£10m Hit on Failed Free Schools

The Department for Education has taken a £10 million hit after selling the buildings of failed free schools to mostly private property developers.

An investigation by Schools Week found it also spent an additional £10.9 million on upkeep, such as security, maintenance and utility bills, on the empty sites.

The government revealed after a parliamentary question last year that it had sold 20 buildings due to house free schools since 2017.

A later Freedom of Information request from Schools Week showed the it had spent £131 million snapping up 16 of the sites for which it held full data.

But these were sold on years later for just £120 million.

Experts suggest prices may have been high initially as developers pushed prices up if they knew the government and its property company LocatED were interested. The need for school-suitable sites may also have limited choice.

Hayley Dunn, a business leadership specialist at the school leaders’ union ASCL, said the findings were “alarming”, adding the amount of money lost “raises serious questions around due diligence”.

“The DfE needs to urgently review its processes to stop this from happening. At a time when schools and colleges have to fight for every penny they receive from the government, these staggering losses make for particularly grim reading.”

The department lost money on 11 sites.

£5m loss on Hampstead Police Station

Hampstead Police Station in north London was bought for £14.1 million in 2015, but sold for just £8.9 million in 2021 after planning permission for a free school failed.

The department also paid £1.4 million in upkeep costs on the vacant site, including £700,000 on security.

The Camden New Journal reported the building was vandalised during a Hallowe’en party in 2020. It was bought by Redington Development to be turned into homes and offices.

Another £4.3 million was lost when Penn School in Buckinghamshire was sold to software billionaire Peter Kelly for £7.2 million in 2021. There are no details on why a planned free school was scrapped.

The DfE spent £1.3 million on upkeep and made £300,000 from location charges for filming, but it was reportedly in a poor state of repair. The Victorian building also became grade II listed, which may have impacted the price. It could now become a boutique hotel and restaurant.

Christine Bayliss, a former civil servant in DfE’s free school unit, said in the “early days” of the free school programme she would advise “proposer groups not to make it public that they were searching for land as it was a well-known thing that developers would push their price up”.

Jeremy Pilgrim, the managing director of School Property Matters, said because schools needed unique buildings, it could “make it harder to get a good deal – the market is much tighter”.

The department made a profit on four buildings, including £4 million on the Met Building in east London which sold to Metcom Ltd last year for £57 million. But it spent £2.4 million on the building’s upkeep during attempts to open an all-through school.

Sale profits wiped out by upkeep fees

When demand for primary school places declined in Croydon, Ark scrapped plans for a school and the site was sold for £4.2 million to Mayday Road LLP. Although this was £100,000 more than the buying price, profits were wiped out by £800,000 upkeep fees.

In total, £2.4 million was made from 16 sites, including £800,000 from commercial leases, filming and parking charges at the Met Building.

Dunn said property was usually “one of the best assets for wealth growth and these sales have been carried out at a time when the market was booming”.

According to the Office for National Statistics, the average UK house price has risen by 31 per cent between November 2017 and 2022.

Meg Hillier, the Labour chair of the public accounts committee, said if the money was put into existing capital for building repairs “it might be better” for children in crumbling schools.

The DfE said it did not pay in excess of what a site was worth, or purchase expensive sites, if there were better value-for-money choices in the area. It would also aim to recover assets and identify an alternative educational use for a site.

A spokesperson said: “The free schools programme has allocated more than £8.5 billion since 2010, delivering over 650 new schools and providing more than 390,000 good school places across the country.

“We take a strategic approach to the overall management of that investment, taking account of the overall value-for-money position when making decisions to acquire or dispose of a site.”

Source: Schools Week