DCLG rebuffs plea from council for help with £33m+ contract cancellation costs

Last week Norfolk County Council revealed that the costs had come in at the higher end of expectations – as a result of hedging arrangements – and that it needed to find £3.4m within three working days.

It has now learned that the DCLG will not contribute to the cancellation costs.

The council’s Leader, George Nobbs, had written to the Prime Minister and other government ministers in April to request financial assistance.

In the letter he blamed the inaction of the Communities Secretary, Eric Pickles. When deciding to terminate the contract with Cory Wheelabrator, the council had cited the failure to secure satisfactory planning permission for an energy from waste plant near King's Lynn.

Baroness Stowell, lead minister for local government procurement at the DCLG, has now confirmed that no financial assistance will be forthcoming from central government.

In her reply, which can be viewed here, Stowell wrote: “In relation to your point on financial assistance for penalty clauses in cancelled procurement contracts, I would simply observe that it seems that your local authority, in this instance, decided to sign a contract with a penalty clause exposing the local authority to a financial risk, costing £30m, on an issue which was not pre-determined and which is subject to quasi-judicial processes.”

The minister added: “The details and clauses of any local procurement contract are a private matter between the relevant parties. It is for the local authority to assess the risks and benefits of any local contract prior to agreeing to it.

“Therefore any need to pay a cancellation penalty is a private contractual matter and is for the local authority to consider how to meet such costs. It is not appropriate for national taxpayers to provide funding for penalty costs, should they arise, from locally-procured contracts.”

Responding to the letter, George Nobbs said: "This puts to bed once and for all the frequent and various suggestions from Henry Bellingham MP that the Government would help the county council if it agreed to terminate The Willows’ contract.

“I'm sure people will agree with me when I say I depreciate the rather dismissive comments made by Baroness Stowell about the efforts and judgement of my predecessor and his administration in relation to this contract.”

At a meeting Norfolk’s Cabinet has called for a report to be drawn up by officers on how the remaining deficit (£4.4m) can be addressed. This report will be discussed by full council next week.