One of the unexpected by-products of the controversial privatisations of the 1980s was the discovery of shockingly poor real estate management by state bodies – a rare glimpse of a problem only brought to the surface when the need for proper balance sheets arose.
UK government departments and agencies have since been shown to exhibit appalling asset management, as any sweep through Public Accounts Committee (PAC) or National Audit Office (NAO) reports will demonstrate – stories of unused land & buildings, ‘forgotten’ landholdings, leases on punitive terms, opaque sale of land at below market prices. Government departments also own very large quantities of smaller parcels of land, or parcels which can be separated from larger areas and better utilised. State asset managers tend to regard these as too numerous to bother with.
My thesis is twofold.
First, that there are many more salable real estate assets controlled directly or indirectly by the state than the formal data would suggest. Sale or ‘release’ of such underused assets provides sorely-needed funds.The sale of urban and industrial land can help commercial firms find premises or provide land for housing, and help boost the depressed construction industry. However, new primary legislation may be required to prevent concealment, and ensure a proper market price. (Secret sale of state land without open competitive process, is, after all, blatant theft from the public). In addition, to prevent corruption, the price and terms of sale should be made public – there are no grounds for ‘commercial confidentiality’ here.
Second, that reforms related to state-owned or controlled real estate should form part of a broader set of reforms designed to prevent waste of state assets more generally – for example when using complex contracted ‘quasi-privatisations’ like PFI, management contracts or combination concession-lease-franchise arrangements, which seem to suffer from deliberate obfuscation.
I particularly recall a PAC meeting in January 2003 where discussed in one session alone were hundreds of empty properties in Liverpool, a shocking deal over the building that houses the Treasury, (which cost an estimated £1.7 billion), an MoD office refurbishment that allegedly cost three times the cost of a new building (costing ‘one million pounds per room’) – all in one session.
Questions over the treatment of land assets have been raised with respect to the MoD, the Highways Agency, Building Schools for the Future, the Qinetiq privatisation, the infamous PRIME and Trillium deals, the BBC and several tales of woe from the FCO in foreign countries. In February 2010 after 15 years of reform the NAO said of FCO real estate management that it, “still needs to get the basics right”!
PAC and NAO reports have also been severely critical of the handful of state organisations formed specially for the purpose of ‘managing’ government real estate. Indeed, patterns of questionable transactions suggest that the ‘fudge and incompetence’ maybe more deliberate than it appears.
In response to such problems in 2009 yet another new body was launched – the Government Property Unit, but this has been resisted at every turn. In a recent session of Public Accounts Committee (13th June 2012) on a report by the Comptroller General, the PAC Chair said of the Government Property Unit: “The unit appears to lack authority. It appears to have taken forever to get off the ground. It appears to have awful problems, with people not even being able to sit in the same place because they cannot use the IT systems, which seems so ruddy basic it is depressing.. It appears to have a very bad relationship with the Treasury…”
The benefits to the nation of getting to grips with this problem are huge. However, the Lib Dems in the Coalition will need to be made of stern stuff if they are to defeat the obfuscation and implement the political reforms needed.
* Paul Reynolds works with multilateral organisations as an independent adviser on international relations, economics, and senior governance.
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6 Comments
You are onto something vitally important here but one quibble. It’s not just land; it’s people, software development, government programmes of every kind that are being catastrophically badly managed and which are ‘not fit for purpose’. For the Lib Dems this potentially represents an open goal – the Tories have remarkably little to say and are in many cases implicated in creating the mess in the first place.
What is to be done?
Firstly, forget bodies like the Government Property Unit or the various Czars that Whitehall loves so much and is forever inventing. These are top down solutions for a problem mainly caused by, err, the top down absentee-landlord approach; remote decision-makers and confused accountability will never work and the only surprise is that successive governments have stuck with it so long. The solution is meaningful localisation of responsibility AND accountability that meet in one person – the larger the sums involved the more senior the person and always with the sanction that poor performers are asked to leave (without a golden parachute).
In an overstaffed bureaucracy promotion gets to be determined more by (corporate) political skills than any ability to do the job so the wrong people are systematically promoted and they naturally do what they know and understand best and what justifies their own position which is to add yet more staff and complexity. This dynamic needs to change and in essence the way to do that is to devalue (corporate) political skills and promote those with the ability to get the job done. I have seen this happen in a private sector bureaucracy and the results were startling and quick.
First of all, can we see evidence that the record of public agencies in management of assets in the broadest sense now – not in the 1980s – is markedly worse than the record of the private sector?
Secondly, and this is a point for “Liberal Eye” rather than the original post, we forget at our peril as Liberals and democrats that there is a public interest which is not easily measured along commercial lines. Business people coming into the statutory sector often propose solutions that would save money for the agency employing them at the expense of hurting the public. That statutory sector officers often rise through knowing the right welcome message to give their superiors I certainly agree, though this is not unknown in the private sector as analysis of the banking crash shows! But they are also trying to serve the interests of the local community, which cut across neat agency boundaries, and respond to political pressures from elected representatives who in turn are responding to their electorate. Do away with all that and things will be much nicer and simpler!
As for property assets, forgetting land holdings that could make money is unforgiveable. Disposing of every building that can make money, though, has repeatedly damaged the local voluntary sector and informal community groupswhich have found space in council premises but find themselves squeezed out by commercial owners, either as unwanted or through being priced out. Disposal to the voluntary sector is generally less damaging, but in the real world this not infrequently leads to local feuds causing some valuable users to be excluded. whereas local authorities are generally very careful not to exclude organisations from premises for having annoyed them.
On issues like this, commercial factors aren’t the only ones that public agencies should consider.
The key challenge facing those who promote the selling of state assets hasn’t changed since the 1980’s, namely the creation of new state assets, otherwise it is just a cash cow gained from a one-off sale.
Yes correctly used state assets can have massive economic and community impact, however this doesn’t necessary mean that they have to be sold. Urban and industrial land already in public/state ownership can be used for community purposes at costs that make many things viable, this can include providing low cost premises for smaller and community-based commercial firms. A good example of farsighted and enlightened usage of public ownership of land is Milton Keynes: All the (state-owned) landscaping and parkland is maintained, along with the annual fireworks display through the rents gained from the public ownership of various business premises across the city.
Also we shouldn’t always be in too much of a hurry to re-use “unused land & buildings”; for example it is largely because of poor estate management that Bletchley Park remained (largely) intact and so could be saved for the nation.
Very useful comments. I would plead ‘logic’ here. Addressing a problem of unused commercial land and buildings under indirect or direct state control does not imply that all state assets should be sold, nor that all such proprties should be sold regardless of the consequences. In addition the unnecessary waste of hundreds of millions of tax pounds in opaque property deals is not excusable via similar cases of waste somewhere in the private sector – and after all, finance raised can be used to pay for tailor-made community facilities.
A key question is why real estate transactions by public bodies has to be so opaque. One wonders what is being hidden here.
Simon,
I think you mistake my meaning as I absolutely agree that (a) there is very often a dimension to a decision that cannot be measured or assessed by formal financial methods and that (b) the proper target is overall public good, not merely that of some agency or department. That in turn leads me to conclude that the public sector (but a reformed one) should have a more central role than now when it has been put very much on the back foot by years of Tory myth-making. My sense is that liberals have been very good at getting to grips with this sort of issue and with joining the dots across agencies/departments when in local government but have made very little showing when it comes to the national stage.
Inclidentally, I would highly recommend Leslie Chapman’s book “Your Disobedient Servant: the Continuing Story of Whitehall’s Overspending”. First published in 1978 it is now out of print but available second hand last time I looked. Chapman was a senior civil servant in the old Ministy of Works who discovered that it was reliably possible to cut costs by a third without cutting any useful output and with the support of the workforce. Despite the mass of evidence he accumulated about how to do this his reforms were strenuously opposed by the senior civil service and eventually died with him paving the way for Thacher to start the althernative plan of privatising that has played such a big role in creating crony capitalism – without notably cutting costs!
Paul,
Excellent article.
Perivate scetor firms have to file accounts and ;ist assets, so of course they dont forget them, also private firms like to make profits, funnily enough, so they tend not to forget sources of revenue that often.
As Liberals we should not wish to see resources underused rthat could be used for the benefit of the people, which is whats happening now.