by Owen Temple on 19 October, 2016
As a result of the argument I made, Press (1 member) and Public (none) were allowed into cabinet today for one of the previously “secret” items I wrote about on Sunday – the refinancing of County Durham’s debt in respect of 3 PFI schools.
And what a peep it was! To re-finance the £43 million still owing on these school buildings, Durham will have to pay eye-watering early redemption penalties of around £12 million to the banks. That’s not a misprint. It’s not a mis-placed decimal point. It’s really £12 million. And despite that the county council still expects to save money on the new deal!
That begs the question. What sort of lousy deal was it that allowed the council (which says it is “common for this debt to be refinanced”) to be so badly stitched up that this common practice has turned out to be an ultra-expensive practice? What sort of a deal was it that allowed the county’s finance “partners” (who put the deal together) to write into the contract their share in any additional profit if they were subsequently to arrange a replacement deal?
An appalling deal in my view, and what adds insult to the injury is that now we’re paying lawyers and accountants at least another £68,000 to check out whether we should indeed hand this windfall to the banks and financiers.
I accept that this refinancing may be the right thing to do now because it may still save the council some small amount of money over the next twenty years. I’m pleased that the county’s political leadership agreed to the issue being discussed in public rather than behind closed doors. But I’m convinced that the complacency which I heard at cabinet this morning, the same complacency which allowed this deal to happen in the first place, remains a real threat to the financial well-being of County Durham.
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