17 February 2006
A conflict between the government's private investment programme in schools and the education white paper means it must choose between escalating borrowing costs or significantly reducing its aspirations for trust schools, Public Finance has learnt.
The Department for Education and Skills has committed £15bn to its 'Building Schools for the Future' capital programme, approximately half of which will be invested in Private Finance Initiative schemes.
The schemes are agreed between local education authorities and private contractors. But the white paper's model of independent trust schools – which own their own assets – has raised questions over who will be contractually responsible for the service charges.
The DfES is expected to announce shortly that, where schools becoming trusts are part of PFI schemes, the liability for paying the contractors will remain with the LEA.
But Stephen Matthew, PFI project partner at the law firm Nabarro Nathanson, told PF that investors were more concerned about the future of 'exclusivity agreements' with LEAs.
'The carrot for the private sector is to carry out all the future work – maintenance, refurbishment, cleaning, etc – over the LEA's entire school estate,' he said. 'But if you start with an estate of 20 schools and, over the course of time, eight become trust schools, the business opportunities are significantly cut.'
Matthew said that private contractors would respond to that new risk by increasing the cost of schemes during their initial phases.
Out of the £2.2bn BSF funding committed for next year, £1.2bn involves PFI-style schemes.
An alternative solution the DfES is thought to favour is to make BSF the only option for capital investment, forcing all schools to take part.
But Claudia Wood, research fellow at the Social Market Foundation, said that would 'detract greatly' from the intended independence of trust schools.
'The guidelines for BSF are quite stringent and the LEA has a huge role in approving schemes,' she said. 'So if the trust school wanted to do something that was slightly out of the guidelines, it would still have to negotiate that with the LEA, which detracts greatly from their so called independence.'
Martin Rogers, co-ordinator of the Local Government Information Unit's education network, said that the limited freedom implied by BSF 'raised questions about the need to transfer school assets to trusts in the first place'.
PFfeb2006
