Councils seek judicial review of Defra decision to withdraw PFI credits from waste projects

Out-Law News | 30 May 2013 | 10:47 am | 2 min. read

Three local authorities who were told in February that the Government was withdrawing previously-awarded financial support for waste management projects have launched legal challenges to the decision. 

North Yorkshire County Council announced on its website that it was seeking permission from the court to make an application for judicial review of the decision by the Department for the Environment, Food and Rural Affairs (Defra) to withdraw waste infrastructure credits (WICs) from its long-term waste management contract. Two  other affected councils, Bradford City Council and Calderdale Council, have also made similar applications in relation to their joint project, according to local press reports (registration required).

"We consider that the Secretary of State has not made the decision to withdraw our credits in a proper manner and that he has failed to follow Defra's own published criteria," said North Yorkshire chief executive Richard Flinton. "We also consider him to have failed to take account of the waste management obligations in the Waste Framework Directive; failed to consult with us on his decision; and failed to give proper reasons for his decision."

He added that the Government had not given any indication that the council would be prevented from funding its scheme through the project finance initiative (PFI) at any point during a "lengthy five-year procurement process". The proposed scheme, a joint project with City of York Council, was projected to save the councils up to £320 million in waste management bills and landfill taxes, he said.

Defra has previously said that whether or not to proceed with the projects would be a decision for the local authorities concerned following the withdrawal of funding. The Merseyside Recycling and Waste Authority (MRWA), which covers Merseyside and Halton, decided to continue with its project following the withdrawal of WICs. Last month it appointed SITA as its preferred bidder for a 30-year "resource and recovery" contract, which will include the construction and operation of an energy from waste facility.

The Landfill Directive sets EU-level targets for the reduction in the amount of biodegradable waste that should be sent to landfill by 2020. By this date, the amount of biodegradable municipal waste (BMW) to be sent to landfill should have fallen to 35% of 1995 levels, or 10.2 million tonnes. Announcing its decision in February, Defra said that its decision to withdraw support from the projects would only reduce the UK's likelihood of meeting its overall target by 2%, to 93%.

WICs are granted to local authorities to help them meet payments to their private sector project partners under PFI schemes. According to Defra's analysis, the credits typically cover around 30% of the charges payable under the PFI credit. The Government had previously withdrawn credits from seven projects in 2010, but had indicated that it would allow three projects to continue. Of the seven projects which previously had credits withdrawn, only three continued to the procurement stage.

Richard Flinton said that North Yorkshire County Council would continue to work with its contractor, AmeyCespa, to finalise the details of its waste management project while waiting for the court's decision on whether it would be able to proceed with its judicial review.