Saturday, 16 December 2017

SBC contractors all washed up


The dissolution of the insolvent New Earth Solutions Group - the waste management contractor hand-picked by councillors in the Scottish Borders for a "ground-breaking" treatment project - may herald the end of a dark chapter in the area's local government history.

A decision by the Group's administrators Duff & Phelps to end their involvement with NESG has been published on the Companies House website, indicating it is intended to conclude the administration by way of dissolution.

New Earth's debt mountain together with their failure to deliver the urgently needed £23 million treatment facility for Scottish Borders at Galashiels is probably how the bankrupt firm will be best remembered.

But the role of elected members on Scottish Borders Council in a scandal which saw £2.4 million of taxpayers' money squandered (mainly on expensive consultants) for absolutely no return will not be forgotten either.

Their decision to sanction a completely unproven brand of technology, and to rely on an offshore investment fund - New Earth Recycling & Renewables (NERR) - to come up with the cash for the scheme proved catastrophic.

Unfortunately no-one will be held to account thanks to the lack of interest in the debacle by Audit Scotland, the public spending watchdog which allowed SBC to write off their losses without offering a public statement outlining the factors behind their mismanagement of public funds..

The Final Progress Report to NESG creditors outlines the various debts owed by the Group which appears to have been insolvent long before Borders council pulled the plug on a 24-year contract.

Even the Co-op Bank, a secured creditor owed £41.8 million, has not been reimbursed in full because of "insufficient realisation" to pay.

And although NESG and NERR were inter-linked, the contractors owed the Isle of Man-based fund £39 million at the time of the administration process being instigated for quasi-equity funding. The report states: "There is no prospect of any distribution being made to NERR under its security".

Dozens of unsecured creditors who were owed a total of £9.1 million have received payments equating to 1.5 pence in the pound.

Duff & Phelps' fees for the administration total more than a quarter of a million pounds. In the case of NESG the administrators will be paid £194,740 (748 hours at an average hourly rate of £260). And the fees for New Earth Solutions Facilities Management, which ran the operational treatment plants amount to £90,455 (302 hours at an average of £299.

Duff & Phelps say: "The joint administrators consider they are now in a position to conclude the administration and cease to act. It is intended to exit the administration by way of dissolution."

The insolvency experts have filed a report to the UK Government regarding the conduct of the directors of NESG in the three years prior to administration, but the contents of that report remain confidential.

The end of NESG follows the news earlier this week that Premier Group (Isle of Man) which ran the NERR fund and is also in the process of being liquidated had had its licence to practice revoked by the Manx financial services watchdog for breaches of regulations and failure to pay money due to the authority for the licence.

Thursday, 14 December 2017

Council's offshore "funders" have licence revoked


Premier Group Isle of Man which ran the fund chosen to bankroll Scottish Borders Council's £23 million waste treatment facility has had their licence to practice revoked by Manx. financial regulators for breaching regulations.

Not Just Sheep & Rugby has already revealed how Premier Group collected tens of millions of pounds in fees for controlling and managing New Earth Recycling & Renewables [Infrastructure] Fund (NERR) while that fund was involved in the disastrous Borders project alongside contractors New Earth Solutions Group (NESG).

Research has shown that NERR was never in a position to put up the cash for the combined Mechanical Biological and Advanced Thermal Technology plant at Easter Langlee where a landfill site is due to be closed down next year.

The council scheme also collapsed because of technical other words the form of technology approved by elected members was unable to function. But the loss of £2.4 million of taxpayers' money on the failed venture was blithely written off with no public explanation.

Since then Premier Group has plunged into liquidation with a similar fate for NERR whose 3,250 investors are almost certain to get none of their money back. At the same time NESG is in administration following the revelation it had debts of more than £150 million.

Now the Isle of Man Financial Services Authority (IOMFSA) has confirmed that Premier Group (in liquidation) which was licensed under the island's financial regulations has had its licence revoked with effect from December 6.

Premier, whose managing shareholder is Premier Group Distribution Inc. (PGDI) registered in the British Virgin Islands, had already ceased trading, but IOMFSA was not able to accept the surrender of the licence, according to a statement issued by the regulator.

The statement, which sets out the reasons for revoking the licence, cites the following: "Audit requirements including the provision of audited financial statements for the year ended December 31 2016 of the Financial Services Rule Book have not been met.

"Premier Group has not discharged amounts it owes to the Authority in respect of the last annual licence fee and certain administrative civil penalties".

Yet Premier Group claimed when liquidators were called in that it would meet all of its financial obligations.

IOMSA's statement added: "Under Rule 8.57 (8) of the Financial Services Rule Book the Authority may require a licence holder to hold professional indemnity insurance (PII) cover in respect of claims arising from past acts or omissions.

"The Authority would expect a licence holder such as Premier Group to take steps to hold appropriate PII but Premier Group has not been able to achieve this".

Meanwhile NESG administrators Duff & Phelps have given notice to Companies House of their intention to move NESG from administration to dissolution. Details of the notice are expected to be made public during the next few days.

It seems that in the not too distant future all of the businesses and funds chosen by Borders councillors for their "cutting edge" waste treatment project will cease to exist. And yet none of this warrants an investigation by Scotland's spending watchdog Audit Scotland.

Thursday, 7 December 2017

Police raid council's Belgian bankers


The offices of the Belgian state bank which holds six separate loans taken out by Scottish Borders Council over a decade ago was raided by police this week as part of an investigation into allegations of tax avoidance by companies exposed in the so-called Panama Papers.

Belfius Bank - formerly known as Dexia until the institution had to be rescued by Belgian taxpayers in 2008 - has its headquarters in Brussels.

Six out of eleven LOBO (lender option borrower option) loans drawn down by SBC during 2004 and 2005 are with Dexia Bank. Three were for £3 million each while the three others were for £5 million each. Full details of the controversial transactions were revealed in Freedom of Information requests during 2015 and 2017.

The Dexia portfolio is now valued at over £38 million with the council not due to clear this aspect of its outstanding debt until 2054 and 2065 respectively. Interest rates on the loans range from 3.75% to 4.5%. Critics of LOBO loans claim councils throughout the UK were wrongly advised to borrow from foreign banks by treasury consultants who collected fat bonuses for arranging the credit.

Dexia was one of the "banks of choice" when LOBO loans were being set up in the early years of the Twenty-first Century.

Reports in the Belgian press and media this week say that the Dec.5th raid on the bank followed last year’s revelations that Belfius’former subsidiary, Experta Corporate and Fund Services, had been a prominent client of Mossack Fonseca, the Panamanian law firm at the centre of the Panama Papers probe based on 11.5 million leaked files.

Last year we revealed SBC's other links to Mossack Fonseca. The company in control of the council's bankrupt waste management contractors New Earth Solutions was registered at the law firm's offices in British Virgin Islands.

Experta, a tax consulting firm, helped to establish hundreds of offshore companies on its clients’ behalf, allegedly taking advantage of lax reporting requirements for foreign accounts, according to the Belgian news organisations.

The Panama Papers revealed that Experta requested the Panamanian law firm set up 1,659 offshore entities for clients in Belgium, France and Germany. Most of the companies have since closed.

Experta, whose services range from accounting and tax advice to financial planning was a unit of Dexia Group — the Franco-Belgian bank later renamed Belfius — until 2011. That year Experta was sold to Banque Internationale à Luxembourg.

Directors of Dexia, the former parent bank, included Belgium’s ex-Prime Minister Jean-Luc Dehaene, and authorities are now investigating what role the bank’s managers played in the tax avoidance schemes.

Media commentators claim the raid at the Brussels headquarters of Belfius signals that, after months of investigation by the federal police anti-fraud unit, Belgian authorities have begun to close in on the most active players in the offshore advisory business. 

On Tuesday Belgian officers seized computers and files documenting Dexia and Experta’s business operations, the Belgian press reported.

A Belfius spokeswoman told local media that the bank is cooperating with the investigation.

In the aftermath of the Panama Papers revelations, politicians criticised Experta for enabling tax avoidance, and possibly helping clients hide funds, even after its former parent Dexia had been rescued by the $3.7 billion government bailout in 2008.

“It is inconceivable for a financial institution, which has been supported by taxpayers money, to become involved, actively or passively, in tax evasion on such a scale,” said Finance Minister Johan Van Overtveldt last year, according to Belgian media.

Thursday, 23 November 2017

Suddenly Tories are the "borrowing party"


Conservative-led Scottish Borders Council may have inadvertently set the mood for Philip Hammond's budget by embarking on a borrowing spree which will increase local government debt in the region by in excess of £15 million in 2017/18, equivalent to more than £280,000 a week.

However, this complete turnaround in fiscal policy in the face of Tory declarations stressing 'we must get the deficit down' has not even merited a mention in Borders local newspapers even though the details were published in full in the council's mid-year Treasury Management Report.

The latest hike in borrowing will push SBC's outstanding debt to a figure well above the council's annual revenue budget. The report revealed: "Additional borrowing amounting to £10 million has been undertaken in April 2017. Further borrowing of £5.2 million is anticipated during the remainder of the year".

All of that against a backdrop of £6 million additional grant from the (SNP) Scottish Government and the prospect of the much trumpeted South-east City Deal which is already turning out to be far less attractive for the Borders than the spin doctors would have us believe.

So much for the battle cries of those at the top of the Tory Party since 2010 that "we must not leave higher burdens of debt to our children and grandchildren". Labour were the bad guys who would bankrupt the nation by borrowing billions to fund public services, warned Theresa May and her Cabinet colleagues

In the Borders this greater reliance on borrowing means the council’s external debt which was already £265.4 million at the start of the current financial year (bigger than the annual revenue budget of £264.7 million) will now rise to £271.2 million.

Apparently the current approved (capital expenditure) budget at SBC is higher than the original budget due to "adverse timing movements from February 2017 to 31 March 2017 in areas of the capital plan".

According to the finance document: "The key drivers for the 2016/17 changes are assets and infrastructure - roads and transport infrastructure total additions to budget amount to £1.86 million.

"Also increases to the Land and Property Infrastructure projects total £0.63 million. The Other Corporate Services budget has increased by £2.85 million, principally from the inclusion of additional £2.64 million ICT Transformation budget.

"Children & Young People - School Estate budget increases amount to £3.32 million. The key increases in estimated expenditure result from a net timing movement relating to the construction of Broomlands (Kelso) and Duns Primary Schools.

"Economic Development - Additional budget as a timing movement between financial year amounting to £3.6 million relates to the Hawick Regeneration project".

The council's liabilities comprise long-term borrowing of £198.3 million plus £72.9 million of other outstanding debts. The level of debt has increased significantly over the last five years. The equivalent figures in 2010/11 were £164.8 million for long term borrowing plus £61.8 million for "other liabilities".

But at least the Tory group on SBC can claim to be in step with the party hierarchy. Following yesterday's UK budget in which Chancellor Hammond also embarked on a campaign to increase borrowing any hopes of balancing the nation's books have been dashed until at least 2031.

Unfortunately, in the Borders case, - given the current direction of travel - it could be several centuries before the debt is paid down, leaving generations of council taxpayers to pick up the tab for servicing those burgeoning external liabilities. Interest payments are currently running at more than £10 million a year.

Monday, 30 October 2017

Will Borders waste station find favour this time?

DOUG COLLIE on a council dilemma

Just six months after throwing out proposals for a multi-million pound waste transfer station (WTS) at Galashiels Borders councillors will be invited to backtrack and sanction virtually the same scheme when they meet next week.

Members of Scottish Borders Council planning committee turned down an application in April from local authority colleagues for the development of the storage facilities at Easter Langlee amid fears for road safety outlined in objections from local residents.

There were suggestions at the time that councillors were 'playing to the gallery' just a few weeks before municipal elections were held in May.

That decision threw SBC's waste management strategy into complete chaos given the looming deadline for the closure of landfill sites in Scotland. The WTS is required as a matter of urgency so that tens of thousands of tonnes of household refuse can be taken to Easter Langlee before it is transferred by road to treatment facilities elsewhere.

There are even more individual objections (eighteen) to the revised application which will be considered next Monday. But as before, senior planners at SBC are recommending approval even though they concede the serious shortcomings of the C77 road cannot be overcome.

Opponents have the backing of local ward councillor Harry Scott, and a nearby residents' association has also tabled a strong objection.

A 22-page report compiled by planning officer Carlos Clark outlines the pros and cons associated with the siting of the WTS at Easter Langlee.

The report says amenity impacts - according to protesters - include:

*The development will unfortunately prolong use of the site for waste treatment or disposal. Further consideration should be given to protecting the area for residential and other compatible uses. 

*Concerns are raised regarding impacts on existing residential properties, and potential for future houses.

*The development will prolong and may exacerbate noise, dust and smell concerns (including odours during construction); visual impacts, including trees and landscape issues; vehicle noise (including from more HGVs and from reversing vehicles); and air pollution. 

*The content and findings of a Transport Statement produced by the applicants are challenged, including factual accuracy, speed survey findings and proportion of commercial vehicles using the road. The report is considered to be one-sided in favour of the development being approved. 

The report adds: "There is no answer to the fact that the pinch point between Aislinn Cottage and No 2 Easter Langlee Cottages cannot be widened. This is the most dangerous point of a pedestrian’s journey where the road is not wide enough to accommodate a HGV and another vehicle passing each other, visibility is severely restricted, and verges are extremely narrow and overrun by HGVs. The transport statement confirms that a solution cannot be achieved.

 "Another blind bend creates a similar hazard further north. Proposed improvements were previously judged to be inadequate. There is no change in the improvement proposals that can overcome the intrinsic unsuitability of the C77.

The report to councillors also states that all properties flanking the C77 have had vehicles enter their property through boundary fencing, one experiencing this twice. Vehicles have also come off the road and fallen into the valley adjacent the waste site. Photographs demonstrate instances of vehicles involved in accidents, including one showing a Council refuse lorry (though it is unclear if the lorry was involved in the accident).

Despite there being a 30 mph limit here, a traffic survey carried out on behalf of the Council indicated that, on a weekly average, a substantial number (47.1%) exceeded the speed limit, with excessive speeds ranging between 36.3 mph and 49 mph.

People and children (sometimes unsupervised) with or without dogs walk this road and walkers are increasingly using it. Six properties on this stretch have no other means of accessing a bus stop or post-box without walking on this road. The path through the industrial estate is steep, on an angle and has steps. Therefore, the only route for wheelchair users, those with restricted mobility and parents with pushchairs is to use the C77. There is no footway and the grass verge is non-existent.

Locals also warn: " A major accident, with possible fatalities, may occur and the development should be stopped before the inevitable occurs."

But according to Mr Clark: "The provision of the Waste Transfer Station will provide clear community benefit, particularly in allowing closure of the landfill site”.

The Transport Statement states that there would be 6 extra vehicle movements per day of which 5 would be articulated lorries, when compared with the existing traffic for the landfill. This amounts to 88 movements per day in total, of which 14 would be artics., as opposed to 82 and 9 for the landfill site respectively. 

The predicted traffic would be less than that for the consented MBT (Mechanical Biological Treatment) facility. While that consent is an historic approval it is, nonetheless, a consent that is capable of still being implemented without further planning approval and the judgements leading to that permission are valid considerations here. This increase in traffic is not considered to be significant, he writes.

His report concludes: "Ultimately, it must be acknowledged that the development will replace the existing landfill activity and achieve a waste management solution that will have less intensive traffic implications than the consented MBT facility.

"While objectors’ concerns are legitimate and fully acknowledged, there is insufficient evidence to suggest that the WTS would result in road safety impacts that are so materially different to either the existing landfill operations or approved MBT facility such that the C77 would be incapable of safely accommodating its traffic."

The recommendation is for approval with conditions. 

It will be interesting to see whether the reconstituted planning committee sticks with the previous decision or gives the WTS their seal of approval.

Thursday, 26 October 2017

Methane from Borders landfill = 7,000 cows!

Blowing in the wind EXCLUSIVE by EWAN LAMB

The 356,000 kilos of methane sent skywards from the Easter Langlee landfill site on the outskirts of Galashiels in 2016 equates to the annual gas production of 7,120 beef cattle, according to an investigation conducted by Not Just Sheep & Rugby. 

The rubbish tip operated by Scottish Borders Council is already mired in controversy as planners consider a second application from the local authority who wish to develop a £4 million waste transfer station on land which may already be contaminated.

A growing number of objections to that plan - mainly on grounds of road safety - have been submitted to the planning department which is, of course, another service run by SBC. In the last few days Councillor Harry Scott, one of the Galashiels representatives on the council, has added his voice to the list of waste transfer station opponents.

Meanwhile the Scottish Environment Protection Agency (SEPA) today published environmental statistics on emissions of greenhouse gases in 2016 including methane and the even more damaging chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs).

The reporting threshold for methane is 10,000 kgs per annum and for CFCs and HCFCs 1 kg per annum.

That means the 356,000 kgs of methane emissions at Easter Langlee last year were more than 35 times above the reporting threshold. There was a slight drop from 403,000 kgs in 2015, but the figure was well above the 2010 level of 274,000 kgs.

Scientists claim methane warms the planet by 86 times as much as carbon dioxide (CO2). And based on the estimate that one beef cow emits 50 kgs of methane into the atmosphere each year it would require 7,120 head of cattle to equal Easter Langlee's "performance".

The toxic mixture of emissions at Easter Langlee also included 27.4 kgs of CFCs and 21.4 kgs of HCFCs. Both figures are more than 20 times above the reporting threshold. Levels of CFCs and HCFCs above the threshold are not generated from any other site in the Scottish Borders.

SBC intends closing the landfill facility down in 2018 in yet another bid to comply with Scottish Government regulations on burying household refuse.But their intentions could be jeopardised if planning committee members reject the waste transfer station concept again.

The waste disposal issue should have been dealt with by 2013 had proposals for a modern Mechanical Biological Treatment (MBT) facility been delivered on time. Instead SBC took a huge gamble in a bid to incorporate untried Advanced Thermal Treatment (ATT) technology into the project which resulted in the entire venture having to be aborted in 2015 without a single brick being laid on site.

Now we wonder - mischievously - whether spreading vast quantities of seaweed over the landfilled sections of the Easter Langlee site might cut methane emissions by say 90%. Apparently boffins in Australia may have come up with proof that including seaweed in the diet of cattle might curb their harmful 'botty burps'.

News of this potentially game changing breakthrough emerged in a Scottish Parliament written answer, published only hours before SEPA produced their data. Here is the riveting exchange in full:

John Scott (Ayr) (Scottish Conservative and Unionist Party): To ask the Scottish Government what evaluation it has made of the claim made by the University of Queensland that including a certain type of seaweed in the diet of cattle can reduce their methane output by up to 90%.
Fergus Ewing:  (Cabinet Secretary for Rural Economy): The Scottish Government is aware of this work as part of a wider assessment which it has undertaken on the potential for reductions in GHG emissions to be made through changes to livestock diets.
John Scott (Ayr) (Scottish Conservative and Unionist Party): To ask the Scottish Government whether it has invited any research institutions to evaluate the work of the University of Queensland with regard to methane reduction in cattle by including seaweed in their diet, and to assess whether a Scottish application might be found for this research. 
Fergus Ewing: Experts at Scotland’s Rural College were invited to consider these findings and advised that the reductions observed were based on laboratory based tests only, using seaweeds which are not native to Scottish waters. We remain keen to see how this research progresses and shall continue to monitor developments in this emerging research area.

Tuesday, 24 October 2017

Council "scandal" hits the headlines

NOT JUST SHEEP & RUGBY reproduces the text of an article which appeared in today's edition of Scotland's The National newspaper. It is the first time a daily paper has covered the dossier of evidence compiled after Scottish Borders Council poured at least £2.4 million of public money down the proverbial drain on a worthless infrastructure project

Bombshell report reveals fresh concerns over aborted waste project that cost council taxpayers £2.4m

by Martin Hannan 

Scottish Borders Council refused to answer questions from retired journalist Bill Chisholm, but was rebuked by the Information Commissioner

A BOMBSHELL report about the loss of more than £2.4 million of public money by Scottish Borders Council casts doubt on the official investigation into that loss.

Distinguished journalist Bill Chisholm, who was awarded the MBE for services to journalism when he retired some years ago, spent 30 months investigating the scandal. The Easter Langlee waste transfer system was never built but still cost the public purse more than £2.4m.

Despite Scottish Borders Council (SBC) constantly refusing to answer his questions, Chisholm – now 72 and describing himself as a concerned council tax payer – persevered and the Scottish Information Commissioner ruled in his favour seven times so that he was able to access the information, which he claims shows mismanagement and a misuse of public funds.

But Audit Scotland’s investigation has cleared the council and it says its file on the matter is now closed.

The saga began in 2011 when the council awarded a 24-year waste management contract, valued at between £65m and £80m, to an English firm, New Earth Solutions Group (NESG), which would include the development and construction of a “cutting-edge” waste treatment facility at Easter Langlee near Galashiels at an estimated cost of up to £23m.

Chisholm’s 43-page report alleges the technology to be used at Easter Langlee by Dorset-based NESG, backed by Isle of Man-based New Earth Recycling & Renewables [Infrastructure] PLC (NERR), was not fully tried and tested.

He reports: “In an interview published in the Journal of the Chartered Institute of Waste Management in October 2015 … Richard Brooke, the commercial director of NESG, said ‘The development in Scotland that would have been New Earth’s sixth facility did not come to fruition for a variety of reasons … the specific energy technology to be built and operated was not ready to bring on-line on a commercial scale.’”

The contractors were given more time and 18 SBC councillors and officers visited NESG’s premises in October 2014 – a trip that cost council taxpayers almost £4,000.

NESG then failed to deliver on Easter Langlee. Less than four months later on 19 February, 2015, the contract was terminated.

Both NESG and NERR went bust and SBC had to write off more than £2.4m. The council has since tried to establish its own new £4.8m waste transfer system at Easter Langlee, but after planning problems work has still not begun and the council continues to face penalties for its failure to treat its waste.

Chisholm asked a series of questions about the technology and funding but received insufficient answers.

The Information Commissioner then overruled SBC in very strong terms, saying: “In the Commissioner’s view, disclosure of the withheld information would serve the public interest in informing the public about the actions and decisions taken by the council, the basis for those actions and decisions, and the reasons why the project failed. The project had involved many years of work, and substantial sums of public money.”

Chisholm was finally told by SBC that the costs involved during the lifetime of the contract totalled £1.968 million – excluding 20 per cent VAT – with much of the money having gone to highly paid consultants.

After external auditors KPMG passed the council’s accounts, public spending watchdog Audit Scotland took over as auditors and concluded the council acted correctly. Both SBC and Audit Scotland have refused to re-open any inquiry into the failed project.

Chisholm told The National: “I would suggest Audit Scotland has made a misjudgment [in connection] with the Borders’ £65m waste management contract

“A significant number of people who have read the report, including an eminent procurement expert, have expressed the view that there are many issues I have uncovered which would justify an investigation.

“Examples include the question of whether the council might have breached EU procurement rules, not to mention the complete loss of at least £2.4m of taxpayers’ money.”

Chisholm added: “Audit Scotland may have closed the file on Project Easter Langlee: I have not.”

A Scottish Borders Council spokesperson said yesterday: “Mr Chisholm has not yet presented Scottish Borders Council formally with a copy of his report, however it is worth noting that both KPMG and Audit Scotland have examined the matter and are both satisfied with the steps taken by the council in relation to the contract with New Earth Solutions.”

An Audit Scotland spokesman said: “In our response to Mr Chisholm we explained that our opinion is that the council came to a reasonable judgment in terminating the contract when it did. We are also satisfied that audit work previously completed by the external auditor showed that the council followed a reasonable process in the procurement of the waste management contract.”