Tuesday, 15 September 2015

Suckers for the unknown cost us millions

EWAN LAMB asks why so many publicly funded organisations seem prepared to gamble by investing our cash in unproven and decidedly risky technology 

Question: What do Scottish Borders Council, Scottish Enterprise and The Carbon Trust have in common?

Answer: They've all wasted millions of pounds of public money on untried and untested technology, leaving each organisation with burnt fingers and forced to write off unnecessary losses without having to provide a meaningful explanation to taxpayers.

Not Just Sheep & Rugby has attempted to expose the recklessness and fecklessness of Borders councillors who were warned of the dangers of allowing a waste management company to use them as guinea pigs for a method of converting household rubbish into heat and power, using a brand of technology which was untried and untested.

A council source told us: "It's easy to criticise us with the benefit of hindsight. But just imagine if the New Earth Advanced Technology (NEAT) had proved to be a roaring success. The Borders would have become national leaders in the field of waste management".

The fact that the experiment/gamble failed spectacularly with over £2 million down the drain and significant extra borrowing on the way appears to have been a minor detail to the council and to its external auditors who, we are told, will exonerate the local authority in a report to be made public later in September.

And no-one is prepared to take the elected members to task because of the embarrassment the findings of an investigation might pile on all political parties after their various representatives signed up for a completely useless piece of kit without any thought for the high risks attached to their stupid strategy.

No doubt the same will apply at Scottish Enterprise (SE) whose annual report for 2014/15 revealed that more than £23 million had been written off after 47 different investments ended in complete failure. Several of the companies which persuaded SE to part with huge wads of dosh are now either dissolved, in liquidation or administrators are pocketing six figure fees for clearing up the financial messes.

The £16.326 million lost by SE during a "partnership" with Pelamis Wave Power Ltd makes the Borders fiasco look like a kids' tea party, although local council taxpayers hereabouts may not see it that way.

The enterprise company had more than 1.1 million shares in Pelamis as well as five outstanding mortgages which will not be repaid.

Other creditors of the Orkney based wave power pioneers when the business bombed last November included The Carbon Trust, a company set up by the UK Government in 2001. The Trust held 228,000 shares in Pelamis and was owed £2,470,456 as part of the firm's estimated deficiency of at least £15.69 million.

Such a loss is probably small beer for The Carbon Trust which has racked up a number of environmentally friendly successes over the years. It received grants of £15.131 million from the Department of the Environment & Climate Change in 2014 alongside a £5.356 million contribution from the Scottish Government.

According to the Trust's accounts it recorded an operating loss of £7.5 million last year yet its chief executive received a salary of £175,497, a bonus of £84,605 and "other benefits" of £46,941 making a grand total of £307,043, up from £277,018 in 2013.

Pelamis's annual report for 2013 enthused: "It is planned to build a new generation machine (wave power) commencing in 2015 ready for testing in 2016. If successful this will form the basis for commercial development of the technology".

Sounds a bit like the NEAT technology which so impressed/took in SBC. But like the council, SE and other funders might have been wiser to 'ca' canny' until at least a few results were on the board. After all, under the heading of RISK, the same Pelamis report warned: "The company's technology may not work as envisaged".

Administrators KPMG - coincidentally they also happen to be SBC's external auditors - sold off Pelamis' assets for just £305,000 to the highest bidder who happened to be Highlands & Islands Enterprise, another publicly funded enterprise agency with close ties to SE.

Meanwhile KPMG has clocked up administration costs of £292,336.50 for 803.3 hours work at an average of £362.49 per hour.

SE's tale of technological woe does not end there. The winding up of a company called SESMOS Ltd resulted in another £1.047 million lost in a fruitless venture.

The main activity in this case was the development of drug discovery techniques. But despite the sizeable investment by SE the company lost £1.035 million in 2014 and also had outstanding liabilities of £2.246 million.

A company report tells us: "The directors and shareholders (one share held by SE and one by Siemens Technology) concluded it was not appropriate to continue to fund the company due to the lack of sufficient technical progress."

But just imagine....if the technology pioneered by Pelamis and by SESMOS had proved successful then The Carbon Trust and Scottish Enterprise, like Scottish Borders Council. would have become beacons of light at the cutting edge of scientific progress. What a shame it has cost all of us so much to finance their shattered dreams.

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