Concerns for future of PFI schools as council spends extra £1m to plug funding gap

The costs of schools in Leeds maintained by private companies makes for “worrying reading” according to one Leeds councillor.

The comments were made during a meeting of the authority’s children and families scrutiny board during a discussion on extra funding for so-called PFI schools.

The meeting took place in Leeds Civic Hall.

The meeting took place in Leeds Civic Hall.

Leeds City Council is set to spend an extra £1 million a year on contracts for PFI schools, after a report by council officers claimed a number of financial issues have arisen recently around their funding.

Coun Jess Lennox (Lab) told the meeting: “A number of points are made about the challenges we face around PFI schools funding. It is quite worrying reading and I wonder whether is it in the scope of our board to look at that.

“It’s going to have a massive impact on everything our board does look at.

She later added: “I want to know how we will asses the impact of what the children will experience if those schools are squeezed, and if they have to make decisions about what their spending is.”

Coun Jonathan Pryor, the council’s executive member for children and families, said: “It’s a massive issue and a massive concern, particularly around school budgets, additionally as we are getting squeezed by government, spending on PFI contracts is getting more difficult.

What are PFI Schools?

Under a local authority PFI contract – typically lasting 25 years – private companies build and maintain facilities in return for annual payments made over the lifetime of the contract.

At the end of the 25 years, ownership passes to the council. Critics argue it is a more expensive way of funding public schemes, while supporters point out costs are fixed and contracts can include a range of other benefits.

By its own admission, Leeds has a “high number” of PFI-funded schools, with 29 PFI-maintained schools and academies across five schemes. This represents around 11 per cent of the schools in Leeds. Some contracts are not expected to end until 2037.

This is paid for using a “unitary charge”, which is currently funded by the DfE and the schools themselves – this is currently around £52 million a year in Leeds.

So what is the problem?

A council budget report warned there are issues around future funding of these contracts.

It stated: “There are significant differences between the original assumptions in the PFI financial models and what has actually been experienced for variables such as the rate of inflation, the rate of overall increase of the unitary charge payments, lettings income and the available funding to meet the payments.

“Re-modelling of the financial position for each of the PFI schemes shows increasing and significant funding issues over the remaining lifetime of the schemes, particularly as inflation has increased over the last few years.”

During the meeting, council officer added: “PFI contracts are inherently complicated. We have done a lot of work over the last year in terms of making sure new academy sponsors coming into PFI schools have a good start.

“We work closely with the Education and Skills Funding Agency to see how they would like that to be reflected in the Leeds funding formula for schools.

“That being said, there is hardly a week goes by without a PFI school raising some sort of affordability issue around the unitary charge, and their perception is that they have got some issues.

“PFI schools are maintained to a high standard, but with this high standards and maintenance there are high charges in the unitary charge.”

What is the council doing about it?

After discussing the issue with the DfE, it was proposed that the schools funding formula for Leeds (the government’s way of working out how much money gets spend on schools) includes extra money for PFI schools.

The council states this will be made up using an extra £1 million using its own cash reserves over the coming year.

A council budget report stated: “This proposal protects non-PFI schools from contributing to the increased costs of the PFI contracts and provides more certainty over meeting future cost pressures for PFI schools.”