Building a Blackpool school will cost taxpayers £3 million more than first thought.
Highfield Leadership Academy, in Highfield Road, South Shore, was projected to cost £100.3m over the course of a 25-year Private Finance Initiative (PFI) deal, despite having a capital value of just £29 million.
But it will actually cost £103.1m, the JPIMedia Investigations team can reveal.
Blackpool Council said the projected cost was “based on predicted inflation rates between February 2010 and February 2037”, with the actual costs “dependent on real inflationary increases during this period”.
It said they “will inevitably differ during the operational phase of the contract”.
The new school building, which was built within existing grounds off Lindale Gardens, welcomed its first pupils in 2012, though government data showed work wasn’t completed until two years later.
At the time, the school - then called Highfield Humanities College - was run by the local authority. It was the last secondary school in the resort to controversially become an academy, on the orders of the government in a bid to boost standards, in 2016.
Under PFIs, private companies handle up-front costs on public building projects such as prisons, hospitals, schools, and infrastructure, in exchange for yearly payments from the state.
Contracts often last decades and the deals, which were introduced by the Conservative government in the ‘90s and increasingly used by Tony Blair’s Labour government, cost the taxpayer much more than if the projects had been funded from the public purse.
A report from the National Audit Office said there are over 700 current PFI deals with a capital value of £60bn. “Annual charges for these deals amounted to £10.3 billion in 2016/17,” it said. “Even if no new deals are entered into, future charges which continue until the 2040s amount to £199 billion.”
The former Chancellor Philip Hammond last year said no new PFI deals would be signed, saying the government was “putting another legacy of Labour behind us” and would “abolish” their use.
He said: “I remain committed to the use of public-private partnership where it delivers value for the taxpayer, but there is compelling evidence that the private finance initiative does neither … I have never signed off a PFI contract as chancellor, and I can confirm today that I never will.”
Three years ago, Blackpool Council renegotiated a 25-year PFI contract with the Community Lighting Partnership, which maintains and replaces street lights and traffic signals, that was projected to cost £129.9m by the time it ends in 2034/35.
At the time, it was hoped the move would save £3m, but it will actually save £5.4m.
Speaking in 2016, council leader Simon Blackburn said: “I’m sure residents spend time researching different options when mortgaging their property and this is the same exercise - just on a larger scale.
“During the tough financial times we are facing, it is vitally important that we scrutinise every contract we have to ensure we are getting the best possible deal.”
The council said the scheme was “refinanced to take advantage of lower funding costs available to PFI schemes post-capital investment period”.
Coun Tony Williams, the opposition leader at Blackpool Council, said: “PFI schemes in the long term can be an incredibly expensive way to build new bricks and mortar developments.
"In fact the overall cost on average could be between four to five times the price of the original build due to annual repayment costs, in built high maintenance charges and extortionate property management fees.
“After the 25 year agreement has ended, lots of these buildings will need replacing or undergoing large scale repairs.
“Ongoing running costs dig deep into shrinking council budgets and, down the line, many PFI developments have had to be sold off at a loss just because they became a serious challenge to local authorities’ budgets.
“PFIs are a total drain on council resources and it would have been much wiser to have agreed a fixed cost contract, as this development may end up costing more that the extra £3 million quoted and if interest rates rise this scheme could end up being a financial disaster.”
Schemes have 'crippled hospital finances'
Taxpayers are shelling out billions of pounds more than planned for schools, hospitals and other projects built through controversial deals with private companies, an investigation by JPIMedia can reveal.
Extra costs and rocketing inflation are set to add at least £4bn to the overall price tag of Private Finance Initiative (PFI) schemes, according to figures obtained from hundreds of public bodies.
Penny Mordaunt, the former Defence Secretary, is among those who have warned that PFI schemes have “crippled hospital finances” as it can be revealed hospital bosses in her
Portsmouth North constituency will pay out an extra £700m for a hospital expansion scheme signed under the Labour government in 2005.
It can also be revealed that:
- An NHS maternity unit built and run by a private company was closed after just 16 years but is still costing the taxpayer millions of pounds;
- A police force in the South East is trying to think up new uses for a mothballed custody suite it is still paying for;
- Expensive maintenance contracts have seen one police force billed £884 for an extra chair.
With some PFI schemes set to continue into the 2040s, trade union leaders and public sector campaigners have called for urgent action.
Unite assistant general secretary Gail Cartmail said the “ever-escalating costs” of PFI are a “national scandal”.
She said: “The money that has poured into the pockets of profit-hungry financial institutions and private companies could have been much better spent directly on public service projects and infrastructure. PFIs are a rip-roaring example of out-of-control ‘bandit capitalism’.”
Many of the deals struck with the private sector in the late 1990s and early 2000s to replace crumbling buildings were pegged to the retail price index (RPI), the now-discredited high measure of inflation still used to calculate rail fare hikes and student loan interest payments.
This has risen faster than many councils, police forces or NHS trusts had planned for, lumbering them with ever-bigger payments at a time when they have seen their own budgets squeezed.
Alterations to buildings or services have also seen authorities hit with unforeseen costs.
Joel Benjamin, the co-founder of The People versus PFI, a campaign group calling for an end to the “institutionalised theft” of PFI debt, said the rising bill highlights how the scheme is a “shocking waste of public money”.
The contracts were first introduced by John Major’s Conservative government in the 1990s, but were significantly expanded under Tony Blair’s Labour.
The annual cost of PFI deals has this year hit £10bn - equivalent to a tax of more than £150 on every person in the UK.
The government’s oversight of PFI was heavily criticised by MPs and trade unions after the spectacular collapse of outsourcer Carillion, which the National Audit Office estimates is set to cost taxpayers £150m.
The shadow Chancellor John McDonnell has said a new Labour government will end PFI and bring financing schemes “in house”. Labour said the cost of schools and hospitals has “ballooned” under PFI.
In setting out his post-Brexit investment plans at the Conservative conference last month, the Chancellor Sajid Javid said he would “bring in an infrastructure revolution” and invest an extra £13.4bn into public services.
His predecessor Philip Hammond abolished the PFI model in the wake of the Carillion collapse.
The Treasury said it was supporting health authorities to manage the costs of old PFI deals. A spokeswoman said: “As announced in last year’s Budget, we will no longer be using PFI and PF2 funding for new government projects.”
Many deals to run public buildings are still shrouded in secrecy
Many authorities have refused to release details of the Private Finance Initiative (PFI) schemes they are involved in, prompting criticisms that the deals remain shrouded in secrecy.
JPIMedia Investigations requested the release of hundreds of contracts using Freedom of Information laws, but a third of responding authorities refused to supply them, citing commercial confidentiality.
It comes as our investigation reveals that taxpayers are paying billions more than planned towards the schemes, thanks to rocketing inflation and additional costs.
Megan Waugh, a postgraduate researcher at the University of Leeds who is studying PFI, said this meant the contracts and the people profiting from them were “not accountable to anyone”.
She said: “Councillors, MPs and members of the public have legitimate questions about the safety of these buildings about the level of profiteering but the answers remain hidden behind the cloak of ‘commercial sensitivity’ and ‘confidentiality’.
“It is very difficult to challenge this legally as private interests trump the public interest.”
Explaining the decision to withhold the contracts, many of the authorities said they had decided that the duty to protect suppliers’ commercial interests outweighed the public interest in releasing the documents.
Some other authorities heavily redacted contracts before supplying them.