Controversial plans to finance the multi-million-pound rebuilding of a London school by selling off part of its site for luxury housing have been given the go-ahead by governors and councillors.

But the move has led to a vote of no confidence in governors by teachers at Pimlico secondary school, Westminster, who are worried about the loss of space and disruption to pupils’ education.

Governors, under their chairman Home Secretary Jack Straw, voted narrowly (10 to eight) in favour of the Private Finance Initiative bid, a decision endorsed by Westminster council.

St George’s Square Partnership has been named as the preferred bidder, over rivals McAlpine Osborne Consortium.

The council will now start negotiating a contract with the partnership, which will be subject to the further approval of members.

Westminster has long argued that PFI - a Conservative scheme to get private money into the public sector - is the only way ahead for Pimlico. The 1960s’ glass-and-concrete school building is too hot in summer, too cold in winter, and suffers from leaking roofs. The sell-off of nearly a quarter of the school’s prime city-centre site for housing is the key attraction for private developers.

But parents and teachers claim the school can ill-afford to lose the space, and that the option of refurbishing the existing buildings has not been fully explored. Children will be working on a building site and their education will suffer, teachers warn.

Opponents of PFI have approached the district auditor with their concerns about whether the scheme is good value, and may mount a legal challenge based on the regulations covering competitive tendering.

And Michael Ball, chairman of the school’s parent-teacher association, has called for Mr Straw to resign - claiming he has reneged on a pledge not to back plans unlikely to win parental support.

A parents’ survey revealed opposition running at 155 to nine, and the city council’s own consultations show more parents in favour of refurbishment or opposed to PFI than in favour of it.

But parent-governor Philip Saunders, who voted in favour of PFI, said tthat there was no proof that the necessary funding could be secured for refurbishment. The cost of the PFI rebuild scheme is estimated atPounds 32 million over 25 years.

“It was an almost impossible decision, one way or the other. I couldn’t take the chance of leaving the school as it is for another few years,” said Mr Saunders, a youth worker in neighbouring Lambeth for more than 30 years.

Jenny Bianco, Westminster’s education chair, said: “It has to be remembered that this was the only option on the table for us to be able to do anything to improve the education facilities at Pimlico. We need to support the governing body. They took a very brave decision to go forward with this project.”