In September last year, the BBC’s Panorama reported that more than 169 schools had fallen victim to the large-scale equipment leasing scandal, with some schools signing deals that left them paying as much as 10 times the value of the leased computers and photocopiers.
At the time of the Panorama report, Stephen Sklaroff from the Finance and Leasing Association, speaking on behalf of the industry, stressed that it was up to the schools – not the financing companies – to make sure they were not signing bad deals.
However, current Department for Education regulations on leasing, limit schools to operating leases rather than finance leases, meaning schools’ hands are tied.
An operating lease involves paying a rental fee for the hire of an asset for a period of time, similar to a rental agreement. A finance lease can be likened to a loan – the products are owned by the school.
The British Educational Suppliers Association (BESA) is currently advising the government that it should change its policy and guidance to schools. We believe it can achieve substantial savings by making a small change to the current leasing and finance guidance it provides.
Since schools have been given the freedom to manage their own budgets, many have welcomed the opportunity to use leasing to manage their procurement and cash flow and spread the cost of resources over a number of years.
A lease gives schools the ability to acquire the technology they need now, rather than waiting until funding arrives.
In terms of an expectation of having the latest technologies in each classroom, the majority of available leases for school equipment allow for technology upgrades, enabling schools to manage the life of their products.
Depending on the term of the lease, as new equipment becomes available, schools can upgrade to the latest models, often at the same monthly fee.
The upgrade usually comes with a new fixed-term contract, but with many ICT equipment leasing programmes schools should have the flexibility to add-on extra computer equipment, or upgrade current equipment.
Another argument for leasing is the ability to forecast expenditure. In the event that an item needs replacing quickly, such as a server, schools can do so with a relatively minor monthly adjustment to the budget, instead of a lump sum that could seriously affect cash flow.
Leasing is also inflation-friendly. Although inflation will be built into the lease, it is based on the current cost of the products rather than how much they will cost at the end of the contract. Of course, with the price of many ICT products falling, this could equally be a disadvantage.
At BESA, we believe the justification for leasing in schools is strong if government guidance is clear and if only reputable financial service providers are used.
By amending government guidance to reflect industry best practice, schools will be able to secure better value leasing contracts that are more relevant to their educational needs and will be able to achieve multi-million pound savings across the sector. BESA has responded to the Department for Education’s Review of Efficiency in the Schools System by calling for the government to introduce new leasing guidance in time for the introduction of the new national curriculum in September 2014.
New guidance supported and promoted by the industry would also cut down on the mismanagement of leasing arrangements.
BESA is keen to work with the government to ensure that leasing contracts are straight-forward, transparent, and cannot be altered by a finance company at any time during the term of the lease.
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Caroline Wright is director of the British Educational Suppliers Association.