Public sector property Pt 2

As delegates attended this years’ Government Property conference at the QEII Centre yesterday, acrossParliament Squareteachers were lobbying MPs over cuts to the Building Schools for the Future programme.

Inside the conference centre tensions were just as apparent. Cuts versus investment, speed versus thoroughness, frontline versus back office, central control versus localism.

Andrew Smith, chief executive of Hampshire County Council, suggested we might be witnessing a “perfect storm” as national fiscal priorities combine with local pressures on facilities and services. The book value of local government property is £128bn. Hampshire occupies property equivalent to twice the national sales area of M&S. Smith asked the not entirely rhetorically question: “Do we really need that much space?”

But will this perfect storm drive collaboration and green initiatives or lead to retrenchment and across-the-board percentage cuts? As more than one speaker said, collaboration between local government and with other public agencies is very difficult to crack.

In the big scheme of things it may all be “public money” but who pays the cost and who makes the savings are not entirely academic questions.

The shape of the coalition’s plans for central Government property are becoming a little clearer, as it targets £5bn running cost savings and £20bn in cash receipts from disposals, both by 2020. The relocation of OGC to the Efficiency & Reform Group within the Cabinet Office signals intentions pretty clearly.

The new Government Property Unit, created from OGC’s property team and John McCready’s team in the Shareholder Executive, is finding its feet and planning to harness private sector knowhow, whilst ensuring public sector negotiators remain commercially astute.

Speaking at the conference, McCready said the Government had introduced a moratorium on lease extensions and would extend “national property controls” by the end of this financial year.

In London, Government will rationalise its presence in the five central postcodes aroundWhitehall, maximise freehold and exit leasehold property. McCready also reasserted his view that “ownership of property must be clearly distinguished from use of property.”

“Property vehicles” appear to be the chosen model for achieving this separation and later in the day KPMG helpfully offered a view of what a Government Asset Management Company or GAMCo might look like.

KPMG aren’t predicting widespread sale and leaseback deals or property outsourcing. They see it more in terms of reducing fragmentation of ownership, bringing in skills and making revenue savings.

One thing’s for sure, the Government won’t be lacking in advice on how it can make savings.