黑洞社区

鈥淚t鈥檚 a buzz like no other,鈥� says Richard Dobson, London area director at Morgan Sindall. What鈥檚 he talking about? The feeling that you get from handing over the keys to a new school to staff and students.

鈥淚t is the best thing in the industry,鈥� Dobson adds. 鈥淵ou can absolutely tell you are making a difference to the lives of those teachers and students, and you can absolutely feel it. You can see the energy it gives.鈥�

The sad fact is, however, that Dobson is describing an experience that is in seriously short supply right now. According to a highly critical from June last year, contracts for jobs under the government鈥檚 flagship school rebuilding programme were already coming forward at just a third of the expected rate even before the RAAC emergency hit in earnest late last summer, putting the Department for Education into full-scale crisis mode.

The NAO report exposed a situation where the department had been spending on average just a third of its 鈥渂est practice鈥� estimate of the money needed to keep schools in good condition, leaving a 鈥渟ignificant gap鈥� between the money available and that required to keep schools 鈥渟afe and in a good condition鈥�.

In the wake of the RAAC crisis, official statistics show that public capital spending on education has only fallen even more. Last year it ended at 拢3.5bn, half the level of 2010 and the lowest annual spend (inflation adjusted) since before Labour鈥檚 黑洞社区 Schools for the Future (BSF) programme started to ramp up 17 years ago.

With a general election looming as schools fall further into disrepair, what then are the chances that the next government will choose to plug that 鈥渟ignificant鈥� funding gap? And, with public sector finances in a parlous state, from where might the money be found?

Drop in the ocean

Labour has certainly looked to make political capital out of the poor condition of the 21,600 schools in the nation鈥檚 school estate. Shadow education secretary Bridget Phillipson said last year that the spectacle of crumbling schools built from RAAC (reinforced aerated autoclaved concrete) 鈥� many of which would have been replaced under the cancelled BSF programme 鈥� was just one big 鈥渕etaphor for 13 years of Tory government鈥�.

And there is little wonder that Labour has looked to take advantage. Last year鈥檚 NAO report found that 700,000 children were learning in schools which required major refurbs and which were seriously impacting their education. Meanwhile, 38% of school buildings are beyond their design life, with nearly one in six built before 1940.

The report warned starkly that schools had suffered years of underinvestment and were deteriorating, with some posing an 鈥渦nacceptable鈥� safety risk to students and staff. It also showed that, while the DfE鈥檚 assessment of the 鈥渂est-practice level of annual capital funding鈥�, contained in its 2020 spending review bid, was 拢7bn and that 拢5.3bn was its 鈥渞ecommended鈥� funding to mitigate serious safety risks, the Treasury ultimately only allocated 拢3.1bn.

In addition, according to the NAO, the average spend in the five years to March 2023 was even less, at only 拢2.3bn 鈥� a third of the original 鈥渂est practice鈥� assessment.

>> See also: 

>> See also: Scandal over RAAC school closures points to deeper malaise

The department, for its part, maintains that the total capital funding allocated to support the education sector in the 2021 spending review amounted to 拢19bn in the three years between 2022-23 and 2024-25 鈥� just under 拢6.5bn per year 鈥� and that it prioritises the school buildings in the worst condition across England. 

The government鈥檚 main drive to tackle schools in the worst condition is the (SRP), under which it has promised to build 500 schools over a decade. However, while that figure may sound significant, it is a drop in the ocean next to the 64,000 buildings across 21,600 schools in the education estate.

黑洞社区 at a rate of 50 schools a year, as the government has promised, would mean that existing schools could expect to be replaced once every 432 years. Steve Beechey, group public sector director at contractor Wates, says: 鈥淏ack when the Education Funding Agency was in charge of capital spend, the rule of thumb used to be that we should be replacing around 300 to 400 schools every year just to keep pace with the crumbling estate.鈥�

Delays

As if the building plans were not already constrained enough, the problem has been made worse by difficulties spending the money that has been allocated given hellish levels of construction inflation. 鈥淭ricky鈥� is how Wates鈥� Beechey describes the market, with many working in the sector testifying to the difficulties in getting schemes away after construction costs have risen sharply.

Morgan Sindall鈥檚 Dobson says the response in many cases has been to cancel projects when budgets are exceeded. 鈥淚t has been difficult for the Department for Education, or any funder, to keep pace with the inflationary market.

鈥淚t can just mean that a school that people have spent six months designing and getting through planning then ultimately doesn鈥檛 progress beyond that stage. We鈥檝e seen an increase in that.

鈥淭he number of schools coming through in the last few years has been down on previous programmes.鈥�

The latest set of industry forecasts from the Construction Products Association (CPA) describes the SRP as 鈥渂eleaguered鈥�, with delivery 鈥渂eset by problems due to fixed capital budgets and exceptional rates of cost inflation鈥�, meaning that 鈥減rogrammes are running significantly behind schedule鈥�.

The latest update from the government shows that just four schools have been completed under the SRP, which started in 2021, and as of last summer, 24 contracts had been awarded, compared with a forecast of 83 by that time.

The work is not coming forward at the rate expected, it鈥檚 not delivering at 50 schools a year

James Stone, Gleeds

Then into this situation has come the RAAC crisis. Officials at the DfE have not been given extra money to deal with RAAC-affected schools, so the issues are being picked up via existing programmes.

Following a , 119 of the 235 RAAC-affected schools will now be rebuilt via the SRP, meaning that other schools in poor condition are likely to either miss out on funding altogether 鈥� or suffer serious delays.

James Stone, a director at consultant Gleeds, says: 鈥淭he work is not coming forward at the rate expected, it鈥檚 not delivering at 50 a year. The SRP programme is highly complex because it鈥檚 work on existing sites,鈥� he says, adding that the programme has also suffered as 鈥渙ther programmes like RAAC have refocused what鈥檚 needed鈥�.

Catherine Ward, associate at architect HLM, which works on numerous school projects, says: 鈥淩AAC is now the focus at the department and understandably that is slowing things down. This has impacted on the current pipeline, and we now expect to see a reprioritisation of the future pipeline.鈥�

Little wonder, then, that the volume of public-sector education work appears to be declining. Official statistics, which include work on colleges, show that output in 2023 fell 6% to 拢3.5bn, the lowest figure since 2007, with the workload 12% below the 2021 level.

Investment

Given this backdrop, there is widespread agreement in the sector about what should happen now. 鈥淲hoever is in government next, the focus on school condition should continue,鈥� says Andrew Dutton, education sector leader at consultant Arcadis, 鈥渂ut the pace of delivery needs to increase.鈥�

Likewise, Gleeds鈥� Stone says: 鈥淭here鈥檚 obviously a need for more investment going forward, particularly in backlog maintenance.鈥�

The problem is that, while everyone wants more investment, there is little to indicate that it will be forthcoming. The Conservatives have so far remained silent on the issue of school condition, and what they might promise in their forthcoming manifesto.

However, the government said in autumn 2022 that it plans to freeze departmental capital budgets at their current level until at least 2028, effectively depreciating building spend year-on-year as inflation forces prices up.

And, while Labour, the clear bookmakers鈥� favourite to win the election, may have been keen to make political capital out of the sorry state of UK schools, so far it has avoided committing capital of its own. With the Institute for Fiscal Studies warning last week about the 鈥減oor鈥� state of UK public finances 鈥� with taxes near 40-year highs and the national debt close to 100% of UK GDP 鈥� Labour leader Keir Starmer has almost entirely avoided expensive policy commitments.

Hence, many in the sector are assuming that, if any extra investment does come after the election, it will be modest. The CPA鈥檚 latest forecast predicts that public education construction output will increase by 1% this year and 4% next,  but 鈥渞emain low relative to the long-term average鈥�.

Arcadis鈥� Dutton says: 鈥淟abour鈥檚 not making any big promises, it鈥檒l probably be business as usual. I can鈥檛 see them changing focus away from condition, but there may be a small uptick in funding.鈥�

HLM鈥檚 Ward says: 鈥淚 expect we will see some change [if Labour is elected]. However, it is likely that we won鈥檛 see another 黑洞社区 Schools for the Future programme.鈥�

Steve Beechey says: 鈥淗ow could either government fund a big increase? As a nation, we鈥檙e effectively broke.鈥�

Show me the money

There are other options, however, that are keeping some in the sector hopeful that the market could return. Firstly, Andrew Dutton says the DfE is working hard to bring forward a new form of collaborative working with the industry on its schools projects, designed to avoid the problems that have plagued recent procurements in the SRP.

He says a planned 鈥渁lliance for learning鈥� framework i s being worked up to deliver the principles of , the review by David Mosey of public sector construction frameworks. The idea is that this would encourage contractors to work together on larger pipelines of work, allowing them to invest and innovate with confidence.

鈥淚t鈥檚 about collaborating and sharing risk and reward. It鈥檚 one of the actions in place to increase the pace of delivery,鈥� Dutton says.

>> Also read: DfE to bring forward new 鈥榓lliancing鈥� framework for contractors

More fundamentally, the DfE鈥檚 school rebuilding programme is not, of course, the only funding route available for schools looking to undertake building works. As well as separate capital pots for free schools, primary schools, colleges and special educational needs schools, there are a variety of different funding routes for maintenance work, with some administered centrally and others by local authorities.

Beyond this, schools can use Section 106 planning agreements or land asset deals with developers to fund new buildings, or approach the government鈥檚 education land agency, LocatED, for help identifying a site. And beyond those options, of course, is always the spectre of private finance which, under the guise of PFI and PF2, delivered 173 schools with a capital value of more than 拢8.5bn over 20 years from 1998.

Former chancellor Philip Hammond banned the use of PF2 on new public projects in England in October 2018 following concerns over the financial burden it was placing on the public sector. However, supporters of the model point to the track record of delivering large numbers of buildings, and the fact that it is once again being used to fund projects in Wales, apparently successfully, under the mutual investment model 鈥� with a 拢500m fund set up for school projects by the Meridiam-backed Welsh Education Partnership Company.

Some are sceptical as to whether a form of PFI could ever find a way back, but Wates鈥� Beechey, who has given evidence to a Labour Party review of social infrastructure being run by shadow chief secretary to the Treasury Darren Jones, says the state of public finances means radical options must be considered.

鈥淭he question is whether there could be a role for private finance,鈥� he says. 鈥淚t won鈥檛 be PFI, but could we see a variation on a theme, if we create a new model that can better balance risk and reward for the public sector?鈥�

Dobson at Morgan Sindall is keen on the whole range of routes, such as Section 106 and land asset deals 鈥� where schools are funded by the returns made by developing public land 鈥� and under which Morgan Sindall has delivered a 拢44m school and lesiure centre in Hackney (see box).

Dobson says: 鈥淲e need to be sweating all those individual funding models in order to support an estates rebuilding programme.

鈥淚 think it鈥檚 unlikely the government will pick just one. But, yes, I think private funding model has to feature somewhere.鈥�

Without the government and clients being willing to risk a new way forward on school-building funding, however, it seems unlikely that the much hoped-for pick-up in school building work will happen. And Dobson will continue to miss out on that new-school buzz as a result.