Taxpayers to fork out extra £13m for Peterborough schools after PFI deal costs increase
Taxpayers will fork out an extra £13 million due to rising costs for a private finance initiative (PFI) deal relating to three Peterborough schools.
An investigation by JPIMedia, the publishers of the Peterborough Telegraph, earlier this year revealed that a deal made 13 years ago by the city council to expand and refurbish Ken Stimpson and Jack Hunt schools, and build the Voyager, will end up costing £115 million - nearly double the original £60 million contract.
However, it has now been revealed that the £115 million costs of the repayment is £13 million larger than previously anticipated due to an “increase in inflation”.
The information was revealed after a Freedom of Information request by JPIMedia. The FOI was originally rejected by the council before the information was finally revealed after an internal review was requested.
Moreover, the cost of the scheme rose just a year after repayments began to be made.
A council spokeswoman said: “The original projected cost of the unitary charge payments over the full life of the scheme was based on an estimated annual rate of inflation and therefore was never set in stone.
“The actual rate of inflation that has been applied each year since the start of the loan in 2007 means that the unitary charge payments have been higher.
“The PFI scheme played an important role in delivering investment into three secondary schools in Peterborough to provide modern buildings and meet the need for additional school places. At that time PFI was the favoured route of central government by which local education authorities could secure the funding necessary to meet the demand for increasing school places.”
The works were carried out as part of a 30-year PFI deal which means repayments of roughly £9 million will continue for nearly two more decades.
Moreover, under the terms agreed by the council the three schools had to sign up with the PFI contractor for all maintenance services during the length of the contract, preventing them from sourcing a better deal elsewhere.
Including the charge for services, taxpayers will end up forking out around £272 million over the 30 year deal to the PFI provider.
Leader of the council’s Labour group, Cllr Shaz Nawaz, has described the deal as “poor value for money”.
The contract deal was signed by the council in 2005 with preferred bidder IIC Bouygues Education.
It led to the building of The Voyager School (now Queen Katharine Academy) in Mountsteven Avenue, Walton, to replace Walton and Bretton Woods community schools.
It also delivered expansion of Jack Hunt School in Netherton to take 175 more pupils, and for Ken Stimpson Community School in Werrington to be extended and refurbished to accommodate 250 new pupils.
Moreover, the deal included covering ongoing costs associated with maintaining and upkeeping the school buildings and delivering the essential services of cleaning, grounds maintenance, caretaking and catering.
In this case, Bouygues UK was contracted by IIC Bouygues Education to deliver those services.
In total, the annual repayments are £8.9 million, of which £3.8 million is for the building works.
Another £2.8 million is for ‘facilities management costs’, while £2.3 million is for ‘lifestyle costs’ – an annual programme to maintain the buildings.
Of the £8.9 million annual charge, a government grant covers £4.7 million of it, while the schools contribute £3.9 million and the council £0.3 million.
At the end of the 30-year period the council will take ownership of the three schools.
The authority is currently seeking to negotiate part of the facilities management contract to bring down costs by £168,000 a year with the schools also benefitting by the same amount.
A council spokesperson has previously told the PT: “Whether or not the council had made use of the Private Finance Initiative in 2006 it would still have had to borrow and repay capital to have built/refurbished the three schools and the schools would have to pay for the annual delivery of the facility management services from their revenue budgets.”
The three schools have to ask the PFI company – via the council – for permission to make any changes to their buildings.
The council spokesperson said: “The lowest price will usually be successful.
“Local contractors are used to keep costs down and to support the local economy.
“The PFI contractor has been very good and worked with us and we have a very good relationship with them. There have been no significant issues.”
Of the £60 million building works, just under half (£28 million) was spent on Voyager, which opened in 2007.
In addition, £15 million was spent on Ken Stimpson Community School, in Staniland Way, and £12 million on Jack Hunt School in Ledbury Road. The rest was spent on “fees”.