School leaders demand PFI contracts review

Private finance initiative contracts should be reviewed by the government as it plans a new national funding formula, so as not to “jeopardise the financial health” of schools, the Association of School and College Leaders has said.

The union has used its response to the funding formula consultation to urge the government to seize the opportunity to address serious concerns throughout the school sector, regarding the financial situation of some schools with contracts relating to new buildings.

It follows a lengthy investigation by Schools Week into the “toxic legacy” of PFI, and warnings that the change to the funding system could cause serious problems for schools with contracts.

PFI contracts involve the private sector financing, building and operating public infrastructure, such as schools, and being repaid through leases spanning 25 or 30 years.

They were used to build and repair secondary schools under the Labour government’s building schools for the future programme, to which nearly 100 local authorities had signed up by 2009.

But our investigation found that schools were looking at cutting staff to balance their books, after annual repayments on some contracts soared by £125,000.

Schools Week uncovered 128 academies paying almost £70 million on PFI costs in the 2013-14 financial year: an average of more than £500,000 per school.

The Department for Education has said it will take PFI into account as the new system is designed, but union bosses say a simultaneous review is essential.

Malcolm Trobe, the interim general secretary of the union, argued for a “more financially efficient approach” to PFI to be taken, incorporating a “value for money challenge on the PFI contract terms”.

Julia Harnden, the union’s funding specialist, said it was “absolutely essential” to make sure the contracts were delivering value for money.

“As the government is planning to introduce a new funding formula it makes sense to carry out this review at the same time,” she said.

In its consultation response, the union has also warned of pressures being put on school leaders by increasing demands created by Ofsted and performance measures, adding that a new formula should establish minimum per-pupil funding levels which “sufficiently resource the costs of delivering and embedding the huge changes taking place to the curriculum”.

Trobe added: “We have campaigned for fairer funding for many years, but sharing out money more evenly will not on its own solve the funding crisis currently affecting schools.

“More investment is needed in the education system to meet rising costs and ensure that schools and colleges are able to deliver the outstanding education every young person deserves.”

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  1. Whilst there needs to be a fresh focus on PFI costs through the sector, I would also raise the problems being experienced across the Country where Academies are dealing with legacy contracts entered into by the Authority without the level of transparency that is required.