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Legislation not PFI cash key to waste spending

The Comprehensive Spending Review (CSR) settlement for waste infrastructure was this week criticised by the industry for its bias towards the use of private finance initiative (PFI) funding.
Chancellor Alistair Darling last week revealed that funding through the PFI credit system would rise from £380M in 2007/8 to £700M in 2010/11, a total investment of £2bn.

However, Biffa external affairs director Peter Jones said legislation was far more likely to encourage private investment in waste than in government funding. "PFI will wither and die," said Jones.

"From 1 November the pre-treatment regulations will make it impossible to take mixed waste direct to landfill.

"From next year, landfill tax will rise by £8 per year to take it to £48 per tonne by 2011."

Jones said these two measures would soon make building new facilities cheaper than sending waste to landfill and, he said, it will be this, rather than any government cash incentives, that will encourage the private sector to invest in waste facilities.

PFI credits typically cover 25% of the capital costs of facilities.

The government aspires to get this ratio up to 50% and increasing the credits available is a necessary part of that (news last week).

ICE waste board vice-chair Jonathan Davies welcomed the increased government investment.

But he warned that local authorities might struggle to find contractors willing to deliver facilities funded through PFI.

"There are 52 projects to be tendered in the next five years – at least twice the current rate of closes," said Davies.

"These will put additional pressure on the planning system, the resources to process procurement and design and contractor appetite."

Waste PFI contracts often take two years to get through planning and typically cost each bidder between £3M and £5M to get to the preferred bidder stage.

With many contractors having full order books, there is a danger that contractors reject bidding for waste PFI schemes in favour of less costly procurement routes, said Davies.

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