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.

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