Later this year, ownership of much of the government estate will be passed to a new Government Property Agency – with departments charged market-level rent for their offices in a bid to drive down costs. Mark Leftly listens in as the GPA's top team explains why the new approach to the government's estate is about more than just saving money
The usually bubbly Liz Peace is irritated.
“The Public Accounts Committee is saying ‘Oh my God, it’s another quango,” she sighs. “We’re not setting up a huge new bureaucracy, we’re absorbing into the Government Property Agency a lot of functions that already exist in departments… pulling in various other property professionals from around government.
“To my mind, this is about a rationalisation rather than a quangoisation. It’s all about effective, efficient ways of managing the estate.”
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Peace, who chairs the GPA, is addressing around 100 property experts from local and central government in the Queen Elizabeth II Centre in Westminster. It’s the start of February and the GPA was only set up in shadow form a few days earlier – yet already it is drawing criticism from MPs.
In a little-noticed PAC hearing on January 25, the committee's chair, Meg Hillier, and senior Conservative backbencher Kwasi Kwarteng took aim at Sherin Aminossehe, executive director at the similarly-named Government Property Unit.
While being grilled on the future of HM Revenue & Customs’ property portfolio, Aminossehe mentioned how the GPA was being developed to have “central ownership and management of a large number” of government offices. She explained the GPA is to be “an executive agency of government”.
Eyes narrowed, Hillier shot back: “A new quango.”
Kwarteng was even more suspicious: “That seems to be quite a serious development. You are suggesting that there is a new body that will hold assets… It seems to me a risk when we have civil servants playing the property market.”
Indeed, the GPA – which had been announced, albeit not formally named, in the 2015 Budget – is a significant development for the civil service. Ownership of much of the government estate will be passed to the new body and then departments will be charged market-level rent for the offices and buildings they occupy.
This is part of a much-trumpeted "New Property Model", using commercial incentives to help reduce the number of costly buildings occupied by departments from 800 to fewer than 200 by 2023.
The GPA will incorporate a number of programmes, most notably the "Government Hubs" scheme, which bring multiple departments under one roof in regions across the country. For example, the government recently announced a hub for Canary Wharf, moving 5,700 officials away from 12 departments in their traditional home of Whitehall to east London.
John Manzoni, the chief executive of the civil service, says these hubs “are about modern workplace design, state-of-the-art mobile IT, and, above all, will encourage people to work productively from a variety of locations, rather than being tied to the same desk”.
"Not just about funky sofas"
The government’s renewed focus on property efficiency has produced some startling results in recent years. Last week’s State of the Estate report, produced by the Cabinet Office, revealed that the government had reduced its property footprint by more than 300,000 sqm in the last financial year.
That’s the spatial equivalent of about seven Wembley stadiums – enough to reduce running costs by £176m. The sale of prestigious properties that were nevertheless unsuited for modern working, such as Admirality Arch and the Old War Office, brought in £1bn.
"If staff are working in a way that suits them you’re going to get 20% more productivity out of them" – GPA chief executive Ian Playford
And for all the talk of how the private sector is more efficient that the state, only 1.4% of the central government estate comprises vacant space. The private sector average is more than six times higher, at nearly 9%.
Filling in for absent Cabinet Office minister Ben Gummer, Chris Skidmore, the minister for the constitution, told the Government Property 2017 conference: “Civil servants deserve to work in buildings that are modern, well-connected and flexible… [The GPA] will deliver further savings by providing professional asset management services across the government portfolio.
“It has been established in order to take a more commercial approach to leases and will compete with the best of the private sector.”
But Peace and the GPA’s interim chief executive Ian Playford used the conference to try and calm fears that the hubs and the broader estate strategy will result in cost-cutting and cramming civil servants, shoulder-to-shoulder, into cheap buildings.
Playford was asked directly by one attendee whether the GPA’s central aim was to “save money, create value, or engineer service transformation".
Leaving aside the property industry’s typically impenetrable jargon, the suspicion was clear: government isn’t really bothered about where civil servants “deserve” to work; ministers only want to see spending cut after a financial crisis that wrecked the nation’s balance sheet.
Playford admitted there would be times when one factor outweighed the other, but insisted: “It is, of course, all three. The tricky part is getting the balance of those three things… Smart working is not just about funky sofas and collaborative space. If they [civil servants] are working in a way that suits them you’re going to get 20% more productivity out of them.”
“At the moment government is not a growth business” – GPA chair Liz Peace
Peace also conceded that improving public finances could not be dismissed, but argued that senior civil servants want to use the New Property Model to improve the working environments of their staff. “I would like to think that every permanent secretary wants the best value, most fit-for-purpose accommodation… Over my career I worked in some godawful places,” she told the conference.
“You might think what drove all this in the first place was the wish to find loads of stuff for disposal and, of course, the need to feed the housing market [through developing on surplus public sector land]. Well, there is an element of that of course. But one of our motivations is to reconcile the two.”
But Peace also reminded her audience that officials have to be realistic, that “at the moment government is not a growth business”. She added: “We are doing the will of the government that we have, and that’s to manage effectively a smaller central government function.”
The dynamic duo has until the autumn to work out how to get better working conditions at a lower cost. The GPA will then go live, several months later than first envisaged.
"You’ve got have that positive client relationship"
Peace, the former chief executive of the British Property Federation and before that a 27-year veteran of the Ministry of Defence, got Playford in place late last year. A qualified chartered surveyor, he was previously the group property director at B&Q owner Kingfisher.
Playford moved to placate his audience by comparing the civil service to Kingfisher, arguing that his fellow executives would not let him come up with a money saving property strategy if it was going to stop them “selling paint”. “Whatever fancy property strategy you come up with. it needs to fit in with basic needs of that business,” he argued.
The GPA, which is co-sponsored by the Treasury and Cabinet Office, is piloting its ideas with a handful of departments while in this shadow form. What Playford is attempting is to centralise property expertise so that departments can focus on their core tasks, as well as “trying to breakdown the barriers that exist between departments and have capital employed in property for the broader central use of organisation – that’s the big change”.
As a result, the GPA will have a hotbed of property expertise to advise departments on how to meet their property needs within their budgets. “This organisation will give a broader platform for that depth and breadth of talent to be nurtured and deployed in more complex problems on the day-to-day running of the estate,” Playford argued.
“What we are doing is setting up a body which will be the equivalent to an asset management company,” said Peace, explaining that departments will now be able to focus on frontline services. “Which will relieve departments of the need to actually be asset managers themselves. When you think about it, that makes a huge amount of sense – you want departments of state to concentrate on the things they should be doing and we will take away the burden of providing them with effective accommodation.
“Whatever fancy property strategy you come up with. it needs to fit in with basic needs of that business" – Ian Playford
“Ian, in setting up the organisation, has been absolutely clear that there has to be a major focus on the requirements of the customer [the civil service]. The departments need to write their strategic plans, then they come to us and say 'this is what we need'. We might say ‘are you sure, is this the only way?’ But fundamentally, we’ve got to engage with the department, you’ve got have that positive client relationship.”
This advice is intended to help departments get the best lease terms and the flexible offices they need, while also hitting a new government target to reduce space per employee to eight sqm by March next year.
The target has become more onerous because the civil service easily hit an earlier aim of 10 sq m per official. Playford suggests this will not be as tough as it immediately sounds, given some departments have even reached six sq m. And, he adds, this doesn't mean officials will be packed into offices like sardines – rather that the average is reduced because many are working from home.
Playford also confirmed that NHS buildings, such as hospitals, will not be in the “scope” of the GPA. Putting these almost sacrosanct buildings under the remit of an organisation that will inevitably force closures through consolidation was never going to be acceptable politically.
However, Playford revealed that the Department of Health’s office portfolio is “under discussion”. Intriguingly, this comes at a time when the department’s Whitehall block, Richmond House, is likely to provide temporary accommodation for MPs while vital repair work is undertaken on the Houses of Parliament.
A further revelation is that the GPA could look at controlling parts of Whitehall’s property budgets. There is a belief among some real estate experts that a central body could best allocate and plan annual property spending across the estate.
Playford won't go this far, believing that managers on the ground need to be prepared to negotiate a tough deal with GPA to get the best possible estate. He says: “We could look at moving all the budgets across to GPA and then provide the solution, but what that takes out is the tension – the necessary tension – between the customer and the service provider and we want that in play, we want to be partners in getting to the right solution.”
However, he says there “are arguments” for small parts of estate budgets to be “ringfenced”. This would make sure that buildings are properly maintained throughout the year – often these sums are diverted to a department’s frontline services at the end of the year when budgets become tight.
“There’s work going on as we speak about we finesse our corporate finance structure, but it is not on the table to take whole budgets off departments,” adds Playford.
The delegates seemed satisfied that their working environments will, ultimately, improve once the GPA is allowed to formally get on with its task later this year, no doubt largely down to Playford and Peace’s straight talking and impressive CVs.
But a press release on efficiency savings the day after the conference will have reminded them just what ministers also expect, highlighting the government’s “relentless focus on efficiency”. Balancing the financial expectations of ministers and the workplace requirements of the civil service is going to be quite an act of skill.