Pathfinders on the cash trail

15th March 1996 at 00:00
Five institutions are poised for major rebuilding projects as part of the Private Finance Initiative. Harvey McGavin reports

Five major college rebuilding projects have been earmarked to become the first Private Finance Initiatives in further education.

Liverpool, Canterbury, Newbury, Stoke-on-Trent and South East Essex colleges were named last week as "pathfinders" in a pilot scheme to test the viability of privately-funded capital projects worth a total of Pounds 120 million.

The PFI, a scheme designed to attract private investment in public infrastructure programmes, has enjoyed limited success since its launch in 1993, mainly in hospital and road building projects.

In other sectors, the hoped-for cash injections have been sporadic, prompting Sir Alistair Morton, former chairman of the PFI's advisory panel, to liken the scheme to an old tube of toothpaste - providing only the occasional spurt.

A major factor in the reluctance of industry to embrace the idea has been the element of risk involved. The biggest PFI project so far, the Pounds 3 billion Channel Tunnel rail link, only secured private backing after the Government threw in St Pancras hotel and other property to sweeten the package.

In education, the Pimlico School in London recently became the first comprehensive to invite PFI bids for an Pounds 18.5 million refurbishment.

The five "pathfinder" colleges must now invite tenders before negotiating the contracts.

Principals of the five colleges gave the initiative a mixed reception. "We are like the blind leading the blind," said Newbury College principal Gordon Bull. "Unless a college is sitting on millions of pounds of reserves I think we will see very few major capital projects getting built.

"I hope I am proved wrong but I am sceptical as to what we have got to offer the private sector out of our core business for them to stump up the money. "

Liverpool Community College principal Wally Brown said: "This is a new area for us and we are still exploring the possibilities."

Other colleges were more enthusiastic about the scheme's potential. Neil Preston, director of Stoke-on-Trent College, where enrolments have doubled in five years, said he was "delighted".

Susan Pember, principal of Canterbury College, described it as an exciting development. "We have grown by 40 per cent in the last four years and we could grow more but our site is stopping us.

"At the moment we don't have sports facilities but we have 200 students on sports and leisure courses. Whatever happens over the next 20 years we will have to spend an awful lot of money on maintaining our buildings anyway. If we don't move we will have to demolish and rebuild.

"We want a partner who would operate the sports facilities for commercial use. I don't want to run the caretaking and the cleaning and the security and the canteens. I want to run the education business."

She doesn't believe that PFI schemes will lead to a creeping privatisation of further education. "Even if you have got someone else providing the services you are still in control and holding the purse strings. We provide education for 11 prisons in Kent so we are a private contractor ourselves."

Patricia Stubbs, spokeswoman for the FEFC said that PFI capital projects in colleges represented "an investment opportunity" for finance houses and property developers. She envisages partnerships between investors and colleges creating a range of commercially managed facilities such as sports centres and canteens.

The FEFC have drawn up a register of more than 500 capital schemes with a total value of Pounds 823 million suitable for PFI development.

Philip Head, the FEFC's property services manager, said there have already been a number of enquiries from the private sector. "It's early days but we are encouraged by the level of interest. It's a simple concept but quite a complicated thing to do. What it does for the colleges is it allows them to concentrate on those things where their expertise lies, that is, teaching. "

John Brennan, policy director of the Association for Colleges, said that PFI could well be a solution for substantial building projects. But he was less convinced of its appropriateness for smaller scale refurbishments and renewal of equipment.

"We have got no objection in principle to the concept of using private capital to meet college's needs. Where we have reservations is with their suitability for all types of capital project."

He predicted that private-sector finance would not compensate for Government cuts in capital allocation, set to fall by Pounds 100 million over three years. "The argument is that the private sector will come in to fill the gap - we don't believe that's the case. We are still a long way from actually seeing any really tangible examples of PFI in bricks and mortar. But if the practical obstacles can be overcome there are real possibilities."

The five Pathfinder projects:

* City of Liverpool Community College: to build a Pounds 10 million centre housing the creative and performing arts, which are presently scattered across three sites, in the first stage of a Pounds 40 million redevelopment.

* Canterbury College: relocation from their present site in the city centre to a Pounds 30 million American-style campus on the outskirts.

* Newbury College: a Pounds 10 million scheme to sell its present site for housing redevelopment and move to a new 40-acre green field site on the outskirts of the town.

* Stoke-on-Trent College: constructing a Pounds 20 million third campus to accommodate visual and performing arts, business studies and general education departments.

* South East Essex College of Arts and Technology: development of a new town-centre site close to the present campus at a cost of Pounds 21 million.

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