Taxpayers’ £11m wasted on eco-energy project

Scheme set up to generate wood-fired heat and hot water for homes in Wick. Picture: Phil Wilkinson

Audit Scotland’s Accounts Commission reveals in a report published today a scheme set up to generate wood-fired heat and hot water for homes in Wick has cost Highland Council and had “significant deficiencies”.

The public spending watchdog said other local authorities could learn lessons from the failures of the project, which “did not represent value for money for the council’s taxpayers”.

The Caithness Heat and Power (CHaP) was set up in 2004 by Highland Council to be run as an arm’s-length company. Initially, the scheme was to involve a wood-fuelled system producing heat and hot water for houses owned by the council, a housing association and private owners.

A second phase would extend the service to other properties and, with the additional equipment, provide income by selling electricity to the national grid.

CHaP decided to combine these phases in 2005. The equipment was installed but, by 2008, financial and technical difficulties appeared. The project failed and it had to be taken back into council ownership.

Two reports, in 2010 and 2011 highlighted failures in the project’s structure, governance and accountability.

Between 2004 and 2008, councillors received only three reports about progress on the scheme, despite failings already being identified.

At that time, the council estimated the total cost of its involvement in the project would be £15.4m. However, it made savings of £2.9m by not having to repay grants, and an additional £1.1m on re-instating homes.

In today’s follow-up report the public spending watchdog for local government criticises Highland Council for the “serious” blunder, stating: “This is a substantial and serious loss of public money caused by significant deficiencies in the governance of the project and, patently, it does not represent value for money for the council’s taxpayers. The council has learned an expensive lesson in this case.” It added: “As a result of its own actions, in particular the lack of good governance, the council has not secured value for money from the substantial amount of public money spent.”

The commission also said other local authorities could learn from Highland Council’s mistakes, and concluded that it was essential for any new arm’s-length organisation to have robust governance and accountability arrangements.

Equipment and assets were sold to a private firm which now services more than 160 homes.

A spokesman for the local authority said: “Since taking control of the enterprise in 2008, the council has worked tirelessly to minimise the losses and to learn lessons to ensure that the failings are not repeated in any future venture of this nature.