PFI, Schools

PFI payments rise leave headteachers ‘scrimping and scraping’

School budgets squeezed as spiralling inflation triggers £150k PFI hikes

School budgets squeezed as spiralling inflation triggers £150k PFI hikes

16 Jun 2023, 12:00

More from this author

The DfE will help all PFI schools handle expiry.

Headteachers forecast having to fork out over £150,000 more in private finance initiative (PFI) payments, with one admitting: “I don’t know what to do.” 

While leaders are already struggling with growing financial burdens, three in the West Midlands are bracing for a 12.9 per cent rise to annual payments owed to private companies that built their schools.

Bosses have revealed the spiralling costs have forced them to “scrimp and scrape” as they each have more than a decade left on their PFI contracts.  Teaching vacancies are also having to be left unfilled.

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, typically for 25 years, before handing them over to taxpayers. Repayments also cover management of maintenance services.

Fears PFI rises will continue

Imran Iqbal, the headteacher of Holly Lodge High School in Smethwick, said he has not been able to update the secondary’s 15-year-old IT software.  

Imran Iqbal

“I’ve got fewer teachers as a result, less admin staff and I’m scrimping and scraping on resources. The IT in the school is 10 or 15 years out of date. It’s also impacting on SEN support in the classroom. 

“My biggest fear is if the charges continue to spiral, we would have to look at staffing restructure because I couldn’t absorb another £170,000 increase.” 

Most PFI contracts are pegged to the retail price index (RPI), which stood at about 8.3 per cent in 2022 before rising to 12.9 per cent this year. 

Iqbal said the leap would increase his repayment costs by more than £170,000, from £1.32 million to almost £1.5 million. The annual fee stood at almost £874,000 when the contract began in 2011-12. 

Money for kids ‘severely limited’

The costs are paid to Sandwell Futures, which has similar deals in place with four other schools across the borough, including the Westminster School which is expecting a rise of more than £100,000. Oliver Flowers, its head, said an increase of 90 pupils was the “only reason” he was able to offset the costs in recent years. 

Keziah Featherstone

Keziah Featherstone, head of Q3 Academy Tipton, said the increases had “severely limited the amount of money we have for the children”. The secondary’s payments are set to leap from just under £1.5 million to more than £1.6 million this year.  

“Every role is now scrutinised about whether we need like-for-like replacements, whether we can go part-time rather than full-time. We’re looking for as many savings as we can.  

“The proportion of our budget we’re spending on staffing is quite low – and that’s having to be maintained, rather than increased.”   

Government figures show 694 PFI projects across the country holding a total capital value of £54.7 billion. Almost a third are for schools.  

‘All PFI schools impacted’

Ian Denison, a director of PFI adviser Inscyte, said “all” schools holding similar contracts were facing the same inflationary pressures.  

“The ESFA would provide schools with money to cover their PFI costs. That met every cost of the PFI until 2019, but now inflation has outstripped it.  

“That adds another pressure on to schools, so their education budgets are being used to subsidise the PFI. Some of our clients have gaps that are over £100,000 a year – generally it’s sizeable, about two to three teachers’ worth.”  

Shaun Bailey, MP for West Bromwich West, told a House of Commons debate last month the legacy of PFI meant schools having to choose between “resourcing the education of children or doing basic maintenance”.  

He said headteachers were pleading with him and telling him they did not know what to do.

Pleas to education secretary

Iqbal last month wrote to Gillian Keegan, the education secretary, urging her to support PFI schools by treating the RPI increases as “an exceptional funding factor”.  

He said this would mean schools would be reimbursed “the gap between what we originally paid and what we’re paying now”.   

A spokesperson for Sandwell Council said it had an “ongoing dialogue with headteachers at these schools and we are working with them through these financial challenges.”

It would help schools “review and closely monitor contracts for services they require”. 

Resolis Ltd, which is listed as Sandwell Futures’ secretary on Companies House, did not respond to a request for comment. 

Your thoughts

Leave a Reply

Your email address will not be published. Required fields are marked *