Budget 2009: Treasury to raise money through government property sell-off

Chancellor Alistair Darling said in his Budget 2009 that it would make an extra £9bn of efficiency savings by 2013/2014, and had made £26.5bn of efficiency savings so far.

His comments follow the publication of the ‘Operational Efficiency Programme’ report yesterday that detailed the £15bn ‘efficiency savings’ that could be made from Whitehall departments to help pay for the government’s hefty spending plans.

Darling said the savings will help the government to continue to invest in the ‘future of this country’.

The report was prepared by five external advisers Martin Read, Martin Jay, Gerry Grimstone, Sir Michael Bichard and Lord Carter of Coles who assessed the government’s property estate.

It said savings could come from ‘back office operations and IT, collaborative procurement, asset management and sales, property and local incentives and empowerment’.

Lord Carter of Coles said he found that up to £1.5bn of annual running cost efficiencies could be achieved from the government’s property estate by 2013-14, rising to £5bn a year over a ten year period.

Furthermore, he said £20bn of proceeds from property sales, excluding council housing, may be possible over a ten year period. To achieve this, he has recommended a series of specific incentives and mechanisms, including the creation of a small, strategic central property function to ‘drive the efficiency and rationalisation agenda across the public sector’.

The study also laid out plans to privatise the Royal Mint and the possibility of selling assets including Queen Elizabeth II Conference Centre before 2012. Any disposal of government property would not include the sale of council houses.

The advisers’ assessment is that around £6bn of these savings will be delivered as part of plans in the current spending review period, contributing to the government’s overall £35bn efficiency target, with the rest being delivered by the end of the next spending period.

Martin Laws, the lead property consulting partner at Deloitte, said: ‘The actual delivery of this scale of savings will require a fundamental change in the way that property, and associated running costs, are planned, resourced, managed and delivered in the public sector. It will also require a shift in governance, mind-set, skills and culture, not just in policy and process, around how the public sector occupies property.

‘Previous government initiatives, such as Gershon and Lyons, which sought to rationalise the public sector estate have secured the easy wins. The hidden implication behind these, the Carter recommendations, is that previous no-go areas such as ambitious cross-departmental office sharing will become a reality.

‘The winner will be the public purse. But inevitably the property industry will be the loser as the public sector exits a significant number of properties.’