Our Sutton investigations editor, CARL SHILTON, on the latest strokes being pulled by the LibDem-controlled council
Tonight, there is a meeting of the Sutton Shareholdings Board, the committee that exercises the corporate shareholder and governance responsibilities of Sutton Council’s privately-held companies.
These companies include SDEN, Sutton Decentralised Energy Network Ltd, the Liberal Democrat-run council’s failing energy supplier which has inflicted misery on hundreds of customers at New Mill Quarter in Hackbridge, with sky-high energy charges and more than 25 service outages over the past year.
Since August, the Chartered Institute of Public Finance and Accountancy, CIPFA, has been conducting a review of SDEN’s financial model and investigating viability. Evidence has been taken from councillors, residents, council staff and other “stakeholders”.
It was stated in CIPFA’s terms of reference that stakeholders would be consulted over the factual accuracy of their contributions in the report ahead of it being presented to the Strategy and Resources Committee on November 1.
But in the last 24 hours, Inside Sutton has learned of efforts, thought to be instigated by the council chief exec, Helen Bailey, to stop some interested parties from getting access to the draft report. They have even erased SDEN from the agenda for tonight’s meeting.
The agenda for all meetings of the Sutton Shareholdings Board includes a regular item on the operation, governance and business plans of SDEN. The political groups on the council are each given a briefing by council officials ahead of the meeting.
The Conservative members of the Sutton Shareholdings Board are councillors Tim Crowley and Neil “Father Jack” Garratt.
Both, when invited, gave extensive evidence to CIPFA as part of its SDEN investigation. But both have now been blocked from seeing the CIPFA draft report ahead of publication.
Crowley told Inside Sutton, “Neil Garratt and I were told yesterday at our SSB briefing with senior officers that we couldn’t see the CIPFA report ahead of its publication, and only then would we be allowed to ask questions and comment.
“We asked if any LibDem councillors had seen the draft, and we were told, somewhat reluctantly, that several LibDem members, including councillors McCoy, Ruth Dombey, the council leader, James and Abellan, had been shown the draft CIPFA report last week.
“So we asked how we were meant to discharge our duties as members of the committee that oversees the governance and business of SDEN when the three LibDem members had already seen the CIPFA report and we had not.
“We received no answer of any substance.”
‘What have they got to hide?’
Conservative opposition group leader Tom Drummond then wrote to the council’s chief executive, Bailey, asking why Crowley and Garratt could not see the draft report ahead of the SSB committee. “The logical, transparent and democratic solution would have been to give us sight of the draft report so we were on an equal footing with the LibDem members of SSB,” Crowley said.
“Instead, Helen Bailey and the chair of SSB, Sunita Gordon, chose to remove SDEN from the agenda tonight.
“This has astounded me. We are being prevented from doing our duty as elected members simply because the council wants to hide the CIPFA report. I have contacted CIPFA and they have confirmed that the council does, in fact, want to make changes to the report.
“So the simple question is what have they got to hide?”
SDEN was set up to “greenwash” the building of the Viridor incinerator at Beddington. Viridor has a 25-year contract worth £1billion to burn residual waste (and, as it has now been proved, recycling) from the four councils that comprise the South London Waste Partnership, including Croydon.
SDEN was given the go-ahead by Sutton councillors on the strict condition that the business wuldmake a profit – a 9.04 per cent internal rate of return on investment, and a net cash profit of £1.54million. This was verified at a 2015 meeting of Sutton’s Housing, Economy and Business Committee.
Significantly, the chair of HEB, “Calamity” Jayne McCoy, was given delegated authority, along with council staff, to “agree amendments to the business case that may be required, insofar as the overall parameters of the business case can still be achieved”. In other words, if you don’t hit the financial targets, SDEN doesn’t go ahead.
When, in 2017, Sutton Council commissioned consultancy firm KPMG to review SDEN’s business model to ensure the plans were sound, the council reported that the resulting report found “no material issues” with SDEN’s model or its assumptions. The initial financial targets had actually been marginally improved, it was claimed. McCoy and the council repeated this mantra ad nauseum, but oddly, they kept the report secret.
Independent councillor Nick Mattey waged a three-year battle with the council, using the Freedom of Information Act to have the KPMG report published, which, in 2020, Sutton was finally forced to do. Only now did the truth emerge.
It was clear that KPMG had some serious issues with the financial model and assumptions that, it seems, the council simply ignored.
In July this year, a council motion from Conservative councillor Catherine Gray called for an independent investigation into SDEN and its business model, which she described as being “dishonest at best, fraudulent at worst”.
McCoy responded by saying that she had “complete faith in the integrity of the modelling”. McCoy also claimed that there was no need for SDEN to make a certain financial return in order to borrow millions of pounds from the council. “The projected profit was actually very modest and the purpose was simply to cover the cost of the project with the profit to act just as contingency,” she said.
But this was provably untrue – even the KPMG report confirmed that a certain return was needed for the project to progress to a financial close.
The Tories’ call for an independent investigation into SDEN was voted through coouncil unanimously, the LibDems adding a few alterations and extremely narrow terms of reference. By the end of the month, Amanda “Mandy” Cherrington, the senior Sutton council exec, had quit the role as managing director of SDEN that she had held for five years.
Mattey, in whose Beddington North ward the £210million incinerator was built, is not surprised.
“The whole business case for SDEN is built on sand,” he says.
“As we confirmed when we were finally allowed sight of KPMG’s report, many of the assumptions made in the model were ridiculous, and would have overstated the turnover by more than 30 per cent.
“KPMG challenged some of the assumptions, and the council simply made up figures to reach the targets they set themselves. I don’t need an inquiry to know that the figures were manipulated to ensure that SDEN went ahead. Too many people would have lost face if it hadn’t.
“Once again Sutton LibDems have decided to mark their own homework. This seriously calls into question the integrity and independence of the CIPFA report. There’s something in this draft that the administration doesn’t want opposition councillors to see. Why else would a draft report be withheld from elected members who were also stakeholders in the investigation?
“The terms of reference also suggested Viridor would see the report before publication. This is absurd. Are Viridor more important than elected councillors?”
After more than five years, SDEN remains a company with a sole customer: the residents of New Mill Quarter in Hackbridge, built by Barratts, who did a sweetheart deal with the council to agree to be part of the misfiring heating network. The promised “cheap” and “green” supply of energy from the incinerator has yet to be delivered.
Crowley said, “The council was convinced that phase two of SDEN, including proposed extensions to St Helier Hospital and the Lavenders development, would paper over the financial shortcomings. But not one shred of phase two has progressed.
“It’s a shambles.”
Read more: Sutton heat network director quits as fraud inquiry begins
Read more: SDEN’s business plan ‘dishonest at best, fraudulent at worst’
Read more: SDEN: A timeline of council bungling and sky-high fuel prices
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