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Caerphilly County Borough Council has agreed to buyout a schools PFI contract, despite concerns from governors and opposition councillors.

Lewis School Pengam and Ysgol Gyfun Cwm Rhymni’s Gelihaf site were designed and built with money from the private sector in 2001. In return a 30-year contract was issued for maintenance and catering for both sites.

The PFI contract held by the schools started on September 1, 2002, and was intended to continue until August 31, 2032.

By buying out the contract and potentially bringing the services in-house, the council has said it will save around £2 million a year.

The exact figure has not been revealed by the council, but the Local Democracy Reporting Service understands that £7.7 million has been earmarked from the council’s reserves for the buyout.

In 2022/23, the council spent £4.9 million on the PFI contract and it has also spent £91,404 on compiling the business case for its termination.

But there are concerns the schools will suffer a reduction in service when the council takes over responsibility – expected to be in October.

At a special council meeting on Wednesday April 19, councillors voted to approve the termination of the contract – 42 voted in favour, 12 against and eight abstained.

At the meeting, Independent councillor Kevin Etheridge questioned the need to “rush” the decision.

Originally the council said it wanted to end the contact in July, but this was delayed after governors expressed concerns about the “pace” of the process and decision.

Project manager of the termination, council officer Sue Richards, said the council had alleviated both schools’ concerns.

In a letter to the council, chair of governors at Ysgol Gyfun Cwm Rhymni, Phil Bevan, said he “continued to have concerns” about the termination.

The council said the early termination of the contract would save “significant” money and offer-up opportunities for community-use of the schools.

Council leader Sean Morgan said: “This gives residents the opportunity to have available extra leisure services in the evenings and on weekends, including a 3G pitch.

“This gives no detriment to the pupils at a time of massively increasing austerity for this council, where we are looking to make savings well in excess of £20m in a year.”

The council has said it has in-house capability to provide the services that are currently delivered under the contract. However, once the PFI contract ends, the schools will have the right to choose whichever provider they want.

Mitie Facilities Management Limited has been the subcontractor since 2007, prior to this it was held by Wiltshier FM. The council’s report states the two PFI schools are in generally good condition and the service provision by Mitie is to a good standard.

Cllr Morgan, who represents Nelson, said savings of £2m a year could be made by the termination.

Plaid Cymru councillor Colin Mann said he “failed to see” where these savings could come from. He added: “From what I have read, I’m not convinced this is a good deal at the moment.”

Stephen Harris, head of financial services, and Robert Tranter, head of legal services, are expected to agree the final terms of the termination.

Plaid Cymru councillor Donna Cushing questioned why the compensation sum was being decided by unelected officials.

Cllr Cushing, who represents Hengoed, said: “I would like to see it come back to council and for members to scrutinise the amount of money involved.”

Stephen Harris, head of finance, said he had a responsibility to ensure any deal made is right for the council.

Deputy leader of the council, Cllr Jamie Pritchard, said the termination of the contract could ensure greater equity across all schools.

He said: “Don’t we want the best for every school in the county borough?”

The exact details of the termination are not publicly available, but elected members were offered “reading days” to look at the documents.

Independent councillor Nigel Dix said: “Having read the reports and gone through them for two hours, I’m less convinced than ever that this is the correct thing to do.

“There are so many unknows in there, I feel it’s impossible to make a balanced decision. My gut feeling is I’m not convinced this is value for money or a good deal for the pupils.

“I’m grateful to the council for giving us the opportunity to look at the report in more detail but this just shows the council were happy to push through without the proper scrutiny.”

The Welsh Government has requested local authorities review their PFI contracts to assess whether they continue to offer value for money.

Cllr Carol Andrews, cabinet member for education, said: “It is important to note that this decision affects specific support services and that all other aspects of teaching and learning will remain unaffected.

“Our staff remain committed to working in partnership with both schools over the coming months, as the finer detail of the new arrangements are developed. The saving generated by the termination will also help reduce the financial burden on our school estate as a whole over coming years.”

The council has another Private Finance Initiative with Sirhowy Enterprise Way. This is a “design, build, finance and operate” contract. It was signed on January 21 2004 and expires on January 20 2034.