Incinerator's cost doubles

7:46am Friday 28th September 2007

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Exclusive by Jess Bauldry and Lawrence Marzouk

The construction costs of a controversial incinerator project have more than doubled from original estimates.

A total of £145.7 million will now have to be paid by waste contractor Veolia just to prepare the site in Newhaven and to build the incinerator.

Last night Brighton and Hove City Council agreed to help Veolia meet its financial burden by extending the life of the contract from 25 to 30 years.

East Sussex County Council gave its backing to the deal on Tuesday.

Both councils took the decisions at secret meetings.

All councillors have refused to discuss the details of the arrangement although opinion was divided over whether details of such largescale spending should be released into the public domain.

A copy of the papers, leaked to Lewes MP Norman Baker, suggests that Veolia claimed that the waste contract, agreed four years ago, was no longer profitable and would have to be extended by five years.

Under the contract Veolia is liable for all increased costs to the project but councillors feared that without help the contractor would go bankrupt causing the project to collapse. Veolia faces a rise in construction costs from £71.7 million to £145.7 million.

The longer contract will give Veolia an extra £35 million in income.

Councillors feared that if they refused to extend the contract Veolia would walk away.

The project would then have to be put back out to tender and be likely to cost even more.

In the meantime, European rules would see the councils face big fines for failing to cut the amount of waste dumped in landfill sites. Extending the contract was the lesser of two evils - and some even regard it as a good result for the taxpayer over the long term.

The project is already two years behind schedule because of delays in submitting planning applications.

Both councils are so keen to see it completed they have also promised a blank cheque to Veolia for any legal costs that arise if opponents of the scheme challenge it in the courts.

The deadline for a "judicial review" is next January.

Veolia is also thought to have been granted an indemnity against costs if the incinerator project falls through, meaning it will get back at least some of the money it has spent so far. It is understood that councillors were told that the costs of not accepting Veolia's demands would have been significantly more than agreeing to the revised contract.

In 2003, a 25year contract was signed between East Sussex, Brighton and Hove and Veolia, the world's second biggest waste management operator.

The contract was dubbed a "25-year monopoly" by opponents and has attracted sustained opposition for plans to build a waste sorting centre in Hollingdean, Brighton, and the incinerator in Newhaven.

Despite protests, both schemes have cleared all major legal hurdles and work at the Brighton site has begun.

And even though the project has a £1 billion price tag almost nothing is known about the financing or the costs of the buildings or services.

Councillors were split last night on the decision to hush up the deal.

Councillor Keith Taylor, Green convenor, said: "Any significant changes to a public contract such as this should be explained to the public. "There is a fine balance to be struck between protecting commercially sensitive information and being accountable to the taxpayer."

Councillor Gill Mitchell, leader of the Labour group, said: "This decision to hold this debate in closed session was justified because matters concerning commercially confidential information were discussed and needed to be protected."

Conservative Mary Mears, deputy leader of the city council, refused to comment on the decision, saying only that the discussion contained financial figures that were confidential.

Liberal Democrat councillor Paul Elgood said: "Residents should be extremely concerned about what they're not being told by the council. We call on Brighton and East Sussex to make a full disclosure in the public interest."

Lewes MP Norman Baker plans to complain to the Audit Commission and the European Union.

He said: "This is a criminal waste of taxpayers' money and represents the Arthur Daley school of economics.

"The councils appear to be determined to throw good money after bad in their blinkered determination to bulldoze through this incinerator. They are recklessly gambling with our money."

Should the councils press on with the contract or start again from scratch? Have your say below.