Posted: Thu 16th Jul 2020

Flintshire Council dismisses comparisons between new school investment model and controversial PFI deals

News and Info from Deeside, Flintshire, North Wales
This article is old - Published: Thursday, Jul 16th, 2020

A local authority has dismissed comparisons between a new school investment model and controversial private finance initiative (PFI) deals.

Former UK chancellor Philip Hammond abolished PFIs, under which private companies provide public infrastructure, in 2018 after they were heavily criticised for failing to deliver value for money.

The Welsh Government has since developed the Mutual Investment Model (MIM) as an alternative with plans to pump £500m of investment into school buildings in Wales.

Similarities have been drawn between MIM and PFIs, but ministers believe the initiative, in which the public sector holds a minority stake, avoids the negatives of earlier schemes.
Flintshire Council is set to pilot the project by using it to create a combined primary and secondary campus at Argoed High School in Mynydd Isa.

The proposals were discussed at a meeting of the authority’s ruling Labour cabinet on Tuesday , where council leader Ian Roberts was also keen to stress the difference between the two models.

The education portfolio holder said: “The Prime Minister said he wants ambitious plans to build and we have ambitious plans to build for the young people of our county.

“Welsh Government explains that the Mutual Investment Model is a new form of public-private partnership and it allows WG to deliver infrastructure projects beyond that set by present UK Government borrowing limits.

“If WG do not use MIM, £500m of investment in the education estate will not be available to councils in Wales and this would have implications on the council’s proposed programme locally.

“A friend of mine in Sheffield was headteacher of a PFI school and this was a very different model to what’s being proposed here.”

The scheme would see a private contractor appointed by the Welsh Government to build and maintain the school.

In return, the government will pay a fee to the private partner, which will cover the cost of construction, maintenance and financing the project once it’s fully operational.

The council would required to pay an annual charge similar to a rent payment for a period of 25 years before the building falls back into public ownership.

The council’s chief executive Colin Everett said he believed MIM had been “unfairly shadowed” by the legacy of PFIs.

It follows examples being raised of hospitals being charged £20 or more to change a light bulb under the UK Government model.
He said: “I think we’ve discounted the comparison to PFI generally.

“Because MIM is new, everybody has asked these questions about value for money and if it’s PFI in disguise.

“We know it’s not because we’re close to it, but it’s important we give assurance to people because the history of PFI is, let’s be frank, a chequered one.

“We’ve been convinced by MIM for a while and it was a case of which scheme goes first. This is just a process decision to go to the next stage.”

An education officer said the MIM initiative had “stripped out” the negative aspects of private schemes in England and Scotland.
It was highlighted that it would grant schools more autonomy, with the ability to agree work costs up front.

However, the Welsh Senedd’s finance committee undertook an inquiry last year which concluded it was hard to see the difference between MIM and PFI.

Writing when it was published in November, North Wales MS Llyr Gruffydd, who chairs the committee, said: “Much of the evidence we heard compared Private Finance Initiatives and MIM.

“Whilst MIM is an improvement in terms of community benefits and oversight of projects, it is hard to establish a significant difference between the two models, specifically as to how MIM offers greater value for money than previous PFI models.

“Whilst it is reassuring that MIM is attracting interest from the private sector, we hope that MIM will enable public bodies to have greater influence over decision making and provide flexibility over changes to long-term contracts.”

Long-term revenue obligations have also been cited as a potential issue, with a report estimating the council would need to pay £681,000 for the financial year 2026/27, compared to a sum of just over £5,000 in the first year.

But a senior official said the investment was money the authority would not be able to attract by other means.

Neal Cockerton, chief officer for housing and assets, described the Mynydd Isa development as “good news” for Flintshire.

Cabinet members voted unanimously to support the use of MIM for the project at the end of the debate.

A consultation will need to be carried out before the school reorganisation can go ahead, along with achieving planning permission.

Liam Randall – Local Democracy Reporter (more here).

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