Free schools don't come cheap

The challenge of providing enough school places for a rising population, while ensuring that all of those places are in safe buildings that don’t leak, and doing it all within today’s public spending environment, is, it appears, an impossible equation. The government is spending between £4bn and £6bn a year on work on the school estate; but while that may sound a lot, it pales by comparison to the sums slated to address the twin problems of expanding pupil numbers and deteriorating buildings.

The Department for Education estimates it will cost £6.7bn to bring the existing school estate up to “satisfactory” condition, with costs increasing to nearly £14bn to raise it to the dizzying heights of “good”. This sum is rising all the time, thanks to the age of the current estate, and is expected to double by 2021 even with current levels of funding. Meanwhile, while the government chases this whirling dervish of repairs, officials must also create 420,000 new pupil places by that date, either by creating new schools or extending existing ones.

Against this backdrop, making a political decision on the type of schools that can be built which leads to a 33% premium on the cost of creating a primary school place, and 51% on a secondary, seems at best questionable and at worst, a flagrant waste of money. These are, according to the National Audit Office, the average differences between the cost of places under the government’s treasured free school project, and those delivered by local authorities. Meg Hillier MP, the labour chair of the influential Public Accounts Committee, is in no doubt what that represents, saying simply, “Where’s the value for the taxpayer?”

The government’s insistence that all new schools must be “free schools”, created outside of local authority control, even though local authorities themselves bear responsibility for providing sufficient school places, is hugely divisive – as is the issue of the educational benefits of the schools themselves. But even if you are politically opposed to free schools, the question of whether too much is being paid for their development is, in fact, far from clear cut.

The higher cost of delivering places through free schools comes down to the price of the land they are built on – a problem that local authorities largely do not encounter

The actual cost of construction is similar to that of the redevelopment projects carried out to address poor building conditions under the Priority School Building Programme, and in fact cheaper than new places delivered by local authorities. So the higher cost of delivering places through free schools comes down to the price of the land they are built on – a problem that local authorities largely do not encounter, as they can only extend schools rather than build from scratch.

Critics of the cost say that were they to enter the land market, local authorities, with their own land reserves and ability to swap sites with developers, would be able to get cheaper results than the government’s school delivery agency, the newly renamed Education and Skills Funding Agency (ESFA). There may be an element of truth to that in some cases, but how much difference it would make in headline terms is doubtful. The reality is that much of the demand for places is in cities, particularly London boroughs, where competition for land is intense, and costs are in reality often higher than official RICS “red book values”, which are based on historic comparisons. As one source put it this week: “You’re not going to find 20 acres of playing field to build on in Westminster: those days are long gone.”

The recent creation of a publicly owned property company, LocatED, dedicated to securing sites for schools, offers the ESFA an extra tool to lower costs, by entering into mixed-use developments and offsetting the cost of schools with commercial projects. It should also encourage developers and consultants working on wider schemes to proactively approach the body with suggestions for incorporating schools in their schemes: officials are clearly trying to think more holistically, and the demand for places is not going anywhere any time soon.

But for the foreseeable future, many schemes will still be standalone projects, and the ESFA has daunting numbers of free schools to deliver – 610 at the last count. And so, with the Treasury having sign-off of land deals that are significantly over book value, the government needs to be absolutely clear about what it is prepared to pay for sites – and be ready to allow its agencies to walk away from the most expensive deals, acknowledging the effect this may have on its ambitious targets for free school delivery.

Because if the market thinks government will pay any amount, that is what will be charged. And with so many competing demands for school cash, there has to be a level at which the price of a free school is too high.

Sarah Richardson, editor