One of the Government's flagship policies has been dealt an embarrassing blow, The TESS can reveal, with the news that Clackmannan College has pulled out of its partnership with Falkirk College to build a new further education centre in Stirling under the private finance initiative.
Jim Thomson, chairman of the Clackmannan board, said it took the view that it would be "irresponsible" to become involved in what it saw as an unviable project which could put the future of the college at risk. "In financial terms, it was hairy as hell," Mr Thomson added.
Although Falkirk intends to press ahead, the extent of pledges made to back the Stirling campus with Pounds 250,000 from Forth Valley Enterprise and from European funds must now be in doubt. The only other educational PFI project under investigation is the new Livingston campus for West Lothian College, and education authorities have also shown a distinct lack of enthusiasm for the initiative.
The Clackmannan move will be particularly alarming news for Raymond Robertson, the Education Minister, who only this week told a Commons debate on FE funding that "increasingly the private finance initiative will take the place of capital grant funding." He suggested the colleges were enthusiastic about it, citing both Falkirk and West Lothian.
But the Clackmannan board took its view after studying the figures and ordering a report from its external auditors. This recommended that the Stirling project was not viable without considerable sums of external funding. John Taylor, the principal, also gave the board the same advice in his role as the college's accounting officer.
Mr Thomson said: "We decided that it was not appropriate in terms of the public interest, the financial interest, the interests of the college, or the interests of the students." Clackmannan already has two FE centres in Stirling, just eight miles away, and intends to press on with its own development plan for the area .
The PFI plan, under which the private sector builds, owns and operates public facilities, would have cost the two colleges an annual rental initially of Pounds 850,000 which would reduce to just under Pounds 600,000 with the injection of Forth Valley Enterprise and European funds. But a similar building in the Stirling area would only cost Pounds 300,000, Mr Thomson claimed.
The Clackmannan board was also swayed by the capping of full-time students on higher education courses in FE colleges and the freezing of student bursaries. "The idea that a new campus would produce new students was not going to be possible," Mr Thomson commented. "Without any expansion in student numbers, we would simply have been moving students around from Falkirk and Clackmannan to Stirling without any educational rationale and with no benefits to students in Stirling."
The Clackmannan board had pressed the Scottish Office for assurances to ease their financial worries but say none was forthcoming. "We were being asked to commit ourselves to a 25-year rental for which the collateral would be the current college buildings. That would put the future of the college at risk and tie up vital resources in servicing the debt. The thought of entering into such an agreement, which would have built-in rent reviews and no escape route, is fearsome and would have been totally irresponsible."
At Falkirk College, Graham Clark, the principal, disputed Mr Thomson's financial arguments. The Scottish Office and the Treasury had appraised Falkirk's proposals and found they offered "very good" value for public money.
He said that Clackmannan had been offered a partnership in which they bore only a quarter of the costs but would have had half of the involvement as managers. He could not understand Clackmannan's financial concern: there was no issue of collateral risk. The private sector would have borne the risk, not the two colleges.
Dennis Canavan, the Falkirk West MP who initiated this week's debate on FE funding, criticised the total sums available for colleges as well as the way the money was distributed.
And he also dismissed the PFI option as "not enough to renew or replace dilapidated buildings or obsolete equipment and some colleges may be forced to cut recurrent expenditure to fund essential capital projects".