Out-Law News 1 min. read

Amendment allowing continuing PFI payments for academies passed

Local authorities will not be prevented from continuing payments under a historical private finance initiative (PFI) agreement after a school rebuilt using this funding method has converted to academy status.

The Education Act, which has now received Royal Assent, clarifies the law which requires a local authority to "cease to maintain" a school once it converts to an academy. Academies are self-governing schools operating with funding from central Government rather than from a local authority.

The Act specifically states that this provision does not prevent a local authority from providing "financial or other assistance in respect of the academy... by making payments in respect of some (but not all) of the expenses of maintaining the academy".

It adds that a local authority may also provide premises, goods or services to an academy or make premises, goods or services available to be used for the purposes of the academy.

The change followed concerns that by providing that a local authority must "cease to maintain" a school on the date on which that school opens as an academy, the Academies Act prohibited continuing payments under existing PFI arrangements. In September, a Sheffield secondary school rebuilt ten years ago under a PFI scheme delayed its transition to academy status as a result of concern over whether the payments would be considered "maintenance" under the Act.

The Department for Education (DFE) previously said that a local authority contributing to the expenses of academies, whether in money or in kind, did not amount to "maintaining" a school. However, it said in a statement that the Government wished to put the matter beyond doubt.

Minister of State for Schools Nick Gibb said that any assistance provided to academies by local authorities, whether financial or otherwise, would only ever be a proportion of the total expense of running an academy. The clarity provided by the amendment confirmed that this applied to payments under PFI and other contracts, he said.

"Local authorities have always been able to use their own resources to provide assistance, including financial assistance, to academies and to enter into contractual commitments and incur liabilities on their behalf. We are clear that their continuing to do those things would not have been prevented by the wording of... the Academies Act, and that was not the intention behind the Act," he told the House of Commons.

"All academies are, and will continue to be, maintained by the Secretary of State under funding arrangements entered into under [the Academies Act]," he said.

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