Church primaries and secondaries could be refurbished thanks to a Royal Bank of Scotland deal, report Dorothy Lepkowska and Neal Smith
The Royal Bank of Scotland is to underwrite a deal worth up to pound;1.5 billion to rebuild hundreds of Church of England schools.
The bank is in talks with ministers and church groups about putting together proposals to help fund refurbishments under the Government's Building Schools for the Future programme.
The deal is expected to be announced formally next month and comes as concerns are being raised within the Anglican and Roman Catholic churches about how they will raise the cash for building projects.
Ministers have pledged that every secondary school in England will be rebuilt or refurbished by 2015, but church schools have to find 10 per cent of the cash.
The RBS scheme would only rebuild Anglican schools. The Church of England estimates it will still need to find up to pound;500 million towards the rebuilding or refurbishment of its 250 schools, and also the building of up to 60 new secondaries by 2008.
The Catholic Church also says it would have to find as much as pound;500m to pay for its share of rebuilding its 394 secondaries.
Oona Stannard, director of the Catholic Education Service, said the Church was extremely anxious, but confident that its substantial shortfall in funds would be met by the Government.
"The solution is not yet on the horizon and the Church remains very concerned to resolve this," she said.
The RBS would lead the financial management of the Anglican project through a capital programme called Partnerships for Church of England Schools.
The TES has learned that one option being considered is to raise money to rebuild the 250 Anglican secondaries through bond financing, a long-term investment programme used by the pensions industry. The RBS will arrange the bonds and underwrite them into a package to attract capital market investors.
Nick Prior, projects director for Partnerships for Church of England Schools, said: "We want to make sure that we have the most cost-effective funding structures in place to ensure that this investment programme achieves what the Government wants."
He added: "We are looking at a programme of up to pound;1.5bn to improve the infrastructure of C of E schools."
Mr Prior said the RBS had won an inter-bank competition to look at ways a scheme could work.
Church officials are expected to meet senior officials from the Department for Education and Skills to discuss the way forward.
Marilyn Mason, education officer for the British Humanist Association, said: "This is an expensive way of providing schools and our children will end up paying for them for years to come."