Builders set to win huge refinancing profits in £45bn schools programme

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The Independent Online

Companies involved in the £45bn programme to rebuild, or refurbish, every secondary school in the country are set to win huge refinancing profits.

Partnerships for Schools (PfS) is in talks with the Treasury to ensure that the private sector is incentivised to bid for the projects.

An early criticism of the private finance initiative (PFI), in which the private sector builds and runs projects on behalf of the Government in return for a fee over a 25-to-30-year contract, was that firms would make windfalls by remortgaging loans taken out to finance projects, once a building was built.

The Government has since taken a 70 per cent share of any profit above £3m. However, long-term debt is now less available, so companies have to take on more expensive seven-to-10-year loans. Tim Byles, the PfS chief executive, said: “The private sector could end up with greater losses [should a project go wrong], so there should be a corresponding gain.”

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