Conversion to academy status for a number of schools has been put on hold owing to financial issues

September 19th, 2011

Conversion to academy status for a number of schools has been put on hold owing to financial issues.  Some schools have benefitted from PFI rebuilding projects, funded by bank loans which authorities are currently repaying.  On schools converting to academy status, banks have become concerned about whether authorities would remain liable for PFI repayments.  Read more about it in the Guardian here: https://www.guardian.co.uk/education/2011/sep/16/schools-academies-bank-pfi-deals.  It’s not quite clear from the Guardian report what the issue is.  Any liability under a PFI contract could be transferred from the authority to the school when the Secretary of State makes a transfer scheme under s 8 of the Academies Act 2010.  However, it may be that the issue in these cases is either that no specific provision has been made, or that the banks are concerned about the strength of any newly-formed academy’s covenant and wish the authority to remain liable for repayments.  Perhaps a reader ‘in the know’ could clarify?

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