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Sunday, 22 September 2013 12:54

Private Finance Initiative: Kent maintained schools face £100 million levy to support academies

I have identified a financial scandal relating to academies, with Kent County Council being forced to pay more than £100 million to Private Finance Initiative (PFI) companies who are running schools that have become academies, over the length of their contracts. This is a figure that is likely to rise even further, and perhaps double as more schools convert. Academies are run independently of KCC and fully financed by government, many would say over generously, so it is bizarre that KCC still has to financially support their arrangements.  I was interviewed on both Radio Kent and BBC SE about the issues.

None of what follows is a criticism of the schools themselves, who are the innocent parties in this mess.

The PFI money comes out of the pot available to KCC maintained schools, so every school that is not an academy contributes to this totally unjust payment. The size of the pot depends on the number of schools that are not academies and so shrinks every time one converts. However, the sum payable to the PFI companies remains constant (and is index linked) so each school remaining with KCC receives a smaller budget. To take it to the extreme, if all but a few schools became academies, as the government would like, those few would have no budget at all - the total school fund going to meet the PFI bill.  This injustice can only increase the pressure on schools to change status, supporting a vicious circle that already operates because of other fixed costs faced by the county.  

Back in January, I highlighted the reason for the protracted delay in Swan Valley School becoming an academy. A letter published on the school website from the Department for Education to Swan Valley School explained why it could not become an academy at that time. The background is contained in two articles I published in January and February when I discovered the potential consequences: The Tribulations of Swan Valley School, Swanscombe, and PFI Funded academies to benefit at expense of Kent children in maintained schools.

The explanation was startling, the letter alleging (correctly) that Kent County Council was holding up the school’s transition to academy status because of issues relating to Private Finance Initiative. There were three of these issues. Because of the refusal by Kent and some other Local Authorities to give in to government pressure, two relating to taxation and the terms of the borrowing agreement were resolved in Kent’s favour. This saved the Local Authority £9.5 million annually, so well worth challenging!.  The outstanding problem was that of the continued payments by KCC to service the loan for the remainder of the contract if the PFI school became an academy.  So the cost would fall on those schools remaining with the county for another 15 years in the case of Ebbsfleet Academy. KCC estimates this sum, called the affordability gap, to be around £1 million per annum for Ebbsfleet (the smallest of the secondary schools) alone.

My story received considerable publicity in the media, especially when I highlighted that there were at least six other PFI schools, three of which, Holmesdale Technology College, The Malling School, and The North School (Ashford) all had long standing applications to become academies which had stalled. My presumption that the reason for this was the PFI problem was not denied.

There are also another four PFI built schools, The Craylands School, a primary school adjacent to Ebbsfleet Academy, and three more secondary schools rebuilt under the Building Schools for the Future programme: Northfleet Technology College; St John’s Catholic School; and Thamesview School.

 I have now established that KCC concluded it would not be able to sustain a successful legal challenge, and so decided not to prolong the uncertainty. My personal view is that this was a wise decision in the circumstances, although Roger Gough, Cabinet member for education hinted, in his radio interview that this decision was being revisited.

In the event, at the time of writing (this sentence revised 25/9) Swan Valley has still not converted as the general complications of transferring a PFI school to academy status is immensely complicated (google PFI and academies to get a sense of the problems!). It is expected now to go on 1st November 2013.   

Another of the six schools, Ellington and Hereson High School has now lodged an application to become an Academy, probably sensing that the way was now clear. If the remaining schools all convert, with longer PFI contracts to run than Ebbsfleet, and with the three BSF schools already academies, the cost to the Kent Education budget, to be met from the schools budget for schools that have not converted, will easily amount to several hundred million pounds, over the duration of the contract.

This is not just a Kent issue, as many Local Authorities across the country have invested in Private Finance Initiative as the only way to secure acceptable premises for the education of their children. But it is becoming increasingly evident that PFI is a financially disastrous way of financing borrowing and many public institutions and ventures, not only schools, are the pawns of very profitable private companies who, at very little risk, have lent funds to Local Authorities and public Trusts at high rates of return.

Is it, however, the only PFI scheme where a proportion of the PFI fees are directly recovered from competitor institutions to the disadvantage of their customers, in this case Kent children at KCC maintained schools?

 

Last modified on Wednesday, 25 September 2013 22:42

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