2.7 In 2004 the O'Donnell review recommended that the Inland Revenue and HM Customs & Excise should merge, to improve effectiveness, customer service and compliance costs, and achieve efficiencies through economies of scale. They merged in 2005. Our interviews with the Department and Mapeley confirmed that the mechanics of the estates merger went smoothly. The contract's existence meant that the Department had considerable estates information available, and it already managed the contract as a single entity.
2.8 Until the merger in 2005, the two departments managed their estates plans separately. From 2003 uncertainty over a possible merger hindered development of combined estate plans, and following the merger in 2005 there was further delay as the Department established its structure and responsibilities. Under the Government-wide efficiency agenda, the Department has been expected to make efficiency savings by reducing staff numbers and relocating posts out of London and the South East. It currently has a target to reduce total expenditure by five per cent a year to 2011-12. The contract's vacation allowances have enabled the Department to respond to these targets and reduce the size of its estate. The contract has also facilitated other changes, such as the creation of the Revenue and Customs Prosecution Office (2005), and the Serious Organised Crime Agency (2006). These organisations and the Department confirmed that the contract, along with protocols developed by the Office of Government Commerce, enabled reasonably easy transfers.
2.9 In 2007 the Department developed its estates plans to March 2012 under its Workforce Change and Estates Consolidation Programmes. The Workforce Change Programme involved business areas identifying their optimal staffing and accommodation needs to achieve their targets and transformation, resulting in buildings being earmarked for closure. The Estates Consolidation Programme is the operational programme to accommodate staff in fewer buildings through closures identified by the Workforce Change Programme.
2.10 As part of the Estates Consolidation Programme, the Department plans to use space more efficiently. The Office of Government Commerce's High Performing Property initiative recommends an average space allocation of 10 to 12 square metres per person.8 The NAO report Improving the efficiency of central government office property9 found that the Department's space utilisation in 2005-06 was 16 square metres per person - at the lower end of the range of 13 to 22 square metres per person across 16 departments. The Department initially planned to improve space utilisation to 12 square metres per person by 2012, but in March 2009 revised its estimate to 13.8 square metres following reductions in the space it plans to vacate.
2.11 Figure 8 shows the Department's actual and planned use of vacation allowances to 2011-12. Prior to the launch of the Estates Consolidation Programme in 2007, it had vacated 90,000 square metres using 34 per cent of available cumulative allowances of 264,000 square metres. Due to a lack of consistent data, we have been unable to calculate actual savings achieved back to 2001, but our modelling, based on an average cost per square metre, indicates savings of £23 million out of a possible £75 million. By March 2009 it had vacated 181,000 square metres, using 51 per cent of available cumulative allowances of 356,000 square metres, achieving savings of £52 million out of a possible £151 million.10 Savings achieved are proportionally lower than the allowances used because of the timing of vacations: vacating buildings at the earliest opportunity would have saved the cost of that space over future years.
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8 The Office of Government Commerce launched the initiative in 2006 to improve efficiency of the civil estate. It sets good practice guidelines for achieving efficiency, and milestones for departments.
9 HC 8 Session 2007-08.
10 Lost savings are higher than the £72 million in Figure 4. The contract model assumed that the Department would use only some allowances. The modelled £151 million is based on using all vacation allowances.