FREEDOM OF INFORMATION: Threat of Jarvis crash led to crisis plan for schools

Treasury documents reveal concern over PFI scheme and choice of Governor

THE GOVERNMENT was so concerned about the potentially devastating impact on the school-building programme of a collapse of Jarvis that it put in place detailed contingency arrangements across Whitehall to keep construction going at the taxpayers' expense, it emerged yesterday.

Documents released by the Treasury under the Freedom of Information Act show a co-ordinated action plan was drawn up, ready to be implemented across the country had the financially crippled contractor gone bust last July, leaving scores of school projects up in the air.

This included the possibility of local authorities stepping in to fund schemes to completion if the administrators of Jarvis had insufficient money to pay sub-contractors. At the time, Jarvis had pounds 3bn worth of PFI projects in its order book including 24 schools projects, eight of which were still under construction. Three schemes to build schools in Kirklees, the Wirral and Richmond in Surrey were identified as "high priority".

Partnerships UK, the government-controlled body specialising in private finance initiative schemes, was appointed to project manage PFI schemes in which Jarvis was involved on behalf of all affected local authorities. In addition, the Department for Education and Science wrote to local authorities with Jarvis-led schools projects in their areas, giving them guidance on how to deal with problems relating to their PFI contracts.

The Treasury, meanwhile, appointed the legal firm Cameron McKenna to advise it on the Government's rights in respect of Jarvis and the position of individual PFI contracts.

On 28 July last year, the day before Jarvis's banks were to decide whether to continue supporting it, a crisis planning session was held at the Treasury to which all local authorities that had dealings with Jarvis were invited. In the event, Jarvis survived the financial crisis after its banks agreed to continue funding it. Last weekend Jarvis finally reached an agreement to offload all its PFI commitments and provide it with banking facilities for a further year.

But the internal Treasury memoranda and e-mails released yesterday show how close to meltdown Whitehall believed the school-building programme had come. Among the options examined by the Treasury were the replacement of Jarvis as construction contractor and direct payment of sub-contractors to ensure that building work continued. In the event, it decided to rely on a contingency plan drawn up by Barclays Private Equity, Jarvis's main financial backer on most of its PFI schools projects.