Councils urged to act now on property assets

The party’s over on big, centrally funded building schemes and if local authorities are to avoid the hangover, now’s the time to exploit the business potential of the land and buildings they already own.

According to the Audit Commission, in a follow up to research first carried out in 2000, councils in England are sitting on property including offices, libraries, schools and  leisure centres,  valued in their books at a collective £250 billion.

But, progress over nine years on managing their estates effectively has been modest.  A third of councils do not yet share offices or facilities with other local public bodies and, overall, they have spent £1.2 billion more on buying or refurbishing their offices than they have raked in from sales.

In a new report 'Room for Improvement' launched today (17 June), the Commission says central government is partly to blame by not making it clearer what was expected of councils and failing to offer incentives to use assets more frugally.

It calls on government to resolve the apparent conflict of priorities between disposing of properties to maximise receipts and enhancing estates to deliver better public services.

The Commission also wants better incentives for councils to rationalise their estates and relaxation of rules restricting use of the proceeds of asset sales.

Audit Commission Deputy Chairman Bharat Shah said:
"The recession is a good time for councils to plan how to use the property they own more efficiently and possibly even to acquire assets for the future.

"While some councils have reaped the benefits of good asset management, many lack the capacity or even the basic information to support strategic planning.

"This leaves them badly placed to deal with tougher times ahead and the new standards for strategic asset management set for Comprehensive Area Assessment.

"Now that capital funding is scarce, councils need to think about the value in their assets.  They can start by addressing questions that are routine in private sector companies - do I need this asset, do I need to own it, and am I making the best possible use of it?"

The report aims to help councillors, local authority chief executives, directors of resources, finance and property managers understand how a more strategic approach to asset management could secure better value for taxpayers’ money.  

It recommends that councils collect data on size, use, occupancy, condition, running costs and keep abreast of  open market values (at realistic alternative uses) of any assets they and their partners own.  This puts them in a better position to review their property holdings and reduce them where possible by disposal, change of use, re-organisation and sharing.

The Audit Commission will promote better property management with best-practice case studies, support for councillors and continued assessment through Use of Resources Assessments and better benchmarking.

A full version of the report can be found at:
http://www.audit-commission.gov.uk/assetmanagement

Notes

• Two thirds of the book value of all public sector property assets nationally is managed by local councils.
• England’s councils own property worth £250 billion; this book value has nearly doubled in the last decade and its market value is probably higher.
• Some councils are on top of their property portfolios, but only one in 14 councils is an exemplary manager of its assets
• In 2007/08, while 65 improved, the performance of 46 councils on asset management deteriorated (based on their UOR scores)
• Councils made net capital investment in property of over £10 billion in 2007/08
• In 2000, councils invested about £200 million in acquiring or refurbishing offices. This rose to nearly £800 million in 2007/08
• A third of councils say that their property holdings have reduced in size, but have increased in either quality or value
• Councils collectively across the UK realised an annual average of £4 billion from property sales between 2000/01 and 2007/08 
• A fifth of English councils spent less on capital investment in their own offices between 2000/01 and 2007/08 than they received in sales, generating £0.9 billion surplus
• The other four fifths of councils spent over £2 billion more on capital investment in offices than they realised in sales

The Research

The study rests on qualitative and quantitative research including:

• Detailed case study fieldwork at 22 councils
• A representative survey of 80 council directors of finance, carried out by Ipsos MORI
• A review of Use of Resources (UoR) scores for asset management and performance assessments from 2005 to 2008 provided by district auditors
• A review of a sample of 20 per cent of councils’ property asset management plans
• A review of all their 2007/08 annual efficiency statements, as well as bids by councils to acquire ‘unitary’ status.

'Estate' or 'Assets'

Terms like ‘estate’ or ‘asset’ in this report relate only to land and property or buildings that councils own outright and on long lease which they can sell. It does include housing stocks but not those managed by ALMOs.  The report does not address fixed infrastructure assets such as roads and highways or public parks, or movable assets such as computer equipment, fleet vehicles or stock. 

About the Audit Commission

The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.

Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies.

As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.

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