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There is no PFI loophole

I am writing to correct a series of misunderstandings in the article on PFI funding by William Stewart (TES, March 17, "Councils fear they will foot the bill"). Contrary to the article there is no "loophole" in the current Bill with regard to PFI contracts. Schools which change status will not be able to walk away from the obligations or benefits of any contracts, including those for PFI.

The governing body of any school which changes status to become a foundation school, with or without a foundation (trust), will not become a new legal entity. It will be the same body corporate as the governing body of the existing school and therefore will continue to have all the contractual benefits and obligations of the previous school.

These will include, where the school is part of a PFI contract, the individual agreement that the governing body must have signed with its authority, which will include its obligation to contribute to the unitary charge for the PFI contract because of the services it will receive from the contract.

It is correct that the PFI contract is signed between the authority and the PFI provider and that the authority is legally responsible for paying the unitary charge. But the school remains bound by any subsidiary agreements it has made.

These matters are already embedded in existing legislation and therefore do not require inclusion in the Bill. Existing regulations already provide for the transfer of assets, rights and liabilities when schools change category.

A phone call to my department could have cleared these matters up for the local authorities quoted.

Jacqui Smith, MP Minister for Schools Department for Education and Skills

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