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Schools’ PFI contract decision deferred by Caerphilly Council

A DECISION to buyout a schools’ PFI contract has been deferred by Caerphilly County Borough Council, following concerns from schools and local members.

Lewis Pengam School and Ysgol Gyfun Cwm Rhymni, near Fleur-de-Lys, were designed and built by the private sector under a Private Finance Initiative (PFI). In return, a 30-year contract was issued for the building maintenance, catering and grounds maintenance service for both sites.

The PFI contract held by the schools started on September 1, 2002, and was intended to continue until August 31, 2032. PFIs were introduced in 1992 to encourage the private sector to tender to local authorities for provision of public infrastructure and services.

The council now wants to terminate the contract by July this year to save “significant” money over the remaining nine years – the report estimates this could save £2 million a year.

Councillors were originally expected to make a decision on the voluntary termination of the contract at a full council meeting on Wednesday March 15 – but this has been pulled from the agenda.

In a letter, chief executive Christina Harry, said: “The leader is keen to ensure that each of you as elected members have the opportunity to review the full business case prior to its debate at full council.”

The business case had previously not been shown to members because it is “commercially sensitive”. This was criticised by Independent councillors, Cllr Nigel Dix and Cllr Kevin Etheridge.

Cllr Etheridge, who represents Blackwood, said he was “pleased” to see the report deferred. He added: “It’s taxpayers’ money so councillors need to be fully informed and not excluded. Why wasn’t all this dealt with before it went to scrutiny?”

Cllr Kevin Etheridge

Councillor Dix, who also represents Blackwood, said: “I want proper information put before me as a councillor, in a detailed report. I don’t want dogma – I want financial information. Does this benefit taxpayers? If not, we can leave it as it is.

“I do hope that deferring the meeting, following questions from myself and others, will result in a comprehensive report with all costs included. I’m happy the council has responded by giving us more time to look at this decision.”

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Cllr Nigel Dix

The chief executive has confirmed that “reading days” will be held at Ty Penallta so members can examine the business case. Those wanting to read the document will have to sign a confidentiality statement.

The report is expected to be brought back to full council on April 19 for a decision.

Mitie Facilities Management Ltd has been the subcontractor since 2007, prior to this it was held by Wiltshier FM. The Local Democracy Reporting Service understands that £7.7 million has been earmarked from the council’s reserves for the buyout.

In 2022/23, the council spent £4.9 million on the PFI contract. It has also spent £91,404 on complying the business case for its termination.

Last week Cllr Etheridge wrote to the cabinet members with responsibility for finance and education, and questioned whether the termination would provide value for money.

The Independent councillor said: “There’s reference to  £2 million savings but it’s not certain. I have asked the council how this figure has been calculated and if they can give us some idea of the financial benefits as they state there will be ‘significant savings’.

“We have got to safeguard the schools and I fully support the governors.”

The report states the savings from the termination could be invested back into education. A compensation sum will have to be paid for the early termination – the sum has not been revealed.

Cllr Dix said: “I, and many other elected members, have real concerns about this proposal, and if indeed it is value for money for the taxpayer.

“There is also concern the schools will not have the same level of service currently provided by the PFI.

“The Labour-led council have failed to present a comprehensive report detailing any savings and they have failed to fully engage with the schools – who have real concerns.”

Governors at both schools have raised concerns about the “pace” of the consultation.

The schools will now be able to provide further responses up until the week before April 19.

Cllr Etheridge welcomed this and said the schools should have been given more time for “proper consultation and engagement” to take place. He added that it would be useful for a representative from the schools to speak at full council.

Stephen Harris, head of financial services and Robert Tranter, head of legal services, are expected to agree the final terms of the termination if approved by full council.

The council has said it has in-house capability to provide the services that are currently delivered under the contract. However, the schools have the right to choose whichever provider they want.

The Welsh Government have requested local authorities review their PFI contracts to assess whether they continue to offer value for money

Cabinet members supported the termination of the contract at a meeting on Wednesday, March 8.