The Department for Communities and Local Government (DCLG) has written to Norfolk County Council saying it will not be providing any financial assistance to the council to help it cover its cancelled waste incineration contract, despite pleas for help.
The Leader of Norfolk County Council, George Nobbs, wrote to Prime Minister David Cameron last month asking for financial assistance, stating that the ‘inaction’ of the Secretary of State for Communities and Local Government Eric Pickles led the council to cancel its incinerator contract with Cory Wheelabrator.
Cancelled contract background
Norfolk County Council’s cabinet unanimously voted to abandon its King’s Lynn incinerator contract with Cory Wheelabrator last month, after it was found that for every day Pickles delayed making a decision about the planning permission for the Willows Power & Recycling Centre, it cost the council £140,000.
Despite previously stating that a decision would be made by 14 January 2014, no indication had been made as to when one could be expected (and no such notification has yet been announced), so the council decided to break its contract immediately to protect it from future costs.
It was originally thought that the cost of breaking the contract would come in at around £30 million (£20.3 million of capped compensation to Cory Wheelabrator, as well as public inquiry costs of £1.6 million, and costs relating to the ending of the ‘hedging arrangement’ of £8.36 million). However, when the contract was formally terminated on Friday (16 May), the strength of the pound and reducing long-term interest rates meant the cost of ending the hedging arrangement had gone up to £11.836million, taking the total costs to around £33.7 million – an increase of £3.4 million on previous projections.
‘Not appropriate for national taxpayers to provide funding for penalty costs’
Despite Norfolk’s plea for assistance (citing DCLG’s culpability in the contract failure), DCLG Parliamentary Under Secretary of State Baroness Tina Stowell wrote to the council saying that it was not ‘appropriate’ for taxpayers’ money to be used to cover the costs.
She wrote: ‘In relation to your point on financial assistance for penalty clauses in cancelled procurement contracts, I would simply observe that it seems that your local authority, in this instance, decided to sign a contract with a penalty clause exposing the local authority to a financial risk, costing £30m, on an issue which was not pre-determined and which is subject to quasi-judicial processes.
‘The details and clauses of any local procurement contract are a private matter between the relevant parties. It is for the local authority to assess the risks and benefits of any local contract prior to agreeing to it.
‘Therefore any need to pay a cancellation penalty is a private contractual matter and is for the local authority to consider how to meet such costs.
‘It is not appropriate for national taxpayers to provide funding for penalty costs, should they arise, from locally-procured contracts.’
The money “has to be found, and will be found”
In response to the letter, Nobbs said: “This puts to bed once and for all the frequent and various suggestions from Henry Bellingham MP that the government would help the county council if it agreed to terminate the Willows contract.
“I'm sure people will agree with me when I say I depreciate the rather dismissive comments made by Baroness Stowell about the efforts and judgement of my predecessor and his administration in relation to this contract.”
He also said that although the new compensation figure was “more than [the council] would have hoped”, it “has to be found, and will be found”.
Steve Morphew, Cabinet member for Finance, added: “More bad financial news is the last thing we needed, but we are already working out how best to protect the people of Norfolk.”
The council is now reportedly considering selling the Willows site at Saddlebow to the Borough Council of King’s Lynn and West Norfolk.
The full council is due to consider a recommendation from the cabinet about the costs of terminating the contract on Tuesday (27 May), and Nobbs has already called for an investigation into the ‘political decision-making’ surrounding its abandoned incinerator contract.
Read more about the Norfolk incineration contract history, or see Baronness Stowell’s letter to Councillor Nobbs.
Get our weekly digest
resource.co article ai
How will the government and DMOs address the challenges of including glass in DRS while ensuring a level playing field across the UK?
There's no easy solution to include glass in the DRS while maintaining a level playing field. Potential approaches include a phased introduction of glass, potentially with higher deposits to reflect its logistical challenges. The government and DMOs could incentivise innovation in glass packaging design and subsidise dedicated return points for glass-handling. Exemptions for smaller businesses unable to handle glass might also be necessary. Any successful solution will likely blend several approaches. It must address the differing priorities of devolved administrations, balance environmental benefits with logistical and cost implications, and be supported by robust consumer education campaigns emphasizing the importance of glass recycling.