COMMITTEE FOR THE ENVIRONMENT

OFFICIAL REPORT

(Hansard)

Departmental Briefing on Local Government (Contracts and Compulsory Purchase) Bill

18 September 2008

Members present for all or part of the proceedings:
Mr Patsy McGlone (Chairperson)
Mr Cathal Boylan (Deputy Chairperson)
Mr Billy Armstrong
Mr Roy Beggs
Mr Trevor Clarke
Mr David Ford
Mr Tommy Gallagher
Mr Alastair Ross
Mr Peter Weir

Witnesses:
Ms Julie Broadway )
Ms Marie Finnegan ) Department of the Environment
Mr Ian Maye )
Mr Ivan Gregg )

The Chairperson (Mr McGlone):
We now move on to the departmental briefing on the local government (contracts and compulsory purchase) Bill. In light of the briefing from the Principal Clerk, I feel that we should all declare our membership of local authorities.

Mr Beggs:
I declare an interest as a member of Carrickfergus Borough Council.

Mr Ford:
I declare an interest as a member of Antrim Borough Council.

The Chairperson:
Mr Ross, you are not a councillor.

Mr Weir:
I declare an interest as a member of North Down Borough Council. However, may I suggest an alternative? Perhaps we could stick a notice on the wall that would be visible to any officials coming in. I appreciate the advice that we have received, but given that it is not a secret that all of us have declared our particular interests in this matter; to constantly keep on declaring those interests at every meeting —

The Chairperson:
My intention is to do that once, and that is now.

Mr Weir:
I appreciate that. However, by doing that once is that for all time?

The Chairperson:
Yes. That is correct.

Mr Ford:
It would be if a notice were stuck on the wall.

Mr T Clarke:
I declare an interest as a member of Antrim Borough Council.

The Chairperson:
I declare an interest as a member of Cookstown District Council.

Mr Beggs:
If there are new witnesses present, I feel that the advice that the Principal Clerk has given is correct, and that they should be made aware of member’s interests. If a member decides not to declare that interest, that is that individual’s personal choice.

The Chairperson:
On 20 March 2008, the then Minister of the Environment, Mrs Arlene Foster, notified the Committee of her intention to introduce proposals for a local government (contracts and compulsory purchase) Bill, for inclusion in the 2008-09 legislative programme. She advised the Committee that, as legislation would need to be in place by mid-2009, it may be necessary to seek accelerated passage.

Following queries from the Committee, the Minister subsequently advised — on 23 April 2008 — that the legislation could be progressed without accelerated passage. She also provided members with an anticipated timeline that envisaged that the Committee Stage would be shorter than usual.

The Department supplied a draft consultation document and a draft Bill. It also sought and obtained the agreement of the Committee to consult on the Bill between August and November 2008. Copies of the draft consultation and the draft Bill have been provided to the Committee today.

The Department has advised that the Bill will be finalised, following the consultation exercise, during December 2008 and January 2009. The Department has also advised that it will forward the Bill, with any amendments, to the Committee, hopefully, in late January/early February 2009.

Members have a copy of the local government (contracts and compulsory purchase) Bill policy paper and a letter from the current Minister of the Environment, Sammy Wilson, dated 13 July 2008, in their packs The letter provides clarification on a number of issues concerning the Bill’s progress. Departmental briefing notes have also been included.

I welcome, Ian Maye, Marie Finnegan, Ivan Gregg and Julie Broadway from the Department, who will provide members with an update on the Bill. It is particularly good to see Mr Maye back before the Committee — I hope that you have made a good recovery following your short spell in hospital.

Mr Ian Maye (Department of the Environment):
Thank you, Chairman. I will start off today, but I will pass the hard stuff to my colleagues. I thank the Committee for its invitation to appear today to brief it on the issues. It is a great pleasure for me to be back before the Committee. It has been a while but I am very glad to be back in action and doing the business again.

We are here today to talk about two of the Bills that we have in our proposed legislative timetable. The first item that we are dealing with is the proposed local government (contracts and compulsory purchase) Bill. My colleagues will also be talking about the proposed local government (finance) Bill. For the information of members, we have proposals for a further two bills in the legislative programme — a local government modernisation Bill and a local government reorganisation Bill. Therefore, a total of four Bills will be presented for the Committee’s consideration in the course of the next 30 months. That will be a significant and challenging timetable for us all.

Before I go into the details of the local government (contracts and compulsory purchase) Bill and hand over to my colleagues, I will explain briefly where we are in relation to the review of public administration (RPA) as a whole, because three of the four Bills are integrally tied into the implementation of the RPA decisions made by the Executive Committee on 13 March 2008. As members know, the Department’s strategic leadership board has established three policy development panels, which have been up and running since early summer. Those panels have been taking forward the detailed work that will lead to the policy proposals that fit into the latter two Bills, the modernisation Bill, and, in particular, the reorganisation Bill. We are working closely with the local government sector and with the parties represented around this table to put those policy proposals together and to draft the necessary legislation that will give effect to the decisions that will be made. We hope that when we bring those Bills before the Committee we will do so with the support and agreement of the local government sector.

I will hand over to my colleagues to talk about the detail of the local government (contracts and compulsory purchase) Bill. Ivan Gregg is from the departmental planning and environmental policy group, and has been closely involved in the preparation of the policy that underpins the Bill. Ms Julie Broadway is the Bill team leader and has been involved in the detailed drafting of the consultation paper and the legislation. Marie Finnegan is well known to members and is the head of the finance team in the Department’s local government policy division. We are accompanied by colleagues who will be involved in the progress of the Bill. It is important that they are here today in order to get a feel for appearing before a Committee, as they will do so during the deliberations on those two Bills and future Bills. We will all get to know each other very well.

Ms Julie Broadway (Department of the Environment):
The need for the local government (contracts and compulsory purchase) Bill has arisen because of the EC landfill directive, which sets recycling targets for member states to meet. Those targets must be met to avoid the possibility of infraction proceedings. The aim of the EC landfill directive is to prevent or reduce the negative effects on the environment of the landfilling of waste. In order to meet the set targets, new recycling facilities will have to be constructed.

One of the options being considered by councils involves the three waste management groups entering into PPP/PFI contracts with private-sector contractors and their financiers to construct various plant and facilities so that the necessary recycling services are made available for use by the groups.

I will now turn to the reasons for the local government (contracts and compulsory purchase) Bill. District councils currently have a general power to enter into contracts for the discharge of their functions. However, there is some uncertainty about whether those powers are sufficient to enable councils to enter into long-term service contracts with the private sector. Similar uncertainty existed in Great Britain in the 1990s, when local authorities began to enter into such contracts. The Local Government (Contracts) Act 1997 was introduced to deal with that.

The proposed Bill is very similar to the 1997 Act. It will clarify the power of councils to contract with the private sector in order to remove any concerns that contractors and their financiers might have about entering into such contracts, and, therefore, reduce the possibility of any delay in the waste-infrastructure procurement process. It will enable councils to certify long-term service contracts, giving private-sector contractors and their financiers “safe harbour” protection from legal challenge, except by judicial or audit review. It will, by means of a simple but rigorous certification process, minimise the likelihood that certified contracts will be set aside. It will also empower the courts to direct that such contracts shall continue to have effect, notwithstanding that they were entered into unlawfully, and ensure that contractors will be compensated if contracts are ever set aside in a judicial or audit review.

In addition to the provisions on the local government contracts, the Bill also proposes provisions to enable councils to acquire land, otherwise than by agreement, for waste-management purposes. It also contains a couple of enabling powers, which will give the Department the power to make regulations that will give the detail and set out matters to be included in the certification process, and will allow the Department to amend the legislation to expand on the types of contracts that may be entered into by a council. Although the Bill is being taken forward at this time because of the waste-infrastructure issues and the EC landfill directive, it will apply to all council functions, not simply waste.

Regarding the timetable for legislation, we are currently awaiting the agreement of the Executive to the policy proposals and for permission to consult on the policy and on the draft Bill. We propose that, subject to the agreement of the Executive, we should consult on the draft Bill from October to December 2008, with a view to introducing the Bill in the Assembly in February 2009. The Bill must be in place by mid-2009 in order to meet the EC landfill directive targets.

Mr Weir:
Thank you for your presentation. We are acutely aware of the necessity of ensuring that EU targets are met, and that we do not place any undue financial burden on ourselves.

Having had a quick glance at the legislation, I see that, when it talks about vesting powers, there are references throughout to district councils. Most of the work that is done on waste is done on a collective basis by the waste groups, and ultimately co-ordinated by the strategic waste board. With regard to the powers that are given to a district council, would that also apply to councils that are acting as a group, or does any explicit reference need to be made? North Down Borough Council, for example, could acquire land for waste purposes according to the legislation. Would, for example, Arc21 or the southern waste management partnership (SWaMP) be covered by the legislation if they decided to acquire land? As the reference is to a “district council”, can it be done on the basis of a group of district councils?

Mr Ivan Gregg (Department of the Environment):
At present, both Arc21 and SWaMP are bodies corporate, and that legislation has been passed. In essence, they have the same powers as a district council, although our understanding is that they would have powers to vest land, and there should not be any difficulty with that.

Mr Maye:
It would be slightly different in relation to the north west region waste management group (NWRWMG) in that it is not a body corporate and would therefore have to rely on one of its constituent councils to enter into the contract on its behalf.

Mr Weir:
Leaving aside the north-west group for a moment, regarding SWaMP or Arc21, once the power is given to the district council, there is no reason for further clarification in relation to that.

Is there any restriction on what land can be vested in terms of the ownership of that land? If the land were owned by a Government Department, or if SWaMP or Arc21 wanted to vest land that already belonged to one of the district councils, or even if it were owned by the Crown, would there be any restriction on what land can be vested?

Mr Maye:
I think that the short answer is no. It does not impose any restrictions, and they can vest from any landowner, whether that be a Government Department or a —

Mr Weir:
What if, for example, they wanted to vest land that belonged to the Planning Service? Perhaps they think that the Planning Service headquarters, for example, might be a good place to put a lot of waste.

Mr Maye:
I could not possibly comment on that, but the answer is that it would be available for that purpose.

Mr Gregg:
It is subject to the approval of the Department. There are powers for vesting in the legislation, and the Department would have to approve whatever land that has been identified.

Mr Weir:
So the Department has to approve any vesting? Is that correct?

Mr Gregg:
Yes. The Department would make the vesting order, so Arc21, or any other body, would have to submit the proposals to the Department for approval. There are also restrictions in the legislation relating to the actual vesting process.

Mr Weir:
Just to clarify then, is there a standard measure of compensation for any individual or body whose land is vested? Presumably they would receive the market value of the land.

Mr Maye:
There are processes for determining the amount of compensation. The Department is working with the valuation service central advisory unit in Land and Property Services.

Mr Weir:
If you are working with Land and Property Services, you might be waiting a while.

The Chairperson:
As the devil is in the detail, it might be an idea if we could get that information to put a bit more flesh on the bones of what has been said.

Mr Maye:
I would like to return to the point that was first raised, about the powers available to the waste-management groups. Arc21 has raised that issue with the Department, and the preliminary view is that the powers available to the councils are, by definition, available to the waste-management groups, where those groups are bodies corporate. However, we are considering whether it would be wise to put something a bit more explicit in the legislation, to ensure that everyone is absolutely clear that that is the case.

Mr Weir:
I know that the term “district council” has a particular meaning, but presumably an easy way around the problem would be to insert a definitional clause that states the precise meaning of the term as used in the legislation. That would cover councils and bodies corporate that are made up of councils.

Mr Beggs:
It seems that a particular route has been mapped out, and it may well be the best and most economic route. However, I am curious to know at what stage the gateway process to determine the best-value route is, and what the schedule for that process is. Will that process start only after the legislation has been passed? It may be that it is better for councils themselves to deal with waste management, and to finance it through direct borrowing. Presumably the proposed legislation does not preclude any particular route at this stage. Is that correct?

Mr Gregg:
Gateway reviews in relation to the processes and procedures of the three waste-management groups are currently being carried out. An outline business case has been submitted by Arc21, which has been approved by the Department. The Department is still awaiting outline business cases to be submitted from SWaMP and the NWRWMG. The whole process is designed to ensure best value, and the business cases will be examined by technical and financial experts to ensure that the final solution is the best value.

Mr Maye:
Part of the reason that the Bill is felt to be necessary, and that it is necessary for it to be delivered by the middle of 2009, is that contract negotiations will have reached a critical point at that stage, and the provisions must be in place to provide clarity for all the parties involved, including the financiers. That is the reason that the Department believes it is essential to have the Bill in place within the timescale that we set out.

Mr Gallagher:
On that last point, mid-2009 seems to be a deadline. What is that the deadline for? Earlier, Julie mentioned the possibility of EU fines for not meeting targets.

Is there a deadline in relation to a penalty for non-compliance? I know that the legislation has to be in place by mid-2009, but from what date will we be penalised for failure to meet the EU deadlines?

Mr Maye:
The critical dates are set out in the EU landfill directive.

Mr Gregg:
There are three dates: 2010; 2013; and 2020. The volume of biodegradable waste must be reduced by a different percentage for each of those years. Current estimates indicate that we are likely to meet the 2010 target, but there will be increasing difficulties as each year progresses. It is unlikely that we will meet the 2013 target — and we will certainly not meet the 2020 target — without the provision of the additional infrastructure.

There is a lead-in time and a procurement exercise to start work on the facilities. It is envisaged that contracts will be signed in 2010, and the construction of the facilities will proceed over the following couple of years. It is imperative that the facilities are up and running as soon as possible to enable us to meet the series of deadlines, particularly 2013 and 2020.

The Chairperson:
What is the immoveable deadline — the latest date by which the legislation must be in place?

Mr Gregg:
One aspect of the legislation is to assure contractors that they can bid for the work and that the contracts will be viable. Arc21 has just placed its advertisement in the official journal, inviting bidders to express interest. As the process continues, we want to be able to assure prospective bidders that we can stand over the contracts. The more reassurance that we can provide early in the process, the more likely it is that we will attract a range of bidders and get the best-value solution.

There is no date by which the legislation must be in place, but the earlier the better.

Mr Maye:
Our specialist contract advisers, particularly in the Strategic Investment Board (SIB), have told us that mid-2009 is the end-date by which the legislation should be in place to provide that assurance.

Mr Boylan:
The Bill will create serious pressures to achieve the targets. I am concerned about the value-for-money aspect. How will the contract ensure that value for money is achieved? Ultimately, the costs will have to be met by the ratepayers in the council areas. Therefore the contracts will have to contain measures to ensure value for money. We do not yet know how the process will roll out, but we must ensure that people’s basic needs are recognised and protected, and that value for money can be achieved when the targets are set. That should be set in the terms of the contract, and we must ensure that that is ongoing.

It is important that value for money is achieved when the process is rolled out. In time, we will find that the targets in the directives will be difficult to meet. It is all very well to see the dates on paper, but the ratepayer will incur the associated costs.

The Chairperson:
Your concern is that we will not —

Mr Gregg:
There is a rigorous process involved in approving the submitted business cases. They are looked at by economists and the Department of Finance and Personnel. A range of experts will look at the details that are submitted by the waste management groups — who, in fact, have consultants working to ensure that best value is achieved.

Mr Beggs:
You said that one of the three waste management groups has advertised in the European Journal, and you are concerned that it will come to a critical stage next summer — when, it is hoped, legislation will be in place to ensure best value. At what stage of the process are the other two groups, if they have not even advertised? Is there a concern that they are already lagging further behind?

Mr Gregg:
There is an approximate timetable for the other two groups. The Arc21 outline business case was approved last month and its advertisements have been placed in the official journal. The north-west regional waste management group is expected to submit its business case over the next few weeks, so there is no delay there. There are difficulties with the establishment of SWaMP; however, those are being resolved, and we are hopeful that it can make up time over the next few months. There is an approximate date, I think, of November/December for its outline business case to be submitted. Once that is approved, SWaMP can submit its advertisement in the official journal. There has been a bit of delay, but we hope that we will still meet the overall deadline of 2013.

The Chairperson:
We will return to the matter.