PFI: Council faces £400,000-a-year school closure bill

A failing school handed an academy order more than a year ago is set to close after a sponsor couldn’t be found – leaving the council facing an annual £400,000 PFI bill.

South Shields School, in South Tyneside, was ordered to become an academy by the government after being rated “inadequate” by Ofsted last year.

However, talks with two trusts, with low pupil numbers and a £400,000-a-year private finance contract cited as reasons.

South Tyneside council has now said it has no option but to consult on closing the school – despite the authority facing a £7.6 million bill left to pay off on the school’s PFI contract, due to run for another 19 years.

The case is another example of how hefty PFI contracts – whereby private firms build, operate and run buildings that are leased back to the taxpayer under contracts of around 25 years – are blocking struggling schools from receiving potentially transformative takeovers.

It wouldn’t be the first PFI school to close. Liverpool city council is currently paying £4 million every year – or around £12,000 a day – on a PFI contract for the now empty building that housed Parklands High School until it closed in 2014.

Labour MP Stella Creasy, a regular campaigner against PFI, said: “PFI is the nightmare that continues to decimate budgets across the country – yet these loans are the one repayment they can’t cut, meaning it’s schools and councils that suffer instead.”

South Tyneside council said it was informed by the government in August that the school’s academy order would be revoked on the condition a consultation over closure was launched.

However, a Department for Education spokesperson said any decision for closure was down to the council.

Council documents stated the school’s surplus places, close proximity to other schools with “substantial places”, a lack of growth of pupil numbers in the area and the PFI agreement mean that “no solutions can be identified”.

The closure comes despite Ofsted inspectors, during a follow-up inspection in May, finding leaders are taking effective action towards the removal of the serious weaknesses designation.

The school is also the only one in the area that runs a DfE-funded cadet unit to improve character education.

The council currently pays £409,802 a year on its PFI contract with Inspiredspaces STaG Ltd, a company set up by Carillion.

Repayments increase by the RPI measure of inflation every year. Terms of the contract mean the building can also only be used for educational purposes.

A statutory representation period for the closure will run until mid-December. The council said it will develop transition plans for pupils.

Meanwhile, a spokesperson for Liverpool city council said negotiations are ongoing to find a new education tenant for its empty site.

The council’s PFI contract with Education Solutions Speke Limited runs until 2028.

The firm lists Michael Dwan – the founder of the collapsed Bright Tribe academy trust – as a director.

A spokesperson for the firm told Schools Week it remains “extremely flexible” to accommodating alternative uses for the school buildings, which remain available and “continue to be maintained to a high standard. The council can exercise their right to terminate but, as with any contract, would need to pay the balance of the remaining term.”