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

Examination of Witnesses (Questions 860 - 879)




  860. So you are saying that you want EBCO to do one job, but they believe they should be doing something else. Is that right?
  (Mr Carrigan) It is not quite right, Chairman. I think Dr Aickin's view was that their approach should be to do something else. The remaining members of the EBCO Council, I believe, do agree that the job we have asked them to do is the correct job.

  861. So you have a rather more compliant group of people now.
  (Mr Carrigan) We have the same group of people, Chairman, with a different Chairman.

Mr Cummings

  862. What actions do you intend to pursue to ensure that EBCO can play a fuller role?
  (Mr Carrigan) The things I have described really. We will continue in a process where I meet them monthly. We have already had a couple of discussions, which I think were more practical and progressive than our previous discussions, about the way forward with certain practical aspects of the scheme. I have quite high hopes, I am pleased to say, that under its new leadership EBCO is going to deliver what we are looking for from it. Further, I have some confidence that it will do so within its budget in the coming year, which it failed to do last year.

Mr Blunt

  863. May I ask a question about Dr Aickin's draft document that you pointed out, Lord Cranbrook, was not the final document submitted by EBCO. We all know what happens to realistic appraisals and drafts, as they go through the political process, before they get formally submitted in public. Do you think that what Dr Aickin was saying was accurate or inaccurate?
  (Lord Cranbrook) I was sitting in the back on the day you received the document but I did not actually see the document that you got. I presume that it was the draft that was sent to us some time in September, which was his first draft for what he was going to submit to this Committee. Dr Aickin, as Mr Carrigan has said, is a man who has—

  864. Is, what he says in a draft document, likely to be a credible and realistic appraisal of what is actually happening before it gets (shall we say) moulded?
  (Lord Cranbrook) What we believed was—and I think the results have shown us to have been right—was that this was not a reflection of what the EBCO Board, as a whole, would feel.

  865. You are not saying no to my question?
  (Lord Cranbrook) Dr Aickin wrote that document and I assume he wrote it to express his opinions in it.

  866. Presumably you value his opinion because have you not appointed him to your Improvement Panel?
  (Lord Cranbrook) We had invited him to join our Improvement Panel. Dr Sills will say where that invitation has got to.
  (Dr Sills) We invited him to join several months ago but he wanted to disengage himself from EBCO before accepting it. Formally, he has still not accepted it in writing.

  867. Did you invite him before or after this draft memo?
  (Dr Sills) Before.

  868. Would you invite him again?
  (Dr Sills) I think so on the basis that, yes, he is a critic, but he is a strategic critic rather than a critic on the tactical details of the scheme. I think that this is something that we would want to take advantage of because, as Lord Cranbrook has said, we are willing to alter and improve our operations and that is exemplified by the appointment of an Improvement Panel. Dr Aickin would become a useful member of that.
  (Lord Cranbrook) Chairman, Mr Carrigan has just pointed out to me that I should have reminded you that, as Mr Carrigan has just told you, Malcolm Aickin's statement about the budget was wrong.

Mr Donohoe

  869. How do you respond to what Dr Aickin has said, as far as the allegations in The Guardian were concerned, that you were an unfit regulator?
  (Lord Cranbrook) You cannot expect me to say that I am an unfit regulator but I can try to explain, if what we have said so far has not shown you the way we do things. The way in which we regulate has been outlined by Dr Sills. The reason why I am confident that what we are doing is meeting the regulations, is the closeness that we have with Customs. As I have said, Customs are at all our meetings. I believe that we have got together a staff who have excellent qualifications for the process of regulation. You have heard Mr Carrigan speaking. You are able to evaluate that he is, in fact, a man who has a good grasp of the whole operations' activities. We have also a Head of Audit and Verification. I believe that the processes we have in place are those which are required under the regulations, to ensure that environmental bodies are compliant and that projects are compliant. There are always ways in which one can intensify one's scrutiny. We have also resolved very early on to be as tight a ship as possible. To provide good value for money. To remain within the 2 per cent compliance fee. If there are other aspects of unfitness you would like me to look at, I will readily answer any further questions.

  870. Do you accept there is a potential conflict, in terms of the structure of the Board of ENTRUST, in that perhaps what is required is a stronger Government sponsored regulator. If we were to draw conclusions on the basis of evidence, perhaps that is what we should be recommending to Government.
  (Lord Cranbrook) The structure of the Board was drawn up initially by the working group of 1995-96. This recommended the basic range of interests and activities that the Board members should have. These are reflected in the Terms of Approval of Customs which say, just in case you are not familiar with them, that: there should be at least one and not more than three directors who possess direct experience and knowledge of each of the following sectors. The sectors are: Landfill operators or the waste management industry. Local authorities. Environmental groups. The legal profession. Finance and accountancy. Academia. And industry generally, including major waste producers.

  871. So you maintain that this should continue to be taken into account or should it be changed?
  (Lord Cranbrook) I believe that the way it is laid out provides a very good stakeholder basis for our directors. I believe I have a good team of directors as a consequence.

  872. Do you not see that to a lay person, looking at that Board and looking at the way you have had problems, that it would be a lot better were there to be a distance from the industry itself? It would then, I would suggest, take a far purer view as to what we see now as a relationship that is far too cosy.
  (Lord Cranbrook) The relative weighting is not less than one and not more than three from each of those areas, so what that means is that our Board of Directors is not over-weighted in terms of the industry. There are three representatives who were appointed as a result of the proposals coming from the original working group: Mr Roger Hewitt, who was at the time the Treasurer of the Institute of Waste Management; Mr Peter Neill, who was at the time the Director[4] of the ESA; and Dr Marion Carter.

  873. What is the Board's total?
  (Lord Cranbrook) The Board, at present, is 13. I do not think, by any means, three can be said to be dominant. However, if I can broaden the discussion briefly and say that the way we would like to see the Board appointed and structured, perhaps I could let you into some of the ideas that we are developing in ENTRUST. We resolved, as we were working up this year's corporate plan, which came into effect from 1st August, that we needed to look at our governance structure. The issue, which has been identified from several quarters and one which I can appreciate externally can give the kind of anxiety that you are thinking of, is the fact that the directors and the members of the company are the same people. Therefore, because it is ultimately the members of the company who appoint the directors, we are appointing ourselves. I can see that this is a valid criticism. Now that is not an abnormal situation amongst companies that are not-for-profit companies, because there are no shareholders and somebody has to be the members. As I said in my introduction, we have looked at some of the governance structures of the other larger, not-for-profit, private companies that are regulators, such as the Financial Services Authority.


  874. Just to get this out of the way, the compliance contractor that you are using, who is it?
  (Dr Sills) Lodge Services.
  (Lord Cranbrook) So we have looked at the way in which appointments are made to directors of these other companies. We believe that the Government bodies, Departments, Ministers, ought to be involved. We would like to see Ministers positively involved, taking the role of our shareholders and, therefore, approving appointment of directors and also setting the salaries of directors. We believe that would bring us into line with some of the other large not-for-profit companies that are regulators and we believe that could be an advance.

Mr Brake

  875. Lord Cranbrook, you have now outlined ways of improving ENTRUST. Have you any views about how the Landfill Tax Credit Scheme could be improved?
  (Lord Cranbrook) I would need to preface my remarks by saying we are the regulators. We are appointed to implement the existing regulations. We could have a Light Brigade approach to this, saying: "Not for us to reason why. Just for us to do and die before Select Committees." Nonetheless, because we are practitioners, we do have some ideas. I think I will ask Dr Sills to outline some of the ways in which we see the Credit Scheme, which we are a part of, could be improved.
  (Dr Sills) Lord Cranbrook has already pointed out the interim sanctions against the Environmental Body who is reluctant to comply. This is one aspect. Secondly, the regulations should provide for mandatory application of best value and open tender competitions for all non-trivial contracts by environmental bodies. That is a weakness in the current system. There needs to be some overall cost benefit analysis of the system and we would like responsibility for running that, although not doing it ourselves. We would like to look at individual environmental body efficiencies and project value for money, so that we have some sort of scrutiny. Finally, we are conscious that there are a number of private companies and consultancies and professional firms who quite legally have created environmental bodies through which the consultancy or the professional firm, in a sense, can feed, while the environmental body is strictly not for profit and compliant with the regulations. Nevertheless, I think the mandatory requirement for the best value open tender would throttle that and enhance probity and the reputation of the scheme.

  876. On what you said latterly there, are you suggesting that there is nothing you can do at the moment to control what you seem to be suggesting, which is an abuse of the system?
  (Dr Sills) There is nothing that we can do outside of the compliance of the environmental body. We cannot insist, except in one special case, on an open tender or best value being implemented. That single case is where a contributor could obtain a contract. If a contributor obtained a contract, then that would be subject to the benefit preclusion within the existing regulations. So we can insist that an open tender competition is taken when a contract might be obtained by a contributor, be that of a local operator or a third party.

  877. It is not entirely clear to me. Maybe you could send a written note on exactly what you are outlining there. Can you tell us how many consultancies you have identified that you are operating in this way. Can you tell us the scale of the problem.
  (Dr Sills) Not precisely but I am aware of probably between 15 and 20.

  878. Any idea of the sums of money involved?
  (Dr Sills) No idea at the moment.

  879. Are you investigating how much money might be involved?
  (Dr Sills) We will do. We have it on our database but I have not pressed the appropriate button.

4   Witness correction: Chairman and Chief Executive. Back

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