Council must pay £500k to let flagship school stay in use

Oversubscribed Victoria Dock Primary School - the first in the country to be built under the Government’s Private Finance Initiative - will now get the new £1.8m extension it has been waiting for.

But Hull Council is having to pay Sewell Group, which built and operates the school £490,000, because two leases on the land on which the school was built don’t align.

According to a report, only made public following a call-in by councillors, the council granted a head lease on the land to a company, now Sewell (Education) Hull Ltd, in July 1998 and ending in 2038.

But a private finance agreement - which began six months later - involving a sub-lease back to Hull Council of the school, ends in 2024, leaving the council with no rights of occupation for a 14-year period.

Coun Colin Inglis, who was among those to call in the decision, has been trying to get to the bottom of why the leases didn’t run out at the same time. He is unhappy that the £490,000, which pays for the surrender of the long lease, is coming out of the schools capital programme, which funds works to all LEA schools.

He said: “The fact the head lease is longer than the sub lease is the nub of the problem - why the difference between the two? But I suspect that all the officers (involved in the decision) have long ago departed.”

He was also critical of Sewell, which has built a number of schools and health centres for the public sector locally, adding: “I am not satisfied it is value for money.

“I accept the argument that the directors have fiduciary duty to the shareholders but for a company that makes great play of public spiritedness and philanthropy it is a bit greedy because it is coming out of the schools capital programme.

“It would pay for two mobile classroooms in other schools that need them.”

The council has justified the payment as being better value than paying rent - but has not offered an explanation as to why the leases didn’t align.

In a statement it said it was difficult “at this distance from events to provide detailed comment”.

It added: “The agreement was negotiated with the assistance of external legal advice and was considered an appropriate arrangement.”

Cabinet member Coun Rosie Nicola said: “I’m delighted that in a part of Hull where we’re desperate for additional school places, we’re now able to move forward and meet our moral and legal duties as a local authority”.

Headteacher Denham Kite said the extension would allow them to meet increased demand for places, adding: “Hopefully it will be there for September 2015.”

The £1.8m extension will bring capacity up from just under 350 - some children are in temporary accomodation - to 420.

Sewell Group said the land lease terms were originally set out in contracts issued by the council in 1997. Investments Director Graham Atkins said there had been three extension so far at the school.

He added: “On this occasion, the council wanted to align the PFI and land lease contracts and as a result, the fair and right solution has been developed by independent experts.”