Headlines: June 19th, 2009

Capital funding has become scarce and councils need to adopt the private sector approach and think about what value they can realise from their assets. This advice comes from the Audit Commission.

The Commission estimates that councils are sitting on some £250b of property including offices, libraries, schools and leisure centres. This book value has nearly doubled in the last decade and its market value is probably

Some councils are on top of their property portfolios, but only one in 14 councils is an exemplary manager of its assets. In 2007/08, while 65 improved, the performance of 46 councils on asset management deteriorated. Councils made net capital investment in property of over £10 billion in 2007/08. In 2000, they invested about £200 million in acquiring or refurbishing offices. This rose to nearly £800 million in 2007/08

But progress over nine years on managing their estates effectively has been modest. A third of councils do not yet share offices or facilities with other local public bodies and, overall, they have spent £1.2 billion more on buying or refurbishing their offices than they have raked in from sales.

The Commission wants better incentives for councils to rationalise their estates and relaxation of rules restricting use of the proceeds of asset sales.

The Commission recommends that councils collect data on size, use, occupancy, condition, running costs and keep abreast of open market values of any assets they and their partners own. This would put them in a better position to review their property holdings and reduce them where possible by disposal, change of use, re-organisation and sharing.