Schools stuck with hefty private finance initiative contracts will be given extra funding under the new national formula after Nicky Morgan (pictured below) admitted her team of lawyers had failed to unpick the “watertight” deals.

In last week’s edition, Schools Week revealed the toxic legacy of private finance initiative (PFI) contracts with firms who built new schools.

Potentially transformative management takeovers of cash-strapped failing schools hit the buffers as academy chains baulked at taking on the 25-year contracts.

Many local authorities used a PFI factor in their funding formulas to pay for the deals, prompting concerns that this could be missed out under any new funding formula.

But the Department for Education (DfE) is proposing to allocate cash based on each local authority’s historic PFI spend for the next two years.

There is no solution yet for when local authorities step away from overseeing funding in 2019.

The DfE has said, ideally, it will look into individual contracts and try to draw up a more formulaic distribution.

But PFI costs vary significantly across different schools. This week’s consultation therefore suggests local authorities or regional schools commissioners could distribute a pot of cash for PFI repayments. This would mean local knowledge of different conditions is retained.

In several investigations Schools Week has highlighted how some schools are being pushed into financial ruin because of their repayments – some of more than
£1 million per year.

The education secretary on Saturday said: “We have had teams of lawyers looking at PFI contracts to see whether they can be changed or negotiated, unpicked. They are, unfortunately, incredibly watertight, but I do appreciate the huge pressure that they put on different schools’ budgets.”