KWC Loan Documentation held by the Treasury

Summary

The request sought copies of a Treasury Paper and accounting documentation regarding financial assistance for King William's College, but the outcome was 'Not upheld' with the response text provided containing the Treasury Paper itself.

Key Facts

• The Treasury Paper (No. 25/152) details a request for Ministerial Decision to offer financial assistance to King William's College.
• The assistance is a fully repayable grant of £2,256,395 covering 66.7% of building expenditure.
• The loan carries interest at 1% above the base rate, compounding monthly, after a three-year interest-free period.
• The funding was approved to address short-term cash-flow issues exacerbated by the introduction of VAT on independent tuition in January 2025.
• The maximum repayment amount is projected to be £2,518,131 by January 2030.

Data Disclosed

• £2,256,395
• 66.7%
• 1% above base rate
• three years interest free
• January 2025
• £2,518,131
• January 2030
• £261,736
• £1.3 million p.a.
• £423,074
• 24th February 2025
• 12th March 2025
• 8th January 2025
• Treasury Paper No. 25/152
• Paper number 24/225
• Paper 25/030

Original Request

Further to the information provided by the Treasury in response to FOI 4648917 submitted 12 May 2025 I seek the following additional information namely: Noting the reference to the "Treasury Paper submitted by DfE" (Appendix 1) I seek a copy of the Paper; and Copies of the accounting documentation referred to in Appendix 2.

Data Tables (20)

Full Response Text

Page 1 of 10

Treasury Paper No. 25/152

Treasury Paper

Department/Board/Office Department for Enterprise Chief Officer Mark Lewin Responsible Officer & Andrew Stewart Cut ups to be sent to & Andrew Stewart Date of Treasury Meeting
12th March 2025

Title King William’s College – Financial Assistance Scheme - Appendix 5 Application

Has appropriate internal and/or public consultation taken place? Internal Are there any resource/personnel implications? Yes Do you have the statutory vires? (If yes, provide confirmation of the source within ‘Background’) Yes Are there any inter-Departmental implications?
Not applicable If yes, which other Departments are involved?

Major Policy Proposal/Primary Legislation? No Have you completed an impact assessment? If yes, please append a copy to this paper Not Applicable If Primary Legislation, has Council Legislation Subcommittee approved the inclusion of the proposed Bill on the legislative programme Not Applicable Decision date of the Council Legislation Subcommittee

Does the recommendation have Political approval within the Department/Board/Office? Yes Date approval granted 24th February 2025 Are there any Financial Implications? Yes GDPR Implications

Data Protection Impact Assessment undertaken? Not Applicable Detailed evaluation undertaken? Not Applicable Are there any Equality Act Implications? Append a copy of the impact assessment Not Applicable Has a Climate Impact Assessment been prepared? Append a copy of the impact assessment Yes Fund Claim Application? The Designated Body is responsible for either notifying or seeking approval from the Council of Ministers where applicable Yes Purpose of the Paper: To seek approval to award an offer of financial assistance to King William’s College totalling £2,256,395 in the form of a fully repayable grant towards 66.7% (2/3rds) building expenditure required to improve existing infrastructure, repayable with interest charged at 1% above base rate, compounding monthly, after three years interest free.

s.25 s.25 Page 2 of 10

1. Background 1.1. This paper brings forward a request for a Ministerial Decision in respect of Treasury Concurrence with a Minister’s Decision made by the Minister for Enterprise on 24th February 2025, to offer financial assistance totalling £2,256,395 to King William’s College (KWC) under the Appendix 5 of the Financial Assistance Scheme – Financial assistance for businesses in difficulty.

1.2. The assistance of £2,256,395 to be offered in the form of a fully repayable grant, which is repayable over a maximum of five years, with interest to be charged at 1% above based rate from the third year anniversary of the first drawdown payment.

1.3. The application from KWC was submitted under Appendix 5 due to the School being faced with short-term operational cash-flow issues compounded by the implementation of VAT being applied to independent tuition with effect from January 2025, which came at an already challenging time for the School, which is currently going through a period of change as a result of its ‘One School’ project, which sees the lower school being incorporated into the higher School on the site adjacent to the Airport.

1.4. The application was considered at the Department meeting held on 8th January 2025 (paper number 24/225). However, the recommendation received mixed views and it was suggested that an additional option was brought forward for consideration, which was a fully repayable grant for the full amount requested, with interest charged more in line with commercial loan rates.

1.5. It was agreed that the concerns raised by Department Members would be taken into account in any final consideration, which ultimately would be a Ministerial Decision.

1.6. As a result, a further paper (25/030) which incorporated the additional option (Option 5) of offering a fully repayable grant, due over a five year period, with options for adding interest at differing rates, was brought forward for Ministerial Decision on 24th February 2025.

1.7. The Ministerial Decision was to offer support to KWC in line with Option 5 c) + d) – offering financial assistance of up to £2,256,395 upfront, towards building costs and charging interest at 1% above base rate, compounding monthly, after three years interest free. This would result in KWC repaying a maximum of £2,518,131 by January 2030 (a maximum of approximately £261,736 in interest charges).

1.8. It was felt that supporting this option would offer compromise as well as assisting to put KWC back on a secure footing, giving it the best chance of remaining viable going forward, in an uncertain economic climate.

1.9. It also recognises the significant exchequer benefit created by KWC’s existing staff which totals approximately £1.3 million p.a. and the additional one-off construction exchequer benefit of approx. £423,074 that will be created as a result of the One School project which is being carried out by local construction companies.

1.10. The original Department paper and report can be found at Appendix 1 and the meeting minutes can be found at Appendix 2. The DfE Ministerial Decision paper can be found at Appendix 3, all of which provide additional information to support this Treasury paper. Page 3 of 10

1.11. The Treasury Ministerial Decision requested looks to provide concurrence for financial support to be offered to KWC for its capital programme under Appendix 5 of the Financial Assistance Scheme – financial assistance to businesses in difficulty, on a short-term basis whilst it undergoes the planned restructuring, which in turn will deliver future cost savings and efficiencies, creating financial stability for the School over the long term.

1. Options Considered 2.1. The options considered for DfE Ministerial Decision were Options 1 – 4 from the original Department paper, alongside newly introduced Option 5 as outlined below:

2.2. Option 1 - a 40% Grant based on construction costs which equates to £1,353,837;

2.3. Option 2 - financial assistance is offered based on 66.7% (2/3rds) of net construction costs upfront (a total of £2,256,395) but is part grant - 40% of total costs (£1,353,837), with the remaining 26.7% being repayable with interest in January 2029 (£902,558 net plus interest at a flat rate of 10%) when KWC receives the final lump sum as a result of the sale of the Buchan Site. The total to be repaid in 2029 would be £992,814;

2.4. Option 3 - financial assistance is offered based on 66.7% (2/3rds) of net construction costs upfront (a total of £2,256,395) and is fully repayable on an interest free basis (interest-free aligns to other Appendix 5 applications);

2.5. Option 4 - Refuse the application.

2.6. Option 5 - Financial assistance is offered based on 66.7% (2/3rds) of net construction costs upfront (a total of £2,256,395) and is fully repayable a maximum of five years (estimated to be June 2030) from the date of the first drawdown payment (estimated to be June 2025) at one of the following rates:

2.7. a) Interest free in line with other offers made under Appendix 5.

2.8. b) Interest to be charged at a flat rate of 5% per annum on the amount that remains outstanding as of 31st December each year. The maximum amount repayable would be £2,820,495 (based on the full amount being drawn down straight away with nothing repaid until 2029 – c £112,820 interest charged p.a. – a total of £ 564,100).

2.9. c) Interest to be charged at 1% over base rate compounding monthly. The maximum amount repayable would be £2,968,747 (based on the full amount being drawn down straight away with nothing repaid until the end of the five year period). The maximum amount of interest paid would be approximately £712,352.

2.10. d) In combination with b) or c), the Department could consider offering a three year interest-free period, which would reduce the amount of interest accumulated during the period in which the heaviest expenditure would occur. This would facilitate the opportunity for KWC to ‘get back on its feet’ and incentivise early repayments if it has sufficient funds available.

Page 4 of 10

2.11. Option 5 b) + d) – charging interest at a flat rate of 5% per annum after three years interest free would result in KWC repaying a maximum of £2,482,035 by January 2030 (a maximum of approximately £225,640 in interest charges).

2.12. Option 5 c) + d) – charging interest at 1% above base rate, compounding monthly, after three years interest free would result in KWC repaying a maximum of £2,518,131 by January 2030 (a maximum of approximately £261,736 in interest charges).

1. Consultation/Stakeholder Engagement 3.1.
   The application has been considered by the Enterprise Support Division and the Locate Agency.

2. Impact Assessment

4.1 Business KWC is a large employer in the south of the Island and currently employs 185 staff which contribute approximately £1.3m p.a. in exchequer benefit. The financial support recommended will help to protect these jobs. In addition, one-off construction exchequer benefit of approximately £365,141 will be created as a result of the building work relating to the One School project, which will be carried out by local contractors. The School’s local spend is significant, estimated at over £2.8m p.a. In addition, KWC estimates that its international boarding students spend approximately £1m p.a. in the local economy.

4.2 Government KWC is a major employer and there would be a significant negative impact on tax contributions if the School ultimately closed. The One School project is a major capital investment in improving infrastructure on the Island which will improve KWC’s facilities for its students and the wider community that may access them, supporting aims within the Economic Strategy and the Island Plan.

The School offers nursery and wrap-around childcare places which support the aims of the Childcare Strategy and support parents/carers to be economically active. Having the choice of independent education on-Island is also often an important consideration for families looking to relocate into roles where there are skills shortages.

Based on KWC’s current student numbers, it is estimated that a saving of approximately £3.7m p.a. to government/taxpayers is made, based on the estimated state school spend, per child, per annum.

4.3 Social Supporting this application may help assist in the continuation of KWC’s current students’ education as well as supporting their social and emotional wellbeing. It is hoped that these students will form strong, positive social networks on-Island and remain residents, forming part of the Island’s economically active population in the future and rebalancing the dependency ratio.

4.4 Environmental (including Climate) Please see the Climate Impact Assessment included in the DfE Department paper attached at Appendix 1.
Page 5 of 10

4.5 GDPR N/A – this application has been assessed under the Financial Assistance Scheme
guidance which has already considered data protection.

4.6 Equality N/A – the Financial Assistance Scheme deals with businesses rather than individuals.

1. Financial Implications 5.1. Approval of Option 5 c) + d) - would award an offer of financial assistance to King William’s College totalling £2,256,395 in the form of a fully repayable grant towards 66.7% (2/3rds) of the building expenditure required to improve existing infrastructure, repayable with interest charged at 1% above base rate, compounding monthly, after three years interest free. This would result in KWC repaying a maximum of £2,518,131 by January 2030 (a maximum of approximately £261,736 in interest charges).

The funds are requested from the Economic Strategy Fund.

1. Decision Requested 2.13. The Department is requesting Treasury concurrence to approve Option 5 c) + d) as detailed above and Treasury approval to allocate financial assistance totalling £2,256,395 from the Economic Strategy Fund, in the form of a fully repayable grant, with interest charged at 1% above base rate, compounding monthly, after three years interest free.

2.14. The following conditions to apply:

• Payment/s of the grant may be claimed once the Department has received confirmation of the following:

o Final sale price of the Buchan site and instalment schedule – copy of contract/agreement to be provided
o Repayment schedule in place for the repayment of the grant to the satisfaction of the Attorney General’s Chambers
o Security to be arranged to the satisfaction of the Attorney General’s Chambers

• The Department’s standard terms and conditions to apply for 5 years from the date the College receives the last drawdown payment from the loan facility

• No early repayment fees

• The Department is able to amend the repayment schedule should the College make any early repayments

• Funds to be used towards the costs of the building work relating to the ‘One School’ project and not for any other purpose

• The School to inform the Department if it plans to cease any part of the business Page 10 of 10

• The Department’s standard terms and conditions to apply for 5 years from the date the College receives the last drawdown payment from the loan facility

• No early repayment fees

• The Department is able to amend the repayment schedule should the College make any early repayments

• Funds to be used towards the costs of the building work relating to the ‘One School’ project and not for any other purpose

• The School to inform the Department if it plans to cease any part of the business

• Quarterly management accounts to be sent to the Department until the final repayment is made

• The School to keep up to date with payments to Income Tax and VAT throughout the period of the Department’s Terms and Conditions

• 5% VAT related increase to be applied to tuition fees from the 2025/2026 academic year, in addition to any inflationary increase. Further tuition fee increases to be reviewed thereafter

• Full repayment of the grant/loan, plus interest, to be made by 31st January 2029 when the College receives the last payment from the sale proceeds from the Buchan site. If in the event that the College is not able to make full repayment of the grant by 31st January 2029, at least 50% of the amount owed is to be repaid by this date, with the remainder being due a maximum of five years from the date of the first drawdown payment (estimated to be 30th June 2030 if the first drawdown payment is made in June 2025)

• If the grant is not fully repaid by the five year anniversary from the date

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