SUMMARY

1  The European Union (EU) introduced a Directive in 1999 ("the EU Directive") requiring all Member States to reduce the amount of biodegradable municipal waste (BMW) sent to landfill. BMW, which accounts for 70 per cent of municipal waste, is waste, such as food, vegetation and paper, that can be broken down by other living organisms.

2  The EU has set targets for the reduction of BMW sent to landfill because:

■  biodegradable material sent to landfill prevents the recycling of waste and the recovery of energy from waste materials; and

■  it can also release emissions: to the air, which may be harmful to the environment and contribute to climate change; and to soil and water, which can be harmful to health.

3  EU Member States will be subject to financial penalties if they fail to meet the landfill reduction targets for BMW. The targets for reduction in England are:

■  by 2010 to reduce the weight of BMW landfilled to 11.25 million tonnes per annum (75 per cent of BMW landfilled in 1995);

■  by 2013 to reduce the weight of BMW landfilled to 7.5 million tonnes per annum (50 per cent of BMW landfilled in 1995); and

■  by 2020 to reduce the weight of BMW landfilled to 5.25 million tonnes per annum (35 per cent of BMW landfilled in 1995).

4  The Department for the Environment, Food and Rural Affairs (The Department) has a national strategy for waste disposal, which includes plans for meeting the EU Landfill Directive targets in England. Local authorities have statutory responsibility for municipal waste disposal. The Department decided that, to meet the targets, local authorities needed to invest in new waste infrastructure.

5  Local authorities decide the form of procurement for their waste infrastructure projects. Where authorities procure projects under the Private Finance Initiative (PFI), central government financial support, known as PFI credits, is available for approved projects. The PFI credit is an undertaking that central government will give annual grants to the value of the PFI credit to help local authorities service the cost of the projects.

6  So far, 18 local authorities have signed PFI contracts with a combined capital value of £1.6 billion. The Department has allocated around £750 million of PFI credits and in the Comprehensive Spending Review 2007 it received a further provisional allocation of £2 billion for waste projects.

7  PFI contracts are expected to cover around 80 per cent of the waste processed by new infrastructure coming into operation by 2013. Some local authorities, however, use other types of procurement for these projects. These other procurements account for most of the deals expected to close in 2008-09 and 2009-10. The non-PFI procurements are mainly small capacity projects but PFI continues to be used for the larger projects.

8  A previous National Audit Office report Reducing the Reliance on Landfill in England (HC1177 200506) examined the Department's initial response to the EU Directive. In this report we have examined the Department's management of its PFI waste infrastructure programme. We focus on three criteria:

i  whether a suitable programme of projects with a thriving, competitive supply market has been established;

ii  whether the projects have been delivered in a timely fashion; and

iii  whether the Department has applied appropriate oversight to the projects for which it is providing financial support.

9  This report focuses on PFI projects for which the Department has responsibility through granting PFI credits to local authorities. Many of the issues set out in the report will also be relevant to local authorities taking forward other forms of waste infrastructure procurement. Local Authorities are subject to inspection by the Audit Commission which published in September 2008 Well disposed: Responding to the waste challenge. The Audit Commission's report focussed on the local authorities' approach to the problem of BMW being sent to landfill.