Bank forgives debt for school technology lease rip-off

Laptop computers lined up on school desks In some cases schools were massively overcharged for substandard equipment

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A High Street bank has agreed to write off millions of pounds in debts owed by 27 schools that fell victim to a large-scale equipment leasing rip-off.

The BBC's Panorama programme found that at least 169 schools fell for the elaborate scheme.

At least 10 head teachers have been suspended or have resigned after being duped by mis-selling companies.

Some schools signed deals that saw them paying as much as 10 times the going rates for computers and photocopiers.

Clydesdale Bank told the programme that as an act of goodwill, it would forgive the debts of the 27 schools which signed deals with the the bank involving two firms, called LTM and DTS.

'Moral responsibility'

Both companies, which operated out of the same premises in Hertfordshire, collapsed with combined debts of £30m.

Start Quote

When the auditor came in... he just sat down and told us that it was a colossal scam”

End Quote Liz Steel Former head teacher

But it was the schools themselves that were left to make repayments under the deals that LTM and DTS had arranged.

The debts that schools across the country were left to pay has put some in danger of closing. Other schools have been left with hefty bills to pay for equipment that in some instances did not arrive and in other cases was damaged or substandard.

In total, more than 70,000 pupils have been affected.

Margaret Hodge MP, chair of the Commons Public Accounts Committee, said that while banks and other financing companies might not be legally required to examine whether the deals offered value for the public money being spent by the schools, she felt there was a "moral responsibility".

"I think if I was sitting in a major bank knowing that these supply companies were fleecing our schools, I would accept my moral imperative to intervene on behalf of the education sector," she said.

'Colossal scam'

School rip-off examples

  • Katesgrove School, Reading: Deal for 330 laptops, 100 never arrived. Left owing £1m
  • St Joseph's Catholic School, Slough: Debt of £1.4m and was almost forced to close
  • Gloucester Primary, south London: Laptops should have cost £650 but over the lease period the cost rose to £4,000 each. Total leasing costs - £1.9m.

A spokesman for Clydesdale Bank said that it had no involvement in selecting the suppliers, or the equipment prices agreed by the schools, but was taking a sympathetic view of the situation.

The bank, which called in the police to investigate the actions of both LTM and DTS, said: "As a gesture of goodwill, we will be writing to all 27 schools that financed their equipment with us to provide them with reassurance that the bank will support them by writing off the outstanding principal debt associated with these agreements.

"Those schools will also be able to retain the equipment. We hope this will provide the schools and their communities with a great deal of comfort."

But Stephen Sklaroff, of the Finance and Leasing Association, speaking on behalf of the industry, said it was up to the schools - not the financing companies such as banks - to make sure they were not signing bad deals.

"Value for money is something that the school has to take account of in making the purchase in the first place," he said.

The BBC has discovered that the banks have huge sums invested in school leases - about £300m across the UK.

Panorama: Find out more

BBC Panorama logo
  • Paul Kenyon presents Panorama: Reading, Writings and Rip-offs
  • BBC One, Monday, 24 September at 20:30 BST

Liz Steel, former head of Glemsford Primary School in Suffolk, was one of the victims of mis-selling firms.

Her school was left owing more than £500,000 for 125 laptops.

She said: "When the auditor came in, supposedly to count the equipment, he just sat down and told us that it was a colossal scam. And it was like my world had just fallen apart."

Ms Steel had signed the deal after being told the school could lease as many laptops as necessary and, because of corporate sponsorship, would not have to pay for them.

DTS initially paid the lease instalments to the bank but when it then went into administration the school was left to pick up the repayment schedule. She only realised what had happened when Clydesdale Bank's auditor arrived to count the equipment.

Ms Steel was suspended immediately by the local authority and eventually resigned.

Panorama: Reading, Writing and Rip-offs, BBC One, Monday, 24 September at 20:30 BST and then available in the UK on the BBC iPlayer.

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