Victoria Dock Primary School in Hull was the first in the UK to be built under PFI, a procurement method which allows private finance to fund public sector building projects.
But the Yorkshire Post can reveal the contract agreed in 1999 has exposed it to an uncertain future, giving the school and city council no rights of occupation for 15 years, and the company which owns and maintains it the option of running a business from the site throughout that period.
The deal is now thwarting both plans to convert the school into an academy, and to extend it.
The school is owned and maintained by Victoria Dock (PFI) Ltd, effectively the Hull-based Sewell Group, and is operating under two leases – a “sub lease”, which expires on January 7, 2024, and a “head lease”, which ends on July 1, 2038.
The council, which called the arrangement “unorthodox”, is now locked in negotiations with the Sewell Group in a bid to resolve the impasse and bridge the 15-year “gap”, although there is understood to be a willingness on all sides to assist the school in its bid to become an academy.
Headteacher Denham Kite said: “I’m aware there’s a difference in the lease and the local authority and Sewell, I hope, are talking to sort it out. Sewell have been absolutely fantastic partners and it’s something we have to sort out so we can go on for an academy. Hopefully everyone will work together to get it sorted for the good of all.”
A council spokeswoman confirmed talks were under way, adding: “The funding institutions behind the PFI insisted the lease for Victoria Dock was done in this way.”
A spokeswoman for the Sewell Group said: “We’ve put forward a number of pro-active suggestions to the council and we are just awaiting them to come back with what they want to do.”
The school is one of the most successful and sought-after primaries in the city and massively oversubscribed. Some children are being taught in a temporary classroom to cope with demand and parents in the catchment area have petitioned the council asking for a permanent extension to be built.
Hull East MP Karl Turner said: “Victoria Dock Primary School is an excellent school in my constituency. My understanding is that Sewell have been a very supportive partner of Victoria Dock Primary School and I believe they will want the best outcome for the school. Hull City Council is currently negotiating a way forward and I hope that a fair outcome will be achieved.”
The PFI scheme has come in for severe criticism and is now under review.
Last month, Margaret Hodge, chair of the Commons Public Accounts Committee, said the financial viability of a number of NHS trusts was being undermined by “unaffordable” private sector contracts under the initiative.
A Treasury spokeswoman said: “In November last year the Chancellor announced a fundamental reassessment of the PFI model with the goal of ensuring long-term value for money for the taxpayer, more effective use of private sector innovation and skills, reducing costs, improving flexibility and increasing transparency.”
The findings of the review are expected to be released in the Chancellor’s autumn statement, due on December 5.