4.17 The workstrand has estimated the potential benefits in terms of disposal receipts and running costs by using the limited available data and drawing on evidence and assessments from property stakeholders regarding the potential savings achievable for different parts of the estate.
4.18 The analysis is also supported by specific studies. For example, a study undertaken in partnership with NHS London indicated that there was significant potential for efficiencies in the health estate although this workstrand acknowledges the significant challenge to achieving them (see Box 4.A). This analysis could be developed further and should not be used to provide a final assessment of the efficiency of particular trusts.
Box 4.A: Study of the use of NHS property in London The property strand of the OEP worked in partnership with NHS London to examine NHS property use in London focusing mainly on NHS acute trusts. The study identified the main drivers of space usage within acute trusts and then developed a benchmarking model to calculate how much space an acute trust requires given the level and type of activity that it undertakes. This model enabled comparisons to be made between trusts with a similar profile. At the same time the model controlled for the quality of healthcare provision by including only those trusts that had been rated 'good' or 'excellent' by the Healthcare Commission in relation to quality of service. It also made an adjustment for the Government's current policy of raising service quality through the provision of single-bedded wards. In this way the methodology compares trusts with what is currently being achieved by other comparable trusts offering at least a 'good' quality of care. By applying this methodology to all good and excellent rated trusts across London, the study concluded that, on average, these trusts could deliver their current level of activity and quality with about 18 per cent less space. |
4.19 The recommendations this workstrand makes should produce substantial savings as follows:
• around a 30 per cent reduction in central government office accommodation through the reduction of space occupancy from 14.5 to 10 square metres or better per FTE could be achieved by adopting best practice (including desk sharing). This could reduce running costs for this part of the estate by £1 billion a year;
• for the remainder of the estate, property assets (excluding council housing) could be reduced by around 20 per cent over an initial 10 year period, reducing running costs (including rent from leasehold buildings) by between £2 billion and £4 billion a year;
• for the retained estate, running costs could be reduced by around £0.5 billion a year. A further £0.5 billion a year could be saved from collaborative procurement of facilities management (FM), which is included in the savings figures in Chapter 2;
• for the whole of the public sector freehold estate (excluding council housing) £20 billion in disposal receipts over an initial 10 year period;14 and
• the reduction of the estate would also bring significant improvements to government's performance on carbon emissions reduction, including making a large contribution to the achievement of the government's carbon emissions targets for the central office estate.15
4.20 In total, this would mean:
• compared to an estimated 2007-08 running costs of approximately £25 billion, savings of up to £1.5 billion a year plus a further £0.5 billion from collaborative procurement of FM by 2013-14. This rises to a total of around £5 billion by the end of a 10 year period (excluding energy efficiency savings); and
• proceeds from sales in the region of £20 billion (excluding council housing) over an initial 10 year period.
4.21 In order to realise these savings, departments are likely to need to invest in their estate. The majority can be funded from efficiency savings, but initially departments may need to prioritise significant up-front investment.
4.22 Potential rationalisations and savings will not be spread equally across the public sector and organisations' previous performance needs to be taken into account. Some organisations have already taken significant steps to rationalise their estate and its running costs. Following Budget
2009 these calculations will be refined in order to create tailored and intelligent targets to inform new departmental spending plans (see paragraph 4.54).
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14 The 2004 Spending Review established a target endorsed by Sir Michael Lyons, to dispose of £30 billion of assets by 2010, with £24 billion to come from local government, and the remaining £6 billion from central government. Disposals under this target included property, as well as other fixed assets and council housing, which made up a significant share. The latter two are excluded from the OEP property strand's estimate for disposals. The OEP has calculated an estimated market value for use as a basis for estimated disposal receipts from the estate, rather than using the book value.
15 The government's targets for Sustainable Operations on the Government Estate (SOGE) were launched by the Prime Minister in June 2006. For more details see www.defra.gov.uk