Local authority funding for waste management: Private Finance Initiative (PFI)

PFI is one of the main mechanisms through which local authorities can procure assets in a value for money way in partnership with the private sector. It is a procurement methodology for asset-based services. Long term fixed price contracts are entered into with private sector contractors to deliver services to specified performance standards.

Latest news

6 December 2010 - As part of the Spending Review process Defra concluded that seven waste infrastructure projects should not receive the PFI credits which had provisionally been allocated to them, on the basis that, on reasonable assumptions, these projects would no longer be needed in order to meet the 2020 landfill diversion targets set by the European Union.  In announcing these decisions, the department undertook to publish further details of the analysis it had undertaken and the criteria that it had used to prioritise the projects with provisional allocations of PFI credits.  The following paper meets that commitment.

Background

Waste PFI schemes will help the UK meet EU Landfill Directive diversion and recycling targets. They also encourage greater partnership working between authorities resulting in efficiency gains, more integrated waste management solutions and the benefits of economies of scale that flow from this and a more strategic approach to planning and procurement.

As part of the 2010 Spending Review process, Defra reviewed the amount of PFI grant that central government needs to put into local government funded waste treatment infrastructure.  It was concluded that we must withdraw the provisional allocation of PFI credits from seven projects, on the basis that, on reasonable assumptions, these projects will no longer be needed in order to meet the 2020 landfill diversion targets set by the European Union. This will reduce estimated central government PFI expenditure by £3 million per annum in 2014-15 rising to £26 million per annum from 2017/18 onwards.

The EU Landfill Directive set targets for each Member State to reduce the amount of Biodegradable Municipal Waste sent to landfill.  Defra has used economic and risk forecasts to carry out a detailed analysis of future waste growth and the future treatment capacity required to meet the diversion target in 2020.  Based on this analysis the 18 projects to which funding had provisionally been allocated were prioritised on the basis of i) the value for money that would be obtained from the PFI grant investment, ii) the likelihood of delivery of the facility, and, iii) how soon the facility was planned to be operational.

The provisional offer of central government support in the form of PFI Grant funding to projects sponsored by the following authorities have been withdrawn.

Local Authorities:

  • Cheshire West and Chester, and Cheshire East;
  • Coventry, Solihull and Warwickshire (“Project Transform”);
  • Gloucestershire;
  • Leicestershire;
  • Milton Keynes and Northamptonshire;
  • North London Waste Authority; and
  • South London Waste Partnership (consisting of the London Boroughs of Croydon, Kingston, Merton and Sutton).

Details of the 32 PFI projects are available.

Page last modified: 6 December 2010
Page published: 5 February 2003