Michael Burton 06 March 2018

Is there a new option for unlocking council assets?

Is there a new option for unlocking council assets? image

A new property model could deliver up to £6bn of investment in construction if adopted by all councils across England, a report has argued.

The study is based on 21 English local authorities already using the model and on course to generate £374m of investment in construction. It says that if adopted across all councils in England, 36,000 new homes and 104,000 jobs could also be created.

Called ‘Putting relationships first to unlock property value within the public sector’, the study says its model of ‘relational partnering’ is offering the public sector ‘the ability to “in-source” additional skills and resources to enhance their capacity and obtain greater value from their property estates.’

Commissioned by the 21-strong group of authorities using the model which calls itself the Council Consortium Group, in partnership with Public Sector Plc, the study calls its model ‘the fourth option’, the other three being in-house, outsourcing or status quo. It coincides with the recent collapse of Carillion and questions about the wisdom of outsourcing public services.

Richard Smith, chairman of the commission, said: ‘Relational Partnering is a model that, through the principles of insourcing, allows local authorities to access additional skills and expertise from the private sector.

‘This approach ensures that local authorities can always maintain oversight and do not have to outsource work to third parties.

‘As we have seen recently, outsourcing has its limitations. It is better that the private sector introduce additional resources to strengthen the public sector’s capacity to undertake projects rather than to outsource them.

This approach has and continues to be at the very heart of relational partnering.

‘It is a model that, through the principles of in-sourcing, allows local authorities to access additional skills and expertise from the private sector.’

As part of the study an independent economics consultancy Regeneris concluded that the completed and ongoing projects from the 21 councils currently using relational partnering could deliver £374m of investment in construction, the building of an additional 2,300 homes, and supporting up to 6,270 long term jobs and 3,000 short term construction jobs.

If the model were used across 353 councils in England, Regeneris estimated that there could be up to £6bn of investment in construction, with as many as 38,000 additional homes being built. It could also support up to 104,800 long term jobs and 50,600 short term construction jobs.

The report makes 11 recommendations:

• Councils should investigate whether ‘relational partnering’ (RP) can help unlock value within their property assets and ensure it is the fourth option, to be considered as part of their best value option appraisal.

• Councils should consider how an RP strategy could be utilised within a local authority’s overall property strategy.

• Councils should communicate the additional value they are generating from their property assets each year, including social benefits as well as financial ones.

• Councils should encourage greater transparency and accountability by creating a direct link between the value created from their property assets, their annual budgeting process and preservation of front-line services.

• Councils should recognise their role in solving the UK’s housing crisis by building additional houses on council owned land.

• Modern methods of construction, including offsite manufacturing, should be prioritised given the speed of delivery, lifetime ownership cost and associated environmental benefits.

• Councils’ code of corporate governance – and the joint framework for ‘Delivering Good Governance in Local Governance’, prepared by CIPFA/SOLACE – should include carrying out option appraisals and best value analysis, including RP.

• Councils should challenge their existing operating cultures and consider whether they need to change from a cautious, risk averse approach to a more open, collaborate and proactive relationship with their partners.

• Local government should be given greater freedom to invest and borrow to invest in property assets under the jurisdiction of their own councils.

• Local government pension funds should invest in local assets that meet their target returns, but can also have a beneficial social impact in their members’ communities.

• All public sector bodies should consider whether RP can help unlock value within their property assets.

This feature first appeared in Public Property magazine. Please email l.sharman@hgluk.com to sign up for your own free quarterly copy.

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