Norfolk incinerator latest: No help from government to pay £33.7m compensation costs
17:16 21 May 2014
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Norfolk County Council will get no government help to pay the multi-million pound compensation costs created by axing the controversial incinerator contract, it has been announced.
George Nobbs, Labour leader at County Hall had written to prime minister David Cameron, chancellor George Osborne and business secretary Vince Cable asking for a helping hand.
The council last month voted to pull the plug on a contract with Cory Wheelabrator to build and run the £610m plant at Saddlebow in King’s Lynn, after officers said a delay in a decision from communities secretary Eric Pickles on whether it could go ahead meant it no longer offered value for money.
The decision to scrap it left the council facing a £33.7m bill, including £20m in compensation to Cory Wheelabrator, contractor public inquiry costs of £1.6m and exchange rate and interest rate related costs of £11.86m.
On top of that, £5m had already been spent to procure the contract and buy the site.
But Mr Nobbs today received a letter from the Department for Communities and Local Government making clear no help would be forthcoming.
In her letter, Baroness Stowell, parliamentary under secretary states: “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 predetermined and which is subject to a quasi-judicial process.
“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.”
Last year, the Department for Environment, Food and Rural Affairs withdrew waste credits which would have been worth £169m over the lifetime of the proposed plant.
Mr Nobbs said: “This puts to bed once and 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 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.”
Earlier today, council leaders postponed a decision on whether to sell the site where the incinerator was due to be built.
And whether to go ahead with a proposal to snatch second homes cash back from district councils will also be left to another day.
Under proposals put forward before the potential compensation costs for axing the proposed Saddlebow incinerator went up by £3.4m, two options were put forward to help pay the bill.
One option would take £900,000 from highways maintenance and spend £140,000 less on library books.
The other would make up the missing £1m or so from about half of the money from council tax on second homes which the county council currently gives to district councils.
But a call-in by west Norfolk county councillors John Dobson, Brian Long and Jason Law criticised the officers’ recommendations as “ill-thought through”.
Scrutiny councillors recommended that cabinet review the proposed service cuts with a view to finding the savings elsewhere, in line with Mr Dobson’s proposal.
But at a meeting today, the controlling Labour/Liberal Democrat cabinet decided to ask officers to draw up a further report on how the missing money might be found.
That report will come before the full council at the annual meeting on Tuesday.
A separate proposal from Cabinet scrutiny, that the county council should offer to sell the Willows site at Saddlebow to West Norfolk Borough Council, subject to valuation by the District Valuer, was also pushed further down the line.
The cabinet agreed that any sale should be a matter for the new committees which will be formed after Tuesdays’s meeting.
But officers said the council could not just sell the site to West Norfolk Council and would have to follow due process to get the best possible deal for taxpayers.
And they said the site could still be needed for an alternative way to deal with the county’s waste.