It is government U-turn season! We can now eat pasties straight out of the oven without paying VAT, sell-off our house and move into a static caravan, have secrets discussed openly – well in secret anyway, and 261 schools, out of 587 applicants, will be rebuilt or refurbished within the government’s re-vamped PFI (Private Finance Initiative) scheme – the Priority School Building Programme.
When the Coalition came to power they ended New Labour’s £55bn Building Schools for the Future (BSF) programme but Education Secretary Michael Gove admitted recently that the manner in which this was done was “clumsy and insensitive”.
Of course PFI was not uncontroversial under New Labour. It involved construction companies, banks and management services companies building schools, hospitals, roads and other infrastructure, at their own cost, and leasing these back to the providers for a monthly fee, over 25+ years. In fact there are two fees, one for the building and one for the management contract to run the building, often held by different companies. These contracts, and the ownership of the buildings, are traded as financial commodities. Most of the builders have sold their contracts to banks or private equity companies, taken a profit and reinvested. The contracts provide a long-term secure income.
The U-turn makes sense. The Coalition is seeking to stimulate the economy. It is keen to have new providers in the public service sector, and wants to reduce public sector expenditure in the short term. PFIs may offer all of that but they come with considerable transaction costs (contract writing and monitoring, investment in the design process etc) and there is an unresolved debate about whether in the longer term they are cheaper or more expensive than traditional financing and ownership by the state.
The new scheme will mean that yet more of the public service infrastructure will be privately owned, in some cases by overseas companies. And the BSF scheme did lead to difficulties for service providers. One school in which I have been researching has a member of staff permanently assigned to manage relations with its PFI contractors. Just before the last election a Department for Children Schools and Families regulation required that the school have yellow lines painted on its stairs to help visually-impaired students. The building contractor said it was not their responsibility, and the management services company said it was not theirs. But the building contractor forbade the school to paint “their” building. In the Coalition scheme the Department for Education has been working with the Treasury to reform the PFI model and provide a “cost-effective and more transparent” delivery of services. Schools will manage and control services such as cleaning, catering and security. But details of procurement and contracting remain sketchy.
The overwhelming response to the new PFI scheme is that it does not do enough for a school system that is literally creaking and bursting at the seams. Equally though it is important to bear in mind the longer-term implications of PFI for the future funding and ownership of the education system.