Interestingly, Cllr Ali’s paper refers to a process by which the council was going to resolve the matter. Both sides agreed to a process. But it has been stopped. 

He states that the issue has been determined by the QC, but the amounts each party has to contribute have not yet been apportioned.

So, the council and the schools agreed to a process and having submitted his findings, the council says that they don’t want it. He doesn’t say what the “Expert” QC’s “final and binding determination” was!

But clearly it wasn’t “final” or “binding”

How much did this cost Cllr Ali?   

Surely, the elected councillors would want to know who the report says is responsible for the payments. Come on Cllr Ali. Let’s have some openness and transparency. PUBLISH THE DETERMINATION.

We can understand the lack of desire for litigation, especially when you have an arbitration report before you! But why would you even think of litigation when you were committed to arbitration?

What we can’t understand is the rest of the paragraph where Cllr Ali waffles about his failure to interest schools in expansion in order to cater for the increased numbers of secondary school pupils. Just what does that have to do with the decision not to litigate?

So, for those of you who did not make it to the bottom of the paper, Cllr Ali’s advice is that:

• Having spent over two years on an arbitration, they won’t follow the findings of the QC who has made a determination.

• They won’t publish the determination.

• He says that the shortfall may be paid from the General Fund.

• Or he might get some extra money from the Secretary of State.

• But his preferred solution is that instead of the academies paying for their own costs, the costs will be spread across all schools. All the schools foot the bill for £12.5m rather than getting the academies to sort it out themselves. That is nearly £900,000 out of the schools’ budget for the next 25 years.

What a gift, robbing Peter to pay Paul; and we thought that this administration was opposed to academies!

CONFIDENTIAL

ALL-MEMBER BACKGROUND BRIEFING ON PRIVATE FINANCE INITIATIVE (PFI)  ON REPORT TO CABINET ON  3/11/20

Dear colleagues, I am taking this opportunity to provide you a contextualising brief note on the longstanding Lister and Rockby School PFI issue as a decision will be made on the report at the next week’s cabinet meeting. 

 This note set out the background and complexity of options available to the Council in agreeing a resolution to a lengthy dispute between two schools and the Council as a result of a PFI contract. It is not a detailed account of the issue as this is contained within the report to Cabinet (3/11/20).

I am sure you are aware of the Private Finance Initiative (PFI) contracts which were used to encourage public/private partnerships in 1990s as a way to finance and provide public sector infrastructure such as roads, hospitals and schools. 

In Newham there were three education PFIs contracts with 25 years term covering six schools. The way it works is that during the length of the contracts, the Council makes payments to the private companies to cover debt repayment, financing costs, maintenance and any other services such as grounds maintenance, catering and caretaking. 

The PFI 3 contract covering Lister and Rockby School was signed in June 2009. Unfortunately in 2012/13 a dispute between the Council and the schools arose. Since then the schools have continued to pay only part of the sums due each year and disputed the rest. Unfortunately no real effort has been made since then to resolve the dispute and the disputed sums kept increasing annually.

It was not in anyone’s interest to allow this dispute to linger on for years and the matter ought to have been resolved several years ago. This would have helped to maintain good working relationship with schools, helped to reduce the outstanding disputed amount and agreed arrangement for the remaining years of the PFI project. Unfortunately this did not happen and we are in a situation which is of significance both to the schools and indeed the Council in the current financial climate.

In order to avoid ongoing delays and continued consequential impact in terms of our relationship with schools and the budgetary implications, we gave this a priority to resolve and our Officers have been working with schools to find an amicable way to resolve this dispute. However, as you can imagine, extended inaction and delay in resolving cannot be expected to provide opportunities for an easy solution to this matter.

Officers have looked at all possible options and alternatives to see how best this longstanding issue can be resolved amicably, recognising the fact that both schools are maintained schools.

In this regard a number of solutions are considered and are being reported to the Cabinet for consideration on 3rd November 2020.  I would like to take this opportunity to appraise you of these consideration as follows:-

1) Do Nothing 

I am sure you would agree that not doing anything and maintaining status quo is not a realistic option. The impact of the existing delays   from 2012/13, has led to even greater complexities and our inaction has not helped any party at all.  It will simply mean that  the council  will continues to invoice the schools  who will continue to make  only partial payment and the substantive  issue will remain unresolved which will continue to adversely impact the Council’s finances. As such I am sure you would appreciate that this isn’t the option that we can afford to take any longer.

2) Conclusion of Expert determination 

It is also worth noting that in January 2018 the schools and the Council jointly appointed Queens Counsel (QC) to make a final and binding Expert Determination. Whilst this determination has been issued, unfortunately the exact amounts due to be paid are still not clarified and the matter continues to remain unresolved. If we were to continue to the conclusion of this, there is a risk of significant adverse impact on the schools’ budgets (if the ruling is not in their favour). If this were the case, in order to avoid this impacting on the quality of education provided by the schools, the Council may have to step in to offer financial and organisational support as they are maintained schools. As such this option isn’t essentially going to come up with a solution that is amicable and in the best interest of our continued ambition of sustaining educational standards improvements in the borough.

3) Litigation

This is an option that we would normally use in any dispute where negotiations and all other efforts fail to reach an agreement. However this is not considered appropriate as an action of this nature would damage working relationships between the Council and the schools which are otherwise positive and constructive. The Council has developed strong working relationships with these schools in order to deliver on key priorities for education in Newham. Furthermore we do have increase in secondary school places as well as places for special need children and there is need to make necessary arrangements for 2021/22 onwards to comply with our statutory duty to provide sufficient school places. In order for us to consider any expansion plans, schools have to come forward and agree. We did invite schools in this regard but there has not been a great interest mainly due to space shortage and lack of interest from schools. Lister and Little Ilford schools came forward. Lister also came forward to host an annexe to meet increasing demand for places for secondary aged pupils and complex autism and plans are in progress in principle subject to resolution of the dispute for an expansion to support Special need as well as increasing secondary school demand.

4) Pay the shortfall from General Fund

The Council may decide to meet the disputed shortfall from General Fund. However, as you are aware, the Council has challenging budget savings to deliver over the next three years. Also we have no idea how things will move with Covid 19 as government isn’t providing sufficient resources to meet our expenditure in this regard.

5) To agree revised future payments with the schools and to consult the Schools Forum on PFI contributions from the Dedicated Schools Budget (DSB)

As I said earlier, negotiations with the two schools have been ongoing resulted in a proposal for revised future contribution payments. Details of these arrangements are in the Cabinet report which is available on the website..  Whilst schools have decided future payments, there will still be a shortfall for which    the Schools Forum will be consulted on agreement for annual payments from the DSB to the Council’s General Fund as contributions for PFI services.  If this is agreed by the School Forum, these payments will be shared by all school from DSB. However if this is not agreed by the Schools Forum, the matter will need to be referred to the Secretary of State for Education for determination. 

I would also like to mention here that our officers are also intending to approach the Department for Education to seek additional Government funding in respect of increasing costs on the education PFI contracts. We hope for its success as Leeds city Council has recently been successful in getting support from department of Education. However, if this is not successful, there will need to be an additional call on the DSB to meet the potential shortfalls. This is the solution that is being recommended as a way forward in resolving this longstanding dispute. 

I sincerely hope this note briefly takes you through the history of this dispute, the impact of the long delays and provides sufficient information on different available solutions, their merits and the way forward. I hope you will read the Cabinet report. I will be happy to deal with any queries as you may have.

Zulfiqar