Schools in England’s biggest private finance initiative (PFI) contract are facing 20 per cent fee hikes just over a year before the deal is due to end.
The case – the first large-scale PFI of its kind to reach expiry – is considered a warning to the rest of the sector as concerns grow over local authorities’ readiness to take back control of schools.
Stoke has 88 schools in its contract, which is due to end next October. But in a recent letter from the local authority schools were told their annual fees would rise. Some are facing six-figure bills.
Stoke-on-Trent council has pledged to use £6 million from PFI reserves – leftover sums from contract contributions – to limit the increases, but it’s unclear how much this will soften the blow.
Chris Tomlinson, the chief executive of the Co-op Academies Trust, which has five affected primaries, said the authority had “tried to minimise this increase as much as possible, but it will be financially challenging for our primaries”.
£100k PFI increases
“The challenge for trusts is that every PFI contract is very different, and so as each contract ends, the challenges will be unique to navigate.”
The Co-op’s schools are facing increases of “almost 20 per cent”.
City Learning Trust is facing a more than £200,000 (21 per cent) rise across four of its schools.
Creative Education Trust’s annual charges have also jumped 22 per cent, from £437,000 to £533,000, at one of its two Stoke PFI schools. The other has been hit by a £13,000 increase (18 per cent).
Jon Ward, its estates and facilities director, said the trust would be saddled with “significant” capital costs as the “PFI hasn’t always been able to ensure lifecycle investment has been made”.
“We’re essentially paying for a repair and reactive service, as opposed to ensuring the building is maintained with lifecycle investment.”
The Infrastructure and Projects Authority (IPA) guidance says “effective management of the expiry process … [is] essential to help protect value for money and ensure the continuity of vital public services”.
Creative is now completing its own condition surveys to plan what work will need to be done after the contract ends.
Ormiston trust is also working with Stoke to ensure significant maintenance – worth about £300,000 – is completed.
Its contributions for two academies have leapt by about £130,000 (18 per cent).
Tom Rees, its chief executive, said it was “not helpful for PFI fees to be rising significantly – especially at a time when costs are rising, funding is stagnant and there are reductions in the wider services around schools”.
Lessons for the sector
Eleven trusts – responsible for dozens of impacted Stoke schools – are now in talks to secure advice from PFI expert Ian Denison, of Inscyte.
They will have to pay for his help out of their own pockets.
In 2021, the Cabinet Office started running health checks on contracts set to expire in less than seven years, the point at which the IPA advises authorities to start their preparations.
But Schools Week revealed in March, just two of 41 were deemed to be on track. One in five was rated “amber/red”, meaning “major” additional work was needed.
Due to the complexities at the heart of the Stoke deal, Denison said the case would “re-emphasise the IPA’s belief you need to get into the ribs of expiry well in advance”.
“It will present a learning curve [for other areas] in terms of what are the key things that need to be resolved ahead of expiry.”
Successive governments have used PFI to fund new schools since the late 1990s. Private companies build and maintain sites in exchange for mortgage-style payments, normally over 25-year contracts – which rise beyond inflation – before handing them over to taxpayers.
Rees said there were longer contracts “with even more significant challenges” in areas such as Sandwell in the West Midlands.
A Stoke-on-Trent City Council spokesperson said “the larger than normal” uplift – which varied from school to school – was “mainly due to inflation on utility charges”.
The schools had previously been “protected” from this through “the provider’s long-term energy deal, which has now ended”.
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