Agenda item

Steve Elson presented the paper which was to inform Schools Forum of the increased costs to the PFI contract and suggest a possible way of dealing with the shortfall.  The Benchmarking exercise in November 2012 resulted in an increase in the cost of the contract by £180,334. The first four or five months were covered by the DSG underspend. The paper recommends one way this cost can be covered is from the DSG underspend, then after that half is covered by schools and half is covered by DSG underspend. The LA recommends that the DSG picks up the charge in the first year and then supports it in future years.

This is a significant decision for Schools Forum.

The contract started in 2005 and agreed a contribution from each school based on  10% of the school’s budget at the time with increases e.g. for pupil numbers as they increased. . The total contract cost is £7m per year. The majority of this is met by the DfE but the Unitary Charge (the total amount paid back by Slough every year)  is £2.2m. There is a total £1m contribution from the three schools and £400,000 from the DSG in recognition of the saving on out-of-borough placements. The £800,000 ‘affordability gap’ is paid by the Local Authority from central funds and was agreed previously.

In summary:

• Schools Contribution = £1m
• DSG = £400,000
• Affordability Gap = paid by the LA, £800,000 (comes through the DSG as an in-out amount).

These are the original figures, this £2.2m has now increased by £180,334 as a result of the Benchmarking exercise.

Robin Crofts provided an explanation of the PFI Benchmarking exercise as follows:

The PFI was introduced in 2004 and started in 2006. The sum was not fixed until the last resource was opened in November 2007. November 2012 was the five year point at which it needed to be evaluated. Costs are based on 2006 although they didn’t start until 2007. The figures have been held for 7 or 8 years without any uplift. The catering component was tendered but the other 3 components were benchmarked. Benchmarking was viewed as the preferable route to Tendering as Tendering is likely to result in higher costs.

The figure of £180,334 has been well tested and Robin Crofts has assurances from David Banham. Staffing costs in Slough are higher in this area but overall the Benchmarking outcomes are good in comparison to what was likely to come out through a Tendering process.

Three alternatives are possible:

1)  Whole cost to be paid by the schools

2)  Whole cost to be paid by the DSG

3)  Whole cost to be split between schools and the DSG.

Mary Sparrow expressed concern about schools losing out if the increase they are suggesting is not in line with the increase in schools funding. Debbie Richards said that there was no reference in the governor’s agreement to a Benchmarking exercise and it doesn’t cover all the costs of running a building. Schools were not kept informed of the Benchmarking process which started last year and only received notification of the increase two weeks ago. Robin Crofts confirmed that this has been raised with David Banham and will be done differently in future benchmarking exercises.

A fourth option would be to inform the LA that Schools Forum will not endorse use of the DSG and suggest that the LA pick the cost up. Steve Elson explained that Schools Forum can decide not to spend the DSG; the LA would then decide whether to fund centrally or pass the charge on to the three schools. Clauses of the contract need to be checked by the three schools involved.

Schools Forum agreed that there was not enough information at this time to make a decision and they asked to have sight of the contract and some legal advice regarding whether the LA can pass the cost back on to the schools. There is discomfort in using DSG money but also in letting the three schools bear the full cost of the increase.

It was agreed to defer the decision to the December meeting. The decision of Schools Forum will be to decide whether to use DSG to support and if so, to what extent.

Steve Elson highlighted Appendix 1 which indicates the unspent contingency of £708,293 added to school budgets and already agreed by Schools Forum.

Council officers will bring a paper back to the December Schools Forum.