Defra defends private waste policy

22 Feb 07
The Department for Environment, Food and Rural Affairs has defended its private finance programme for waste disposal, saying that councils are better protected from risk.

23 February 2007

The Department for Environment, Food and Rural Affairs has defended its private finance programme for waste disposal, saying that councils are better protected from risk.

'Once you've got the money, you still want to make sure that you're spending it on an asset that will work,' Ben Prynn, head of Defra's waste infrastructure delivery programme told Public Finance.

'In private financing, the banks take a lot of responsibility through their due diligence processes, so it's not an easy ride [for a council] to borrow the money directly as it's incumbent on them then to do all the due diligence work.'

Prynn said that although the department was open to the idea of local authorities financing waste disposal and recycling developments through direct borrowing – for example from the Public Loans Works Board – it was wary about hidden costs.

'We're encouraging local authorities not to underestimate the challenges,' he said. 'Banks actually do it for a living, so they are professional about it.'

Prynn said that although he supported private financing, Defra had 'taken the point' of criticisms that its procurement strategy had perversely favoured the same landfill operators that it was trying to supplant with greener recycling methods of waste disposal. The criteria for assessing applications for PFI credits from Defra had now been changed, he said.

Rather than emphasising contract integration, there was now an emphasis on 'not overintegrating'. Prynn added: 'You often find landfill provision in a particular area is very much under the control of one company, so if you put landfill into the mix, that company has a very strong bidding position.

'But… you can always procure landfill on its own and then separately procure what will be the substitute for landfill.'

Eight out of 14 local authority waste processing schemes currently in procurement are under the Private Finance Initiative. Prynn admitted that, with all councils racing to meet the same European Union landfill reduction targets by 2010 and 2013, there was a risk that suppliers could still command a high price for providing finance and technology.

But less integrated contracts would help make the market more competitive by opening it to new bidders, he said.

PFfeb2007

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