Private Finance Initiative - what's in it for the
community
The Education Unions approached Education
scrutiny on 19th March 2003 with a series of questions about the PFI (Private
Finance Initiative) plans to rebuild Lilian Baylis. Ray Sirotkin (NUT) and
Wendy Stevens (ATL) were the union questioners. John O'Keefe (Assistant
Director, Finance) answered the questions.
We asked several questions - 15 in all
ranging from who the company, Focus Education were to who will be running the
day to day management of the school. Some of the answers were reassuring, some
were not. In fairness, John answered fully and honestly, so we wouldn't wish to
take him to task in any way.
However, we have to be wary of the problems
ahead. To start with, Focus Education have no track record of building even a
garden shed. They are a consortium bringing together Halifax Plc and Bovis
construction. It is not clear whetehr this company will be borrowing money, but
it could be at 5.5% - 1% higher than the rate at which the borough would borrow
money. The project is expected to cost up to £20.4m, increased since last
year. It could come to more, which is a worrying matter for the project. We are
assured that this in itself does not mean that costs will be met by other
education projects.
We attempted to discover the level of
Unitary Charge - the annual payment to the builders to pay of the work opver 25
years. This can fluctuate and can be adjusted according to inflation. The
charge is met by the school, LEA, revenue supportgrant and interest on positive
balances (from the building account). We are told that the payments will not
jeopardise other LEA projects. This will be true if LEA payments are from
capital rather than revenue accounts. This will need to be scrutinised.
So, what if the contractor goes bust? With
Halifax plc behind it, you wouldn't think this a problem as they have
loadamoney. There is a world shortage of capital and has been for some time.
One aftermath of the War on Iraq could make this more so. Suppose that Halifax
plc need to scale back their programme due to financial considerations and pull
the plug on Focus Education? If no other contractor is then found, Lambeth
would take possession of the building, we are told.
What about day to day management? Lambeth,
at least here, unlike elsewhere are not allowing the school to be run by
building contractors. The contractors will be responsible for maintenance, but
not for staffing, payroll and day to day management. Any shortfall in the
construction receipts cannot be met by the school.
Thanks for your honest and straight forward
answers, John even if we didn't hear what we'd have liked to hear. We will
watch how things go. |
