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1 Page 1 of 7 LGIU Local Government Information Unit Independent Intelligent Information Building On Strong Foundations: A Framework for Local Authority Asset Management (LGIUandSTEER) 19/2/2008 Author: Alan Waters Reference No: PB 1752/08L This covers: England Overview The 2007 Comprehensive Spending Review included a requirement that each government department develop an asset management strategy. In addition to its own strategy, Communities and Local Government (CLG) were asked to produce an Asset Management Strategy for local government. One the basis that local authorities face different challenges and one size doesn t fit all, CLG have produced a Local Authority Asset Management Framework ( The Framework ) which explores the key factors that shape local authority asset management Local authority fixed assets, worth nearly 239bn, are the second most costly resource after staff for local authorities to manage. The report argues that effective asset management is central to delivering better outcomes for citizens, creating a sense of place and generating efficiency gains. Asset management should therefore underpin and contribute to the delivery of the local vision and priorities set out in the Sustainable Community Strategy, the Local Area Agreement and the Local Development Framework. The report provides guidance and an extensive reading list of good practice, including case studies from English local authorities who were consulted in drawing up The Framework. CLG have commissioned the Royal Institute of Chartered Surveyors (RICS) to produce a series of topic based local authority asset management pamphlets to reflect recent policy changes. The framework is designed for English local authorities and other organisations working at the local level and is of particular relevance to key decision makers in local government senior officers and elected members and asset management and property experts who would like to know more about the changing relationship between central and local government The report acknowledges that there are different and competing demands faced by local authorities in how they use their assets. This is the real challenge: to meet some tough efficiency targets, including disposals as well as help underpin strategies that will deliver better outcomes for citizens. The LGIU provides policy briefings and seminars on this issue and related themes around

2 Page 2 of 7 the government s improvement and efficiency agenda. Briefing in full Introduction to Local Authority Asset Management While acknowledging that there are numerous definitions of asset and property management, the Framework uses a definition from the Royal Institute of Chartered Surveyors (RICS) 2008 Public Sector Asset Management Guidelines: Strategic asset management is the activity that seeks to align the asset base with the organisation s corporate goals and objectives. It ensures that the land and buildings asset base of an organisation is optimally structured in the best corporate interest of the organisation concerned. Asset management creates challenges for both central and local government. Central government has acknowledged that local government is best placed to understand the needs of its citizens and the community and has provided a legislative framework the 2003 Local Government Act, the 2006 Local Government White Paper, and the 2007 Local Government and Public Involvement in Health Act that gives freedom and flexibility to local authorities. For local government whatever the size and nature of their asset holdings, they share similar challenges around modernising service delivery and getting the most from their resources; including optimising the alignment of the assets they hold as part of delivering priorities for themselves and their partners. The benefits of good asset management are both financial and non financial, with caveat that at times these benefits may conflict with each other : enhanced service delivery community empowerment cultural change sustainability e.g. reduction in carbon emissions strengthen compliance with the Disability Discrimination Act 2005 foster co-location and partnership working generate efficiency gains, capital receipts or an income stream improvement of the quality of the public realm Local authority asset data Excluding the value of local highways, in 2007 local authorities in England owned nearly 239 billion of fixed assets, the vast bulk of which, some 220 billion, are operational assets of which the largest (approximately 50%) is in council housing stock. The other main categories are: land and buildings for direct service delivery to the public (schools, public parks, elderly persons homes) assets that support service delivery (local authority administrative buildings, vehicle depots) transport assets (highways, car parks, municipal airports)

3 Page 3 of 7 There is an acknowledgement that local authorities have made significant progress in improving asset management, but perhaps predictably there is a need to narrow the gap between the best and worst authorities. The worst performing authorities in respect of asset management are commonly lacking in: corporate culture understanding among senior members and officers of the importance of strategic asset management leadership across the authority What does good look like? There is a four point process which outlines the steps a local authority needs to take to achieve an effective role for asset management: strengthen asset management processes within the local authority align assets with the other corporate objectives of the council implement an asset management plan which takes a strategic approach to: colocation with partners and stakeholders; the opportunities afforded by flexible working; the options for underused assets, financing new assets and maintaining and adapting existing assets review and monitor corporate management arrangements: conduct post implementation reviews of all capital projects which have been undertaken; review processes following the Comprehensive (Performance/Area Assessment); share learning with other organisations to achieve continuous improvement. Influencing and Shaping There are a range of high level policies that influence and will continue to shape local authority asset management. Devolution and creating a sense of place the devolutionary framework set out most recently in the Local Government White Paper and the 2007 Local Government and Public Involvement in Health Act a strong role in delivering the visions set out for the local area in the Sustainable Community Strategy, the Local Area Agreement, and the Local Development Framework the new Duty to Involve, which will become a statutory requirement on all Best Value authorities from 1 April 2009 Local government finance The key messages of the 2007 Comprehensive Spending Review and the financial settlement for local government are about delivering improved outcomes in a tight financial climate. There is a specific reference to the utilisation of under used assets and how they can contribute towards local authority targets for reducing running costs and generation of capital receipts. Sub National Review (SNR) of economic development Within the single regional strategies envisaged by the SNR, which will set the economic, social, spatial and environmental objectives for each region, reference is made to the use of

4 Page 4 of 7 local assets to inform and achieve local and sub regional outcomes as set out in the integrated regional strategy'. Multi Area Agreements (MAAs) will have a particular focus on economic development considering infrastructure issues such as housing and transport. Cross government policies All central government departments are required to develop a strategic asset management strategy. These will be published sometime in early 2008 and will contain information on specific local assets. The Housing Green Paper explores how local authorities might use their assets to form joint venture vehicles with the private sector to deliver more housing and increase regeneration. There will be guidance published in due course. Planning The Planning Bill currently before Parliament and due to come into effect in April 2009 will enable local planning authorities to charge a Community infrastructure Levy (CIL) on new developments to unlock planned housing growth. The report recommends that preliminary discussions with local partners will be a useful preparation for CIL. Other roles for asset management Asset management by local authorities and their partners has a role to play in delivering: healthy sustainable communities The Children s Plan 2005 Disability Discrimination Act neighbourhood policing fire and rescue services adapting to climate change positive activities for young people as part of a ten year strategy community sports facilities joint waste authorities Opportunities Partnership working, co-location and shared services The report asserts that the changed relationship between central and local government gives greater freedom to local authorities to use their resources to get the best results for their residents. These greater freedoms are framed within the context of creation of Local Strategic Partnerships (LSPs), the new Performance Framework and Local Area Agreements. It is therefore "essential that all public sector bodies extend partnership working to the management of their assets". Examples of this approach given include the Joint Service Centre (JSC) PFI programme, set up in According to the report some 40 centres have been established in about 20 local authority areas. Also the co-location of health and social care facilities as a result of Primary Care Trusts (PCTs) and Local Authorities working together. Reference is also made to the Local Improvement Finance Trusts (LIFT) programme where joint venture companies build and maintain buildings and then lease them to PCTs.

5 Page 5 of 7 Community ownership of assets The report summarises the key principles of the Quirk Review - Making Assets Work - published in May 2007: the transfer of public assets to community management and ownership at less than best consideration is a legitimate option as part of a strategic approach to asset management where the benefits can be shown to outweigh the costs, there are no substantive impediments to such asset transfers. The Government having accepted Quirk s recommendations refers to its implementation plan, Opening the Transfer Window. This sets out how local authorities and their statutory and third sector partners can deliver on the Quirk recommendations. Communities and Local Government (CLG) are currently supporting a demonstration programme in 20 local authority areas (to be extended to 60 further areas in the next two years) to show how this can work in practice. Efficiency gains The CSRO7 Value for Money Delivery Plan and the strategic priorities of the National Improvement and Efficiency Strategy (NIES) see a central role for asset management in: delivering efficiency gains of some 300m over the CSRO7 period achieved through asset disposals, asset sharing and reductions in operating costs delivering innovative strategies to meet customer needs and community aspirations underpinning local authorities capacity to improve local economic growth There will be a dissemination of key findings from a number of improvement and pathfinder projects which are currently underway. Financing of new assets Over the CSRO7 period, the Government will provide a minimum of 29 billion support to local authorities, just under half of this not ringfenced. The report then lists a number of existing means by which councils can fund and maintain new assets: grants from central government; the Private Finance Initiative; money generated from capital receipts; prudential borrowing; and Public Private Partnerships. Sharing knowledge The report contains examples of local authority good practice, as well as a number of case studies and reference to the formal and informal asset management networks where best practice can be shared. Responsibilities Engaging with citizens and councillors As "the bedrock of local democracy" local councillors have a crucial role in making sure that the local authority engages with local communities at the earliest phase of developing plans for asset management. The new Duty to Involve from April 2009 will be a particular driver.

6 Page 6 of 7 Under-used assets It is expected that local authorities will contribute 4 billion per annum over the CSRO7 period to the Treasury s target of 30 billion of public sector assets to be disposed of within the period to The forecast figure for is 4.3 billion. Performance framework While there is no one indicator in the new performance set of 198 indicators that underpins asset management, the report argues that asset management can be reflected in several national indicators. By way of illustration, performance indicator number 154 records the number of net additional homes that have been provided. Comprehensive assessments As part of the new Comprehensive Area Assessment (CAA) the Use of Resource judgement will judge local authorities "on how well they work with other local public agencies to identify opportunities for using assets to deliver greater benefits to the community". Sustainability and assets Use of Resources will also assess whether organisations are strategic in minimising their impact on the environment and how they are tackling climate change. Local authorities as key contributors to the UK Government s Sustainable Development Strategy should use their asset management plans to promote more sustainable buildings and use sustainable procurement as part of their asset management strategies. Comments Building on Strong Foundations is a strong message by central government that although local authorities no longer have to submit their corporate capital strategies and asset management plans to the Government Offices, Government has not lost interest in asset management. The report explicitly states the importance of asset management as being the key to underpinning key strands of Government policy arising out of the 2006 Local Government White Paper; the Quirk Review; the recommendations of the 2007 Comprehensive Spending Review, and the Local Government & Public Involvement in Health Act. What is positive is the Government s view that it should restrict itself to providing a good practice framework rather than be more directive in its approach. Building on Strong Foundations also highlights the central question arising from this report: how do local authorities prioritise and handle the different and competing demands in how they use their assets? What s clear is that the spotlight will be on local authority asset management for the foreseeable future. Additional Information If you were interested in this briefing, you might be interested in the following up-coming LGiU seminars:

7 Page 7 of 7 Meeting the cost of neighbourhood working (Repeat) - 28 February The SNR: How Local Government Will Work With RDAs - 11 March Economic development can be sustainable - 28 March Covers Adult social care Trade Union and Workforce issues Skills, Training, Economy, Environment, Regeneration (STEER) Housing Finance, Charging and trading Equalities, Social inclusion, Community cohesion Planning, Transport, Environmental sustainability Democracy, Governance, Councillor issues, Standards board, Neighbourhood governance, Regional governance, Local government information Culture, Libraries, Sport Corporate management, Audit and Inspection, Evaluation, Targets, Procurement Community involvement, Partnerships and LSPs, Voluntary sector Question Send Feedback for this briefing Related links Building on Strong Foundation report Related briefings Delivering Value for Money in Local Government: meeting the challenge of CSRO7 Quirk Review: Making Assets Work National Improvement and Efficiency Strategy Comprehensive Area Assessment - Use of Resources Consultation Copyright Local Government Information Unit