DCLG’s hand in Envirolink’s insolvency

Since I “retired” from Biffa over 4 years ago, I haven’t been short of things to do. One of my jobs has been as chairman of the Warrington-based not for profit organisation Envirolink Northwest, providing business support to the low carbon and environmental goods and services sector. As a group, the non-executive directors and I gave hundreds of hours of pro bono time to support the work of a dedicated team of staff. But in December we had to take the hard decision to liquidate the company. In a personal capacity, I’d like to explain why I feel that, despite the impact of projects ending, funding being withdrawn and the difficulty of winning new work in a difficult economy, the key problem was the hurdles that the Department for Communities and Local Government (DCLG) put in the way of Envirolink receiving funding it was due – with repercussions across green industry in the North West.

A welcome development

Originally established in 1999 by a group of forward-thinking business leaders, the value of Envirolink was soon noticed by the North West Development Agency (NWDA), and in 2000 they began to fund the organisation to act as a cluster manager for environmental projects across the region. Later we were able to secure funds from the European Regional Development Fund (ERDF), which was administered by the NWDA, and turnover grew to £6m. By that time Envirolink, a not for profit company, employed 19 staff and was delivering ground-breaking work in the form of subsidised conferences, advice and reports to an audience primarily of small and medium sized enterprises.

SMEs account for more than 99% of companies, nearly 60% of private sector employment and close to 50% of private sector turnover; this is no less true in the green sector than in others. Small businesses can be adaptable and innovative, but can struggle to find the full range of skills and expertise they need within a small workforce.

Envirolink’s aim was to support the growth of the low carbon and environmental goods and services sector. The businesses in this market have a huge contribution to make to sustainable economic growth and environmental protection, and are vital for the UK’s transition to a low carbon economy. Through collaboration with suppliers, end-users, research institutes and funders, Envirolink helped businesses to develop low carbon and environmental products and services. We also had an important role as a link between suppliers and buyers, and helped suppliers market their products.

Envirolink partnered with Salford University to make use of unique facilities like this “Energy House”. Photo via Salford University

Envirolink successfully delivered a number of projects, including the Northern Wind Innovation Project and the Irish Sea Conservation Zones Project, but our ERDF work for the NWDA was a big part of this positive story. At the company’s height, the Low Carbon development work they funded accounted for around 80% of our turnover. However, it all changed when the coalition Government decided to disband the Regional Development Agencies. With the demise of the NWDA, DCLG took charge of monitoring ERDF expenditure in April 2011.

Dead losses

Although there was no suggestion of any problem with how Envirolink had managed its ERDF funding, DCLG promptly decided to change the basis of the qualifying data. There was no consultation, and no willingness to discuss the revised approach. In consequence, staff were diverted onto unproductive backtracking tickbox exercises to try to revise all the data we held. Even having carried out the required review, which required us to contact 1,500 small businesses and led to a year of almost complete inaction, DCLG still withheld over £205,000. It was no wonder that some of those we contacted saw it as “bureaucracy gone mad” and refused to co-operate. Any possibility of continuing business development for Envirolink was destroyed, projects were lost and cashflow was severely impaired.

The end result is that an otherwise successful enterprise – which was fulfilling a real need, providing employment both directly and indirectly, and supporting growth in a key area of business for the UK – could no longer keep on trading.

I have no problem with the requirement to meet audit standards, but for those standards to be changed retrospectively, and to so quickly result in such a huge loss of income is unconscionable. In my professional life I have never had to place a company into liquidation on such spurious grounds.

I fear that Envirolink will prove to be just the tip of the iceberg. My work in the sector has given me a broad contact base of people involved in ERDF programmes, and I don’t know whether to be relieved or saddened that we are not the only ones to feel the chilling effect of DCLG’s takeover. Tales of arbitrary retrospective changes in the audit rules are rife, and the distraction, distress and waste of effort that DCLG has caused are quite extraordinary.

I can only speculate as to how this has come about, but while Eric Pickles is no icon of the green sector I doubt that he is behind the destructive policy being implemented in his name. Perhaps civil servants simply ignored what the RDAs were doing and decided on their own ERDF rules; or perhaps they felt a different audit regime was needed to satisfy the European funders. Was Baroness Hanham, the minister responsible, in the loop? How about Bob Kerslake, the permanent secretary? We simply don’t know – and the environmental press should be looking at how this train wreck policy has come about. For example they should be asking:

• Who in DCLG authorised a retrospective change in the audit rules for ERDF support, and did they act on Ministerial authority?
• What is the total value of ERDF grants withheld over the last 5 years despite the projects having proven delivery?
• What happened to the money withheld? Has it been rebated to the ERDF, and lost to the UK? Or is DCLG recycling it in some way?
• How does the Treasury feel about DCLG undermining GDP growth, employment and tax flow in this way?

The Treasury isn’t the only one to lose out – there are of course Envirolink’s creditors. Indeed, I’m one of them, in respect of my travel costs to recent meetings; but one of our biggest, ironically enough, is another DCLG body. They too will now lose their money, underlining the stupidity of DCLG’s approach. As a constituent I intend to pursue this with my MP. But I hope others will also ask why the government is taking needless steps that undermine beneficial environmental projects and the central thrust of government policy by driving committed individuals from work to welfare.