The details are complicated and secret, the figures eye watering. But what is clear is that offshore companies are cashing in with public money from Salford kids' education.
Back in 2009 Salford City Council began a 25 year Private Finance Initiative (PFI) contract to build two secondary schools under the Building Schools for the Future scheme. Official Government figures show that the actual capital, or building, cost for these schools was £55.6million. By the close of the contract in 2036/7 it will cost a staggering £229million, including interest and operational costs.
In 2011 Salford Council began another 25 year PFI contract to build three new schools. Government figures show that the capital cost was £69.9million, with the final cost an equally staggering £274.4million.
Originally both contracts were with a SPV (Special Purpose Vehicle) called S & W TLP (Project Co One and Two), in which companies Hochtief and Lang O'Rourke held an 80% stake, with Salford Council and Amber Infrastructure holding 10% each.
Between four and five years later, Hochtief and O'Rourke had sold their stake to HICL Infrastructure, an offshore company based in the tax haven of Guernsey, which has continued to reap huge profits from the contracts. HICL has a finance portfolio of over three dozen schools contracts nationally.
Salford Council accounts for 2015-16 show the enormity of the PFI schemes, paying interest rates of 8% and 10% on the two contracts, while market rates are currently less than 1%.
Over the remaining years of both contracts, the Council is committed to making payments of £430million, supported by Government grants of over £276million, but still having to find £153.373million – for schools that cost around £125million to build in the first place.
Accounts show that Salford City Council is having to find an average of £7.133million per year to finance these PFI contracts, although they add that `The actual payments made will depend upon S&W TLP's performance in provision of the services'.
The payments are coming straight out of the budgets for schools, which are already beginning to make teachers redundant (see previous Salford Star articles – click here and click here). It is not clear what happens to these contracts, or the school building assets, should the schools become academies ie privatised.
Next week, Salford City Mayor, Paul Dennett, is set to rubber stamp the `refinancing' of `Phase 1 and Phase 2 BSF Grouped Schools PFI Schemes'. The details, as always, are being kept secret, discussed in Part 2 of a Cabinet meeting.
The Salford Star would like to ask Salford Council how far these PFI schemes are detrimentally affecting school budgets and what the terms of the `refinancing' are: ie whether there are financial penalties to pay etc. But neither Salford Council nor the Mayor speak to the Salford Star or answer any requests for interviews and comments.
Meanwhile, Salford City Council accounts also reveal the staggering total amount of PFI liabilities for public financed contracts as whole in the city, which include the Pendleton PFI, special schools and secondary schools PFI projects...
The total PFI liability for Salford Council in 2015 was £155.574million. In 2016 it is £185.573million – up by £30million.
This year, Salford Council will be forking out a total of £32.339million in PFI payments, of which £17.5million - over half - is in interest alone!
Over the next thirty years, Salford Council will be forking out a total of £893million in PFI payments, of which almost £295million is interest!
Most of this interest is being paid to offshore companies paying little or no tax; that have bought stakes from the original contractors and are now cashing in, while Salford suffers from an ongoing financial crisis...
The community campaign People vs Barts PFI is calling for the nationalisation of Special Purpose Vehicles to "end profiteering from public assets", and is urging trade union branches, community and other relevant organisations to pass motions in support of its aims.
Its full proposal The People v PFI has a full explanation of what SPVs and PFI are and how they work, together with its alternative nationalisation ideas – click here for full details.
• HICL Infrastructure also has a 50% holding in Salford Royal Hospital PFI – see previous Salford Star article for full details.
Over the coming months, the Salford Star will be investigating the remaining PFI contracts within Salford.
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