Government estate costs cut by more than £170m in past year, new figures show

Total running costs fell by over 7% in 2015-16, Cabinet Office says, as it readies launch of "New Property Model" to charge departments rent on their holdings

By Matt Foster

02 Feb 2017

More than £170m was sheared from the cost of running the government estate over the past year, according to the latest figures from the Cabinet Office, which have been published ahead of a major overhaul of the way departments manage their property holdings.

The new State the Estate report, published on Thursday by minister Ben Gummer, shows that the total cost of running the central estate – which includes sites used by government departments, executive agencies and the courts service, but excludes local government, NHS and military land – fell by over 7% in 2015-16.

Total running costs fell from £2.7bn last year to £2.55bn this year, the figures show, and the central estate is now 3.7% smaller than at the same point last year. The report says the estate now totals 8m square metres in size, down from 8.3sq m in 2014-15.

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The report comes ahead of the launch of a new "commercially driven" approach to government property and land management, first unveiled at the 2015 Budget

Under the so-called "New Property Model", the newly-established Government Property Agency will centralise ownership of a large chunk of government property and land and then charge commercial rents to departments for their use, in a bid to incentivise them to dispose of unused space.

According to the new report, the GPA will be "going live in 2017", and will transfer offices, warehouses, depots and non-specialist parts of the government science estate to the balance sheet of the GPA, "which will provide a full commercial portfolio management service, working for departments which will act as ‘intelligent clients’".

But the report makes clear that departments will retain control of what are being dubbed "specialist assets", including courts and prisons.

"These will remain on the balance sheet of departments, with GPU and the GPA providing support and challenge to ensure they receive effective commercial portfolio management," it says.

"This approach is based on ‘Expert Partnering’ but with a stronger commercial emphasis."

As well as shedding light on the overall fall in costs of the government estate, Thursday's State of the Estate report also shows by how much individual departments have reduced their overall footprint in the past year. 

The Ministry of Justice slashed its estate size by 108,667 sq m in the past year, representing a 7% cut on 2014-15 levels. The Ministry of Defence also made a sizeable reduction in its total holding area, which reduced by 30,390 sq m, a 9% cut. 

Some organisations have also completely vacated their entire owned holdings over the past year, the document reveals, with the Charity Commission, the Export Credit Guarantee Department and National Savings and Investment now renting space in other government buildings.

The Department for Work and Pensions, which oversees a sprawling network of Jobcentres, remains the government ministry with the largest estate, holding some 1.5 million sq m. The Ministry of Justice ranks second, with 1.4 million sq m, the vast majority of which is accounted for by HM Courts and Tribunals Service. 

That is followed by the now-defunct Department for Business Innovation and Skills, which held 1.3m sq m – largely thanks to the research councils – when the figures were collected last March, and HM Revenue and Customs, which ranks as the fourth-largest department by estate size with just under 1m sq m.

Launching the report, Gummer, the minister for the Cabinet Office, said the £176m fall in the cost of the estate represented "a considerable reduction".

"Our drive to modernise and improve the running of the government estate is delivering a myriad of benefits: reducing cost to the taxpayer; giving civil servants the flexible and modern workspace they need to be more innovative and creative to serve the public better; and releasing much-needed land for alternative use, such as housing."

The government's wider estate strategy – which aims to see three-quarters of all governments offices closed by 2023 – has not been without controversy, however.

HMRC's plans to drastically shrink its 170-strong office network and move to just 13 regional site was recently questioned by the public spending watchdog, while the DWP's bid to close more than 130 Jobcentre and back office sites came under fire from MPs in the Commons on Monday.

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