Room for Improvement

1. Room for Improvement Strategic asset management in local government Mark Wardman CBSS Summer Conference 8 July 2009

2. Between 1999 and 2008 the value of the local government estate nearly doubled Book value of councils’ fixed assets Non-operational Non-operational Community assets Infrastructure assets Other land & buildings – other Other land & buildings – education Council dwellings Community assets Other land & buildings – other Other land & buildings – education Council dwellings Source: Communities and Local Government, Capital Outturn Returns

3. Before the credit crunch, there were many expectations of the local government estate • Capital receipts and revenue savings • Pursuit of wider objectives CSR 07 Targets Source: Communities and Local Government

4. The £4 billion receipts target has been achieved largely from housing and exceptional sales Capital receipts by service Leeds Bradford Airport £145m Kingston Communications £107m City of London Fund £207m Forecast Source: Capital Outturn Returns

5. Significant funding streams included capital receipts and (for the first time in 2003/04) prudential borrowing • Sources of funds for councils’ capital expenditure Source: Communities and Local Government, Capital Outturn Returns

6. But times are getting harder • IFS estimates of capital spending across government Conservative Governments: 1979-80 to 1996-97 Lab inherited Con spending: 1997-98 to 1998-99 1999-00 to 2007-08 Latest forecast: 2008-09 to 2010-11 Plans for: 2011-12 to 2013-14 Institute for Fiscal Studies Source: IFS presentation ‘Public Spending’, April 2009

7. The recession will lead to a significant reduction in funding for assets • Can major central government funded capital programmes continue in their current form? • How attractive is prudential borrowing as: • asset values decline? • revenue budgets come under pressure? • The Operational Efficiency Programme demands savings: • potential efficiencies over the next 10 years of £20 billion in receipts from disposals • £5 billion a year in running costs across the whole estate • Councils will have to focus more on the opportunity • in their own estates

8. Councils have spent more on acquiring or refurbishing property than they have raised from sales • Capital spending on and receipts from sales of office property • All councils 2000/01 2002/03 2003/04 2004/05 2005/06 2006/07 2001/02 2007/08 Source: Communities and Local Government, Capital Outturn Returns

9. A minority of councils release net value year-on-year from office properties • Capital spending on and receipts from sales of office property • 80 councils Source: Communities and Local Government, Capital Outturn Returns

10. We set out nine years ago what good practice looks like • Hot Property(2000): • Set out why a strategic approach was needed to avoid wasting money or providing the public with sub-standard services • Encouraged councils to share property with other public bodies to get better value for money

11. Since Hot Property, councils have made slow but steady progress towards it • Auditors’ judgements on councils’ asset management between 2006/07 and 2007/08… 46 got worse 65 got better Source: Audit Commission

12. Councils identify several barriers that prevent them from doing so • Barriers inhibiting a strategic approach to asset management Source: Ipsos MORI telephone survey of 80 councils, Dec 08 – Jan 09

13. A fifth of councils say they have all the data they need • To what extent do you feel that your authority has the data it needs to make informed decisions about the management of its property? Source: Ipsos MORI telephone survey of 80 councils, December 2008 – January 2009

14. But most say they lack data that would allow them to benchmark their performance with others • What would you say are the main barriers to benchmarking property and asset data? Source: Ipsos MORI telephone survey of 80 councils, December 2008 – January 2009

15. LSPs have not yet driven property sharing, but councils expect them to How likely to share assets as a result of the development of LAAs & LSPs? Is your LSP actively promoting sharing property among partners? A great extent 3% Don’t know 3% Less likely 0% Don’t know 8% Not at all 13% Made no difference 33% A fair amount 45% More likely 64% Not very much 31% Source: Ipsos MORI telephone survey of 80 councils, Dec 08 – Jan 08

16. We found evidence to suggest that councils that share their assets do so opportunistically, not strategically • The councils we visited did not share assets using a • strategic, area based approach: • Only 13 of the 80 councils in our survey could quantify the savings arising from sharing • 42 per cent said that sharing arrangements are usually or always ad hoc • 28 per cent said that sharing arrangements are usually or always strategic

17. CLG and Barry Quirk have encouraged councils to transfer assets to communities – with some success • What impact has the Quirk Review had on your approach to community transfer? Would you say it has had a…? Source: Ipsos MORI telephone survey of 80 councils, December 2008 – January 2009

18. But councils are uncertain of the voluntary and community sector’s capacity to manage assets • What would you say are the main barriers to transferring assets to communities? Source: Ipsos MORI telephone survey of 80 councils, December 2008 – January 2009

19. A few councils have shown what can be done • LB Wandsworth – Savings • £23m capital receipts (£16m net surplus) from offices 2001-07 • Maintenance backlog reduced by 75% between 2003-08 • Over 120 properties either used by or shared with partners • No borrowing & lowest council tax in England • Lancashire CC – Property performance indicators • Office rationalisation programme driven by national & local PPIs • £2.4m capital receipts & £270k revenue savings from Preston Office Review • Maintenance backlog for worst buildings - fallen by 80% over last 4 years • Wychavon DC – Place Shaping • Built new hospital and leased to PCT generating revenue stream • Built new supermarket leased to Waitrose helped to regenerate Droitwich • Civic centre shares offices with CC, PCT, Police • Shared rev & bens service with 2 south Worcestershire Districts

20. We recommend that central government help councils take advantage of the recession • Clarify what it expects councils to do with their property during recession • Specifically address the perceived conflict between: • maximising receipts from disposal of assets • enhancing the estate to deliver better services And create incentives to encourage councils • 2. Review capital accounting rules to allow more flexibility in what local government can use capital receipts for

21. Councils’ reactions to our findings have been too defensive But: We’re not saying you’ve been doing the wrong thing Councils have behaved rationally in the circumstances We recognise the constraints you face (and have tried to move government on some of them) And we highlight some who have overcome them And we make no apology for: Focusing on the money Recognising that times have changed Raisingthe bar we assess you against