Private Finance Initiative (PFI) schools are facing a budget crisis as they are forced to pay increasingly high fees to meet the terms of their contractors, according to a new report by the BBC.
The Government has pledged additional support to the struggling institutions, but there are genuine concerns this will not begin to help the near 900 schools under these contracts.
But what are PFI schools, and what are the issues ? Here’s everything you need to know:
What are PFI schools?
PFI schools are state schools that are owned and managed by the private sector during a set contract.
John Major’s Conservative government ushered in the initiative in the 90s, supported by Labour.
The idea was the private sector would fund the construction and upkeep of the buildings, and would make a profit from their under a long-term contract, usually for 25 years.
The intention was that schools would benefit from new facilities and improve educational standards.
The first PFI school opened in 1999, and more than 900 have opened since then, but the concept was scrapped in 2018.
What are the issues with PFI schools?
The schools are locked into lengthy contracts, and are subject to charges which can increase by the Retail Price Index, a typically higher measure of inflation.
Along with this, headteachers usually have to adhere to strict non-disclosure agreements, leaving them powerless to negotiate the terms of the contract or get a handle on spiralling prices.
Under the contract, the PFI contractor is responsible for maintaining the school buildings, but when the contract ends, this responsibility passes to the school.
If the contractor has not kept up their end of the deal, the school can suffer the financial consequences.
And from the PFI contractor’s point of view there can be little incentive to invest in maintenance lifecycles, such a replacing a boiler every 10 years – over the last few years of the contract.
Another significant issue is organising how all the services provided through the PFI contractor will be delivered after the contract ends.
The services can often span cleaning, catering, sport lettings and IT, and if not updated before the expiry date, the services can stop being provided altogether, leaving schools to grapple with their own arrangements.
The BBC reported that since 2010, PFI charges have surged by 25 per cent in real terms, forcing schools to make cuts to essential services and staffing.
In Stoke on Trent, which contains the largest hub of PFI schools with more than 80 institutions, school leaders were told in a meeting they face at least a 10 per cent increases in charges. Stoke City Council, which is also under the PFI contract has asked the Government for extra funds as it struggles with crippling financial pressure.
What is the budget crisis?
Schools are now having to spend tens of thousands of pounds more a year to be able to afford the rising costs of contracts with private firms.
David Potter, the head teacher of Middlefield Primary in Speke, Liverpool, told the BBC nearly 20 per cent of the school’s entire budget is now spent on meeting “frustrating” terms of the PFI contract, which will cost more than £470,000 this year – a rise of more than £151,000 since 2021.
One of the terms of the contract includes keeping the grass on the school playing field no more than 2.5cm in length – which incurs a yearly maintenance fee of around £30,000.
According to the National Education Union (NEU), PFI schools are haemorrhaging around £400m annually in interest charges alone.
In response to this, the Department for Education has pledged to increase support for schools under PFI contracts by 10.4 per cent in the new financial year.
Speaking on behalf of PFI investors, Lord John Hutton told the BBC price comparisons were made regularly, but school budgets had not kept up with inflation over the lifetime of PFI contracts.
He said the contracts “do reflect good value for money for the taxpayer” and “make sure that schools are getting value for money when it comes to cleaning, catering and everything else”.