Public: Property and regeneration + Features | Public

Fixed assets: the government estate

Fri, 16 Apr 2010 08:01:00 GMT

With a portfolio worth £280bn and estimated running costs of £25bn the public property market is one area where savings could and should be made, however selling off assets is not an easy - or quick process

One characteristic of property, both from a landlord's and an occupier's point of view, is that manoeuvring with it is like turning a supertanker: you have to have made the decision to change course a long time before you hit the rocks.

Leases can be long, commonly up to 25 years, and disposing of property, whether it is owned or rented, is not a fast process.

And, as has been made painfully obvious by the recent economic downturn, timing is everything if the most is to be made of a property's value, whether realising profits or cutting costs.

Headline grabbing savings

Perhaps that is why the assortment of public-sector-cost-cutting promises contained within the three main political parties' manifestos have largely been unspecific about the property occupied by the public sector, despite its estimated £280bn worth (Source: Kable, Public Sector Property to 2013), the £25bn annual running cost of the central government estate alone and the apparent potential for headline grabbing cost-saving statements.

The Conservatives have indicated that making reductions in public sector property costs could contribute to their plans to cut departmental spending by an additional £12bn over savings already planned by Labour.

Property will perhaps form part of the "wholesale review of value for money in the public sector" that the Liberal Democrats have promised will be based on the findings of the National Audit Office and the House of Commons public accounts committee.

Labour has reasserted that if re-elected it would cut back office and property running costs. It's not overtly stated but property is perhaps part of the efficiency savings of £15bn in 2010 and 2011 and the "operational efficiencies" that the Labour manifesto says will cut government overheads by an additional £11bn by 2012-13.

And, to be fair, the present government had already started to look at cutting property costs, the potential of which was identified by Lord Carter of Coles in his part of the Operational Efficiency Programme (OEP), published with the April 2009 Budget.

Office accommodation

Among the findings of this independently authored report was the conclusion that using central government's offices more intensively could reduce its need for office accommodation by 30%, with this single measure saving £1bn a year. Slimming down the remainder of the estate by 20% over 10 years would save running costs of £2bn to £4bn a year while collaborative procurement of facilities management (FM) would save £0.5bn.

Lord Carter reckoned that £20bn could be realised from the whole of the public sector's freehold estate. However, it's no quick fix and will take 10 years – or two parliaments – to realise.

The validity of the OEP won't end on 6 May, whoever wins, and maybe when overlaid with plans to cut quangos, do away with or reform regional development agencies, devolve decision making etc, the scope for property savings will be even larger.

Perhaps it's just as well that John McCready, the head of the Shareholder Executive's recently created Property Unit, has had a few months to get his feet under the table.

Alongside the Office of Government Commerce he's likely to be the person piloting the property supertanker through the next parliament, and possibly the one after that, assuming that successive governments value the advice of someone with actual property knowledge when making property decisions.

Builders crack the art of consideration

Fri, 08 Jan 2010 09:30:00 GMT

Construction sites have not been exactly environmentally friendly in the past - nor the most political correct of workplaces, but for more than 10 years there has been a quiet revolution going that has seen builders repoint their image

You may have wondered if it is a trick of the imagination or whether building sites really are less conspicuously noisy and dirty than they used to be, or whether there are quite so many wolf-whistling brickies swinging from the scaffolding?

If so, you are almost certainly right, there has been a change for the better on each score. Some of it is undoubtedly due to more stringent environmental and health and safety legislation and the effect of the widespread adoption of policies of corporate social responsibility (CSR).

However, part of the improvement follows a deliberate effort by the construction industry to clean up its act and repoint its image.

The origins of this smarter, more grown-up industry can be traced to the 1994 publication of Sir Michael Latham's review of the construction industry, Constructing the Team, one of the spin-offs of which was the considerate constructors scheme (CCS).

Officially launched in June 1997 when 75 sites were registered, the considerate constructors scheme had clocked up 1,000 sites by November 2000, and by December 2009 - recession notwithstanding - 40,000 sites had been registered by construction companies, all keen to toe the line and abide by the 'site code of considerate practice' which forms the basis of the scheme.

Building companies of course benefit from the scheme, but so too do their clients, who after all have a longer-term vested interest in being a good neighbour.

Given recent levels of construction activity among public sector organisations and their need to be beyond reproach, it is no surprise that government and local authority building projects are prominent among them.

The CCS top 50 clients include the Highways Agency, which has registered 786 sites, the NHS (501), the Environment Agency (153), Defence Estates (138) and the Department for Work and Pensions (92).

Local authorities in the top 50 include: Leeds city council with 322 sites registered, Hampshire county council (226), Kingston upon Hull city council (198), the London Borough of Hammersmith & Fulham (194) and Staffordshire county council (174).

An awareness of the environmental impact of the site

The site code of considerate practice sets out to ensure that work is carried out with consideration for traders, businesses, site personnel, visitors and the general public and with an awareness of the environmental impact of the site as well as the effects of noise, light and air pollution.

Contractors have to use local resources when possible, reusing and recycling materials when they can. Sites have to be kept clean with facilities such as offices and toilets well maintained. Dirt and dust has to be minimised and contractors have to communicate regularly with neighbours.

They also have to ensure respectable and safe standards of dress. "Lewd or derogatory behaviour and language should not be tolerated under threat of severe disciplinary action," according to the code.

In north Staffordshire, Newcastle under Lyme College has just taken delivery of a new £60 million campus. Both the college and its contractor, Hertfordshire based building company BAM construct have been keen CCS participants. The college's vice principal Craig Hodgson said that he was not aware of the CCS prior to starting the project but one of the key requirements was to fit in with the local community.

"We didn't just want to arrive, put up hoardings and be a nuisance for two years," says Hodgson.

The reality was that after the construction period finished in December the college had not received a single complaint. "That's unusual for any project of this size," says Hodgson. "It was managed in an incredibly sensitive way and the first thing that the project manager did was to go out to the community groups and tell them what we were going to do and when we were going to do it – that takes the steam out of any complaints – then they stuck to their word."

"When you are a public sector organisation you want the public to feel positive and reassured because, after all, you are spending public money."

Pre-budget report: Investment in infrastructure is vital

Mon, 07 Dec 2009 11:04:48 GMT

A new body to plan what type of buildings Britain needs for the next 50 years will be a vital, if little-noticed, part of the pre-budget report

Infrastructure is never the sexiest of subjects, and yet its effects are all around us. This influence is felt not just in the quality of our buildings – the schools, waste plants, hospitals and houses – but also in our economy. Spending money on infrastructure creates thousands of jobs and pays for itself many times over through increased economic growth.

So when the pre-budget report is published on Wednesday, it will be worth peering through the likely torrent of commentary about tax rates and government borrowing to see what the Treasury has to say about its building plans.

One thing that the chancellor, Alistair Darling, is bound to announce when he stands up in Parliament is the creation of a body called Infrastructure UK. Background work on this idea has been going on since the summer, led by Lord Davies of Abersoch – better known as the City grandee and former Standard Chartered chairman Mervyn Davies.

Its remit, of which the outline is already clear, is nothing if not ambitious: to plan what buildings, transport and communications infrastructure, and energy generation Britain will need for the next 50 years.

The thinking behind Infrastructure UK is that even though British levels of investment in infrastructure have picked up hugely under Labour, that spending has not been coordinated. Large programmes – most delivered using public private partnerships (PPP) or the private finance initiative (PFI) – have been launched in all the key areas, but separately.

That leaves Britain at a disadvantage compared to its European neighbours and even countries such as Australia, which has recently launched a body to coordinate infrastructure investment (called, imaginatively enough, Infrastructure Australia).

"It's very, very important for the UK to have a centralised agency … that can prioritise projects across departments," says Yann Le Saux, the deputy director of French construction firm Bouygues, which for the last 10 years has been building schools and hospitals in the UK.

"The UK is still, despite 12 years of investment in infrastructure, behind the continent, behind countries like France."

Infrastructure UK will therefore try to coordinate the various capital spending programmes, so that, for example, new energy plants can be planned alongside rail extensions. It will also have to think about how private investment can be channelled into these projects.

The body is likely to have a strong PPP 'feel' to it: those helping Lord Davies in his preparations have included Sir Adrian Montague, a former head of the Treasury's PPP taskforce, and Cressida Hogg, the managing director of 3i, a major PFI investor.

A crowded field

How it will interact with other agencies remains an interesting question. It will enter an already crowded field that includes relatively low-profile (but often powerful) bodies such as Partnerships UK, Local Partnerships, Partnerships for Schools, and the Treasury's own infrastructure finance unit (Tifu), which lends public money to PFI schemes struggling to attract private finance.

Infrastructure UK could incorporate some or all of those bodies in an attempt to make life simpler; but if it does, the role of the Tifu becomes extremely interesting. It is, after all, a public infrastructure bank, albeit on a very limited scale.

In a report published earlier this year, the right-leaning Policy Exchange thinktank urged the government to establish an infrastructure bank similar to those operating overseas, notably in Germany.

Such a body, incorporating the Tifu and the Public Works Loan Board, which lends to local councils, could give real force to infrastructure policy, financing the construction phases of projects before they become operational and generate income.

"The prize is an institution," the report argued, "which facilitates the introduction of private sector capital without crowding it out, finances itself with a government guarantee … and whose liabilities do not score in the national accounts."

For the Policy Exchange, a body such as Infrastructure UK without any financing powers would be "significantly" less effective – just another advisory agency or centre of excellence.

The Liberal Democrats agree: their Treasury spokesman, Vince Cable, has already argued for a national infrastructure bank. "Government would provide guarantees but the national infrastructure bank would be professionally managed and make investment decisions on an objective, project by project basis. It would not be a nationalised industry," he said last month.

Not everyone is convinced, however. Contrary to the Policy Exchange's optimism, an infrastructure bank could very easily crowd out private finance, leading to no net increase in investment in buildings. Or it could become highly politicised, despite Cable's assurances.

Nor is it clear how Infrastructure UK, in whatever form it takes, will work with government departments. Will it be able to override their wishes, to dictate that certain projects will happen before others? Or will its decisions be subject to veto by departments, leaving it with no power to do anything other than give advice?

None of this will become clear until Darling has finished speaking on Wednesday. But the hope is that he will give infrastructure planning the prominence it has so long deserved, but not often received.

The feeling's mutual

Mon, 09 Nov 2009 11:51:47 GMT

As the country struggles to come out of recession collaboration between property developer and local authority has never been more imperative and the ground rules of public-private partnerships for urban development are shifting to a more equal footing

A recent survey of property experts has confirmed that the days are gone – well more or less – when the redevelopment of city centres was an adversarial soap opera with the hard-pressed local authority defending the beloved but fleabitten fabric of the city from the clutches of the wicked property developer, hell-bent on flinging up concrete to make a quick buck.

Nowadays there is much greater acknowledgement that collaboration has far more to offer than confrontation. For one thing, the "wicked" property developer is quite likely to be the development arm of a pension fund manager or a substantial listed property company keen to create an investment in which it will have a long-term interest.

Also, in a political context, there is a much greater recognition among those who run today's towns and cities that the places in their care are competing for investment, shoppers and residents.

In these times of recession the need for cities to be competitive is in an imperative one.

But of course, each has something the other wants. While the developer – in normal circumstances at least – has access to funds as well as expertise, the local authority probably has control over the land or at least what can be built on it.

According to a survey of the 2,300 European members of the Urban Land Institute (ULI) - which describes itself as "a global research and education institute dedicated to responsible land use" and whose members fall on both sides of the public-private divide - joint ventures between the public and private sectors will be the way forward for the next 10 to 20 years.

Naturally, most of the survey respondents thought that Europe's cities will be "very important" for the future of the European economy as a whole over the next decade or two.

In particular, ULI members believe that investment in infrastructure and public facilities will be the fastest growing areas of investment over the next three years with investment in housing, offices, shops and leisure facilities trailing in their wake.

However, apart from lack of capital and lack of confidence, the main obstacles to investment will be "lack of good partnership between city governments and investors" rather than a lack of good projects to invest in or lack of demand for facilities.

It comes as no surprise then that co-investment with investors and developers, and more flexible planning are felt to be the chief instruments that will enable "good city government" to encourage investment.

More than 60% of respondents said that investors and developers will need to forge joint ventures with the public sector in order to make urban investment work in the next 10 to 20 years.

The ULI announced the results of the survey in Barcelona at the first summit of its urban investment network. The network was founded a year ago to promote investment in urban development and brings together a mix of cities, European institutions and private sector organisations. By the end of 2011 the ULI hopes to have 100 cities and metropolitan areas and 100 investors and developers in the network.

The network already includes Amsterdam, Barcelona, Birmingham, Edinburgh and Istanbul along with Germany-based Allianz Real Estate, Deutsche Bank, ECE Projektmanagement and Eurohypo AG, and Netherlands-headquartered ING Real Estate Development as well as the OECD.

Menno Maas, chief executive of ING Real Estate Development, says that the network brings together key decision makers to share their experiences of collaboration and examine how well it works in each case.

He says the network has already revealed a range of different approaches to public-private partnership for the purpose of urban development.

Perfecting these urban partnerships chimes well with the British experience. Whatever the result of the impending election an array of public-private arrangements seems likely to result as urban administrations battle their way out of the recession.

It is no surprise then to see that the UK's Department for Communities and Local Government has also signed up to the urban investment network.

Cities are back: but London still leads the pack

Wed, 30 Apr 2008 23:00:00 GMT

ubregions of England are to get new powers and purpose, but the gap between them and London remains huge

Cities are back. After decades of decline and urban deprivation the metropolis (so the rhetoric goes) is the powerhouse of the 21st century post-industrial economy. In England the "core cities" - Birmingham, Sheffield, Bristol, Nottingham, Leeds, Liverpool, Manchester and Newcastle - have been working together to promote urban renaissance.

A plethora of reports promoted cities and regional governance. Their thread has been devolving power from the centre to local government; a key idea is the city region, in which (with or without structural reorganisation and boundary changes) the regional development agencies, councils and private bodies work together, conurbation-wide.

But if ministers have talked of giving cities their heads on the ground there's scepticism: things are not moving, despite the recent publication of an implementation plan for last summer's subnational review. It wants to formalise multi-area agreements within regions and requires regional development agencies to devolve funds to local authorities.

And despite the talk, the core cities are still lagging. In the UK, London is still seen as the only real global city player; the rest fall behind their counterparts elsewhere in Europe. A report in 2006 identified only two cities outside London (Bristol and Leeds) in the top 61 performing European cities.

Despite the success of the London model, few cities have actually opted for a directly elected mayor; there are only 13 across the country and none in the core cities.

Dermot Finch, director of the Centre for Cities thinktank, identifies a "power gap" between London and other cities as a result. "This is definitely something the government should be responding to. The more the mayor of London accumulates power, the further away London's system of government gets from other big cities. The power gap will start to disadvantage lots of really quite large cities."

But he adds that the government has gone from "lukewarm to silent" on the issue of mayors despite a manifesto pledge to consult on a new generation of city mayors.

The local government minister, Hazel Blears, has made noises encouraging cities to go for mayors based on existing local authority boundaries and a recent paper from the Institute for Public Policy Research calls for a mayor for every English town and city. But the Centre for Cities favours regional mayors based on the London model with strategic powers to push through big infrastructure developments and override local planning concerns.
Finch, however, points out: "Turkeys don't vote for Christmas - you can't look to existing bodies to suggest a mayoral model." It should be incentivised, he says, with promises of greater powers from central government on transport, strategic responsibilities and skills funding.

Leadership
Business groups have been campaigning in some areas such as Birmingham for a mayor to attract inward investment and in other cities such as Liverpool and Nottingham it has been mooted by factions dissatisfied with existing leadership but has got no further. Those against changing the system say a mayor is not necessarily a panacea.

Congestion charging provides a case in point of the difficulties of pushing through controversial developments requiring the buy-in of local councils, business and agencies. Despite the real traffic problems afflicting cities and estimated to cost the British economy £20bn a year, London is the only city to have any kind of road pricing. Three years ago, Edinburgh residents rejected plans for a congestion charge in a referendum and in many other cities the idea hasn't got past the first post. City leaders and regional agencies in Birmingham recently rejected road pricing plans, fearing it would harm the local economy.

The government has gone cold on national road pricing, instead encouraging local schemes to tackle congestion and reduce car use, offering matching funds through the Transport Innovation Fund. But Manchester is so far the only region where authorities and transport bodies managed to get their act together and present a bid in the first round of the scheme, which aims to invest £3bn in public transport with £1.2bn raised from road pricing.

City region brand
Manchester is seen as furthest down the line in terms of establishing a city region brand, with good partnership arrangements in place between the 10 Association of Greater Manchester Authorities. It is also the only authority that looks set to seek statutory status for its multi-area agreement. In other cities such as Birmingham it has proved more difficult, particularly as nearby Coventry sees itself as a big hitter in its own right and is unwilling to be subsumed into the idea of a greater Birmingham (see page 35). The city has also abandoned plans for the time being for a formal multi-area agreement.

Transport links are vital to make commuting possible and join up urban hubs - many resurgent cities are in the south-east, with good links to London, including Southampton and Reading. More needs to be done to make use of those links in the north, the Centre for Cities has urged. But it's not as simple as a north-south divide. York and Warrington are successful, prosperous cities in the north.

New research by Ivan Turok, professor of urban studies at the University of Glasgow, found British cities having outdone many of their European neighbours in terms of economic improvement over the last 10 years. London, Southampton-Portsmouth, Sheffield, Liverpool, Coventry and Newcastle were in the top 20 European cities in terms of urban employment revival. But UK cities do less well on productivity - the revival has been led by the service industry and financial services, with lower-level jobs created, compared to the outstanding European performers, Dublin, Helsinki and Stockholm, he said.

Retail boom
At a city regional level, Turok points out cities' economic performance is affected by their outlying areas. He says that while the core of Glasgow has benefited from the consumer and retail boom, its overall performance has been brought down by weaker outlying areas.

This is why you have to have interactions within regions, he says. Much of Glasgow's recovery could be put down to it capturing the spend that should have gone to its surrounding areas. "There is a danger that cities see the best route forward as competing against neighbours to build shopping centres, supermarkets and competing for talent, whereas they should be taking a strategic view to attract investment to the whole region."

Gambling proves a step too far for city regeneration

Wed, 02 Apr 2008 23:00:00 GMT

The decision not to gamble on supercasinos leaves holes both in city regeneration plans and the government's policy-making

The French president Georges Pompidou once said: "There are three roads to ruin; women, gambling and technicians. The most pleasant is with women, the quickest is with gambling, but the surest is with technicians."

Over supercasinos, gambling has done little for Whitehall's reputation for policy-making. Whatever the respective roles of ministers, MPs and civil servants, the episode did not exhibit much skill or consistency.
T
he policy started out grand (see box). At the turn of the century, policy makers in Blackpool were scratching their heads about how to turn around the city's ailing fortunes. Although visitor numbers still ran to their millions, they were predominantly short trips and not the more lucrative summer holidays. This was exacerbated by decades of little investment in transport and other infrastructure. Inevitably, the economy suffered.

The North-west Development Agency and Leisure Parcs (which owns many of the city's tourist resorts) came up with a "masterplan" to kick start Blackpool's fortunes. At its heart were proposals for a casino complex on the site of the city's old central station.

The government accepted the case that Las Vegas-style casinos could have a catalyst effect on regeneration efforts. Following a review by the Independent Gambling Review Body, led by Sir Alan Budd, the government published a draft gambling bill which proposed to liberalise the laws regulating gambling. It was part of a shift in thinking in Whitehall and Downing Street that the state needed to and could trust citizens more to run their own lives, which manifested itself in the liberalisation of licensing hours, but also influenced the choice and personalisation agenda.

The Gambling Act 2005 initially intended to remove many of the regulations governing casinos. The then minister for gambling Andrew McIntosh said of the bill: "It recognises that adults need to be treated as such and trusted to make informed decisions about their free time ... Reform will create new jobs and generate significant inward investment, boosting tourism and regeneration programmes in key areas."

With that in mind, it is peculiar that the casino policy did not involve other parts of Whitehall more. If regeneration was an important consideration behind the location of casinos, other Whitehall departments should have been involved in a much more meaningful way.

Scaled down
Originally the plan was to have unlimited numbers of supercasinos but it was soon scaled back to 40, then eight and finally a single supercasino. In addition to concerns over problem gambling, the policy ran into trouble over perceived conflicts of interest between the government and the gaming industry. It emerged that the then deputy prime minister John Prescott had enjoyed hospitality from American business tycoon Philip Anschutz, whose proposed investment in the Millennium Dome was conditional on it winning the supercasino licence.

The choice of where the supercasino should go was handed to an independent casino advisory panel. In January 2006, it recommended Manchester, against all expectations.

But a report by a House of Lords committee stopped the policy in its tracks. "While the Gambling Act stressed the importance of minimising the harm from gambling caused by the new casinos, the evidence made clear that this was not a high priority in the selection criteria." Although the Gambling Act 2005 had itself gone through the usual process of drafting, committee and debates, the level of risk a supercasino would have posed seems to have only become a serious concern after Gordon Brown became prime minister. He immediately put a hold on Manchester's plans and at the end of February, the government scrapped the idea.

The culture secretary, Andy Burnham, said government research showed a supercasino was likely to fuel problem gambling, might not produce as many local jobs as were hoped and could increase crime.

These fears are hardly new, so why had neither the Department for Culture, Media and Sport nor the casino advisory panel taken these factors into account?

In fact, the panel had looked at the risks but felt Manchester would monitor and tackle problem gambling well. The u-turn can instead be put down to greater risk aversion among Brown's cabinet than in Blair's government. As with the government's drinking policy, while Blair's thinking was that people could be trusted to run their own lives, now the mood music seems to be swinging back the other way.

But would a supercasino really pose more crime and problem gambling risks than smaller or medium sized complexes? Burnham argued it would. Having 1,250 unlimited stake and jackpot machines in a supercasino posed a much higher risk than smaller casinos. The eight medium casinos that are still going ahead in Leeds, Southampton, Great Yarmouth, Middlesbrough, Solihull, Hull, Milton Keynes and Newham, will only be allowed up to 150 slot machines, while those in Somerset, Dumfries and Galloway, Scarborough, Wolverhampton, Swansea, Luton, Torbay and East Lindsey are likely to be smaller still.

And things will not be so rosy for the areas awarded smaller casinos either. Burnham said in order to minimise the risk of fuelling problem gambling, the 16 medium and small casinos will have to close for at least six hours a day and will be prohibited from providing free drinks to gamblers. Credit cards will not be allowed. And if casinos fail to contribute enough to the gambling trust (which helps tackle problem gambling), the government will introduce a statutory levy.

Even before the decision to abandon a supercasino, the policy making process was far from flawless. The choice of Manchester flew in the face of the views of a number of experts including the North-west Development Agency, which recommended Blackpool as the preferred location.

This was largely due to the narrow terms of reference the culture department set the casino advisory panel. The government wanted to be able to get as accurate an assessment of the supercasino's local effect, so the panel's primary remit was to ensure that locations "provided the best possible test of social impact". This meant that any supercasino proposals where people would travel some distance to go there would be discounted. It tipped the balance in favour of Manchester.

Olive branches
The question now is whether the government can proffer enough olive branches to appease the two cities. Manchester city council is still considering legal action over the decision. The government has established a ministerial panel, chaired by Blears, to work out suitable compensation. Some £300m of regeneration money has already been offered to Blackpool, which will go on new schools and better transport.

But many of the measures announced as compensation are not new. Manchester's Sportcity complex already exists. Similarly, the government was already looking favourably on proposals by councils in Greater Manchester for a multi-area agreement to boost jobs, transport, investment and housing.

And Steven Broomhead, chief executive of the North -west Regional Development Agency said despite the extra £60m the development agency is investing in Blackpool this year on a variety of regeneration schemes, it will not produce the economic impact the supercasino would have.

Clearly, whatever funding the government offers will not deliver the thousands of jobs or the private sector investment the supercasino promised the two cities. "The government is not capable of completely compensating either us or Manchester for the potential amount of money a supercasino might have produced for regeneration," says George Marsden, the MP for Blackpool. "We do not need money per se - what we need is logistical support and pump priming money that may provide a new economic regenerator," he adds.