Examination of Witnesses (Questions 860
TUESDAY 28 NOVEMBER 2000
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.
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.
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 wasand I
think the results have shown us to have been rightwas that
this was not a reflection of what the EBCO Board, as a whole,
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
(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
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
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.
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
(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
(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