State property savings could cut deficit by £4.3bn

17 June 2010

The Government could save an extra £4.3bn within five years, through a radical new approach to its property management, a new report claims.

The savings, equivalent to a £1.42bn reduction in the annual budget deficit within five years, is more than eight times the £170m of annual savings announced by the Government for this financial year. The research, entitled Property Efficiency Solutions, was conducted by specialist economics consultancy SQW, and examines the efficiencies that could be achieved if current best practice in public and private sector property management were to be applied across the government estate
The findings are likely to be welcome news for Government ministers as they plot further manoeuvres in their war on government waste in the Budget on 22 June. The report suggests that property efficiencies could provide answers for ministers as they search for ways to cut the ballooning deficit without hurting frontline services.
The research was commissioned by property outsourcing specialists Telereal Trillium, and uses a model based on authoritative, independent assessments of the efficiencies achieved by Telereal Trillium in its management of the DWP, DVLA and Aviva estates.
At present, the UK civil service occupies some 7.7m sq m of office space. However, despite the previous government’s ambitions for reducing the running costs of the civil office estate by £1bn in annual savings, progress so far has been limited.
The SQW report for Telereal Trillium finds that substantial savings are achievable through deeper and accelerated implementation of best practice approaches to civil estate management – 40 per cent higher per year than estimated by the last government. The report projects that cumulative savings of £4.3bn could be achieved within five years, rising to more than £12bn by 2020.
The savings identified in the report relate only to the civil service estate, which accounts for 10 percent of the overall £25bn annual running costs of the entire public sector property portfolio.
Yet further savings could be achieved if government plans to scrap quangos and scale back government programmes result in a reduction in the number of Whitehall jobs. If the posts are located in London, then the additional property-related savings could amount to around £50m per annum for every 10,000 posts eliminated.
Launching the report, lead researcher Steve Lucas from SQW said: “The Government faces a massive challenge in seeking to get the deficit under control without harming frontline services. We have already seen a clear public commitment to cutting government waste. These findings prove that big savings are possible simply by using property more efficiently and accelerating the process of reform. The emergency budget on 22 June provides an opportunity for the new Government to set much more ambitious goals than those adopted by the previous administration. This research enables them to be confident that those goals are achievable.”
Ian Ellis, Executive Chairman of Telereal Trillium said: “Reducing the deficit is a formidable task for the Government. The focus on reducing waste is welcome, but the challenge of turning rhetoric into reality cannot be underestimated. The public sector can no longer afford to adopt a sub-optimum approach to the management of its property assets. Telereal Trillium is committed to playing its part in addressing these challenges, and this research demonstrates that commitment. We have successfully delivered cost savings and improved working conditions over many years, and we believe that that experience can provide valuable lessons for policy makers as they seek to get spending under control.”
A copy of the report can be downloaded from
http://www.telerealtrillium.com/uploads/fileGallery/Property%20Efficiency%20Solutions%20Report[1].pdf