Hopes dashed for City cash

8th December 1995, 12:00am

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Hopes dashed for City cash

https://www.tes.com/magazine/archive/hopes-dashed-city-cash
The Government scheme for bailing out the cash-strapped public sector with private finance will have little immediate impact on schools or colleges without crucial changes, according to leading bankers and industrialists.

Last week the Education and Employment Secretary Gillian Shephard claimed that more than Pounds 1 billion could be raised for education from the private sector through the Private Finance Initiative, over the next three years. The Government has already planned for at least Pounds 100 million worth of investment in further education by cutting the same amount from colleges’ budget.

But leading potential investors this week said they doubted that the scheme would provide much cash to rebuild the country’s crumbling school or college buildings, at least in the short term. To date not one definite plan has emerged.

Three leading college organisations this week drew a blank in their search for participants. School heads have also criticised the PFI.

Kevin McNeany, the chairman of a leading firm of educational entrepreneurs, has told The TES that the scheme is unlikely to get beyond “fringe” facilities such as sports halls and swimming pools.

“These things are peripheral,” said Mr McNeany of Nord Anglia, which this week won five contracts to run careers services, bringing its total to seven. “They are not at the heart of PFI which is about building new schools, reducing the public-sector borrowing requirement and providing large amounts of money for the Chancellor.”

The three-year-old scheme, re-launched last week, works on a hire-purchase basis, allowing schools or colleges to buy buildings and services over a long period. The private sector must maintain the fabric of the building during the lease period.

But according to one of the bankers who helped devise PFI, neither schools nor colleges have enough cash to pay for major work and attract private investors.

“Schools may simply not have enough money in their budget to pay for the investment,” he said this week. “The problem of where the income comes from is fundamental. There’s no reason why the investment industry should be unwilling to take part in the long run: but in the immediate term some other way of funding schools will be needed.”

Sir Christopher Bland, chairman of the Private Finance Panel, which is responsible for co-ordinating the scheme, last week admitted that education is set to be a slow starter.

The panel is currently pressing the Department of the Environment to relax local authority spending rules which restrict capital investment in schools Neville Simms, group chief executive of the giant Tarmac construction firm, is optimistic about the long-term future of PFI in education.

“If we can tackle it in health I’m sure we can tackle it in education, ” said Mr Simms, who sits on the PFP. He believes better use can be made of educational assets.

In the short term, however, he believes there are “political” problems, with educationists doubtful about the propriety of private involvement. The financial industry has yet to accept the idea of investment in education. He called on City banks to set up investment funds targeted at education.

Norman Biddle, chairman of the Symonds Group, a major firm of project managers, is also optimistic, but only on the basis that several schools are grouped together under a single scheme - which would ideally be sponsored by a local education authority.

He argues that Britain’s stock of school buildings, much of which was erected rapidly in the 1960s, is in urgent need of PFI investment.

John Sutton, general secretary of the Secondary Heads Association, expressed no surprise at the lack of interest. “We can’t see that anyone would want to invest where there’s no prospect of return,” he said. “It is hard to see it in the state sector because we’re not about making profits.”

The Association for Colleges found “little evidence to show that private sector funds would be available on the scale required”. The Association for Sixth Form Colleges said it had received little but expensive offers of advice from consultants.

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