Are council education debts to rise?

Written by Tom Freeman on 29 July 2015

The legacy of PFI continues.

With council education budgets ever-tightening, the money set aside for maintaining unitary payments for schools built using private finance initiatives has been rising in recent years.

In 1998-2001, Audit Scotland predicted the initial PFI deals would lead to more long-term value for money and greater focus on long-term service and performance standards.

Critics said it was a short-term fix, and compared it to buying schools and hospitals with a credit card.


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The reality which has been borne out is the financial crash meant financial institutions imposed greater 'inflationary adjustments' to the contracts, and in the spring UK Treasury figures revealed the UK now owes £222bn in 'unitary charges' for PFI projects.

The impact this is having on local education budgets should not be underestimated.

In Scotland the SNP Government introduced a Non-Profit Distribution model, managed by the Scottish Futures Trust. It was designed to keep public spending off the balance sheet but limit the profit for the private consortia. £330m of the latest round of investments has been set aside for Scotland's Schools for the Future programme.

However, an investigation by the Guardian newspaper has revealed pressure from revised EU public spending rules and the an Office of National Statistics review has meant private companies are going to be paying more of the upfront cost of these prohjects.

This will inevitably lead to an even greater debt burden on Scotland's councils.

Labour's Jackie Baillie has called on Audit Scotland to investigate the changes, although she remains supportive of using private finance.

Meanwhile the Scottish Government points out the NPD projects remain on time and on budget. But if the result of these new schools is more 30 year rising debt burdens for councils while savings need to be found in every other area, it's almost as if the lessons of the crippling PFI debts haven't been learned.

 

This is an extract from Holyrood's weekly Education briefing. Sign up here to receive it every Wednesday

Tom Freeman

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