Headteachers are urging the government to review schools’ private finance initiative (PFI) contracts, warning that some schools are spending more than 10 per cent of their budgets on the deals.

The Association of School and College Leaders has warned that PFI deals, in which private firms fund school building work and are paid back over the long term, are a “significant and increasing pressure” on schools’ budgets.

The union argues it would “make sense” for the government to bring in a “value for money challenge on the PFI contract terms”, alongside its plan to introduce a new school funding formula from next year.

The proposal is part of the union’s response to the Department for Education’s consultation on the factors that should be included in a new national school funding formula. The suggestion has been made as classroom unions voice opposition to the plans for a new formula, which will change the way the national education budget is distributed between schools. 

Julia Harnden, a funding specialist at the ASCL, said: “Schools where PFI contracts were used to fund building work include agreements under which the PFI contractor provides services such as maintenance, cleaning and IT.

“This can mean that as much as 10 per cent of the school’s budget, and in some cases even more, is tied up in funding these costs.

“School funding is incredibly tight, with budgets under severe pressure, so it is absolutely essential to review these contracts and make sure they are delivering value for money.”

The union supports a proposal by the DfE for a new funding formula to include a separate factor that would cover schools’ PFI costs.

It said it would be “difficult to disagree” with the “guiding principles” of the new formula, which was published last month. However, it warned that “unintended consequences” could emerge at the second stage of the consultation, in which the government is expected for the first time to publish details of what the proposals would mean in cash terms for schools.

‘Financial cliff edge’

The association said a £500 million fund announced by Chancellor George Osborne in last month’s Budget should target “highly efficient” schools in low-funded areas, to “save them from the financial cliff edge that they are facing in 2016-17”.

Other education unions have set out their opposition to the government’s plan for a new formula. The ATL said in its response to the consultation: “This proposal simply redistributes the current schools budget.

“The overall result will, if implemented, mean winners and losers. For this reason, ATL believes that this proposal does not meet the most important objective of a new national funding formula - fairness.

“It is unfair that schools could lose funding at such a critical time when so many are reporting that they are already struggling to meet their current obligations.”

The union said it “vigorously opposes” the government’s plan to remove local authorities’ role in distributing funds between schools - a move that the ASCL said it supported. 

The ATL said the overall schools budget should be increased, adding: “No school should see a drop in funding as a result of implementing a national funding formula.”

Kevin Courtney, deputy general secretary of the NUT teaching union, said: “The government’s position is simply to level down provision by penalising areas with higher than average funding even though all areas are under-funded and all face further real-terms cuts.

“It is an absolute scandal that the education secretary is content to preside over such inadequate funding policies for our schools. Children deserve the best start in life that schools can provide. Forcing schools to scrape by is simply not good enough”.

Russell Hobby, general secretary of school leaders’ union the NAHT, said: “The weighting of factors within the formula will be crucial, and for schools the devil will be in the detail. We’re disappointed not to see a pupil mobility factor within the formula, as this presents an enormous challenge for some schools.

“The demise of the Education Services Grant will also be a concern to academies, who will have to cover the auditing and administrative costs this currently covers. At a time when budgets are at breaking point, this is an unwelcome additional cost for schools.”

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