PFI firms gobble up school funding
New research shows that private firms operating in the school sector stand to receive at least 20% of the school funding increases announced last year. This news comes after a National Audit Office report found that schools built using the Private Finance Initiative (PFI) are far more expensive than those built by the public sector.
In the health sector, the Centre for Health and Public Interest thinktank notes that payments to these private contractors are ring-fenced, thus protected from budget cuts, which means that schools and hospitals, in a time of austerity, are having to find savings from elsewhere.
Labour MP Stella Creasy is campaigning for a windfall tax, arguing that these firms are reaping the benefits of corporation tax cuts whilst providing a drain on public sector resources:
“When schools in Walthamstow tell me teachers are having to buy basics as their budgets are so tight, it is horrifying to think that nearly one pound in every four pounds the government claims it’s giving to schools in extra funding is going out the door and into the pockets of PFI companies instead as profit.”
A tax on these companies is a good start, but there should also be a right to cancel contracts without compensation, as Labour shadow chancellor John McDonnell has suggested (article behind FT paywall). This more radical measure would allow local authorities to free themselves from long-term agreements, signed long ago, which simply don’t work. It would give public sector leaders greater flexibility, and reassert their authority against firms just out for a quick buck.