Stick, Sell or Twist? The Choice Gets Harder!
Local government’s approach to asset management is always going to be distinctively different from that used by other public agencies. This is because most public agencies will use assets in support of their delivery strategy. For them their assets, the land, the buildings, the plant and machinery will be directed to support the people employed to perform service activities. In truth, they have little more than a utilitarian accountancy approach to assets. Is the asset base adequate for the longer term? Does the asset base reflect balance sheet considerations properly? Is the profile of investment into the asset base commensurate with depreciation rates? But for local government, it is not feasible to disentangle the accountancy approach to assets from the place, the locality, the very fabric of community life in the location in which the assets are situated.
That is why for most public services a building that houses an activity can be simply sold for cash if that activity is planned to be trimmed back or halted. That cash can be returned to the public service in question and used elsewhere – indeed anywhere in the UK sometimes. But in local government, a building that houses an activity also has meaning in a locality. If not the building (which could be a dilapidated eyesore attracting much criticism), then more probably the land on which the building is situated. Communities may have dozens of alternative uses to which the building or land could be used. This is why crystallising the value of the asset, by disposal, is therefore not as straightforward for local Councils. It is not that the building or land may be a repository of strongly positive community sentiments (although it might); it is that the building or land actually exists within the Council’s boundaries – in short, it is more a part of the locality than a part of the Council’s balance sheet.
This may seem an obvious truism but local government is full of examples where Councils have misread community sentiment and treated buildings or land as an asset to sell rather than an asset to revive. To get things right we need to recognise two things about building and land assets: first, that they are intimately entangled with the history of service provision in a locality; and second, that they might be useful to unlock public value in an area even if they are not used for public service purposes.
There are plenty of examples across the country of Councils embarking on “service change” which requires them to withdraw from using buildings or land. This is inevitable given the scale of cost reduction required to meet the Government’s austerity plan for local government. Councils will need to use buildings and land much less if they are dramatically to lower their costs. But when looking at a soon-to-be-vacant building or piece of land, Councils will need to compare the public value benefits of regenerating the asset for new uses with the likely cash sum if the asset is sold (assuming of course that there are buyers who are prepared to purchase). The lazy argument often used against asset sales is that the monies received will simply disappear into the “Town Hall coffers”. This reasoning is ridiculous. Monies received from asset sales are redirected into other public priorities; which includes lowering the cost to taxpayers generally. What Councils need to be better at is balancing the costs and benefits of alternative uses and explaining to their public why they are choosing a particular path over the alternatives.
These issues became clear to me when Lewisham Council was considering the sale of an asset it owned in another country – well, in Wales. In the 1990s Greenwich and Lewisham Councils inherited from the Inner London Education Authority an outdoor pursuits centre at the southern edge of the Snowdonia National Park. This is about as far away from life in south east London as you can get. Why not just sell it? After all there are only so many south east Londoners eager to go mountaineering each year. Instead both Councils felt that selling was the narrower path. The centre offered tremendous environmental experiences and growth opportunities for young people. What was needed was to heighten the quality of the offer to the wider public. So an independent trust was created (the “Wide Horizons trust”) that draws upon a far wider network of partnerships and sponsorships that either Council could muster. And the trust is now (nearly a decade later) thriving and seeking to extend its high quality offer into youth experience and professional development. It is a great example of a public asset that revives the spirit of those who use it.
Of course assets of buildings and land offer local Councils the opportunity to refashion their cost base as well as regenerate their localities. The best examples of reshaping costs include regeneration of places. But it needs to be recognised that blending the two goals is not feasible in every instance. Moreover, each Council knows there are not a few liabilities dressed up as assets on many balance sheets. And with asset prices falling those who grasp at public assets need to beware the practice of “catching falling knives”. This is why regenerating assets is a complex and difficult task. Should you stick with your assets, sell them or twist them into something new? In urban England we have too many 19th century buildings housing 20th century services desperately needing to be converted for 21st century uses. Thankfully this is a practical and not a theoretical problem. And local government is great at solving practical problems. This is why reshaping and reviving public assets is rewarding – for the elected politicians and professional managers involved; as well as for the communities themselves.
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This article appeared in the Guardian’s “local leadership hub” on 21st February 2013; it is on the Investing for Growth blog on the Guardian’s Public Leader’s Network