PFI funding plans for North Kingston school a financial milestone for years to come

Plans announced today by Kingston Council to fund the construction of the new North Kingston secondary school by seeking a loan under the Private Finance Iniative are an expensive folly for local council tax payers, according to the Christian Peoples Alliance party. Last Friday was the deadline for bids under the Coalition government’s Priority School Building Programme, which is intended for local authorities who meet criteria of having basic need for demographic reasons, or were promised money under the last government’s Building Schools for the Future (BSF) programme.

Kingston Anti Cuts Group says that residents are entitled to look at alternative ways of  funding the school. One KACG member, Paul Pickhaver, says PFI funding has many drawbacks:

“Under PFI, private sector companies are brought in to fund and build the new school. Local council taxpayers will avoid upfront costs but are locked into expensive long-term repayment deals. We need to see the exact terms of the proposed deal, but experience tells us that Kingston Council’s plans could be a financial millstone for decades to come.”

KACG is pointing to a recent highly critical report by the House of Commons Treasury Select Committee which found that the return on private finance – about 8.5% on a typical deal, compared to about 4% on long-term government bonds – is too high to represent good value. The report evaluated the costs of construction, maintenance and services under typical PFI deals and found no evidence of any savings over normal public procurement. It concluded that the value for money case for the PFI “is implausible”.

Paul Pickhaver added that the proposed deal could also damage other schools in the borough:

“PFI companies can and do charge huge mark-ups for basic maintenance. As schools are funded through ring fenced grants, the potential additional costs of an individual school will have to be met by the whole school sector rather than by Kingston Council. This could mean that other schools in our area have a reduction in their funding to meet the additional costs of this proposed PFI deal.”

Last year, the Department for Education’s budget for school buildings was slashed by 60 per cent in the comprehensive spending review. The Government also axed Labour’s £55bn programme to rebuild or refurbish every secondary school in England, although a small number of construction projects will still go ahead.


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