The government's plans to reform how its UK-wide property estate is managed and make billions of savings are being hampered by out-of-date IT systems, poor data collection and a lack of ambition, MPs have warned.
The Public Accounts Committee said the government’s plan for a network of government offices hubs across the UK seems to be “in disarray” due to the failure to replace old technology, a lack of understanding of the reduction in office use post-pandemic, and rental market fluctuation.
The committee also raised concerns about government’s plans to raise £2bn through a property sell-off and reduced operating costs across the property estate, questioning if the £1.5bn in building sales ambitions could be achieved and, in contrast, calling the £500m operational savings proposal too unambitious.
MPs ‘sceptical’ over hubs plan
The Government Hubs programme is relocating civil servants from small offices into up to 50 large, modern government hubs located in cities across the United Kingdom.
But MPs said they are “sceptical” whether the hubs scheme still represents good value for money given the decreased office working since the pandemic and the long leases the government has locked itself into.
Since the pandemic, office use has decreased, with more civil servants taking advantage of hybrid working opportunities. Based on limited data, the Government Property Agency has calculated that there has been at least a 25% reduction in office attendance.
MPs warned it is “therefore possible that fewer hubs, or smaller hubs, will now be required” but the government “risks being locked into long-term, expensive leases”.
Giving HM Revenue and Customs as an example, the committee said twelve new hubs are locked into 25-year unbreakable leases at higher than current market rents.
“This means that six large hubs are locked into much higher rents than the current market but the capital values for the leases have also declined,” the report said.
“HMRC is now trying to sub-let spaces at a rent which is higher than the market. We warned HMRC about this practice.”
Sir Geoffrey Clifton-Brown, deputy chair of the Public Accounts Committee, said the plan for a network of government office hubs across the UK “appears to be in some disarray, with radical shifts in office space use and rental values”, adding that the Cabinet Office “simply hasn’t got enough grip on the facts on the ground to adapt”.
A government spokesperson said: "We are regularly able to agree leases at below market rates, allowing us to invest in new hubs all across the country which consolidate staff in a smaller number of buildings and will enable us to close 130 offices by 2030.
“This saves the taxpayer millions of pounds while also allowing us to move 22,000 civil service roles out of London and into communities.”
The Government Hubs programme has saved over £170m per year through building closures in London alone, the Cabinet Office added.
Government 'lacks data or IT system necessary to oversee and manage government estate’
The failure to replace ageing IT is key to the issues with the government property portfolio, the committee said.
The Cabinet Office expanded its data collection in 2020, shifting from only gathering data on the civil estate (e.g. offices and warehouses,) to gathering data on all government property (e.g. schools and hospitals).
But the 17-year-old government property database, ePIMS, is unable to accommodate the additional data and so it has to be updated manually until a new system is up and running.
The Cabinet Office has attempted to update the property database, but its efforts have been hampered by a “series of unnecessary delays and setbacks”, the committee said.
The Cabinet Office announced its new property database in 2018, with an anticipated launch date in 2021. However, contractor Landmark Solution failed to complete the project despite being given a year extension, blaming staff turnover, and the Cabinet Office terminated the contract in July this year.
The government has not yet appointed a new contractor and PAC said the Cabinet Office could not say when the new system will be up and running or how much it will cost.
MPs said the IT issues, combined with the limited data on office usage post-pandemic, means the government “does not have the data or IT system necessary to oversee and manage the government estate”.
Clifton-Brown said the stalled £1m IT upgrade is hampering savings reform across the property portfolio: “The plague of ageing, inadequate data systems strikes again, this time at the heart of government’s £158bn property estate."
‘Don’t repeat property sell-off failures’, PAC warns
The Cabinet Office announced plans in August to sell off £1.5bn worth of government buildings in London over the next three years, as part of plans to raise £2bn from property sales and other efficiency savings.
But MPs said it is “unclear” how the government will meet its target for property disposals as the department has failed to publish detailed plans.
They said previous programmes, such as the 2018-2022 Government Estate Strategy, have “struggled”, with many departments falling significantly behind their targets. The committee called on the Cabinet Office to ensure that departments with the largest land holdings fully participate in the disposals programme this time around.
The Cabinet Office said the previous strategy had “helped reduce the cost of the public estate and released more than £5bn of public funds, as well as saving an additional £1.5bn of taxpayers’ money through reductions in running costs”.
PAC also warned that recent market turbulence may negatively impact the programme but said Cabinet Office officials had reassured them there will no property fire sale.
‘Lack of ambition’ in plan to reduce operating costs
As part of the £2bn savings plan, the Cabinet Office said it would save £500m annually through its new property strategy, a 2% reduction.
PAC said this is “not sufficiently ambitious”, adding that the Cabinet Office had not been able to say if the government’s current operating cost-to-property value ratio is a good one.
In 2020–2021, the operating cost for central government property was £22bn compared to the valuation total of £158bn, around 14% of the value which the MPs said is “higher than we expect”.
However, this includes rent for leasehold property, as well as maintenance costs and other expenses.
“We couldn’t get a precise figure for managing this property because the cost of leases and facilities management were included in that figure,” Clifton-Brown said.
“We recommend that these items are separated out so that we can see what the true management cost is but on the face of it, 13% of the property value looks to be high.”
The committee said Cabinet Office officials have told them the £500m target “was a cautious one and more savings may be found”. This could include savings from the £8bn per year spent on facilities management – the Cabinet Office has recently issued new requirements for facilities management contracts which it expects to lead to improved contracts and better value for money, PAC said.
A government spokesperson said: "Our plans will save the taxpayer £2bn over the next three years through selling buildings we don't need and bearing down on running costs."
MPs on the Public Administration and Constitutional Affairs Committee are also looking into the government’s property strategy, having launched an inquiry earlier this year.