Thursday, 19 October 2017

The file ignored by Audit Scotland, parliament and politicians [1]

In a series of articles over the course of today, Not Just Sheep & Rugby will publish the complete text of the damning report into Scottish Borders Council's (mis)handling of its £65 million waste management contract with insolvent contractors New Earth Solutions (NES) and their penniless "funders" Premier New Earth Recycling & Renewables (NERR) fund.

Bill Chisholm, a retired journalist worked for The Scotsman for 38 years. He spent two and a half years from 2015 investigating the loss of at least £2.4 million of Borders council taxpayers money on a failed project which was supposed to provide the local authority with a state of the art waste treatment plant costing £23 million at Easter Langlee, Galashiels.

The one-man inquiry, dogged by concerted efforts on the part of the council to prevent the release of embarrassing evidence and a complete unwillingness by local politicians to get involved, eventually uncovered a number of disturbing elements of SBC's disastrous four-year liaison with NES.

But when he circulated his 42-page report to Scotland's 'guardian of the public pound' (Audit Scotland) and to Borders-based MSPs Mr Chisholm discovered there was no interest whatsoever in pursuing the issue in a bid to discover why so much public money was lost on a venture which left the Borders with nothing for its cash.

Audit Scotland indicated several times that it was satisfied with an examination of SBC's books by accountancy firm KPMG, commissioned by the watchdog and paid well over £200,000 by SBC for the exercise. And after receiving the report the watchdog made it clear it would not be responding to any further correspondence on the matter.

Meanwhile not a single MSP has offered a comment on the report's findings while SBC has maintained a stony silence when approached by the local press. 'Ignore it and it will go away' seems to be the attitude of anyone and everyone who should be concerned.

So now the public can judge for themselves whether there was or is a case to answer. Any reader who would like to pass comment is welcome to do so.

Here is the first section of the report reproduced without any alterations or editing.


How Scottish Borders Council (SBC) gambled with at least £2.4 million of taxpayers’ money, lost it, wrote it off, then mounted a concerted campaign to conceal hundreds of documents, emails and letters linked to the financially disastrous episode from public scrutiny.


NOTE: The vast majority of this information has been assembled in the course of a two and a half year investigation which SBC has consistently tried to frustrate and hamper.

From 2008 onward Scottish Borders Council was faced with an urgent environmental/financial issue. Time was beginning to run out on their practice of land-filling the vast majority of some 40,000 tonnes of waste per annum generated by households across the local authority’s territory.

Previous attempts (well documented) to devise a credible waste management strategy for the Scottish Borders had failed, and in 2008/9 elected members of SBC were being told by senior officers that to ‘do nothing’ and continue to landfill rubbish at the Easter Langlee disposal site on the outskirts of Galashiels was no longer an option: rapid, and potentially expensive action was required.

It was decided to award a 24-year waste management contract, valued at between £65 million and £80 million to a firm of specialists which would include the development and construction of a “cutting edge” treatment facility at Easter Langlee at an estimated cost of up to £23 million, depending on the specifications.

The plant was to be built in two stages over seven years. A conventional Mechanical Biological Treatment [MBT] centre would divert up to 80% of Borders rubbish from landfill. Then, at a later date once technological processes had proven themselves to be commercially viable an Advanced Thermal Treatment [ATT] facility would be added. This would have the capability of converting waste into energy to power local homes, factories and public buildings with surplus electricity being sold off to the National Grid. SBC would receive some of the profits.

A team of environmental, financial and legal consultants was assembled to advise SBC. Following a lengthy procurement process it was announced in March/April 2011 that the contract had been awarded to Dorset-based New Earth Solutions Group (NESG), a company which had never worked on a project in Scotland before. The losing competitor was Shanks, a business with vast experience in the field of waste management throughout the UK.

But the release of highly confidential documents during the course of 2016/17 following SEVEN separate applications to the Scottish Information Commissioner to overturn refused Freedom of Information requests, shows the project had hit funding and technological problems by January 2012, only nine months after the contract was handed to NESG. These issues proved insurmountable, but the council granted NESG generous contract moratoriums which allowed the undeliverable project to squander hundreds of thousands of pounds of public money until it had to be abandoned in February 2015.

Letters from NESG to SBC in January 2012 claimed the stand alone MBT could no longer attract bank funding. Money for the Easter Langlee scheme was supposed to come from either the Co-op Bank or from NESG’s partner, the Isle of Man-based New Earth Recycling & Renewables [Infrastructure] Fund [NERR].

But changes in the Scottish Government’s waste disposal policies were allegedly proving tricky and unattractive to financiers, according to NESG, and an alternative way of delivering the Borders project would have to be identified.

Following months of unsuccessful negotiations between NESG and the council’s Project Team it was finally decided to recommend a very major alteration to the contract to combine the MBT and ATT in a single phase development.

This has to be viewed as an extremely high risk strategy for one simple reason. NESG’s brand of ATT – named NEAT Technology – was completely untried and untested in 2012. For the record it remains problematical and unproven in 2017. And the release of sensitive documents dating from 2012 shows the NEAT system had not even completed its journey through research & development testing in October 2012 when members of SBC sanctioned the so called Deed of Variation [DoV] at a private meeting even though this could have been construed as commercially unfair to rival bidders Shanks.

The DoV was to make little difference. NESG was heavily in debt to banks and to NERR whose directors had a major stake in NESG and were basically keeping New Earth Solutions afloat by providing a total of £39 million to that company. This arrangement/mortgage was concluded in September 2011, and the paperwork is available for public scrutiny at Companies House.

 At the same time NERR’s parent company Premier Group (Isle of Man) Ltd [PGIOM] was picking up millions of pounds each year in fees for managing and promoting NERR to 3,500 unwitting investors and shareholders. The managing shareholders of Premier Group were entities based in the offshore tax haven of British Virgin Islands.

SBC appears to have been completely unaware of the complex financial arrangements involving NESG, NERR and PGIOM. The council has also confirmed it was unaware of many alleged complaints made about the conduct of Premier’s array of investment funds, including NERR, to the Manx regulatory authorities, and to the UK Financial Services Ombudsman from 2004 onwards.

The problems and apparently insurmountable technological and financial issues facing NESG and SBC dragged on through 2013 and 2014 without a brick being laid at Easter Langlee. A selection of documents, many of them heavily censored by SBC before release, give a patchy view of what was happening on a month to month basis as the project staggered on.

Details of a high powered visit by a large delegation of Borders councillors and officers to NESG headquarters in Avonmouth, near Bristol in October 2014 are extremely sketchy as SBC claimed when asked for reports on the trip that nothing had been written down. But representatives of the Borders press were given the impression the visit had been extremely worthwhile from a “due diligence” point of view, and the elected members had been impressed by what they had been shown. SBC firmly believed it was on the right track to become Scotland’s leading waste management authority.

Unfortunately there was a different behind-the-scenes scenario which suggests Borders councillors were completely deluded. By now NESG was virtually insolvent; the NEAT technology continued to misfire, NERR had still not come up with the £23 million needed to build the Borders project, and Scotland’s environmental watchdog SEPA (Scottish Environment Protection Agency) was still refusing to sanction an operating permit for the combined MBT and ATT because of unresolved issues.

Four months after the expensive trip to south-west England a press release issued by SBC in February 2015 contained the shattering news of the contract’s complete collapse.
The statement declared: “Since the contract was signed in April 2011 there have been significant changes with regard to Scottish waste policy and regulation, and project-specific issues in terms of technology and funding.”

No further details were given despite the complete failure to deliver a crucial facility, and the squandering of millions of pounds of public and private money over four years. On top of that SBC’s waste management strategy was in tatters yet again with landfill deadline day looming.

From the publication of the press release on February 19th 2015 SBC was determined to pull down the shutters on Project Easter Langlee to cover their own backs and to prevent anyone from exposing their sheer incompetence and risky decision making. The Borders public deserved better.


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