AT the recent Radcliffe Area Board meeting the iissue of a single new school for Radcliffe was discussed and whilst everyone wants improved facilities there was some consternation as to the practicalities of getting from A to B: A being the existing two schools and B being the proposition for a single school.

What was also "in the air" was how the project, variously estimated at between £20 and £40 million, was to be funded. It is not being "gifted" by the State so, one way or another, it has to be funded out of the local education budget and paid back over, say, the next 30 years because there is no capital monies available of this magnitude. So the cost has implications for all schools in the area, since the education budget has to be carved up between them.

Margaret Thatcher legislated in the 1980s to stop Labour Councils spending recklessly and mortgaging their town hall buildings. This spawned finance schemes designed to turn a "capital" project into a "revenue" cost to get round this legislation. This is important because capital expenditure has to be included in the Government's borrowing figures whereas revenue schemes do not. Operating leases for equipment and vehicles are typical mechanisms which do this and have then been found to cost significantly more.

PFI is the more complex extension of operating leases but serves the "off balance sheet" purpose which suits the Government's book-keeping. So is there any alternative to PFI funding for this school? Probably not, simply because PFI is the only type of funding which the Government permits without the local authority being faced with stark choices and perhaps discriminating between capital projects on the basis of priority.

So who is going to ensure that value for money is achieved, or will that even matter? Councillors see this as a politically priceless milestone that fits in with New Labour's education pledge. And what can value for money be benchmarked against if the scheme only gets approval as a revenue project? Other PFI projects maybe?

To date approximately £22 billion worth of PFI projects have been implemented (figures from Head of Economics, Tenon, London). The Government can currently borrow 30-year money on the gilts market at under 5 per cent per year. But the average annual rate of return required by PFI investors is around 7.5 per cent. The PFI "premium" is thus about 2.5 per cent per year. Applied to the £22 billion capital value of PFI projects, this gives an extra cost of £550 million a year, enough to employ 25,000 teachers at a cost of just over £20,000-a-year per teacher .

The judicious use of PFI could, in theory, help galvanise the issue of public sector asset procurement. But is it really value for money to the tax-payer or is it more a means of paying extra just to hide from the country's balance sheet the true value of the liabilities that are being accrued under a Labour government, maybe to suit Euro entry criteria at the expense of future generations of tax-payers?

A single school may be a good idea but should only proceed at the right cost, not at any cost.

E.B.