CASH-strapped Herefordshire Council is accused of having “money to burn” on the £160 million incinerator pitched as the future for the county’s waste.

The claim comes from county UKIP MEP Jim Carver who brands the energy from waste project a “foolhardy gamble” with taxpayers money.

Work on the site at Hartlebury, Worcestershire, for an incinerator that Herefordshire Council will share with Worcestershire County Council is already underway.

Mr Carver has been meeting with opponents of the project to assess their concerns.

Now, he says an agreement to borrow £165 million from the Government’s Public Works Loans Board (PWLB) to build the incinerator is a “foolhardy and unnecessary gamble”.

Opponents have criticised the PWLB for handing over “millions of pounds of taxpayers’ money” for a project, which at the time, did not have a proper final business case.

The overall cost of the project which is being extended to 2042, is estimated to be £1.65 billion. This is in addition to the current Private Finance Initiative (PFI).

Mr Carver said: “I am deeply troubled by this whole project and by the fact that the National Audit Office and Defra are aware of the serious financial implications yet have taken no action.

"Defra has already handed over £98 million since 1998, after admitting that there was probably never a business case then, so what has this money been spent on?"

"The Local external auditors Grant Thornton have been asked to look into a number of issues including Value for Money; taxpayers hope that their issues are being taken seriously as the auditors seem to be dragging their feet. I will be raising my serious concerns about this dire situation with each of the relevant departments involved.

“At the end of the day there is an oversupply of incinerators which are all chasing rubbish to burn. It appears these councils are playing fast and loose with the public’s purse – they must have money to burn”.

Herefordshire Council stood by the incinerator in September when MPs turned the heat on the near  £90 million paid to the PFI project so far  without the incinerator  being built.

The Commons public accounts committee questioned the basis of  government grant funding for the project and its future in a sector where technology is continually evolving.

A report from the council’s external auditors Grant Thornton found that cabinet members did not get the detail  of why officers – rather than consultants - saw an incinerator as the future with a relevant appraisal recommending cabinet support lacking detail and clarity.

Grant Thornton said it could not conclude its 2013-14 audit of the council or issue the council with its audit certificate until it had “completed consideration”  of specific issues raised around the incinerator plan.

The incinerator  is integral to a joint 25 year waste disposal contract with West Mercia Waste signed by Herefordshire Council and Worcestershire County Council.

An initial capital cost for the project is reported to be more than £160 million, but opponents claim ongoing maintenance will at least double this over the 25 years  while the cost using PFI funding could triple.

In February, Herefordshire Council passed a 2014-15 budget committing the council to paying £40m for the  incinerator at Hartlebury, Worcestershire, over three years.

A budget strategy estimated council borrowing as increasing by £50.8 million over 2014/15, pushing the overall debt up to £218.2 million, including £11 million borrowed over the year for the incinerator.

The issue came to a head at full council in September.

 There, Cllr Glenda Powell asked for “assurance to members and taxpayers” as to the plant’s future effectiveness.

Cllr Harry Bramer, cabinet member for contracts and assets, stood by a financial and options appraisal put to Cabinet in December last year supporting EfW) as the most “cost effective and viable solution” for the county’s waste over 25 years

Cllr Liz Harvey referenced her questioning “confidence” in capital borrowing for the incinerator at the council’s budget setting meeting in February.

Then, Cllr Bramer said confidence in capital borrowing as a best value option came from analysis and appraisals  in both the joint waste management strategy and a cabinet report completed in accordance with relevant government guidance.

At September’s meeting, Cllr Harvey raised the findings of the public accounts committee , specifically the conclusion that the Department for environment, food and rural affairs made decisions on waste projects focused on the need to meet EU targets without regard to the impact on local authorities.

Cllr Bramer said the council “does not disagree” with the findings quoted but cited the findings as focused on DEFRA’s oversight of PFI contracts.

It was, said Cllr Bramer, a matter for DEFRA to respond to the committee’s findings rather than either of the two councils.

The committee found PFI contracts of  25-30 years are “inappropriate” for the waste sector where technology is continually evolving with the amount of waste in  hard to predict.

Funding agreements for early PFI waste deals were “poorly drafted”  by the then Department for Environment, Transport and the Regions (DETR)  and “too lax” in requiring payments for key assets that had not been built.

As such, the committee found that the funding agreement signed with Herefordshire and Worcestershire councils highlighted the “shortcomings” of early PFI projects, with payments to the council aligned with payment made by the councils to the contractor.

Grant payments started as soon as the councils started to pay the contractor, with the government, through either the DETR or its successor the Department for Environment, Food and Rural Affairs (DEFRA),  legally committed to making grant payments ever since.

In December 1998, the DETR signed a funding agreement with Herefordshire Council and Worcestershire County Council for £143 million and the payment of related grants started shortly after.

The terms of the original funding agreements did not allow central government to stop payment or alter the payment terms in the event that key capital assets were not delivered.

Since its creation in 2001, DEFRA  has had responsibility for overseeing these grants and did not review the agreements until 2011.

Terms with Herefordshire and Worcestershire councils were not successfully renegotiated until 2013, resulting in a £30 million cut in total funding.

The process of renegotiation was time-consuming. In the case, of the Herefordshire and Worcestershire DEFRA confirmed to the committee that it took them six months to approve the new funding approach the councils were proposing.

With contractor apparently unwilling to fund the incinerator, the councils were left considering using the rate income generated from the populations of both counties to cover the cost of the contract.

At the end of the 2013-14 financial year, both councils had received nearly £90 million for an incinerator plant that had still to be built