Schools struggling with Government initiated Private Finance Initiative payments

Schools struggling with Government initiated Private Finance Initiative payments

Many school leaders face significant increases in their private finance initiative (PFI) payments.

Reports have emerged that certain head teachers in the West Midlands anticipate needing to allocate an additional £150,000 or more towards these payments, leading to significant challenges in maintaining educational quality and meeting operational costs.

PFI has been a tool used by multiple Governments since the late 1990s to finance new schools. Under this model, private companies build and maintain school sites in return for mortgage-style payments typically spread over 25 years. After this period, the properties are transferred to the public sector.

School leaders have highlighted the pressure caused by a 12.9 per cent rise in annual PFI payments. The increasing financial obligations, coupled with over a decade remaining on many PFI contracts, have led schools to tighten their belts. Unfortunately, this has included leaving teaching vacancies unfilled due to limited funds.

The payment hike is tied to the retail price index (RPI), which increased from 8.3 per cent in 2022 to 12.9 per cent in 2023.

Concerns about these increases have been raised by schools across the West Midlands and other regions. The Westminster School, for example, is preparing for more than £100,000 rise in payments.

Speaking with online publication Schools Week, Head of Q3 Academy Tipton, Keziah Featherstone, stated that the increase in payments has greatly restricted the funds available for students.

Government figures reveal that there are 694 PFI projects nationwide with a total capital value of £54.7 billion, with nearly a third of these related to schools.

In response to these challenges, some school leaders have written to the Education Secretary, Gillian Keegan, requesting that the RPI increases be treated as an ‘exceptional funding factor’.

This adjustment would ensure that schools are reimbursed for the gap between the original and current payment rates, providing some relief for struggling educational institutions.

Contact Haslers for advice.