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College that can't afford to teach

'So at the end of 25 years and having spent pound;52 million of what we shouldn't forget is public money, the college will not even own the buildings. How clever is that?' Neil Munro talks to a principal living with a PFI nightmare

"AS we say in Yorkshire, it's a pig's arse."

That is the no-nonsense verdict of Sue Pinder, West Lothian College's principal, on the fate that has befallen her brand new, state-of-the art pound;18 million institution - and she pins the blame squarely on the private finance initiative (PFI) scheme which built it.

Mrs Pinder fears the college cannot afford the costs arising from the complex PFI deal it has been locked into, which she says was an early version of the initiative (now renamed public private partnerships) that "would not see the light of day now".

"Notwithstanding all of that, we do have a beautiful new campus now," she says.

She stresses repeatedly that she does not want to be seen as "whingeing" or apportioning blame. None of the key players - the Scottish Executive, the FE funding council or the present college management - was responsible for brokering the deal. "Every-one agrees the situation is unsatisfactory," she says. "The problem is how to resolve it."

The college faces an unsustainable bill of pound;12 million after 2007 for the remaining period of the 25-year contract. For the first six years of the contract, the funding council has agreed to meet in full the annual pound;3 million rent which the college has to pay to the PFI consortium as well as the VAT bill for facilities management. But after 2007, the college will have to bridge a widening gap by generating surpluses.

The college had a deficit of pound;1 million last year before the impact of the PFI and other exceptional items and it is only now poised to break even for the first time. To sustain its income, meet its costs and grow the business, it calculates that it needs to be funded on the basis of 60,000 WSums (the weighted units that measure student activity). But is only being funded for 43,000.

The college decided to go beyond that level in 2001-02, its first year in Livingston, because of what Mrs Pinder says has been "phenomenal" student demand. However, it cannot afford to carry this cost itself and has capped numbers at the 43,000 WSum level. As a result it is only 60 per cent occupied - but still paying the same rent.

The college needs funded growth, both to grow its business and to meet its obligations. Its PFI deal is a deficit funding model and relies upon the college receiving incremental increases in funding throughout the life of the PFI contract.

Other costs and features of the contract cause endless headaches. As well as rent, pound;1.1 million a year for facilities management goes to Interserve, which is responsible for cleaning, upkeep and maintenance, janitorial services and security. That sum is fixed whether the college has one student or 1,000 students, and represents 13 per cent of the college's turnover.

"How many colleges of this size would spend that amount of money on these services every year?" the principal muses. "They wouldn't."

The college is not helped by some extraordinary decisions taken at an early stage of the PFI deal. The 23-acre site in the centre of Livingston is owned by the college but it entered into a 99-year agreement to lease the land to HBG Construction, which built the college.

HBG also owns the buildings but the college can only buy them back at the end of the contract at the market price. "So at the end of 25 years and having spent pound;52 million of what we shouldn't forget is public money, the college will not even own the buildings," Mrs Pinder says. "How clever is that?"

The college has been involved in a series of wrangles with HBG over major defects. The creche floods when it rains because the doors were badly fitted. HBG has finally agreed to do the job - but not before some surreal exchanges. Mrs Pinder says: "We were told the contract was not impaired if it was a sunny day and no water was getting in. Water had to come in and be seen to be coming in. So do we have to read the meteorological charts before deciding whether to allow a room to be used or not?"

There is a dispute over the heavy external doors, which the company claims are compliant with disability legislation but which the college insists have handles that are too high for disabled students to open without help.

The college now has no alternative but to stump up pound;25,000 to adapt the doors.

While the college has had several one-off sums for PFI costs from the funding council, it receives no capital support because it is a new building. So any costs that HBG refuses to bear have to be met by cash from the college's hard-pressed budget (it received the lowest increase in grant allocation for the coming session).

The college board believes the solutions lie in the hands of the Executive and the funding council. The council said in a statement that it would continue to do its best to help and pointed to increases in FE spending overall. But it added that funding issues for 2007 and beyond were a matter for the Executive.

Mrs Pinder, it appears, will have to soldier on. "Our management team and board have spent more time on PFI issues than on students' teaching and learning," she says. "People like me should be concentrating on education - but I'm a property developer, a PFI manager. That cannot be right. Living with it is a nightmare."

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