Thursday, 30 July 2015

Fall out from Avonmouth fire sale


The controllers of the offshore fund which would have financed a "state of the art" waste treatment plant for the Borders are refusing to release details of the numerous technical issues which have forced them to sell off the £60 million prototype for the Galashiels facility.

Earlier this week Not Just Sheep & Rugby revealed that New Earth Solutions had failed to solve a range of technological problems at their Avonmouth ERF (Energy Recovery Facility) near Bristol - problems which do not appear to have bothered Scottish Borders Council whose members signed a multi-million deal for an identical project long before the "groundbreaking" incinerator was even operational.

Angry investors from all over the world who lodged many millions of pounds in the Isle of Man-based New Earth Premier Fund are now attempting to recover their cash as the Group negotiates the sale of the troubled Avonmouth plant to an Australian bank and an anonymous institution. Shareholders and investors have been warned the terms of any sale are likely to be unfavourable.

The continuing poor performance of Avonmouth ERF and the need for further significant capital expenditure which still carries significant risk as to its ultimate success, according to Premier director Michael Richardson.

An agent campaigning for overseas investors told us: "Given that Borders councillors unanimously ripped up New Earth's 24-year contract on February 19th 2015, it seems to me that the Borders' termination precipitated the Fund's suspension in a matter of days."

Asked how much the SBC/NES fiasco might have cost, he said: "The council fesses up to £2.4 million of which at least £2 million is to be written off without investigation. For New Earth 'a significant sum - significant enough to generate suspension of the Fund. But I doubt we'll ever know the true cost."

He said although he was unimpressed with Premier's track record of suspended funds, it was his opinion that the burden of responsibility for the investors' problems lay with Scottish Borders Council and not Premier/New Earth.

"The original 2011 contract was for the construction of a mechanical biological treatment (MBT) facility to pre-treat Borders domestic and residual waste - a proven process. However, the contract was amended the following year to include combined heat and energy recovery involving construction of a gasification facility.

"At the time the gasification process was operational on a small scale but nowhere near proven on a commercial scale. I can imagine that New Earth would have taken on the technological challenge with explicit caveats, not wishing to scupper things at that point.

"What I find difficult to understand is why the council was so keen to force the time frame to include the second stage technology which was still in development. Where are the minutes of the various meetings relating to all of this? The taxpayer deserves to know."

Premier Group was asked how much money from the fund had been used to unsuccessfully tackle the problems at Avonmouth, what was the nature of the technological issues and how much New Earth expected to receive from the sale of the failing plant.

The response was less than useful. They said: "The group of companies have decided that specific information on the finances of the businesses is commercially sensitive and not available for release at this stage.

"There have been a variety of technical issues but essentially the technology is not performing as intended and significant additional working capital is essential in order to improve the levels of electricity generation, while also supporting operational losses."

Yet this vastly expensive assemblage of "cutting edge" technology which clearly is not and has not been functioning properly from day one was deemed to be worth a gamble by Borders councillors who planned to use millions of pounds of taxpayers' money on a virtually identical project at Easter Langlee. It should be remembered that this revolutionary incinerator was meant to provide a reliable source of heat and power for hundreds of homes and businesses in Galashiels. It looks as though local residents had a lucky escape!

Premier Group added: "There is no benefit in providing detail of the numerous technical issues (at Avonmouth) as these are based on high-level engineering terms and would not necessarily be useful.

"The negotiations for the sale of the energy business are at an advanced stage; specific details on the transaction will be released once concluded so we cannot release the name of the institution due to reasons of confidentiality at this stage".

It seems New Earth are keeping as tight lipped as SBC, their former partners in a misadventure with worldwide repercussions.

Wednesday, 29 July 2015

FOR SALE! Avonmouth plant which so impressed Borders councillors

EWAN LAMB watches chickens coming home to roost

The waste treatment incinerator near Bristol on which an identical facility planned for the Borders was based is set to be sold off at a knockdown price after the operators failed to resolve a range of technical problems which will cost millions of pounds to fix.

New Earth Solutions' Energy Recovery Facility (ERF) at Avonmouth left a delegation of elected members and chief officers from Scottish Borders Council impressed and satisfied following a visit to the troublesome plant in October 2014. The council was convinced a scaled down version using the same technology, to be developed at Easter Langlee, Galashiels, would be the answer to local waste treatment issues.

The latest dramatic development in the saga - the under-performing Avonmouth facility is causing a "substantial drain" on New Earth's funds - seems certain to increase the pressure for an investigation into why SBC signed up for the deficient and untried ERF technology in October 2012, long before the prototype plant had even generated its first watt of electricity.

The council has so far resisted requests for full disclosure of reports and other information relating to their disastrous and expensive involvement with New Earth by claiming a strict confidentiality clause in their £65 million contract with NES will remain firmly in place until 2021. It is difficult to see how that position can be justified with the contract torn up and the technology on which it was based patently not fit for purpose.

Shareholders in the New Earth funds have been told by Premier Group Isle of Man, controllers of the business, that the level of performance at the Bristol facility has consistently fallen well short of target. Now, a programme of work undertaken earlier this year "has proven to be unsuccessful. Operational, manpower, maintenance and repair costs have consistently proved to be much higher than originally planned."

There is also a strong hint in the document circulated to NES investors that the ERF was in fact under performing when the large Borders delegation toured the plant last year. So what were the questions asked by Borders representatives on that visit?

In April, NES commissioned an external engineering consultancy to carry out a further technical and financial review on the future potential of the plant.

According to Premier: "The consequence of this review is that further essential and significant capital expenditure has been identified in order to potentially improve the ERF plant's performance. Based on history, this programme will still carry substantial technical risk.

"In addition, the continued under performance of ERF still requires further working capital to support operational losses until capital modifications are made over the next 18 months. As with all technology there is often a steep learning curve and sometimes a high degree of uncertainty as to the outcome and these have unfortunately been amploy demonstrated in the performance of the ERF to date."

The risks and 'high degree of uncertainty' appear to have been totally ignored by Borders councillors, the paid officials who advised them and the so-called experts from private consultancies who made up the Easter Langlee project team. The result is a spectacularly failed venture which has already cost taxpayers several millions of pounds and will cost millions more in future not to mention the knock-on impacts for the local environment.

In what appears to be a desperate bid to save New Earth's skin, the directors of the fund have embarked on a so-called demerger of the energy and waste businesses within the group. The energy business, including the £60 million Avonmouth ERF will, hopefully, be sold and refinanced.

The report to shareholders says: "Conversations are at a very advanced stage with Macquarie Bank and an (un-named) institution for the sale of the energy business combined with refinancing.

"Given the continuing poor performance of Avonmouth ERF and the need for further significant capital expenditure, which still carries significant risk as to its ultimate success, the terms of any sale are unfortunately likely to be unfavourable for shareholders."

The latest revelations certainly provide strong evidence that Scottish Borders Council bought a proverbial pig-in-a-poke when councillors sanctioned radical changes in their multi-million pound contract with NES on October 25th 2012. The resultant mess will not be cleared up until ALL of the facts and figures are made public.

Tuesday, 28 July 2015

Viasystems revisited - ruthless as ever

DOUG COLLIE on the 'casino capitalists' who still haunt the Borders

Mention the name Viasystems anywhere in the Central Borders and you are certain to evoke memories of some of the darkest days in the region's chequered industrial past when the US electronics conglomerate pulled the plug on a thousand jobs in Selkirk and Galashiels before disappearing across the Atlantic with the spoils from their asset stripping exploits.

In 1997 the printed circuit board moguls from St Louis, Missouri had promised their Borders workforce such a bright future they'd all need sunglasses. But a year later the guys in the sharp suits were gone, leaving the skilled PCB makers to pick up the pieces of their shattered lives and dealing the regional economy a near fatal blow.

The Mills brothers - Jim and Bob - who founded the business and ran the show together with colleagues like David Sindelar, the company's chief finance officer, showed complete disregard for the families who suffered at their hands, and union shop stewards dismissed the group of mercenary Yanks as 'casino capitalists' who gambled with people's lives to become filthy rich.

So it was intriguing for those of us who lived through the Viasystems nightmare to learn the much-maligned company had been taken over by another PCB outfit called TTM Technologies Inc., from California. TTM paid an impressive $927 million dollars to clinch the deal, much of the money being required to pay off Viasystems' extensive debts.

Not Just Sheep & Rugby was anxious to discover what the gang of heartless executives who brought misery to hundreds of local folk seventeen years ago had been up to in the interim, whether any of the main players from the Borders trauma were still with the company, and was there a chance some of those at the top might get their deserved comeuppance?

We discovered that it's been very much business as usual following the decision to up sticks from Scotland, become bankrupt in 2001, then rise like a Phoenix from the ashes three years later with a multi-million dollar development programme aimed at world domination of PCB production. A series of new factories were built in China and Mexico to take full advantage of the cheapest labour on the planet.

The odious Mills brothers are long gone: pensioned off with massive golden goodbyes. Some will remember they even paid themselves bonuses shortly after completing their dirty work here in the Borders.

But Mr Sindelar is still around. He managed to climb right to the top of the greasy pole where he now sits as chief executive officer on a basic annual salary of $920,000 dollars, and total earnings in 2014 (inclusive of stocks, bonuses, compensation and pension enhancements) of $3,634,239. But that was a relatively poor year for him compared to 2012 when he trousered $4,520,155. His car allowance last year - $33,994 - was also pretty impressive.

Some of Viasystems' employees fared rather less well than Mr Sindelar. A rationalisation at the Juarez plant in Mexico saw the scope of operations and the workforce reduced by 22% during 2014 with the company shelling out $600,000 on numerous severance packages. Another community devastated by Viasystems' actions, just like Selkirk all those years ago.

And there have been issues too in China where disgruntled employees at the biggest factory stopped work temporarily even though Viasystems had become totally "non-union". A fire at the Guangzhou facility damaged property, destroyed inventory and temporarily reduced manufacturing capacity. The company raked in $33 million dollars from the resultant insurance claims.

The penny pinching outfit, always hoping to force down costs and pay overseas workers as little as possible, have taken steps to counter new minimum wage levels which vary in each of the Chinese provinces.

According to a Viasystems file lodged with the US Securities and Exchange Commission (SEC): "With anticipated changes in minimum wage laws in China we expect our labour costs will increase. We have begun reducing staffing at certain of our Chinese plants."

It is interesting to note that the Chinese minimum wage in 2015 ranges from 1,030 yuan per month in Guizhou province to 1,820 yuan per month in Shanghai. The sterling equivalents are £106.84 and £188.79 respectively. Hardly in David Sindelar's league!

Meanwhile back in the USA Viasystems has been mired in law suits in Delaware and Missouri. It is alleged that company bosses grossly under-valued the business during the takeover negotiations with TTM, charges that are without foundation say the Board of well-heeled directors, all of them earning at least $210,000 a year.

And if David Sindelar is concerned that the new owners might want to add him to the long list of Viasystems severance deals then he can at least rely on an arrangement he has with the company which means he is entitled to up to $9.1 million dollars if his employment is terminated or there is a change of control.

It's all enough to give casino capitalism a bad name!

Monday, 27 July 2015

Borders councillors silent on crucial tax reform issues


Top brass at Scottish Borders Council have warned a Government commission investigating a possible replacement for the council tax of a possible migration of Borderers into England for financial gain if a system of local income tax is introduced.

The paid public officials who make up SBC's Corporate Management Team have lodged a highly subjective six-page submission on behalf of the local authority with the Commission On Local Tax Reform which is expected to report in the autumn.

But although the future of local government finance in Scotland is regarded as one of the most important issues facing the country's 32 councils there has not been a single contribution to the commission from any Borders councillor or the various political groups at Newtown St Boswells. The Tories nationally have boycotted the initiative by the SNP Government to consider a "fairer" system of paying for local services.

One observer of the Borders local government scene commented: "Regrettably this demonstrates just how SBC is officer-led with our elected members apparently unable or unwilling to make statements or air their views in public. Surely we have the right to know whether local councillors are in favour of keeping the council tax or replacing it with some other system".

The Corporate Management Team certainly pull no punches in their hard-hitting statement to the commission whose members include Borders Liberal Democrat councillor Catriona Bhatia.

They suggest the commission carries out more detailed research into other forms of local taxation, particularly land tax, tourist tax, and Development Land Tax. The submission, signed by chief executive Tracey Logan, claims any proposal to introduce a local income tax would have to address a list of issues.

According to the Borders evidence: "As the tax is on people and not property there is a danger that the tax will be seen as an additional tax rather than replacing the council tax. Scotland may be viewed as an area of hihger taxation making it less attractive for potential and prospective residents as well as businesses.

"This is even more of a concern in the Scottish Borders due to the area bordering England. There is a risk that people (especially those near the border) would migrate into England for financial benefit. A tax based on personal income may encourage tax avoidance behaviour especially by those able to obtain specialist tax advice."

It is also claimed that students who are currently exempt from council tax may find themselves paying tax on part-time earnings. This may have an impact on where students choose to study as well as where they choose to work after qualifying. It may also have the indirect effect of increasing the level of student loans.

"Many young people living in the Scottish Borders and Scotland who do not currently pay council tax may consider leaving if the income of a local income tax on take home pay is significant and is not a factor in England", adds the submission. "Businesses may look to relocate elsewhere due to higher personal taxation, higher taxation for their employees and the administrative complication of two tax rates. There is potential for businesses to be targeted to relocate especially into the North of England which this local authority borders. Finally, local people may object to paying the same level of taxation for services whose quality is perceived to vary across Scotland."

The officers go on to argue that a property-based system like the council tax presents advantages for rural areas such as the Scottish Borders.

"While recognising the current system is in need of reform and some modernisation, in general the current system benchmarks well against the principles of effective taxation. It is very stable, has high collection levels, has low collection costs at around two per cent and is generally accepted and understood by large sections of the local electorate.

"The overall fairness and ease of understanding could be improved by undertaking wholesale revaluation (of properties) with regular revaluations thereafter to maintain a fit for purpose framework."

It is also suggested that a fair system of council tax banding is pivotal to a progressive system of local taxation. As such the number and widths of the council tax bands require to be amended to make the system more progressive. "Consideration should be given to increasing the number of bands at both the top and bottom ends and the ratios between bands with a review of bandings being undertaken at each valuation cycle."

The commission/Scottish Government also needed to work towards lifting the council tax freeze to ease the pressure facing local government services, particularly in the Borders with respect to the increasing number of older people requiring care.

The document concludes: "It is desirable, particularly in rural areas, that the administration of local taxation is carried out locally rather than being centralised. There are relatively high value jobs involved in the land taxation process and their loss would adversely impact on local economies particularly in rural areas."

Sunday, 26 July 2015

The £9 million contract that never was!

DOUG COLLIE unveils another "Wastegate" poser

Not Just Sheep & Rugby recently published information which suggested over £1 million worth of construction work had been commissioned at the proposed Borders waste treatment facility at Easter Langlee before the ill-fated project was abandoned by councillors earlier this year.

The mysterious sum lay tucked away in a corner of the audited accounts of New Earth Solutions (Scottish Borders) Ltd., the £2 company awarded the multi-million pound contract by Scottish Borders Council. Unfortunately, NES claimed it could not answer questions or provide explanations for their accounts entry: " "Construction work in progress at 31/1/2014 £1,136,771".

The problem is that despite New Earth's substantial losses in their Galashiels venture, and the millions of pounds of taxpayers' cash frittered away and written off by the Borders local authority there is nothing to show for their combined lavish expenditure. Yet no-one seems to believe the fiasco warrants a thorough independent inquiry.

Now, our attention has been drawn to a £9 million contract finalised in late 2011 when the council and NES told Galashiels residents: "We are delighted to announce that Muir Construction has been appointed to build the new waste treatment facility at Easter Langlee".

For some strange reason that announcement was confined to the pages of the Easter Langlee Community Newsletter (December 2011 edition) which can still be read online. Our researchers can find no trace of a press statement heralding the important event from either SBC or NES even though their respective logos adorn the front cover of the newsletter.

The only other public reference we could find was in Construction News, a building industry publication which merely gives the value of the contract as £9 million. So presumably the time spent on this aspect of the scheme by council officials, personnel from NES and specialists from Muir Construction also added up to a considerable financial loss for all concerned.

The contract awarded to Muir Construction, one of Scotland's largest privately owned construction companies, was for the Mechanical Biological Treatment (MBT) plant. It would have diverted up to 80 per cent of Borders rubbish from landfill.

But within a few short months councillors sanctioned a so-called Deed of Variation for their £65 million contract with NES which meant the environmentally friendly MBT was never built. Eventually the entire initiative to assist Scotland's Zero Waste strategy collapsed, leaving council taxpayers in the Borders heavily out of pocket, investors in NES funds unable to access their cash, and the local waste treatment regime in complete disarray.

The contract for the MBT resulted in two overhead electricity cables being diverted to free up the Easter Langlee site for development. According to the newsletter: "This proved a complex task, but has been completed with minimal disruption to local homes and businesses". It is believed that element of the project cost a six-figure sum which should be added to the escalating list of losses.

Partners SBC and NES assured the people of Easter Langlee the construction process would commence in January 2012 and would be completed by January 2013. They added: "Final commissioning and staff training will follow so that the facility is ready to receive waste in April 2013."

A much needed jobs bonanza was promised in the newsletter which declared: "New Earth is committed to employing local people in all our facilities. Job roles will range from site manager, environmental technician and administrator to banksman and mobile plant operators." Sad to say this welcome boost for the local economy never materialised either.

The bullish SBC and NES even invited the populace to "Meet Our Construction Partner" at a special event in a local church hall on January 11th 2012.

Details were supplied of the five phases required to deliver the MBT facility. Earthworks would create a tiered, three-level development platform followed by the installation of driven concrete foundation piles and laying of the foundation and floor slabs. The rest of the building work would follow.

So where did it all go wrong? The MBT had been fully designed and costed after receiving planning permission, and an operating permit from the Scottish Environment Protection Agency. The £9 million contract appears to have disappeared into thin air along with the many millions squandered by the local authority.

There remains an unfulfilled need for a full public explanation for the controversial and costly decision by the council and/or NES to shelve the MBT apparently within weeks of Muir Construction's appointment to build it in favour of a risky and highly ambitious project requiring largely untried technology.

Friday, 24 July 2015

Housing crisis forces more into temporary accommodation


The sharp fall in the level of investment in social housing in the Scottish Borders has coincided with a dramatic increase in the number of households being forced to seek shelter in temporary accommodation, according to sets of data released under Freedom of Information regulations.

There are plans to invest up to £22 million in a bid to address a chronic shortage of affordable homes in the region via the council's joint initiative, Bridge Homes Limited Liability Partnership, with plans for 200 house completions. And the latest statistics on expenditure and use of temporary housing units would suggest an increase in the local housing supply cannot come fast enough.

According to the figures some £7.2 million was spent on social housing projects in 2009/10 with a start made on 112 new homes and 165 completions during the following financial year.

But by 2013/14 expenditure had plummeted to just £2.2 million (it was a dismal £800,000 in 2012/13). The number of site starts in 2013/14 was 62 while there were 49 completions in 2014/15.

In a separate Freedom of Information response, statistics show the number of households in temporary accommodation during 2014/15 at 397 was 43 per cent higher than the 276 recorded in 2010/11. Meanwhile the numbers entering temporary housing went up by 57 per cent from 227 in 2010/11 to 357 2014/15.

The mean average cost per night for social sector accommodation is given as £25 before Housing Benefit income is taken into account. The average cost of placing homeless people in bed and breakfast accommodation is £53, according to the response.

Scottish Borders Council currently has access to 107 housing units (2013/14 figure) which the local authority sub-lets from local registered social landlords with an additional 67 private sector leases.

The FOI requester also asked how many nights did households accepted as homeless spend in temporary accommodation during 2013/14. In the social sector 74 single households spent a total of 10,777 nights in temporary housing with 37 other households being being accommodated for 8,237 nights. Bed & breakfast establishments were used to provide shelter for the homeless on 369 nights.

In their response, the council add the following caveat: "Figures may under-estimate the total time spent in temporary accommodation as the data set only commenced in April 2013".

Tuesday, 21 July 2015

"Extremely uneconomical" food waste collections in full swing

EWAN LAMB chews the cud on a truly mouthwatering issue!

The occupants of every "non rural" property in Scotland must be provided with a separate kerbside food waste collection by the end of 2015 irrespective of the costs involved.

It means local authorities like Scottish Borders Council, whose refuse management officers dismissed such a service as 'extremely uneconomical' in an official submission to Scotland's Government in 2011 are now firmly aboard the food waste bin wagon despite claiming local collection costs would work out at more than £350 per tonne.

But while Hawick and the "accessible small town" of Jedburgh (population 4,030) will get their food waste caddies in time for uplift in September, an extremely quirky and totally bizarre piece of classification by some faraway faceless civil servant means the "remote small town" of Kelso (population 5,639) 'does not require to receive a kerbside food waste collection service'.

Residents in Galashiels, Peebles and Selkirk have been putting out their food scraps for the scaffie cart for several weeks now after Zero Waste Scotland handed SBC £250,000 to help pay for the new municipal service covering 24,000 households. But none of the towns of Berwickshire - Eyemouth, Duns and Coldstream - qualify for the weekly collections.

We wondered if, like the good citizens of Kelso, the folks who dwell in The Merse were making do with an inferior variety of grub at mealtimes which meant their leftovers were not worth recycling. But no, the formula used to place Borders towns in accessible and remote categories is much more complicated than that.

It all depends whether you happen to be living in "a settlement with a population of between 3,000 and 10,000 within a 30-minute drive time of a settlement of 10,000 people or more".The document outlining the criteria adds helpfully (?):

"The above information was published by the Scottish Government along with a
series of postcode look up tables for each Local Authority area. Where each
table summarised the postcodes that fell within a rural area of each Local
Authority boundary. Kelso was listed as such an area and therefore not required to
receive a kerbside food waste collection service."

Is that clear? Oh, and by the way, that 30 minute drive to a larger settlement is based on a HGV collection vehicle's journey time and not on a normal domestic vehicle's travel time.

As we've already pointed out the events of 2015 represent a complete change of food waste collection policy in the Borders. When the Zero Waste consultation was on the go four years ago SBC declared: "Having conducted a review recently of a separate food waste collection service it was deemed extremely uneconomical to provide such a service across such a large geographical area."

The submission went on to suggest: "It is estimated that a food waste collection would cost in excess of £350 per tonne. Scottish Borders Council considers that the collection of both food and garden waste will provide the most efficient and cost effective means of collecting biowaste. Such benefits would include savings related to omitting the need for separate collection vehicles, systems and containers for food only biowaste."

However, within a couple of years of that seemingly sensible proposal being mooted councillors voted to withdraw Borders garden waste collections completely, making the green bins which would have doubled up as receptacles for food scraps redundant and surplus to requirements.

The concept of joint biowaste collections also met with the approval of the council's former waste management contractor New Earth Solutions. Their separate submission during the Zero Waste consultation advised: "We consider that the collection of both food and garden waste will often provide the most efficient and cost-effective means of collecting biowaste in most Scottish local authority areas."

Where did it all go wrong, and where does the Borders food waste end up being treated?

Thursday, 16 July 2015

Did construction work really start on Borders waste plant?


At least another £1.1 million appears to have been lost on the disastrous Easter Langlee waste treatment project involving Scottish Borders Council and the New Earth Solutions Group, according to the latest revelations to emerge from the wreckage of the fiasco.

The local authority has casually written off at least £2 million of taxpayers' cash amid claims it did nothing wrong after terminating its £65 million contract with NES after the company could not deliver the waste treatment plant because of funding and technological issues.

But it appears from the audited accounts of the company set up specially to carry out the multi-million pound contract for SBC that a substantial amount of building work was under way at Easter Langlee at some point between the signing of the original contract in 2011 and the end of January 2014.

New Earth Solutions (Scottish Borders) Ltd was launched with just two £1 shares in 2011 to act as a so-called SPV (Special Purpose Vehicle) to steer the waste treatment project through the various development phases from a proposed start in January 2012 to completion twelve months later.

There may be no evidence whatsoever of any building work ever having taken place at the Galashiels site. But included in NES (Scottish Borders) latest published financial records is a puzzling entry which states: "Construction work in progress at 31/1/2014 £1,136,771".

Most of the money seems to have been sourced from shareholder loans (£1,136,360), and the accounts confidently state: "The business plan projections up to January 2016 demonstrate the company can trade within its facilities with the support of its major shareholder, New Earth Recycling & Renewables (Infrastructure) PLC."

But as Not Just Sheep & Rugby reported only last week the New Earth Recycling & Renewables (NERR) Fund has been suspended for many months and investors from around the world are trying desperately to extricate their cash, so far without success.

New Earth Solutions was asked: "What does this substantial sum of money refer to? Is it the amount owed to contractors?"

But Matthew Webb, from NES Group replied: "We are unable to respond to your questions. Please direct all questions to Scottish Borders Council".

It is difficult to comprehend how a public body could be expected to explain the presence of £1.136 million on the books of a private company. So it seems NES, like Scottish Borders Council, is not prepared to provide the paying public with an explanation for their expensive actions.

Meanwhile, back in the real world, there are further hints that failure to build the much needed plant could result in tens of thousands of tonnes of Borders rubbish having to be transported out of the region for treatment and disposal.

The topic of waste management has cropped up during the Scottish Government's consideration of the Scottish Borders Local Development Plan (LDP). Planning officials representing the Scottish Ministers have asked SBC to comment on the implications of the existence of a significant shortfall in waste management facilities, the emphasis being placed "on need over proximity", and the achievement of a sustainable strategy possibly involving waste crossing planning boundaries.

In a response published on the Government's planning website, the council's Barry Fotheringham says SBC recognises the shortfall in waste management facilities by identifying Easter Langlee landfill site as being strategically important to the Scottish Borders, safeguarding the site for waste management purposes.

Mr Fotheringham goes on to tell Scottish Ministers: "Easter Langlee landfill site currently benefits from detailed planning permission for the erection of an advanced thermal treatment plant which would process municipal waste producing residual electricity and heat.

"This would allow for Scottish Borders waste and secondary resources to be managed in the most appropriate centrally located installation by means of the most appropriate methods and technologies."

Unfortunately, there is a slight drawback, which Mr Fotheringham goes on to explain. He states: "However, it is worth noting that the contract between Scottish Borders Council and the thermal treatment plant provider has recently been terminated.

"This will require the council's Integrated Waste Management Strategy (IWMS) to be reviewed in the short, medium and long term. It also has implications for cross boundary transfer of waste materials to other local authorities for treatment which will be considered as part of the IWMS review."

Wednesday, 15 July 2015

Equivalent of two new towns needed, say house builders


House builders are demanding a staggering eight-fold increase in the amount of land allocated for new homes in the Scottish Borders over the next ten years even though they have consistently failed to meet completion targets which slumped to an all time low in 2014.

The yawning gap between the figure of 4,989 additional building plots being touted by construction industry pressure group Homes for Scotland and the 630 allowed for in Scottish Borders Council's Local Development Plan (LDP) is one of the key unresolved issues currently being examined by Scottish Government planning officials.

The examination of the LDP, which began last October, is expected to be completed next month. In the course of the investigations into dozens of planning issues the council and interested parties have been invited to submit further information to Scottish Ministers, and a hearing took place earlier this year when the dispute over the allocation of housing land was the topic for discussion.

According to the published LDP, there are sufficient development sites spread across the region to accommodate 13,422 new houses between 2009 and 2025. This includes the 630 extra houses which could be built on 15 sites, and there is added flexibility provided as the LDP also allocates 51 redevelopment opportunities covering 62 hectares.

Borders planners state: "In overall terms the Scottish Borders provides a large and generous housing land supply, in part to meet the diverse geographies of the area, but also reflecting the Council's desire to promote economic development. The total established supply is substantially in excess of current demand."

That claim is backed up by a series of statistics on the achievements of house builders, many of them members of Homes for Scotland. The council says: "It is noted that the house building sector has not delivered the requirement for the period 2009 to 2014, falling short by 2,988 units, based on 1,837 completions and a requirement of 4,825."

The average rate of completions during the period was 367 houses and the total has not exceeded 306 in each of the last three years.

"The significant decrease in completions across the Borders is a result of the economic downturn; many of the sites under construction have stalled due to lack of developer and mortgage finance", the council has told Scottish Ministers. "The release of further land would not solve the issue of market demand."

Homes for Scotland together with several planning consultants working for clients in the private sector do not accept the council's statistics and recommendations.

The national housing agency, which challenges policy makers on behalf of its members, argue that the 630 extra homes allowed for in the LDP is at least 3,709 short of the 4,399 required. And if a so-called 10% generosity allowance is built in to the calculations Homes for Scotland believes there would be an additional need for 4,989 homes.

To give that figure some context, between them the towns of Selkirk (2,779) and Jedburgh (1,915) currently have 4,694 households while Peebles has 4,034, according to the 2011 census.

So is Homes for Scotland and its members seriously suggesting the Borders will need the equivalent of another Jedburgh and Selkirk or an additional expanded Peebles as well as the extensive collection of development sites already available by 2025? If so, the Borders Railway will need to generate a housing boom the like of which has never been seen in the region's history.

Sunday, 12 July 2015

Extra millions for Borders Common Good funds


The value of the eight Common Good funds in the Borders increased by more than 35 per cent in the space of a year following revaluations of land and buildings and the return of heritable properties previously in the ownership of the local council.

But at the same time the "charitable activities" of the funds - grants to worthy causes - during 2014/15 fell by more than 44 per cent from £154,000 to just £85,000.

The figures can be found in the Unaudited Annual Report and Financial Statements of the funds which are administered by Scottish Borders Council. Governance costs including the charges levied by SBC, and the payment to the external auditor totalled £50,000 last year, down from £56,000 in 2013/14.

Between them the funds for the former burghs of Duns, Galashiels, Hawick, Jedburgh, Kelso, Peebles, Lauder and Selkirk are now worth £13.392 million compared to £9.742 million before assets were revalued or transferred. The revaluations alone added £3.497 million to the funds, boosting so called tangible fixed assets (land and buildings at net book value) from £7.092 million to £10.622 million.

The main beneficiaries from the revaluing exercise are Hawick (up from £2.532 million to £3.675 million) and Selkirk (£2.104 million to £3.312 million. In addition, there were significant increases for Lauder (£691,000 to £1.028 million) and Peebles (£678,000 to £914,000).

There have been complaints aired throughout Scotland concerning the alleged "disappearance" of Common Good property, originally bequeathed to former burghs and royal burghs by Scottish monarchs many centuries ago. Other gifts from generous benefactors are also said to have wrongly fallen into local government hands during relatively recent reorganisations of council structures.

A number of local authorities, among them SBC, have - to their credit - ordered investigations in a bid to establish the true ownership of land and buildings currently part of council portfolios.

As a result of inquiries into potential Galashiels Common Good assets a number of items - Bank Street Gardens, Old Gala House, Ladhope Golf Course and other smaller parcels of land and property with a total value of £313,000 have recently been transferred into the burgh fund.

Further research could see Common Good funds across Scotland reclaiming possession of additional heritable property. But a considerable number of former Scottish burghs - examples in the Borders are Coldstream, Eyemouth, Melrose and Innerleithen - have no Common Good assets at all.

Some critics claim that cannot be right, and detailed investigations into ancient deeds and charters, and long forgotten town council minutes could uncover a treasure house of "skeletons in the wrong cupboard".

The accounts for the Borders funds do not specify reasons for the marked fall in financial help for organisations within the towns. The largest 'givers' were Jedburgh (£34,000), Peebles (£21,000), Selkirk (£16,000) and Hawick (£12,000). The funds in Duns and Galashiels did not make any donations.

Thursday, 9 July 2015

Was New Earth Fund such a good bet?


Dozens of investors from around the globe have formed a pressure group in a bid to rescue their cash from the offshore fund which was to have provided millions of pounds to build a new waste treatment plant for the Scottish Borders.

The New Earth Recycling & Renewables Fund (NERR), approved by Scottish Borders Council as the funding source for the new treatment facility at Easter Langlee, Galashiels, has been suspended since April 2014, leaving investors unable to access their money and "with a growing feeling of frustration and distress."

NERR had also had its listing suspended on the Channel Islands stock exchange in November 2013, over a year before the contract between SBC and New Earth Solutions Group had to be scrapped in February of this year. NES was subsequently unable to deliver the waste plant because of funding and technological issues.

Some very serious questions are now being asked about the "high risk" NERR fund which is controlled by Isle of Man based Premier Group. Could the fund's apparent difficulties be the reason for the complete collapse of the Borders' waste strategy which was inextricably linked to NES?

Not Just Sheep & Rugby can also report that serious doubts were being expressed about NERR as far back as July 2008 when potential investors were warned: "This is a fund that is very expensive, that has few, if any, of the benefits of a professionally managed, diversified portfolio, and which appears to be subject to a high degree of risk, including granting unsecured credit to a tiny company on what appear to be fairly generous terms."

David Whitaker one of the directors of Premier, which also has links to businesses in the tax haven of British Virgin Islands, was also on the Board of New Earth Solutions (Scottish Borders) Ltd, the SBC's contractors.

It is not known whether Scottish Borders Council or its financial advisers were aware of the potential risks associated with NERR while they were negotiating a £65 million contract with NES between 2008 and 2011. But a confidential report to councillors in March 2011 which recommended approval for the original deal names NERR as the funder for the Galashiels project.

A second report, considered in private in October 2012 when councillors agreed to radically alter the contract, gives this assurance: "Finance and the Council's External Financial Advisor have been involved in evaluating the options and scenarios throughout the discussions with NES. This has ensured detailed information is available in respect of the financial implications of the recommendations."

Further on in the document councillors are told: "The project team have utilised the expertise of external consultants for financial, legal and procurement advice throughout these negotiations with NES. It is standard practice for a local authority to utilise external expertise to reduce the legal and financial risk in a project of this scale.

"The external consultants that have advised the project team throughout these contract negotiations were involved throughout the competitive dialogue, evaluation, and contract award procedures and this continuity has benefitted the Council through this process".

The cost of that advice was considerable, as a Freedom of Information request revealed recently. SBC paid Nevin Associates £143,401 for financial counselling, technical assistance from SLR, a global organisation, cost £184,345, project management advice was supplied by SOLACE and Practicus at a cost of £92,475 and £116,042 respectively while the expert legal service from Edinburgh law firm Brodies resulted in a bill for £679,316. The end result is a nil return for massive expenditure of public money.

As the Council's disastrous involvement with NES neared its financially catastrophic conclusion the investors in NERR were becoming increasingly concerned about their money.

Now a special pressure group has been formed by the ExPat Investment Club (EPIC) to "seek speedy financial redress" for its members.

When the fund was launched in 2008 to invest in UK recycling facilities profits were to be derived from five income streams including capital appreciation on the underlying value of long-term local authority contracts. The Borders contract with NES was to last 24 years, but was terminated after just four years.

According to EPIC the warnings issued by sceptical investment commentators failed to deter a number of commission-hungry Independent Financial Advisors who energetically promoted NERR. The promotions led Premier Group to launch fund variants in US Dollars, Euros and Singapore Dollars between 2010 and 2012 before David Whitaker was able to announce in 2012 that NERR had reached £100 million in asset value.

But by 2014 the fund was suspended and that suspension remains in place to this day. EPIC blames a lack of diversity for NERR's problems - in effect the fund's investors were making an outright unsecured loan to New Earth Solutions.

Details of the pressure group have been posted on a website called which declares: "No two ways about it: granting unsecured credit to a small company on fairly generous terms carries high risk. High risk ventures invariably raise liquidity concerns - and this has come to haunt here."

In a paragraph headed 'Enough is enough', EPIC say: "For many investors who want exit, this seemingly endless situation has gone on long enough. They want to realise their capital and do other things."

It seems the Borders waste treatment project was unable to withstand high risk technology and even higher risk financial obstacles both of which were brushed aside by SBC's elected members and senior officers.Yet no-one in authority believes there is a need for a wide ranging independent inquiry.

Tuesday, 7 July 2015

Borders almost mentioned in Dispatches

This week's worrying revelations by Channel 4's Dispatches programme about £15 billion's worth of risky bank loans taken out by 240 UK local authorities may have been viewed with concern by finance officers and portfolio holders at Scottish Borders Council which has a clutch of eleven of the so-called LOBO loans worth £43 million.

As soon as the Dispatches investigation How Councils Blow Your Millions was screened on Monday evening Clive Betts MP, the chairman of the Westminster parliamentary committee which scrutinises local government, called for an inquiry after it emerged that some councils are paying more than seven per cent interest per annum on their LOBOs (Lender Option Borrower Option) deals at a time when rates are at an all time low.

Dispatches claimed expensive exit fees imposed on the councils by lenders like RBS and Barclays meant local authorities could not get out of contracts which were set to last for between 40 and 70 years.

Most LOBO loans were arranged between 2003 and 2011 when council officials believed interest rates would stay high.The eleven Borders loans - the money was used to fund capital investment projects -were taken out between 2002 and 2007, and included a £6 million advance from Barclays in 2005.

Under the terms of that deal SBC was to pay 2.87% interest until 2009, then 4.4% to 2065. Banks have the option of raising the rates at regular intervals. Borders council officials also borrowed £24 million in six separate LOBOs from Dexia Public Finance Bank based on the Continent with a further £8 million provided by German bank Dresdner. The highest interest rate quoted in any of these deals was 4.99% by Dresdner Bank.

Dispatches researchers estimate that banks made more than £1 billion upfront profits from the LOBOs. It is suggested that if the councils could refinance at today's interest rates they could save taxpayers £145 million this year alone or almost £750 million across the parliamentary term.

The programme also uncovered evidence that some council advisers were not only paid by the local authority, but also earned commission from City brokers if town halls took out these risky loans. Mr Betts described this potential conflict of interest as "outrageous".

Apparently few people outside a council's finance department or the City of London know about the existence of LOBO loans. But if Mr Betts has his way that is about to change.

He wants the Financial Conduct Authority to investigate the City firms which give specialist financial advice to local authorities on their borrowing.

SBC was asked about its LOBO collection earlier this year by a Freedom of Information requester. He asked the council for a review after they denied him copies of the loan documents, and these have now been made available.

The FOI request asked for the name of the adviser who recommended SBC to opt for LOBO loans. According to SBC: "There is no recorded information specifically stating who advised the Council to enter each LOBO agreement. But the Finance Section explained that in each instance there would have been an external adviser. One of the Council's external advisers at the time of LOBO agreements was Butler Capital LLP".

Sunday, 5 July 2015

"New Borders waste strategy to cost millions more" - expert


The procurement expert employed by Scottish Borders Council to negotiate a £65 million contract for the treatment and disposal of the region's domestic refuse has told Not Just Sheep & Rugby that all of the options now being considered for a revised council waste management strategy will be considerably more expensive than the deal he brokered.

Barry Phelps and his company D & P Management were paid £302,000 by SBC for work carried out between 2008 and 2011 when the original contract for the construction of a conventional waste treatment plant at Easter Langlee, Galashiels, was agreed with New Earth Solutions. That project would have reduced the amount of waste going to landfill by 80 per cent.

But after Mr Phelps left the local authority's employment councillors altered their arrangement with NES to include a high-risk Energy from Waste treatment facility which was to employ untried technology. The so-called Deed of Variation signed by both parties to incorporate Advanced Thermal Treatment (ATT) led to the complete collapse of the proposals which are now years behind schedule.

SBC terminated the revised contract with NES in February, wrote off at least £2 million it had squandered on the venture, and announced it was returning to square one in a bid to produce yet another revised waste management plan.

Last month councillors were presented with a report which outlined a range of possible options for dealing with the region's annual 65,000 tonnes of waste. The choices include developing a purpose-built plant to serve the region or transporting rubbish to treatment plants in neighbouring council areas.

We asked Mr Phelps to comment on the report's contents which are crucial if SBC is to meet Scottish and European landfill reduction targets.

He told us: "In summary what they are intending to do is nothing more than what was undertaken in 2008, albeit there is new legislation. The disappointing thing is the NES solution was flexible enough to meet the emerging legislation."

Mr Phelps warned that if the council decided to construct and operate their own waste facility, based on previous detailed modelling, this would have cost SBC around £56 million more than the NES bid.

He went on: "Should the council opt to transport waste out of the Borders this brings other challenges. Cost of transport could be in the region of £1 million per year based on previous estimates of using an Edinburgh or Dunbar site while the gate fees (total cost of disposal) for these other facilities were much higher than those quoted by NES."

This option would also have a huge negative impact on SBC's carbon footprint, explained Mr Phelps. And some local authorities - supported by planning restrictions - did not allow waste to be imported from outwith the council perimeters.

"One suggestion in the report is to consider using the Viridor facility (I assume this is Dunbar). The capacity will predominately take all of Edinburgh's waste leaving a small amount for other parties including the private sector.

"Viridor will be acutely aware they are in a dominant commercial position and are likely to charge accordingly. Where else will SBC be able to go?."

He pointed out that SBC had tried before - unsuccessfully - to collaborate on waste treatment issues with local authorities in the Lothians and Edinburgh. This was why the Borders had been trying to "go it alone".

"Currently SBC is not complying with EU regulations on landfill diversion and are exposed to fines of £150 per tonne above the permitted allowance", warned Mr Phelps. "Although the Scottish Government has suspended the imposition of the fines at present they could well lift that suspension at any time."

In Mr Phelps' view SBC had only three practical options to consider, namely: 1 construct and operate their own facility; 2 re-tender for a new provider with the risk of failing to attract any interest; 3 transport waste out of the Borders.

Said Mr Phelps: "I am confident that any of the above options will cost SBC significantly more than the NES contract, even without the ATT option."

Saturday, 4 July 2015

Mortgage free Borders back in the red

The controversial decision taken by Borders councillors twelve years ago to privatise the region's entire stock of 6,728 public rented houses meant all of the outstanding loan debt on the properties was cleared at a stroke, mainly thanks to a whopping £59 million hand-out from Chancellor Gordon Brown.

It seemed strange at the time that a Labour controlled Scottish Executive under the direction of Communities Minister Margaret Curran (remember her?) was leading the drive to divest Scottish councils of their responsibility for social rented housing. Councillors were convinced this radical step was 'the only game in town' and made it clear they no longer wanted to preside over a rented sector.

Such was the level of enthusiasm and the size of the cash incentives for the transfer of tens of thousands of Scottish rented homes to housing associations that Mr Brown's Treasury followed up their massive contribution which paid off the Scottish Borders Council loan charges with £920 million for Glasgow and £76 million for Dumfries & Galloway. It seemed money was no object.

In the Borders, the newly formed Scottish Borders Housing Association eventually acquired SBC's houses - they had an open market value in excess of £200 million - for a paltry £23.337 million or £3,468 per property. Even that sum was considerably above the £16.639 million SBHA wanted to pay, and a deal was only concluded after the association tweaked its business plan on no fewer than eleven occasions to make it fit for purpose.

But in 2003 a beaming Ms Curran presided over a signing ceremony at council headquarters when the Scottish housing sale of the century was completed. Most of the proceeds were used to wipe out those loan charges (average £11,684 per house) totalling £78.613 million.

It seemed SBC had virtually washed its hands of housing for good even though only a handful of other Scottish councils would follow their lead as the concept of stock transfer turned sour and soon hit the buffers.

But Borders councillors would go on to sanction the privatisation of a number of other services via the creation of so-called arms length companies, a process which continues to this day.

There were warnings at the time of the transfer that the new arrangements coupled with tenants' right-to-buy would lead to a rented housing crisis in the Borders. And a year after the switch Ms Curran's department stepped in with an allocation of £1.5 million to buy up land for development as the local waiting list for tenancies shot up to 2,500.

The new housing providers were unable to access sufficient funds to maintain the level of house building required to keep up with demand. For example, only 64 'affordable' houses were approved for construction in 2003/4 compared to the 240 needed. By now 8,000 of the region's best quality rented homes had been sold to sitting tenants at giveaway prices under a system kick started by Margaret Thatcher.

Earlier this week the council published the accounts of Bridge Homes, one of several Limited Liability Partnerships (LLP) it has set up in the interests of 'efficiency'. This one was formed in a bid to tackle the continuing chronic shortage of rented housing. It has powers to borrow up to £18.8 million and contribute an additional £3.3 million from the council's own Affordable Housing Investment Budget.

The target seems to be to develop 200 new homes by 2019. It means that if all of the £22.1 million allocated for the project is used then the loan charge on each property will work out on average at £110,500. That's ten times higher than the outstanding charges on the thousands of houses sold for a pittance in 2003.

Could it be that in a few years from now Chancellor George Osborne or his succesor will step in and clear off the loan charges provided SBC agrees to sell off the houses?

Wednesday, 1 July 2015

How the other 0.0001% live!


The Scottish Borders may have one of the lowest wage economies in the United Kngdom, and 4,000 people who work here have to hold down at least two jobs just to make ends meet. But the local council's annual accounts for 2014/15 reveal yet another round of massive redundancy packages and platinum-plated pensions at the other end of the incomes scale.

Meanwhile chief executive Tracey Logan's total remuneration increased from £118,000 to £128,000 while the number of council employees earning more than £50,000 per annum shot up by over 13 per cent from 96 to 109. At the same time public sector pay nationally has been virtually frozen with unions battling to secure one per cent increases for even the lowest paid.

The 111-page document recording how SBC spent our money during the last financial year includes a remuneration report which has the potential to spark a brief bout of public outrage before the figures are forgotten. The statistics have been 'achieved' against what the document dubs "a very difficult financial background".

The revelations relating to compensation for loss of employment and the accompanying figures on pensions for a trio of former top brass will maybe raise the odd eyebrow even though the payments are perfectly justified and the recipients are fully entitled to them. So surely it is the local government system of remuneration which is in urgent need of a radical overhaul.

For the record, here are the three top payments dished out to leaving officers in 2014/15. J G Rodger, Director of Education & Lifelong Learning - compensation for loss of employment £82,569, pension £48,999 per annum, pension lump sum £119,798; H L Thompson, Head of Transformation Projects - compensation £60,843, pension £39,062 p.a., pension lump sum £98,943; I Wilkie, Head of Corporate Governance - compensation £61,892, pension £34,242 p.a., pension lump sum £84,484.

The total of 40 exit packages, among them 21 compulsory redundancies, cost £626,136.

One disgruntled punter told us: "If only we could attract a few private companies to the Borders who'd be willing to offer salaries, pensions and severance packages on this scale. Then maybe more of your talented young people would be tempted to stay. Some of the sums mentioned in the report are, quite frankly, beyond belief".

There are a number of other interesting sets of data within the confines of the annual accounts. For example, the percentage of household waste recycled has, in line with projections, reduced from 39.27% to 36.03%. Those statistics come on the back of the withdrawal of garden waste collections.

SBC also continues to be hog-tied by inescapable debt payments on the three secondary schools which were build under the controversial PFI system almost a decade ago. A payment of £8.296 million, including interest, will be required in 2015/16 alone to service the debt. The total due over the next 30 years is recorded as £258.210 million...enough to pay for a good few exit packages!

Management commentary on the accounts concludes: "The operating environment for the Council continues to be very challenging with financial and economic influences such as welfare reform, increasing demands on services, low interest rates and cost pressures from pay and price inflation all affecting the Council's finances.

"The Council, despite these challenges, remains financially sound and well placed to serve the people of he Scottish Borders in future."