separately, the overall cost of the waste levy and the lack of any financial incentives for the council to invest in achieving higher recycling rates.

“Newham is tied to ELWA by statute and must deliver all its waste to that authority. Having been encouraged to adopt this approach by central Government, we are now caught in an expensive PFI contract where we lack the choice, flexibility and savings opportunities through recycling solutions that many other authorities are able to exercise.”

In all, Coffey asked 34 poor-performing authorities last summer to explain their low rates, including fellow ELWA member Barking & Dagenham Council.

A response from council leader Darren Rodwell, dated 24 August 2017, said the waste disposal contract with ELWA and Shanks/Renewi lacked a differential gate fee for recycling and domestic waste. The contract runs until 2027.

Rodwell said: “Unfortunately, we are bound by a contract that currently charges £125 per tonne for waste and recycling disposal, making ELWA one of the most expensive levy rates for recycling in London.”

ELWA’s payment to Shanks in 2016-17 was £58.8m. There is £538.6m left to be repaid on the PFI contract, as of March 2017. The Government will contribute around £85m of PFI grant funding during the contract’s life span.

Part of the PFI deal was to build infrastructure such as the Jenkins Lane bio-MRF (pictured).

Brighton & Hove City Council has also blamed an inflexible PFI deal for restricting recycling. In its letter to Coffey, the authority said its PFI contractor for waste disposal, Veolia, recycled only those materials for which there is a guaranteed end market.

The letter said: “While other councils can and do recycle these kinds of materials, the Brighton & Hove council is contractually obliged under the terms of the PFI agreement to provide all waste materials, whether residual or recyclable, to Veolia.”

Brighton indicated it was reviewing the 30-year, £1bn PFI contract in conjunction with the Treasury-backed Local Partnerships and Defra.

Waste PFIs have come under intense scrutiny since the Greater Manchester Waste Disposal Authority terminated its contract with Viridor-John Laing in August 2017. The authority said the contract’s termination has saved £77.7m.

A Renewi spokesperson told MRW: ”We work very closely with our customers to ensure that we are aligned in our goal to maximise recycling and diversion from landfill.

”The current statistics for ELWA council’s waste show that the amount sent to landfill has fallen dramatically over the last ten years and we will continue to sustain high diversion levels through a combination of our leading waste-to-product and recycling technology and the education programme being led by the council.”

An ELWA spokesperson said: ”ELWA, like all public authorities, has a commitment to deliver best value in relation to managing waste disposal. Therefore, periodically the Authority conducts contract reviews to identify scope for efficiencies and improvements to benefit local residents wherever possible. ELWA is not presently considering termination of its PFI contract.”

Comment: Phillip Ward, owner of Falcutt Consultancy and former head of waste at the Department of the Environment

”The ELWA contract was one of the early ones. It was conceived when the recycling targets were lower and the focus was on reducing biodegradable waste to landfill. The problem with the Shanks solution - and a number of the other PFI projects that have got into difficulty - is that they had little flexibility to adjust to changing legislative and market conditions or to learn from the growing understanding of consumer behaviour. These contracts probably need to be renegotiated. Government were involved in setting them up and should be prepared to be involved again.”

  • This story was updated on 28 February to include the comment from Phillip Ward and on 5 March to include comment from ELWA and on 6 March to correct the length of the PFI contract.

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