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Academy facing closure over ‘crippling’ £21 million PFI costs



A struggling academy is facing closure because of “crippling” PFI repayments – with the council set to pick up the outstanding £21 million debt.

The government has agreed “in principle” to close The Kingsway Academy, in Wirral, following two-year discussions over its viability.

Northern Schools Trust, which took on the academy in 2014, said low pupil numbers and rising private finance initiative repayments, currently costing more than £600,000 per year, mean the school is “unviable and potentially not able to pay its bills”.

This is nothing to do with the quality of the education being provided

Extensive investigations by Schools Week previously revealed how schools were being pushed into financial ruin by soaring debts owed to the private firms that funded their buildings.

Schools make repayments through councils that signed up to the PFI deals to build or refurbish schools. Contracts normally run for around 25-years, and rise each year – whether or not schools lose funding because pupil numbers drop.

Nigel Ward, chief executive of the Northern Schools Trust, said: “This is nothing to do with the quality of the education being provided but to do with a shortage of pupils at the top end of the Wirral and the funding mechanism chosen by the Wirral Council to refurbish its schools many years ago.”

According to Edubase, the school has 443 pupils on roll, but a capacity of 1,500.

Schools Week understands the PFI contract still has around 15 years yet to run – with repayments of around £21 million due to be paid.

If the school closes, the council will have to pick up the tab, as it would own the building, the trust said.

The Liverpool Echo reported last year how Liverpool council was repaying £4.3 million PFI costs per year for a school, even though it had closed in 2014.

Wirral Council did not respond to a request for comment. The Department for Education told the Liverpool Echo the school would remain open until the end of the school year.

A department spokesperson said: “Should the school close, we will work with the trust and the local authority to identify alternative places for students to ensure their education is not disrupted.”

READ MORE: Toxic PFI legacy is pushing schools towards financial ruin

Ward said the decision follows a “considered process by a team of educationalist responsible for the sustainable success of the students and school” over two years, including potential mergers with other schools.

“The Northern Schools Trust has been party to the discussions regarding the strategic options, and presented possible outcomes, but ultimately have no role or say in the final decision.”

That will fall to the secretary of state.

Schools Week has previously revealed how takeovers of struggling schools had hit snags over PFI issues. Trusts willing to takeover schools identified as needing intervention have been put off over PFI repayments.

Former education secretary Nicky Morgan previously said government lawyers had tried, but failed, to unpick the “watertight” deals.

But Morgan pledged schools with hefty PFI contracts would get extra funding under the new fair funding formula. Further details on the final funding formula are expected to be released later this year.

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4 Comments

  1. PFI is a poisoned chalice. It was a disastrous policy started in 1992 by the Tories and heavily used under Labour. But the buy-now-pay-later policy has tied schools and hospitals to potentially ruining payments for years. These payments will not stop if the facilities are closed.
    You’d think PFI would have been thoroughly discredited. But new school buildings are still being financed through this policy under the Priority School Building Programme.
    Meanwhile the PFI tracker for both the DfE and the Department of Health doesn’t seem to be working. The ‘openness rating’ is a mere two stars and has been given a ‘bronze’ rating: https://data.gov.uk/dataset/private-finance-initiative-pfi-data

  2. Alistair Thomas

    There was always an affordability gap with PFI – for schools, the deals involve inflation beating increases for the developers (on the services). With school funding Being “flat cash per pupil” for the last seven years, even a deal that was solid and is basically tracking to plan would be starting to look uncomfortable in an austere world where inflation has to absorbed by the business (school). That means that teaching and learning is squeezed to pay private investors – doesn’t sound so clever now, does it?

    Given that many of these schools were built or at least planned at a time of maximum hubris, if they were built with growing room which never materialized or god forbid that pupil numbers (and the cash basis of the budget) actually fall, then the numbers simply won’t add up. These 30-year deals have no flexibility. Schools can’t even sweat the assets or downsize.

    Both main parties are as bad as each other on PFI. Tories should have used QE to buy back schools and hospitals instead of underwriting bankers’ bonuses. Labour talk of nationalizing this and that – well they should start with the private schools and hospitals that they foisted on us at vast expense, and can we stop talking about G Brown as if he was a good chancellor? Labour’s holier than thou attitude makes me want to vomit, but the Tories are little better. A plague on both their houses.

  3. Victoria Jaquiss

    As JANET wrote – PFI, a poisoned chalice. It is a scam that should be front page, first news item night after night! Not just crippling schools finances, but the share-holders, the building owners dictate what school activities can happen after school on the premises. And in many cases what activities won’t happen.