Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence


Examination of Witnesses (Questions 20 - 39)

WEDNESDAY 28 MARCH 2001

LORD CRANBROOK AND DR RICHARD SILLS

  20. That will be recorded in the minutes?
  (Lord Cranbrook) Absolutely.
  (Dr Sills) Yes.

Mrs Ellman

  21. Could you clarify Dr Aickin's position at the moment?
  (Lord Cranbrook) Dr Aickin is Chief Executive of Entrust and a board member.
  (Dr Sills) No, Dr Aickin.
  (Lord Cranbrook) I beg your pardon, I thought you said Dr Sills. Sorry.

  Mr Olner: The look of panic as you got the sack.

Mrs Dunwoody

  22. That was a rapid change in regulation.
  (Lord Cranbrook) I hope that will not appear in the record, I am so sorry. The tongue runs away with itself and I got confused. Dr Aickin at present, there has been a meeting between Dr Aickin, Dr Sills and myself which is recorded in the correspondence to you, Chairman. There is quoted in that correspondence a joint memorandum which was drafted by Dr Aickin and is supported by all three of us.

Mrs Ellman

  23. Could you tell us what that means in terms of Dr Aickin's future in relation to Entrust?
  (Lord Cranbrook) What that means is that Dr Aickin has in that memorandum clearly stated that none of the parties, including himself, see that a position on the Improvement Panel would be where he would be best placed in order to assist Entrust. It also tells you that with Dr Aickin Entrust will examine ways in which he can assist us to improve our regulatory capacity. We envisage that there are two frameworks within which this may be possible. One is regulation under the regulations that exist and the other is looking forward and being in a position to be prepared to adapt to whatever changes may be made by Government to those regulations in pursuit of the statement that was made by the Government itself and possibly in response to your Select Committee's report.

  24. You have not identified the precise role yet?
  (Lord Cranbrook) We have only had one meeting. There has not really been time. You will imagine that there are other things pre-occupying ourselves these last few days.

  25. In your letter to this Committee you do clearly apologise for the contempt. If what you had done had not been constituted as contempt of Parliament or this Committee, would you still have done the things you did?
  (Lord Cranbrook) I did not hear the end of the question.

  26. You have apologised for contempt, if your actions had not constituted contempt, would you still have wanted to continue what you started?
  (Lord Cranbrook) What I started?

  27. Have you changed your position because you found you were in contempt of Parliament? If you had not been in contempt of Parliament would you have felt justified in what you did?
  (Lord Cranbrook) Circumstances have unrolled as they have. We were in a position of negotiating with Dr Aickin at one stage and I cannot really say what would have occurred if it had not been that we had inadvertently committed this contempt.

Mr O'Brien

  28. Can I just follow up the question of openness and the relationship with the user groups and the environmental groups. Reading from a reported dated 9 September on the issue of Delivering Sustainable Waste Management there is a reference to some minutes at that meeting. I quote: "We acknowledge that there has been criticism by environmental bodies that EBCO is too constrained by Entrust. We have endeavoured to represent the broad spectrum of environmental bodies' views and concerns to Entrust. This in turn has attracted criticism from Entrust that we have strayed outside our terms of reference." This appears to be a factor where Entrust is putting pressure on organisations to remain within the confines of Entrust. Can you give us a little bit more information about that?
  (Lord Cranbrook) I would be most grateful if you could explain what this document of 9 September is. If it is the original draft memorandum which Dr Malcolm Aickin prepared perhaps it is relevant for me to draw attention to his note on page 97 of your report if that is the document, but I do not otherwise know what document of 9 September may be being referred to.

  Mr O'Brien: It is the document to this Select Committee from the Environmental Bodies' Council. The document has been sent out with our evidence giving reference to the minutes of meetings that have been held. Are you saying you are not aware of this document? Can I pass it to you?

Chairman

  29. Let us put it another way. Are you satisfied that Dr Aickin is the only person who is being critical of the way in which you have treated EBCO?
  (Dr Sills) No, he is not the only critic, there have been others. However, the EBCO board as a whole is far less critical. The present Chairman, for instance, recognises fully the constraints that we are under under our terms of approval from HM Customs where the requirement to set up a user group is mandated and the restrictions on that are placed on us and, therefore, we have to place on our user group, EBCO in this case, to feed back information and opinions and views about the working of the scheme and also to comment on the proposed administrative changes. In most cases the criticism that has been levelled at us by Malcolm Aickin in particular has been of a far more strategic nature and fundamental to the structure of the regulations which we have no power to change.

  30. You think it has been reasonable you have directed EBCO to a substantial extent only to concentrate on the issues that you have got jurisdiction over?
  (Dr Sills) Yes, because we have a responsibility to use the money that we have been given in our administration fee only for the things that we are mandated for. Those are the things that we are giving, as it were, to EBCO to spend their money on.

  31. If you were going to continue to exist, would it not be a good idea to have a proper watch dog that looked at the whole of the operation of the Landfill Tax?
  (Dr Sills) I am sorry, I do not understand.

  32. Someone who could actually not only criticise what you were doing but was able to criticise the more strategic picture?
  (Dr Sills) That may be something which Government might consider, yes.

Mr O'Brien

  33. This is the same document I am advised that you are referring to. The criticism from the environmental bodies is that they refer to the voluntary sector and this is an area where perhaps there is a wide diversion because of the voluntary part of the sector. Then they refer also to the environmental bodies "... are viewed as part of the mechanism by which the scheme delivers Government policy". There are two parts to this, there is the voluntary sector which we have discussed previously and then there is the responsibility of the environmental bodies carrying out Government policy. Now there is an overlap there, it is referred to in these documents. Can you give us a bit more information on that? This is where the criticism comes from actually.
  (Lord Cranbrook) Entrust was not responsible for the preparation of that document and, therefore, it does not represent the opinions of Entrust. That said, I can understand that what that phrase might mean would be that the regulations were passed by Parliament. The objectives that are laid down in the regulations are the objectives of environmental bodies and environmental bodies are the mechanism by which those objectives are achieved. I do not know whether Dr Sills would like to add anything.
  (Dr Sills) I think that is right. I would imagine that is what Dr Aickin meant in his submission, that those are the objectives written down as approved objects in the regulations and those were enshrined from Government policy within these regulations.

  34. My concern is—and I think it might be part of the concern of EBCO—the policing, the monitoring of these schemes by Entrust. As you are aware I have drawn your attention to the fact that monitoring it after the decisions have been taken in my opinion is not the right way to do this. Could you give us some comment on the point that I have raised with you in the past where people are under the impression that resources from the Landfill Tax, as my colleague referred to, and the donations by the landfill operations are being used in a way that can be critical of the work of Entrust in monitoring that kind of activity? My concern is that you play a part after the decision has been taken, instead of co-operating with the environmental bodies, during the discussion of those schemes. You advised me that is not your job, you have told us that is not your job. Can you give us some indication how you can prevent that kind of overlap that is referred to in this document that I have witnessed personally?
  (Dr Sills) I think you are referring to the strategy that we use to review and scrutinise the environmental bodies' activities.

  35. Yes.
  (Dr Sills) The regulations only stipulate two things. That we enrol bodies subject to certain structural criteria that are given in the regulations and that we scrutinise their expenditure implicitly after the fact to find out if it is compliant or not and then we would report to Customs and Excise. What we have done in actual fact is to take a rather more holistic view of the audit process, if you like, and we have instituted a three stage process. We look at the proposed projects before they occur so that we can advise environmental bodies whether we believe they are compliant or not. We look during work in progress on these projects by inspection and audit of what is going on to make sure that it is still compliant. Following that, after the event, we both look at their internal records of what they spend the money on and also we look at their independently audited accounts of their annual expenditure. Now that has been criticised, as you may know, by the NAO who believe that we should be focusing only on the latter, ie. after the event auditing. We do not believe that is sufficient to ensure the maximum possible compliance, nor do we believe that it is of the maximum possible help and assistance to environmental bodies in them getting it right.

Mr Blunt

  36. I do not think anyone could quibble, Lord Cranbrook or Dr Sills, with the fact your apologies are complete and unreserved for the contempt but you did say, Lord Cranbrook, to Mrs Ellman that you could not say that if it had not been contempt whether you in the end would have acted in the same way. Does that not come to the heart of the problem with how Entrust is established and the scheme over which you are presiding? Is not the issue that you are neither fish nor fowl? You are a private company and had you been able to act in the way a normal private company does I would have expected Dr Aickin, given the way he has performed through this, to have been on the receiving end of the same treatment that George Graham received at the hands of Tottenham Hotspur, but you are not in a position to do that. Is there not a fundamental problem about a private company having to administer this scheme?
  (Lord Cranbrook) From the initiation of our company one of the very first board decisions was recognising that we were a private company we would nonetheless attempt to behave in every possible way as if we were in the public sector. That has led to our policy of openness. In the case of Dr Malcolm Aickin we have someone who is highly respected in the environmental world. He is Chairman of the Environment Council and he is also Chairman of an environmental body which handles the RMC Environment Fund. He has an extremely thoughtful mind and he has, in frequent exchanges with us, shown that he is a broad strategic thinker and there are many ways in which he can see improvements, not only to the way in which Entrust manages its affairs but also in the overall design of the scheme which is completely outwith our control and outwith our management capabilities. I have known Dr Malcolm Aickin personally for a long time and I have a great personal respect and many common memories of things which have happened together. I have little doubt that his expertise would have been something that we would have liked to have tapped if it had been directed towards assisting us, which was our aim in inviting him to join the Improvement Panel.

  37. Yet you find yourself in the position of saying "We are most disappointed that you have chosen to publicise your views, damaging Entrust's reputation and inflicting severe injury on the Credit Scheme and all of those participating in it". Had it not been for the contempt, of course, I presume you would still be, Dr Sills, standing by those remarks?
  (Dr Sills) Yes. I think the problem that we have mutually, Malcolm Aickin and ourselves, is that we actually have a highly successful scheme. It has outgrown its originators' wildest visions. We are disappointed in Entrust that Malcolm's criticisms have not been more of the character of "this is a great scheme, let us make it better" rather than "this is a fundamentally flawed scheme" which is what I deem his leaked evidence says.

  38. Given this is one of the products of a successful scheme which you say has outgrown the ability of a private company or the appropriateness of a private company to manage it, and given the scale of operation—and you have seen the recommendations of this Select Committee about the future necessity to use Landfill Tax and Incineration Tax directly to support, for example, the market in recyclables, which is obviously putting the whole scale of the scheme on a totally different basis—do you think the time has come to review Entrust's position? In a sense, what we are discussing this morning could be an unhappy example of the difficulties you now find yourself in arguing that you are a victim of the success of the scheme.
  (Lord Cranbrook) I think I need to answer this one because you have asked a strategic question. We have no comment on the appropriateness of a private company or otherwise but I would defend our capacity to regulate. We have in place a strong team. We have in place a system for auditing and verifying expenditure, as Dr Sills has explained very carefully, and also auditing and verifying the objects of that expenditure and confirming that these are compliant with the legislation. I am convinced, and I hope that the Committee is equally convinced, that the staff we have in place have the capabilities to fulfil entirely the requirements of the regulator and all the regulations. My confidence in saying this is because of the very close relationship that we have with Customs who sit there as observers at every level of the organisation, as has been made clear already.

  39. Would you accept the point of view that in the end the scheme you are presiding over is in the end public expenditure by other means?
  (Lord Cranbrook) These are questions which I do not believe as Chairman of Entrust I need to ask myself. We are required to operate. We have terms of approval of Customs and we operate as regulators within those terms of approval.


 
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