Page last updated at 00:15 GMT, Wednesday, 7 January 2009

Credit crunch warning for schools

School work
Some school building schemes have been fast-tracked

The economic downturn could be about to hit schools and children's services, a government committee has warned.

"Serious economic problems" could undermine investment in education and related services, the Children, Schools and Families Committee report said.

And England's school building programme could be hit as private firms become less willing to invest, it warned.

But the government said funding was at record levels and that school building programmes were being brought forward.

The committee's report on departmental public expenditure warned: "Those in charge of schools and children's services more widely need to be planning now for ways of coping with a much more austere future."

It also suggested that the recession could prevent the government from achieving some of its objectives.

One has to place a very serious question mark over whether the government may still be committed to a 45 billion programme to rebuild or refurbish every single school in the country
Barry Sheerman
Committee chairman

Singled out for special concern is the government's 45 billion Building Schools for the Future (BSF) programme to rebuild or refurbish all England's schools.

The report warned as the private sector struggles to obtain credit and grapple with tougher financial times, it may be far less willing to invest in long-term building projects.

Under the private finance schemes which build most new schools, the upfront capital comes from the private sector although it is the taxpayer that funds the schemes in the long term.

Committee chairman Barry Sheerman said there had been eight or nine "fat years" in education, with per capita spending increasing, but it was already tailing off.

"Overall we see a lessening of spending on education as opposed to health.

"When we put the BSF programme in the context of a recession, and the long term prospects for the economy, one has to place a very serious question mark over whether the government may still be committed to a 45 billion programme to rebuild or refurbish every single school in the country.

"Many have already been rebuilt or refurbished."

'Vague terms'

He said the fact that the government was already fast-tracking some capital building schemes may mean that some people in the next years of funding may be disappointed.

His committee's report said the government had made extraordinarily large amounts of capital available to banks to enable them to continue operating and that its tax revenues would fall as the recession began to bite.

There was also a suggestion that a forthcoming review of the BSF programme could lead to it being curtailed.

The committee called for the Department for Children, Schools and Families to make a clear statement about its future.

A DCSF spokeswoman said: "We have put unprecedented funding increases into schools to address decades of underinvestment and poor pay to drive up standards.

"The current school funding settlement will continue to deliver our major reforms."

She added that BSF had support at the highest level, with the prime minister recently emphasising school investment as a counter-recessionary pressure.

Extra value for money was being sought for a range of Whitehall programmes including BSF but this was not a scaling back of the programme, she said.

The report also criticised the financial accountability within the DCSF, claiming there was no clear breakdown of how much money was spent on departmental objects or government targets.

It also said it was particularly difficult to see how much money was being spent on areas such as child protection, childcare and adoption.

'Potential storm'

It also pointed to a lack of detail over the way some 4.46 billion in efficiency savings had been made.

"The way in which it has been achieved is again painted in broad and frankly vague terms," it said.

Acting general secretary of the National Union of Teachers Christine Blower said the committee was right to point to "the potential storm on the horizon for education spending, created by the financial crisis".

"It is vital, therefore, that education funding maintains its upward trajectory so that Gordon Brown's commitment to matching spending for schools in the state sector with that of the private sector is realised."

She added that it was about time that "expensive and burdensome" PFI schemes were laid to rest.

Ian Fordham, deputy chief executive of the British Council for School Environments, said: "It's inevitable that the sector will be looking hard at the impact of the economic downturn on the attractiveness of PFI projects at this time."

Liberal Democrat Children's spokesman David Laws said the coming years would see a massive squeeze on schools' budgets, with many of them experiencing real cuts.

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