Building schools for the future - Unison

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BUILDING SCHOOLS FOR THE FUTURE
much higher than the cheaper route of using conventional procurement (See Section 1 (2) What’s
wrong with BSF). In the case of BSF, the local authority must ensure it can meet its payment
obligations under the PFI deal. This means that financial resources used to pay for PFI can be tied up
for many years reducing any flexibility in the local authority budget.
PFI is particularly inflexible in schools. PFI payments have to be met regardless of pupil numbers but
changes to pupil numbers affect school budgets while the local authority remains responsible for
ensuring the payments. They bear the demand risk despite having less control over the education
system under the LEP model.
One of the advantages claimed for PFI is that ‘risk’ is transferred to the private sector - risks such as
contracts taking longer than expected to complete or material and construction costs going up. The
argument is that if the private sector is involved then these risks, which can increase prices of projects,
are transferred away from the public sector purse. However, there is a major flaw in this argument as
these risks could be transferred to the private sector under conventional procurement anyway. (See
also Section 4 – In-house service delivery and the Building Schools for the Future Initiative for a
description of risk transfer and its impact on in-house service involvement in schemes).
For more general criticisms of PFI see UNISON reports on PFI (resources)
(ii) Supported Borrowing
PFI is not the only kind of funding under BSF. Manchester City Council is using conventional funding for
all its 15 BSF schools with Supported Borrowing.
Supported Borrowing is a traditional form of funding for public sector capital works. The government in
effect, provides the local authority with capital grant to support the cost of borrowing money through
conventional means. (This is different to Prudential Borrowing where the local authority must first
establish if it can afford to repay any debts it has created.) Supported Borrowing allows the government
to provide credits – similar to PFI credits – for councils to use to build new schools as an alternative to
PFI.
Manchester anticipates that the use of the Supported Borrowing route will enable it to procure the new
buildings much more quickly than PFI. A report to Manchester City councillors states: “By adopting a
traditional procurement approach, the council will retain greater flexibility to introduce its initiatives, in
particular around regeneration, community involvement and service delivery partnerships as they
develop over time”.
Action point 10
Branches can use UNISON’s anti-PFI materials to challenge its use. Arguments on value for
money, inflexibility, complexity and long-term uncertainty should be used to minimize the PFI
elements in the BSF.
7. Differences between new build and refurbishment schemes
APSE research shows that where schools are to be refurbished conventional funding will be used while
PFI tends to be the preferred funding arrangement new build schemes. This demonstrates that
refurbishment schemes are considered too risky by the private sector because of the unknown or
unquantifiable risks. So branches may find that the type of funding used within a BSF programme is
dictated by whether or not schools are to be built from new or are to be refurbished. Many authorities
will use a mixture of funding as well as a mixture of new build and refurbishment schemes.