Thousands of schools duped by 'toxic contracts'

20th April 2012 at 01:00
Equipment scam leaves one primary owing #163;500,000

Thousands of schools across the country are falling foul of equipment scams that could end up costing the taxpayer hundreds of millions of pounds, experts have warned.

Between 10 and 15 per cent of primaries and secondaries could be trapped in so-called "toxic contracts" for back-office kit such as photocopiers, fax machines and computers, often to the tune of #163;200,000 or more.

The figures come from Martin Tucker, an expert on mis-sold leases, who claims that 30-40 per cent of schools are paying too much for their school equipment.

The sheer scale of the problem surfaced earlier this month after Suffolk County Council announced that it had suspended the headteacher and entire governing body of one of its primary schools, which had been duped into a computer equipment scam costing more than half a million pounds.

Glemsford primary owes #163;500,000 to Clydesdale Bank after it unwittingly signed up to expensive long-term leases for 100 new laptops. The school believed that it was being given the computers free of charge, but it had unknowingly entered a leasing agreement that spiralled out of control.

The company it sourced the laptops through, Direct Technology Solutions, has since gone into administration, leaving the school owing a large sum of money to the bank.

Glemsford's headteacher, Elizabeth Steele, has been told to stay at home by the council, while town hall bosses have turned to the Department for Education to replace the governing body with an interim executive board.

But the move has been heavily criticised by heads' leaders, who said it was unfair to blame headteachers for signing up to the contracts because they are not trained to be experts in hire purchase agreements. Russell Hobby, general secretary of the NAHT heads' union, said that Glemsford had lost an excellent headteacher who was popular among parents and staff.

"We don't want heads to be experts in hire purchase agreements; we want heads to be experts in teaching," Mr Hobby said. "There is a risk for heads that if they sign up to a bad contract then their job might be on the line. It means heads will just keep quiet about the leases they have and that will just make it worse. Many heads assume the people they are dealing with are upfront and decent when they are not."

According to Mr Tucker, the extent of the problem has only become clear in recent years, as more schools have converted to academy status. When a school converts it has the option to cancel any existing contract, leaving the local authority to foot the bill.

Mr Tucker works with TES BuyWire, a sister enterprise to TES, to give advice to schools on their leases. He said he is working on at least 10 cases where the school's liability is more than #163;200,000. "Certain suppliers know exactly what budgets schools have and purposefully overvalue the equipment," he said. "They will tie the schools into rolling contracts, which catch them out. They need the equipment to run the school, but they can't buy themselves out of the expensive contracts so they just keep rolling them over."

Glemsford primary had been told by the company it accepted the laptops from that it was merely signing an agreement to satisfy EU regulations, but it had really entered into a long-term lease. Despite claims that it was the victim of a scam, Suffolk County Council has pushed on with its plans to remove the school's governing body and suspend the head.

"We are in the middle of an internal and police investigation involving the school and it would be inappropriate for us to comment further at this stage," a council spokesperson said.

The DfE said it was aware that schools had entered into poor finance deals when buying equipment, and issued a word of warning to heads. "There is some evidence to show that suppliers employ a range of high-pressure sales tactics that lead schools into inappropriate and costly lease agreements," a DfE spokesperson said. "This is why we are working with schools to help them avoid costly mistakes by getting to grips with the different types of leases they are confronted with."


30-40% of schools are paying too much for their office equipment

10-15% are tied into toxic contracts

#163;500,000 was owed by one primary school for 100 laptops

#163;350 is the average price of a laptop from Argos

#163;320,000 was owed by another school for seven photocopiers

#163;100,000 was the actual value of the photocopiers.

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