FREE SCHOOLS-WHERE’S THE CAPITAL?

FUNDING AND FREE SCHOOLS

Shortage of funds remains a big issue and limits expansion

Comment

There was a significant moment, just after Michael Gove had delivered his recent speech  at Policy Exchange(he was the think tanks first Chairman)  when the  FT’s Chris Cook asked the Education Secretary whether he could confirm that more than 100 free schools are due to open in September 2012 . Gove declined to do so.  Though demand for Free schools is significant,if measured by the number of bids, relatively few, perhaps 10, or, so will open this September. But it is becoming pretty clear that a chronic shortage of funding is acting as major obstacle   to expansion. The high attrition rate for bids that were rejected in the first round is explained away by the DFE in terms of bids failure to reach the  high quality threshold. This is seen as an indication of how robust the vetting mechanism is. Certainly some iffy bids were submitted. But few close to this initiative believe that this is the full explanation. There are also a number of parents who have sweated blood  to prepare their bids only to have them rejected at the eleventh hour. Finding the right building and local planning restrictions are compounding their problems.  You have to look at the funding challenges to get a complete picture.  As the Liberal Democrat commentator, Julian Astle, pointed out in the Telegraph last  month the reason for Goves reticence becomes clear.  Astle writes ‘Let’s assume that the average cost of opening a new school is £10 million (a significantly lower figure than the £25 million average cost of Labour’s architect-designed academies), with primary schools costing £6 million and secondaries £14 million. That’s a cool £1 billion to build 50 primaries and 50 secondaries – a big ask for a department that has seen its capital budget slashed by 60 per cent and which is facing an £8.5 billion repair bill in existing schools.’ Astle continues ’Little surprise then that the government is apparently considering using the Private Finance Initiative (PFI) to get these free schools off the ground. But PFI, as George Osborne knows, is very costly in the long run. If a private company borrows £14 million to build a secondary school at 2.2 per cent over gilts (a conservative estimate), assuming a standard 25 year repayment period, the school would need to pay it £1.1 million a year. For a primary, the cost would be just under half a million a year. Not only does this cost more than traditional capital but, assuming the money comes from the Department’s revenue budget, could have a real impact on schools’ running costs. Get a few hundred free schools established and you would need to raid the Dedicated Schools Grant for hundreds of millions of pounds, cancelling out the additional funds provided through the government’s flagship Pupil Premium to help the poorest pupils.’ The Government has yet to respond to the James Review on capital funding and the delay in responding is understandable given this backdrop. Ministers will have known the main findings of this review well before its publication so they have been thinking long and hard about it.  And there is no easy solution indeed perhaps no solution at all without the help of the private sector. And if PFI has its limitations what are the alternatives?  Tim Byles who used to head the Partnership for Schools said at a recent  Policy Exchange event  that a lack of funding is a big issue. He has created “Cornerstone” a mutual to deliver new public sector infrastructure. He will  purchase surplus assets from the public sector, and  invest in the development of local service delivery and make a commercial return for the investors. But most of Cornerstones  initial focus ,perhaps significantly, will not be in  education.

Before the election the Gove team decided not to rely on the private sector and the profit motive to drive education reform. Many within his own ranks criticised him for this- indeed this included the influential think tanks Policy Exchange, which he co-founded,  and Reform who between them have been a major influence on Tory education thinking. So, Gove has to rely on public funding to support the FS initiative. And with this funding in such short supply, Free schools expansion, but also, to a degree Academies expansion, is under medium term threat. Schools converting to Academy status, of course, cost the Exchequer money and so for how much longer will this money be available. Will the Governments response to the James Review hold a few clues?

Conceivably there could be some leeway. Capital funding on schools hasn’t stopped by any means and  despite the recent cuts is at 2007/8 levels according to Sebastian James. And those now involved in the programme seem to think that they can deliver schools at 30% less than under the BSF programme which may create some space.

However going back to Chris Cooks question to Gove. Will we see as many as 100 new Free schools opening up in September 2012. As things stand it is highly unlikely.

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