Thursday, 26 February 2015

Debt mountains the size of Everest

In a week when Borders councillors calmly authorised writing off at least £2 million of other people's cash following their own catastrophic decision to award a large contract to a company which could not deliver, it was surely an ironic coincidence that the Scottish Government should regale us with the latest local government finance statistics.

The reams of data, published on Nicola Sturgeon's website a couple of days ago, appear to be sitting there virtually unnoticed even though they have a highly depressing monetary tale to tell.

So rather than baffle readers with a huge basket of figures embracing revenue and capital expenditure let us concentrate on just one topic...the level of debt our councils are now wallowing in with no sign of a day when outstanding bills will have to be settled.

The tables show Scottish Borders Council's deficit at the end of the 2013/14 financial year had reached £193.842 million which is equivalent to £1,702 for every man, woman and child in the territory they administer. The local debt pile increased by £728,000 from the £193.114 million in 2012/13.

But if you think that financial situation is unsustainable take a second to digest the overall debt figure for all 32 Scottish councils. I kid you not, the sum owed is £12.950 BILLION. Had this been the Sky Sports vidiprinter churning out the football scores they'd have repeated those numbers in words and in brackets so that incredulous fans could be assured the result was correct and not a practical joke.

The official statistics reveal that between them our local authorities are spending almost £600 million per annum - £598.150 million to be exact - just to service their various debt mountains or bottomless pits if you prefer.

When staff in the Not Just Sheep and Rugby office first read the debt levels for SBC and Scotland as an entity we wondered what the respective deficits might have been ten years ago.

One of our researchers soon tracked down the information via a previous post still available on the Scottish Government/Jack McConnell internet pages.

In those halcyon weeks and months of 2003/04 SBC, which had just shed its entire housing stock to rid itself of even more debt, owed £154.491 million on its general fund - £1,427 for every man jack in the Borders. At the same time the national total was a mere £6.719 BILLION. Happy days!

This means that in the space of a decade our local administrators have presided over an increase of £39.351 million in Borders local government debt, up by well over 20 per cent, with an average yearly increase of almost £4 million. And in those ten years the debt per capita has spiralled by £275.

So it was perhaps fitting that in April 2011 our debt-ridden local authority hooked up with New Earth Solutions (NES) to develop that state of the art waste treatment facility which never quite came to fruition.

A separate piece of research shows that in the year to January 2011 the outstanding debts at NES had reached £55.572 million (up from £26.992 million in 2010) while the company recorded an annual loss of £8.358 million compared to a deficit of £7.548 million the previous year. For the record the company's 2014 loss was £11.996 million.

The NES accounts for 2011 include the following statement: "The process of securing senior debt funding for both the construction and operational phases of the Avonmouth and Scottish Borders projects is at an advanced stage." There's that four-letter word DEBT again.

Yet almost four years later the council and their chosen developer have parted company after NES encountered "issues" in terms of funding for the Galashiels waste centre. What can have gone wrong, you may ask.

But you have to admit that in the overall scheme of things another £2 million squandered and lost won't make that much difference to the respective debt mountains.

Wednesday, 25 February 2015

More than just money down the drain!

The decision by Borders councillors to tear up a £65 million contract for a waste treatment and power generating plant at Galashiels appears to have rendered many thousands of man (and woman) hours a complete waste of time, not to mention the well reported seven-figure financial losses linked to the project's abject failure.

Tucked away in a remote corner of the Scottish Environmental Protection Agency's website can be found a vast assemblage of documentation, running to around a thousand pages, prepared and submitted to SEPA in a bid to secure permission to vary the conditions of a permit to run the Easter Langlee facility.

Now, of course, the certificate will not be required. But the entire process may have to be repeated should the doomed plans for a District Heating (DH) scheme for Galashiels be resurrected. Even a cursory look at the redundant paperwork supporting the application gives an indication of the sheer scale of the effort involved in working up the proposals for the impressively named Easter Langlee Advanced Thermal Treatment Facility Heat and Power Plan.

SEPA's webpage devoted to the Borders project contains the warning: "due to the size of the full application it cannot be forwarded by email". One wonders how many pages of unpublished script, maps, drawings, artists' impressions and technical tables lurk on the compact disc which is/was apparently available on demand.

It was certainly good of the agency to distil the much larger collection of material down to a bite-sized 1,000 pages or so. The literature outlining the ambitious DH scheme alone amounts to 350 pages, including 11 appendices and a 17-page 'offer' from Scottish Power to connect the plant to the electricity distribution system in Galashiels at an estimated cost of £926,331.

This vast report, drawn together by consultants Energetic Project Management, envisaged large swathes of properties on the Langlee housing estate owned by social landlords, nearby private housing schemes, local industrial premises, council-owned properties and buildings occupied by educational establishments being converted and then heated by waste material converted into electricity at the revolutionary New Earth Solutions plant.

A series of consultations was held involving almost 30 top officials and private sector executives from Scottish Borders Housing Association, Eildon Housing Association, Persimmon Homes, Scottish Borders Council, Borders College, Heriot-Watt University, Forth Resource Management Ltd, Schofield, dyers and finishers, Network Rail and the Borders Energy Agency.

But one major player appears to have been less than impressed by the DH scheme, even at this early stage. The other social landlord with a substantial property portfolio at Langlee is Waverley Housing Association (WHA) with a long block of maisonettes in Beech Avenue and cottages in Laurel Grove and Larch Grove.

The report admits:."Several attempts have been made to include WHA in this exercise (by telephone and post), but they have declined to respond. It may be that this will change when the project is in development."

A great deal of time must have been spent calculating the individual energy requirements of more than 400 SBHA tenancies together with similar data for the council's own estate. But the results are laid out for all to see.

Correspondence between the various parties involved in information gathering shows SBHA had confirmed their interest in the concept even before the SEPA application was lodged. The association was also willing to consider the option of shareholding in the energy supply company which was to have been set up to operate the DH scheme.

Now all of the bold ideas, the dreams and the green ideals associated with the Easter Langlee Advanced Thermal Treatment Facility Heat and Power Plan (ELATTFHPP for short!) have been shattered, and for now the glossy brochures and technical reports produced at great cost by the teams of planners and consultants along with the unclaimed CDs will be left to gather dust. Perhaps someone out there will be able to calculate the losses in terms of hours and resources devoted to ELATTFHPP.

Tuesday, 24 February 2015

Cost of that least £2.8 million

The case for an independent investigation into what might be dubbed 'Easter Langleegate' or even 'New Earthgate' may grow stronger by the day. But senior figures at Scottish Borders Council appear to be in no mood to apologise or even express regret following the loss of up to £2.8 million of public money. Instead they seem happy to write off the vast sum,close the entire topic down, and move on.

Far from accepting responsibility for a fiasco which has cost the Borders dearly, our local government leaders, like Sir Malcolm Rifkind, seem convinced they have done nothing wrong. But at least Sir Malcolm confessed to a possible error of judgement.

Indeed a council spokesman is quoted as saying: "£2 million was properly spent on the Waste Treatment Project with New Earth Solutions (NES). Given the contractual obligations with New Earth the money was used both appropriately and we believe effectively."

The vast majority of local taxpayers will surely regard that statement to be both incredible and highly questionable. Perhaps someone in authority at Newtown St Boswells might tell the world what the return has been for such a massive outlay from the council's near-empty coffers.

We require a detailed breakdown of how the money was spent, which parties were beneficiaries, and why the plug was not pulled much earlier on a 24-year contract which was apparently heading for trouble not long after it was signed.

According to the official contract award notice detailing the £65 million deal between SBC and NES in April 2011 the four most important criteria for the local authority were technical capability, value for money, experience and quality of service in that order.

But when New Earth Solutions (Scottish Borders) Ltd, one of 31 active and dormant subsidiaries of NES Group, submitted an application to the Scottish Environmental Protection Agency on May 27 2013 for a permit to operate the Easter Langlee integrated waste recovery and renewable energy facility, the group's only other power generating facility at Avonmouth, Bristol had produced its first electricity just 19 days earlier.

So it could hardly be said NES could claim to possess the technical capability or the experience in what was being classed as a revolutionary and virtually untried method in the UK waste management sector.

It must have come as no surprise to those closely associated with the Borders scheme when it subsequently encountered "project specific issues in terms of technology and funding".

At least one back bench councillor has had the courage to raise questions about the flawed contract in public. It makes a refreshing change after all of the previous chapters in the unfolding drama were heard and acted out in private.

Hawick member Watson McAteer, who recently parted company with the ruling group at SBC, said: "The fact that the council has already sunk more than £2 million on the integrated waste management strategy with the prospects of any residual benefit being negligible is a great concern to Borders taxpayers.

"At a time when services have been cut or reduced, including removal of the garden waste collections, this money could have been used more effectively. I have met with council officers and asked that they confirm that an investigation or review of the circumstances will be completed so that lessons can be learned and any failings if they exist are properly identified and addressed."

But council leader David Parker countered: "There is absolutely no reason to believe that the New Earth project was anything other than well managed throughout. Given that every decision that was taken by council over the eight year life of this project and that the documents are all available, Councillor McAteer can conduct his own review if he wishes."

At the very least it is to be hoped that Councillor McAteer takes up the offer made by Councillor Parker. And if the mountain of paperwork generated by the saga is readily available for inspection then perhaps an independent investigation would not be too difficult to arrange.

Sunday, 22 February 2015

That messy divorce continued...

The £65 million deal between Scottish Borders Council and New Earth Solutions (NES) for the development of a ground breaking waste management centre at Galashiels was facing serious problems at least ten months ago, according to information now in the possession of our chief reporter Doug Collie.

A few days ago we reported on Thursday's announcement by the council that it had abandoned the project, including a 24-year contract with NES for the disposal of garbage generated throughout the Borders. According to both parties the ill-fated scheme - said to have involved expenditure of at least £2.5 million to date - had run into technological and funding issues which could not be resolved.

There had been no previous public pronouncements indicating the Easter Langlee project was at least potentially in trouble, and in fact the council was making encouraging noises about its successful delivery as recently as September last year, and again during October.

In a Freedom of Information response, issued by SBC on September 16, it was claimed planning permission had been secured for an energy recovery facility, and an application for a modification to the operating permit was being progressed with the Scottish Environmental Protection Agency (SEPA). The response went on: "In early 2015 there will be a clear delivery path in place."

Then, following a visit by a 16-strong council delegation to the NES treatment centre at Avonmouth, Bristol, there was an even more upbeat message from council leader David Parker.

Councillor Parker told the Border Telegraph: "The Avonmouth visit was valuable and illuminating. I am satisfied after our visit that we are on the right track and confident the WTF (waste treatment facility) will be up and running before the 2019 contract deadline, hopefully by mid-2017."

But both of those positively glowing statements now appear to have a distinctly hollow ring given the contents of a minute from a private council meeting held on April 29 2014 which has been drawn to the attention of Collie and his colleagues.

Councillors were informed at that meeting that New Earth Solutions had requested a contract moratorium to allow them to put in place a new funding and energy-from-waste development strategy for the Borders project. NES had also experienced funding and technology issues with their Avonmouth plant, the meeting heard.

According to the minute councillors agreed to a contractual moratorium up to October 2014 while a February 2014 contract termination date was to be extended until March 31 2015 so that a "no compensation termination" could be used by SBC if required.

So why were these problems and issues kept under wraps and hidden from the public for almost a year while contradictory messages were emanating from the local authority? Was the project in trouble well before April 2014?

The council statement did not include details of the technical and funding problems which caused the flawed  project to fail. But an indication of those issues which were to scupper a contract carrying potential expenditure of £80 million has now been given to a trade magazine by Matthew Webb, commercial manager at NES.

He claimed new rules mandating the separate collection of food waste in Scotland meant the project would lose food waste feedstock in the future.

The project was also partly affected by Scotland's 'strong support for recycling' and 'less focus on residual waste'. Furthermore, waste volumes have been declining since the contract was signed which meant NES had to secure more waste contracts to help with the project's funding. Changes to guidelines on the thermal treatment of waste also caused delays.

And, according to Mr Webb, the technology gas-to-engine gasification was supposed to be the first of its kind in Scotland and had not yet been proven on a commercial scale. This had also made funding the plant more difficult. Neither the council nor NES were able to address implementation issues faced by the project

Mr Webb's revelations surely beg the question: "Why were none of these problems and issues identified and resolved by officers and expensive specialist consultants before SBC signed multi-million pound contract documents?"

Friday, 20 February 2015

A tax haven and a messy divorce!

A bland statement from Scottish Borders Council announcing the early termination of a multi-million pound contract with a firm of waste management specialists cannot conceal yet another financial disaster which will have cost local council tax payers a small fortune.

The impression gained from reading the waffle compiled by the council's public relations team is of an amicable divorce between SBC and the New Earth Solutions Group, their relationship having encountered some irreconcilable technical difficulties only four years after the parties signed up to a 24-year deal quoted in various newspapers and specialist publications as having a value of between £60 million and £100 million.

NES was commissioned to develop a cutting edge waste treatment plant at Easter Langlee on the outskirts of Galashiels. It was to be central to the council's so-called integrated waste management strategy. The collapse of the project leaves that strategy in tatters, and now SBC will be left to pick up the pieces as it struggles to catch up in Scotland's drive for a zero waste policy.

Millions of pounds have no doubt been wasted thanks to the council's ill-fated dalliance with NES, and millions more will be needed to recover from this latest fiasco. There's also the small matter of that £4.5 million law suit lodged in the Court of Session by Barry Phelps who worked for the council to procure the NES contract and who now wants his share of the "savings".

According to the aforementioned statement, since the contract was signed in 2011 there have been "project specific issues in terms of technology and funding". There's also mention of the partners being "unable to address all the implementation issues faced by the project". It would be helpful and informative to have these difficulties and issues published in detail together with an explanation as to why they were not spotted in advance.

Needless to say Thursday's council debate which preceded the divorce notice was conducted behind closed doors. Councillors also appear to have been blissfully unaware of Mr Phelps' court action until a few days ago even though it's been active since August 2013.

The long-suffering Borders public needs to know the amount of money spent, and subsequently wasted, on legal advice, consultants and other so-called specialists throughout this lengthy debacle. What type of risk assessments were undertaken?

How much did it cost to prepare the detailed assessments and other material needed to support an application to the Scottish Environment Protection Agency for an operational permit? How much was paid to Mr Phelps via his own limited company during his three-year involvement in the procurement process?

In addition there was a 160-page report commissioned by the council into the establishment of a new timber kiln drying capacity linked to the NES facility at Easter Langlee. How much did SBC pay to EnviroCentre for the study, and to Buccleuch Woodlands and Nevin Associates for technical and financial aspects of the study?

So the host of unanswered questions and unresolved matters that surround this sorry saga surely merit a thorough and independent investigation to establish how things went so badly wrong.

Cash-strapped local authorities like SBC cannot afford to squander resources in this manner and it is important to establish whether recklessness or sheer incompetence played a part. Yet the chances of an inquiry seem to hover somewhere between extremely slim and non-existent given Audit Scotland's track record.

Meanwhile it seems surprising to be told funding for the Easter Langlee development was a problem. As far back as 2008 New Earth Solutions launched what it called a series of sub-funds aimed at investors wishing to commit at least £10,000 towards the group's revolutionary green technology for dealing with the country's mountains of waste material.

In 2012 NES was able to proudly announce the funds had topped £100 million, and according to reports on the internet the total had reached an impressive £163.5 million by April 2014.

The Galashiels project has featured regularly in a prospectus aimed at investors. It shows the funds are managed by the Premier Group (Isle of Man) Ltd,with the promise of an annual return of 12-15 per cent net of charges. Offshore investments in the Isle of Man incur no liability to taxes on investment income or capital gains.

The document - freely available on the internet at sites including - also promised investors "robust, predictable, long-term contracted income from local authorities." It explains that a new waste treatment plant was due to be opened in 2015 in the Scottish Borders with a planned capacity of 60,000 tonnes per annum undersigned by a 45,000 tonnes per annum contract with SBC.

Premier Group (Isle of Man) Ltd's directors include David Whitaker who is also a director of New Earth Solutions Group, and John Bourbon, a former managing director of the Cayman Islands Monetary Authority. This Manx company is also the defendant in legal actions being pursued by disgruntled clients, notably in Spain.

Wednesday, 11 February 2015

Gain share and a £4.5 million law suit

This week's alarming revelation that Scottish Borders Council has been involved in a £4.5 million law suit since August 2013 once again emphasises the value of an inquisitive local press.

Borders council taxpayers should be grateful for the investigative journalism of the Border Telegraph which broke the story on its front page today (Wednesday), and left many of us wondering how the council managed to get itself into such a difficult and potentially costly situation.

One thing's for sure...the great Borders public would never have been told of the Court of Session action by management consultant Barry Phelps had the newspaper not stuck its nose into the local authority's private business. Yet surely the sheer scale of the litigation - and the council's decision to defend the claim - must have been debated and approved by a committee of elected members, and duly minuted. Or was it?

That is the first question requiring an answer in a saga which should also warrant a full investigation once the parties have their day(s) in court and the judge delivers his decision.

For those of you who haven't read the Telegraph article a brief resume of the case might be of assistance. It appears Mr Phelps and his company D & P Management Enterprises was hired by the council between 2008 and 2011 to help procure the £65 million integrated waste management facility at Easter Langlee on the outskirts of Galashiels.

The legal action centres on a so-called gain share agreement between SBC and Mr Phelps under which he was to receive a percentage return based on the savings he achieved on behalf of the council. Mr Phelps obviously claims to have cut the bill for the Easter Langlee project by many millions of pounds, but SBC say they owe him nothing.

Mr Phelps says he's already handed over £300,000 in fees to his legal team while the council has engaged hot-shot law firm Brechin Tindal Oatts (BTO) to fight their corner. SBC confirmed to the Telegraph that they had (so far) spent just over £30,000 on the case, but all fees would be recouped in the event of a win in court.

It was BTO which successfully beat off an attempt by the Information Commissioner to impose a £250,000 penalty on SBC for multiple data protection breaches in 2013. It's not clear whether the local authority managed to claw back the hefty six-figure legal bill which they ran up during those proceedings.

Following the Border Telegraph's expose of this disturbing story the council issued a statement in the following terms: “There is currently an ongoing action in the Court of Session raised by D&P Management Enterprises Limited against Scottish Borders Council.

“A director of D&P Management Enterprises, Barry Phelps, was engaged as a consultant to assist SBC in connection with the procurement of the integrated waste management facility at Easter Langlee near Galashiels.

“Mr Phelps is representing D&P Management in the claim which was first raised in August 2013 and relates to the recovery of allegedly outstanding payments arising out of gain share provision.  SBC disputes the claim in its entirety and is defending the action on the basis that no sum is due to the company.

“In terms of legal fees, the Council has thus far spent £30,316 but if the Council successfully defends the claim it will recover its costs. If the claim was successful, the Council would put appropriate plans in place.

“The matter called in court on Friday 6 February to deal with technical issues, with a full hearing of the case to take place in the Court of Session in March and April. As this is a live matter before the Court, sub-judice rule is in force, and as a result, the Council cannot comment any further on the case.”

A future investigation into the episode might reveal to the public just what is involved in a gain share provision. Which members of SBC were told about this arrangement, who exactly signed off the deal with D & P Management Enterprises and Mr Phelps, and how common is this practice within the realms of Scottish local government procurement. 

Sunday, 1 February 2015

Thumbing their noses at the useless FOI system

Jed Forrester has never met Roy Mackay, a resident of Sheep and Rugby Country who must be truly cheesed off with Scottish Borders Council and, for that matter Rosemary Agnew, the Scottish Information Commissioner.

A few days ago Jed's attention was drawn to a decision notice posted on the Commissioner's website which revealed the council had been "convicted" of a seventh breach of Freedom of Information regulations involving requests from Mr Mackay in barely eighteen months.

If you run a check on all of Ms Agnew's decisions in cases involving SBC you’ll discover that on five previous occasions to this one the council failed to respond to Mr Mackay within the permitted timescale of 20 working days. The dates of those decisions were June 28 2013, November 14 2013, March 6 2014, July 15 2014, and July 25 2014.

To compound the felony another decision dated March 20 2014 relates to three separate requests from Mr Mackay for information relating to appointments. SBC failed to respond to two of those requests. On the third occasion they provided information following a requirement for review. If I was Mr Mackay I'd be either spitting feathers or banging my head off the walls of council headquarters in sheer frustration.

This series of farces in which our local authority failed in its duty to answer reasonable requests for information graphically illustrates the utter contempt many public organisations display towards the much vaunted (by the Commissioner) FOI legislation.

It is a disgrace that Mr Mackay has had to seek the intervention of Ms Agnew every time SBC failed to respond to his questions to force the council into action. But it is an even bigger travesty that council officers responsible for fielding questions from members of the public they are supposed to serve know they will not be exposed to any form of punishment from Ms Agnew no matter how many times they flout the toothless FOI rules.

This is the local authority which seldom takes the wishes of local taxpayers into account when making decisions on the services it will deliver yet has the brass neck to commit millions of pounds of public money to that tapestry project few Borderers want to see implemented.

So they are hardly going to take notice of a flawed and worthless FOI system which is supposed to hold councils, health authorities and government departments to account but which instead protects those organisations from public scrutiny.

Do not be surprised to see Mr Mackay's name cropping up on the Commissioner's website again in the not too distant future should SBC choose to ignore yet another request for information. Anyone with seven "previous convictions" for the same offence against the same person would normally be facing a prison sentence or an ASBO at the very least.

But in the cosy world ruled by the Scottish Information Commissioner where penalties and sanctions are non-existent there's simply no chance of that happening. Any public authority which dislikes the FOI system or regards it as an inconvenient nuisance can continue to thumb its nose at requesters without fear of retribution.