APPENDIX 7
Memorandum from UNISON (RPS 12)
INTRODUCTION
1. UNISON welcomes this inquiry into the
role of private companies in providing state education. The union
represents approximately 250,000 members working in this area,
including school support staff, eg Classroom assistants, nursery
staff, school administration, cleaners, caretakers and school
meals workers, as well as those working for Local Education Authorities.
2. Privatisation and CCT in the past has
had a disproportionate and adverse impact on these workers, in
particular, cleaning and catering staff. The EOC report on the
impact of CCT on equalities highlighted that the vast majority
of those affected by privatisation were low paid women and that
in general their pay and conditions had worsened. Surveys undertaken
by various organisations including UNISON, the Public Services
Privatisation Research Unit and the Centre for Public Services
have shown that privatisation resulted, in many cases, in a worsening
of service provisions. For example, when CCT was at its height
local authorities reported problems with over 40 per cent of school
meals contracts with private companies and over 10 per cent were
actually terminated. More recent private sector involvement has
also affected support staff and the services they provide.
MONITORING PRIVATE
COMPANY PERFORMANCE
3. UNISON has been collecting details of
contractor failures since the onset of competitive tendering.
There are numerous examples of companies which have resisted their
legal responsibilities to honour staff terms and conditions under
TUPE. There has been significant case law resulting from union
and contractor disputes. Although the rights of staff on transfer
are now proven, the efforts of some companies to avoid them justifies
the fears of union members.
4. There are numerous examples of companies
being underresourced and unable to fulfil their contracts. There
is a common pattern of services starting well and declining, for
example, in 1990 a company in Strathclyde won two contracts to
clean schools. It faced strike action almost at once after sacking
14 cleaners. A survey of head teachers found that 75 per cent
felt that cleaning hours had been reduced and standards had fallen.
The contract was not renewed. Stockport Council contracted out
its school meals service in 1993. Monitoring reports reveal filthy
equipment and the use of out-of-date food products. There were
complaints about inadequate portions. The company received 48
rectification notices and 10 warning notices from town hall monitors.
It had cut back staff by 30 per cent and withdrawn holiday retainers.
Hours were reduced. Services were taken back in-house. There is
a similar trail of failures in other school meals contracts around
the country.
5. The organisations which have been in
the forefront of bidding to provide wider LEA services, eg Nord
Anglia and Cambridge Education Services have limited experience
in providing education for specific groups eg small private schools,
nurseries language schools or inspection services etc but no experience
of providing an all round education services meeting the needs
of inner-city schools, children with multiple social problems
or indeed children who simply do not want to be at school.
EDUCATION ACTION
ZONES
6. The future success or otherwise of Education
Action Zones is still in doubt. UNISON is concerned at the emphasis
being put on the involvement of private sector companies, and
believes that Education Action Zones can only work with co-operation
and co-ordination from Local Education Authorities.
UNISON has established a network of union activists
from the initial 25 Education Action Zones and from our experience
it would appear that Local Education Authorities and the other
partners involved have been keen to ensure the Education Action
Zones remain educationally focussed and driven by educational
needs.
7. Although, as we understand it, all the
Education Action Zones Forums have places for representatives
of teaching unions, support staff representatives often have to
fight hard to get similar access. This is despite the fact that
the changes which have taken place and those planned usually have
a greater impact on support staff than other staff, eg plans for
greater use of classroom assistant, introduction of breakfast
clubs, after school clubs, more use of IT etc.
THE PRIVATE
FINANCE INITIATIVE
8. PFI in Local Government is a relatively
recent development. As of 8 November 1999 a total of 113 projects
have now been endorsed from 79 different authorities. Of these,
30 have reached contract signature and another 83 are rapidly
progressing towards that stage. School PFI projects constitute
a large proportion of the PFI projects in local government. There
are six signed PFI projects for individual schools and 11 projects
for individual schools, which have been endorsed. And 20 endorsed
grouped school PFI projects.
9. According to a recent DfEE press release
the Government has funded more than £850 million of new investment
benefiting 600 schools through Public Private Partnerships. They
also announced that "There are more than 30 schemes to modernise
school buildings and facilities either signed or in development,
including new computer equipment in all schools in Dudley and
a new school meals service in Lewisham. A further 17 schemes benefiting
64 schools have already been provisionally approved for 2001-2002."
10. There is no doubt that many schools
are in a chronic state of disrepair and capital funding and investment
is urgently needed to bring schools up to an habitable standard.
Indeed on 11 November 1999, David Blunkett referred to "the
worst of the backlog of repair and maintenance work left by two
decades of neglect." He also announced an extra £200
million worth of capital funding for the repair and maintenance
of schools in England. Of this "a total of £100 million
has been made available to enable high quality private finance
initiative projects to modernise schools to get the go-ahead.
11. Whilst UNISON welcomes extra capital
funding for LEA schools UNISON believes that the funding for PFI
projects is a substitute for publicly financed capital expenditure,
and is not, as has been claimed, additional capital finance. Furthermore
there is ample evidence to show that there is no economic case
for PFI. This is because public procurement through PFI is a much
more expensive way of borrowing and funding capital projects than
the traditional methods of public procurement. PFI projects are
costly, the starting out/setting up costs are extremely high.
Bidding, for a project takes longer due to negotiations between
the council and the contractors on issues like the transfer of
risk. These negotiations can be extremely lengthy and hence costly.
The Audit Commission's paper, "Taking The Initiative: A Framework
For Purchasing Under The Private Finance Initiative", warns
that "PFI is likely to be a costly process", so that
the public body needs to be "clear about its main requirements
and that PFI is a realistic option before it engages in discussions
that will cost it and the private sector time and money".
It also highlights various indications that would show whether
the proposed PFI project is likely to deliver value for money.
A key indication is the rate of return to the private sector.
12. PFI consortia usually want a minimum
rate of return on their investment of 10 per cent. For example
there is a projected rate of return of 19.4 per cent per annum
for Bridgend Prison and 12.8 per cent for Fazakerly Prison. (See
"The Employment Impact of the PFI" published by ADLO).
Furthermore, the Audit Commission advise that companies can make
excessive profits from PFI and therefore recommends that the authority
should compare whether the likely rate of return is excessive
when compared to industry or economy norms. "The Employment
Impact of the PFI" shows that "the estimated cost of
the Birmingham Schools PFI project was originally £20 million
for eight schools in 1996. By April 1998 the figure was £65
million. The cost more than tripled in less than two years.
13. The Select Committee on Public Accounts
23rd report vindicates many of the key criticisms UNISON has made
against PFI. The "buy now pay later" approach of the
PFI means that "in the short term, a PFI deal may be more
readily affordable than a conventional procurement", because
the local authority "does not have to find the money upfront
to meet the initial capital costs. But for any given PFI project,
the continuing cash payments made by [the local authority] to
the private sector may be higher than in the conventionally financed
equivalent project. In cash terms then it is possible that in
the longer term a PFI deal may be less affordable than the conventional
project". The Committee acknowledges that "it would
always be cheaper for the Government to borrow directly to finance
a given capital expenditure". The Committee also criticised
the high set up costs of PFI projects illustrated by the example
of the cost of the Prison Service's legal advisers for Bridgend
and Fazakerly Prisons, which exceeded the initial estimate of
£200,000 by more than three times.
14. There is also evidence to show that
PFI undermines the ability of an LEA and of schools to plan strategically
for future educational provision, limiting how they use their
budgets and limiting their ability to respond to changes in school
rolls. Since payments to the PFI contractors, from within individual
school budgets, are ring-fenced, non-PFI educational provision
becomes vulnerable to cuts to fund PFI payments. So in years when
the budget is cut or at a standstill, educational provision will
suffer. As the majority of a school's budget goes towards employment,
what remains is the small amount in which governors have some
room for manoeuvre. Once the PFI project is agreed, most of that
budget will disappear from the governors control into a single
agreed contract fee. So virtually the only choices left to governors
facing financial difficulties will be about redundancies, of teaching
or support staff.
15. It is also possible that payments to
the PFI contractors will become an increasing proportion of each
school's budget, depending on the vagaries of the market. The
Audit Commission warns that PFI contractually commits the public
sector body to paying for services for long periods of time. "This
could restrict the future flexibility of the body to determine
the way that services are provided and that careful attention
is given to incorporating into the contracts provisions for making
changes to the nature and the costs services provided". It
also "limits the ability of public bodies to switch resources
in future, and also where there is a need to cut spending, the
PFI contract payment will be protected from cutbacks. This also
means that non PFI expenditure may have to carry proportionally
deeper cuts".
16. UNISON is also concerned that in order
for the PFI project to be attractive to private sector consortia,
local authorities make many concessions, which are to the detriment
of educational provision. For example one local authority proposed
the following changes to a grouped school PFI contract:
— The requirement to provide a portering
service to the schools—previously not time limited would
be restricted to 37 hours a week.
— Contractors to be given power of
veto over who can use school premises.
— Individual schools will no longer
be able to withdraw from the contract if they are not satisfied
with the contractors' performance. This will now only happen if
all schools withdraw.
— The Pimlico school PFI scheme involves
selling off an acre of its site for redevelopment. This will leave
the new school with an external recreational area, which is much
less than that recommended by the DfEE.
IMPACT ON
NEIGHBOURING SCHOOLS
17. UNISON is also concerned about the impact
of school PFI projects on other schools in the locality. Evidence
from some completed school PFI projects indicates that once a
PFI school has been built or refurbished, this puts a greatly
increased demand for places at the school. And the school rolls
in surrounding schools drops. This has occurred in the PFI project
for the new Victoria Dock primary school in Hull and is likely
to occur in the Pimlico School PFI projects.
18. Furthermore, as noted above the non-PFI
schools do not receive funding for refurbishment and repair of
their buildings because LEA funding is committed to paying for
the PFI school project. Again this prevents any strategic planning
for future educational provision as it is determined by the commitment
to the PFI project, rather than what is best for the educational
needs of children. An article by Jean Shaoul and Pam Edwards entitled
"The Lessons of Pimlico" illustrates this issue. They
state that "If, at some future date, the LEA's budget is
financially viable, destabilising the other schools. If Pimlico's
budget is cut, or the PFI service charge rises above the rate
of inflation—and given that the consortium provides nearly
all non-teaching services—the Pimlico will not have the
flexibility to cut anything other than the teaching budget. If,
on the other hand, Westminster makes good any PFI increase, then
other schools will suffer".
IMPACT ON
STAFF
19. UNISON is also concerned about the impact
of PFI projects on staff. The trend in PFI contracts has been
to reduce the salaries of staff taken over from the public sector
and to cut jobs. UNISON would not wish to see this happening in
Local Government. In a House of Commons, Select Committee on Health,
there was strong criticism of PFI particularly the impact on employees.
The NHS Confederation argued that PFI was equally unpopular with
managers: "We do not want to have demoralised, demotivated
staff who are unhappy to work for us . . . the PFI process . .
. is at best a hindrance to the way we plan our capital developments,
PFI is slow, it is bureaucratic, it requires us to put up a vast
amount of management time and consultancy fees at risk without
the certainty of success. The schemes are not . . . necessarily
better value for money . . . or, they achieve that by reducing
the terms of working conditions of the staff involved."
SUMMARY
| 1. | Privatisation in the past has had a disproportionate and adverse impact on support staff and services.
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| 2. | The private and/or not for profit companies interested in running wider educational services do not have experience of this or of providing for children with differing needs and requirements.
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| 3. | Education Action Zones should remain educationally focused and driven by education needs.
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| 4. | The Forums for Education Action Zones should ensure that the views of support staff are represented.
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| 5. | Schools are in a chronic state of disrepair and there is an urgent need for more capital funding and investment.
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| 6. | School PFI projects constitutes a large proportion of the PFI projects in local government.
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| 7. | There is no economic case for PFI it would always be cheaper for the local government and the Government to borrow directly to finance capital expenditure, than pay for PFI projects.
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| 8. | PFI undermines the ability of LEA and of schools to plan strategically for future educational provision. Resulting in educational provision being determined by the PFI project, rather than what is best for the educational needs of children.
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| 9. | In order for the PFI project to be attractive to private sector consortia, local authorities make many concessions, which are to the detriment of educational provision.
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| 10. | Once a PFI school has been built or refurbished, this puts a greatly increased demand for places at that school. And the school rolls in surrounding school drops, adversely affecting the quality of education.
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| 11. | PFI contracts have reduced the salaries of staff taken over from the public sector and cut jobs, which also leads to demoralised and demotivated staff.
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UNISON
December 1999
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