Withdrawal of waste credits at odds with Government's commitment to infrastructure, says expert

Patrick Twist of Pinsent Masons, the law firm behind Out-Law.com, said that Defra's decision to withdraw previously-awarded waste infrastructure credits (WICs) from projects in Bradford, Merseyside and North Yorkshire would be "greeted with dismay" by the waste and construction industries.

"Government had previously withdrawn credits from seven projects in 2010, but had allowed these three to proceed," he said. "Defra has now determined that there will not be any need for the facilities to be developed in order for the UK to meet its targets under the EU Landfill Directive in 2020, and the decision is backed up by a detailed paper comparing future demand and future capacity. Whilst convincing in its own terms, the preamble to the paper makes a big point of the uncertainty of the projections on which it relies."

"Without WICs, the three projects are unlikely to proceed. It is difficult to reconcile this very late withdrawal of support by Defra with the Coalition's stated commitment to investing in economic infrastructure and boosting the construction industry," he said.

Defra said that it would be up to the local authorities concerned whether to cancel the projects following the withdrawal of its support. However the report setting out its decision (41-page / 832KB PDF) indicated that the withdrawal of WICs would "significantly reduce the likelihood" of the projects going ahead. Only three of the seven projects which had credits withdrawn in 2010 have since continued to procurement, it said.

"Government has already provided £0.6bn in financial support and will provide a further £3bn to 29 waste PFI projects over the next 28 years," it said in a statement. "Defra's Waste Infrastructure Delivery Programme will continue to provide commercial and technical advice to councils which continue with their procurement of waste infrastructure."

WICs are granted to local authorities to help them meet payments to their private sector project partners under private finance initiative (PFI) schemes. According to Defra's analysis, the credits typically cover around 30% of the charges payable under the PFI contract. "If the credits are withdrawn, this creates an affordability gap which [local authorities] would need to consider," the report said.

The Landfill Directive sets EU-level targets for the reduction in the amount of biodegradable waste that should be set 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. According to Defra's analysis, withdrawing support from the three projects will reduce the UK's likelihood of meeting this target by 2%, to 93%.

The report also indicates substantial "project specific risks" to the three developments coming online by 2020. Two of the projects have been rated 'amber red' under its colour coded system, as although they are in procurement they are yet to receive planning permission. The North Yorkshire and York project has been assessed as 'red' as "the securing of a satisfactory planning permission is likely to be problematic given the controversial nature of the development".

John Weighell, leader of North Yorkshire County Council, said that Defra's decision was "frankly baffling and disappointing". The council is seeking an urgent meeting with the Government to discuss the future of its project, the Allerton Waste Recovery Park.

"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," he said. "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 us and without warning, is extremely disappointing," he said.