Exclusive: £8k for a blind, £2k for a tap; the true cost of PFI

21st April 2017 at 06:00
Schools locked into expensive contracts may find their only option is to cut staff

Schools are paying thousands of pounds more than they should for everyday items because they are locked into PFI contracts they have no control over, a Tes investigation has revealed.

In what are dubbed “life-cycle costs”, schools are charged over the duration of PFI contracts, which results in even modest monthly payments mounting up over the years.

One teacher, who asks not to be named, cites an example: “We are a PFI school with an annual PFI bill of £132,478. We have been paying £88 [a year] for the installation of a new sink for 14 years now. With nine years left on the PFI contact, that sink will cost £2,024.”

At Bristol Metropolitan Academy, a single blind for a room will end up costing £8,154 under PFI. Oasis Academy Brislington, also in the Bristol area, will pay £2,211 for an external water tap over the course of a contract.

Stella Creasy, Labour MP for Walthamstow, in north-east London, told Tes that the companies that profit from financing PFI deals were the “legal loan sharks of the public sector”. She wants an inquiry into PFI “before even more schools and hospitals are saddled with debts they can’t pay”.

For some schools, even getting the gates open to allow children to use the toilet before a school trip is a costly exercise.

One secondary in Oldham – Newman RC College – was charged £48 after security opened the school to allow pupils to visit the lavatory. The same school had to pay more than £400 for caretakers to fit some notice boards.

Such charges are not unusual. Tim Gilson, the head at Malmesbury School, in Wiltshire, said: “We had some benching put in the canteen, just along one wall, about 20 yards. We have to pay about £40 a month for the facilities management cost of that bench, on top of the cost of putting that bench in and all the materials. It’s a monthly charge that continues for the length of the contract.”

With 13 years left on his school’s PFI contract, the secondary will be charged £6,240 just for the management of the bench.

Lack of value for money

Concern over the value for money in PFI deals – or the lack of it – has prompted the National Audit Office to launch a new investigation into PFI schemes, with schools one of the areas being looked at.

The government watchdog will examine the costs and benefits of PFI, as well as how they are managed and how savings can be made. Before the general election was called, the inquiry was expected to be completed by the summer. The investigation comes amid mounting anger over cuts to school funding, with schools already under pressure to make billions in savings.

PFI is a way of funding government spending by using the private sector to provide the money up front.

Investors make profits from contracts which run for decades and result in schools costing several times what they are actually worth.

Companies make money from not only charging interest on repayments, but also from schools paying for services such as security, cleaning and maintenance, in yearly payments called unitary charges.

Anything that falls outside of the contract, such as a school wanting to get an additional fire extinguisher or change the use of a room, typically results in extra charges.

Jenny Smith, headteacher of the Frederick Bremer Secondary School in Walthamstow, said: “Our PFI costs are already prohibitively high at about 16.7 per cent of our budget. These are fixed costs and cannot be reduced.

“Over the next three years we are facing real-term cuts to our budget of over £800,000, and that does not include PFI increases. Obviously, this is completely unviable for the future of the school.”

Meg Hillier, Labour chair of the Public Accounts Select Committee told Tes that some schools with PFI contracts were being hit with a “triple whammy” when counting losses under the national schools funding formula and the savings schools are expected to make,

The Labour MP said: “The government has not fully understood the interaction of existing PFI deals that people are tied into and the demands that [ministers] are making for £3 billion in efficiency savings.

“This is just another example of the lack of grip by the Department for Education on the reality for schools on the ground who are trying to sort out their budgets.”

Councils are concerned that PFI contracts “impose a cost burden which is not transparent and which puts profit ahead of educational considerations”, according to Richard Watts, chair of the Local Government Association’s Children and Young People Board.

A Department for Education spokesperson said: “We have recently consulted on a new, fairer national funding formula for schools, into which PFI costs are be taken into consideration.

“Including a PFI factor in this formula recognises these costs in how funding is allocated across the country, for the first time. This will, we believe, mean a fairer outcome for schools in areas with PFI commitments.”

This is an edited article from the 21 April edition of Tes. Subscribers can read the full article here. This week's Tes magazine is available in all good newsagents. To download the digital edition, Android users can click here and iOS users can click here

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