DfE lays foundation for new schools – with private cash

2nd October 2015 at 01:00
It seeks advice on how to secure funds for school buildings

The government is inviting some of the world’s biggest consultancy firms to advise on how it might secure private sector cash to pay for more free-school buildings.

The Department for Education is exploring the creation of a specialist property agency to tap industry expertise for the delivery of 500 new free schools, TES has learned, and “nothing is off the table” as ministers weigh up options for the building programme. Sites will need to be purchased for the schools, while capacity is needed for 900,000 extra pupils expected to enter the school system by the end of the current Parliament.

Under the proposal, a so-called “prop co” would be created. Owned by the secretary of state, the agency would enable the DfE to spend money without encountering the restrictions currently faced by the Education Funding Agency (EFA).

The move would also allow the agency to raise funds from the private sector, giving the government greater access to capital.

According to a well-placed source, the body would oversee the creation of the 500 free schools that prime minister David Cameron has committed the government to building by 2020. When Mr Cameron made the pledge before the general election, Lib Dem schools minister David Laws said the policy would “blow a giant £4 billion hole in the school-buildings budget”.

Lifting the brakes

A major concern for DfE officials delivering the free-schools programme is a lack of viable sites, particularly in the South East, which is acting as a significant brake on the initiative.

“The hope is that the move will enable the DfE to bring in expertise from the property sector, which has the experience and ability to broker deals that the EFA just doesn’t have,” the source said. “It will also provide greater flexibility to the DfE as the bulge in pupil numbers moves into the secondary sector.”

The new body would act as a land bank, enabling the DfE to distribute sites to free-school applicants, many of whom have had to defer opening owing to a lack of premises. According to figures in the private finance world, such a proposal would be possible only in partnership with the private sector.

Harry Hyman – managing director of the Nexus Group, which manages the Pine Fund, a private property investment fund that is active in the education sector – said the amount of money required to maintain the school estate was too big for the government to tackle alone.

“There are already a number of parallels in the public sector, such as in health,” Mr Hyman said. “An additional 200,000 students are expected in London alone over the next five years, and if every new secondary costs around £20 million, that is a lot of capital. By using the private sector and its expertise, free schools and academies could be built and then the buildings leased back to the operators funded by the government.”

Perhaps conscious of the memories of schools built under private finance initiatives, which drew heavy criticism during the Labour administration, the DfE has played down the role of the private sector in securing funds.

Malcolm Trobe, deputy general secretary of the Association of School and College Leaders, advised caution, saying ministers should “avoid getting into the type of mechanisms that could keep the government within certain spending limits in the short term, but lead to funding issues in the longer term.”

A DfE spokesperson said: “As part of looking at how we can best meet our commitment to deliver 500 more free schools by 2020, we are in the early stages of exploring options to build on the role of the EFA to acquire potential sites.”

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