The government plans to sell Admiralty Arch in central London for up to £75m – part of a wider drive to get better value from its vast property estate, as Channel 4 News hears.
Minister for the Cabinet Office Francis Maude said the iconic building on Trafalgar Square was no longer fit for purpose as a government office building.
The landmark is mainly empty but reports suggested that a sale could reap up to £75m – much needed cash for the public sector coffers.
The building could be transformed into flats or even a hotel under a new leaseholder. The government is not selling the freehold of the building.
The government is one of the country’s largest landowners and the largest tenant, and the planned sale of Admiralty Arch is part of a wider strategy to improve the efficiency of government property.
We will leave no stone unturned in the drive to make the civil service more efficient and cut costs for the taxpayer. Francis Maude
It has also vacated 36 other property holdings in London since May 2010, around 20 per cent of its office space in the capital – saving £90m.
Mr Maude, speaking at the Public Property Summit, said: “We will leave no stone unturned in the drive to make the civil service more efficient and cut costs for the taxpayer…
“Admiralty Arch is not fit for a modern day office and could not be adapted without disproportionate costs to the taxpayer. Let’s not forget that it’s not at all accessible to the public at present, so we are looking for ways to preserve this beautiful building, celebrate its history and heritage, create opportunities for public access and generate value for the taxpayer.”
The public sector, including central government, has long been criticised for inefficient management of its assets.
Last year, TopShop tycoon Sir Philip Green described government waste as “shocking” after he was asked to review spending across departments by the coalition. Sir Philip said no business could survive the level of money that was being wasted by the government.
The National Audit Office has also slammed government inefficiency in the past – particularly the management of the public sector estate. In its most recent report, it said there was “scope for substantial value for money savings”, although it did admit some good work was already under way.
Annual spending on property in the public sector, including running costs, is £25bn on an estate, excluding council housing, worth £100bn. Central government departments’ office property alone costs almost £1bn in annual running costs.
But the coalition says it has woken up to the problem of inefficiency, and has put tackling it at the centre of its plans to tighten up public spending and cut the deficit. Property sales could even begin to tackle the UK’s other problem – vast government debt.
There is always the argument – is this the wrong time to be selling assets? James Grierson, property consultant
In August, the Cabinet Office said it had already saved £3.75bn by improving efficiency, cutting jobs and axing projects. In property, it has set up the Government Property Unit to try and tackle the legacy of its vast estate.
But is now the right time to sell? The global economy is on the slide and the property market is in the doldrums.
James Grierson is a director at property consultancy DTZ, and an expert on public sector property. He told Channel 4 News the timing of any disposal is always treated with caution by the government, something Mr Maude himself has also referred to in the past.
He said: “There is always the argument – is this the wrong time to be selling assets? Civil servants are very conscious of this because they have had their fingers burnt before – selling the gold reserves and that sort of stuff.
“But the question to ask is, if the government didn’t own the building, would they be going to the Treasury to raise money to go out and spend in the property market, because they are looking at the possibility of commercial property values going up? Is that an appropriate thing for the government to do?
“If you put it that way round the answer is, of course not, and also – do they know how long it will take for the market to recover and how much it will recover? Most say it will be a lengthy process. So every year you don’t make the move that starts generating savings, you miss out on savings.”