PFI deal makes economic sense, says university

October 4, 2002

Hertfordshire University this week defended its decision to pursue an ambitious building programme part-funded through a private finance initiative.

The university said the deal would not cost the taxpayer more in the long run and students would not have to pay increased rents.

The university announced a £190 million deal with construction company Carillion and the Royal Bank of Scotland in February. The money will be used to build its new de Havilland campus. The campus will open in time for next year's students and will have high-quality student accommodation with internet access, a sports village and a 24-hour high-tech Learning Resources Centre.

But the project has its critics. Allyson Pollock, head of the Health Policy and Health Services Research Unit at University College, London, an opposer of PFI whose work was criticised this year by the select committee on health, said: "PFI is a debt that has to be funded and in many schemes the real costs are transferred back to the university and on to the students in the form of high rents and severe penalties for non-payment."

Tim Wilson, the pro vice-chancellor at Hertfordshire University responsible for negotiating the deal, said: "Carillion has agreed to build the student facilities and maintain them over a 30-year period, after which ownership will be transferred to the university. We will inherit a well-maintained and high-quality building. If you look at the maintenance backlog in the higher education sector as a whole, and what this could cost the taxpayer, then the deal makes economic sense."

He said the university would deal with the students. "We will be responsible for setting rents and for pastoral care. The new accommodation can be used to generate money from conferences in the holidays, and this money will keep down rents."

The scheme has been supported by the Higher Education Funding Council for England through its pathfinder programme, set up in 1995 to help universities negotiate private finance deals. So far, 30 projects have been supported at a cost of £4.5 million.

"We believe we are the first UK university to negotiate a private finance initiative funded by a project bond," Professor Wilson said.

Raising money through bonds has a chequered history in higher education. Lancaster University's attempts to raise £35 million through a bond issue in the mid-1990s failed.

"Our bond is for a specific project and not for general use as, I believe, the Lancaster one was," Professor Wilson said. "It is capped so that we will not be adversely hit by higher rates of inflation."

The remainder of the campus, principally the academic buildings, is not being developed through a PFI deal but from the sale of existing campuses and with £7 million of Hefce money.

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