Asset Disposal Strategy Scrutiny Commission ... - Lambeth Council

Cabinet 7 February 2011
Response to the Asset Disposal Strategy Commission
All Wards
Cabinet Portfolio:
Cabinet Member for Finance and
Resources: Councillor Paul McGlone
Report authorised by:
Executive Director for Finance and
Resources: Mike Suarez
Executive summary
In September 2010 the Finance Scrutiny Sub-Committee commenced a commission to
examine the asset disposal strategy and to look at the future of office accommodation at
the Council and any appropriate links with the asset disposal strategy and the
investment strategy. The Commission has now completed its work and is presenting its
findings for consideration by Finance Scrutiny Sub-Committee and Cabinet. The report
contains a number of recommendations which, if implemented, will increase member
oversight of and improve the Council’s approach to realising asset value to fund new
capital spend.
Summary of financial implications
There are no direct financial implications arising as a result of this report. However, the
effective implementation of the recommendations may lead to the realisation of higher
values when the council disposes of surplus properties.
Recommendations
(1) To approve the report and recommendations of the Asset Disposal Strategy
Commission, subject to comments shown in the report.
(2) To direct officers to implement the action plan in response to the commission’s
recommendations.

Consultation
Name of
consultee
Department or Organisation Date sent Date
response
received
Comments
appear in report
para:
Internal
Jonathan Divisional Director Corporate 21.01.11 21.01.11 Throughout
Williams
Finance
Mark Hynes Director, Governance & Democracy 25.01.11 25.01.11 Section 4
Uzo Nwanze Head of Asset Strategy 21.01.11 24.01.11 Throughout
Rachel Sharpe Divisional Director Housing 21.01.11 21.01.11 2.16.1
Les Brown Divisional Director Planning 21.01.11 21.01.11 2.8.1 to 2.8.3
Cllr Paul
McGlone
Cabinet Member for Finance and
Resources
21.01.11 21.01.11
External
None
Report history
Decision type:
Key decision
Key decision: reason
EITHER a) expenditure or savings of £500,000 or
more
Authorised by Cabinet
member:
Date report
drafted:
OR/AND: b) proposal affects significantly two or
more wards
X
Date report sent:
Report deadline
See above 21.01.11 27.01.11 17.01.11
Report no.:
Report author and contact for queries:
249/10-11 Xavier Hinckson, Corporate Financial Consultant
Background documents
020 7926 9206 xhinckson@lambeth.gov.uk
Asset Disposal Strategy Commission report – see appendices
Asset Disposal Strategy Commission action plan – see appendices
Appendices
Appendix 1 – Asset Disposal Strategy Commission report
Appendix 2 – Asset Disposal Strategy Commission report (exempt from disclosure)
Appendix 3 – Asset Disposal Strategy Commission action plan
Reason for Exemption from Disclosure
The following appendix is exempt from disclosure by virtue of the following
paragraphs of Schedule 12A to the Local Government Act 1972:
3. Information relating to the financial or business affairs of a particular person.
(Including the authority holding that information).

Response to the Asset Disposal Strategy Commission
1. Context
1.1 Finance Scrutiny Sub-Committee established the Asset Disposal Strategy
Commission following its consideration of the Lambeth Emergency Budget report
on 21 st July 2010. That report highlighted a funding gap of £23.5 million on the
Capital Investment Programme and the need to dispose of surplus properties to
generate receipts to close that gap. The commission was established to,
“examine the asset disposal strategy…[and]…to look at the future of office
accommodation at the Council and any appropriate links with the asset disposal
strategy and the investment strategy.” 1
1.2 The commission held two information gathering sessions during November 2010
where officers from Corporate Finance and the Valuation and Asset Management
Service (VAMS) presented information and answered members’ questions. The
commission met twice subsequently to draft its report.
1.3 The Commission’s report and is attached at Appendix 1. The key themes within
the recommendations are the need to ensure that asset management decisionmaking
is transparent, corporate (rather than departmental) and is designed to
maximise value.
1.4 The Commission’s report is due to be considered by Finance Scrutiny Sub-
Committee on 27 January 2011 and any amendments to the recommendations
and action plan will be reported to Cabinet.
2. Proposals and reasons
2.1 The commission’s report contained 16 recommendations that are attached as
action plan at Appendix 2. The action plan outlines responses to these
recommendations over the next two months. In summary, the action plan
proposes the developments below:
2.2 Recommendation A: Cross-departmental Cabinet Member to sit on SAMG
2.2.1 The Strategic Asset Management Group (SAMG) is an officer group jointly
chaired by the Executive Director of Finance and Resources and the Executive
Director of Housing, Regeneration and Environment. Officers believe that
reconstituting the Capital Programme Review Group with the Cabinet Member for
Finance and Resources as its Chair will achieve the same aim, but preserve the
delineation between officers and members and maintain clear accountability
lines. The group's activity will be broadened from the implementation of
investment decisions to encompass asset management strategy and disposals.
Its name will change to the Asset Review Group (ARG) to reflect its broader
responsibilities.
1 London Borough of Lambeth, Minute No5 of meeting of Finance Scrutiny Sub-Committee, 21 st July 2010

2.3 Recommendation B: Ultimate disposal decision made at corporate centre
2.3.1 The decision making framework will be amended to ensure that decisions on
disposals are made on the basis of advice provided by the corporate officer-led
SAMG and member-led ARG.
2.4 Recommendation C: the primary questions for the retention of assets should be
is a property owned by the council required?
2.4.1 The decision making framework will be amended to ensure that decisions on
retention or disposal flow from the questions: Is a property asset required to
deliver the service that currently uses the operational building? And does the
asset need to be owned by the council?
2.5 Recommendation D: quantitative analysis should be weighted more heavily than
qualitative analysis
2.5.1 The decision making framework will be amended to ensure that the weighting of
qualitative and quantitative criteria in the Operational Property Portfolio be
reversed so that the qualitative data is weighted 40% and the quantitative 60%.
2.6 Recommendation E: asset disposal decisions should be transparent
2.6.1 The enhancements to the existing process noted in the responses to
recommendations B, C and D will be captured in a process that can be clearly
articulated to members and the public.
2.7 Recommendation F: disposals are timed to ensure maximum return
2.7.1 The revised disposal process will demonstrate that consideration has been given
to the impact the timing of disposals has on returns. However, the ultimate
decision will need to balance the urgency of the funding requirement (set out in
the Capital Investment Pipeline) with maximising returns.
2.8 Recommendation G: where disposals have failed to achieve reasonable value
after marketing the council should apply for a change of planning use
2.8.1 The Planning Division strongly advocates and supports the pro-active approach
set out in the recommendation as the most effective way in establishing the best
value and benefit to the Council in the disposal of sites. The approach to deciding
planning applications is however, determined by law as set out in planning
legislation and case law.
2.8.2 The recommendation that the Council submit a planning application to change
the use of a site to achieve a higher value would only be appropriate in certain
circumstances. All planning applications need to be determined in line with
planning legislation and case law and therefore this approach should only be
progressed where a change of use is considered be in line with current planning
policy or where other material considerations are relevant..
2.8.3 The Government Planning Policy Statement 1 (The Planning System: General
Principles) sets out that, “Local planning authorities must determine planning
applications in accordance with the statutory Development Plan, unless material

considerations indicate otherwise……Where there are other material
considerations, the Development Plan should be the starting point, and other
material considerations should be taken into account in reaching a decision.”
2.9 Recommendation H: prioritise the sale of high value offices
2.9.1 The Council's use of office space is currently being reviewed with a view to
releasing significant funds
2.10 Recommendation I: Corporate Landlord Model implementation timetable
2.10.1 The "Corporate Landlord Model" is taken to mean the centralisation of property
management and decision-making. Strategic decisions about the council’s asset
portfolio are made corporately by the Strategic Asset Management Group, and
planned maintenance is centrally coordinated. This is illustrated in the Capital
Investment Programme by the establishment of a Planned Maintenance budget
managed by VAMS (in the HRE department).
2.11 Recommendation J: Clear and transparent decision-making in the budget setting
process
2.11.1 Council will be asked to approve the projects in both the Capital Investment
Programme and the Capital Investment Pipeline at its budget setting meeting in
February. The individual projects in both the Programme and the Pipeline will be
detailed in the appendices to the budget report, providing members and the
public with an unprecedented level of clarity and transparency. The Capital
Investment Programme will be updated through the July Finance Review and a
new mid-cycle Budget Update report in November, again increasing clarity,
transparency and accountability.
2.12 Recommendation K: HRA income from commercial portfolio
2.12.1 The government is fundamentally reforming the housing finance system. The
reforms will enable councils to retain the income from local rents, abolish the
subsidy system and lead to the equalisation of housing debt across local
authorities that provide housing services. It will therefore have a significant effect
on Lambeth’s Housing Revenue Account. The HRE Resources division is
modelling the impact of these proposals, which will need to be carefully
considered to ensure that the HRA will remain stable and be able to support the
delivery of housing services. Removing the income from the commercial portfolio
before the stability of the HRA under the new system has been proven would be
premature. Nevertheless, the principle behind this recommendation is accepted
and may be implemented in the medium to long term.
2.13 Recommendation L: timing of disposals of commercial properties reflects market
conditions
2.14 The revised disposal process will demonstrate that consideration has been given
to the impact the timing of disposals has on returns. However, the ultimate
decision will need to balance the urgency of the funding requirement (set out in
the Capital Investment Pipeline) with maximising returns.

2.15 Recommendation M: shopkeepers’ ability to purchase commercial properties is
protected
2.15.1 Shopkeepers will be consulted as part of any disposal strategy for the
commercial portfolio, including arrangements for them to purchase their
properties.
2.16 Recommendation N: Cabinet Housing Commission considers the
appropriateness of the voids disposals policy
2.16.1 The Housing Commission will consider policy on the sale of void properties in the
context of addressing options for meeting the housing investment gap. The costvalue
ratio formula for housing disposals has recently been updated but will be
kept under review as necessary.
2.17 Recommendation O: Disposals monitoring reports are considered by Finance
Scrutiny Sub-Committee
2.17.1 Progress against annual disposals budgets is reported in the Finance Monitor.
The Capital Investment Programme recommended to Cabinet is fully funded, so
new disposals would be used to fund those projects set out in the Capital
Investment Pipeline. The impact of receipts on the movement of projects from
the Capital Investment Pipeline to the Capital Investment Programme would be
articulated through the Finance Monitor, the July Finance Review and a new midcycle
Budget Update report in November.
2.18 Recommendation P: all possible capital financing options have been considered
2.18.1 The budget report proposed to Cabinet includes revenue contributions to capital
of £14.5 million over the three year budget period. Although the council has used
the Private Finance Initiative as alternative financing solution, the main
determinant of its viability is the availability of central government grant to pay the
PFI contractor. The viability of Tax Increment Financing (TIF) will largely be
determined by the potential of the investment to increase revenue from business
rates. Its application to the maintenance of roads or the construction of schools,
for instance, would be risky. Nevertheless, this is an area that will be monitored
closely.
2.18.2 The commission also cited the New Local Government Network report Capital
Momentum – new financing options for locally driven capital investment and the
alternatives it sets out for capital financing, such as investment through pension
funds or municipal bonds. Such approaches would generate the cash for
investment through new debt instruments. The capital financing issue the council
faces is not its ability to access debt instruments, but the declining revenue
streams available to pay for those instruments. This criticism also applies to sale
and lease back arrangements, whose use should be judged on broader value for
money criteria rather than purely as a source of capital funding.

3. Comments from Executive Director of Finance and Resources
3.1 There are no direct financial implications arising from this report. However, a
number of the proposals set out in the action plan will be captured in a revised
Asset Management Strategy that will be submitted to Cabinet for consideration.
4. Comments from Director of Governance and Democracy
4.1 The Council has a fiduciary duty to the council tax payer to provide the
management of its assets as efficiently and effectively as possible and to have in
mind the best outcome for the Council’s area, in consideration of the Council’s
wellbeing powers provided in section 2 of the Local Government Act 2000,
including the use of or disposal of assets.
4.2 Section 111 of the Local Government Act 1972 provides powers for a local
authority to do anything (whether or not involving the expenditure, borrowing or
lending of money or the acquisition or disposal of any property or rights) which is
calculated to facilitate, or is conducive or incidental to, the discharge of any of
their functions.
4.3 By virtue of section 123, Local Government Act 1972, the Council is empowered
to dispose of land held by it in any manner it wishes but, except with the consent
of the Secretary of State, it may not do for a consideration less than the best that
can reasonably be obtained (unless the disposal consists of a grant of a term not
exceeding seven years). A General Consent was issued in 2003 allowing the
disposal of property at an undervalue (of not more than £2 million) if the disposal
is likely to contribute to the promotion or improvement of the social, economic or
environmental well-being of the residents or some of the residents of the
borough. This General consent only applies to non HRA properties.
4.4 Section 21 of the Housing Act 1985 provides the Council with powers for the
general management, regulation and control of its dwelling stock subject to
Section 32 consent to dispose of land.
4.5 Pursuant to section 32 and 34 of the Act and Section 25 of the Housing Act 1988
the Secretary of State has issued general consents to dispose of land held for
housing purposes which place conditions as to the terms of disposal.
5. Organisational implications
5.1 Risk management:
The activities set out in the action plan may improve the council’s management of
some of the risks associated with the disposal of surplus properties.
5.2 Equalities impact assessment:
The activities set out in the action plan will be captured in specific proposals that
will be considered by cabinet. Equalities impact assessments will be undertaken
for those specific proposals.

5.3 Community safety implications:
There are no direct implications for community safety.
5.4 Environmental implications:
There are no direct environmental implications.
5.5 Staffing and accommodation implications:
There are no direct staffing and accommodation implications.
6. Timetable for implementation
6.1 The timetable for implementation is set out in the action plan attached at
Appendix 2.
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