4.6 Obtaining and compiling data about the size of the total estate owned and used by the public sector is challenging. From limited available data, and drawing on a number of different sources, the workstrand has established the following picture.1
4.7 According to the Office of National Statistics, the public sector's property assets have a book value of £370 billion.2 This represents about £6,000 worth of assets for every UK resident.3 The UK's local government property (including council housing) accounts for two thirds of this total - around £240 billion - and central government and public corporations for the remaining one third - £130 billion.4
4.8 This asset base is growing. Public Sector Net Investment (the resources invested in the creation of new capital assets, including property) was about £30 billion for 2007-08.5
4.9 From the 2007 National Asset Register, which itemises all central government freehold assets with a book value of over £1 million, the sectors with the largest property holdings are health, with around £35 billion,6and defence with around £18 billion.7
4.10 Local government's estate is made up of a diverse portfolio including schools, housing, offices and leisure facilities. Unlike other parts of the public estate, local authorities (including counties, metropolitan boroughs and districts) are partly funded by central government and
partly from council tax revenue. They are also able to raise capital through borrowing, subject to affordability as set out in the prudential code.8
4.11 The book value of property does not give a good indication of the market value. For example, the net book value of council housing in England is around £100 billion, while the current market value is estimated to be over twice as much.9 By contrast, for operational property assets such as hospitals or courts, the net book value is often much higher than their estimated market value.10
4.12 In order to assess the potential size of disposal receipts, this workstrand has made a conservative estimate of the market value of public sector property. Excluding council housing, and taking account of current property market conditions, the potential market value of the estate is estimated to be in the region of £100 billion. This figure has been used as the basis for estimating the level of receipts achievable through property disposals.
4.13 The public sector estate has estimated annual running costs of more than £25 billion11 - equivalent to five per cent of total public sector current expenditure.12 This includes the cost of running the freehold estate as well as leasehold and Private Finance Initiative (PFI) property.
4.14 In considering efficiency, an important measure is density of occupation or use. For the public sector, reliable information is available only for the central government office estate, where almost 14.5 square metres are used per full-time equivalent (FTE) employee, but good practice in public and private sector organisations shows that this can be reduced by a third.13 At present comparable information is not readily available for other parts of the public sector estate.
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1 Reliable and consistent data on the property assets owned and used by the public sector is difficult to obtain because there is no one comprehensive, detailed and authoritative record. Organisations' accounts provide information on assets held, and some bodies also maintain estate databases, but given the vast number of public sector organisations, it was not feasible to compile a complete picture from these.
2 United Kingdom National Accounts: The Blue Book, Office of National Statistics, 2008.
3 National Statistics, www.statistics.gov.uk
4 United Kingdom National Accounts: The Blue Book, Office of National Statistics, 2008.
5 See 2008 Pre-Budget Report.
6 This includes the Department of Health, National Health Service, Foundation Trusts and Primary Care Trusts in England.
7 National Asset Register, HM Government, 2007.
8 The Prudential Code for Capital Finance in Local Authorities has been developed by the Chartered Institute for Public Finance and Accounting (CIPFA). More information is available at www.cipfa.org.uk
9 For net book value see: Local Government Financial Statistics England, No18, Communities and Local Government, 2008. A potential market value of around £260 billion is derived using 2006 English House Conditions Survey valuations (which are the most recent available), based on sale of each individual property on the contemporary housing market (vacant possession at contemporary market prices), which are applied to the around 2 million properties that make up English council housing stock. The average house price reduction of around 10 per cent since 2006 (Source: average Halifax and Nationwide house price growth rates in 2006 and 1st quarter 2009) suggests a current market value in the region of £234 billion.
10 The net book value of specialised property assets is normally based on Depreciated Replacement Cost, the estimated cost of replacing the functions of the property asset in queSenior and strategic managementstion and providing the same service potential, adjusted to take account of obsolescence. The estimated market value is normally based on their alternative use.
11 OEP estimate based on a number of sources. Running costs normally include rent, rates, utilities and Facilities Management (FM) costs. For PFI buildings, these costs are included in a 'unitary charge', which includes payments to cover the cost of capital expenditure incurred in building the property (and associated financing costs), the cost of maintaining the building and the facilities management services costs.
12 See 2008 Pre-Budget Report.
13 Based on information from OGC, various private sector organisations and professional bodies including the Royal Institution of Chartered Surveyors (RICS) and the Association of Chief Estates Surveyors and Property Managers in the Public Sector (ACES).